|California banking regulators shut down two banks. Losses from the two failures are expected to cost the federal government more than $300 million.
County Bank was shut down on Friday by the California Department of Financial Institutions, according to an announcement from the Federal Deposit Insurance Corporation -- which was appointed receiver.
In its own statement, the Department of Financial Institutions cited inadequate capital for its action. The state had been closely monitoring County and had ordered it to increase its capital reserves -- which the bank was unable to comply with.
Last year, County and parent Capital Corp. entered a written agreement with the Federal Reserve Bank of San Francisco that required it to enhance risk management and preserve capital. The Federal Reserve approved County's acquisition of 11 National Bank of Arizona branches in 2007 -- a move that was expected to make County the 40th-largest insured depository institution in California.
The Merced, Calif.-based bank had 39 offices. Around $1.3 billion in deposits as of Feb. 2 will be assumed by Westamerica Bank.
All of County's $1.7 billion in asset will be purchased by San Rafael, Calif.-based Westamerica, though the FDIC has agreed to share some of the losses on some asset pools. Around $837 million in mortgages were held by County as of Sept. 30, 2008.
The FDIC projects a $135 million hit to its Deposit Insurance Fund as a result of County's failure.
California's Department of Financial Institutions also said it shut down Alliance Bank on Friday for inadequate capital and appointed the FDIC receiver.
A cease-and-desist order was issued against Alliance by the FDIC on Oct. 15.
Alliance's deposits were $951 million as of Dec. 31 and will be assumed by California Bank & Trust. Assets were $1.14 billion, of which San Diego-based California Bank & Trust will aquire $1.12 billion at a $10 million discount. The FDIC has also agreed to a loss-sharing agreement in this asset sale.
Mortgage holdings at Culver City, Calif.-based Alliance were $602 million on Dec. 31.
Losses tied to Alliance's failure are projected to cost the FDIC $206 million.
So far in 2009, nine federally insured banks have failed.