Venture Bank faces financial deadline

Federal regulators issue directive to raise more capital or find a buyer by next month

By Rolf Boone | The Olympian • Published March 29, 2009

Comments (0)

DuPONT – Federal regulators have ordered Venture Bank to raise more capital or find a buyer by next month because of concerns about its financial health.

In a letter dated Feb. 13 but disclosed on the Federal Deposit Insurance Corporation's Web site Friday, the FDIC notified the bank that it has 60 days to raise more money, find a buyer or find a merger partner. The 60-day period ends April 14. Among the FDIC's concerns were that:

• The bank's condition continues to deteriorate.

• The bank's management has not demonstrated the ability to return the bank to a safe and sound condition.

"We are appealing this and take exception to their conclusions," Venture Bank President and Chief Executive Jim Arneson said Saturday. He declined to comment at length about the directive but said regulator concerns stem from investment losses the company reported in the third quarter of last year.

Venture Financial Group Inc., parent company of the bank, announced an after-tax loss of $26.1 million in the third quarter of last year that was linked to investment losses related to mortgage giants Freddie Mac and Fannie Mae. Although the company reported a $1.4 million profit in the fourth quarter last year, it still reported a full-year net loss of $21.4 million.

Arneson said the company has hired investment bankers and is in discussions with potential investors.

"This represents no change in the banking service we provide," he said, emphasizing that depositors' accounts are insured up to $250,000.

"We've always complied with the FDIC or we are well on the way to compliance," he said.

Arneson added that at least 1,000 banks throughout the country were affected by the falling value of investments in Freddie Mac and Fannie Mae.

"There are a great many that have had to raise capital," he said.

Members of the South Sound banking community said Saturday they hoped Venture Bank could meet the FDIC directive and emerge unscathed.

Mike Edwards, a former Federal Reserve adviser and founder of Thurston First Bank, took issue with the FDIC's approach to dealing with Venture.

"I'm disappointed to see the regulators have announced their concerns with the bank in a public fashion, dragging it through a prolonged public view," he said.

Edwards praised Venture's role in the community and said that had the government not taken over Freddie Mac and Fannie Mae, Venture would have weathered the economic downturn as well as anyone else.

"They were striving to do the right things and got caught in a very unusual circumstance," Edwards said.

South Sound Bank President and Chief Executive Dan Yerrington said he hoped the bank could put some kind of deal together but acknowledged that trying to raise capital or pull off a merger in a slower economy could be a challenge.

"They are good guys," he said about Arneson and Venture Financial Chairman Ken Parsons. "They are just in a tough spot."