Columbia Banking System in Tacoma on Friday bought all of the deposits and some assets of the Bank of Whitman, making the Eastern Washington bank the third in the state to fail this year.
Several of the branches will be reopened, but the branches in Kennewick and Pasco will close.
All depositors of Bank of Whitman will automatically become depositors of Columbia State Bank. Deposits will continue to be insured by the FDIC.
Depositors of Bank of Whitman can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.
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Columbia Bank already has two branches in the Tri-Cities at 139 Gage Boulevard in Richland and 4725 Road 68 in Pasco.
Bank of Whitman customers in Pasco and Kennewick should use the local Columbia Bank locations starting Monday.
Federal regulators also shut on Friday a small bank in Illinois, lifting to 63 the number of U.S. bank failures this year.
The pace of closures has slowed, as the economy has stabilized and banks work their way through the bad debt accumulated in the Great Recession. By Aug. 6 last year, regulators had shuttered 109 banks.
"Large loan losses made it impossible for Bank of Whitman to continue," DFI Division of Banks Director Richard M. Riccobono said in a statement. "Bank management was unable to raise sufficient capital to remain viable. It hurts to lose an institution like the Bank of Whitman because they extended services to our state's smaller communities."
Columbia Banking System is the holding company for Columbia State Bank, which will reopen eight of the 20 branches of Bank of Whitman, which was based in Colfax, on Monday as usual.
Those eight branches are in Clarkston, Colfax, Othello, Pullman, Ritzville, Walla Walla and two in Spokane.
In May, Columbia Bank acquired the three-branch Summit Bank in Skagit County and First Heritage Bank, which operated five branches in Snohomish County.
Columbia State Bank has 93 banking offices, including 68 branches in Washington and 25 in Oregon.
As of June 30, Columbia Bank has total assets of $5.43 billion and total deposits of $3.58 billion.
As of June 30, Bank of Whitman had about $548.6 million in total assets and $515.7 million in total deposits. In addition to assuming all of the deposits of the failed bank, Columbia State Bank agreed to buy about $314.4 million of the failed bank's assets. The FDIC will retain the remaining assets for later disposition.
Customers with questions about Friday's transaction should call the FDIC at 800-881-7816 or go to www.columbiabank.com.