First Iowa State Bank leads a small town renaissance

Northwestern Financial Review, Aug 15-Aug 31, 2002 by Dullum, Justin

A state official once called Albia the ugliest town in Iowa. Thirty years after a facelift, Albia is a burgeoning tourist destination.

Orange construction fencing surrounds the historic Monroe County Court House in the middle of Albia's town square. Scaffolding surrounds its clock tower. The bricks are being stripped and the structure beneath is being reinforced. These are signs that the citizens of Albia do not allow their buildings to waste away.

It's safe to say that no small town in America is quite like Albia. Sure, the usual gang of rural afflictions has impacted this central-Iowa town of 3,800 people: giant retail stores, population decline and the economic roller coaster of agriculture, to name a few. But thanks to one banker's flair for all things Victorian, committed community leaders, and a population that takes pride in its town's charm, Albia has managed to keep its downtown beautiful, vital and a destination point for tourists as well as new industry.

The story begins in 1956 when Albia native Robert Bates returned home. Bates had made a name for himself in Hollywood as an interior decorator to the stars. He held a law degree from Drake University and came from a long line of bankers. (His father, D.W. Bates, was Iowa's superintendent of banking during the Great Depression and helped establish the FDIC.) Robert had planned a brief stay in Albia, but his roots re-grew permanently.

From the window of his apartment overlooking the Albia town square, Bates conceived Project Facelift, which in the early 1970s, reinvigorated the square's 19th century storefronts and earned Albia headlines in newspapers such as The New York Times.

As chairman of First Iowa State Bank, Bates followed up on Operation Facelift with 25 years of lending money to local businesses and residents. He relied heavily on his business partner, Robert Kaldenberg, First Iowa's president, to oversee the day-to-day operation of the bank.

Under Bates and Kaldenberg, First Iowa State Bank became the nexus of Albia's architectural and economic renaissance. Bates lavishly furnished the bank's interior. Victorian period furniture was used throughout. Art covered the bank's walls. The bank evolved into a functional museum-a portal to another time. It became a tourist destination. Meanwhile, Kaldenberg was keeping businesses in the town square capitalized.

Bates and Kaldenberg died in 1995 and 2000, respectively, but not before planting the seed of something special. Bates left his estate to the town, including the vast collection of art and Victorian antiques in his apartment. His fortune was used to establish the Bates Foundation, which provides money for the maintenance of the town square's facade.

When such driven people pass on, a question arises as to whether others will be able to keep the torch burning as brightly. Today, stepping into Albia's square is still like entering a time warp, thanks in no small part to a second generation of impassioned community leaders.

The second generation

Today, Albia native Raymond Davis is president of the $105 million First Iowa State Bank, rising from the position of CEO which he held during the 1990s. With this background, Davis is keenly attuned to the sentiments of Bates and Kaldenberg. This makes him a community banker with a twist: as president, he's also the curator of a museum in which people live and work.

"I haven't counted exactly but there must be 300-plus paintings in the bank," said Davis, who occasionally buys new pieces for the bank. He points out two paintings by a local artist-an individual whose arms are disabled and therefore paints by holding a brush between his teeth. They are delicate depictions of rural landscapes. "Most of the art on the walls was done by local artists," Davis said.

Keeping the bank functional hasn't been difficult. Customers and employees use all of the antique furniture. A local man handles touch ups and reupholsters the furniture as needed. The janitorial bill is higher than most banks at the end of the month but it's a drop in the bucket, said Davis. "When you see what a difference it makes, you don't think about it. Sure, it might be a little less expensive to buy regular office chairs, but not anywhere near enough to make a real difference."

"Where you see a good small community, a progressive community, you're also going to see a good community bank," Davis said. "We have to be the leaders. If we don't support and finance mortgages for young families or businesses on the square, nobody else is going to do it."

Davis said community banks must take risks that regulators might question. "A regulator might deem a loan riskier than we do but part of that is because we know the community and we know the customers," said Davis, who added that the other community bank in town, Peoples State Bank, has also been instrumental in keeping the town rolling.

In a nutshell, the banks support businesses and the Bates Foundation helps those businesses maintain historically accurate storefronts. The storefronts add up to an impressive, vibrant square that helps attract tourists and industry.