Another troubled Washington bank has fallen while another strongly managed state bank has signaled its plans to grow along the I-5 corridor.
The Washington Department of Financial Institutions closed Longview-based Cowlitz Bank Friday afternoon citing inadequate capital and severe loan losses.
Following the closure, the agency immediately named the Federal Deposit Insurance Corporation as receiver of the bank. The FDIC immediately announced that it had entered into a purchase and assumption agreement with Olympia-based Heritage Bank.
Heritage Bank will assume all deposits and certain assets of Cowlitz Bank.
Established in 1977 and based in Longivew, Cowlitz Bank had four local branches – in Longview, Castle Rock, Kalama and Kelso.
Heritage also acquired branches of Cowlitz subsidiary Bay Bank, which operated branches in Bellevue, Seattle and Vancouver, in Washington; and Portland and Wilsonville, in Oregon.
Brian Vance, Heritage president and CEO, said late Friday that the purchase “does a lot of things for us. Some of the more critical things – it gets us into King County in a big way. It gets us into both the Seattle and Bellevue markets. We hope to expand our market in King County. It gives us a toehold and exposure there.
“It also get us into Oregon,” he said. “It’s a small presence. A regional bank needs to have a presence in Seattle and Portland and points in between.
“We are very pleased,” he said.
Vance said he anticipates further growth at Heritage, both organic – including two branches planned for this year in the South Sound – and by acquisition.
Heritage now counts 29 branches in Western Washington, Oregon and, with its Central Valley Bank, in Central Washington.
“The failure of Cowlitz Bank is an unfortunate example of the severe consequences these exceptionally challenging economic times bring for our financial institutions that have been heavily committed to commercial real estate land acquisition and construction lending,” DFI Director Scott Jarvis said in a release Friday. “While it is difficult to close a bank with such strong commitment to its community, we are pleased that Heritage Bank, a Washington State-chartered bank with a strong balance sheet and an 80-year history of serving its communities, has acquired Cowlitz Bank.”
This may not be the end for failed state banks.
“We’re not through,” said Brad Williamson, director of banks at DFI. “I’d say we’re certainly on the backside. There will be a lot less going forward, but there are still several banks that need capital if they’re going to make it. Only time will tell. The good news is that deliquent loans and all of those kinds of metrics are getting somewhat better. There are a few banks – they just need some more capital.”
All Cowlitz Bank locations will reopen Monday as branches of Heritage Bank. The Longview Cowlitz Bank drive-up facility will reopen on Saturday with normal business hours.
There had been relatively high trading in Cowlitz stock in the past few months, with 1.5 million shares changing hands on June 18, according to the Cowlitz website. Several days in June saw trading in six figures. Since the end of July of last year until early March, it was difficult to find a day with more than 10,000 shares traded.
Cowlitz stock closed at $1.70 on Friday, well below its 52-week high of $21.00 and down 90.71 percent over the last 12 months, according to Bloomberg News.
Cowlitz Bank customers with questions should visit www.dfi.wa.gov/banks/cowlitz.htm.