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Bank future perhaps in peril

Silver State Bancorp, the $2 billion-asset holding company for a similarly named Henderson bank, on Thursday disclosed it may not be able to continue as a “going concern” as presidential politics began to swirl around former director Andrew McCain, son of Republican presidential candidate John McCain.

The national news media is starting to ask questions about the resignation of Andrew McCain from Silver State’s board in late July as the bank’s financial problems became more apparent.

The bank holding company Thursday reported to the Securities and Exchange Commission that the regional recession, nonperforming loans and financial losses “create an uncertainty about the company’s ability to continue as a going concern.”

Silver State said it is “considering all strategic alternatives available,” stopping its stock repurchase program and reducing “its lending exposure,” particularly because of slumping values for residential and residential development properties.

In another troublesome note, the bank holding company said four customers provide 34 percent of the bank’s total deposits.

Silver State increased its loan loss reserve by about $10 million and restated its second-quarter loss by the same amount. Silver State reported that the loan loss increase stemmed from an updated appraisal on collateral on one of the bank’s commercial land loans.

The company changed its second-quarter report to reflect a $73.2 million loss, up from $62.7 million reported less than two weeks ago. The loss per share was $4.84, rather than $4.15 a share as reported earlier.

The increase in loan reserves reduces the bank’s capital and increases the amount needed to be classified as “well capitalized” to $17.8 million, almost double the amount needed before the second-quarter restatement, said Timothy Coffey, vice president of research at FIG Partners.

“Well capitalized” is the top of three classifications for capital or liquidity measures. Silver State dropped from “well capitalized” in the first quarter to “adequately capitalized” in the second quarter.

Steve Stern, a spokesman for the bank, declined to elaborate on the statement but confirmed that national news reporters have been inquiring about the resignation of Andrew McCain.

Andrew McCain previously was a director of Choice Bank in Scottsdale, Ariz., which Silver State acquired in February. Andrew McCain joined Silver State’s board the following month.

He served on the board’s audit committee, but the audit committee didn’t see financial results for the second quarter until several days after Andrew McCain resigned, Stern said.

The younger McCain resigned as a director at the holding company for “personal reasons,” the company reported on July 26.

A source close to Andrew McCain said he resigned from the board because he was unable to spend the time needed to deal with challenges at the community bank, particularly after accepting an appointment as chairman of the Greater Phoenix Chamber of Commerce.

“He realized after he had joined (Silver State’s board) that, like many regional banks around the country, Silver State faced serious challenges requiring a director that could give it considerable attention,” the source said.

“He wanted to make sure that Silver State had a director in that position to deal with the really difficult problems that the bank faces,” the source said.

Taylor Griffin, a spokesman for the Republican presidential candidate, said the campaign had no comment on the matter.

In addition to serving as chairman of the Greater Phoenix Chamber of Commerce, Andrew McCain is also chief financial officer of Hensley & Co., a beer distributorship owned by John McCain’s wife.

Silver State shares gained 3 cents, or 3.8 percent, to close at 83 cents on the Nasdaq Global Select market. That’s down from a 52-week high of $19.44 on Aug. 27 last year.

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

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