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 $1.6 million, or $0.16 per diluted common share, for the quarter ended September 30, 2014, compared to net income available to common shareholders of $320 thousand, or $0.03 per diluted common share, for the quarter ended September 30, 2013.

The Board of Directors has declared a cash dividend of $0.01 per share, payable on November 20, 2014 to shareholders of record as of November 6, 2014.

"We are very pleased with the results for this quarter," said Richard Wayne, President and Chief Executive Officer. "We have continued to leverage our capital and increase our core earnings through a combination of higher net interest income and leveraging our existing operating platform and personnel. We achieved a net interest margin of 5.2% on the strength of $2.0 million of transactional income on purchased loans."

At September 30, 2014, total assets were $782.3 million, an increase of $20.4 million, or 2.7%, compared to June 30, 2014. The principal components of the change in the Company's balance sheet are as follows:

1. The loan portfolio - excluding loans held for sale - grew by $25.4 million, or 4.9%, compared to June 30, 2014, principally due to net growth of $33.4 million in commercial loans purchased or originated by the Bank's Loan Acquisition and Servicing Group ("LASG"), offset by an $8.0 million decrease in the Bank's Community Banking Division loan portfolio.

New loans generated by the LASG aggregated $53.5 million for the quarter, consisting of $13.2 million in purchases, at an average price of 81.7%, and $40.3 million of originations, the latter total including $36.0 million of loans to broker dealers secured by marketable securities. Residential and consumer loan production sold in the secondary market totaled $30.8 million for the quarter.

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 and commercial real estate loan availability under these conditions follow.

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 increased by $19.5 million, or 3.4%, for the quarter, attributable primarily to growth in non-maturity accounts, which increased by $20.2 million, or 8.7%, for the three months ended September 30, 2014. This growth was centered mainly in money market accounts attracted through the Bank's online-only ableBanking division.

3. Stockholders' equity increased by $1.2 million from June 30, 2014, due principally to earnings of $1.6 million, offset in part by a $368 thousand decrease in AOCI and $134 thousand in share repurchases (representing 14,400 shares).

Net income from continuing operations increased by $1.3 million to $1.6 million for the quarter ended September 30, 2014, compared to the quarter ended September 30, 2013. Earnings for the current quarter included the following items of significance:

1. Net interest income before provision for loan losses increased by $2.4 million, or 33.3%, for the quarter ended September 30, 2014 compared to the quarter ended September 30, 2013, due primarily to higher transactional interest income from purchased loan payoffs and the positive effect of balance sheet growth. Average earning assets increased by $60.0 million, and average loans by $63.3 million, when compared to the first quarter of FY 2014.

The various components of transactional income are set forth in the table below entitled "Total Return on Purchased Loans." When compared to the quarter ended September 30, 2013, transactional interest income increased by $1.3 million, boosting the net interest margin, which increased to 5.18% from 4.24%. The following table summarizes interest income and related yields recognized on the loan portfolios.

The yield on purchased loans in each period shown 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 total transactional income of $2.0 million for the quarter ended September 30, 2014, an increase of $1.1 million from the quarter ended September 30, 2013. The following table summarizes the total return recognized on the purchased loan portfolio:

2. Quarterly noninterest income of $1.2 million was $134 thousand lower than the quarter ended September 30, 2013, primarily due to a $136 thousand reduction in gains realized on sales of purchased loans.

3. Noninterest expense decreased by $115 thousand for the quarter, measured against the quarter ended September 30, 2013. Comparing the two quarters, variances of significance are:

• Salaries and employee benefits decreased by $79 thousand, principally due to reductions in severance and overall employee head count, offset in part by higher incentive compensation expense;
• Occupancy and equipment costs declined by $125 thousand, the result of a reduction in software maintenance and depreciation expense following the conversion of the Bank's core systems platform to an outsourced model in May 2014. The decrease in equipment expense was offset in part by higher conversion-related data processing fees, which increased by $88 thousand;
• Professional fees, which tend to fluctuate from quarter to quarter, were lower by $68 thousand;
• Loan expense decreased by $199 thousand, mainly due to lower loan acquisition and work-out expenses as well as a $78 thousand recovery of work-out expenses previously incurred;
• A $250 thousand insurance recovery was recognized in the quarter ended September 30, 2013.

4. The Company's effective tax rate for the quarter ended September 30, 2014 was 36.0%, compared to 33.5% for the quarter ended September 30, 2013. The increase in the quarter was primarily the result of a change in estimated state tax apportionment.

At September 30, 2014, nonperforming assets totaled $9.4 million, or 1.2% of total assets, compared to $9.3 million, or 1.2% of total assets at June 30, 2014 and $8.9 million, or 1.2% of total assets, at September 30, 2013.

At September 30, 2014, the Company's Tier 1 leverage ratio was 15.9%, unchanged from June 30, 2014, and a decrease from 17.2% at September 30, 2013. The total risk-based capital ratio was 23.0% at September 30, 2014, a decrease from 23.7% at June 30, 2014 and 25.6% at September 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 10:00 a.m. Eastern Time on Monday, October 27, 2014. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 24713113. 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 two loan production offices that serve individuals and businesses located in western and south-central Maine and southern New Hampshire. 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 that adversely affect borrowers' ability to service and repay 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 of compromises or breaches to our security systems; 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

(1) Includes loans held for sale.
(2) Nonaccrual loans are included in the computation of average, but unpaid interest has not been included for purposes of determining interest income.
(3) Short term investments include FHLB overnight deposits and other interest-bearing deposits.
(4) 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.
(5) Core deposits include all non-maturity deposits and maturity deposits less than $250 thousand. Loans include 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

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