As everyone in and associated with the trucking industry knows, most of the last two years have been very difficult ones for the industry.
Trucking companies large and small have gone out of business. There are too many trucks chasing too little freight. Rates on most lanes are at or below 2019 levels — another bad year for the industry.
In addition, brokerages have also been hurt. As widely reported by FreightWaves and other media, Convoy, a very high-profile brokerage, recently shut down for financial reasons. Other brokerages have also gone out of business, and layoffs have become relatively commonplace.
There are hiring freezes and other belt-tightening moves in effect throughout the freight industry.
Citizens Bank goes under
Now the trucking bloodbath has taken down a bank.
Citizens Bank of Sac City, Iowa, has failed, and it appears that its exposure to commercial trucking is the cause.
Citizens Bank was a small state-chartered bank. Its loan portfolio was focused on “commercial and industrial loans,” according to Bank Reg Blog.
The blog reported on Nov. 3 that the Federal Deposit Insurance Corporation (FDIC) “announced that Citizens Bank, a $66 million asset nonmember bank … had failed.”
Supervised by the FDIC and the Iowa Department of Insurance and Financial Services, all of the deposits of Citizens Bank were assumed by Iowa Trust & Savings Bank, the blog reported.
Citizens Bank was a state-chartered bank that was closed by the Iowa Division of Banking on Nov. 3 and the FDIC was then appointed receiver. At the time of Citizens Bank’s closure, the FDIC estimated that the bank had losses of $14.8 million due to the bad loans.
To protect depositors, the FDIC entered into a purchase and assumption agreement with Iowa Trust & Savings Bank of Emmetsburg, Iowa. Iowa Trust & Savings assumed all the deposits and substantially all the assets of Citizens Bank, but not the bad loans.
Bad trucking industry loans?
The superintendent of the Iowa Division of Banking (IDOB), which is part of the department, also issued a statement, according to the blog, saying that in the course of a joint FDIC/IDOB examination, “examiners identified significant loan losses that had not previously been identified by the bank.”
In addition, the superintendent’s statement included information that Citizens Bank’s loan portfolio was concentrated in “out-of-territory and out-of-state loans to one industry.” The blog noted that “some of those loans had incurred heavy losses.” In the statement, the industry in question was not identified.
However, prior to the failure of Citizens Bank, the FDIC and IDOB entered into a consent order with it in August, the blog reported.
As part of the consent order, according to Bank Reg Blog, Citizens Bank was required to engage an “independent third-party loan consultant” with “requisite knowledge, skills, ability and workout experience.”
Additionally, the consent order focused on one loan portfolio, the blog reported. The consultant had “full authority and discretion to administer and service the Bank’s commercial trucking loan portfolio.”
Sac City’s population is just over 2,000 people; the population of Iowa is only about 3.2 million people. Citizen Bank’s assets were only $66 million.
Prices for new Class 8 trucks in 2023 vary by brand, as well as by the number and type of features and equipment. However, they are expensive; prices range between $150,000 for basic models to over $220,000 for models with custom features.
How or why a small state-chartered bank in the very small town of Sac City, Iowa, was making loans on expensive trucks is unknown, but doing so seems highly speculative.
Stephen webster
20 months ago the gov was told to limit the number of foreign students and workers coming into the U S and Canada to 5000 as mechanic in Canada and 10,000 truck drivers for a 8 months contract from April to December
As Canada has a surplus of trucks and truck drivers from Dec 20 till April 10 every year. THE largest trucking companies said Canada and the U S had a huge problem to get drivers so instead of going to hourly pay and overtime after 9 hrs of driving or 10 hours on duty in a day they bought more new truck and new drivers at cheap rates of 43 cents cd or 30 cents U S per miles and unpaid hours at shipping and receiving when e logs came in . We need a fair wage for company truck drivers of at least $24 U S per hour while on U S siol or $32 cd hr plus medical and a min detention rate of $50 U S per hr to the truck with a min of $25 .of that going to the drivers
Pat Boone
So, the public holding the empty bag. Practices like Donald J. Trump would have gutted the banking industry…fortunately, he paid the banks back. Just too risky. The end results…lies, cheating, con artists, deviant rich peoples and trumpian behavior always end in destruction.
cn
As others have pointed out, this may have been a scam deal for people to skim money from loans. Back in the ’90’s there was a famous case in Indiana involving a truck dealer and a finance company where everybody got approved and many of the loans had sub-loans for the down payment all set up. Seems the finance company had ringers in control and people were making money on the skim. Tiny dealership suddenly began selling tons of trucks and customers coming from all over the country because the word went around fast that this dealer could “make it happen” even if you had little to no money.
johny679343
Craig gets so excited when trucking related business fail LOL sad life
Sean
This story seems all to familiar. There are in fact too many companies in the trucking industry. Too many brokers and to many independent contractors. The trucking companies have tried to turn themselves into the company town and force drivers to live in the company
house and shop at the company store. A complete scam
Thomas Murray
They were insured by the FDIC.
Read the FDIC’s page at fdic.gov about this failure.
Tom Jordan
This is an old scam that burned thru Texas back in the 1980’s. This story, and the many more that are going to continue to surface should come as no shovk to Freightwaves or any other publicstion/media outlet that understands banking/finance. These loans were “setups” from the onset. Please feel free to contact me for further commentary and data.
John Lease
This is incorrect, the loss is absorbed by the FDIC. State Charter non members are non members of the Federal Reserve, FDIC is the primary federal regulator.