First Regional Bank of Century City on Friday became the first California bank this year to be shut down by regulators, a victim of real estate loans that went bad.
The Federal Deposit Insurance Corp. immediately sold First Regional’s eight branches and nearly all of its $2.2 billion in assets to First-Citizens Bank & Trust Co. of Raleigh, N.C., which agreed to assume the failed institution’s deposits.
The FDIC agreed to shoulder most of the losses on First Regional’s loans, and estimated the failure would cost the bank deposit insurance fund $825.5 million.
First Regional’s branches are to reopen Monday as part of First-Citizens, which operates under the name First Citizens Bank and is a unit of publicly traded First Citizens Bancshares Inc.
Customers of First Regional can continue to write checks as usual and withdraw cash using their ATM cards, and their deposits will remain insured by the FDIC, the agency said.
The deal marks the second acquisition of a failed California bank by First Citizens, which had $18.5 billion in assets at the end of 2009. In July it bought 11-branch Temecula Valley Bank in the Inland Empire and San Diego County. In September it acquired a failed bank in Washington state.
Friday’s deal gives First Citizens a total of 380 branches in seven states, including Virginia, West Virginia, Tennessee and Maryland as well as North Carolina.
FDICLike other institutions that have failed in the wake of the housing market’s collapse, First Regional overextended itself on construction lending during the boom years. It had seven full-service branches in Los Angeles County and one in Irvine, with nearly $1.9 billion in deposits.
It was the 14th FDIC-insured bank to fail in the country this year. Earlier Friday saw the failures of two banks in Georgia, one in North Dakota and one in Florida. Later in the day regulators took over a bank in Washington state.
In 2009, 140 U.S. banks failed -- 17 of them in California -- the most since 1992 at the end of the savings and loan crisis.
Founded in 1979 as Great American Bank, the Century City bank became First Regional in 1987. Of its $2 billion in loans as of Sept. 30, more than a third were for construction and land development. It also has major portfolios of commercial mortgages and apartment loans.
Last February, the bank consented to an order from the FDIC requiring it to strengthen its lending policies and raise capital. The Federal Reserve slapped a similar order on the parent company, First Regional Bancorp, in April. But the bank’s capital levels instead declined as its loan portfolio deteriorated.