From national banks on down to the smaller community banks and credit unions, financial institutions in Northern Nevada are vying for both the commercial and consumer business that continues to grow daily here.

Competition is heated, as banks especially want to get in on making business loans and establishing lines of credit with corporations in this burgeoning metropolitan area. The financial institutions primarily known as “business banks” are making auto and boat loans and opening free checking accounts, too, often as a “package” or as a personal account bonus for a business opening commercial loans or accounts. Here, we take a look at how some of the area institutions differentiate from one another and also examine how they advertise their products and position their brands in an increasingly competitive market.

The actual brick-and-mortar buildings that make up the branches of First Independent Bank of Nevada may be younger than those of most banks statewide, but what they lack in age, they make up for in the breadth of experience and expertise in their people, says president and chief executive officer Grant Markham. “We opened our doors in September 1999, and that was a very opportune time to open a community bank,” Markham recalls. “At that time, there were only five community banks in this area, all being sold and acquired by various entities. That left Heritage Bank and us, and we were the newest kid on the block.”

Since the other community banks were involved in the turmoil of acquisition then, the newly formed First Independent Bank of Nevada had a great opportunity to gather customers and employees from those institutions in transition.

“When we began, we decided to form a bank owned by Nevada people,” Markham says. “Our board is made up entirely of Nevada residents, and our staff members are all longtime local bankers who are truly interested in and care about the Northern Nevada communities we serve.”

In keeping with that edict of “keeping it local,” First Independent Bank of Nevada opened with $10 million in initial capital and was sold to 62 investors, 59 of whom are Nevadans and three others who are relatives of those Nevadans who live in other states, Markham says. “Of that group of 59 Nevadans, 48 are Northern Nevadans. Our first board of directors was made up of 14 Nevada residents, and our current board now consists of 11 of those original members.” Immediately after opening, the bank here in Reno for a long time. They have loyal customers and do business in such a way that we garner new business from word-of-mouth advertising and referrals from happy clients. We love this community, and we feel we have an obligation to give back.”

That philosophy is exemplified in First Independent Bank’s mission statement: “Your best experience every time.” Markham says he would describe the bank as welcoming, and bank visits should be “pleasant, friendly experiences and a joy for the customer.” Advertising campaigns for the bank feature employees, primarily the people who have been in the local financial industry for years, Markham says. “We like to put a face with our bank and let people know about our involvement and volunteerism in the community.”

Markham himself serves on several boards of local charities, and he and the bank recently were honored as the Juvenile Diabetes Research Foundation of Northern Nevada’s outstanding financial and volunteer supporters.

“I’d have to say that people make the difference for us, and we are extremely fortunate to have some of the employees that we have, including many folks with 20 or 30 years of experience,” Markham says. “It’s been a pleasure working with our people because they take a lot of pride in our organization. We think we are different and better and the feedback we get has been extremely gratifying.”

■ ■ ■ Nevada State Bank is the state’s oldest chartered bank, and despite its acquisition in 1985 by Zions Bancorporation, it has maintained its reputation as a staunch community-supportive financial institution and is operated as an autonomous subsidiary.

“We are growing our business organically within our current customer base,” says Kevin Sullivan, senior vice president and Northern Nevada corporate administrator for Nevada State Bank in Reno. “We are continually working to increase market share and increase deposits, but there are lots of banks in this market and we are all chasing the same business. So we look at growing through the addition of new branch locations, but we’re also very cautious and work to get the best bank branch for our money.” Nevada State Bank currently has no plans to acquire other banks but is always evaluating those opportunities as they arise, adds Sullivan, who has worked in the banking industry for more than 20 years and currently oversees all commercial loan activity.

Since its purchase by Salt Lake City-based Zions in 1985, Nevada State Bank acquired five Wells Fargo Bank branches statewide in 1997 and purchased Sun State Bank that same year. In 1999, Nevada State Bank merged with Pioneer Citizens Bank to create the third-largest bank in the state at that time. It now is the fourthlargest bank statewide.

The bank enjoys a rich history in Nevada. Chartered in 1959, its downtown office at One West Liberty St. in Reno was the sole location from 1959 until 1973. In 1974, the bank embarked on an aggressive managed to raise some additional capital and expansion plan by opening six freestanding branches within the growing Las Vegas market. The bank’s first supermarket branch — the first in the state of Nevada — was opened at Maryland Parkway and Sahara Avenue in May 1989. Telephone, Internet and PC banking were introduced in 1998, and like Wells Fargo Bank, NSB was one of the first to offer its clients the ability to bank 24 hours a day, seven days a week.

Nevada State Bank now has 72 branches (37 free-standing branches and 35 grocery store branches inside Smith’s Food & Drug Stores). Assets total more than $4 billion as of June 2006.

“The last new branch we opened was in Minden, but we will soon start construction of a new branch in Carson City,” Sullivan says. While the company isn’t currently working on any strategic alliances with other banks, it does partner with other institutions for large loans.

“If we have larger credits and we want to minimize risk, we will do out-participations with banks on credits,” Sullivan explains. “For example, we have some commercial loans in which Wells Fargo is the lead bank but we are a large holder of a piece of credit, which spreads the risk. In this case, the customer grew too large for us to do it all by ourselves. So we went to Wells, and they took over the lead portion, which they are better suited to do.”

Sullivan describes Nevada State Bank as both a commercial and consumer bank. From a commercial standpoint, he says, “There is no industry that we won’t try to be involved in.” Clients include health care providers, attorneys, contractors, developers, manufacturers, and gaming companies. Nevada State Bank differentiates itself from the larger, more centralized banks such as Bank of America or Wells Fargo by remaining decentralized and operating autonomously from its holding company, Zions Bancorporation.

“It’s been Zions’ way that they evaluate the banks they purchase and buy them without changing things, without decentralizing,” Sullivan says. “They allow us to operate autonomously because we were doing well when purchased. They told us, ‘We can help you grow, but we bought you because you were already successful.’ It’s refreshing to work with a corporation like that, because it allows us to make all the decisions here in Nevada.” Zions owns banks in California, Texas, Arizona and Utah, all with different names, different leadership and all making decisions locally. The “face” of Nevada State Bank is chairman and CEO William “Bill” E. Martin, who was previously CEO of Pioneer Citizens Bank of Nevada. Martin is the focal point of all NSB ads and helps position the brand as one consumers can trust, while describing the bank as a “respectful” institution.

“We believe that we have the best attributes of a big bank in our offering of products and services and the best attributes of smaller banks, including the more personalized service typically associated with a community bank,” Sullivan says. “We think we’re wellpositioned in that mid-point, and we’re working from that advantageous position to remain competitive in this marketplace.”

■ ■ ■ With 42 financial stores here in Reno, a growing deposit base and a 154-year-old brand, Wells Fargo possesses an enviable market position. More growth and a greater distribution network is exactly the path senior vice present Chad Osorno can foresee for the company’s near future.

“Wells Fargo has been a major player in the banking industry in Nevada since the early days in 1860 in Virginia City,” Osorno says. “As a brand, it is well-known around the country and even the world. We have a brand presence in every state in the union … maybe not a branch or store in every state, but our brand is there in some capacity.”

Reasons for the growing presence nationally are many, but one primary aspect of that growth is the tremendous breadth of companies and products Wells Fargo offers. Wells not only provides all types of banking products, but diversified financial services, home mortgages, commercial loans, private banking and even a specialized division for the Nevada gaming industry. “We are a pioneer with the gaming industry,” Osorno says. “We grew up with the casinos here in Nevada, and it has proliferated. We remain the leaders in the growing gaming industry, including riverboats, Atlantic City casinos, Native American reservations, even gaming overseas. The leader of our gaming team for Nevada just headed off to Macau recently to talk to investors about casinos there.”

Wells Fargo has so many consumer, small business and corporate bankers that the company serves thousands of customers and finds it difficult to just remain “local,” Osorno says. “Our community president has a mantra. He says we need to ‘out local’ the national banks and ‘out national’ the local banks, and I think we do that well.”

Osorno says he is particularly happy about Wells Fargo’s track record of local community volunteerism. In 2005, the bank contributed more than $1 million to Reno area nonprofit organizations, and that doesn’t even count the hundreds of hours of volunteerism by Team Wells members in their bright yellow T-shirts.

“We maintain leadership roles on numerous boards in town, and we operate the Banking Education Center out on Sutro, which delivers quality financial literacy education programs to this market,” Osorno adds. “It is a location we staff with Team Wells members. It has computer labs, financial literacy courses, hands-on banking and online assistance. We created something that wasn’t a commercial for us, that everyone can use without feeling that it is our specific program.”

The facility helps various age groups learn about financial services, about how to open checking accounts, how to use ATMs and how to surf the interactive online program that accompanies the center. Wells Fargo, by the way, was one of the very first banks in the U.S. to introduce Internet banking and electronic bill paying through its Web site. This was back in the early 1990s when other banks were struggling with the idea.

As philanthropy thrives, so does the bank. Wells Fargo’s acquisition strategy for Northern Nevada and throughout the U.S. is to partner with local, smaller financial institutions in the West and Midwest and then blend those two worlds, Osorno says. “Our chairman, Dick Kovacevich, has been in banking since 1986, and he always says, ‘Bigger isn’t better, only better is better,’” Osorno says. “Here in the Nevada market, we’ve been prohibited from having the total combined deposit strength of those we’ve acquired. When we joined with First Security Bank five years ago, the banking officials took a look at our market share, and we were required to divest a bit.”

Wells Fargo since has been able to add strength in the mutual fund business and today has $393 million in assets; $355 million currently provides a broader, more diversified mix of products, including insurance. “We’ve expanded our products versus growing just to grow,” he says. “We are growing organically in both Northern and Southern Nevada, and we are winning customers by being a good bank for them. In the past three or four quarters, the number of households we serve is up by 3 percent and core deposits are up 7 percent. Our key measure of success is products per household, and we give our customers better prices if they have more products with us. We call it membership banking, and we build relationships with our customers that way.”

■ ■ ■ While for-profit local banks vie for commercial and consumer market position and share, nonprofit credit unions such as Greater Nevada Credit Union quietly build consumer membership and gain deposits, raising capital internally and returning those earnings to the members.

Many banks consider credit unions unfair competition because of their tax-free status, and debate has raged for years between the American Bankers Association lobbyists and Credit Union National Association members. Greater Nevada Credit Union President Wally Murray takes all the ruckus in stride and says there are advantages and disadvantages to both ways of conducting financial business.

“As a credit union, we are owned by our members, and that separates us from banks,” Murray says. “We can’t do mergers and acquisitions, we can’t issue stock and we don’t do a lot of business banking. Our strength comes from our members and we are entirely consumer-oriented. We are nonprofit by regulation.”

Greater Nevada Credit Union has a long history in Nevada, starting operations in 1949 in Carson City. The organization now has nine full-service branches and one educational branch operated by students at Carson High School, including one branch each in Reno, Ely, Minden, Dayton and Wendover. Overall, there are $500 million in assets and 50,000 members who own those assets, Murray adds.

“Many people don’t understand the difference between banks and credit unions, or they think they can’t join because they don’t work for a certain company,” Murray says. “It’s actually very easy to join, and no specific business affiliation is necessary.”

A credit union is a “cooperative financial institution, owned and controlled by the members who use its services,” according to the Greater Nevada Web site. “Credit unions serve groups that share something in common, such as where they work, live or go to church. While banks are in business to make a profit for a small group of shareholders, credit unions are not-forprofit and pass along excess earnings in the form of higher savings rates, lower loan rates and lower fees.”

Like other financial institutions, credit unions are closely regulated. The National Credit Union Share Insurance Fund is administered by the National Credit Union in deposits and $278 million in loans. “Our primary focus is commercial banking and assisting businesses with their financial needs,” Markham says. “We also offer consumer products, such as checking accounts, auto loans, CDs and savings accounts, and we do have a large number of consumer customers as well.”

First Independent Bank of Nevada started with one branch at Talbot Avenue and McCarran Road. It now has a new headquarters building on Kietzke Lane, as well as the original branch on Talbot, one on Robb Drive and Interstate 80, a branch at Sparks Boulevard and Prater Way in Sparks and a branch in Fallon. Markham said the bank is looking at two other sites for new branches in the Sparks area.

“Ideally, we want to look at opening a new branch location every 18 months or so, and with those new locations, we want to expand our consumer business into residential areas,” Markham says. “We’ve become known as a commercial bank, but smaller community banks are limited by regulators as to how much we can lend to one borrower. We do participation loans with other banks, depending on the size of the credit request.” Markham said the bank’s original growth projections of $22 million a year for the first five years have been met and doubled, and because of the bank’s success in the community, the employees working there donate time and capital to local nonprofits on a regular basis.

“There is simply no better group of local banking experts to be found than the ones we have working here,” Markham says. “Our people have been in the banking industry Administration, an agency of the federal government. It insures deposits of credit union members at thousands of federal and state-chartered credit unions nationwide. At Greater Nevada, savings are insured up to $350,000.

“We take those earnings, set aside a portion for safety and soundness and then directly return those earnings to our members,” Murray says “We were started by six employees from the State of Nevada, and our target market remains working-class families in Northern Nevada. Everything we do is for consumers. Our board of directors is made up of non-paid volunteers elected from our membership. They do all the same things a bank board does; they just don’t get paid.”

Greater Nevada Credit Union does its job well and reaches out to consumers across Northern Nevada. A member of the credit union has access to all the usual financial products — including checking accounts, savings accounts, certificates of deposit, money market accounts, mortgages, home equity loans, auto loans — but typically these are offered at reduced cost to the consumer. Greater Nevada is the No. 1 auto lender in all of Northern Nevada and has been in that position for the past two years, even surpassing the loan activity of GMAC Finance and Ford Motor Credit locally.

“We hold all our loans and mortgages and service all of our loans,” Murray says. “That’s another differentiating factor. We’ve sold far less than 1 percent of our mortgage loans, and all our members can make their payments here at our branches. We deliver that level of consistency to our members, and that’s what they expect from us.” Murray adds that a large part of the Greater Nevada Credit Union brand is based on the communities it serves, where it partners to improve the quality of those communities.

“We do volunteer work important to our members,” Murray says.

Credit union members also do not pay transaction fees for ATMs at any of the 25,000 credit union ATMs across the U.S., and online banking and electronic bill pay are free to members as well, Murray adds. “We reach out directly to employers to try to provide services to their employees,” Murray adds. “Historically, that has worked well for credit unions, and that’s something we do at the State of Nevada offices for their employees. Our members are happy with our products and constantly provide us with feedback so that we can grow and improve to meet their needs.”

Cashing in: Bank marketing a big business locally

You’ve driven by and seen the billboards … smiling guys and gals in suits telling you that they are your hometown bank, some touting lower mortgage rates or higher CD rates or informing you that their business banking hours are more convenient.

Perhaps you’ve watched the television ads or heard the radio spots as well, or read the newspaper and magazine ads with those same folks in suits telling you about their financial institutions and putting a warm and fuzzy “face” on an otherwise cold, stodgy business of numbers, percentage points and columns.

Bank marketing and advertising is big business locally and nationally, with most institutions setting aside large portions of their annual earnings to create advertising that hopefully generates more earnings annually.

Statistics bear out the changing nature of banking. According to the “2004 Analysis of Bank Marketing Expenditures,” a yearly survey published by the Bank Marketing Association in Washington, D.C., banks of almost all sizes increased spending as a percentage of deposits. This translates into average annual expenditures of around $20,000 for banks with assets less than $10 million, to about $5 million in marketing expenditures for banks with assets of $5 billion and more. Marketing expenditures include not only advertising and public relations, but sales promotion, training and market research.

“TV and print make up the largest percentage of our advertising expenditures,” says Chad Osorno, president of the Northern Nevada Market of Wells Fargo Bank. “We definitely want a ‘face’ for our products, and I believe we have a human touch that others in the financial industry may not have.”

Osorno says customers tell him they have seen the advertisements for business banking, promoting the Wells team of 20 business banking professionals. “We take care of the financial needs of more than 1,000 business banking customers, and we are all about building relationships with business leaders in Northern Nevada,” he says.

At Nevada State Bank, TV and radio are the advertising media of choice, and chief executive officer Bill Martin is the “face” of the bank, according to senior vice president and Northern Nevada corporate administrator Kevin Sullivan.

“Bill has a philosophy about banking and respect that resonates with our customers, and he has a unique personality that fits as the focal point of our ads,” Sullivan says. “We’ve got radio spots with the theme ‘Ask Bill’ and he attempts to answer customer questions, often in a humorous way. He presents our products and services, whether it’s print or billboards or TV or radio.”

Rose/Glenn Group in Reno handles advertising for Nevada State Bank. Sullivan says effective bank advertising is challenging in the “very competitive marketplace” of Northern Nevada, especially with a recent and gradual slowdown in the economy.

“Nevada businesses have always been a little insulated from the economic downturns, and even though the economy has softened a little bit, we still have a pretty strong marketplace overall,” Sullivan notes.

Nationally, banks and financial institutions are primarily marketing their products with staff assistance, rather than outsourcing the work to agencies. The American Bankers Association Bank Marketing Survey Report (published in October 2004 and accessible in part at www.aba.com) recently explored in charts and analytical text topics such as market segmentation, Internet marketing, cross-selling and sales incentives. It also addressed direct marketing, ad agency use, allocating marketing monies to advertising, public relations and sale promotions, and using successful strategies against the competition.

Among the report’s highlights:

■ The majority of banks surveyed reported that marketing activity was handled completely or partially by bank staff, with media placement, creative and marketing research listed as the functions most likely to be outsourced.

■ 73 percent of respondents actively promoted their corporate brands, with almost 98 percent involving their marketing department in the effort.

■ Newspapers accounted for the largest share of banks’ advertising expenditures; banks with assets of $5 billion or more used direct mail as the primary advertising tool.

■ More than four in five banks report using market segmentation — up from just half in 2001.

■ More than 90 percent of banks surveyed have a Web site; slightly more than half of these hired an outside firm to maintain them.

■ Banks that consider their marketing efforts to be ahead of the competition have full-time marketing employees to actively promote their brand, measure customer loyalty, have MCIF (marketing customer information files — a sort of database of households and customer information) and update their Web sites frequently.

At First Independent Bank of Nevada, chief executive officer Grant Markham says his bank uses television ads that show employees and the bank’s community involvement. “We spend quite a bit on advertising,” Markham says. “We use radio, television, print and of course, we have mailings and in-branch collateral. We also have a frequently updated Web site, and we send our customers e-mail statements, if they request it.”

Markham says the people and customer service at First Independent and its “different and better brand” are the key factors in its growth and success since opening their doors in 1999.

“The feedback we get shows up in our bottom line as well, since we’ve grown quite quickly and have been profitable since our eighth month of operation. We are financially solid, and we’ve done well.”

Law of the banking world: acquire or be acquired?

Nevada’s business-targeting community banks, facing higher interest rates and ever-tightening competition for loans, could be entering a new era of consolidation. Since spring, the industry has seen a spate of mergers at both ends of the state, including:

■ Nevada Security Bank is acquiring Northern Nevada Bank in Reno.

■ BankWest of Nevada has acquired Bank of Nevada and Nevada First Bank in Las Vegas.

■ Community Bank of Nevada intends to purchase Valley Bank in Las Vegas.

Whether it all portends a return to the merger-manic 1990s is uncertain. But the symptoms are similar, as is the evolutional struggle between growth and competition. “It’s easier for a larger bank to acquire a small bank rather than fight for new customers,” says Keith Schwer, economist and director of the Center for Business & Economic Research at the University of Nevada, Las Vegas.

“And if you’re doing very well, you make yourself attractive,” he says.

Moreover, Schwer cites Nevada’s phenomenal economic growth in recent years. Nowhere is that more evident than in job growth rates in the Reno and Las Vegas metropolitan areas that are four to five times that of the national average. And much of it is in the robust small-business sector that’s the cream of community banks’ crop of customers.

It’s what has helped propel growth at such aggressive community banks as Nevada Security Bank and First Independent Bank in Northern Nevada and Business Bank of Nevada at both ends of the state. Many factors make up a decision to merge, industry observers say, notably timing of profitability, shrinking market share and pressure to turn a profit as economies of scale dictate that the bigger the bank, the more bang from an operational buck.

That was alluded to in the official statement by Hal Giomi, CEO of The Bank Holdings, parent of Nevada Security Bank, accompanying the May 17 announcement of the acquisition of Northern Nevada Bank. “Northern Nevada (bank) is a very profitable, high-growth institution, as such, we expect this transaction to be accretive to earnings immediately,” Giomi says.

Officials of both banks are keeping tightlipped about the merger as the deal wends its way through the regulatory process with a hoped-for completion this fall.

But longtime Northern Nevada banker Jerry Gregory wasn’t surprised at the news and believes there will be more mergers to follow — but not in the same crush of cometogethers the industry saw in the 1990s that led to the current crop of community banks. “Each bank tries to establish a niche,” says Gregory, senior vice president, northern region manager for Business Bank of Nevada. “Most, if not all, have found that niche. They’ve done well and certainly prospered. “Then they get to a point, just like with any business, where they start asking, ‘Where do we go from here?’” Gregory says. “They have several choices: expand with new branches or acquire or be acquired.

“It’s going to happen, we all have limited resources. It’s an evolutionary cycle.” And there’s dialogue going on between other banks even as the current mergers come to fruition, Gregory believes.

“What it will lead to, remains to be seen,” he says. “But I hear they’re looking and talking.”