Physician niche just what doctor ordered for this small bank

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TransPecos Banks in Pecos, Texas, is relying on a new digital platform to home in on the health care industry.

The $211 million-asset bank has quietly built BankMD, a specialty product it is offering to physicians. The platform is live, but the bank has yet to advertise it.

TransPecos was interested in establishing subject-matter expertise in different industry verticals when Moses Luevano, a veteran health care lender, approached leadership with the idea for BankMD, said Michael Kozub, the bank's president and CEO.

“If you want to win in commercial banking in the future, you have to have some kind of distinctive knowledge and offer some kind of real value to customers beyond loan products,” said Kozub, a former data and analytics officer at USAA who joined TransPecos in the fall.

The San Antonio area is dotted with medical practices and professionals, so BankMD's target audience resonated with TransPecos' executives and board, Kozub said.

“This is a way to stand out in the market and provide value-added services in a way that positions them as forward-thinking and tech savvy, which is so important to customers today, especially younger generations,” said Christine Barry, a senior analyst at Aite Group.

TransPecos joins a growing list of community bank building a digital or fintech brand. Eastern Bank in Boston spun out Numerated Growth Technologies in 2017 and Live Oak Bancshares in Wilmington, N.C., spun out its nCino software platform in 2015.

While it is more common to start digital offshoots for consumers, launching a digital brand focused on a business niche could be something other community banks consider, Barry said.

“We're going to let this opportunity go where it takes us,” Kozub said. “I see us building extensive, long-term relationships with a number of doctors in the area.”

Luevano, who is also a partner at the private equity firm LFIV Group, was looking for a banking partner to build BankMD. His expertise in the health care field sparked the idea to create a digital bank for the industry.

“This BankMD idea has always been something I was interested in trying to develop, but I never found the right partner,” Luevano said. TransPecos’ “leadership team is entrepreneurial and they understood the vision of what we are trying to accomplish.”

Luevano considered starting BankMD as a de novo, but decided the process for obtaining a bank charter was too costly and time consuming.

BankMD is initially focused on offering mortgages to physicians, but TransPecos plans to expand the product set to include personal lines of credit, equipment loans and checking and savings accounts, said Luevano, who is the digital bank's president. He hopes to provide health care professionals with loan decisions in minutes.

Luevano and TransPecos have identified a handful of other states for possible expansion. Luevano hopes to turn BankMD into a national brand eventually.

“The bottom line for us is creating a frictionless experience for physicians and generating market share,” he said.

Luevano, who declined to disclose BankMD’s business volume, said that the brand's "landing page is busy" and that he receives many calls and requests from potential clients.

“We’ve been working hard behind the scenes to make sure we have the right resources and infrastructure in place to handle the volume” once advertising begins, he said.

When asked about starting a mortgage platform late in the economic cycle, Luevano said physician lending is more insulated from economic downturns than other industries.

“It is a good niche to be in,” Luevano said. “I’m not going to blow the doors open, but it’s a niche that if serviced properly can be extremely profitable and will always be there.”

Over time, Luevano said TransPecos could consider licensing BankMD to other community banks. This year, Luevano would like to add more people to the BankMD team and perfect the technology platform.

TransPecos could copy the BankMD concept in other industry niches down the road, Kozub said.

“While we understand the huge value in that local touch, if you want to expand beyond immediate areas you're going to have to compete with the big boys," Kozub said. "This is the way to do that."

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