Camden National Corp. earns national ranking

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CAMDEN – You won’t see its advertisements on television. Its branch offices are not bigger than those of its competitors. And its territory does not span from one end of the state to the other.

But quietly, Camden National Corp., the parent company of Camden National Bank and UnitedKingfield Bank, has become one of the most successful financial institutions in Maine.

In the June issue of the American Bankers Association trade journal, which lists the nation’s top 100 banks, Camden National Corp. is ranked 80th. The list ranked publicly traded banks with assets of $1 billion or more; CNC is the only bank in that category which operates wholly within Maine.

Robert Daigle, president and chief executive officer, said the ranking is based on return on equity, a standard assessment used in measuring the success of financial institutions.

“This ranking tells us we are giving our investors a good return,” Daigle said in a recent interview.

Brad McCurtain, president of Maine Securities, a Portland-based financial analysis firm, said banks aim for a 1 percent return on assets. CNC is at 1.4 percent.

“That’s really pushing it,” he said of the company’s success. “That’s exceptional.”

The bank, founded in Camden in 1875, has grown significantly in the past decade, but that growth has been careful and considered, Daigle suggested.

Rather than trying to grow simply by putting up more bricks and mortar, the corporation instead is on the lookout to buy other banks or businesses that can add services for an existing customer base – or allow the company to grab a niche market.

In 1995, CNC acquired Bangor-based United Bank, with its branches that stretched from Jackman to Corinth. At the time, CNC’s assets were seven times larger than United’s. In 1999, CNC acquired Kingfield Savings Bank with its assets of nearly $180 million.

Finding income outside of loans is key these days as banks find the margin narrowing between the interest they pay and the interest they charge, Daigle said. “Diversifying the revenue stream is critical,” he said.

To that end, CNC recently purchased two Portland-area financial institutions – Acadia Trust and Gouws Capital Investment Inc.

While CNC has offered trust management services for some time, with its 51 percent ownership in the Bangor-based Trust Company of Maine, Acadia Trust and Gouws Capital will bring in an existing customer base.

Greg Dufour, senior vice president of finance for Camden National, said the acquisitions allow CNC to offer one-stop shopping to existing customers, which is increasingly important for a local institution, as national competitors such as Fidelity Investment enter the Maine market.

Daigle and Dufour say demographics show that retirees, many of them younger than 65, and in-migrants from metropolitan areas are the fastest-growing segment of the communities in which CNC operates. The company’s goal is to make these people feel comfortable in transferring all of their financial assets to one bank.

But Daigle tempers this by stressing, “We would rather be customer-driven than product-driven.” So CNC hasn’t jumped into offering insurance, as banks are now able to do with the recent repeal of a federal ban.

How much more will the bank grow? How much should it grow?

“I believe you get bigger by being better, and not the reverse,” Daigle said. Stockholders expect a certain rate of growth each year, but a bank must also invest in the newest technological amenities that customers expect, he said.

“It truly boils down to four basic ingredients,” Daigle said:

. Above average growth in deposits and loans.

. Success in controlling expenditures to achieve an efficiency ratio – in other words, expenses-to-revenue ratio – that is better than the industry average. CNC spends 51 cents to earn $1, Daigle said, compared with the average of 60 cents.

. High-quality loans, meaning they are repaid with regularity.

. Finding sources of noninterest income, such as fees for services, that are outside of loans.

Daigle is especially proud of the company’s efficiency ratio.

“Productivity in this company is above average,” he said.

McCurtain of Maine Securities said CNC’s efficiency ratio is remarkable.

“That’s almost unheard of,” he said, noting that another Maine bank is spending an average of 68 cents for every dollar earned. McCurtain said that with CNC operating one-person branches in Rangeley and Jackman, “that’s what makes that efficiency ratio all the more amazing.”

Daigle attributes the efficiency to strong and committed employees. By offering a good benefit package, the banks are able to attract employees with a good work ethic, he said.And employees must be treated as valuable assets.

Each month, Daigle has breakfast with every employee celebrating a birthday that month. Dubbed “Breakfast with Bob,” the gatherings give employees the opportunity to ask Daigle virtually anything about the business.

The company also has spelled out a list of values, focusing on such qualities as honesty, fairness, pride, work ethic, working to exceed customer expectations and “contributing to an environment of having fun.”The company also does strategic planning, and updates its plan three times a year.

Every three months, Daigle meets with all the employees of a branch. CNC has a small commercial real estate loan operation in Portland, which Daigle said is a good example of how the company finds a niche – even a small one – and moves into it, in a low-profile manner. Dufour has a phrase for this approach, calling it being “aggressively cautious.”

“We’re not trying to be all things to all people, but rather, find a natural extension of what we’ve done well for 126 years,” Daigle said.

When a customer walks into the branch in downtown Camden and asks to see the president, Daigle will open his door and sit down with the person, he said.

Balancing growth with the bank’s small town values is essential to survival as a locally owned, independent bank, Daigle believes. He likes to point out that in 1976 there were 154 banks operating in Maine. Today there are fewer than 40.

McCurtain said CNC’s board of directors has recently authorized the repurchase of up to 5 percent of the company’s stock, because of the confidence it has in the stock gaining significant value in the next year or so.

In the most recent Maine Securities newsletter, McCurtain wrote that the stock “appear[s] capable of providing a double-digit return over the next 12 months.”

The financial analyst also noted in the article that the company “could be vulnerable to an unsolicited takeover,” because of its strong earnings, efficiency and strong capitalization.

Daigle doesn’t believe a takeover is likely, for the very reasons that the business is successful.