Community banks endure hurt

Southern Nevada's 19 community banks last year all lost money during the fourth quarter and the full year, as they set aside additional reserves for loan losses, charged off the worst loans and generally watched their net worth shrink.

Community bankers got no relief in the fourth quarter as losses continued, financial results compiled by SNL Financial show.

"The numbers are horrendous," said Barry Hulin, former chief executive officer of Valley Bancorp, which was acquired in 2005.

Of the 19 banks, seven ranked zero, the lowest score possible in the five-star rating system used by Bauer Financial of Coral Gables, Fla. BauerFinancial released its ratings earlier this week.

The best Southern Nevada community banks rated three stars, which BauerFinancial considers adequate. The three-star banks are Nevada National Bank, First Security Bank, Town & Country Bank and Nevada State Bank, a subsidiary of Zions Bancorporation.

The good news: The Federal Deposit Insurance Corp. backs each customer's deposits in interest-bearing accounts up to a maximum of $250,000. It gives deposits in noninterest-bearing accounts unlimited FDIC insurance backing.

Careful depositors need not worry about losing money, but bank shareholders may see the value of their investments drop. Analysts also say that bank results often mirror the economy, which has imploded in Southern Nevada.

"The fourth-quarter numbers indicate continued difficulty in the commercial real estate market," said Bill Uffelman, chief executive officer of the Nevada Bankers Association. "The economy is bad. So it's bad for banks in Nevada."

Banks that began operations after the real estate bubble started to burst a few years ago skirted the problems for a while, because they started with a clean slate and initially had no loans that could go bad.

However, Hulin said even the new banks seem to be getting hurt as the deep and brutal recession continues.

Three new institutions -- Service1st Bank, First Security Bank and Bank of George -- began operations with large chunks of capital from investors. Their capital continues to provide a cushion against losses but the level of that protection has shrunk as losses pile up.

Service1st has gone through about half of its $52 million in equity since opening for business in January 2007. However, Service1st still continues to be strong with risk-based capital equal to 18 percent of its assets.

Meadows Bank, which opened for business in March 2008, is one of the best-performing institutions, Hulin said, but it has been open for only two years, making it one of the state's youngest banks.

"It appears that the later you started the better off you are," he said. "The problem they all have is how do they make any money."

Commercial and industrial loan opportunities are too limited to use as a replacement for commercial real estate lending in Southern Nevada, he said.

"The banking industry here has been based on making real estate loans," Hulin said.

However, the value of Southern Nevada real estate has been collapsing, and commercial loans are going into default as shopping centers and office buildings lose tenants.

While some new banks are starting to feel the bite of loans going bad, some of their older peers are just trying to tread water in a sea of busted loans.

BauerFinancial gave seven Southern Nevada banks zero ratings. They include Nevada Commerce Bank, Sun West Bank, SouthwestUSA Bank and 1st Commerce Bank.

Desert Community Bank, Bank of Las Vegas and Red Rock Community Bank also got zeros. The last three institutions don't appear on the accompanying table because their parent, Capitol Bancorp, merged them with one-star Black Mountain Community Bank. The consolidated bank is called Bank of Las Vegas.

The second-largest community bank in Southern Nevada, Bank of Nevada, rated one-star as well.

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