With the pace of bank failures accelerating, the Federal Deposit Insurance Corp. is increasingly enticing buyers to assume assets by promising to cover the majority of future losses.

The agency has struck three so-called loss-sharing agreements this month, and industry observers said it is looking to negotiate similar deals with others that agree to take over failed banks.

Industry watchers said the FDIC may be overwhelmed by the sheer number of workouts on its plate.

"The FDIC has more assets to manage right now than they can say grace over," said Chip MacDonald, a partner at the Atlanta law firm Jones Day.

Acquiring banks like the loss-sharing arrangements, because they can inherit good customers and performing loans and can work out the nonperformers at reduced risk.

However, some observers worry the loss-sharing deals could exacerbate weaker acquirer's own asset troubles, putting more stress on the banking system.

In an interview, Andrew Gray, an FDIC spokesman, said the loss-sharing deals help keep assets in the private sector — letting the agency devote resources to other areas — while allowing the acquirers to hedge some of their risk.

"There are potential advantages to keeping those assets in the private sector, the primary one being that it preserves continuity," the spokesman said.

But Mr. Gray also said this is not a departure from agency practices. Loss-sharing deals kept assets in the private sector during the savings and loan crisis, he said, and legal requirements that the agency accept the "least costly" resolution package limit the FDIC's ability to encourage loss-sharing deals.

"Has the strategy changed? Certainly not," the spokesman said. "We have about 20 years experience with loss-sharing."

The agency has taken steps to prepare for its mounting asset management duties, including using outside contractors and bringing back retirees on staff, he said.

The FDIC struck two loss-sharing agreements last year, both with U.S. Bancorp, when it bought the failed Downey Savings and Loan Association in Newport Beach, Calif., and PFF Bank and Trust in Pomona. (The FDIC has also been involved in loss-sharing arrangements cut with Citigroup and Bank of America Corp.)

On Feb. 9, California Bank and Trust, a San Diego unit of the $55.1 billion-asset Zions Bancorp. in Salt Lake City, bought all $951 million of deposits and about $1.12 billion, or 98%, of the assets of Alliance Bank in Culver City, Calif.

David Blackford, California Bank and Trust's chief executive, said in an interview Thursday that government-assisted deals involving assets are superior to deposit-only ones.

"Alliance was a business bank, and most of their core deposits were associated with relationships with quality middle-market borrowers," Mr. Blackford said. "If you buy deposits only, then these customers go elsewhere, and you could have tremendous runoff."

His unit bought the assets at a discount of $9.9 million. The FDIC agreed to assume 80% of the first $275 million of losses and 95% of the rest.

As Alliance's nonperforming loans are worked out or charged off, California Bank and Trust hopes to retain roughly half, or about 250 to 300, of its creditworthy middle-market customers that are both depositors and borrowers, Mr. Blackford said.

Also Feb. 9, Westamerica Bank in San Rafael bought all $1.3 billion of the deposits and all $1.3 billion of the assets of County Bank in Merced. Five days later Washington Trust Bank in Spokane bought all $62 million of the deposits and about $72 million, or 98%, of the assets of Pinnacle Bank in Beaverton, Ore. Washington Trust bought the assets at a discount of $7.6 million.

In both of those deals, the acquiring banks agreed to share in the losses.

Robert Patten, an analyst at Regions Financial Corp.'s Morgan Keegan & Co., said private-equity firms are also likely trying to negotiate loss-sharing deals. He cited W.L. Ross & Co. LLC and Carlyle Group, which have been rumored to be interested in acquiring BankUnited Financial Corp. of Coral Gables, Fla.

A source close to those firms told The Wall Street Journal last week that the government declined to provide assistance for a bid by those firms, but Mr. Patten said Wilbur L. Ross, the CEO of W.L. Ross & Co., more than likely was still trying to negotiate "a prototype" loss-sharing deal between the government and the private-equity firms.

Calls to W.L. Ross and BankUnited were not returned; Carlyle Group would not discuss the matter.

Edward Timmons, a Sterne, Agee & Leach Inc. analyst, said that so far most of the loss-sharing agreements seem to be a net positive for the acquiring banks, because they likely are taking a certain amount of additional chargeoffs in exchange for paying little or no premiums on the failed bank's deposits.

"But there is always some concern, because most of the due diligence is performed over a very short period of time, and there's always questions surrounding the loan portfolio and what's still to come," Mr. Timmons said.

The inherited problems could be an added distraction to acquiring banks if they are dealing with their own problems with asset quality, he said.

Bert Ely, an independent analyst in Alexandria, Va., said he worries that the increasing number of troubled banks and the finite number of relatively healthy potential acquirers could lead to weak banks buying even weaker ones. In the late 1980s, at the height of the savings and loan crisis, the now-defunct Federal Home Loan Bank Board rolled up numerous insolvent thrifts into large, troubled thrifts that ultimately became insolvent.

"Some weak banks may now step in and try to grow their way out of their troubles" by making such deals, "but they are doomed to fail," Mr. Ely said.

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