The state regulators have seized the San Francisco based bank and its operations have been acquired by East West Bancorp of Pasadena, California.
East West paid premium of 1.1 percent to acquire United Commercial’s $11.2 billion in assets and its banking operations in the nation as well as China.
With the acquisition of United Commercial, East West has become the second largest independent bank in California.
“This is a transformational event,” stated Dominic Ng, chief executive officer East West. “The transaction strengthens our presence in key markets throughout the U.S. and Asia.”
Four other banks fail
The regulators also closed four other banks Friday, in Georgia, Michigan, Missouri and Minnesota.
United Security Bank of Sparta in Georgia will be acquired by Ameris Bank. Home Federal Savings Bank of Detroit in Michigan will be acquired by Liberty Bank and Trust Co.
Prosperan Bank of Oakdale in Minnesota will be taken over by Alerus Financial. Central Bank of Kansas City in Missouri will acquire Gateway Bank of St. Louis.
Customers of all the banks have been protected and can access their accounts as usual.
More failures to deplete FDIC’s funds further
The failure of United Commercial Bank is expected to cost FDIC around $1.4 billion, further pushing agency’s funds in the red.
On an average, 11 banks have failed every month this year, making it the highest rate since 1992 when 181 banks had shut down. But this is yet not the end of failures. The FDIC has warned of more failures in the coming year.
The failures so far have cost FDIC more than $25 billion and eroded funds meant to insure bank deposits.
As many banks are still saddled with bad debts, more bank failures are expected, which are likely to increase cost to $100 billion in the next four years.
The loss sharing agreement with various banks taking over the struggling units have defrayed FDIC costs to certain extent, but to cut costs further the agency is contemplating borrowing money from healthy U.S. banks to keep its deposit insurance fund solvent.
The proposal is still in its initial stage and the final outcome is yet to be seen.
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