On September 25, the California DFPI seized a California state-chartered bank and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver after the bank’s financial condition deteriorated and it failed to satisfy a March 2026 capital order. The bank held approximately $690 million in assets, and the FDIC accepted a bid from another bank to assume all deposits, including uninsured deposits, and a substantial portion of its assets.
The seizure followed several years of state and federal scrutiny involving the bank’s governance, management, and financial condition. In March 2026, after the bank reported a net loss of approximately $75.3 million, DFPI ordered the bank to take one of three actions within 120 days: raise its tangible shareholders’ equity ratio to at least 9.5%, enter into an acceptable merger or sale, or submit an acceptable voluntary liquidation plan. The order also required the bank to strengthen liquidity stress testing, revise its contingency funding plan, reduce deposit concentrations and reliance on wholesale non-core deposits, and improve its allowance for credit losses methodology. DFPI later stated that the bank did not successfully complete a capital raise, sale, merger, or voluntary liquidation and that shareholders’ equity ultimately fell below the statutory minimum.
Three days after the seizure, BCSA published a statement from California Business and Consumer Services Secretary Rohit Chopra addressing the bank’s failure. In the statement, Chopra said California would take further steps concerning third-party auditor independence and uninsured-deposit risk, including heightened scrutiny of banks with high levels of uninsured deposits. He also said the state would continue to guard against gross mismanagement by executives and board members.
Putting It Into Practice: For state-chartered banks, the seizure shows how concerns involving capital, liquidity, deposit concentrations, governance, credit risk, and management can develop into increasingly prescriptive supervisory requirements before culminating in receivership. Institutions should review those areas proactively and monitor whether DFPI or BCSA follows the seizure with broader guidance or examination expectations concerning uninsured deposits, governance, or auditor independence.
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