Friday, Oct. 16, 2009 | 3 a.m.
Dallas Haun has led Nevada State Bank for the past two years, during one of the most difficult times for the banking industry. As the bank’s president and CEO, his company has successfully acquired two failed banks and managed the shutdown of a third.
Haun has elected not to be the face of the bank in advertising campaigns like his predecessor, Bill Martin, instead pitching the bank with a symbolic blue open door — meaning the bank is lending to those who qualify.
Haun spoke with In Business Las Vegas about small-business banking, selling foreclosed properties and the changing banking industry.
IBLV: Tell us about Nevada State Bank.
Haun: The company is 50 years old this year. We’re the oldest and largest state-chartered bank in Nevada — 59 offices throughout the state. Our business is equally divided among investors, real estate investors, small-business owners and consumers.
Our approach the last couple of years has been to reorganize the bank into five lines of business: retail banking, small-business banking, corporate banking, real estate and private banking. I think the demographics, the company, the client base fit well into those five. Now, our focus is on excelling at those five things, and I think the technology changes (and) the people who we’ve recruited, fit nicely into those five brackets, which we think cover the spectrum of the needs of Nevada.
What is your background?
I started in 1975 at — when I was there it was Detroit Bank & Trust, it’s now CoMerica — I was there a couple of years, then I went to Long Beach, Calif., and went to work for a startup small-business bank — Harbor Bank of Long Beach — stayed there for 20 years, was the president and chief operating officer, and then in 1997, we sold to City National Bank. Then I went to City National Bank and stayed there until 2007, when I joined Nevada State Bank.
At City National, we were headquartered in Beverly Hills, and I managed the private banking and the commercial banking operations there for California. I oversaw our international group, leasing, asset-based savings and our sales division.
I joined Nevada State Bank in September 2007 — two years ago.
You mentioned you were with City National Bank before taking over here. How do those two banks differ?
City National is more of a private business bank. City National did not have the retail consumer component that Nevada State Bank has — different niches, different approaches to the industry. Nevada State, with our branches and the number of clients, the average deposit per client — it’s just different from what City National does. It is more of a pure private bank and a business bank. And the retail consumer component here is a big part of this company.
What are the challenges small businesses are facing as they pertain to banking?
I think the ability to find a bank that understands their business and a bank that understands their credit needs. The last five years have shown us that, clearly, too much credit is a bad thing. Finding a bank that understands the appropriate credit product to fit your business, to help your business grow, funding a loan or putting together a credit structure that you know two years from now that client is going to have trouble with is sort of what we’re dealing with today. Small-business people need to be vigilant in interviewing and talking to a variety of bankers to make sure that they have aligned themselves with someone who understands their business.
Then you hear so much in the press about the contractual credit and do they have access to credit. They do at our company. We funded over $100 million to small-business owners in the first half of this year, but our declinations are up. Our applications are up, but our turndowns are up (too), due to the stress of the small-business men and the small businesses that they run. The access to credit is another thing that we read about in the papers, and in many instances it’s real, but I think they need to take the time to find the bank that fits their needs. I tell our prospective clients the same thing: Funding this loan today is not what you should be focused on. You should be focused on “Is this a relationship and a company that understands where I want to be five years from now?”
One thing that small-business men want to try to fight is jumping banks. You find a small-business man who maybe has been to three or four different banks over the last six or seven years, and that doesn’t help him, and, frankly, it doesn’t help the companies either.
How has Nevada State Bank changed the way it handles business accounts during this recession?
I think trying to get closer to our clients, trying to help them deal with the stress they’re dealing with and they can only do that if there’s more communication. When the economy is growing as quickly as the economy did for so many years, all business is focused on dealing with the new business and sometimes is not spending as much time with clients, the older clients, as it might have. What’s happened in the last 12 months, 18 months, 20 months, in Nevada, has allowed all businesses, not just banking, to spend more time and value the core clients.
I saw this mentioned on the bank’s Web site: What is executive banking?
Executive banking is the high end of our retail banking group. They would handle the clients and the professionals whose needs are above the basic needs and touch required of the retail bank, yet they don’t have the requirements of our private banking group. It’s a big part of our retail bank, and it’s something that Kelly Brockman, who manages it, has done a real nice job with.
What is Nevada State’s economic outlook for Las Vegas?
I think it’s going to take us another four to six quarters to work through the current situation that we are in. I think that it’s going to take our economy in Nevada to diversify. If you look at how we’ve diversified away from gaming, tourism, over the last 10 years, I think with where the gaming and tourism industry is today, vis-a-vis, how it’s affected by the national economy, we need to spend time — Somer Hollingsworth, all the good work he does, and the mayors of all the cities recruiting businesses into Nevada, because it’s such a great state to do business in, what with the taxes, the permitting, the fees, access to decision-makers, and they come from California. Now that is a great place to do business. As we digest the overexpansion in commercial, residential and industrial, and the gaming industry right-sizes itself with fees and other triggers that they found very creatively, traditionally, to attract visitors, we also need to focus on diversifying the economy so when this current right-sizing of some of the real estate values, after that’s transpired, then we have more pistons in the engine to drive our economy.
I understand the bank is selling some of its foreclosed properties. What is the strategy there?
Well, I think trying to not hurt the market, because you’re going to have more and more banks, you’re going to have the (Federal Deposit Insurance Corp.) portfolios that have been packaged from the closures of Silver State (Bank), etc., that they are going to hurt the economy, they’re going to hurt prices as you draw more supply than demand. As demand drops, the price drops, which further exasperates the challenge we all have. That’s one thing that I’m very sensitive to — trying to protect, as best we can, the rest of the players in the market with predisposed properties.
Clearly beyond that, it’s our moral obligation to the shareholders and our balance sheet that we have to move these properties. We have Bob Walters, Chip Hinderlighter who run our special asset group, and they’re doing a terrific job. We deal with Rick Myers at Thomas & Mack, we’ve got relationships throughout the community that we’re using to try to, in an efficient way both for our company and the marketplace, move these properties.
What percentage of the foreclosures are residential, and what are commercial?
Fifty-two percent residential, 47 percent commercial.
How much property is the bank holding on to before it puts it on the market?
We have everything on the market.
I’ve heard that banks are holding on to some, not putting them on the market.
No. Everything’s listed.
Why? Why would you?
From what I understand, it’s to keep prices higher.
Yeah, that’s the timing, but you can do that by what you list the property at. No, we haven’t done that.
What kind of buyers is the bank getting, and are the offers fair, or are they low-balling you?
Some of them are. You get calls from hedge funds and different investor groups and they can be real low-ball offers. Some of the properties we’ve sold to local investors; some of the properties we’ve sold to our clients. You do get some low-ball offers. We’ve sold to out-of-town people, in-town people, investors and clients. Everyone you could imagine.
Are you entertaining offers at distressed prices?
It just depends on the project.
With the past year’s banking crisis, how has that changed the competition in the marketplace as it relates to banks?
Well, there are fewer competitors. There are some banks that have stronger balance sheets than others, that are going to be able to work through these economic times. There are some that don’t. There will probably be fewer banks going forward; I think that is a fairly general consensus in the nation and in this community. When you’ve got that, you have less competition in some ways.
Will it change the way your bank competes?
I don’t think so. What we try to execute are the needs of the clients and putting the clients in the right products with the right structure and that won’t change.
Recently the bank cut back its branch operating hours. What other operational changes are in store for the bank?
Just cutting back the hours?
Yes. We did an in-depth study of the hours and we tracked very closely the number of clients. In some of the branches where we are cutting the hours, in fact the hours that we are eliminating, the lobbies were all empty. We conducted that study over an extended period of time and clearly, if those offices had been busy, we wouldn’t have cut the hours back. But to have branch offices sit empty for an afternoon just didn’t make sense for anybody.
Are you finding more people are doing their banking online?
Definitely, and the ATM. We spend a lot of time trying to develop our online products and online access, the ease of it, and we do find the usage is growing steadily.
Nevada State Bank has been in the unusual position of acquiring two banks and also facilitating the shutdown of another. What’s Nevada State’s secret? Why is it doing so well when it comes to acquiring failed banks?
I think, first of all, the FDIC has to believe in your ability to execute. Our management team, we’ve done a good job of analyzing which of these companies would fit best with us.
Clearly Silver State, we were able to hire some of its people, we were able to keep three or four of its offices that filled in our franchise, the client base, the deposit base, it all fit nicely with ours. Then there were some other deals here that we didn’t bid on.
Then Great Basin (Bank) in Elko. The same thing. We didn’t have an office in Winnemucca or Fallon. We had been in Elko for 15 years. The acquisition of Great Basin allowed us to fill in part of the franchise. But most important, the clients of Great Basin fit our client base, fit our products, our delivery model. Why try and do something that doesn’t fit? So, we spent a lot of time analyzing what the clients are, who they are, what their business is, and can we keep them, can we service them, can we do a good job for them?
And then, most recently, was Community Bank (of Nevada). We got a call the day before it was closing to tell us it had not accepted any of the bids. It asked us to come in and manage the thing for 30 days and help it close down.
The people who we saw at Community (Bank) from the FDIC were the same people who we saw at Great Basin and the same people who we saw at Silver State. We know them, they know us. There is a real comfort level and we knew what needed to be done. To mobilize our troops and get 60, 70 people there within 24 hours was a real testimony to the people that work at this company.
I understand bank employees work over the weekend during the transition from taking over a bank. What is the process on the receiving bank’s end when the FDIC comes in and takes it over?
We’ll receive e-mails from the FDIC a week or two before a bank is going to be closed, along with a lot of other banks in this market and other markets. And you’re given the opportunity to analyze the financial statements and you have full access to them.
We have a methodology that we use that we think is very successful in analyzing what is there to potentially be purchased. But as I mentioned earlier, what is more important to me is the client base. So, we spend a lot of time internally with our own resources looking at who those clients are, will they fit our company, and can we service them in a professional way?
Then the next step is the bids are submitted. If you’re the winning bidder, along the parallel path there’s a very small group of people that know this because of the confidentiality. As soon as the bid is accepted, typically on a Tuesday or a Wednesday for a Friday close, then we mobilize our operations and our retail people. Rena Whitehead, our director of operations, has been the spearhead of all three of these transactions. Her people do a terrific job.
You think in terms of very basic stuff. Counting the cash, the ATMs, their Web site, their online product, their loan payments, and in the meetings before the closure with the FDIC, you start partnering up with the person you will have to manage through that process with. At every step of the way, we’re partnered with the FDIC on a soup-to-nuts, very basic stuff to then dealing with the employees (of the failed bank) which is the most painful part of this thing. You know, I’ve had to go in three times on a Friday night and talk to people. It’s heart-wrenching. It’s just very difficult for me to do.
I can imagine there is a lot of emotion.
It’s awful. It just is. There’s no way to describe it, really.
And then our focus is on the client. We start any type of advertising we’re going to do, working with you on a press release, and then, how we’re going to reopen on Monday morning and manage it. How many of our people we’re going to need in each branch to run the thing, how we’re going to communicate with all three. We’ve made thousands of phone calls with Silver State. I think we called their top 5,000 clients. We did the same thing with Great Basin and Community Bank.
We were on the phone for four or five straight days, making sure people understood what was happening with their debit card, what was happening with their credit card, where their checking account is, what they could continue to use, what the branch hours were, and then how they could transition their relationships to Nevada State Bank. We had welcome kits and an extensive mailer, a lot of on-site visits, and making sure that the branches were appropriately staffed, because as you can imagine, and you saw, down here with Silver State and some of the others, that first day (after the shutdown) the branches are pretty busy.
And in all those, I spent my own time the first four or five days just visiting the branches. I was very visible, handing out business cards and just talking with people. People are scared. They want to know what’s happened, and what’s happened to their money and their accounts. If there’s one thing that we’ve learned from this, it’s making sure you clearly communicate exactly everything that’s on their minds and you have someone there for them to talk to, and not let them get lost in an 800 number or a call center. I think that is the thing that I’m most proud of — that we dealt directly, either in person or over the phone, with everyone who had questions.
I will say the FDIC people do a really good job. We found them to be good partners in this process. They’re very knowledgeable, very compassionate. They’ve had some uninsured people that have lost money, and how they’re communicated with and what the process is for them to file a claim at some point when the assets are liquidated to potentially recover some of their deposit. The FDIC does a good job with this. The team that we’ve dealt with — it’s compassionate, it’s thorough.
It’s been a little over 30 days since Community Bank was shut down. Are the buildings completely empty? What’s happened since then?
To my knowledge, they are empty. I mean, there may be a few people in each one cleaning up some records or files. date Over the weekend, I drove around and looked at a couple of them just to see, and they were dark and they were empty.
How has the bank’s marketshare in Las Vegas evolved with the acquisitions?
It’s increased (laughs).
By how much?
I don’t know what the recent share is, because there’s been so much movement in this market. But our marketshare has increased, and it’s something that we take very seriously. And it’s something you need to earn, because if you gained it, you could lose it. And you lose it one client at a time, and our job is the responsibility to our clients. While we have fared reasonably, comparatively well, you can lose that. You lose it or earn it, one client at a time. That is something I take very seriously and everyone that works here does, too. Very much so.
Is there any other growth planned for the bank?
Not at this time. I think three semi-acquisitions within a 10-month period is enough at this point. We want to focus on our clients. As you and I talked about earlier, with the disposition of assets, we’re not without our own challenges, in dealing with the real estate portfolio. We are extremely well capitalized. You’ve seen our numbers. We’re extremely liquid. We’re selling over $900 million a night in fed funds. So, with strong capital and strong liquidity, we’re going to see ourselves through this. At this time, I think any further expansion might be ill-advised. It’s time for us to deal with our issues and take care of our clients. So many companies get into an expansion mode and you sort of forget what brought you there, and that is your clients, every one of them.
Is there anything else you would like to add?
There’s a lot of very, very talented people at this company, and I get letters from clients that had been here 30 years, 20 years, 10 years, a week, that are very complimentary. And we do get criticism. I get letters where people are unhappy for a variety of reasons, and that’s something that we react to very seriously — at all levels of the organization. Everyone, you can see the look on their face when a complaint comes in. We all take it very personally. That’s one of the hallmarks of this company, and that’s its client-centered focus. Not only with the products and the technology, but with the mind-set of the people.
I think the FDIC would not have called us on Community Bank had it not had a sense of the quality of the management team here. That’s something, in addition to the strong brand that has been created over 50 years. That’s something that I’m most proud of, and the association of the quality. There’s just so many good, good people who work hard every day, and take quality client service and client satisfaction. That’s really at the heart of this company.
(Added following the interview): First, regarding the number of new employees we have gained from the three FDIC transactions we have been involved with, we have a total of 150 new colleagues. The majority of these colleagues joined our retail network as we have five new branches from the Great Basin transaction in the northeast as well as five new branches from the Silver State transaction last fall. Although we did not gain any branches in our recent assistance with the FDIC at Community Bank of Nevada, we felt fortunate to be able to hire some of their colleagues for our open positions as well. Also, I’d like to credit Craig Kirkland, executive vice president and director of retail banking for leading his team and its efforts with the FDIC transactions.