Mike Koch, Regional President, Happy State Bank

In an interview with Invest:, Happy State Bank Regional President Mike Koch highlighted San Antonio as a key growth market. Its new branch will focus on small businesses, with bilingual staff and community-centric features. Koch emphasized local decision-making and resilience amid real estate uncertainty: “We’re staying focused on what we do best: supporting our communities.”

What makes San Antonio a key market for Happy State Bank’s continued expansion?

San Antonio is the second-largest city in Texas, so it plays a significant role in the state’s economy. Texas itself is one of the best markets in the world, and San Antonio is a vital part of that. For us, it was a gap in our footprint. Our first branch here opened in mid-August, and after that, I’ll begin working on a second one.

San Antonio has all the right economic drivers. It’s business-friendly, and companies continue to move here from across the country. We may lose one or two, and it gets some attention, but overall, this market is still growing. Even if we hit a dip or a challenge, the long-term outlook remains strong.

How is Happy State Bank positioning itself to serve emerging enterprises and growth sectors in San Antonio?

We’re specifically focusing on small to midmarket businesses. We’re not chasing the super-large entities. The first branch includes a lending team focused on small businesses, as well as full-service offerings in mortgage, wealth management, and trust services.

That branch is located in northwest San Antonio off Huebner Road, near the medical district and UTSA’s campus. It’s a modest-income area, but it’s surrounded by strong growth. We also have branches in Boerne and New Braunfels, which support the northern edge of the metro area.

What differentiates Happy State Bank from other competitors in the market?

Most banks talk about their people, and our people are critical. What sets us apart is how we operate. We’re a large bank in aggregate, but many of our functions are decentralized. That allows us to make local decisions.

Our market president in San Antonio will have significant autonomy. He’s dynamic, well-connected, and will influence how we do business in the city. We’re conservative in our approach, which means we might not always offer the lowest rates, but we’re consistent. We don’t pull back when things get tough.

For example, a year ago, when many banks stopped lending, we kept going. And now that some of them are offering low rates again, we remain disciplined. Our approach is about being here today, tomorrow, and through any downturn that comes.

How are you attracting and staffing talent for your new branches?

People want to be where it’s exciting, where leadership is supportive and ambitious. We encourage our team to act like they own the bank. That kind of autonomy and entrepreneurial spirit draws good leaders.

In San Antonio, we specifically sought bilingual staff. For the Huebner branch, I wanted people whose first language is Spanish. That has been a challenge, but I believe we’ve got the right team in place now.

It’s also our first branch with a children’s play area. Given the modest income in the area, we wanted to be thoughtful of our customers’ potential needs. We want the branch to feel like it was built for them.

How do you integrate community into your banking strategy?

We strive to be highly integrated in each community we serve. In Kerrville, for example, after the recent floods, our market president there, Greg, was fully engaged in the response. We created a donation account, and I offered to match the first $20,000. When donations hit $31,000 in five days, our chairman increased the match to $250,000. Customers brought supplies from other branches; there was a real sense of family.

Our approach varies by location, but we try to customize our engagement to each market. In San Antonio, our market president is deeply involved — he even participates in Fiesta events, which are a major part of the city’s culture. We want to celebrate with, mourn with, love, and support the community through all circumstances.

How are real estate pressures and market uncertainty shaping your outlook on banking in Texas, particularly in a city like San Antonio?

We’re at a challenging moment in both commercial real estate and the one-to-four family housing market. The one-to-four family segment is a major economic driver nationally, and right now, it’s stalled. New home sales are happening, but resales are largely stagnant across most Texas markets, including San Antonio.

We are seeing increased inventory, primarily in resales, and purchasers are driving terms. The increased inventory creates downward pressure on home values, which erodes consumer confidence and perpetuates the challenge. There is another potential challenge in that institutional investors jumped into the 1-4 family residential space, and their portfolio performance has not met expectations. Without improved rates or rental income, the institutional investors could exit the space nationally, which will exacerbate inventories and drive prices lower. We stand at the edge of what could be a challenging period for consumers and banks if the market does not improve.

We’re on the edge of a precipice. If rates don’t fall and institutional holders start selling, it could be a rough stretch, not just for consumers, but for banks. Whether or not one-to-four family loans are classified as commercial, for many banks, they’re part of the same portfolio. That adds to our risk exposure.

What could help is a drop in mortgage rates. I’ve said before — and still believe — that if rates can reach 5.875%, just under 6%, the market could pick up momentum again. But that’s still nearly a full percentage point below current levels.

On the commercial side broadly, we’ve overbuilt in areas like industrial and warehouse space, and absorption has been slower than expected. Office and retail are already under pressure. We’re in a place where the market either stabilizes or we face a downturn. It won’t be as severe as 2008 to 2010, but it could be difficult.

San Antonio, however, continues to be strong and plays a crucial role in the state’s economy. Texas remains one of the best markets in the world, and San Antonio is a vital part of that. The city was a missing piece in our footprint. Our first branch opened in mid-August, and we’re already planning for the next.

It’s a business-friendly market with the right economic drivers — chip manufacturing, corporate relocations, and continued population growth. Even if we see short-term dips, the long-term outlook is strong.

I’ve lived through market cycles like this since the 1980s, both as a banker and as an investor. We always come out the other side. I hope that policymakers and investors don’t panic. If rates soften and institutional players hold steady, we’ll weather this.

In the meantime, we’re staying focused on what we do best: supporting our communities — San Antonio included — the best way we know how.

What are your key priorities for San Antonio over the next 12 to 24 months?

Our priority is to engage with and serve small businesses in the area, starting with a half-mile radius around our first branch and expanding from there. We want to connect with business owners whose goals align with ours and support them as they grow.

It’s less about hitting specific growth numbers and more about quality service. We’re focused on identifying people and businesses that align with our values, whether they’re entrepreneurs, nonprofits, or consumers with unique cultural or religious needs. We love San Antonio.