California Regulator Closes State Bank

California's financial regulator closed a state-chartered bank on September 25, 2026, after its capital fell below the statutory minimum and it failed to comply with an earlier order to raise capital, merge, or liquidate.

In an Order Taking Possession of Property and Business, the California Department of Financial Protection and Innovation found the bank's tangible shareholders' equity had dropped to about $5.6 million, or 0.82 percent of total assets, as of September 22, 2026, insufficient to support roughly $685 million in total liabilities. The Department also found the bank had failed to comply with a March 6, 2026, order requiring it to raise its equity ratio to at least 9.5 percent within 120 days.

The Commissioner of the Department found that the bank's tangible shareholders' equity was less than 3 percent of total assets, that the bank had inadequate capital, that it was conducting business in an unsafe or unsound manner and was doing so because of its present financial condition, and that it had violated the March order. On that basis, separately and cumulatively, the Commissioner took possession of the bank's property and business under Financial Code Section 592, Subdivisions (a) through (d) and (e)(1).

The FDIC was named receiver and arranged for Sunwest Bank of Sandy, Utah, to assume substantially all deposits, including uninsured ones, and to purchase about $476 million of the failed bank's assets, with the FDIC retaining the remainder. The sole branch was set to reopen as a Sunwest branch during normal business hours on September 28, 2026.

The bank's holding company was not part of the closure or receivership. The FDIC preliminarily estimated the failure will cost the Deposit Insurance Fund about $114 million. The agency said the estimate is expected to change as retained assets are sold. Allowed claims are paid, after administrative expenses, in order of priority to depositors, general unsecured creditors, subordinated debt holders, and stockholders.