Polk County Bank, Johnston, Iowa, was closed today by state regulators who appointed the FDIC as receiver. All deposits of failed Polk County Bank were assumed by Grinnell State Bank of Grinnell, Iowa, under a purchase and assumption agreement with the FDIC.
Polk County Bank has a long history, having opened for business in 1903. The family owned and operated Bank grew slowly over the years, ending 1993 with assets of only $18 million. In subsequent years, asset growth expanded rapidly at Polk County, reaching $84 million in 2001 and $170 million at the end of 2007.
The increased pace of loan growth during the real estate bubble of the past decade ultimately resulted in the Bank’s failure as loan defaults increased dramatically starting in late 2008. Polk County Bank had a troubled asset ratio of 100% by the end of 2008 and by June of this year reached 420%. The vast majority of banks with a troubled asset ratio over 100% wind up failing and Polk County was no exception to this rule.
In October 2008, Polk County was issued a cease and desist order by the FDIC which detailed numerous unsafe or unsound banking practices employed by Polk County Bank.
All three branches of Polk County Bank will reopen on Saturday as branches of Grinnell State Bank. Full FDIC deposit insurance coverage will continue for depositors of failed Polk County Bank up to the applicable limits. Over the weekend, customers of Polk County will have access to their money through ATM, checks and debit cards.
At September 30, 2011, Polk County had total assets of $91.6 million and total deposits of $82.0 million. Besides assuming all deposits, Grinnell State Bank agreed to purchase all the assets of Polk County. This is the first acquisition of a failed bank by Grinnell State Bank. Similar to Polk County, Grinnell State Bank is also a locally owned and family run bank.
The estimate cost to the FDIC Deposit Insurance Fund for the failure of Polk County Bank is $12.0 million. Polk County becomes the nation’s 89th banking failure of 2011 and the first in Iowa this year.