"In the face of mounting pressure on what they earn from gathering deposits and lending, many banks have sought additional income from sales of peripheral services, such as insurance. Portsmouth-based TowneBank, for example, has added divisions that sell insurance, investment services, mortgages and residential real estate.
But concentrating on lending and steering clear of other services make sense for some community banks because diversification doesn't always deliver the expected benefits, said David Danielson, president of the bank consulting firm Danielson Capital in Vienna. Buying an investment-services division, for example, can be costly for a community bank. In addition, it sometimes provokes a clash of cultures between its bankers and the better-compensated investment advisers, Danielson said.
Also, potential acquirers are rarely interested in anything other than a community bank's customer base and network of branches, he said."