Silver State is 11th failed bank this year

By John Poirier

WASHINGTON (Reuters) - Silver State Bank, which recently included Republican presidential candidate John McCain's son on its board, was closed by regulators on Friday, becoming the 11th bank to fail this year, as the struggling economy and falling home prices take their toll on financial institutions.

Andrew McCain, whom Senator John McCain adopted in a previous marriage, formerly served as a director of the Henderson, Nevada, bank, which was closed by Nevada state officials and taken over by the Federal Deposit Insurance Corp.

Andrew McCain sat on Silver State's board in February and served on the audit committee, bank regulatory filings show.

He resigned in July due to "personal reasons," the bank said. He previously served as a director of Choice Bank in Scottsdale, Arizona, from 2006 to April 2008 when Choice Bank merged with Silver State.

His involvement in the bank during the current credit and housing problems is a reminder of his father's alleged role in the massive savings and loans scandal decades ago.

In the late 1980s John McCain was one of five senators known as the "Keating Five." They were investigated by Congress over their alleged roles in the crisis, which resulted in a U.S. taxpayer bailout.

They were accused of aiding Charles Keating, who was the chairman of the failed California-based Lincoln Savings and Loan Association. McCain and another senator, John Glenn, were cleared in the Senate Ethics Committee investigation.

On Thursday John McCain accepted the Republican Party's presidential nomination. He and his running mate Alaska Gov. Sarah Palin are battling Democrat Barack Obama and his vice presidential running mate Joe Biden for the White House.

The FDIC said the Silver State -- a subsidiary of Silver State Bancorp -- had $2 billion in assets and $1.7 billion in deposits as of June 30. The failure is expected to cost the FDIC deposit insurance fund between $450 million and $550 million.

The bank was heavily exposed to illiquid and poor quality loans primarily in the commercial real estate business as well as development and construction loans in distressed markets in Nevada and Arizona.

There was no indication of any wrongdoing by Andrew McCain involving Silver State's failure.

Nevada State Bank, which is based in Las Vegas, has agreed to assume the insured deposits. The transaction did not include about $700 million in volatile, high-cost insured funds called brokered deposits.

Nevada State Bank is a subsidiary of Zions Bancorp.

The FDIC said it would pay the brokers directly for their deposits at Silver State, which was closed by Nevada state banking officials. Its branches will reopen as Nevada State Bank in Nevada and National Bank of Arizona in Arizona.

The FDIC estimated there was about $20 million in uninsured deposits.