Tioga State Bank: 150 years of navigating a community bank

How do you mark your 150th birthday?

If you are Tioga State Bank (TSB), you celebrate for an entire year, starting with a ribbon-cutting, press conference, and gift of $20,000 to local food banks. The kick-off event took place Jan. 28 at the bank’s headquarters in Spencer.

During 2014, TSB will promote a travelling display about the bank, launch contests for adults and children, publish a cookbook with proceeds donated to the United Way, and participate in local parades.

Celebrating your sesquicentennial with five generations of the same family guiding a company is a rare event. “Tioga State Bank has survived The Civil War, two World Wars, the Great Depression, the Great Recession, and numerous other events and milestones,” says TSB’s current president and CEO, Robert M. Fisher. “During these 150 years, there have been many changes in the social fabric of our communities … The one thing that hasn’t changed is our mission to provide community banking at its best.”

The headwinds facing TSB today may be different, but no less difficult than in the past. “There is increased competition from other banks. We all have money to lend, but not enough borrowers, resulting in more competitive deals … Interest rates continue at historically low numbers causing compression in our margin,” Fisher says. “These low rates have a negative impact not just on TSB but also on the entire community-banking industry, which relies heavily on net-interest income for the majority of its profits … Credit unions continue to pursue more authority for commercial lending, meaning that they compete for many of the same deals we are pursuing … Technology is changing rapidly, requiring a constant investment in hardware, software, and training … [And] the regulatory burden continues to grow at a rapid pace.”

“Onerous” regulations

Fisher’s comment about the regulatory burden is best described as understatement. In an interview with The Business Journal in December 2012, he expressed concern about the recently established Consumer Finance Protection Bureau (CFPB), set up to protect the “little guy” from predatory financial firms.

Since then, the CFPB has moved quickly to open the floodgates of regulation. In January of this year, the regulators issued new rules clarifying when a borrower is considered able to repay a mortgage. The regulations run to hundreds of pages of opaque and complex rules, which leave lenders liable to repay all mortgage payments and precludes foreclosure on a property if regulators determine that the rules were not followed properly.

Two months ago, the CFPB reached a settlement with Ally Financial for $98 million, because the bank discriminated against minority customers. How did the regulators determine this since Ally collects no information on the race or ethnicity of its customers? The answer was to extract data published by the U.S. Census Bureau using surname “geocoding” to infer the race of Ally’s customers. Based on this, minorities paid interest rates 0.29 percentage points higher than those who were probably not minority customers.

Next on the drawing board are rules requiring financial firms to submit plans to the CFPB confirming that their staffs and suppliers are sufficiently diverse and new rules covering small businesses which, apparently, are now defined as “consumers.”

“Banking regs are onerous,” laments Fisher. “All banks are held to the same standard. I have two full-time employees who spend all their time complying with regulations and many other staff spending time on compliance. It’s very expensive.”

Despite these headwinds, TSB continues to be fiscally sound and profitable. “In its latest statement, TSB Services, Inc. [the holding company that owns the bank] posted assets of about $400 million and a net income of $4.4 million,” states Fisher. “We generated these numbers from 11 locations in Broome and Tioga Counties and 97 employees, who staff the bank and a subsidiary, Tioga State Investment Services (it offers a wide variety of financial planning options, life- disability- and long-term-care insurance plans, and brokerage services.) … We achieved these numbers even while mortgage refinancing revenue and transactions dropped significantly, only to be offset by increased commercial lending. Our revenues are now tilting toward the commercial side over the retail side, 55 to 45 percent.”

As for soundness, “Our tier-1 numbers have never been stronger,” asserts TSB’s president. “Historically, the bank has maintained an eight percent ratio; today, the number is 11 percent. (Tier-1 capital is the core yardstick of a bank’s financial strength as measured by its common stock, retained earnings, and some preferred stock.) On top of that, BauerFinancial has given us a 5-star rating for the past 22 consecutive years as recognition of our fiscally conservative policies.”

Fisher applauds his staff for the bank’s success, particularly the management team. In addition to Fisher as president, Anne E. McKenna is the CFO, George Bowen serves as chief lending officer, Lisa Welch is chief credit officer, Sharon Y. Yaple is a senior vice president responsible for retail banking and business development, and Christopher P. Powers is the senior vice president for human resources. Fisher also cites support from outside professional service providers: Hinman, Howard & Kattell, LLP for its legal work and the Syracuse office of The Bonadio Group for its accounting.

The future

TSB is well positioned for growth. “There is no plan to issue an IPO,” muses Fisher. “The bank has always had a long-term focus on our direction. We don’t want to be guided by quarterly results. [The holding company] … currently is closely held with the majority interest owned by the Fisher family. This allows us to control our destiny and be flexible in our decision-making. Historically, our growth has been organic, except for a merger in 1961 and the acquisition of a branch in Waverly in 1991 from Fleet/Norstar. Our branch expansion has been largely de novo, which runs contrary to the industry, but we think it’s a less expensive way to grow in the long-term.”

TSB’s strategy for growth is to constantly look for opportunities. “We made the move into Broome County 10 years ago. We studied the potential carefully and then committed the bank’s resources. If we grow geographically, I assume we are looking at contiguous areas, because we know the market best. Or we could buy a mortgage company if it were a good fit … Bottom line, however, is that we really understand banking best.”

Fisher says he runs a “boring” bank. A visit to any of the branches or TSB’s web site would suggest otherwise. Customers have access to all the technology and features of the “big banks” with online and mobile banking, online bill paying, ACH processing, telephone banking with 24-hour access, and talking ATMs. If you are looking for investments, life-, disability-, long-term-care or health-insurance, tax or estate planning, retirement planning, or business planning, Tioga State Investment Services offers a wide range of options. “In 2014, we’re adding ‘TSB Mobile Deposit Anywhere’ (e-mail checks for deposit), smart ATMs that handle both checks and cash, and ‘iChat,’ where you can talk to a real person in our service center when you are online with a problem,” adds Fisher.

Is there a sixth generation in the wings? Fisher’s son Josh is currently a sophomore at the University of Pittsburgh. Daughter Kate is a freshman at Nazareth College. Both have already worked at the bank when not in school. Daughter Allison, who is 10, has yet to intern at TSB. Fisher says it’s too early to determine whether the family tradition will reach six generations.

The 46 year-old president of TSB resides with his wife, whom he met at the University of Notre Dame and married in 1991, in Owego.

Contact Poltenson at npoltenson@cnybj.com