A tiny merger in Maine could be a key test case for a novel type of bank deal that risk-averse buyers have been struggling to pull off.

Bar Harbor Bankshares' agreement to pay $1.2 million for most of the assets and liabilities of the three-branch Border Trust Co. of Augusta is at least the fifth so-called good bank/bad bank deal announced in the last two years.

Bankers eager to buy in a dismally slow M&A market have had mixed luck with the Depression-era concept of buying just the healthy parts of a troubled bank. Only one of those deals has closed, two collapsed and a fourth is on track to close after being stalled by a court challenge.

Bar Harbor (BHB) is confident its deal — the smallest of the bunch — will close in the third quarter, as regulators warm to such deals, says Gerald Shencavitz, the $1.2 billion-asset company's chief financial officer and treasurer. "They're just coming into vogue," he says. "Since they are becoming more and more common we felt there wouldn't be an issue so we gave it a shot."

There is big interest in Bar Harbor's deal because it will show whether complicated carve-outs work for tiny deals in places where mergers have been exceptionally slow. If they can happen in Maine — arguably the nation's deadest consolidation market — that could imply a higher likelihood of success in bigger markets. It could also show growing acceptance for creatively structured deals.

Carveouts can be hit-or-miss because dicing up a bank often raises disputes between stakeholders with different agendas. They also have the potential to spook regulators.

The highest profile good bank/bad bank deal so far has been BB&T's November agreement to pay about $300 million for most of BankAtlantic Bancorp's (BBX) thrift. That transaction had to be renegotiated in March after BankAtlantic's bondholders successfully blocked the initial deal in court on the grounds that it violated their rights.

BB&T (BBT) addressed the issue, agreeing to take on the bondholders' $285 million in liabilities. The deal is on track to close in the third quarter after receiving approval from the Office of the Comptroller of the Currency and the North Carolina Office of the Commissioner of Banks.

Skittish regulators were to blame for at least two other deals that unraveled.

First Guaranty Bank & Trust of Jacksonville's agreement to sell its trust unit and most of its branches to CertusBank in Greenville, S.C. fell apart in January when regulators closed First Guaranty, selling the Florida company's remnants to CenterState Banks (CSFL) in Davenport. Fla.

In February, the Federal Deposit Insurance Corp. barred Prosperity Bank of St. Augustine, Fla., from selling a majority of its bank to private equity investors Patriot Financial Partners and Castle Creek Capital.

The only carveout to succeed so far involved Sterling Financial (STSA) in Spokane, Wash. In March, the company paid up to $25 million for the branches and trust operations of First Independent Bank in Vancouver, Wash.

Shencavitz says he is optimistic Bar Harbor's deal will pass muster with regulators. The company is profitable and well-capitalized, so it has the strength to absorb most of Border Trust's $46.9 million in assets and $41.1 million in deposits, he says.

The company had informal meetings with regulators before signing the transaction. "The last thing any bank wants to do is go out with a big announcement only to have the application crushed," Shencavitz says.

"Following the meeting we signed the purchase and assumption agreement and went public," he adds. "What do you derive from that? We feel confident."

The last whole bank transaction in Maine took place in early 2010. There have been no post-crisis failed bank deals there either.

Maine's M&A market has been unusually slow because the state has a high concentration of small, but healthy, banks. They do not have to sell because they are in decent shape, and aspiring buyers are wary of overpaying.

In another sign that Maine's M&A market may be gelling: Bank of America (BAC) on April 24 agreed to sell 15 branches in Bangor and Augusta to Camden National (CAC) in Camden.

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