Steve Thompson, CEO, Texas Gulf Bank

In an interview with Invest:, Steve Thompson, CEO of Texas Gulf Bank, discussed Houston’s banking landscape, growth opportunities for community banks, and the city’s economic momentum. “Houston provides tremendous opportunities across the board,” Thompson said.

How would you describe Houston’s business climate and the trends shaping the banking sector today?

Houston and Texas have seen tremendous merger and acquisition activity in banking over the past year. My former bank, Prosperity Bank, entered into a large merger with Stellar Bank, which expanded its market presence in Houston. We have also seen regional banks acquired by places like Ohio and Pennsylvania. There has been a strong interest from outside institutions in Texas growth markets.

That creates an opportunity for Texas Gulf Bank because we are one of the few remaining community banks in Texas with the ability to make decisions locally. Many banks have become large and corporate through consolidation. Some customers like that model, but many still want relationship banking and local decision-making.

We have been around for more than 100 years. The bank was chartered in 1913 in Freeport, and over the last few years, we have expanded more heavily into Houston. We are now headquartered in CityCentre and have more than 125 employees across 10 branches, from The Woodlands down to Freeport. 

Houston itself gives us a strong runway. Population growth remains positive, real estate is healthy, and the business community is resilient. Everyone seems to recognize that the city offers unique opportunities across industries. I was hired to grow the bank, and that is what I intend to do.

What is your approach to growth?

There are really two ways to grow a bank. You can do it organically by hiring strong lending teams, building customer relationships, and growing that way, or you can acquire other banks. There has obviously been a lot of M&A activity in Texas.

I do not think Texas is done with consolidation. One challenge across the industry is succession planning. There is a generation gap in commercial banking because many people did not enter the business during the 1980s and 1990s, when many Texas banks failed. As a result, there are fewer bankers in leadership pipelines today.

That dynamic creates opportunities for us. There are talented bankers who do not want to work for large institutions. They want to work somewhere they can make a difference. We can be selective with talent, and that allows us to continue growing.

We are a disciplined, risk-focused institution grounded in traditional banking principles. At the same time, we are committed to responsible growth. Our flat, relationship-driven model, strong talent base, solid balance sheet, robust capital position, and continued investment in systems and processes position us to grow and expand into new markets.

Right now, though, our focus is on Houston because there is so much opportunity here.

Which sectors are creating the most opportunities for Texas Gulf Bank?

Construction and commercial real estate have been hallmarks of this bank for a long time. We are also trying to grow our commercial and industrial book.

Some areas of lending have become more difficult because many banks are underwriting aggressively. Stabilized retail and multifamily, for example, can be challenging for smaller banks when larger institutions are willing to offer non-recourse structures, lower rates, and longer terms.

Where we have been particularly successful is ground-up development. We are good at building projects, and that continues to be an area of focus for us.

How does the bank differentiate itself in lending?

One of the advantages of a bank our size is that we do not silo our lending teams. Our lenders are generalists. We do not separate commercial real estate from C&I lending into different groups. That gives us the ability to be nimble.

A customer may need an operating line for their business, financing for a building purchase, an investment property loan, or even a home loan. One officer can service all of those requests. Our goal is to be a one-stop shop for our customers.

That approach allows us to take a holistic view of a business and move quickly. It is one of the ways we add value as a smaller institution.

How would you describe commercial real estate conditions in Houston today?

Class-A office properties are performing well. If you have a new, high-quality building, it is getting filled up. Class-B office is much more difficult. Fortunately, that is not an area where we have heavy exposure.

Multifamily remains solid because population growth is still strong, although there has been some softening over the last couple of years. Retail is also performing well in Houston. The city has a strong reputation nationally, and tenants are willing to commit to space here.

Overall, Houston has been resilient. People are still moving here, and that supports demand. Multifamily development slowed because projects became harder to finance over the last couple of years, particularly from an equity standpoint, but as supply diminishes, demand should strengthen again.

After several years of higher interest rates, are businesses becoming more confident about borrowing and expansion?

While no one can predict the path of rates, there is a growing acceptance that current levels may persist for some time. As a result, businesses appear more willing to move forward with borrowing when the underlying economics—such as IRR and return on capital—are compelling, though the cost of funds remains a key consideration in decision-making.

On the real estate front, there has definitely been a wait-and-see approach among some developers. Many expected rates to come down faster than they have.

A lot of loans were underwritten several years ago at much lower rates. When those loans convert to current floating rates, properties can struggle to cash flow. If a project was underwritten at 4% and rates move closer to 8%, that creates pressure.

Some office buildings are clearly under stress, and some multifamily loans have required extensions or restructurings. Still, Houston has weathered the environment fairly well compared to many other urban markets, and continued population growth and a strong business environment in Texas in general should support ongoing borrowing demand and expansion.

How are customer expectations changing amid industry consolidation?

A bank our size has a different focus than a large institution like JPMorgan. We typically focus on loans between $1 million and $10 million. Many larger banks are not interested in that segment because they are focused on bigger transactions.

That creates opportunity for us because there are many excellent businesses in that range, including multigenerational companies that want long-term banking relationships. They want to work with people who know them and understand their business.

We are also privately owned, which gives us stability. We are not tied to a public stock price, and we have the ability to weather downturns. Customers who have been through cycles understand the value of that consistency.

How are you attracting and retaining talent?

Some bankers do not want to work for large institutions. They want to work somewhere they can move the needle and make a difference. Houston is relationship-driven, and people talk within the banking and business communities.

It took a lot to pull me away from Prosperity Bank because it is a fantastic institution. What attracted me here was the opportunity to help grow Texas Gulf Bank and make a real impact.

The bank was already in strong shape when I arrived. It is conservatively run, has a strong balance sheet, and there was nothing that needed to be fixed. It simply needed growth. That has been a compelling message when speaking with other lenders.

How is the bank investing in technology?

I was pleasantly surprised by the technology platform when I arrived. I expected we might need significant upgrades, but the ownership had already invested heavily in improving the bank’s systems.

We recently implemented an in-house AI program that has been a beneficial tool for the organization. In terms of technology offerings, both internally and for customers, I believe we are highly competitive with much larger institutions.

What are your top priorities for the next two to three years?

Our priority is to grow in the right way and continue doing the things that have made the bank successful for more than a century.

Houston is no longer just an oil town. It has a diverse economy and opportunities across many industries. People are moving here, companies are moving here, and industries are expanding here.

With the port, the city’s geographic position, and the continued growth across sectors, Houston provides tremendous opportunities across the board.