Evergreen Bank failure may signal more consolidation

Seattle's Evergreen Bank became the latest casualty of the financial crisis Friday evening, when regulators shut down the 38-year-old bank and handed its operations to Oregon's Umpqua Bank.

It was the second local bank failure this month, in what likely will be a wave of consolidation in which the region's stronger banks scoop up the weaker ones.

Evergreen, with seven branches and $439 million in deposits, was brought down by the same factors that have crippled scores of community banks throughout the Northwest and around the nation — primarily a heavy load of bad construction and land-development loans, residential mortgages and other real-estate loans.

Evergreen branches will reopen Monday with the Umpqua name.

Umpqua, led by ambitious Chief Executive Ray Davis, is one of a handful of relatively strong Northwest banks. It has $9.2 billion in assets and has spent a decade expanding in Oregon and Northern California.

"I would say Evergreen is just the beginning of what we want to do in the greater Puget Sound region," Davis said Friday night.

He said Umpqua "will be very aggressive" in bidding for other troubled banks if the circumstances are right.

Umpqua acquired the operations of Bank of Clark County after regulators closed the Vancouver-based bank just over a year ago. Umpqua has had offices in Bellevue and Kent since the mid-2000s.

Umpqua is assuming virtually all of Evergreen's assets and deposits, except about $44 million in brokered deposits; those will be paid out by the Federal Deposit Insurance Corp. Customers' accounts should be unaffected, and they can write checks and use ATMs as usual.

The FDIC also entered into a loss-sharing agreement with Umpqua covering $379.5 million of Evergreen's assets. While the terms of that agreement weren't immediately disclosed, typically they involve the FDIC covering 80 percent of losses up to a certain level and 95 percent beyond that.

In all, the FDIC estimated that Evergreen's failure will cost the agency's deposit insurance fund $64.2 million.

One Evergreen customer who had just withdrawn money from the ATM at the Eastlake branch became distressed Friday evening when told about the closure.

"I didn't know. I have a lot of money in there," the Seattle woman, who did not want her name used, said before returning to the ATM to withdraw more money.

When she went to read the notice posted on the front of the bank, people from inside came to welcome her in. After several minutes and some hugs, she came back out.

Friday's consolidation wave spread the other way, too. Columbia State Bank of Tacoma took over operations of Columbia River Bank of The Dalles, after it was closed by Oregon regulators.

The FDIC also will share losses with Columbia State, and expects the Columbia River closure to ultimately cost the insurance fund $172.5 million.

Regulators also closed three other U.S. banks Friday. The year's total is nine.

Evergreen's failure comes two weeks after Horizon Bank's operations were taken over by Washington Federal. Since Washington Mutual's collapse in September 2008, four other Washington-based banks have failed.

Evergreen, at one time part of the PEMCO Financial Services network of companies, saw its capital position shrivel last year as more borrowers stopped repaying and the bank was forced to write off millions in bad loans.

The bank's pile of nonperforming loans stood at $53.3 million as of Sept. 30, more than six times the level a year earlier.

Last November, the FDIC told Evergreen it had 30 days to raise capital or find a buyer. Like many banks in similar straits, however, it found that investors were unwilling to put new money into it.

But Umpqua, Columbia State and Washington Federal all raised money last year by selling stock.

Brad Williamson, director of the state Division of Banks, said he expects the consolidation to continue.

"Banks that have been able to avoid real-estate problems and have kept their balance sheets clean have been able to go to the capital markets," he said. "They have war chests, and they can take the opportunity to get into markets they may have wanted to get into for a long time."

Times business editor Becky Bisbee contributed to this story.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com