LAS VEGAS - John Dedolph says there are two Las Vegas business communities. One, of course, is the gaming industry. The other, consisting of the bread-and-butter businesses of any metropolis, is where Mr. Dedolph's Sun State Bank is placing its bets.
It's not new territory for Mr. Dedolph (pronounced DEE-dolph), a plain-vanilla banker who likes to use props to illustrate the fundamentals of banking. But banking at Sun State was anything but plain vanilla before Mr. Dedolph arrived.
In fact, if there was ever a community bank that typified Las Vegas, both its good and bad sides, Sun State would be it. The bank is a product of the city's two worlds. Mr. Dedolph just made sure it ended up in his half.
Unlikely Hero
Sun State Bank's story could happen only in this town. It's a story of shady characters, money laundering, and against-all-odds success. And Mr. Dedolph, in the end, is the unlikely hero.
A native Nevadan who prefers hiking in the mountains to gambling, eight years ago he staked his career and his reputation on a belief that Sun State could survive a federal indictment and become a high-quality community bank for Las Vegas' small and midsize businesses.
And he succeeded. This year Sun State will post five years of solid growth in assets, capital, and profitability. Mr. Dedolph predicts a 1.9% return on assets in 1993.
Mr. Dedolph, in his new office on the outskirts of the casino district, looks back on 1984. "I had hair then," he quips.
Taint of Scandal
At that time, Sun State was Pan American Bank of Nevada, a 21-month-old institution whose founders and majority owners had just been indicted in a money-laundering scandal.
The founders, Raphael Acosta, a Cuban immigrant who was the Latin American liaison at the Desert Inn Casino and moonlighted as a baccarat dealer, and George Gebrayel, a Lebanese expatriate, hoped to create an ethnically oriented bank with an international clientele.
Within five months of opening, Pan American had amassed $10 million in assets from its headquarters: seven mobile homes slapped together on a piece of land owned by Mr. Acosta.
But the same bank today has no trust department, no ATMs, and no Saturday hours - just tellers and loan officers. It is 70% controlled by board members, all longtime local businessmen.
Large Personal Stake
Sun State (Mr. Dedolph changed the name in July 1984) really began the second stage of its life in 1988. Having worked through the lawsuits and the bad loans left by his predecessors, Mr. Dedolph took the bank private. Today, it has about 40 shareholders, with Mr. Dedolph owning about 5% of the stock. ("It's my biggest asset.")
Indeed, what Sun State Bank is and what it was (or at least promised to be when it was founded) are like night and day.
"I don't like exotics," Mr. Dedolph says. "We're an extremely focused community bank. We are here for business customers who want loans or deposit services without hassle."
He frankly terms banking's drive to diversify into the securities business "horseshit."
A Way of Life
Mr. Dedolph doesn't just talk simplicity, he shows it the way he displays pictures of the wild bighorn sheep in his yard or the Alpine-like vistas from his northwest Nevada vacation home. He explains his attitude toward loan risk with a drawing on a cocktail napkin - "If I give you this pile of money, you say you're going to make these piles of money. But all I get is this pile of money, which was mine to begin with, and then this little pile of money for all my worry."
To home builders who come into his office looking for unsecured loans, he revels in producing a collection of baseball hats, each displaying the logo of home builder that defaulted on an unsecured loan.
He grew up in Reno, the son of an Army supply officer. He got a degree in history in college, and thought about teaching. But after graduation he joined the Navy as a junior officer, serving three combat tours on the U.S.S. Kitty Hawk in Vietnam.
Stint at First Interstate
After the service, he went back to school but quickly changed his mind about becoming a teacher. He wound up in a training program at a Reno Bank in 1971 and became a lender. His first real job in banking was with First interstate Bank in Los Angeles, where he moved his family in 1972. He hated Southern California and longed for the traffic-free, open spaces of Nevada, and as soon as he had the opportunity to return, he did.
In 1979 he landed a job as the senior lending officer of American Bank of Commerce. He spent five years making a name for himself as a small-business lender, cultivating a reputation as a tough underwriter who nevertheless liked to hear loan pitches from customers - the wilder the better - according to a colleague there.
It was this Mr. Dedolph who walked into a bank in chaos in April 1984, the month he was convinced by several Pan American Bank directors to leave his job as senior lending officer of neighboring American Bank of Commerce and become chief executive of of the most notorious bank in town.
He was the seventh chief executive in 21 months, replacing the acting CEO, Mr. Gebrayel, who was in jail awaiting trial.
"They were doomed to difficulty from the beginning, having plagiarized the logo of Penn Square Bank in Oklahoma City," Mr. Dedolph says, as if remembering a bad dream." Pan American's logo, with three letters scrunched together in black and white, bore a striking resemblance to that of Penn Square, a little bank in Oklahoma whose failure shook the industry's foundations in the early '80s.
Within a year of Pan American's formation, agents from the Internal Revenue Service set up a sting operation at the bank, taping Mr. Gebrayel and another bank employee tutoring an undercover agent on how to launder money. The bank, Mr. Acosta, Mr. Gebrayel, and the head cashier were indicted on federal money-laundering charges in August 1983.
Portfolio Cleansed
During the early '80s, Las Vegas' economy was coming into its own. The casino business, for years the butt of jokes about its management and seedy image in the business world, was at last attracting professional managers. Some gaming properties actually began to go public. Tourists surged into Las Vegas in the 1980s in unprecedented droves. And the population, with its tangential growth in businesses and services, was beginning to climb.
Mr. Dedolph spent three years, until the end of 1988, getting rid of the founder's ownership position in Sun State. He cleaned up the loan portfolio - in their short tenure, Mr. Acosta and Mr. Gebrayel doled out $200,000 in unsecured loans without board approval - and freed it from a number of regulatory restrictions.
Ironically, Mr. Dedolph managed to get Sun State healthy at the perfect time. In addition to the wild growth in the economy, a series of big bank consolidations have thrown off small-business customers in droves, he says. The bank is 75% loaned out, and has grown at an average annualized rate of over 20% in the past five years.
But Mr. Dedolph remains cautious. He has beefed up his commercial and residential construction loan underwriting in the past year.
"We've been a little smart and a lot lucky in loans in the last few years," he says. "We recognize that our economy can't grow forever and our big competitors can't continue to be inept forever. We'll have profitability and growth, but it won't be the same as it has in the past."
