Part I
Two of the more recently established brick-and-mortar bank branches in Ulster County sit on either end of the Route 9W commercial stretch in the Town of Ulster. The one on the north end, opened a few months ago by Ulster Savings Bank, is in a modestly sized building at Ulster Commons, directly opposite the state highway from Adams Fairacre Farms. Further south, on the southeast corner where Ulster Avenue splits off from Route 9W to head into Kingston, is the first Ulster County office of The Bank of Greene County, a more commodious space formerly occupied by M&T Bank and leased from it.
Both managers, Jess Davis at The Bank of Greene County and Kristin Bauer at Ulster Savings, are local, Davis living in Ulster and Bauer in Hurley. Both have worked their way up the local banking ladder, Davis working almost eleven years at Bank of America and Bauer the same length of time at Chase. Both are very active in community organizations.
The Federal Deposit Insurance Corporation (FDIC) lists the two banks as similar not only in the amount of local deposits but also in their number of branches (14 each). Both institutions trace their heritage back to the nineteenth century. Both stayed as one-office banks for most of their histories.
It’s not easy for a local bank in the mid-Hudson Valley to accumulate half a billion dollars of deposits. Excluding credit unions, only four have in fact succeeded in reaching that mark, according to federal banking statistics for the end of June 2015. Heading the FDIC list as of the end of June 2015 are the two whose branches are described above, Ulster Savings Bank with $641.5 million in deposits and The Bank of Greene County with $623.4 million.
In terms of total deposits, two other banking institutions, Rhinebeck Bank headquartered in Dutchess County ($610 million in deposits) and Orange County Trust Company ($574.2 million) are bunched in the same ballpark. Each of the four largest community banks in terms of deposits has by far its strongest market presence in its home county.
Add to the total deposits of $2.45 billion in these four banks about $1.8 billion in deposits of five other all-or-mostly-local banks in the region with deposits above the quarter-billion mark but below a half-billion: They are Walden Savings Bank with $432.8 million in deposits, Jeff Bank in Sullivan County with $409.7 million, Kingston-headquartered Catskill Hudson Bank with $375.2 million, The National Union Bank of Kinderhook with $336.4 million, and Rondout Savings Bank with $267.8 million.
The mid-Hudson Valley consumer looking for a relationship with a large mostly-local banking institution has nine banks and two very substantial regional credit unions, the immense Hudson Valley FCU in Poughkeepsie (with $4.239 billion in assets) and Kingston-based MHVFCU (with $805 million). Each financial institution has a different history, a different culture, different ambitions and different concerns. And there are many respectable smaller local institutions available as well.
There’s sometimes more to the picture than the FDIC numbers disclose. Take the two largest community banks on the list. Ulster Savings Bank has a billion-dollar mortgage servicing business that doesn’t appear on its balance sheet. The stockholders of the Bank of Greene County, which has almost 46 percent of the deposits in Greene County, also own the Greene County Commercial Bank, the second biggest bank in the county which has an additional almost 16 percent market share. It does business with local governments.
In the future, even the deposits the largest independent local banks boast may not be enough to assure the long-term survival of these community institutions. Don Gibson, president of the fast-growing Bank of Greene County, says he is aiming for a billion dollars in deposits four years from now.
If present trends hold, the larger mostly-local banks are more likely to hold or improve their market positions than their smaller compatriots. They can spread the costs of technology and government compliance over a larger base, and yet be small enough to retain their community character. Of course these trends could either accelerate or reverse. But at this point in time, that seems unlikely.
The large regional banks and the handful of too-big-to-fail giants that increasingly dominate the national banking market, are steadily increasing their market share at the expense of their community-based brethren. The October announcement of a merger between two large regionals, the $72-billion Cleveland-based Key Bank and the $27-billion upstate New York First Niagara, which are ranked first and fourth respectively in deposits in the mid-Hudson region, is just the latest consolidation. The combination, which is being opposed by the Andrew Cuomo administration, would create the nation’s thirteenth largest bank.
Though the national and regional banks may have been gaining national market share and have higher profitability, they have by no means displaced the community banks of the mid-Hudson Valley. Still recovering from the Great Recession, the more aggressive community banks of every size and stripe remain active, scheming how to increase their own market share and profitability, deciding whether to open or close brick-and-mortar branches in an age of increasing technology and government regulation of their industry, and figuring how to differentiate themselves from each other — all in the name, of course, of better serving their customers.
In next week’s second part of this article about community banking, we’ll talk with the CEOs of the two largest local banks in the mid-Hudson region, Don Gibson at The Bank of Greene County and Glenn Sutherland of Ulster Savings Bank.
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