Harnessing unique business lines to boost bottom line

Prominent niche lenders emphasized the benefits of specialized segments on May 1 during the Bank Holding Company Association’s Spring Seminar in Edina, Minn. 

Panelists included Chris Vinson, CEO of Sioux Falls, S.D.-based Windsor Mortgage, the mortgage division of Plains Commerce Bank; Alfred Furth, president and CEO of Sioux Falls-based credit card originator Capital Services; and Dave Hales, president and CEO of Kiester, Minn.-based Global Innovations Bank.

Panelists included Chris Vinson, CEO of Sioux Falls, S.D.-based Windsor Mortgage, the mortgage division of Plains Commerce Bank; Alfred Furth, president and CEO of Sioux Falls-based credit card originator Capital Services; and Dave Hales, president and CEO of Kiester, Minn.-based Global Innovations Bank.

Plains Commerce Bank entered the mortgage business more than a decade ago as it was exiting the card services business, Vinson noted. The bank acquired Sioux Falls-based independent mortgage company Journey Mortgage in 2008, and by 2012 had secured a major share of the Sioux Falls market. Windsor Mortgage was established four years later. 

Vinson emphasized the importance of methodically growing unique lending segments. After initially working with a few banks in South Dakota, Iowa and Nebraska as a wholesale mortgage servicer, the bank today has more than 4,000 clients and wholesale mortgage divisions in all 50 states as well as a Sioux Falls-based retail mortgage center. Windsor Mortgage’s $5.6 billion in originations over a recent 12-month stretch was nearly six times higher from the bank’s asset size of roughly $1 billion. 

At Capital Services, Furth noted that credit cards are a good complement to the company’s strong community bank model. The company, which has three South Dakota-based charters, has been a key source of growth for the Farrar Banking Organization. Over the last five years, Capital Services’ 9.2 percent return on assets at its smallest charter, First National Bank of Oldham, was far higher than the core bank’s ROA of less than 1 percent. At First National Bank in Pierre, S.D., Capital Services’ ROA on credit cards increased the bank’s overall ratio to 2.4 from 1.4 percent, providing more income and capital to grow the bank.

Furth said the groundwork for the company’s success was laid even before it was established 25 years ago. Founder Frank Farrar played a crucial role by hiring Jeff Agerter, an experienced credit card executive at Citibank and Premier Bankcard. Capital Services has utilized its in-house expertise to test, strategize and optimize returns.

“Look for where the need is, and then test out and have a hypothesis and continue to test out that hypothesis over and over again,” Furth advised. “It’s all about doing that research, testing the hypothesis and learning with every time that you look at something new.”