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From The Olympian:

A series of issues that contributed to the closure of DuPont-based Venture Bank last fall were highlighted in a report released Wednesday by federal regulators.

The 43-page report, known as a material loss review, was released by the Office of Inspector General of the Federal Deposit Insurance Corp. It outlines the reasons behind the banks failure and the role state and federal regulators played in supervising the financial institution.

The review was conducted by auditors KPMG LLP on behalf of the OIG. Material loss reviews are triggered by failed banks that tap FDIC funds, according to the report…

The report largely focused on Ventures commercial real estate and acquisition, development and construction loans a risky investment strategy and Venture management before the bank was closed Sept. 11 and sold to First Citizens Bank & Trust of North Carolina.

On the day it closed, Venture had $992 million in assets, and the estimated loss to the FDICs fund was $240.1 million. Venture Bank started as Lacey Bank in May 1979…

Among the reports findings:

Commercial real estate and acquisition, development and construction loans:

The banks concentration of commercial real estate loans were more than 600 percent of total capital from 2005 to 2007, compared with 357 percent to 405 percent for similar-sized banks in the same period. Acquisition, development and construction loans also totaled nearly 50 percent of total loans. By September 2008, Ventures ADC concentration exceeded all but 1.5 percent of the banks and thrifts nationally, the report states.

Investment strategy:

The banks total investments, which contained very high-risk instruments, rose to $295 million in June 2008 from $170 million in 2006….

Management and board oversight:

After a series of examinations by regulators, they noted that the board was either unaware of or failed to grasp the potential threat to the banks viability of increasing risk without corresponding increases in capital.

The board members failed to place limits on managements investment decisions and did not slow the steady increase in ADC loan concentrations, the report states.

Regulators, however, could have done a better job in supervising Venture Bank.

Stronger supervisory actions in 2007 could have influenced Ventures board and management to limit the significant level of risks assumed, the report states.

Dave Ross’s morning commentary on the CBS Radio Network which aired on KIRO-FM 97.3 radio in Seattle highlights some similar banking practices at WaMu:
April 13, 2010
When the profit motive attacks!
The Senate Committee investigating the collapse of Washington Mutual today heard testimony that bank executives were warned they were loaning money to people who couldn’t pay it back.
CLICK HERE to listen.

Posted by Steve on April 22, 2010 at 5:16 am | Permalink

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