OLYMPIA – The Washington Department of Financial Institutions closed North County Bank in Arlington, Sept. 24, citing inadequate capital and severe loan losses. Immediately following the closure, DFI named the Federal Deposit Insurance Corporation as receiver of North County Bank.

The FDIC immediately entered into a purchase and assumption agreement with Whidbey Island Bank headquartered in Oak Harbor, Wash. Whidbey Island Bank will assume a majority of the deposits and assets of North County Bank. A limited amount of the bank’s assets will be retained and certain brokered deposits will be paid out by the FDIC.

“North County Bank’s capital has been eroded by large loan losses associated with land development and construction lending,” Brad Williamson, Director of DFI’s Division of Banks explained. “The bank’s management was not able to raise capital to offset the significant loan losses. The bank is critically undercapitalized which requires today’s closure.”

“The failure of North County Bank is an unfortunate example of the difficulties our smaller financial institutions face during these economic times, particularly those heavily committed to commercial real estate land acquisition and construction lending,” DFI Director Scott Jarvis said. “We are very pleased that Whidbey Island, a Washington State-chartered bank with a strong balance sheet and a 50-year history of serving its communities, has acquired North County Bank.”

North County Bank, headquartered in Arlington, Wash. has four branches located in the cities of Arlington, Lake Stevens, Marysville and Everett. Whidbey Island Bank will acquire all the North County branches. All locations will reopen Monday as branches of Whidbey Island Bank.

Throughout the weekend and transition, North County Bank customers can access their funds by writing checks or using ATM or debit cards. Checks will continue to be processed. Loan customers should continue to make their payments as usual. Online services also will remain available.

As of June 30, 2010, North County Bank had total assets of $288,776,000 and total deposits of $276,081,000.

North County Bank customers seeking more information about the closure should visit www.dfi.wa.gov/banks/northcounty.htm, www.fdic.gov, http://northcountybank.com/ or http://www.wibank.com.

For more information about deposit insurance for Washington banks and credit unions, visit www.dfi.wa.gov/consumers/deposits.htm. For details about FDIC coverage and requirements, visit www.fdic.gov or call toll-free 1.877.ASK.FDIC.

DFI also offers answers to frequently asked questions for bank business loan customers in turbulent times at http://dfi.wa.gov/banks/business-loan-faqs.htm.