LAS VEGAS-Less than a week after announcing he was resigning as CEO of Silver State Schools Credit Union, Dave Rhamy has returned to the job.
Rhamy's resignation was announced Dec. 18 and confirmed by the state's regulator, the Financial Institutions Division, with a statement issued at that time that Rhamy had departed in order to spend more time on his law firm, Rhamy & Coe, which provides estate planning and tax advice.
But on Christmas Eve, the credit union, the regulator and the provider of its deposit coverage, American Share Insurance, had come to a new agreement in which Rhamy would return to Silver State Schools, which has suffered ongoing losses in the midst of Nevada's plummeting real estate market. Rhamy has been CEO of SSSCU for the past 10 years.
Calls for comment by Credit Union Journal to the credit union and American Share Insurance were not returned over the holiday weekend.
Concerns over the financial condition of the $883-million Silver State Schools and the effect its failure would have on Dublin, Ohio-based ASI have been the subject of several media reports in recent months. The credit union is the second largest insured by ASI.
In November, ASI CEO Dennis 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."
We are strong and feel very comfortable in our capacity to cover potential losses, as do our regulatory authorities. At year-end 2008, our equity reserve ratio was 1.48%, and I think NCUA is reporting around 1.3% for their fund," Adams earlier told Credit Union Journal, noting that the reserve ratio has dipped to 1.42% after the failure of ASI-insured Comorah CU, which has seen been absorbed by Rantoul, Ill.-based Credit Union 1. "We have $50 million in equity and $8 million to $9 million in reserves. So that's $60 million in just pure reserves and has nothing to do with deposits our credit unions have given us, and nothing to do with our ability to go back to them and bill them for our losses."
ASI showed a consolidated balance sheet of $230 million at the end of September. It provides deposit insurance to credit unions in nine states. In addition to Silver State Schools CU, in Nevada it is the primary deposit insurer for Clark County Credit Union, Boulder Dam Credit Union and Plus Credit Union.
Through the first nine months of 2009 Silver State Schools reported losses of $36 million.
