IOWA CITY, Iowa – In spite of the ire of local banking groups here, the University of Iowa Community Credit Union's reasons for buying a 65-year old bank is motivated purely by synergies in operations and cost savings, say executives at both institutions. In a move that is being described as an industry first, the credit union entered into an agreement last fall to buy Hawkeye State Bank, the fourth largest bank in Johnson County here with $96.7 million in deposits. UICCU is the fourth largest CU in the state with more than 38,000 members and nearly $300 million in assets. "The synergies in operations – we do some things well, they do some things well, the cost savings we can pass back to members and keeping the acquisition local" are the main reasons for the purchase, said Jeff Disterhoft, UICCU's president/CEO. "We've had some on again, off again situations where institutions come in from outside the community to buy banks. We wanted to keep the decision making local." UICCU put in a bid, along with several other institutions to acquire the bank last November and is awaiting state and national regulator approval. Neither Disterhoft or Hawkeye State Bank CEO Russ Gerdin would disclose the purchase price. Disterhoft has said the price was reduced because of financial losses incurred under former bank president Ray Glass, who oversaw Hawkeye's operations for nearly 14 years and was placed on administrative leave in November, according to several published reports. The purchase price does include "protections for credit union members," and transactions would not be affected, Disterhoft assured. Hawkeye Bank customers will continue business as usual at each of its two branches including being able to access their accounts and the use of debit and credit cards. No gaps in services and no layoffs of the two institutions' combined 140 employees are expected, but Disterhoft was undecided as to whether Hawkeye's two branches would remain open. Separately, FDIC records show that the bank recorded $280,000 in net charge-offs and recoveries through Sept. 30, 2002, up $16,000 for the same period in 2001. The credit union has begun its own investigation to assure all concerns are identified before finalizing the deal. A complete investigation, federal and state approval of the sale and dissolution of the bank are expected to be completed within 120 days, Disterhoft said. The Iowa Bankers Association said the purchase could potentially "exceed the initial purpose of what credit unions were meant to be," adding UICCU has "become a major competitor that has a significant tax advantage." In a statement, IBA President John Sorensen said the sale "could cost the city of Iowa City more than $35,550 annually in lost tax revenue, erasing more than $23,700 from county coffers." Disterhoft said for every $1 in tax savings, credit unions return $5 to their members. "We are not aware of any parties damaged as part of this transaction," the credit union said in a release. "That being said, we expect opposition from the banking industry, knowing their motives are simply driven by profit. Our motives are driven by service to our members and the good of the community." Meanwhile, the IBA is currently lobbying state legislators to conduct a study of credit unions in Iowa that will include competitive issues with banks and the impact of tax-exemption status on taxpayers. -

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