Bank might sell assets as financial woes worsen

By Steve Green

Thursday, April 2, 2009 | 10:02 a.m.

The parent company of Community Bank of Nevada disclosed deepening financial problems late Wednesday and said it's looking for ways to bolster its capital structure including the sale of assets.

Las Vegas-based Community Bancorp, parent of Community Bank of Nevada and Community Bank of Arizona, said it's still working on its 2008 annual report to the Securities and Exchange Commission and notified the SEC that the report will be filed late while it assesses how much it will have to write off in goodwill impairment and loan losses. It expects to report a loss for 2008 vs. a profit of $20.4 million in 2007.

As a result of the losses, the holding company expects its principal subsidiary, Community Bank of Nevada, with 13 Southern Nevada branches, to be "adequately capitalized" and Community Bank of Arizona to be "well-capitalized" for regulatory purposes as of Dec. 31.

But because of bad loans tied to the recession, it expects federal and state regulators will require a formal agreement covering asset quality, capital and earnings. In order to bolster the capital ratios at the Nevada bank, the company has filed applications with bank regulatory agencies to merge its Arizona subsidiary bank into Community Bank of Nevada, moving excess capital at the Arizona subsidiary and reducing expenses.

Community Bancorp said it is not in compliance with certain debt service coverage ratios, has stopped making interest payments on some obligations as permitted by the lenders and is exploring the possibility of selling assets -- performing loans -- in order to reduce its risk-based assets.

While Community Bancorp is deferring interest payments on the obligations -- "subordinated trust preferred obligations'' -- it is prohibited from making any dividend payments on or repurchasing its capital stock.

Community Bancorp last reported earnings for the third quarter of 2008. It said that as of Sept. 30, it had loans and other assets of $1.787 billion. Its nonperforming loans at that time totaled $185.5 million, or 12.5 percent of gross loans.

Community Bancorp's stock, which traded at $13.75 in April 2008, traded today at $1.71, down 4 cents from Wednesday.

Edward Jamison, chairman and chief executive officer, issued this statement about the bank's situation:

"As we witnessed in the news throughout the country, real estate values have declined and Nevada and Arizona real estate experienced their share of substantial declines in values during the fourth quarter of 2008 and continue to have downward pressure this year. With the decline in the economic indicators in Nevada and Arizona and our own experience with stressed businesses and loans, we have and continue to assess the underlying collateral values supporting our loan portfolio and, when appropriate, either set aside reserves or write off these reductions in values. This resulted in higher reserves and higher loan amounts being written-off during 2008. Banks with real estate concentration have been impacted by these declining values and loan performance issues. Nevada, with the gaming and hospitality industry, construction, and small businesses, is feeling the impact of the times. Arizona likewise has had declines in property values, heightened vacancies in commercial offices and the retail real estate sector and increasing unemployment numbers. Our communities, in which we operate, have been severely impacted by the economic downturn and continue to do so. Local banks in general are a reflection of the economy of the communities in which they operate and our community has been economically stressed. Likewise as recovery comes we believe that Las Vegas will rebound and grow and recover along with the country as a whole.''

"We believe that the Board of Directors and management of the company have implemented a very aggressive strategy to address the challenges of this economic cycle. We are moving forward and executing our plans to strengthen our capital, our earnings and our asset quality. We have hundreds of dedicated officers and employees working toward solutions and progress is being made. Our customers are loyal and we appreciate that."