Banks in Conn. and Calif. Seized, For 5th and 6th Failures This Year

Regulators seized two community banks this weekend after their managements failed to resuscitate them.

Late on Friday, Connecticut Banking Commissioner John P. Burke closed New Haven-based Founders Bank, while California Superintendent of Banks Conrad W. Hewitt shuttered Pacific Heritage Bank, Los Angeles. The Federal Deposit Insurance Corp. was named receiver for both institutions.

Founders had $78.7 million in assets, while Pacific had $155.6 million.

The seizures mark the fifth and sixth closures this year, but Founders is the first institution outside the West Coast to be seized, according to the FDIC.

Waterbury, Conn.-based Center Financial Corp. bid $3.8 million for Founders and will assume $72.7 million in about 5,000 deposit accounts. The holding company will also purchase about $25.3 million in assets.

California Federal Bank, also based in Los Angeles, will assume about $138.4 million in 10,300 deposit accounts, after paying a deposit premium of $752,000.

The thrift will also buy $31.5 million of Pacific's assets.

About $3 million of Founders' deposits and $8.2 million of Pacific's deposits won't be assumed by the other banks because they exceed the FDIC insurance limit of $100,000.

The agency will make advance payments to those depositors of 70% for Founders and 48% for Pacific.

Founders, a state-chartered bank started in 1985, had developed a niche serving small businesses in New Haven and Meriden. The bank was one of only two state banks to be designated a Small Business Administration preferred lender.

The bank had been struggling with high nonperforming assets for several years and was operating under a 1992 cease-and-desist order. Despite officials' efforts, the bank suffered a $2.7 million loss in the first quarter of this year, bringing its equity capital to negative $395,000.

This is the second acquisition in the past month of a struggling institution by Center Financial, which now has $2.2 billion in assets. Center announced on July 11 that it would buy $336 million-asset Great Country Bank, Ansonia, Conn.

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