Banking on the positive: For bankers, it’s forward, and fast, post-recession
December 3, 2017
Northern Nevada's current wave of economic growth has the region's bankers largely bullish as a new year approaches.
Feeding their outlook for continued growth in 2018 is a common theme: jobs and a diversified employment base with unemployment rates in the low single digits.
That, they say, separates the present run from the last time around. Unlike the runup to the Great Recession a decade ago fueled by the collapse of the housing market, the region's job base now is more solid and broad-based thanks to a more diversified economy.
And that, in turn, means more reliability and confidence when it comes to banks' decision to sign off on loans to small business and other enterprises looking to grow.
"Unemployment is low, new companies are coming in, balance sheets are looking stronger. I'm very optimistic," said Lori Haney, senior vice president and Northern Nevada market manager for City National Bank based in Carson City.
"Everything is showing positive nationally, which trickles down to the state and local levels. The challenge is meeting the needs in a robust economy," she said. "There's a lot of demand going on and the challenge is keeping up with that demand."
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Stan Wilmoth, president and CEO of Reno-based Heritage Bank of Nevada, echoed her sentiment on jobs.
"That's the one huge difference," he said of the current economy versus the mid-2000s when the region's housing market overheated as home mortgages were easier to get with less due diligence, resulting in Nevada's nation-leading home foreclosure rates. At its peak in 2011-2012, unemployment in Washoe County reached nearly 14 percent.
While Wilmoth expects a downturn at some point, current conditions are remarkable, he said, in their breadth of growth in the post-recession era.
"We've never seen a recovery like this," Wilmoth said. "We're radically successful now because our customers are so successful. We've had huge growth in deposits."
He, along with other business leaders, points to the business Goliaths that have come to Northern Nevada in recent years — Tesla, Switch and Apple among them — and the coattail effect they have on the broader business landscape, promising continued growth into 2018 and beyond.
"The aircraft carrier that is Tesla is here," Wilmoth said of the electric car maker's lithium-ion battery gigafactory at the Tahoe Reno Industrial Center east of Sparks, where thousands of people will eventually be employed as the company ramps up to full production.
"And the rest of the carrier group is coming," he added.
As they arrive, Wilmoth and others are ready.
Nevada State Bank opened a new branch last year in the fast-growing Wingfield Springs area of the Spanish Springs Valley north of central Sparks, which is home to many TRIC commuters as well as a growing business core of its own.
"We're very bullish there," said Terry Shirey, Nevada State Bank president and CEO based in Las Vegas. "We want to make sure we're serving the economy there."
He said as the economy grows, so does competition among banks. To that end, speed is of the essence, and Nevada State Bank has refined its small-business loan application process to where loans for up to $100,000 can be underwritten and signed — all the same day.
It's a simple matter of competition, he said.
"Across banking, competition is moving toward a faster experience," he said. "The underwriting focus now is more on cash flow to support debt payment. We're still very disciplined in that respect. Those clients in a good financial position have a lot of opportunities with banks now. The competition is pretty intense."
At City National Bank, Haney said technology and online banking — and the speed and convenience that come with it — are shrinking the industry's dependence on bricks-and-mortar storefronts.
But she said her bank's business loan underwriting process, including at City National's Reno, Carson City and Minden branches which she oversees, hasn't changed through recession and beyond.
"We have to keep telling folks that the criteria for commercial lending hasn't changed. Home mortgages is where we got into trouble," she said of the Great Recession. "We don't do those kinds of loans. There's no creative financing here. I can count on one hand how many losses we took on commercial loans.
"As long as we are lending to credit-worthy borrowers, we're OK."
Looking ahead to 2018, Haney sees growth opportunities for small businesses in real estate acquisition, ideally with existing buildings, as an alternative to leasing.
"We've been getting quite a few inquiries into buying," she said.
She also cited a "hot topic" among the manufacturing sectors is international markets and the potential there for expanding their sales opportunities.
"Companies are looking for more ways to diversify," she said.
At Nevada State Bank, Shirey said the lessons of the past have been learned as he looks into the coming year.
"I don't have concerns. Things really are good," he said. "There's always concerns around Northern Nevada's reliance on California. We're still very much impacted by them. But there are really good fundamentals now.
"We're not setting ourselves up for another 2009. From what I can see, growth pre-recession was speculative. I don't see it now. It's true growth now. That speaks to why this cycle is more sustainable. The base as a whole has more discipline."
But even in these go-go times, Wilmoth, for one, is keeping one eye on signs of concern. He's been a banker in Northern Nevada for nearly 44 years and has seen many ups and downs that have come to characterize the region's economy.
"We are concerned about running into another bubble," he said. "In '05 and '06, speculation ran the marketplace. We expected everything to keep going up. It didn't.
"I hope people remember that we were there helping people get through that tsunami that was 2009-2011."