Oct. 01--Banking regulators have eased their scrutiny of First Security Bank of Nevada after the lender, nearing collapse a few years ago, turned itself around.
The Federal Deposit Insurance Corp. disclosed Monday that it and the Nevada Financial Institutions Division terminated a consent order they issued in September 2010 against the Las Vegas bank, which had pushed heavily into real estate lending and suffered steep losses when the economy crashed.
Under the consent order, First Security was required, among other things, to maintain adequate capital levels, formulate plans to reduce its commercial real estate lending and get prior approval to pay dividends to shareholders.
Regulators did not say why the order was terminated, but First Security President and CEO John Sullivan said it was because the single-branch lender addressed its "significant weaknesses," including its soured loan portfolio.
In June 2010, a few months before the consent order was issued, 10 percent of First Security's loans were past due. As of this June, just 0.7 percent were late, according to FDIC data.
Moreover, in the year ending June 2010, the bank lost $3.2 million. In the year ending this June, it booked $435,000 in profit.
"We're very pleased," Sullivan said.
First Security was founded in January 2007 -- shortly before the economy collapsed -- and focused heavily on the booming real estate sector. By the end of 2007, 80 percent of its $42 million loan portfolio was tied up in property deals.
By spring 2011, after the real estate bubble had burst, First Security had about $16 million in delinquent loans and faced a strong possibility of getting shut down by regulators, Sullivan has said.
Sullivan was hired in May 2011 to turn things around. After initial fundraising efforts flopped, he recruited Las Vegas attorney and entrepreneur Jason Awad to inject needed capital. Awad, now the chairman and majority shareholder of First Security, led a group that invested $14 million cash in August 2011.
Since then, the bank has moved into the black and boosted its lending.
First Security had about $85 million in loans on its books as of June 30, up 24 percent from a year earlier, according to FDIC data.