Struggling for answers

Southwest Washington reeled from the takeover of Vancouver-based Bank of Clark County in the days following the whirlwind event.

At the end of the workday on Friday, Jan. 16, the Washington Department of Financial Institutions closed BOCC, citing inadequate capital and liquidity. The Federal Deposit Insurance Corp. was named the receiver and entered into a purchase and assumption agreement with Roseburg, Ore.-based Umpqua Bank.

Bank of Clark County had a major local presence, supporting numerous business-related activities, community events and nonprofits.

“Bank of Clark County hasn’t just been a bank,” said Greg Seifert, president and CEO of Vancouver-based Biggs Insurance Services and a BOCC shareholder. “It took the community bank mantra and carried it.

“I think you can lose a bank – you can always move your deposits and borrow from somebody else, hopefully – but I don’t think you can replace the presence they had in the community.”

At this point, it looks unlikely investors will recoup much, if any, money.

Although the rumor mill was active the week of the seizure, shareholders were not notified by bank leadership that the bank was in trouble.

So when BOCC’s two branches opened for business as Umpqua Bank on Tuesday, Jan. 20, many in the business community were still scratching their heads, wondering how it could have happened at all, let alone how it happened so quickly.

The bank’s downtown branch at 1400 Washington Street was buzzing Tuesday morning as patrons – some angry – tried to decipher what exactly happened to their bank.

Umpqua, BOCC and FDIC employees were on hand to try to ease their confusion.

“We’re a strong institution,” said Ray Davis, Umpqua’s chief executive officer. “We are already serving the greater Vancouver market, and we’re committed to it. … It was also an opportunity to step up and help out the customers of Bank of Clark County and Southwest Washington, who could have been in a pretty tough situation.”

Davis said Umpqua realized BOCC’s situation was coming to a head late Thursday night and made the choice to buy the failed institution.

Far-reaching effects

Bank of Clark County was founded in 1999 after a group of business owners raised millions of dollars from about 400 local shareholders.

Neither former leadership of BOCC nor the board of directors was available for comment on the reason for its demise, but the bank was deeply rooted in the development community. As the economy drooped, the bank’s loan portfolio diminished.

Shareholder Paul Winters, president of Vancouver-based Winters & Assoc., said he was under the impression developers were making payments and loans were current.

“What had changed, as a shareholder, I don’t know,” he said.

State inspectors required a revaluation of underlying collateral, an accounting practice referred to in the industry as “mark to market.” This reduced the loan-to-value ratios on real estate loans, triggering a need for higher reserves to cover losses if those loans were to default.

Additionally, the FDIC increased the standard for bank liquidity, or cash-on-hand requirements, Winters said.

What about a bailout?

Many have questioned why large institutions such as Bank of America have benefitted from federal TARP funds, while community banks have been left vulnerable.

“From a mechanical standpoint, it’s distressing to me that an accounting change can take what I considered a reasonably healthy bank and force it into liquidity,” Winters said. “The TARP funding is being lavishly thrown at larger institutions…and they’ve taken an admirable institution and in the dead of the night, have thrown it away. It’s a poor way to treat Middle America.”

Congressman Brian Baird said he was saddened by the news, calling it symptomatic of the economic turmoil nationwide. But Congress has tried to help smaller financial institutions, too, he said.

“Remember, the original bill we were given by the Bush administration asked for $700 billion with no control or limits to what they did with it,” Baird said. “Many insisted more had to be done to help small banks and home borrowers. We fought against an administration that resisted such efforts.

“More could have been done, should have been done. Ultimately, it’s important to remember that the primary responsibility certainly isn’t residing within the adequacy of the rescue package but with problems with the lending institutions themselves.”

Baird said the bank didn’t contact legislators to detail specific needs, but it would have been “totally inappropriate and possibly illegal” for him to have stepped into the process, he said.

As of Jan. 13, BOCC had total assets of $446.5 million and total deposits of $366.5 million, according to the FDIC.

Umpqua assumed BOCC’s insured deposits, but not the $117.8 million in BOCC’s brokered deposits. The FDIC will pay the brokers directly for the amount of their insured funds.

In addition, Umpqua bought $30.4 million of BOCC’s assets but did not assume BOCC’s loan portfolio, which is now owned by the FDIC, Davis said.

Lines of credit held by small businesses are also under control of the FDIC.

Umpqua didn’t have enough time to do due diligence on the loan portfolio, and will look at some loans on a case-by-case basis, Davis said.

At the time of closing on Jan. 16, there were about $39.3 million in uninsured deposits held in about 138 accounts that potentially exceeded the insurance limits of $250,000.

Davis said that figure is likely to come down fairly significantly and that much of the money is government funds, which are protected.

Deposits of public money that are not fully covered under federal deposit insurance are protected by Washington’s Public Deposit Protection Act, which requires public depositories to pledge collateral for government money, according to the Office of the Treasurer.

The FDIC estimates the cost to its Deposit Insurance Fund will be between $120 and $145 million. Bank of Clark County is the second FDIC-insured institution to be closed this year, and the first in Washington to fail in the state since Emerald City Bank of Seattle in 1993.

“In the end, I think the community is going to suffer by this action,” Winters said. “I have great respect for the leaders of the bank. This is a humiliating experience to them and it’s undeserved. The loss has not been looked at right.”

Megan Patrick-Vaughn can be reached at

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