2 more banks go belly-up

Regulators close down Franklin Bank, a Houston bank with $5.1 billion in assets, and Security Pacific Bank of California, with assets of $561 million, raising the tally of failed banks this year to 19.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Catherine Clifford, CNNMoney.com staff writer, and Tami Luhby, senior writer

NEW YORK (CNNMoney.com) -- The tally of failed banks in 2008 rose to 19 as the government announced that a Texas and a California bank had been shuttered Friday night.

Franklin Bank, a Houston, Texas-based bank and Security Pacific Bank, a Los Angeles, Calif.-based bank were shut down by state regulators Friday, marking the 18th and 19th bank failures this year.

Franklin Bank (FBTX) had total assets of $5.1 billion and total deposits of $3.7 billion as of Sept. 30, 2008, according to a statement on the Federal Deposit Insurance Corp.'s Web site.

Ironically, Lewis Ranieri, the 61-year-old co-founder and chairman of parent Franklin Bank Corp., is credited with inventing mortgage-backed securities two decades ago, the AP reported, back when he worked at Salomon Brothers, where he is a former vice chairman.

Franklin Bank Corp. just Sunday said it had received proposals for transactions to strengthen Franklin Bank's capital position and was keeping regulators informed of the talks' progress, according to the Associated Press.

Security Pacific Bank had total assets of $561.1 million and total deposits of $450.1 million as of October 17, 2008, according to the FDIC.

Prosperity Bank (PRSP), based in El Campo, Texas, will assume all of the deposits of the failed Texas bank, including those that exceed the insurance limit and brokered accounts. Depositors of the failed bank will automatically become depositors of Prosperity.

In addition to taking over the deposits of the failed Franklin Bank, Prosperity will purchase $850 million of assets. The FDIC will retain the remaining assets to dispose of later.

Pacific Western Bank of Los Angeles will assume all of the deposits of Security Pacific Bank and will purchase approximately $51.8 million of the assets. The FDIC will hold on to the remaining assets to dispose of later.

The failed Houston bank's 46 offices will open as branches of Prosperity under normal hours, including Saturday hours. The deal will give Prosperity more than 170 banking locations in Texas.

Security Pacific's four branches will reopen on Monday as branches of Pacific Western.

Customers of both banks should continue to use their existing branches, according to separate press releases on the FDIC's website. Dan Rollins, president of Prosperity Bank, in a statement said records will be fully integrated during the first quarter of 2009.

"The customers will be able to go about their business as usual; they will be able to access their money and use their ATM/debit card, Internet banking, bill pay service or other electronic banking services beginning Saturday morning," said Rollins.

Security Pacific customers can continue to access their funds via ATM, checks or debit cards, according to the FDIC.

In Friday's announcement about Franklin Bank, the FDIC said that the cost of its failure to the Deposit Insurance Fund will be between $1.4 billion and $1.6 billion.

Meanwhile, Security Pacific's failure, the third in California this year, will cost the FDIC $210 million. The FDIC said that for both banks, acquisition of their deposits was the least costly resolution.

Smaller regional banks have been under pressure as the financial crisis continues to take its toll.

Prosperity Chief Executive David Zalman said in a statement that his bank was "committed to taking care of their existing and new customers during this volatile time in the financial industry." To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Sponsors

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.