BROWNSVILLE, Tex. - In full view of the bridge that spans the Rio Grande between here and Matamoros, Mexico, dozens of Mexican boys each day strip off every stitch of clothing, wade in up to their necks, and cross into the United States illegally.

Above the din of the bridge traffic, you can hear the boys chattering - unworried - as they make their way across the dirty stream that separates the two countries. On the other side, they dress and disappear into the crowded streets of downtown Brownsville.

All this in full view of the armed Customs agents and representatives of half a dozen other U.S. government agencies at the crossing gate. The Border Patrol, which alone is charged with policing the ban against unregulated crossing between the United States and Mexico, doesn't have a heavy presence here.

The Peso and the Dollar

The crossings illustrate a simple fact about this border community: Notwithstanding the debate over the North American Free Trade Agreement, the United States and Mexico, at least here, are as one.

And it's Mercantile Bank that has picked up most of the transborder banking business - so it's no wonder that Mercantile, the largest bank in Brownsville, made its logo out of a silver dollar and a peso.

"If Mexico's economy suffered, so would our bank," said Mercantile chairman and CEO E.A. "Gene" Gibbs.

Moreover, if community banks take on the character of their communities, then Mercantile is a pure community bank - taking on the strengths and contradictions of this bustling town.

Spanish Spoken There

One of its top three officers, Graciela Guttierrez, is a Mexican citizen. Nearly 99% of Mercantile's employees are bilingual. It is 97% owned by a wealthy Mexican hospital operator, Olegario Vazquez Rana, but its chief executive is a died-in -the-wool Texan who speaks Spanish only haltingly.

Its annual report is printed in Spanish and English. And, though the the bank recently expanded to the north, Mr. Gibbs said he wished he could open a branch in Vera Cruz or Mexico City, where the bank has hundreds of customers. American banks are barred from owning Mexican banks under Mexican law.

In his 10 years as head of Mercantile, Mr. Gibbs has dealt with more changes in his world than most community bankers, even in big cities, have had to deal with in a lifetime.

Rare Survivor

One of the few MCorp banks to survive that company's 1989 bankruptcy debacle, Mercantile has been at the heart of the blinding growth of Mexican trade here and the mass influx of both people and companies that went with it.

"You really have to know what you're doing down here," Mr. Gibbs said. "It's not like any other banking environment I know."

The difference lies in the fact that almost every facet of daily life in Brownsville, whether business or social, revolves around its proximity with Mexico.

Like the Texas border communities of Laredo and El Paso, Brownsville and the people who do business there have made a profitable sport of building trade around the complex and restrictive barriers, legal and otherwise, that separate the two countries.

Main Trading Partner

Not surprisingly, Mexico is Texas' leading trade partner, with exports totaling $18.8 billion in 1992.

Texas products amount to 44% of the total U.S. products exported to Mexico according to the Brownsville Economic Development Corp.

And Mercantile, with its myriad trade products - such as letters of credit, foreign exchange, international wire transfer, and a host of links with the Export-Import Bank, the Small Business Administration, and the Texas Department of Commerce - is as busy as the toll takers on the Brownsville-Matamoros bridge.

To be sure, Mercantile's competitors all have pieces of the trade action in Brownsville.

Texas Commerce Bank, the Chemical Banking Corp. unit in Texas, has long been a player in Mexican trade business and has a branch down the street from Mercantile's headquarters.

The International Bank of Commerce, a Brownsville subsidiary of a holding company in Laredo, has been making a run for this city's trade business in recent years.

Unparalleled Profitability

No competitor, however, can claim the kind of profits from the business that Mercantile has had. In 1992, it ranked third in the nation among its peers in return on assets and fifth in return on equity.

The key to Mercantile's success is not lending. Mercantile's loan portfolio, in fact, didn't grow at all between 1989 and 1992.

"We do three things in order of importance and volume," Mr. Gibbs said. "They are wire transfer and foreign letters of credit, currency exchange, and, lastly, lending."

In February, Mercantile, flush with $7 million in new capital from owner Rana, bought the First City Bank in Corpus Christi, adding $300 million to its $404 million of assets.

More Traditional Presence

The acquisition, which added eight branches in Corpus Christi to the three in Brownsville and doubled its employees to 500, gave Mercantile a more traditional banking presence, Mr. Gibbs said.

"It's a natural fit for us," he said. "It lessens our reliance on Mexico.

"The loan demand there is stronger as well," added Mr. Gibbs, "so we can put to use some of our liquidity here in Brownsville. And, as it stands right now, we're the only local bank in Corpus Christi with the ability to facilitate business in Mexico."

In Corpus Christi, only 5% of Mercantile's customers trade with Mexico, said James Scott, Mercantile's president, who is managing the Corpus Christi operation.

U.S. Manufacturing Base

By contrast, upwards of 90% of the Brownsville operation's customers trade with Mexico.

In fact, almost everything that goes on in Brownsville commerce has to do with Mexico. The maquiladoras began popping up 25 years ago, and their number mushroomed in the 1980s. Today, 94 U.S. companies have set up factories in Matamoros to manufacture products with cheap Mexican labor.

Maquiladoras - a Spanish word for a miller who grinds grain and keeps a percentage of it as payment - bring in raw materials or parts from the United States, assemble them into finished products, then ship the products back to the United States for sale or export.

The companies in Matamoros range from Fisher-Price to General Motors, and they employ more than 38,000 Mexican workers in Matamoros alone, most of them young women.

Payroll Services

Mercantile comes in with cash management for these operations. To make payroll, for instance, U.S. companies must have the ability to exchange the currency and transfer it to a Mexican bank.

Mercantile performs hundreds of currency exchange and wire transfers a month, aggregating at times tens of millions of dollars.

And the business isn't just in Mexico. Brownsville has seen a boom in company relocations in recent years as U.S. corporations become "more comfortable with Mexican prospects," said Mark Sorensen, executive vice president of the Brownsville Economic Development Council.

Take Trico Products Corp., the world's biggest manufacturer of windshield wipers. It has a maquiladora in Matamoros, but in 1988 it relocated its headquarters from Buffalo to Brownsville.

Financing Triumph

Mercantile, in a coup for a community bank, permanently financed its 350,000-square-foot Brownsville facility. With the maquiladoras come a host of warehouse, industrial parks, shipping, and port businesses on the Brownsville side of the river.

All of which has Gene Gibbs smiling.

"I wouldn't call it a boom-town," he said. "But there's definitely a lot of business going on around here. And the growth potential is enormous. We may have a high unemployment rate [11.75%], but we also have one of the country's fastest-growing labor supplies and the fastest job growth rate."

More Bridges Needed

It's interesting that when asked what is the biggest problem facing Brownsville, Mr. Gibbs and other people in this town don't say immigration or unemployment.

Instead, Mr. Gibbs talks about the need for more bridges across the river. Mr. Gibbs feels that illegal immigration and the problems that accompany it - unemployment, a burden on the city's schools and welfare system - indicate a need to further break down the barriers, both trade and otherwise, with Mexico.

Two-Way Street

"Too many people have the perception that when Nafta is passed, there will be this huge flood of immigrants coming here and a huge flood of jobs going over there," he said. "What you have to realize is that it goes both ways, and it's been going on for 15 years down here.

"The more money people make in Mexico, the better they'll be able to buy our products. Mexico is our second-biggest trading partner, with an economy growing the fastest of any of our trading partners.

"Nafta will just make it easier to trade. But if it isn't adopted, it won't stop what's happening already."

Plucky Decision Helped Save Bank from MCorp Debacle

BROWNSVILLE, Tex. - Mercantile Bank this year nearly doubled in size as a result of an acquisition in Corpus Christi. It's making piles of money servicing the trade business with Mexico.

Things never looked better. Yet the present is even more sweet for Gene Gibbs, chief executive, and James Scott, president. Sweeter because by all accounts, this bank shouldn't even be here.

Mercantile used to be MBank Brownsville, the southernmost unit of MCorp, which filed for bankruptcy in 1989 when its lead banks slipped into insolvency.

Mr. Gibbs remembers 1988, 1989, and 1990 with a shudder.

"It was three years of hell," he said.

Mr. Gibbs and Mr. Scott remember a fateful day in late 1988 when Dallas-based MCorp sent down a $200 million package of loan participations for their bank to buy. MCorp was trying to raise it liquidity, but the loans were junk.

"We both looked at each other, and we both said the same thing," Mr. Scott said. "We said: Do we want to fail this bank or not? We didn't buy the participations."

Two-Year Search for a Buyer

"I was pretty sure I'd get fired," Mr. Gibbs said. "Luckily, the [Office of the Comptroller of the Currency] had just put out a bulletin saying that a holding company couldn't make the management of a subsidiary bank do something that could jeopardize our safety and soundness. We just bucked our bosses, basically."

Lucky for them.

The Brownsville bank was one of five MCorp banks to remain solvent as MCorp collapsed. On April 1, 1989, the day after MCorp filed for bankruptcy and the federal government began arrangements to sell its banks, Mr. Gibbs embarked on a two-year mission to sell MBank Brownsville.

In January 1991, Olegario Vazquez Rana bought the bank, with Mr. Gibbs and Mr. Scott buying a small piece.

They changed the name to Mercantile Bank, MCorp's old name, and in 1992 it was one of the most profitable banks in the country.

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