Saturday, September 06, 2008

Silver State Bank Put to Sleep By State of Nevada Regulators and FDIC

Well, #49 on our bank failure watchlist, Silver State Bank, was killed off yesterday. It is a $2.0 billion asset bank with $1.7 billion of insured deposits. I haven't done the analysis, but I suspect the greater the ratio of insured deposits to total assets, the worse it is for the FDIC. The FDIC expects to lose $450-550 million on this nationalization. That's 22.5% to 27.5%, which reflects the general upward trend in expected losses that we've noticed over the past month.

On a personal note, it's good to see Nevada put another point on the board. Up until now, they'd only had one of 2008's ten bank failures happen in their state. Given it is home to one of the four epicenters of the housing debacle (Inland Empire, South Florida, Pheonix, Vegas), I'd hate to see them get lapped by some of their rivals.

Here is the WSJ's take on the Silver State Bank collapse.

The Unders have had quite a run with one bank being taken down basically every week for two months. I expect the pace will do nothing but grow over the next six-plus months.

It has occurred to me that really the loss rate is not insured deposits to total assets but (insured deposits + FHLB and other senior to the FDIC borrowings) / total assets.

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