County Bank of Merced, California, with deposits of $1.3 billion and assets of $1.7 billion, was shut yesterday by the state’s Department of Financial Institutions, according to an e-mailed statement from the Federal Deposit Insurance Corp. Westamerica Bancorporation, holding company for Westamerica Bank, acquired all the assets and deposits.

The Georgia Department of Banking and Finance closed McDonough-based FirstBank Financial Services Inc., which had $337 million in assets and $279 million in deposits as of Dec. 31, the FDIC said in a statement. The California Department of Financial Institutions shut Culver City-based Alliance Bank, with assets of $1.14 billion and $951 million in deposits.

The FDIC was named receiver of the institutions, which will resume business as branches of the acquiring banks. Regulators seized six banks in January, the largest monthly toll since 1993, including Salt Lake City-based MagnetBank, which the FDIC closed Jan. 30 after being unable to find a buyer. The FDIC shuttered 25 banks last year, matching the total for 2001 through 2007.

The FDIC, other U.S. bank regulators and Congress are taking steps to help banks avoid losses as the administration of President Barack Obama readies a stimulus package that may include guarantees for toxic assets, according to people familiar with the plan.

Insurance Legislation

Legislation that would more than double deposit insurance coverage and offer safeguards for banks is being considered by Congress. The House Financial Services Committee unanimously approved a measure that would raise coverage to $250,000 per depositor per bank, from $100,000.

Congress also may extend the FDIC’s line of credit with the Treasury to $100 billion from $30 billion to replenish the deposit fund. The FDIC said bank failures through 2013 may cost the fund more than the $40 billion estimated in October.

“We do expect there to be more stress on banks, which could result in an increase in commercial bank failures,” said Comptroller of the Currency John Dugan in a Feb. 2 interview. A deepening recession that adds stress may lead to “significantly more losses,” said Dugan, regulator of national banks.

The FDIC on Dec. 16 doubled premiums it charges banks to replenish its reserves, which totaled $34.6 billion as of the third quarter. The Washington-based agency oversees 8,384 institutions with $13.6 trillion in assets.

Price Tag

The latest bank failures will cost the FDIC’s deposit insurance fund a combined $452 million. The fund is supported by fees on insured banks.

Westamerica, based in San Rafael, California, acquired 39 County Bank branches. The branches with Saturday hours will open as Westamerica offices today, and the rest will open Monday as usual. Westamerica shares have declined less than 1 percent in the past 12 months, to $48.52, as the 24-company KBW Bank Index has plummeted by almost two-thirds.

Regions Financial Corp. will buy about $17 million of FirstBank’s assets and assume all of the deposits, the FDIC said. FirstBank’s four branches will open as offices of Regions, a Birmingham, Alabama-based bank. Regions’ acquisition is its second in five months, following the purchase of Alpharetta, Georgia-based Integrity Bank’s assets in August.

“It is our responsibility to work with and support the FDIC in finding solutions for depositors in these challenging times,” said Regions Chief Executive Officer Dowd Ritter. “We also felt it was important to be a safe harbor for all customers by assuming both insured and uninsured deposits.”

Zions Bancorporation

California Bank and Trust of San Diego, owned by Salt Lake City-based Zions Bancorporation, acquired Alliance’s deposits and bought $1.12 billion of its assets at a discount. Alliance Bank’s five branches will open next week as offices of California Bank, the FDIC said. Zions, which operates in 10 Western states, also acquired the deposits of Henderson, Nevada-based Silver State Bank in September.

The FDIC classified 171 banks as “problem” in the third quarter, a 46 percent jump from the second quarter, and said industry earnings fell 94 percent to $1.73 billion from the previous year. The agency doesn’t identify problem banks by name.

The Obama administration is considering a range of options to unclog bank balance sheets, and may emphasize the guarantee of toxic assets over proposals to create a government-run bank. Treasury Secretary Timothy Geithner will unveil a plan as part of the financial-recovery package on Feb. 9, a Treasury official said yesterday.

Preventing Failures

The FDIC and the Office of the Comptroller of the Currency have taken steps to stem failures, such as allowing private- equity firms and other bidders to buy assets and deposits of lenders running out of cash. IndyMac Bank, the fourth-largest U.S. lender to fail last year, was sold to a private-equity investor for $1.3 billion on Jan. 2. The sale was led by Steven Mnuchin of Dune Capital Management LP.

Washington Mutual Inc., the biggest savings and loan, was seized on Sept. 25 and its assets were sold to JPMorgan Chase & Co. after customers drained $16.7 billion in deposits in less than two weeks. Wachovia Corp. was near failure before being bought by Wells Fargo & Co. for $12.7 billion.

To contact the reporters on this story: Margaret Chadbourn in Washington at mchadbourn@bloomberg.net; Ari Levy in San Francisco at alevy5@bloomberg.net.

Last Updated: February 7, 2009 00:00 EST

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