Iowa bank sale to credit union would benefit consumers and increase state tax revenue

DES MOINES — First American Bank’s recent decision to sell seven of its branches to GreenState Credit Union will lead to an increase in state tax revenue for Iowa and more money in consumer’s pockets, research shows. If First American Bank customers had been members of GreenState Credit Union last year, the State of Iowa would have received more than $250,000 in additional tax revenue. Further, the 10,000 bank customers impacted by this transaction would have earned an additional $8.4 million on their deposits in 2018.

“The Iowa Bankers Association appears to operate under the idea that ‘if you say it enough, it must be true.’ The facts are clear: this bank sale to a credit union will result in more tax revenue paid to the State of Iowa and millions of dollars in Iowans’ pockets,” said Murray Williams, President and CEO of the Iowa Credit Union League. “By becoming credit union members, there is significant value returned to the pockets of hard-working Iowans instead of going to bank stockholders. This does not even account for the better loan rates these new members will enjoy at a credit union.”

The additional $8.4 million that could have been earned on customer deposits in 2018 is due to the credit union paying higher interest than the bank. This money would have been subject to individual state income tax and generated approximately $500,000 in new tax revenue. In addition, GreenState would have paid an additional $150,000 in state tax on its legal reserves.

By comparison, First American Bank reported total state income tax accrued of $323,000 in 2018. First American Bank is structured as a Subchapter S bank, which means it is exempt from federal corporate income tax and its shareholders receive a state tax credit available only to those banks.

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