Bank widens comfort zone

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Aaron L. Groff Jr. has made a few changes since he moved into the executive office at Ephrata National Bank three years ago. For starters, the 52-year-old put a computer on his desk and a credenza under the window, where an open briefcase sits next to a picture of Groff’s 14-year-old daughter, Kirsten, playing soccer.
A bolder change came in January. Ephrata National opened its first branch outside a five-mile radius of the small borough that is the bank’s namesake.
Ephrata National needs to step out from its traditional “comfort zone” if it wants to continue growing, said Groff, the bank’s top officer since January 1999. A farmer’s son and Lancaster County native, Groff looks like President George W. Bush, minus the cowboy boots.
The bank’s first foray took it to the outskirts of Lititz in Manheim Township, along busy Route 501 in Lancaster County and a nine-mile drive from the bank’s main office. The area is one of the county’s fastest-growing.
In a banking arena of fierce competition and rapid growth, the leap may seem a small one. Commerce Bank/Harrisburg opens three or four branches every year and recently announced a big push into Berks County. A year ago, Lancaster-based Fulton Financial Corp. scooped up 18 branches at once in Delaware, New Jersey and Pennsylvania.
For Ephrata National, however, the Lititz branch is a relatively aggressive move, analysts said. Still, observers don’t expect a rapid growth spurt, even as the competition gets bigger.
“They certainly can’t stay still, but I’m not anticipating that you’ll see Ephrata putting up a significant number of branches. In fact, it would be very out of character if they started building a branch a year or more,” said George Weaver III, executive vice president in the Lancaster office of Hazlett Burt & Watson Inc., a brokerage firm based in Wheeling, W. Va.
Weaver described Ephrata National as conservatively run and generally insulated from shareholder pressure to produce grander returns. A trust established by a former president owns 30 percent of the bank’s stock. Directors and managers also own sizable chunks.
All told, more than half the shares are closely held, reducing demands to sell or merge, Weaver said. “It may also allow them to really take the long viewpoint in managing their business.”
The view stretches back to 1881, when Ephrata National was founded. Since then, the bank has stuck close to its hometown, with two branches in the borough, including one near the Ephrata Cloisters. The bank’s first branch outside Ephrata opened in 1974 in Hinkletown, about four miles to the east. Another branch opened to the west, in Denver, in 1981.
The next branch opened 18 years later, in neighboring Akron. The office relieved overcrowding at the Cloisters branch. Customers were complaining about long waits for tellers and backed up drive-through lines, Groff said. Within a year, the Akron branch had $10.3 million in deposits and $6.3 million in loans.
So far, the Lititz branch is doing as well as the Akron branch, Groff said. In three months, the office has gathered $2.94 million in deposits, compared with $3.3 million for Akron in the same time. The branch has made $2.48 million in loans, compared with Akron’s $1.1 million.
To break even, the branches need about $20 million in deposits, Groff said.
As Ephrata National expands, its operations staff is outgrowing the central office, Groff said. To make room for an operations center, the bank is buying three acres behind its headquarters.
Though confined to Lancaster’s northeastern corner, Ephrata National is the county’s sixth-largest bank, with nearly a 6 percent market share. The rest of the county is dominated by hometown heavyweights: Bank of Lancaster County, Farmers First Bank and Fulton Bank.
While competitors field television and billboard campaigns, Ephrata National depends more on word-of-mouth, Groff said. And unlike its larger rivals, Ephrata National gives no thought to mergers or acquisitions, Groff said.
Ephrata National focuses on service to retail customers, small businesses and farms, Groff said. Its loan limit is about $6 million, though the bank can lend more in partnership with other banks.
Groff joined Ephrata National in 1967 after graduating from Cocalico High School. He started as a teller. In 1972, he helped the bank install its first computer.
In becoming president, chairman and chief executive officer, Groff replaced John H. Shuey, the bank’s sixth president.
Analysts said that bank management remains conservative. Nonetheless, Groff has made some subtle changes.
Shuey’s senior management team consisted of Groff and another executive, Paul Brubaker. Groff’s team includes six managers, creating more debate.
In addition, Groff is more likely to be found wandering through the bank’s offices. Shuey generally stayed in the executive suite, Groff said.
Groff spoke well of his predecessor. Asked about the wait between branches in the 1980s and 1990s, Groff said only, “I think maybe 18 years was a bit long.” The next branch might come within five years, he added.
The two men’s styles stem, in part, from generational differences, Groff said. Shuey began his tenure in the top job in 1978 and is 13 years older than Groff.
Shuey, for example, never had a computer on his desk. “I would feel naked without one,” Groff said.
Geographical expansion, meanwhile, has sparked informal discussions about renaming the bank, Groff said.
As banks grow, they often seek names that hide their geographic ties. For now, executives hope the Ephrata tag will hold its value for more distant customers.