- Key takeaway: Strengthening its retail branch network may help Northeast Bank lessen reliance on costly brokered deposits.
- Forward look: The $5.23 billion-asset company plans to open a branch in Bangor early next year.
- Expert quote: "While each location will reflect the character of its community, customers should immediately recognize they're in a Northeast Bank banking center when they visit any one of our locations." – Northeast Chief Retail Banking Officer Bob Banaski.
A bank known nationally for punching above its weight in commercial real estate and Small Business Administration lending has decided to lavish some tender loving care on its branch network in Maine in hopes of ultimately strengthening its funding base.
The $5.23 billion-asset Northeast Bank in Portland has announced plans to enter Bangor with a de novo branch. The expansion comes two years after Northeast vacated leased branch space in Auburn, relocating to a nearby building the bank purchased and then renovated. The company is also remodeling its Auburn branch, a project Chief Retail Banking Officer Robert Banaski described as "a rebuild from the ground up."
Northeast is considering doing similar work on its five other existing branches, Banaski told American Banker Thursday.
"Modern, welcoming banking centers allow us to better serve our customers while providing our team members with an environment that supports their success," Banaski said. "We're evaluating every location across our network to determine the right level of investment, whether that's a refresh, renovation, or complete rebuild."
Northeast is embarking on its program as a number of much larger institutions are engaged in similar activity. Banks including Pittsburgh-based PNC Financial Services Group, San Francisco-based Wells Fargo, JPMorganChase in New York and the Minneapolis-based U.S. Bancorp have announced plans to construct hundreds of new branches and renovate thousands of existing ones.
The upgrades help money-center and super-regional institutions create consistent customer experiences across national and multi-state footprints, a goal Northeast is seeking to replicate on a smaller scale in Maine.
"While each location will reflect the character of its community, customers should immediately recognize they're in a Northeast Bank banking center when they visit any one of our locations," Banaski said. "We're investing not only in our physical locations, but also in our digital banking capabilities…Our goal is making sure the tools and resources our customers have access to are best-in-class."
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Brand consistency is a worthwhile goal for any bank, Sean Payant, president of the Lincoln, Nebraska-based community bank consulting firm Haberfeld, told American Banker Friday. "Customers who bank with that institution understand when they go from one branch to another, they're going to get a consistent feel," Payant said. "There's a level of comfort that people get from that."
Northeast's effort to align the experiences of its branch and digital channels is also useful, Payant added. "The marrying of the online platform with the branches, I think that's the future," he said. "It's already happening. Many institutions are using the exact same onboarding system in their branches that you would use when you go to the website. I see that as an advantage."
While Northeast's community banking roots in Maine stretch back to 1872, it's won renown in recent years for its national lending operations, in SBA and — especially — commercial real estate. The company purchased or originated $1.7 billion of CRE loans in the 12 months ending June 30. It originated another $158 million of SBA loans.
That level of activity helped Northeast generate $12.74 million of net income for the year ending June 30, up from $10.8 million in the previous 12 months. It's also created an outsized demand for funding. Branches provided about $1.2 billion in deposits as of June 30, but Northeast also held $1.75 billion in higher-cost brokered deposits. Reducing that wholesale reliance would likely push the net interest margin down and lift profitability even higher.
"By continuing to invest in and build our deposit franchise, we're strengthening our funding base, deepening customer relationships, and helping to position Northeast Bank for continued growth and success," Banaski said.
That appears to be the logic behind the move into Bangor, Maine's second largest retail banking market, with more than $5 billion of deposits. Northeast's new branch is expected to open early in 2027.
"Establishing a presence there allows us to better serve both existing and prospective customers while continuing to strengthen our position across the state," Banaski said.
Still, Northeast has its work cut out for it. Moving into a new market "is the hardest work you'll ever do when it comes to building deposits," Payant said. "It's because you don't have name recognition there, you've never had a presence and, depending on the size of the community, you may not have maximum convenience."
