Friendly Competition Twin Banks Follow Separate Paths To Success

The bank presidents don’t like to call it competition.

For Idaho Independent Bank, the main focus has been commercial lending. For Mountain West Savings Bank, the focus has been home loan lending.

One business strategy has supported steady growth, the other has stoked a dynamo.

Local economic expansion has nurtured these two small Kootenai County institutions, but as growth moderates they must compete more directly for business customers.

It wasn’t always so, although similarities between Idaho Independent and Mountain West abound.

They opened the same day - Oct. 12, 1993. Both banks say it was pure coincidence, at the same time acknowledging each knew for months the other was opening that fall.

Both bank presidents are veterans of megabank mergers and buyouts who are more comfortable with the challenges of community banking.

Both banks promote the benefits of local decision-making, and customer access to their presidents. And for each the result was a rapid increase in assets the last four years.

The similarities stop there.

“We are two different banks with two different markets,” says Jon Hippler, president of Mountain West Savings Bank.

Hippler’s office is decorated with three-ring binders, computer-printouts and fliers from recent projects. His computer hums quietly beside him. Nearby, cubicles and teller stations have a worker-bee, almost utilitarian, effect.

A few miles away, the scene differs at the colonial edifice of his counterpart.

Marbled columns line rows of dark wooden desks at Idaho Independent Bank, and President Jack Gustavel sits casually in front of a big window overlooking the parking lot. Bankers work quietly at their desks.

Like Hippler, he says politely, “We are going after different markets.”

Gustavel smiles slightly when asked if competition is a concern. “No,” he says simply, without explanation.

Idaho Independent identified the small-business market as its focus when organizing in 1992, and those plans paid off.

Through June of this year, Idaho Independent had assets of $84.9 million - a nearly 30 percent increase from the $66.7 million at the end of last year. Earnings the last three years have hovered around $275,000, but the bottom line masks the investments made in expansion.

The bank made a second stock offering last year and opened its third branch in Boise.

“We’re very proud of our growth,” Gustavel says.

The prosperity is due partly to banking on Kootenai County’s expanding business community. From 1993 to 1996, the number of Kootenai County employers grew 19.9 percent and employment increased 18.8 percent. The bank in 1996 divided its number of loans evenly between business and real estate, according to Federal Deposit Insurance Corp. records.

But while Kootenai County’s business community mushroomed, home sales - Mountain West’s bread and butter - stalled.

Home sales boomed from 1992 to 1994, with average annual sales of more than 2,000. Now activity has cooled as overbuilding and rising prices have kept many potential new home buyers on the sidelines.

The trend has been a significant hurdle for a small bank dependent on its piece of the mortgage-lending market.

Not that Mountain West hasn’t progressed nicely.

Assets that stood at about $14 million in 1994 have tripled to almost $43 million last year and $48.2 million on June 30 this year. Earnings last year totaled $151,000. Mountain West said it will issue a second stock offering this fall.

Gratifying as those results may be, Mountain West revised its strategy last year and added a small-business loan center.

“As the real estate market slows down, we have to get a bigger share of the (small-business loan) pie,” Hippler says.

Mountain West also asked its stockholders to approve moving to a state charter, rather than keep its more restrictive federal charter.

“Had we known what we know now, we certainly would have made a different decision,” Hippler says, recalling the thrift’s organization.

A federal thrift charter typically costs seven times more than a state commercial charter. The advantage is this: If a bank decides to move into other states, it answers to only one federal regulator, rather than agencies from several different states.

At the time, the federal charter allowed Mountain West to loan only 10 percent of its assets to commercial ventures. Those regulations have since been eased, and the bank can loan up to 20 percent commercially.

Now, the thrift is in a “wait and see” mode before making the change.

Quick response to the market is a Mountain West hallmark. For example, rather than wait six to nine months to open while its first building in Coeur d’Alene was constructed, the thrift set up shop in a converted trailer home.

“After we decided on the property, we just wanted to get the doors open,” Hippler says.

And when the Post Falls market opened up, Mountain West moved into a former U.S. Bank branch there last December.

Board member David Chapman agrees with the quick move into Post Falls.

“The opportunity arose and the board acted quickly,” says the president of Chapman Financial Services in Coeur d’Alene. “It’s not a knee-jerk operation. Our board is made of independent thinkers. We think things out.”

Speed and change will be increasingly important as the financial services industry becomes more of a free-for-all.

“The competition right now is extremely fierce because everyone is getting into everyone else’s business,” said Gavin Gee, director of Idaho Department of Finance. “Now all the lines are blurred.”

Now independent mortgage brokers, insurance agencies and commercial banks are making mortgage loans - the niche traditionally reserved for thrifts.

Mountain West’s consideration of a charter change follows a national trend, says R. Jay Tejera, an analyst with Dain Bosworth.

“The thrift (bank) is essentially an anachronism,” he said. “A number of people that have been successful say ‘We no longer look like a savings and loan, so why do we still have the charter? Let’s become a bank,”’ Tejera says.

In 1980, there were 5,000 savings banks. By 1989 that number had dwindled to 2,900 and today to only 1,800, he says.

And after the national savings and loan mess in the 1980s, which still burdens taxpayers with $150 million in debt, the stigma remains.

“It’s guilt by association,” Tejera says.

But a charter is only one element in matching savings banks vs. commercial banks.

More importantly, it’s about the markets they serve and the bank’s vision of those markets.

As Mountain West and Idaho Independent sharpen their focus, the overlaps may become more clear, and the competition - acknowledged or not - more keen.

, DataTimes ILLUSTRATION: Color Photo