For more than 40 years, Citizens and Northern Bank (CNB), a $1.1 billion bank in rural north-central Pennsylvania, has had decentralized branches that operate much like community banks. Its strategy seems prescient at a time when numerous community banks are prospering amid very large institutions.
CNB’s 19 branch managers have authority to approve home-mortgage loans of up to $200,000 and secured small-business loans of $100,000 and are active on local nonprofits and community efforts. Composed of nine former independent community banks, CNB is the deposit market leader in its primary service area of Tioga, Bradford, and Sullivan counties, according to CNB officials.
Craig G. Litchfield, president, CEO, and chairman of CNB, explained: “Our approach has always been to centralize the back-office processes such as data processing, human resources, and investments, but leave the direct customer-contact processes at the branch level. While our people know they are part of a bigger team, our customers feel that their local branch is their community’s bank and the branch manager, to them, is the bank president, because our branch managers are vested with a great deal of authority.”
Reinforcing its local ties, CNB has 16 local advisory boards of business and community leaders who identify opportunities and provide contacts. Litchfield noted that members of CNB’s board of directors also bring different, valuable perspectives. The 13-member board includes three women (an attorney, a certified public accountant, and a hospital CEO).
CNB officials explain that in addition to its decentralized approach, the bank can be somewhat flexible in its lending criteria. When a young couple is buying a house, CNB will sometimes accept a parent’s or grandparent’s house as collateral. Also, since there are many seasonal tourism-related businesses in Tioga County, the bank requires larger payments when income is higher and interest-only payments in the off-season.
The decentralized community-bank approach presents some challenges in terms of internal controls and compliance review, since many loans are approved and underwritten at the branches, Litchfield explained. It also may be more expensive than a centralized model because staff must be hired and trained in the branches to underwrite loans and prepare loan documents, he said.
Litchfield started as a loan collector at a CNB predecessor 33 years ago and worked in consumer and commercial lending and compliance before becoming president and CEO in 1997.
CNB’s headquarters are located on the main street of Wellsboro, Pennsylvania (population 3,328), the Tioga County seat near the New York border. Founded in 1806 by New England colonists, Wellsboro has a wide main street with shade trees and is a destination for outdoor enthusiasts and tourists en route to Pennsylvania ’s Grand Canyon 10 miles away.
CNB played an important role in the renovation of the Arcadia movie theater on Wellsboro’s main street, obtaining loans totaling $675,000 from the Community Investment Program of the Federal Home Loan Bank of Pittsburgh (FHLB-P). CNB received the FHLB-P’s Pillars of the Community Award in 1999 for its role in the renovation, which created a four-screen theater and prevented the Arcadia ’s closure.
John M. Reber, vice president, director of risk management, and CRA officer at CNB, said, “The theater has helped revitalize Wellsboro’s downtown. There is street traffic on a Friday night until about 9:30, whereas otherwise it would stop at 6.”
A CNB loan in the 1980s enabled the Ward Foundry (now Ward Manufacturing Inc.), a pipe-fitting manufacturer in Blossburg, Tioga County, to remain open. That facility, and a Ward-related company established later in nearby Lawrenceville, provide 722 full-time jobs — a large number in a rural county.
CNB penetrated the Williamsport-area market after bank mergers created opportunities for community banks. CNB did so by opening a branch in Muncy (near Williamsport ), pursuing trust business, and purchasing a large bank building in Williamsport in 2003.
“We’ve always served our community,” Litchfield said. “As long as we can make a loan that’s likely to be repaid, we do. Our success in CRA has been in doing our regular business — in being ourselves as a community bank.” He noted that it has been difficult to comply with the CRA investment test because there are few investment opportunities in its rural service area.