State-chartered banks report tough fourth quarter

By Nicole Lucht

Friday, Feb. 6, 2009 | 2 a.m.

The final quarter of 2008 was a tough one to the top two state-chartered banks in Las Vegas.

The parent companies of Nevada State Bank and Bank of Nevada reported an increase in their allowance for loan losses, marking their expectations of further loan defaults during the fourth quarter in response to the deepening recession.

Western Alliance

Western Alliance Bancorp, parent of Bank of Nevada, reported a net loss of $148 million, primarily from writing down the 2006 acquisitions of Nevada 1st Bank and Bank of Nevada (when the bank was BankWest of Nevada) and securities that have not yet defaulted, but may be deferred, said Dale Gibbons, chief financial officer of Las Vegas-based Western Alliance.

Bank of Nevada incurred the greatest net loss — $122.8 million — of Western Alliance’s banks, including those in California and Arizona. The company also operates First Independent Bank of Nevada in Northern Nevada.

Bank of Nevada is the second largest state-chartered bank in Nevada with $1.96 billion in deposits as of June, according to In Business Las Vegas research.

In the fourth quarter of 2007, the Nevada subsidiaries’ net income was $900,000.

Excluding the write-downs of its troubled assets, the company reported a net operating loss of $12.2 million. Nevada’s net operating loss was $4.3 million.

The company received $140 million through the Treasury Department’s capital purchase program.

Companywide, year-over-year gross loan growth was up 12.7 percent, from $463 million in December 2007 to $4.1 billion in 2008. Of that, Western Alliance’s Nevada subsidiaries delivered $25 million in loans during the fourth quarter and $121 million for the full year.

Western Alliance’s provision for loan loss — an allowance set aside for loan losses — increased 45.5 percent, $14.7 million in the third quarter to $32.3 million in the fourth quarter.

By the end of the fourth quarter, its loans past due by 30 to 89 days were $45.2 million, up from $35 million at the end of the third quarter.

“This past year has been very challenging for our company due to unprecedented turmoil in the financial industry and housing markets,” Robert Sarver, chief executive and chairman of Western Alliance, said in the company’s release of its fourth quarter results. “Despite this difficult operating environment, we succeeded in substantially boosting our capital position, maintaining strong margins and addressing our most troubled asset class by writing off virtually our entire trust preferred (collateralized debt obligations) portfolio (from $108 million to $1.4 million).”

Zions Bancorp

Zions, parent of Nevada State Bank, also had a tough final three months of 2008, reporting a net loss of $498.1 million, a loss that mostly includes goodwill.

Nevada State Bank is the largest state-chartered bank in Nevada with $2.44 billion in deposits as of June, according to In Business Las Vegas research.

Salt Lake City-based Zions played it cautious in the fourth quarter, provisioning $285.2 million for loan losses, but ended up writing down $179.7 million for the fourth quarter.

The majority of its goodwill write-down stemmed from its banking subsidiaries in Nevada, Arizona and Colorado.

The company received $1.4 billion from the Treasury’s capital purchase program.

During 2008, it extended $4.6 billion in credit, of which $2.7 billion was in new loans.

However, its nonperforming assets — those overdue and no longer collecting interest — were $1.1 billion in the fourth quarter, a year-over-year increase from $283.9 million.

The company said the increase was because of the deteriorating real estate industry and the continued weakening in Utah’s residential construction.

“In what most observers agree is the most difficult economic environment in over half a century, we have strengthened our balance sheet by building record high levels of capital and liquidity,” Zions Chief Executive and Chairman Harris Simmons said. “The goodwill impairment has no impact on regulatory and tangible capital ratios, and reflects in part the fact that market values of all banks are significantly lower in current highly stressed markets. While this is a challenging environment for Zions and the industry, we continue to successfully extend new credit and serve our customers.”