California closes Nano Banc as the sixth bank this year

The California Department of Financial Protection and Innovation has closed Irvine's Nano Banc and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. This marks the sixth bank failure in the U.S. in 2026 and is the largest by asset size this year.

As of June 30, the bank reported assets of $736 million and deposits of $686 million; on the day of closure, state regulatory assets were approximately $690 million. The FDIC reached a purchase and assumption agreement with Sunwest Bank in Sandy, Utah, which assumed nearly all deposits and purchased approximately $476 million in assets, also disclosing the assumption of deposits of about $605 million and loans of about $227 million. The FDIC retains the remaining assets for future disposition, with initial estimates of the cost to the deposit insurance fund at about $114 million.

The bank had only one remaining branch, which will reopen on September 28 as a Sunwest branch. Depositors will automatically become Sunwest customers, and deposits will continue to be insured by the FDIC. In March, state regulators required the bank to raise its tangible equity to at least 9.5% or complete a sale, merger, or liquidation, which it failed to achieve. As of September 22, tangible equity was about $5.6 million, only 0.82% of assets, below the 3% statutory minimum. State regulators attributed the closure to deteriorating financial conditions, years of mismanagement by executives, and regulatory violations.

The bank was renamed in 2018 after a team acquired Commerce Bank of Temecula Valley for $23.3 million, initially expanding its community business through a technology platform. In 2021, assets peaked but subsequently faced written agreements and cease-and-desist orders from the Federal Reserve and California regulators. In 2022, the Fed issued another cease-and-desist order against the holding company and the bank, requiring a change in management and enhanced governance. In November 2024, the Fed barred former director and interim CEO Anthony R. Gressak III from the industry and fined him $75,000, while another former director, James T. Chung, was also barred, with allegations involving false applications for COVID relief funds for personal expenses.

Prior failures in 2026 occurred in Illinois, Georgia, Indiana, Kansas, and Pennsylvania, all with assets smaller than Nano Banc. The number of failures this year has surpassed the five in 2023 and is higher than the two in both 2024 and 2025. The yield on the 10-year U.S. Treasury recently stood at 5.24%, up from about 4.20% a year ago, putting pressure on community banks' funding costs and securities valuations.

Mechanically, this is a regulatory forced exit rather than a market auction sale. Deposits and some loans were taken over by Sunwest with the assistance of the FDIC, while bad assets and losses are borne by the deposit insurance fund and remaining assets. Funds are flowing from failed community banks to regional banks with capital buffers and expertise in handling receiverships. Beneficiaries include Sunwest and its deposit customers, while Nano's equity holders, subordinated creditors, and similar small banks holding duration-mismatched assets under high interest rates are under pressure. The driving event is clear: the bank was closed after capital fell below regulatory thresholds, not due to a bank run.

Sunwest stated this is its sixth acquisition assisted by the FDIC, having previously taken over failed banks in California, Arizona, Washington, and Idaho between 2009 and 2014. The 10-year yield remains around 5.24%, indicating that the repricing of uninsured wholesale funding and fixed-income assets continues.

Source: Public information