A crowded market still draws financial institutions
Photo/Tim Greenway
Yellow Light Breen, senior vice president of Bangor Savings Bank, says the bank is actively marketing its growing Portland presence
The opening of Bangor Savings Bank's newest branch on Allen Avenue two weeks ago will just about conclude the bank's $4 million year-long expansion into the southern Maine market. Meanwhile, Town and Country Federal Credit Union yesterday opened its second Portland branch, on Forest Avenue, and Atlantic Regional Federal Credit Union in November celebrated the opening of a branch in Cumberland. Bath Savings Institution, which already has a branch in Portland, is planning to open a second at the Mill Creek Shopping Center in South Portland.
Joining these is a host of other new credit union and bank branches that have opened in Portland and the surrounding region in the last few years. Bangor Savings Bank alone will have grown from one full-service branch in Portland in 2005 to eight branches by March when it opens a Falmouth office.
The migration of more community banks and credit unions into Greater Portland -- a trend that really got its start about a decade ago -- does not appear to be abating, even while the market grows more saturated with financial institutions. Though the city is arguably overbanked, and increasing numbers of customers prefer to do Internet banking, opportunities can still be unearthed here, according to experts, who say it also makes sense to have a brick-and-mortar presence in a desirable market.
"People still make the decision on where they're going to conduct financial service based on convenience, and when a new location opens, it becomes more convenient," explains John Murphy, the president of the Maine Credit Union League, a trade group.
Community banks and credit unions move into the Portland area because they either perceive holes in the marketplace (Atlantic Regional Federal Credit Union, for instance, opened its Cumberland branch because there were no other financial institutions nearby, according to President Roger Sirois), or they think they can capture a slice of market share from dominant banks, according to Christopher Pinkham, president of the Maine Bankers Association. In 2010, for instance, nine banks were operating within the Portland zip code 04101, with TD Bank and KeyBank holding 96.12% of this small area's total bank deposits between them, according to the FDIC.
Greater Portland's biggest lures are its population density and its importance as an economic driver in the state. "We were looking to grow as a company and expand our reach into markets that have more people and more businesses," explains CJ Conrad, senior vice president and director of marketing for Androscoggin Bank. The Lewiston-based bank opened a location on Middle Street in Portland a little over a year ago.
Yellow Light Breen, Bangor Saving Bank's senior vice president, says the area offers potential for community banks in particular. "There's $3 billion in Portland of customer deposits, and two-thirds of it is in out-of-state banks," Breen spells out.
He says his bank conducted a survey of business owners before and after the financial crisis, which showed that in 2005, 63% of business owners in Maine preferred doing business with a local bank. In 2008, he says that percentage jumped to 84%.
Pinkham, with the Maine Bankers Association, points to other possible factors behind the trend. He says that in the "go-go real estate days," many mortgage brokers were available to help people buy homes, but since then, their numbers have plummeted. Consequently, more banks are shifting into residential real estate, a market they have historically dominated. "The marketplace still has demand for residential lending, and banks have been able to get back some of the marketplace they lost," Pinkham points out.
But besides the purported potential here, there are plenty of challenges as well -- expensive challenges. "There are many, many banks jockeying for position and market share," Breen reasserts. "And for us, part of our critical element of success will be building enough awareness among customers and businesses, and making sure they know what sets us apart. It's a significant marketing challenge."
Compounding this challenge is the difficulty financial institutions have convincing customers to switch over. "Until their current bank really screws up and creates so much pain and frustration, people put up with it," Breen observes.
To jockey for position, Bangor Savings Bank has increased its marketing budget by 10% in the past year, partly to support its Portland expansion, Breen says. Between 2005, when it opened its full-service branch on Fore Street, to now, the bank has grown its market share of deposits from .46% to 1.32%, according to the FDIC's metropolitan statistical area report on Portland, South Portland and Biddeford.
Other banks also say they increased their marketing dollars, on top of the considerable capital investments they made in new buildings and additional employees. "We sure did step up marketing," Conrad of Androscoggin Bank says. "We had a focused, concerted effort in Portland leading up to the opening." By June 30, 2010, Androscoggin Bank had 1.04% of market share in the Portland-South Portland-Biddeford area, according to the FDIC.
Marketing and advertising are important in spreading the word about a new branch, but the best way to grab a slice of the market is a tactic that appears, on the surface at least, quite simple. "You can have a great brand and awareness, but really the number one way is word of mouth," Dave Libby, president of Town and Country Federal Credit Union, says. "If someone you trust has told you about a great service experience, it will help you do business with that particular financial institution. It is all about trust."
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