Las Vegas Review-Journal: City National bank chief thrives with niches

(Note: From the Archive)
By Chris Sieroty
LAS VEGAS REVIEW-JOURNAL
Posted: Nov. 13, 2011 | 2:01 a.m.
Updated: Nov. 13, 2011 | 9:29 a.m.

Sixteen years ago, Russell Goldsmith was named chief executive of City National Corp., the parent company of a small-business bank with a coveted roster of wealthy clients and a niche market serving a Hollywood clientele.

At age 44, Goldsmith was following in his father’s footsteps.

Since then, the bank has grown rapidly. City National Bank has made 19 acquisitions, including three in Las Vegas, since 1995, when Russell Goldsmith took over from his father, Bram.

The bank’s assets also have risen from about $3 billion to $23.1 billion at the end of the third quarter. He’s also quick to point out that City National has “never lost money in a single quarter for over 18 years.”

Today, City National is the largest independent bank headquartered in Los Angeles, where it has been doing business for more than half a century.

That’s no small feat in an industry in which banks have been gobbled up by larger competitors or shuttered by the Federal Deposit Insurance Corp. because of losses associated with failed real estate loans.

“People think rightfully, because my dad was CEO of the bank for 20 years, that I grew up in it,” he said. “But I didn’t. When I was a kid, my dad was in the real estate business.”

It was only after he graduated from Harvard Law School in 1975 that his father went from being a director of the bank to being its chief executive. He joined the company’s board of directors in 1978.

Goldsmith, who is president and CEO of City National Corp. and CEO and president of its subsidiary City National Bank, recently sat down with the Las Vegas Review-Journal to discuss his career, company projects and new banking regulations implemented after the recession.

At 60, he still sits firmly in the chairman’s seat of a publicly traded company that his family holds a minority stake in and that generated $41.4 million, or 77 cents a share, in net income in the third quarter.

That was a 20 percent jump from net income of $34.4 million, or 65 cents per share, in the third quarter of 2010.

“I really don’t think of a time horizon,” Goldsmith said when asked if he was thinking about retirement. “I’m sure that if you asked me 16 years ago if I would still be doing this 16 years later, I would have said, ‘Who the heck knows?’‚ÄČ”

City National has managed to thrive by concentrating on niche industries, notably entertainment and real estate. In recent years, the bank has developed expertise in other businesses, and now supplies financial services to apparel manufacturers, law firms and medical practices, among others.

The total loan portfolio — which includes commercial loans, real estate loans and residential first mortgages, and real estate construction and installment loans — now stands at $12.2 billion.

City National has aggressively targeted small and midsized business in Nevada and the other states in which it operates. Goldsmith described those companies as businesses with $2 million to $200 million in annual revenue.

“Entertainment has been our focus,” he said. “Twenty percent of the bank revolves around the entertainment business. That’s a whole division that works to provide both private and commercial banking services to one industry.”

Goldsmith said the bank understands how to finance a movie or finance a music publishing catalog. He said the company has staff in offices in Las Vegas; New York; Beverly Hills, Calif.; and Burbank, Calif.; that specialize in entertainment financing.

City National is even looking to strike up a tune with the Nashville, Tenn., music scene.

“We just opened in Nashville,” he said. “That’s because of the music business. The two places our clients were saying you need to be was in Nashville and Atlanta.”

The bank’s Atlanta office was expected to open by year’s end, he said.

Perhaps more important, throughout Goldsmith’s tenure, City National has been savvy enough to find the right acquisition at the right time.

The company expanded to Nevada in 2007 with its purchase of Business Bank Corp.

“People don’t realize that City National had been doing business in Nevada for a number of years before our acquisition of Business Bank,” Goldsmith said. “We didn’t have an office, but we had clients here who were doing business with us on projects in Southern Nevada.”

In retrospect, Goldsmith said nobody thought Nevada’s economy would be as hard-hit as it was. But with adversity came opportunity for City National to expand its brand in the Silver State.

“We felt (the economy) was frothy in 2008, but very few people thought it would crumble as severely as it did,” he said. “So the opportunity that came out of this terrible recession was failed banks taken over by the FDIC.”

Since May 2010, City National has acquired Sun West Bank and Nevada Commerce Bank through deals with the FDIC.

“Because City National is well capitalized … we could take over those banks and absorb them into the infrastructure of City National Bank of Nevada,” he said.

Since 2008, Goldsmith said, the bank has been fortunate to increase both its client and loan numbers in Nevada.

Through these acquisitions and its own efforts, he said, the third quarter was the biggest quarter for net new loans in the bank’s history. The bank generated $500 million.

Following two quarters with no provision, the company set aside $7.5 million for loan and lease loss provisions in the third quarter. As of Sept. 30, City National’s allowance for loan and lease losses totaled $263.3 million.

“Obviously, we’ve had problem loans,” he said. “Anybody in real estate in Southern Nevada would have had issues as you would expect. But through our acquisitions and our own efforts, we are actively out there looking for loan opportunities.”

As for new acquisitions, Goldsmith said he believed the company was the right size. But like most banking executives, he wouldn’t turn down a deal if it would add to the company’s bottom line.

“We always have our eyes open for acquisitions that might fit our standards,” he said. “We talk about it. But, a potential acquisition has to meet three criteria. They are fit, focus and price.”

City National Bank now operates 78 branches with 3,300 employees in four states.

Quietly, City National has entered the gaming business. The bank’s latest investment was as a partner in the purchase of Aliante Station in North Las Vegas.

City National and Bank of America Corp., along with seven other banks and three private equity firms, bought the troubled property in a bankruptcy proceeding from Station Casinos LLC. Station manages the property, according to a deal approved by state gaming regulators.

He declined to discuss other investments in gaming companies.

“We’ve participated in some other deals, but the past few years have been particularly challenging,” Goldsmith said. “We believe in the gaming industry. We have some loans in the industry and we are looking to grow those.”

It’s no secret that Goldsmith is on the board of directors of Wynn Resorts Ltd.

“Before I first started dating my wife (Karen), her father, Jerry (Jerome) Mack, along with Perry Thomas, were two of the people closest to Steve in Las Vegas,” he said. “That was in the late 1970s. I remember meeting Steve even before I was married. We’ve been friends for all that time.”

Goldsmith said Wynn first approached him a few years ago after one of his directors resigned.

“I was flattered he thought I could add something to his successful company,” he said.

Goldsmith said his tenure on the Wynn board has involved more than just gaming.

“In the time I’ve been on the board, they’ve opened Encore. So it was fascinating to walk through a construction site with Steve and learn how he makes decisions,” he said. “I’ve also been to Macau a couple of times to get an understanding of the property.”

Splitting his time between City National and his other commitments is nothing new.

Besides being on the board of Wynn Resorts, Goldsmith is chairman of the Los Angeles Coalition for the Economy and Jobs, is a trustee of the Harvard-Westlake School in Los Angeles and is a member of the Council on Foreign Relations.

He’s also finishing his fourth year on the Federal Reserve Board’s 12-member Federal Advisory Council, representing the 12th District of the Federal Reserve. The 12th District, which is based in San Francisco, includes Nevada.

“I’m the vice president of the council,” he said. “This is my last year. I’m termed out after four years. The normal term is three years, but I got an extension, which I’m grateful for.”

Michael Shepherd, chairman and chief executive officer of Bank of the West and BancWest Corp., has been appointed to replace Goldsmith on the council in January.

Goldsmith said most people don’t know about the Fed’s advisory council.

“Each district on the council is usually represented by a bank CEO,” he said. “So every quarter for almost four years, I’ve gone to D.C. with 11 other people to meet with the board of governors of the Federal Reserve.”

He said it’s an opportunity to discuss issues ranging from the economy to regulations.

“Over the years there has been a tradition of off-the-record meetings with key figures in the government,” he said. “I think it’s a terrific way for policymakers … to get some real-world input.”

Goldsmith, who has also served as a board member of the Los Angeles branch of the Federal Reserve, said a new rule designed to rein in risky trading by firms whose customers are federally insured wasn’t expected to affect City National.

“We are not operating a trading desk,” he said. “There is a lot of confusion between what an investment bank does and a megabank does. In other words, the biggest three or four banks ran trading desks where a lot of their income was derived from trading revenue which injects a level of volatility and risk.”

He said that volatility and risk is what the Volcker rule is trying to reduce. The proposed rule, which is named for former Federal Reserve Chairman Paul Volcker and is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, limits banks from engaging in proprietary trading that isn’t in a client’s best interests, or from owning or investing in a hedge fund or private equity fund.

While the final rule hasn’t been implemented, Goldsmith said he was concerned that a cap on how much banks can invest in private equity funds would affect the profitability of City National and its clients.

“We invest through some of our clients who are private equity firms who are in turn investing in portfolio companies,” he said. “Typically, these are young or emerging companies that are investing to grow their business and create jobs.”

He worries about the banking industry struggling to implement the final rules.

“I worry about overregulation,” he said. “Not every bank CEO would agree with me, but I think we do need some additional regulation. But I worry about the pendulum swinging too far in the wrong direction.”

When asked about the Occupy Wall Street protests that have grown from a few citizens to rallies worldwide, Goldsmith said he could understand their frustration.

“People are not happy that there are high levels of unemployment and that the economy is not doing very well,” he said. “I understand it. Believe me, when you run a bank, you get it.”

But at this point, Goldsmith argued, it’s not about blaming anybody.

“We should be honest with ourselves. As a country, we were on credit steroids,” he said. “It was a bubble. Its collapse is not the fault of any one person or any one (industry) segment.”

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.

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Las Vegas Review-Journal: Poker lobbying group marks Black Friday anniversary

By Chris Sieroty
LAS VEGAS REVIEW-JOURNAL
Posted: Apr. 14, 2012 | 2:02 a.m.

The Poker Players Alliance on Friday reminded poker players that its lobbying campaign to organize gamblers is running out of time as the one-year anniversary of Black Friday’s seizure of several of the most popular online poker sites approaches.

Titled “The Players Will Never Fold,” the PPA is urging players to contact their elected representatives and demand legalization of online poker in the United States. The campaign runs through Sunday, which marks the one-year anniversary of Black Friday.

“It’s been a full year since the rights of millions of American poker players were trampled and … we are calling on congress to reverse this wrong and reinstate our basic freedoms,” said John Pappas, PPA’s executive director.

On April 15, 2011, three of the largest online poker sites were seized and shut down by the U.S. Department of Justice. Operators of sites such as Full Tilt Poker, Poker stars and Absolute Poker were charged with illegal online gambling, as well as bank fraud and money laundering.

In subsequent months the Justice Department seized at least a dozen gambling websites, including Bookmaker.com and Doylesroom.com.

The federal crackdown on Internet poker stopped thousands of U.S. residents from playing and tied up millions of dollars they had deposited or won. Pappas said the Washington, D.C.-based nonprofit organization has more than one million members, some who still have online poker site balances that are still frozen nearly a year later.

On Thursday, attorneys for four leading class-action plaintiffs filed suit in federal court in Las Vegas against former Full Tilt directors Howard Lederer and Chris “Jesus” Ferguson alleging illegal conversion of funds.

The lawsuit claims that before and after April 15, 2011, Lederer and Ferguson “exercised unlawful dominion and control” over players’ money deposited in Full Tilt accounts. The government has described Full Tilt as a “global Ponzi scheme.”

The lawsuit also claims U.S. players have been denied access to some $150 million in their accounts in part because of Lederer’s and Ferguson’s decisions.

The lawsuit claims Lederer “received approximately $42 million in distributions and ‘profit-sharing’ payments,” some in Full Tilt loans that may still be outstanding, while Ferguson received $85 million, some of which may have been in the form of loans.

The plaintiffs seek a court order requiring Lederer and Ferguson to refund player money and pay punitive damages. The four leading plaintiffs in the lawsuit are Steve Segal, of New York; Nick Hammer and Robin Hougdahl of Minnesota; and Todd Terry of New Jersey.

The PPA and the American Gaming Association have lobbied against state-by-state legalization of online poker, favoring federal legislation. In December, Nevada became the first state to approve regulations that allow companies in the state to apply for licenses to operate online poker websites.

Despite the Justice Department’s crackdown, hundreds of illegal, offshore Internet sites are still operating, Frank Fahrenkopf Jr., AGA president and CEO, said in a statement Friday.

“As long as these sites are operating outside the reach of U.S. law enforcement and with little to no regulation, Americans who continue to patronize them will be at risk of being defrauded,” Fahrenkopf said.

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.

Las Vegas Review-Journal: WSOP $1 million charity tournament will produce richest prize ever

By Chris Sieroty
LAS VEGAS REVIEW-JOURNAL
Posted: Apr. 12, 2012 | 2:23 p.m.

The World Series of Poker’s never-before-seen $1 million buy-in tournament is expected to generate the richest prize in poker history with the winner claiming more than $12 million.

Series officials announced Thursday that 30 players have committed to participate in the Big One for One Drop starting July 1 at the Rio.

That number of players puts the top prize at $12.3 million, which series spokesman Seth Palansky said tops the $12 million Jamie Gold won in 2006 for outlasting 8,773 players at no-limit Texas Hold’em in the main event.

The three-day special event will air on ESPN, according to tournament organizers. The winner will also earn a specially designed platinum bracelet.

Palansky said the event is just one of 61 tournaments held as part of the 43rd annual World Series of Poker. He said this tournament was unique because, so far, 20 of the 30 players who have signed up are nonprofessional poker players.

The 30 confirmed players have already committed their buy-in, and series organizers expect to reach their cap of 48 entries.

If the cap on participants is reached, the first-place prize awarded to the winner would be more than $18 million, Palansky said.

Eight-time gold bracelet winner Erik Seidel will take part in the game, along with Bob Bright, CEO of the stock trading firm Bright Trading LLC, and Paul Newey, co-founder of London-based private investment firm New Wave Ventures.

Professionals such as Johnny Chan, Tom Dwan and Daniel Negreanu will player poker with nonpros such as Guy Laliberte, founder of Cirque du Soleil and One Drop, and Phil Ruffin, owner of Treasure Island.

“A million dollar buy-in seems crazy, and well, it is, but when you factor in a great cause like One Drop getting a percentage of the prize pool, all of a sudden it seems like a fantastic idea, and a great way to raise money for charity,” Negreanu said in a statement. “Count me in.”

Caesars Entertainment Corp., which owns the WSOP, will fund two tournament participants. The gaming company said one seat will go to the winner of a Mega Satellite event June 30 at the Rio while the other will come from a yet to be determined promotion.

“I’m buying in,” said Dwan. “One million dollars has a nice ring to it. It’s so sick, and for such a good cause; now I just gotta win.”

The $1 million buy-in includes an 11.1 percent cut for charity but doesn’t include the normal fees taken out of the prize pool by the series for holding the tournament.

Laliberte organized the tournament to raise money to fund One Drop, a nongovernmental organization that helps fight poverty by funding access to water projects worldwide.

“Since its creation, One Drop has reached out to millions of people to support access to water and raise … awareness of water-related issues,” said Laliberte, adding that one person dies from a water-borne disease every 20 seconds.

With 30 players already committed, more than $3.3 million will be donated to One Drop.

Contact reporter Chris Sieroty at csieroty@review journal.com or 702-477-3893.

Las Vegas Review-Journal: Gaming Conference set to return to Las Vegas in 2013

By Chris Sieroty
LAS VEGAS REVIEW-JOURNAL
Posted: Apr. 9, 2012 | 3:27 p.m.

For veteran economist Bill Eadington, it was an easy decision to partner with the University of Nevada Las Vegas to bring one of the gaming industry’s most important conferences to Las Vegas next year.

Eadington had hoped to hold the 15th International Conference on Gambling and Risk Taking this year at Lake Tahoe, but budget cuts at the University of Nevada, Reno forced organizers to consider other options.

By partnering with UNLV, Eadington, director of UNR’s Institute for the Study of Gambling and Commercial Gaming, said the two universities could combine their financial and academic resources.

“We are too small a state and under funded to do this alone,” Eadington said.

Eadington and Bo Bernhard, executive director of the International Gaming Institute at UNLV, on Monday announced the return of the four-day conference, coming to Caesars Palace on May 27-31, 2013. The 15th conference, held every three years since 1974, returns to Las Vegas for the first time since 2000.

“This is really a historic partnership,” said Bernhard, during a news conference at UNLV’s International Gaming Institute.

This will be the fifth time the conference is held in Las Vegas. Eadington said by co-sponsoring the event, “it gives us the ability to draw from the resources we’ve both developed over the years.”

The conference over the years has attracted academics and researchers. At the 2009 conference, about 180 professional research papers were presented and about 300 people attended the event.

Eadington said both UNLV and UNR would “put out a call for (research) papers” in the near future.

“This time around that we are in Las Vegas, we are quite optimistic,” Eadington said. “We are targeting 500. We get the academics, policy makers, operators and regulators, but can we broaden it?”

The will focus on online gaming, the future of Las Vegas and casinos in the United States, gambling in Asia, gambling addiction and new gaming industry technologies. Besides academics, policy makers, operators and regulators, the conference is also expected to attract researchers, health professionals, mathematicians, international representatives and gambling enthusiasts.

Bernhard praised Eadington for creating a “field that is the academic study of gaming.”

In 1974, the study of gambling was almost nonexistent, Eadington said. It was also nearly impossible to get industry executives to attend a gaming conference organized by an academic.

“The gaming industry had a lot of trouble working with academia” in the beginning, Eadington said. “They were very suspicious of academics.”

But since the first conference, Eadington said attendees have ranged from card counters and mathematicians to behavioral scientists and professional gamblers.

Eadington said with 40 states legalizing gambling, there was much more interest in gaming and it had become a more important industry.

The conference was also important to preserving Nevada’s reputation as a gambling destination, as gaming has spread to dozens of other destinations, including Macau and Singapore.

Eadington acknowledged Singapore and Macau’s continued double-digit growth in gaming, but he cautioned it wouldn’t last forever. Macau’s casinos generated $3.12 billion in revenue in March, a 24 percent increase compared to a year ago.

“Something will happen at some point,” Eadington said. “We just don’t know when.”

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.