Tompkins Bank of Castile's headquarters in Batavia overlooks Main Street, where M&T Bank and KeyBank have branches practically across the street.
So Tompkins Bank of Castile knows all about the tough competition it will face on a larger scale in the Buffalo market, where it is preparing to open a branch.
M&T dominates the Buffalo area in deposit market share, and Key has bulked up its own share since acquiring First Niagara Bank a year ago. If two banks with a commanding presence would seem to deter new competitors from moving into the Buffalo Niagara market, three other banks disagree:
- Bank on Buffalo already has a downtown branch in the Electric Tower, is preparing to open two others in the suburbs, and is searching for a fourth location.
- Steuben Trust will open a branch in Clarence, and named a former Evans Bank official as its president.
- As it decides where to open its first local branch, Tompkins Bank of Castile has hired a Grand Island resident as its regional market leader.
All three of the banks come from deep roots and have hired experienced bankers from the area to help make inroads here. And they see a chance to capitalize on the shakeup caused by the Key-First Niagara deal.
It's almost unheard of for banks to start from scratch in Erie and Niagara counties nowadays. Greater Buffalo Savings Bank was established in 1999, but was absorbed by First Niagara eight years later. Waterford Village Bank opened in 2007 but was shut by state regulators only two years later. It's more common to see banks with branches outside the region steadily make their way here, as is happening now.
The Buffalo Niagara region's roster of banks with branches serving the market has fluctuated over the past two decades. It's been as high as 20 banks, as recently as 2007, and as low as 14, in late 2016, according to Federal Deposit Insurance Corp. data. But once Tompkins Bank of Castile and Steuben Trust open branches here, the total will rise to 17.
Here is a look at how each of the three banks intends to crack the Buffalo market:
Tompkins Bank of Castile
Tompkins Bank of Castile already has 16 branches in five upstate New York counties. And while a branch in Erie or Niagara County is a notable step, Tompkins Bank of Castile has a long track record of commercial lending with customers here, said John M. McKenna, the president and CEO.
The bank has thought about expanding its branch network into the region for years, McKenna said.
"It's been high on the agenda for a long, long time," he said.
The idea picked up steam amid its stepped-up commercial lending, in light of all the development in the region, as well as upheaval stemming from the Key-First Niagara deal, he said.
M&T and Key have a combined deposit market share of about 82 percent in the Buffalo Niagara region, based on FDIC figures from 2016.
"That's intimidating on the one hand, but on the other hand, it's a big market," McKenna said. "There's lots of great people and companies to do business with."
The Bank of Castile's origins date to 1869. In 2000, it was acquired by Ithaca-based Tompkins Financial Corp., and operates as one of four sister banks under the parent company, which has about $6 billion in assets. The bank added "Tompkins" a few years ago as part of a company-wide rebranding.
To guide its strategy in the Buffalo area, the bank hired Adam M. Desmond, a Grand Island resident who worked for First Niagara, as its regional market leader for Buffalo.
"We're not envisioning that we're going to have 50 percent market share in Buffalo in five years," Desmond said. "That's not the size or scope of this institution. We're looking for thoughtful entrances, really being selective with our customer base, and kind of growing that way. And I think that there's a partner for everyone out there."
The four banks under Tompkins Financial are separately chartered, with their own boards and executives.
"People live, work, play all in the market, and that's who you're really doing business with," Desmond said. "In the commercial [lending] space, in the greater Buffalo market place, I think there's a lot of business owners who want to be doing business with their neighbor, someone who's in market."
McKenna said Tompkins Bank of Castile can also draw upon larger financial and technical resources than some community banks, and has a larger credit capacity than many of its rivals.
Tompkins Bank of Castile had not yet chosen a site for its first Buffalo-area branch, or settled on the number of locations that it will open here, McKenna said. But he said the bank is focusing on hiring the right people to round out Desmond's local team.
"It's definitely a people-first strategy for us. There's nothing more important to us than having the right team and fit," he said.
Bank on Buffalo
Martin Griffith takes a personal approach to his role as president. His face is even on the bank's billboards around town.
He's fond of referring to Bank on Buffalo as a "152-year-old startup," a quip that summarizes the bank's profile. It's a division of Pennsylvania-based CNB Financial, which traces its roots to 1865, and has about $2.7 billlion in assets. But Bank of Buffalo has hired local people and emphasizes local responsiveness. It's a message Griffith pitches to prospective customers.
"We are truly Buffalo-based and making decisions from Buffalo, but it's also important for them to understand we're backed by a significant amount of capital from a 152-year-old company," he said.
Bank on Buffalo competes for commercial real estate loans, just like its rivals. But since commercial real estate can be cyclical, Griffith is eager to see the bank to win business with small and medium-sized businesses for what are called commercial and industrial - or C&I - loans. Customers use C&I loans for purposes such as purchasing equipment and working capital. Griffith said those loans can lead to valuable repeat business, beyond a one-time transaction that a commercial real estate deal might bring.
"Over the past three to six years, as we've gone through this long but slow recovery, there haven't been as many expansions," Griffith said. "There hasn't been as much capital equipment need as there was in economic good times. But there's been a need for working capital."
First Niagara had a reputation as a strong player in C&I lending, he said."We're trying to absorb that void that's been created by the departure of First Niagara."
Griffith is a banking industry veteran, and he liked the opportunity of helping Bank on Buffalo get off the ground.
"I felt to some degree, the region was overbranched, but I thought it was underbanked," he said. "What I mean by that is, there really are in this community anymore, only two to three large banks in town, and then the rest of us, the community banks struggling to lap up the spilled milk."
M&T and Key are the titans of Buffalo deposit market share. The next tier consists of banks like Bank of America, Northwest and Citizens, each of whom control several percentage points of deposit market share, according to FDIC data.
"That last 8 to 10 percent of the ($42 billion) in deposits, is what ourselves and the other (smaller) banks are all struggling to obtain," Griffith said. "And none of us, I think, need 5 percent of the market. But we do need a couple percent of the market in order to sustain the loan growth that we anticipate."
Bank on Buffalo plans to open one branch in Orchard Park in October, and another in Amherst later that month. Griffith is already scouting a fourth location. The bank has 18 employees, and has added more leased space inside the Electric Tower, home of its first branch, to accommodate its growth.
The bank has originated more than $100 million business loans since last summer, and is concentrating on keeping the momentum going, Griffith said.
"I thought, and I still feel strongly, that if you're committed to building a branch network or a branch franchise to support the lending side of the equation, that the community does need another bank in town," he said. "They don't need 30 or 40 branches. We're talking about maybe doing a dozen branches."
The Hornell-based bank will take advantage of the Key-First Niagara deal in at least one way: The bank will move into a former First Niagara branch in Clarence, which was closed last October amid the consolidation. Steuben Trust hopes to open in 8503 Main St. this fall, said Brenda L. Copeland, the bank's CEO.
Clarence seemed a good fit for its first area branch, Copeland said. "It works well for us in terms of being more of a community presence, versus an urban presence."
"Demographically it's a pretty affluent area for us to begin to raise deposits, as we build out the Buffalo region on a lending basis, so that the deposits kind of line up with the lending, if you will," said John Eagleton, the bank's president.
Eagleton, who was named Steuben Trust's president in June, was most recently an executive vice president at Evans Bank. Copeland plans to retire at year's end, after which Eagleton is expected to add the CEO's duties. Copeland will remain on the board, as vice chair.
Steuben Trust plans to add more branches in the Buffalo market, if the first location performs as expected, Eagleton said. "We're very confident it's going to be a winner."
Copeland said the new branch will complement the commercial lending office the bank already has in Elma, where the bank has two full-time commercial and industrial lending officers.
Steuben Trust traces its roots to 1902, and has 14 branches in five upstate counties. The bank had assets of about $536 million at the end of March, and recorded net income of $5.4 million in 2016.
Copeland said "overwhelming growth" in the commercial market in the Buffalo was part of the reason the bank decided to extend its branch network here.
Disruption caused by the Key-First Niagara deal's disruption was also a factor, she said.
"For us, it's all about relationship banking. John's network there, and mine, and our commercial lenders -- it's all about taking care of the people that we have great relationships with" Copeland said.
"There are some really great folks up there and relationships that we think we can handle very efficiently and be responsive, maybe where the other larger players take a little more time," Copeland said.
Eagleton said from a consumer's perspective, particularly in commercial lending, "as the banks get larger and larger, they're a smaller player in the pie that is in that marketplace. And that will undoubtedly have some effect on the service they receive. That's just human nature."
"It's a size game, and there's still a huge play there for community banks to come in, as you're seeing, and we decided to be part of that," Eagleton said.
Eagleton said he liked the opportunity to move into a president's role with Steuben Trust, and he was impressed with the bank's credit and capital picture. "It was very clear that I would be able to come in here and not have to fix anything" and instead focus on growing the institution.
The bank envisions expanding not just in Buffalo but regionally, including in markets like Rochester and the Southern Tier, he said.
As the bank prepares to open a branch here, Steuben Trust will spread the word to potential customers that it's a full-service community bank. "We need to get our name out there and what we're all about," Copeland said.
While the three banks emphasize their ability to connect with customers on a smaller level, Darren J. King, M&T's chief financial officer, said he believes a bank like M&T can deliver customers the same level of service, despite its larger size.
"We look big compared to those guys, but we still think we're pretty nimble," King said. With the number of relationship managers, branch managers and executives M&T has around Western New York, "I think our relationships run pretty deep.
"I'm not sure that you could come in off the street and convince a customer who's worked with someone from M&T for five, 10, 20 years, that just because you're smaller, you can actually know them better than someone I've dealt with for decades," King said.
Let the competition begin.