Son of presidential nominee John McCain was reportedly former board member; closing marks the 11th bank failure this year.
Last Updated: September 5, 2008: 10:43 PM EDT
WASHINGTON (AP) — Nevada regulators have shut down Silver State Bank. It was the 11th failure this year of a federally insured bank.
Andrew McCain, son of Republican presidential nominee John McCain was a member of the bank’s board, but recently stepped down for “personal reasons,” according to The Wall Street Journal. The younger McCain, 46, had also served on Silver State’s audit committee, and was only with the bank for five months before leaving on July 26, the Journal reported.
The Federal Deposit Insurance Corp. was appointed receiver of the bank, located in Henderson, Nev. It had $2 billion in assets and $1.7 billion in deposits as of June 30.
The FDIC said Friday the bank’s insured deposits will be assumed by Nevada State Bank of Las Vegas. Its branches will reopen Monday as offices of Nevada State Bank in Nevada and National Bank of Arizona in Arizona.
The agency said depositors of Silver State Bank will continue to have full access to their deposits.
The 11 failures so far this year compare with three for all of 2007, and federal banking officials have said that more banks are in danger of collapse.
Silver State Bank has operated 12 branches in Nevada and Arizona as well as loan offices in Nevada, Utah, Colorado, Washington, Oregon, California and Florida.
The FDIC estimated its resolution will cost the deposit insurance fund between $450 million and $550 million.
Regular deposit accounts are insured up to $100,000; for some individual retirement accounts, the limit is $250,000.
There were about $20 million in uninsured deposits held in roughly 500 accounts at Silver State that potentially exceeded the insurance limit, the FDIC said.
Concern has been growing over the solvency of some banks amid the housing slump and the steep slide in the mortgage market. The pressures of tighter credit, tumbling home prices and rising foreclosures have been battering many banks, large and small, across the nation.
The largest bank failure by far this year has been that of savings and loan IndyMac Bank, which was seized by regulators on July 11 with about $32 billion in assets and deposits of $19 billion.
The seizure of Pasadena, Calif.-based IndyMac, which was the largest regulated thrift to fail in the United States, prompted hundreds of angry customers to line up for hours in Southern California to demand their money. IndyMac also was the second-largest financial institution to close in U.S. history, after Continental Illinois National Bank in 1984.
The FDIC has been operating the bank, now called IndyMac Federal Bank, under a conservatorship.
The FDIC plans to raise insurance premiums paid by banks and thrifts to replenish its reserve fund after paying out billions of dollars to depositors at IndyMac. The fund, currently at $45 billion, is expected to take a hit from IndyMac of $4 billion to $8 billion.
Federal officials expect turbulence in the banking industry to continue well into next year, and more banks to appear on the FDIC’s internal list of troubled institutions.
Of the 8,500 or so FDIC-insured banks in the country, 117 were considered to be in trouble in the second quarter – the highest level in about five years and up from 90 in the first quarter. The agency doesn’t disclose the banks’ names.
Only 13 percent of banks that make the list fail, on average, and most are nursed back to health or acquired by stronger institutions, according to the FDIC.
Federally insured banks and thrifts set aside a record $50.2 billion to cover losses from soured mortgages and other loans in the April-June quarter, when profits plunged 86 percent from a year earlier.