North Liberty, Iowa. (Source: SevenMaps/Shutterstock)Late Friday evening, the Iowa Division of Banking and the First American Bank announced an agreement in which the banking superintendent will approve the bank’s application that includes the sale of its seven branches to the $5.7 billion GreenState Credit Union in North Liberty.
“Because of the unique circumstances surrounding this transaction and because prolonging the dispute between the superintendent and First American will only prolong the pain and confusion of the impacted customers (members), the superintendent agrees to approve First American’s application,” the five-page settlement reads. “The superintendent’s approval of the application is solely for the purpose of settling this dispute, and the superintendent does not admit that an Iowa state-chartered bank may sell substantially all of its assets and liabilities to a credit union under Iowa code. Rather, the superintendent reiterates his conclusion that such a transaction is not authorized and that IDOB will quickly deny any future application based on a similarly structured transaction. And….the superintendent retains the right to make such a conclusion before the transaction is closed.”
Jeff Plagge, Iowa Division of Banking’s superintendent, had planned to make his decision about the bank and credit union application after the March 5 public comment period ended. But on March 1, he learned that over the Feb. 28th weekend the two financial institutions closed the deal and the branches were already operating under the credit union’s brand.
In a March 2nd email letter to a Des Moines lawyer, Stephen H. Locher who represents FAB, Plagge wrote that because First American closed this transaction without obtaining prior approval, the bank’s application was denied.
The superintendent’s denial included a demand that First American and GreenState maintain separate financial records until the matter would be resolved.
First American argued that it did not have to obtain the superintendent’s approval prior to the closing of the transaction and also disputed the superintendent’s decision to deny the application and effectively block the transaction.
Throughout the week, however, the regulator and FAB held discussions to resolve the dispute.
“First American Bank is pleased to have reached an agreement with the Iowa Division of Banking confirming the finality of the bank’s sale of branches to GreenState Credit Union,” First American Bank said in a prepared statement Friday evening. “Although First American Bank did not agree with the Iowa Division of Banking on many legal matters, it appreciated the Division’s open and productive dialogue as the parties worked toward resolution of this matter.”