Settlement Agreement Ends Dispute on Bank Selling to CU

On March 6, First American Bank and the Iowa Division of Banking entered into a settlement agreement allowing the bank to sell its Iowa assets and branches to a credit union.

Both parties decided it was in the best interest of all, especially First American Bank's customers, to settle this dispute. Both parties recognized that litigation could take months, if not years, to resolve the issue to the detriment of First American Bank's customers.

As background, GreenState Credit Union (North Liberty, IA) completed its acquisition of First American Bank (Fort Dodge, IA) on February 28.

However, the Iowa Division of Banking on March 2 blocked the sale of First American Bank’s remaining Iowa-based assets and branches to GreenState Credit Union. The banking regulator also directed the bank and the credit union to maintain separate records until the matter is resolved.

But First American Bank asserted that it did not need the prior approval of the Superintendent before the transaction closed and disputed the Superintendent's decision to deny the bank's application and effectively block the sale.

As part of the settlement, a state chartered bank must obtain the approval of the Superintendent before voluntarily ceasing the business of banking.

The superintendent understands that First American Bank was confused about whether it needed the approval of the Superintendent before closing the deal with GreenState CU. Part of the confusion arose from First American Bank in 2019 selling its Florida branches and assets to MID-FLORIDA Credit Union without the prior approval of the Iowa Division of Banking. But the Division of Banking did not object to the sale, because the bank still had significant assets and deposits and was still actively engaged in the business of banking.

Due to the unique circumstances of this transaction, the Superintendent agreed to approve First American Bank's application. But the approval of this application should not be construed as setting precedent where an Iowa state-chartered bank can sell substantially all its assets and liabilities to a credit union.

First American Bank agreed to pay $110,700 to cover cost incurred by the Division of Banking associated with the application.

First American Bank does not necessarily agree with the Superintendent's position on the legal issues addressed in the settlement agreement. The settlement agreement should not be interpreted as an admission of wrongdoing by the bank. Both parties have agreed to disagree regarding their respective positions.