Butte Community Bank and Pacific State Bank Closed By State of California

August 20, 2010 – Butte Community Bank, Chico, California, and Pacific State Bank, Stockton, California, were closed today by the California Department of Financial Institutions, which appointed the FDIC as receiver.   Both failed banks with a total of 23 branches were acquired by Rabobank, N.A., El Centro, California which agreed to assume all deposits and purchase essentially all assets of the two unaffiliated failed banks.

The parent company of Rabobank, is privately owned Rabobank Group based in the Netherlands which has been in business for 110 years and has total assets of over $800 billion.  The Rabobank website describes Rabobank Group as “one of the largest and safest banks in the world and the only private bank in the world with a triple A credit rating”.

Rabobank stated that the acquisition of Butte Bank and Pacific State Bank “is a significant step forward in Rabobank, N.A.’s growth strategy and is highly synergistic, combining community banks with similar business lines and little geographic overlap. The addition of the banks significantly expands Rabobank’s footprint, creating a 120 branch retail banking franchise”.

Rabobank has been expanding rapidly in California since 2002 growing rapidly through acquisitions and internal growth.  Rabobank stated in a press release that: “Rabobank began its California retail banking operations with the December 2002 acquisition of Valley Independent Bank and subsequently more than doubled that bank’s assets and capital. In January 2006, Rabobank acquired Community Bank of Central California, adding 14 branches to its then 26-branch network. The January 2007 acquisition of Mid-State Bank & Trust added 41 branches to Rabobank, N.A.’s franchise. In 2009, Rabobank, N.A. opened eight branches in the Modesto-Merced area and one in Carpinteria. In 2010, the bank acquired Napa Community Bank and will open new branches in Visalia, Tulare and Bakersfield (2) later this year”.

Butte Community had assets of $498.8 million and deposits of $471.3 million and Pacific State Bank had assets of $312.1 million and deposits of $278.8 million.  Rabobank agreed to pay the FDIC an unusually large premium of 4.05% on Butte’s deposits but did not pay a premium on Pacific State deposits.

The FDIC and Rabobank entered into a loss-share agreement covering $425.4 million of Butte’s assets and $249.7 million of Pacific State’s assets to protect Rabobank from losses on the asset pool purchased.

Butte Community and Pacific State Bank are the 115th and 116th banking failures this year.  The cost to the FDIC insurance fund for closing Butte is $17.4 million and the cost for closing Pacific State is $32.6 million.  A total of four banks failed in California this week and a total of 8 nationwide.  The other two bank failures in California this week were Los Padres Bank of Solvang and Sonoma Valley Bank of Sonoma.

The FDIC does not provide an explanation regarding the loss on closing failed banks but the losses on both banks, as a percentage of total assets is unusually small at 10% for Pacific State and a very small 3% for Butte.   (See Is The FDIC Understating The Cost Of Bank Failures?) During 2010, the average loss on closing a failed bank has amounted to 23% of a failed bank’s total assets.


  1. John O'Neil says:

    Butte Community Bank, the FDIC and or the Rabobank knew 5 months ago that this closure was in the making and this is when my wife and I started an account why were we aloud to start an account with this going on? I love how these big money corps and institutions play with our lives and make decisions with out money this is my money not the banks or goverments and we are treated like we cannot handle this type news… well I can handle it alot better than the games played behind our backs

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