The Biggest little city in Texas

San Antonio isn’t just host to this year’s ICBA convention; it’s also an attractive destination for tourists and community banks alike. We survey the banking scene

By Dinah Wisenberg Brin

San Antonio, Texas, is a flourishing metropolitan area with small-town sensibilities, making it a fertile environment for the city’s community bankers—and this year’s ICBA Community Banking LIVE event.

A vibrant hospitality sector and a large military presence have long fueled the economy in the Alamo City, where aerospace, bioscience, information technology and other industries now also drive commerce.

Did you know?

San Antonio’s Fairmount Hotel holds the Guinness World Record for the heaviest hotel ever relocated. In 1985, the
3.2 million-pound building
was moved five blocks at a
cost of $650,000.

Due to the market size, “there are a lot of banks that want to be there, both locally chartered and branch banks,” says Christopher L. Williston, president and chief executive of the Independent Bankers Association of Texas (IBAT), who calls the market “very competitive.”

San Antonio, the seventh largest U.S. city and the second largest in Texas by population, is a “dynamic business market” and international city that engages in significant cross-border trade, Williston notes. Founded in 1718 and known for the Alamo and River Walk tourist attractions, the city is “also a very popular national and international convention destination because of its uniqueness, and so the local economy is extremely strong,” he says.

The accelerating influx of new residents reflects San Antonio’s economic health. From July 2014 to July 2015, the greater metropolitan area added more than 51,000 people, making it one of the 20 fastest-growing metro areas in the country and bringing its population to nearly 2.4 million.

“There are a lot
of banks that want
to be there, both
locally chartered and branch banks.”
—Christopher L. Williston, Independent Bankers Association of Texas

All of that expansion translates into strong demand for commercial and residential real estate and small-business lending, as San Antonio aims not only to attract new corporate business through financial incentives and foreign trade zones, but also to generate a hip vibe with trendy restaurant, shopping and boutique hotel districts.

Fertile ground
The city’s traditional small-business base, meanwhile, remains a staple for community banks. “It’s a big little city,” says Robert Potter, chief lending officer and executive vice president of the $250 million-asset Lone Star Capital Bank, whose portfolio mainly comprises small to medium-sized commercial real estate developments, owner-occupied developments and investor real estate.

“One of the things that’s unique about San Antonio is that the market is dominated by small business,” he adds. “[Lone Star is] very much a family-owned, community-based company, and the majority of our customers are … small-business people, entrepreneurs and full-sized developers that are really looking for more of a service-oriented option.”

Other relevant 2017 Community Banking LIVE articles:

First Timer to Convention? You’re Not Alone


Conventional Wisdom

Community banks hold 60 percent of the market’s bank deposits, a higher share than their counterparts in larger Texas markets hold, says Marvin Rickabaugh, San Antonio region president for market deposit leader Frost Bank. Frost was founded 149 years ago, operates across Texas, is ranked among the country’s 50 largest banks, and holds almost $30 billion in assets.

The San Antonio-New Braunfels metro area—Texas’s third-largest banking market in deposits—had 61 institutions with nearly $103 billion in deposits as of the third quarter of 2016, according to the FDIC. Those figures don’t include several credit unions, such as the large Security Service Federal Credit Union, key competitors of the city’s community banks, several of which are chartered in San Antonio.

In addition to community banks and credit unions, regional and national banks including Wells Fargo, Bank of America and JPMorgan Chase do business in San Antonio. The city also is headquarters for USAA Federal Savings Bank, which serves military families.

Active and stable market
With San Antonio unemployment at 3.7 percent in October 2016, compared with a 4.9 percent national rate, and the local labor force expanding, the market is “very active,” with a lot of real estate activity, including high-dollar mixed-use and multifamily residential projects to provide housing for people closer to town, Rickabaugh says.

Did you know?

The Alamo was so named because it was situated in a grove of cottonwood (álamo in Spanish) trees.

The large military presence—four installations comprise Joint Base San Antonio, directly and indirectly employing more than 280,000 people—adds stability to the area, although less since Kelly Air Force Base’s 2001 closure, Rickabaugh says. It also generates market competition, with military-focused credit unions and USAA centered on service members’ business, he notes.

That stability has offered San Antonio some protection against economic downturns, including the financial crisis of nearly a decade ago. “We didn’t go down as far, [but] we didn’t go up as fast either,” Rickabaugh says.

In about two years, Frost plans to move its headquarters into a new, 23-story office tower, which will be the first new skyscraper to rise on San Antonio’s skyline in 25 years. But while loan demand is healthy, Frost, like other banks, feels the low-interest-rate margin squeeze. “It’s very competitive and it’s nothing that we don’t see in all of our other markets,” Rickabaugh says. “Loan demand has been good and margins have been tough.”

Cliff McCauley, Frost’s senior executive vice president, says the market has been “blessed and cursed” with liquidity, “so there are lots of dollars chasing every deal.” Despite the vigorous competition, Rickabaugh expects that more banks will enter the market.

Healthy demand
Statewide, loan demand is good, with loans to assets at about 70 percent on average, “which is very high and very healthy,” IBAT’s Williston says. Most Texas banks have fared well over the past five years, although margins remain around 3.5 percent or lower, he says.

Lone Star, meanwhile, considers its competitive pricing and ease of transactions two strong points, but as Potter acknowledges, “The pricing, without a question, is the most challenging aspect of the competition.”

“One of the things that’s unique about San Antonio is that the market is dominated by small business.”
—Robert Potter,
Lone Star Capital Bank

Credit unions, which dominate the consumer market, are starting to lend to corporate entities much as the banks do, making the “intensely competitive” commercial market Credit unions, which dominate the consumer market, are starting to lend to corporate entities much as the banks do, making the “intensely competitive” commercial market even more so, Potter notes. “I’m not overly concerned. The way that we have been able to distinguish ourselves in the market is with commonsense underwriting, a high level of customer service and competitive pricing,” he says. “Our batting average is very high against the competition. … We win way more than we lose.”

Regulations like the Dodd-Frank consumer protection law, however, “have created some challenges for everybody,” Potter says. With limits on real estate loan concentration and San Antonio banks heavily concentrated in real estate, he says, “everybody’s contending with trying to have a more diverse portfolio. That’s easier said than done.”

He credits the state’s healthy economy, business-friendly tax and regulatory environment, and above-average job growth with lifting Texas banks. “We’re all very fortunate to be in Texas,” Potter says. And with 4,000 people moving every month to greater San Antonio, he adds, in terms of housing and ancillary services, “that’s very respectable growth.”

“Small-business and commercial real estate are still extremely big among the community banks,” IBAT’s Williston says, “and that seems to be a good market for them.” The future looks “exceptionally good” and will remain highly competitive for the city’s community banks, he says.

Williston doesn’t expect a contraction in the number of community banks or credit unions. Although cities sometimes can be overbanked, he says, “right now it’s just rocking along.”

Did you know?

In 1939, the city’s famous River Walk received money from the Works Progress Administration, part of President Franklin D. Roosevelt’s New Deal, that funded construction of 17,000 feet of walkways and about 21 bridges.


Dinah Wisenberg Brin is a writer in Pennsylvania.

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