Business

Iowa banking division halts GreenState Credit Union acquisition of First American Bank

GreenState Credit Union logo.
GreenState Credit Union logo.

The Iowa Division of Banking earlier this week barred First American Bank’s request to become an Iowa corporation — a necessary hurdle for GreenState Credit Union to acquire the bank’s central state business operations.

The state’s credit union league, however, sees the decision as a conflict of interest.

Jeff Plagge, Iowa’s superintendent of banking, told a First American attorney in a letter Monday that he denied the bank’s application — to sell GreenState seven of its branches around Des Moines and Fort Dodge, plus their assets — due to legal concerns.

First, Plagge wrote, First American and GreenState finalized the deal despite knowing they needed his division’s approval.

“In fact, letters issued by the Iowa Division of Credit Unions and the National Credit Union Administration acknowledged that approval of this proposed transaction was contingent on approval by, among other regulators, the Iowa Division of Banking,” he wrote.

Iowa Code also permits a state bank to sell its assets and liabilities to another state or national bank, or another FDIC-insured financial institution, but not an insured Iowa credit union, according to Plagge’s letter.

“If I reached a different conclusion on this matter and approved this application, it would establish a precedent that could lead to more taxpaying financial institutions being purchased by tax-exempt financial institutions,” he said.

“That, in turn, could adversely affect the budget of the state of Iowa.”

Plagge later continued, “The ongoing evolution of credit unions, particularly large credit unions, and their proper role in Iowa’s, and the nation’s, financial services ecosystem are public policy issues that must be addressed and resolved by the appropriate policymakers — in this case, the Iowa Legislature.”

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The Iowa Bankers Association voiced support for the rejection and echoed Plagge in stating there are no statutory grounds under Iowa Code for First American, of Fort Dodge, to merge with GreenState, of North Liberty.

“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,” said John Sorensen, the association’s president and CEO, in an emailed statement. “Policymakers should take note, and re-evaluate whether these institutions continue to deserve the growing tax subsidies provided by Iowans.”

The Iowa Credit Union League, however, accused Plague — also CEO of Northwest Financial Corp., which owns Northwest Bank branches in the same central markets as First American — of injecting “politics and personal gain into a legal business transaction.”

“Mr. Plagge’s attempt to halt this business transaction would benefit his bank, and himself personally,” said Murray Williams, the league’s president and CEO. “This is blatant conflict of interest that Mr. Plagge should have disclosed.”

Under Iowa Code, the state’s banking superintendent is one of the few division employees allowed to own an enterprise subject to the division’s regulatory purview, though they’re prohibited from participating in cases concerning that entity.

In a statement Friday afternoon, a GreenState spokesman said First American’s legal counsel and the state banking division had a “constructive dialogue,” and the division is expected to announce a “positive resolution” next week.

“With all applicable regulatory approvals for the purchase in hand, our stance is that the deal remains consummated and will not be undone,” said Jim Kelly, the credit union’s chief marketing officer, later adding, “We are extremely excited about the joining of these two Iowa-based institutions and the positive outcomes it will produce for Iowans.”

GreenState has $5.5 billion in assets and 200,000 members. In announcing its First American acquisition in June, the credit union said it expected to add 10,000 new members, plus $200 million in loans and $500 million in deposits.

Comments: (319) 398-8366; thomas.friestad@thegazette.com

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