Nevada Commerce Bank’s attorney blames FDIC for failure

A bank attorney has pulled back the curtains of secrecy that surrounded the failure of one Southern Nevada bank and the struggles of another.

The May issue of the Findley Reports, a newsletter edited and published by California attorney Gary Findley, reports that the planned buyout of 1st Commerce Bank of North Las Vegas is stalled, if not terminated.

The newsletter, widely circulated among bank executives in the region, also detailed unsuccessful efforts to save Las Vegas-based Nevada Commerce Bank, which regulators closed in April.

Findley had an insider's view of the Nevada Commerce meltdown -- he was the bank's attorney -- and his newsletter provides a rare view of Southern Nevada community banks struggling to survive in the worst recession of a generation, and of the role of regulators who decide whether to close them.

Southern Nevada's community banks were hit particularly hard by the recession. They offer personalized service to small businesses, but most also hold -- or held -- large portfolios of commercial real estate loans.

Massive losses prompted regulators to shut down 10 independent banks in Nevada since 2008.

Findley's report revolves around lawyer and businessman Jason Awad, who was chairman of Las Vegas-based Business Bank four years ago. He negotiated a profitable sale to City National Bank of Los Angeles before the real estate collapse.

Since then, Awad has been looking for acquisitions, and is considered one of the few investors with cash, fortitude and interest in bailing out a broken bank. Awad discussed an investment in Great Basin Bank of Elko but no deal was cut. It was closed in 2009.

Last year Awad announced an offer for 1st Commerce, a single-location, $35 million-asset community bank controlled by Capitol Bancorp of Lansing, Mich. Awad negotiated a deal to pay a token $1 for 1st Commerce in return for taking on big liabilities in the bank's loan portfolio and adding needed capital. The deal apparently failed when Awad decided 1st Commerce and Capitol Bancorp weren't capable of satisfying the terms of the purchase agreement, Findley said.

Awad declined to comment to the Review-Journal, but Capitol Bancorp has been under a cloud since disclosing a Securities and Exchange Commission subpoena in November regarding reserves for loan losses and related information. And on March 30, the SEC warned it would send a second subpoena, this one regarding recently amended and restated financial statements.

Awad may also have backed out because of reports that 1st Commerce's financial condition has continued to deteriorate.

1st Commerce ended 2010 with $1 million in equity capital. It received a $1.6 million equity infusion from Capitol Bancorp early this year. Yet by March 31, equity had plunged to $848,000 mainly because of $1.8 million in first-quarter losses, according to regulatory reports.

Representatives of Capitol Bancorp didn't return calls for comment .

In April, Awad started talking with Nevada Commerce Bank, another Las Vegas independent with two branches, offering to invest $18 million in fresh capital. But the Federal Deposit Insurance Corp. wanted $7 million in additional capital, based on regulatory guidelines. The agency's rejection left Nevada Commerce without a source of new capital. The Nevada Financial Institutions Division seized the bank on April 9 and named the FDIC receiver, as is customary with failed state chartered banks.

The division "had to close Nevada Commerce Bank, because it was in imminent danger of insolvency and their efforts for recapitalization were unclear," said George Burns, the division commissioner.

Findley criticized the FDIC for failing to let Awad ride to the rescue.

Nevada Commerce "should have been saved," not closed, Findley said.

FDIC spokeswoman LaJuan Williams-Dickerson said the decision to close Nevada Commerce was made by state regulators, not the FDIC.

Findley reports that the FDIC was ready to award the bid to another bank he doesn't identify. Industry sources told the Review-Journal the bidder was Meadows Bank, another Las Vegas independent with two locations.

Meadows, whose founders include television station owner James Rogers and former tennis pro Andre Agassi, started operations in 2008. Lacking the baggage of sour real estate loans, it has been one of the most profitable Southern Nevada banks in recent years.

But just days before Nevada Commerce was to be taken over, the FDIC appeared to realize "that the bid was not viable since the bidding bank had made some errors in calculation," Findley wrote. Acquiring Nevada Commerce would "put significant capital pressures" on the rescuing bank, he said.

Industry insiders agreed that Meadows Bank didn't have the financial strength it needed to take over Nevada Commerce. City National Bank, which had tendered a lower bid, acquired Nevada Commerce as regulators shut it down.

Bank insiders say the botched bid was embarrassing for both Meadows and the FDIC, and Findley said that it was the first time he has heard of a miscalculation in an offer for a failed bank.

Meadows CEO Arvind Menon didn't return calls for comment.

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