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Sep. 09, 2008
Copyright © Las Vegas Review-Journal

'Trust us,' ad said before bank failed

Silver State Bank worked to keep up image as deposits waned and bad loans mounted

By JOHN G. EDWARDS
REVIEW-JOURNAL
SILVER STATE BANK DIRECTORS

 Acting Chairman Phil Peckman; Brian Collins of Collins and Collins Development; Craig McCall, owner of ASAP Auto Pawn; Brian Cruden; president of Insurcorp; Alan Knudson, investor; Bryan Norby, former chairman of Silver State Bancorp; Corey Johnson, former Silver State CEO; Thomas Nicholson, Idaho rancher.

REVIEW-JOURNAL


Nevada State Bank Chairman and President Dallas Haun stands Monday in the lobby of a new branch at 400 N. Green Valley Parkway. The location was formerly a Silver State Bank branch.
Photo by Craig L. Moran.

The day before federal and state regulators seized Silver State Bank of Henderson, its outside advertising firm placed an advertisement suggesting it was sound and secure.

The advertisement, part of a new campaign, said: "Security. Protection. Independence. Freedom."

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    • It continued: "Why do so many of Nevada's strongest businesses trust Silver State Bank?"

    Yet the numbers show that fewer and fewer depositors were trusting Silver State with their money. Between June 30 and Sept. 4, customers yanked $264 million of $1.7 billion in deposits at Silver State, a report by global law firm Jones Day shows.

    And on Aug. 14, Silver State Bancorp, the bank's holding company, said in a report that it might be unable to continue as a going concern.

    The ads were scheduled at the start of the year to run this month, said Paula Yakubik, managing partner of Mass Media Corporate Communications, which handled advertising for Silver State.

    "They never called us to pull the ads," Yakubik said. She said she didn't know "what they knew or what they were thinking."

    Steve Stern, a spokesman for Silver State, said the company had no comment. Phillip Peckman, acting chairman of the bank holding company, didn't return calls for comment.

    In June, Silver State sought to boost its capital with a $40 million offer of common stock through a rights offering, which would have given existing shareholders the right to buy shares at a predetermined price. The offering was never started, however, said Chip MacDonald, a partner in Jones Day's capital markets group.

    A torrent of bad loans was inundating Silver State and eroding its net worth. It lost $73 million in the second quarter, as its nonperforming loans ballooned to $255 million or 19 times the level at year-end 2007.

    Yet, lack of liquidity and continuing cash withdrawals triggered the closing by the Nevada Financial Institutions Division and takeover by the Federal Deposit Insurance Corp., MacDonald said.

    "A run on deposits is what kills banks. It killed IndyMac," a $32 billion asset institution that closed in July in California, said Tim Coffey, vice president of research for FIG Partners, a broker dealer specializing in financial institutions. "It happened that way in the Great Depression, and it's happening again."

    Dallas Haun, chairman and chief executive officer of Nevada State Bank, met with FDIC officials and Silver State workers Friday night because Nevada State bought $650 million of Silver State's deposits.

    "Some knew it was coming. Some were surprised, and all were saddened," Haun said.

    Nevada State has 90 days to decide whether it will buy any of the 13 branches that Silver State owned. It may seek new leases on two branches owned by third parties. Haun said it was also too soon to say how many of the estimated 70 employees and managers of the branches will be offered jobs at Nevada State.

    Officers and directors also face uncertainties. The FDIC, which lost between $450 million and $550 million with the closing of Silver State, has the option of suing officers and directors for losses if it believes it can prove gross negligence.

    "I don't know whether they will in this case, or whether they would be justified in doing so," MacDonald said.

    For the last couple of decades, bank failures were infrequent, although that changed this year when the economic downturn took hold. As a result, observers have little recent history for guidance on the likelihood of an FDIC lawsuit.

    The FDIC was suing officers and directors in about 20 percent to 25 percent of the bank failures in the late 1980s and early 1990s, said David Baris, a lawyer and executive director of the American Association of Bank Directors. Neither he nor MacDonald knew of any FDIC lawsuit against officers and directors of failed banks this year.

    Silver State reported Monday that it expects Nasdaq to delist its stock. Michael Thorell, acting chief executive officer, and director Mark Bosco, a Phoenix lawyer, resigned Sunday, the banking company said.

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

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    huh? wrote on September 10, 2008 05:30 AM: I'm not an NSB employee, I'm a Zions employee and work in Central Adjustments here in Las Vegas. Every business is concerned with the bottom line, this includes Mom & Pop Business to Microsoft. Do I have my resume updated and ready, you bet!


    Ex-NSB Employee wrote on September 09, 2008 06:41 PM: huh?--You work 'with' Nevada State Bank? Are you a contractor or did you mean to say you work 'FOR' Nevada State Bank? You think the public is misinformed? Of course--welcome to the real world! Don't forget...YOU are also included in that group. As an NSB employee, the fact that no one below corporate level at NSB OR Silver State had any idea about this should be a huge wake-up call. If you think NSB is concerned with anything other than the bottom line, you're sorely mistaken. If I were you, I'd get my resume ready. Good luck!


    huh? wrote on September 09, 2008 06:14 PM: I work with Nevada State Bank. Boy is the public sadly misinformed. All your comments make sense to someone who does not know the facts. Y'all are ignorant.


    hermit wrote on September 09, 2008 04:02 PM: Another fine example of George II fincial policies.


    ralph wiggum wrote on September 09, 2008 03:40 PM: who really cares. some people are just crazy. ssb was lame anyways....


    David wrote on September 09, 2008 03:15 PM: Hi there........I am from the Government, and I want to help you!


    roger wrote on September 09, 2008 01:33 PM: Anthony you are 100% correct. I saw a headline the other day saying the departing CEO's for Freddie and Fannie might get 'golden parachute' severence packages. Why are CEO's allowed to run companies into the ground, destroy the savings, investments and 401 plans of employees and investors alike..then walk away with a huge bonus for their efforts? Anyone besides me see a problem with this picture? Hold these people accountable, please!!! And we wonder why the rich get richer and the distribution of wealth in this country is so skewed ?


    mcconnell wrote on September 09, 2008 12:43 PM: Our finacial institutions are crumbling right before our eyes, yet Bush and Cheney keep sending billions after billions to Iraq and Georgia while the federal deficit keeps getting bigger and bigger. $470 billion already for the year. When will the deaf and blind finally see and hear the devastations around them. This is another "Dust Bowl" that will bury working families for years to come. Thank you George and Dick for bringing the country to the verge of bankruptcy.


    Anthony wrote on September 09, 2008 11:25 AM: If any thing positive comes from this crisis it will be execs. will see that the common depositor (you and me) who deposits their weekly paychecks are the ones who keep banks open, Me personally dont keep money in the bank any more with the uncertain times, I know that they say your deposits are protected up to $ 100,000.00
    But that doesn't stop them from feeing me to the point where i cant make money and if i cant make money, then I'm not going to help them make money.
    I've been charged a $50.00 line of credit Inactivity fee before thats a fee for having good credit and you dont use it.
    The sooner they close the sooner they get no more bonus's.
    Bonus's are an Incentive To Unconscionable Business Practices!


    Dave B wrote on September 09, 2008 08:53 AM: Here's an idea. Loan $400k to a person with no verifiable income for a house that is worth $175k. And while you're at it, make a loan for a second and third home for them too. Duh! Everyone gets what they deserve (except the CEOs who really are to blame).

    The taxpayers should not bail out these banks. The shareholders and executives should take the hit for their recklessness. Even the depositors should take the hit. This would make everyone think twice about being responsible instead of playing keno with taxpayer funds.

    I don't recall the federal government helping Charles Barkley to pay his gambling tab.

    Didn't anyone see this comming when housekeepers and waitresses were buying their third rental property (at a price of $450k per house)?
    I am no genius but when my secretary told me that she had just purchased her fourth rental home, that is when it hit me. Are you kidding me? I sold every parcel of real estate I owned (including my own home). Even the guy smoking crack behind the shuttered Lady Luck should have seen this comming.


    Now that prices are comming back to normal, I can buy my house back (with a loan guaranteed by the federal government). Just raise my taxes to cover the irresponsible bankers who are laughung their a$$es off on some beach somewhere.


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