Heritage Bank of Washington Becomes 44th Banking Failure

First Heritage Bank of Snohomish, Washington, became the nation’s 44 banking failure of 2011.  The Bank was closed by the Washington State Department of Financial Institutions which appointed the FDIC as receiver.

The FDIC sold failed Heritage to Columbia State Bank of Tacoma, Washington, which will assume all deposits and purchase most of the assets of the failed bank.

First Heritage was a locally owned independent bank established in 1982.  The Bank rapidly increased its assets during the peak of the real estate boom.  Assets of First Heritage ballooned from about $125 million in 2006 to almost $225 million in 2009.  As real estate value weakened, First Heritage was overwhelmed with defaulting loans which lead to its failure.

First Heritage had been operating under a Consent Order that was issued in April 2010 by state and federal regulators.  First Heritage was cited for “unsafe or unsound banking practices relating to management, capital, asset quality, loans, liquidity, and brokered deposits.”  First Heritage was unable to raise additional capital as required by the Consent Order and regulators closed the bank to protect depositors.

At March 31, 2011, First Heritage had total assets of $173.5 million and total deposits of $163.3 million.  Columbia State Bank agreed to pay the FDIC a premium of .75% for the deposits of First Heritage.

Columbia State Bank agreed to purchase the assets of failed First Heritage subject to a loss-share transaction with the FDIC that covers $142.2 million of the asset pool purchased.  The loss-share agreement limits the losses that Columbia can incur on the purchased assets.  According to the FDIC, the use of loss-share agreements limits the amount of losses on a bank failure by keeping the assets in the private sector.

Columbia State Bank has acquired three other failed banks including Summit Bank of Burlington, WA, which was closed by regulators last week.  Columbia also purchased failed Columbia River Bank of Oregon and failed American Marine Bank of Washington, both in January 2010.

Columbia State Bank is owned by its holding company Columbia Banking System, which is headquartered in Tacoma, Washington.  Columbia Banking System has over 85 branches in Washington and Oregon and over $4 billion in assets.  The Bank reported a profit at December 31, 2010 of $30.8 million and the Bank’s stock has seen a major recovery in its value since 2009.



First Heritage Bank is the nation’s 44th banking failure of the year and the second in Washington. The estimated cost of closing First Heritage is $34.9 million.



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