Tapping the brakes

In the face of rising interest rates, bankers in northern Nevada expect a bit of a slowdown in 2006, but they don't see that hindering their continuing growth.

Their hopes rest on what they see are the strong economic fundamentals in the local market: unemployment continuing to be below 4 percent, small business thriving, tourism and visitors volume remaining stable, gaming revenues tending toward the positive and real estate adjusting in the right direction.

"Everybody's earnings are going along very well and I suspect that will continue," says Bill Uffelman, president and chief executive officer of Las Vegas-based Nevada Bankers Association."Nobody's predicting gloom and doom."

In fact, the sentiments among bankers are far from it.

As it ends the year with the tag of being the top lender to small businesses in northern Nevada,Wells Fargo Bank does not see 2006 as dramatically different from 2005.

"I see strong economic growth continuing in northern Nevada," says Chad Osorno, senior vice president ofWells Fargo."Our business customers are being cautious but are optimistically investing in their workforce, additional plants and machinery.

Generally speaking they appear to be very bullish, especially in the small business sector."

Community bankers are confident too.

They expect the local economy to remain strong and see a good year ahead.

It just may not be as strong as the last two or three years, says Grant Markham, chief executive officer of First Independent Bank of Nevada and the immediate past chairman of Nevada Banker's Association.

"We expect a slight decline in loan demand partially due to increasing interest rates," he says.

Rising interest rates affect different banks in different ways.

First Independent Bank does not have a mortgage lending division, but rising rates impact it from the standpoint of financing homebuilders.

"As demand for houses diminishes slightly, obviously they are going to build less and so the bank would expect a slight decline on the commercial loan side fewer loans in terms of construction loan volume,"Markham added.

"A bank that has a mortgage lending division will also see a decline on that side."

But Osorno feels that the long-term interest rates that drive the residential real estate market are still low when judged historically.

And that's one reason, he adds, that longpredicted residential slump has yet to develop.

Nevada State Bank also expects a steady growth, though it witnessed a decline in its share of deposits in northern Nevada as of June 30.

Nevada State Bank has thrived, although mid-sized banks sometimes are squeezed between the smaller community banks below it and the big banks such as Wells Fargo and Bank of America above it.

It has succeeded by remaining at the cutting edge of technological innovation.

It was one of the first banks in the region to introduce remote deposits, allowing a business owner to scan a check through a machine and deposit it electronically,without visiting the bank.

The bank has plans to launch another new product in early 2006, which its President and Chief Executive Officer Bill Martin says is targeted toward a particular group of professionals.

"This is a product that replaces an existing product and can save 10 percent to 15 percent of their total revenues in cost savings," he says, although he won't tell any more.

The big banks as well as smaller competitors have plans to open new branches across northern Nevada in 2006 to reach out to a larger customer base.