The Iowa Division of Banking has denied an application by First American Bank in Fort Dodge to convert to an Iowa corporation, a step the agency said is necessary for GreenState Credit Union to acquire First American’s branches in Fort Dodge and Des Moines. 

In a March 2 letter to an attorney representing First American Bank, Iowa Superintendent of banking Jeff Plagge wrote that he had been waiting until the end of a public comment period on March 5 to issue his decision. However, on March 1 it came to Plagge’s attention that First American and GreenState had already finalized the proposed transaction at the end of February. 

“The parties did this despite knowing that the approval of the Iowa Division of Banking was required,” Plagge wrote. “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. … Because First American closed this transaction without obtaining my prior approval, I must act immediately and deny First American’s transaction.” 

In his legal rationale for denying the application, Plagge said he could not approve the proposed plan because it does not satisfy requirements under relevant clauses of the Iowa Code. For one, GreenState is neither a state bank nor a national bank, nor is it an FDIC-insured financial institution, Plagge wrote. 

Also, Plagge wrote, the Iowa Legislature “has made no provision for a deposit-taking institution insured by the [National Credit Union Share Insurance Fund] to acquire the assets and assume the liabilities of an Iowa-chartered bank. … The legislature therefore intentionally omitted credit unions [from the statute].” 

Plagge further wrote that approving the application “would establish a precedent that could lead to more tax-paying financial institutions being purchased by tax-exempt financial institutions. That, in turn, could adversely affect the budget of the State of Iowa.” 

The leader of the Iowa Credit Union League is questioning the decision, calling it a “blatant conflict of interest.” In an emailed statement, ICUL President and CEO Murray Williams said Plagge’s attempt to halt the acquisition would benefit the bank that Plagge still leads, because its market areas in Des Moines and Fort Dodge overlap with those of First American Bank. Plagge, who was appointed last summer as Iowa’s banking superintendent by Gov. Kim Reynolds, said in a profile article published in January in the Business Record that he is transitioning out of the role of CEO of Northwest Financial, which is the parent company of Northwest Bank and First National Bank. Northwest Financial’s website still lists Plagge as CEO. Williams also wrote that Plagge, who has served as chairman of the Iowa Bankers Association, “has publicly been critical of credit unions for years, which further calls into question the impartiality of his decision-making.” 

Representatives for GreenState and First American Bank could not be immediately reached for comment. 

The Iowa Bankers Association applauded the division’s decision, saying it supports the ruling. 

“The Iowa Bankers Association supports today’s action taken by the Iowa Superintendent of Banking, denying the application of First American Bank to convert to an Iowa corporation so that its offices in Fort Dodge and Des Moines could be acquired by GreenState Credit Union,” John Sorensen, president and CEO of the IBA, said in a statement. “There is no statutory authority in the Code of Iowa permitting a bank to merge with a credit union.

“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,” Sorensen said. “Policymakers should take note, and re-evaluate whether these institutions continue to deserve the growing tax subsidies provided by Iowans.” 

Plagge said this morning in an emailed statement: “This situation presents several complex issues that must be resolved. The [Iowa Division of Banking] is currently assessing the situation and working with the parties and our fellow regulators to resolve these issues in a timely manner. The IDOB is also keenly aware that this transaction directly impacts Iowa consumers, most importantly former First American customers, and will strive to ensure these consumers are not negatively impacted by any regulatory action.” 

This story was updated to include comments from the Iowa Credit Union League.