Capitalizing on brand name, Principal Bank turns first profit

Northwestern Financial Review, Feb 5, 2000

Principal Bank, the Des Moinesbased virtual bank of the Principal Financial Group, finished 1999 with a profitable quarter, its first since opening 20 months ago.

The bank earned a profit in excess of $40,000 for the fourth quarter. At year-end, the bank had $113 million in assets, $87 million in deposits and 11,000 customers.

The bank's ability to turn a profit so quickly is unique, said Steve Ollenburg, president of Principal Bank. "We earned our first profit 20 months after opening for business," Ollenburg said. "That's an accomplishment given today's extremely competitive Internet banking environment. Not many banks - virtual or otherwise - can claim profitability in that short of a time."

Principal Bank, which is privately held, operates under a federal charter and is regulated by the Office of Thrift Supervision. It was one of the first virtual banks established under the OTS.

Ollenburg credits the bank's success to a sound fundamental banking structure, coupled with a strong electronic commerce philosophy. "We utilize a solid balance of traditional banking and cutting edge e-commerce," Ollenburg said. "Our goal all along has been controlled growth, and by combining traditional banking techniques with advanced technology, we have been able to achieve that goal."

Principal Bank also is able to target current customers of the Principal Financial Group, providing added value to customers' existing financial relationship with the company. "We have the benefit of being associated with the strong brand and customer loyalty of the Principal Financial Group," Ollenburg added.

"We're part of a trusted company and we are able to supplement the financial needs of our customers."

A major success for the bank this past year was the introduction of the Principal Bank credit card. Made available in August 1999, the credit card - with no annual fee - has a rewards program that allows customers to allocate rewarded money to a variety of savings vehicles and other products offered by the Principal Financial Group.

In addition to the credit card, Principal Bank offers free electronic bill pay, free Internet access to accounts, free checking and savings accounts with quality interest rates, no ATM fees and no transaction fees. The bank also offers a wide array of banking products, including certificates of deposit, money market accounts, consumer loans and a variety of savings and checking accounts.