Park State Bank to tackle competitive Twin Cities market

To find its target audience of young professionals, Duluth-based Park State Bank is going where the yuppies are: Minneapolis’ Warehouse District.

With $29 million in assets, the small bank is opening a fourth branch this month, its first beyond Duluth’s west side, said President Dale Lewis. It’s also the first foray of a Duluth-based bank into the Twin Cities.

The Warehouse District is a gathering place for the young, creative small business owners that Park State is seeking for its array of non-traditional banking products, she said.

“We are attuned to the small business-small office professionals that have the three-to-10 employees, and who are not looking for a traditional bank,” Lewis said. “We have searched around this region for more customers like that and really couldn’t find any. We are looking for more growth opportunities, but the Duluth area is overbanked.”

That led Park State to the Twin Cities, and the Warehouse District in particular. Lewis said she perceived a niche in the neighborhood, which is host to growing community of loft condominium owners as well as a center for high-tech start-ups and other emerging small businesses. Although it is located in the northern section of downtown Minneapolis, the Warehouse District is nearly a mile from the city’s financial center, making it a long walk to the nearest bank, in most cases too far for a lunch hour trek. The immediate neighborhood has no bank branches.

So Park State is about to fill the void.

It currently has branches in the Morgan Park, Gary-New Duluth and Lincoln Park neighborhoods, and a “quick bank” mini-branch in Canal Park’s DeWitt-Seitz Building.

According to the bank’s call reports filed with the Federal Insurance Deposit Corp., Park State had $28.9 million in assets as of June 30. The bank posted net income of $282,000 in 2003, compared with net income of $186,000 in 2002. Its return on equity — a measure of the bank’s return for shareholders’ investment — was 14.2 percent last year, a rise from 10.5 percent in 2002.

In the first six months of 2004, Park State reported $45,000 in net income compared with $233,000 in net income for the same period in 2003.

With Lewis at the helm, Park State Bank has developed a reputation for marketing to customers who embrace social causes and want to steer their assets away from big corporations.

An example is the bank’s seven-year-old $3.5 million Designated Investment Fund. Park State is one of few U.S. banks with such a program, in which customers can en-sure their deposits are loaned only to projects that a local committee deems beneficial to the community. The idea is to strengthen the Duluth area economy by supporting projects with a positive community impact.

“We’re not a mainstream bank, we’re not the old corporate guard,” Lewis said. “We are independent bankers. We don’t make loans based on scores or points, we make them based on common sense. And with our deposit services, it’s the same thing. Our specialty is personal attention and personal services with all the bells and whistles.”

The philosophy could go over well in the Warehouse District, which is a haven for creative professionals who flock to the area for its renowned night life as well as relatively cheap office space. Increasingly, its historic rehabbed warehouses are being converted into loft apartments and condominiums and it has become one of the Twin Cities’ fastest-growing residential neighborhoods.

Lewis said the new branch will be small (900 square feet) and highly automated. It will have one full-time and two half-time banking professionals on the first floor of the Kickernick Building, at the corner of First Avenue North and Fifth Street, two blocks east of the Target Center in the heart of the Warehouse District. She hopes to open the branch on Sept. 20 and expects the bank to generate a significant amount of pedestrian walk-up business.

Another key to Park State’s Warehouse District plan is the new Hiawatha Line light rail transit. The line terminates in front of the Kickernick Building and is bringing significant new foot traffic to the area, said Joanne Kaufman, executive director of the Warehouse District Business Association.

“It’s already made a huge difference,” she said. “Lunchtime business is up for many businesses, anywhere from 10 to 25 percent. People can hop on light rail in other parts of downtown and get to the Warehouse District quickly where it might have been a 10-minute walk.”

The rail line opened June 28 and immediately exceeded ridership projections. In July, the first full month, ridership totaled 462,400 — double original 231,400 estimate — according to the Metropolitan Transit Commission, which operates the Hiawatha Line.

Kaufman said everyone along the route has noticed an upsurge in business, although the jury is still out on whether a novelty effect is at work.

“Once it’s open all the way to the Mall of America and Twin Cities International Airport, it’ll be that much better,” she said. “Once the novelty wears off, and once the weather starts getting cold, I think we’ll see that people have become accustomed going to the Warehouse District on the light rail.”

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