A Las Vegas-based bank with $2 billion in assets has been shut down by banking regulators, marking the 11th U.S. institution to fail in 2008 and the seventh since July 11.
Silver State Bank in the Las Vegas suburb of Henderson was seized on Sept. 5 by the Nevada Financial Institutions Division, and immediately placed in the control of the receiver, the Federal Deposit Insurance Corp.
The FDIC estimates the failure of Silver State Bank will cost the insurance fund between $450 million and $550 million.
The deteriorating real estate market of the United States is prompting federal regulators to step in to shore up the wobbling banking industry that has suffered from problem loans made at the peak of the market.
Founded in 1996, Silver State Bank employed 345 people at its 14 branches in Greater Las Vegas area and four locations in the Greater Phoenix area.
Silver State Bank lost $85.7 million in the first half of the year ending June 30, after earning a profit of $12.3 million in the first half of 2007, according to FDIC data.
Silver State Bank, which had a loan portfolio of $1.6 billion on June 30, had an abnormally high ratio of problem loans. The bank’s noncurrent loans to loans ratio spiked in 2008 to 15.38 percent from 0.01 percent in 2007.
The skyrocketing noncurrent loans ratio resulted from a spike in problem real estate loans, especially construction and development financing that increased by nearly 22 percent.
In a deal structured before Silver State Bank’s failure, the FDIC entered into a purchase and assumption agreement whereby Silver State’s $1.7 billion in insured deposits in both Nevada and Arizona would be transferred to one of two institutions.
Nevada State Bank, a 49-year-old institution based in Las Vegas with $3.8 billion in assets, assumed the Nevada deposits. The National Bank of Arizona, a 36-year-old institution based in Tucson with $5.2 billion in assets, was the recipient of the Arizona deposits.
“In addition to assuming the failed bank's insured deposits, Nevada State Bank will purchase a small amount of assets comprised of cash and securities,” according to an FDIC statement. “The FDIC will retain the remaining assets for later disposition.”
Silver State Bank is the second Nevada institution to fail this year. In July, banking regulators shut down the First National Bank of Nevada in Reno, which along with the First Heritage Bank in Newport Beach, Calif., was owned by First National Bank Holding Co. in Scottsdale, Ariz.
At the time of closing, the First National Bank Holding Co. had combined assets of $4.6 billion and 28 locations scattered around Arizona, California, and Nevada. The estimated cost of the failure of the First National Bank Holding Co. is $862 million, according to the FDIC.
For the year, California, Nevada, and Missouri lead the nation in failed institutions with two banks each. Florida, Arkansas, Minnesota, Kansas, and Georgia, have each had one institution shuttered this year.
A host of other banks are being closely monitored by industry watchers who anticipate further failures this year, especially in Sun Belt states where the housing crisis has hit hardest.
Before regulators swooped in on Silver State Bank in Nevada, the focus of examiners was on Greater Atlanta-based Integrity Bank, a $1.1 billion in assets institution that was shut on Aug. 29.
Working down the list of failed lenders, regulators seized Columbian Bank and Trust Co., a $752 million in assets institution based in Topeka, Kansas, on Aug. 22.
Three weeks earlier on Aug. 1, regulators shut First Priority Bank of Bradenton, a six branch institution with $261 million in assets located on the state’s west coast. First Priority’s closing marked the first Florida institution to be closed by regulators in more than four years.
On July 11, federal regulators shut down IndyMac Bank, a $32 billion institution based in Pasadena, Calif. The estimate cost of that seizure is between $4 billion and $8 billion, according to the FDIC.
Before IndyMac, regulators seized Minnesota-based First Integrity Bank with $54.7 million in total assets and $50.3 million in total deposits on May 30; Arkansas-based ANB Financial with $2.1 billion in total assets and $1.8 billion in total deposits on May 9; Missouri-based Hume Bank with total assets of $18.7 million and total deposits of $13.6 million on March 7; and Missouri-based Douglas National Bank with $58.5 million in total assets and $53.8 million in total deposits on January 25, according to the FDIC.
Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don't forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™ .
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