While another chapter of merger mania, the threat of rising interest rates and the hot-potato issue of home equity lending greet Corpus Christi bankers in 1997, most are optimistic that a banner year of profit and economic progress is ahead.
"The banking industry in Corpus Christi is doing well primarily because the local economy is doing fairly well," said Al Jones, president of American Bank, the city's largest independent.
"Diversification of our economy in recent years has served to smooth out the rough spots and to increase the level of business activity," Jones said. "We should look for that to continue well into 1997."
Jones' upbeat projections for the Coastal Bend economy and banking in general are echoed by other local bank chief executives such as Mike Carrell at Frost Bank, Bill Dodge at Pacific Southwest Bank, Jerry Gates at NationsBank, Charles White of International Bank of Commerce and C. Ivan Wilson at Mercantile Bank.
Bank acquisitions and consolidations, which headlined local banking news in 1996, are forecast to continue but possibly at a slower pace, mainly because fewer candidates are left as sale suitors.
Watch for another heated legislative battle pushed by banks and credit unions to free billions of dollars for home equity lending, a measure strongly opposed by the real estate industry.
And more personal business banking services handled by home computers are on the way as technology courts consumer's time and convenience.
Carrell and Dodge, who figured into the largest local bank purchases last year, say they are still in the expansion market if the right opportunities come along. But they may spend more time this year fine-tuning their new properties and pushing their lending markets.
Pacific Southwest will become the city's largest bank in number of locations in mid-March when it completes the purchase of 10 Bank of America branches in the Coastal Bend. The expansion will move Pacific Southwest from 10 to 20 Coastal Bend locations and from five to 11 within Corpus Christi.
Frost Bank's purchase of independent Citizens Bank, an acquisition also due to close in March, will expand its area presence from four to 10 banks, moving it up as the second largest in banking sites. Frost closed its Ingleside branch in December as part of the restructuring.
Pacific Southwest will retain all 60 Bank of America employees and locations, increasing the bank's total area employment to 130 people.
Frost will cut 60 Citizens' jobs but keep open the six bank sites and retain 75 of the employees for a total staff of 195 employees. Positions terminated will be the result of duplication of services such as data processing, accounting, check proofing, lending and trust operations. Lobby personnel, including tellers and customer contact employees, will remain.
The mergers will double Pacific Southwest's area deposits from $248 million to about $500 million. Frost will grow from $297 million in deposits to $480 million. NationsBank will continue to lead in deposits at $550 million and in assets at $650 million.
"We see a good year ahead," Dodge said. "We are excited about the prospects of stepping up our lending activities and putting all these newly acquired deposits to work in loans. We think it is very timely for us because of the healthy economy and opportunity for business growth."
"Our Citizens Bank acquisition will provide more customer convenience, a better presence and increased deposits and loans," Carrell said. "We have a vibrant economy and consumers seem to be meeting their debt obligations.
"There is healthy loan demand going into the first quarter. We have been averaging growth at 13 to 14 percent and hope to pick it up to 16 or 17 percent. Business activity does not seem to be slowing down," he said.
"Our consolidations are not over," Carrell added. "We will probably end up with fewer banks but larger ones with more locations. There is an advantage of economy of scale. You can offer more services and handle more accounts with existing overhead structures, which creates more profitability of operations."
Gates sees 1997 as an extension of a strong 1996 year for banking when steady growth in loans and deposits were above average.
His main concerns are possible pressures on prices and wages, rising inflation and consumer debt and risk of another bad year for farmers and ranchers.
"These could mean some slowdown in business activity but certainly no downturn," Gates said. "We've been on a good roll for a while and I think local businesses and bankers are still in positions to weather minimal slowdowns with good capital and liquidity. Our loans remain on double-digit annual growth.
"I am optimistic because we still have good commercial and residential building," Gates said. "But if interest rates go up (to control inflation) prices will go up, it will slow building and disposable income and impact everybody."
Gates, who favors legislation to allow homeowners to tap their equities to use for various loans, said the issue needs to be put to a vote of the people. Texas is the only state that prohibits full homeowner access to home equities.
The current homestead law "is ridiculous and does not make sense," he said of the property restriction. "Elderly homeowners have considerable equity in their homes that they cannot get out unless they sell them or pay high credit card debt if they need money.
"You can build a swimming pool (using home improvement loans against your homestead) but you can't use it to start a new business or send your children to college."
Wilson, former president of the Texas Bankers Association, said: "I see a very stable economy and our banking industry looks fine. I also see a new growth in independent charters. Although it is not happening here yet there is some interest in banks wanting to come to Corpus Christi.
"This is a reaction to mergers by major out-of-state banking groups. I think the local economy does better if we have Texas-based banks."
Wilson is encouraged that bankers "have taken a more aggressive lending posture. They have worked through all the failures and risks and seem to want to loan more than in the past. They are more willing to work with quality borrowers and consumers and that's good.
"I'm a little concerned that there are too many bankruptcies and overuse of credit but banks are healthy," Wilson said. "Banks are growing with branches and that's good because competition makes us all better bankers."
"I see continued growth in jobs and I believe Corpus Christi is gaining recognition as an untapped quality labor force source," he said.
White said there will continue to be changes of ownership in Corpus Christi banks in 1997.
"There are currently 18 banks in Corpus Christi, indicating a healthy banking climate here," White said. "Most of these banks are headquartered in other Texas cities from Alice to Dallas and only three are headquartered out of state.
"With this many different banks doing business in Corpus Christi, it is inevitable that changes will continue as these financial institutions seek to establish a local presence," he said.
White said Texas consumers could save millions of dollars a year if the Texas Homestead Act is changed to allow homeowners to borrow against the equity and the interest on the loans would be tax deductible.
"I have talked to many new residents moving here from another state who are shocked when I tell them they can't use their home equity as collateral for a loan," White said.
Jones is also troubled about rising bankruptcies and credit card debt.
He sees continued changes in Corpus Christi's banking landscape. And American will break ground soon on a new Southside location on Saratoga and is considering a Westside branch.
"It also wouldn't surprise me to see one or possibly two of our so-called regional banks change hands," Jones said.