Dozens of branch sales in New York are fueling dramatic growth at a handful of community banks in the state.

Boston-based Fleet Financial Group Inc. said Monday that it is selling 18 branches in upstate New York. That follows on the heels of Cleveland- based KeyCorp's sale of 43 branches in the Empire State this year.

The buyers were two community banks and a midsize thrift that are more than pleased to enter the smaller communities that the giants are fleeing.

In Monday's deal, Community Bank, Canton, N.Y., would buy 12 branches with $183 million of deposits and $70 million of small-business and consumer loans. The remaining six branches are to be acquired by $560 million-assset Glens Falls (N.Y.) National Bank and Trust Co., a subsidiary of Arrow Financial Corp., which expects to get $144 million of deposits and $37 million of related loans.

"The transaction will ... strengthen our overall franchise in New York State by allowing us to redeploy our resources so that we can continue our commitment to high-quality products and services for our customers statewide," said Gunnar Overstrom, the Fleet vice chairman responsible for its consumer and investment management business.

In other words, smaller towns just don't cut it with Fleet, nor with many of the other multistate banking companies that have been built in recent years. In California, Texas, the Midwest, and the Northeast, the sprawling branch systems created by recent megamergers have led in short order to rural-area branch sales.

"It's clear to me that smaller banks like Community Bank do a far more effective job of competing in smaller markets than Key or Fleet does," said Kevin Timmons, banking analyst at First Albany Corp.

Fleet and Key have both said publicly that they wish to concentrate their marketing strength on urban areas and would divest branches accordingly. The $70 billion-asset Key is selling hundreds of branches in its 14-state network as part of a massive restructuring.

Mr. Timmons said prices for the branches and deposits were not released so he can't assess the soundness of the transactions. But he said he thinks the branches make particular sense for Community Bank, the lead unit of DeWitt, N.Y.-based Community Bank System Inc.

"They are a lot like Key used to be," he said. "They are thriving in towns where there isn't much competition. In some cases they are the only bank in town, and in most cases they have a 30% to 40% market share."

Arrow Financial officials said they weren't actively seeking an acquisition, but the deal fit perfectly into its strategy.

"All banks are figuring out their niche and pursuing it," said Tim Badger, a spokesman. "Ours is providing community banking to rural communities in upstate New York, and this acquisititon was perfect for that."

Sanford Belden, Community Bank System's chief executive officer, came on board several years ago and turned the company around. In recent years, he's been increasing the company's size fast through acquisitions-from $712 million of assets in 1993 to $1.4 billion now. The Fleet deal and an earlier acquisition of Key branches will add 20 branches to the company's current 49.

Mr. Belden said the purchases would immediately boost Community Bank System's earnings per share after some one-time expenses. The new branches are not expected to add much to the bank's overall costs, he said.

James A. Wears, regional president of Community Bank, said the company may even consolidate some of its existing branches with the new ones. "What we're most excited about is that it expands our market share in areas we're in and extends it a little further out," he said.

Mr. Wears added that the company remains interested in expanding through acquisition but "right now our plate is pretty full."

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