Silver State wants more time to repay loan
Financially ailing Silver State Schools Credit Union is negotiating with the company that insures its deposits for an extension on a $22 million loan that matured in August.
Silver State, which had 73,000 members and $792 million in assets as of June 30, is negotiating with American Share Insurance of Dublin, Ohio, for an extension up to five years on a loan the mutual insurance company made in February.
The insurance company made the loan to bolster the credit union's net worth but set an initial maturity date of Aug. 11. American Share extended the loan until Sept. 30, however, so that it could negotiate longer-term repayment terms.
While the loan renewal agreement hasn't been signed, "we're committed to a five-year extension," insurance company President Dennis Adams said.
Adams praised Silver State for progress in improving its financial strength. The insurance executive forecast the credit union would post a net profit in one or two of the last months this year.
"We're still in there, and they're doing everything they can and they're doing a good job," Adams said, noting the credit union's efforts to cut costs.
Adams said losses at Silver State have dropped from $15 million in the fourth quarter last year, to $8.5 million in the first quarter of this year and $4.9 million in the second quarter.
"The credit union losses are coming down. A lot of efficiencies are being developed," Adams said.
Silver State also has been boosting its reserve to cover possible loan losses, Adams said.
The credit union had set aside $26 million in allowances for potential loan losses on June 30, but it reported $60.8 million in loans past due two months or more. Its net worth, which includes the $22 million loan, was 4.9 percent of total assets on June 30, the lowest of 11 Southern Nevada credit unions.
The credit union has been restructuring its operations under a regulatory consent order. The credit union closed five branches around Nevada in June.
The initial loan had a 3.25 percent interest rate and was subordinated to the claims of credit union members and creditors. Adams said the rate probably will be lowered to be comparable to a two-year Treasury, which is 0.5 percent.
Silver State Chief Executive David Rhamy didn't respond to a request for comments.
Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.
Executive sued
The National Credit Union Administration on Tuesday sued David Rhamy, chief executive officer of Silver State Schools Credit Union, and 15 other former directors and officers of Western Corporate Federal Credit Union in Los Angeles federal court, claiming more than $1 billion in losses.
The administration put San Dimas, Calif.-based Wescorp into conservatorship in March 2009.
Wescorp was the largest corporate credit union that provided banking services for credit unions, according to the lawsuit. Several local credit unions lost investments in Wescorp when it failed.
In the lawsuit, the federal agency criticized Wescorp for "embarking on a reckless growth and investment strategy dependent on massive borrowing." The administration also complained about a heavy concentration of investments in mortgage-backed securities and compensation paid to Wescorp executives.
Rhamy, who served on the Wescorp board from 1995 to 2006, didn't respond to a request for comment.
The federal agency seeks unspecified amounts of compensatory and punitive damages related to Wescorp's failure.
LAS VEGAS REVIEW-JOURNAL
