Under attack from banker, University of Iowa Community CU defends name
An Iowa regent who raised concerns about how the University of Iowa might be impacted by a Wells Fargo-type scandal at University of Iowa Community Credit Union is actually part-owner of a local bank.
When Larry McKibben raised concerns about the credit union’s name, it made headlines in local media. According to the Des Moines Register, McKibben said many Iowans were “confused” about the relationship between the school and the credit union, and said the regents needed to develop a policy regarding use of the name. According to the Register's reporting, other regents shared McKibben's concerns.
Jeff Disterhoft, president and CEO of University of Iowa Community Credit Union, has brushed off those concerns, telling Credit Union Journal “Larry McKibben, it turns out, is part-owner of a bank: Farmers Savings Bank in Marshaltown, Iowa,” said Disterhoft. “No one found that out right away because the bank technically is owned by a holding company [Beaman Bancshares, Inc.], but Mr. McKibben owns stock in the holding company. That has been overlooked in this story, and we were not aware of it until recently. It appears he has a financial conflict of interest.”
According to Federal Reserve filings, McKibben as recently as 2014 held a 2.46 percent ownership share in the bank, where is is also a director and vice-chairman, but as of 2016 had reduced his stake to just 0.86 percent.
McKibben did not respond to Credit Union Journal's request for comment.
The issue comes at a time when Iowa is center stage for one of the biggest credit union issues – the CU tax exemption. In February, Iowa lawmakers began consideration of a bill that would tax the state’s credit unions, and last month a rally on the steps of the state capitol in Des Moines drew approximately 750 credit union supporters, including CUNA President and CEO Jim Nussle, an Iowa native who previously represented the state in Congress.
Justin Hupfer, VP of government affairs for the Iowa Credit Union League, told CU Journal University of Iowa Community Credit Union has engaged with the university’s regents for a number of years, “so it is up to the credit union rather than an issue for the league.”
“It is not a public policy issue that is as important as the tax issue for us, and it is not a new issue,” Hupfer said. “We have had no conversations with the regents regarding the credit union’s name.”
Asked if Regent McKibben is ignoring the potential negatives of having the university’s name in the credit union’s name, such as people assuming they cannot join, or if they are fans of Iowa State or another university, Hupfer replied, “I think the regents are looking at it from the perspective of any business that might utilize the university name.”
As for the tax issue, Hupfer said an Iowa Senate bill that passed earlier this year included a tax on credit unions, but Iowa’s House is looking at a bill from the governor that does not have a credit union tax increase.
“We are continuing our grass roots lobbying efforts to make sure taxation efforts by the bankers do not find their way into the bill,” he said.
What's in a name?
According to Disterhoft, the issue surrounding the credit union’s name was settled four years ago, when the University of Iowa contacted the credit union and found no legal manner to make the CU change its name – in part because the school itself is not using its legal name, the State University of Iowa.
Echoing that legal name, the CU was chartered as State University of Iowa Credit Union in 1938, he explained.
“Both the university and the credit have changed their name, but only us legally,” Disterhoft said. “The University of Iowa changed its brand in 1964, but not its legal name, so technically we do not mirror the legal name. At one point we changed to University of Iowa Credit Union. In approximately 1997 added the word ‘Community.’”
Disterhoft said UICCU has not been contacted by the board of regents or the University of Iowa since the regent raised his concerns.
The name itself is a “double-edged sword,” Disterhoft said. When people see the words “credit union,” they know it is different from a bank and they might think they have to be a member of a sponsor group.
“In many cases, they might think they cannot join,” he asserted.
When UICCU opened its first branch in Cedar Rapids about eight years ago, it surveyed new members and asked why they joined. Disterhoft said roughly 2 percent joined because of the name, “so our research does not support that they joined because of a perceived affiliation with the university.”
One CU’s successful rebrand
There is a history in Iowa of asking a credit union to change its name in order to further separate the CU and its namesake.
In 1934, John Deere Employees Credit Union was founded in Waterloo, Iowa, by a handful of John Deere employees. The CU’s field of membership was extended to those living or working in the neighboring town of Cedar Falls in 1986, prompting a small change in the name: John Deere Community Credit Union.
In December 2004, Deere & Company asked three of the four credit unions using a portion of the John Deere name to change their names and eliminate the corporate moniker from the titles. The company stressed its request was not related to any problems at the credit unions but said it wanted to avoid any implied direct affiliation or subsidiary relationship between the corporation and the credit unions.
One of those three credit unions was Waterloo, Iowa-based John Deere Community CU, which in 2006 became known as Veridian Credit Union.
Today, Monte Berg is CEO of the $3.5 billion Veridian CU. In 2004 he was VP of finance. He recalled that the management team at the time looked at other credit unions that had changed names and talked with consultants to develop best practices. The CU then tested various names with membership before coming up with Veridian, which came from the words “verdant,” meaning green and growing, and “veritas,” or truth.
“The John Deere company was understanding that this was a big undertaking,” Berg told CU Journal recently. “The most important piece was letting the membership know the only thing that was changing was our name. It was not a difficult process, but we had to follow a timeline and let everybody know what was happening. We did not do a mass reissue of debit cards or share drafts. The company allowed us to reissue those as they expired.”
In the years since, the new name “has served us well,” Berg assessed. He said switching to the new name allowed the credit union to trademark it, so it has control over its name.
“The change allowed us to move into new markets with our own name. Obviously, the [John Deere] name is very solid and recognizable, but the new name allowed us to have our own identity rather than being tied to our original employer group.”
Veridian CU has “continued to grow and diversify,” Berg continued, including a move into the Council Bluffs, Iowa/Omaha, Neb. market. “We now have 31 branches, adding about one or two a year in recent years.”
As for the issue with the name of University of Iowa Community CU, Berg said the regent who brought it up is a former state senator in Iowa.
“It is politically motivated,” Berg said. “UICCU is a strong, successful credit union that has become a target of the Iowa Bankers Association.”