Pulaski Savings failed after years of issues, $21M of unaccounted for deposits

The collapse of Pulaski Savings Bank of Chicago is now the subject of an in-depth review by the FDIC’s Office of Inspector General, reflecting the exceptional loss to the Deposit Insurance Fund (DIF) and the alarming discovery that nearly $21 million in deposits were never recorded in the bank’s core system.

The state-chartered mutual savings bank, which had $49.5 million in total assets, failed in January, with most of its assets and deposits sold to Millennium Bank in Des Plaines, Ill.

Pulaski Savings’ closure resulted in an estimated $28.4 million loss to the DIF — equal to 62% of the bank’s assets. That’s nearly four times the average loss rate of 17% seen in other bank failures over the past five years.

The OIG determined that the failure stemmed primarily from the unrecorded deposit liabilities and, by extension, impaired capital. The core accounting failure was flagged by a contractor hired by the bank, who discovered that some CDs were not posted to the core system, effectively making key deposit liabilities invisible to management and regulators.

Because these deposits had no corresponding assets and were never reflected in the bank’s core system, the resulting accounting void eroded the bank’s equity and rendered its financials unreliable by the end of 2024.

A December 2024 exam confirmed major unresolved discrepancies in suspense accounts, failures to post certificates of deposit, and a widespread lack of internal documentation. In response, the FDIC downgraded Pulaski’s CAMELS rating to levels indicating failure across virtually every regulatory metric.

Regulatory concerns at Pulaski were not new. The bank had operated under a memorandum of understanding since 2017, which was updated in 2020 and again in 2023, with a goal of improving board oversight, succession planning, and profitability. Yet the bank failed to produce a single year of positive core earnings between 2005 and its closure.

CAMELS ratings for management and earnings were rated “3” or worse for more than a decade. In a September 2023 exam, regulators noted insufficient progress in addressing deficiencies related to oversight, succession, profit planning, commercial real estate risk, and business continuity.

The issue of succession planning became acute when the bank’s CEO fell ill in 2023. According to the report, “many documents could not be provided to examiners,” highlighting a lack of leadership depth and institutional knowledge.