Conservative Maine Thrift Stands Amid Bad Loans, U.S. Takeovers : Banking: One savings and loan avoided the excesses of the ‘80s. Money now flows its way as overextended rivals fail.

Gorham Savings Bank’s president no longer mows the lawn himself, and only rarely does he run the flag up the flagpole. He still opens the mail, though--every morning, like clockwork.

“That’s one of my little fetishes,” Allison C. Edwards said. “I get in early and I open the mail. I want to see what comes in.”

Doing that daily chore enables him to monitor the volume of deposits in the mail and to keep tabs on complaints. “Is someone upset? If I open the mail, I can see that and react immediately,” he said.

Personalized service has become a hallmark of Gorham Savings, a 122-year-old thrift with $180 million in assets, 45 employees and a single branch opened 11 years ago in nearby Standish.

Edwards became a minor legend in banking circles for mowing the lawn outside the bank and raising the flag in the morning. In today’s turbulent financial climate, he wins praise for keeping Gorham Savings on the path to profit.

At a time when some of Maine’s biggest banks are awash in red ink, some smaller institutions that abstained from the merger mania and stock conversions of the ‘80s are doing well.

Gorham Savings and other conservatively run community institutions stand out as jewels in a bleak landscape littered with huge losses, bad loans and federal takeovers.

Among the wounded are giants such as the Bank of New England and its Maine branch, Maine National, both seized by the federal government last week. Maine Savings Bank and Peoples Heritage Bank, which abandoned their mutual form of ownership to sell stock, are facing rough times too, as is Casco Northern Bank, which was taken over by an out-of-state bank holding company whose own fortunes have slumped.

While other banks grew swiftly through takeovers or conversion to stock companies, Gorham Savings stuck to writing home mortgages and financing businesses within a 25-mile radius of this college town west of Portland.

“There’s always room for the corner store. We have that niche to fill, and we’ve grown as the community has grown,” Edwards said.

The Maine banks that remained healthy while real estate values in the region were falling were those that adhered to prudent lending policies and remained well capitalized, said Donald H. DeMatteis, superintendent of the state bureau of banking.

“They’re the banks that were very fundamental in the services they offered--particularly their loan portfolios,” DeMatteis said. “Not a lot of condo loans or construction loans.”

Gorham Savings still earmarks more than 70% of its deposits for home mortgages. It avoids most commercial real estate ventures and won’t touch construction projects for which the builder doesn’t already have a buyer.

As a result, Gorham’s loan portfolio has been virtually free of problems. Its nonperforming loans totaled less than $100,000 last year.

Moreover, few of its mortgages are sold on the secondary market, and the bank refuses to offer higher interest rates on jumbo certificates of deposit.

“That we consider to be hot money that’s going to move on a fraction of a point change,” Edwards explained.

To Edwards, the bad loans overtaking other banks show what can happen when an institution gets too big too fast.

The only sound reason for becoming a stock company would be to raise needed capital, he said, not to pursue expansion for its own sake, as other banks seem to have done.

“In becoming larger quickly, it was difficult to get those dollars invested in a rapid manner effectively. And that’s when chances were taken, and that’s when errors were made,” he said.

Gorham Savings’ managers did consider hopping on the fast track and moving away from mutual ownership, but always rejected the idea.

“We discussed these things for years, but somehow it didn’t seem appropriate,” Edwards recalled. “So much of this is common sense.”

Gorham Savings never has reported a quarterly loss, although it came close during the interest rate havoc of the early 1980s, when it was forced to pay up to 16% on deposits while its books were loaded with mortgages written at 9%.

“I think we had one month when we were in the red,” Edwards said.

He is resigned to the fact that Gorham Savings will have to pay higher premiums for federal deposit insurance because of mistakes made by less prudent bankers.

“Our industry--we’re part of it --is at fault for doing certain things,” he said. “So we’ve got to get it back on track, get beyond the bad times and go onward and upward.”

The underlying conservatism at Gorham Savings hasn’t obstructed innovation and solid growth.

In 1975, it became the first bank in Maine to offer Individual Retirement Accounts. It also was the first to introduce a rapid-amortization mortgage that offers interest savings to borrowers.

Problems among rival banks and savings and loans over the last couple of years could spur even faster growth.

“A lot of the banks’ bad publicity has caused a lot of deposits to come to us,” Edwards said. “I call it a flight to safety on the perception of the public.”

He doesn’t feel like celebrating, however.

“I feel sad. I really do,” he said. “It’s like some member of your family that’s gotten ill and you know may be dying.”