LAS VEGAS -- The failure of another Nevada bank, the second intwo months, has led credit unions to emphasize their strong safetyand soundness positions with their members.

"We may be issuing another one of our financial reports andplacing a newspaper ad--laying out as we did before--our capitalposition 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 memberletters, reports and their Web sites to stress insurance coverageand institutional stability in the wake of the Sept. 5 collapse ofthe $2 billion, 13-branch Silver State Bank of Henderson, a LasVegas suburb.

Silver State, the failure of which was attributed to faultymortgage and construction loans, was taken over in an FDIC-arrangedpurchase transaction by Zions Bancorp of Salt Lake City. The Utahbank already owns Nevada State Bank, the state's largest, and hasan Arizona affiliate, National Bank of Arizona, both of which tookon Silver State customers. Harris Simmons, former American BankersAssociation chairman, is chairman of Zions.

Silver State's demise was not a surprise to Nevadans, accordingto CU officials who had been following media reports of financialproblems 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 SilverState Schools CU, the state's largest, said her CU has issuedsafety and soundness messages since the July failure of IndyMacBank in Pasadena, Calif., and now her CU might be looking at newcommunication avenues in light of the failure of Silver StateBank.

Despite the common Silver State name, the Nevada public seems tobe able to differentiate between the bank and the CU, McGoldricksaid.

Dan Paulson, chairman of the Nevada Credit Union League andpresident/CEO of the $186 million WestStar CU of Las Vegas, saidhis CU was prepared to issue new safety and soundness messagesthough so far in the first week since the failure he has seenlittle switching of funds.

Like Washington Mutual and Wachovia, Silver State had beenreaching for liquidity, he said, offering liberal 12-month CD ratesat 4.75%, "something we are not about to combat."

"These are tough times, but we've talked to our members, and weintend 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 relatedstory pages 28-29), Beal acknowledged the difficulties weathered byCUs and banks, but so far Nevada FCU "has absorbed the real estatelosses" and has remained profitable.

The failure of Silver State was the eleventh so far this yearand comes on the heels of the July takeover of the $2 billion FirstNational Bank of Reno by Mutual of Omaha Bank. Other failures inAugust included the $752 million Columbian Bank & Trust inTopeka, Kan., and the $1 billion Integrity Bank in Alpharetta,Ga.

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