Silver State Bankruptcy: Another FDIC Friday Night Special

By Edward Harrison On Sep 5, 2008

This time it is Silver State Bank of Henderson, NV to go bankrupt. Read the press release below. This one is pretty large with assets of $2 billion and it has ties to Republican Presidential nominee McCain.

See my list of Bankrupt global financial institutions for major bankruptcies and my Credit Crisis Timeline for writedown announcements.

Until recently, the son of Republican nominee Sen. John McCain sat on Silver State’s board and was a member of its three-person audit committee, which was responsible for overseeing the company’s financial condition.
–Wall Street Journal

This particular little bankruptcy has the potential to be very explosive given the position that John McCain’s own son had on the audit board and given his stealthy exit from the company just weeks ago, according to Bloomberg.

Andrew McCain, the son of presumptive Republican presidential nominee John McCain, served on the board audit committee of a Nevada bank facing losses and scrutiny by federal and state regulators, the Wall Street Journal reported.

Andrew McCain, 46, resigned from the board of Silver State Bancorp on July 25 after serving just five months, the newspaper said. A week later, the bank reported a loss of $62.7 million in the second quarter, the Journal said. The bank Aug. 14 said it actually lost $73.2 million in the quarter; regulators are investigating, the Journal said.

There is no evidence that Andrew McCain committed any wrong- doing, the Journal said. His full-time job is chief financial officer for Hensley & Co., the Arizona beer distributor owned by Cindy McCain, wife of the senator. John and Andrew McCain declined to comment, the Journal said.
–Bloomberg

Stay tuned! I expect this will hit the newswires in a big way.

Silver State Bank, Henderson, Nevada, was closed today by the Nevada Financial Institutions Division, and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. To protect the depositors, the FDIC entered into a Purchase and Assumption Agreement with Nevada State Bank, Las Vegas, Nevada, to assume the Insured Deposits of Silver State Bank.

The branches of Silver State Bank will open on Monday as Nevada State Bank in Nevada and National Bank of Arizona in Arizona. Depositors of the failed bank will automatically become depositors of Nevada State Bank or National Bank of Arizona. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage.

Over the weekend, customers of Silver State Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of June 30, 2008, Silver State Bank had total assets of $2.0 billion and total deposits of $1.7 billion. Nevada State Bank agreed to purchase the insured deposits for a premium of 1.3 percent. At the time of closing, there were approximately $20 million in uninsured deposits held in approximately 500 accounts that potentially exceeded the insurance limits. This amount is an estimate that is likely to change once the FDIC obtains additional information from these customers.

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.

Customers with accounts in excess of $100,000 should contact the FDIC toll-free at 1-800-523-8177 to set up an appointment to discuss their deposits. This phone number will be operational this evening until 9:00 p.m. PDT; on Saturday and Sunday from 9:00 a.m. to 6:00 p.m. PDT; and on Monday and thereafter from 8:00 a.m. to 8:00 p.m. PDT.

Customers who would like more information on today’s transaction should visit the FDIC’s Web site at https://www.fdic.gov/bank/individual/failed/silverstate.html. Beginning Monday, depositors of Silver State Bank with more than $100,000 at the bank may visit the FDIC’s Web page, “Is My Account Fully Insured?” at https://www2.fdic.gov/dip/Index.asp to determine their insurance coverage

In addition to assuming the failed bank’s insured deposits, Nevada State Bank will purchase a small amount of assets comprised of cash and securities. The FDIC will retain the remaining assets for later disposition.

The transaction is the least costly resolution option, and the FDIC estimates that the cost to its Deposit Insurance Fund is between $450 and $550 million. Silver State Bank is the second bank to fail in Nevada in 2008. First National Bank of Nevada, Reno failed on July 25, 2008. This year, a total of eleven FDIC-insured institutions have been closed.

Source
Press Release: Nevada State Bank Acquires the Insured Deposits of Silver State Bank, FDIC
En Español

Related articles
Regulators Shutter Silver State Bank – WSJ
Silver State of Nevada Is 11th Bank Failure This Year – Bloomberg
McCain’s Son Sat on Troubled Bank’s Board – Wall Street Journal
National Media Finally Examining McCain’s Son Role In Failing Bank – Huffington Post
Andrew McCain Resigns from Silver State Bank – Huffington Post