The Iowa Division of Banking on Monday blocked the sale of First American Bank’s remaining Iowa-based assets and branches to Green State Credit Union, a $5.8 billion institution based in Iowa City. The agency said the arrangement—in which the Fort Dodge, Iowa-based bank would sell substantially all of its assets and liabilities and go out of business as a bank—did not meet criteria required under state law.
Specifically, the Iowa code requires banks that are voluntarily dissolving to adopt plans for their assets and liabilities to pass to another state or national bank or other FDIC-insured institution. The statute does not refer to credit unions as authorized purchasers.
The letter from Iowa Superintendent of Banking Jeff Plagge denying the application said that he was waiting until the close of a comment period that was set to end on March 5 to issue his decision. However, he said, it came to his attention that the transaction had already been finalized without the required approval from the Iowa Division of Banking. Plagge directed the bank and credit union to maintain separate records until the matter is resolved.
“This is but one more example of a large credit union placing unrestricted growth and tax-free profits ahead of service to Iowans with modest means,” commented Iowa Bankers Association President and CEO John Sorensen. “Policymakers should take note and re-evaluate whether these institutions continue to deserve the growing tax subsidies provided by Iowans.”
Amid a recent increase in credit union acquisitions of banks, the Iowa news comes less than two months after the Colorado State Banking Board denied the sale of a bank to a credit union citing state law.