Best in the midwest

Northwestern Financial Review, Sep 5, 1998 by Olmsted, Monte

Iowa's Pioneer Bank

The $57.4 million Pioneer Bank of Sergeant Bluff, Iowa, reported an ROE of 23.9 percent last year.

The institution specializes in small business banking and residential mortgage production and has its own mortgage center. Both have been mainstays of the bank, which provides few agriculture-related loans.

Since its parent, Pioneer Development Co., also operates separate insurance and realty companies, Pioneer Bank has had an advantage over competitors, said Bruce Kolbe, the bank's executive vice president.

"We've had the ability to cross-sell various services such as home loans, insurance and banking throughout various entities," Kolbe said.

Another ingredient to Pioneer Bank's success has been its high noninterest income production, which has been steady for the last few years. "It's probably higher than our peer group. [Also] we've been able to keep interest spreads well above the peer average," Kolbe said.

Plus, the bank has relied on a staff of 29 with very little turnover. "We've had a very stable employee base," Kolbe said.

Another trio of circumstances has played an important role for the bank.

First, Pioneer Bank is in Sergeant Bluff, one of the fastest growing communities in Iowa. Boasting an excellent school system and location a few miles south of Sioux City, Sergeant Bluff has become an attractive haven for businesses such as Pioneer Bank.

The bank also has two branches, one in Salix and the other in Sioux City. The latter branch, opened in 1986, has proven fruitful. Much of the bank's income growth has come in the Sioux City market, said Kolbe, whose office is there. Sioux City's good, steady economy of late has meant good things for Pioneer Bank.

The Sioux City branch was able to locate in a prime four-story downtown office that formerly housed a savings and loan. "That has greatly enhanced our image in the community."

Finally, as a community bank, Pioneer Bank has thrived because of customer disenchantment with megabanks in Sioux City. Among the heavy hitters in Sioux City include Minneapolis-based Norwest Corp., which will soon merge with Wells Fargo & Co.; Milwaukee's Firstar Corp., which will join forces with Star Banc Corp., and Charlotte-based NationsBank, soon to merge with BankAmerica.

"What's really helped us in the market, and it's been a sore subject, is a lot of banks have been acquired by regionals," said Kolbe. "We tend to position ourselves as the local, independent, hometown bank. We know the customers, and they don't have to call an 800-number."

A good marketing strategy also has helped, and last year, the bank hired a company that has "enabled us to spend our marketing dollars more intelligently," Kolbe said.

Nebraska's Home State Bank

Community dedication and success in installment and real estate lending has made Home State Bank in Louisville, Neb., a success on the ROE front. Last year, the $44 million bank reported an ROE of 33.08 percent.

"This sounds cliche, but we just know our clientele through a longterm association," said Philip Pankonin, president.