CALAIS – The city’s hometown bank – Calais Federal Savings and Loan – located on the corner of Main and North streets, announced Friday it plans to merge with Gardiner Savings Institution.

The change, recently approved by the banks’ boards of directors, is subject to regulatory approval, with the actual change anticipated in the first quarter of 2007.

But as word of the merger spread among area residents, there was a collective lump in everyone’s throat.

City Manager Linda Pagels remembered being in her 20s and getting her first loan there. Asked how old she is now, she said, “I’m talking my first half … century.”

Eric Hinson, who owns Calais Press, said the bank has a warm place in his heart because it gave him a house loan when he was first married.

The bank did the same thing in 1965 for retired businessman Dan Hollingdale, who now is chairman of the board of directors. “I had very little money at the time,” he said. “Fortunately I had a piece of land which I’d bought for $2,500 and they helped me put an application in that allowed me to get a GI loan.”

The bank began in 1936, Hollingdale said, through the efforts of a few businessmen, who included Clarence Beckett and Reed Jewett and others. Their goal was to have a hometown bank.

“The beauty of the Calais bank,” Hollingdale said, is that “a lot of decisions were made not only on the equity presented to us, but we always looked at the people applying for a loan. The board always tried to find a way we could grant the loan if at all possible.”

Hollingdale said that was one of the reasons they decided to merge with Gardiner Savings because its philosophy mirrored the Calais bank’s.

Pagels said she viewed the change as positive. “It will still have a Main Street presence, the people at the bank aren’t going to change and I think in this day and age hometown is a much larger landscape than just Main Street or the town we live in,” she said. “It’s a bigger world out there. If their thinking is still local, I think [the merger means] more resources they can direct our way.”

And Gardiner Savings agrees.

“This is an appropriate response to today’s banking environment,” Arthur C. Markos, president of Gardiner Savings Institution, said in a prepared statement. “Smaller banks are forced to compete with tax-exempt credit unions and mega banks with a size advantage that becomes a factor as technology continues to develop in the industry. The cost of regulatory requirements is an additional burden. This merger positions both banks to better compete in this fast-moving arena.”

“Our focus as a community-oriented bank parallels Calais’,” he added, “and we intend to maintain, and hopefully enhance, that commitment to the communities and customers that Calais Federal Savings & Loan serves.”

Dennis Brown, president of Calais Federal, said the merger would benefit the Calais bank’s customers.

“In addition to investment products and 26 new locations with free ATM access, Gardiner Savings has well established commercial loan and commercial real estate programs to accommodate business customers. Combined resources will better accommodate expansion and product development, which provide a cornerstone for expanded opportunities for our staff,” he said.

Gardiner Savings, established in 1834, is the second oldest savings bank in Maine. With assets totaling over $750 million, the bank has a solid footprint in central and midcoast Maine with more than 20 branch locations. It is also in the process of acquiring First Citizens Bank, headquartered in Presque Isle, adding $135 million in assets and five branch offices.

“This merger complements our recent acquisition of First Citizens Bank and reflects our commitment to serving northern and eastern Maine with the same dedication we have had for 170-plus years in central Maine,” Markos said. “For the second time our policies, procedures and products fit nicely with another well respected local financial institution and we look forward to partnering with the board and group of employees who are responsible for their excellent reputation.”

Hollingdale will be elected to the Gardiner board once the merger is complete.

“In considering strategic alternatives, our board of directors placed a great deal of value on Gardiner’s culture. Technological and regulatory support will allow our local staff to focus on customer service and allow us to maintain, expand and enhance services and products that should be very attractive to business and retail customers alike,” he said. “We truly believe Gardiner Savings embraces community banking and will bring a continued dedication to our customers.”

Other members of the Calais board will be named to a special advisory board to provide input to the Gardiner-based bank and to work with advisers who have been established in each of the bank’s present locations.

When both mergers have been completed, Gardiner Savings will have a footprint extending from central Maine and the midcoast area to Down East Maine and Aroostook County, and the bank’s assets will approach $1 billion, allowing it to increase the amounts it can lend to borrowers in the regions the bank will serve.