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 Business News | January 2007 
Banks Exceed $1 Billion in Deposits in the Southwest Texas Region
 Joe Hyde - swtexaslive.com
| | First National Bank of Sonora President Michael Hale has lived through boom and bust times in the oil industry of Sonora and Ozona since the 1970s. He believes the good national economic climate is contributing to deposit growth in the area. (LIVE!/Joe Hyde) |
Banks in the region passed a monumental milestone in 2006 when total deposits exceeded $1 billion in this region.
Area bankers say the growth of banking deposits in southwest Texas is a result of various factors, including: The rapid increase in the value of real estate (especially ranch land), an oil and gas boom in the northern counties, and most of all, deposits from Mexican nationals seeking a safe harbor for their cash during a turbulent election year in Mexico.
The traumatic Mexican peso devaluations in 1986 and 1994 are not too distant memories for Mexican citizens and U.S. citizens on the border. Last year, Mexico was faced with another year of potential political turmoil, that, had it not been contained, could have led to a repeat of 1994. Felipe Calderon won last summer’s presidential election by one percentage point, amid allegations of fraud from his opponent Lopez Obrador.
In southwest Texas, money flowed into U.S. banks conveniently situated along the border. And, while the turbulence in Mexico’s political situation appears to have subsided for now, bankers here do not believe the trend of Mexican citizens depositing money into U.S. banks will ebb anytime soon.
“We’re focusing on international relationships to handle the influx of money coming in from Mexico,” explained Falcon International Bank Regional President Willie Hyslop. Hyslop heads Falcon’s three branches in Del Rio, 504 S. Main St. and 110 Chevrolet Drive, and Eagle Pass, 725 Main St. Suite C. As the latest entrant into the southwest Texas border region here, Falcon advertises aggressive certificate of deposit, money market rates, and higher-than-average rates on interest-bearing checking accounts that attract the Mexican money.
To reach its customers, Falcon is engaged in an aggressive build out in the region. “We’ll build our own building to serve north Del Rio in 2007,” Hyslop said. In Eagle Pass, Falcon will open its main branch on S. Bibb St., next to Wal-Mart this month (January 2007). When Falcon’s short-range expansion into the area is complete, they will have three branches in Eagle Pass and two in Del Rio.
Over at the Eagle Pass branch of Texas State Bank, 275 S. Bibb St., longtime Eagle Pass banker Humberto “Beto” Garza agrees with Hyslop’s assessment. “Cross border customers are seeking a ‘safe harbor’ for their money,” he said. Garza added that the economy in Mexico is doing quite well, and they have more money than before. Garza explains that bank deposit safety and privacy are primary concerns for Mexican citizens. “The most important part of all of this is relationships,” Garza stressed. “When we [Texas State Bank] were bought by BBVA [Banco Bilbao Vizcaya Argentaria, a Spanish bank holding company] this past summer, the majority of the phone calls from clients was to ask ‘Who’s going to be there?’” Garza said. Garza noted that, because of the existing relationships with its customers, his bank experienced no noticeable customer churn during the ownership change.
Garza’s bank ownership change experience is going to be tested again when he welcomes a new owner this month. In order for BBVA to obtain approval from U.S. regulators for its acquisition of Texas State Bank’s holding company, Texas Regional Bancshares, Inc., they had to sell the Eagle Pass branch where Garza sits. First National Bank of Edinburg, Texas, is the new owner. “They have 52 branches, and we’re going to be the 53rd,” Garza said.
With First National Bank of Edinburg’s acquisition in Eagle Pass, a fourth bank has entered that city’s market. Garza is mum about the expansion plans, but he said to expect important announcements of regional expansion soon.
In Del Rio, Amistad Bank President Tony Hernandez sees more than just money from Mexico, and recognizes the highly competitive market for deposits. He understands that his bank, owned by Eden Financial Bancshares, Eden, Texas (near San Angelo), is the smallest of all, and requires a niche. That niche, too, is based upon relationships, and Hernandez focuses on small business owners.
“I am here for the mom-and-pops,” Hernandez said. “I can get things done for the little guy that larger banks can’t do,” he said. To fund small business loans, new construction loans, and mortgages, Hernandez needs deposits too. “All the new players in the region have created a very competitive atmosphere,” he said. This month, Amistad Bank, 1301 Veterans Blvd., introduced a 6 percent APR CD, the highest (so far) in the area, and more than a point higher than bankrate.com’s reported national average.
In addition to money from Mexican citizens causing deposit growth, Hernandez said the stabilized and low mortgage interest rates have caused a land boom around the region. “I see people flipping ranches because they are selling for astronomical amounts,” Hernandez said. Those big real estate gains are being parked in local banks.
Sid Cauthorn, president and C.E.O. at The Bank & Trust, 1200 Veterans Blvd., agrees that ranch land is seeing a big boom. But Cauthorn also believes that the overall economic health of the region is strong because of the new jobs being created by the federal government with the Laughlin Air Force Base mission expansion and increased Department of Homeland Security thrusts on border security.
At the same time, the region is made up of small towns, Cauthorn observes. That means there is less sophistication in monetary transactions than there are in the major metropolitan areas like Houston or Dallas. “The border is still a cash society,” Cauthorn observed. Consumers and businesspersons here are more apt to utilize the financial products of the local banks because they are more convenient for cash transactions.
The International Bank of Commerce (IBC) based in Laredo has accomplished the most aggressive expansion into the region, using Eagle Pass as a hub. Andres Beattie, Senior Vice President Retail Banking for IBC Bank in this region, 439 Main St., enthusiastically described his bank’s strategy: location and convenience.
“We’re open seven days a week,” Beattie said. And, numerous branches and ATMs in Eagle Pass, Del Rio, and Uvalde open all he time are paying off. “We’ve more than doubled the deposits since taking over NBC Bank [in Eagle Pass],” he said. The remarkable ten-year deposit growth at IBC Bank’s Main Street locations is believable, Beattie said. These locations are convenient to the international bridge. IBC is also considering new locations to expand. “We’re looking all the time,” Beattie said.
To the north of the region in Sonora, the economic focus turns to ranches, oil and gas. Michael Hale, president, First National Bank of Sonora, 102 N. Main St., observes that good economic times for the nation as a whole are fueling the growth in deposits in the region. “It is a positive time and an exciting time. The economy is doing quite well,” he said.
Hale has seen boom and bust. He began his banking career in the 1970s and survived the energy bust of 25 years ago. “We had no technology back then like we do now,” he said. Technology, particularly in natural gas drilling, has aided the industry in being smarter about where to drill for new gas, and that has smoothed over the historic “boom” or “bust” economy of Sonora and Ozona. According to Hale, a majority of his banking customers in Sonora have ties to oil and gas.
But the customer base is diverse, too. In addition to natural gas, Sonora greatly benefits from its location along Interstate 10, according to Hale. “We’ve seen the traffic increase here, and with it the service industry catering to travelers such as motels and convenience stores,” Hale said.
First National Bank of Sonora has focused its growth northward, into the San Angelo market. Hale has seen the same growth in deposits across all locations of his bank, and he believes the economy for southwest Texas will remain strong as long as interest rates remain stable at currently low rates. |
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