Atlanta bank failure to have big impact

(CNNMoney.com) -- When regulators announced last Friday they had seized control of the relatively unknown Silverton Bank, its collapse struck many as just another minor casualty in the ongoing economic crisis.

But the demise of the Atlanta-based bank could have broad implications for the entire industry, given Silverton's unique role as a so-called "bankers' bank".

Unlike the 31 other banks that have failed so far this year, Silverton did not take deposits from, or make loans to consumers. Instead, its primary purpose was to offer a variety of services such as check clearing and credit card operations to community banks around the country that find it too costly to do this on their own.

Silverton also often acted as the lead banker on some syndicated commercial real estate loans, a business that helped contribute to its failure.

All told, Silverton serviced approximately 1,400 community banks in 44 states, according to the Federal Deposit Insurance Corporation, making it one of the largest of the 20 or so "bankers' banks" in the country.

But even as regulators attempt to smooth the transition for Silverton's clients, many community banks will suffer as a result of its collapse.

Arguably among the hardest hit will be the hundreds of community banks that were shareholders in Silverton's holding company. Their stakes have been completely wiped out as a result of the failure. Most bankers' banks are cooperatively owned by their community bank customers.

The total dollar impact may be tough to discern at this point, but some individual banks are already warning that they are on the hook for millions as a result.

Nashville-based Pinnacle Financial Partners (PNFP), for example, revealed last week that it would write off $21.55 million in its second-quarter results as a result of the Silverton failure.

Banks that participated on some of the troubled commercial real estate loans that Silverton helped generate may also find themselves at risk, notes Chris Cole, a vice-president and senior regulatory counsel for the Independent Community Bankers of America.

In addition, the institutions that relied on Silverton on a daily basis for services now have to deal with the disruption of finding a new provider.

"There will be some pain," said Cole.

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