Horizon Bank, a pillar of Bellingham's business community for 88 years, ceased to exist Friday. Federal bank regulators closed the bank and turned it over to Washington Federal Savings, Inc. of Seattle.
Heavy with non-performing construction loans and real estate deals, Horizon became the first U.S. bank of 2010 to be closed by the Federal Deposit Insurance Corporation. It had operated under sternly explicit federal directives since last March, and in October officers of the bank warned that it seemed "highly unlikely" that it would be able to meet the regulators' demands.
Horizon operated 18 branches in four counties, with $1.2 billion in deposits as of September 30. It was the largest bank in Whatcom County in terms of customer deposits, with more than 24 percent of the total. FDIC officials emphasized that deposits are guaranteed up to $250,000 and that at opening time Saturday the new owner would be ready for customers. Washington Federal operates 124 offices statewide, with branches in seven other Western states.
A controversial plan to build hundreds of houses and condos on a green Chuckanut hillside may have died with the bank. Horizon owned 85 wild acres of timber, rocks, and wetlands, which the bank and its development partner called Fairhaven Highlands; the nature-loving residents of Bellingham refer to it fondly as Hundred Acre Wood. It's part of a scenic backdrop above the historic southside village of Fairhaven. Horizon and developer David Edelstein planned to build 558 apartment and condominium units and 181 single-family homes on the ridge, and the proposal set off a civic storm that is still building.
Citizens organized under the name of Responsible Development have fought the project on environmental grounds, with a high-powered team of scientists and other professionals including noted land use attorney David Bricklin of Seattle. Responsible Development targeted Horizon bank, publicizing an "open letter" from 850 Bellingham citizens criticizing the bank's role in the development. Bank customers publicly cancelled millions in borrowings and deposits, a small sliver of Horizon's total business but a continuing public relations problem.
The bank failure raises some out-of-the-ordinary questions about the future of the Fairhaven Highlands development. Washington Federal had no immediate statement concerning its new real estate holdings, but it reportedly has not engaged heavily in the kind of buy-develop-build-sell projects that contributed to Horizon's troubles.
One of the FDIC's March directives to Horizon was to stay out of multi-family real estate development, but the bank continued to press its case for city permits on a project that was four-to-one multi-family. The project's Draft Environmental Impact Statement is currently being rewritten by the developer's consultant. Opponents will challenge the legality of the city's even considering the approval of an EIS for a development when its ownership is in question.