Pittsburgh’s Community Bank leaning into fintech during transformative expansion

Publish Date: March 1st, 2024

The year 1901 proved momentous for some. That was the year Theodore Roosevelt became the 26th president of the United States after President William McKinley had been assassinated. That also was the year finance tycoon J.P. Morgan bought coal mines and steel mills and incorporated U.S. Steel as the world’s largest producer of steel. That same year, oil was discovered in Texas.

And deep in the hills of Southwestern Pennsylvania, in a rural Greene County coal community with fewer than 500 residents, 1901 marked the launch of a small community bank called the First National Bank of Carmichaels.

It would take 86 more years for the bank to begin its official expansion into Washington County and change its name to Community Bank. And still longer to acquire another bank that would allow it to become publicly traded (NASDAQ: CBFV), with office branches throughout Greene and Washington counties, as well as in West Virginia’s western panhandle, and expanded financial service offerings. But that was then.

Today, only three years into an ambitious new 10-year strategic growth plan, Community Bank, now headquartered in Washington, Pennsylvania, continues to serve its traditional markets while expanding rapidly northward into the heart of metropolitan Pittsburgh and beyond. Taking on the big banks with a new Pittsburgh-based commercial lending division, a treasury management team, specialized financial services for the health care industry, a locally based call center, and a series of financial technology investments aimed at elevating the bank’s client interactions and cybersecurity, Community Bank is marching forward.

“Our focus today remains firmly on innovation and excellence,” said John H. Montgomery, president and CEO of Community Bank for the past three years and author of the bank’s latest transformative strategic plan. “We are continuously exploring new ways to enhance our client’s banking experience, whether it’s through financial solutions or innovative digital tools that empower them to achieve their goals.”

Montgomery discussed the bank’s strategic plan, technology investment, and resulting transformation recently as part of a new Business Insights series, presented in partnership with the Pittsburgh Business Times.

The planning efforts are paying off already, according to the latest reported year-end financial results. The bank’s holding company, CB Financial Services, Inc., reported adjusted net income (Non -GAAP) of $12.6 million for the year ended Dec. 31, 2023 versus $11.2 million for the previous year. Adjusted earnings per common share — diluted (Non-GAAP), meanwhile ended 2023 at $2.46 per share, up from $2.14 per share in 2022.

Total assets rose to $1.46 billion in 2023, up from $1.41 billion in 2022. Excluding the $34.9 million decrease in indirect automobile loans, a product the bank discontinued in 2023, total loans increased $95.4 million in 2023, up 9.1% and included an increase of $41.2 million — or 58.9 percent — in commercial and industrial loans.

Shoring up its legacy

“We are a true community bank that is heavily invested in our communities, and we tend to have a long tenure with our clients,” Montgomery said. “But the banking and finance industries have changed as client expectations have evolved. We needed to change with it if we were going to continue being the bank of choice for our clients.”

The bank, he said, always had maintained good asset quality as a “conservative” bank, but he acknowledged that some of the technologies supporting the Bank’s services and back-office processing functions were outdated and in need of process improvement. The resulting strategic growth plan would resolve those issues, significantly improving client service and shoring up Community Bank’s ability to aggressively take on the Greater Pittsburgh market with confidence.

“We had to do some rationalization and consolidation along the way, but we stayed committed to our communities and clients and kept our grand vision focused at a very local level,” Montgomery said of the strategic plan and its ongoing implementation.

At the same time, he said, the bank’s leaders worked hard to preserve the bank’s legacy identity. That is, to remain people-centric, “still focusing on clients and employees,” and values-driven, which means embracing an agile work environment and “leaning into” new technologies and processes.

The goal, Montgomery said: “Making it simple and easy for our clients to bank with us.”

Investing in change

To effect the transformation, Montgomery explained, Community Bank began with an assessment of its core business that led to a decision to consolidate the bank’s branch locations as more and more clients conduct their banking online and on their phone. Those reductions, then, allowed for other significant expansions in hiring talent, investing in technology and refreshing six branches in 2023. Additionally, toward the end of 2023, the Bank divested its wholly owned insurance subsidiary, resulting in an estimated $30 million in proceeds, which will serve as a key funding source for the technology investments that are being made going forward.

Driving much of the Bank’s strategic plan, Montgomery said, is the advanced financial technology now available that allows Community Bank to compete more equitably with larger banks in the region.

“There has been a fintech explosion,” he said of the many banking tools, applications, and computer software systems coming out of the computer software industry to strengthen the banking industry and client interactions. “Now, you can buy technology that is equal to or better than any at a big bank.”

The value of human interaction

Among the bank’s investments is the establishment of a large — and local — virtual banking and call center located in Waynesburg, Pennsylvania, that provides real time service to clients through the Interactive Teller Machine (ITM) network. The new ITMs are replacing the older ATMs and have increased functionality via self-service methods and also provide complete full-service options via touch screen, connecting clients with a virtual teller to completely handle their transactions.

“We now are transacting faster, more efficiently, and less expensively, even as we’re engaging more with our clients,” he said. “Transactions, though, aren’t where the value is anymore. It comes down to the people. The value is in the human interaction. That’s a differentiator for us in the market.”

Despite the branch consolidation, which “gave us some cost savings,” Community Bank is in the middle of a building project for a new, “state-of-the-art” banking facility in Rostraver Township and has been updating other branches across the network.

Other recent technology investments include an upgraded mobile banking app and other tools, back-end transaction processing systems, a new loan origination system, and even a new “.bank” web domain (www.cb.bank) with built-in safeguards developed specifically for the banking industry and its clients.

Moreover, Montgomery said, all transactional data now is processed in near real time and securely stored in cloud servers with backup redundancy.

Commercial innovation

Among the bank’s bolder expansion moves has been the establishment of a commercial and industrial banking beachhead in Pittsburgh, Pennsylvania, in addition to a new treasury management team.

“We were able to attract a top-level commercial banking team — one that is experienced, knows the clients, and knows how to bring true value to a banking relationship,” Montgomery said of the new banking operation. “We’re really attracting some top talent, and now we can compete and deliver a better client experience than our larger counterparts.”

The bank also established a specialized health care banking service to help support the growth and operations of expanding health care systems and practices.

In addition, the bank also now operates a “stand-alone” small-business banking unit aimed at helping businesses that are trying to navigate growth phases. Not only does the bank provide small-business loans, but it also provides industry metrics that could provide insights to clients about their business.

“It’s all about speed – how quickly we can help them get it done,” he said of the bank’s ability to finance its clients’ growth. “We developed new processes on handling small-business loans and checking accounts, and we’re winning clients.”

Said Montgomery: “We want to be an innovative institution that makes it simple and easy for our clients to do business with us.”

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