When Houston's Anadarko Petroleum Corp. decided late last year to automate its process for verifying leases and paying property owners, it asked Southwest Bancorp. of Texas Inc., not a software company, to do the job.
At first glance, asking a banking company to tackle a programming job seems odd, but the $7.5 billion-asset Southwest, which is based in Houston, has made a name for itself designing customized payment systems for its customers.
Its treasury management division designed a system for Harris County that lets residents pay property tax bills online, and one for the University of Texas' medical center that cross-references patients' bills with their explanation-of-benefits statements to make it easier to get payments from insurance companies.
Southwest even created an electronic tithing program for a local Methodist church.
"If a product or service doesn't exist, then we'll take the time to build it," said Myra Caldwell, Southwest's product and strategy development manager.
The division is generating a growing amount of fee income for Southwest. Perhaps more importantly, analysts say that the division has also helped Southwest carve out a unique position in the hyper-competitive Houston banking market by giving it the horsepower to go after business from companies that a banking company its size would not normally serve.
This month Southwest unveiled the result of its work for Anadarko. The system lets the giant oil-and-gas producer verify leases and schedule payments on the Internet to reduce the time involved from days to hours. The system will archive each lease, as well as 24 months of payment information.
Scott Alaniz, an analyst at Sandler O'Neill & Partners LP in Atlanta, said products like Collections Web Delivery - the name Southwest gave the system it designed for Anadarko - are valuable, because "they get banks hooked into a customer's back room … now the bank is managing its cash inflows and outflows," and the customer is tied all the more tightly to its apron strings.
Anadarko, which generated more than $6 billion of revenue last year, is certainly worth tying down, but Southwest does not plan to stop there. It has already begun marketing the system to other energy companies and says it may be applicable to auto dealers, as well.
Reduced to its essence, treasury management consists of collecting payments and bills for a corporate customer, then depositing the cash in the customer's account and presenting the bills for payment. It is a nuts-and-bolts type of service that most banks offer to get at the credit and deposit parts of a commercial relationship.
At Southwest, though, treasury management has evolved into a marquee business line in its own right. Ms. Caldwell said Southwest often leads with it, rather than its loan or deposit products, in sales calls on prospective customers.
Ms. Caldwell called Collections Web Delivery a "voice of the customer" product and said Southwest was continually on the lookout for feedback like the kind it got from Anadarko. Her company regularly conducts focus groups with its treasury management customers and frequently sends representatives on visits to their offices to see how their systems perform and whether any improvements are needed.
Southwest, which plans to change its name to Amegy Bancorp Inc. next month and renamed its bank subsidiary Amegy Bank last month, was not always so proactive. When customers first started requesting customized systems about five years ago, it was not sure how to respond, one of its executives told American Banker in a 2001 interview.
The intensifying focus on treasury management can be seen on Southwest's bottom line. In 2000 the treasury management division generated just over $9.1 million of noninterest income. Last year it generated $20.5 million.
Barry McCarver, an analyst with Stevens Inc. in Little Rock, said the division also gives Southwest a leg up by letting it compete head to head with the likes of JPMorgan Chase & Co. and Bank of America Corp. for major corporate customers. Virtually no other community banking company has the product set to do that, he said.
Other Houston-area community banking companies, like the $3.5 billion-asset Prosperity Bancshares Inc. and the $3.4 billion-asset Sterling Bancshares Inc., "are attempting to move upstream, but they're finding out just how difficult the market is," Mr. McCarver said. "It's a little harder for them to compete."
Mr. Alaniz said competition for corporate customers has gotten especially fierce in the past two years as more large, out-of-state banking companies have entered what is viewed as one the nation's most attractive markets.
"The competition is directly related to capacity, and significant capacity has been added over the past two years," Mr. Alaniz said. "There are more banks, and they're getting more aggressive."
How aggressive? In a conference call with analysts and investors last week, Prosperity said roughly $21 million of its loans that were on the verge of closing in the first quarter were lost to other banks that offered better terms.
Mr. McCarver called Southwest's focus on treasury management "a mix of a good solution" with outstanding service. "They take a community-bank approach to service. It's got to be pretty darn good, or they wouldn't be getting so many customers."
