The Office of the Comptroller of the Currency closed Frontier Bank and appointed the FDIC as receiver which in turn sold the failed bank to the Bank of Southern California, San Diego, CA, which agreed to assume all deposits of the failed bank.
Both branches of Frontier Bank, which had been doing business as El Paseo Bank, will reopen as branches of Bank of Southern California. Customers of Frontier Bank will continue to have access to their money over the weekend thorugh the use of checks, debit cards, and ATMs. All depositors of Frontier Bank will continue to have full FDIC deposit insurance coverage up to the applicable limits and will automatically become customers of Bank of Southern California.
Frontier Bank is owned by its holding company, Western Community Bancshares, Inc., Palm Desert, CA, which was not included in the receivership proceedings of Frontier Bank. Frontier Bank was a problem bank, struggling financially for a number of years. In March 2011 regulators issued a cease and desist order against the bank for operational and financial deficiencies.
Although Frontier Bank was a very small institution with total assets of only $86.4 million it offered a full range of banking services to its customers including personal checking and savings accounts, certificates of deposit, check cards, wire transfers, business checking, deposit boxes, mortgage and business loans, lines of credit, and IRAs.
At June 30, 2014, Frontier Bank had total deposits of $82.1 million and total assets of $86.4 million. As part of the purchase and assumption agreement with the FDIC, Bank of Southern California agreed to purchase all of the assets of failed Frontier Bank and to pay a premium of 1.06% on all of the acquired deposits. According to the FDIC , the least costly method of failed bank resolutions is to sell a failed bank to an acquiring institution.
The cost to the FDIC Deposit Insurance Fund for the failure of Frontier Bank is $4.7 million. Frontier Bank becomes the 17th banking failure of 2014 and the first bank failure in California during 2014. The last bank to fail in California was Palm Desert National Bank, Palm Desert, on April 27, 2012.