According to a recent Bloomberg BNA story, the community bank industry, nationwide, is stabilizing as the number of failures of independent banks declined last year.
Despite the decline of small towns, fewer startup community banks, and rising costs associated with new industry regulations, there remains a banking demand that larger banks are not meeting in small towns and big cities.
In San Antonio, a few locally owned and/or operated independent and mid-sized banks have seen longterm success. This year, Broadway Bank celebrated its 75th anniversary, Jefferson Bank is currently observing its 70th anniversary, Frost Bank is gearing up for its 150th anniversary celebration in 2018 and Bank of San Antonio opened just nine years ago.
Even in a fast-growing city like San Antonio, tradition, embracing new generations of customers, and a chance to serve niche markets keeps independent and locally owned/operated banks strong. This appears to be the case for institutions such as Broadway Bank that have been owned and run by members of the same family for decades.
Col. Charles E. Cheever Sr. and his wife Betty Cheever opened Broadway National Bank on Feb. 15, 1941, at 5044 Broadway in Alamo Heights with five employees and $60,000.
Broadway National Bank originally capitalized on a growing population in the Alamo Heights area north of downtown – considered the northernmost suburb back then – and military personnel at nearby Fort Sam Houston.
“(The Cheevers) loved the area. They would take lots of walks in the Alamo Heights community,” said Jim Goudge, Broadway Bank president and CEO. Despite the conventional notion in the pre-World War II years that it was best to start a bank in the city’s downtown, the Cheevers felt it could work outside of downtown.
The Cheevers provided firm, steady leadership in the institution’s early years. Betty Cheever even ran the bank with help from a board of directors while her husband was in Europe during WWII.
The institution, now known as Broadway Bank, ushered in many firsts for the San Antonio banking industry. The bank developed a mortgage lending division in 1959, opened a branch center on a military base at Fort Sam Houston in 1973, and provided standalone, 24-hour ATMs in 1982.
Broadway Bank also locally introduced the raising of savings rates, the provision of on-site discount brokerage services. It was the first suburban institution to open a downtown branch, in 1992.
There were few community banks offering mortgage lending services during the 1950s, and local banks were open only 9 a.m. to 3 p.m. as per orders from a local clearinghouse. Broadway Bank’s leaders saw an unfilled need, so they established lending services and new hours for customers.
“We were missing people going to work before 9 and leaving work after 3, so the hours were expanded,” Goudge said. The clearinghouse briefly kicked out Broadway Bank from its membership, but other banks caught onto the idea of having longer business hours.
Broadway Bank is now the largest privately owned bank in San Antonio, with 39 branches across San Antonio, Austin and the surrounding area. The institution has more than 630 employees, and $3.2 billion in assets. The bank recorded about $1.5 billion in loans by 2015, with a net income of $37 million.
Second, third and fourth generation family members have always been involved in daily operations at Broadway Bank. Col. Charles and Betty Cheever’s son, Charles Jr., went into the family business after completing his military service, and is currently chairman emeritus.
“It was under Charles Jr.’s leadership that the bank began to do some innovative things that led to its growth we still see today,” Goudge said, referring to the aforementioned innovations among local banks and the things such as locating the corporate headquarters to Northeast Loop 410. That happened when San Antonio was experiencing mostly northward expansion.
Currently, Charles Jr.’s daughters Suzanne Cheever Goudge – Jim’s wife – and Jean Cheever both serve on the bank’s board of directors. Chris Cheever, their brother, works in the bank’s private banking division.
Sara Goudge Brouillard represents the fourth generation of Cheever family members, and runs the bank’s Family Business Resource Center. Her sister, Carrie Goudge Dyer, serves on the Broadway Bank-Austin advisory board.
These strong family ties are carefully guiding Broadway Bank in a digital world, where mobile and online banking are popular options for many customers of banks big and small, Jim said. These options also help institutions further distinguish themselves.
“It’s import to set yourself from your competition. The most innovative thing you can do revolves around technology and services,” Jim added. Broadway’s banking centers feature bistros, charging stations and SMART ATMs that let customers deposit cash and checks without having to fill out a deposit slip or use an envelope.
Aside from focusing on keeping atop changes in mobile and online banking, Goudge said Broadway Bank is particularly proud of more recent developments, such as opening the Family Business Resource Center in 2012.
“Since we’re a family-owned business, we want to help keep down the stress of other family-owned business leaders,” Goudge said. “We invite family-owned businesses to come talk about their issues, challenges and goals. If you want to remain a family-owned business, it’s great to say it, but you’ve really got to work hard at it.”
Businesses know it takes expert leadership, especially in times of industry turmoil. Dick Evans, chairman and CEO of Frost Bank, was a vital member of the leadership team that steered Frost Bank through the real estate and banking crises that Texas endured for much of the 1980s. Frost emerged from that decade as the only top-10 bank to survive the financial crises without federal aid or selling to an out-of-state firm.
Under Evans’ leadership, Frost Bank and its parent organization Cullen/Frost Bankers, have increased assets to more than $25 billion and has grown its financial center network to more than 120 locations.
Frost is the largest bank in San Antonio, publicly traded and boasting a local market share nearly double of that of its two biggest competitors. Frost was so well positioned in the 2000s that, during the financial crisis of 2008, Evans and his colleagues turned down federal bailout funds.
“The industry has changed so much in the last several years, but we’re not changing our core values that we’ve had since the beginning nearly 150 years ago,” Evans said. “We embrace delivering to customers in different ways.”
In late January, Cullen/Frost announced annual earnings for 2015, reporting net income available to common shareholders of $271.3 million, an increase of .5% compared to 2014. Over the fourth quarter of 2015, average deposits rose by .3% to $24.5 billion, up $760 million from the $23.7 billion in the fourth quarter of 2014.
Evans, who is preparing to retire March 31 after a 44-year career with Frost, was the first person outside of the Frost family to lead Frost Bank. Phil Green, a 35-year Frost veteran, will take over the reigns. It’s taken a blend of decades of experience among the company’s senior leadership, and diversifying services, that have helped the bank to become of the biggest in Texas, Evans said.
“Over 90 years ago, our customer base was agriculture based. We were a big agricultural lender. Today, we’re a very diversified lender, in energy, health care, automobiles, technology, homebuilders, construction, you name it,” he said. Additionally, Frost’s wealth management division has done about $30 billion in business, and its insurance brokerage division is one of the biggest in the state.
The company is constantly looking for ways to stay atop modern banking techniques while staying true to its community roots, Evans said. He has no doubt Cullen/Frost will continue to strengthen the core brand in years to come, but adapt to meet the needs of its diversifying neighborhoods around San Antonio and other areas that the bank serves.
“For example, our branches have changed in the way they look and act. They’re much broader based,” Evans said. “At every center, you have consumer, commercial and retail service. It’s a community bank that has everything. It’s an outstanding bank that has served this community well.”
Even while getting ready for retirement, Evans said he is sure that Texas community banks will continue to thrive. He commends what other local independent banks have been able to achieve over the decades.
“I have been a defender of community banks. Certainly institutions such as Broadway Bank have been a strong leader here,” he said.
Jefferson Bank is injecting some fun and community involvement in its 70th anniversary observances, including television commercials rolling out this spring, customer photo submissions and unique surprises each month honoring the communities it serves.
Jefferson Bank’s leadership is enthusiastically paying tribute to the institution’s past and is excited about what lies ahead for the organization.
“We’ve just completed another record year,” said Jefferson Bank President Paul McSween. Jefferson Bank reported more than $1.6 billion in assets and $126 million in total shareholders’ equity at the end of 2015. The bank operates 112 branches in San Antonio, Boerne and New Braunfels.
Like Broadway Bank, the origins of Jefferson Bank go back to a time when a group of individuals felt a neighborhood outside of downtown San Antonio was underserved. In this case, it was the Jefferson High School community.
This group of renowned local businessmen had no problem putting up money to start a bank, but had no actual banking experience. The Texas Banking Department referred the businessmen to an experienced banker, A.J. “Jack” Lewis. He liked their idea, bought bank stock, and accepted the role of chairman and president. The bank opened its first location at 1904 Fredericksburg Road, next to the Woodlawn Drug Store.
Lewis had been a bank examiner during the Great Depression and, from that, had learned lessons about what makes a bank successful, especially in hard times. Lewis applied his knowledge and enabled three generations of families to guide Jefferson Bank through the highs and lows in U.S. financial history.
McSween said Jefferson Bank came out of the financial crisis of 2008 unscathed.
“It actually provided a great opportunity for us and other community banks to benefit and be recognized by companies that had been working with larger banks,” McSween said. “Those companies felt there really wasn’t anyone they could talk to, specifically mid-market and small business. They just wanted someone they could speak with, face to face, about their company and what’s happening with the bank. They wanted to be reassured.”
According to McSween, the last five to six years have been among the best in Jefferson Bank’s history in terms of growth in assets. The institution, he added, has focused on different markets around San Antonio. In early 2015, Jefferson Bank opened its first Southside branch at 1111 Goliad, in a former Bank of America branch building.
The Southside banking center has the full spread of Jefferson Bank services, as well as a community room that residents can use for meetings and events free of charge. Jefferson Bank recruits employees, especially top officers, for each of its branches from within the neighborhood that branch serves.
“We give authority to an officer who can make major decisions there on the spot,” McSween said. “We like to think the people who work in that banking center know that market well. We think that kind of responsiveness makes us unique. It’s a more decentralized approach for branches.”
Like any other bank, big or small, Jefferson Bank is keeping pace with technological advances in mobile and online banking. Still, after his bank has studied various demographic groups including Millennials, the so-called human element cannot be underestimated, McSween said.
“They want high-tech banking, but they also want a person they could talk to. We feel it’s a great approach to developing more relationships,” he said.
Bank of San Antonio
As far as targeting other client markets goes, Bank of San Antonio has established itself as a worthy outlet for businesses in a short time. The institution opened nine years ago when a group of local investors proposed a new business model for regional banking.
“The shareholders said, ‘Let’s go do something for businesses of San Antonio. Let’s not compete with the big banks for their consumer and retail markets,’” said Brent Given, Bank of San Antonio president/CEO. The investors raised more than $28 million to launch Bank of San Antonio, which opened in 2007.
The institution, the city’s fourth largest locally owned bank, now has more than $560 million in assets, and operates four centers around the city. A fifth branch is due to open in Schertz this May.
The Bank of San Antonio centers are smaller than the branches operated by the likes of Broadway, Jefferson and Frost banks. The Bank of San Antonio centers are located in areas saturated with businesses of varying sizes.
The bank will also open a new corporate headquarters in the Vance Jackson Road/Loop 410 area this year, moving the main campus from its original Callaghan Road/Interstate 10 location.
In a 2015 San Antonio Business Journal article, chairman/founder J. Bruce Bugg said Bank of San Antonio’s quick trajectory to success reflected local businesses’ demand for a locally owned bank that concentrated on their needs.
The bank capitalized on the strengths of mobile deposit technology, as that was emerging, Given said, and by building a new platform the young institution showed mainly local businesses how they could benefit from the technology.
The Bank of San Antonio made converts of many of those businesses, which helped to grow the organization’s client base. The financial crisis of 2008 also helped Bank of San Antonio in a way because the institution had solid capital, no bad loans and a clean reputation. It’s more attractive to new clients and provides an array of business banking and treasury management services as well as private banking, complete with wealth advisors and insurance expertise.
“This is a group of experienced bankers delivering a much higher level of service,” Given said. “We take care of the customers and their back office (employees). I think we do a good job for local business owners and their families.”
Even with the growth of these and other independent and locally operated/owned banks, the San Antonio area has room for even more community banks, said Jim Goudge of Broadway Bank.
“I think we’re in the best state, in one of the best markets in the country. All these areas have wonderful features, and more people are moving in here,” he said. “There’s always opportunities to grow community banks.”
CORRECTION: While Frost Bank is headquartered locally and closely associated with its founding family, it is a publicly traded financial institution.
*Top image: A.J. Lewis, son of Jefferson Bank’s founding chairman Jack Lewis, opens the bank’s first savings account on opening day, Aug. 12, 1946, with help from bank president, Tom Murrah. Photo courtesy of Jefferson Bank.