A Syracuse, N.Y.-area community bank is boosting its branch network by almost 50%, with the acquisition of 15 rural upstate branches from Chase Manhattan Corp.

Community Bank System Inc. will pay an 8.75% deposit premium for $455 million of deposits, or about $37 million. The bank will also pay Chase the fair market value for about $30 million in small business loans and for the actual branch facilities.

The total price could reach $75 million, although the exact amount won't be known until the deal's closing, which is expected in the second quarter of 1995, pending regulatory approval.

The 15 new branches will add to $852-million-asset Community Bank's 37-branch network spanning the center of the state from the Canadian border to the Pennsylvania state line. The branches are located in 11 counties, including five that are new to Community Bank's network.

"It all ties together and extends our northern region franchise very nicely," said Community Bank president and chief executive Sanford A. Belden. "We now have a continuous line in the central part of the state from north to south."

Community Bank officials plan to issue about $35 million to $40 million in new common stock in early 1995 to help finance the transaction.

This is the second time the two banks have teamed up for a branch sale. Community bought Chase's Cato, N.Y., branch earlier this year.

No other deals are currently pending with Chase, Mr. Belden said. The deal is part of a move by $117-billion-asset Chase to place more emphasis on technology and service delivery in urban markets through ATMs, telephone and computer banking, and workplace services.

"Our business strategies going forward will put more emphasis on technology and people," said William H. Hoefling, executive vice president and distribution executive for the New York Citybased corporation. "As we focus our marketing activities on the more urban upstate markets, the branch sale will enable us to commit additional resources to new service technologies."

Chase has also sold two branches in Livingston County to the Bank of Castile.

A Chase official who declined to be identified said he wasn't sure what the corporation will do with its other small-town branches, but "if there's interest expressed, we're talking to people."

"The end result is going to be a more cost-effective distribution system," said another Chase official who did not want his name used. "That's one of the objectives of what we're doing here."

Except for one branch in downtown Utica, all of the 15 sold to Community Bank are in rural towns and villages, which is consistent with the DeWitt-based company's marketing strategy.

Most of its existing locations are in municipalities with populations as low as several hundred people. Some of the branches are the only bank in their towns.

The Utica branch is the bank's first location in a small city, but Mr. Belden stressed that the bank still does not intend to expand to nearby Rochester or Syracuse, two of the state's largest cities, with populations well over 150,000 each.

"This reinforces our strategy. It does not change it at all," Mr. Belden said.

"And it's consistent with Chase's strategy, which is why it's such a great transaction from both vantage points."

Community Bank System at a GlanceHeadquarters DeWitt, N.Y.Founded 1866President Sanford A.and CEO BeldenAssets $852 millionROA 1.32% 15 Chase Manhattan Corp.Purchase branches, with $455 million in deposits

Source: Company reports

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