One year after state and federal agents took over the Bank of Clark County, the community is still experiencing the financial and emotional fallout.
Though most of the defunct local bank’s depositors, borrowers and employees have recovered funds, found new jobs and generally moved on, some still are in limbo.
Frozen lines of credit, stalled loan sales and all-out losses from the bank failure led to a cascading effect of real estate foreclosures, failed businesses and lost personal fortunes. And the faith and pride many community members held in the homegrown bank have been replaced by general disappointment, resentment and in some cases distrust of banks and local business leaders.
“When a bank goes under it affects the entire local economy,” said Ron Wysaske, CEO of Riverview Community Bank in Vancouver. “It helped exacerbate falling real estate prices and created a lot of problems for customers and angst among everybody doing business.”
What happened?
From its opening days in 1999, the Bank of Clark County was the community’s go-to lender for commercial real estate and construction loans. By September 2008, the bank’s real estate portfolio ballooned to 550 percent of total capital.
As a result, the bank was hit hard by the housing crash and resulting sharp decline in real estate values in Clark County by late 2008.
Loan losses mounted until state and federal regulators deemed the bank “significantly undercapitalized” and seized its assets last January. The bank closed with $468.1 million in assets but debt write-offs meant a $131.4 million loss to the federal Deposit Insurance Fund, according to the Federal Deposit Insurance Corp.
An FDIC Inspector General’s report issued in August placed the bulk of the blame for the failure on risky lending behavior by the bank’s management.
What’s left
The FDIC, which seized the bank’s assets Jan. 16, 2009, hasn’t finished liquidating the plunder, including loans and foreclosed property. Customers and stakeholders who are still owed money won’t know how much they’ll recover until every remaining asset is sold.
As of last week, the FDIC had sold some 448 Bank of Clark County loans for $115.6 million in three rounds of auctions to private investors and other institutions. Some 263 loans worth a nearly $135 million remain to be sold.
The agency expects to complete the loan sales in the first quarter, said Greg Hernandez, an FDIC spokesman.
The winners
Some beneficiaries of the closure have emerged.
First Independent Bank, Pacific Continental Bank, Wells Fargo, Bank of America, and U.S. Bank among others have made significant gains in market share in the Clark County shake up, in part by attracting former BOCC depositers. Dozens of outside investors have snapped up BOCC loans in FDIC auctions, for less than 30 cents on the dollar in some cases. And real estate bargain hunters, such as the city of Ridgefield and the Ridgefield port, have bought foreclosed property at a fraction of the value of two years ago.
Umpqua Bank, which took in about $165 million in insured deposits when it bought the Bank of Clark County from the FDIC, grew its market share more than 18 percent between June 2008 and June 2009.
“We’re really pleased. At the beginning we lost a few relationships… but overall our deposit growth continues to be strong in the Vancouver market,” said Ric Carey, executive vice president in charge of community banking for Umpqua in Portland. “We’re up in deposits over when we took over that location.”
Umpqua is considering expanding its Clark County foothold with possible new branches in Ridgefield, Battle Ground and Camas, said Carey.
Employees move on
When Umpqua Bank bought out the BOCC’s insured deposits and certain other assets, all of BOCC’s top executives were let go but it kept the majority of the work force, or about 90 employees. Of those employees, about 30 stayed on as temporary employees with the FDIC, according to Umpqua.
Beyond that, Umpqua says it’s unsure about the final number it retained, saying only that all of the “front facing” customer service employees kept their jobs along with a dozen or so support staff.
Conversations with several former BOCC employees, who wished to remain anonymous, indicate that those that initially went to Umpqua felt marginalized by their new employer or didn’t fit the company culture and found work at other Clark County banks and elsewhere.
All of the failed bank’s former top executives have stayed in the community and found other work, including former bank president and founding member Mike Worthy, who left a long career in banking to work for Vancouver trucking company Atlantic and Pacific Freightways.
Former bank board members either did not return phone calls seeking comment or declined to comment due to possible pending litigation, but their listings indicated that they’ve stayed here and most have remained in business.
Shareholders, uninsured suffer
Perhaps the biggest fallout from the BOCC closure was felt by the bank’s investors, who are last in line to recover money from FDIC auctions. They see the chances as very slim that any money will remain after everyone else is repaid.
“It will be the shareholders that are really taking it in the pants,” said Doug Palin, CEO of Infinity Internet in Vancouver and a former BOCC business customer. “They’re selling performing loans for 34 cents on the dollar. That’s not right, somebody is making a lot of money on that.”
Bank board member Keith Koplan last year said the bank’s failure contributed to his decision to close his two-generation family retail store, Koplan’s Home Furnishings, in downtown Vancouver.
Meanwhile, customers with less than $250,000 in deposits were insured by the FDIC and immediately received their money back. But 45 Bank of Clark County customers held deposits over the insured amount, totaling $20.77 million.
The uninsured deposit holders are first in line for refunds as the FDIC sells off the assets. And the agency in October did refund 23 percent of the deposits uninsured customers had lost, totaling $4.79 million. It was the first time those customers heard anything from the FDIC about the fate of their money since the closure.
Vancouver resident Florence Wager was one uninsured customer who was refunded by the FDIC in October. She has so far recovered $37,000 of the $161,000 in lost deposits.
“I haven’t heard anything since October (and) I’m not holding out any great hope,” said Wager. “There’s no recourse, you just carry on and hope there will be some additional dividend.”
While the U.S. financial collapse in September 2008 and subsequent federal bank bailout shook Clark County’s faith in big banks, the Bank of Clark County collapse dealt a blow to trust in local banks.
Wager’s experience left her reluctant to trust other local banks and especially their executives, she says. It’s a sentiment shared by many bank customers here.
Bank of Clark County was founded by local business leaders who built close relationships with the bank’s clients, concentrating their lending in the Vancouver area. Many of those business relationships are broken, as well, and will take several more years to mend, explained Brett Bryant, executive vice president of First Independent Bank in Vancouver.
“It was a very sobering event, Bank of Clark County felt like a community asset and to see it catastrophically fail was very alarming and disappointing,” said Bryant. “It shook the confidence of people and made people pay much closer attention to deposit insurance.”
Borrowers in limbo
Loans held at BOCC were not sold to Umpqua Bank and instead are being auctioned by the FDIC to outside investors and institutions.
The first bundle of 414 Bank of Clark County commercial loans worth $170.4 million was sold to seven private investors in May for $90.8 million, or 53 cents on the dollar. A second round of 10 bank loans valued at $22.6 million closed in September for a sale price of $6.26 million, or 27 cents on the dollar, to five financial institutions, according to the FDIC. And the third round of 24 Small Business Administration loans sold for $2.2 million in December.
In most cases, the loans were bought by investors outside of the Vancouver metro area. Borrowers must now deal with businesses that are less willing to renegotiate loan terms. Many borrowers also report having a difficult time learning who exactly owns their loan after the sale.
Infinity Internet landed one of the last loans that Bank of Clark County handed out before its closure. The Vancouver Web hosting company planned to build a new data center in Portland and its commercial real estate loan was among those sold in the SBA auction. The company has since refinanced the loan with another local bank and the project will move forward again this year, said Palin.
Vancouver contractor Lynn Wiley was also able to refinance three of his home construction loans after they were sold at auction. But the FDIC still owns the $3 million loan Wiley took out with BOCC to build Hawthorne Acres, a vacant Orchards subdivision.
That loan is labeled a “toxic asset” by the FDIC because the land is now worth less than the loan amount, said Wiley.
“The land is devalued so much we can’t get offers for $3 million and no one will refinance it, even though we’re strong borrowers,” said Wiley, owner of L&C Wiley Inc. “Banks tell us you can apply but we don’t have any room left for that type of loan.”
Wiley has had little luck trying to renegotiate the loan with the FDIC. He’s worried that the loan will be auctioned off to a new owner that will choose to foreclose on the property.
The builder, who employs four to 12 workers depending on the season, has laid off nearly his entire crew. A foreclosure on the property would mean bankruptcy for his small company, Wiley said.
David Horowitz, an accountant and former developer in Vancouver, was one borrower able to negotiate with the FDIC to pay off his construction loan on a property in Hawaii. The FDIC accepted a discounted price because the agency would likely have received a lot less for the loan at auction, he said.
The house was 90 percent complete when BOCC closed, Horowitz said, so he and his business partner finished the project with their own money and finally sold it in December at a loss.
“We lost a lot of money on that house,” Horowitz said. “The good news is … we don’t have that debt hanging over our heads, and we’re no longer in the business of building homes.”
