The Exchange National Bank of Spokane was organized in 1889 and operated until early 1929. During its existence it was one of the major financial institutions of the Inland Empire and was generally regarded as the second largest bank in Spokane. The importance of the institution transcended its business activities as many of the people connected to ownership or management of the bank were active in governmental, educational, philanthropic, trade association, Federal Reserve and clearing house activities.

The bank itself was involved in many facets of financial and business operations beyond commercial lending. It was, in fact, a pioneer "full-service" bank, offering a savings department, home loans, escrow, trusts, and investment subsidiary - the Cariboo Company, and such other services at a fairly early date. It was, ironically, these special activities which eventually spelled the doom of the bank. More and more special loans, most of a capital investment nature, were made in the 1920s and the bank began to become involved in the operation and overseeing of other businesses. On occasion some of these concerns failed and the bank found itself directly operating non-financial business such as a stock yard and a lumber mill. Not only were such operations of doubtful legality, but additionally they proved to be business mistakes. The most costly mistake was a long protracted affair called "the Herrick loans." These loans grew from the vigorous lending activities of E. E. Flood, the moving spirit of the bank in the 1920s, who seems to have imagined himself as the "Washington Giannini." Flood, early in the 1920s, committed the bank to refinancing a series of commercial loans secured by personal notes which had been made by Fred Herrick, a logging and sawmill operator of St. Maries, Idaho. A crusty and colorful character of the "robber baron" stripe, Herrick was totally unscrupulous and seems to have consistently deceived Flood.

Through the mid-twenties, Flood continue to pick up Herrick's notes from banks all over east Washington and north Idaho. Eventually he realized Herrick was on the verge of insolvency. Flood then backed Herrick's proposal to contract cutting a vast stand of National Forest Land timber in central Oregon. When that arrangement failed to materialize, due to Herrick's difficult relations with governmental agencies, the whole Herrick operation began to collapse. Flood, in a last desperate effort to stave off bankruptcy, consolidated all the debts of Herrick, now totaling over four million dollars. He then attempted to refinance Herrick with gold bonds sold on the Chicago market. But before the bond sale was successfully completed, depositors who realized the bank was holding vast amount of illiquid assets began a "run," forcing its closure.