Regulators close three failed banks in Georgia, California

Regulators on Friday closed FirstBank Financial Services in Georgia and two California banks, Alliance Bank and County Bank, marking nine failures this year of federally insured institutions.

The Federal Deposit Insurance Corp. was appointed receiver of the three banks. FirstBank Financial, based in McDonough, Ga., had $337 million in assets and $279 million in deposits as of Dec. 31. Alliance Bank, based in Culver City, Calif., had about $1.14 billion in assets and $951 million in deposits as of year's end. Merced, Calif.-based County Bank had around $1.7 billion in assets and $1.3 billion in deposits as of Feb. 2.

Twenty-five U.S. banks failed last year, far more than in the previous five years combined. The six failures announced in the last two weeks are double the total for all of 2007.

It's expected that many more banks won't survive this year amid the pressures of tumbling home prices, rising mortgage foreclosures and tighter credit. Some may have to merge with other institutions.

The FDIC said FirstBank Financial's deposits will be assumed by Regions Bank in Birmingham, Ala. Its four branches will reopen Monday as offices of Regions Bank. Regions Bank also agreed to buy around $17 million of FirstBank's assets; the FDIC will retain the rest for eventual sale.

Alliance Bank's deposits will be assumed by San Diego-based California Bank & Trust, which also agreed to buy about $1.12 billion in assets. The FDIC will keep the rest for eventual sale. In addition, California Bank & Trust agreed to share losses on the assets with the FDIC. Alliance Bank's five branches will reopen Monday as offices of California Bank & Trust.

Westamerica Bank, based in San Rafael, Calif., agreed to purchase all the deposits and assets of County Bank. Westamerica also is sharing losses with the FDIC. County Bank's 39 branches will reopen as branches of Westamerica, some on Saturday and others on Monday.

Regular deposit accounts are insured up to $250,000.

Since October, the Treasury Department has been using most of the first half of the $700 billion federal bailout fund to buy stock in banks and other financial institutions, with the idea that cash injections will spur banks to get lending again.

But with banks clamoring for the second $350 billion installment to be doled out, Treasury Secretary Timothy Geithner and other top officials are readying a plan to overhaul the rescue program. Those efforts are expected to be announced Monday.

Seattle-based thrift Washington Mutual failed in late September, the biggest bank collapse in U.S. history. It had $307 billion in assets. Wall Street powerhouse JPMorgan Chase bought Washington Mutual's deposits, branches and loan portfolio from the FDIC for $1.9 billion.

The FDIC estimates that through 2013, there will be more than $40 billion in losses to the deposit insurance fund, including an $8.9 billion loss from the failure of IndyMac Bank last July. The agency has raised insurance premiums paid by banks and thrifts to replenish its fund, which now stands at around $34.6 billion, below the minimum target level set by Congress and the lowest level since 2003.

An FDIC official asked Congress this week to more than triple the agency's line of credit with the Treasury Department to $100 billion from the current $30 billion, as a way to reassure the public that the government stands firmly behind insured bank deposits.

The FDIC has in place a program to guarantee as much as $1.4 trillion in U.S. banks' debt for more than three years as part of the government's financial rescue plan. Under the program, which is meant to thaw the freeze in bank-to-bank lending, the FDIC is providing temporary insurance for loans between banks, guaranteeing the new debt in the event of payment default by the borrowing bank.

Of the roughly 8,500 federally insured banks and thrifts, the FDIC had 171 on its confidential list of troubled institutions as of Sept. 30 — a nearly 50% jump from the second quarter and the highest tally since late 1995.

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