Carrie Bay | 12.11.08

Four more community banks have collapsed under the pressures of the country's economic and housing crises - two in Georgia and two in California. The recent failures bring the total number of institutions on the Federal Deposit Insurance Corporation's (FDIC's) failed bank list to 23 in 2008.

First Georgia Community Bank in Jackson, Georgia, was shut down by the Georgia Department of Banking and Finance late last week. Its four branches, located in Jackson, Covington, Griffin, and Locust Grove, were reopened as branches of United Bank. United, located in Zebulon, Georgia, agreed to assume all the deposits of First Georgia Community Bank from the FDIC, for a .811 percent premium.

First Georgia Community Bank had total deposits of $197.4 million and total assets of $237.5 million. United Bank also agreed to purchase approximately $60.6 million of the defunct bank's assets. The FDIC estimates that the cost to its Deposit Insurance Fund to cover the failure of First Georgia Community will be $72.2 million. The failed bank is not affiliated with First Georgia Banking Company.

The Community Bank of Loganville, Georgia was closed late last month. Bank of Essex in Tappahannock, Virginia has assumed all the deposits of The Community Bank and reopened its four branch locations.

Bank of Essex purchased approximately $84.4 million of The Community Bank's $681 million in assets, and paid the FDIC a premium of $3.2 million for the right to assume the failed bank's $611.4 million deposits. The FDIC estimates that the failure will cost it between $200 million and $240 million. Including The Community Bank and First Georgia Community Bank, four Georgia banks have gone under this year.

In a transaction facilitated by the FDIC, U.S. Bank, N.A. of Minneapolis, Minnesota acquired the banking operations, including all the deposits, of two Southern California institutions -- Downey Savings and Loan Association in Newport Beach and PFF Bank & Trust in Pomona, both of which were also closed late last month. Prior to the acquisition, U.S. Bank had 353 offices in California. It now adds Downey Savings' 170 branches in California and five in Arizona, as well as PFF Bank's 38 California branches.

Downey Savings had total assets of $12.8 billion and total deposits of $9.7 billion. PFF Bank had total assets of $3.7 billion and total deposits of $2.4 billion. In addition to assuming all the deposits from the two California banks, U.S. Bank agreed to purchase virtually all of their assets.

The FDIC and U.S. Bank entered into a loss share transaction. U.S. Bank will assume the first $1.6 billion of losses on the banks' asset pools. The FDIC will then share in any further losses. The loss-sharing arrangement is expected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers as they will maintain a banking relationship, the FDIC said.

As part of the transaction, U.S. Bank also agreed to implement a loan modification program similar to the one the FDIC announced in August when it took over the failed IndyMac Bank, F.S.B., Pasadena, California.

The FDIC estimates that the cost to its Deposit Insurance Fund for Downey Savings will be $1.4 billion and $700 million for PFF Bank. U.S. Bank's acquisition of the two institutions was the "least costly" option, the FDIC said. A total of five banks have been closed in 2008 in the state of California. To view the FDIC's full list of failed banks, click here.