Eight Banks Fail in Four States

Regulators shut down ShoreBank of Chicago, along with banks in California, Florida and Virginia.
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WASHINGTON (

TheStreet

) -- Eight banks were shuttered by regulators Friday, bringing the 2010 tally of U.S. bank failures to 118.

Six of the eight failed banks were included in

TheStreet's

Bank Watch List

of undercapitalized institutions, based on second-quarter regulatory data provided by

SNL Financial

.

The Federal Deposit Insurance Corp. found buyers for the deposits and branches for all of the failed institutions and estimated the combined cost to its deposit insurance fund would be $473.5 million.

The largest failure on Friday was

ShoreBank

of Chicago, which had $2.16 billion in total assets. ShoreBank received wide media coverage after

Bloomberg

reported Aug. 5 that the institution had been denied federal bailout funds that would have been required to complete an earlier deal to raise $145 million in capital from an investor group that included

Citigroup

(C) - Get Report

,

Bank of America

(BAC) - Get Report

,

JPMorgan Chase

(JPM) - Get Report

,

Wells Fargo

(WFC) - Get Report

,

Morgan Stanley

(MS) - Get Report

,

Goldman Sachs

(GS) - Get Report

and

Northern Trust

(NTRS) - Get Report

.

Early Friday, the

Wall Street Journal

reported that the same investor group had agreed to back ShoreBank's new management team in a new bid to buy ShoreBank's assets from the FDIC were it to fail.

This is indeed what happened. After Illinois regulators shuttered ShoreBank, the FDIC sold the failed institution's deposits for a 0.50% premium to the newly formed

Urban Partnership Bank

of Chicago, which also acquired ShoreBank's assets, with the FDIC agreeing to share in 80% of losses on $1.41 billion of the acquired assets.

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Because of the unusual nature of the failed bank's resolution and the wide media coverage before ShoreBank's failure, the FDIC released additional details about its marketing efforts for the failed bank, saying that the Urban Partnership Bank bid was the only one received and emphasizing that the senior managers retained form ShoreBank were the new management team that had joined the bank in June.

FDIC spokesman David Barr told

TheStreet

that if the agency hadn't received the offer from the Urban Partnership group, liquidating ShoreBank could have cost the deposit insurance fund "close to $700 million." He also emphasized that ShoreBank was a designated community development bank with a business strategy of serving "underserved low-to-moderate income communities," and that Urban Partnership Bank's management would follow the same strategy and eventually seek the same designation from the Treasury.

The 15 branches of ShoreBank in Chicago, Detroit and Cleveland were set to reopen during normal business hours as branches of Urban Partnership Bank. The FDIC estimated the cost to the deposit insurance fund would be $367.7 million.

Four California Failures

The California Department of Financial Institutions took over

Butte Community Bank

of Chico, Calif., which had $499 million in total assets, and

Pacific State Bank

of Stockton, which had total assets of $312 million. The FDIC was appointed receiver and sold the deposits and assets of both failed banks to

Rabobank, NA

of El Centro, Calif. Rabobank paid the FDIC a 4.05% premium for Butte Community's deposits, but it paid no premium for Pacific State Bank's deposits

The failed banks were not affiliated with each other. Their combined 23 branches were scheduled to reopen during normal business hours as Rabobank branches. The FDIC agreed to share in losses on $425 million of Butte Community Bank's assets and $250 million of Pacific State Bank's assets and estimated the cost to the deposit insurance fund would be $17.4 million for Butte Community's failure and $32.6 for Pacific State Bank

California regulators also shut down

Sonoma Valley Bank

of Sonoma, Calif., which had $337 million in total assets. The FDIC sold it to

Westamerica Bank

of San Rafael, Calif., which is the main subsidiary of

Westamerica Bancorporation

(WABC) - Get Report

.

Westamerica paid the FDIC a 2% premium for the failed bank's deposits. The FDIC estimated the cost of Sonoma Valley Bank's failure to the deposit insurance fund would be$10.1 million. The failed bank's branches were set to reopen Saturday as Westamerica branches.

The Office of Thrift Supervision closed

Los Padres Bank

of Solvang, Calif., which had $870 million in total assets. The FDIC sold the failed bank to

Pacific Western Bank

of San Diego, Calif., with the acquirer paying a 0.45% premium for Los Padres Bank's deposits.

Pacific Western Bank is held by

PacWest Bancorp

(PACW) - Get Report

.

The FDIC agreed to share in losses on $580 million in assets acquired by Pacific Western Bank and estimated the cost to the deposit insurance fund would be $8.7 million. The failed bank's 14 offices were scheduled to reopen as branches of Pacific Western on Monday.

Two Florida Failures

The Office of the Comptroller of the Currency shut down

Community National Bank at Bartow

and

Independent National Bank

of Ocala, Fla. The FDIC was appointed receiver and arranged for

CenterState Bank of Florida

to acquire all of the deposits and assets of both failed banks. CenterState is held by

CenterState Banks of Florida

(CSFL) - Get Report

.

Community National Bank at Bartow had $68 million in total assets, and Independent National Bank had $156 million in total assets. The FDIC agreed to share in losses on $52 million of the assets CenterState acquired from Community National Bank at Bartow and $120 million of the assets acquired from Independent National Bank. The failed banks' five branches were scheduled to reopen during normal business hours as CenterState branches.

The FDIC estimated the deposit insurance fund would incur costs of $10.3 million for Community National Bank at Bartow's failure and $23.2 million for Independent national Bank.

Imperial Savings and Loan

The OTS shut down

Imperial Savings and Loan

of Martinsville, Va. The FDIC was appointed receiver and sold the failed thrift, which had $9.4 million in total assets, to

River Community Bank, NA

, also of Martinsville, Va. The sole office of Imperial Savings and Loan was scheduled to reopen Monday as a River Community branch, and the FDIC estimated the cost to the insurance fund would be $3.5 million.

Ongoing Bank Failure Coverage

All previous bank closures since the beginning of 2008 are detailed in

TheStreet's

interactive bank failure map:

The bank failure map is color-coded, with states having the greatest number of failures highlighted in red, and states with no failures in gray. By moving your mouse over a state you can see its combined 2008-2010 totals. Clicking on a state will open a detailed map pinpointing the locations of the failures and providing additional information about each one.

--

Written by Philip van Doorn in Jupiter, Fla.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.