UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

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

 

Date of Report (Date of earliest event reported):	July 30, 2018
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. ☐

 

 

Item 2.02

Results of Operations and Financial Condition

 

On July 30, 2018, Northeast Bancorp, a Maine corporation (the "Company"), issued a press release announcing its earnings for the fourth quarter of fiscal 2018 and declaring the payment of a dividend. The full text of this press release is attached hereto as Exhibit 99.1 and is 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 9.01

Financial Statements and Exhibits

(c)

Exhibits

 

 

Exhibit No.

Description

 

99.1	Press Release dated July 30, 2018

 

 

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/ Jean-Pierre Lapointe
	Name:	Jean-Pierre Lapointe
	Title:	Chief Financial Officer and Treasurer

 

Date: July 30, 2018

 

 

EXHIBIT INDEX

 

Exhibit No.

Description

 

99.1	Press Release dated July 30, 2018

 

Exhibit 99.1

 

FOR IMMEDIATE RELEASE     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

 

Northeast Bancorp Reports Fourth Quarter and Fiscal Year Results and Declares Dividend

 

Lewiston, ME (July 30, 2018) ‒ 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 $4.3 million, or $0.48 per diluted common share, for the quarter ended June 30, 2018, compared to net income of $4.0 million, or $0.45 per diluted common share, for the quarter ended June 30, 2017. Net income for the year ended June 30, 2018 was $16.2 million, or $1.77 per diluted common share, compared to $12.3 million, or $1.38 per diluted common share, for the year ended June 30, 2017.

 

On July 30, 2018, the Board of Directors declared a cash dividend of $0.01 per share, payable on August 24, 2018, to shareholders of record as of August 10, 2018.

 

“We closed the year with a strong quarter,” said Richard Wayne, President and Chief Executive Officer. “For the quarter, we earned $0.48 per diluted common share, a return on equity of 13.0%, a return on assets of 1.5%, and an efficiency ratio of 57.9%. For the fiscal year, we earned $1.77 per diluted common share, compared to $1.38 for the prior fiscal year, representing an increase of 28%. For the quarter, our Loan Acquisition and Servicing Group (“LASG”) produced $119.2 million of loans, including originations of $66.6 million and purchases with a recorded investment of $52.6 million. This represents quarterly net growth in the LASG portfolio of $51.6 million, or 8.1%, and annual net growth of $111.4 million, or 19.3%.”

 

As of June 30, 2018, total assets were $1.2 billion, an increase of $80.9 million, or 7.5%, from total assets of $1.1 billion as of June 30, 2017. The principal components of the change in the balance sheet follow:

 

1.

The following table highlights the changes in the loan portfolio for the three months and year ended June 30, 2018 compared to the same periods in the prior year:

 

		Loan Portfolio Changes
		Three Months Ended June 30, 2018
		June 30, 2018 Balance				March 31, 2018 Balance				Change ($)				Change (%)
		(Dollars in thousands)
LASG Purchased		$	290,972			$	254,700			$	36,272				14.24	%
LASG Originated			397,363				381,990				15,373				4.02	%
SBA			60,156				50,583				9,573				18.93	%
Community Banking			123,311				129,156				(5,845	)			(4.53	%)
Total		$	871,802			$	816,429			$	55,373				6.78	%

 

		Year Ended June 30, 2018
		June 30, 2018 Balance				June 30, 2017 Balance				Change ($)				Change (%)
		(Dollars in thousands)
LASG Purchased		$	290,972			$	246,388			$	44,584				18.10	%
LASG Originated			397,363				330,515				66,848				20.23	%
SBA			60,156				52,965				7,191				13.58	%
Community Banking			123,311				149,327				(26,016	)			(17.42	%)
Total		$	871,802			$	779,195			$	92,607				11.88	%

 

 

Loans generated by the Bank's Loan Acquisition and Servicing Group ("LASG") for the quarter ended June 30, 2018 totaled $119.2 million, which consisted of $52.6 million of purchased loans, at an average price of 93.6% of unpaid principal balance, and $66.6 million of originated loans. The Bank's Small Business Administration ("SBA") Division closed $23.9 million and funded $21.3 million of new loans during the quarter ended June 30, 2018. In addition, the Company sold $10.9 million of the guaranteed portion of SBA loans in the secondary market, of which $7.5 million were originated in the current quarter and $3.4 million were originated or purchased in prior quarters. Residential loan production sold in the secondary market totaled $10.7 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 June 30, 2018
					(Dollars in millions)
Total Loans		Purchased loans may not exceed 40% of total loans			$	101.0
Regulatory Capital		Non-owner occupied commercial real estate loans may not exceed 300% of total capital			$	166.3

 

 

An overview of the Bank’s LASG portfolio follows:

 

		LASG Portfolio
		Three Months Ended June 30,
		2018																2017
		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		$	56,233			$	66,588			$	-			$	122,821			$	50,202			$	67,860			$	-			$	118,062
Net investment basis			52,637				66,588				-				119,225				45,060				67,860				-				112,920
Loan returns during the period:
Yield			10.87	%			7.45	%			0.00	%			8.83	%			13.64	%			6.45	%			0.00	%			9.61	%
Total Return (1)			11.49	%			7.45	%			0.00	%			9.08	%			13.78	%			6.45	%			0.00	%			9.68	%

 

		Twelve Months Ended June 30,
		2018																2017
		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		$	137,249			$	224,546			$	-			$	361,795			$	126,713			$	237,691			$	-			$	364,404
Net investment basis			124,111				224,546				-				348,657				112,807				237,691				-				350,498
Loan returns during the period:
Yield			11.35	%			6.80	%			0.00	%			8.66	%			12.24	%			6.21	%			0.82	%			8.69	%
Total Return (1)			11.73	%			6.80	%			0.00	%			8.82	%			12.30	%			6.21	%			0.82	%			8.72	%
Total loans as of period end:
Unpaid principal balance		$	326,855			$	397,363			$	-			$	724,218			$	279,854			$	330,515			$	-			$	610,369
Net investment basis			290,972				397,363				-				688,335				246,388				330,515				-				576,903

 

 

(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 on purchased loans does not include the effect of purchased loan charge-offs or recoveries during the period. Total return on purchased loans is considered a non-GAAP financial measure.

 

 

2.

Deposits increased by $65.1 million, or 7.3%, from June 30, 2017 to June 30, 2018, attributable primarily to increases in money market accounts of $46.3 million, or 12.4%, and time deposits of $15.1 million, or 4.5%.

 

3.

Shareholders’ equity increased by $15.6 million, or 12.7%, from June 30, 2017 to June 30, 2018, primarily due to earnings of $16.2 million. Earnings were partially offset by stock option exercises which decreased additional paid-in-capital by $1.2 million. Additionally, there was stock based compensation of $870 thousand, an increase in accumulated other comprehensive loss of $129 thousand, and dividends paid on common stock of $355 thousand.

 

Net income increased by $317 thousand to $4.3 million for the quarter ended June 30, 2018, compared to net income of $4.0 million for the quarter ended June 30, 2017. 

 

1.

Net interest and dividend income before provision for loan losses increased by $651 thousand for the quarter ended June 30, 2018, compared to the quarter ended June 30, 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 June 30,
		2018												2017
		Average				Interest								Average				Interest
		Balance (1)				Income				Yield				Balance (1)				Income				Yield
		(Dollars in thousands)
Community Banking		$	128,296			$	1,630				5.10	%		$	163,997			$	1,949				4.77	%
SBA			56,088				1,116				7.98	%			55,229				848				6.16	%
LASG:
Originated			381,783				7,088				7.45	%			301,988				4,859				6.45	%
Purchased			259,119				7,021				10.87	%			237,306				8,068				13.64	%
Total LASG			640,902				14,109				8.83	%			539,294				12,927				9.61	%
Total		$	825,286			$	16,855				8.19	%		$	758,520			$	15,724				8.31	%

 

 

 

		Year Ended June 30,
		2018												2017
		Average				Interest								Average				Interest
		Balance (1)				Income				Yield				Balance (1)				Income				Yield
		(Dollars in thousands)
Community Banking		$	139,239			$	6,871				4.93	%		$	190,704			$	9,102				4.77	%
SBA			53,030				3,888				7.33	%			42,946				2,619				6.10	%
LASG:
Originated			350,427				23,834				6.80	%			239,796				14,883				6.21	%
Purchased			242,652				27,553				11.35	%			236,937				28,997				12.24	%
Secured Loans to Broker-Dealers			-				-				0.00	%			31,085				256				0.82	%
Total LASG			593,079				51,387				8.66	%			507,818				44,136				8.69	%
Total		$	785,348			$	62,146				7.91	%		$	741,468			$	55,857				7.53	%

 

(1)

Includes loans held for sale.

 

 

The components of total income on purchased loans are set forth in the table below entitled “Total Return on Purchased Loans.” When compared to the three months and year ended June 30, 2017, transactional income for the three months and year ended June 30, 2018 decreased by $1.2 million and $439 thousand, respectively. The total return on purchased loans for the three months and year ended June 30, 2018 was 11.49% and 11.73%, respectively. The decrease over the prior comparable periods was primarily due to higher accelerated accretion in the three months and year ended June 30, 2017. The following table details the total return on purchased loans:

 

 

		Total Return on Purchased Loans
		Three Months Ended June 30,
		2018								2017
		Income				Return (1)				Income				Return (1)
		(Dollars in thousands)
Regularly scheduled interest and accretion		$	5,043				7.81	%		$	4,588				7.76	%
Transactional income:
Gain on loan sales			402				0.62	%			-				0.00	%
Gain on sale of real estate owned			-				0.00	%			93				0.16	%
Other noninterest income (expense)			-				0.00	%			(10	)			-0.02	%
Accelerated accretion and loan fees			1,978				3.06	%			3,480				5.88	%
Total transactional income			2,380				3.68	%			3,563				6.02	%
Total		$	7,423				11.49	%		$	8,151				13.78	%

 

		Year Ended June 30,
		2018								2017
		Income				Return (1)				Income				Return (1)
		(Dollars in thousands)
Regularly scheduled interest and accretion		$	18,752				7.73	%		$	18,975				8.01	%
Transactional income:
Gain on loan sales			918				0.38	%			-				0.00	%
Gain on sale of real estate owned			-				0.00	%			148				0.06	%
Other noninterest income (expense)			-				0.00	%			(12	)			0.00	%
Accelerated accretion and loan fees			8,801				3.62	%			10,022				4.23	%
Total transactional income			9,719				4.00	%			10,158				4.29	%
Total		$	28,471				11.73	%		$	29,133				12.30	%

 

 

(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 $931 thousand for the quarter ended June 30, 2018, compared to the quarter ended June 30, 2017, principally due to the following:

●

A decrease in gain on sale of SBA loans of $833 thousand, due to a lower volume of SBA loans sold in the quarter;

●

A decrease in fees for other services to customers of $161 thousand, due to lower commercial loan servicing fees; and

●

A decrease in gain on sale of residential loans of $134 thousand, due to lower volume of residential loans sold in the quarter.

●

The decreases in noninterest income were partially offset by an increase in gain on sale of other loans of $402 thousand, due to the sale of two LASG purchased loans in the quarter.

 

3.

Noninterest expense increased by $114 thousand for the quarter ended June 30, 2018, compared to the quarter ended June 30, 2017, primarily due to the following:

●

An increase in data processing fees of $142 thousand, primarily due to the increased cost associated with the outsourcing of data processing;

●

An increase in loan expense of $123 thousand, largely driven by higher expense related to loan acquisition and refinance activity; and

●

An increase in other noninterest expense of $43 thousand, primarily due to increased travel expense.

●

The increases in noninterest expense were partially offset by a decrease in salaries and employee benefits of $219 thousand, primarily due to lower headcount, and a decrease in incentive compensation for the quarter.

 

 

4.

Income tax expense decreased by $576 thousand for the quarter ended June 30, 2018, compared to the quarter ended June 30, 2017, primarily due to the following:

●

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, which resulted in a $464 thousand decrease in federal income tax expense; and

●

A decrease in income tax expense as a result of a $114 thousand income tax benefit arising from the treatment of stock options exercised under ASU 2016-09, Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, whereby the tax effects of exercised options are treated as a discrete item in the reporting period in which they occur.

 

As of June 30, 2018, nonperforming assets totaled $14.2 million, or 1.23% of total assets, as compared to $14.6 million, or 1.25% of total assets, as of March 31, 2018, and $14.8 million, or 1.37% of total assets, as of June 30, 2017.

 

As of June 30, 2018, past due loans totaled $7.7 million, or 0.89% of total loans, as compared to $11.2 million, or 1.37% of total loans as of March 31, 2018, and $13.4 million, or 1.72% of total loans as of June 30, 2017.

 

As of June 30, 2018, the Company’s Tier 1 leverage capital ratio was 13.1%, compared to 12.8% at June 30, 2017, and the Total capital ratio was 19.3%, 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 fourth quarter earnings and business outlook at 10:00 a.m. Eastern Time on Tuesday, July 31st. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 5291318. 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 market via ten branches. 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 on purchased loans, 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.

 

 

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

 

		June 30, 2018				June 30, 2017
Assets
Cash and due from banks		$	3,889			$	3,582
Short-term investments			153,513				159,701
Total cash and cash equivalents			157,402				163,283
Available-for-sale securities, at fair value			87,687				96,693
Residential real estate loans held for sale			3,405				4,508
SBA loans held for sale			3,750				191
Total loans held for sale			7,155				4,699
Loans
Commercial real estate			579,450				498,004
Commercial and industrial			188,852				175,654
Residential real estate			100,256				101,168
Consumer			3,244				4,369
Total loans			871,802				779,195
Less: Allowance for loan losses			4,807				3,665
Loans, net			866,995				775,530
Premises and equipment, net			6,591				6,937
Real estate owned and other repossessed collateral, net			2,233				826
Federal Home Loan Bank stock, at cost			1,652				1,938
Intangible assets, net			867				1,300
Loan servicing rights, net			2,970				2,846
Bank-owned life insurance			16,620				16,179
Other assets			7,564				6,643
Total assets		$	1,157,736			$	1,076,874
Liabilities and Shareholders' Equity
Deposits
Demand		$	72,272			$	69,827
Savings and interest checking			109,637				108,417
Money market			420,886				374,569
Time			352,145				337,037
Total deposits			954,940				889,850
Federal Home Loan Bank advances			15,000				20,011
Subordinated debt			23,958				23,620
Capital lease obligation			605				873
Other liabilities			24,803				19,723
Total liabilities			1,019,306				954,077
Commitments and contingencies			-				-
Shareholders' equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares issued and outstanding at June 30, 2018 and June 30, 2017			-				-
Voting common stock, $1.00 par value, 25,000,000 shares authorized; 8,056,527 and 7,840,460 shares issued and outstanding at June 30, 2018 and June 30, 2017, respectively			8,057				7,841
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized; 882,314 and 991,194 shares issued and outstanding at June 30, 2018 and June 30, 2017, respectively			882				991
Additional paid-in capital			77,016				77,455
Retained earnings			54,236				38,142
Accumulated other comprehensive loss			(1,761	)			(1,632	)
Total shareholders' equity			138,430				122,797
Total liabilities and shareholders' equity		$	1,157,736			$	1,076,874

 

 

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

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

 

		Three Months Ended June 30,								Year Ended June 30,
		2018				2017				2018				2017
Interest and dividend income:
Interest and fees on loans		$	16,855			$	15,724			$	62,146			$	55,857
Interest on available-for-sale securities			298				271				1,111				1,018
Other interest and dividend income			819				376				2,636				1,046
Total interest and dividend income			17,972				16,371				65,893				57,921
Interest expense:
Deposits			2,896				1,949				9,897				7,357
Federal Home Loan Bank advances			109				166				547				800
Subordinated debt			552				487				2,102				1,888
Obligation under capital lease agreements			7				12				38				51
Total interest expense			3,564				2,614				12,584				10,096
Net interest and dividend income before provision for loan losses			14,408				13,757				53,309				47,825
Provision for loan losses			254				389				1,410				1,594
Net interest and dividend income after provision for loan losses			14,154				13,368				51,899				46,231
Noninterest income:
Fees for other services to customers			386				547				1,822				1,952
Gain on sales of residential loans held for sale			159				293				931				1,452
Gain on sales of SBA loans			1,033				1,866				2,955				5,277
Gain on sales of other loans			402				-				918				365
Loss on real estate owned, other repossessed collateral and premises and equipment, net			(138	)			(31	)			(123	)			(23	)
Bank-owned life insurance income			109				114				441				454
Other noninterest income			8				101				84				219
Total noninterest income			1,959				2,890				7,028				9,696
Noninterest expense:
Salaries and employee benefits			5,809				6,028				21,565				21,706
Occupancy and equipment expense			1,166				1,222				4,585				5,002
Professional fees			458				401				1,749				1,666
Data processing fees			601				459				2,447				1,744
Marketing expense			143				120				472				392
Loan acquisition and collection expense			356				233				1,354				1,734
FDIC insurance premiums			80				79				317				303
Intangible asset amortization			108				108				433				432
Other noninterest expense			757				714				2,808				2,810
Total noninterest expense			9,478				9,364				35,730				35,789
Income before income tax expense			6,635				6,894				23,197				20,138
Income tax expense			2,291				2,867				7,031				7,799
Net income		$	4,344			$	4,027			$	16,166			$	12,339
Weighted-average common shares outstanding:
Basic			8,934,038				8,823,679				8,906,710				8,898,448
Diluted			9,116,157				8,979,471				9,129,152				8,952,614
Earnings per common share:
Basic		$	0.49			$	0.46			$	1.81			$	1.39
Diluted			0.48				0.45				1.77				1.38
Cash dividends declared per common share		$	0.01			$	0.01			$	0.04			$	0.04

 

 

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS

(Unaudited)

(Dollars in thousands)

 

		Three Months Ended June 30,
		2018												2017
						Interest				Average								Interest				Average
		Average				Income/				Yield/				Average				Income/				Yield/
		Balance				Expense				Rate				Balance				Expense				Rate
Assets:
Interest-earning assets:
Investment securities		$	88,933			$	298				1.34%			$	98,033			$	271				1.11%
Loans (1) (2) (3)			825,286				16,855				8.19%				758,520				15,741				8.32%
Federal Home Loan Bank stock			1,655				24				5.82%				1,938				19				3.93%
Short-term investments (4)			178,244				795				1.79%				137,570				357				1.04%
Total interest-earning assets			1,094,118				17,972				6.59%				996,061				16,388				6.60%
Cash and due from banks			2,611												2,753
Other non-interest earning assets			30,430												31,910
Total assets		$	1,127,159											$	1,030,724
Liabilities & Shareholders' Equity:
Interest-bearing liabilities:
NOW accounts		$	73,357			$	59				0.32%			$	71,209			$	51				0.29%
Money market accounts			447,775				1,580				1.42%				345,352				878				1.02%
Savings accounts			37,799				14				0.15%				37,863				13				0.14%
Time deposits			309,362				1,243				1.61%				323,399				1,007				1.25%
Total interest-bearing deposits			868,293				2,896				1.34%				777,823				1,949				1.01%
Federal Home Loan Bank advances			15,000				109				2.91%				20,014				166				3.33%
Subordinated debt			23,915				552				9.26%				23,579				487				8.28%
Capital lease obligations			629				7				4.46%				896				12				5.37%
Total interest-bearing liabilities			907,837				3,564				1.57%				822,312				2,614				1.28%
Non-interest bearing liabilities:
Demand deposits and escrow accounts			76,368												80,188
Other liabilities			8,654												7,181
Total liabilities			992,859												909,681
Shareholders' equity			134,300												121,043
Total liabilities and shareholders' equity		$	1,127,159											$	1,030,724
Net interest income (5)						$	14,408											$	13,774
Interest rate spread											5.02%												5.32%
Net interest margin (6)											5.28%												5.55%

 

(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 $17 thousand for the three months ended June 30, 2018 and June 30, 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)

 

		Year Ended June 30,
		2018												2017
						Interest				Average								Interest				Average
		Average				Income/				Yield/				Average				Income/				Yield/
		Balance				Expense				Rate				Balance				Expense				Rate
Assets:
Interest-earning assets:
Investment securities		$	92,599			$	1,111				1.20%			$	95,624			$	1.018				1.06%
Loans (1) (2) (3)			785,348				62,156				7.91%				741,468				55,928				7.54%
Federal Home Loan Bank stock			1,803				89				4.94%				2,172				90				4.14%
Short-term investments (4)			171,360				2,547				1.49%				133,599				956				0.72%
Total interest-earning assets			1,051,110				65,903				6.27%				972,863				57,992				5.96%
Cash and due from banks			2,889												2,833
Other non-interest earning assets			31,550												32,394
Total assets		$	1,085,549											$	1,008,090
Liabilities & Shareholders' Equity:
Interest-bearing liabilities:
NOW accounts		$	70,486			$	210				0.30%			$	70,912			$	204				0.29%
Money market accounts			407,680				5,145				1.26%				322,011				3,120				0.97%
Savings accounts			37,514				57				0.15%				36,438				50				0.14%
Time deposits			311,544				4,485				1.44%				326,601				3,983				1.22%
Total interest-bearing deposits			827,224				9,897				1.20%				755,962				7,357				0.97%
Federal Home Loan Bank advances			16,947				547				3.23%				24,334				800				3.29%
Subordinated debt			23,787				2,102				8.84%				23,468				1,888				8.04%
Capital lease obligations			730				38				5.21%				992				51				5.14%
Total interest-bearing liabilities			868,688				12,584				1.45%				804,756				10,096				1.25%
Non-interest bearing liabilities:
Demand deposits and escrow accounts			79,767												79,560
Other liabilities			7,472												7,599
Total liabilities			955,927												891,915
Shareholders' equity			129,622												116,175
Total liabilities and shareholders' equity		$	1,085,549											$	1,008,090
Net interest income (5)						$	53,319											$	47,896
Interest rate spread											4.82%												4.71%
Net interest margin (6)											5.07%												4.92%

 

(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 $71 thousand for the year ended June 30, 2018 and June 30, 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:
		June 30, 2018				March 31, 2018				December 31, 2017				September 30, 2017				June 30, 2017
Net interest income		$	14,408			$	13,134			$	12,457			$	13,311			$	13,757
Provision for loan losses			254				364				437				354				389
Noninterest income			1,959				1,882				1,228				1,958				2,890
Noninterest expense			9,478				8,975				8,563				8,714				9,364
Net income			4,344				3,932				3,304				4,586				4,027
Weighted-average common shares outstanding:
Basic			8,934,038				8,927,544				8,924,495				8,841,511				8,823,679
Diluted			9,116,157				9,143,177				9,168,084				9,089,936				8,979,471
Earnings per common share:
Basic		$	0.49			$	0.44			$	0.37			$	0.52			$	0.46
Diluted			0.48				0.43				0.36				0.50				0.45
Dividends per common share			0.01				0.01				0.01				0.01				0.01
Return on average assets			1.55	%			1.43	%			1.26	%			1.71	%			1.57	%
Return on average equity			12.97	%			12.15	%			10.20	%			14.61	%			13.34	%
Net interest rate spread (1)			5.02	%			4.69	%			4.68	%			4.89	%			5.32	%
Net interest margin (2)			5.28	%			4.94	%			4.93	%			5.13	%			5.55	%
Efficiency ratio (non-GAAP) (3)			57.91	%			59.77	%			62.57	%			57.07	%			56.25	%
Noninterest expense to average total assets			3.37	%			3.27	%			3.27	%			3.25	%			3.64	%
Average interest-earning assets to average interest-bearing liabilities			120.52	%			120.27	%			122.21	%			121.09	%			121.13	%

 

		As of:
		June 30,2018				March 31, 2018				December 31, 2017				September 30, 2017				June 30, 2017
Nonperforming loans:
Originated portfolio:
Residential real estate		$	2,914			$	3,116			$	3,783			$	3,667			$	3,337
Commercial real estate			1,499				1,408				2,537				2,409				413
Home equity			298				255				107				58				58
Commercial and industrial			1,368				636				2,555				2,629				2,600
Consumer			134				136				147				131				103
Total originated portfolio			6,213				5,551				9,129				8,894				6,511
Total purchased portfolio			5,745				8,063				8,962				7,758				7,452
Total nonperforming loans			11,958				13,614				18,091				16,652				13,963
Real estate owned and other repossessed collateral, net			2,233				947				910				2,040				826
Total nonperforming assets		$	14,191			$	14,561			$	19,001			$	18,692			$	14,789
Past due loans to total loans			0.89	%			1.37	%			3.87	%			1.60	%			1.72	%
Nonperforming loans to total loans			1.37	%			1.67	%			2.34	%			2.19	%			1.79	%
Nonperforming assets to total assets			1.23	%			1.25	%			1.84	%			1.78	%			1.37	%
Allowance for loan losses to total loans			0.55	%			0.57	%			0.56	%			0.53	%			0.47	%
Allowance for loan losses to nonperforming loans			40.20	%			34.46	%			24.07	%			24.23	%			26.25	%
Commercial real estate loans to risk-based capital (4)			200.74	%			186.07	%			187.92	%			166.15	%			181.23	%
Net loans to core deposits (5)			91.54	%			83.65	%			91.46	%			88.68	%			87.68	%
Purchased loans to total loans, including held for sale			33.10	%			31.02	%			31.28	%			30.11	%			31.43	%
Equity to total assets			11.96	%			11.47	%			12.57	%			12.07	%			11.40	%
Common equity tier 1 capital ratio			16.02	%			16.48	%			16.74	%			16.50	%			16.00	%
Total capital ratio			19.28	%			19.92	%			20.30	%			20.04	%			19.48	%
Tier 1 leverage capital ratio			13.12	%			12.88	%			13.41	%			12.77	%			12.81	%
Total shareholders' equity		$	138,430			$	133,787			$	130,003			$	126,712			$	122,797
Less: Preferred stock			-				-				-				-				-
Common shareholders' equity			138,430				133,787				130,003				126,712				122,797
Less: Intangible assets (6)			(3,837	)			(3,973	)			(4,087	)			(4,146	)			(4,146	)
Tangible common shareholders' equity (non-GAAP)		$	134,593			$	129,814			$	125,916			$	122,566			$	118,651
Common shares outstanding			8,938,841				8,925,399				8,939,273				8,890,353				8,831,654
Book value per common share		$	15.49			$	14.99			$	14.54			$	14.25			$	13.90
Tangible book value per share (non-GAAP) (7)			15.06				14.54				14.09				13.79				13.43

 

(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.