Silver State Bank Fails, Eleventh Bank to Crash this Year

Somewhat overshadowed by the weekend government takeover of Fannie Mae (FNM) and Freddie Mac (FRE)see HW’s coverage here — markets seem to be glossing over another Friday bank failure announced by the Federal Deposit Corp. This one isn’t as small as some of the others comprising the eleven banks that have failed so far this year: Henderson, Nevada-based Silver State Bank had total assets of $2.0 billion and total deposits of $1.7 billion. The FDIC said it entered into a purchase and assumption agreement with Las Vegas-based Nevada State Bank to assume the insured deposits of Silver State Bank, re-opening the failed bank on Monday as Nevada State Bank in Nevada and National Bank of Arizona in Arizona. Nevada State Bank agreed to purchase the insured deposits for a premium of 1.3 percent, the FDIC said. At the time of closing, there were approximately $20 million in uninsured deposits held in approximately 500 accounts that potentially exceeded the insurance limits. Silver State Bank also had approximately $700 million in brokered deposits that are not part of today’s transaction. The FDIC will pay the brokers directly for the amount of their insured funds, regulators said. The latest bank failure is expected to hit the FDIC’s deposit insurance fund to the tune of between $450 and $550 million. Recent bank failures, particularly the failure of IndyMac Bank in Pasadena, Calif. earlier this year, have pushed the insurance fund’s reserve ratio below the 1.15 percent statutory minimum. FDIC chairman Sheila Bair last week emphasized that the FDIC has a line of credit with the U.S. Treasury, if needed, and said the agency would look to hike insurance premiums going forward — with the majority of the premium increases going towards more at-risk banks. The FDIC’s “problem list” of banks grew to 117 institutions from 90 at the end of the first quarter, although the regulator does not publicize its list of problem banks. That is the largest number on the list since the middle of 2003. Total assets of problem institutions also increased from $26 billion to $78 billion, with $32 billion coming from IndyMac Bank, which failed in July. For more information, visit http://www.fdic.gov. Disclosure: The author was long FRE when this story was published; indirect holdings may exist via mutual fund investments, as well. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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