|
|
 September 29, 2009 Welcome to Ask First Sound Bank. We will use this section of our website to address any questions you may have about our announcement that we are restating our 2008 earnings. A copy of that announcement along with a message from our Chairman and President are posted in the Communication Center as well. If you have additional questions, please email us at customerservice@firstsoundbank.com and we will share the answer with all of our readers (please do not send confidential information via email, as it is not secure). If you would like Don Hirtzel or Steve Shaughnessy to contact you, please include your e-mail address or phone number. We appreciate your interest in First Sound Bank. Q. I heard that there was some kind of settlement between First Sound Bank and Washington Federal recently, can you explain what transpired? A. On September 24, 2009, First Sound Bank and Washington Federal Savings agreed to settle and dismiss all claims that Washington Federal had previously filed against First Sound Bank. Washington Federal's claims arose out of First Sound Bank's March 2008 acquisition of Puget Sound Leasing Co., Inc. assets. Washington Federal was the most significant purchaser of lease portfolios from First Sound Bank's Leasing Division following the acquisition and during the time when Louis Secord had management authority for the Leasing Division. Accordingly, resolution of Washington Federal's claims represents an important step in addressing the issues created by the Puget Sound Leasing transaction. Q. I understand you were in federal court recently, can you share the outcome of the initial hearing claiming fraud, misrepresentation and breach of contract in your litigation against Larasco, Inc. (formerly Puget Sound Leasing Co., inc.)? A. On May 12, 2009 US District Court Judge Thomas S. Zilly, in a written order, stated that "First Sound Bank has established probably validity in its Washington State Securities Act Claim and its Breach of Contract Claim" against Larasco, Inc. Under Washington and federal law, this finding entitles First Sound Bank to attach certain assets of Larasco so the assets will be available to First Sound Bank in the event First Sound obtains a final judgment against Larasco. Q. What happens if the judge does not rule in your favor in the suit with the former owners of Puget Sound Leasing Co., Inc.? A. While we expect a positive ruling in this case, we have been very conservative in planning for the possible impact. Much of what we would recover from the former owners of Puget Sound Leasing is in the category of impairment that is a major part of the increased loss that was announced April 30 when we restated our 2008 year end report. Q. Did the Federal Deposit Insurance Corporation (FDIC) have any influence on your decision to restate earnings? A. No. We made the decision based on our assessment of the situation with Puget Sound Leasing earlier this year. The FDIC was not involved. We subsequently initiated a meeting with the FDIC and the Department of Financial Institutions to advise them of our restatement. Q. Is First Sound Bank still making loans? A. Yes. In fact, so far in 2009 we have approved more than $15 million in credit extensions and issued more than 100 new leases through April. Our situation is not like most other banks. We do not make the residential loans that have hurt so many banks. Commercial real estate loans make up less than one third of our total portfolio with loans to small businesses accounting for the rest. Our challenges are primarily the result of alleged fraud committed by the owners of Puget Sound Leasing in how they portrayed their profitability and their assets when they sold the company to First Sound Bank last year. Q. Could quality conditions at Puget Sound Leasing continue to get worse? A. While we can't predict when the economy will turn around, we believe we have been very aggressive in assessing the problems there. We are in litigation with the former owners for alleged fraud, misrepresentation and breach of contract. We have placed the questionable assets in the non performing category, tightened our lending underwriting standards and installed new management at the leasing division. Q. Will you have to lay off employees? A. Because of the downturn in the economy and the reduction in total lease volume we have already reduced total employment in the company by approximately 30 percent. We have taken a number of steps to reduce expenses. Our executive team and board have taken salary cuts of up to 20 percent and a salary freeze has been imposed on all employees. We hope these steps will allow us to avoid future layoffs. Q. Wasn't the president of Puget Sound Leasing a member of your board of directors? A. Richard A. Secord, EVP of Puget Sound Leasing Co., Inc., was a founding director of First Sound Bank in 2004. He stepped down from the board when First Sound Bank began negotiating the purchase of Puget Sound Leasing from he and his brother, Louis. Louis Secord was appointed to the board as a condition of the sale when the transaction was completed. First Sound Bank relieved him of all authority over the leasing division in November, 2008. Q. Are my deposits safe at First Sound Bank? A. Absolutely. First Sound Bank remains a well capitalized financial institution and has a higher Risk Based Capital ratio than many community banks. Under the Transaction Account Guaranty Program, through December 31, 2009, all non-interest bearing transaction accounts are fully guaranteed by the FDIC for the entire amount in the account. IOLTA accounts and certain NOW accounts (earning less than .50%) are included in the unlimited coverage. All other accounts are covered up to $250,000 (or more depending on ownership structure) through December 31, 2009. Additional information on deposit coverage is available at www.fdic.gov. Q. First Sound Bank received $7.4 million from the Troubled Asset Relief Program (TARP) in December. Is that money included in the calculation of your capital ratios? A. Yes. We have been using the TARP funds to support growth in loans and deposits. It has allowed us to make some loans that would not have been possible without it. Home Contact Us Privacy Policy Terms of Use USA Patriot Act Identity Theft Internet Fraud Prevention
© 2010 First Sound Bank. All rights reserved. |
|
