Fewer loan losses, failure of 7 banks contribute to boost in profitability for state banks

By Libby Clark, Columbian Web Editor

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More than half of Washington banks turned a profit in the quarter ending March 31 compared with just 16 percent of state financial institutions in the previous quarter, according to data released Thursday by the Federal Deposit Insurance Corp.

The number of state banks that were unprofitable declined to 40 percent in the first quarter of 2010 from 65 percent in the fourth quarter of 2009.

“Problem loans peaked a quarter ago,” said Brad Williamson, director of the Washington State Department of Financial Institutions’ Division of Banks, referring to the last quarter of 2009. “That doesn’t mean anyone is out of the woods. That was a real high peak, so there’s plenty of pain to go.”

Thirty-five of the state’s 88 banks accounted for a loss of $132 million in net income in the quarter ending March 31. Three months earlier, 61 of 95 banks registered a $646 million loss in net income.

That dramatic improvement in profitability was due in part to the failure of seven of the hardest-hit banks in the first quarter, compared with a total of three bank failures in the state in 2009. Fewer loan losses and the setting aside of more appropriate loan loss reserves played larger roles in the boost, Williamson said.

Vancouver’s two homegrown banks — First Independent Bank and Riverview Community Bank — were among those that suffered losses in the first quarter. First Indy lost $15.3 million in the quarter ending March 31, compared with a $1.4 million loss for the same quarter a year ago, according to the FDIC. Riverview lost $4.5 million in the first quarter, compared to a $386,000 loss in the same period of 2009, FDIC documents report.

Both banks, however, reported strong total assets in the quarter: First Indy held $886 million as of March 31, while Riverview held $837 million, according to the FDIC.

Columbian staff writer Aaron Corvin contributed to this story.