Coffey agrees with analysts who predict commercial real estate loan problems loom for banks.

"It's going to happen, and it might be worse in this market," he said. "We're not seeing it yet, because a lot of the loans haven't come up for maturity."

Many loans secured by commercial real estate face balloon payments starting this year, increasing next year and declining some in 2011. Values have declined as vacancy increased and rents dropped, he said.

"Retail is the worst," he said. "Hotels seem to be better."

He mentioned three outcomes: the borrowers could put up more collateral for the loan, find another lender or watch as the bank forecloses.

In Western states, he expects tougher bank regulation and seizures of some institutions, but Coffey said Florida and Georgia are the epicenter for failing banks. Since July, four Nevada-based banks have been seized.

During the first quarter, the surviving banks got little relief from the worst recession in decades.

With a few exceptions, state chartered banks in Nevada lost money. However, many of them have large amounts of capital or equity that allow them to absorb the losses and continue in business.

About half of community banks continued to pump out new loans, more than offsetting the loans that were paid off and those that were charged off. (See related story)

In addition, many community banks attracted new deposits, reversing the previous flight to the perceived safety of giant regional and money center banks.

Bill Martin, chief executive officer of the $188 million-asset Service1st Bank, said he is attracting customers who feel that other banks are pushing them away.

"Daily I receive phone calls from longtime borrowing customers of other banks who are being treated very aggressively in terms of collection efforts, probably for a good reason but seemingly without regard to those long-term established relationships that have existed," he said in an e-mail. "Our board has discussed and endorsed that we will make every effort to do what is right for both our customer and ourselves so that the loyalty and relationships -- both ways -- remain when this economic nightmare has passed."

Yet, some banks continue to rely on brokered deposits, which are considered hot money, for some of their funding needs.

Brokered deposits are like hot sauce, a little bit can help but a lot can create financial heartburn. How much is too much? The Federal Deposit Insurance Corp. charges a deposit-insurance premium for brokered deposits that exceed 10 percent of total deposits, providing at least a benchmark for acceptable levels of brokered deposits.

Investors who buy certificates of deposit through stockbrokers are looking for yields and are often ready to pull their money when they can get higher rates elsewhere or when they suspect a bank may be set to fail.

In contrast, bankers covet so-called core deposits made by local businesses and residents who have a relationship with their institution and staff. Customers from the community frequently keep their deposits with the local institution for the long term.

Giant regional and money center banks, including Bank of America and Wells Fargo Bank, don't have state charters from Nevada. So they are not required to break out financial results for the Silver State.

Nevada State Bank, Nevada's largest conventional, state-chartered bank, reported that the flow of red ink increased since the fourth quarter of last year. The bank lost $64.5 million in the first quarter, up from $54.8 million in the fourth quarter of last year. It charged off $45.5 million in loans, down from $74.4 million in the fourth quarter.

Its noncurrent loans as a percentage of total loans jumped to 10.3 percent in the first three months this year from 6.2 percent at the end of last year. Its parent, $55.4 billion-asset Zions Bancorporation of Salt Lake City, can provide a financial backstop. Nevada State says it has a strong capital base.

"Our capital levels are at historic highs and are well above our peers," Executive Vice President and Chief Financial Officer Terry Shirey said in an e-mail. One key capital ratio "has nearly doubled from one year ago and is over 2.5 times the amount required to be considered 'well capitalized.'" Shirey said.

"Our first-quarter results reflect our continuing efforts to deal with clients experiencing stress in the local real estate market, which we expect to continue through 2009," he said. "Further, we have no reliance on brokered deposits and we continue to expand our client base both through our robust branch network and FDIC-approved transactions like the recent acquisition of Great Basin Bank in Elko."

Bank of Nevada, a subsidiary of Las Vegas-based Western Alliance Bancorporation, lost $60.9 million in the first quarter compared with a loss of $116.8 million in the fourth quarter. A noncash, write-off of goodwill for past bank acquisitions contributed to the latest loss.

Its risk-based capital ratio registered at 11.6 percent in March, but the holding company completed a $200 million stock offering that boosted capital. Chief Financial Officer Dale Gibbons said the holding company wanted to increase its capital so that it can take advantage of "unprecedented opportunities" to acquire banks and assets and deposits from closed banks.

Merger and acquisition activity among Nevada banks will pick up when the economy improves, Gibbons said. Many would-be acquirers fear their potential targets have hidden problem loans. Acquiring banks will feel more comfortable when the economy stabilizes, he said.

Bank of Nevada's nonperforming assets as a percentage of total assets increased to 2.5 percent in the first quarter from 1.4 percent year-end 2008, but Gibbons said the ratio is among the lowest of large banks based in Nevada.

"Certainly commercial real estate values are still falling a lot," Gibbons said.

"We don't see stabilization in that market yet," Gibbons said. "We're not seeing free fall in this area either."

Signs of financial improvements in the casinos "helps the psychology of the whole city," he said.

As shown in the accompanying table, Community Bank continues to struggle with problem loans and high levels of brokered deposits. SouthwestUSA Bank, a $226 million-asset institution, is doing poorly after recording profits for 2008 and the fourth quarter of last year and relies on brokered CDs for 26 percent of its assets. Sun West Bank and Nevada Commerce Bank both are getting around 27 percent of deposits from brokers. Sun West reports 13 percent of its loans are past due. Nevada Commerce has lower past-due loans but holds $7.8 million in foreclosed real estate.

Meadows Bank, Bank of George and Service1st Bank came late to the party and are glad they weren't around to make loans during the boom times that turned bad during the bust. They also benefited from extrasizing their startup capital.

Rather than raising $10 million, as start banks did a few years ago, Service1st began with $50 million in early 2007. Bank of George raised $22.5 million for its September 2007 opening. Meadows opened its doors in March 2008 with $40 million in capital. This gave them more cushion against losses and the ability to make larger loans than community bank startups earlier in the decade.

"The newly chartered banks have the advantage of timing, that is, they weren't around to participate in the former booming real estate market," Service1st Bank President and Chief Operating Officer John Gaynor said in an e-mail.

"Those new banks were also chartered with above-average capital levels. Less real estate exposure and better capital ratios are a good combination," Gaynor said.

Meadows Bank CEO Arvind Menon said: "Our timing has been extremely provident. When you don't have any problem assets in your portfolio, you don't have distractions (from new lending opportunities)."

It doesn't hurt to focus on lending to recession-resistant businesses. Matt Smith, owner of the 17 similarly named physical therapy clinics, fits the bill. Smith, who employs 130 workers, received a line of credit and refinancing through Meadows Bank in February.

Menon said, "I have to say it's been a good year."

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