Financial Regulators Close Down California Bank

On Friday 1st Contennial Bank in California became the third U.S. bank to fail this year. The Banks $676.9 million in deposits will be assumed by First California Bank. 1st Contennial Bank’s 6 branch offices will also re-open Monday as offices of First California Bank.

The FDIC was appointed as the receiver of 1st Centennial Bank’s $803.3 million in failed assets. Out of this First California Bank will purchase approximately $293 million, with the rest to be sold by the FDIC. The FDIC estimates that at the resolution of 1st Contennial the total cost to the federal deposit insurance fund will be about $227 million.

Twenty-five U.S. banks went out of business last year due to the rising mortgage foreclosures, falling home prices, and strict credit guidelines. In comparison if you look at the last 8 years (between 2000-2008) a total of 52 banks have collapsed.  States that have been hurt the most by the falling prices are Arizona, California, Florida, and Nevada.

The FDIC estimates that there will be approximately $40 billion in losses to the deposit insurance fund through 2013, including an $8.9 billion lost from the collapse of IndyMac Bank last July.  The agency recently had to increase insurance premiums paid by banks to replenish its funds of about $34.6 billion, which is currently below the minimum target level set by Congress and the lowest they have been since 2003.

To read more about regulators close 1st Contennial Bank in California head on over to BusinessWeek.