EVERETT — With a single sentence from banking regulators, Mountain Pacific Bank becomes the first Snohomish County-based bank to be released from federal oversight without an infusion of outside capital or a merger.
The Federal Deposit Insurance Corp. gave Mountain Pacific the news in a brief letter dated April 4.
“For your information, the joint Order to Cease and Desist issued … by the San Francisco office of the Federal Deposit Insurance Corporation (“FDIC”) and the Washington Department of Financial Institutions (“WDFI”) on March 5, 2009, has been terminated.”
“We’re a better bank today for having gone through this process, but it was not an easy path,” Mountain Pacific Bank President and CEO Mark Duffy said in a news release. “We could not have accomplished this without our loyal customers, talented employees, supportive investors and a fully engaged board of directors. We were successful in ‘keeping it local’ by working through our issues and raising new capital from local investors.”
Mountain Pacific Bank said it had met all of the requirements of the regulatory order prior to its most recent examination by regulators. Those included improving the quality of the banks’ loan portfolio and raising key capital ratios. Over the past two years, the bank reduced problem assets by $15.9 million, while successfully raising more than $10.5 million in new capital from local investors.
To date, most banks released from consent or cease and desist orders have been due to FDIC closures, acquisitions by other institutions or by loss of local ownership to out-of-area investors, Mountain Pacific Bank officials said.
Last October, Coastal Community Bank and its holding company, Coastal Financial Corp., submitted an Interagency Notice of Change in Control to the Federal Reserve Bank of San Francisco announcing that Steven Hovde of Barrington, Ill., would acquire “10 percent of more of the voting shares of Coastal Financial Corp., and thereby indirectly acquire Coastal Community Bank.” The notice also announced the appointment of Hovde to Coastal’s board of directors.
The same Federal Reserve Bank notice listed an investment by Seattle limited partnerships Montlake Capital II and Montlake Capital II-B to acquire voting shares of Coastal Financial Corp. while appointing Andrew Dale to the board of directors.
Coastal Community Bank CEO Eric Sprenk emphasized that the Montlake Capital II partners were one of the original investors in the bank and that Hovde is the bank’s only out-of-state investor.
“We just raised $9 million in capital,” he said. “The vast majority (of our investors) are local owners.”
Sprenk said Coastal Community Bank increased its lending in 2011 by 30 percent and saw deposits increase by 45 percent.
The Snohomish County banking landscape changed dramatically after the recession hit in 2008 and the housing and credit markets collapsed. Union Bank of California took over Frontier Bank in 2010 in a forced FDIC sale after Frontier couldn’t raise enough capital to offset its bad real-estate loan portfolio. Likewise, Whidbey Island Bank took the assets of City Bank and North County Bank when they failed. In 2011, Opus Bank of California took over Cascade Bank and Columbia State Bank of Tacoma got the assets of First Heritage Bank after it failed.
“Local community banks provide the fuel for economic growth in communities like ours and it’s been devastating for the people and businesses of Snohomish County to have lost so many local banks,” Mountain Pacific Bank board chairman Rick Pedack said in the news release. “We’re in this for the long term and I’m proud that our success has helped preserve local community banking in Snohomish County. Now that we’re back on track, Mountain Pacific Bank is ready to grow into the void of locally owned, locally managed banks in this area.”
Kurt Batdorf: 425-339-3102, kbatdorf@scbj.com.
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