Regulators closed and started liquidating Community Bank late Friday, establishing a temporary bank to give depositors time to find a new financial institution.
The $1.4 billion-asset bank became the fifth to fail in Nevada in the last 13 month, the biggest since Silver State Bank of Henderson was seized last September.
This time, however, the Federal Deposit Insurance Corp. found no other banks interested in acquiring the $1.4 billion-deposit bank although it contacted 166 potential bidders for the Nevada bank, said FDIC spokesman David Barr.
The FDIC said Nevada State Bank contracted to operate the bank as Deposit Insurance National Bank of Las Vegas for about 30 days. Regulators set up the temporary bank to give depositors time to find a new financial institution, Barr said, but borrowers must continue making payments on loans after the temporary bank is closed.
Regulators rarely created temporary bank in recent years, but the FDIC has done so twice earlier with failed banks this year, Barr said.
"To protect depositors of Community Bank of Nevada, accounts will be assumed by the FDIC," Commissioner George Burns of the Nevada Financial Institutions Division, said in a statement. "We want Nevadans to know that their insured deposits are safe."
Only $4.2 million of the billion plus in deposits were uninsured because the government increased deposit insurance to $250,000 per account, Barr said.
Community Bancorp, the Las Vegas-based holding company for the Nevada bank, also operated a similarly named bank in Arizona. MidFirst Bank of Oklahoma City will assume all the deposits of Community Bank of Arizona, a $158.5 million-asset subsidiary of Community Bancorp.
Edward Jamison, chairman and chief executive officer of the holding company, had not given up.
"Over the past months, Ed Jamison strived to drive new capital into the bank, including talks with several major financial institutions throughout the nation, two of whom were due to meet with him next week," said bank spokesman Steve Stern of Stern and Co.
Timothy Coffey, vice president of research for FIG Partners, a stock brokerage specializing in bank stocks, offered details.
"What impacted Community Bank is what has impacted the economy of Las Vegas, Southern Nevada and Phoenix," Coffey said. "The precipitous decline in residential real estate caught them short. By the time the cracks started to appear in the residential construction market, it was too late."
Community Bank did not make many, if any, residential mortgage loans, but it did lend to developers of residential communities and strip shopping centers, he said.
Like Silver State, Community Bank made numerous highly profitable and risky construction loans and relied in large part on deposits sold by stock brokers based on high yield, analysts said.
The aggressive strategy worked until the Southern Nevada real estate economy tanked, causing borrowers to default on loans and the value of real estate collateral to collapse.
Community Bank of Nevada reported capital of about five cents for every $100 of assets in its June financial report, while most banks have $10 of capital or more for each $100 in assets. Nonperforming assets, which include delinquent loans and repossessed real estate, were 30 percent of total loans on June 30.
Jamison dominated the bank and the board deferred to him and usually supported his recommendations, bankers say. The board was a tightly knit group that included former Clark County Commission Chairman Jay Bingham, vice chairman of the holding company.
Analysts compared Community Bank's high-risk, high-reward business strategy to that of Henderson-based Silver State Bancorp, which was seized last September, and First National Bank of Nevada, which was closed in July 2008.
Community Bank of Nevada reported that construction and land development loans were 52 percent of $1.2 billion in total loans at the end of June.
In June 2008, shortly before the government shut it down, Silver State reported that 66 percent of its loans were for construction and land. First National Bank showed that 45 percent of total loans were for construction and land development, not counting other types of real estate loans.
By late 2007, Southern Nevada's supercharged economy started to sputter.
Residential homeowners began losing homes to foreclosure often because they could not afford the payments, particularly after teaser rates ended.
The banking company last October reported a $3 million loss, down from $4.6 million in the second quarter. Jamison counted 13 loans for $147 million that comprised 80 percent of the banking company's nonperforming loans.
Community Bancorp, which has shares traded on the Nasdaq National Market, failed to file required fourth- quarter and annual reports with the Securities and Exchange Commission, saying it could not do so until an audit had been completed.
Community Bancorp continued to file financial reports with federal bank regulators, however.
In May, Community Bancorp reported that it amended its financial report for its Nevada to increase its provision by $17.4 million at the end of last year, resulting in a $151.9 million loss for last year.
The $1.5 billion-asset bank reported $878,000 in capital or net worth, a paper thin cushion against further losses. Nonperforming assets, mainly bad loans, at the Nevada bank accounted for a whopping 30.8 percent of all assets. More than one-third of its deposits were brokered.
The Nevada bank employed 160 people in June, down from 233 workers three months earlier.
Stockholders stand to lose most of their investments in Community Bancorp. Shares that closed at $30.90 on Dec. 17, 2004, last traded Friday on the Nasdaq National Market at 90 cents, off 10 cents or 14.1 percent.
The failure of the Nevada bank will cost the federal deposit insurance fund an estimated $781.5 million, according to the FDIC.
The Arizona bank failure will cost the FDIC about $25.5 million.
Contact reporter John G. Edwards at firstname.lastname@example.org or 702-383-0420.