17th US Bank Failure This Year, Regulators Close Small Bank in California

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It will be the 17 ^th US Bank failure this year after 24 closures in 2013. The Federal Deposit Insurance Corporation has taken over the control of Frontier Bank FSB, based in Palm Desert. The bank is otherwise known as El Paseo Bank and operates two branches. The Bank had $86.4 million in assets and $82.1 million in deposits as of June 30.

Frontier Bank's deposits were acquired by Bank of Southern California NA, based in San Diego who agreed to pay Federal Deposit Insurance Corporation a premium of 1.06 percent. Bank of Southern California also agreed to buy the failed bank's assets.

The two branches of the Frontier Bank, FSB, did business as El Paseo Bank will now reopen as branches of Bank of Southern California, N.A. Depositors of Frontier Bank, FSB will automatically become depositors of Bank of Southern California, N.A. Deposits will continue to be insured by the FDIC.

The failure of Frontier Bank will cost the federal deposit insurance fund $4.7 million. It is a far cry from the situation in 2008 after the financial meltdown when 25 banks were closed. The figure jumped up to 140 in 2009. In 2010 157 banks failed, the largest since the loan and savings crisis 20 years ago. According to FDIC, 2010 was the highest limit for bank failures from the recession.

The situation improved later when the number of sick banks came down to 92 in 2011 and fell further to 51 in 2012. A healthy economy sees the closure of four to five banks annually. The Federal Deposit Insurance Corporation is financed by insured banks the fund fell into red in 2009 after it had to shell out $88 billion during the financial meltdown of 2008. With failures dropping, the fund once again turned positive in the second quarter of 2011, and it had a $51.1 billion balance as of June 30.