About three years ago, TransPecos Financial Corporation, the holding company for TransPecos Banks in San Antonio, Tex., began offering mortgage loans to newly graduated doctors under the brand name BankMD. “Internally we call these ‘baby doc’ loans. They have zero in their bank account and a ton of debt. Basically they’re HENRYs – high earners, not rich yet,” said TransPecos Financial Corp.’s General Counsel and Chief Strategy Officer Dub Sutherland. “In the aggregate, they’re still a great risk.”
Sutherland said the bank was lucky enough to hire an expert in healthcare banking and the program took off. The idea is simple. A representative visits area medical schools around graduation time to meet with new doctors in a group setting and discuss mortgage options. BankMD offers a 100% loan-to-value mortgage loan to these customers, as well as a separate line of credit to cover items like furniture. But there was just one thing missing.
“We weren’t capturing and building any deposit relationships because our legacy core can’t handle a second brand like that,” said Sutherland.
The bank had already started a search for a new core processing platform and eventually narrowed it down to two: a long-established legacy core and SmartCore from NYMBUS. According to Sutherland, while the legacy core may have been better suited for the bank’s short-term needs, SmartCore was far and away a better solution for long-term growth in a market of ever-changing financial technology.
It was in working with NYMBUS on the core conversion – scheduled for 2021 – that the bank was introduced to SmartLaunch. SmartLaunch is a Banking as a Service product from NYMBUS that allows a financial institution to launch a separate digital brand using its existing charter in as few as 90 days. SmartLaunch relies on SmartCore for data processing, as well as a robust marketing system called SmartMarketing. NYMBUS even provides call center services from a call center in Columbus, Ohio. With SmartLaunch in place, BankMD can now offer a complete range of lending and deposit services. This is key to building strong customer relationships.
“To us, a relationship means that we’re going to make it easy on you and meet you wherever you want to be met,” said Sutherland. “That takes a combination of technology and human interaction. With NYMBUS taking care of the technology, our staff can focus on the human aspect,” he added.
But does SmartLaunch make financial sense? Yes, according to Sutherland. “I can’t imagine how expensive it would have been or where we would have started to build this out on our own,” he noted. “We expect SmartLaunch to deliver a return on equity between 12-15%.”
Regarding staffing, Sutherland said, “We have one executive running the program, but he’s focused on customer acquisition. He has two employees that help move the loans through the pipeline, but we haven’t had to devote any staff to maintaining SmartLaunch.” He added that on TransPecos Banks’ ledger, BankMD just looks like another branch.
Sutherland suggested that any institution looking to undertake such an endeavor needs to make sure there’s buy-in at all levels. “We had an old-guard group at the bank who were used to doing mortgages a certain way and, quite frankly, we got some pushback,” said Sutherland. “We’re providing a concierge service for these doctors, so we need to do things a little differently. We need to get these loans processed as quickly as we can.”
Whereas it is standard procedure for most loan departments to order an appraisal only after there is some certainty of the loan closing, this slows the process down. BankMD mortgage appraisals are ordered at the front end.
“We can live with eating a couple of these appraisals if it means providing a better customer experience because we know we’re going to close the majority of these loans,” said Sutherland.
How do other bankers react to this somewhat novel approach?
“I usually get one of two reactions,” said Sutherland. “Some bankers recognize they need to come up with new models to stay competitive and really like what we’re doing. Others just smile and nod.”
By John San Filippo