BELFAST, Maine — Here’s a fact that speaks volumes about the midcoast banking market: Not counting Bangor Savings Bank’s original three branches in Bangor, the company’s best performing branches are in Belfast.
Bangor Savings Bank operates 56 branches, but the two in the Waldo County city total $100 million in deposits. The bank — which operates a large shopping plaza branch and a tiny storefront office downtown — is tops in the market in Belfast — population 6,300 — said Yellow Breen, a senior vice president at Bangor Savings.
But elsewhere in the coastal region, from Searsport to Damariscotta, the competition is fierce among community banks.
Most of the service centers in the midcoast — Belfast, Camden, Rockland, Waldoboro and Damariscotta — have several branches vying for customers, even though the communities are relatively small. The reason, said one bank executive speaking on background, is the same one the infamous Willie Sutton gave for robbing banks: because that’s where the money is.
There is money in the region, held by baby boomers approaching retirement, retirees who have settled here from out of state and small businesses that reap the rewards of healthy tourism and economic activity in service centers, bank officials and industry observers say.
There are 20 state chartered banks in Maine, nine nationally or federally chartered banks and three federal savings and loans, Lloyd LaFountain, superintendent of the state’s Bureau of Financial Institutions, said. Perhaps owing to the recession, no new banks have formed or moved into Maine in the last seven years, LaFountain said.
Maine has the second highest number of bank branches per capita in New England, a statistic that may not be surprising given the state’s small, far-flung population.
According to data provided by the American Bankers Association, Maine has one bank branch for every 2,559 residents. New Hampshire, with roughly the same population as Maine, has one branch for every 3,030 people. Only Vermont, with a branch for every 2,355 people, has more banks per capita than Maine among the six New England states.
“Part of it’s the rural nature of the state,” LaFountain said.
The number of banks per capita nationally has not been computed.
A hundred years ago, many towns had their own, standalone banks, typically with the name of the community followed by “savings bank,” LaFountain said. But as some banks began to dominate markets, they acquired others in neighboring towns, and regional banks were established.
Along with Bangor Savings, the other for-profit players in the midcoast area include:
Camden National Bank, based in Rockport with two branches in Belfast, two in Camden, and one each in Rockland, Thomaston, Union, Damariscotta and Union.
Damariscotta Bank & Trust, based in Damariscotta where it has two branches, and branches in New Harbor, Warren, Union and Belfast.
The First, based in Damariscotta with 14 branches ranging along the coast from Calais south to Wiscasset.
National banks such as Key and Bank of America also have branches in the region.
LaFountain said while it might seem that some of the banks open branches for strategic reasons, perhaps to keep a foot in the door in some markets, he is confident that is not the case.
“I don’t think the number of branches has compromised any of these banks’ earnings,” he said. Banks’ research markets carefully and typically acquire a vacant building rather than building new. It is highly unlikely that any branches are operating at a loss, he said.
Keith Leggett, vice president and senior economist with the American Bankers Association, agreed. Some branches may take two or three years before the bottom line turns black, but they always are on a course toward profitability, he said.
“Branch location is very important,” especially in competitive locations, Leggett said, as the midcoast is described as being.
In surveys of banking consumers, “convenience is usually cited as the most important characteristic,” he said. “It’s location, location, location — people don’t want to walk or drive an extra mile in order to find a branch.”
Community banks — generally understood as those based in the regions they serve — rely heavily on “relationship banking,” Leggett said, where customers expect tellers and loan officers to be familiar with them and their needs.
“It’s ‘high touch,’” he said. “You don’t have the same level of turnover of customers. It’s a much more consumer-friendly experience.”
Maine’s high number of banks per capita differs from other parts of the country. In the Midwest, for example, many counties have just one bank, the result of state banking laws, Leggett said.
Banking’s sweet spot
Customers in the 50-75 age bracket are attractive to banks for asset management business — savings, certificates of deposit, 401(k) accounts — while the 30-55 age group tends to be customers for credit products — car, home mortgage and small-business loans, Leggett said.
The midcoast banking market is heavily influenced by a group known in financial circles as “mass affluent.” Those in this category have less wealth than the ultrahigh wealth group and the high-end group, he said, but nonetheless have assets in the $100,000 to $1 million range, including pensions, IRAs, 401(k)s and certificates of deposit.
“That becomes a very nice sweet spot for banks,” Leggett said. Most in that cohort are baby boomers — born in the 1946-1964 period, “transitioning from being borrowers to wealth accumulators,” he said.
Greg Dufour, president and CEO of Camden National Bank, based in Camden, said the Waldo, Knox and Lincoln county area “is evolving into a retirement destination,” and banks are responding to that demographic.
Camden National has 38 branches around the state and soon, after the acquisition of some Bank of America branches, will have 50 branches. But in the midcoast, Dufour said the elements of the market are distinctive, clear and favorable.
“It’s a good, stable economy here,” with affluence, relative to Maine terms, evident.
Retirees, for whom Dufour said the business community should be grateful, have a balancing effect on the economy. Those retirees buying and building homes along the coast have built property values and created a strong tax base, he said.
Coupled with a vibrant tourism industry, the lending and savings markets are more predictable, Dufour said.
Dan Daigneault, president and CEO of The First, described his bank’s strategy as a three-legged stool planted firmly on the coastal region’s economic strengths. The legs are tourism, lobstering and real estate.
Among The First’s loan portfolio are bed-and-breakfast inns, motels and hotels, retail stores and schooners, he said.
“Tourism has been very good,” Daigneault said, even though it is often a short season in which to turn a profit and success often hinges on weather.
The current low prices notwithstanding, the lobster industry has been lucrative, he said, with record catches registered in the last two years. With its ties to lobster-fishing communities such as Boothbay Harbor, Friendship, Rockland, Northeast Harbor and Winter Harbor, the bank is heavily invested in the fishery.
“It’s a big part of our business,” Daigneault said. “We finance their boat, we finance their traps, their houses, we provide them with working capital.”
The third leg for The First has been the second homes and retirees who move to coastal Maine. “We finance a lot of second homes,” he said.
Daigneault acknowledged that the income levels in the midcoast provide banks with a firm footing.
“People used to describe the midcoast as the gold coast,” he said. “We’ve found that our success, particularly over the last 15 years, has been tied to the growth of personal income along the coastal area.”
Damariscotta Bank & Trust operates only in what might be considered the heart of the midcoast: Lincoln, Knox and Waldo counties. President and CEO Scott Conant attributes the bank’s success to its location and its small size, making it attractive to retirees looking for a local bank.
Though the midcoast has some unifying characteristics, Breen of Bangor Savings notes that “the whole region is really different micromarkets.” Searsport and Camden are different from each other demographically, as are the adjacent communities of Camden and Rockland, he observed.
In 2011, Bangor Savings branches in the Castine to Rockland area outperformed all except the Bangor and Portland regions in terms of producing new customers and new loans.
But the rise of technology is poised to change the market yet again, according to the bank observers and operators. They say younger people are more likely to use national banks, whose services they can access online, even though all banks offer the same Web-based services and many of the same financial products. Older people often are more comfortable with face-to-face transactions.
Winning and maintaining customer loyalty is key to retaining and growing market share, the bank presidents said.
Camden National president Dufour notes that though the bank formed in 1875 in Camden, “We want to keep pace with the changing demographics and changing economics of the area. We don’t want to take it for granted, just because we have ‘Camden’ in our name.”