A Pierce County bank on Friday evening became the first announced bank to fail in the United States in 2013.
The state Department of Financial Institutions on Friday closed University Place-based Westside Community Bank.
The agency cited inadequate capital and severe loan losses. Immediately following the closure, DFI named the Federal Deposit Insurance Corp. as receiver.
The FDIC immediately entered into a purchase and assumption agreement with Sunwest Bank of Irvine, Calif., which will assume all of the deposits and assets of Westside.
“Westside Community Bank’s capital has been depleted by large loan losses associated with land development and construction, as well as commercial real estate lending,” said Rick Riccobono, director of DFI’s Division of Banks, in a Friday release. “While the board of directors and management have worked diligently to address the bank’s problems, they were unable to raise sufficient capital to remain viable.”
“The closure of a Washington state chartered bank is never a welcome event,” DFI Director Scott Jarvis said. “However, a very positive signal is sent when another financial institution acquires a failing institution and continues service to the community.”
Riccobono said that, in his opinion, Westside will be the only bank to fail in Washington in 2013.
At Westside “the numbers were pretty bad,” Riccobono said by phone Friday evening. “There was an unusual circumstance. They had a lot of land, construction development. They needed capital, and the bank president suffered an illness and subsequently died during the fundraising effort. The board hadn’t replaced him in hopes that he would be back. The difference between this and the others — they lost the person who was going to be responsible, and he was out of commission. When they brought someone in, it was too late. It was a critical year.”
Riccobono described the current board chairman as “one stand-up kind of guy, an impressive guy.”
Along with its University Place headquarters, Westside also operated a branch in Puyallup.
Throughout the weekend and transition, Westside customers can access their funds by writing checks or using ATM or debit cards. Checks will continue to be processed. Loan customers should continue to make their payments as usual. Online services also will remain available.
Westside Community Bank customers seeking more information about the closure should visit www.dfi.wa.gov/banks/westsidecommunitybank.htm, or www.sunwestbank.com.
In February 2011, the Federal Reserve Bank of San Francisco issued an agreement between itself and Westside Banking Co., the holding company for Westside Community Bank. In that agreement, the Federal Reserve directed Westside board chairman William Schuur to comply with a previous consent order between Westside and regulators.
The order further demanded that the bank pay no dividends, distribute no funds to insiders (employees or shareholders, for instance), redeem no shares or incur any debt, without regulatory permission.
Last July, federal regulators said the bank should either sell shares to raise money or find a buyer willing to take over the operation.
The FDIC said at the time that Westside’s previous plan to raise capital was unacceptable and that management was unable “to return the bank to a safe and sound condition.”
In its latest quarterly filing, from last September, Westside reported assets of $97.6 million and liabilities of $96.6 million. Net income for the quarter came in at minus $5.3 million.
C.R. Roberts: 253-597-8535 c.r.roberts@ thenewstribune.com
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