Meadows Bank, the Las Vegas-based bank known for its celebrity board of directors, which includes Andre Agassi and Lorenzo Fertitta, continues to grow its loan balance as it considers moving into new markets.
Meadows Bank posted loan growth of $98 million in 2014 and ended the year with a loan balance of $376 million. The loan numbers are all the more remarkable given that Nevada’s economy continues to recover from the Great Recession.
“We have seen steady improvement, not extraordinary improvement,” Meadows Bank CEO Arvind Menon said.
Menon attributed Nevada’s steady improvement to growth in “lower (wage) jobs, not the high wage jobs” a diversified economy needs. On the other hand, he said discretionary spending does seem to be increasing as consumers seem more willing to spend.
Menon declined to discuss fourth-quarter and 2014 earnings because as of Monday the bank’s call report had not been filed with the Federal Deposit Insurance Corp.
Meadows Bank, formed in March 2008, has been profitable since 2010. Menon said opening new branches in Henderson and Reno over the past two years has boosted the business bank’s profitability.
“We are always looking at new markets,” Menon said. “We are not in Southern California or the Pacific Northwest.”
The bank has carved a niche for itself in the Nevada market by focusing on Small Business Administration 7(a) and 504 loans.
Menon’s latest move was to open a SBA business development office in Dallas. That loan production office joins a roster that includes Salt Lake City, Phoenix, Denver and Sacramento, Calif.
“Texas is a pretty vibrant market,” the veteran banker said.
But Reno presents the most opportunities at the moment as Tesla Motors Inc.’s $5 billion battery Gigafactory is taking shape, and more companies are moving into Northern Nevada.
Menon said an additional 10 to 15 companies will move into the Tesla facility as subcontractors.
“There is a lot of activity,” Menon said. “Reno has done a very good job of diversifying its economy.”
Menon said that diversity gives Meadows Bank more businesses to market to. He credited Stan Thomas, executive vice president marketing and competitive expansion, and other executives with the Economic Development Authority of Western Nevada with marketing the region to foreign and domestic companies.
Looking forward, Menon said the bank will never have branches on every corner, but could sustain a couple of more branches in Northern Nevada. He said Meadows Bank could open branches in Sparks and Carson City.
Menon said he is pleased with the progress of Meadows Bank’s Henderson branch, which opened in October 2012. But he does see a missed opportunity to open a branch in downtown Las Vegas. He said it was a great location that was a branch and was in move-in condition.
“We could have opened with very little cost,” Menon said. “What really got us was the FDIC, (which) didn’t approve our application. Now the space is gone.”
Menon said the bank is dealing with the effect of Dodd-Frank, the bill passed by Congress in response to the recession and signed into law by President Barack Obama in 2010. He said Meadows Bank has two full-time compliance employees to deal with new regulations. He described Dodd-Frank as “more of an expense that we have to have.”
He said the federal banking regulations have not really affected Meadows Bank as it has larger financial institutions. But he said his bank does have to deal with interchange fees, fees paid between banks for the acceptance of card-based transactions.
In recent years, interchange fees have become controversial, the subject of regulatory and antitrust investigations. Many large merchants such as Wal-Mart Stores can negotiate fee prices.
Menon expressed concern that if merchants can get a lower fee, the consumer incentive to use his bank’s credit cards may wane.
Other concerns include Europe’s stagnant economy, the Affordable Care Act, the Federal Reserve’s move to raise interest rates, and Republican Gov. Brian Sandoval’s tax proposal to raise more money for education in Nevada.
Menon said he wasn’t aware of all the details of the governor’s tax proposal, but was concerned about the effect increased business fees would have on businesses. He said banks are already paying a 2 percent payroll tax in Nevada.
“I haven’t seen the proposal or how the money will be spent,” Menon said. “But it will have an impact.”
EARNINGS SEASON
A question that lingers on conference calls as bankers release their 2014 earnings is, “Is there any change on the economy in Nevada or is it still sort of status quo here?”
Western Alliance Bancorp CEO Robert Sarver responded, “It’s getting better. That’s where, hopefully, we have some opportunity this year because our loan totals in Nevada have been shrinking for the last six years, including last year.”
Sarver told analysts, “Business is looking a little bit better there.”
Western Alliance, the parent of Bank of Nevada, reported net income of $40.4 million, or 46 cents per share, for the fourth quarter, compared with net income of $31.4 million, or 36 cents per share, a year earlier.
Net-income for 2014 was $148 million, or $1.67 per share, compared with $115 million, or $1.31 per share, for 2013. Both figures beat analyst expectations for $1.65 per share for the full year and 43 cents for the fourth quarter.
Bank of Nevada reported a gross loan balance of $1.67 billion at Dec. 31, a decrease of $11 million during the quarter, and a decrease of $86 million for 2014. Deposits were $3.23 billion at Dec. 31, an increase of $37 million during the quarter, and an increase of $308 million during 2014. Pretax income was $18.9 million and $74.3 million for the three and 12 months ended Dec. 31, respectively.
“I was just looking at some recent economic data,” Sarver said. “Unemployment rate dropped again. They actually had some of the highest price housing value increases … and we’re seeing more momentum there.
“Maybe this year turns the corner in terms of loan growth and we actually start growing our book of loans in Nevada and Reno’s got a little excitement going on there too. So that could have a meaningful addition for us.”
Meanwhile, East West Bancorp, parent of East West Bank, posted fourth-quarter net income of $93 million, or 65 cents per share, compared with $75.7 million, or 55 cents per share, a year earlier.
Net income for 2014 was $342.5 million, or $2.38 a share, compared with $295 million, or $2.10 per share, in 2013.
