Beverley Hills, Calif.-based City National Bank announced last month that it will acquire the $489 million Business Bank.

John Guedry, Business Bank chief executive, says the move will result in few layoffs, since City National plans to expand Business Bank's presence in the Las Vegas market.

And the California bank known for catering to the film industry and stars like Gov. Arnold Schwarzenegger will make new corporate headquarters under construction for Business Bank in Summerlin its Nevada home base.

Guedry, who will remain on City National's executive team for Nevada, said customers can expect to see little change in the way of service from experienced local bankers, but will have access to all the resources at the $14.5 billion City National's disposal.

Born in New Orleans, Guedry moved to Las Vegas during high school and graduated from UNLV with a degree in business management.

After working in the agricultural banking industry in California, he moved back to Las Vegas with his wife and joined the staff at Valley Bank, now Bank of America, in their sales department.

At age 26 Guedry was tapped to take over the sales department, but left to start his own business when BofA began its acquisition of Valley Bank.

After getting back into the traditional banking industry with Community Bank, Guedry joined Business Bank in 2000 to help turn around the struggling company.

Almost seven years later, he says the bank is one of the most profitable in the country and is free of regulatory problems.

Guedry sits down with In Business Las Vegas to discuss the future of Business Bank, including its upcoming acquisition.

Q. During the upcoming legislative session, what are your plans to lobby for the repeal of the Payroll and Franchise Tax, and what's the effect of that tax on the industry?

A. It doesn't impact just the industry, but the community. It was, I think, a big setback for the business environment of the state. The environment that always existed in Nevada was anti-tax. When the state legislators passed the largest tax increase in our history, the justification was that it was post-Sept. 11. We were obviously very dependent on the tourism industry, which had suffered a pretty major setback after Sept. 11 and the state had, I think, some legitimate concerns about how they were going to fund the citizens' needs on an ongoing basis. They were looking for ways to be less dependent on the gaming industry tax.

Unfortunately a lot of misinformation was used to justify this increase as opposed to a more broad-based tax and at the end of the day industries that have previously not been burdened by state taxes were starting to see taxes as a burden.

Nevada has one of the largest number per capita of business licenses. There are a lot of entrepreneurial businesses in the state and having a new tax that wasn't planned for can be enough to put a small business under and certainly strain the abilities of a business to reserve capital for growth.

And I think it hurt us. It sent the wrong message to the rest of the country by saying Nevada's going to solve its growth problems and it's fiscal problems by creating a new tax. I don't think any businesses that could afford it were opposed to paying their fair share of taxes, but I think it was more than a fair share ... Our concern wasn't just how it impacted us, but the impact on future industries.

As the state legislature sees that they need more taxes, will another industry that's perceived to be a very successful industry be singled out? It was an ill-conceived plan to figure out how they were going to beat this tax burden as oppose to thinking it through, taking more time and not just reacting.

What we're likely to see happen going into the legislative session is a repeal of some of the unjust portions of the tax. Specifically for our industry, we would like to be treated like any other industry. We are taxed at three times the payroll tax rate and we're the only industry that was singled out for a franchise tax.

The gaming industry made the argument that they pay more than their fair share of taxes. But the reality is, from what we can tell from the tax rolls, they pay approximately the same percentage of taxes as the employment rates they have. So I don't see that as paying more than their fair share.

But more importantly, it's a privileged license to open a casino property. It's restricted. So the state deems who is and isn't licensed. And whenever you have a privileged license, there is the right and the responsibility of the state to make sure that that privileged industry is covering a certain segment of the state. Our industry was saying from day one that the state has certain needs. We have educational needs, senior needs and growth needs and all we're saying is, tax everybody on a fair and equitable basis.

How successful do you think you're going to be this time?

I think legislators realized during the last session in '05 that certain aspects of the tax didn't make sense.

Will Gov.-elect Jim Gibbons be an advocate for the industry?

I do expect that the governor will recognize that this is a very small percentage of the overall state budget.

Banking in Nevada has become increasingly consolidated, because of all of the mergers and acquisitions. What do you think of the level of competition in the state, especially considering your upcoming acquisition?

Let's start with the acquisition we have coming up. I think that this is a bank we have coming into the market that is going to be a major competitor ¦ This is a bank that's used to a very competitive market in California. Also, they have operations in New York City. With the people we have here as part of Business Bank, we're going to be a force to be reckoned with in the industry.

As far as the overall competitive environment ¦ it's a very healthy market. Most banks in the country would love to be here. Quite a few are here. For every merger that's announced there are five new bank applications pending, so there's a lot of new startup banks coming online. So there should be a very healthy mix of smaller community banks, startup banks and larger national banks ¦ I think this gives the community a very broad, diverse base of choices in banking.

You've said City National would have been your first choice to acquire Business Bank. What will your customers gain through the acquisition?

Several things. For any bank that's been here for any amount of time, they know that a large part of our population base in the last couple decades has come from California ¦ And so we're already finding a recognition of the brand. Clients that we deal with and others in the market have called us and said, "we banked with City National Bank before and we really liked them and we're excited about them coming to the market." I think that that excitement is the first thing they'll gain, because they've dealt with them before.

Secondly, (they'll gain) a more broad array of products than we currently offer. As a community bank we currently have some limitations on what we can offer our client base. We have competitive cash management tools, but we're going to have more of them. On the lending side, larger lending limits, more competitive rates, more of all types of loans ¦ I just think it gives us more to offer the community than what we currently have.

Will customers lose anything by no longer banking with a locally-based bank?

I'm hopefully that because we're retaining the vast majority of our employees that they really won't lose anything. There's always a concern when a larger bank or an out-of-state bank acquires an in-market bank that the customer is not going to know who they're dealing with. In this case, they're going to be dealing with the same bankers that have offered them service in some cases for decades. I don't see our customers losing anything in this.

What does the future of the bank look like? Will you get more involved in the gaming industry?

It's one area where we have some expertise on staff, and now that we will have more capacity to lend I see us being more active. But how active I don't know yet and only time will tell. But certainly it's a segment of the industry we haven't been involved in in any meaningful way in the past. But I think that will increase. I think we'll be able to do more for the customers we have served and possibly serve larger companies.

Speaking of California customers, City National is known for some of its famous clientele. Do you think that will be a good fit considering Las Vegas has become the playground for the rich and famous from California and beyond?

Las Vegas is becoming more and more known for its entertainment. And not just the entertainers, but the companies that are involved in every aspect of entertainment, companies that do set design and production of shows and the types of things we've seen coming online in the last couple of decades that are comparable to any entertainment you would get anywhere in the world. I think that that's a good fit considering City National already has a division that's geared toward that type of industry, although they're probably more focused on the movie and television industry while we're more stage production. But they do have a presence in New York, so they've probably had some inroads with Broadway productions. So I really think that it is a very good fit, I think that there are more of those types of companies and individuals in this market that are wanting that kind of service.

John Guedry, chief executive of Business Bank of Nevada, talks about a hiking adventure during an interview at the bank this week. Photo by Steve Marcus

Will Business Bank take the City National name?

Yes.

When will that happen?

It looks like it will probably occur at about the time the deal gets closed, which is estimated to be March 1.

And what will the effect be of Business Bank changing its name? Does that affect the customer base, and how does the process work?

We spent a lot of time talking about whether it makes sense to change the name, but we were very much in favor of it and encouraged City National to go that path. They've done it with other acquisitions they've made in California, but obviously that's a market where they have a brand awareness. But because, again, we have so many California transplants here we felt that their brand awareness would carry over here. And it looks like that has been a correct assumption.

You have said you're keeping all the current branches. Will you be adding more, and if so where?

Right off the bat we'll be adding more. We have the new corporate office, which will have a branch location in it. That's scheduled to open around the end of June. And City National had been planning to come into this market before we had a chance to negotiate our sale, so they had looked at a couple locations. They're not quite ready to announce, but there is at least one location that we'll hopefully be announcing soon.

Getting back to the competition for a minute, you've said that the acquisition will help your competitiveness with big banks. Will it enable Business Bank to stand up against the Bank of Americas and the Wells Fargos of the world?

Every bank has some niche they do better than others. The Wells Fargos and the BofA's are obviously great consumer banks. They have lots of locations and products geared to consumers. They're also very good in the gaming industry because they've had years worth of experience putting together large gaming syndication credits. In those arenas, I don't know that we will be a direct competitor with them. I think that they still stand alone, or with some of their peers. But certainly in the business community and professional market, in the entertainment industry, in the wealth management arena, we anticipate to be a very strong competitor with them. We're going to be out there battling for as much of that business as we can do.

What about credit unions? Are you on the side that argues that credit unions are starting to become unfair competition?

I'm all in favor of competition. It's ultimately best for the customer. The unfair part is the part where our industry has some concerns about the credit union industry. It's really just large mega-credit unions that have become more like commercial banks. They were originally designed to serve a certain segment of the market that needed lower cost, easier-to-acquire financial services. They've gone way beyond that scope. We find ourselves directly competing with credit unions for commercial building loans and private banking services and other things they're really not designed to deliver.

That's fine if they want to be in that arena, but then file for a commercial bank status and pay taxes like all of us. If you want to be tax exempt, then stay within the scope of what you were designed to do to receive that tax-exempt status. And that's really the only argument we have.

I think credit unions serve a definite role and I would hate to see the credit union industry go away or get taxed out of business. So I'm not in favor of taxing credit unions. I'm just in favor of seeing credit unions stick to the scope that they were designed to do. And if ultimately as a commercial bank we see ourselves competing in that arena, then we have to be good at what we do to get the business.

Is there a legislative solution to that problem?

Yes. Hold them accountable. Right now the regulatory body that regulates credit unions is not holding them accountable to stick to their charter.

The Las Vegas housing market is in what many would call a slump right now. How will Business Bank's entry into the mortgage lending market go?

Very carefully. It's a challenging market. Obviously we've grown very rapidly. Lots of jobs are being created through the construction industry and all the projects that are either planned for or under way.

In the near future it looks like there will be a very healthy demand for the housing industry. I think initially that is putting a demand on the rental industry. So there's a need for more rental projects. It looks like in the next five years there will be a need for more entry level or step-up housing, which right now is in that $200,000 range. (My first house here cost $45,000 and I had to think really hard about whether to buy it. Now I wish I'd kept it.) I think that that's where the need exists.

We'll still see a fair amount of retirees coming here. We'll see a fair amount of people looking for second homes that will be more in the high price range bracket. I just think the amount of product that exists right now it's going to take a little while to get that inventory sucked up. I would rather be here than in the Midwest or some segments of the East Coast. There's certainly a lot more demand for housing.

So, it's a slump, but I don't see the bursting bubble that some others have predicted. It just might take some patience, and from a lending standpoint we're going to be careful with what we do. We don't want to put people in situations where we've created a problem for them financially. When it makes sense we'll definitely be out there doing our fair share of loans both to the buyers and the home builders that are building the product type that is needed. But if we feel like it's a product type that's not needed or it's not well-located or it's too risky a structure, we feel an obligation to tell the buyer, "We feel we'd be doing a disservice to you by giving you what you're asking for."

Do you think having City National's expertise in that area will help?

Oh, absolutely. And we have some members of our staff that have come from larger banks that have done tract housing and construction lending for custom homes, so we do have some expertise on our staff as well.

We'll combine that expertise with what City National brings to the table. They've gone through much more difficult market downturns as recent as four or five years ago and then back in the early 90's, so they're going to have a lot more knowledge about what can get you into trouble and what can get the borrower into trouble.

And I'm sure being a California bank they're very well-versed in inflated home prices and a volatile market.

That's probably going to be a good and a bad thing. The good thing is, they know what to expect when prices get too inflated. The bad thing is, it may be difficult for them to translate from a 30 or 40-year-old home that's being sold in California for $500 or $600 a foot to a brand new home here that's costing $250 a foot. They may think that's the deal of the century, but it may not be.

Rate the state's business climate. What will change in 2007, especially with a new governor in office?

I still think it's a very good business climate ... While the regulatory aspect of opening businesses and running businesses in the state has gotten more cumbersome, in comparison to other markets it's still a very easy place to do business. It's a very easy place to come in and open a new business.

I do have some concerns about how taxes are going to proceed. Are we going to see more and more broad-based taxes being levied on businesses? I think we need to be really careful about that and not put ourselves in a position where we're killing job creation because we're trying to solve a short-term problem.

But I do think it's a pretty healthy environment. I do see business still wanting to locate here. We've gotten to a size now where we actually are somewhat self-sustaining. We're not as dependant on outside markets to sustain or grow our local economy. We have a pretty strong and growing economy already built here that can sustain itself through up and down periods.

What do you think the national economy will look like next year?

Short-term interest rates, I think, will have some impact on it. Long rates have stayed pretty flat. Short rates obviously have gone up quite a bit in the last year and a half. If the experts - and I use that term loosely - are right, we should start to see a slight decline in rates in the second half of the year. If that's true, then I would anticipate seeing businesses starting to reinvest capitol towards growth and job creation. If it's not and rates either stay where they are or, worse, start to climb I think we could see a slower economy in the end of '07 into '08.

I don't see drastic changes in the first half of the year. I think we'll see some sluggish areas of the economy on a national basis, and locally a little less sluggish. Hopefully second half of the year we'll start to see some stimulation of the economy as we see a reversal on short rates.

What will Nevada's economy look like over the next decade? Do you think the growth will continue?

I do. I think there are some limitations that people much smarter than I can speak more intelligently about. But obviously there are limitations: land availability, availability of natural resources like water, the cost of water and power, the cost to do business here. If those resources - land and water and power as well as labor pool and other things - get too costly, I could see us having a much slower growth market statewide than what we've experienced in the last three to four years, which has been slower even than the last couple decades.

If we solve some of those problems on the land side and work on an appropriate arrangement with the federal government for the release of BLM (Bureau of Land Management) land to the consumer for personal, business or municipal consumption, that would help alleviate some of the stress we're seeing on land prices.

The Southern Nevada Water Authority has done a great job with the limited water resources they have. If they're able to continue to use the brain trust that they've put together and continue to do some of the things they've done over the last decade going forward that will solve a big part of our resource problem going forward.

Labor is probably the one that causes the biggest concern. It's a need not just for a general labor force, but an educated labor force. We're seeing more and more businesses that are turning away from this market because they're finding it difficult to hire employees with an appropriate level of education.

And I think that's something that we all need to be focused on. How do we upgrade the school system, K-12, and how do we provide adequate support to the university and the college system to make sure we're getting a work force that's going to allow us to grow in the business sector? That's going to be the biggest problem to solve in the next decade to see our growth continue. If we are able to solve that, it seems likely the natural resource problems can be solved.