Silver State Bancorp (fka SSBXQ)

[Estrella]

Excuse me!? That information is public and current; one is the last PR on Apr 09, 2009 and the other is the information on their website. I hope this help.


Report blames bank's officials

Apr 09, 2009 (Las Vegas Review-Journal - McClatchy-Tribune Information Services via COMTEX) -- The managers and directors of Henderson-based Silver State Bancorp. are to blame for the failure of the $1.9 billion asset bank last September, but federal bank examiners should have spotted problems and intervened earlier, the Inspector General's Office of the Federal Deposit Insurance Corp. said in a report.

The report, which was released Monday, said that the banking company's chief executive officer and executive vice president bear the main responsibility for the "high-risk business strategy" and "uncontrolled growth" that led to the bank's collapse. While the report did not name CEO Corey Johnson and Executive Vice President Douglas French, they were the individuals in those positions during the periods addressed by the inspector general's office.

The report cited as an example of problems at the bank that weren't spotted or stopped that French was given a bonus for loans he originated under arrangements that didn't emphasize loan quality. The report said such executive compensation is not only highly unusual but it is "a significant concern."

The Federal Deposit Insurance Corp.'s deposit insurance fund lost $553 million because of Silver State's demise, up from $505 million estimated earlier.

Silver State was formed in 1996, but over the years, the bank switched from focusing on risky commercial real estate loans that are secured by developed properties, to riskier acquisition, development and construction loans that are typically backed by raw land or construction projects, according to the Inspector General's report.

At the same time, Silver State grew more dependent on volatile sources of deposits, such as high-yield certificates of deposits sold by stock brokers.

At the request of the Nevada Financial Institutions Division and the FDIC, the bank's board of directors adopted a resolution in 2005 relating to commercial real estate loans.

Regulators directed the board to establish a business strategy that acknowledged the risk of having a concentration of commercial real estate loans, the need for sufficient capital and the need for adequate loan loss reserves.

The FDIC lifted those requirements in September 2006, but the Inspector General said "these issues were not effectively resolved." Acquisition, development and construction loans ballooned to 690 percent of capital in 2008 from 131 percent of capital in 2001.

"In addition, (the bank) had liberal loan underwriting standards, ineffective loan administration procedures, poor loan risk management practices and an inadequate (allowance for loan losses)," the report said.

At the same time, Silver State started relying more on certificates of deposit sold by stock brokers and a few large depositors. Bankers consider brokered CDs "hot money," because these CD holders typically have no loyalty to the bank and may pull their money if they can do better elsewhere.

Those "funding sources are subject to quick withdrawals in a deteriorating market or a reported decline in the bank's financial position," the report said. FDIC officials said "it appeared that bank management did not understand the nature of level of risk that they created by using these volatile funding sources."

Total assets at Silver State grew to $2 billion from $700 million over 42 months, according to the report. Risky acquisition development and construction loans climbed to 67 percent from 21 percent of gross loans over the same time frame, despite the rapid growth in total loans.

The Inspector General's report also criticized bank examiners for failing to take stronger actions to address the growing risks at Silver State.

"Although the deterioration of the bank's financial condition was severe in 2008, the underlying risks were evident in the preceding years," the report said.

In fact, in May 2007, the FDIC gave Silver State an overall 2, the second-best rating on a scale known as CAMELS that looks at how banks manage their market risks.

The examiners' report also failed to note how the Las Vegas and Phoenix markets where Silver State operated were deteriorating.

"Examiners did not downgrade the bank's ratings until the following examination in July 2008 -- (Silver State's) last examination before the bank failed," the report said. The FDIC in March 2008 found that Silver State was inappropriately using loan reserves. It would make a loan that included an interest reserve. Loans for projects that were struggling would be current on interest payments because the payments were drawn from pre-funded reserves, thus masking underlying problems.

At the June 2008 examination, the bank's composite CAMELS rating was cut to 5, the lowest possible rating, "indicating extremely unsafe and unsound practices or conditions, critically deficient performance and inadequate risk management practices."

Because of reliance on high-rate and brokered deposits, "when the bank's financial condition began to deteriorate, its funding sources began to disappear."

The Nevada Financial Institutions Division seized Silver State in September and named the FDIC as receiver.

George Burns, commissioner of the Financial Institutions Division, said the report speaks for itself. The FDIC could not be reached for comment. Johnson did not return calls for comments.

http://www.silverstatebank.com

Phone: [phone]