The 18 Federal Deposit Insurance Corp.-insured banks based in Nevada have earned $877 million through the first six months of the year, a decline from $992 million posted in that period last year and $1.07 billion in 2013.
Although net income may be down, total assets for the first six months were up sharply to $143.8 billion, from $124.3 billion in 2014 and $129.4 billion in 2013. Nevada banks also continued to show deposit growth this year, with total deposits at $123.1 billion, which is up from $105.6 billion last year and $97.1 billion in 2013.
Employment in the banking industry has also shown modest year-over-year growth, now employing 3,236 people, up from 3,061 last year and 3,131 in 2013.
Nationally, the FDIC said commercial banks and savings institutions aggregate net income of $43 billion in the second quarter, up $2.9 billion, or 7.3 percent, from a year earlier and the highest quarterly income on record. The FDIC attributed the record earnings to a $3.6 billion rise in net operating revenue.
“Strong loan growth, diversified revenue streams and a continued improvement in asset quality were hallmarks of a very strong second quarter,” said James Chessen, chief economist with the American Bankers Association. “The tremendous across-the-board increase in lending was the single biggest driver of higher bank earnings.”
Chessen said banks in Nevada and nationwide are prepared for the Federal Reserve’s Federal Open Market Committee to raise interest rates. The FOMC gathers this week and faces its toughest policy call in years by deciding whether to raise interest rates for the first time since 2006.
“Banks continue to balance customer demand for long-term loans at low rates with the need to properly manage interest-rate risk,” Chessen said. “Institutions are actively engaged and continue to prepare for the return to a more normal rate environment.”
Cautions on pot business
With dispensaries opening their doors in Las Vegas, Sparks and Reno, the medical marijuana business is flourishing after a 15-year political battle to determine how the business will operate statewide.
The Nevada Bankers Association said it understands how it would seem easy to view medical marijuana dispensaries and growers as a legitimate small businesses with growth potential just like any other business.
“However, all banks, whether a national bank or state-charter bank, are subject to federal laws,” the Las Vegas-based trade group said in a statement issued to all of its members. “As it stands, possession or distribution of marijuana violates federal law, and banks that provide support for those activities face the risk of prosecution and assorted sanctions.”
The NBA said it appreciated the efforts of the state Legislature to create an entity type that would be able to provide needed banking services. An amendment to A.B. 480, signed by Gov. Brian Sandoval on June 10, allowed for the creation of new savings and loans institutions to serve the marijuana business.
The amendment, written into the mortgage lending bill, changes the rules so savings and loan companies wouldn’t have to access the Federal Deposit Insurance Corp. These financial institutions would be state-charted and privately insured.
According to the NBA, these institutions would still not be approved for access to the Federal Reserve for processing payments. “NBA also believes such an entity would also still face several federal statutory barriers, including the Controlled Substance Act … USA Patriot Act,” the statement said. “NBA does appreciate the recent efforts by the Department of Justice and FinCEN to provide guidance, yet that guidance itself contains strong reminders that marijuana is still illegal under federal law.”
So, NBA suggests the only way Nevada banks can eliminate the risk is to wait for Congress to legalize marijuana.
Talmer Bancorp offering
Talmer Bancorp Inc. has completed a secondary public offering by which funds affiliated with New York-based WL Ross & Co. LLC sold 9.7 million shares of Class A common stock in the bank.
Talmer purchased 5.077 million shares at $14.77 a share for an aggregate price of almost $75 million.
Wilbur L. Ross said the sale “is due to portfolio considerations.” In a statement, Ross said they were “proud to have recognized that Talmer would quickly create a major regional bank in the Midwest.”
That regional bank operates four branches in Las Vegas and Henderson under the Talmer West Bank name. Talmer Bancorp entered the Southern Nevada in October 2013 with the purchase of Bank of Las Vegas from Capital Bancorp Ltd., the community bank’s bankrupt parent company.
“We believe we are all well positioned to continue to capitalize upon growth opportunities in our markets,” said David Provost, Talmer president and CEO.
Provost expected the share repurchase would allow the company “to improve balance sheet efficiency and better leverage our strong capital position in the near term.” He noted that due to WL Ross & Co. LLC’s financial support during the recession, Talmer was able to grow from one branch with less than $100 million in assets in 2010 to more than $6.4 billion in assets as of June 30.
Talmer has branches and lending offices in Nevada, Michigan, Ohio, Illinois, Indiana and Maryland.