Community banks are at a crossroads. Particularly coming out of the pandemic, with its boost in the adoption of digital processes and conveniences in all facets of life, the time to innovate or suffer the consequences – namely, consolidation or closure – is nigh. According to the CSBS 2022 National Survey of Community Banks, the percentage of bankers who said that adopting new tech was “extremely important” doubled over the past three years. In New Jersey, a number of such institutions are finding success by adding new technologies, expanding their physical presence and broadening their services to retain customers and appeal to new ones.
Approaching its 100th birthday, Glen Rock-based Ascendia Bank faced a clear choice when it came to committing to change. “We basically … had to realize that at this stage of the game, if we were going to continue to be relevant, we needed to do all of the things that the big banks do,” Ascendia President and CEO Ferdinand Viaud told NJBIZ.
So, over the course of the past 15 months or so, the former Glen Rock Savings Bank – which debuted its new moniker in September 2021 – has embarked on a transformation. “[W]hat we did was not only change our look and our name, but also the way we do things,” Viaud said.
A lot of those changes are rooted in technology; among them, the chief executive cited a new user-friendly website with more information, a bill-pay system and mobile banking that were “only the beginning.” This month, he said Ascendia plans to roll out a number of additional capabilities, including the ability to file a mortgage application or apply for a home equity loan online, without having to make a trip to the bank. For larger institutions, these practices are typically already baked in. “For a bank of our size, to be able to offer these services to the public is something we’re very proud of,” Viaud said.
And Ascendia isn’t the only institution coming to that realization. According to the 2022 community banking research report from consulting and accounting firm Wipfli LLP, nearly half (48%) of survey respondents agreed with the statement: “Our bank has very clear objectives and a path forward to digital transformation.”
For most, according to the report, that looks like payment transactions, followed closely by faster loan approvals or account openings, and virtual branches; a little more than a third defined that transformation as offering digital financial advisory services. While adopting and incorporating tech into operations is at the forefront of transformation in the community banking space, and seemingly integral to its survival, on the surface it appears to be at odds with these institutions’ role as pillars of, well, the community.
These new conveniences, however, coupled with the physical presence inherent in the community banking model, can be a boon to operators, appealing to customers who may be without a local location to frequent, should the occasion arise. According to S&P Global Market Intelligence data, in 2021, the number of U.S. branch net closings was nearly 3,000 – more than two times what it was in 2014 (1,398) and up by 801 from 2020. Among the highest-ranking net closures of bank branches in 2021, S&P found, were familiar national brands like Wells Fargo & Co. (at No. 1), Bank of America Corp., PNC Financial Services Group Inc. and M&T Bank Corp., among others.
In contrast, according to Wipfli, only 17% of community banks reported closing branches in 2021. And most had forecast growth for 2022.
Last month, Unity Bank of Clinton announced the opening of a new full-service branch in Lakewood, marking its expansion into Ocean County. In a statement issued at the time, bank President and CEO James Hughes spoke to the way community banks can fill the vacuum left when other financial institutions shut their doors. “Ocean County has lost almost 25% of its bank branches in the past decade and county officials are concerned that senior citizens in the county are underserved by the current population of banks,” he said.
This month, the bank plans to open another new branch in North Jersey, in Fort Lee.
Over the next 12 months, Viaud said that Ascendia is looking to open up one – or possibly two – new branches. In November, as a birthday present to itself and to accommodate current and future growth, it moved into a new headquarters space in Glen Rock, allowing the bank to consolidate teams in one central location.
In addition to that office, Ascendia Bank has four branches: one each in Glen Rock and Hawthorne and two in West Orange. As of Sept. 30, 2022, the most recent information available, Ascendia had $329 million in total assets and $260 million in total domestic deposits. When the bank first got to work on its growth initiatives it had “a little over $270 million in assets,” Viaud said. “So, it’s been very well received.”
He credited the bank’s board of directors for its support.
“[They] understand that if the bank is going to continue to grow – and again, I keep using the term – be relevant, we have to provide these services,” he said. “This is just the way of the world. And if you don’t, you’re going to eventually go away, you know, and we don’t want to do that.”
In addition to making the banking experience better for existing customers, transformative efforts on the part of community banks also aim to entice new patrons. Beyond new spaces and technology, that also includes new services.
One of the areas that Viaud said has been a real boost to business is commercial and real estate lending—a customer-facing service that is based in Ascendia’s new headquarters. According to the Federal Deposit Insurance Corp., community banks account for just 15% of the banking industry’s total loans; however, in contrast to their relative size, they hold 30% of all CRE loans, 36% of small business loans and 70% of agricultural loans.
“In the last 12 months, our commercial lending department has put on more than $60 million worth of commercial real estate loans — and this was something four years ago that we had never done,” Viaud explained. The change was prompted by leadership’s recognition “that we needed to branch out into other things in order to make the bank more profitable.” Now, the commercial lending department is comprised of a five-person team, with another member set to come on board shortly. “And we are continuing to grow in that area,” Viaud added.
For Unity Bank, the establishment of its Lakewood branch followed the opening of a commercial and residential lending office at the Ocean County outpost earlier in 2022.
“Our commercial and residential lending team has made significant inroads serving the unmet needs of the local community so the new branch is a logical extension of these efforts,” Hughes explained at the time. “Lakewood has been the fastest growing municipality in the state so this new branch makes good sense for the community and Unity.”
Staying keen to the needs of the community is one way that community banks distinguish themselves among potential customers, but big-name banks aren’t the only competitors they have to worry about.
“The competition is coming from all different types of business,” Viaud said. That includes the “big money center banks,” along with credit unions, insurance companies and larger regional players — like Columbia Bank, Spencer Savings Bank or Kearny Bank, for example.
“These are all four, five, six, $10 billion banks and every day we have to compete with them,” Viaud added, “so in order to continue to be successful … not only for the current periods and in the present – I’m looking 10 to 15 years down the road when I pass this along to someone else – that we want the bank to be in good shape and continue to be prosperous going forward.”
That foresight is integral to staying power.
Ascendia updates its strategic plan every three years, according to Viaud, and in 2018 there was a number that stuck out: 66. That was the average age of the bank’s customer at the time, which the executive pointed out, does not leave much room for future success. “And if you want to attract younger customers, you need to offer the convenience that younger people are looking for,” he said.
“They never have to step foot in the bank if they don’t want to, and that’s the world we live in,” Viaud added. “And if you don’t embrace that business demographic, it’s just going to pass you by and eventually your deposit base and your customer base goes away ….”
But if you’re going to talk the talk, you have to be able to walk the walk. Beyond just updating branding or providing digital capabilities, when it comes to achieving real change, “It’s a mindset,” Viaud said.
“[I]t would’ve been very easy for us to just sit back for the next 20 years and continue to do what we were doing, but eventually the customer base would’ve shrunk. The bank would’ve gotten itself into a situation where it couldn’t remain relevant in the marketplace anymore. And it would’ve eventually been merged into another bank somewhere.”
According to the FDIC, voluntary mergers were the primary driver in the decline in the number of insured depository institutions from 2012 to 2019. In the Garden State, a number of combinations announced or completed over the past 12 months, including the Bank of Princeton’s plans to acquire Noah Bank, Columbia Bank’s addition of RSI Bank, and a merger agreement between Provident Financial Services Inc. and Lakeland Bancorp Inc.
Most recently, First Bank announced in December that the Hamilton-based institution would acquire Malvern Bancorp Inc. – the parent company of nine-branch institution Malvern Bank of Pennsylvania – in a $149.5 million deal. The year before, First Bank grew with the addition of two OceanFirst Bank locations in the Garden State.
“The competition and merger activity in the state of New Jersey in the banking industry is very intense,” Viaud said. “The number of banks continues to drop as mergers continue to happen. … And every time that happens, the number of banks that we could possibly do something with goes away, so the number of opportunities continues to go away.”
And while that growth path works for some, the volume of activity in the space also helps to encourage the more organic options players like Ascendia have employed, which also offer additional security. As economic headwinds persist moving into 2023, Viaud said that, so far, Ascendia has been able to carve out a niche for itself that helps to abate anxiety around those issues.
“We were concerned when rates started to rise that we would see that business start to dry up a little bit and slow down,” he said, but “that hasn’t been the case.”
“I think where it comes from is that as long as you are competitively priced – and we kind of found a niche in that the big banks – the city banks, Wells Fargo’s, Bank of America’s – aren’t interested in making that loan to a builder that’s looking to build four or five homes — that loan isn’t big enough for them,” he said. “We found a niche in picking up those type of businesses where they want to cash out on their existing properties to build new homes.
“Those are the types of loans that we’ve been doing and we have found no shortage of business to make those loans,” he added.
In addition to the other developments and new services, committing to operating in that sort of capacity is directly tied to not just Ascendia’s role and roots as a community institution, but to the overarching nature of the sector, and its future success.
“And that’s exactly the way we thought about it,” Viaud said. “Those big guys can take those big loans, that’s not what we’re around to do. We are here to lend in our communities and to make sure that our communities are well served with their financial needs,” he said. “And that’s exactly what we’re trying to do.”