Investor Relations

Apr 25, 2018

Northeast Bancorp Reports Third Quarter Results and Declares Dividend

LEWISTON, Maine, April 25, 2018 (GLOBE NEWSWIRE) -- Northeast Bancorp (“Northeast” or the “Company”) (NASDAQ:NBN), a Maine-based full-service financial services company and parent of Northeast Bank (the “Bank”), today reported net income of $3.9 million, or $0.43 per diluted common share, for the quarter ended March 31, 2018, compared to net income of $3.5 million, or $0.39 per diluted common share, for the quarter ended March 31, 2017. Net income for the nine months ended March 31, 2018 was $11.8 million, or $1.29 per diluted common share, compared to $8.3 million, or $0.93 per diluted common share, for the nine months ended March 31, 2017.

On April 25, 2018, the Board of Directors declared a cash dividend of $0.01 per share, payable on May 25, 2018 to shareholders of record as of May 11, 2018.

“Our strong growth in fiscal year 2018 continued in the third quarter,” said Richard Wayne, President and Chief Executive Officer. “We achieved earnings of 43 cents per diluted share through solid loan volume, purchased loan transactional income, gains from sale of SBA and residential loans, disciplined expense management, and a reduction to 28.0% in our federal income tax rate. Our Loan Acquisition and Servicing Group produced $105.9 million of loans, including originations of $72.9 million and purchases with a recorded investment of $33.0 million, for net growth in the LASG portfolio of $45.6 million, or 7.7%, during the quarter. This quarterly activity helped drive our return on equity to 12.2%, our return on assets to 1.4%, and our efficiency ratio to 59.8%.”

As of March 31, 2018, total assets were $1.2 billion, an increase of $89.3 million, or 8.3%, from total assets of $1.1 billion as of June 30, 2017. The principal components of the change in the balance sheet follow:

1. The following table highlights the changes in the loan portfolio for the three and nine months ended March 31, 2018:

  Loan Portfolio Changes
  Three Months Ended March 31, 2018
  March 31, 2018
Balance
  December 31, 2017
Balance
 

Change ($)
 

Change (%)
  (Dollars in thousands)
LASG Purchased $ 254,700   $ 244,177   $ 10,523       4.31
%
LASG Originated   381,990     346,874     35,116     10.12
%
SBA   50,583     49,109     1,474     3.00
%
Community Banking   129,156     134,030     (4,874 )   (3.64
%)
Total $ 816,429   $ 774,190   $ 42,239     5.46
%
                                   
  Nine Months Ended March 31, 2018
  March 31, 2018
Balance
  June 30, 2017
Balance
 

Change ($)
 

Change (%)
  (Dollars in thousands)
LASG Purchased $ 254,700   $ 246,388   $ 8,312       3.37 %
LASG Originated   381,990     330,515     51,745       15.57 %
SBA   50,583     52,965     (2,382 )     (4.50 %)
Community Banking   129,156     149,327     (20,171 )     (13.51 %)
Total $ 816,429   $ 779,195   $ 37,234       4.78 %

Loans generated by the Bank's Loan Acquisition and Servicing Group ("LASG") for the quarter ended March 31, 2018 totaled $105.9 million, which consisted of $33.0 million of purchased loans, at an average price of 85.8% of unpaid principal balance, and $72.9 million of originated loans. The Bank's Small Business Administration ("SBA") Division closed $8.9 million and funded $8.8 million of new loans during the quarter ended March 31, 2018. In addition, the Company sold $5.8 million of the guaranteed portion of SBA loans in the secondary market, of which $4.1 million were originated in the current quarter and $1.7 million were originated or purchased in prior quarters. Residential loan production sold in the secondary market totaled $16.4 million for the quarter.

As previously discussed in the Company’s SEC filings, the Company made certain commitments to the Board of Governors of the Federal Reserve System in connection with the merger of FHB Formation LLC with and into the Company in December 2010. The Company’s loan purchase and commercial real estate loan availability under these conditions follow:

Basis for
Regulatory Condition
  Condition   Availability at March 31, 2018
        (Dollars in millions)
Total Loans   Purchased loans may not exceed 40% of total loans   $   122.8
Regulatory Capital   Non-owner occupied commercial real estate loans may not exceed 300% of total capital   $    185.6

An overview of the Bank’s LASG portfolio follows:

  LASG Portfolio
  Three Months Ended March 31,
  2018     2017  
    Purchased (1)   Originated  Secured Loans to 
  Broker-Dealers
 Total LASG   Purchased (1) Originated Secured Loans to Broker-Dealers Total LASG
  (Dollars in thousands)
Loans purchased or originated during the period:                                  
Unpaid principal balance $ 38,493   $ 72,894   $ - $ 111,387     $ 8,609   $ 81,806   $ -   $ 90,415  
Net investment basis   33,021     72,894     -   105,915       7,861     81,806     -     89,667  
                                   
Loan returns during the period:
Yield   11.29 %   6.83 %   -   8.65 %     11.89 %   6.44 %   1.13 %   8.68 %
Total Return (2)   12.16 %   6.83 %   -   9.00 %     11.95 %   6.44 %   1.13 %   8.71 %
                                   


  Nine Months Ended March 31, 
  2018   2017 
    Purchased (1)   Originated  Secured Loans to 
  Broker-Dealers
 Total LASG   Purchased (1) Originated Secured Loans to Broker-Dealers Total LASG 
  (Dollars in thousands)  
Loans purchased or originated during the period:                                  
Unpaid principal balance $ 81,016   $ 157,958   $ - $ 238,974     $ 76,511   $ 169,831   $ -   $ 246,342  
Net investment basis   71,474     157,958     -   229,432       67,747     169,831     -     237,578  
                                   
Loan returns during the period:
Yield   11.53 %   6.56 %   -   8.60 %     11.77 %   6.10 %   0.82 %   8.36 %
Total Return (2)   11.82 %   6.56 %   -   8.72 %     11.80 %   6.10 %   0.82 %   8.37 %
                                   
                                   
Total loans as of period end:
Unpaid principal balance $ 289,852   $ 381,990   $ - $ 671,842     $ 268,651   $ 299,340   $ -   $ 567,991  
Net investment basis   254,700     381,990     -   636,690       237,569     299,340     -     536,909  

(1) Period end purchased loan balances include loans held for sale of $0 and $973 thousand at March 31, 2018 and March 31, 2017, respectively.
(2) The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on asset sales, and other noninterest income recorded during the period divided by the average invested balance, which includes purchased loans held for sale, on an annualized basis.  The total return does not include the effect of purchased loan charge-offs or recoveries during the period. Total return is considered a non-GAAP financial measure. 

  1. Deposits increased by $86.4 million, or 9.7%, from June 30, 2017, attributable primarily to an increase in money market accounts of $115.7 million, or 30.9%, offset by a decrease in time deposits of $25.7 million, or 7.6%.
  2. Shareholders’ equity increased by $11.0 million, or 9.0%, from June 30, 2017, primarily due to earnings of $11.8 million. Earnings were partially offset by stock option exercises which decreased additional paid-in-capital by $1.1 million. Additionally, there was stock based compensation of $635 thousand, an increase in accumulated other comprehensive loss of $128 thousand, and dividends paid on common stock of $266 thousand.

Net income increased by $471 thousand to $3.9 million for the quarter ended March 31, 2018, compared to net income of $3.5 million for the quarter ended March 31, 2017.

1. Net interest and dividend income before provision for loan losses increased by $675 thousand for the quarter ended March 31, 2018, compared to the quarter ended March 31, 2017. The increase is primarily due to higher average balances in the loan portfolio. These increases were partially offset by higher funding costs and higher average deposit balances.

The following table summarizes interest income and related yields recognized on the loan portfolios:

  Interest Income and Yield on Loans    
  Three Months Ended March 31,    
  2018     2017      
  Average   Interest       Average   Interest        
  Balance (1)   Income   Yield   Balance (1)   Income   Yield    
  (Dollars in thousands)    
Community Banking $ 136,824   $   1,743   5.17 %   $ 188,748   $   2,402   5.16 %    
SBA   53,069     1,017   7.77 %     44,538     678   6.17 %    
LASG:                                  
Originated    351,271       5,916   6.83 %      256,778       4,075   6.44 %    
Purchased    241,793       6,732   11.29 %      245,135       7,184   11.89 %    
Secured Loans to Broker-Dealers   -     -   -       27,933     78   1.13 %    
Total LASG    593,064       12,648   8.65 %      529,846       11,337   8.68 %    
Total $  782,957   $   15,408   7.98 %   $  763,132   $   14,417   7.66 %    
   
 Nine Months Ended March 31,
   
  2018     2017      
  Average   Interest       Average   Interest        
  Balance (1)   Income   Yield   Balance (1)   Income   Yield    
  (Dollars in thousands)    
Community Banking $ 142,873   $   5,242   4.89 %   $ 199,566   $   7,150   4.77 %    
SBA   52,014     2,772   7.10 %     36,867     1,771   6.07 %    
LASG:                                  
Originated    340,014       16,746   6.56 %      219,140       10,030   6.10 %    
Purchased    237,183       20,532   11.53 %      236,822       20,925   11.77 %    
Secured Loans to Broker-Dealers   -     -   -       41,409     256   0.82 %    
Total LASG    577,197       37,278   8.60 %      497,371       31,211   8.36 %    
Total $  772,084   $   45,292   7.81 %   $  735,804   $   40,132   7.27 %    
  (1) Includes loans held for sale.  
 

The components of total transactional income on purchased loans are set forth in the table below entitled “Total Return on Purchased Loans.” When compared to the three months ended March 31, 2017, transactional income increased by $312 thousand. The total return on purchased loans for the three months ended March 31, 2018 was 12.16%. The increase over the prior comparable period was primarily due to the gain on loan sales in the three months ended March 31, 2018. When compared to the nine months ended March 31, 2017, transactional income increased by $742 thousand. The total return on purchased loans for the nine months ended March 31, 2018 was 11.82%. This increase over the prior comparable period was primarily due to the gain on loan sales and higher accelerated accretion in the nine months ended March 31, 2018. The following table details the total return on purchased loans:

  Total Return on Purchased Loans
  Three Months Ended March 31,
  2018     2017  
  Income   Return (1)   Income   Return (1)
  (Dollars in thousands)
Regularly scheduled interest and accretion $ 4,630   7.77 %   $ 4,914   8.13 %
Transactional income:                  
Gain on loan sales     516   0.87 %       -   -  
Gain on sale of real estate owned     -   -         36   0.06 %
Other noninterest income     -    -         -    -  
Accelerated accretion and loan fees     2,102   3.52 %       2,270   3.76 %
Total transactional income     2,618   4.39 %       2,306   3.82 %
Total $   7,248   12.16 %   $   7,220   11.95 %


   
  Nine Months Ended March 31,
  2018     2017  
  Income   Return (1)   Income   Return (1)
  (Dollars in thousands)
Regularly scheduled interest and accretion $ 13,709   7.70 %   $ 14,383   8.09 %
Transactional income:                  
Gain on loan sales      516   0.29 %       -   -  
Gain on sale of real estate owned     -   -         55   0.03 %
Other noninterest income     -    -         -    -  
Accelerated accretion and loan fees     6,823   3.83 %       6,542   3.68 %
Total transactional income     7,339   4.12 %       6,597   3.71 %
Total $   21,048   11.82 %   $   20,980   11.80 %

(1) The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on asset sales, gains on real estate owned and other noninterest income recorded during the period divided by the average invested balance, which includes purchased loans held for sale, on an annualized basis.  The total return does not include the effect of purchased loan charge-offs or recoveries in the quarter. Total return is considered a non-GAAP financial measure.

2. Noninterest income decreased by $426 thousand for the quarter ended March 31, 2018, compared to the quarter ended March 31, 2017, principally due to the following:

  • A decrease in gain on sale of SBA loans of $391 thousand, due to a lower volume of SBA loans sold in the quarter; and
  • A decrease in gain on sale of residential loans of $54 thousand, due to lower volume of residential loans sold in the quarter.

3. Noninterest expense increased by $133 thousand for the quarter ended March 31, 2018, compared to the quarter ended March 31, 2017, primarily due to the following:

  • An increase of $312 thousand in other noninterest expense, primarily due to $140 thousand of expense related to the quarterly valuation of SBA servicing rights recorded in the three months ended March 31, 2018, and a $167 thousand recovery from a legacy mortgage insurance premium plan that was recorded in the three months ended March 31, 2017, with no such recovery recorded during the three months ended March 31, 2018;
  • An increase of $164 thousand in data processing fees, primarily due to the increased cost associated with the outsourcing of data processing; and
  • An increase of $126 thousand in salaries and employee benefits, primarily due to an increase in incentive compensation and a decrease in deferred salaries driven by loan originations, offset by a decrease in salaries due to a decrease in headcount.
  • The increases in noninterest expense were partially offset by a decrease in loan expense of $464 thousand, largely driven by lower expense related to loan acquisition, collection, and refinance activity.

4. Income tax expense decreased by $335 thousand for the quarter ended March 31, 2018, compared to the quarter ended March 31, 2017, $397 thousand of which was due to a decrease in the federal corporate income tax rate as a result of the Tax Cuts and Jobs Act signed into law on December 22, 2017, offset by an increase related to a higher pre-tax net income amount.

As of March 31, 2018, nonperforming assets totaled $14.6 million, or 1.25% of total assets, as compared to $19.0 million, or 1.84% of total assets, as of December 31, 2017, and $14.8 million, or 1.37% of total assets, as of June 30, 2017.

As of March 31, 2018, past due loans totaled $11.2 million, or 1.37% of total loans, as compared to $30.0 million, or 3.87% of total loans as of December 31, 2017, and $13.4 million, or 1.72% of total loans as of June 30, 2017.

As of March 31, 2018, the Company’s Tier 1 Leverage Ratio was 12.9%, compared to 12.8% at June 30, 2017, and the Total Capital Ratio was 19.9%, compared to 19.5% at June 30, 2017.

Investor Call Information
Richard Wayne, Chief Executive Officer of Northeast Bancorp, and Jean-Pierre Lapointe, Chief Financial Officer of Northeast Bancorp, will host a conference call to discuss third quarter earnings and business outlook at 10:00 a.m. Eastern Time on Thursday, April 26th. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 8745479. The call will be available via live webcast, which can be viewed by accessing the Company’s website at www.northeastbank.com and clicking on the About Us - Investor Relations section. To listen to the webcast, attendees are encouraged to visit the website at least fifteen minutes early to register, download and install any necessary audio software. Please note there will also be a slide presentation that will accompany the webcast. For those who cannot listen to the live broadcast, a replay will be available online for one year at www.northeastbank.com.

About Northeast Bancorp
Northeast Bancorp (NASDAQ:NBN) is the holding company for Northeast Bank, a full-service bank headquartered in Lewiston, Maine. We offer personal and business banking services to the Maine and New Hampshire markets via ten branches and one loan production office. Our Loan Acquisition and Servicing Group purchases and originates commercial loans on a nationwide basis and our SBA Division supports the needs of growing businesses nationally. ableBanking, a division of Northeast Bank, offers online savings products to consumers nationwide. Information regarding Northeast Bank can be found at www.northeastbank.com.

Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles (“GAAP”), this press release contains certain non-GAAP financial measures, including tangible common shareholders’ equity, tangible book value per share, total return, and efficiency ratio. Northeast’s management believes that the supplemental non-GAAP information is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names.

______________________

Forward-Looking Statements
Statements in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although Northeast believes that these forward-looking statements are based on reasonable estimates and assumptions, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and other factors. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company’s control. The Company’s actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, changes in interest rates and real estate values; competitive pressures from other financial institutions; the effects of weakness in general economic conditions on a national basis or in the local markets in which the Company operates, including changes which adversely affect borrowers’ ability to service and repay our loans; changes in loan defaults and charge-off rates; changes in the value of securities and other assets, adequacy of loan loss reserves, or deposit levels necessitating increased borrowing to fund loans and investments; changing government regulation; operational risks including, but not limited to, cybersecurity, fraud and natural disasters; the risk that the Company may not be successful in the implementation of its business strategy; the risk that intangibles recorded in the Company’s financial statements will become impaired; changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company’s Annual Report on Form 10-K and updated by the Company’s Quarterly Reports on Form 10-Q and other filings submitted to the Securities and Exchange Commission. These statements speak only as of the date of this release and the Company does not undertake any obligation to update or revise any of these forward-looking statements to reflect events or circumstances occurring after the date of this communication or to reflect the occurrence of unanticipated events.

NBN-F

NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share data)
  March 31, 2018   June 30, 2017
Assets          
Cash and due from banks $ 3,621     $ 3,582  
Short-term investments   218,446       159,701  
  Total cash and cash equivalents   222,067       163,283  
           
           
Available-for-sale securities, at fair value   89,741       96,693  
           
Residential real estate loans held for sale   2,686       4,508  
SBA loans held for sale   1,853       191  
  Total loans held for sale   4,539       4,699  
           
           
Loans          
  Commercial real estate   530,565       498,004  
  Commercial and industrial   185,049       175,654  
  Residential real estate   97,297       101,168  
  Consumer   3,518       4,369  
  Total loans   816,429       779,195  
  Less: Allowance for loan losses   4,691       3,665  
  Loans, net   811,738       775,530  
           
           
Premises and equipment, net   6,762       6,937  
Real estate owned and other repossessed collateral, net   947       826  
Federal Home Loan Bank stock, at cost   1,758       1,938  
Intangible assets, net   975       1,300  
Loan servicing rights, net   2,998       2,846  
Bank-owned life insurance   16,510       16,179  
Other assets   8,108       6,643  
  Total assets $ 1,166,143     $ 1,076,874  
           
Liabilities and Shareholders' Equity          
Deposits          
  Demand $ 66,054     $ 69,827  
  Savings and interest checking   108,667       108,417  
  Money market   490,236       374,569  
  Time   311,323       337,037  
  Total deposits   976,280       889,850  
           
Federal Home Loan Bank advances   15,000       20,011  
Subordinated debt   23,873       23,620  
Capital lease obligation   675       873  
Other liabilities   16,528       19,723  
  Total liabilities   1,032,356       954,077  
           
 

Commitments and contingencies
    -         -  
           
           
Shareholders' equity          
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares        
  issued and outstanding at March 31, 2018 and June 30, 2017     -         -  
Voting common stock, $1.00 par value, 25,000,000 shares authorized;          
   8,016,669 and 7,840,460 shares issued and outstanding at        
   March 31, 2018 and June 30, 2017, respectively   8,017       7,841  
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized;          
  908,730 and 991,194 shares issued and outstanding at
  March 31, 2018 and June 30, 2017, respectively
908       991  
Additional paid-in capital   76,926       77,455  
Retained earnings   49,981       38,142  
Accumulated other comprehensive loss   (2,045 )     (1,632 )
  Total shareholders' equity   133,787       122,797  
  Total liabilities and shareholders' equity $ 1,166,143     $ 1,076,874  


NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except share and per share data)
  Three Months Ended March 31,   Nine Months Ended March 31,
  2018   2017   2018   2017
Interest and dividend income:                      
  Interest and fees on loans $ 15,408   $ 14,417   $ 45,292   $ 40,132
  Interest on available-for-sale securities   280     261     813     748
  Other interest and dividend income   795     282     1,818     669
    Total interest and dividend income   16,483     14,960     47,923     41,549
                       
 

Interest expense:
                     
  Deposits   2,696     1,855     7,001     5,407
  Federal Home Loan Bank advances   118     159     438     634
  Subordinated debt   525     475     1,550     1,401
  Obligation under capital lease agreements   10     12     31     39
    Total interest expense   3,349     2,501     9,020     7,481
                       
Net interest and dividend income before provision for loan losses   13,134     12,459     38,903     34,068
Provision for loan losses   364     384     1,156     1,205
Net interest and dividend income after provision for loan losses   12,770     12,075     37,747     32,863
                       
 

Noninterest income:
                     
 Fees for other services to customers   435     516     1,437     1,405
 Gain on sales of residential loans held for sale   227     281     772     1,160
 Gain on sales of SBA loans   560     951     1,921     3,411
 Gain on sales of other loans   516     365     537     365
 Gain on real estate owned, other repossessed collateral
 and premises and equipment, net
    4       20       15       9
 Bank-owned life insurance income   108     113     331     341
 Other noninterest income   32     62     55     115
   Total noninterest income   1,882     2,308     5,068     6,806
                       
 

Noninterest expense:
                     
 Salaries and employee benefits   5,329     5,203     15,756     15,678
 Occupancy and equipment expense   1,159     1,299     3,418     3,781
 Professional fees   423     370     1,291     1,265
 Data processing fees   619     455     1,846     1,286
 Marketing expense   172     89     329     272
  Loan acquisition and collection expense   264     728     998     1,502
 FDIC insurance premiums   77     78     236     224
 Intangible asset amortization   107     107     325     324
 Other noninterest expense   825     513     2,053     2,093
   Total noninterest expense   8,975     8,842     26,252     26,425
                       
Income before income tax expense   5,677     5,541     16,563     13,244
Income tax expense   1,745     2,080     4,741     4,932
Net income $ 3,932   $ 3,461   $ 11,822   $ 8,312
                       
                       
Weighted-average shares outstanding:                      
 Basic   8,927,544     8,830,442     8,897,633     8,923,280
 Diluted   9,143,177     8,893,534     9,133,515     8,963,483


Earnings per common share:
                     
                       
  Basic $ 0.44   $ 0.39   $ 1.33   $ 0.93
  Diluted   0.43     0.39     1.29     0.93
Cash dividends declared per common share $ 0.01   $ 0.01   $ 0.03   $ 0.03


NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
  Three Months Ended March 31,
  2018     2017  
      Interest   Average       Interest   Average
  Average   Income/   Yield/   Average   Income/   Yield/
  Balance   Expense   Rate   Balance   Expense   Rate
Assets:                              
Interest-earning assets:                              
Investment securities $   91,630   $   280   1.24 %   $   96,868   $   261   1.09 %
Loans (1) (2) (3)     782,957       15,408   7.98 %       763,132       14,435   7.67 %
Federal Home Loan Bank stock     1,758       23   5.31 %       1,938       24   5.02 %
Short-term investments (4)     202,283       772   1.55 %       128,082       258   0.82 %
Total interest-earning assets     1,078,628       16,483   6.20 %       990,020       14,978   6.14 %
Cash and due from banks     3,079                 2,875          
Other non-interest earning assets     32,332                 31,606          
Total assets $   1,114,039             $   1,024,501          
                               
Liabilities & Shareholders' Equity:                              
Interest-bearing liabilities:                              
NOW accounts $ 68,716   $   49   0.29 %   $ 69,773   $   49   0.28 %
Money market accounts     428,946       1,437   1.36 %       338,662       807   0.97 %
Savings accounts     38,369       17   0.18 %       36,940       13   0.14 %
Time deposits     321,271       1,193   1.51 %       329,442       986   1.21 %
  Total interest-bearing deposits     857,302       2,696   1.28 %       774,817       1,855   0.97 %
Federal Home Loan Bank advances     15,000       118   3.19 %       20,021       159   3.22 %
Subordinated debt     23,831       525   8.93 %       23,506       475   8.20 %
Capital lease obligations      697       10   5.82 %       961       12   5.06 %
Total interest-bearing liabilities     896,830       3,349   1.51 %       819,305       2,501   1.24 %
                               
Non-interest bearing liabilities:                              
Demand deposits and escrow accounts    78,209                81,901          
Other liabilities     7,714                 6,659          
Total liabilities     982,753                 907,865          
Shareholders' equity     131,286                 116,636          
Total liabilities and shareholders' equity $   1,114,039             $   1,024,501          
                               
  Net interest income (5)       $ 13,134             $ 12,477    
                               
Interest rate spread             4.69 %               4.90 %
Net interest margin (6)             4.94 %               5.11 %
                               
(1)  Interest income and yield are stated on a fully tax-equivalent basis using the statutory tax rate.
(2)  Includes loans held for sale.
(3)  Nonaccrual loans are included in the computation of average, but unpaid interest has not been included for purposes of determining interest income.
(4)  Short term investments include FHLB overnight deposits and other interest-bearing deposits.
(5)  Includes tax exempt interest income of $0 and $18 thousand for the three months ended March 31, 2018 and March 31, 2017, respectively.
(6)  Net interest margin is calculated as net interest income divided by total interest-earning assets.


NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
  Nine Months Ended March 31,
  2018     2017  
      Interest   Average       Interest   Average
  Average   Income/   Yield/   Average   Income/   Yield/
  Balance   Expense   Rate   Balance   Expense   Rate
Assets:                              
Interest-earning assets:                              
Investment securities $ 93,816   $   813   1.15 %   $ 94,824   $   748   1.05 %
Loans (1) (2) (3)     772,084       45,302   7.82 %       735,804       40,185   7.28 %
Federal Home Loan Bank stock     1,852       65   4.68 %       2,250       70   4.14 %
Short-term investments (4)     169,073       1,753   1.38 %       132,280       599   0.60 %
Total interest-earning assets     1,036,825       47,933   6.16 %       965,158       41,602   5.74 %
Cash and due from banks     2,981                 2,860          
Other non-interest earning assets     31,924                 32,554          
Total assets $   1,071,730             $   1,000,572          
                               
Liabilities & Shareholders' Equity:                              
Interest-bearing liabilities:                              
NOW accounts $ 69,532   $ 152   0.29 %   $ 70,814   $ 152   0.29 %
Money market accounts     394,364       3,564   1.20 %       314,259       2,242   0.95 %
Savings accounts     37,418       42   0.15 %       35,964       37   0.14 %
Time deposits     312,268       3,243   1.38 %       327,664       2,976   1.21 %
  Total interest-bearing deposits     813,582       7,001   1.15 %       748,701       5,407   0.96 %
Federal Home Loan Bank advances     17,594       438   3.32 %       25,768       634   3.28 %
Subordinated debt     23,745       1,550   8.70 %       23,431       1,401   7.97 %
Capital lease obligations     764       31   5.41 %       1,024       39   5.07 %
Total interest-bearing liabilities     855,685       9,020   1.40 %       798,924       7,481   1.25 %
                               
Non-interest bearing liabilities:                              
Demand deposits and escrow accounts   80,896               79,352          
Other liabilities     7,080                 7,738          
Total liabilities     943,661                 886,014          
Shareholders' equity     128,069                 114,558          
Total liabilities and shareholders' equity $   1,071,730             $   1,000,572          
                               
  Net interest income (5)       $   38,913             $    34,121    
                               
Interest rate spread             4.76 %               4.49 %
Net interest margin (6)             5.00 %               4.71 %
                               
(1)  Interest income and yield are stated on a fully tax-equivalent basis using the statutory tax rate.
(2)  Includes loans held for sale.
(3)  Nonaccrual loans are included in the computation of average, but unpaid interest has not been included for purposes of determining interest income.
(4)  Short term investments include FHLB overnight deposits and other interest-bearing deposits.
(5)  Includes tax exempt interest income of $10 thousand and $53 thousand for the nine months ended March 31, 2018 and March 31, 2017, respectively.
(6)  Net interest margin is calculated as net interest income divided by total interest-earning assets.


NORTHEAST BANCORP AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL HIGHLIGHTS AND OTHER DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
  Three Months Ended:
  March 31, 2018   December 31, 2017   September 30, 2017   June 30, 2017   March 31, 2017
 

Net interest income
$   13,134     $    12,457     $    13,311     $    13,757     $   12,459  
Provision for loan losses   364       437       354       389         384  
Noninterest income   1,882       1,228       1,958       2,890         2,308  
Noninterest expense   8,975       8,563       8,714       9,364         8,842  
Net income   3,932       3,304       4,586       4,027         3,461  
                   
Weighted-average common shares outstanding:                  
 Basic   8,927,544       8,924,495       8,841,511       8,823,679       8,830,442  
 Diluted   9,143,177       9,168,084       9,089,936       8,979,471       8,893,534  
Earnings per common share:                  
 Basic $    0.44     $    0.37     $    0.52     $    0.46     $   0.39  
 Diluted     0.43         0.36         0.50         0.45         0.39  
Dividends per common share     0.01         0.01         0.01         0.01         0.01  
                   
Return on average assets   1.43 %     1.26 %     1.71 %     1.57 %     1.37 %
Return on average equity   12.15 %     10.20 %     14.61 %     13.34 %     12.03 %
Net interest rate spread (1)   4.69 %     4.68 %     4.89 %     5.32 %     4.90 %
Net interest margin (2)   4.94 %     4.93 %     5.13 %     5.55 %     5.11 %
Efficiency ratio (non-GAAP) (3)   59.77 %     62.57 %     57.07 %     56.25 %     59.88 %
Noninterest expense to average total assets   3.27 %     3.27 %     3.25 %     3.64 %     3.50 %
Average interest-earning assets to average
interest-bearing liabilities
  120.27 %     122.21 %     121.09 %     121.13 %     120.84 %
                   
  As of:
  March 31, 2018   December 31, 2017   September 30, 2017   June 30, 2017   March 31, 2017
Nonperforming loans:                  
Originated portfolio:                  
Residential real estate $    3,116     $   3,783     $    3,667     $    3,337     $   3,265  
Commercial real estate   1,408       2,537       2,409       413         420  
Home equity   255       107       58       58         48  
Commercial and industrial   636       2,555       2,629       2,600         2,636  
Consumer   136       147       131       103         65  
Total originated portfolio   5,551       9,129       8,894       6,511         6,434  
Total purchased portfolio   8,063       8,962       7,758       7,452         8,388  
Total nonperforming loans   13,614       18,091       16,652       13,963         14,822  
Real estate owned and other repossessed collateral, net   947       910       2,040       826         3,761  
Total nonperforming assets $    14,561     $    19,001     $    18,692     $    14,789     $   18,583  
                   
Past due loans to total loans   1.37 %     3.87 %     1.60 %     1.72 %     3.25 %
Nonperforming loans to total loans   1.67 %     2.34 %     2.19 %     1.79 %     2.00 %
Nonperforming assets to total assets   1.25 %     1.84 %     1.78 %     1.37 %     1.81 %
Allowance for loan losses to total loans   0.57 %     0.56 %     0.53 %     0.47 %     0.46 %
Allowance for loan losses to nonperforming loans   34.46 %     24.07 %     24.23 %     26.25 %     22.77 %
                   
Commercial real estate loans to risk-based capital (4)   186.07 %     187.92 %     166.15 %     181.23 %     181.83 %
Net loans to core deposits (5)   83.65 %     91.46 %     88.68 %     87.68 %     87.46 %
Purchased loans to total loans, including held for sale   31.02 %     31.28 %     30.11 %     31.43 %     31.87 %
Equity to total assets   11.47 %     12.57 %     12.07 %     11.40 %     11.55 %
Common equity tier 1 capital ratio   16.48 %     16.74 %     16.50 %     16.00 %     15.80 %
Total capital ratio   19.92 %     20.30 %     20.04 %     19.48 %     19.30 %
Tier 1 leverage capital ratio   12.88 %     13.41 %     12.77 %     12.81 %     12.46 %
                   
Total shareholders' equity $    133,787     $   130,003     $    126,712     $    122,797     $   118,675  
Less: Preferred stock     -         -         -         -         -  
Common shareholders' equity     133,787         130,003         126,712         122,797         118,675  
Less: Intangible assets (6)     (3,973 )       (4,087 )       (4,146 )       (4,146 )       (3,898 )
Tangible common shareholders' equity (non-GAAP) $    129,814     $    125,916     $    122,566     $    118,651     $   114,777  
                   
Common shares outstanding   8,925,399       8,939,273          8,890,353         8,831,654         8,815,279  
Book value per common share $    14.99     $    14.54     $    14.25     $    13.90     $    13.46  
Tangible book value per share (non-GAAP) (7)     14.54         14.09         13.79         13.43         13.02  
                   
(1) The net interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.
(2) The net interest margin represents net interest income as a percent of average interest-earning assets for the period.
(3) The efficiency ratio represents noninterest expense divided by the sum of net interest income (before the loan loss provision) plus noninterest income.
(4) For purposes of calculating this ratio, commercial real estate includes all non-owner occupied commercial real estate loans defined as such by regulatory guidance, including all land development and construction loans.
(5) Core deposits include all non-maturity deposits and maturity deposits less than $250 thousand. Loans include loans held for sale.
(6) Includes the core deposit intangible asset and loan servicing rights asset.
(7) Tangible book value per share represents total shareholders' equity less the sum of preferred stock and intangible assets divided by common shares outstanding.
 

For More Information:

Jean-Pierre Lapointe, Chief Financial Officer
Northeast Bank, 500 Canal Street, Lewiston, ME 04240
207.786.3245 ext. 3220
www.northeastbank.com 

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Source: Northeast Bancorp