IMPEACH BUSH

Silver State Bank, which bet its future on Las Vegas real estate values and lost, became the second Nevada bank to fail because of the continuing mortgage and credit crisis.

The Henderson-based bank was seized by state and federal regulators on Sept. 5 and reopened Sept. 8 as part of Nevada State Bank.

The bank had $1.7 billion in deposits. Nevada State Bank took over the deposits insured by the Federal Deposit Insurance Corp., leaving only $20 million in uninsured deposits, which may not be wholly recovered.

Following the bank takeover, Silver State Bank President Calvin Regan said he had "no comment."

"We look forward to welcoming both Silver State Bank employees and clients when we open our new Nevada State Bank branches for business," Nevada State Bank Chairman and Chief Executive Officer Dallas Haun said in a statement.

Western Alliance Bancorp, the holding company for Bank of Nevada, was an unsuccessful bidder, Western Alliance Chief Financial Officer Dale Gibbons said. Nevada State, which is part of Zions Bancorporation, paid a 1.3 percent premium for some deposits at Silver State in Nevada and took over 13 branches. National Bank of Arizona, another Zions subsidiary, will take over four Silver State branches in Arizona.

"It's a very good strategic move for Nevada State Bank," said Bill Martin, president of Service1st Bank and former CEO of Nevada State. "They pick up branches. They pick up deposits."

Silver State became the sixth bank to fail in Nevada since the Great Depression and the 11th bank failure in the country this year.

Federal regulators in July closed $3 billion-asset First National Bank of Nevada, which also operated in Arizona and had a small affiliate bank in California.

"Clearly, Silver State and First National were the most stressed of the institutions in Nevada," Gibbons said. "I'm glad that these issues are being resolved."

News of bank failures is causing concern for depositors at community banks, said Timothy Coffey, vice president of research at FIG Partners, a broker-dealer specializing in financial institutions.

"It puts significant pressure on other community banks in the Las Vegas region to show depositors that they have the financial strength to survive," Coffey said.

FIG Partners has noticed some marginal movement to larger banks that seem safer than smaller banks, but no massive flight of cash so far.

FDIC Chairwoman Sheila Bair told Florida bankers that "more (banks) will fail and others will go on the 'problem' list."

Bank results this year are "pretty dismal," Bair said.

"You simply must accept that the credit downturn is far from over," she said. "It's a tough slog, but there's no easy way out."

The Silver State failure looms as a higher-profile story than First National although Silver State had less assets.

Andrew McCain, son of Republican presidential nominee John McCain, joined Silver State's board in February but resigned for unspecified personal reasons in late July.

Also, Silver State Bancorp, the bank's holding company, is publicly owned and its failure affects numerous investors. First National was privately held.

Silver State had been posting some of the highest profit margins among banks before the collapse of the area's real estate market.

A year ago, the bank was charging more than 10 percent on average for loans, compared with 7.8 percent at similar-sized banks. Many of its borrowers provided raw land for collateral, leaving the bank exposed to losses when land values plummeted and borrowers began defaulting.

Silver State Bank was organized in 1996. Tom Nicholson and the Yanke family, both of Idaho, were key initial investors, having profited from early investments in Micron Technology.

In 2006, SNL Financial, a research firm in Charlottesville, Va., reported that Silver State was the second most profitable publicly-owned bank in the country as measured by return on equity, which is profit divided by shareholder equity. Silver State had been the top Small Business Administration lender in dollar terms for seven consecutive years.

Last year, many Southern Nevada banks started bleeding red ink as borrowers started defaulting on real estate loans, but not Silver State.

In the last three months of 2007, Silver State reported that profits increased to $5.9 million from $5.7 million in the last quarter of the previous year and nonperforming loans remained low.

The banking company gave $1.4 million in bonuses for 2007 to five senior executives who also received increases in base pay.

Contact reporter JohnG. Edwards at jedwards@reviewjournal.com or 702-383-0420.