Community banks in Texas border towns could reap huge rewards from the state's new interstate branching regulations.
Catherine A. Ghiglieri, Texas banking commissioner, announced this month that state-chartered banks may branch and merge across state lines. She did so to grant state banks the same expansion power as national banks, whose right to branch under federal law was affirmed in Texas after a court battle.
"A lot of our community banks want to do business in adjoining states," Ms. Ghiglieri said, pointing to banks headquartered near the Arkansas, Louisiana, Oklahoma, or New Mexico borders. "I expect quite a bit of activity from them."
Her decision could also open the door for community banks in neighboring states to branch into the Lone Star State.
Texas community bankers said they have no immediate plan to branch across state lines, but they were clearly pleased at getting the expanded branching power.
"We see this as an opportunity," said Michael D. Hensley, president and chief executive officer of Van Horn State Bank, which is located about 85 miles from the New Mexico border. "Any action that can make us more competitive and broaden our markets is super."
B.A. Donelson, president and chief executive officer of First State Bank in Stratford, said he will consider branching his $120 million-asset bank into Oklahoma, whose border is just 15 miles from the bank's headquarters.
Texas had been one of two states that opted out of the federal interstate branching law. In 1997, the Office of the Comptroller of the Currency approved NationsBank's application under the National Bank Act to merge its Texas bank charter with the North Carolina charter it had brought out to a New Mexico-Texas border town under the interstate branching law.
Texas regulators opposed the OCC action because it ignored the state's decision to opt out of interstate branching and would exempt NationsBank from paying more than $10 million in franchise taxes. A Texas court upheld the OCC this month. So Ms. Ghiglieri, taking an "if you can't beat 'em, join 'em" stance, quickly approved the same power for state banks.
Out-of-state community banks could also benefit from the new ruling. David E. Rainbolt, chief executive officer of BancFirst Corp. in Oklahoma City, said his $1.5 billion-asset community bank holding company can now be a serious bidder when Texas banks go up for sale.
Mr. Rainbolt said BancFirst previously had passed on acquisitions in Texas because it would have been too expensive to maintain a charter there.
"If we were a great big company, it would be O.K.," he said. "But we buy small banks, one or two at a time. There weren't any cost savings."
BancFirst now plans to bid on banks based in county-seat towns in northern Texas, Mr. Rainbolt said.
Other cities likely to attract out-of-state community banks are El Paso, near the Texas-New Mexico line, and Texarkana, a Texas-Arkansas border town, said bank consultant William H. Strunk, chairman of Strunk & Associates in Houston.
