Having made a string of insurance agency acquisitions, Northeast Bancorp a year ago was projecting 10% annual growth in its insurance business.

But the economy hasn't cooperated. Although the Lewiston, Maine, bank's insurance unit is eking out growth of 1% to 2%, the poor market means its plans for fast growth will have to wait, said Jim Delamater, the bank's president and chief executive.

"We're still growing net positive despite the soft market and the economy," he said. "If it changes, and we see our normal market, we'll be very excited."

Agencies are encountering prospects and clients that have been battered by the poor economy, noted Michael White, president of Michael White Associates in Radnor, Pa.

Indeed, Northeast is seeing clients cancel policies and risk being uninsured because they need to save money, Delamater said.

Agencies for years have been suffering from a soft market, and the poor economy has worsened matters. That softness of demand seems to have no end in sight "apart from the occasional, temporary slowing of the decreases in premiums for a line or two of business," White said.

Between 2007 and 2009, Northeast bought 10 insurance agencies. From 156th place at the end of 2005, the bank now ranks 70th among banks with at least $500 million of assets that report insurance brokerage income, according to the Michael White-Prudential Bank Insurance Fee Income Report.

Northeast's aim was to create a business with $35 million to $45 million of annual premiums, which would allow it to do business with a wide range of insurance carriers, Delamater said. Northeast did about $35 million in premiums last year.

Northeast mostly sells property and casualty insurance, but has discussed plans to expand its small foothold in health insurance. The bank is doing a better job of offering this to its existing small business clients, but overall, the weak market has limited the progress of that business, Delamater said.

On a relative basis, Northeast continues to look impressive. Its $5.9 million of insurance brokerage income in 2009 ranks it fourth among bank holding companies that have between $500 million and $1 billion of assets, according to the White report.

Its insurance brokerage fee revenue accounts for 20.8% of the bank's net operating revenue, according to the report. That ranks Northeast third among 264 insurance brokerage-earning bank holding companies with assets of $500 million to $1 billion.

Another key metric for gauging banks' success in insurance sales is the insurance brokerage income as a percent of noninterest income, according to White.

Northeast's ratio is 53%, meaning that more than half of its nonlending income comes from insurance brokerage, according to the White report.

The $610 million-asset bank ranks eighth nationally among all 603 bank holding companies that report insurance brokerage income and that have assets of greater than $500 million. In fact, Northeast has moved up three places in that statistical category, from 11th in 2008.

Finally, compound annual growth rate for the bank's insurance brokerage income over the three years that ended Dec. 31, 2009, was 44.3%.

As the president of a bank, Delamater said, his insurance learning curve has been steep. "Every day in this business has been a good learning experience for me," he said.

The biggest adjustment has been understanding and accepting that bank and insurance products are delivered in very different ways, he said. Referrals from bankers to the insurance business are going smoothly now, but it took a lot of education and personal meetings with top bank and insurance executives to get all the bankers on board, Delamater said.

"We had our agency and senior management of the company go door to door and talk with each office and employee to explain what we were doing," Delamater said. "We had tried doing it other ways, and it just didn't work."

Among those meeting with staff at all 12 Northeast branches was Delamater himself.

Northeast has taken advantage of the slow market to unify its sales and service model across the insurance business.

Because technology has been standardized across the acquired agencies, each can do things like accept payments for others and service customers hundreds of miles away. And the bank's call center can refer customers to any available agent.

The raft of improvements "sets the stage for growth without more hiring," Delamater said.

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