The failure of a former credit union that converted first to a mutual bank and then to a fully stock issuing bank was looming on the horizon, according to press reports and government filings.
The Washington Department of Financial Institutions closed the Tacoma, Washington, based Rainier Pacific Bank as of close of business on Friday, Feb. 26. Under an arrangement with the FDIC, Oregon based Umpqua Bank will assume the deposits and some of the assets of the 14-branch Rainier Pacific.
The bank started its life in 1932 Tacoma Teachers Credit Union and went through several mergers over its life to eventually become Rainier Pacific Credit Union with a community charter in 1995. It converted to a state chartered mutual bank in 2001 and then to a fully stock issuing bank in 2003.
According to filing with the Securities and Exchange Commission and FDIC, the bank lost almost $70 million in 2009 and agreed to a cease and desist order to implement a corrective action plan in October of 2009.
The order required the bank to increase capital, maintain its allowance for loan and lease losses at a level proportionate with the risk in its loan portfolio, reduce its classified assets, discontinue the extension of loans to borrowers that have had loans with the bank that were classified or charged-off, implemented accurate and realistic models for determining impairment charges and the valuation of its trust preferred collateralized debt obligations portfolio, according to a press release at the time from the bank.
The bank reported losses of $35 million for the third quarter of 2009 and attributed a significant portion of the loss to the performance of its portfolio of the trust preferred securities.