The San Antonio Business Journal

West Texas bank with SA roots starts online bank for doctors

The following article was originally published on October 29, 2018 by Kristen Mosbrucker, Reporter at The San Antonio Business Journal.

The holding company of TransPecos Banks in San Antonio has launched an online-only bank tailored for doctors across Texas — without filing for a new bank charter.

BankMD is an affiliate of TransPecos Financial Corp., the parent company of TransPecos Banks in West Texas. The bank was acquired several years ago by an investor group led by Patrick Kennedy of local law firm Kennedy Sutherland LLP. Dub Sutherland, who is a partner at Kennedy Sutherland and a former CEO of TransPecos Banks from 2009 to 2011, told the Business Journal that the lawyers have been conceptualizing niche banks for several years.

“The ability to create an affinity brand where you really focus on a group’s needs is just a big opportunity and something that a bank can build a team around,” Sutherland said. “We try to let those [West Texas] market presidents take care of their own committees, and then in San Antonio we focus on new initiatives. We intend to further develop these niches.”

BankMD leverages the software technology of Miami-based startup Nymbus Inc. for issuing debit cards or account origination, while the deposits and loans are made under TransPecos’ charter. Sutherland said he found Nymbus while reviewing deals for clients. The Miami technology startup has raised $28 million from fewer than a dozen investors since its inception in 2015. Nymbus’ software connects with legacy computer software controlled by the bank, enabling the user experience to be more smartphone-friendly.

Prospective customers of BankMD may be early career doctors looking for mortgage loans. Many physicians early in their career are saddled with heavy student loan debt and are light on cash, so the online financial institution offers 100 percent loan financing for some mortgages, rather than the standard 80 percent.

The goal is to bring physicians who are accomplished executives into the professional network through the bank to connect with those looking to build practices. Future plans in the works include small business banking, commercial lending, real estate construction loans and leveraging physician practice buy-outs. The bank plans to start underwriting unsecured small business loans up to $300,000 for physicians.

The Permian Basin’s economic boom has largely not been a factor in the bank’s decision to expand.

“Our deposits have probably gone up because the individuals that we bank in West Texas have more income coming in, whether that’s royalty or a better-paying job because of the boom out there in that Delaware Basin, but we haven’t seen an uptick in loan volume because of it,” Sutherland said.

Deposits for TransPecos Banks grew about 15 percent from June 2017 to June 30, according to Federal Deposit Insurance Corp. records. TransPecos Banks hold about $175 million in deposits across three physical branches.

TransPecos Capital Trust I and TransPecos Statutory Trust I are subsidiaries of the San Antonio-based holding company. Kennedy held roughly 81 percent of stock in the bank, according to records on file with the Federal Reserve Bank of Dallas. James and Mecca Kenney in Pecos, Texas, own 8.6 percent of the bank, while Dub Sutherland holds about 1 percent. Retired Texas Instruments chairman James Adams holds about 1.6 percent of the bank, and John Kerr — chairman of Azaya Therapeutics — owns about 3.3 percent in the bank, records show.

While lawyers owning a bank may seem like an unusual fit, Sutherland said the firm’s partners incorporate practices from financial institutions across the country that it has represented over the years.

“We get to see the good, the bad and the ugly,” he said.

TransPecos Banks had $194 million in total assets as of June 30, the most recent data available, up from $151 million as of June 2017. The bank underwrote $23 million in commercial and industrial loans as of June 30, records show.

Mike Kozub, a former data and analytics officer at USAA, was hired as CEO of TransPecos Banks in October.

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