Blog Series: Changing Bank Control and the New Iowa Notice Requirements

On July 1, the most significant change to the legal landscape for Iowa banks in a generation occurred when new amendments to Iowa Code Chapter 524 became effective. For the next several weeks, Dickinson Law will cover some of the most significant changes and how they affect Iowa banks.

Iowa banks interested in changing their ownership structure should be advised that effective July 1, 2022, the change in control section of the Iowa Code has been revised.

Section 524.544 is amended to add the following new subsection:

“As used in this section, the term ‘control’ means owning, controlling, or having power to vote twenty-five percent or more of any class of voting securities of a state bank or having the power, directly or indirectly, to elect the board of directors.” 

Previous versions of the above Code section read as follows:  “As used in this section, the term ‘control’ means the power, directly or indirectly, to elect the board of directors.”  Although there was no specific percentage ownership previously stated, this usually meant owning more than 50% of the voting shares.

The Iowa Division of Banking has indicated that one of the goals was to align this provision with the requirements of the Federal Reserve Act.  Under the federal Change in Bank Control Act, prior approval from the Federal Reserve is required when a person, acting alone or together with others, acquires control of a bank holding company, savings and loan holding company, or state member bank.  The agencies have defined “control” as having “the power, directly or indirectly, to direct the management or policies of the bank, or to vote 25 percent or more of any class of voting securities of the bank.” 

Iowa Code Section 524.544 continues to urge banks to seek prior approval if there is any change in bank governance.  This section of the Code, as did prior versions, continues to indicate that “If there is any doubt as to whether a change in the ownership of the outstanding shares is sufficient to result in control thereof, or to effect a change in the control thereof, such doubt shall be resolved in favor of reporting the facts to the superintendent.” 

If your bank is in doubt as to whether a change in control notice is required, contact one of our firm’s banking attorneys for assistance.