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NEW INVESTORS

Northeast Bank set for $16 million capital infusion

Bank plans expanded operations

By Matthew Stone mstone@centralmaine.com
Staff Writer

A Lewiston-based bank with offices in Augusta, Livermore Falls, Anson and Jackman is moving ahead with a deal that will attract $16 million in new capital and a set of new, deep-pocketed shareholders.

Northeast Bank's existing shareholders have signed off on plans to sell $16 million in new shares and $13 million in existing ones to a newly formed Delaware corporation that boasts investments from a number of high-profile equity firms.

As a result, Northeast Bank will get a new chief executive officer. CEO Jim Delamater will now lead Northeast's community banking division.

The transaction is still subject to approval from the Federal Reserve, which regulates Northeast Bancorp, the bank's holding company. Nevertheless, the shareholder approval marks a key step in advancing the deal.

Current shareholders can opt to keep their stock in the bank or cash out at about $14 per share.

"It's not like there's a company buying Northeast Bank," Delamater said. "We're bringing in new capital, new lines of businesses, new teammates to join our existing team. And that's a good thing."

The three officers of FHB Formations, the company that formed to execute the $29 million transaction, will join Northeast Bank, according to Delamater. And once the deal is complete, the bank's holding company will absorb FHB Formations.

Delamater said that should all happen by the end of the year.

That's when FHB Formations CEO Richard Wayne will become Northeast Bank's CEO. Claire Bean and Heather Campion, FHB's two other officers, will also join the bank. Bean will be the chief operating officer and chief financial officer; Campion will become chief administrative officer.

"It's always about people," Delamater said. "Good people make you money."

Wayne was a co-founder of Boston's Capital Crossing Bank and its president and co-CEO until its sale in February 2007.

Bean was executive vice president and CFO of Benjamin Franklin Bancorp.

Campion was an executive at Citizens Financial Group for nine years. She was also on the Carter administration's speechwriting staff and served on Walter Mondale's and Michael Dukakis' presidential campaigns in the 1980s, according to a prospectus distributed to Northeast shareholders.

The $29 million transaction includes investments from at least three New York private equity firms -- Arlon Capital Partners, BlackRock and East Rock Capital -- and one from Boston -- Highfields Capital Management -- that manage billions of dollars in assets across the globe.

"This is very exciting for us to have very experienced, high-quality professional investors say, 'We like your plan,'" Delamater said. "It's quite a compliment to our company."

With the $16 million capital infusion, Delamater said, Northeast plans to branch out into the loan acquisition business, in which Northeast will buy discounted loans from across the country and service them. That added business might lead to some new hires, according to Delamater.

"We had always wanted to be in that line of business," he said, "but we didn't have the talent available to us to do that here in Maine."

The bank -- which has $610 million in assets, according to the most recent regulatory filings -- already offers insurance and investment services.

While the transaction wasn't compelled by any regulatory order to raise capital, Northeast has a $4 million loan outstanding received through the Troubled Asset Relief Program -- the federal bank bailout program rolled out under the Bush administration during the financial crisis that began in 2008 with the implosion of Lehman Brothers.

Delamater said the $16 million in added capital will allow Northeast to repay that money, but bank officers haven't determined a timeline for repaying it.

"We'll have to decide once we close on the transaction when we do that," he said.

Matthew Stone -- 623-3811, ext. 435

mstone@centralmaine.com