FDIC lauds Nevada health

Kevin Rademacher

Thursday, April 7, 2005 | 10:58 a.m.

The Federal Deposit Insurance Corp. on Wednesday cited Nevada as an example of economic vitality, a point federal regulators have made for many consecutive quarters.

At the same time, the FDIC also expressed concern about the concentration of real estate loans held by the state's banks, also a point that regulators have made for years.

Highlighting the corporation's concern was the upward trend in home prices and interest rates.

"Construction and development loan portfolios likely represent a more significant source of of vulnerability to home price trends," the FDIC's spring 2005 Nevada State Profile said.

In addition, the report said that the median construction and development loan-to-capital ratio was 131 percent, the second highest concentration in the FDIC's San Francisco Region, which also includes Hawaii, California, Alaska, Oregon, Washington, Arizona, Utah, Idaho, Montana and Wyoming.

"Any stifling in the real estate market could trickle over," said Judy Plock, the FDIC's acting San Francisco regional manager.

Still, Plock pointed out that despite the concentration of real estate loans Nevada banks are currently in good health.

"Those institutions have very low delinquency rates," she said.

The percentage of loans past due or in nonaccrual status fell from 0.79 percent in the fourth quarter of 2003 to 0.45 percent in the fourth quarter of 2004, the state profile said.

The percentage of net loan losses for Nevada's banks also fell to 0.02 percent in the fourth quarter from 0.19 percent a year ago, the profile said.

The report singled out Nevada's nation-leading, year-over-year job growth rate of 6.5 percent for the fourth quarter of 2004. "Strong growth is expected to continue through 2005," the report said.

Also leading the nation, the report said, was Las Vegas' fourth-quarter home price growth of 36.2 percent. That rate "was the highest in the nation among major metropolitan areas, but was modestly slower than third-quarter growth rates," the report said.

"Home prices were definitely strong last year, outpacing income growth," Plock said. "While we are not implying that every boom means a bust, rising interest rates have an affect on home construction."

Tom Mangione, president of Nevada Community Bancorp Ltd., said the real estate industry should continue in strong fashion given the strong performance of the key gaming and tourism industries.

"Probably the thing I watch the most is hotel rooms and rooms under construction," he said, pointing to the soon-to-be opened Wynn Las Vegas megaresort and several Strip expansions. Those rooms, Mangione said, will require new employees.

"That pretty much drives everything," he said, adding that while home prices are higher Las Vegas is still competitive with many national markets. "There's still a need for housing."

George Smith, president of Bank of America's Nevada operations, also said that while higher interest are a factor, the rates remain low from a historical perspective.

"The rates are still good rates," he said. "They are changing, but I'm not concerned right now."