Nevada Commerce Bank fails; L.A. bank to assume all deposits
Regulators seized Nevada Commerce Bank on Friday afternoon, making it the 10th Nevada bank to fail since 2008.
City National Bank of Los Angeles will assume all the deposits of Nevada Commerce Bank. It will open Nevada Commerce's two locations for business as usual on Monday.
It is the second failed bank that City National has acquired in Las Vegas in less than a year. The California bank took over operations of Sun West Bank in May 2010. It first came to Nevada with the acquisition of a healthy institution, Business Bank, in 2007.
"This cost-effective acquisition of Nevada Commerce Bank underscores City National's commitment to Nevada, and it enhances our ability to serve a greater number of entrepreneurs, professionals and small and mid-size businesses in Las Vegas," City National Chief Executive Officer Russell Goldsmith said in a statement.
Financial Institutions Commissioner George Burns in an order said that he appointed the FDIC as receiver for Nevada Commerce, because the local bank was in "imminent danger of becoming insolvent."
"In these challenging economic times, our goal is to protect depositors while minimizing the disruption to business and preserving jobs as much as possible," Burns said in a statement.
Half of the Nevada Commerce's $90 million in loans were nonperforming. Commercial real estate was collateral for 53 percent of Nevada Commerce's loans, according to City National. Another 15 percent of loans were for construction.
The FDIC estimated that the bank failure will cost its deposit insurance fund $31.9 million.
Nevada Commerce, which opened in 2000, has been fighting a losing battle as the recession continued relentlessly and loan losses mounted.
The bank had 40 percent of its loans in construction and land, plus another 35 percent in commercial real estate loans at the end of 2008 when the recession put Southern Nevada in a chokehold and sent real estate values into free fall.
The bank reported $145 million in assets at the end of last year. But it lost $5.4 million in 2010, its third consecutive year of red ink.
The bank tried to reinvent itself by hiring a team of Small Business Administration loan specialists from Silver State Bank after regulators closed that bank in 2008.
Former Silver State Bank President Calvin Regan was named executive vice president at Nevada Commerce and led the SBA team.
About a year later, however, Regan resigned from Nevada Commerce and joined Meadows Bank, one of the area's newest and financially strongest community institutions.
Regan brought eight SBA specialists with him to Meadows Bank, crippling the effort to make SBA loans at Nevada Commerce.
In late 2009, the FDIC disclosed that Nevada Commerce signed a consent order, which directed officers and directors to restore the bank to a safe-and-sound condition and to reduce its concentration of commercial real estate loans.
The FDIC required the bank to boost its risk-based capital, one measure of net worth or equity, to 12 percent.
The bank reported 9.6 percent risk-based capital at the time, but it dropped to 4.5 percent at the end of 2010, according to SNL Financial, an analytical firm.
In September last year, the FDIC followed up the original consent order with a directive that Nevada Commerce take "prompt corrective action." The federal regulatory agency said the bank's condition was deteriorating.
Chief Executive Kathy Phillips made repeated efforts to persuade investors to inject more capital in the bank.
On a couple of occasions, Phillips said she believed she was on the verge of getting a commitment from an investor who would boost Nevada Commerce's capital, but the deals apparently fell through. Attempts to reach Phillips Friday were unsuccessful.
Bankers say it has become difficult to raise capital, because the recession is causing a steady flow of losses at all but a few local institutions.
At year-end 2010, Nevada Commerce's risk-based capital had slipped to 4.5 percent. More ominously, about 30 percent of its assets were nonperforming loans or foreclosed real estate.
The bank has deep roots in the Las Vegas business community.
Long-time banker James Bradham, former chairman of the Nevada Development Authority, helped found the bank in 2000 and was bank board chairman. Bradham served as CEO for Nevada Commerce Bank for a time.
Claudine Williams, owner and operator of the Holiday, the Strip casino that was sold to Harrah's, was chairwoman of Nevada Commerce Bank before she died in 2009.
She also was chairman of American Bank of Commerce, a bank that Bradham ran before it was sold in 1997 to the holding company for First Security Bank.
A former American Bank officer said Bradham pursued a more conservative strategy at American Bank than at Nevada Commerce.
Jerry Dye, former owner of Dye Associates Developers, served as board secretary for Nevada Commerce.
Other Nevada Commerce directors were Timothy Cashman, owner of Las Vegas Harley-Davidson Sales & Service; Astoria Homes founder Joel Laub; Jerilyn Clayton, former owner of Consolidated Mortgage; VTN Nevada President Gene Kraumetbauer; Mojave Electric CEO Dennis Nelson; John Sullivan, president of Territory Inc.; and David Rocchio, president of Capriati Construction.
It had offices at 6975 Edmond St. and 3200 Valley View Blvd.
Contact reporter John G. Edwards at
jedwards@reviewjournal.com or 702-383-0420.
