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):

April 29, 2019

 

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 April 29, 2019, Northeast Bancorp, a Maine corporation (the "Company"), issued a press release announcing its earnings for the third quarter of fiscal 2019 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 April 29, 2019

 

 

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: April 29, 2019

 

 

EXHIBIT INDEX

 

Exhibit No.

Description

 

99.1	Press Release dated April 29, 2019

 

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 Third Quarter Results and Declares Dividend

 

Lewiston, ME (April 29, 2019) ‒ 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 $4.8 million, or $0.52 per diluted common share, for the quarter ended March 31, 2019, an increase of $896 thousand, or 22.8%, compared to net income of $3.9 million, or $0.43 per diluted common share, for the quarter ended March 31, 2018. Net income for the nine months ended March 31, 2019 was $14.5 million, or $1.58 per diluted common share, an increase of $2.7 million, or 22.5%, compared to $11.8 million, or $1.29 per diluted common share, for the nine months ended March 31, 2018.

 

The Board of Directors declared a cash dividend of $0.01 per share, payable on May 28, 2019, to shareholders of record as of May 13, 2019.

 

“In the quarter, we produced $104.7 million of new loan volume,” said Richard Wayne, President and Chief Executive Officer. “Our Loan Acquisition and Servicing Group originated a record volume of $84.5 million of loans during the quarter, representing net growth in our LASG originated portfolio of $42.2 million, or 9.7%, compensating for the lower level of loan purchases, which can be lumpy from quarter to quarter. This quarterly activity helped us achieve a return on average equity of 13.0%, a return on average assets of 1.6%, and an efficiency ratio of 57.7%.”

 

As of March 31, 2019, total assets were $1.2 billion, an increase of $73.7 million, or 6.4%, from total assets of $1.2 billion as of June 30, 2018. The principal components of the changes in the balance sheet follow:

 

1.

The following table highlights the changes in the loan portfolio for the three and nine months ended March 31, 2019:

 

		Loan Portfolio Changes
		Three Months Ended March 31, 2019
		March 31, 2019 Balance				December 31, 2018 Balance				Change ($)				Change (%)
		(Dollars in thousands)
LASG Purchased		$	320,326			$	330,643			$	(10,317	)			(3.12	%)
LASG Originated			478,020				435,817				42,203				9.68	%
SBA			63,653				67,282				(3,629	)			(5.39	%)
Community Banking			99,654				104,544				(4,890	)			(4.68	%)
Total		$	961,653			$	938,286			$	23,367				2.49	%

 

		Nine Months Ended March 31, 2019
		March 31, 2019 Balance				June 30, 2018 Balance				Change ($)				Change (%)
		(Dollars in thousands)
LASG Purchased		$	320,326			$	290,972			$	29,354				10.09	%
LASG Originated			478,020				397,363				80,657				20.30	%
SBA			63,653				60,156				3,497				5.81	%
Community Banking			99,654				123,311				(23,657	)			(19.18	%)
Total		$	961,653			$	871,802			$	89,851				10.31	%

 

 

Loans generated by the Bank's Loan Acquisition and Servicing Group ("LASG") for the quarter ended March 31, 2019 totaled $89.1 million, which consisted of $4.6 million of purchased loans, at an average price of 98.5% of unpaid principal balance, and $84.5 million of originated loans. The Bank's Small Business Administration ("SBA") Division closed and funded $6.4 million of new loans during the quarter ended March 31, 2019. In addition, the Company sold $6.7 million of the guaranteed portion of SBA loans in the secondary market, of which $4.8 million were originated in the current quarter and $1.9 million were originated in prior quarters. Residential loan production sold in the secondary market totaled $7.8 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 (“FRB”) in connection with the merger of FHB Formation LLC with and into the Company in December 2010. The Company’s loan purchase and commercial real estate loan availability under these conditions follow:

 

Basis for Regulatory Condition		Condition		Availability at March 31, 2019
				(Dollars in millions)
Total Loans		Purchased loans may not exceed 40% of total loans		$	108.1
Regulatory Capital		Non-owner occupied commercial real estate loans may not exceed 300% of total capital			90.1

 

On January 7, 2019, the Company announced a corporate reorganization pursuant to which its bank holding company structure would be eliminated and the Bank would become the top-level company (the “Reorganization”). If the Reorganization is completed, these commitments to the FRB will no longer be applicable. The Bank intends to replace these commitments with standards relating to its capital levels and asset portfolio composition, which will be incorporated into its policies and procedures, and compliance with Federal Deposit Insurance Corporation (“FDIC”) policy on commercial real estate concentration risk.

 

As a result of the Reorganization, the Bank intends to incorporate the following standards into its policies and procedures:

 

●

Maintain a Tier 1 leverage ratio of at least 10%, which is unchanged from the requirement in the commitments to the FRB;

 

●

Maintain a Total capital ratio of at least 13.5% (as opposed to 15%);

 

●

Limit purchased loans to 60% of total loans (as opposed to 40%);

 

●

Maintain a ratio of the Bank’s loans to core deposits of not more than 125% (as opposed to 100%); and

 

●

Hold commercial real estate loans (excluding owner-occupied commercial real estate) to within 500% of Total capital (as opposed to 300%).

 

These newly established standards are designed to help ensure the Bank will continue to operate in a safe and sound manner, but may permit more growth in the Bank’s loan portfolio as compared to operating under the existing commitments. The Maine Bureau of Financial Institutions’ order approving FHB Formation LLC’s acquisition of the Company in December of 2010 requires the Bank to maintain a Tier 1 leverage ratio of not less than 8.5% and a Total capital ratio of not less than 13.5%. These conditions will continue to apply to the Bank whether or not the Reorganization is completed.

 

On March 11, 2019, the Company announced that the Bank received approval from the FDIC for the Reorganization. The Reorganization remains subject to various closing conditions including, among others, (i) approval by the holders of the outstanding shares of the Company’s capital stock entitled to vote on the Reorganization, (ii) receipt of all remaining required regulatory approvals, including approval of the Bank’s stock issuance and amended and restated articles of incorporation and bylaws by the Maine Bureau of Financial Institutions, and (iii) approval for listing on NASDAQ of the Bank’s common stock.

 

 

An overview of the Bank’s LASG portfolio follows:

 

		LASG Portfolio
		Three Months Ended March 31,
		2019												2018
		Purchased				Originated				Total LASG				Purchased				Originated				Total LASG
		(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance		$	4,675			$	84,546			$	89,221			$	38,493			$	72,894			$	111,387
Net investment basis			4,604				84,546				89,150				33,021				72,894				105,915
Loan returns during the period:
Yield			9.49	%			7.87	%			8.56	%			11.29	%			6.83	%			8.65	%
Total Return on Purchased Loans (1)			10.22	%			7.87	%			8.87	%			12.16	%			6.83	%			9.00	%

 

		Nine Months Ended March 31,
		2019												2018
		Purchased				Originated				Total LASG				Purchased				Originated				Total LASG
		(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance		$	94,423			$	219,348			$	313,771			$	81,016			$	157,958			$	238,974
Net investment basis			88,741				219,348				308,089				71,474				157,958				229,432
Loan returns during the period:
Yield			9.75	%			7.64	%			8.54	%			11.53	%			6.56	%			8.60	%
Total Return on Purchased Loans (1)			10.00	%			7.64	%			8.65	%			11.82	%			6.56	%			8.72	%
Total loans as of period end:
Unpaid principal balance		$	354,655			$	478,020			$	832,675			$	289,852			$	381,990			$	671,842
Net investment basis			320,326				478,020				798,346				254,700				381,990				636,690

 

(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. See reconciliation in below table entitled “Total Return on Purchased Loans.”

 

2.

Deposits increased by $61.7 million, or 6.5%, from June 30, 2018, attributable primarily to an increase in time deposits of $187.1 million, or 53.1%, as a result of campaigns in the current nine-month period, partially offset by decreases in money market accounts of $124.2 million, or 29.5%.

 

3.

Shareholders’ equity increased by $14.8 million, or 10.7%, from June 30, 2018, primarily due to year to date earnings of $14.5 million.

 

Net income increased by $896 thousand to $4.8 million for the quarter ended March 31, 2019, compared to net income of $3.9 million for the quarter ended March 31, 2018.

 

1.

Net interest and dividend income before provision for loan losses increased by $1.9 million to $15.0 million for the quarter ended March 31, 2019, compared to $13.1 million for the quarter ended March 31, 2018. The increase was primarily due to higher yields and higher average balances in the loan portfolio. These increases were partially offset by higher funding costs and higher average deposit balances.

 

 

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

 

		Interest Income and Yield on Loans
		Three Months Ended March 31,
		2019												2018
		Average				Interest								Average				Interest
		Balance (1)				Income				Yield				Balance (1)				Income				Yield
		(Dollars in thousands)
Community Banking		$	102,850			$	1,348				5.32	%		$	136,824			$	1,743				5.17	%
SBA			69,247				1,366				8.00	%			53,069				1,017				7.77	%
LASG:
Originated			437,499				8,490				7.87	%			351,271				5,916				6.83	%
Purchased			324,414				7,592				9.49	%			241,793				6,732				11.29	%
Total LASG			761,913				16,082				8.56	%			593,064				12,648				8.65	%
Total		$	934,010			$	18,796				8.16	%		$	782,957			$	15,408				7.98	%

 

		Nine Months Ended March 31,
		2019												2018
		Average				Interest								Average				Interest
		Balance (1)				Income				Yield				Balance (1)				Income				Yield
		(Dollars in thousands)
Community Banking		$	110,566			$	4,319				5.20	%		$	142,873			$	5,242				4.89	%
SBA			71,309				4,091				7.64	%			52,014				2,772				7.10	%
LASG:
Originated			418,747				24,031				7.64	%			340,014				16,746				6.56	%
Purchased			311,780				22,815				9.75	%			237,183				20,532				11.53	%
Total LASG			730,527				46,846				8.54	%			577,197				37,278				8.60	%
Total		$	912,402			$	55,256				8.07	%		$	772,084			$	45,292				7.81	%

 

(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 ended March 31, 2018, transactional income for the three months ended March 31, 2019 decreased by $672 thousand, while regularly scheduled interest and accretion increased by $1.6 million due to the increase in average balance. The total return on purchased loans for the three months ended March 31, 2019 was 10.2%. When compared to the nine months ended March 31, 2018, transactional income for the nine months ended March 31, 2019 decreased by $1.8 million, while regularly scheduled interest and accretion increased by $4.1 million due to the increase in average balance. The following table details the total return on purchased loans:

 

		Total Return on Purchased Loans
		Three Months Ended March 31,
		2019								2018
		Income				Return (1)				Income				Return (1)
		(Dollars in thousands)
Regularly scheduled interest and accretion		$	6,228				7.79	%		$	4,630				7.77	%
Transactional income:
Gain on loan sales			582				0.73	%			516				0.87	%
Gain on sale of real estate owned			-				0.00	%			-				0.00	%
Other noninterest income			-				0.00	%			-				0.00	%
Accelerated accretion and loan fees			1,364				1.70	%			2,102				3.52	%
Total transactional income			1,946				2.43	%			2,618				4.39	%
Total		$	8,174				10.22	%		$	7,248				12.16	%

 

 

		Nine Months Ended March 31,
		2019								2018
		Income				Return (1)				Income				Return (1)
		(Dollars in thousands)
Regularly scheduled interest and accretion		$	17,849				7.63	%		$	13,709				7.70	%
Transactional income:
Gain on loan sales			582				0.25	%			516				0.29	%
Gain on sale of real estate owned			-				0.00	%			-				0.00	%
Other noninterest income			-				0.00	%			-				0.00	%
Accelerated accretion and loan fees			4,966				2.12	%			6,823				3.83	%
Total transactional income			5,548				2.37	%			7,339				4.12	%
Total		$	23,397				10.00	%		$	21,048				11.82	%

 

(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 $16 thousand for the quarter ended March 31, 2019, compared to the quarter ended March 31, 2018, principally due to the following:

●

A decrease in gain on sale of residential loans of $119 thousand, due to lower volume of residential loans sold in the quarter; and

●

A decrease in fees for other services to customers of $27 thousand, due to lower deposit fees and commercial loan servicing fees; offset by,

●

An increase in gain on sale of other loans of $66 thousand, due to a higher volume of LASG purchased loans sold in the quarter; and

●

An increase in net unrealized gain on equity securities of $65 thousand.

 

3.

Noninterest expense increased by $777 thousand for the quarter ended March 31, 2019 compared to the quarter ended March 31, 2018, primarily due to the following:

●

An increase in salaries and employee benefits expense of $453 thousand, primarily due to increases in base salary, stock-based compensation expense, incentive compensation, and a decrease in deferred salaries expense;

●

An increase in loan acquisition and collection expense of $345 thousand, largely driven by increased loan expenses and collection expenses incurred on the purchased loan payoffs and real estate owned during the quarter; and

●

An increase in data processing fees of $208 thousand, primarily due to increased IT outsourcing costs; partially offset by,

●

A decrease in occupancy and equipment of $202 thousand, primarily due to a decrease in equipment repairs and maintenance expense.

 

4.

Income tax expense increased by $160 thousand to $1.9 million, or an effective tax rate of 28.3%, for the quarter ended March 31, 2019, compared to $1.7 million, or an effective tax rate of 30.7%, for the quarter ended March 31, 2018. The increase in expense was primarily due to the increase in pre-tax earnings. The decrease in effective tax rate was primarily due to the decrease in the federal corporate income tax rate to 21.0% for the quarter ended March 31, 2019, as compared to the blended federal corporate income tax rate of 28.0% for the quarter ended March 31, 2018, offset by a decrease in excess tax benefits recognized in the current period.

 

As of March 31, 2019, nonperforming assets totaled $14.8 million, or 1.20% of total assets, as compared to $14.2 million, or 1.23% of total assets, as of June 30, 2018.

 

 

As of March 31, 2019, past due loans totaled $20.8 million, or 2.16% of total loans, as compared to past due loans totaling $7.7 million, or 0.89% of total loans as of June 30, 2018. The increase in past due loans from June 30, 2018 is largely attributed to the thirty-one day month in March, as past due loans totaled $18.3 million, or 1.95% of total loans as of December 31, 2018.

 

As of March 31, 2019, the Company’s Tier 1 leverage capital ratio was 13.6%, compared to 13.1% at June 30, 2018, and the Total capital ratio was 19.3% at both March 31, 2019 and June 30, 2018.

 

In connection with the Reorganization, the Company intends to redeem the $16.5 million unpaid principal balance of junior subordinated debentures issued by the Company in connection with the issuance of trust preferred securities by its three Delaware statutory trust subsidiaries, and the Bank will assume the Company’s obligations under the $15.1 million unpaid principal balance of 6.75% Fixed-to-Floating Rate Subordinated Notes due July 1, 2026. On a pro forma basis as of March 31, 2019, after giving effect to these transactions, the Bank’s Tier 1 leverage capital ratio and Total capital ratio would have been 12.3% and 17.8%, respectively, and the Bank would be considered “well capitalized” under all regulatory capital definitions and in excess of the proposed standards. In addition, the redemption of the junior subordinated debentures is expected to result in a reduction in net income of approximately $5.2 million, after tax, during the quarter in which the redemption occurs, due to the write-off of the carrying value discount on the debentures that was recognized in connection with the merger of FHB Formation LLC with and into the Company in December 2010.

 

Investor Call Information

Richard Wayne, Chief Executive Officer of Northeast Bancorp, and Jean-Pierre Lapointe, Chief Financial Officer of Northeast Bancorp, will host a conference call to discuss third quarter earnings and business outlook at 10:00 a.m. Eastern Time on Tuesday, April 30th. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 2888769. 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; the ability of the Company and the Bank to satisfy the conditions to the completion of the Reorganization; the ability of the Company and the Bank to meet expectations regarding the timing, completion and accounting and tax treatments of the Reorganization; the possibility that any of the anticipated benefits of the Reorganization will not be realized or will not be realized as expected; the failure of the Reorganization to close for any reason; the possibility that the Reorganization may be more expensive to complete than anticipated, including as a result of unexpected factors or events; changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company’s Annual Report on Form 10-K and updated by the Company’s Quarterly Reports on Form 10-Q and other filings submitted to the Securities and Exchange Commission. These statements speak only as of the date of this release and the Company does not undertake any obligation to update or revise any of these forward-looking statements to reflect events or circumstances occurring after the date of this communication or to reflect the occurrence of unanticipated events.

 

 

NBN-F

 

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

 

		March 31, 2019				June 30, 2018
Assets
Cash and due from banks		$	2,507			$	3,889
Short-term investments			150,346				153,513
Total cash and cash equivalents			152,853				157,402
Available-for-sale securities, at fair value			76,938				81,068
Equity securities, at fair value			6,819				6,619
Total investment securities			83,757				87,687
Residential real estate loans held for sale			1,276				3,405
SBA loans held for sale			-				3,750
Total loans held for sale			1,276				7,155
Loans
Commercial real estate			641,157				579,450
Commercial and industrial			231,176				188,852
Residential real estate			86,754				100,256
Consumer			2,566				3,244
Total loans			961,653				871,802
Less: Allowance for loan losses			5,658				4,807
Loans, net			955,995				866,995
Premises and equipment, net			5,786				6,591
Real estate owned and other repossessed collateral, net			2,014				2,233
Federal Home Loan Bank stock, at cost			1,258				1,652
Intangible assets, net			542				867
Loan servicing rights, net			2,943				2,970
Bank-owned life insurance			16,948				16,620
Other assets			8,030				7,564
Total assets		$	1,231,402			$	1,157,736
Liabilities and Shareholders' Equity
Deposits
Demand		$	76,003			$	72,272
Savings and interest checking			104,678				109,637
Money market			296,720				420,886
Time			539,223				352,145
Total deposits			1,016,624				954,940
Federal Home Loan Bank advances			15,000				15,000
Subordinated debt			24,217				23,958
Capital lease obligation			395				605
Other liabilities			21,978				24,803
Total liabilities			1,078,214				1,019,306
Commitments and contingencies			-				-
Shareholders' equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares issued and outstanding at March 31, 2019 and June 30, 2018			-				-
Voting common stock, $1.00 par value, 25,000,000 shares authorized; 8,241,314 and 8,056,527 shares issued and outstanding at March 31, 2019 and June 30, 2018, respectively			8,241				8,057
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized; 800,554 and 882,314 shares issued and outstanding at March 31, 2019 and June 30, 2018, respectively			801				882
Additional paid-in capital			77,732				77,016
Retained earnings			68,274				54,236
Accumulated other comprehensive loss			(1,860	)			(1,761	)
Total shareholders' equity			153,188				138,430
Total liabilities and shareholders' equity		$	1,231,402			$	1,157,736

 

 

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

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

 

		Three Months Ended March 31,								Nine Months Ended March 31,
		2019				2018				2019				2018
Interest and dividend income:
Interest and fees on loans		$	18,796			$	15,408			$	55,256			$	45,292
Interest on available-for-sale securities			444				280				1,229				813
Other interest and dividend income			939				795				2,789				1,818
Total interest and dividend income			20,179				16,483				59,274				47,923
Interest expense:
Deposits			4,447				2,696				12,111				7,001
Federal Home Loan Bank advances			116				118				359				438
Subordinated debt			578				525				1,752				1,550
Obligation under capital lease agreements			5				10				19				31
Total interest expense			5,146				3,349				14,241				9,020
Net interest and dividend income before provision for loan losses			15,033				13,134				45,033				38,903
Provision for loan losses			414				364				1,047				1,156
Net interest and dividend income after provision for loan losses			14,619				12,770				43,986				37,747
Noninterest income:
Fees for other services to customers			408				435				1,240				1,437
Gain on sales of SBA loans			568				560				2,361				1,921
Gain on sales of residential loans held for sale			108				227				387				772
Gain on sales of other loans			582				516				582				537
Net unrealized gain on equity securities			65				-				75				-
Gain (loss) on real estate owned, other repossessed collateral and premises and equipment, net			-				4				(64	)			15
Bank-owned life insurance income			108				108				328				331
Other noninterest income			27				32				56				55
Total noninterest income			1,866				1,882				4,965				5,068
Noninterest expense:
Salaries and employee benefits			5,782				5,329				16,991				15,756
Occupancy and equipment expense			957				1,159				2,692				3,418
Professional fees			483				423				1,516				1,291
Data processing fees			827				619				2,764				1,846
Marketing expense			160				172				413				329
Loan acquisition and collection expense			609				264				1,633				998
FDIC insurance premiums			81				77				242				236
Intangible asset amortization			107				107				325				325
Other noninterest expense			746				825				2,433				2,053
Total noninterest expense			9,752				8,975				29,009				26,252
Income before income tax expense			6,733				5,677				19,942				16,563
Income tax expense			1,905				1,745				5,455				4,741
Net income		$	4,828			$	3,932			$	14,487			$	11,822
Weighted-average shares outstanding:
Basic			9,044,230				8,927,544				9,029,409				8,897,633
Diluted			9,198,077				9,143,177				9,194,346				9,133,515
Earnings per common share:
Basic		$	0.53			$	0.44			$	1.60			$	1.33
Diluted			0.52				0.43				1.58				1.29
Cash dividends declared per common share		$	0.01			$	0.01			$	0.03			$	0.03

 

 

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS

(Unaudited)

(Dollars in thousands)

 

		Three Months Ended March 31,
		2019												2018
						Interest				Average								Interest				Average
		Average				Income/				Yield/				Average				Income/				Yield/
		Balance				Expense				Rate				Balance				Expense				Rate
Assets:
Interest-earning assets:
Investment securities		$	84,318			$	444				2.14	%		$	91,630			$	280				1.24	%
Loans (1) (2) (3)			934,010				18,796				8.16	%			782,957				15,408				7.98	%
Federal Home Loan Bank stock			1,332				26				7.92	%			1,758				23				5.31	%
Short-term investments (4)			152,854				913				2.42	%			202,283				772				1.55	%
Total interest-earning assets			1,172,514				20,179				6.98	%			1,078,628				16,483				6.20	%
Cash and due from banks			2,647												3,079
Other non-interest earning assets			28,399												32,332
Total assets		$	1,203,560											$	1,114,039
Liabilities & Shareholders' Equity:
Interest-bearing liabilities:
NOW accounts		$	68,869			$	59				0.35	%		$	68,716			$	49				0.29	%
Money market accounts			318,423				1,251				1.59	%			428,946				1,437				1.36	%
Savings accounts			35,599				14				0.16	%			38,369				17				0.18	%
Time deposits			501,378				3,123				2.53	%			321,271				1,193				1.51	%
Total interest-bearing deposits			924,269				4,447				1.95	%			857,302				2,696				1.28	%
Federal Home Loan Bank advances			15,000				116				3.14	%			15,000				118				3.19	%
Subordinated debt			24,170				578				9.70	%			23,831				525				8.93	%
Capital lease obligations			419				5				4.84	%			697				10				5.82	%
Total interest-bearing liabilities			963,858				5,146				2.17	%			896,830				3,349				1.51	%
Non-interest bearing liabilities:
Demand deposits and escrow accounts			79,599												78,209
Other liabilities			9,489												7,714
Total liabilities			1,052,946												982,753
Shareholders' equity			150,614												131,286
Total liabilities and shareholders' equity		$	1,203,560											$	1,114,039
Net interest income						$	15,033											$	13,134
Interest rate spread											4.81	%											4.69	%
Net interest margin (5)											5.20	%											4.94	%

 

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

 

 

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS

(Unaudited)

(Dollars in thousands)

 

		Nine Months Ended March 31,
		2019												2018
						Interest				Average								Interest				Average
		Average				Income/				Yield/				Average				Income/				Yield/
		Balance				Expense				Rate				Balance				Expense				Rate
Assets:
Interest-earning assets:
Investment securities		$	85,850			$	1,229				1.91	%		$	93,816			$	813				1.15	%
Loans (1) (2) (3)			912,402				55,256				8.07	%			772,084				45,302				7.82	%
Federal Home Loan Bank stock			1,547				74				6.37	%			1,852				65				4.68	%
Short-term investments (4)			164,841				2,715				2.19	%			169,073				1,753				1.38	%
Total interest-earning assets			1,164,640				59,274				6.78	%			1,036,825				47,933				6.16	%
Cash and due from banks			2,606												2,981
Other non-interest earning assets			30,339												31,924
Total assets		$	1,197,585											$	1,071,730
Liabilities & Shareholders' Equity:
Interest-bearing liabilities:
NOW accounts		$	70,882			$	183				0.34	%		$	69,532			$	152				0.29	%
Money market accounts			366,326				4,259				1.55	%			394,364				3,564				1.20	%
Savings accounts			35,592				42				0.16	%			37,418				42				0.15	%
Time deposits			450,064				7,627				2.26	%			312,268				3,243				1.38	%
Total interest-bearing deposits			922,864				12,111				1.75	%			813,582				7,001				1.15	%
Federal Home Loan Bank advances			15,000				359				3.19	%			17,594				438				3.32	%
Subordinated debt			24,084				1,752				9.69	%			23,745				1,550				8.70	%
Capital lease obligations			490				19				5.17	%			764				31				5.41	%
Total interest-bearing liabilities			962,438				14,241				1.97	%			855,685				9,020				1.40	%
Non-interest bearing liabilities:
Demand deposits and escrow accounts			80,953												80,896
Other liabilities			8,575												7,080
Total liabilities			1,051,966												943,661
Shareholders' equity			145,619												128,069
Total liabilities and shareholders' equity		$	1,197,585											$	1,071,730
Net interest income (5)						$	45,033											$	38,913
Interest rate spread											4.81	%											4.76	%
Net interest margin (6)											5.15	%											5.00	%

 

(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 for the nine months ended March 31, 2018.

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

 

 

NORTHEAST BANCORP AND SUBSIDIARY

SELECTED CONSOLIDATED FINANCIAL HIGHLIGHTS AND OTHER DATA

(Unaudited)

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

 

		Three Months Ended:
		March 31, 2019				December 31, 2018				September 30, 2018				June 30, 2018				March 31, 2018
Net interest income		$	15,033			$	15,643			$	14,359			$	14,408			$	13,134
Provision for loan losses			414				101				532				254				364
Noninterest income			1,866				1,545				1,554				1,959				1,882
Noninterest expense			9,752				9,903				9,355				9,478				8,975
Net income			4,828				5,125				4,534				4,344				3,932
Weighted-average common shares outstanding:
Basic			9,044,230				9,048,397				8,995,925				8,934,038				8,927,544
Diluted			9,198,077				9,201,557				9,183,729				9,116,157				9,143,177
Earnings per common share:
Basic		$	0.53			$	0.57			$	0.50			$	0.49			$	0.44
Diluted			0.52				0.56				0.49				0.48				0.43
Dividends declared per common share			0.01				0.01				0.01				0.01				0.01
Return on average assets			1.63	%			1.70	%			1.51	%			1.55	%			1.43	%
Return on average equity			13.00	%			13.94	%			12.81	%			12.97	%			12.15	%
Net interest rate spread (1)			4.81	%			5.00	%			4.61	%			5.02	%			4.69	%
Net interest margin (2)			5.20	%			5.33	%			4.93	%			5.28	%			4.94	%
Efficiency ratio (non-GAAP) (3)			57.71	%			57.62	%			58.79	%			57.91	%			59.77	%
Noninterest expense to average total assets			3.29	%			3.28	%			3.12	%			3.37	%			3.27	%
Average interest-earning assets to average interest-bearing liabilities			121.65	%			120.67	%			120.72	%			120.52	%			120.27	%

 

 

		As of:
		March 31, 2019				December 31, 2018				September 30, 2018				June 30, 2018				March 31, 2018
Nonperforming loans:
Originated portfolio:
Residential real estate		$	2,169			$	2,445			$	2,633			$	2,914			$	3,116
Commercial real estate			3,336				2,764				1,703				1,499				1,408
Home equity			148				150				151				298				255
Commercial and industrial			1,495				1,420				1,454				1,368				636
Consumer			236				216				185				134				136
Total originated portfolio			7,384				6,995				6,126				6,213				5,551
Total purchased portfolio			5,366				5,351				5,375				5,745				8,063
Total nonperforming loans			12,750				12,346				11,501				11,958				13,614
Real estate owned and other repossessed collateral, net			2,014				1,463				1,549				2,233				947
Total nonperforming assets		$	14,764			$	13,809			$	13,050			$	14,191			$	14,561
Past due loans to total loans			2.16	%			1.95	%			1.09	%			0.89	%			1.37	%
Nonperforming loans to total loans			1.33	%			1.32	%			1.30	%			1.37	%			1.67	%
Nonperforming assets to total assets			1.20	%			1.16	%			1.08	%			1.23	%			1.25	%
Allowance for loan losses to total loans			0.59	%			0.57	%			0.60	%			0.55	%			0.57	%
Allowance for loan losses to nonperforming loans			44.38	%			42.99	%			45.98	%			40.20	%			34.46	%
Commercial real estate loans to total capital (4)			251.02	%			242.38	%			230.48	%			200.74	%			186.07	%
Net loans to core deposits (5)			94.19	%			94.84	%			87.17	%			91.54	%			83.65	%
Purchased loans to total loans, including held for sale			33.27	%			35.17	%			33.75	%			33.10	%			31.02	%
Equity to total assets			12.44	%			12.44	%			11.81	%			11.96	%			11.47	%
Common equity tier 1 capital ratio			16.23	%			16.04	%			16.50	%			16.02	%			16.48	%
Total capital ratio			19.33	%			19.15	%			19.81	%			19.28	%			19.92	%
Tier 1 leverage capital ratio			13.58	%			13.20	%			12.83	%			13.12	%			12.88	%
Total shareholders' equity		$	153,188			$	148,491			$	143,391			$	138,430			$	133,787
Less: Preferred stock			-				-				-				-				-
Common shareholders' equity			153,188				148,491				143,391				138,430				133,787
Less: Intangible assets (6)			(3,485	)			(3,583	)			(3,768	)			(3,837	)			(3,973	)
Tangible common shareholders' equity (non-GAAP)		$	149,703			$	144,908			$	139,623			$	134,593			$	129,814
Common shares outstanding			9,041,868				9,048,863				9,047,390				8,938,841				8,925,399
Book value per common share		$	16.94			$	16.41			$	15.85			$	15.49			$	14.99
Tangible book value per share (non-GAAP) (7)			16.56				16.01				15.43				15.06				14.54

 

(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.