When James Klein started at Cedar Rapids Bank and Trust in 2004, the three-year-old bank had one office and the seventh-largest market share in Cedar Rapids.
Today Klein, the president since 2019, oversees a bank with the highest market share in the Cedar Rapids area and nine offices in Iowa.
The change at CRBT is part of a larger trend of customers increasingly doing business at Iowa-based banks.
Federal law put restrictions on how national banks could enter markets, but the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 eliminated those barriers. Nationally chartered banks already were the top three leaders in Cedar Rapids market share in 1994, though.
In 2000, the three banks with the most deposits were Firstar Bank, Wells Fargo and Commercial Federal Bank, according to data from the Federal Deposit Insurance Corp.
No Iowa-based bank had more than 10 percent of deposits, or market share, in the Cedar Rapids metropolitan statistical area.
In 2020, Iowa-based banks accounted for almost three-quarters of the deposits in the Cedar Rapids area. That’s up from about one-half in 2000.
CRBT saw the most profound increase in market share in that time, going from nonexistent in 2000 to market leader in 2020.
Klein noted having a number of employees on staff for several years has helped with longer-lasting customer relationships.
“To have a trusted banker who has knowledge and can help, that kind of stuff is really important to our commercial clients,” Klein said. “That trust expands and allows us to capture new business.”
He also pointed to local decision-making and CRBT’s support of community events as keys for the bank’s success.
Iowa Bankers Association President John Sorensen said Iowans may be “a little atypical” in still wanting face-to-face interactions and relationships with their bankers.
“Iowans are relationship-based people,” Sorensen said. “They want to trust the institution they deposit their money into or go to for a loan or get a mortgage.”
Sorensen said community banks “stepped up in a big way” with the federal Payroll Protection Program because “they know their customers.”
All five financial institutions with at least 100 PPP loans of $150,000 or less to Cedar Rapidians were locally based. CRBT had the most, with 185 — more than four times as many as Wells Fargo.
“It was a chance to prove that we will be there when clients and our community needs us,” Klein said.
While many other markets in the Midwest may have a handful of national bank options such as Chase, Bank of America or BMO Harris, the only national banks with a presence in Cedar Rapids are Wells Fargo and US Bank.
Both came to the area by way of acquisitions.
Wells Fargo first entered the market in the early 1980s when Norwest Bank bought First National Bank of Marion.
Norwest Bank — which in 1998 merged operations with Wells Fargo in 21 states and took its name — also purchased a few other banks with a presence in Cedar Rapids, expanding its footprint.
“The Norwest approach, plus those acquisitions, have really connected us to that community for quite some time,” said Brett Smith, regional bank president at Wells Fargo.
Wells Fargo Commercial Banking Leader John Dorfler said the national bank prioritizes customer relationships as well in the Cedar Rapids market.
“To me, relationships is what banking is all about,” Dorfler said. “Especially in Iowa, I think that’s an important part of building that trust.”
Any national bank must operate under Office of the Comptroller of the Currency regulations, but state banks operate under Iowa Division of Banking and Federal Deposit Insurance Corp. regulations instead. Sorensen said the Iowa Division of Banking is a “regulator that understands the Iowa economy,” allowing community banks to thrive.
“Banks enjoy working with regulators who are here in Iowa and have a good understanding of our economy,” Sorensen said.
Sorensen pointed to the especially high number of community banks as a deterrent for national banks considering new markets.
“When you move into any new marketplace, yeah, you’re going to do an analysis of the existing institutions, the market share that they have and how or whether or not you can carve out niche,” Sorensen said.
“Cedar Rapids is already a very competitive market.”
Twelve banks are headquartered in Linn County, according to FDIC data, and Johnson County has five.
In comparison, Racine County in Wisconsin, which has a slightly smaller population than Linn County, has only two banks headquartered in the county.
There are more community banks in Iowa than in New York and California combined, according to BankStrategist.com.
“The lion’s share of our banks have always been state charters historically,” Sorensen said. “We have a strong community banking presence in our state.”
That total of community banks in the area do not include credit unions.
GreenState Credit Union, based in North Liberty, has $6.7 billion in assets, according to data from the National Credit Union Administration.
It’s more than three times the total number of assets than CRBT’s.
Credit unions also do not need to pay income taxes as banks do.
“Especially the large credit unions — credit unions like GreenState — do everything a bank does,” Sorensen said. “They’ve become competitors to our commercial banks.”
The extra competition puts pressure on the community banks.
Sorensen estimated the state has about six to 12 acquisitions or mergers of community banks a year — in part because of the growing popularity of credit unions.
Looking ahead, the community banks also are adapting to an increasing number of people banking via a phone app than at a bank branch, a trend Sorensen said the pandemic has accelerated.
“I think there will be less of an emphasis on branches,” Sorensen said. “And more on providing the technology that our customers want.”
He doesn’t see the relationship-first mentality of the Cedar Rapids market changing any time soon, though.
“You can’t lose sight of that relationship part of the business,” Sorensen said.
Comments: (319) 398-8394; john.steppe@thegazette.com
Market share
Here are the top 10 banks, by market share by percent, in the Corridor metro areas, according to FDIC market share data. The lists do not include credit unions.
Cedar Rapids:
1. Cedar Rapids Bank and Trust — 16.52
2. US Bank — 14.19
3. Wells Fargo — 10.96
4. Farmers State Bank — 10.84
5. Hills Bank and Trust — 8.46
6. Bankers Trust — 4.24
7. Farmers and Merchants Savings Bank — 3.89
8. BankIowa of Cedar Rapids — 2.43
9. Ohnward Bank and Trust — 2.32
10. Fairfax State Savings Bank — 2.01
Iowa City:
1. Hills Bank and Trust — 47.14
2. MidWestOne Bank — 17.13
3. US Bank — 6.17
4. Washington State Bank — 5.40
5. West Bank — 4.29
6. Wells Fargo — 4.20
7. Central State Bank — 2.82
8. Federation Bank — 2.06
9. Great Western Bank — 1.97
10. CBI Bank and Trust — 1.95.
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