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Westsound Bank lays off 33 from mortgage lending operation

In a tersely worded, three sentence press release sent out after the stock market closed on Friday, Sept. 21, WSB Financial Group, Inc., the parent company for Bremerton-based Westsound Bank and Mortgage, announced that it had laid off 33 people in its mortgage lending division.

A call to Bank President and CEO Dave Johnson on that Friday morning only elicited the response that a press release would be forthcoming after the market closed.

The press release confirmed the terminations, and also noted the bank’s chief mortgage rainmaker, Brett Green - who was also an officer and major stockholder in the bank - left to form his own mortgage company.

According to Yahoo Finance.com, on Aug. 28, the last reporting date, Green owned 60,000 shares of Westsound with a value of $918,000 at the close of the market on Friday, Sept. 21. Westsound stock, which is traded on the NASD index, closed at $15.30 on Friday, Sept. 21, before the announcement was made. However, the following Monday it closed at $12.40 - down $2.90, on a volume of 209,753 shares. Normal volume is around 8,800 shares. The stock value dropped 19 percent in one day, devaluing Green’s holdings by $127,910.

The official reason given in the press release for basically shutting down the mortgage operation was, “…due to a reduction in mortgage demand, and the uncertainty and elimination of various secondary marketing conduits.” The elimination of the 33 jobs came in the areas of administration, origination, production and servicing according to the release.

Westsound’s growth has been fueled by the booming local real estate market. According to the FDIC Web site, it currently has over $400 million in total loans, with only about $30 million of that in commercial and consumer loans. The balance is in real estate and construction lending. The FDIC site also shows that as of the last reporting period, which was June 30, Westsound had charged off $284,000 in bad loans. Only $62,000 of those were commercial or other types of loans, including credit cards. The other $222,000 charged offs was secured by real estate. By comparison, Kitsap Bank, which is more than twice as big, had a total of $58,000 in charge offs and American Marine Bank had $71,000 - none of which were real estate loans at either bank.

According to a number of other local mortgage lenders and bankers, builders and developers were scrambling on the day of the announcement to find alternative financing and avoid the possibility of Westsound leaving them unable to access the funding to complete their projects. Many were afraid of Westsound calling their construction loans due. One lender reportedly had builders waiting in line to see him, while several others were unable to be reached for comment because their voice mails were full.

According to Johnson, there’s nothing to worry about. “This is a transitional period for the real estate industry, and we’re very aggressive in that market. But that sure doesn’t mean we’re closing down,” he stated. “When the market slows down like this, we’re like any other business and have to take whatever steps are prudent.”

He went on to say, “We’re a publicly traded company. As far as capitalization, we’re capitalized better than almost any other bank in the state.”

When asked about the builder’s apprehension about their loans being called in, Johnson added that was an unnecessary fear. “Every loan has a maturity date. It’s due and payable on that date.” He added that Westsound was trying to work with its builder customers that were experiencing financial difficulty because of the market. “We’re looking at each one on a case-by-case basis,” he said, adding that the last thing the bank wanted was to own a bunch of half-finished houses.

When questioned about why the bank would allow Green, who was responsible for the bulk of the real estate lending, to set up a competing firm, Johnson became evasive, and alluded to the possibility of the bank doing some business with Green in the future. “I just don’t have anything else to say about Brett Green,” he stated emphatically.

When the word hit the street about the layoffs - the day before the official announcement - the rumor mill went into high gear. There were rumors that federal auditors were looking into the bank’s operations. Johnson refused to answer questions about that, other than to say, “The FDIC can come in and look at our books any time they want.” He declined to confirm or deny whether or not they had been there more than once this year. He also was closed mouthed on the subject of the rumor that some kind of fraud was being investigated. “As the CEO of a publicly traded company, I have to be careful about what I can and can’t say,” Johnson stated.

Calls to several of the bank’s directors, as well as Green, were not returned.

WSB Financial Group, was founded in 1999, and operates nine full service branches and one loan production office in six counties in Western Washington. It’s Web site is www.westsoundbank.com.

 
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