LEWISTON, Maine--(BUSINESS WIRE)-- 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 available to common shareholders of $320 thousand, or $0.03 per diluted common share, for the quarter ended September 30, 2013, compared to net income available to common shareholders of $936 thousand, or $0.09 per diluted common share, for the quarter ended September 30, 2012.

The current quarter included $554 thousand of expenses related to severance and an insurance recovery of $250 thousand related to a lawsuit settled in the previous quarter. Excluding these items, which the Company considers to be non-core, net operating earnings were $521 thousand or $0.05 per diluted common share.

The Board of Directors has declared a cash dividend of $0.09 per share, payable on November 26, 2013 to shareholders of record as of November 12, 2013.

"Our results this quarter reflect the variability inherent in our loan purchasing activities, and specifically the timing of transactional income on our purchased loan portfolio, which for the quarter was $912 thousand as compared to $2.8 million for the quarter ended June 30, 2013," said Richard Wayne, Chief Executive Officer. "Such fluctuations in loan purchasing activity and associated revenue will continue to affect our results, causing fluctuations in earnings per share, until moderated by the positive effect of growth in our balance sheet and the full leveraging of our capital. To that end, we achieved $48 million of net loan growth this quarter and produced a net interest margin of 4.24%."

At September 30, 2013, total assets were $725.0 million, an increase of $54.3 million, or 8.1%, compared to June 30, 2013. The principal components of the quarterly changes in the balance sheet follow:

1. The loan portfolio grew by $48.1 million, or 11.1%, compared to June 30, 2013, principally due to net growth of $35.4 million in commercial loans purchased or originated by the Bank's Loan Acquisition and Servicing Group ("LASG") and $12.7 million of net growth in loans originated by the Bank's Community Banking Division. Growth in the Community Banking Division during the quarter was principally due to $27.7 million of residential loan originations held in portfolio to increase the Bank's loan purchasing capacity under regulatory conditions. As has been discussed in the Company's prior 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 capacity under these conditions follows.

An overview of the LASG portfolio follows.

(1) 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, on an annualized basis.

2. Deposits and borrowings increased by $47.4 million and $6.2 million, respectively, from June 30, 2013. Growth in each was tied to the Company's strategy for funding its loan growth, and in particular to mitigate the interest rate risk associated with the increase in its residential loan portfolio. To date, the Company has duration-matched such growth with a mix of term funding raised through deposit listing services and Federal Home Loan Bank advances, the latter in conjunction with interest rate swaps.

Net income decreased by $714 thousand to $320 thousand for the quarter ended September 30, 2013, compared to $936 thousand for the quarter ended September 30, 2012. Pre-tax income for the quarter ended September 30, 2013 included $554 thousand of expenses related to severance and an insurance recovery of $250 thousand related to a lawsuit settled in the previous quarter. Operating results for the quarter included the following additional items of significance:

1. Net interest income increased by $1.0 million, or 16.5%, to $7.1 million for the quarter compared to the quarter ended September 30, 2012, primarily due to growth in the purchased loan portfolio. This result is evident in the net interest margin, which increased to 4.24% for the quarter ended September 30, 2013, compared to 3.80% for the quarter ended September 30, 2012. The following table summarizes interest income and related yields recognized on the loan portfolios.

The yield on purchased loans was increased by unscheduled loan payoffs, which resulted in immediate recognition of the prepaid loans' discount in interest income. The following table details the "total return" on purchased loans, which includes transactional income of $912 thousand for the quarter ended September 30, 2013, a decrease of $870 thousand from the quarter ended September 30, 2012 and a decrease of $1.7 million from average transactional income for the four prior quarters.

(1) 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, on an annualized basis.

2. Noninterest income decreased by $1.2 million for the current quarter, compared to the quarter ended September 30, 2012, principally due to the following:

• A decrease of $792 thousand in net securities gains. In the quarter ended September 30, 2012, the Company sold a substantial portion of its available-for-sale investment portfolio and reinvested the sales proceeds in similar securities at lower market yields. There were no security sales in the quarter ended September 30, 2013.

• A decrease of $489 thousand in gains on real estate owned. In the quarter ended September 30, 2012, the Company recognized a gain of $473 thousand on the sale of real estate previously securing a purchased loan.

3. Noninterest expense increased by $1.0 million for the current quarter, compared to the quarter ended September 30, 2012, principally due to the following:

• An increase of $1.0 million in salaries and employee benefits, principally due to severance of $554 thousand and increased headcount in the LASG and mortgage lending divisions.
• An increase of $277 thousand in occupancy and equipment expense, principally due to the relocation of the Company's Boston office in the second quarter of fiscal 2013.
• A decrease of $143 thousand in marketing expense, principally due to a reduction in deposit marketing in the quarter ended September 30, 2013.
• A $250 thousand decrease in legal settlement expenses, due to an insurance recovery recognized in the quarter ended September 30, 2013.

At September 30, 2013, nonperforming assets totaled $8.9 million, or 1.2% of total assets, as compared to $7.0 million, or 1.1% of total assets at June 30, 2013. The increase in nonperforming assets during the quarter was principally due to two purchased loan relationships.

At September 30, 2013, the Company's Tier 1 leverage ratio was 17.2%, a decrease from 17.8% at June 30, 2013, and the total risk-based capital ratio was 25.6%, a decrease from 27.5% at June 30, 2013.

Investor Call Information

Richard Wayne, Chief Executive Officer of Northeast Bancorp, and Claire Bean, Chief Financial Officer of Northeast Bancorp, will host a conference call to discuss first quarter earnings and business outlook at 11:00 a.m. Eastern Time on Wednesday, October 30, 2013. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 93619559. 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. Northeast Bank offers traditional banking services through its Community Banking Division, which operates ten full-service branches and six loan production offices that serve individuals and businesses located in western and south-central Maine, southern New Hampshire and southeastern Massachusetts. Northeast Bank's Loan Acquisition and Servicing Group purchases and originates commercial loans for the Bank's portfolio. ableBanking, a division of Northeast Bank, offers savings products to consumers online. Information regarding Northeast Bank can be found on its website at www.northeastbank.com.

Non-GAAP Financial Measure

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 stockholders' equity, tangible book value per share, and net operating earnings. 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.

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 continuing 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; increasing government regulation; 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.

IMPORTANT NOTE: Securities and Advisory Services offered through Commonwealth Financial Network, Member FINRA, SIPC, and a Registered Investment Adviser. Securities are not FDIC insured, not bank obligations or otherwise bank guaranteed and may lose value. Northeast Financial is located at 77 Middle Street, Portland, ME 04101.

NBN-F

(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) Net interest margin is calculated as net interest income divided by total interest-earning assets.

(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 non-interest expense divided by the sum of net interest income (before the loan loss provision) plus non-interest income.
(4) For purposes of calculating this ratio, commercial real estate includes all those loans defined as such by regulatory guidance, including all land development and construction loans. As of September 30, 2013 and June 30, 2013, commercial real estate excludes loans secured by owner-occupied properties.
(5) Core deposits includes all non-maturity deposits and maturity deposits less than $250 thousand. Net loans includes loans held-for-sale.
(6) Tangible book value per share represents total stockholders' equity less the sum of preferred stock and intangible assets divided by common shares outstanding.
(7) Management believes operating earnings, which exclude non-core items, provide a more meaningful representation of the Company's performance.

Northeast Bank
Claire S. Bean, 207-786-3245 ext. 3202
CFO & COO
www.northeastbank.com

Source: Northeast Bancorp

News Provided by Acquire Media