Regulators seized Alliance Bancshares California late Friday and transferred the deposits of the beleaguered Culver City business bank to a San Diego institution.
The California Department of Financial Institutions shut down Alliance and appointed the Federal Deposit Insurance Corp. as receiver, which entered into a purchase and assumption agreement with California Bank & Trust of San Diego.
Alliance’s five Los Angeles area branches will reopen Monday morning as branches of California Bank & Trust. Deposits of Alliance will be automatically transferred to the new institution and Alliance customers will have full access to their accounts, the FDIC said. Alliance executives did not respond to an interview request.
Alliance, the holding company for Alliance Bank, had assets of $1.14 billion and deposits of $951 million as of Dec. 31.
In addition to assuming all of Alliance’s deposits, California Bank & Trust will buy $1.12 billion of the failed bank’s assets for $9.9 million. The FDIC will keep the remaining assets for later sale.
The failure of Alliance was not unexpected. Burdened by souring construction loans, particularly loans for single family homes and tract projects, Alliance was deemed “under-capitalized” in September and was subsequently issued a cease and desist order by regulators directing the bank to shore up its dwindling capital levels.
Then in November, Alliance said it was facing receivership if it could not raise capital either through the sale of securities or through a merger with another institution.
Founded in 1979, the bank struggled in its first few years. Chief Executive Curtis Reis, who joined the bank in 1986 after two decades in the Los Angeles banking industry, helped guide the bank to profitability by focusing on lending to small and mid-sized businesses, particularly those that are run by immigrants.
Alliance is the eighth bank to fail this year and the second Southern California institution to be seized in the past two weeks. On Jan. 23, Redlands-based 1st Centennial Bank was closed and its insured deposits were assumed by First California Bank, headquartered in Westlake Village.
The FDIC estimates that the failure of Alliance will cost its insurance fund $206 million.
The fund took a considerable hit in 2008 as 25 U.S. banks and thrifts failed, including several high-profile meltdowns such as Pasadena-based IndyMac Bank and Seattle-based Washington Mutual. Earlier this week, the FDIC said its insurance fund could endure losses of more than $40 billion in the next few years as more banks succumb in the deteriorating economy.
As of Sept. 30, the FDIC had 171 institutions on its list of troubled institutions.
