AUSTIN — Start-up capital appears to be drying up in some markets, but it is still flowing freely in Texas and is starting to trickle into the state's second-tier cities.
So far this year, organizers have filed applications to open banks in Lubbock, Waco, and Corpus Christi, which have not had bank start-ups in more than a decade.
Observers said smaller cities are drawing attention because, as in larger markets, acquisitions have thinned the ranks of hometown banks. They also point out that the populations of these areas are growing as people flee more expensive cities.
"It makes sense that other Texas cities are showing some growth," said Dan Bass, the managing director of Carson Medlin Co.'s Houston office. Bank organizers are considering these areas, he said, because "there is a lot of money out there looking for investments, and the worst you can do with a bank is get your money back."
Lubbock, Corpus Christi, and Waco are hardly backwaters. Lubbock and Corpus Christi have populations above 200,000, Waco's tops 100,000, and all three are hubs of commerce and higher education.
But when it comes to new banks, investors and organizers have largely set their sights on the state's five major metropolitan markets: Houston, Austin, San Antonio, Dallas, and Fort Worth. All but three of the 50 banks started in Texas in the last five years opened in those markets.
Those areas remain hotbeds, but capital is also making its way to Lubbock, where two banks are in organization. One of them, Platinum Bank, is to open next week with about $15 million of capital.
Across the state, in the coastal city of Corpus Christi, a group has purchased real estate for the headquarters of what is to be Charter Alliance Bank. In Waco, a group that wanted to buy a bank but could not make a deal work has filed to charter a new bank instead.
A bank is even set to open next week in Bellville, which has a population of about 4,300 and is 64 miles from Houston. Austin County State Bank, named for another local bank that was sold in 2000, would be Bellville's first new bank in nearly a century. It is to open with $6 million of capital — $1 million more than organizers had been seeking.
Lee Bradley, a managing director with Samco Capital Markets, said he expects an acceleration in start-ups in smaller Texas cities.
"I think there is going to be more activity in smaller markets as bankers see others become successful," he said. "Once one guy paves the path, it motivates someone else to try."
Mr. Bradley said capital "is getting tougher to come by" in states such as Florida and Georgia, former start-up hotbeds that many investors now view as overbanked.
Investors are also skittish because the economy is slumping in pockets of the Southeast as the housing markets have cooled.
"Institutional investors are being more selective about where they are going now," Mr. Bradley said. "You'd be hard-pressed in Florida to get an institutional investor."
It's a different story in Texas, where the economy remains strong and sellers are still raking in hefty prices. Already this year 11 banks or thrifts have opened, compared with five at this point last year.
Eric Shero, who would be the president and chief operating officer of Alliance Bank of Central Texas in Waco, said finding capital has been as easy as opening his mailbox.
"I'm getting letters all the time from people I don't know, blindly asking if they can invest in our bank," he said. He had just received a letter from an Austin woman looking for an investment, he said.
Greg Garrett, Platinum's president and chief executive officer, said raising the capital went very smoothly.
The day Platinum opens it will have assets of $80 million, because Mr. Garrett has made a deal with the $315 million-asset First National Bank of Monahans to buy the branch he started for First National in 2003, after a bank he was working for was acquired.
"Although it's a de novo, it's a different kind of de novo because I am buying the assets and liabilities of this particular branch," Mr. Garrett said.
Platinum intends to open a second Lubbock branch over the next 18 months and to focus on real estate lending, agriculture, and commercial businesses, he said.
Another Lubbock start-up, Lone Star Bank of West Texas, is being organized by a group of bankers who left State National Bank after it was acquired by Banco Bilbao Vizcaya Argentaria this year.
Alan Lackey, its chairman, CEO, and president, said that about 23 people have joined the organizing bank, which is to open simultaneously with a five-employee branch in Odessa.
Lone Star is expected to open by yearend. It plans to raise $20 million to $30 million.
"It's pretty easy to raise capital right now. I'm confident we will be able" to raise the targeted amount, Mr. Lackey said.
He said Lone Star lenders are already booking loans for the $2.3 billion-asset Amarillo National Bank, which would hold a minority stake in Lone Star and sell back loans when it opens.
The toughest part of getting Lone Star off the ground will be attracting deposits, Mr. Lackey said.
According to information provided by Carson Medlin, Lubbock has one of the state's highest ratios of branches per person. Of the 66 metropolitan statistical areas in Texas, Lubbock ranks 48th, with only 2,776 people per branch.
Mr. Lackey said he is counting on its Odessa branch to help pick up the slack. The Odessa area is home to a number of oil and gas fields and, as a result, is rich with deposits.
It also has a lower ratio of people per branch than Lubbock. According to Carson Medlin, it ranks 23rd in the state, with 4,088 people per branch.
The $144 million-asset Charter Bank, on the northwest side of Corpus Christi, is to own 51% of Charter Alliance Bank, which plans to open on the south side of the city, said Raleigh Cosby, who would be Charter Alliance's president.
Mr. Cosby, a senior vice president of Charter Bank, said the organizers decided to seek a new charter instead of building a branch because a new investor group wanted to invest in the bank, but current stockholders in Charter Bank, a subchapter S corporation, did not want to dilute ownership.
"The bank will have an investor group that we hope will bring new business to the organization, and without that group, we don't think we can get that business," Mr. Cosby said.
By participating with Charter Bank on loans, Charter Alliance would significantly increase what would be a $750,000 loan limit provided by the $3 million of capital investors are raising. The combined loan limit would be around $3 million.
Mr. Cosby said his group is still awaiting regulatory approval. He did not say when he expects the bank to open.
