Venture Bank of Lacey closed by regulators

State banking regulators closed Venture Bank in Lacey, Thurston County, on Friday, and the Federal Deposit Insurance Corp. (FDIC) arranged to turn its deposits over to First-Citizens Bank & Trust of Raleigh, N.C.

Regulators said Venture Bank suffered from growing red ink in its real-estate lending and large losses on investments in Fannie Mae and Freddie Mac preferred stock and in complex debt securities.

The bank's 18 branches in King, Pierce, Thurston and Lewis counties will reopen today as branches of the North Carolina bank, and depositors will automatically become customers of that bank. They continue to be insured by the FDIC, and loan customers can continue making payments as usual.

Customers with questions may call the FDIC at 800-430-7974 or visit the FDIC's Web site at www.fdic.gov/bank/individual/failed/venture-wa.html.

Venture is the 92nd FDIC-insured institution to fail this year, and the third — and largest — in Washington. The state's other two this year were the May failure of Westsound Bank in Bremerton and the January shutdown of Bank of Clark County in Vancouver.

Venture's failure is expected to cost the FDIC's deposit-insurance fund $298 million.

In February, Venture was ordered by the FDIC to raise more capital or find a buyer within 60 days. In May, senior vice president of marketing Joseph Beaulieu said the bank was working with several investors to finalize a capital infusion of $30 million to $50 million, but that transaction apparently didn't go through.

In June, Venture was one of three banks that filed an involuntary Chapter 7 case against Seattle developer Michael Mastro, contending he owed them nearly $10 million.

At the end of July, Venture had assets — which in banking parlance means loans — of $970 million and deposits of about $903 million. Besides assuming Venture's deposits, First-Citizens will buy about $874 million of its assets.

The FDIC and First-Citizens agreed to share the losses on a pool of $715 million in loans. The agency said that is meant to maximize returns on those loans by keeping them in the private sector and will minimize disruptions for loan customers.

The state Department of Financial Institutions, which closed the bank, cited its inadequate capital and severe loan losses for the failure.

"Venture's capital has been depleted by large loan and investment losses," Brad Williamson, director of the agency's division of banks, said in a release. "Like many banks across the country, Venture's real-estate construction and development portfolio has suffered as real-estate values have fallen."

Investment losses also played a role.

"Venture's demise was hastened by very large losses associated with FNMA/Freddie Mac preferred stock and collateralized debt obligations," Williamson said. "The combination of loan and investment losses created capital problems that couldn't be overcome without an immediate capital infusion, which hasn't been forthcoming."

Venture Bank's parent company, Venture Financial Group of DuPont, filed for an initial public-stock offering in September 2007 but dropped its plans as the financial markets deteriorated.

The FDIC on Friday also closed Corus Bancshares, a major Chicago-based lender to condominium, office and hotel projects.

The agency said Corus Bank's $7 billion in deposits will be assumed by MB Financial, also based in Chicago. That closure, one of the largest this year, will cost the FDIC $1.7 billion.

A much smaller bank, Brickwell Community Bank in Woodbury, Minn., was also closed. It had $63 million in deposits, which will be assumed by CorTrust Bank, based in Mitchell, S.D.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

Information from The Associated Press is included in this report.