In the Corridor, community banks can hold their own

The United States struggled with one of its worst recessions. Faith in Wall Street was severely shaken.

Yet community banks in the Corridor notched bigger deposit gains than their larger national cousins from mid-2007 through mid-2011.

Community banks and their bigger, national cousins not surprisingly put varying interpretations on the data.

Nonetheless, the differences were stark.

Hills, Iowa-owned-and-operated Hills Bank and Trust, for example, gained about $254 million in deposits in Johnson County and about $78 million in Linn County over the five-year period, according to Federal Deposit Insurance Corp. figures - more than any other bank.

In Linn County, Cedar Rapids Bank & Trust gained $132 million in deposits, and Marion-based Farmers State Bank added $66 million in deposits in the same county, the FDIC reported.

On the other hand, U.S. Bank, a major national lender based in Minneapolis, had a decline of about $58 million in its Linn County deposit base and an increase of about $25 million in its Johnson County deposit base. That amounted to a net decrease of about $23 million over the five-year period in its Corridor deposits.

The Linn County deposits of Wells Fargo, one of the nation's largest banks, declined $221 million and its Johnson County deposits increased $46 million, for a net decrease in the Corridor of about $175 million.

Deposits are a kind of necessary evil for banks. The deposits cost them money in interest payments to depositors, but allow the banks to loan out money to borrowers at a higher rate.

Loans are on the books as assets and provide another way of looking at market share.

Iowa Division of Banking Superintendent Jim Schipper said he looks at deposits more as a way of measuring market share, as assets leave out regulatory capital and non-deposit wholesale funds that don't tend to reflect their market activity.

Cedar Rapids Bank & Trust grew its deposit market share from 6.5 percent in 2007 to 9.7 percent in 2011. Its president, Larry Helling, says community banks over time have gained back market share from large national banks.

“You've got to fight for it,” Helling said. “We had to take that share from somebody.”

Manchester-based F&M Bank's market share grew from 2.3 percent to 3.7 percent over that five-year period. Its Linn County deposits grew from $82 million to $140 million.

“That trend continues that local banks are taking share away from the national banks,” F&M Executive Vice President Tim German said. “It may be fee-driven. It may be rate-driven.

“When rates get to where they are now (low), they may be quicker to lower rates to bare bones.”

German said consumers have become more attentive to the strength of their financial institution after the turmoil of the past few years, and they may tend to associate national banks more with the financial meltdown on Wall Street.

U.S. Bank and Wells Fargo officials provide an entirely different interpretation of their market share and deposit slippage.

U.S. Bank spokeswoman Amy Frantti said the bank has many large commercial customers that make big changes in their deposit level according to their own needs. She added that point-in-time comparisons such as the FDIC's market share reports, recorded on June 30 of each year, don't paint a realistic picture.

Frantti said the bank does not see a negative trend in the market.

Wells Fargo spokeswoman Angie Kaipust said the declines in Wells Fargo's Linn County deposit levels between 2009 and 2010 and again between 2010 and 2011 were related to balance moves made for administrative reasons connected to the integration of its merger with Wachovia Bank.

“We're seeing consumer and business banking core deposits up nearly 13 percent in Cedar Rapids since 2009,” Kaipust said. “We're seeing a large and stable deposit base in Cedar Rapids.”

Unlike many other states, Iowa's banking landscape is not completely dominated by nationwide banking giants. This primarily is because of the state's relatively low cap on the percentage of the state's deposit base that can be concentrated in one financial institution.

That cap stands at 15 percent, but none of the banks are even close to reaching it, said Iowa Division of Banking Superintendent Schipper.

Wells Fargo, the biggest banking presence in Iowa, had $6.079 billion in deposits on June 30, 2011. Even that was only 8 percent of the state's deposits.

U.S. Bank is second in deposits among Iowa banks, with $4.48 billion on June 30, and Bank of America was third, with $3.5 billion.

FDIC statistics show that on a statewide basis the big regional banks generally have grown deposits over the past five years, although they've seen little or no growth in market share.

Schipper's office regulates state-chartered banks. Schipper said the strongest deposit growth in recent years has been at Iowa's rural banks, buoyed by a strong farm economy.

The fastest-growing bank by deposits, Schipper noted, has been Bankers Trust in Des Moines.

For its part, Hills Bank, which has put up the biggest deposit growth numbers in the Corridor, remains modest about its success. Senior Vice President John Benson said it's hard to tell what factors contributed to Hills's growth in what proportion.

“Deposit growth for the banks over the past few years was helped by a relatively stable local economy,” Benson wrote in an emailed response. “Also, anxiety over the national economy helped people see the value in FDIC-insured deposits, especially when coverage increased from $100,000 to $250,000.”

Cedar Rapids Bank & Trust's Helling said the dominant force that Hills has become in Johnson County may be due in part to the fact that large nationwide banks have never had a big large presence there, and in part to its long history in the county.

Benson, German, Helling and others say local residents should take heart in their deposit growth.

“The real reason we're using the money is to loan back into this community,” Helling said.