Independent Banker - July 2024 - 33

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2. Pore over the financials
Opening a new branch generally
means a large capital outlay, and
today's high construction costs make
the stakes even higher.
It usually takes two to three
years on average for a branch to
reach a break-even point, says Scott
McComb, president, chairman and
chief executive of $1.9 billion-asset
Heartland Bank in Whitehall, Ohio,
which has opened multiple branches
in the last decade or so.
To be profitable, a branch,
generally speaking, needs to have
$30 million or more in deposits.
" Community banks can't just plop
a number of branches somewhere
and wait for them to be profitable, "
McComb says. " They have to use their
capital wisely. "
3. Choose your location prudently
Community banks should look for
a market that isn't overbanked or
that is underserved by the banks in
the market, says Robert M. Fisher,
president and chief executive of Tioga
State Bank, N.A., in Spencer, N.Y.
They should also aim to set up shop
in a place where there's likely to be
significant foot or car traffic, or both.
The $565 million-asset community
bank is building a branch in Johnson
City, N.Y., next to a major grocery
store and across the street from an
older mall that is being brought back
" Community banks can't just
plop a number of branches
somewhere and wait for them
to be profitable. They have to
use their capital wisely. "
-SCOTT MCCOMB, HEARTLAND BANK
to life with medical facilities, eateries,
a wholesale club and other shopping
options, Fisher says.
Heartland Bank has tended to
look for well-defined communities
that have their own chamber of
commerce, local government and
school system, McComb says. He
adds that community banks should
also use FDIC data to assess the
opportunity for deposit-gathering,
which can be more plentiful in lowerto
middle-income areas, where people
tend to use bank branches more.
Community banks could also
consider building a branch in a town
experiencing significant population
growth to take advantage of the
potential for deposit growth, which is
a tactic big banks often take, he says.
Ease of access is also important.
" You don't want to be on the left-hand
side of the road when you can't make
a left turn, " says Bailey.
BIG STAT
50K
The approximate number of U.S.
community bank locations
Source: ICBA
4. Consider a trial run
Two years ago, Community Spirit
Bank opened a loan production office
in Fulton, Miss., about 25 miles from
its main office, and later transitioned
it to a full-service branch.
Renting the location allowed
the bank to get its feet wet in the
community until it could identify a
more ideal spot in town, where it's
building now. The new building will
be more accessible to customers and
allows for a drive-through option.
" We were diligent in looking at the
lot we wanted that would be good
for the bank for the next 50 years, "
Bolton says.
5. Focus on staffing
Staffing the branch appropriately
is critical to winning new loans and
deposits, bankers say. Community
Spirit Bank, for instance, chose to
recruit one of the top-performing
local loan officers, so that loans-and,
eventually, deposits-would follow.
" People bank with people, not a
bank, " Bolton says. " That's the key
to success. "
6. Plan for unknowns
There will always be unknowns with
any project, so community banks
have to be sure to plan accordingly.
Fisher says Tioga State Bank's
Johnson City construction project
hit some snags early on, including
an unknown drywall on the property
and a buried tank that needed to be
removed. Luckily, the community
bank had set enough aside to cover
unexpected expenses.
" We had a contingency pool in
the construction budget that has
been able to handle these surprises, "
he says.
Cheryl Winokur Munk is a writer in
New Jersey.
independentbanker.org // 33
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Independent Banker - July 2024

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