Some time ago I wrote an article about Sterling Bank, a fine super community bank gaining ground in Houston through acquisitions and mergers.

In return I received a challenging letter from Walter Johnson, the chief executive of Southwest Bank of Texas, who asked: "How come you're only writing about Sterling when we are the most unique super community bank in Houston?"

That was no exaggeration.

Waiter Johnson spent over 18 years as the leader of Allied Bank of Texas, specializing in middle-market lending, primarily to Houston companies. When Allied was sold to First Interstate, Johnson remained, but became increasingly aware of how unhappy Houstonians were with the big banks that were coming to town. Customers were losing their identity. Names they knew and trusted changed, and so did the staff.

Johnson felt the middle market was not being adequately served, that solid middle-market lenders were greatly needed. And so, Southwest Bank of Texas was born.

He raised $13.5 million to start a Houston-owned bank. He took over a small, bank and changed its name. He opened two more branches and staffed them with a strong team of veteran bankers assembled from banks taken over by the out-of-staters.

Now, nearly five years later, the bank has over $550 million in assets. This growth, however, was not accompanied by the typical growth of a high-risk loan portfolio. As of June 30, the bank's loan portfolio totalled $324 million, with only $163,000 in nonperforming loans and one piece of OREO, worth $246,000.

Several things were unique about Southwest. One was the bank's use of technology from the get-go. Johnson was committed to using state-of-the-an products with top-notch banking professionals. Southwest created a highly sophisticated cash management system, with an automated wire transfer system like the one currently used by Bank of Tokyo.

It also brought in four of the city's top cash-management officers; Johnson perceived that to be a critical part of his arsenal in going after middle-market companies.

He also brought aboard 22 bankers who knew the Houston market and understood what the customers needed. He also added a strong team of professionals with comprehensive investment management capabilities to better serve the private banking market.

Another Unique aspect of the bank's success is that 100% of its growth has been self-generated, one customer at a time. The company does not intend to entertain any mergers or acquisitions. It would like to add branches, but has no immediate plans to do so.

All of a sudden, Houston had a bank that could provide the same services as the super regional banks but was home-grown and home-managed. "When we call on a prospect today, we can say that here you will find a longtime Houston banker who understands you and your needs," Johnson says, "We know the city and are working for ourselves. All Southwest employees have company stock or options. Each of us is an owner.

"In our initial optimistic plans, we expected to be $300 million in 1996. We are now already over $500 million. Houston's response to us has been incredible. We often run a list of our shareholders in the local papers -- truly the Who's Who in Houston. You must be a Houstonian in order to buy stock in this banks."

The bank has been extremely successful financially. Its loan-to-deposits ratio ranges between 65% and 70%. Loan losses are minuscule. The return on assets as of June 30 was 1.1% and return on equity 17%. The company now has over 200 employees and an efficiency ratio of 61.5%. Southwest does not play dividends; all money is plowed back into the bank to generate growth and fund capital expenditures.

The results have been phenomenal. This bank has grown consistently at $120 million a year, with 30% noninterest bearing demand deposit accounts.

"We don't want to be a big bank; we want to be a good bank," says Johnson. His customers apparently feel Southwest is indeed a good bank and gave it a 95% approval rating in a recent third-party-administered survey.

What are your new challenges? I asked. "Big banks are loosening their credit standards. We have lost a few customers to competitors that make them an offer we refuse to match. We are conservative, solid lenders, but the big guys are doing crazy things."

Ms. Bird is a partner at Financial Management Advisors, a New York-based consulting firm, and author of "Supercommunity Banking: A Superstrategy for Success."

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