Citizens Bank of Sac City, Iowa, failed Friday after examiners “identified significant loan losses that had not previously been identified by the bank,” the Iowa Division of Banking announced.
The $66 million-asset bank’s collapse marks the fifth bank failure this year and stemmed from loans made to the commercial trucking industry, Iowa Superintendent of Banking Jeff Plagge told the Des Moines Register.
State regulators Friday said the bank had a “concentration of out-of-territory and out-of-state loans to one industry and incurred heavy losses on some of those loans.”
The Register reported that the Federal Deposit Insurance Corp. in August directed the bank to give an independent consultant “full authority and discretion to administer and service the bank’s commercial trucking loan portfolio.”
The bank entered into FDIC receivership Friday and was then purchased in full by Iowa Trust & Savings Bank, resulting in no loss to depositors.
Curt Hoff, a finance professor at Iowa State University, told the Register that Citizens’ financial statements showed about half of the bank's $59 million in deposits were in excess of $250,000 and therefore uninsured.
“I’m going to say that only about 20% to 30% of banks in Iowa have that much in uninsured deposits,” he told the Register.
The uninsured deposits at Silicon Valley Bank and First Republic Bank dwarf those at Citizens. The banks, whose collapses accelerated the banking crisis in March, had 85% and 64% of deposits uninsured, respectively.
Established in 1929, the Iowa bank is the eldest to fail this year. The second-eldest, SVB, was established in 1983.
Klaros Group partner Brian Graham told Banking Dive that Citizens’ failure was an “old-fashioned bank failure resulting from losses due to bad credit on loans.”
“That's unlike the instances of the spring, like SVB and FRB, where banks failed despite having pristine credit as a result of unrealized losses on fixed rate bonds and loans stemming from poor interest rate risk management,” he said.
The common theme in these failures, said Klaros director Vince Curotto, “is the significant risk banks take by becoming overly concentrated and reliant on banking a single industry.”
What for SVB was the venture-backed tech industry was, for Citizens, trucking.
Citizens’ two branches reopened Monday under the Iowa Trust & Savings banner, the FDIC said.