Should Dick Evans be able to sleep at night?

Though not a small company at $15 billion of assets, his Cullen/Frost Bankers Inc. in San Antonio is nevertheless going toe-to-toe against the nation's banking giants — which have only grown during the recession — in the coveted Texas market.

"I really don't worry about having the big players" in Texas, Evans said. "I really enjoy it. It gives us an opportunity to take business from them."

Cullen/Frost has been booking record deposit growth — including 10.2% last quarter. Though some of that growth no doubt comes as money fleeing from equities, the company does display a road map for taking on the titans, analysts say.

Cullen/Frost's secret is no secret at all, which reinforces just how important it is for the nation's smaller banks to stay within their comfort zones. Many tactics of regional banks — their emphasis on service to draw depositors, smart loans to local businesses the banks understand and an all-out effort in carefully chosen markets — are not new ideas but fundamental avenues to success in the current dismal economy.

Maclovio Pina, an analyst at Morningstar Inc., said that Evans' customers and others like them have different outlooks after being inundated with news about national banks teetering during the recession.

"Some people now trust the smaller, regional banks more," Pina said.

Right now, the top rank is entrenched. Bank of America Corp., Wells Fargo & Co., and JPMorgan Chase & Co. controlled 33% of the country's deposits in 2008. Before the recession began, those companies had held 23% of all deposits, according to SNL Financial. Each boasts a share of at least 10%. No. 4 on the list, Citigroup Inc., has a 3.49% share.

Though their outsize scale gives the three deposit leaders an edge in products like credit cards and mortgages, industry experts say nimble regional players can steal market share by stressing their local roots and being big on a small scale, with lots of automated teller machines and branches. Smaller banks can still claim the upper hand on service and relationship-building, the experts said.

"The fact that Bank of America has [12%] market share, I don't think that worries XYZ bank in a little market," said Mark Fitzgibbon, the head of research at Sandler O'Neill & Partners LP. "They know they can compete with Bank of America head-to-head in their market."

Richard Carrion, the CEO of Popular Inc., a Puerto Rican bank with about 100 branches in the mainland United States (nearly half in the New York-New Jersey area), agreed that deposit gathering is a local game. This is why his company is most worried about the bank branch down the street rather than the company with the largest national deposit share.

"You are really looking at the immediate space around the branch. Size does help you in giving you a good marketing umbrella and all that," Carrion said. "At the branch level it really is the branch manager and that team that makes a difference."

Cullen/Frost ranked eighth in Texas last year with $10.8 billion in deposits, or 2.22% of the market, according to last year's data from the Federal Deposit Insurance Corp., which usually releases a summary of banks' deposit shares in October. JPMorgan, Bank of America and Wells Fargo were ranked first, third and fourth in Texas, respectively.

Evans said his company — with more than 100 sites in the state — has not really altered its strategy to take on the national banks. It is benefiting from what it always does, he said: catering to customers with good service and fair rates while stressing its local roots as consumers and businesses save more.

For instance, a recent advertisement noted that Cullen/Frost has been active in the state for 140 years while proclaiming: "Texas is the 10th-largest economy in the world. We're its bank."

Thomas Chen, the managing director and group head of the financial institutions group at Piper Jaffray & Co., said smaller banks must concede to the banking giants the market for credit cards and specialty lending like leverage finance. But the field for local deposits and business lending is wide open.

"On the left hand of the balance sheet there is a barrier to entry that has been created by five or six large banks," Chen said. "There is still room for regional firms to have a better product offering, better customer service, better local market knowledge to effectively compete with the large, large institutions."

Bart Narter, a senior vice president in the banking group of Oliver Wyman Group's Celent, said regional players need "density" locally to compete. This means having a high concentration of ATMs and branches in their areas to improve customer convenience and ease technology costs.

"Consumers prefer to be able to access their cash fee-free at a large network," Narter said. "That doesn't mean you need a nationwide footprint."

Building density at a local level was a key reason that Buffalo's M&T Bank Corp. recently bought Provident Bankshares Corp. of Baltimore. M&T now has more than 1,000 places in and around Baltimore and Washington where its customers can do business, having picked up 135 branches and 190 ATMs in its Provident deal.

"We think that convenience [of] being big in communities we choose to operate [in] gives us an advantage," Rene Jones, M&T's chief financial officer, said in an interview with American Banker last month. "With the largest distribution system in the Baltimore-Washington corridor, it positions us very well."

Suzanne Moot, a banking consultant at M&M Associates, said smaller banks have other ways to compete if their presence is outmatched by bigger players in their market. They can join no-fee ATM networks, for example, and keep their branches open longer.

"You can win on a number of other fronts," she said. "You can be competitive on branch hours. You can be competitive on your customer service center. In the lending arena they can be very competitive because they do know their local market pretty well."

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