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July 24, 2017

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banking column:

Stock delisting could compromise Service1st acquisition

Beyond the Sun

The acquisition of Service1st Bank of Nevada seems to be in limbo after the New York Stock Exchange notified Western Liberty Bancorp on Oct. 20 that it plans to delist the stock. The company is trying to acquire the 3-year-old bank.

Western Liberty is listed with the American Stock Exchange, a second-tier stock exchange owned by the New York Stock Exchange.

An exchange official told me that generally when the exchange sends a notice of delisting, it’s because the company no longer complies with the exchange’s listing standards.

When the notice is sent, it is an opportunity for shareholders to “adjust their investments,” the official said.

In a news release, Western Liberty said it will appeal the stock exchange’s plans to delist it, but that there is “no assurance that (its) appeal will be successful.”

Western Liberty, which recently changed its name from Global Consumer Acquisition Corp., could not be reached for comment.

Service1st isn’t the first bank the company has tried to buy in Las Vegas. Before Colonial Bank was seized by federal regulators and sold to Branch Banking & Trust, Western Liberty had announced plans to buy Colonial’s Nevada operations.

Banks paying more in fees

Higher insurance fees for banks could mean higher costs for customers as banks look for ways to make up the lost revenue.

For the past three years, most banks have had a major increase in Federal Deposit Insurance Corp. fees.

That’s because for the prior 10 years, more than 90 percent of banks considered well-capitalized and well run, didn’t have to pay insurance fees.

U.S. banks pay a total of $12 billion every year into the insurance fund, FDIC spokesman David Barr said. Banks also paid another $5 billion in a special assessment fee due Sept. 30, he said.

But during the economic boom when banks were making money hand over fist, the well-capitalized, best-run banks weren’t paying anything into the insurance fund, Barr sad.

“During the good times, the FDIC’s cash position didn’t change much,” he said. Now the FDIC is strapped for cash. It approached Congress in 2006 about changing how it collects fees, and in 2007 it was given permission to collect them from all banks it insures.

“We wanted to build up the fund in the good times,” Barr said. “Unfortunately, because of what’s going on in the industry, we have to charge more for deposit insurance.”

For example, City National Bank has seen its fees increase 600 percent or “millions” of dollars, said Larry Charlton, regional executive.

“The rise in premiums is pretty substantial,” Charlton said.

That’s one reason banks’ income is down, he said.

“Why should we pay for other people’s mistakes?” Charlton said. “But it happens in all areas of insurance.”

Almost 100 banks have been shut down this year, and the insurance fund had to pay nearly $40 billion for failed banks bad loans or uninsured deposits.

The fund is not paid for by taxpayers. It had $10.4 billion as of June 30, according to the FDIC. In March 2008 the fund had $52.8 billion.

Which banks the FDIC did or did not collect from Barr could not disclose. The FDIC also doesn’t disclose how much an individual bank pays into the fund because that could reveal a bank’s health, he said.

Banks in good health and with good management pay 12 cents to 16 cents for every $100 they have in deposits, regardless if the deposits are insured. This is up from 2007 and 2008 when banks were paying 5 cents to 7 cents for every $100.

For instance, if a bank has $100 million in deposits, it would pay $160,000, based on 16 cents for every $100. This is up from $70,000 the bank would have had to pay in 2007 and 2008, based on 7 cents for every $100.

The rates will remain high for at least the next seven years as the insurance fund rebuilds itself, Barr said.

City National said it’s not passing all of the costs to its customers.

“If you simply passed all the fees to the customer, they’d go to the next bank,” Charlton said. “Banks are slow to (pass it on to) businesses or customers ... (but) some of this has to be passed on.”

U.S. Bank gift

U.S. Bank’s fundraising arm gave $187,000 to 19 Southern Nevada charities this year, supporting the arts, economic opportunity and education.

“U.S. Bank is proud to support these nonprofit organizations in the Las Vegas Valley,” said Lori Soren, president of U.S. Bank in Las Vegas. “The families in this community have opportunities for better education, housing and culture due to the work of these organizations, which is why we are so pleased to offer our support.”

Bank shutting branches

Bank of Nevada is closing three branches in Las Vegas after its parent, Western Alliance Bancorp, announced a third-quarter loss.

Branches at Boca Park and 8275 W. Flamingo Road, acquired during an earlier takeover, are within a couple of miles of other branches, spokeswoman Jan Rowe said. A third at 8745 W. Warm Springs Road is also being closed.

In its filing to the Securities Exchange Commission, Western Alliance reported a net loss of $23.9 million, but a $344 million increase in deposits to $5 billion.

The three branches are in the southwest valley and will be shut down in November.

Credit union fails

State regulators shut down Cumorah Credit Union on Oct. 23, handing it over to Illinois-based Credit Union 1.

Credit Union 1 has 80,000 members, primarily in Illinois and Indiana.

Click to enlarge photo

A view of the Cumorah Credit Union branch on Paseo Verde Parkway in Henderson, one of four local Cumorah branches affected by Credit Union 1's takeover.

Cumorah will keep its name, operating as a division of Credit Union 1.

Cumorah requested the state’s financial institutions division to declare it insolvent, according to the state’s order taking over Cumorah.

Regulators found that Cumorah had “poor asset quality, poor liquidity, inadequate earnings, (was) critically undercapitalized, and (had) excessive loan risk.”

“Long term, this is the best case scenario for Cumorah,” Vice President Steele Hendrix said. “Credit Union 1 can provide the financial support to help us ride out this tough economy.”

Earlier this year, Las Vegas-based Community One Federal Credit Union was shut down and sold to America First Credit Union.

WaMu is now Chase

Chase is nearing the end of its rebranding of former Washington Mutual branches it acquired when WaMu failed in September 2008. The signs have been replaced, the buildings retrofitted with the Chase style and the computer system will be connected to the national network by Nov. 2.

Operations in Nevada, California, Arizona and Colorado were the last that Chase rebranded.

First Republic to be sold

Bank of America announced it will be selling First Republic Bank, which it acquired earlier this year, to investors led by First Republic’s management team. The investors include funds managed by Colony Capital and General Atlantic.

Colony Capital acquired a majority stake in Station Casinos when it went private.

First Republic has one branch in Las Vegas.

Nicole Lucht covers health care, workplace, energy and banking issues for In Business Las Vegas and its sister publication, the Las Vegas Sun. She can be reached at 259-8832 or at [email protected].

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