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Wednesday, Feb. 4, 2009 | 2 a.m.
Sun Archives
- Owner of two Nevada banks reports $148.3 million loss (1-30-2009)
- Nevada State Bank’s parent company reports $498.1 million loss (1-26-2009)
- Nevada State Bank to open four valley branches (1-23-2009)
- Carping about TARP (1-23-2009)
Last month, Nevada State Bank launched a marketing campaign to publicize its “renewed commitment to lending.”
“Your business needs a bank loan. We happen to be loaning,” the print ads stated. “A new economy starts now. And we’re ready to do our part.”
However, Nevada State Bank and other recipients of federal funding from the Treasury Department’s Troubled Assets Relief Program, or TARP, aren’t loaning enough to satisfy some critics who say financial institutions that benefitted from the taxpayer-funded program should be doing more to revive the economy.
These critics would like to see financial institutions that received the funds loosen their lending standards to aid local businesses.
But the banks’ executives say that amid declining demand for high-quality loans, if they were to lend more they could wind up making the same kinds of bad loans that contributed to the economic troubles in the first place.
Nevada State Bank — one of two Las Vegas community banks serving local businesses to have received TARP funds — saw its lending grow $20 million last quarter over the one before. Most of the loans came during the period before the bank received a $260 million cash infusion from TARP, part of the $1.4 billion the federal government paid to its parent company, Zions Bancorporation.
A Wall Street Journal study recently found that loans at 10 of the biggest TARP beneficiaries declined $46 billion, or 1.4 percent, from the third quarter to the fourth, when the funding was distributed.
Nevada State Bank’s lending practices have not changed, Chief Financial Officer Terry Shirey said. The bank was in a strong position to make loans before it received the new capital, he said.
A decrease in creditworthy borrowers has made lending more difficult, Shirvey said, and it would be unwise for the bank to lower its lending standards and risk creating more bad assets.
Las Vegas-based Western Alliance Bancorporation is in a similar position. It received $140 million from the federal government, of which $50 million went to Bank of Nevada in Las Vegas and $20 million went to a Reno-based bank.
In October, Western Alliance Chief Executive Robert Sarver told investors that the company had benefitted from being “one of the few banks in our markets that can make a loan.” It had just raised $50 million from investors at a time when raising money was difficult.
The bank planned to use the TARP funding to make “good-quality loans” and to hire bankers from other companies who have preexisting relationships with clients in order to boost deposits, Sarver said.
The bank had seen a steady stream of new wealthy clients request loans, Sarver said. “We’re getting calls from people that two, three, four years ago, we just couldn’t even get in to see or talk about doing business, let alone them coming to us and wanting to sign personally on credit,” Sarver said.
For the last few months of 2008, Western Alliance’s lending was up $149 million from the previous quarter. In Las Vegas during that period, Bank of Nevada’s lending rose $29 million.
But some local business leaders say they aren’t seeing that money. The local banks that have received government funding should be more lenient in their lending, rather than target the same good bets they were after before they received the taxpayer dollars, they say.
Dennis Smith, chief executive of Home Builders Research, said numerous home and apartment builders have halted construction because of financing problems with both regional and national banks.
“Instead of just doing business and looking at the bottom line, they should look at what’s going on in the economy and come up with some sort of adjustments,” Smith said.
Homebuilding has been one of the hardest hit segments of the economy amid widespread foreclosures that have created a glut of cheap homes. New home sales in Las Vegas were down 47 percent last year, and the 10,464 homes sold was the lowest number since 1988. Of the homes sold, 65 percent were bank-owned.
Smith predicts that picture will grow gloomier this year.
Despite the dismal numbers, homebuilders say banks should work with builders to finish the projects rather than pull out.
“They create so much distress instead of trying to work out something,” said Tom McCormick, president of Las Vegas-based homebuilder Astoria Homes. McCormick announced this week that the company would go on “hiatus” because of problems with financing.
Yet some analysts say the view that banks should be more flexible is shortsighted.
“We shouldn’t be forcing banks to make bad loans,” said Bert Ely, an independent bank analyst. “Many banks are just finding that there isn’t much in the way of good loan prospects out there as the economy shrinks and as the better borrowers are trying to de-leverage.”
The assumption that capital infusions from the government would necessarily lead to increased lending during a recession was based on faulty logic, Ely said.
“TARP was there to basically strengthen the capital foundation of the better-managed, stronger banks so that they could ride through this fiasco,” he said.
Been a long time Wells business customer. They refused to increase our company $10K credit line one single Penney. We asked for $25K. This would have represented less than .5% of our annual net! It made cash flow management for the last six months a nightmare. Nearly bankrupted the business and me!
Since we have now made it through and are recovering without Wells help, we will let them know how much we appreciate them being there when we needed them. We'll call NSB this morning. Perhaps they understand the difference between "help us manage our cash flow" and "give us a loan so we can forestall our inevitable bankruptcy".
"Bailout was never going to work, other critics say"
johnevegas, didn't you know Wells wasn't making loans because they needed the money to pay for their Junkets to reward themselves for scamming the american people out of our tax dollars.
a refusal to increase your credit line by 15k almost bankrupted you???? if that's the case then Wells made the correct decision not loaning to you!! especially if you're claiming a 500k net cash flow.
Get 15 of your co-workers to head down to dollar loan center and each get $1000 loans, they don't require credit checks or bank statements...
what jokes. A business with a 2million dollar net does not nearly bankrupt over 15 thousand in desired credit. Banks can't make loans because qualified borrowers can't be found. The regulators have not lowered any regulations on the banks. If they make a 100,000 loan and the regulators think it might go bad they may mark it down to 75,000 in current value and the bank must immediately book a 25 thousand dollar loss on the loan even if it does get paid back.
Home equity loans were the source of peoples money and they can't be made because the equity is gone with the lower values.
Do we really want banks making bad loans now to recreate the same problem again?
If the banks would re-define their lending standards they could start lending more - but, that will take courage and a willingness to share in the risk - which banks don't want to do!
At the consumer level, how many banks are willing to make V.A. ensured loans to Veterans - darn few! It's outrageous that you have to have a credit score of 720 (out of 800) points to even get a banker to sit down and talk with you about getting a home loan!
This is why people's credit scores should be adjusted back to the highest point before they got ripped off - by bankers! If the banks would disregard the credit points lost due to mortgage scams, rip-off car loans and medical bills and be willing to loan to people who do pay their bills on time we can turn this recession around!
But that will take courage and confidence and a return to basic compassion for the victims of a capitalistic system that became corrupt and an orgy of greed! It is so sad that an honorably discharged veteran can not get a V.A. home loan in Vegas! The very people that protected every business' freedom can't get a fair shake at their bank!
anthemccresident - Do you work for Wells? You don't seem to know the difference either.
If you can't cover dips in cash flow, you can't pay bills. We experienced a major dip in cash flow, but a minor drop in business. With no ability to pay bills temporarily, there is no future business to be had.
By the way, never open a business. You wont make it.
"what jokes. A business with a 2million dollar net does not nearly bankrupt over 15 thousand in desired credit."
Another non-business owner speaking from complete ignorance. This explains your other posts as well. Armchair quarterback. Zero experience, all advice.
"Get 15 of your co-workers to head down to dollar loan center..."
Funny. Don't have 15 coworkers. But funny nonetheless.
As I said, we no longer need the money. We made it without help. Business is booming now. Wells can take a hike! So can the rabid dog non-business owners on this website. So easy to judge when you haven't a clue. Our success is the ultimate feedback anyway. Don't care about rabid doggies.