Iowa bank is fifth failure this year

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A small community bank in Sac City, Iowa, has failed after examiners identified "significant loan losses that had not been previously identified," according to a statement by the Iowa Division of Banking.  

Citizens Bank, which was taken over by regulators on Friday, had $66 million in assets and $59 million in deposits. It operated one full-service branch and a drive-up facility in Sac City. As of June 30, Citizens controlled about 10% of the $530 million deposit market in Sac County — the county seat of which is Sac City — according to data from the Federal Deposit Insurance Corp.  

Citizens is the fifth bank to fail in 2023. It had been the target of regulatory scrutiny prior to Friday's announcement. In August, Citizens entered into a consent order with the Iowa Division of Banking and the FDIC that focused on Citizens' commercial trucking portfolio. The consent order required Citizens to retain a consultant with problem loan workout experience and to cease using overdrafts as a means of funding borrower operations. 

The trucking industry, which enjoyed a significant pandemic-related lift as consumers turned to delivery, is now in the midst of a deep downturn that has made it difficult for many operators to repay loans. 

While neither the Division of Banking nor the FDIC disclosed how many truck loans Citizens had on its balance sheet, commercial-and-industrial loans made up 37% of its $38.2 million loan portfolio, according to the bank's third-quarter call report. Citizens reported a $4.6 million loss for the quarter ending Sept. 30.

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Citizens' assets were purchased by the Iowa Trust and Savings Bank in Emmetsburg. According to the state banking regulator, the purchase covered all consumer, commercial and public deposits, so there are no losses to any depositor. 

FDIC reported a $14.8 million loss to the Deposit Insurance Fund. 

Prior to Citizens, the most recent community bank failure was that of the $139 million-asset Heartland Tri-State Bank in Elkhart, Kansas, which failed in September after it fell victim to a cryptocurrency scam. 

Citizens was the first Iowa bank to fail since regulators closed the $91.6 million-asset Polk County Bank in Johnston in November 2011.