Northeast Bancorp
NORTHEAST BANCORP /ME/ (Form: 8-K/A, Received: 11/06/2017 17:12:09)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K /A

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):

October   24 , 2017

   

Commission File No. 1-14588

 

NORTHEAST BANCORP

(Exact name of registrant as specified in its charter)

 

Maine

01-0425066

(State or other jurisdiction of incorporation)

(IRS Employer Identification Number)

   

500 Canal Street
Lewiston, Maine

04240

(Address of principal executive offices)

(Zip Code)

 

Registrant ’s telephone number, including area code: (207) 786-3245

 

Former name or former address, if changed since last Report: N/A

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 | | Written communications pursuant to Rule 425 under the Securities Act

 | | Soliciting material pursuant to Rule 14a-12 under the Exchange Act

 | | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

 | | Pre-commencement to communications pursuant to Rule 13e-4(c) under the Exchange Act

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 

 

Explanatory Note

 

On October 24, 2017, Northeast Bancorp, a Maine cor poration (the "Company"), filed a Form 8-K reporting its earnings for the first quarter of fiscal 2018 (the “Original Form 8-K”). The full text of the press release announcing the first quarter earnings was included as an Exhibit 99.1 to the Original Form 8-K. Subsequent to filing the Original Form 8-K the Company identified that the reported earnings did not reflect the Company’s adoption of ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”) in the first quarter of fiscal 2018. The purpose of this Form 8-K/A is to reflect the adoption of ASU 2016-09 in the Company’s earnings for first quarter of fiscal 2018.

 

Upon adoption of ASU 2016-09, the Company must recognize all excess tax benefits and deficiencies relating to the vesting or exercising of share-based payments as income tax benefit or expense in the income statement in the reporting period in which they occur. Previously, such excess tax benefits would have been recognized as additional paid-in capital. Additionally, ASU 2016-09 may create significant volatility in the Company’s effective tax rate as the excess tax benefit treatment will vary from quarter to quarter as a function of the volume of share-based payments vested or exercised and the market value of the Company’s stock at the time of vest in comparison to the compensation cost recognized in the financial statements. The standard provides that the tax effects of exercised or vested awards will be treated as a discrete item in the reporting period in which they occur. Thus, the tax effect of excess benefits and deficiencies on a company’s tax rate will not be part of the overall projected effective tax rate. For the three months ended September 30, 2017, the Company recognized an income tax benefit of $818 thousand as a result of the adoption of ASU 2016-09, increasing net income to $4.6 million for the quarter.

 

In addition to th e excess tax benefit treatment, the assumed proceeds from applying the treasury stock method when computing earnings per share is amended to exclude the amount of excess tax benefits that would have been previously recognized as additional paid-in capital, which increased diluted weighted average common shares outstanding by 40,966 shares to 9,089,936 shares.

 

For the three months ended September 30, 2017, the adoption of ASU 2016-09 reduced the Company's income tax expense by $818 thousand , decreased the Company’s accrued federal and state taxes payable (included in other liabilities on the consolidated balance sheets) by $818 thousand and increased basic and diluted earnings per share to $0.52 and $0.50, respectively.

 

 

 

 

The following table summarizes the cha nges in the earnings reported in the Original Form 8-K:

 

    Adoption of ASU 2016-09     
   

Amended

   

Previously Filed

 
                 
   

(Dollars in thousands, except share and per share data)

 
                 

Other liabilities

  $ 15,685     $ 16,503  

Total liabilities

    922,925       923,743  

Retained earnings

    42,641       41,823  

Total shareholders ’ equity

    126,712       125,894  
                 

Income tax expense

  $ 1,615     $ 2,433  

Net income

    4,586       3,768  
                 

Diluted weighted average shares outstanding

    9,089,936       9,048,970  

Basic earnings per share

  $ 0.52     $ 0.43  

Diluted earnings per share

    0.50       0.42  
                 

Return on average assets

    1.71 %     1.40 %

Return on average equity

    14.61 %     12.01 %
                 

Commercial real estat e loans to risk-based capital

    166.15 %     167.03 %

Equity to total assets

    12.07 %     11.99 %

Common equity tier 1 capital ratio

    16.50 %     16.40 %

Total capital ratio

    20.04 %     19.93 %

Tier 1 leverage capital ratio

    12.77 %     12.70 %
                 

Book value per common share

  $ 14.25     $ 14.16  

Tangible bo ok value per share (non-GAAP)

    13.79       13.69  
                 

Availability of non-owner occupied commercial real estate loans

  $ 207,078     $ 204,625  

 

 

 

 

Item 2.02      Results of Operations and Financial Condition

 

On November 6, 2017, the Company issued a press release announcing its revised earnings for the first quarter of fiscal 2018. The full text of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.

 

The information contained herein, including the exhibit attached hereto, is furnished pursuant to Item 2.02 of this Form 8-K and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, the information in this report (including the exhibits hereto) are not to be incorporated by reference into any of the Company's filings with the Securities and Exchange Commission, whether filed prior to or after the furnishing of these certificates, regardless of any general or specific incorporation language in such filing.

 

Item 7.01     Regulation FD Disclosure

 

The disclosure made under Item 2.02 above is incorporated herein by reference in its entirety. Additionall y on November 6, 2017 the Company posted to its website a revised presentation for the investor call held on October 25, 2017. The revised presentation is attached hereto as Exhibit 99.2 and incorporated herein by reference.

 

The information contained here in, including the exhibit attached hereto, is furnished pursuant to Item 7.01 of this Form 8-K and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, the information in this report (including the exhibits hereto) are not to be incorporated by reference into any of the Company's filings with the Securities and Exchange Commission, whether filed prior to or after the furnishing of these certificates, regardless of any general or specific incorporation language in such filing.

 

Item 9.01      Financial Statements and Exhibits

 

(c)           Exhibits  

 

Exhibit No

 

Description

     
99.1   Press Release dated November 6, 2017
     
99.2   Revised Fiscal 2018 Q1 Investor Call Presentation dated November 6, 2017

      

 

 

   

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunder duly authorized.

 

     

NORTHEAST BANCORP

 
   

By: /s/ Brian Pinheiro                                        

Name:

Brian Pinheiro

Title:

Interim Chief Financial Officer and Chief Risk Officer

 

Date: November 6, 2017

 

 

 

  

EXHIBIT INDEX

 

 

Exhibit No

 

Description
     
99.1   Press Release dated November 6, 2017
     
99.2   Revised Fiscal 2018 Q1 Investor Call Presentation dated November 6, 2017

      

Exhibit 99.1

 

FOR IMMEDIATE RELEASE  

 

 

For More Information:

 

Brian Pinheiro , Interim Chief Financial Officer and Chief Risk Officer

Northeast Bank, 500 Canal Street, Lewiston, ME 04240

207.786.3245 ext. 3223

www.northeastbank.com

 

 

 

**The press release dated October 24, 2017 has been amended to reflect the adoption of ASU 2016-09, Compensation —Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). For the quarter ended September 30, 2017, the adoption of ASU 2016-09 resulted in the recognition of an income tax benefit of $818 thousand, which increased net income to $4.6 million, and increased earnings per diluted common share by $0.08 to $0.50 per diluted common share. See “Explanatory Note” in Form 8-K/A filed on November 6, 2017 for further detail.

 

Northeast Bancorp Reports Revised First Quarter Results and Declares Dividend

 

Lewiston, ME (November 6, 2017) ‒ 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 revised net income of $4.6 million, or $0.50 per diluted common share, for the quarter ended September 30, 2017, compared to net income of $1.8 million, or $0.19 per diluted common share, for the quarter ended September 30, 2016.

 

On October 24, 2017, the Board of Directors declared a cash dividend of $0.01 per share, payable on November 20, 2017 to shareholders of record as of November 6, 2017.

 

We began our fiscal year with a solid quarter,” said Richard Wayne, President and Chief Executive Officer. “Our earnings of $0.50 per diluted common share, compared to $0.19 per diluted share in the quarter ended September 30, 2016, were positively affected by transactional income from loan payoffs in the purchased portfolio and gains from the sale of SBA and residential loans. This helped us achieve a return on equity of 14.6%, compared to 6.1% in the quarter ended September 30, 2016, as well as a return on assets of 1.7% and an efficiency ratio of 57.1%.”

 

As of September 30, 2017, total assets were $1.0 billion, a decrease of $27.2 million, or 2.5%, from total assets of $1.1 billion as of June 30, 2017. The principal components of the change in the balance sheet follow:

 

 

1.

$74.4 million of loans were originated or acquired during the quarter ended September 30, 2017. Loans generated by the Bank's Loan Acquisition and Servicing Group ("LASG") totaled $44.5 million, which consisted of $3.7 million of purchased loans, at an average price of 84.6% of unpaid principal balance, and $40.8 million of originated loans. The Bank's Small Business Administration and United States Department of Agriculture ("SBA") Division closed $7.8 million of new loans during the quarter, of which $5.9 million were funded. In addition, the Company sold $9.1 million of the guaranteed portion of SBA loans in the secondary market, of which $3.1 million were originated in the current quarter and $6.0 million were originated or purchased in prior quarters. Residential loan production sold in the secondary market totaled $19.2 million for the quarter.

 

 

 

    

In totality, t he loan portfolio – excluding loans held for sale – has decreased by $19.6 million, or 2.5%, compared to June 30, 2017, primarily due to payoffs, pay-downs and sales in the portfolio, partially offset by originations.

 

The following table highlights the changes in the loan portfolio for the three months ended September 30, 2017:

 

   

Three Months E nded September 30, 2017

 
         

Loan Portfolio Changes:

 

(Dollars in thousands)

 

LASG originations and acquisitions

  $ 44,430  

SBA and USDA funded originations

    5,913  

Community Banking Division originations

    22,147  

SBA loan sales

    (9,135 )

Residential loan sales

    (19,153 )

Transfer to real estate owned

    (1,214 )

Payoffs, pay-downs and amortization, net

    (62,599 )

Net change

  $ (19,611 )

 

 

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 September 30, 2017

 
       

(Dollars in millions)

 

Total Loans

 

Purchased loans may not exceed 40% of total loans

  $ 126.5  

Regulatory Capital

 

Non-owner occupied c ommercial real estate loans may not exceed 300% of total capital

  $ 207.1  

 

An overview of the Bank’s LASG portfolio follows:

 

    LASG Portfolio  
    Three Months Ended September 30,  
    2017     2016  
    Purchased     Originated     Secured Loans to Broker-Dealers     Total LASG     Purchased     Originated     Secured Loans to Broker- Dealers     Total LASG  
    (Dollars in thousands)  

Loans purchased or originated during the period:

                                                               

Unpaid principal balance

  $ 4,318     $ 40,779     $ -     $ 45,097     $ 16,790     $ 42,002     $ -     $ 58,792  

Net investment basis

    3,651       40,779       -       44,430       13,853       42,002       -       55,855  
                                                                 

Loan returns during the period:

                                                               

Yield (1)

    12.28 %     6.35 %     -       8.85 %     10.40 %     5.88 %     0.50 %     7.58 %

Total Return (1 ) (2)

    12.28 %     6.35 %     -       8.85 %     10.43 %     5.88 %     0.50 %     7.59 %
                                                                 

Total loans as of period end:

                                                               

Unpaid principal balance

  $ 262,144     $ 340,756     $ -     $ 602,900     $ 269,462     $ 206,748     $ 48,000     $ 524,210  

Net investment basis

    231,232       340,756       -       571,988       237,103       206,748       48,000       491,851  

 

(1 ) Purchased loan balances include loans held for sale of $1.2 million and $789 thousand as of September 30, 2017 and 2016, 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 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.

 

 

 

   

 

2.

Deposits decreased by $27.1 million, or 3.0%, from June 30, 2017, attributable primarily to a decrease in time deposits of $35.7 million, or 10.6%, partially offset by growth in non-maturity (demand, savings and interest checking, and money market) accounts, which increased by $8.6 million, or 1.6%.

 

 

3.

Shareholders’ equity increased by $3.9 million from June 30, 2017, primarily due to earnings of $4.6 million, partially offset by stock option exercises which decreased additional paid-in-capital by $917 thousand. Additionally, there was stock-based compensation of $220 thousand, a decrease in accumulated other comprehensive loss of $104 thousand and $87 thousand in dividends paid on common stock.

 

Net income increased by $2.8 million to $4.6 million for the quarter ended September 30, 2017, compared to $1.8 million for the quarter ended September 30, 2016.

 

 

1.

Net interest and dividend income before provision for loan losses increased by $3.5 million for the quarter ended September 30, 2017, compared to the quarter ended September 30, 2016. The increase is primarily due to higher transactional income on purchased loans and higher average balances in the total loan portfolio. This increase was partially offset by higher rates and higher average deposit balances.

 

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

 

   

Interest Income and Yield on Loans

 
   

Three Months Ended September 30,

 
   

2017

   

2016

 
   

Average

   

Interest

           

Average

   

Interest

         
   

Balance (1)

   

Income (2)

   

Yield

   

Balance (1)

   

Income (2)

   

Yield

 
   

(Dollars in thousands)

 

Community Banking Division

  $ 150,178     $ 1,746       4.61 %   $ 205,765     $ 2,401       4.63 %

SBA

    53,527       941       6.97 %     31,148       519       6.61 %

LASG:

                                               

Originated

    328,775       5,265       6.35 %     185,109       2,742       5.88 %

Purchased

    240,136       7,431       12.28 %     231,999       6,081       10.40 %

Secured Loans to Broker-Dealers

    -       -       0.00 %     48,000       60       0.50 %

Total LASG

    568,911       12,696       8.85 %     465,108       8,883       7.58 %

Total

  $ 772,616     $ 15,383       7.90 %   $ 702,021     $ 11,803       6.67 %

 

(1)        Includes loans held for sale.

(2)       SBA interest income includes SBA fees of $48 thousand and $50 thousand for the quarters ended September 30, 2017 and 2016, respectively.

 

 

The components of transactional income are set forth in the table below entitled “Total Return on Purchased Loans.” When compared to the three months ended September 30, 2016, transactional income increased by $1.5 million. The total return on purchased loans for the three months ended September 30, 2017 was 12.28%. The increase over the prior comparable period was primarily due to higher average balances and transactional income in the three months ended September 30, 2017. The following table details the total return on purchased loans:

 

   

Total Return on Purchased Loans

 
   

Three Months Ended September 30,

 
   

2017

   

2016

 
   

Income

   

Return (1)

   

Income

   

Return (1)

 
   

(Dollars in thousands)

 

Regularly scheduled interest and accretion

  $ 4,613       7.62 %   $ 4,754       8.13 %

Transactional income:

                               

Gain on loan sales

    -       0.00 %     -       0.00 %

Gain on sale of real estate owned

    -       0.00 %     19       0.03 %

Other noninterest income

    -       0.00 %     -       0.00 %

Accelerated accretion and loan fees

    2,818       4.66 %     1,327       2.27 %

Total transactional income

    2,818       4.66 %     1,346       2.30 %

Total

  $ 7,431       12.28 %   $ 6,100       10.43 %

 

 

(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 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 increased by $150 thousand for the quarter ended September 30, 2017, compared to the quarter ended September 30, 2016, principally due to the following:

 

An increase in gain on sale of SBA loans of $276 thousand, due to a higher dollar amount sold in the quarter; and

 

An increase in fees for other services to customers of $118 thousand, due to higher loan servicing fees on SBA loans sold.

 

The increases in noninterest income were partially offset by a decrease in gain on sale of residential loans held for sale of $251 thousand, due to a lower volume sold in the quarter.

 

 

 

3.

Noninterest expense increased by $88 thousand for the quarter ended September 30, 2017, compared to the quarter ended September 30, 2016, primarily due to the following:

 

An increase in data processing fees of $183 thousand, primarily due to the outsourcing of data processing.

 

The increase in data processing fees was partially offset by a decrease in occupancy and equipment expense of $120 thousand, primarily due to lower computer equipment and software deprecation.

 

 

 

4.

Income tax expense increased by $602 thousand for the quarter ended September 30, 2017, compared to the quarter ended September 30, 2016, primarily due to the following:

 

An increase in income before income tax expense of $3.4 million, due primarily to the increase in net interest and dividend income before provision for loan losses of $3.5 million.

 

The increase in income before income tax expense was offset by an $818 thousand income tax benefit arising from the Company’s adoption of ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting in the current quarter, whereby the tax effects of exercised or vested awards are now treated as a discrete item in the reporting period in which they occur, and are recorded as an income tax benefit to the income statement.

 

As of September 30, 2017, nonperforming assets totaled $18.7 million, or 1.78% of total assets, as compared to $14.8 million, or 1.37% of total assets, as of June 30, 2017.

 

A s of September 30, 2017, past due loans totaled $12.1 million, or 1.60% of total loans, as compared to $13.4 million, or 1.72% of total loans as of June 30, 2017.

 

As of September 30, 2017, the Company’s Tier 1 Leverage Ratio was 12.8%, compared to 12.8% at June 30, 2017, and the Total Capital Ratio was 20.0%, compared to 19.5% at June 30, 2017. The increase in the Total Capital Ratio resulted primarily from the net decrease in the loan portfolio, offset by earnings.

 

 

 

    

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 two loan productio n offices. Our Loan Acquisition and Servicing Group (“LASG”) 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 Measure s

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)

 
   

September 30, 2017

   

June 30, 2017

 

Assets

               

Cash and due from banks

  $ 3,528     $ 3,582  

Short-term investments

    147,287       159,701  

Total cash and cash equivalents

    150,815       163,283  
                 

Available-for-sale securities, at fair value

    94,508       96,693  
                 

Residential real estate loans held for sale

    7,106       4,508  

SBA loans held for sale

    2,400       191  

Total loans held for sale

    9,506       4,699  
                 

Loans

               

Commercial real estate

    471,846       498,004  

Commercial and industrial

    183,493       175,654  

Residential real estate

    100,124       101,168  

Consumer

    4,121       4,369  

Total loans

    759,584       779,195  

Less: Allowance for loan losses

    4,034       3,665  

Loans, net

    755,550       775,530  
                 

Premises and equipment, net

    7,274       6,937  

Real estate owned and other repossessed collateral, net

    2,040       826  

Federal Home Loan Bank stock, at cost

    1,938       1,938  

Intangible assets, net

    1,191       1,300  

Servicing rights, net

    2,955       2,846  

Bank owned life insurance

    16,291       16,179  

Other assets

    7,569       6,643  

Total assets

  $ 1,049,637     $ 1,076,874  
                 

Liabilities and Shareholders' Equity

               

Deposits

               

Demand

  $ 74,731     $ 69,827  

Savings and interest checking

    105,691       108,417  

Money market

    380,992       374,569  

Time

    301,309       337,037  

Total deposits

    862,723       889,850  
                 

Federal Home Loan Bank advances

    20,004       20,011  

Subordinated debt

    23,705       23,620  

Capital lease obligation

    808       873  

Other liabilities

    15,685       19,723  

Total liabilities

    922,925       954,077  
                 

Commitments and contingencies

    -       -  
                 

Shareholders' equity

               

Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares issued and outstanding at September 30, 2017 and June 30, 2017

    -       -  

Voting common stock, $1.00 par value, 25,000,000 shares authorized; 7,899,159 and 7,840,460 shares issued and outstanding at September 30, 2017 and June 30, 2017, respectively

    7,899       7,841  

Non-voting common stock, $1.00 par value, 3,000,000 shares authorized; 991,194 shares issued and outstanding at both September 30, 2017 and June 30, 2017

    991       991  

Additional paid-in capital

    76,709       77,455  

Retained earnings

    42,641       38,142  

Accumulated other comprehensive loss

    (1,528 )     (1,632 )

Total shareholders' equity

    126,712       122,797  

Total liabilities and shareholders' equity

  $ 1,049,637     $ 1,076,874  

 

 

 

 

    

NORTHEAST BANCORP AND SUBSIDIARY

               

CONSOLIDATED STATEMENTS OF INCOME

               

(Unaudited)

               

(Dollars in thousands, except share and per share data)

               
   

Three Months Ended September 30,

 
   

2017

   

2016

 

Interest and dividend income:

               

Interest and fees on loans

  $ 15,383     $ 11,803  

Interest on available-for-sale securities

    266       239  

Other interest and dividend income

    529       215  

Total interest and dividend income

    16,178       12,257  
                 

Interest expense:

               

Deposits

    2,176       1,754  

Federal Home Loan Bank advances

    172       255  

Subordinated debt

    508       459  

Obligation under capital lease agreements

    11       14  

Total interest expense

    2,867       2,482  
                 

Net interest and dividend income before provision for loan losses

    13,311       9,775  

Provision for loan losses

    354       193  

Net interest and dividend income after provision for loan losses

    12,957       9,582  
                 

Noninterest income:

               

Fees for other services to customers

    526       408  

Gain on sales of residential loans held for sale

    291       542  

Gain on sales of SBA loans

    1,019       743  

Loss recognized on real estate owned and other repossessed collateral, net

    -       (14 )

Bank owned life insurance income

    112       114  

Other noninterest income

    10       15  

Total noninterest income

    1,958       1,808  
                 

Noninterest expense:

               

Salaries and employee benefits

    5,254       5,314  

Occupancy and equipment expense

    1,109       1,229  

Professional fees

    442       496  

Data processing fees

    604       421  

Marketing expense

    87       87  

Loan acquisition and collection expense

    365       227  

FDIC insurance premiums

    80       124  

Intangible asset amortization

    109       109  

Other noninterest expense

    664       619  

Total noninterest expense

    8,714       8,626  
                 

Income before income tax expense

    6,201       2,764  

Income tax expense

    1,615       1,013  

Net income

  $ 4,586     $ 1,751  
                 
                 

Weighted-average shares outstanding:

               

Basic

    8,841,511       9,106,144  

Diluted

    9,089,936       9,133,383  
                 

Earnings per common share:

               

Basic

  $ 0.52     $ 0.19  

Diluted

    0.50       0.19  
                 

Cash dividends declared per common share

  $ 0.01     $ 0.01  

 

 

 

 

   

NORTHEAST BANCORP AND SUBSIDIARY

 

CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS

 

(Unaudited)

 

(Dollars in thousands)

 
   

Three Months Ended September 30,

 
   

2017

   

2016

 
           

Interest

   

Average

           

Interest

   

Average

 
   

Average

   

Income/

   

Yield/

   

Average

   

Income/

   

Yield/

 
   

Balance

   

Expense

   

Rate

   

Balance

   

Expense

   

Rate

 

Assets:

                                               

Interest-earning assets:

                                               

Investment securities

  $ 95,827     $ 266       1.10 %   $ 94,899     $ 239       1.00 %

Loans (1) (2) (3)

    772,616       15,393       7.90 %     702,021       11,821       6.68 %

Federal Home Loan Bank stock

    1,938       20       4.09 %     2,408       23       3.79 %

Short-term investments (4)

    160,354       509       1.26 %     154,392       192       0.49 %

Total interest-earning assets

    1,030,735       16,188       6.23 %     953,720       12,275       5.11 %

Cash and due from banks

    3,134                       2,941                  

Other non-interest earning assets

    30,887                       30,812                  

Total assets

  $ 1,064,756                     $ 987,473                  
                                                 

Liabilities & Shareholders' Equity:

                                               

Interest-bearing liabilities:

                                               

NOW accounts

  $ 69,577     $ 51       0.29 %   $ 70,850     $ 51       0.29 %

Money market accounts

    387,632       1,097       1.12 %     291,734       682       0.93 %

Savings accounts

    37,033       13       0.14 %     35,769       12       0.13 %

Time deposits

    312,485       1,015       1.29 %     336,271       1,009       1.19 %

Total interest-bearing deposits

    806,727       2,176       1.07 %     734,624       1,754       0.95 %

Federal Home Loan Bank advances

    20,007       172       3.41 %     30,061       255       3.37 %

Subordinated debt

    23,661       508       8.52 %     23,360       459       7.80 %

Capital lease obligation

    830       11       5.26 %     1,087       14       5.11 %

Total interest-bearing liabilities

    851,225       2,867       1.34 %     789,132       2,482       1.25 %
                                                 

Non-interest bearing liabilities:

                                               

Demand deposits and escrow accounts

    80,565                       75,672                  

Other liabilities

    8,464                       8,213                  

Total liabilities

    940,254                       873,017                  

Shareholders' equity

    124,502                       114,456                  

Total liabilities and shareholders' equity

  $ 1,064,756                     $ 987,473                  
                                                 

Net interest income (5)

          $ 13,321                     $ 9,793          
                                                 

Interest rate spread

                    4.89 %                     3.86 %

Net interest margin (6)

                    5.13 %                     4.07 %

 

(1) Interest income and yield are stated on a fully tax-equivalent basis using a 34% 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 $18 thousand for the three months ended September 30, 2017 and 2016, 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:

 
   

September 30,

2017

   

June 30,

2017

   

March 31,

2017

   

December 31,

2016

   

September 30,

2016

 

Net interest income

  $ 13,311     $ 13,757     $ 12,459     $ 11,833     $ 9,775  

Provision for loan losses

    354       389       384       628       193  

Noninterest income

    1,958       2,890       2,308       2,690       1,808  

Noninterest expense

    8,714       9,364       8,842       8,956       8,626  

Net income

    4,586       4,027       3,461       3,100       1,751  
                                         

Weighted-average common shares outstanding:

                                       

Basic

    8,841,511       8,823,679       8,830,442       8,831,235       9,106,144  

Diluted

    9,089,936       8,979,471       8,893,534       8,864,618       9,133,383  

Earnings per common share:

                                       

Basic

  $ 0.52     $ 0.46     $ 0.39     $ 0.35     $ 0.19  

Diluted

    0.50       0.45       0.39       0.35       0.19  

Dividends per common share

    0.01       0.01       0.01       0.01       0.01  
                                         

Return on average assets

    1.71 %     1.57 %     1.37 %     1.24 %     0.70 %

Return on average equity

    14.61 %     13.34 %     12.03 %     10.92 %     6.07 %

Net interest rate spread (1)

    4.89 %     5.32 %     4.90 %     4.72 %     3.86 %

Net interest margin (2)

    5.13 %     5.55 %     5.11 %     4.94 %     4.07 %

Efficiency ratio (non-GAAP) (3)

    57.07 %     56.25 %     59.88 %     61.67 %     74.47 %

Noninterest expense to average total assets

    3.25 %     3.64 %     3.50 %     3.59 %     3.47 %

Average interest-earning assets to average interest-bearing liabilities

    121.09 %     121.13 %     120.84 %     120.73 %     120.86 %

 

 

 

 

   

As of:

 
   

September 30,

2017

   

June 30,

2017

   

March 31,

2017

   

December 31,

2016

   

September 30,

2016

 

Nonperforming loans:

                                       

Originated portfolio:

                                       

Residential real estate

  $ 3,667     $ 3,337     $ 3,265     $ 2,827     $ 3,273  

Commercial real estate

    2,409       413       420       396       361  

Home equity

    58       58       48       48       48  

Commercial and industrial

    2,629       2,600       2,636       2,659       347  

Consumer

    131       103       65       48       121  

Total originated portfolio

    8,894       6,511       6,434       5,978       4,150  

Total purchased portfolio

    7,758       7,452       8,388       4,219       4,773  

Total nonperforming loans

    16,652       13,963       14,822       10,197       8,923  

Real estate owned and other repossessed collateral, net

    2,040       826       3,761       3,145       3,774  

Total nonperforming assets

  $ 18,692     $ 14,789     $ 18,583     $ 13,342     $ 12,697  
                                         

Past due loans to total loans

    1.60 %     1.72 %     3.25 %     2.85 %     1.36 %

Nonperforming loans to total loans

    2.19 %     1.79 %     2.00 %     1.33 %     1.24 %

Nonperforming assets to total assets

    1.78 %     1.37 %     1.81 %     1.32 %     1.29 %

Allowance for loan losses to total loans

    0.53 %     0.47 %     0.46 %     0.41 %     0.35 %

Allowance for loan losses to nonperforming loans

    24.23 %     26.25 %     22.77 %     30.47 %     28.08 %
                                         

Commercial real estate loans to risk-based capital (4)

    166.15 %     181.23 %     181.83 %     197.11 %     179.96 %

Net loans to core deposits (5)

    88.68 %     87.68 %     87.46 %     92.04 %     90.22 %

Purchased loans to total loans, including held for sale

    30.11 %     31.43 %     31.87 %     32.91 %     32.54 %

Equity to total assets

    12.07 %     11.40 %     11.55 %     11.35 %     11.32 %

Common equity tier 1 capital ratio

    16.50 %     16.00 %     15.80 %     14.94 %     15.34 %

Total capital ratio

    20.04 %     19.48 %     19.30 %     18.31 %     18.81 %

Tier 1 leverage capital ratio

    12.77 %     12.81 %     12.46 %     12.60 %     12.25 %
                                         

Total shareholders' equity

  $ 126,712     $ 122,797     $ 118,675     $ 114,942     $ 111,553  

Less: Preferred stock

    -       -       -       -       -  

Common shareholders' equity

    126,712       122,797       118,675       114,942       111,553  

Less: Intangible assets (6)

    (4,146 )     (4,146 )     (3,898 )     (3,856 )     (3,797 )

Tangible common shareholders' equity (non-GAAP)

  $ 122,566     $ 118,651     $ 114,777     $ 111,086     $ 107,756  
                                         

Common shares outstanding

    8,890,353       8,831,654       8,815,279       8,831,235       8,831,235  

Book value per common share

  $ 14.25     $ 13.90     $ 13.46     $ 13.02     $ 12.63  

Tangible book value per share (non-GAAP) (7)

    13.79       13.43       13.02       12.58       12.20  

 

(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 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.

 

 

Exhibit 99.2