In Guaranty Bank, BBVA Compass scored a rare find — a failed bank with almost no baggage — and it plans to make the most of it.

BBVA Compass, the U.S. unit of Banco Bilbao Vizcaya Argentaria SA in Madrid, discovered an eager work force at the Texas bank, but an otherwise blank canvas for consumer products and small-business lending, since the bank had focused primarily on mortgage purchases. Less than a month after converting 164 branches in California and Texas, BBVA Compass is set to begin product promotion in earnest.

Shelaghmichael Brown, the head of retail banking at BBVA Compass, is ready to test what amounts to a whole new creation.

"We get to bring robust products to these branches," she said. "When we got to Guaranty, there was no mortgage lending and no credit cards, some home equity and minute small-business activity. We just need to help drive more traffic."

Brown said BBVA Compass is keen to build branches and buy more U.S. banks to boost distribution for a flurry of new consumer products, and is equipped to proceed if the right opportunity surfaces. "We'd love to do an acquisition in Colorado," she said, and smaller deals in Texas are possible. Longer-term, BBVA will "need more scale" in California and Florida, she said, but there is no rush to double-down in those states.

BBVA Compass closed only two dozen Guaranty branches when they were converted last month. The business model, along with the commanding size of its principal rivals, will nudge the company toward acquisitions that build share in specific markets.

"We'll never have the branch system that some of the major banks have," Brown said this week at American Banker's Best Practices in Retail Financial Services Symposium in Orlando.

In Texas, where BBVA Compass is the fourth-biggest bank by FDIC deposit market share data, executives are focused on four cities: Austin, Houston, Dallas and San Antonio. The company is a distant 14th in Colorado, where roughly a third of its 36 branches are in Denver.

Brown touted several new consumer products BBVA Compass is aggressively pursuing, including small-business loans, offering credit cards branded with a customer's logo and free checking products with features built around the client. In an interview, she said California is a prime area to pitch those products.

"Our branches are well located for small business," she said, adding that many banks in California have focused strictly on consumer products such as mortgages and not small business. BBVA Compass found, for instance, that only a handful of Small Business Administration loans were made last year in Fresno.

BBVA Compass typically defines small-business customers as those with less than $5 million in annual sales and loans of $500,000 or less. It runs small business out of its commercial division, but Brown said the retail network generates 60% of that business.

Curtis Carpenter, a managing director at Sheshunoff & Co., said BBVA Compass will need strong leadership to make inroads in the less familiar California market. "In Texas, you could easily see how they could effectively roll out small-business products," he said. "In California, it seems like more of a boot-up, which could make for a more daunting challenge."

Guaranty was built around the purchase of failed savings and loans in the 1980s and had grown largely by purchasing mortgages from other lenders and funding the assets with borrowings and high-cost certificates of deposits. By the time the FDIC stepped in, the bank had been barred from taking in any more mortgages. Employees were good at service but had never been trained to actively sell products.

Brown said BBVA Compass is instilling a new culture. Managers are in the branches teaching sales practices to employees. Within two years she said Guaranty branches should be selling an average of 4.8 products per customer household — the level of other BBVA Compass branches.

Matching that performance would be a major accomplishment, given that most Guaranty customers only had one product, which was often a deposit account. Brown would not get into details, but she said BBVA Compass had to balance reducing rates for CD and money market accounts. Reluctant to give amounts, Brown said BBVA Compass has been able to increase checking balances and avoid "severe" CD runoff at Guaranty branches.

Brown said the Guaranty branches this month introduced a product for first-time homebuyers that waives payments for the first three months (with no interest accruing) and requires the completion of a financial literacy course. The branches are also offering two new credit cards: one that is secured by a savings account balance and another that rewards cardholders for good payment behavior. "We've gotten good response across the franchise," she said.

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