Q&A: Rudiger Merz

By Buck Wargo

Friday, Dec. 17, 2010 | 3 a.m.

Rudiger Merz faces a big challenge in this economy.

The 46-year-old German-born executive vice president of marketing and communications at Nevada State Bank must deal with a public that’s upset with the federal bank bailout and the inability to get the credit small-business owners need to operate.

Merz, who moved to the United States in 1993, was hired by the bank as a consultant in February 2008, but was immediately hired to handle the bank’s branding, marketing, promotions and sponsorships.

He also is responsible for online product development and marketing.

Merz is leading efforts of an industry that’s trying to reach out to people wanting to start a business and customers who are moving to online and mobile banking.

IBLV: How difficult is it to market a bank in this environment when the industry doesn’t have a good reputation right now?

Merz: The difficulty on the marketing side and what we see as a major trend in the marketplace is yes, there’s dissatisfaction. But it’s a great opportunity for us, and we’re well-positioned for it because consumers and businesses are looking at local banks and community banks. We’re the largest state-chartered and oldest state-chartered community bank. We will take advantage of that trend.

Your bank didn’t do a lot of home loans?

We did very little on the consumer-lending side in terms of subprime lending. We have very few issues with regard to consumer lending. Our main focus or past focus was on the business-to-business lending.

Why didn’t you do a lot of subprime?

We have always been a conservative bank, and we require certain equity from the consumer when they buy a house. When the whole subprime came up — that was not something that the bank focused on. We didn’t want to expose ourselves to that kind of risk.

What about what others did to the economy?

It had an impact on the market. However, we as a bank found it was important for us to stay close to our clients and prospects and help them through these difficult times. That has become more important as a marketer.

Once we get through these challenging times, they will be more successful, and we will be more successful. Staying with them and communicating with them, giving them updates with what’s going on with our bank and economically — that’s what we are focusing on with marketing.

What is your take on what’s happened in the city over the past two years?

If you take a rear-mirror view, we had great times in 2005, 2006 and 2007, and the party was going on longer than it should have been. Looking at it in hindsight, what’s important for us is that we learn from this.

Your business hit was on commercial real estate, right?

We’re working through these business loans, and we’re almost through the tail end of this. I think the banking team and our clients have done a great job of working through these challenging times. We’re definitely on the upswing and feel like we have turned the corner, and we’re seeing that it will be more positive in 2011.

Didn’t you move aggressively to deal with the problem?

What was important for us as a bank is we wanted to keep our clients in these properties. We had numerous workouts and we will continue working with our clients. Wherever there is a possibility or opportunity to work with them jointly and mutually through these challenging times, we will do everything in our power to keep them in the property and make it a win-win situation.

How have you dealt with it?

The way we address it is we have personal-relationship bankers, and they have a portfolio and they work with these clients closely. There’s ongoing communications to make sure each side is updated. If we have this communication, we know what’s happening and we can bring solutions to the table. That’s critical to have close relationships with our clients. That’s something we have focused on closely, and we continue to bring these type of personal relationship managers to bear.

Is a wave of commercial foreclosures coming?

If you look at the overall commercial industry, we’re still in the downtrend, especially if you look at some of the vacancy rates. We’re optimistic. We have seen a significant wave of foreclosures, but we see some trends that it’s slowing down on the commercial side. Have we hit rock bottom yet? We get monthly updates from our economists, and if you believe in these numbers, then that’s the downward trend and it’s slowing down. We take it as a positive sign.

What do you see going on for commercial real estate?

You have to be rather selective in the commercial market. There are segments that aren’t in A neighborhoods that will see distress, but there are positive signs. There’s some legislation in California where the whole warehousing and trucking industries need to revamp their trucks to meet diesel standards. It will cost $60,000 per truck. So what we are looking at Nevada being next to California — the trucking and warehouse industries are huge and they have to do something. Is there opportunity in the warehousing and logistics space to take advantage of that. Absolutely. Do trucking and warehousing companies have the monetary means to update each truck for $60,000? Most likely not because margins are very low. Is there an opportunity for Nevada warehousing logistic trucking companies to step and start using some of the Nevada warehouse space? You bet. That’s the opportunity we need to take on as a bank and work with our clients and the industry to move some of these jobs over here.

What are you doing?

I think we have to be more proactive. We have clients in the industry. This information is so new that we will work with our commercial businesses for outreach to the industry and trade associations, and also toward the real estate broker side to ask them what we can do to create a win-win situation for everyone.

What about the office side?

The office side will be a little bit tougher. We still have a lot of office space vacant. But, for example, we see in the medical segment that it’s growing and so is the educational segment. There are certain industries that have demand for more office space.

What can be done to diversify the economy?

Everyone is talking about it. And talking from a marketing perspective, I think there are opportunities in the green sector. There’s more green legislation coming up with more lending opportunities that are available for companies outside of Nevada to come in. There are opportunities to showcase the state. Nevada is ranked No. 3 in business and tax advantages, and we need to start playing up these advantages a little bit more. We have good story to tell and need to keep attracting more organizations to come to Nevada. We have more affordable housing, and we have a significant momentum around some industries such as the green initiative.

Our affiliate in Arizona launched a program almost two years ago where it works with the military to retrofit some of the insulation for solar panels. There’s been an entire program around that initiative, and we are looking at taking that program and bringing it to market in Nevada. There are tax incentives in Nevada to go with green initiative and some of the loans are underwritten by third-party grants. We are coming as the lender to support the capital within these parameters, and that’s the opportunity going forward.

What about businesses complaining about a lack of credit or loans from banks. Do you hear that a lot?

What we have been seeing in the industry is a deleveraging of debt. We see it on the consumer and business sides. What we have done to respond better to clients in need for loans is we instituted a second review process for business lending. It’s not a computer that runs through it. It’s a human being who looks through it. We are trying to get a lot of people to qualify for these business loans. In the event it does not happen, we are very clear to our clients and prospects as to the reasons and what they need to do to qualify for the loans. But we go one step further and stay in contact. We have webinars where we bring to the table some renowned industry experts to talk about cash flow and risk management and marketing and sales. We are working with organizations to further introduce our clients to them help through these challenging times.

Is it true you are being tough on giving out loans?

We never stopped lending. We always continued lending, and if you go back since 2009 when this started to open, we have extended more than $369 million in loans to consumers and business. We spent a lot on marketing activities and programs to advertise and create awareness that we are lending. We were just named the biggest (Small Business Administration) lender for 504 programs. As marketers with our sales colleagues, we spend a lot of time and effort communicating and getting these loans to our clients.

Are you lending as much today as you were in 2005 or 2006?

If you go back and look, a lot of lending was based on real estate, so that has tapered off significantly. When we look at commercial lending, we definitely want to hold the line and start increasing that. We as a bank we have our underwriting guidelines, and they have not changed over the years. We will take it very seriously. When the loan comes in, it’s being reviewed and if need be, it’s being renewed a second time and we will make the effort to get the business owner that loan.

What about real estate loans?

We don’t see a lot of real estate lending because there are no projects out there. The heyday of the Strip and surrounding properties to receive financing, that has fallen to the wayside. We do see growth in specific segments and specific commercial segments. Maybe a doctor wants to finance office building, or we are working with a salon owner who wants to own her building.

With your marketing efforts are you trying to ferret out entrepreneurs to start a business and create new customers?

It’s always has been our focus to grow our customer base. That has not changed. However, we feel strongly that we have provided value to our clients, and there are a lot of needs for entrepreneurs to tap into resources and help them grow the business instead of making their mistakes on their own. We as a bank, we are very focused on bringing these kind of resources to bear and we have launched a microsite called NevadaSmallBusiness.com where entrepreneurs can go. Our goal is to be the No. 1 destination site for Nevada entrepreneurs.

Has interest in your programs picked up in this economy?

We do see a trend out there in the marketplace, and what we have seen there are more entrepreneurs out there. They don’t currently have a job, and they want to try it on their own and with some limited resources build a new business. We see that emerging more so. Helping these businesses any way we can is paramount to us. If Nevada businesses do well, we will do well. We need to start to reach out to them earlier. We have to be perceived as a partner who earns a right to sit at the table virtually and be an adviser. We hope we are the people they will call on during times of expansion and times of difficulties and times when they want advice.

What is your advice to those starting a new business?

Be passionate about what you want to do and don’t learn necessarily by trial and error. Go out and reach out to organizations and start talking to entrepreneurs who have been in your shoes. A lot of the advice is there for free. Start moving forward and see if you can find one or two or three trusted advisers who you can use along the way who can help you stay focused.

How has your marketing changed with the economy?

Our marketing is evolving, but I will not say it is evolving because of the economy. We track the return on invested marketing dollars, so we want to know how much success have we staged with our marketing programs. You will see us continue to advertise on televisions, billboards and radio, but we started to engage more in direct marketing and e-mail marketing and now with social media. They are not as visible because we are laser-focused to specific targets. Our goal is to understand our clients and what products they need tomorrow. Having that relevant message at the right time and having that communication at the right time is critical.

Will we see lot of changes in the banking industry over the next five years?

There will be. If you look at some of the forecasts — the branch system nationwide is supposed to shrink significantly. Some of the banks are still going through difficult times. We have acquired two banks in the past, and we were asked by the (Federal Deposit Insurance Corp.) to unwind the operations of a community bank. We will look at this opportunistically and provide a safe haven.

What is happening with your presence in grocery stores?

We transitioned out of the grocery-store (branch) business almost two years ago, in January 2009. We have one grocery store (branch) left.

Why?

If you look at where the strategic direction of the bank and look at the grocery business itself, we wanted to have more control over the customer experience and create a full-service customer service. That’s what our brand is all about. We can influence it and stage it in our branch environment. The store concept is one of convenience, but it still has limited hours. And with mobile and online banking, it’s a concept that does not have a lot of future behind it.

Is that where we are heading?

We see more expansion for online banking and mobile banking. A major trend in banking is accessibility, and more consumer segments, especially the younger segment, wants mobile and online banking. The whole 24/7 concept of having accessibility at any given moment and any given time and any given location will become more pervasive.

Do you have problem dealing with Wells Fargo and Bank of America?

The big banks are formidable competitors considering their resources, but there’s a trend in the banking industry on the consumer side and business side to look out for community banks and look for these personal relationships. We are best positioned because we are the largest and oldest state-chartered bank. That is playing to our playbook, and we are mapping out plans and strategies for 2011 to take full advantage of that trend.

Why is the trend going that way?

If you go back to what drives dissatisfaction to the research we have done it is the wrong customer service and not being treated as a human being but more as a number instead of having that personal relationship. There are regulatory changes that will affect cards and checking accounts that further drive dissatisfaction. We have a reputation for customer service. Our clients are used to that customer service, and when they come in, we greet them by name. We have clients who have banked with us for three generations, and there are a lot of trusted relationships. Trust and accessibility these days is what consumers are looking for.

What will be impact of federal financial reform?

We don’t know what exactly because some of the reforms are being written as we speak. We know transactional fees for credit cards and the overdraft fees have been significantly impacted, so there will be less fee income due to these regulations.

Does that mean you will start charging for checking accounts?

We still have free checking and don’t have any plans to change that.

How will you make up for that lost revenue?

That’s where marketing and branding comes into play. What’s important to us is to develop more and deeper relationships with clients. We want be the No. 1 bank for our clients. We want to be partner so we don’t only have their core banking relationships, but there’s also online banking, investment services. We launched our private bank. We want to be that bank to our clients.

What are the expectations for the local economy?

Personally, I feel we will muddle along, but that doesn’t mean there aren’t a lot of opportunities. Microsoft was founded in a recession. IBM was founded in a recession and look where they are at today. There are always two sides to the coin. I can be part of that “it’s really bad and let’s put our head in the sand and wait it out, or go into the entrepreneur side and say here is tremendous opportunity.” It’s reading the signs of where money is being spent by the government and looking at what sectors are moving forward and what their needs and wants are. It’s all being rewritten as we speak.