Applying for a mortgage can be confusing. Just ask Theodore Dyment.
“I haven’t bought a house before,” he says. “I don’t know how all this stuff works.”
With the careful guidance of a mortgage banker at the Tompkins Bank of Castile, Dyment secured the loan he needed. Last August, the Monroe County employee moved from Rochester to his ranch-style Irondequoit home.
Community banks, as defined by the Federal Deposit Insurance Corporation, have $10 billion or less in assets, a drop in the bucket when compared to the $2.38 trillion that the mammoth Bank of America has on its books. Despite the size differential, the smaller banks—which make up 92 percent of FDIC-insured institutions—continue to do well as a group. As of Sept. 30, community banks nationwide reported a total net income of $6.9 billion, a 7.2 percent increase from the same point in the previous year. By contrast, all FDIC-insured institutions reported a 7.3 percent decline in income during that period.
Nonetheless, community banks face challenges such as responding to swings in the economy and embracing digital tools that are increasingly popular. Experts say smaller banks will need to focus on their unique strengths to grab market share.
In order to compete with their larger opponents, Rochester-area community banks set their roots deep into the locales they serve.
“Our competitive advantage is that we’re local, and that we have a keen interest and knowledge of our local markets,” says Philip Pecora, president and CEO of Genesee Regional Bank. “Within that, we just feel that we can provide a higher level of service, both on the commercial banking side and on the residential mortgage side, and also retail banking.”
GRB has just three branches, all in Monroe County. Most on its sales teams sell commercial or residential mortgages.
“On the commercial side, you’re calling and managing your existing commercial relationships—that oftentimes develops into referrals,” Pecora explains. “On the real estate side, they’re primarily calling on the real estate community, the real estate agents, for additional referrals.”
In addition to meeting with GRB’s staff face-to-face, customers also can access their accounts online, and use the bank’s digital tools to conduct their affairs more efficiently.
“It’s certainly a lot more convenient to make a deposit at your desk, instead of having to run outside in that snowy weather,” Pecora says. “Even customers that were in close proximity to our branches wanted that technology.”
Such measures have helped GRB grow over the years. Since Pecora came aboard 18 years ago, the bank’s assets have increased from about $40 million to approximately $600 million, he says. Genesee dispensed $245 million in new residential mortgages in 2019 alone.
Personal touches also help the Canandaigua National Bank & Trust Co. hold its own against banking’s big guns.
“We develop those relationships focusing on high-touch and high-tech,” says Karen Serinis, retail banking executive vice president at CNB.
“High-touch” starts with CNB’s close proximity to its customer base. The bank’s 23 branches are spread around Monroe and Ontario counties.
“Being local and being present in this geography is very important,” Serinis explains. “It gives us the ability to get to know our customers and the community in a broad way. We think that resonates with people.”
Unlike larger banks, which might send loan applications out to faraway headquarters offices for approval, CNB’s loan committee meets in Monroe County twice a week.
“Local decision-making allows us the flexibility to meet the demands of the community we serve,” Serinis says.
CNB also is willing to loan to businesses that take in $100 million in annual revenue or less, which larger banks might consider too small to deal with.
“We have lots of people investing in real estate and multifamily (properties). That’s an asset class that not every large institution is pursuing,” says Charles Vita, executive vice president and chief lending officer.
That approach has helped CNB grow its loan portfolio. Over the last 10 to 15 years, the total of commercial, industrial and real estate loans that the bank has made annually has risen by 5 percent to 9 percent each year. From 2010 to 2019, the bank’s total assets rose from just over $1.6 billion to almost $3 billion, an almost 88 percent increase.
Dyment’s road to home ownership had a few potholes, including problems with the appraisal of the house he wanted. Cindy O’Grady, his mortgage banker at Tompkins, was available to help smooth the way.
“She did such an absolute attention to detail,” Dyment explains. “Anytime I had a question … I would fire off an email to (her), and within 20 minutes every single time I would get a detailed, thoughtful response.”
Tompkins customers can reach out to the bank in other ways, as well.
“You can call us, you can email us, you can chat (online),” says John McKenna, president and CEO of Tompkins. “You’ve got your online banking available on your mobile device, your PC.”
Those who are more comfortable conducting banking face-to face can meet bank employees in their offices, or even on the checkout line.
“They know their client base so well, they’re not sitting at their desks and waiting for people to come in and ask for things,” McKenna says. “They’re bumping into them in grocery stores, and saying, ‘You know, you should consider this (product or service).’”
As one of four banks owned by Ithaca-based Tompkins Financial Corp., Tompkins Bank of Castile also offers benefits that other community banks might lack—such the ability to serve larger-than-usual businesses.
“We take advantage of the lending capacity of the combined company,” McKenna explains. “It allows us to compete further up-market, and serve well larger companies that we wouldn’t be able to if we were on our own.”
Services of that kind have helped the Tompkins Bank of Castile grow. In the past five years, its assets have risen by 30 percent, to $1.6 billion.
For the Sodus-based Reliant Community Credit Union, good service is a key to boosting its customer, or membership, base. Unlike banks, credit unions are owned by their depositors, who are called “members.”
“Greater than 30 percent of our new members come from another member saying ‘I had a great experience at Reliant. You should check them out,’” says Reliant president and CEO Pamela Heald.
Donna Fox appears to agree with that view.
The Prattsburg resident recently bought a 2020 Jeep Grand Cherokee, using a loan that she’d obtained from an arm of the Chrysler Corp. She then headed to Reliant’s Canandaigua branch to refinance the loan in what is called an “auto loan buyout.”
“We buy out that loan at a lower (interest) rate,” Heald explains. “What drives that transaction is that our rate is more attractive.”
Reliant member service representative Laura Feulner was ready to help.
“She’s got a great personality, and she’s really super-good with people,” Fox says. “I like her very much.”
Fox says she saved more than $3,000 by heading to Reliant. The Jeep was the second new car she’d refinanced through the credit union. Fox also has a home equity loan with Reliant, and her paychecks are directly deposited there.
The auto loan buyout is Reliant’s most popular product, and constituted just over 39 percent of the credit union’s $74.2 million 2019 auto loan portfolio. It’s also a terrific selling point for potential new members.
“It’s the No. 1 way that new members come to the credit union,” Heald says.
The kind of service that Reliant provides is another selling point, she adds.
“Our employees have a great rapport with our members, and we really get to know you,” Heald says.
In addition to auto loans, Reliant also offers mortgages, home equity loans and other types of financing, including business loans that are too small to interest larger lenders.
“A large commercial bank may not want to finance a $70,000 item for a business,” Heald explains.
Reliant’s assets topped $473 million in the end of 2019, an almost 60 percent increase compared with 2009.
Though community banks in Rochester report growth, economists are concerned about the threat of recession, while digital disruption continues to reshape the banking environment. A December 2019 McKinsey & Co. report points to the need for community banks to invest in core differentiators, like cutting-edge technologies that support a personal customer experience.
At CNB, Vita says a major goal is to continue to instill its values in all new employees.
“The focus is to maintain our special culture, (and) continue to find, as we have in years past, the talented individuals that can deliver our capabilities in the marketplace,” Vita says.
That culture manifests itself in the relationships that permeate the bank.
“Our decision-making process is very collaborative—it’s not top-down,” Vita explains. “All of our managers are very collaborative; all of our decision-makers are very collaborative; all of our teams are making decisions together. It’s just part of our DNA.”
The Tompkins Bank of Castile strives to get out word of the services it offers.
“Our challenge in markets such as Rochester and Buffalo is building awareness, and communicating the depth and breadth of our capabilities,” McKenna says.
The bank has taken a multipronged approach to that end.
“We work at building awareness through our marketing efforts in traditional media, social media, public relations efforts, and on a very direct basis, by spending time with centers of influence in the community such as CPAs, business associations, and one on one with potential clients,” McKenna explains.
The bank also has had to respond to competition from sophisticated large lenders—some of which have no brick-and-mortar operations, and do business completely online. As part of that effort, about three years ago the bank opened a web portal that allows small businesses to apply for loans using a PC or cell phone.
“They can complete an entire business loan application, submit all the documentation,” McKenna says.
Most of the time, a decision is made regarding a loan within 24 hours after the application and documentation have been sent. If the deal looks good, a loan officer then meets with the applicant to close on it. McKenna says the portal has boosted his bank’s loan volume, but adds that its effect transcends dollars and cents.
“Probably the biggest impact has been just (the) great feedback that we’ve gotten from clients, who appreciate the ease of it,” he notes.
Those seeking mortgages also can apply online. McKenna says his bank hopes to roll out a “significant enhancement” of that application process this fall, though he declined to provide details of the change.
Pecora says the next five to 10 years could present challenges for GRB—and opportunities. On the challenge side, the U.S. economy—which has either been on the upswing or relatively stable for some time—could soften in the near future.
“You’re going to hit the top of the mountain at some point,” he says. “When the economy softens, businesses just don’t do quite as well.”
Though that could mean a loss of business for banks, the reactions of the larger institutions to the change could prove to be a boon.
“Typically, our larger competitors, the larger banks that are national, they change their focus much more quickly,” Pecora says. “They’ll pull back on their aggressiveness in lending. That provides an opportunity for us, who know the local market, who tend to be more consistent, to gain market share.”
Dyment is looking forward to a future in his new, 1,500-square-foot ranch, and with his new bank.
“I’m going to pull the trigger pretty quick of moving my money from my regular bank to Tompkins,” he says.
Mike Costanza is a Rochester Beacon contributing writer.