The Bank of Cattaraugus’s numbers

By Felix Salmon
December 24, 2011
Alan Feuer has the story of the Bank of Cattaraugus, a tiny community bank in the eponymous town an hour south of Buffalo. It's a heartwarming tale of community banking:

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Alan Feuer has the story of the Bank of Cattaraugus, a tiny community bank in the eponymous town an hour south of Buffalo. It’s a heartwarming tale of community banking:

A few years ago, when Ms. Bonner fell behind on her property taxes and was forced to sell her home, the bank’s president, Patrick J. Cullen, who held the mortgage on the house, had his son Thomas buy it. Thomas Cullen, who lives in Chicago, never intended to live there.  Ms. Bonner and her sister were able to stay as renters.

“The whole thing was incredible,” Ms. Bonner said the other day, a single pine branch hanging in her living room in lieu of a full Christmas tree, which she could not afford. “I just didn’t realize there were people like that in the world, people who would help you.

“Especially,” she said, “a banker.”

Feuer doesn’t get much into the financial details, but the ones he does have are intriguing:

With $12 million in total assets, the Bank of Cattaraugus is a microbank, well below the $10 billion ceiling that defines small banks…

In its 130-year history, the bank has rarely booked a profit for itself in excess of $50,000. Last year, Mr. Cullen said, it made $5,000…

The largest employer in the village is the school district, and many village residents survive, like Ms. Bonner, on pensions or government subsidies, in homes that have an average mortgage of $30,000..

Even in Cattaraugus — population 950 — Mr. Cullen says he receives at least two offers a week from larger institutions that want to buy him out. He claims to be unsurprised by these overtures, though his business is exceptionally simple: 80 percent of the loans in his portfolio are mortgages.

The bank’s official FDIC reports add a bit more detail — and show income of $8,000 on total assets of $16.2 million as of September, along with $1.1 million in equity capital. Last year, net income was $47,000, which even then was a return on assets of just 0.3%.

Total salaries and employee benefits are $276,000, split between eight employees, plus $34,000 in directors’ fees. (Both the CEO and his daughter, the CFO, are directors; his son Thomas is “Director Emeritus”.) Feuer describes Mr Cullen as “a well-to-do man”; but he’s clearly not extracting a huge salary from his bank. Instead, Cullen uses the bank as a vehicle for his civic ambitions: he holds a position of great importance in this town. It’s easy to see why he has no interest in selling the bank and getting replaced by some ambitious banker working his way up the corporate ladder. Instead, this bank is a family affair: a Cullen has been president since 1957, and Cullen’s daughter will surely replace him when he retires.

Understandably, Bank of Cattaraugus doesn’t have online banking, although it does have something it calls “bank-by-mail”. And there are signs of significant political clout, too: the bank is home to state and municipal deposits totaling $5.42 million, more than 37% of its total deposit base. Without those deposits, its hard to see how the Bank of Cattaraugus could run any kind of profit at all.

What the bank does have, of course, is much more liquidity than any individual in town. And although it doesn’t engage in complex trading strategies, it does do its own kind of risky proprietary trading: the bank took took over one abandoned house, for instance, fixed it up, and sold it for an eventual loss of $500.

Most interestingly, it also has a local monopoly. As a result, it faces little competition when it comes to things like deposit interest rates, and extremely little competition even when it comes to lending rates. No other bank understands local property values like the Bank of Cattaraugus does, which almost certainly means it’s often the first and last stop for locals looking for a mortgage. Cullen also tells the story of a local Amish man who got an $85,000 consolidation loan from the bank: no one else would loan him anything like that, given his declared income of just $2,300 a year. But the result is that if you get a loan from the Bank of Cattaraugus, you’ll pay whatever Patrick Cullen says you’ll pay.

Now there’s no evidence that Cullen is abusing his monopoly at all. The bank has earning assets of $13.7 million, on which it earned net interest income of $544,000: that’s an average interest rate of less than 4%. And service charges are running at $58,000 per year, which works out to just under $3 per month, on average, for each of the bank’s 1,625 deposit accounts. That’s an entirely reasonable sum to pay for the utility service of having a bank account at your local community bank.

The Bank of Cattaraugus, then, really does look as though it’s everything Feuer says it is. It’s run by a pillar of the local community, to really help local businesses — and the town itself — thrive. I’m sure that if you wanted to buy up the old hotel in the center of town and spruce it up a bit, Cullen would give you all the help and support you needed. The Cullen family gets to live well in, and provide some financial plumbing for, a town they clearly love and feel partially responsible for. And the bank looks perfectly healthy, even without much in the way of profits.

Of course, this kind of model doesn’t scale: that’s kinda the point. And neither could some enormous franchise with hundreds or thousands of branches ever provide the same kind of service that the Bank of Cattaraugus does now. But without what you might call the Cullen family’s noblesse oblige, they would surely have sold the bank for a seven-figure sum by now, and gone off to more lucrative careers elsewhere.

How can one institutionalize that kind of citizenship? The answer is simple: credit unions. While the Bank of Cattaraugus is a prime example of a small community bank which really is doing God’s work (on a total asset base rather lower than Lloyd Blankfein’s annual salary), everything it does could also be done by a credit union, without the associated risks of the owners selling out at some point.

Everything, that is, except one important thing: banks are allowed to accept state and municipal deposits, while credit unions are not. If the Bank of Cattaraugus became a credit union tomorrow, it would have to return $5.42 million in deposits, and it would become insolvent overnight. So while I don’t for a minute begrudge the bank those deposits, I do wonder why credit unions don’t have the opportunity to do the same kind of thing with them. The world would be a better place if they could.


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Credit unions can’t accept state and municipal deposits but states can create their own state bank like the Bank of North Dakota and get pretty much the same results.

Of course, bankers will lobby like mad against any state legislator who would have the impudence to try to cut them them off.

Posted by Frwip | Report as abusive

The manager prior to 1957 wasn’t James Stewart by any chance, was it? :D

Posted by FifthDecade | Report as abusive

Feuer describes Mr Cullen as “a well-to-do man”; but he’s clearly not extracting a huge salary from his bank


By the standards of middle USA, he would be ‘well to do’ in a small town. Both he and his wife work at the bank – 2 of the 8 employees. Assume that they each make 50% more than the other staff. $276,000 in salaries divided by [6 + (2 x 1 1/2) = employees at around $30,600 and him and his wife each at $46,000. His household would have $92,000 in salaries. Add in 1/3rd of the directors $34,000 and his household has $103,300 a year.

And out in the real wolrd – not the world of the NYC/DC chattering classes, $100,000 a year household income is ‘well to do.”



DOn’t know if the prior bak president was Jimmy Stewart but sure sounds like this guy is a distant cousin to the presidents of our 2 little community banks here in tow. Both only have 2 branches. Both have online banking and bill pay. Both are run just the same way.

Posted by onthelake | Report as abusive

I do not wish to be skeptical, but I am wondering how a man can become “wealthy” if the total salaries are so low. I do so hope that the operation is entirely legitimate and continues to be the pillar of the community. (It sounded too good to be true after reading the whole story)

Buying local rundown properties will keep the town more stable, but he sounds like he has Disneyesque ideas, using bank profits, and that doesn’t bode well in a poor economy. I hope his head is in the same place his heart is…being the bank makes little profit, yet millions are being spent on distressed properties.

Credit Unions are the Jimmy Stewart operations of today. I have no idea why people are not flocking to them, being they give among the best rates, negotiate with long term customers, return fees when you have steady deposits and have lower fees than most banks? People have a choice, yet don’t exercise it.

Given the choice of a large bank and this one, I would choose the local community bank…

Posted by youniquelikeme | Report as abusive

youniquelikeme, if you think $100k in salary is “so low”, you really should get out and meet somebody who takes care of a family and saves to put the kids through college on the median family income, which is something like HALF that $100k. If you make $100k while living only modestly better than the median lifestyly, you could easily be socking away $40k every year. In just five years, you’ve saved $200k; earning even a modest 5% on it, and reinvesting all of it, you’ve just upped your annual savings to $50k; and so on.

A family earning $100k that really wants to, can accumulate quite a lot of wealth over the course of just a few decades.

Posted by Auros | Report as abusive

@Auros, it takes a while for a family earning $100k to accumulate $1.1M in equity. “A few decades” is about right.

That said, the bank is 130 years old, and presumably had a reasonable amount of equity to begin with. I doubt that Mr. Cullen needs to save additional equity at this point, even if the bank isn’t profitable enough to extract anything.

Note also that he might have additional sources of income (e.g. county tax collector, CPA, etc…) The bank is not necessarily his sole support.

Finally, an income of $100k goes rather farther than you might think in upstate NY. A much simpler (and more relaxed) lifestyle than we see in the cities.

Posted by TFF | Report as abusive

Auros, when I wrote my message the previous one to mine was not yet up.

Even so, you are making assumptions that a person’s salary can be lumped in with his wife’s. I did say “total salaries are so low” relatively speaking to consider the man wealthy and I still maintain that. (why you had to take what I wrote out of context is beyond me) Perhaps he made his money elsewhere as TFF says.

No need to presume me wealthy, or elitist as I make a very modest income with which I do amazing things like take care of my family, pay off my mortgage and I started saving for college when my child was 4… so it is paid for. I am not sure why you presume otherwise.

My questions arose being the article Felix is writing about speaks of the banker’s “wealth”, his modest income (either he is making a modest income or his employees are grossly underpaid, being it doesn’t state what his salary is) and the millions he is spending on museums and depressed building… he and the bank.

Posted by youniquelikeme | Report as abusive