🔒Old bank, new times: Bangor Savings strategy calls for southern expansion and new technology

As the newest captain at the helm of a 163-year-old ship, Bangor Savings Bank President Bob Montgomery-Rice sees the future in expanding branches in southern Maine and adding more technology to the bank's repertoire of services.

“We're continuing great growth,” Montgomery-Rice, 49, told Mainebiz from his office in Portland. He took over as president on Jan. 1, and will become CEO in April. He said the Bangor-based bank set up branches in Portland 10 years ago, and in April, after it opens a branch in Ogunquit, will have 57 branches from York to Houlton.

“We are continuing expansion and growth in this [southern Maine] market,” he says. The bank expects to add about two branches a year with five employees each going forward. “And younger people using the bank are continuing to grow, so we are keeping pace with technology, security and taking care of data.”

Mobile banking, for example, represented three times the transactions at branch teller stations, and this year it hit 3 million mobile transactions a month, with the service having started only 18 months ago, according to Yellow Light Breen, executive vice president and strategic officer at the bank. Visits to rural branches are decreasing, while “visits” to the bank from mobile phones and tablets are on the rise.

“The frequency of mobile use is more than 10 times a month, which is high,” Breen says. “We spent a lot on monitoring on our side, millions of dollars in the past couple years. Our application is secure.” He said three to four people in Bangor monitor transactions flagged as unusual. The bank uses software that can look for abnormal account use patterns and issue an alert.

The bank is rushing to include new microchips to detect fraud in its credit cards, and later in its debit cards. MasterCard and Visa are pushing for the chips, which are used commonly in Europe, to be embedded into cards. The credit card companies want retailers and banks to change their card readers to accommodate the new chips by this October. Bangor Savings is working on its ATMs and services, and expects to have a pilot for the cards completed by the end of this year, and comply with the new technology sometime next year.

Debit cards with the new chips could cost double to produce and mail to customers, that is, $5 compared to $2.50 now, and it's still unclear how much money banks will end up saving on fraud. “We lose several $100,000 a year in debit fraud,” Montgomery-Rice says. “The chip will stop [magnetic strip] swipe fraud, but not online dummy cards.”

Changing times

The new technologies, along with changes in how banking is done, are signs of the changing times in banking, notes Christopher Pinkham, president of the Maine Bankers Association.

“We've had 11 new CEOs in the past [four years], and four alone in the first month of this year. In general, the industry is having a generational change in leadership,” he says.

Montgomery-Rice is one of the four new bank presidents who took the reins in January. He is replacing longtime Bangor Savings' CEO James Conlon, who retired. Elsewhere, Andrew W. Silsby took over as CEO of Augusta-based Kennebec Savings Bank on Jan. 5 after being named president last June. First Bancorp, based in Damariscotta, named Tony C. McKim president and CEO of the corporation and its wholly-owned banking subsidiary, The First, replacing Daniel R. Daigneault. And Saco & Biddeford Savings Institution named Bob Quentin as president, while CEO Kevin Savage plans to retire in May 2017.

“[Montgomery-Rice] symbolizes this generational change of leadership. There's a shift going on now within most banks of realizing the retail systems we've grown in the past 40 to 50 years have plateaued, and customer use of branches is changing and Internet competitors are huge now,” Pinkham says. “High on the list for CEOs is trying to be relevant as a bank going forward. There's some level of urgency to this.” Some banks, he says, like Ally Bank (formerly GMAC) have no branches at all, but exist completely online as competitors to brick-and-mortar banks.

He added that banks have to figure out how, in 2015, to be relevant to their customer base. And customers can vary greatly, from banks serving influxes of seasonal visitors to those interested in local business hours or those serving commuters to Boston who need more mobile services.

The other change coming to banks is their composition of executives. Already, Norway Savings Bank and Lewiston-based Northeast Bank have top female executives, and boards of directors are getting younger, Pinkham says. “The traditional, gray-haired male and often-retired group of directors has seen dramatic change in the last half dozen years in gender, age and, frankly, attention span,” he says, adding that many still have jobs, so board meetings are shorter as well.

Differentiators

Montgomery-Rice cites the bank's people and way of doing business as differentiators, saying customers do get attached to tellers and other workers. He also is pushing to improve pay to workers. Everyone now makes at least $12 an hour, compared to $11 hourly a year ago, and he wants to keep improving that going forward.

“We thought of the skill set, and we want to make sure employees have a livable wage,” he says. The $12 includes benefits, such as medical, matching 401(k) plans and tuition assistance. “This raise initially affects 300 people and will cost a few hundred thousand a year,” he adds. Tellers, many of whom are part-time, were making $9.50 just three years ago.

Adds Breen, “Tellers need to do a lot more than they were expected to do before. People are looking for a whole host of financial advice.”

Another differentiator is that the bank owns a payroll company called Bangor Payroll that services more than 3,000 Maine companies and generates more than 55,000 payroll checks. Montgomery-Rice says it's a way to become a trusted advisor to a company that could then, in turn, become a customer of the bank. Payroll generates $7 million in income, so it is about 5% to 6% of top-line revenue for the bank.

Bangor Savings also is a mutual savings bank, which in 2007 also became a mutual holding company called Bangor Bancorp to allow for future acquisitions and the option to raise capital by issuing securities or selling stock while protecting the bank's assets.

Mutual savings banks started as eleemosynary institutions, that is, charitable or belonging to the community, explains Pinkham of the Maine Bankers Association. Many date to the 1800s and might have been owned by a mill or other business. Laws allowed only tax-free savings accounts at such banks, but as more services and retail business came into play, banking rules changed, and retail branches sprang up.

Maine has 31 retail banks, 27 of which are headquartered in the state. Of those 27, 19 are mutual banks, and nine of those 19 also have a mutual holding company.

One advantage of a mutual bank is that it can take a long-term vision of its business, out 20 years or so, says Montgomery-Rice.

That proved to be a positive during the recession. When other banks curtailed loans, especially to small businesses and would-be home buyers, Bangor Savings remained active. Consumer and commercial loans totaled $605 million in 2009 and $767 million in 2013, with consumer loans being just over 60% of the annual lending. And in the first nine months of its current fiscal year, it has loaned more than $466 million.

“We have the structure to think long term,” Montgomery-Rice says. “So we lived through the recession.”