| By MarketWatch |
| Last Update: 4:19 AM ET Sep 7, 2008 |
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| Regulators close down Nevada's Silver State Bank |
SAN FRANCISCO (MarketWatch) -- State and federal regulators shut down Nevada's Silver State Bank late Friday. It was the 11th bank to fail in the U.S. so far this year.
The bank, which was overexposed to risky real-estate loans, had almost $2 billion in assets and 17 branches in Nevada and Arizona.
Until six weeks ago, Andrew McCain, the son of Republican presidential nominee Sen. John McCain of Arizona, was a member of Silver State's board and also its three-member audit committee. Andrew McCain left the Henderson, Nev., bank July 26 after five months on the board, citing "personal reasons." He is Sen. McCain's adopted son from his first marriage.
There is no evidence that Andrew McCain, 46, committed any wrongdoing, nor is there any indication that Sen. McCain had any knowledge of or involvement in Silver State's problems.
The Wall Street Journal reported in its online edition that McCain spokesman Taylor Griffin said Andrew McCain joined the bank's board in April but stepped down from the board and audit committee when he realized that the obligation would require more time and attention than he was able to give.
According to the Federal Deposit Insurance Corp., Nevada State Bank, based in Las Vegas, will assume all the insured deposits of Silver State Bank. Nevada State Bank agreed to purchase the insured deposits for a premium of 1.3%. At the end of June, Silver State Bank assets of $2 billion and total deposits of $1.7 billion.
Nevada State Bank is a subsidiary of Zions Bancorp., the Salt Lake City banking- and financial-services provider.
At the time of closing, about $20 million in uninsured deposits were held in about 500 accounts that potentially exceeded the insurance limits. This estimate is likely to change once the FDIC obtains additional information from these customers.
Silver State Bank also had some $700 million in brokered deposits that are not part of Friday's regulatory action. The FDIC will pay the brokers directly for the amount of their insured funds.
Silver State's closure will cost the FDIC's deposit insurance fund an estimated $450 million to $550 million.
According to the Journal article, Silver State was founded in 1996 to specialize in construction and land-development loans in Nevada and Arizona. The company raised about $30 million in an initial public stock offering in July 2007.
But in one year, the business fell into disarray under the pressure of the subprime credit and real estate crises. By June 30, borrowers had fallen behind on about $252 million worth of loans, compared to about $11.5 million six months earlier, according to the FDIC.