Casco Northern Bank

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Casco Northern Bank

P.O. Box 678
Portland, Maine 04104
800) 452-8762
Fax: (207) 776-7454

Wholly Owned Subsidiary of KeyCorp
Incorporated: 1933
Employees: 664
Total Assets: $1.2 billion
SICs: 6021 National Commercial Bank

Known as The Bank of Maine, Casco Northern Bank has over $1 billion in assets and many offices throughout the state of Maine and has undergone many changes during its long history. During the 1970s the firm gained a national reputation for offering some of the most innovative banking services in the industry, including NOW accounts, the first such service in Maine that provided interest on checking accounts. At the beginning of the 1980s, however, Casco suffered along with the rest of the banking industry and was forced to undergo a series of major changes, including mergers and the acquisition and reselling of the firm by major bank holding companies.

Cascos incorporation and charter started in 1933, but its history actually extends back to 1824 with the formation of the Casco Bank in Portland, Maine. Initially chartered and operated as a state bank, the coming of the U.S. Civil War and the passage of the National Bank Act in 1865 convinced the firms shareholders to relinquish their status as a state bank and operate as the Casco National Bank. In 1866 the bank was completely destroyed by a fire that swept across Portland, and almost $2 million in both currency and notes were lost. Shareholders voted to rebuild the bank the same year.

Casco National Bank prospered during the next 30 years and built a reputation among farmers and merchants in Portland. In 1897 the shareholders voted to merge with Mercantile Trust Company, a much smaller banking concern. The merger brought to Casco numerous branches in tiny towns across the state, including offices in such locations as Bridgton, West Buxton, Norway, South Paris, South Berwick, and Buckfield as well as four additional offices in the city of Portland. Renaming itself the Casco Mercantile Trust Company, the new operation conducted business under the auspices of the state charter of Mercantile Trust. Other mergers and acquisitions followed, and by 1900 the bank reported assets in excess of $23 million and deposits of nearly $20 million. The bank grew slowly but steadily during the early years of the 20th century, increasing both the amount of its assets and customer deposits. In the 1920s Casco Mercantile Trust Company was widely regarded as one of the most stable and reliable banks in the region.

However, with the stock market crash of 1929 and the Great Depression, deposits for the bank began to decrease at an alarming rate and by 1932 had fallen from $19 million to $14 million, with continuing decline. Casco Mercantile was in trouble, and other banks in the Portland area started donating money to keep the bank solvent. In early 1933 the states bank regulators recognized that nearly all the banks in Maine had exhausted their liquid assets, and more depositors were clamoring for their money every day. In March 1933 the governor of Maine, Louis J. Brann, preempted President Franklin Delano Roosevelts federal Bank Holiday by ordering the closure of banks throughout the state.

After the Bank Holiday, only four banks in Portland were able to reopen and conduct business under their old state charters: Portland Savings, Maine Savings, Portland National Bank, and Canal National Bank. Casco Mercantile Trust Company, First National Bank, and Fidelity Trust Company were unable to reopen and thus were forced into liquidation. Approximately $10 million of depositor money was part of what the bank could not cover. A lengthy and very painful liquidation process ensued, ultimately taking over five years to settle. Similar events occurred in every city and small town across the United States.

After the demise of Casco Mercantile Trust Company, a group of young businessmen and established bankers became convinced that a new bank was needed to serve the rural areas surrounding Portland. Since most of the banks reopening were in the city itself, this group regarded a newly organized bank as a necessity for people living in the countryside. There was a significant obstacle ahead of them, however: state law required that a new bank raise $200,000 of capital with an additional $100,000 in surplus. This compounded the groups desire to open a new bank, and it had to convince investors that there was, in fact, a need for bank branches in outlying rural localities where other banks had failed and that the bank would hire able management. This second criterion was especially important due to the erosion of depositors trust in how deposits were managed prior to the Bank Holiday.

In six short months the group of 25 businessmen and bankers, under the dynamic and persevering leadership of Leonard Timberlake, the former president of Casco Mercantile Trust Company, was able to raise the state-required funds. On December 11, 1933, the new Casco Bank & Trust Company opened its doors as a state-chartered bank. During the same day, the bank also opened branch offices in Limerick, South Paris, Buckfield, Woodfords Corner, Bridgton, South Portland, and West Buxton. Everyone was surprised, as the venture was thought to be an impossibility by the more conservative banking elements in the state. Banking services had been restored in many rural areas.

The founding directors of the bank, as well as the states regulatory authorities, assumed that Timberlake would become president of the newly formed enterprise. Unfortunately, his name had been indelibly connected to the failure of Casco Mercantile Trust Company and its loss of millions of dollars. Thus a new president was required, one who had an unblemished record and a proven track record in business. Although without experience in banking, H. Herbert Sturgis was chosen as the first president of the new Casco Bank & Trust Company. In spite of the fact that Sturgis had served on the board of directors at Casco Mercantile, there were no residual effects. He was widely respected and admired in rural areas, where his lumber company operated. To Sturgiss credit, many of the banks first customers were people who knew or had some connection with Sturgis.

Sturgis left the daily operations of the bank to Timberlake, who stayed on as vice-president. During the first full year of business the bank attracted many new depositors and not a few had received liquidation payments from Casco Mercantile. Commercial loans were also in high demand, and with careful consideration the bank management developed a successful lending program. By June 1935 the banks total assets had grown from $300,000 to over $11 million. In addition, the bank was growing so rapidly that management decided to open another bank office in Fryeburg.

The late 1930s were anxious years for the new bank. The traumatic Bank Holidays remained in the minds of Cascos board of directors, and the membership insisted that all loans be submitted to the board for approvaleven loans as small as $25. Real estate loans could not be more than 50 percent of appraised property values, which were also determined and approved by the board of directors. In addition, the total amount of real estate mortgages could not exceed one-third of the entire amount of the banks savings accounts. As the bank prospered and assets rose steadily, however, the directors gradually gave more authority to the banks management. By the end of the 1930s the president, vice-president, and treasurer were given $500 worth of unsecured loan authorization. Moreover, the board of directors granted management at the bank practical authority to conduct operations without its direct approval, and from that time forward it properly concerned itself with the role of setting policy.

Cascos president, Herbert Sturgis, died in March 1943. The banks board of directors was convinced that Timberlake was the man to replace Sturgis, especially since the passage of time had lessened the perception that Timberlake was responsible for the mismanagement of the bank before the Bank Holidays in the early 1930s. The new president assumed his duties in 1943 and continued in this capacity until 1955. Timberlakes strategy included cautious but steady expansion. Assets climbed to $41 million, and 13 new branch offices were opened under his administration. Among all the services that Casco provided, Timberlake focused on consumer loans to individuals. Committed to delivering high-quality and reliable banking services to the banks customers, Timberlake pushed the consumer loan program to approximately $5 million, its residential mortgage program to over $7 million. In fact, loans to individuals constituted more than 60 percent of Cascos total loan portfolio.

Halsey Smith became president upon Timberlakes retirement. Brought to the bank by Timberlake in 1951 and groomed as his successor, Smith was only 34. He assessed the strengths and weaknesses of the bank and decided to implement a strategy that revamped much of the informal nature of Cascos operations and business. He extended the loan program to take advantage of the growing business sector in Maine and continued the expansion strategy established by Timberlake. The First-Auburn Trust Company, along with its branch network in New Auburn, Gray, and Brunswick, was acquired in 1960, and a total of 17 new branch offices were opened throughout southwestern Maine. Assets climbed to $115 million by 1969, and Casco Bank was the recognized leader in the southwest region of the state.

In the fall of 1970 Casco moved into its newly built facility in Portland, and it centralized administrative and managerial operations. Wendell L. Phillips replaced Smith as president and aggressively pursued untapped markets throughout Maine. Within two years the bank grew from the fifth-largest to the second-largest in Maine, helped by the acquisition of Northern National Bank, located on Presque Isle. Having penetrated the northern and southern regions of the state, management determined to make inroads across central Maine as well. Under Phillips, Casco initiated many new banking services, including NOW accounts and Passbook Plus. These two innovative banking services brought millions of new depositor dollars into the bank.

John M. Daigle replaced Phillips as president and led the institution through volatile years within the banking industry. With a background as senior accountant at Arthur Andersen & Company and many years of service at Casco as controller and treasurer, Daigle was well prepared for the trials ahead. At the beginning of the 1980s the U.S. economy went into recession, with increasing inflation, escalating prices, and a loss of business in the commercial sector. Having experienced uninterrupted growth and expansion for nearly two decades, the bank tailspinned, and profits dropped by one-third. Daigles response was to merge with Northern National, a bank partner with Casco for years. Named Casco Northern Bank, the new organization was better able to compete in the deregulated banking atmosphere. By the mid-1980s Casco seemed to have revived. Assets approximated $735 million in 1984, and 56 branch offices served people throughout Maine. As most commercial banks in the state lost market share Casco increased total deposits.

The recession within the banking industry was lengthier than anticipated, however, and Casco management decided to merge with Bank of Boston, a huge bank holding company focusing on the New England region. Bostons investment helped stabilize Cascos condition and provided the bank with enough capital to continue opening new branch offices. By the mid-1990s, however, Bank of Boston decided to sell Casco Northern Bank. As it turned out, Bank of Boston was never a significant presence in retail markets in Maine and shifted its focus to the wealthier urban areas in southern New England.

In early 1994 KeyCorp, a Cleveland-based holding bank with over $61 million in assets, offered to purchase both Casco Northern Bank in Maine and the Bank of Vermont. Through its Portland subsidiary, Key Bank of Maine, the deal was finalized for a purchase price of $198.5 million. With the purchase, Key Bank of Maine took control of $3.5 billion in assets and became the second-largest bank in the state. With the addition of Cascos branch offices, Key Bank of Maine began to supervise operations of approximately 100 branch locations. Although the U.S. Department of Justice initially questioned KeyCorps acquisition of Casco, the complaint was dropped after KeyCorp management agreed to sell a number of its branches in seven different areas within the state of Maine.

Under the new management, Casco National Bank was completely incorporated into KeyCorp. Long known as one of the premier banks serving the state of Maine, branches once owned by Casco National Bank continued to emphasize high-quality customer service in both rural and urban areas.

Further Reading

Aber, Jack W., and William E. Jackson III, The Surprising Importance of Deposit Rate Flexibility, Journal of Retail Banking, Spring 1992, pp. 9-14.

Daigle, John M., Casco Northern Bank, Newcomen Society: New York, 1984.

Iida, Jeanne, Key Buying Maine, Vermont Units From Boston Bank, American Banker, June 27, 1994, pp. 2-5.

Oppenheim, Sara, and Sara Seiberg, KeyCorps Maine Purchase Approved, American Banker, January 24, 1995, p. 4.

Racine, John, Big Acquisitions Create Opportunities to Purchase Branches, American Banker, January 23, 1995, pp. 18A-25A.

Seiberg, Jaret, Banks: Plan to Ease Tying Rules a Start, but Should Go Further, American Banker, January 26, 1995, p. 3.

Justice Dept. Withdraws Objection to KeyCorp Deal, American Banker, December 20, 1994, p. 2.

Vogelstein, Fred, Superregional Shows Clout, American Banker, March 10, 1992, pp. 1-10.

Thomas Derdak

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Casco Northern Bank

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