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Two Banks Fail; 2011 Tally at 73 (Update 1)

Additional information about the failure of Citizens Bank of North Carolina.

WASHINGTON ( TheStreet) -- State regulators shuttered two banks on Friday, bringing this year's total number of bank failures to 73.

Both failed banks were previously included in TheStreet's second-quarter Bank Watch List of undercapitalized institutions, based on regulatory data provided by SNL Financial.

Bank of the Commonwealth

State regulators on Friday closed Bank of the Commonwealth, of Norfolk, Va., which was formerly held by Commonwealth Bancshares (CWBS) and had $985.1 million in total assets and $901.8 million in deposits when it was seized by the Virginia State Corporation Commission.

The Federal Deposit Insurance Corp. was appointed receiver and sold the failed bank's deposits and $924.3 million of its assets to Southern Bank and Trust Co. of Mount Olive, N.C. The FDIC retained Bank of the Commonwealth's remaining asset for later disposition.

The FDIC agreed to cover 80% of losses on $798.2 of the failed bank's assets acquired by Southern Bank and Trust Co., and estimated the cost of Bank of the Commonwealth's failure to the deposit insurance fund would be $268.3 million.

The failed bank's 21 offices were set to reopen during normal business hours as Southern Bank and Trust branches.

Bank of the Commonwealth was the seventh-largest undercapitalized bank included in TheStreet's second-quarter watch list. The largest surviving bank on the watch list is Community One Bank, NA, which had $1.7 billion in total assets as of June 30 and is a subsidiary of FNB United (FNBN).

FNB United on April 27 entered into a deal to acquire Bank of Granite Corporation (GRAN) of Granite Falls, N.C., with $158 million in new capital being contributed by The Carlyle Group and Oak Hill Capital Partners. The target company holds Bank of Granite, which is also on the watch list. On August 16, FNB United announced that a total of $310 million in private equity subscription agreements, contingent upon approval of current shareholders and regulators.

In order for this complicated deal to be completed, all private equity investors need to meet their commitments, the U.S. Treasury Department needs to exchange $51.5 million in preferred shares of FNB United -- held in exchange for bailout funds received through the Troubled Assets Relief Program, or TARP - for common shares in the new combined holding company (the agency has already agreed to do so), and CommunityOne needs to repay outstanding debt and repurchase preferred stock held by SunTrust (STI - Get Report).

Citizens Bank of Northern California

The California Department of Financial Institutions shut down Citizens Bank of Northern California of Nevada City, which had total assets of $288.8 million and $253.1 million in deposits. The FDIC was appointed receiver and sold the failed bank to Tri Counties Bank of Chico, Calif.

The acquiring institution is a subsidiary of TriCo Bancshares (TCBK - Get Report).

The FDIC estimated that the cost of Citizen Bank of Northern California's failure to the deposit insurance fund would be $37.2 million.

The failed bank's seven branches were scheduled to reopen Monday as branches of Tri Counties Bank.

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