If you are a customer of Citizens Bank in Sac City, Iowa, you may have been surprised to find out that your bank was closed by the regulators on November 3, 2023. This marked the fifth bank failure in the US this year and the first one in Iowa since 2011.
Citizens Bank was established in 1929 and had two branches in Sac City, a small town of about 2,000 people. According to the FDIC (Federal Deposit Insurance Corporation), the bank had about $66 million in total assets and $59 million in total deposits as of September 2023. The bank was mainly focused on agricultural lending, but also had significant exposure to commercial trucking loans.
Cause of Citizens Bank Failure
During a joint examination by the Iowa Division of Banking and the FDIC, examiners discovered that the bank had incurred heavy losses on some of its out-of-territory and out-of-state loans to one industry. The regulators did not specify which industry was involved, but some sources suggest that it was related to oil and gas exploration. The bank had not properly reported these losses to its management or shareholders, leading to insolvency.
Resolution and Impact on Customers
The FDIC was appointed as the receiver of the bank and entered into a purchase and assumption agreement with Iowa Trust & Savings Bank, based in Emmetsburg. Iowa Trust & Savings Bank agreed to assume all deposits of Citizens Bank, including personal, commercial, and government accounts. The two branches of Citizens Bank reopened as branches of Iowa Trust & Savings Bank on November 6. Customers can access their money through existing checks, debit cards, and online banking services. The FDIC assured that no depositor lost any money as a result of the bank failure.
The FDIC provided a toll-free number (1-800-523-8089) and a website (FDIC Citizens Bank Closure) for customers to get more information about the bank closure and their accounts. Customers are advised to review their deposit insurance coverage using the online Electronic Deposit Insurance Estimator (EDIE) tool to calculate their coverage.
Financial Implications and FDIC's Role
The FDIC reported that as of June 30, 2023, there were some banks on its “problem list,” indicating banks at risk of failure. The estimated cost of resolving Citizens Bank is $14.8 million, to be paid by the Deposit Insurance Fund (DIF). The DIF, with a balance of $117.9 billion as of June 30, 2023, represents 1.35% of insured deposits. The FDIC aims to maintain the fund at a minimum level of 1.35% and can adjust premiums accordingly.
The bank failure of Citizens Bank is not expected to have a significant impact on the overall banking system or the economy of Iowa. However, it is a sad event for the community of Sac City and the employees and shareholders of Citizens Bank. We hope that this information has helped you understand what happened to Citizens Bank and what you can do if you are affected by it.