The troubled Silver State Schools Credit Union of Las Vegas, operating once again with a reinstated president/CEO and mounting a campaign to restore public confidence, is now poised to receive a cash infusion from its private insurer, American Share Insurance Inc.
Just how much ASI was willing to shell out to fix the balance sheet and thereby prevent a collapse or merger of the $883 million credit union, the largest in the state, was not spelled out in a transaction apparently winning state regulatory approval.
One industry source suggested the price tag "could likely be tens of millions," but David Rhamy, who resigned the CEO job on Dec. 18 and then returned on Christmas Eve with little explanation from the board, told a Las Vegas newspaper the ASI funds would be used "to fund car loans and mortgages to generate more revenue for the credit union." Rhamy was unavailable for comment.
Rhamy, the former chairman of WesCorp and a Las Vegas attorney, also told The Las Vegas Sun that the CU, with 79,000 members, is in no danger of failing, continues to lose less money and should return to profitability in 2010.
The embattled CEO who first said he was leaving to return to private law practice and then recanted, has insisted Silver State can weather the financial storms of 2010 because it has $54 million in reserve capital.
That means, he wrote in a Dec. 26 Web site message, "that we could endure two more years of losses similar to those we've experienced in 2009, although we won't likely need to because your (and our) financial condition the past few months is much more positive than the first nine months of the year."
Rhamy acknowledged that the CUs' capital has dipped from a high of $80 million to $54 million at the end of the third quarter and forecast that reserves could dip to $50 million once fourth-quarter losses are calculated.
Losses for the first nine months stood at $35.8 million and should increase by less than $7 million in the fourth quarter, which, he said, is at a slower pace than the $10 million to $15 million in losses during the first three quarters.
As to the ASI transaction, a spokeswoman for Nevada's top regulator, George Burns, commissioner of the Financial Institutions Division, declined to comment "on any potential arrangements" involving Silver State.
As for Rhamy's sudden return as CEO, the spokeswoman said the division views "continuity in management and board leadership during these challenging times" as factors contributing "to the credit union's overall safety and soundness."
Rhamy, who has been CEO since 1999, explained that he resigned the Silver State job after a discussion he had with his seven-member board, regulators and management team based on the notion that someone had to pay a price for what happened. However, he said he choose to leave on his own, albeit reluctantly. As CEO, he said "I am responsible for what goes on here."
Peer CEOs in Las Vegas said they were stunned at the turn of events at Silver State, with one calling it "a terrible mess" and expressing surprise at the appearance of management turmoil.
When Rhamy resigned, the CU promptly anointed Carol Gibson, executive vice president/chief operating officer, as interim CEO.