A slowdown in the construction and tourism industries could affect the lending portfolios of Nevada community banks, the Federal Deposit Insurance Corp. cautioned in a recent report.
Spurred by an influx of residents and a steady flow of tourists, Nevada has enjoyed unprecedented growth in recent years.
But with signs that the state's economy may be cooling, regulators say that banks' assets may be too heavily tied to the cyclical real estate and construction sectors.
"Construction of new hotel rooms is outpacing the number of visitors, and commercial vacancies have climbed well above the national average," the FDIC said in its second-quarter Regional Outlook report.
Catherine I. Phillips-Olsen, regional manager of the FDIC's San Francisco office, would not speculate on the effect the slowing economy could have on the state's banks.
In singling out Nevada in the report, she said, "we just want to give these bankers a heads-up on an emerging trend and show them where they stand on a national and regional basis."
Several Las Vegas banks that were opened in 1994 and 1995, all with less than $300 million of assets, are prime examples of exposed banks with portfolios consisting mainly of commercial real estate, construction, and multifamily loans.
According to FDIC data, as of March 31, about 64% of Commercial Bank of Nevada's loan portfolio was made up of such loans.
Other banks with high concentrations of these loans included Community Bank of Nevada, 61%; Las Vegas Business Bank, 59%; and BankWest of Nevada, 55%.
Overall, Nevada banks with less than $1 billion of assets had 55.3% of their loans in commercial real estate and construction, compared with 25.8% for similar-sized banks nationwide.
William E. Martin, president of $905 million-asset Pioneer Citizens Bank of Nevada in Reno, acknowledged that commercial real estate lending can be risky.
And with competition getting more heated as California banks and mortgage firms open shops in Nevada to cash in on the state's economy, he said, Nevada banks are under increasing pressure to lend.
Nevertheless, he insisted that banks' lending practices are sound.
"I think our bank, and other community banks here, (is) maintaining the right standards," he said.
Larry Woodrum, chief executive of BankWest of Nevada, said his rapidly growing $242.4 million-asset bank caught the eye of regulators despite its healthy financial statements.
"The FDIC was concerned about our loan quality," Mr. Woodrum said, "because we weren't kicking the tires around as much as we could have been in some cases."
FDIC scrutiny spurred BankWest to hire a credit administrator and a few loan quality control clerks in the past year to directly oversee the loan portfolio.
Nevada's was one of the nation's fastest-growing states in 1997, adding jobs at a 4.3% clip-well above the national average.
And that is down from the extraordinary 7.7% rate in 1996, according to the FDIC.
However, the FDIC warns that the state's huge gaming and tourism industry appeared to weaken somewhat in 1997 and construction growth slowed dramatically.
But Alfred Alvarez, the CEO of $88.1 million-asset Las Vegas Business Bank, said the numbers are not as alarming as they may appear.
"I don't think we have any more exposure than the big banks do," Mr. Alvarez said. "Nevada is just a different animal."
Still, Mr. Alvarez is not taking any chances.
To diversify its balance sheet, he said, his bank plans to open loan production offices outside the state.