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Silver State Bank seized and sold

State and federal bank regulators late Friday announced the seizure and sale of Henderson-based Silver State Bank, which bet its future on Las Vegas real estate values and lost.

The bank had $1.7 billion in deposits. Nevada State Bank is taking over the deposits insured by the Federal Deposit Insurance Corp., leaving only $20 million in uninsured deposits, which may not be wholly recovered.

Following the bank takeover, when called by a reporter, Silver State Bank President Calvin Regan said he had "no comment" and hung up the telephone.

"It would be premature at this point to comment on the situation," Silver State spokesman Steve Stern said.

Silver State Bank branches in Nevada will open Monday as part of Nevada State Bank.

"We look forward to welcoming both Silver State Bank employees and clients when we open our new Nevada State Bank branches for business," Nevada State Bank Chairman and Chief Executive Officer Dallas Haun said in a statement.

Western Alliance Bancorp, the holding company for Bank of Nevada, was an unsuccessful bidder, Western Alliance Chief Financial Officer Dale Gibbons said. Nevada State, which is part of Zions Bancorporation, paid a 1.3 percent premium for some deposits at Silver State in Nevada and took over 13 branches.

National Bank of Arizona, another Zions subsidiary, will take over four Silver State branches in Arizona.

"It's a very good strategic move for Nevada State Bank," said Bill Martin, president of Service1st Bank and former CEO of Nevada State. "They pick up branches. They pick up deposits."

Martin said it was good that Silver State was taken over with no more than $20 million in uninsured deposits. The FDIC typically insures deposits up to $100,000.

Silver State became the sixth bank to fail in Nevada since the Great Depression and the 11th bank failure in the country this year.

Federal regulators in July closed $3 billion-asset First National Bank of Nevada, which also operated in Arizona and had a small affiliate bank in California.

"Clearly, Silver State and First National were the most stressed of the institutions in Nevada," Gibbons said. "I'm glad that these issues are being resolved."

News of bank failures is causing concern for depositors at community banks, said Timothy Coffey, vice president of research at FIG Partners, a broker dealer specializing in financial institutions.

"It puts significant pressure on other community banks in the Las Vegas region to show depositors that they have the financial strength to survive," Coffey said.

FIG Partners has noticed some marginal movement to larger banks that seem safer than smaller banks, but no massive flight of cash so far.

FDIC Chairwoman Sheila Bair told Florida bankers on Friday that "more (banks) will fail and others will go on the 'problem' list."

Bank results this year are "pretty dismal," Bair said.

"You simply must accept that the credit downturn is far from over," she said. "It's a tough slog, but there's no easy way out."

The Silver State failure looms as a higher-profile story than First National although Silver State, with $2 billion in assets, is smaller.

Andrew McCain, son of Republican presidential nominee John McCain, joined Silver State's board in February but resigned for unspecified personal reasons in late July.

Also, Silver State Bancorp, the bank's holding company, is publicly owned and its failure affects numerous investors. First National was privately held.

Silver State shot across the Southern Nevada banking scene like a comet, posting some of the highest profit margins among banks before fading after the collapse of the area's real estate values.

A year ago, the bank was charging more than 10 percent on average for loans, compared with 7.8 percent for comparable banks. Many of its borrowers provided raw land for collateral, leaving the bank exposed to losses when land values plummeted and borrowers began defaulting.

Silver State Bank was organized in 1996. Tom Nicholson and the Yanke family, both of Idaho, were key initial investors, having profited from early investments in Micron Technology.

In 2006, SNL Financial, a research firm in Charlottesville, Va., reported that Silver State was the second most profitable publicly owned bank in the country as measured by return on equity, which is profit divided by shareholder equity. Silver State had been the top Small Business Administration lender in dollar terms for seven consecutive years.

Last year, many Southern Nevada banks started bleeding red ink as borrowers started defaulting on real estate loans, but not Silver State.

In the last three months of 2007, Silver State reported that profits increased to $5.9 million from $5.7 million in the last quarter of the previous year and nonperforming loans remained low.

The banking company gave $1.4 million in bonuses for 2007 to five senior executives who also received increases in base pay.

Silver State recorded a $14.4 million loss in the first quarter. Yet, the bank continued to pump out more loans. The bank boosted its total outstanding loans to $1.6 million, up $68.4 million from the year-end -- an annualized rate of $274 million.

Meanwhile, Douglas French, executive vice president of Silver State and a key lending officer, had sold 168,000 shares of Silver State stock in several transactions for $2 million. He said he had to pay loans secured by the stock as the stock price dropped. He resigned in May.

The company reported on Aug. 1 that Johnson and board Chairman Bryan Norby resigned. Michael Thorell, former CEO at Choice Bank, became acting chief executive and Phillip Peckman was named acting board chairman.

A few days later, the banking company said it lost $73 million in this year's second quarter. Silver State said it might not be able to continue as a "going concern."

Johnson didn't return calls for comment Friday. Attempts to reach acting bank chairman Peckman and Thorell failed.

The company failure comes a little more than a year after the bank completed an initial public offering of stock at $20 a share. Shares closed on Friday at 56 cents, unchanged from the prior day, on the Nasdaq National Market.

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

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