Texas Banks Ride Economy Back to Pinnacle

Article excerpt

Texas banks' rise from the depths of the oil and gas bust of last decade shows no sign of cresting.

After taking a steep dive during the late 1980s and early 1990s, total assets and net income soared to records at the end of last year, heralding the comeback of an industry that was once a center of regulatory concern.

The previous record for total assets in the state was set in 1985, at the height of the Southwest's energy and real estate boom and just before the economic collapse that led to the failure of 512 banks in a dozen years.

"The whole state of Texas is extremely healthy," said William Strunk, chairman of the Houston investment bank Strunk & Associates, which issued a report on the health of the state's industry.

The recession "kind of fleshed out the (list of) people who shouldn't have been in the banking industry anyway," Mr. Strunk said. "What's left is good, hard-core bankers who know what they're doing."

"We've got a very healthy economy, and the banks are very reflective of that healthy economy," said Byron L. Calcote, senior vice president of Texas State Bank, a subsidiary of $1.3 billion-asset Texas Regional Bancshares, McAllen. "Most bankers believe that the economy is going to remain good, certainly through the next year."

The Strunk report said the state's 891 commercial banks reported total assets at the end of last year of $212.7 billion, topping the 1985 mark. In that year, Texas banks numbered 1,936 and held $209 billion of assets.

Net income also reached an all-time high in 1996, at $2.5 billion.

Banks owned by out-of-state holding companies, which hold 60% of the state's assets, reported an average return on assets of 1.18%, while independent banks yielded 1.28% despite a sizable increase in loan-loss provisions and a record payout in dividends.

"The banking system in Texas has returned to health in a big way and is at an all-time high," Catherine A. Ghiglieri, state banking commissioner, told the Texas Bankers Association in a May 9 speech. …