After four years away, Coastal Bank has returned to Maine's largest city.

Westbrook-based Coastal, struggling to survive in the wake of New England's real estate crash and the collapse of a sister thrift, closed its Portland branch in 1994. Now solvent, the $150 million-asset thrift opened a new Portland branch last month, with an emphasis on small-business customers.

"Even as we were leaving the city, we could see an opportunity," said Gregory T. Caswell, Coastal's president and chief executive officer. "But we weren't in a position to go after that opportunity until now."

Coastal's troubles started in the early 1990s when New England real estate values began plummeting. Its problems were compounded by troubles at Suffield (Conn.) Financial Group, a bank holding company that acquired the thrift in 1987.

Suffield's other thrift, Suffield Savings Bank, failed in 1991. Under a 1989 thrift bailout law, Coastal was responsible for $90 million of losses to the Bank Insurance Fund caused by the closure of Suffield. Meanwhile, Coastal was near failing itself, with nonperforming loans making up 16% of its total assets.

To stave off seizure of the thrift, officials from First Coastal Corp.- the renamed holding company-negotiated a settlement in 1995 with the Federal Deposit Insurance Corp. The agency agreed to release its claims against First Coastal in exchange for $9 million.

First Coastal paid its FDIC bill in July 1996. The company raised $10 million from a public offering and through a loan from four mutual savings banks.

The thrift is once again healthy. By Dec. 31, 1997, its return on assets had grown to 1.15%, from 0.19% in 1994, and return on equity jumped to 11.8%, from 2.8%.

Coastal had been looking to get back to Portland almost since the day it left. Though the city is dominated by three large institutions-Peoples Heritage Savings Bank, Key Bank, and Fleet Bank-Mr. Caswell said there is room for "a smaller, nimbler business bank."

The thrift is offering a streamlined cash management service aimed at business customers. It charges a flat fee for cash management, as opposed to charging for each transaction as its competitors do, Mr. Caswell said. Coastal also includes PC banking for business customers in its package.

Gerard S. Cassidy, analyst with Tucker Anthony Inc. in Portland, said there is reason to believe Coastal's strategy will work.

"Portland is a microcosm of the scene being played out across the nation," he said. "There is evidence everywhere that community banks can be successful if they focus on niches in the marketplace."

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