By Mike Benbow Herald Writer
OAK HARBOR — The takeover of Lynnwood’s City Bank was immediately profitable for Washington Banking Co., which reported a 250 percent increase in net earnings Tuesday from the previous quarter.
Washington Banking, the holding company for Whidbey Island Bank, reported $4.2 million in profit for the quarter ending June 30, or 27 cents per diluted share.
That compares to $1.6 million for the previous quarter before the April takeover, or a dime a share in earnings. It’s a 413 percent increase from a year ago, when the company earned $818,000 or 9 cents a share, with fewer shares outstanding.
“Our FDIC-assisted acquisition of City Bank in Lynnwood, which closed on April 16, is contributing to profitability as planned,” said Jack Wagner, president and chief executive.
The Federal Deposit Insurance Corp. forced the sale of City Bank to prevent its failure, agreeing to acquire many of its riskier assets. The bank had a large percentage of loans in homes and real estate that were poor risks because of the recession and the subsequent housing bust.
Washington Banking’s report Tuesday offered more details of the sale, noting that it had 90 days to decide whether it would buy or assume the leases of City Bank’s eight branches. It said it chose to take them all on July 14.
“We are in the process of making improvements to these properties with fresh paint, new landscaping and installing Whidbey signage and flag poles on our newly acquired branches,” Wagner said.
He also noted that the bank has kept on 110 of the 158 employees of City Bank, choosing to keep most branch employees and operations staff members but letting go senior managers and the real estate lending staff.
“I am extremely pleased with the progress of integration, and we expect system conversions to be completed later this quarter,” he said.
Other points noted in the bank’s financial statement:
Initially, there were $650 million in deposits from the Lynnwood bank, but the owners of about $113.4 million, mostly in certificates of deposit, took their money elsewhere when the interest rates on deposit accounts were lowered after the deal.
“Customers who chose not to accept the new rates on time deposits did not incur any prepayment penalties,” Wagner said.
He added that he was pleased with the number of depositers who remained and that the bank’s staff “did an excellent job of maintaining customer relationships.” He added that he expects the long-term retention rate “to remain high.”
Wagner noted that the company was doing well financially before the acquisition and that its “core franchise,” meaning its operations outside the City Bank acquisition, continued to do well afterward.
Mike Benbow: 425-339-3459, email@example.com.