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By RAELYNN RICARTE
News staff
writer
Columbia River Bank closed 21 branches on
Friday as the ninth financial institution to fail in the nation
during January — but was back in business under new ownership by
the next day.
“This transition is a seamless and invisible
process,” said Greg Henderson, spokesperson for the Federal
Deposit Insurance Corporation.
“The only thing that you are going to notice
now is that the bank has a new name; other than that it is
business as usual for the customers.”
He said the deposits of Columbia River Bank,
headquartered in
The Dalles,
have been assumed by Columbia State Bank, which already has 52
branches and is based in
Tacoma,
Wash.
Columbia River’s
closure followed the loss of $52 million in the first nine
months of 2009 and $26.3 million in 2008.
Henderson
said accounts at the bank will continue to be insured by FDIC up
to $250,000. He said customers are asked to continue using their
existing branch until they receive notice from
Columbia
State
that it has completed systems changes to allow other branches to
process their financial transactions as well.
He said the 322 employees of
Columbia River, including those at the branch in
Hood
River,
will work for the FDIC until all of the details related to the
change in ownership are completed within the next few weeks.
He said these workers will retain their
current pay grade and accrued vacation time until
Columbia
State
is authorized to make staffing decisions.
“There’s no overlap so we don’t foresee any
changes in the branch system at all,” said JoAnne Coy, vice
president of corporate communications for Columbia State.
“This acquisition gives us a nice additional
presence in both Oregon and Washington.”
She said all of Columbia State’s new
customers have been sent a welcome letter to explain the
transition and the services they will now be offered.
The FDIC estimates that the cost to the
Deposit Insurance Fund from the closure of Columbia River will
be $172.5 million.
Henderson said the failure of Columbia River,
founded in 1977, was largely tied to bad home and commercial
real estate loans. He said these loans contributed to the bank’s
demise after the housing market’s crash.
According to Henderson, the institution has
been on the FDIC’s “troubled bank” list since the fall of 2008.
At that time, Columbia River’s construction loans exceeded $274
million, or 32 percent of its total loan portfolio.
State and federal regulators took control of
Columbia River’s slightly more than $1 billion in total assets
and $980 million in deposits Jan. 22.
All of the bank’s deposit accounts were
immediately transferred to Columbia State and the money was
available to bank customers on Jan. 23.
The new owner company will pay the FDIC a
premium of 1.0 percent to assume all of the deposits of Columbia
River and has agreed to purchase all of the assets.
Last February, Columbia River, which was held
by Columbia Bancorp of The Dalles, received notice from the FDIC
and the Oregon Division of Finance and Corporate Securities that
it needed to boost its minimum capital levels.
Terry Cochran,
CEO
of Columbia River, addressed the bank’s efforts to overcome its
economic woes during an interview this month in the Columbia
Gorge Business Review.
“Our past-due accounts have declined
significantly. We’re selling a lot of property and putting a lot
of money back into interest-earning funds — it’s just taking
longer than I thought,” he said.
Cochran was a 20-year veteran of the bank who
had remained a member of the board of directors. He returned
from retirement in 2008 to help address Columbia River’s
financial challenges.
According to reports, Cochran helped the bank
reduce its outstanding construction loans from $274.6 million to
$181.5 million in a year.
In September 2008 the bank announced it would
close its mortgage division, which had provided about 5 percent
of income. Between layoffs from that division and attrition, the
bank cut its work force from 420 people to the current staffing
level.
The bank also sold its $7 million credit card
portfolio for $7.8 million to Elan Financial Services of
Pittsburgh, Penn., adding cash to Columbia’s balance sheet while
removing some risk.
In spite of this progress, regulators
determined that Columbia River had sunk into insolvency by not
raising enough capital to meet minimum requirements.
Henderson said in 2009 there were 140 bank
failures across the county, the most since 1992, when there were
181 at the tail end of the Savings and Loan crisis.
On Friday, Evergreen Bank of Seattle, with
slightly more than $200 million in assets, also failed.
Columbia River is the fourth — and largest —
Oregon bank to fail and was preceded in 2009 by Community First
Bank of Prineville, Silver Falls Bank of Silverton, and Pinnacle
Bank, based in Beaverton.
Congress created the FDIC in 1933 to restore
public confidence in the nation’s banking system. The agency
insures deposits at the nation’s 8,099 banks and savings
associations and monitors their financial activities to address
the risks to which they are exposed.
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