In 1966 the sleepy, remote border town of laredo was not the first place you would have picked to start a bank. The town had chronically high unemployment, no manufacturing, and scant retail business. It was just a river’s width away from a Third World country with even fewer economic prospects. Ever since 1840, when it became the capital of the ill-fated Republic of the Rio Grande, whose first and only president was executed by a firing squad after a year in office, Laredo had remained a poor, isolated place.But that year Antonio R. Sanchez, Sr., who owned a store that sold typewriters and other office equipment, and a few friends decided to start a bank anyway, a tiny institution called Bank of Commerce-Laredo. The idea was to do what the local banks, which preferred to lend to big ranchers, would not: make loans to small businessmen on both sides of the border. It was supposed to be a bank for the little guy. If there was one thing Laredo had plenty of, in 1966, it was little guys.

As it happens, Typewriter Tony, as the newspaper called him, had a knack for spotting hidden assets. He later bought land leases on property that turned out to be part of one of the biggest natural gas fields in the United States. Profits from his gas wells made him hundreds of millions of dollars. And 35 years after he co-founded his little-guy bank, the International Bank of Commerce, as it would later be called, has grown into a border-straddling, multibillion-dollar behemoth that dominates South Texas. The bank—now controlled by other members of the Sanchez family, including his son Antonio R. “Tony” Sanchez, Jr., a likely gubernatorial candidate in the 2002 election—is the largest economic entity in a booming city of 195,000 that has become one of the great entrepôts of the Western Hemisphere. Some $65 billion in commerce poured through Laredo last year, and IBC had its fingers in much of that business. With nearly $6 billion in assets and 105 subsidiaries and branches, the largest minority-owned bank in America rules the border.

But IBC has done more than just ride the NAFTA-driven wave of commerce. It has prospered by doing things that few other banks are willing or able to do. One is to make loans to the Mexican American community along the border—one of the poorest parts of the United States and a place most other big banks avoid like a recession. The other is to finance trade in the corridor between Monterrey, Mexico, and San Antonio, a place where IBC’s history and growth, far from the mainstream of American finance, have given it an overwhelming competitive edge.

IBC is unusual for other reasons as well. It is a throwback, in fact, to an idealized era of American banking, in which clichés from Frank Capra movies come to life—a world where ordinary people can talk to the chairman without an appointment, where your credit is as good as your character, where bank officers are deeply entwined in the social and philanthropic networks of their communities, where all business is personal, and where, as chairman Dennis Nixon says, “We are local bankers in a world of global banking.” Perhaps the most astonishing thing about the bank—considering the general poverty of the area in which it operates—is that it is hugely profitable. According to BankInvestor magazine, IBC’s performance from 1994 to 1999 placed it third among America’s top one hundred publicly traded banks. In addition to everything else, IBC is a cash machine.

What Tony Sanchez, Sr., saw back in 1966 was something simple: trade, and lots of it, in Laredo’s future. He was right. After 1987, when Mexico first began lowering tariffs on imported goods, commerce between the U.S. and Mexico rose rapidly. So did the bank’s fortunes. Even though most of the goods that pass through the city are headed elsewhere, Laredo plays a key role in their distribution. To handle the merchandise carried by eight thousand trucks a day, there is a whole subworld of warehouse companies, freight forwarders, customs brokers, trucking firms, distribution companies, repackagers, labelers, and sales agents on both sides of the border. These companies, which are the main reason Laredo is now the second-fastest growing city in America behind Las Vegas, need financing and other bank services, and this is what IBC does best.

Life on the edge of the Third World wasn’t without its risks, however. In 1982 the entire Mexican financial system crashed, and the unemployment rate in Laredo soared to 30 percent. Then there was the great Texas bust of the eighties, which wiped out most of the indigenous financial institutions. Between 1986 and 1992, 562 Texas banks and 229 savings and loans went under. In fact, IBC and San Antonio-based Frost Bank were the only major Texas banks that remained independent. And in 1994 the border was hit hard again by another Mexican recession and peso devaluation.

Through all of this economic turmoil, IBC not only did not have a loss in any year but also never had a losing quarter. “These were very difficult times for us, very hard,” says board member Tony Sanchez, Jr., who, along with his father, acquired a controlling 30 percent interest in the bank in the seventies (his father passed away in 1992). “We were able to weather the storm even though a lot of our loans were not doing well and some of our clients were in terribly difficult times. These were relationships we had built over time, and we stuck with them.” The loyalty paid off. By the time the big boom in Mexico-U.S. commerce came after the signing of the North American Free Trade Agreement, in 1993, the bank had, as Sanchez says, “thousands of long-term clients on both sides of the border. We were the dominant player with dominant relationships.”

In the early nineties, IBC expanded into the Rio Grande Valley. It also acquired banks and branches in San Antonio, Corpus Christi, Houston, Lake Jackson, and Freeport. At the same time, its business with Mexico rose sharply, usually with companies that were either importing goods from or exporting goods to the U.S. Bilingual and bicultural IBC officers travel constantly in Mexico, making contacts, networking, and attending such events as clients’ family weddings and baptisms— cultivating the personal connections that are so important in conducting business south of the border. The bank’s growth in these years was not, as many outsiders have mistakenly assumed, driven by laundered drug money. While IBC has considerable deposits from Mexican nationals—around 40 percent—it has never been shown to be associated in any way with criminal money.

As the bank has expanded in Texas and watched its assets balloon into the multibillions, it has stuck stubbornly to its “local” strategy. This is probably the most unusual thing about IBC. It is part of Tony Senior’s original vision and has been faithfully implemented since 1975 by Dennis Nixon. It is Nixon, more than anyone else, who is responsible for the success of IBC. His management theory starts with the bank’s architecture: In IBC’s headquarters, a brick-and-steel building rising from a sea of taco and burger joints, auto parts companies, and bus stations in central Laredo, the offices are glass-walled, meaning that no one is invisible, including the chairman. Nixon receives most of his visitors without appointments, he says, as do all of his senior officers. No one is turned away or told to come back later. At IBC, tellers and clerks have the same access. “If the manager is a jackass, we’re going to hear about it pretty fast,” says Nixon.

Then there is Nixon’s theory of total immersion in the communities in which IBC operates. This starts with charity, which at IBC is practiced on a scale unknown in most large companies. Almost 70 percent of its 1,600 employees voluntarily participated in charitable activities last year, donating more than 20,000 hours of personal time. In all of the communities in which IBC finds itself, bank officers are deeply enmeshed in civic and charitable organizations such as the United Way. “Our managers are part of the social structure of these communities,” says Nixon.

IBC’s charitable bent is not accidental. Nixon makes no secret of the fact that he hires and promotes his staff in part based on how involved they are in their communities. “You don’t move up in the ranks and you don’t become an officer if you don’t like to get personally involved,” says Jorge Gonzalez, a former bank officer who is now the sales and operations manager at Mercy Health Plans.

Nixon has also structured the bank so as to drive both decision making and responsibility down into the various communities where the bank does business. IBC has no fewer than nine boards of directors, mostly holdovers from its acquisitions; the bank has, by and large, kept the old directors in place. “If you are looking at making a loan to someone, and you don’t have fifteen to twenty years experience in the community, then you just can’t make those kinds of judgments,” says Nixon. With deep local expertise and officers involved in all major civic clubs, IBC is able to make loans to small businesses that other banks can’t or won’t make. South Texas is littered with the failures of large banks that couldn’t cut it. Bank of America lasted two and a half years in Laredo before closing up shop. In another clear sign that IBC covets just the sort of business Bank of America rejects, in 1997 IBC bought Bank of America branches in Angleton, Lake Jackson, Freeport, Texas City, and Rosenberg.

According to a recent Chase Bank study, IBC and a few other banks, including its smaller neighbor Laredo National, are bucking an unusually strong trend away from small-business lending on the border. In El Paso, a city dominated by giant banks and where IBC has no branches, smaller commercial loans are hard to get. “Small businesses are often being forced into the credit card market,” says Eliot Shapleigh, a state senator from El Paso who has made a crusade of trying to force big banks to make small loans. He holds IBC up as a model. “The big banks have an unwritten rule that they won’t make loans under $250,000. What makes IBC different is that their model is lending to people who are typically denied credit. They use SBA [Small Business Administration] loans heavily, to help shore up collateral, and they go in with one thought: How are we going to make this loan?”

In the financial history of South Texas, there was one thing you could always count on: Financial capital invariably moved from north to south. The border was poor, and the money was concentrated in the financial centers of Houston and Dallas. But in the past few years, that has changed. With IBC’s northward expansion, first into San Antonio and then into Houston and Austin, substantial amounts of capital are flowing north from the border for the first time in Texas history. In San Antonio IBC now has more banking locations than any other bank, and this year it will open eight new locations in Houston. Can the bank duplicate its small-city feats in the megalopolis? Says Nixon: “We have a small town mind-set. When we take it to the city, people like it.”