Illinois regulators closed Chicago-based Pulaski Savings Bank on Friday evening in the first bank failure of 2025.
The closure comes on the heels of last year’s predictions that “hundreds” of small lenders would collapse through 2026 under the pressure of higher interest rates.
After the Illinois Department of Financial and Professional Regulation shuttered Pulaski, the Federal Deposit Insurance Corporation stepped in as receiver and found a buyer for the bank’s deposits and most of its assets, according to the FDIC.
Millennium Bank of Des Plaines, Illinois, assumed all of the bank’s nearly $43 million in deposits at a 4.6 percent premium. And it bought the bulk of its $49.5 million in assets, which include loans.
That leaves $4.5 million in assets in the FDIC’s hands. The agency estimated the failure would cost the Deposit Insurance Fund about $28.5 million — small potatoes compared to the $2.5 billion Signature Bank’s failure cost the fund in March 2023.
It’s not yet clear what drove Pulaski’s collapse. The FDIC noted “suspected fraud” would cost more to the DIF.
Forecasts that bank failures would pockmark the industry over the next two years largely predicated on bank’s exposure to commercial real estate amid the surge in interest rates and the distress rattling the office market.
It doesn’t appear that Pulaski specialized in commercial real estate lending. Its site specifies that such loans were made on a “case-by-case basis.”
The bank did make residential mortgages, according to its site. The percentage of mortgages marked 30-89 days delinquent has ticked up since the Federal Reserve started hiking rates in March 2022; though, the rate remains low at 1.4 percent, according to National Mortgage Base data.
Pulaski’s collapse comes the same quarter it was set to merge with larger Chicago Mutual Federal Bank — a sign that trouble was brewing. The deal was called off suddenly earlier this month.
Often, the FDIC will force a so-called shotgun wedding if it thinks insolvency is imminent.
Typically, a smaller bank is acquired by a bigger one. Mutual Federal had about $92 million in assets at the end of 2024, compared to Pulaski bank’s approximately $50 million.
Pulaski operated out of the South Side’s Bridgeport neighborhood for over 125 years. Its Morgan Street location was set to open as a branch of Millennium on Saturday morning.