Friday, May 30, 2008

Local Banks Effected by Las Vegas Real Estate Crisis

LV bank shuts down - Nevada officials say voluntary closing a first for state

A Las Vegas bank voluntarily shut its doors in late April due to worsening economic conditions, a first for Southern Nevada's usually vibrant banking community. Fifth Street Bank had been operating for about a year before bank officers decided to notify depositors and state officials of the decision.Neither state regulators nor bank Chief Executive Officer Philip LaChapelle knew of any instance in which a bank had voluntarily closed, although bank regulators periodically take over and shut down failing banks.

The bank was finding it increasingly difficult to find borrowers with good credit.

Fifth Street used short-term, variable rate deposits to make long-term fixed-rate loans, according to two other bankers, who spoke anonymously.

Silver State Bancorp reports $14.4 million first-quarter loss

Silver State Bancorp of Henderson reported a $14.4 million first-quarter loss because of problem loans, which reversed net income of $5.6 million, or 39 cents per share, a year ago.

Silver State charged off $9.7 million in loans and counted $78 million in nonperforming loans. About two-thirds of Silver State’s loan portfolio is construction and land loans, and those loans account for approximately 82% of the company’s $78 million in nonaccrual. Nonperforming loans represented 4.8 percent of outstanding loans, compared with 0.01 percent a year ago. The company related the increase of bad loans to project delays on residential construction and land loans.

The other two publicly traded banking companies headquartered in Southern Nevada, Community Bancorp and Western Alliance Bancorporation, also are struggling with problem loans because of the local economic slump.

Silver State Bancorp Announces Resignation of Douglas E. French, Executive Vice President

Silver State Bancorp (Nasdaq: SSBX) today announced the resignation of Douglas E. French, Executive Vice President of Commercial Real Estate Lending, for personal reasons.

First National bank of Nevada posts $7.3 million loss

The real estate bust is hammering banks in the state, but First National Bank of Nevada, an affiliated bank in Arizona and their holding company are getting dinged more than most.

"A number of other financial institutions are facing the same issues, and we are doing the same things that other financial institutions are doing," said Joel Gottesman, executive vice president and chief administrative officer of the banks.

First National's banks are working to raise capital and reduce the size of the balance sheet, he said.

First National Bank Holding Co., a $4.6 billion-asset company based in Scottsdale, Ariz., reported a first-quarter loss of $140.4 million, compared with profit of $9.1 million last year, according to the Federal Deposit Insurance Corp.

Most of that stemmed from its $2.8 billion-asset First National Bank of Arizona, which reported $131.3 million in first-quarter losses compared with profit of $1.8 million in the first period last year.

Nonaccrual loans at the Arizona institution totaled $260 million, compared with $50 million a year ago.

Bankers classify loans as nonaccrual when the borrower has defaulted on interest or principal payments or is expected to default.

The $1.6 billion-asset Nevada bank employs 210 workers at 11 branches around the state. The Nevada institution reported a first-quarter loss of $7.3 million, compared with $6.8 million in profit in the same period last year.

Problem loans weighed on the Nevada bank's performance. It reported $62.1 million in nonaccrual loans, compared with $231,000 in nonaccrual loans at the end of the first quarter last year.

Looked at another way, nonperforming loans and loans more than 90 days past due equaled 4.28 percent of total assets at the Nevada bank, up from 0.61 percent at year-end and a miniscule 0.02 percent a year ago.

At the Arizona bank, nonperforming loans and loans 90 days past due totaled a 10.92 percent of assets, which bankers privately call staggering.

Closing Thoughts:

This housing/credit crunch ball-game has just started, so I expect to see several more Nevada banks fail within the next 12 months.


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