Sun West Bank fails, will reopen as City National

By Las Vegas Sun Staff (contact)

Published Friday, May 28, 2010 | 6:14 p.m.

Updated Friday, May 28, 2010 | 7:39 p.m.

The Nevada Financial Institutions Division on Friday announced that Sun West Bank in Las Vegas has failed and that its branches will reopen on Tuesday as branches of City National Bank.

Sun West, which ended 2009 with only $9.3 million in equity capital, saw its equity cushion deteriorate even further in the first quarter of this year when it lost $4.665 million.

Sun West reported that in the first quarter, it collected $3.788 million in interest income, but that amount was more than canceled by interest expenses of $1.489 million and another $3.783 million it set aside to cover loan and lease losses.

After some high-profile bank failures in Las Vegas in 2008 and 2009, Sun West is the first bank in Las Vegas to fail this year.

Sun West’s closure is another reminder that thinly capitalized banks in Southern Nevada are having trouble surviving the recession that has decimated commercial and residential real estate values, pushed Las Vegas to the top of national foreclosure lists and led to a record local unemployment rate of 14.2 percent.

Earlier, big banks and credit unions in Southern Nevada that failed during the recession were 1st National Bank of Nevada, Silver State Bank, Community Bank of Nevada, Community One Credit Union, Cumorah Credit Union and Ensign Federal Credit Union. Big out-of-state banks with local branches that failed included Washington Mutual and Colonial Bank.

In April, it was revealed that four other Las Vegas banks had agreed to a consent order issued by the Federal Deposit Insurance Corp.

They were SouthwestUSA Bank, Bank of Las Vegas, Town & Country Bank and 1st Commerce Bank.

The orders generally deal with increasing the bank’s capital position and decreasing non-performing real estate portfolios.

On Friday, the state agency said it took possession of Sun West Bank and appointed the FDIC as receiver.

As of March 31, Sun West Bank had loans and other assets of approximately $361 million and deposits of approximately $354 million. Sun West Bank had five branches in Las Vegas and two branches in Reno.

“Nevadans can be confident that their deposits are safe,” FID Commissioner George E. Burns said in a statement. “Deposits are insured by the FDIC for up to $250,000 per depositor, per type of account ownership. All deposits of Sun West Bank will be assumed by City National Bank.”

“Due to inadequate capital and mounting loan losses, it was necessary to close Sun West Bank and appoint the FDIC as receiver,” Burns said in the statement. “We are committed to protecting the public interest and ensuring that Nevada’s banking system continues to be fundamentally safe and sound.”

Sun West Bank customers will continue to have access to banking services over the three-day holiday weekend, and normal business hours and access to banking services will continue on Tuesday.

Over the Memorial Day weekend, Sun West Bank’s depositors can access their deposits by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

The FDIC, in the meantime, said Los Angeles-based City National Bank is assuming all of the deposits of Sun West Bank and is buying essentially all of its assets.

Depositors of Sun West Bank will automatically become depositors of City National Bank. Deposits will continue to be insured by the FDIC.

City National Bank will pay the FDIC a premium of 0.67 percent to assume all of the deposits of Sun West Bank.

The FDIC and City National Bank entered into a loss-share transaction on $280 million of Sun West Bank’s assets such as loans.

City National Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector, the FDIC said.

The FDIC estimates that the cost to the Deposit Insurance Fund will be $96.7 million.

Customers who have questions can call the FDIC toll-free at 1-800-523-8089, or the state Financial Institutions Division at 486-4120. Information is also available at www.fdic.gov.

The deal expands the Nevada banking footprint for City National, which currently has five Southern Nevada branches that in 2009 had some $159 million in deposits.

"The cost-effective acquisition of Sun West Bank expands City National’s commitment to Nevada and reflects our confidence in the state’s long-term economic prospects," City National Chief Executive Russell Goldsmith said in a statement. "Sun West and City National fit well together, especially given that all seven of Sun West’s banking offices are located in the northern and southern Nevada communities that City National now serves. When the integration is complete, clients of both banks will enjoy the added convenience and capabilities of an expanded branch network as well as the outstanding service and financial solutions of America’s 27th largest bank."