Crown Bank graduates at the top of the de novo class of 2000

Northwestern Financial Review, Feb 1-Feb 14, 2004 by Hilgert, Jackie

Suburban Minneapolis' Crown Bank could keep piling up assets at record speed all throughout 2004 and beyond. Or, it could stop growing tomorrow. Either way, Crown Bank's laid-back president and chief executive, Peter Dahl, would be content.

Growth is great, Dahl said, but only if it doesn't impede the banker/customer relationship. "Our business has grown through referrals," Dahl said of the bank's rapid ascent from its $4.5 million de novo capitalization in June 2000 to $106 million as of Dec. 31, 2003. Crown Bank was one of nine new banks to open doors in Minnesota in 2000.

Yet Dahl went on record early in 2001 saying that when a bank reaches the $150 million mark, valuable customer relationships downgrade into mere commodities. When Crown Bank reached that threshold, he said, he'd stop growing.

"Can I project that estimate outward for inflation?" Dahl laughed, then added for clarification, "it is definitely not Crown Bank's strategy to stop growing." Yet he stands by his belief that something gets lost when the numbers - the numbers of customers - get large.

"Our business grows on referrals," Dahl said. "We do no outside marketing. We don't want to change the way we do business." Still, Dahl said, he values relationships so much that if he or his senior managers began to lose touch with their customers because of growth, they would pull in the reigns.

Ninety percent of the bank's clients during the early months were rooted in relationships Dahl, Chairman Tom Healey, Executive Vice President Kevin Howk and CFO Ed Hanson, had nurtured when they all worked for Bank Windsor in the 1990s. Bank Windsor merged with another Minneapolis institution, Riverside Bank, and the two eventually became part of Associated Bank of Minnesota. Today, those residual relationships account for only 10 percent of the bank's total clientele. Growth by referral appears to be working for them - in spades.

Since its inception, the bank has focused on small business. "We let the market define what kind of bank we would be and that definition developed into banking geared to the entrepreneur," Dahl explained. The bank has been good to its entrepreneurs and vice-versa. With Crown's backing, real estate developers have pushed the button on the hottest markets in commercial real estate: urban multi-family housing projects. "We are the financier of choice in that niche," Dahl said.

Stewart Stender, a real estate developer entrenched in the construction of a Minneapolis high-rise condominium project located on the fringe of downtown, said other bankers he'd approached couldn't see past the standard risks of his project. Dahl could. "It's a no-nonsense place to bank," Stender said of Crown Bank. "They know how to underwrite risk and I never hesitate to recommend them to friends and colleagues."

Arnie Gregory got his first real estate development loan from Peter Dahl and has since developed more than $200 million in real estate in the Minneapolis area. "Peter Dahl and Kevin Howk lent me money when nobody probably should have lent me a dime," Gregory recalled.

Dahl based Gregory's loan risk more on what he read in his eyes than what he saw on paper. "I'm a student of interpersonal communication," Dahl said, adding he's fond of measuring a borrower beyond the numbers. It's a method of risk assessment that's failed him a few times, yet no more often than adhering to cash flow and collateral analysis, he said.

The pace of the bank's growth has surprised Dahl when he factors in sluggish economic performance nationwide. But, he said, some things in banking should never come as a surprise. "We built our bank on building a good reputation with customers," he said. Everything is marketed inward and the strategy has paid off.

Dahl's tie hung casually on a hook on the opposite wall near where a tranquil farm scene contrasted the snarl of traffic that feeds the upscale retail empire across the street. But Dahl never chased the retail market and the formality that his forgotten tie represents wasn't something those honest, hard-working entrepreneurs demanded from their banker. Restaurateur John Nermyr said, "Crown is like most entrepreneurs; they think like we do."

As 2004 unfolds, Dahl could have some tough choices to make; the bank's nucleus of successful entrepreneurs have brought him a good deal of business. The question remains. At what point will good business become too much of a good thing?