The Office of Inspector General (OIG) of the Federal Deposit Insurance Corporation (FDIC) issued its report on the In-Depth Review of Pulaski Savings Bank.
The objectives of the in-depth review were to (1) determine the cause(s) of Pulaski Savings Bank’s failure and resulting loss to the Deposit Insurance Fund (DIF) and (2) evaluate the Federal Deposit Insurance Corporation’s (FDIC) supervision of the bank, including the FDIC’s implementation of the Prompt Corrective Action (PCA) requirements of Section 38 of the Federal Deposit Insurance (FDI) Act.
Pulaski Savings Bank’s failure occurred primarily due to impaired capital. Specifically, the bank had deposit liabilities of at least $20.7 million not accounted for in its core financial system. Since assets corresponding with these deposits were not identified, the subsequent recording of these previously unrecognized deposits exceeded the bank’s equity capital, at which point, the bank became critically undercapitalized.
Consistent with Prompt Corrective Action provisions, the FDIC notified Pulaski Savings Bank that it was “critically undercapitalized” and required it to take actions necessary to increase capital. Ultimately, the Illinois Department of Financial and Professional Regulation determined that the bank was impaired, took possession, and appointed the FDIC as receiver.
The FDIC conducted its examinations in a timely manner and identified weaknesses in the bank’s management since 2017. While the FDIC did not formally designate a dominant official at Pulaski Savings Bank, its supervisory actions sought to mitigate weaknesses in the bank’s management including certain key person risks in the most recent examination cycles. For that reason, we are not making a formal recommendation in this report. However, we encourage the Division of Risk Management Supervision to consistently consider the presence and impact of dominant officials as part of the examination process and designate officials as such when appropriate and in accordance with FDIC procedures and guidance. The FDIC had no comments on this report.