Commercial lending strong at Reno-area banks

A sure sign the economy in Reno-Sparks has more than turned the corner: Commercial lending for business expansion was strong throughout 2014 and is expected to remain robust in 2015.

Loan demand was up at many regional banks as small businesses capitalized on the wave of expansions and new marquee-name businesses locating operations in northern Nevada.

Denny Williams, northern Nevada regional president for Meadows Bank, says most regional banks are enjoying a spike in loan activity caused by new businesses moving into the region. And though commercial lending is a primary revenue generator for Meadows Bank, the bank is dipping its toes back into residential lending as the economy continues is upward march.

“We are seeing significant growth, and that will affect bank profitability,” Williams says. “Tesla and all the other business that are relocating here, they are having a big impact on housing and on retail — we are see lot of those big box buildings filling up, and we are very much involved in financing new construction for homes.”

Much of the loan activity at Meadows Bank in 2014 was helping owner-occupied businesses relocate into larger facilities, buy their own properties or fund working capital loans, Williams adds. The pipeline of new loans remains full heading into New Year.

“These businesses are starting to see positive impact, and they are asking for working capital to help finance their growth,” he says. “Loan activity for 2014 was definitely higher than 2013, and we are seeing the same trend for 2015.”

Loan activity through the Nevada offices of the Small Business Administration also was brisk in the past year, a strong indicator of future activity. The SBA backed 176 loans totaling $73 million for businesses located outside of Clark County. Sixty businesses requested funding to acquire real estate or to expand major assets, and 116 small businesses sought fresh capital to begin or expand operations.

Dennis Flannigan, president and chief executive officer of Great Basin Federal Credit Union, says the majority of lending activity in 2015 for credit union members will be for automobile loans. That sector of lending activity experienced a solid increase in 2014, Flannigan says, but lending volume still was down from pre-recession activity.

Great Basin Federal Credit Union had year-over-year increases in loan demand, member growth and profitability, Flannigan adds. Business lending also was on the rise, as members sought funding to get small entrepreneurial ventures off the ground.

“There a willingness from a lot of people to reach out and extend themselves in the business environment,” he says.

Stan Wilmoth, president and CEO of Heritage Bank, says activity at northern Nevada’s only locally headquartered bank was strong throughout the past year, a trend that shouldn’t slip much in 2015.

“As new businesses continue to look at northern Nevada, consumer confidence will continue to rise and increased spending will positively impact businesses across the board,” Wilmoth adds.

“This is a great time for Heritage Bank in northern Nevada,” he says. “With the prospects of the economy being so good it has improved the credit performance at the bank, enabling us to go out and do more deals during what we think will be a fairly robust recovery for northern Nevada.”

Banks will keep a sharp eye on net interest margin in 2015, adds Bob Francl, executive vice present and regional manager for First Independent Bank. The difference between what banks can charge on loans and the cost of funds most likely will mirroring interest rates and stay flat for the first half of the New Year, Francl says.

“With the heavy competition in our market, we don’t anticipate seeing an increase through most of next year on rates we can charge on loans,” he says.

The September announcement by Tesla to locate a massive battery factory at Tahoe Reno Industrial Center also has sparked a flurry of inquiries to bank officers at First Independent.

“If that is an indication of businesses crossing the finish line, we do expect demand to be up next year,” Francl says.