Bank failure: Citizens Bank collapses after 94 years

Bank failure: Citizens Bank collapses after 94 years

The bank failure of Citizens Bank, a Sac City institution for 94 years, has been confirmed by the Federal Deposit Insurance Corp, attributing the cause to significant non-local loan losses.

At the end of the third quarter, the bank’s ledger showed $65,558,000 in assets against $58,930,000 in total deposits, culminating in the institution’s cessation of operations on November 3, the FDIC’s announcement detailed. The regulatory body emphasized that there is no mandated warning period for the closing of a bank.

Come Monday, the main office of Citizens Bank, along with its adjacent drive-up service, will commence operations under the stewardship of Iowa Trust & Savings Bank based in Emmetsburg. This transition was made possible as Iowa Trust & Savings Bank has acquired all varieties of deposits—personal, commercial, and government—ensuring depositors face no monetary losses. Additionally, the acquisition includes the assumption of performing loans, as stated in the announcement.

Upon review, examiners unearthed “significant loan losses” that had gone unnoticed by Citizens Bank’s management. The bank’s loan portfolio was notably concentrated in “out-of-territory and out-of-state loans” tied to a singular sector that experienced pronounced defaults, as per the FDIC’s report.

Citizens Bank closes its doors

This bank failure marks the first in Iowa since 2011, with the FDIC taking over the deposits and the majority of the assets. The FDIC also seeks to address public queries regarding the closure and the subsequent processes.

Bank failure Citizens Bank collapses after 94 years
The bank failure of Citizens Bank, a Sac City institution for 94 years, has been confirmed by the FDIC (Image: Kerem Gülen/DALL-E 3)

The Iowa Division of Banking’s superintendent made a statement revealed by a blog, indicating that a collaborative investigation by the IDOB and the FDIC uncovered considerable undisclosed loan losses at Citizens Bank.

The superintendent’s announcement further highlighted that the bank had a heavy concentration of loans issued to a single industry outside its local territory and state. These loans, as mentioned in the blog, suffered substantial losses. The specific industry linked to these loans was not disclosed in the statement.

The blog also mentioned that before Citizens Bank encountered its downfall, the FDIC and IDOB had mandated a consent order with the bank in August. Under this order, detailed by Bank Reg Blog, Citizens Bank agreed to appoint an independent loan review consultant possessing the necessary expertise, including skills for managing troubled loans.

Moreover, the consent order concentrated on a particular loan portfolio. It gave the newly appointed consultant complete control to manage and service the bank’s commercial trucking loan portfolio.

With a modest population of just over 2,000 in Sac City and roughly 3.2 million across Iowa, the scale of Citizens Bank’s operations was limited, managing assets of about $66 million.

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Is my money still secure following the bank failure?

Absolutely, the FDIC assures that no customer funds were lost due to the closure of Citizens Bank. The entirety of the deposits has been safely transferred to the Iowa Trust & Savings Bank.

How can I access my funds now?

Account holders can use their existing checks, which will be honored up to the available account balance. Similarly, ATM and debit card services remain uninterrupted. The FDIC has confirmed that all funds in various account types — including checking, savings, money market accounts, certificates of deposit, and retirement accounts — have been moved to Iowa Trust & Savings Bank and are available for use.

Bank failure Citizens Bank collapses after 94 years
The FDIC assures that no customer funds were lost due to the closure of Citizens Bank (Image: Kerem Gülen/DALL-E 3)

Will my direct deposits be affected?

The transition will not disrupt direct deposit transactions. Regular electronic deposits, encompassing social security, payroll, veterans’ benefits, and other forms of electronic transfers like disability or unemployment benefits, will continue without interruption.

What about scheduled bill payments and online banking services?

Scheduled bill payments, as well as online banking services, will operate without any change. Your existing routing and account numbers remain valid until Iowa Trust & Savings Bank issues a written notice detailing any changes.

Customers seeking additional details can contact the dedicated helpline for Citizens Bank at (866) 314-1744. Further information is also available on the FDIC’s official website.

Featured image credit: Kerem Gülen/DALL-E 3

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