Although big banks regularly swoop down to the border and buy local banks, independent Valley-based banks have continued to reinvent themselves. Critical to the region’s growth, these homegrown banks have parlayed their in-depth experience with local businesses into success. Eight banks, a mix of community and regional institutions, have headquarters in the Valley.
Renamed and often repurposed, the established community banks have held onto market shares because of the strength and breadth of relationships with customers. The newest banks have gotten up to speed by hiring local bankers with broad community networks. Using Valley residents as bank directors keeps the banks attuned to the local markets.
The proliferation and survival of locally owned banks can perhaps be traced to Texas’ long history of unit banking, before limited branch banking became legal in 1987. Small businesses in particular became accustomed to having accessible bankers and fast responses to loan applications. Each of the banks has staked out a niche, from the oldest of these banks, Texas National Bank, which traces its roots to 1920, to the newest, Texas Regional Bank, which has been ranked among the safest in the nation. First Community has its ATM affiliation with the Stripes chain, and Border Capital has its full spectrum trust services. Rio Bank focuses on local commercial customers, and Bank of South Texas has offices in Hebbronville and Kingsville. Lone Star Bank and First National Bank cater to dual markets, including the Mexican consumer demographic, with banking centers far beyond the Valley.
Forget the old image of banks as staid and perhaps even boring places to work. Homegrown banks are dealing with ever-changing, stringent banking regulations while simultaneously their younger customers are shifting to technology-based banking.
Texas National Bank, founded in 1920 as First National Bank of Mercedes, weathered the Depression, numerous recessions and changes including its purchase in 2005 by MNB Ventures. Under its new name, the bank shifted its headquarters to Edinburg. “From 2005 to today, we’ve about doubled the size of the bank,” said President Joe Quiroga. “It’s the people we hire who are able to make each visit a positive experience.” TNB, one of 35 Hispanic-owned banks in the U.S., prides itself on knowing the community and reinvesting in it. “Ninety-nine percent of the loans we make are within our geographic area.”
Rio Bank, which opened in 1985, changed its focus and management in 1999 when Ford Sasser became CEO. Emphasizing relationship banking and working with the small business owner, Rio Bank provides an important service it doesn’t advertise or charge for: business insights and advice. “Businesses see value in having bankers who can talk to them,” Sasser said. “Sometimes they are just looking for advice, someone to bounce ideas off of. I love being a banker and playing a small part in people’s success.” He noted that people gravitate to the bank that suits their needs.
Washington has created uncertainty in the marketplace, Sasser said. “That paralyzes our customers who are not going to invest until they know what the tax and regulatory outlook is.” So banks and their business customers are just treading water, accumulating cash, not hiring, not expanding, not asking for loans.
Beginning in 2008, Rio Bank and most banks put growth plans on hold. “The economy is still pretty tough. I’m trying to keep as much of our assets out there earning interest, making us money. We try to be very cautious,” Sasser said. “But the big banks aren’t going to put me out of business.” That’s because nationwide banks create products, such as credit cards, that are suitable for millions of similar customers. In contrast, community banks thrive by dealing with their customers individually.
On the other hand, banking is trending to virtual branches. “Far fewer checks are being written. The only time people come in to see us now is if they need a loan or have cash to deposit,” Sasser said. More transactions are handled electronically from deposits via online scanners to online bill paying and direct deposits of payroll and sales.
“Most banks have a lot of money to lend, but the underwriting is a little more demanding than in the past. Plus customers in general are more cautious,” said Joe Brown, president of Border Capital, which caters to small business clients.
“Compliance is a big issue with banks in general and even more so for community banks,” Brown said. While community banks did not cause the financial market turmoil, they are paying the price, Brown said, as regulators use a “broad brush approach” to apply the same rules to national and community banks. No matter the size, there is a fixed cost for assigning a number of employees to work on banking regulations compliance. Brown sees the current regulatory climate pushing some smaller banks into mergers to achieve cost efficiency. “The Valley will go with the trend: you will see the number of banks become less.”
Bank profitability is not at the level of 10 to 12 years ago, with loan demand and rates down and federal government actions unpredictable, Brown said. Yet the future holds promise. “We know our customers. Our directors know the businesses. When it comes to decision making, we can handle things quicker. Tellers know customers and greet them by name, and they like it. That’s what community banking is about.”
Border Capital, recognizable by the military flags which fly with the Stars and Stripes and Texas flags, has carved out its niche in the Valley. “We offer full trust services,” Brown said. He believes Border Capital is the only local bank which has a Valley-based division that invests and manages trust customers’ assets.
While Brown characterized the changes in the banking industry by saying “it’s not as fun,” Border Capital’s directors might not agree. The bank has provided each of them with free iPads to make it easier for them to securely receive and review the many documents circulated for board meetings.
First Community Bank’s logo, “Other banks have branches; we have roots,” epitomizes the heart and soul of community banking. Cameron County’s oldest chartered, independently-owned bank traces its lineage to 1979 but its current name reflects an intention to expand beyond its San Benito and Harlingen roots. A Raymondville location opened in January, and a Brownsville banking center opens on Feb. 15.
“Our mission is pretty concise: to help communities grow and succeed,” said CEO Michael Scott in Harlingen. “That’s been a great mantra, and it’s helped First Community grow from $75 million to $235 million in a few years. There’s no question that community banking succeeds by building relationships.” The bank’s 150 shareholders represent diverse Valley industries including agriculture, medicine, law and finance, and they share a vision of commitment to the community.
“We consider ourselves a commercial bank that services consumer needs,” Scott said. “We work our board pretty hard. It’s 100 percent local decision making,” processing loan applications quickly.
Since late 2012, First Community customers have had free ATM usage at all 600 Stripes stores. “It is a selling point,” Scott agreed. A Stripes store is often closer than the bank. “It really is all about convenience. The Valley has a very young population, and younger customers take advantage of technology” and mobile banking in different formats.
Texas Regional Bank, launched in 2010, has built the region’s newest bank on the tagline, “The people you know.” After fulfilling its initial goals of opening in the Valley’s three major markets within three years and reaching $100 million in assets, the bank is poised for an equally ambitious future. “We will be looking into other major cities in the Valley,” said CEO Paul Moxley.
President Michael Lamon said the bank has grown because of the relationships it has developed with local business owners. Helping businesses develop strengthens the local economy. “We look at ourselves as a commercial bank in the Rio Grande Valley with a community base.” As the new bank on the block, TRB puts particular effort in getting involved as volunteers with community organizations and developing the bank through relationships. “We encourage everyone one of our employees to be involved in the community, in something they have a passion for,” he added.
Texas Regional was recently ranked among the top five percent of the 7,300 U.S. banks in US, with a perfect score in the safety of their loan portfolio, Moxley said. “Our priority is to be safe and sound,” with an emphasis on sound decision making. The Valley is a different market than other Texas cities, Moxley said, noting the influence that Mexico has on the economy.
All of the approximately 200 TRB shareholders are Valley residents or have Valley ties, and no individual or group owns more than 10 percent of the stock.
Lone Star National Bank opened for business in Pharr in 1983. Today the independent bank has over 500 employees and 31 locations across South Texas, including branches in San Antonio. Its technological advances range from mobile banking to remote capture for deposits, bringing the bank to their customers’ homes and offices. First National Bank, which originated in Edinburg in 1934, ranks as the 121st largest bank in Texas, with 57 branches. In addition to these Valley-based banks, banks headquartered in Laredo have a strong presence here also: IBC, Falcon International Bank, and Texas Community Bank.
The Valley’s mix of homegrown, regional and big banks enables customers to find the relationships and the services they seek in a financial institution.
February cover story by Eileen Mattei