How a bank's profits doubled

No single factor accounted for dramatic increase in profits at First Independent Capital of Nevada, the parent company of First Independent Bank, early this year.

Instead, the bank's president and chief executive says the confluence of four factors resulted in pre-tax earnings of $537,123 for the quarter ended March 31.

That's a 222 percent increase over the same period last year.

In part, the improved earnings simply reflect the bank's growth in deposits and loans, said Grant Markham.

Its assets mostly loans stood at $183.5 million on March 31.

That's a 44 percent increase from the $127.7 million in assets the bank reported a year earlier, and the figure is twice as high as the bank's founders projected when they opened in late 1999.

As the bank makes more loans, its income rises.

Deposit growth has more than kept pace with the growth in loans, Markham said.

A second factor in the strong earnings, Markham said, were the economies of scale the bank is beginning to achieve as it moves out of the start-up phase.

As the bank grows larger, its fixed costs take a smaller portion of its revenues.

The third factor in the strong earnings was close attention to expenses.

Markham said low interest rates don't allow banks much room to wriggle, and cost control becomes critical.

Low rates also mean the bank needs to keep a particularly close eye on its spread the difference between what it pays depositors and what it charges loan customers.

"It becomes more difficult with every rate decrease," Markham said.

The strong earnings come as First Independent Bank prepares to break ground on a new main branch and administrative facility on Kietzke Lane in south Reno.

Lisa Milke, executive vice president and chief financial officer of the bank, said construction is expected to begin by early summer.