Northern Nevada’s regional building, population boom means big business for banks
Special to the NNBV
This is the first in a four-part series of stories regarding various aspects of Finance in Northern Nevada, which is the NNBV's content area of focus for its June-July edition.
Read part two here: Northern Nevada’s entrepreneurial ecosystem primed to see unprecedented advances
Read part three here: Small business lending a fast-growing segment across Northern Nevada
Read part four here: Nevada banks, credit unions up ante on use of FinTech, mobile apps and more
This article has been updated from a previous version to accurately report that One Nevada Credit Union has roughly 80,000 credit union members. The original version incorrectly reported that number as 8,000. The NNBV apologizes for the error.
RENO, Nev. — February’s wicked winter weather stifled construction efforts across the region and led to some delays with builders advancing new projects, but with the sun shining, Northern Nevada construction companies — and their financial partners — are moving ahead at full steam.
Stan Wilmoth, president and chief executive officer of Heritage Bank, says the first quarter of 2019 was flat mostly because regional builders couldn’t bring projects out of the ground.
Those builders sold a lot of inventory in December and January and were able to pay back construction loans, Wilmoth says, but the massive and near constant snowstorms that blanketed the region throughout the month of February hampered further development efforts.
The outlook has been much rosier throughout the ensuing quarter, however.
“The second quarter is trending very well for us, and we expect it to be one of the best quarters in a while,” Wilmoth says. “We are seeing asset growth in both lending and investments, and deposits are up quite a bit from the end of the first quarter.”
Net new loans at Heritage Bank grew about 10 percent from 2017 to 18 while deposits shrunk about 1 percent during same period as a very large depositor left the bank, Wilmoth says.
California’s loss is Nevada’s gain
The regional building and population boom continues to favorably impact operations at Heritage and other Northern Nevada financial institutions. The thousands of new residents moving to the Truckee Meadows need to finance homes or new businesses, Wilmoth says, and all regional bankers really need to do is just put on a catcher’s mitt to snag the flow of business from people and companies moving in from California.
“With regulations as tight as they are in California, we will (continue to) see more companies moving here,” Wilmoth says. “Twenty years ago they couldn’t get employees to move with them, but now (people) look forward to moving to Nevada. Any time you see growth, we get a certain percentage of the market, whether it comes from new or existing businesses.”
Heritage also is capitalizing on its ability to rapidly make key financial decisions, Wilmoth adds. The bank is structured so that the majority of key employees are empowered to make financial decisions that affect customers.
“When a customer calls Heritage Bank they can talk to a decision-maker,” Wilmoth says. “With that in place, we get more than our fair share of the businesses that are moving in. We are nimble and not bogged down with loan committees. It’s all done right here, and that’s a real attribute when people want to move fast. It’s important to our customers.”
While these current heady days of Northern Nevada’s surging economy are far removed from the doldrums of the recession, Wilmoth says those years remain among the best in his career since Heritage was able to help many families struggling with debt.
The tide has since risen, however, and Northern Nevada bankers are reveling in the boom that’s leading to spikes in mortgage and commercial lending. Rick Thomas, Senior Vice President and Northern Nevada Executive for Nevada State Bank, says that regional banking trends are pretty much positive over the last few years.
“It’s a fun time,” Thomas says. “Our client base is performing well, and obviously we benefit from that. Loan growth and deposit growth are stable, and that’s a byproduct of the region and its positive job and business growth.”
Region’s recession recovery ‘remarkable’
Nevada State Bank’s year-over-year loan balances grew $175.1 million from $2.33 billion in the first quarter of 2018 to $2.51 billion in the first quarter of 2019. Since fourth quarter of 2018, loan balances are up $10 million. Additionally, Nevada State Bank’s deposit balances grew $99.3 million year-over-year from $4.27 billion in the first quarter of 2018 to $4.37 billion in the quarter 2019, says Laura Foster, NSB’s communications officer.
Still, despite the high tide, Thomas says Nevada State Bank remains selective about its business lending.
“We parallel their success,” he says. “Nobody knows when the (next) recession is coming, but even with the success we are having, both banks and businesses are more cautious than they used to be.
“Nevada State Bank … (is) well-positioned for a recession if it does occur, because growth is stable and controlled.”
Paul Parrish, president and chief executive officer of One Nevada Credit Union, says the regional economic recovery from the recession is nothing short of remarkable. Statewide unemployment is around 4 percent, and while that’s a few percentage points higher than the national rate, it’s far removed from the double-digit unemployment rates of the not-too-distant past.
“It you consider where we came from, it’s been quite a feat,” Parrish says. “Wage growth has been proven, and home prices have recovered from recession lows. Commercial real estate has been good, but it has been a little spotty in some areas.
“We still are seeing some retail properties struggling, and we are being picky on the commercial real estate side of what we are adding to the credit union’s asset mix.”
As interest rates dipped and home prices leveled, One Nevada generated much higher mortgage volume, Parrish notes. One Nevada is on pace to generate between $250 million in first mortgages this year if trends continue — a stunningly good number, Parrish says.
One Nevada’s portfolio of commercial loans is just under $100 million, while its total assets are just under $1 billion among roughly 80,000 credit union members, he adds.
“Economically speaking, the sun is still shining, and our members and the credit union continue to take advantage of this really hot economy,” Parrish says.
Rob Sabo is a Reno-based freelance writer and a former reporter for the Northern Nevada Business View.
Bryan Wachter of the Retail Association of Nevada said his organization is “very concerned about disruptions to the supply chain.”