A plan by Community Bank System to buy a vacant former elementary school in Olean and convert it to a loan operations center has fallen apart, after the bank found that the conversion costs far exceeded expectations and wouldn’t yield enough space for future growth.

The DeWitt-based company, parent of Community Bank, had earlier announced its intent to purchase the Ivers J. North Elementary School building from the Olean City School District, with plans to put at least 120 employees there. The purchase price had not been disclosed.

Last week, however, bank officials received architectural estimates, including for renovations to the building and expected additional off-street parking to meet city planning board requirements.

The bank also would have had to purchase surrounding property. Those costs, including $650,000 to install air conditioning, as well as the inability to house more staff in the future, torpedoed the plan.

“It far exceeded our expectations,” said Brian Donahue, the bank’s executive vice president and chief banking officer. “So we unfortunately had to withdraw our bid.”

However, Donahue pledged that the bank intends to expand in the Olean area, whether in the city itself or surrounding towns.

City officials have been supportive. “Right now, we’re regrouping, and we’re going to re-evaluate our options,” he said. “We’re still committed to the Olean area.”

Donahue wouldn’t comment on the costs of the project, but a source familiar with the bank’s plans said the cost had escalated to more than $5 million, well above the original budget projections of about $2.5 million.

The school district does not have an alternative plan for the building right now, but the Board of Education will meet next week, with the building’s future on the agenda, said Colleen Taggerty, school district superintendent. She said she was “disappointed” but understands the “decision was made based upon sound business practices.”

“The news of Community Bank withdrawing the offer was certainly a surprise,” Taggerty said. “Community Bank has always been, and will continue to be, a community partner with the school district. I look forward to the relationship continuing into the future.”

The planned expansion reflects the regional bank’s significant growth over the past decade and its expectations for more.

The bank now maintains 185 branches throughout the state, from Olean to Canton in northern New York, as well as in northeastern Pennsylvania, and acquired 19 branches last year as part of First Niagara Financial Group’s divestitures after buying HSBC Bank USA’s upstate branch network.

Community Bank has 34 branches in Western New York, including southern Erie County.

Although based outside Syracuse, the company is more decentralized, with other primary operations and administrative hubs in Olean and Canton. It already had loan operations in the Olean area, in 20,000 square feet of space, but wanted to move to the larger school building.