U.S. regulators seized Washington First International Bank in Seattle on Friday evening, bringing the total of failures so far this year to 82.
East West Bank of Pasadena, California will assume all of the deposits and most of the assets of the failed bank, which had about $441.1 million in deposits and $520.9 million in assets as of March 31, the Federal Deposit Insurance Corporation said.
The community bank industry has been slower to bounce back from the deep recession than other parts of the economy.
While many big banks and other financial financial firms are back to reporting steady profits, small banks are still weighed down by slowly unraveling commercial real estate loans.
Bank failures are expected to peak in the third quarter of this year, the FDIC has said, and then start tapering off if the economic recovery continues to take hold.
Last year 140 banks closed, compared with 25 in 2008 and three in 2007.
Despite the steady pace of bank failures, the FDIC is seeing some reasons for hope.
The agency has said more interested buyers are coming to auctions for failed banks, meaning the troubled loans are becoming more desirable.
The FDIC has also scaled back its loss-share agreements, which it entered into with potential buyers of failed banks to hive off some of the risk.
FDIC Chairman Sheila Bair has also said small banks have recently been able to raise more capital, helping some institutions avoid failure altogether.
The FDIC said East West Bank will pay a premium of 0.5 percent to assume all of Washington First International Bank's deposits, and agreed to purchase about $501 million of the failed bank's assets.
The FDIC said it entered into a loss-share agreement with East West Bank on $418.8 million of Washington First International Bank's assets.
The cost of the bank failure to the Deposit Insurance Fund will be $158.4 million, the FDIC estimated.
(Reporting by Roberta Rampton; Editing by Richard Chang)