When a Community Bank Expands Beyond Its Community

By Karen Kroll

Have you heard about the community bank that’s been chugging along for over 150 years, took on “Community Bank” as its name—and “bank happy” as its motto? Scott Kingsley, the bank’s EVP and COO describes the institution as “humble, honest and hardworking.” But hold on to your assumptions. This is also the community bank that:

  • Grew from $4 billion to $11.6 billion over the past ten years
  • Expanded its footprint to more than 240 locations across four states
  • Increased its dividend for twenty-seven consecutive years

Meet Community Bank, N.A. (CBNA), based in DeWitt, New York. The bank’s goal isn’t size for the sake of size, Kingsley says, but to continually improve and generate an average annual return to investors of about 10 percent through a blend of consistent organic growth, as well as a disciplined, strategic approach to mergers and acquisitions. All the while, though, CBNA continues to maintain its identity as a customer-centric institution that knows and cares about its local neighbors. That’s a complex balancing act for a deceptively simple brand.  Here’s how they make it work.

Achieving organic growth

CBNA’s motto, “bank happy,” informs the ways employees work with customers. That is, clients should feel good about engaging with CBNA, Kingsley explains. To that end, CBNA takes a localized focus to decision making. Branch managers have lending authority, albeit with some oversight. “They know the customers better than somebody a couple hundred miles away,” he says.

Along with enhancing customer service, the decentralized decision-making approach tends to motivate employees, Kingsley adds. “Employees who feel empowered to help their customers and make decisions tend to be happier in their day-to-day activities and more engaged with their customer base.”

Another factor in CBNA’s steady growth is the markets in which it operates, Kingsley says. The bank’s 240-some locations stretch across Vermont, much of upstate New York, northeastern Pennsylvania, and western Massachusetts. These typically aren’t considered the fastest growing parts of the country, he notes. The upside? “They tend to be stable in terms of both population and market growth.” And CBNA ranks first or second in market share in about two-thirds of the markets in which it does business.

CBNA tends to stick with “bread-and-butter banking products,” like home mortgages and car loans, rather than complicated or exotic financial instruments, Kingsley says. The product offerings are “really centered on what the customers in our marketplace need.”

As part of that, the CBNA umbrella encompasses a handful of businesses that complement its core banking operations, including a $26 million wealth management business, a $32 million insurance agency and a $97 million employee benefits administration business. These enable CBNA to offer, for instance, homeowner’s insurance to a customer who recently signed a mortgage. The businesses also leverage CBNA’s financial and technology expertise, as well as its ability to process volumes of transactions.

The revenue diversification provides “multiple different levers” that reduce CBNA’s dependence on net interest income, Kingsley says. In total, they contribute about 69 percent of CBNA’s non-interest income.

Decentralized decision-making, a “bank happy” approach and complementary businesses have allowed CBNA to acquire new customers, generating an organic growth rate of about two to four percent annually, Kingsley says.

M&A strategy

Mergers and acquisitions add growth of another three to five percent each year. The strategy behind any bank acquisition is to partner with like-minded, smaller community banks that serve their markets and are already good at what they do, Kingsley notes. In general, CBNA doesn’t acquire institutions that are in distress. Once acquired, CBNA can leverage its IT systems and generally deeper product mix to add value to the combined institutions.

CBNA likely will continue to expand in the markets in which it’s already knowledgeable—such as upstate New York, Vermont, other parts of New England and possibly into eastern Ohio. Where is CBNA unlikely to go? Larger urban areas. “We’re just not sure the business model that we’re operating is something that those larger urban areas are in search of,” Kingsley explains.

Sustaining success

While CBNA has enjoyed solid growth, it is not immune to the challenges confronting many banks. One of those challenges is the rapidly evolving nature of banking itself, particularly around technology. Indeed, customers adopted CBNA’s mobile banking applications more rapidly than they did electronic banking years earlier—or even ATM and drive-up banking, Kingsley says. He expects that trend to continue, especially for many day-to-day transactions. At the same time, a demand for face-to-face interactions still exists, especially for larger transactions, like mortgages.

The fact of CBNA’s success prompts another question: can it continue to thrive even as the bank itself gets larger? Kingsley says it can. “This operating model still has a lot of runway,” he says.

While the bank continues to enhance its technology offerings, that hasn’t radically altered the company’s DNA, Kingsley says. CBNA remains focused on treating people fairly, with transparency and honesty. For CBNA, this is the approach that works equally well in every community.

Karen M. Kroll is a business and financial services writer and content marketer based in Minneapolis-St. Paul. Email: [email protected].