The best news to derive from Friday's announced failure and sale of DuPont-based Venture Bank came in the form of a report from a Seattle TV and radio station.
But the news – that no other banks in Washington were in trouble and facing closure – was very wrong.
Yes, Venture did fail.
But yes again, in fact, there are other banks in the state that might also fail.
Never miss a local story.
Scott Jarvis, director of the state Department of Financial Institutions, said Monday that he thinks he knows how that incorrect information was relayed to the public.
“The consumer reporter called Brad,” Jarvis said. (That would be Brad Williamson, head of banks at DFI.)
The reporter asked if any other banks were in trouble. Williamson – on Friday evening – answered, “We are not closing any more banks this week.”
“Somehow that got translated for the 11 o’clock news that there are no other banks in trouble,” Jarvis said.
“The truth is that we did not close any more banks on Friday,” he said.
And he continued, “There is considerable strain on our banking system attributable to the expansion we had in commercial real estate growth.”
Although his office does regulate banks, it is the Federal Deposit Insurance Corp. that sends notices to banks that are in difficulty.
Because of this, Jarvis would not quantify the number of troubled state banks, nor would he offer an opinion concerning the state of scrutiny or discipline those banks could be under.
He did, however, commend a section of the Economic & Revenue Update issued last Friday by the Washington State Economic and Revenue Forecast Council – which said that conditions continue to improve at large national banks, although:
“Regional and local banks … remain vulnerable because of their disproportionately higher exposure to commercial real estate. The asset quality of state chartered banks has deteriorated faster than that of most national banks. There is a risk, not insignificant, of a second round of credit contraction from regional and local bank failures.”
The failure of Venture Bank – which was overtaken by DFI, then taken by the FDIC, which sold it to Raleigh, N.C.-based First- Citizens Bank & Trust Co. – “went as well as it could have,” Jarvis said.
“The new owners,” he said, “made a very good first impression. I was told that Ken Parsons (head of Venture) was very gracious, telling the staff to keep their focus on the customers. The tension level at these events is always high, and it was relieved by the new owners. It was successful, it was unfortunate and it went very smoothly. I think you need to take comfort in just how smoothly this transaction was. Deposits were safe.”
The lessons for other banks, Jarvis said, “is that whenever we have a bubble, whenever you have overreaching – if the risk is not managed prudently, the downside can be rather severe.”
The sense he had of the loss of Venture, he said, was “almost like attending a funeral.
“We know these people. They’re our state charter. We’ve worked with them throughout the years. These people are active in the community. It’s a very sad event. We’re not immune to that.”
And where one media outlet got the story wrong, others were not as interested as Jarvis could have predicted.
“This got a lot less media coverage than we might have expected,” he said.
“Maybe the public is getting used to this.”
C.R. Roberts: 253-597-8535