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The Washington Department of Financial Institutions closed Longview-based Cowlitz Bank on Friday afternoon, citing inadequate capital and severe loan losses.
Following the closure, the agency named the Federal Deposit Insurance Corp. as receiver of the bank. The FDIC then announced that it had entered into a purchase and assumption agreement with Heritage Bank.
Heritage Bank will assume all deposits and certain assets of Cowlitz Bank.
Established in 1977 and based in Longview, 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 gets 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 expects further growth at Heritage, both structural – including two branches planned for this year in 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.
This might not be the end for failed state banks.
“We’re not through,” said Brad Williamson, the director of banks at DFI. “I’d say we’re certainly on the backside. There will be a lot less going forward, but there still are several banks that need capital if they’re going to make it. Only time will tell. The good news is that delinquent 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 open Monday as branches of Heritage Bank. The Longview Cowlitz Bank drive-up facility will reopen today 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 June 18, according to the Cowlitz website. Several days in June saw trading of more than 100,000 shares. Since the end of July 2009 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 and down 90.71 percent over the past 12 months, according to Bloomberg News.
C.R. Roberts: 253-597-8535 c.r.roberts@thenewstribune.com
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Cowlitz Bank customers with questions can go to www.dfi.wa.gov/banks/cowlitz.htm.
