KEEPING UP WITH THE many big bank providers of cash management services can be a daunting and expensive proposition for a smaller bank.
But for $1.7 billion-asset Victoria Bank and Trust, located deep in the heart of Texas, being smaller than some of its competitors was simply not an issue.
The 920-employee bank has developed a product that allows corporate customers to sweep excess funds from demand deposit accounts into interest-bearing trust accounts.
Called TrustCash, it has been available since the summer of 1993. The trust department currently has more than a dozen customers using the accounts. The total average daily balance of those accounts exceeds $1 million.
"The use of sweeps is another example in banking that as systems continue to become integrated, the industry is seeing products being made available in many different areas," said Mark Hardie, a consultant with The Tower Group in Wellesley, Mass. "The continued development of systems is finally bearing fruit and allowing smaller banks to compete with the larger banks on an equal footing."
The bank has been able to offer this type of account by entering a partnership with Minneapolis-based National Computer Systems Inc.
"We went to NCS, gave them our ideas, and they programmed the system for us," said Cathy Wheeler, vice president and trust operations officer. "The system ties together the customer's DDA accounts with the ability to sweep excess cash directly into a trust agency account and manage the funds without them being touched by human hands."
Every morning the information detailing whether the accounts are producing excess cash is entered automatically into the system.
The corporate customers set minimum and maximum amounts for their accounts and the funds are transferred accordingly. Initially, the funds are moved into money market accounts, which pay a fixed rate of interest.
However, once the account grows, the bank is able to present alternatives to the customer with the idea of moving the money into a mutual fund or higher-yield product.
"The customers may say 'if the account has over $50,000 in cash, the excess should be given to the trust department to invest for me, but if it goes below $20,000 divest it and give it back to me,'" Ms. Wheeler said. "We are helping them manage excess cash but are always making sure they have the cash they need in their checking accounts to meet their needs."
Customers work directly with the commercial bank officers to set the thresholds so that minimum dollars are kept high enough to cover the bank service charges.
In order to process these types of transactions, the bank worked with NCS to develop software that would work with the bank's trust accounting system. The key element is the ability to accept the transmission from the bank and post whether the account is receiving or giving money through the action of the transaction.
The bank's existing trttst accounting system had the ability to sweep excess funds it, to accounts on the bank side and the partnership with NCS allows the funds to be moved to the trust side.
"We needed to come up with a system to handle the functions on the trust side," said Ms. Wheeler. "We went to NCS and said that we wanted to offer this type of feature to our customers, so please make it work on our system."
It took the bank and the software designers at NCS approximately six months to develop the product to the specifications required by Victoria.
The system also allows the bank to show its trust customers' their entire bank relationship through a single statement.
"The customers still get individual checking statements with the canoeled checks inside, but now they get a one- or two-page document with their trust statement, which shows exactly what type of accounts and balances the customer has with us," Ms. Wheeler said.
The bank, which currently has $740 million of assets under management, is in the process of taking on an additional $350 million through its acquisition of the Corpus Christibased trust unit of Texas Commerce Bancshares.
Victoria's main customer base for this service is its commercial accounts. The bank does offer the service to retail customers but found that most of the interest has come from commercial customers who are trying to juggle between 10 and 12 accounts.
"We have one customer where we are actually taking three of his checking accounts and funneling them into one trust agency account," Ms. Wheeler said. "We are managing his cash daily and it has worked real well."
Customers who were leaving money in their accounts are now able to make money in an area that previously was not earning anything.
"In the past, a company's bookkeeper would have to look at its checking account every day and decide if they would have to manually move money around," said Ms. Wheeler. "Now we can automate the process for them once they set the threshold, and it is taken care of from then on."
The bank decided to offer TrustCash after seeing that many of the larger trust departments in its area had similar sweep accounts.
"We realized that if we wanted to be able to compete as we move into the larger trust department markets we needed to offer these capabilities," Ms. Wheeler said. "We were doing it manually and realized that there had to be a way to automate it."
Now that the product is available, the trust department staff can spend more time cultivating new business. "It has definitely freed up a lot of the time spent on manual labor," Ms. Wheeler said.
"One great benefit to us is that we no longer have to fill out forms or receipts from accounts; it is now done automatically as the transactions take place," Ms. Wheeler said. "We no longer have to type debit or credits to go to the proof box because the DDA system on the bank side has the ability to do that for us.
"Our efforts are definitely being moved, and we are in a growth cycle picking up new business," said Ms. Wheeler. "The system allows us to grow without having to increase staff."
