State Banking Superintendent Jeff Plagge says the Sac City bank he declared insolvent on Friday had heavy losses on some of its loans to commercial trucking firms.
“This (bank) had a segment of a business line that actually was outside of not only their geographic territory of where the bank is located, but in some cases outside of the state,” Plagge says.
Citizens Bank in Sac City reopened Monday as a branch of Iowa Trust and Savings Bank of Emmetsburg. An August court order identified some Citizens Bank loans to the trucking industry as higher risk than the bank had previously disclosed and Plagge says that sped up the already scheduled examination of the bank’s portfolio. “Banks are either on a 12 month exam cycle or an 18 month exam cycle depending on the size of the bank and the risk rating of the bank,” Plagge says. “…It just happened to be around that same time as we noticed some issues surfacing.”
Plagge says they’re not seeing similar issues at other Iowa banks. “We have 230 banks in Iowa, so we still have a lot of banks that we either do the direct exam of or we do it with our federal partners at the (Federal Reserve) or the FDIC,” Plagge says. “We don’t see a lot of banks that have a concentration of trucking loans.”
Trucking firms continue to face a shortage of drivers and supply chain issues, as well as high operating costs.
Plagge, who was a commercial banker for 42 years, has been state banking superintendent since September of 2019. He says there’s no reason to be concerned about the viability of Iowa banks in general. “What we see in Iowa right now is 96% of our banks are still rated one and two on a scale of one-to-five, with one being the best, and over 95% of the banks are still profitable and even those that are maybe struggling a little bit with profits because of the net interest margins and squeeze by the Fed moves, that doesn’t mean they’re in trouble,” Plagge says. “They’ve got to go through the maturity cycles of their loans and investments to get back to the current market rates.”
Citizens Bank in Sac City was founded in 1929. Iowa Trust and Savings Bank in Emmetsburg acquired the bank’s nearly $59 million in deposits as well as all available loans.
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