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 24, 2014

 

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:

 

o  Written communications pursuant to Rule 425 under the Securities Act

 

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

 

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

 

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

 

 

 



 

Item 2.02                                           Results of Operations and Financial Condition

 

On July 24, 2014, Northeast Bancorp, a Maine corporation (the “Company”), issued a press release announcing its earnings for the fourth quarter of fiscal 2014 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 24, 2014

 

2



 

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/ Claire S. Bean

 

Name:

Claire S. Bean

 

Title:

Chief Financial Officer

 

 

Date: July 24, 2014

 

3



 

EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release dated July 24, 2014

 

4


Exhibit 99.1

 

FOR IMMEDIATE RELEASE

 

 

 

 

GRAPHIC

For More Information:

 

 

Claire S. Bean, CFO & COO

 

 

Northeast Bank, 500 Canal Street, Lewiston, ME 04240

 

 

207.786.3245 ext. 3202

 

 

www.northeastbank.com

 

 

 

Northeast Bancorp Reports Fourth Quarter Results, Declares Dividend

 

Lewiston, ME (July 24, 2014) – 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 $542 thousand, or $0.05 per diluted common share, for the quarter ended June 30, 2014, compared to net income available to common shareholders of $205 thousand, or $0.02 per diluted common share, for the quarter ended June 30, 2013. Net income available to common shareholders for the year ended June 30, 2014 was $2.7 million, compared to $4.1 million for the year ended June 30, 2013.

 

The current quarter and year included several non-recurring items, related principally to severance costs, one-time costs associated with the Bank’s core systems conversion and a legal settlement recovery. Excluding these items, which the Company considers to be non-core, net operating earnings were $1.1 million, or $0.11 per share, for the quarter and $3.6 million, or $0.35 per share, for the year ended June 30, 2014. Reported net income and net operating earnings for the quarters and years ended June 30, 2014 and 2013, respectively, are set forth below:

 

 

 

Reconciliation of Net Income Available to Common Shareholders (GAAP) to Net Operating Earnings
(non-GAAP)(1)

 

 

 

Three Months Ended June 30,

 

Year Ended June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

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

 

Net income available to common shareholders (GAAP)

 

$

542

 

$

205

 

$

2,692

 

$

4,065

 

Items excluded from operating earnings, net of tax:

 

 

 

 

 

 

 

 

 

Discontinued operations

 

 

41

 

8

 

(125

)

Severance expense

 

407

 

203

 

808

 

203

 

Software conversion expense

 

148

 

 

291

 

 

Legal settlement expense and related professional fees

 

 

672

 

(165

)

672

 

Total after-tax items

 

555

 

916

 

942

 

750

 

Net operating earnings (non-GAAP)

 

$

1,097

 

$

1,121

 

$

3,634

 

$

4,815

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

10,314,197

 

10,446,643

 

10,404,784

 

10,409,588

 

 

 

 

 

 

 

 

 

 

 

Reported basic earnings per share (GAAP)

 

$

0.05

 

$

0.02

 

$

0.26

 

$

0.39

 

Items excluded from operating earnings

 

0.06

 

0.09

 

0.09

 

0.07

 

Net operating earnings per share (non-GAAP)

 

$

0.11

 

$

0.11

 

$

0.35

 

$

0.46

 

 


(1) Management believes operating earnings, which exclude non-core items, provide a more meaningful representation of the Company’s performance.

 

The Board of Directors has declared a cash dividend of $0.01 per share, payable on August 21, 2014 to shareholders of record as of August 7, 2014.

 

“It was a very productive and busy quarter,” said Rick Wayne, President and Chief Executive Officer of Northeast. “We closed $75 million of loans, including commercial loan purchases and originations totaling $45 million, while maintaining sound asset quality.  We generated a return of 12.2% on our purchased loan book, supporting a net interest margin of 4.75% for the quarter.  We significantly enhanced our delivery platform with the successful completion of our core systems conversion; this achievement and the restructuring expenses we incurred will help us to better align resources with our business objectives. Looking forward, we believe our significant operational capacity, lending expertise and capital resources leave us well-positioned for growth.”

 



 

At June 30, 2014, total assets were $761.9 million, an increase of $91.3 million, or 13.6%, compared to June 30, 2013. The principal components of the change in the Company’s balance sheet are as follows:

 

1.              The loan portfolio grew by $84.4 million, or 19.0%, compared to June 30, 2013, principally due to net growth of $75.3 million in commercial loans purchased or originated by the Bank’s Loan Acquisition and Servicing Group (“LASG”) and $9.1 million of net growth in loans originated by the Bank’s Community Banking Division.

 

For the quarter ended June 30, 2014, significant loan growth by the LASG was largely offset by runoff, resulting in a net increase in the LASG purchased and originated portfolio of $7.3 million. Purchased loans of $33.6 million produced a net increase of $18.5 million, net of pay-downs.  LASG originated loans totaling $11.5 million were more than offset by pay-downs, in large part due to the payoff of a low-yielding $12 million securities loan.

 

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.

 

Basis for
Regulatory Condition

 

Condition

 

Availability at June 30, 2014

 

 

 

 

 

(Dollars in millions)

 

Total Loans

 

Purchased loans may not exceed 40% of total loans

 

$

13.2

 

Regulatory Capital

 

Commercial real estate loans may not exceed 300% of total risk-based capital

 

$

148.6

 

 

An overview of the LASG portfolio follows.

 

 

 

Three Months Ended June 30,

 

 

 

2014

 

2013

 

 

 

Purchased

 

Originated

 

Total LASG

 

Purchased

 

Originated

 

Total LASG

 

 

 

(Dollars in thousands)

 

Loans purchased or originated during the period:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unpaid principal balance

 

$

38,244

 

$

11,503

 

$

49,747

 

$

51,677

 

$

21,556

 

$

73,233

 

Net investment basis

 

33,556

 

11,503

 

45,059

 

45,783

 

21,556

 

67,339

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan returns during the period:

 

 

 

 

 

 

 

 

 

 

 

 

 

Yield

 

12.15

%

5.43

%

10.13

%

17.30

%

8.92

%

16.21

%

Total Return (1)

 

12.21

%

7.46

%

10.78

%

17.53

%

8.92

%

16.41

%

 

 

 

Year Ended June 30,

 

 

 

2014

 

2013

 

 

 

Purchased

 

Originated

 

Total LASG

 

Purchased

 

Originated

 

Total LASG

 

 

 

(Dollars in thousands)

 

Loans purchased or originated during the period:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unpaid principal balance

 

$

91,288

 

$

66,225

 

$

157,513

 

$

155,216

 

$

37,181

 

$

192,397

 

Net investment basis

 

79,823

 

66,225

 

146,048

 

121,336

 

37,208

 

158,544

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan returns during the period:

 

 

 

 

 

 

 

 

 

 

 

 

 

Yield

 

11.43

%

5.29

%

9.70

%

16.04

%

9.34

%

15.28

%

Total Return (1)

 

11.76

%

5.87

%

10.11

%

18.33

%

9.34

%

17.32

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans as of period end:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unpaid principal balance

 

$

242,631

 

$

77,588

 

$

320,219

 

$

204,276

 

$

38,846

 

$

243,122

 

Net investment basis

 

203,450

 

77,561

 

281,011

 

166,786

 

38,879

 

205,665

 

 


(1) The total return represents scheduled accretion, accelerated accretion, gains on asset sales, and other noninterest income recorded during the period divided by the average invested balance, on an annualized basis.

 

2.              Deposits and borrowings increased by $89.7 million and $1.7 million, respectively, from June 30, 2013.  Non-maturity deposits increased by $10.6 million, or 4.8%, for the year while time deposits grew by 30.1% or $79.1 million. The latter was centered in deposits raised through deposit listing services, which the Bank uses when advantageous to acquire term funding consistent with its asset/liability management objectives.

 

3.              Stockholders’ equity decreased by $1.7 million from June 30, 2013, in part due to common stock dividends of $2.9 million and $2.8 million of common stock repurchases (representing 291,200 shares).

 



 

Net income from continuing operations increased by $296 thousand to $542 thousand for the quarter ended June 30, 2014, compared to the quarter ended June 30, 2013, both results affected by non-core items as noted above. Earnings for the current quarter included the following items of significance:

 

1.              Net interest income before provision for loan losses decreased slightly, by $55 thousand, or less than 1%, for the quarter ended June 30, 2014 compared to the quarter ended June 30, 2013, due to lower transactional interest income from purchased loan payoffs offset by the positive effect of balance sheet growth. Average earning assets increased by $72.4 million, and average loans by $121.3 million, when compared to the fourth quarter of FY 2013.

 

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 June 30, 2013, transactional interest income decreased by $1.1 million, impacting the net interest margin, which declined to 4.75% from 5.32%.  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,

 

 

 

2014

 

2013

 

 

 

Average

 

Interest

 

 

 

Average

 

Interest

 

 

 

 

 

Balance

 

Income

 

Yield

 

Balance

 

Income

 

Yield

 

 

 

(Dollars in thousands)

 

Community Banking Division

 

$

247,802

 

$

3,096

 

5.01

%

$

235,455

 

$

3,376

 

5.75

%

LASG:

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated

 

80,764

 

1,094

 

5.43

%

20,723

 

461

 

8.92

%

Purchased

 

187,391

 

5,677

 

12.15

%

138,445

 

5,971

 

17.30

%

Total LASG

 

268,155

 

6,771

 

10.13

%

159,168

 

6,432

 

16.21

%

Total

 

$

515,957

 

$

9,867

 

7.67

%

$

394,623

 

$

9,808

 

9.97

%

 

 

 

 

 

 

Year Ended June 30,

 

 

 

2014

 

2013

 

 

 

Average

 

Interest

 

 

 

Average

 

Interest

 

 

 

 

 

Balance

 

Income

 

Yield

 

Balance

 

Income

 

Yield

 

 

 

(Dollars in thousands)

 

Community Banking Division

 

$

246,853

 

$

12,926

 

5.24

%

$

252,199

 

$

14,824

 

5.88

%

LASG:

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated

 

69,883

 

3,695

 

5.29

%

14,906

 

1,392

 

9.34

%

Purchased

 

178,377

 

20,388

 

11.43

%

117,205

 

18,801

 

16.04

%

Total LASG

 

248,260

 

24,083

 

9.70

%

132,111

 

20,193

 

15.28

%

Total

 

$

495,113

 

$

37,009

 

7.47

%

$

384,310

 

$

35,017

 

9.11

%

 



 

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 $1.7 million for the quarter ended June 30, 2014, a decrease of $1.1 million from the quarter ended June 30, 2013.  The following table summarizes the total return recognized on the purchased loan portfolio:

 

 

 

Total Return on Purchased Loans

 

 

 

Three Months Ended June 30,

 

 

 

2014

 

2013

 

 

 

Income

 

Return (1)

 

Income

 

Return (1)

 

 

 

(Dollars in thousands)

 

Regularly scheduled interest and accretion

 

$

4,050

 

8.64

%

$

3,237

 

9.38

%

Transactional income:

 

 

 

 

 

 

 

 

 

Gains on loan sales

 

 

0.00

%

80

 

0.23

%

Gain on sale of real estate owned

 

44

 

0.09

%

 

0.00

%

Other noninterest income

 

4

 

0.01

%

 

0.00

%

Accelerated accretion and loan fees

 

1,627

 

3.47

%

2,734

 

7.92

%

Total transactional income

 

1,675

 

3.57

%

2,814

 

8.15

%

Total

 

$

5,725

 

12.21

%

$

6,051

 

17.53

%

 

 

 

Year Ended June 30,

 

 

 

2014

 

2013

 

 

 

Income

 

Return (1)

 

Income

 

Return (1)

 

 

 

(Dollars in thousands)

 

Regularly scheduled interest and accretion

 

$

15,682

 

8.75

%

$

11,038

 

9.35

%

Transactional income:

 

 

 

 

 

 

 

 

 

Gains on loan sales

 

576

 

0.32

%

2,115

 

1.79

%

Gain on sale of real estate owned

 

100

 

0.06

%

684

 

0.58

%

Other noninterest income

 

4

 

0.00

%

36

 

0.03

%

Accelerated accretion and loan fees

 

4,706

 

2.63

%

7,763

 

6.58

%

Total transactional income

 

5,386

 

3.01

%

10,598

 

8.98

%

Total

 

$

21,068

 

11.76

%

$

21,636

 

18.33

%

 


(1) The total return represents scheduled interest and 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.              Quarterly noninterest income of $1.4 million was unchanged compared to the quarter ended June 30, 2013, as a $318 thousand increase in gains on sales of commercial loans offset a $209 thousand reduction in gains realized on sales of residential mortgage loans. The decline in residential loan sale gains was the result of a reduction in refinance activity compared to the prior period.

 

3.              Noninterest expense decreased by $672 thousand for the quarter ended June 30, 2014, compared to the quarter ended June 30, 2013. Variances of significance are:

 

·                  An increase of $296 thousand in salaries and employee benefits, principally related to an increase in severance costs incurred between the two periods. Severance costs of $652 thousand in the current quarter were primarily the result of the elimination of two senior positions in the Community Banking Division and a restructuring of the Bank’s information technology infrastructure in light of the Bank’s core banking systems conversion in May 2014;

·                  An increase of $64 thousand in occupancy and equipment expense, principally related to a higher level of software maintenance and depreciation;

·                  An increase of $91 thousand in data processing, due to the conversion of the Bank’s core software to an outsourced model during the quarter ended June 30, 2014;

·                  A decrease of $271 thousand in marketing expense, due to a reduction in deposit and residential mortgage marketing in fiscal 2014;

·                  A decrease of $145 thousand in loan expense, principally due to lower loan acquisitions and work-out expenses;

·                  Legal settlement expense in the amount of $980 thousand incurred in the fourth quarter of 2013;

·                  An increase of $251 thousand in other noninterest expense, principally due to contract termination costs and one-time non-capital expenses associated with the recent core banking systems conversion.

 



 

4.              The Company’s effective tax rate for the quarter ended June 30, 2014 was 45.9%, compared to 36.9% and 30.5% for the fiscal years ended June 30, 2014 and 2013, respectively. The increase in the quarter was primarily the result of a change in estimated state tax apportionment.  Absent this change, the Company’s annual effective tax rate would have been approximately 33.3%.

 

At June 30, 2014, nonperforming assets totaled $8.9 million, or 1.2% of total assets, compared to $7.0 million, or 1.0% of total assets at June 30, 2013.

 

At June 30, 2014, the Company’s Tier 1 leverage ratio was 15.9%, a decrease from 17.8% at June 30, 2013, and the total risk-based capital ratio was 23.7%, a decrease from 27.5% at June 30, 2013.

 



 

Investor Call Information

 

Richard Wayne, Chief Executive Officer of Northeast Bancorp, and Claire Bean, Chief Financial Officer of Northeast Bancorp, will host a conference call to discuss fourth quarter earnings and business outlook at 9:30 a.m. Eastern Time on Friday, July 25, 2014. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 77324290. The call will be available via live webcast, which can be viewed by accessing the Company’s website at www.northeastbank.com and clicking on the About Us - Investor Relations section. To listen to the webcast, attendees are encouraged to visit the website at least fifteen minutes early to register, download and install any necessary audio software. Please note there will also be a slide presentation that will accompany the webcast. For those who cannot listen to the live broadcast, a replay will be available online for one year at www.northeastbank.com.

 

About Northeast Bancorp

 

Northeast Bancorp (NASDAQ: NBN) is the holding company for Northeast Bank, a full-service bank headquartered in Lewiston, Maine. Northeast Bank offers traditional banking services through its Community Banking Division, which operates ten full-service branches and six loan production offices that serve individuals and businesses located in western and south-central Maine, southern New Hampshire and eastern Massachusetts. Northeast Bank’s Loan Acquisition and Servicing Group purchases and originates commercial loans for the Bank’s portfolio. ableBanking, a division of Northeast Bank, offers savings products to consumers online. Information regarding Northeast Bank can be found on its website at www.northeastbank.com.

 

Non-GAAP Financial Measure

 

In addition to results presented in accordance with generally accepted accounting principles (“GAAP”), this press release contains certain non-GAAP financial measures, including tangible common stockholders’ equity, tangible book value per share, and net operating earnings. Northeast’s management believes that the supplemental non-GAAP information is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names.

 

Statements in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although Northeast believes that these forward-looking statements are based on reasonable estimates and assumptions, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and other factors. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company’s control. The Company’s actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, changes in interest rates and real estate values; competitive pressures from other financial institutions; the effects of continuing weakness in general economic conditions on a national basis or in the local markets in which the Company operates, including changes 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 that intangibles recorded in the Company’s financial statements will become impaired; changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company’s Annual Report on Form 10-K and updated by the Company’s Quarterly Reports on Form 10-Q and other filings submitted to the Securities and Exchange Commission. These statements speak only as of the date of this release and the Company does not undertake any obligation to update or revise any of these forward-looking statements to reflect events or circumstances occurring after the date of this communication or to reflect the occurrence of unanticipated events.

 

NBN-F

 



 

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

 

 

 

June 30, 2014

 

June 30, 2013

 

Assets

 

 

 

 

 

Cash and due from banks

 

$

3,372

 

$

3,238

 

Short-term investments

 

78,887

 

62,696

 

Total cash and cash equivalents

 

82,259

 

65,934

 

 

 

 

 

 

 

Available-for-sale securities, at fair value

 

113,881

 

121,597

 

Loans held for sale

 

11,945

 

8,594

 

 

 

 

 

 

 

Loans

 

 

 

 

 

Commercial real estate

 

316,098

 

264,490

 

Residential real estate

 

148,634

 

127,829

 

Commercial and industrial

 

41,800

 

29,720

 

Consumer

 

9,884

 

13,337

 

Total loans

 

516,416

 

435,376

 

Less: Allowance for loan losses

 

1,367

 

1,143

 

Loans, net

 

515,049

 

434,233

 

 

 

 

 

 

 

Premises and equipment, net

 

9,135

 

10,075

 

Real estate owned and other possessed collateral, net

 

1,991

 

2,134

 

Regulatory stock, at cost

 

4,102

 

5,721

 

Intangible assets, net

 

2,798

 

3,544

 

Bank owned life insurance

 

14,836

 

14,385

 

Other assets

 

5,935

 

4,422

 

Total assets

 

$

761,931

 

$

670,639

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Deposits

 

 

 

 

 

Demand

 

$

50,140

 

$

46,425

 

Savings and interest checking

 

98,340

 

90,970

 

Money market

 

83,901

 

84,416

 

Time

 

341,948

 

262,812

 

Total deposits

 

574,329

 

484,623

 

 

 

 

 

 

 

Federal Home Loan Bank advances

 

42,824

 

28,040

 

Wholesale repurchase agreements

 

10,199

 

25,397

 

Short-term borrowings

 

2,984

 

625

 

Junior subordinated debentures issued to affiliated trusts

 

8,440

 

8,268

 

Capital lease obligation

 

1,558

 

1,739

 

Other liabilities

 

9,531

 

8,145

 

Total liabilities

 

649,865

 

556,837

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares issued and outstanding at June 30, 2014 and June 30, 2013

 

 

 

Voting common stock, $1.00 par value, 25,000,000 shares authorized; 9,260,331 and 9,565,680 shares issued and outstanding at June 30, 2014 and June 30, 2013, respectively

 

9,260

 

9,566

 

Non-voting common stock, $1.00 par value, 3,000,000 shares authorized; 880,963 shares issued and outstanding at June 30, 2014 and June 30, 2013

 

881

 

881

 

Additional paid-in capital

 

90,914

 

92,745

 

Retained earnings

 

12,294

 

12,524

 

Accumulated other comprehensive loss

 

(1,283

)

(1,914

)

Total stockholders’ equity

 

112,066

 

113,802

 

Total liabilities and stockholders’ equity

 

$

761,931

 

$

670,639

 

 



 

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,

 

 

 

2014

 

2013

 

2014

 

2013

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

Interest on loans

 

$

9,867

 

$

9,808

 

$

37,009

 

$

35,017

 

Interest on available-for-sale securities

 

251

 

209

 

1,048

 

1,138

 

Other interest and dividend income

 

106

 

105

 

314

 

388

 

Total interest and dividend income

 

10,224

 

10,122

 

38,371

 

36,543

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

1,075

 

1,008

 

4,123

 

4,098

 

Federal Home Loan Bank advances

 

326

 

217

 

1,301

 

967

 

Wholesale repurchase agreements

 

72

 

136

 

357

 

651

 

Short-term borrowings

 

7

 

4

 

24

 

19

 

Junior subordinated debentures issued to affiliated trusts

 

240

 

195

 

765

 

769

 

Obligation under capital lease agreements

 

20

 

23

 

83

 

92

 

Total interest expense

 

1,740

 

1,583

 

6,653

 

6,596

 

 

 

 

 

 

 

 

 

 

 

Net interest and dividend income before provision for loan losses

 

8,484

 

8,539

 

31,718

 

29,947

 

Provision for loan losses

 

124

 

301

 

531

 

1,122

 

Net interest and dividend income after provision for loan losses

 

8,360

 

8,238

 

31,187

 

28,825

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

Fees for other services to customers

 

398

 

446

 

1,644

 

1,648

 

Net securities gains

 

 

 

0

 

792

 

Gain on sales of loans held for sale

 

505

 

714

 

1,650

 

3,009

 

Gain on sales of portfolio loans

 

403

 

85

 

1,006

 

2,311

 

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

 

13

 

65

 

63

 

746

 

Bank-owned life insurance income

 

109

 

119

 

451

 

718

 

Other noninterest income

 

9

 

14

 

55

 

82

 

Total noninterest income

 

1,437

 

1,443

 

4,869

 

9,306

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

5,162

 

4,866

 

17,786

 

17,036

 

Occupancy and equipment expense

 

1,336

 

1,272

 

5,448

 

4,626

 

Professional fees

 

316

 

286

 

1,285

 

1,450

 

Data processing fees

 

374

 

283

 

1,209

 

972

 

Marketing expense

 

86

 

357

 

311

 

1,035

 

Loan acquisition and collection expense

 

336

 

481

 

1,539

 

1,766

 

FDIC insurance premiums

 

126

 

90

 

480

 

454

 

Intangible asset amortization

 

164

 

208

 

746

 

943

 

Legal settlement expense (recovery)

 

 

980

 

(250

)

980

 

Other noninterest expense

 

895

 

644

 

3,223

 

2,693

 

Total noninterest expense

 

8,795

 

9,467

 

31,777

 

31,955

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before income tax expense

 

1,002

 

214

 

4,279

 

6,176

 

Income tax expense (benefit)

 

460

 

(32

)

1,579

 

1,881

 

Net Income from continuing operations

 

542

 

246

 

2,700

 

4,295

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations before income tax expense (benefit)

 

 

(64

)

(12

)

189

 

Income tax expense (benefit)

 

 

(23

)

(4

)

64

 

Net income (loss) from discontinued operations

 

 

(41

)

(8

)

125

 

Net income

 

$

542

 

$

205

 

$

2,692

 

$

4,420

 

Net income available to common stockholders

 

$

542

 

$

205

 

$

2,692

 

$

4,065

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

10,314,197

 

10,446,643

 

10,404,784

 

10,409,588

 

Diluted

 

10,314,197

 

10,446,643

 

10,404,784

 

10,409,588

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.05

 

$

0.02

 

$

0.26

 

$

0.39

 

Income from discontinued operations

 

0.00

 

0.00

 

0.00

 

0.00

 

Net Income

 

$

0.05

 

$

0.02

 

$

0.26

 

$

0.39

 

Diluted:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.05

 

$

0.02

 

$

0.26

 

$

0.39

 

Income from discontinued operations

 

0.00

 

0.00

 

0.00

 

0.00

 

Net Income

 

$

0.05

 

$

0.02

 

$

0.26

 

$

0.39

 

Cash dividends declared per common share

 

$

0.01

 

$

0.09

 

$

0.28

 

$

0.36

 

 



 

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS

(Unaudited)

(Dollars in thousands)

 

 

 

Three Months Ended June 30,

 

 

 

2014

 

2013

 

 

 

 

 

Interest

 

Average

 

 

 

Interest

 

Average

 

 

 

Average

 

Income/

 

Yield/

 

Average

 

Income/

 

Yield/

 

 

 

Balance

 

Expense

 

Rate

 

Balance

 

Expense

 

Rate

 

 

 

(Dollars in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities

 

$

112,226

 

$

251

 

0.90

%

$

126,272

 

$

209

 

0.66

%

Loans (1) (2)

 

515,957

 

9,867

 

7.67

%

394,623

 

9,808

 

9.97

%

Regulatory stock

 

5,316

 

55

 

4.15

%

5,253

 

33

 

2.52

%

Short-term investments (3)

 

83,194

 

51

 

0.25

%

118,113

 

72

 

0.24

%

Total interest-earning assets

 

716,693

 

10,224

 

5.72

%

644,261

 

10,122

 

6.30

%

Cash and due from banks

 

2,606

 

 

 

 

 

2,978

 

 

 

 

 

Other non-interest earning assets

 

32,643

 

 

 

 

 

35,982

 

 

 

 

 

Total assets

 

$

751,942

 

 

 

 

 

$

683,221

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities & Stockholders’ Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

NOW accounts

 

$

62,427

 

$

41

 

0.26

%

$

56,650

 

$

38

 

0.27

%

Money market accounts

 

85,119

 

110

 

0.52

%

85,585

 

117

 

0.55

%

Savings accounts

 

35,080

 

11

 

0.13

%

32,868

 

11

 

0.13

%

Time deposits

 

340,214

 

913

 

1.08

%

270,342

 

842

 

1.25

%

Total interest-bearing deposits

 

522,840

 

1,075

 

0.82

%

445,445

 

1,008

 

0.91

%

Short-term borrowings

 

2,051

 

7

 

1.37

%

1,697

 

4

 

0.95

%

Borrowed funds

 

54,522

 

418

 

3.08

%

58,923

 

376

 

2.56

%

Junior subordinated debentures

 

8,416

 

240

 

11.44

%

8,245

 

195

 

9.49

%

Total interest-bearing liabilities

 

587,829

 

1,740

 

1.19

%

514,310

 

1,583

 

1.23

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits and escrow accounts

 

51,562

 

 

 

 

 

46,784

 

 

 

 

 

Other liabilities

 

2,955

 

 

 

 

 

6,900

 

 

 

 

 

Total liabilities

 

642,346

 

 

 

 

 

567,994

 

 

 

 

 

Stockholders’ equity

 

109,596

 

 

 

 

 

115,227

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

751,942

 

 

 

 

 

$

683,221

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

 

$

8,484

 

 

 

 

 

$

8,539

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

 

 

 

4.53

%

 

 

 

 

5.07

%

Net interest margin (4)

 

 

 

 

 

4.75

%

 

 

 

 

5.32

%

 


(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.

 



 

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS

(Unaudited)

(Dollars in thousands)

 

 

 

Year Ended June 30,

 

 

 

2014

 

2013

 

 

 

 

 

Interest

 

Average

 

 

 

Interest

 

Average

 

 

 

Average

 

Income/

 

Yield/

 

Average

 

Income/

 

Yield/

 

 

 

Balance

 

Expense

 

Rate

 

Balance

 

Expense

 

Rate

 

 

 

(Dollars in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities

 

$

115,849

 

$

1,048

 

0.90

%

$

131,199

 

$

1,138

 

0.87

%

Loans (1) (2)

 

495,113

 

37,009

 

7.47

%

384,310

 

35,017

 

9.11

%

Regulatory stock

 

5,620

 

123

 

2.19

%

5,398

 

75

 

1.39

%

Short-term investments (3)

 

78,838

 

191

 

0.24

%

127,781

 

313

 

0.24

%

Total interest-earning assets

 

695,420

 

38,371

 

5.52

%

648,688

 

36,543

 

5.63

%

Cash and due from banks

 

2,876

 

 

 

 

 

3,065

 

 

 

 

 

Other non-interest earning assets

 

33,958

 

 

 

 

 

37,206

 

 

 

 

 

Total assets

 

$

732,254

 

 

 

 

 

$

688,959

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities & Stockholders’ Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

NOW accounts

 

$

61,146

 

$

162

 

0.26

%

$

55,763

 

$

153

 

0.27

%

Money market accounts

 

85,333

 

447

 

0.52

%

63,931

 

337

 

0.53

%

Savings accounts

 

34,391

 

44

 

0.13

%

31,939

 

44

 

0.14

%

Time deposits

 

314,848

 

3,470

 

1.10

%

280,059

 

3,564

 

1.27

%

Total interest-bearing deposits

 

495,718

 

4,123

 

0.83

%

431,692

 

4,098

 

0.95

%

Short-term borrowings

 

2,230

 

24

 

1.08

%

1,472

 

19

 

1.29

%

Borrowed funds

 

58,468

 

1,741

 

2.98

%

75,633

 

1,710

 

2.26

%

Junior subordinated debentures

 

8,352

 

765

 

9.16

%

8,185

 

769

 

9.40

%

Total interest-bearing liabilities

 

564,768

 

6,653

 

1.18

%

516,982

 

6,596

 

1.28

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits and escrow accounts

 

50,890

 

 

 

 

 

49,343

 

 

 

 

 

Other liabilities

 

3,962

 

 

 

 

 

5,982

 

 

 

 

 

Total liabilities

 

619,620

 

 

 

 

 

572,307

 

 

 

 

 

Stockholders’ equity

 

112,634

 

 

 

 

 

116,652

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

732,254

 

 

 

 

 

$

688,959

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

 

$

31,718

 

 

 

 

 

$

29,947

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

 

 

 

4.34

%

 

 

 

 

4.36

%

Net interest margin (4)

 

 

 

 

 

4.56

%

 

 

 

 

4.62

%

 


(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.

 



 

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, 2014

 

March 31, 2014

 

December 31, 2013

 

September 30, 2013

 

June 30, 2013

 

Net interest income

 

$

8,484

 

$

7,112

 

$

9,017

 

$

7,107

 

$

8,539

 

Provision for loan losses

 

124

 

180

 

151

 

77

 

301

 

Noninterest income

 

1,437

 

1,308

 

835

 

1,288

 

1,443

 

Noninterest expense

 

8,795

 

7,516

 

7,614

 

7,852

 

9,467

 

Net income from continuing operations

 

542

 

437

 

1,411

 

310

 

247

 

Net income

 

542

 

437

 

1,393

 

320

 

205

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

10,314,197

 

10,432,494

 

10,432,833

 

10,440,513

 

10,446,643

 

Diluted

 

10,314,197

 

10,432,494

 

10,432,833

 

10,440,513

 

10,446,643

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.05

 

$

0.04

 

$

0.13

 

$

0.03

 

$

0.02

 

Diluted

 

 

0.05

 

 

0.04

 

0.13

 

0.03

 

0.02

 

Dividends per common share

 

0.01

 

0.09

 

0.09

 

0.09

 

0.09

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

0.29

%

0.24

%

0.76

%

0.18

%

0.12

%

Return on average equity

 

1.98

%

1.55

%

4.86

%

1.12

%

0.71

%

Net interest rate spread (1) 

 

4.53

%

3.87

%

4.94

%

3.99

%

5.07

%

Net interest margin (2)

 

4.75

%

4.08

%

5.16

%

4.24

%

5.32

%

Efficiency ratio (3)

 

88.65

%

89.26

%

77.28

%

93.53

%

94.84

%

Noninterest expense to average total assets

 

4.69

%

4.08

%

4.13

%

4.43

%

5.56

%

Average interest-earning assets to average interest-bearing liabilities

 

121.92

%

122.17

%

123.85

%

124.70

%

125.27

%

 

 

 

As of:

 

 

 

June 30, 2014

 

March 31, 2014

 

December 31, 2013

 

September 30, 2013

 

June 30, 2013

 

Nonperforming loans:

 

 

 

 

 

 

 

 

 

 

 

Originated portfolio:

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

$

1,303

 

$

1,678

 

$

1,895

 

$

1,945

 

$

2,346

 

Commercial real estate

 

1,162

 

798

 

487

 

471

 

473

 

Home equity

 

160

 

214

 

204

 

229

 

334

 

Commercial business

 

5

 

 

61

 

62

 

110

 

Consumer

 

124

 

152

 

259

 

259

 

136

 

Total originated portfolio

 

2,756

 

2,842

 

2,906

 

2,966

 

3,399

 

Total purchased portfolio

 

4,114

 

4,582

 

3,245

 

2,553

 

1,457

 

Total nonperforming loans

 

6,870

 

7,424

 

6,151

 

5,519

 

4,856

 

Real estate owned and other possessed collateral, net

 

1,991

 

2,000

 

3,211

 

3,413

 

2,134

 

Total nonperforming assets

 

$

8,861

 

$

9,424

 

$

9,362

 

$

8,932

 

$

6,990

 

 

 

 

 

 

 

 

 

 

 

 

 

Past due loans to total loans

 

1.14

%

1.44

%

1.57

%

1.38

%

1.68

%

Nonperforming loans to total loans

 

1.33

%

1.44

%

1.23

%

1.14

%

1.12

%

Nonperforming assets to total assets

 

1.16

%

1.26

%

1.28

%

1.23

%

1.04

%

Allowance for loan losses to total loans

 

0.26

%

0.26

%

0.27

%

0.25

%

0.26

%

Allowance for loan losses to nonperforming loans

 

19.90

%

18.12

%

21.95

%

22.18

%

23.54

%

 

 

 

 

 

 

 

 

 

 

 

 

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

 

176.98

%

175.10

%

170.69

%

171.30

%

159.07

%

Net loans to core deposits (5)

 

92.13

%

93.18

%

95.10

%

93.04

%

92.94

%

Purchased loans to total loans, including held for sale

 

38.51

%

35.29

%

34.89

%

36.29

%

37.57

%

Equity to total assets

 

14.71

%

15.18

%

15.61

%

15.70

%

16.97

%

Tier 1 leverage capital ratio

 

15.90

%

16.28

%

16.66

%

17.23

%

17.78

%

Total risk-based capital ratio

 

23.74

%

24.21

%

24.61

%

25.63

%

27.54

%

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

$

112,066

 

$

114,008

 

$

114,383

 

$

113,846

 

$

113,802

 

Less: Preferred stock

 

 

 

 

 

 

Common stockholders’ equity

 

112,066

 

114,008

 

114,383

 

113,846

 

113,802

 

Less: Intangible assets

 

(2,798

)

(2,962

)

(3,124

)

(3,334

)

(3,544

)

Tangible common stockholders’ equity (non-GAAP)

 

$

109,268

 

$

111,046

 

$

111,259

 

$

110,512

 

$

110,258

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding

 

10,141,294

 

10,432,494

 

10,432,494

 

10,433,550

 

10,446,643

 

Book value per common share

 

$

11.05

 

$

10.93

 

$

10.96

 

$

10.91

 

$

10.89

 

Tangible book value per share (non-GAAP) (6)

 

10.77

 

10.64

 

10.66

 

10.59

 

10.55

 

 

 

 

Reconciliation of Net Income Available to Common Shareholders (GAAP) to Net Operating Earnings (non-GAAP) (7)

 

 

 

Three Months Ended:

 

 

 

June 30, 2014

 

March 31, 2014

 

December 31, 2013

 

September 30, 2013

 

June 30, 2013

 

Net income available to common shareholders (GAAP)

 

$

542

 

$

437

 

$

1,393

 

$

320

 

$

205

 

Items excluded from operating earnings, net of tax:

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations

 

 

 

18

 

(10

)

41

 

Severance expense

 

407

 

35

 

 

366

 

203

 

Software conversion expenses

 

148

 

84

 

59

 

 

 

Legal settlement expense and related professional fees

 

 

 

 

(165

)

672

 

Total after-tax items

 

555

 

119

 

77

 

191

 

916

 

Net operating earnings (non-GAAP)

 

$

1,097

 

$

556

 

$

1,470

 

$

511

 

$

1,121

 

Net operating earnings per share - basic (non-GAAP)

 

$

0.11

 

$

0.05

 

$

0.14

 

$

0.05

 

$

0.11

 

 


(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.