I
llinois regulators shut down Pulaski Savings Bank, a Chicago-based institution, marking the first bank failure of 2025. The closure comes as predicted by last year's forecasts that hundreds of small lenders would collapse under higher interest rates by 2026. After the Illinois Department of Financial and Professional Regulation closed Pulaski, the Federal Deposit Insurance Corporation stepped in as receiver and found a buyer for its deposits and assets.

    Millennium Bank of Des Plaines acquired nearly $43 million in deposits at a 4.6% premium and bought most of the bank's $49.5 million in assets, including loans. The FDIC retained $4.5 million in assets, estimating the failure would cost the Deposit Insurance Fund around $28.5 million. The cause of Pulaski's collapse is unclear, with suspected fraud potentially costing more to the fund.

    Pulaski did not specialize in commercial real estate lending, but made residential mortgages on a case-by-case basis. Its delinquent mortgage rate has increased since interest rates began rising in March 2022, though it remains low at 1.4%. The bank was set to merge with Chicago Mutual Federal Bank this quarter before the deal was suddenly called off earlier this month.

    The FDIC often forces a merger between a struggling bank and a larger one when insolvency is imminent. In this case, Millennium Bank acquired Pulaski's assets, despite having significantly more assets itself at $92 million compared to Pulaski's approximately $50 million. Pulaski operated in the South Side's Bridgeport neighborhood for over 125 years before its closure.