Regulators shut down 4 California banks, 4 others; makes 118 US failures in 2010

By AP
Friday, August 20, 2010

Regulators shut 4 California banks, 4 others

WASHINGTON — Regulators on Friday shut down four California banks, a big community bank based in Chicago, and banks in Florida and Virginia. The closures boosted to 118 the number of U.S. bank failures this year.

The Federal Deposit Insurance Corp. on Friday took over the California banks: Butte Community Bank, based in Chico; Pacific State Bank, based in Stockton; Los Padres Bank, in Solvang; and Sonoma Valley Bank, in Sonoma.

The FDIC also seized Chicago-based ShoreBank; Imperial Savings and Loan Association of Martinsville, Va., and two Florida banks: Community National Bank at Bartow and Independent National Bank, in Ocala.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

WASHINGTON (AP) — Regulators on Friday shut down a big community bank based in Chicago that has been known for its social activism but racked by financial troubles in recent months. A consortium funded by several of the biggest U.S. financial firms is buying its assets and pledging to operate the new bank by the same principles.

ShoreBank, with $2.16 billion in assets and $1.54 billion in deposits, was the 114th U.S. bank to fail this year.

The Federal Deposit Insurance Corp. took over ShoreBank. Urban Partnership Bank, the newly chartered financial institution, agreed to assume ShoreBank’s deposits and nearly all its assets.

In an unusual move, the FDIC allowed some of ShoreBank’s executives to continue running the restructured bank. Executives who joined ShoreBank recently, as the bank struggled to raise capital, will manage Urban Partnership Bank. These managers “did not contribute to the bank’s problems,” the FDIC said.

The FDIC on Friday also seized Community National Bank at Bartow, in Bartow, Fla.; Independent National Bank of Ocala, Fla.; and Imperial Savings and Loan Association of Martinsville, Va.

ShoreBank lost $39.5 million in the second quarter amid soured real estate loans. The bank had been under a so-called “cease and desist” order from the FDIC for more than a year, requiring it to boost its capital reserves. ShoreBank was able to raise more than $146 million in capital this spring from several big Wall Street institutions. It was unable, however, to secure federal bailout funds it sought from the Troubled Asset Relief Program.

ShoreBank had indirect ties to a few members of the Obama administration — one of them, presidential adviser Valerie Jarrett, was on the board of a Chicago civic organization led by a ShoreBank director — and powerful supporters, including former top federal banking regulators Ellen Seidman and Eugene Ludwig.

House Republicans launched an inquiry this spring into whether the administration intervened to help shepherd a bailout of ShoreBank. Rep. Darrell Issa of California, the senior Republican on the House Oversight and Government Reform Committee, sent a letter to a White House legal adviser asking specific questions on possible contacts between administration officials and executives of ShoreBank or potential investors.

Investors in Urban Partnership Bank read like an all-star roster of U.S. finance, including American Express Co., Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., GE Capital Equity Investments Inc., Morgan Stanley, Northern Trust Corp. and Wells Fargo & Co. The Ford Foundation and the MacArthur Foundation also are investors.

The FDIC and Urban Partnership Bank also agreed to share losses on $1.41 billion of ShoreBank’s loans and other assets.

ShoreBank was founded in 1973 with the aid of several dozen institutional backers. The bank has been known for promoting redevelopment, minority business and environmentally responsible lending, and serving low- and moderate-income neighborhoods in Chicago. It was the nation’s first community development and environmental bank, branching out from its roots on Chicago’s South side to Cleveland, Detroit, the Pacific Northwest and 40 foreign countries.

“Urban Partnership Bank will provide access to financial services and support to distressed neighborhoods in order to help transform distressed neighborhoods into strong, stable communities,” David Vitale, the chairman of Urban Partnership Bank, said in a statement issued Friday night. “The private investment in this new financial institution demonstrates commitment to restoring the economic vitality of our communities,” Vitale said.

The bank’s consulting arm ShoreBank International Ltd. has provided loans to entrepreneurs and mortgages to homeowners in Africa, Asia and Eastern Europe.

__

AP Business Writer Daniel Wagner in Washington contributed to this report.

YOUR VIEW POINT
NAME : (REQUIRED)
MAIL : (REQUIRED)
will not be displayed
WEBSITE : (OPTIONAL)
YOUR
COMMENT :