Seattle-based Washington First International Bank, whose four branches targeted Asian Americans as customers, was closed Friday. East West Bank of Pasadena acquired most of its deposits and assets.

Share story

The Great Bank Shakeout of 2010 continued Friday evening, as state regulators shut down Washington First International Bank (WFIB).

The Seattle-based bank, which targeted Asian Americans as customers, was undone by the same force behind most of the state’s spate of bank failures: an over-concentration in real-estate lending, especially to builders and developers.

When those borrowers have been unable to repay, banks have been left holding worthless paper or unsaleable properties. And small, struggling banks have found it almost impossible to raise new capital to fill in the holes in their balance sheets.

East West Bank, of Pasadena, Calif., which also aims at Asian Americans, assumed all of WFIB’s $441.4 million in deposits and most of its $520.9 million in assets. The Federal Deposit Insurance Corp. (FDIC) will hold onto nearly $20 million of WFIB’s assets for later disposal.

WFIB’s four branches, all in King County, will reopen as East West branches. The International District branch will reopen Saturday, and the other three on Monday. Until then, customers can access their money by writing checks or using ATM or debit cards.

WFIB becomes the seventh Washington-based bank to fail this year, and the 82nd nationwide. It was the only bank in the nation shuttered Friday night.

Dominic Ng, chairman and chief executive of East West, said in an interview Friday evening that WFIB “fit in perfectly” with his bank’s strategy of locating in cities with strong trade ties to the Pacific Rim.

“We think of ourselves as the financial bridge between East and West,” Ng said.

East West entered the Puget Sound market last November when it acquired United Commercial Bank of San Francisco, also in an FDIC-assisted transaction. East West picked up two UCB offices, in Seattle and Bellevue, as part of that deal.

East West finished integrating those offices into its network in April, Ng said, and was ready to look at expanding its Puget Sound-area presence.

“Obviously six (offices) is better than two, when it comes to growth and from an efficiency-of-scale perspective,” he said.

WFIB was founded in 1990 specifically to serve Asian Americans. Three-quarters of its founding stockholders were of Asian descent, and many of the employees spoke at least one Asian language.

At its peak in early 2009, the bank had $660.3 million in assets. But it was heavily dependent on real-estate loans, which have performed poorly during the economic slump.

As of March 31, 40.9 percent of WFIB’s loan portfolio was backed by commercial real estate; another 23.3 percent consisted of land-development and construction loans, and 10.4 percent was single-family mortgages.

The development and construction loans have fared the worst: Out of a total $97.1 million in such loans, according to regulatory records, $59.8 million or 61.6 percent were nonperforming.

WFIB’s stockpile of foreclosed property grew from $2.3 million in March 2009 to $24.6 million as of March 31.

The bank lost $57.9 million last year and recorded a $4.7 million loss for the first quarter of 2010.

“Unfortunately, they were pretty heavily involved in (real-estate) acquisition and development lending, and they had massive losses this year and last year,” Brad Williamson, director of the state Department of Financial Institution’s bank division, said in an interview.

The bank’s management had been unable to raise new capital, Williamson said, and the bank’s recently restated first-quarter financial results put it in significantly undercapitalized territory:

In April, federal regulators gave WFIB 30 days to either raise new capital or find a buyer.

The FDIC and East West will share losses on $418.8 million in loans and other assets acquired from WFIB. Though the specific terms weren’t immediately released, such agreements typically obligate the FDIC to cover 80 percent of an institution’s losses on the acquired assets.

All told, the FDIC estimated that WFIB’s failure will cost its insurance fund $158.4 million.

Drew DeSilver: 206-464-3145 or