MINNEAPOLIS - It's less than 50 miles as the crow flies from BankWindsor's Nerstrand, Minn., headquarters to its flagship branch in downtown Minneapolis. But the bank's operations in the two communities are worlds apart.

In 1988, a group of ambitious Minneapolis investors paid $250,000 for tiny Farmers State Bank. They got the $2.5 million-asset operation in Nerstrand, its collection of small-town accounts and farm loans, and its state charter. Charter in hand, they pumped $3 million in capital into the operation and moved the main offices to Minneapolis, where they created BankWindsor, a decidedly posh bank catering to customers with net worths of at least $1 million.

Today, BankWindsor is about as far from its modest roots as it could be, with $65 million of assets and a customer list of 5,000 well-to-do Twin Cities residents. Meanwhile, Farmers State Bank, now carrying the BankWindsor moniker, has remained at about $2.5 million.

BankWindsor, chief executive John Crinklaw admits, has a certain "snob appeal" in the Twin Cities. And he likes it that way: "A lot of banks aspire to get some sort of identity, and we've got it."

The strategy used by BankWindsor to gain its charter is relatively unique. Several other rural banks, such as Princeton (Minn.) Bank, have set up outposts in the Twin Cities, but none has moved the bulk of its operations there.

Like many other states, Minnesota prohibits banks from opening facilities more than 100 miles away from their headquarters without special approval.

"We wanted to open a bank in Minneapolis, and it was substantially quicker than applying for a new charter," says Sam Kaplan, a Minneapolis attorney who was one of the original investors.

The bank's upscale formula is one that has proven successful in other big cities. The walls and desks of BankWindsor's offices are mahogany with gold trim, and there are no tellers - only a receptionist and personal bankers.

The surroundings are so out of character for a bank that a few years ago, security cameras caught a would-be robber as he entered the bank, looked around and left. A few moments later, he robbed a more traditional bank a block away.

"It's not a typical community bank," says Al Olson, president of the Independent Community Bankers of Minnesota.

BankWindsor's focus on personal and small business banking for wealthy clients places it in head-to-head competition with local giants Norwest Corp. and First Bank System Inc., and a handful of aggressive community banks.

In a metropolitan market flooded with toaster giveaways, free checking, and big-dollar advertising campaigns, BankWindsor relies on simple word of mouth to get its customers.

Mr. Crinklaw, a former executive vice president with National City Bank of Minneapolis, says it doesn't hurt that the privately held bank's 75 investors are among the elite of the local business community. They steer customers the bank's way "to improve their investment." Technically, the company's headquarters remains in Nerstrand, where the 89- year-old former Farmers State Bank still operates. Mr. Crinklaw says BankWindsor has been "lazy" about moving it.

But the rural identity also has helped quell fears in two small Minnesota towns, Sleepy Eye and Chisholm, where the bank - in an apparent reversal of strategy - is buying former branches of Metropolitan Financial Corp., which First Bank acquired last year. Residents in those towns are suspicious of big-city bankers.

"We can say we're a community bank based in Nerstrand, and we understand the small community atmosphere," Mr. Crinklaw explained. "We turned it into an advantage."

Those acquisitions, to be completed later this year, will add $34 million of assets, bringing BankWindsor to the $100 million level.

Given its big-city success, Mr. Olson calls the bank's return to small towns "unusual." But the branches will bring badly needed deposits to BankWindsor's expanding balance sheet.

"Our loan-deposit ratio is going to drop substantially overnight," Mr. Kaplan says.

Mr. Crinklaw says that the bank's rapid growth has caught the attention of the Federal Deposit Insurance Corp., which came in "loaded for bear" on a recent examination, but left satisfied with the bank's loan quality.

In fact, BankWindsor, which has a loan portfolio of $42 million, charged off only $23,000 in bad loans last year. About 70% of the portfolio consists of commercial loans - with an emphasis on entrepreneurial areas such as real estate and high-tech start-ups - which are tied to customers having personal relationships with the bank.

The bank has $57 million of deposits, and recorded a return on average assets of about 1.1% in 1994, en route to profits of $560,000.

As BankWindsor demonstrates, it takes more than just a formula to succeed. The bank's first CEO, Judith Blanchard, was forced from her post in 1991, after the bank recorded losses of over $1 million in the first three years.

The problem, Mr. Crinklaw says, was the balance sheet, which was too heavily weighted in Federal funds, and a loan portfolio that didn't grow fast enough.

The investors moved in, cleaned house, and brought Mr. Crinklaw and some other local bankers in to help turn things around.

Now, the bank is flying high, and investors talk about someday going public.

"We're never going to be a major force in retail banking," Mr. Kaplan says. "But in terms of personal banking, we can do it better than anyone." Mr. Engen is a writer based in Minneapolis.

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