By Mike Benbow Herald Writer
ARLINGTON — Whidbey Island Bank snatched up another Snohomish County financial institution Sept. 24, grabbing Arlington’s North County Bank after it was seized by state banking officials at the end of the day.
“North County Bank’s capital has been eroded by large loan losses associated with land development and construction lending,” said Brad Williamson, director of the division of banks of the state Department of Financial Institutions.
Both Lynnwood-based City Bank and Everett-based Frontier Bank were shuttered and sold earlier this year by regulators after they, too, were hammered by failed real estate loans.
Whidbey Island Bank immediately took over at North County Bank.
The bank continues to be insured by the Federal Deposit Insurance Corp. and depositors were able to access their money immediately by writing checks or by using ATMs or debit cards, the FDIC said.
North County Bank is based in Arlington and has branches in Marysville, Lake Stevens and Everett. With its earlier acquisition of City Bank, Oak Harbor-based Whidbey Island Bank now has branches from Whatcom County to King County.
“The branch network we are acquiring provides a prime gateway for us to develop additional customer relationships in a growing area of Snohomish County,” said Jack Wagner, president and CEO of Washington Banking Co., the parent firm of Whidbey Island Bank.
In a loss-sharing agreement, the FDIC has agreed to pick up $6 million of North County Bank’s brokered deposits, Wagner said.
Washington Banking Co. said its new asset has deposits of about $250 million and loans of about $195 million.
The company said it will continue to be “well capitalized” after the deal, according to regulatory standards.
Wagner said he expects the deal to immediately add to the value of the bank’s shares.
Its deal for City Bank, which had $1 billion in deposits at the end of 2009, immediately made money for the bank. In that move, the FDIC also agreed to pick up many of City Bank’s failed assets.
Williamson said North County bank had problems similar to City Bank and to Frontier Bank, noting that real estate development was particularly heavy in Snohomish County when the market collapsed.
He said that City Bank, Frontier and North County Bank had all invested heavily in home building and in preparing raw land for home development.
“As the real estate market tumbled, North County’s borrowers struggled,” he said. “They tried to recapitalize, but they were not able to attract enough money to remain viable.
“It was exactly the same scenario (as Frontier and City Bank) played out on a smaller scale,” Williamson said.
North County bank, he added, was deemed “critically undercapitalized,” which required its closure.