LAS VEGAS -- The failure of another Nevada bank, the second in two months, has led credit unions to emphasize their strong safety and soundness positions with their members.
"We may be issuing another one of our financial reports and placing a newspaper ad--laying out as we did before--our capital position and our record of profits," declared Brad Beal, president/CEO of the $826 million Nevada Federal Credit Union.
Nevada FCU, like other CUs in the state, have relied on member letters, reports and their Web sites to stress insurance coverage and institutional stability in the wake of the Sept. 5 collapse of the $2 billion, 13-branch Silver State Bank of Henderson, a Las Vegas suburb.
Silver State, the failure of which was attributed to faulty mortgage and construction loans, was taken over in an FDIC-arranged purchase transaction by Zions Bancorp of Salt Lake City. The Utah bank already owns Nevada State Bank, the state's largest, and has an Arizona affiliate, National Bank of Arizona, both of which took on Silver State customers. Harris Simmons, former American Bankers Association chairman, is chairman of Zions.
Silver State's demise was not a surprise to Nevadans, according to CU officials who had been following media reports of financial problems dating back several weeks. There was also a subsequent, sharp drop in the bank's share price.
Carol McGoldrick, director of marketing at the $1 billion Silver State Schools CU, the state's largest, said her CU has issued safety and soundness messages since the July failure of IndyMac Bank in Pasadena, Calif., and now her CU might be looking at new communication avenues in light of the failure of Silver State Bank.
Despite the common Silver State name, the Nevada public seems to be able to differentiate between the bank and the CU, McGoldrick said.
Dan Paulson, chairman of the Nevada Credit Union League and president/CEO of the $186 million WestStar CU of Las Vegas, said his CU was prepared to issue new safety and soundness messages though so far in the first week since the failure he has seen little switching of funds.
Like Washington Mutual and Wachovia, Silver State had been reaching for liquidity, he said, offering liberal 12-month CD rates at 4.75%, "something we are not about to combat."
"These are tough times, but we've talked to our members, and we intend to keep the business," said Paulson.
Beal agreed, stating that his CU "was not about to chase rate." The ongoing rate at Nevada FCU was 3%.
With Nevada foreclosures at the top of the states (see related story pages 28-29), Beal acknowledged the difficulties weathered by CUs and banks, but so far Nevada FCU "has absorbed the real estate losses" and has remained profitable.
The failure of Silver State was the eleventh so far this year and comes on the heels of the July takeover of the $2 billion First National Bank of Reno by Mutual of Omaha Bank. Other failures in August included the $752 million Columbian Bank & Trust in Topeka, Kan., and the $1 billion Integrity Bank in Alpharetta, Ga.