By Kenneth Pybus
Originally published in the Houston Business Journal, February 16, 1997
For a long time, Horizon Capital Bank in Webster was content with its small-town headquarters and a pair of limited retail branches in southeast Harris County malls.
But things are changing fast for the 34-year-old financial institution.
The $100 million bank is going forward with plans to open two new branches this year — one in east Houston and another near the Johnson Space Center in Clear Lake.
While the profit potential is uncertain, the branches will create new customer bases and give Horizon Capital more alternatives in the market.
“The branches we have planned will complement what we already have,” says bank President Aaron Schein. “We’re going into different areas — different from where we’ve been before.”
Horizon Capital isn’t alone. In recent weeks, a half dozen financial institutions headquartered on the city’s outskirts have taken their first steps toward adding full-service banking offices closer to the urban core.
Houston’s larger banks have been in an expansion mode for the past few years, but most financial institutions on the suburban fringes have only recently been bit by the branching bug.
Financial industry analysts say the local banking market is following a statewide trend.
“If you go to towns like Tyler or Abilene, you’ve been finding this for a while,” says local banking analyst Bill Strunk. “All the rural banks are opening offices closer into town.”
Financial institutions that were once content to corner their small ponds have decided to swim with the big fish in a larger market for a variety of reasons.
Wallis State Bank first tested the local waters in 1993, when it opened an inner-Loop branch on Westheimer. Now the $90 million bank with branches in such towns as Eagle Lake and Fulshear is planning to enter the Southwest Houston market at U.S. Highway 59 and West Airport Boulevard.
Wallis State Bank President Fred Allen is hesitant to discuss details about the branch application filed with the Texas Banking Commissioner, but he says the rural bank has already found some niche success in the heart of Houston.
“The Houston branch already has performed very well,” Allen says. “The branch we have filed on is a logical extension of our coverage area.”
Pearland’s First Community Bank, formed in 1995, hasn’t waited as long as others to branch closer into Houston. Last year, the $33 million bank opened an office in Houston proper, and last week sought approval to establish a presence in Pasadena.
“The opportunities are out there,” says Nigel Harrison, president of First Community. “We’ve found a solid group of individuals and business owners interested in what we can provide.”
Webster’s Horizon Capital has found similar interest, despite differences between its original banking customers and those now being targeted on the city’s east side. The Webster customer base is primarily white-collar with strong ties to NASA, while the new branch locations in more blue-collar industrial areas will cater to mostly minority and lower income clientele.
Dallas bank analyst Marshall Surrat says he’s seen the same trend on a smaller scale in the Dallas/Ft. Worth area. And he says the groundwork was laid in recent years by consolidation.
“Many of the smaller banks that were out there have been gobbled up in the last five or six years by a set of megabanks,” he says. “That’s no secret, everybody knows that. But this is just one of the side effects you might not think of right off the bat.”
Some industry analysts say that limited prospects for growth in their own home territories are pulling suburban banks closer to town, where the opportunities for expansion are much greater.
“That’s where the growth is,” says analyst Strunk. “You’ve got to go where the money is, and most of the time that’s in the big city.”