LEWISTON – A growth strategy that Northeast Bancorp adopted years ago is paying off, as the Bethel-born bank continues to expand its insurance division.

A week ago Northeast Bank Insurance Group, the bank’s insurance subsidiary, purchased Southern Maine Insurance Agency – its third acquisition in four months. The purchase of the Scarborough company now gives Northeast 11 insurance offices throughout the state and its first in southern Maine.

“We intend on doubling the size of the insurance agency over where we are now in one year and tripling it in the next three years,” said Craig Sargent, president of Northeast Bank Insurance Group. He said he expects there will be three or four more acquisitions by the end of calendar year.

The intended growth is the fruition of a diversification strategy adopted more than eight years ago by bank President Jim Delamater and its board. Driven by a desire to offer banking customers one-stop shopping for their financial needs, Northeast began adding insurance and investment services to its core banking services.

After some lean years, the insurance division is now generating profits – a welcome hedge to the softening profits from conventional banking services.

“Our strategy is coinciding nicely with the reality of banking,” Delamater said.

A flat economy has put the squeeze on banks. Historically, banks make their profits by investing deposits at interest rates better than they pay the depositor. For years, they enjoyed record-breaking profits when there was a sizable spread between what banks paid in interest to depositors and what they earned in interest from loans.

But that’s changed. An inverted yield curve – a complex relationship between long- and short-term interest rates in the U.S. economy – has ended the windfall. Banks that were enjoying a 5 percent spread in net income margins are now grappling with a 2.75 percent margin.

“And I expect we’ll see that drop to 2.3 or 2.4 percent over the next five years or so,” Delamater said.

Shrinking interest income is going head to head with increasing costs in regulations, compliance and operations. The ensuing belt-tightening has caused some Maine banks to scale back operations or postpone expansions.

But not Northeast.

In its last quarterly earnings report, the bank reported 30 percent of its revenues from non-interest income sources – its insurance and investment divisions. Delamater said the goal is 50 percent.

Gross profits from insurance can approach 40 percent, if a company has enough volume. Delamater said the acquisition of the Southern Maine Insurance Agency brings the total number of carriers available to Northeast customers to 33 – a healthy boost from the eight carriers it had just a few years ago. With about $20 million in written premiums, it also positions Northeast among the top 10 insurance providers in the state.

And, in Delamater’s view, it brings something even more valuable: more customer options.

“We can do a much better job for our customers,” said Delamater of the expanded insurance products.

Sargent said that’s really the name of the game. His own insurance company, Sargent Insurance, was one of Northeast’s earlier acquisitions.

He saw his customers gain more clout with a bigger network of agencies, while his staff got the benefit of more technology and training than his small agency could provide on its own. Plus no one had to sacrifice that small-town personal customer service. Sargent boasts that anyone calling Northeast insurance offices speaks with a live, licensed agent immediately.

“People still love that Maine rural feeling,” he said. “They want to know who they’re dealing with.”