Wednesday, February 3, 2010

January 2010 Recap: More Billion Dollar Deals- Horizon Bank

Horizon Bank of Bellingham Washington, shut down on January 8th 2010, was the first 2010 US bank failure. It was closed by the Washington State Department of Financial Institutions (FDIC, the receiver) and sold to Washington Federal Savings and Loan Association of Seattle, WA. Horizon had $1.3 Billion assets and $1.1 Billion in total deposits. CRE assets (real estate construction loans and land development loans) contributed to the bank's problems.

Interestingly the buyer, Washington Federal, reluctantly took TARP funds in 2008 at Treasury's (can't say no) insistence and the bank later regretted the stigma attached to the perception of being one of the "bailed out" institutions. Clearly the PR cost outweighed the capitalization benefit. The much larger $12.6 Billion Seattle-based institution managed their balance sheet convincingly enough and raised $350 Million of new equity in September 2009 with an eye to acquiring weak players in their backyard.

The loss sharing agreement between the FDIC and Washington Federal (an FDIC arrangement with the acquiring bank to assume a share future loan losses) totaled $1 Billion in assets.