The bank, which had just 270 savers and £7.4m on deposit, lent to house builders and had been trying to wind itself down after being hit by the banking crisis.
The accountancy firm BDO has been appointed as liquidators to the bank.
Savers will get their money back from the Financial Services Compensation Scheme, which will pay out up to its limit of £85,000 per saver.
The Bank of England said: "In order to minimise disruption and to provide access to funds, the FSCS intends to make its payout as quickly as possible. Retail depositors do not need to contact the FSCS to receive a payout as the FSCS will be contacting them."
The FSCS said it would pay out in days.
The FSA added: "Southsea was a small bank with a portfolio of lending to fund housing developments in the local area. The bank's management have not been able to realise the value of Southsea's loans to fund these developments."
Borrowers with mortgages or other loans have been told to keep making repayments as normal.
