Insurer, Regulator, Silver States To Meet On Turnaround Plan

December 28, 2009, 7:05 p.m. EST 2 Min Read

LAS VEGAS–American Share Insurance (ASI), the Nevada Financial Institutions Division, and Silver State Schools CU told Credit Union Journal they will work together this week to develop a plan to turn around the troubled credit union. Over the past week the credit union first announced its CEO, Dave Rhamy, had resigned to pursue his legal practice, and then within days abruptly announced Rhamy had returned to the job.

At least one source indicated to Credit Union Journal that media reports in Las Vegas of the credit unions’ financial condition and the CEO’s departure had led to signficiant withedralwals of deposits, but that report could not be substantiated at press time, and George Burns, Commissioner of Nevada’s Financial Institutions Department, said there have not been significant declines in deposits.

Through the first nine months of 2009, SSSCU reported losses of $36 million, much of it due to the crash of southern Nevada’s real estate market.

“We believe that Mr. Ramey coming back is a stabilizing influence in the minds of Silver State members,” said Burns, who said that his office, Dublin, Ohio-based ASI, and the credit union are devising a plan to get SSSCU back on track.

Calls to the credit union were not answered by press time.

SSSCU’s financial problems have made the credit union a focus for media attention, in particular over what the failure of the $883-million CU would mean to private deposit insurer ASI, which backstops Silver States and 154 other credit unions in nine states, including eight in Nevada that combine for $2.4 billion in assets.

ASI CEO Dennis Adams could not be reached for comment by press time. In November, Adams told Credit Union Journal that his company is adequately funded to address any losses at Silver State. Even with a worst-case scenario--the failure of Silver State Schools-Adams said it would not severely impact ASI. SSSCU represents about a $32-million exposure to the insurer, calculated Adams. "Over the history of ASI, our losses have run on average about 4% of the credit union's balance sheet."

The risk at Silver State is clear: $500 million of its $770 million loan portfolio is in real estate in a part of the country where two-thirds of mortgages are underwater. The CU has $15 million set aside in allowance for loan loss. "We know that is a weak point," Adams told Credit Union Journal. "But we feel that number will be higher soon and will be sufficient to cover the loss exposure on the delinquent and current loans." At that time Adams expressed confidence in the CU's leadership to turn the situation around.