Bank failure hits resident hard

By Jeremy Twitchell

Thursday, Oct. 16, 2008 | 12:02 a.m.

The collapse of Henderson-based Silver State Bank in September affected hundreds of depositors and creditors, but perhaps none more devastatingly than J. Shannon Swann.

Swann, a Boulder City resident, lost hundreds of thousands of dollars, the majority of her life savings, when the bank collapsed, based on what she said was bad advice from representatives of Silver State.

Swann said she moved all of her deposits, which were spread across several banks, into several separate accounts at Silver State with the promise of a 5 percent interest rate on her deposits. The Federal Deposit Insurance Corp. insured each depositor for up to $100,000, and she said, she kept each account under $100,000 because she was told the $100,000 limit was per account, not per person.

But when the FDIC closed Silver State and Nevada State Bank purchased its deposits and assumed control of its accounts, Swann was declared an uninsured depositor for everything beyond the $100,000 limit.

"'Uninsured depositor' rubs me the wrong way," Swann said. "I didn't default on my house loan — I just got some bad information."

FDIC spokesman David Barr said he regularly sees cases like Swann's.

"It's unfair that it does happen, but it does seem to be something we see almost every time a bank fails," he said.

Though the corporation has education programs for bank employees, with the sheer number of employees and the turnover rates, Barr said, it's not possible to reach everyone.

The FDIC requires each insured institution to post signs telling depositors about the $100,000 limit at every entrance and at every station where deposits are taken, Barr said, but in the end, the burden falls on the customer to be careful. The FDIC has depositor information available online at www.fdic.gov or by phone at (877) ASK-FDIC, he said.

"Hopefully this is something that will cause other depositors to realize that, as with any other investment advice, you need to verify it," Barr said.

Though Congress voted earlier this month to temporarily extend the insurance limit to $250,000 per depositor until the end of 2009, the move will not help Swann, because it is not retroactive. Swann said she has written to congressional representatives, senators and even President George W. Bush to look for help.

"I'm writing to everybody I can think of because it's just not right that we suffer because we have incompetent people working in a bank," Swann said.

Though Barr said there is no recourse that guarantees Swann and other uninsured depositors will recover all their funds, the FDIC's rules allow for them to recover at least a portion. Swann has been declared a receiver of Silver State assets, and as such is guaranteed to recover 10 percent of her lost money through the FDIC.

The rest of Swann's money, Barr said, will trickle in over the next several years as Silver State's assets are sold off. As the money comes in, Barr said, it will be used to pay off all of Silver State's creditors, with the uninsured depositors being first in line. Only if and when they are all paid off will other creditors, such as businesses and shareholders, begin to receive any money, Barr said.

"From that standpoint, the uninsured depositors are sitting in a better position than the other creditors," he said.

Barr said he has seen the asset sales recover anywhere from 40 percent to 100 percent of the uninsured deposits, but it is too early to tell how much they will recover in this case.

Jeremy Twitchell can be reached at 990-8928 or [email protected].