Bank of Whitman, Colfax, Washington, was closed today by state banking regulators who appointed the FDIC as receiver. The failed bank was sold to Columbia State Bank which will assume all deposits of Bank of Whitman.
Bank of Whitman, established in 1977, was an employee owned community bank with 20 branches and $548.6 million in total assets. During the past decade, Bank of Whitman lent aggressively, expanding total assets from $340 million in 2004 to $850 million in 2009. As property values boomed and real estate seemed destined to go only higher, Bank of Whitman’s income expanded rapidly until the financial crisis of 2008.
Beset by collapsing real estate values and defaulting loans, the fortunes of Bank of Whitman rapidly reversed. The troubled asset ratio quickly climbed to 158 and the Bank’s fate was sealed. The vast majority of banks with a troubled asset ratio of over 100% wind up failing.
In July 2010, Bank of Whitman signed a consent order with the Federal Reserve requiring the Bank to increase capital and take action to improve management’s oversight of operations.
At March 31, 2011, Bank of Whitman had total assets of $548.6 million of which Columbia State Bank agreed to purchase only $314.4 million. The remaining assets of $234.2 will be retained by the FDIC for later disposition. It has become common for acquiring banks to purchase all of a failed bank’s assets, often in conjunction with a loss-share agreement with the FDIC that limits losses to the acquiring bank. Low quality assets that banks refuse to purchase become the property of the FDIC as receiver.
Columbia State Bank is owned by its holding company, Columbia Banking System, Tacoma, WA. Columbia State Bank is profitable, has over $4 billion in assets and 84 branches operating in Washington and Oregon. Columbia State Bank received $77 million under the TARP program but repaid the loan in August 2010.
Columbia State Bank previously acquired four other failed banks in Washington and Oregon over the past two years.
The loss to the FDIC Deposit Insurance Fund is $134.8 million or 25% of total assets. Bank of Whitman is the nation’s 63rd banking failure and the 3rd in Washington.