Lending on the rise in Las Vegas Valley
Financial institutions are showing more interest in helping small business owners, investors get loans
After several tight-fisted years, banks are starting to lend more money in the Las Vegas Valley, helping business owners expand and consumers refinance auto and mortgage debt.
But don’t think the easy credit culture of the boom years is back.
Banks aren’t opening their vaults to everyone, and terms still can be steep. Lending volume is inching higher after plunging fast during the recession, but no one expects money to slosh around the valley again anytime soon.
Still, finance executives and small business owners say there are signs of improvement.
Nevada State Bank, for instance, had about $2 billion in loans on its books as of Dec. 31, down 4 percent from a year earlier. Despite the dip, the bank grew several areas of its portfolio and had fewer late borrowers, Chief Financial Officer Terry Shirey said.
Consumer lending rose by $43 million, or 6 percent, last year. The bank also issued $57 million in new small-business loans, up about 9 percent from 2011.
Shirey expects lending to rise this year, though not close to pre-recession levels. At the end of 2006, the bank had almost $3.2 billion in loans on its books — 37 percent more than in 2012. “We are seeing select opportunities out there,” Shirey said.
The much smaller Meadows Bank grew its loan portfolio last year by 34 percent to about $236 million. Meadows was founded in 2008 and like many young banks has worked hard to expand, growing its loan portfolio every year since its inception.
Late last year, for instance, it wrote a larger-than-usual $7.1 million loan to help Southern California’s LBG Realty Advisors buy a Home Depot building in Henderson for $13.5 million.
Nevertheless, the bank would be expanding faster had it opened before the recession, CEO Arvind Menon said.
Menon isn’t expecting a big change in loan demand this year. The economy still is struggling, he said, and larger banks can offer lower rates to win clients.
Also, many small-business owners — his main client base — are trying to avoid taking on additional debt because they still are concerned about their companies’ future.
Brad Beal has seen it, as well. The president and CEO of One Nevada Credit Union said loan demand is still a little soft because many people continue to avoid major purchases, such as cars and houses.
One Nevada’s loan portfolio soared with the boom and dropped with the bust. Loan volume rose annually from 2002 to 2007, climbing from $394 million to $548 million. But it fell every year since, sliding to $357 million by the end of 2012, according to National Credit Union Administration data.
Its loan delinquency rate also returned to pre-recession levels, partly because the economy is improving but also because the credit union has fewer borrowers. Those who remain are more reliable borrowers.
“We’ve worked through that segment of the portfolio of a lot of our folks who were struggling,” Beal said.
Nationally, lending is picking up, but at a small rate. Commercial banks had $7.27 trillion in loans on their books in December, up 4 percent from a year earlier, according to Federal Reserve data.
• • •
In Las Vegas, one area of lending that’s unlikely to recover anytime soon is the commercial construction sector.
Local office vacancy rates are the highest in the nation at 26 percent, and retail vacancy rates are tied with Cleveland for the fifth-highest at 16.4 percent. That makes it nearly impossible to persuade a bank to finance a new building. Borrowers often struggle to get tenants and face a high risk of default.
Even so, with the economy improving nationally, financial institutions are showing more interest in helping investors buy commercial properties on the cheap. The valley saw several bulk purchases over the past few months, including a $120-million deal in September in which Hines Interests and Oaktree Capital Management bought 32 office buildings in Summerlin.
Lenders are showing an increased appetite for such deals, and they’re OK with accepting smaller down payments, said Kyle Nagy, a director with CommCap Advisors, a Henderson commercial mortgage brokerage firm.
“They’re willing to take more risk,” he said.
• • •
A number of local businesses have benefited from the uptick.
When Chris Connors and his wife, Stacy, wanted to open a restaurant during the downturn, almost no one would lend to them despite their strong credit.
“The banks would just basically laugh and say, ‘We don’t have anything,’” Chris Connors recalled.
Wary of having too much debt, the couple eventually took out a $30,000 equipment loan despite being offered $50,000. They spent their life savings on Rachel’s Kitchen, which opened in 2010 at the District at Green Valley Ranch.
The Connors are franchisees and own only that location. There are two other Rachel’s Kitchens locally, and another is scheduled to open soon in the Ogden residential tower downtown.
Business has been strong at the Connors’ restaurant, and they recently expanded. They took 950 square feet of space from an empty storefront next door and tripled their seating capacity.
To pay for the $150,000 project, they drew from a credit line they obtained last year from JPMorgan Chase Bank.
A few months ago, the Connors started receiving phone calls from national lenders pitching their products. Chris Connors attributes the calls to the fact that his restaurant has now been in business for a few years, past the point that many restaurants go belly-up.
• • •
In lieu of traditional bank loans, many small Las Vegas companies have obtained government-backed Small Business Administration loans to help finance their daily operations, buy equipment or pay for building expansions.
Lenders issued $175 million in SBA loans statewide last year. That compares with $167 million a year earlier and $103 million the year before that.
By comparison, there were $277 million in SBA loans in 2007.
Henderson Hyundai owner Frank Maione started thinking a year ago about expanding his car dealership. He was told to not bother seeking a traditional bank loan unless he could pay 50 percent down for a short-term loan.
Instead, he got a $2 million SBA loan in December, which allowed him to buy a 3-acre property next door to his existing lot at 460 N. Boulder Highway. He is using that land for employee parking and inventory and eventually wants to build another dealership there.
Maione’s sales volume has tripled since the depths of the recession. In 2009, he typically sold fewer than 100 cars a month. Now, he sells an average of 300 in a good month and expects to hit 400 a month this year.
Four years ago, financing an expansion was not a consideration – or a possibility.
“Never crossed my mind,” he said.