A fragile economy and the banking industry's regulatory turmoil are playing out painfully at Riverview Community Bank, Clark County's last bastion of true community banking in an era when that phrase has lost much of its meaning.
Riverview recently reported its fifth consecutive quarterly profit, creating breathing space for the county's last locally based bank. But it has more cash on hand than it needs because not enough people are willing or able to borrow, says Ron Wysaske, Riverview's president and chief operating officer. The bank is still under heavy regulatory oversight because of past weaknesses even as it focuses on meeting the regulations emerging from Dodd-Frank, the sweeping bank reform law triggered by industry abuses.
Riverview and other small players are entering a challenging new world in an industry that is starting to "wake up and stretch" after its self-inflicted fall in the past decade, Wysaske says. The costs of technology upgrades, administration, and -- especially -- complying with Dodd-Frank work against the community banks least responsible for the nation's financial meltdown.
No one expects an industry to praise its regulators, and banking's legal and ethical sins make it an unlikely candidate for public sympathy. But Rick Riccobono, director of banks in Washington's Department of Financial Institutions, thinks the little guys have reason to feel mistreated.
Half of the rules needed to implement the massive federal law haven't yet been written, creating uncertainty in capital, lending, and underwriting requirements. Meanwhile, the countless bad lending practices that brought down our economy — easy, excessive loans and Wall Street practices that left lax lenders with no skin in the game — aren't being fixed by the new laws, Riccobono says.
The well-heeled and well-connected have already secured watered-down regulations and loopholes that allow risky lending practices to continue, Riccobono believes. And when it comes do the other pieces of Dodd-Frank, the big banks have the resources and economies of scale to absorb new regulatory costs that small banks lack.
The "too big to fail" debate during the financial bailout of huge banks has been replaced by a new question: when, Riccobono asks, is a bank "too small to succeed."
The answer to that question hasn't yet emerged, but some shuffling of the community bank is underway. Last month, Heritage Bank of Olympia and Washington Banking, parent of Whidbey Island Bank, agreed to a merger. And before that, Portland-based Umpqua Bank announced plans to acquire Spokane-based Sterling Bank, which not long ago had snapped up the former Vancouver-based First Independent Bank.
Back at Riverview, Wysaske professes little management interest in finding a suitor. But his is a "never-say-never" statement of a public company where investors call the shots. Both Wall Street and Washington, it seems, have left community banking such as Riverview twisting in the wind.