Camden National Bank in Maine has found that new branches take five to seven years to become profitable in its sparsely populated home state, so it has developed an alternate strategy for entering new markets: small-business financial centers.
The $1.7 billion-asset bank, which has 25 traditional branches, opened its first business center in Portland in 2000 and its second in Kennebunk in 2002. That gave it a foothold in two markets in the southern part of the state, where the population density is highest.
Robert W. Daigle, the president and chief executive of Camden National Corp., said the offices were profitable within two years and that the parent company has been so pleased with them that it has four more in the works, though he would not say where they would open.
The business centers are crucial to Camden's strategy of building market share in one of the nation's slowest-growing states. It recently rolled out a suite of products aimed at bringing in more retail customers, and Mr. Daigle said it is eyeing acquisitions.
In a recent interview, the CEO said the 131-year-old Camden must keep shareholders happy if it wants to remain independent. So far it has done that - its stock is up about 35% in the last year - but Mr. Daigle said it cannot stand pat.
"In order to survive, you've got to thrive," he said.
One way to do that is to reel in more business customers. Camden targets small and midsize businesses, relying heavily on referrals from accountants and attorneys.
Unlike traditional loan production offices, Camden's business centers are set up to do anything a branch can do, including accept deposits and offer services such as cash management.
Cost is one reason Camden has opted for business centers in some markets. The smaller offices can be opened for about $250,000, compared with about $1.8 million for a traditional branch, Mr. Daigle said.
The centers do not need to be as large as traditional branches, because they do not have teller stations. They look more like travel agencies, Mr. Daigle said, with transactions conducted at desks.
He said new centers would open as Camden assembles teams familiar with the businesses in areas in where it wants to expand - either recruited from another bank or transplanted from within Camden.
"We like to hit the ground running with people who know the market," he said. "Generally, we've had business dealings in that market beforehand, serviced from out of our other markets. But now with a small book of business and the right players, we can go into that market and build off those existing relationships."
At the same time, Camden is committed to building in retail in markets where it is already established.
The bank's deposit market share is less than 5% in each of the three largest metropolitan areas - Bangor and Lewiston, where it has retail branches, and Portland, where it has only the business center.
Camden has not made an acquisition this decade, but Mr. Daigle said it would like to bulk up in some of its markets by acquiring a bank, or branches a bank might be divesting.
In the meantime, it is leaning on a new retail initiative to help build deposit share.
Camden introduced its "customer care package" in late December, offering free checking with direct deposit, free online bill pay for those who agree to receive electronic statements, and free unlimited use of any automated teller machines worldwide with a Camden debit or ATM card. There are no minimum balances required, and customers are reimbursed for the ATM fees they incur from other companies.
Mr. Daigle said Camden is the first bank in Maine to offer such a package and he is counting on the campaign to attract "a significant inflow" of new customers.
Camden does not do much advertising, favoring grassroots marketing to draw people into the branches, including holiday celebrations with live music and rides on horse-drawn hay wagons. But it is using a print, radio, and television campaign to promote its customer care package.
Mr. Daigle had been Fleet Financial Corp.'s regional president for Maine before joining Camden in 1996 as the president and CEO of its bank. He became president and CEO of the holding company as well three years later, and turned over the top roles at the bank to Gregory A. Dufour in 2004.
Camden's assets have roughly quadrupled in the last decade. Gerard Cassidy, an analyst at Royal Bank of Canada's RBC Capital Markets, gave much of the credit to Mr. Daigle. "He has grown the bank very nicely both organically and through acquisition," Mr. Cassidy said. "But at the same time, critically important to the success of any community bank, he's been able to keep that community bank feel at the company for his employees and customers."
Mr. Cassidy is familiar with Camden National because he lives in Maine. But no analysts cover the company - and Mr. Daigle said he prefers it that way. "We have chosen not to give guidance and be followed," he said. "We don't want to be driven by quarter-to-quarter results. That oftentimes forces you to take actions that don't support the community banking model that we employ here."
For the three years that ended Dec. 31, 2005, the holding company reported an average return on equity of 17.2%, well above the industry average for banks with assets of $1 billion to $10 billion. For the first nine months of 2006 it reported a return on average equity of 18.23%.
Its stock has also performed well. It hit an all-time high of $47.97 in late December, and though it has retreated a bit since, it still is up more than 35% in the last 12 months. It was trading at $45.11 late Wednesday.
Mr. Cassidy said back-office automation, and a compact senior management structure helps Camden National maintain a strong efficiency ratio - about 50% as of Sept. 30.
Branch-building discipline is another strength, he said. "They're not overbranched. That's one of the traps I think community banks often get into - they get caught up in a branch expansion plan trying to keep up with the big guys."
Its homespun marketing tactics help to differentiate Camden from large competitors, Mr. Cassidy said.
For example, every branch features work for sale by local artists, and about half a dozen of them have cats from the humane society roaming around, or kittens on display in crates.
Customers have to contact the artist to make a purchase; Camden doesn't arrange art sales or take any commissions. Nor does it handle pet adoptions. It directs interested customers to the humane society.
Mr. Daigle said well over 100 cats have been adopted since the humane society began bringing them to his branches about five or six years ago.
"The customers love the cats," he said. "Some of them go to see the kittens before they go to see the tellers."
