Independent banks challenging Compass for Waco-McLennan County (Texas) market share

Aug. 01--BBVA Compass, an international powerhouse with $765 billion in total assets, has the largest share of the McLennan County banking market, the Federal Deposit Insurance Corp. reports.

But that does not mean the county has become a mecca for mega-banks. Far from it. The next four banks in the pecking order are locally-owned independents: 

-- First National Bank of Central Texas;

-- Central National Bank;

-- Community Bank and Trust; and,

-- American Bank. 

Figures show that Waco-area residents love to bank "where they not only know your name, but the name of your dog," joked Steve Scurlock, executive vice president of the Independent Bankers Association of Texas.

Scurlock said Waco's banking market is highlighted with medium-sized to small independent banks. "While Waco has a lot of the advantages of a big city, it still has a small-town feel," Scurlock said. "And of all the business entities that mirror that feel, I think community banks would top the list." 

McLennan County has 25 separate banking institutions. That is more than can be found in 10 of 11 metropolitan areas of similar size to Waco-McLennan County. In some communities, the numbers pale in comparison. Midland has only 13 banking institutions and Beaumont has 12. Tyler in Smith County has 27, beating Waco by two. 

Four major national and regional banks have a presence in McLennan County. They are BBVA Compass, Wells Fargo, Bank of America and JP Morgan Chase. Local deposits combined, they have 30.89 percent of local deposits. 

But the four largest independent banks in the county have 39.84 percent of local deposits. Seventeen other independent banks have a 29.97 percent share, according to FDIC figures as of June 30, 2009, the latest numbers available. 

Todd Moore, chairman and CEO of Alliance Bank of Central Texas, joined the fray in 2007, when he rounded up 140 shareholders to purchase the State Bank of Jewett, changed the name and moved its charter to Waco. 

It still has locations in Jewett and Donie, and has 1.31 percent of the McLennan County market. "It was a little bit of a risk," said Moore of his decision to move another independent to Waco. But he said he felt confident that his large and diverse ownership group, which included veteran bankers, would attract customers. He said several factors have made Waco a popular area for independent banks. 

He said local colleges and universities turn out students with degrees in accounting, finance and business that they put to use in the banking industry. 

He said Wacoans seem to have an entrepreneurial streak that pushes them to open their own businesses. He points to the handful of Waco-based companies that award franchises to would-be business owners. The list includes the Dwyer Group, Curves International, Profiles International and Success Motivation International.

Monte Hulse, chairman and CEO of the First National Bank of Central Texas, said many local bankers earned their stripes in independent banks and have perpetuated a culture of independence.

David Lacy and Bill Nesbitt started their careers at the old Citizens National Bank. Lacy now serves as president and CEO of Community Bank & Trust and Nesbitt is chairman and CEO at Central National Bank.

Waco branch Veteran banker Rodney Kroll, meanwhile, left independent Texas National Bank after it was bought by Compass in 1997. His investment group bought First State Bank of Riesel, changed the name to Texas First State Bank and opened a Waco branch. 

"Our independent banks are doing very well," Hulse said. "They are able to compete successfully with the larger chain banks and I think that will continue. 

"The reform issues the government has passed have tried not to harm community banks because lawmakers realize we had nothing to do with the problems of subprime lending." 

Scurlock, with the independent bankers group, said area residents should consider themselves blessed to have such a vibrant collection of independent banks. He said customers benefit from the competition.

Still, for now, BBVA Compass is the county's top bank in terms of market share for deposits, which total $428 million, or 12.95 percent. 

It gained that status when Compass bought financially troubled Guaranty Bank from the FDIC. Compass spokesman Ed Bilek said he knows independent community banks play an important role, but he said Compass provides services he thinks the independents just can't match. 

He said the bank now offers three credit cards, and a first-time homebuyer's program that waives payments and interest for the first three months. 

Its savings program gives rewards to customers who reach goals during the year.

"We want people to know we are a strong and stable bank that is actively lending," Bilek said.