Community Banking Pays

Posted July 16, 2009, at 6:07 p.m.

The CEOs of community banks like Bangor Savings Bank and Camden National Bank may be tempted to indulge in a grin these days. While their nationwide and local mortgage company competitors have fallen hard, and been blamed for the recession, the community-based institutions continue to enjoy profits. Even though it meant sitting on the sidelines during the heady days of the early 2000s, when “exotic” mortgage refinancing and equity loans were being made fast and furious, the more cautious approach has paid off.

Bangor Savings Bank, which just ended its fiscal year, earned $16.5 million. Camden National Bank earned $10.1 million in the fourth quarter of 2008.

“We stayed true to our underwriting standards even when it was difficult to do so,” said Greg Dufour, CEO of Camden National Corp., the parent company of Camden National Bank. That meant CNB staff had to say, “Sorry, we really can’t finance you,” while other institutions eagerly got customers to sign up, Mr. Dufour said.

Bangor Savings CEO Jim Conlon echoed that account of the last few years. “We took the high road on credit quality and passed on some deals that got done elsewhere,” he said.

Given the fact that 40 banks have closed this year, that cautious, careful approach has paid off. As of late June, Mr. Conlon said, Bangor Savings had 7,600 mortgages but only 50 loans were 60 days past due.

Bangor Savings employs 650 people in 53 branches around the state, and Camden National employs about 400 in 37 branches. Camden National acquired Union Trust last year and continues to be in a growth mode, Mr. Dufour said.

Both institutions want to be engines of economic growth in the state’s less prosperous regions, but they do so while carefully weighing risk against benefit. Mr. Dufour said that while staff was always diligent about protecting the bank, whether it was in the Rangeley or Bangor branch, staff in the smaller branches are made aware of Small Business Association and Finance Authority of Maine programs that can give the bank some flexibility in making loans.

Mr. Conlon said that while many of Bangor Savings Bank’s competitors in the mortgage business have fallen by the wayside, allowing it to make more loans, the surviving banks are picking up the cost of the failures. The bank paid $100,000 in FDIC premiums in 2007, but that increased to more than $600,000 in 2008 and is expected to hit $1 million this year, and as much as $3.3 million in 2010.

While the relative strength of these two financial institutions is good news for Maine, Mr. Conlon offered a sobering assessment of the global and national economies, saying neither had yet hit bottom. Mr. Dufour said his staff is seeing more customers who carefully assess their lending institution, just as the banks are more diligent in assessing customers. It’s a sign of the times, but it’s also the best of Yankee frugality.

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