SYRACUSE — Test labs are usually associated with companies that create food, pharmaceutical, and high-tech products. It’s time to add banks to the list.

NBT Bank has renovated a branch office on Marshall Street, adjacent to the Syracuse University campus and surrounded by a plethora of health-care providers. The 900-square-foot office serves as a model for the digital, retail branch of the future. (NBT has also created a new commercial branch model at its office on Wolf Road in Albany.)

“The layout [of the space] is an open environment,” says Andrew J. Stockwell, the Marshall Street branch manager. “Unlike banking of the past, where the customer waited in line to conduct a transaction with a teller, this office relies on self-service technology combined with interaction by knowledgeable staff. In the age of mobile banking, when the customer enters the branch, the object is to transact business quickly and easily. NBT’s employees are here to ensure that happens through our high-tech, high-impact equipment. We are also here to engage with the customer to answer financial questions. That means our staff has to be familiar with the broad array of NBT products in order to answer questions and/or direct the customer to the resource person who has the answer. [In short,] Marshall Street is a full-service delivery channel, what we call a ‘knowledge portal.’ ” 

The new NBT retail model is an example of “expedited deployment of digital branch delivery,” which ranked number 2 on “The Top 10 Retail Banking Trends in 2015,” listed by Jim Marous, publisher of Digital Banking Report. Marous sees the reshaping of branch networks in this digital, omni-channel world as a response to improve the customer experience. Relying on digital touch-points, branch employees can quickly recognize the customer, understand the reason for the visit, and respond with outstanding service. According to Marous, this is the confluence of the customer-interface and customer-experience platforms, where all banking products, services, and transactions are on a single platform that provides both the customer and staff real-time access and decision-making.

NBT’s Marshall Street test lab is a response to the explosion of consumers’ growing preference for financial and technical innovations such as mobile banking. About 82 percent of 18 to 25-year-olds own a smart phone, and 61 percent engage in mobile banking. The parents of this cohort trail somewhat with 60 percent ownership and 30 percent using a smartphone for banking. With the explosion of mobile banking, 90 percent of bankers surveyed by Celent, a Boston–based research and advisory firm focused on financial services, in 2014 foresaw a 10 percent decline in branch numbers over the next five years. And, 45 percent said they anticipated a decline in excess of 25 percent. Last year, 51 percent of U.S. adults banked online. The reaction of Millennials is a growing concern, where 53 percent don’t view their bank as any different from other banks and 73 percent would be more excited about a new financial-service offering from Google, Amazon, or Apple. 

“Branch and online banking users represent both a challenge and an opportunity,” observes Lori Verzillo, NBT vice president and retail-territory manager. “We spend a lot of time educating our customers on the benefits of mobile banking. It’s true that most bank customers today still use their mobile devices for checking balances or for recent activity, but a lot of our focus is on helping our customers make deposits and payments, and transfer money on their devices. There is no doubt that those adopting mobile banking … [correlate generally] with age, but there are exceptions: the 55-64-year-old age category is one of the fastest-growing groups in terms of mobile-banking adoption. Anecdotally, I can confirm that mobile banking at NBT is trending upward, and our customers are becoming more aware of the options we offer.”

Banking challenges

Increasing consumer demand for mobile-banking options and continued competition are just two of the challenges NBT faces. Much of the competition comes from other financial-services companies, but a growing challenge comes from outside the industry. Companies such as PayPal, Google, Square, and Apple represent a growing industry of neo-banks that is capturing mobile payments. While the usage level of what are called “mobile wallets” seriously lags the awareness of the products, at some point an industry leader will emerge to standardize the process and get beyond what is today defined as “mobile-payments roulette.” NBT has elected not to sit on the sidelines and has chosen to partner with Apple Pay, which allows users to use their iPhones and Apple Watches to pay in stores and through apps.

The banking industry faces a number of other challenges in deciding how to deploy its attention and funds. There are ongoing concerns about cybersecurity, regulators are demanding higher capital requirements, the industry has not yet regained its return-on-equity levels since the 2007 recession, and economic growth is less than robust. Add to this, declining fee-based income, impending higher interest rates, the replacement of traditional credit cards with chip-and-PIN cards, and the increasing cost of technology. To remain profitable and competitive, banks need to focus on deepening their existing customer relationships and differentiating themselves from the competitors.

NBT strategy & results

In today’s environment, where differentiation is becoming more difficult, even a slight edge can yield positive results. A quick look at NBT’s “2014 Annual Report” confirms the bank’s savvy strategy of segment targets, product offerings, pricing, customer interfacing, and internal processes. Established in 1856 as the Bank of Norwich with $125,000 in capital — the same year that the Cunard line established a record crossing of the Atlantic by an iron-hull, paddle-wheel ship in 9 days and 16 hours; Lawrence, Kansas was captured and burned by pro-slavery forces; and James Buchanan beat Millard Fillmore in the U.S. Presidential Election — NBT now has 158 locations in six states, 192 ATMs, and $7.8 billion in total assets. The bank, headquartered in Norwich, employs more than 1,800 people with more than half working in the circulation area of The Business Journal. 

Core net income increased 8.5 percent from $69.9 million in 2013 to $75.8 million in 2014, all while improving the Tier-1 capital ratio. During the same period, earnings per share rose from $1.65 to $1.71, wealth-management revenue increased 14 percent, and market capitalization improved to $1.153 billion. NBT holds the second highest share of deposits in this region — 9.56 percent. The quality of the loan portfolio has also improved as noted by two benchmarks: a steady decline in net charge-offs to average loans and total non-performing loans as measured against total loans — both over the last five years. Only the return on average-tangible-equity has shown a slight decline over the same period.

The Marshall Street office is an important part of NBT’s strategy to get an edge on the competition by creating a one-stop, shopping experience that helps its customers with everything from daily transactions to planning for retirement. Unlike the “robo-advisor” phenomenon sweeping the investment-advisory industry with automated advice generated by algorithms, NBT puts a strong emphasis on marrying technology with a human interface. Florence Doller, senior vice president and director of marketing at NBT, sums up the bank’s keen interest in the new retail test lab: “As customers’ preferences evolve in response to technology [advances] and [as] communication channels continue to proliferate, NBT Bank is paying close attention to various inputs ranging from transaction data that shows increased use of digital-banking technology to feedback from the direct interactions we are able to initiate with customers in spaces like our Marshall Street office. We’re learning every day and will continue to use that knowledge to educate our customers and create engaging and relevant banking experiences for them.”

Perhaps it’s serendipitous that the new Syracuse test lab was formerly occupied by a Baskin-Robbins, a company known for creating more than 1,000 ice-cream flavors in its test lab. Where Baskin-Robbins brought a smile to its customers as they savored their favorite flavor, NBT hopes to bring a similar experience to its retail-banking customers with the new knowledge portal. 

Berkshire Hills Bancorp, Inc. (NYSE:BHLB), parent of Berkshire Bank, recently announced it has started a new initiative to become a more environmentally sustainable company. 

The program, called AMEB Green, is focused on boosting Berkshire’s social, environmental, and financial performance by engaging employees and customers in environmentally conscious behaviors, the banking company said in a news release issued on Earth Day (April 22).

Berkshire Bank’s AMEB Green strategies include:

– Reduce paper consumption by 10 percent over the next three years by using technology, promoting online-banking services to customers, promoting reusable products in its offices, and engaging employees and customers in behaviors that eliminate overall paper usage. (In 2014, Berkshire Bank developed a campaign to move customers from paper statements to e-statements.)

– Reduce energy consumption by 10 percent over the next three years by implementing energy usage standards, temperature and thermostat regulation, and non-essential energy usage reduction. 

– Commit 15 percent of the company’s volunteer service to environmental community causes as well as develop products that promote green banking options and implement recycling standards across the banking company.

“Environmentally friendly business delivers value to our clients, returns for our shareholders, and helps strengthen the economy,” Richard Marotta, executive vice president and chief administrative and risk officer at Berkshire Bank, said in the news release. “AMEB Green was developed by a cross-functional committee of employees that looked at policies, products, operations, and behaviors to identify goals and key steps to become a more environmentally sustainable company.”

To kick off AMEB Green, Berkshire Bank Foundation, the charitable arm of Berkshire Bank, made a contribution to the Arbor Day Foundation to plant one tree in honor of each of Berkshire’s employees to celebrate the launch of the initiative. Also, over a two-week period in late April/early May, Berkshire employees planned to help beautify parks, plant trees, and clean up riverfronts across its geographic footprint, the release stated. 

Berkshire Bank has 98 branches in Massachusetts, New York, Connecticut, and Vermont. Locally, Berkshire Bank ranks number 8 in deposit market share in the 16-county Central New York market with $916 million in deposits, good for a 3.5 percent market share, through 18 branches in the area, according to June 30, 2014, FDIC data, the latest available.       

ITHACA — Tompkins Financial Corp. (NYSE: TMP) recently reported that its net income inched up nearly 1 percent to $12.7 million in the first quarter from 

$12.6 million in the year-ago period. Earnings per share were unchanged at 84 cents. 

“We saw positive trends for business growth during the first quarter with loan and deposit levels both up from the same period last year, and from the most recent prior quarter,” Stephen S. Romaine, Tompkins Financial’s president and CEO, said in the company’s April 24 earnings release. “At the same time, our already excellent asset quality improved further, as we saw a decline in nonperforming assets and net recoveries during the period.” 

Tompkins Financial produced net interest income of $41.2 million in the first quarter of this year, up 3 percent from the same period in 2014, but down 1.1 percent from the fourth quarter of 2014. The fourth quarter included higher interest income from interest collected on the payoff of a nonaccrual loan and a higher level of purchase accounting accretion related to loans paid off in the fourth quarter, Tompkins Financial noted.

Net interest margin declined from 3.53 percent in the fourth quarter to 3.45 percent in the first quarter, but that was largely offset by a $206 million rise in average loans during the first quarter, the banking company said.

Tompkins Financial reported noninterest income of $17.6 million in the first quarter of 2015, up 1.2 percent over the same period last year, but down 2.3 percent from the fourth quarter of 2014. The decline from the prior quarter mostly resulted from higher gains on the sale of other real estate owned in the fourth quarter of 2014, the banking company noted. Fee-based revenue related to insurance and deposit fees were up from the same quarter last year, while fees from providing wealth-management services were flat. 

The banking company’s noninterest expenses totaled $39.7 million in the first quarter of this year, up 3.9 percent from a year ago, and up 1.7 percent from last quarter. The year-over-year increase in noninterest expense mainly resulted from higher salary and wages expenses, according to the earnings release.

Asset-quality trends improved in nearly all categories during the quarter, Tompkins Financial noted. Substandard and special-mention loans declined by nearly $46 million from the same period last year, and by $2.7 million from the previous quarter. The percentage of nonperforming assets to total assets improved to 0.49 percent as of March 31, compared to 0.81 percent a year earlier. 

Tompkins Financial set aside $209,000 for loan and lease losses in the first quarter this year, down from $743,000 in the first quarter of 2014. 

Tompkins Financial is a financial-services company serving the Central, Western, and Hudson Valley regions of New York and the Southeastern region of Pennsylvania. Headquartered in Ithaca, Tompkins Financial is parent of Tompkins Trust Company, The Bank of Castile, Mahopac Bank, VIST Bank, Tompkins Insurance Agencies, Inc., and offers wealth-management services through Tompkins Financial Advisors. The company has nearly $5.4 billion in total assets.

Tompkins Trust ranked 6th in deposit market share in the 16-county Central New York area with almost $1.3 billion in deposits, good for a 4.93 percent market share, through its 13 branch offices. That’s according to the latest available FDIC data, as of June 30, 2014.