Two Banks - One in Houston, One in Los Angeles - Fail

Two banks - Prosperity Bank of Houston, Texas, and Pacific Western Bank of Los Angeles - were seized by state regulators Friday and the Federal Deposit Insurance Corp. transferred their deposits transferred to other institutions.

For Prosperity Bank in Houston, the FDIC entered into a purchase and assumption agreement with Prosperity Bank, El Campo, Texas, to assume all of the deposits of Franklin Bank -- including those that exceeded the deposit-insurance limit. Franklin Bank had 46 offices, all of which will reopen as branches of Prosperity Bank.

In its press release, the FDIC said that Franklin Bank had total assets of $5.1 billion and total deposits of $3.7 billion as of Sept. 30. It said that Prosperity Bank agreed to assume all the deposits, including the brokered deposits, for a premium of 1.7%, and that Prosperity Bank will purchase approximately $850 million of assets. The FDIC said it will retain the remaining assets for later disposition.

The FDIC estimates that the cost of the transaction to its Deposit Insurance Fund to resolve the failure of Franklin Bank will be between $1.4 billion and $1.6 billion.

For Security Bank in Los Angeles, the FDIC entered into a purchase and assumption agreement with Pacific Western Bank, also of Los Angeles. Security Bank has four branches, all of which will reopen as branches of Pacific Western Bank.

In its press release, the FDIC said that Security Pacific had total assets of $561.1 million and total deposits of $450.1 million as of Oct. 17. Pacific Western agreed to assume all the deposits for a 2% premium. In addition to assuming all of the failed bank's deposits, Pacific Western will purchase approximately $51.8 million of assets. The FDIC will retain the remaining assets for later disposition.

The FDIC estimates that the cost to the Deposit Insurance Fund to resolve the failure of Security Pacific will be $210 million. The FDIC noted that customers who have questions about these transactions can call it toll free at 800-591-2845 to discuss Prosperity Bank, or 866-934-8944 to discuss Security Bank. People can also visit http://www.fdic.gov/bank/individual/failed/ for more information.

These are the 18^th and 19^th banks to fail in the nation this year.

Lisa

FDIC