Peninsula Daily News and The Associated Press
First, the most important news — all local deposits at Westsound Bank branches in Sequim, Port Angeles and Port Townsend and six other cities are safe, even those over $250,000.
In a prearranged deal with government regulators, Kitsap Bank took over Westsound’s nine branches on Friday after they were seized because of “severe asset problems, significant losses and inadequate capital.”
Westsound’s branch banks on the North Olympic Peninsula — and its six other branches in Bremerton, Gig Harbor, Federal Way, Poulsbo, Silverdale and Port Orchard — will open Monday as Kitsap Bank branches.
For now and weeks to come, customers can do business at Westsound’s former branches as usual.
They can withdraw money from ATMs and make debit-card purchases.
Checks drawn on Westsound accounts will continue to be honored.
Loan customers should continue to make their payments as usual.
Internet banking
But some of Westsound’s Internet banking services won’t be available until 9 a.m. Monday.
Deposits in Westsound — which had been staggering for more than a year under the weight of millions of dollars in soured real-estate loans — are guaranteed by the Federal Deposit Insurance Corp., or FDIC, up to $250,000.
But as part of its agreement with the FDIC, Kitsap assumed all of the failed bank’s “non-brokered” deposits, even those of more than $250,000.
“If we didn’t do this, depositors were in jeopardy of losing money, and we certainly didn’t want that — no one will lose a dime,” Kitsap Bank President Jim Carmichael said in a telephone interview Saturday with the Peninsula Daily News from the bank’s headquarters in Port Orchard.
Now second largest
More than 100 years old, Kitsap Bank has 24 offices and branches in the greater Puget Sound region.
The takeover of Westsound deposits and operation of its branches gives Kitsap Bank total deposits exceeding $1.1 billion — “that means we are stronger here in our home than either Bank of America or WaMu/Chase, and on the [North] Olympic Peninsula we’ll be the second largest banking operation [after First Federal],” said Carmichael.
He said Westsound’s North Olympic Peninsula branch bank deposits total about $130 million in Port Angeles ($65 million), Sequim ($55 million) and Port Townsend ($10 million).
Kitsap Bank also has branches in Port Angeles, Sequim and Port Townsend — plus Port Hadlock and Port Ludlow.
Those branches have deposits of about $104 million, Carmichael said — about $30 million in Port Angeles, $14 million in Sequim and $60 million in Port Townsend/Jefferson County.
‘Doubling in size’
“We’re going to be doubling in size — Westsound had a particularly strong operation on the Peninsula,” said Carmichael.
The nine Westsound branches will continue to be staffed for the time being by Westsound employees.
Kitsap Bank employees will also be at each branch.
Kitsap Bank will decide over the coming weeks which Westsound em ployees it wants to hire permanently, Carmichael said.
“Ultimately, we’ll have significant openings on our staff for those people,” Carmichael said.
Wants Sequim branch
Kitsap Bank has 90 days to decide which Westsound offices it wants to keep.
Carmichael said at this time Kitsap Bank is interested in purchasing Westsound’s corporate office in Bremerton — and the big branch office in Sequim, “which is bigger than our branch in Sequim and better situated.”
The branches it doesn’t want will stay open another 90 days after that — and in places where there are branches of both banks, it will probably keep one or the other.
Kitsap and Westsound’s Port Angeles branches are within a block of each other on Front Street — “we won’t be keeping that one [Westsound’s branch]” said Carmichael.
It will take three or four months before computers are converted to allow former Westsound customers to bank at Kitsap Bank branches and vice versa.
Locked doors at 5 p.m.
Agents of both the FDIC and the state Department of Financial Institutions were at each Westsound branch Friday evening to begin to facilitate the transition of ownership.
The bank’s offices appeared to be operating normally until closing time, when the doors were locked.
Westsound is the second Washington-based bank and 33rd U.S. bank to fail this year. The state DFI closed the Bank of Clark County on Jan. 16.
By contrast, 25 U.S. banks failed in all of 2008, including Seattle-based Washington Mutual, the biggest bank to fail in U.S. history.
Loans examined
Linda Beavers, regional ombudsman with the FDIC, said the federal agency will take Westsound’s bad loans, pool them by category, and try to find buyers.
In the meantime, customers are asked to continue to make payments as if Westsound still existed.
In addition to assuming the deposits, Kitsap will buy $49.3 million of Westsound’s assets, which include cash, cash equivalents, marketable securities and loans secured by deposits.
The FDIC will hold about $285 million in remaining assets “for later disposition,” the agency said.
The FDIC estimated that the failure of Westsound Bank will cost its deposit-insurance fund $108 million.
The FDIC will pay off $9.4 million in brokered deposits not being assumed by Kitsap Bank.
Brokered deposits are funneled into a bank by customers of brokerage firms chasing the highest yields.
Customers who placed money with brokers should contact them directly for more information about the status of their deposits, the FDIC said.
Was under supervision
Westsound has been operating under tight state and federal supervision since March 2008, when it agreed to bolster its capital levels, tighten its lending practices, clean up its balance sheet and strengthen management and board oversight.
However, the bank’s position continued to deteriorate over the past year, as the deflating economy outpaced management’s turnaround efforts.
Total assets fell from $502.8 million on March 31, 2008, to $334.6 million a year later, while nonperforming assets — mainly foreclosed real estate and delinquent loans — rose from $72.2 million to $127.8 million over the same period.
The bank’s coverage ratio, which measures its loan-loss reserves as a percentage of nonperforming loans, dwindled from 37.4 percent on March 31, 2008, to 14.3 percent a year later.
