Granite State Bankshares, Inc.

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Granite State Bankshares, Inc.

122 West Street
Keene, New Hampshire 03431
Telephone: (603) 352-1600
Toll Free: (877) 924-1224
Fax: (603)358-5707
Web site:

Public Company
Employees: 281 Total Assets: $867.67 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: GSBI
NAIC: 52211 Commercial Banking

Granite State Bankshares, Inc. is the holding company for Granite Bank, the largest independent bank headquartered in New Hampshire. Granite Bank is a New Hampshire chartered commercial bank and operates 18 branch banking offices throughout southern New Hampshire in Cheshire, Hillsborough, Merrimack, Rockingham, and Strafford counties. The bank serves its primary customersindividuals and small to mid-sized business customerswith retail banking services, including checking, savings, and money market accounts, NOW accounts, individual retirement accounts, and certificates of deposit. Lending activities include residential mortgages (approximately 63 percent of the banks portfolio) and commercial real estate (24 percent), as well as construction, commercial, and installment loans. Mortgage loan products are provided by GSBI Mortgage, a nonbank subsidiary. In 1999, the bank introduced GRANITe-bank, an electronic banking service that combines the convenience of Internet banking with industry-standard security protection.

At the Beginning: 18951900

On March 28,1895, seven prominent New Hampshire citizens, led by Obed C. Dort, gathered to form a bank in the small city of Keene, New Hampshire. Located just 15 miles from the Connecticut River, the states boundary with Vermont, and 15 miles from Massachusetts, Keene was and would remain the economic hub for southwestern New Hampshire.

At the turn of the century, Keene was a bustling, forward-looking metropolis with a population of approximately 7,500. As the county seat for several surrounding rural communities in the shade of majestic Mount Monadnock, the city served as the cultural, social, and commercial center for the area. In the 1890s, for example, both Buffalo Bills Wild West show and the Barnum and Bailey circus regularly came to town. The first motion pictures, presented with Edisons new Vitascope, dazzled citizens as early as November 1896.

According to the banks centennial history, The First 100 Years, the Keene Savings Bank was born in a time better suited to failure than success. Yet, the turn of the century seems to have been an auspicious moment to launch the fledgling bank. Innovative, new enterprises were springing up all over the city. The Keene Gas and Electric Company plant opened the year the new bank was incorporated, and the first commercial electric lights were installed in 1898. The citys first bus line, which featured a closed horse drawn vehicle, opened in 1896, and was eclipsed in 1900 by the installation of an electric railway through the commercial center of town. Railroads were a major factor in the citys economic life. The merger of the Cheshire Railroad with the Fitchburg Railroad in 1890 significantly expanded the ability of local manufacturers to reach new markets in Massachusetts and beyond. In the 1890s, a railway repair shop, which serviced engines and cars using the newly merged line, became one of Keenes largest employers.

The official city history, Upper Ashelot: A History of Keene, New Hampshire, reported six pail and pail stock makers, three box makers, two brick manufacturers, five chair makers, two carriage and two engine builders, a tannery, and a woolen mill among many other small and active businesses in Keene. A piano company and a toy company, the latter destined to put Keene on the map in the first half of the new century, were both started in 1892.

The Keene Savings Bank opened its first office on June 15, 1897, two years after incorporation, in the rear of a jewelry store on the corner of Washington Street and Central Square. After a year in business, the bank showed assets of $16,957.67, no loans secured by mortgage, and a gross income of $85.36, according to a New Hampshire Bank Commissioners report. In defense of its modest start, however, the citys newest bank faced significant competition. By 1900, Keene was home to eight other banks. The oldest, the Cheshire National Bank, had been in operation since 1804, and the Cheshire Provident Institution was established 1833.

Solid and Steady Growth: 19001982

By its tenth anniversary, with deposits of more than $500,000, the bank was ready to move from the jewelry store backroom to an area known as Bankers Row on the west side of Keenes Central Square, At mid-century, Keene Savings Bank occupied two impressive adjacent buildings in the heart of Bankers Row. The Bank would remain on the square until 1976, when it built new headquarters.

Dr. Gardner C. Hill, who served as Keene Savings Banks first president until his death in 1915, was a prominent physician and tireless public servant. He served on the Keene Board of Education for 31 years and was a Keene city councilor, county commissioner, and county treasurer. James Taft, the banks first vice-president, was elected mayor of Keene for three consecutive terms, while Herbert Fay, the banks first treasurer, served as mayor in 1914 and 1915. Following in the footsteps of these early leaders, later generations of bank officers and employees would also make a strong commitment to the communities in which they lived and worked. That this commitment proved advantageous to both the bank and its communities was reflected by the banks consistent pattern of steady growth. By the end of its first quarter-century, total assets were slightly more than $1,000,000; 25 years later, assets would reach $4,222,000.

The Smith Years: 1982 and On

The Keene Savings Bank pursued its successful strategy of steady growth throughout most of the 20th century. However, with the new leadership in 1982 of Charles W. Smith, the banks eighth president and the first to hold the title of chief executive officer, the bank embarked on a period of significant change and extraordinary growth. In 1986, with assets of more than $87.5 million and earnings a record $901,476, Smith moved to form Granite State Bankshares, Inc. (GSBI). His purpose was to convert Keene Savings Bank from a mutual savings institution to a New Hampshire chartered guaranty stock savings bank. The initial offering of 1,400,000 shares of common stock was sold in the subscription period and raised $17,074,000 in new capital. This capital would later enable the bank to diversify its markets through acquisition and expansion into other financial and geographical areas.

While he looked to expand the reach of the new bank holding company, Smith understood that the success of the Keene Savings Bank rested on its traditions as a community bank. In a 1991 interview in Bottomline, he said, No matter how much this industry changes, there always will be a role for community banks. People want more than price. They want service. Even when larger banks move into a market, smaller banks have continued to thrive because bigger banks cant give the customer the same attention the community banks give them. You simply dont get the time and commitment from a bank that moves into an area substantially far away from its main base, Smith added.

Even as the bank began to expand into new communities, the tradition of service that had begun almost a century before in Keene, with the banks first officers, remained a focus. The banks 1989 annual report noted that employees had, in that year alone, contributed more than 1,500 hours of volunteer community service. Ten years later, the annual report emphasized the banks sponsorship of community events, funding for regional development, support for the arts, and a high level of volunteerism.

The banks first venture beyond Keene occurred in 1987 when GSBI made New Hampshire banking history in becoming the first bank in that state to establish a de novo bank by purchasing an existing branch of another bank. This historic purchase was a branch of the Amoskeag Bank in Amherst, located in the economically booming central section of southern New Hampshire.

In 1988, the banks name was changed from Keene Savings Bank to Granite Bank of Keene. More significant to the banks new pattern of growth and development was its 1988 merger with the First Peterborough Bank Corp.(FPB) of nearby Peterborough. With the assumption of FPBs subsidiary, the First National Bank of Peterborough, GSBI gained assets of $46.9 million and a group of new staff members with their own strong tradition of community service dating back to 1865. The bank continued to grow in 1989 with the opening of new offices in Chesterfield and Milford. This expansion to both the east and west of Keene meant that Granite Bank now had offices in every major market from the Connecticut River in the west to the Merrimack River in the east.

Company Perspectives:

Granite Bank is proud of the fact that, although it has grown far larger in scope and size than the seven original incorporators could have foreseen, it has never lost sight of the need for a bank to be more than just about money. With offices spread from the western border of New Hampshire clear to the eastern seaboard, Granite Bank employees still follow the example first set by Dr. Hill over a century ago. They and the Bank work side by side in the communities they serve, together helping to make their towns and cities better places to live and work.

Financial opportunities are created in periods of economic downturn, wrote Smith in his message to stockholders in GSBIs 1991 annual report. That year saw more New Hamp-shire bank failures than any other year in the states history. However, Granite Bank was able to turn the hard economic times to its advantage. With government assistance, GSBI purchased two banks that regulators had slated to close: First Northern Bank in Keene and Durham Trust Company in Durham and Portsmouth. This purchase gave Granite Bank a greater market share in Keene and extended the franchise to the seacoast.

These acquisitions were dwarfed, however, by the news, on October 31, 1997, that GSBI had acquired Peterborough-based Primary Bank through a merger with Granite Bank. As of March 31 of that year, Primary had total assets of approximately $430 million, ten branches located in Merrimack, Hillsborough, and Cheshire counties, and an extensive distribution of ATM locations throughout southern New Hampshire. The combination of these two banks resulted in Granite Banks posting consolidated assets of $814 million.

Granite Bank completed the merger with Primary Bank and strengthened its financial position in the late 1990s. By the turn of the century, the bank had become the largest independent bank headquartered in New Hampshire. In 1999, Veribanc, a nationally-recognized rating service, gave Granite Bank a Blue Ribbon Award, its highest ranking for a financial institution and the oldest national recognition awarded to banks for financial safety and soundness. In October 2000, Smith announced that the bank had signed an agreement to purchase the two branch offices of Olde Port Bank in Portsmouth and Hampton, both in Rockingham County. The Olde Port branches brought with them approximately $47 million in deposits and repurchase agreements and $47 million in loans. The two branches employed 23 persons. The transaction was expected to become final by December 31, 2000. As a result of the purchase, Granite Bank was now represented in the economically vibrant seacoast region by five branches.

Looking to the Future

Granite Bank was fully committed to remaining at the fore-front in the swiftly changing personal and commercial banking environment. In 1999, in response to customer requests for Internet-based banking services, the bank launched GRANITe-bank, one of the first online services offered by a New Hamp-shire-based bank. Before designing the new service, the bank surveyed the opinions of more than 750 customers. GRANITe-bank, as a result, was developed with customer service and state-of-the-art security protection as high priorities. A fire wall of sophisticated technology, encryption, and confidential pass-words protected confidential customer information. Individuals and small businesses appreciated the opportunity to access their own accounts at any time, and an added ability to see check images online differentiated GRANITe-bank from other Internet-based banking services. Customer response was overwhelmingly positive, and the service was expected to reach even more households and small businesses in the future.

In the first decade of the new century, Granite Bank planned to continue to offer customers the latest technology-based banking services available anywhere. The banks Internet site had been designed to provide current and prospective customers with the information they needed to take advantage of the Granite Banks many services from the comfort of their homes and offices. With assets of more than $860 million, and the purchase of the Olde Port Bank branches, Granite Bank had established a solid presence across southern New Hampshire from the Connecticut River to the Atlantic Ocean and appeared to be in a strong position to take advantage of further opportunities for growth and expansion.

Principal Subsidiaries

Granite Bank.

Principal Competitors

Andover Bancorp, Inc.; First Essex Bancorp, Inc.

Key Dates:

Keene Savings Bank is chartered.
Offices moved to Bankers Row in downtown Keene.
Assets surpass the $1 million mark.
Bank moves to new headquarters in Keene.
Granite State Bankshares, Inc. holding company is formed.
The banking subsidiarys name is changed from Keene Savings Bank to Granite Bank of Keene.
Company merges with Primary Bank of Peterborough, N.H.
Company acquires two Olde Port Bank branches.

Further Reading

Granite Bank Buys Olde Port Bank Branches in New Hampshire, Prime Zone Media Network, October 4, 2000.

Granite Bank Earns Dividends from Tradition, Technology, New Hampshire Business Review, January, 14, 2000, pp. 1516.

Hutnyan, Joseph D., Rallying Around the Two Words that Sum It All Up, Bottomline, March/April, 1991, pp. 49 +.

Keene History Committee, Upper Ashelot: A History of Keene, New Hampshire, Keene, N.H.: Author, 1968.

Whats the Biggest N.H. Bank? Try Looking in Keene, New Hampshire Business Review, November 7, 1997, p. 35.

Margery M. Heffron