Businessman out $2 million in Silver State takeover

An electrical contractor who said he is too embarrassed to have his name published gambled with $2 million and lost.

He didn’t put all his roulette chips on black 3. Rather, he left $2 million in uninsured deposits with Silver State Bank and lost it this month when regulators shut down the bank headquartered in Henderson.

Here’s his story.

The business owner, who employs 100 workers, moved some of his money out of Silver State because his deposits exceeded the $100,000 maximum for deposit insurance under the Federal Deposit Insurance Corp.

Yet he said he wanted to help the local economy by keeping deposits in a community bank. So he entrusted some of his uninsured deposits to Silver State.

On Sept. 5, a source that he believed to be credible said that the FDIC might be taking over the $2 billion-asset Silver State Bank. He rushed down to a Silver State branch and withdrew $2 million in three cashier’s checks, which a bank employee told him would protect him in the case of federal seizure.

The employee was wrong. The following week, the FDIC rejected the cashier’s checks, because the $2 million in deposits exceeded FDIC deposit insurance limits.

“That hurts a lot,” the businessman said. “Fortunately, my company is not going under.”

FDIC spokesman David Barr said: “It’s unfortunate, but he thought he found a way to circumvent deposit insurance rules, and he did not.”

The businessman noted that Mutual of Omaha Bank took all of the deposits — even those exceeding FDIC insurance maximums — when the insurance company took over operations of failed First National Bank of Nevada this summer.

Regulators say that was unusual because uninsured depositors typically lose some of their money when a bank is closed.

The business man lost his money because cashier’s checks are like deposits, Barr said. If a business has $300,000 in cashier checks from a failed bank, the FDIC will pay only the $100,000 insured portion of the total. If the business had an outstanding loan in the same name as the deposits, Barr said, the business might have been able to use the uninsured deposits to offset and reduce some of the money owed the failed bank.

Bank customers typically recover some of their uninsured deposits. Barr said he has seen bank customers get back anywhere from 40 percent to 100 percent of their uninsured deposits after the bank liquidation is complete. On average, it has been 72 percent.

The FDIC estimates that $30 million of the deposits at Silver State were uninsured.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.