Banking industry woes hit Arizona on Friday night as the federal Office of the Comptroller of the Currency closed the Scottsdale-based First National Bank of Arizona.
Banking officials said depositors' money is safe and that federal regulators negotiated an agreement for the Mutual of Omaha Bank to take over their deposits.
First National Bank has two branches in Tucson, at 6298 E. Grant Road and 10195 N. Oracle Road.
It is not affiliated with either National Bank of Arizona or Bank of Arizona.
The 15 branches of the bank will reopen on Monday as branches of Mutual of Omaha Bank, according to the Federal Deposit Insurance Corp., which was named receiver. Also deposits up to $100,000 remain federally insured.
Over the weekend, customers can gain access to their money by writing checks or using automatic teller machines or debit cards, the agency said.
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Checks drawn on the bank will be processed normally, and loan customers should continue to make loan payments as usual, the FDIC said.
The federal takeover applies also to the First National Bank of Nevada, the parent company of the Arizona bank. The two institutions merged on June 30.
The failed Arizona bank suffered a $131.4 million loss in the first quarter as it was hurt by real estate loans that went bad as the state's economy slowed.
In a statement, the comptroller's office said it acted after finding the bank "was undercapitalized and had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices."
Mutual of Omaha Bank's acquisition of the deposits was the least costly way to resolve the issue for the taxpayer-supported Deposit Insurance Fund because the expected losses to uninsured depositors are being fully covered by a premium paid for the banks' franchises, the FDIC said.
As of June 30, the combined First National Bank of Nevada and Arizona had total assets of $3.4 billion and total deposits of $3 billion, the agency said.
In addition to assuming all of the deposits, Mutual of Omaha Bank will buy about $200 million of the bank's loans and other assets.
The FDIC said it will retain the remaining assets to dispose of later.
The cost of these actions to the Deposit Insurance Fund was estimated at $862 million.
First National Bank of Arizona was the first bank with operations in Arizona to fail in recent years.
Seven FDIC-insured banks have been closed this year across the nation as the real estate and subprime crisis has gripped the financial industry.