Westsound takes number of failed US banks in 2008 to 33

The federal regulators have seized Westsound Bank, Bremerton, Washington, and sold its deposits to Kitsap Bank, the Federal Deposit Insurance Corp said on Friday.

The Bremerton-based bank operated nine branches, mostly on the Olympic Peninsula. It was the nation's 33rd institution insured by the FDIC to fail this year, and the second bank to fail in Washington state.

As on 31 March 2009, Westsound Bank had total assets of $334.6 million and total deposits of $304.5 million. Kitsap will not assume the approximately $9.4 million in brokered deposits. The FDIC will pay the brokers directly. Customers who placed money with brokers should contact them directly for more information about the status of their deposits.

''This unfortunate event is the result of very poor lending practices during the past several years,'' said Brad Williamson, bank director for the Department of Financial Institutions.

''While the current management team worked diligently to overcome problems with the bank's portfolio, a combination of the downturn in the local real estate market and the overall economic situation combined to make it impossible for the institution to continue,'' he added.

The regulatory intervention followed numerous warning signs that Westsound was struggling. The bank's parent company, WSB Financial Group, disclosed ''substantial doubt'' about its ability to continue operating in a regulatory filing last month.