Started from "Cuttings," Maine Startup Grows Deep Roots

The time: The early 1990s. The place: New England. Fleet Bank has been growing aggressively through acquisitions. To keep federal regulators happy, the holding company divests itself of excess assets to lessen the anti-competitive impact of its deals. Bangor, Me., is one of the places where Fleet will shed operations. In 1992, like gardeners starting a new ivy plant from a cutting, a group of investors takes on seven divested branches, 75 employees, and assets of $74 million. Combining the names of two historically significant Bangor banks that had been acquired, plus one of their logos, the group chooses its institution's name and opens the doors of Merrill Merchants Bank in the old headquarters of a defunct savings bank. Much of the senior staff comes from the two namesake banks. Within the bank's second year--and a year-and-a half ahead of plan--the bank becomes profitable, though skeptical regulators, smarting from the New England debacle, play hardball through all the early days. Fast forward. Halfway through the first year of its second decade, Merrill Merchants seems to have more than fulfilled the promise that its original shareholders saw for the bank and its market. Today's Merrill Merchants has 11 locations, $321.8 million in assets, and 120 employees (FTE). In 1998 the company went public and now has around 1,000 shareholders, most of whom live right in Bangor. It helped being a new guy in town with two old names, says Edwin N. Clift, president and CEO, and himself a veteran of Merrill Trust, one of the predecessor banks. Since it hit the black, Merrill Merchants has racked up consistently impressive numbers. At midyear 2003, for instance, in spite of a slowing economy, the company had an ROA of 1.34% (versus 1.35% for the first six months of 2002) and an ROE of 14.41% (versus 14.18%). So it's not surprising Clift doesn't hide his association with Merrill Merchants. Cliff's license plate reads: MERB, which is the stock symbol for the holding company, Merchants Bancshares, Inc. The company trades on the Nasdaq National Market System. No place like homes Bangor, to hear Clift tell it, isn't the kind of place that sets the world on fire. It's a good, steady place to raise a family, a place that avoided a lot of the go-go years, but that also has had a pretty stable economy. The city no longer enjoys the textile and shoe factory jobs that residents used to hold, but it is a key service center for sparsely populated northern Maine and some bordering parts of Canada. The University of Maine is less than ten miles away, and, while the paper business is currently in the doldrums, the city is ringed by six or seven pulp and paper mills that often provide economic punch. This reflects a renewable resource that can be there for years to come. Clift also predicts that big things will someday come of Bangor's International Airport, which he refers to as our city's best-kept secret. But a significant resource is Maine itself. Clift says property values have been rising for some time. In part this is the result of a steadily rising demand for vacation homes. Any part of Maine near water, be it ocean, river, lake, or pond, has a cachet that attracts city or out-of-state money, and out-of state business to mortgage lenders like Merrill Merchants. Clift notes that the bank has numerous out-of-state borrowers, including, for example, airline pilots who have purchased Maine properties. There has also been a great deal of new home construction in the market, which has given the bank the opportunity to make a large number of residential construction loans. Overall, mortgage lending represents one of Merrill Merchants' biggest business lines, with about 75% of both its pipeline and its servicing portfolio representing loans for primary homes. Most of its lending falls within a 50-mile radius of Bangor. While the bank does hold some residential mortgages (they represent 19% of the loan portfolio) it prefers to sell everything it can to the secondary market, servicing retained. …

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