CORRECTED - UPDATE 4-U.S. regulators close seven banks

(Adds dropped figure in paragraph 17)

* Six of the banks controlled by one family - FDIC

* Brings failures so far this year to 52

* City Bank signs 'cease and desist order'

(Adds City Bank)

By JoAnne Allen

WASHINGTON, July 2 (Reuters) - U.S. bank regulators closed seven institutions on Thursday, including six banks in Illinois controlled by one family and a small bank in Dallas, bringing the total number of U.S. bank failures to 52 so far this year.

Founders Bank, of Worth, Illinois, was the largest of the financial institutions seized. The Federal Deposit Insurance Corp said Founders had $962.5 million in assets and approximately $848.9 million in deposits.

The PrivateBank and Trust Co of Chicago (PVTB.O) will assume all of the deposits of Founders Bank.

The failure is expected to cost the FDIC deposit insurance fund an estimated $188.5 million.

The six failed Illinois banks were all controlled by one family and followed a similar business model, the FDIC said. The failures were related to losses that included soured investments in collateralized debt obligations.

According to a website of one of the Illinois banks, they were part of the Campbell Group of privately owned banks.

Also on Thursday, the FDIC ordered City Bank (CTBK.O), of Lynnwood, Washington, to cease and desist "operating with management whose policies and practices are detrimental" to the bank and "jeopardize" deposits.

The FDIC said the community bank operated with inadequate capital, inadequate loan valuation reserve and a large volume of poor quality loans.

Under the cease and desist agreement signed with the regulator and the state of Washington, City Bank must produce a plan to reduce its nonperforming loans and foreclosed real estate. The bank is also required to reduce the level of brokered deposits, City Bank said.

The Federal Deposit Insurance Corp said the other bank closings in Illinois on Thursday were: