UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): |
October 24, 2017 |
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Commission File No. 1-14588 |
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NORTHEAST BANCORP
(Exact name of registrant as specified in its charter)
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Maine |
01-0425066 |
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(State or other jurisdiction of incorporation) |
(IRS Employer Identification Number) |
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500 Canal Street |
04240 |
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(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. ☐
Explanatory Note
On October 24, 2017, Northeast Bancorp, a Maine corporation (the "Company"), filed a Form 8-K reporting its earnings for the first quarter of fiscal 2018 (the “Original Form 8-K”). The full text of the press release announcing the first quarter earnings was included as an Exhibit 99.1 to the Original Form 8-K. Subsequent to filing the Original Form 8-K the Company identified that the reported earnings did not reflect the Company’s adoption of ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”) in the first quarter of fiscal 2018. The purpose of this Form 8-K/A is to reflect the adoption of ASU 2016-09 in the Company’s earnings for first quarter of fiscal 2018.
Upon adoption of ASU 2016-09, the Company must recognize all excess tax benefits and deficiencies relating to the vesting or exercising of share-based payments as income tax benefit or expense in the income statement in the reporting period in which they occur. Previously, such excess tax benefits would have been recognized as additional paid-in capital. Additionally, ASU 2016-09 may create significant volatility in the Company’s effective tax rate as the excess tax benefit treatment will vary from quarter to quarter as a function of the volume of share-based payments vested or exercised and the market value of the Company’s stock at the time of vest in comparison to the compensation cost recognized in the financial statements. The standard provides that the tax effects of exercised or vested awards will be treated as a discrete item in the reporting period in which they occur. Thus, the tax effect of excess benefits and deficiencies on a company’s tax rate will not be part of the overall projected effective tax rate. For the three months ended September 30, 2017, the Company recognized an income tax benefit of $818 thousand as a result of the adoption of ASU 2016-09, increasing net income to $4.6 million for the quarter.
In addition to the excess tax benefit treatment, the assumed proceeds from applying the treasury stock method when computing earnings per share is amended to exclude the amount of excess tax benefits that would have been previously recognized as additional paid-in capital, which increased diluted weighted average common shares outstanding by 40,966 shares to 9,089,936 shares.
For the three months ended September 30, 2017, the adoption of ASU 2016-09 reduced the Company's income tax expense by $818 thousand, decreased the Company’s accrued federal and state taxes payable (included in other liabilities on the consolidated balance sheets) by $818 thousand and increased basic and diluted earnings per share to $0.52 and $0.50, respectively.
The following table summarizes the changes in the earnings reported in the Original Form 8-K:
| Adoption of ASU 2016-09 | ||||||||
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Amended |
Previously Filed |
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(Dollars in thousands, except share and per share data) |
||||||||
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Other liabilities |
$ | 15,685 | $ | 16,503 | ||||
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Total liabilities |
922,925 | 923,743 | ||||||
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Retained earnings |
42,641 | 41,823 | ||||||
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Total shareholders’ equity |
126,712 | 125,894 | ||||||
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Income tax expense |
$ | 1,615 | $ | 2,433 | ||||
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Net income |
4,586 | 3,768 | ||||||
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Diluted weighted average shares outstanding |
9,089,936 | 9,048,970 | ||||||
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Basic earnings per share |
$ | 0.52 | $ | 0.43 | ||||
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Diluted earnings per share |
0.50 | 0.42 | ||||||
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Return on average assets |
1.71 | % | 1.40 | % | ||||
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Return on average equity |
14.61 | % | 12.01 | % | ||||
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Commercial real estate loans to risk-based capital |
166.15 | % | 167.03 | % | ||||
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Equity to total assets |
12.07 | % | 11.99 | % | ||||
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Common equity tier 1 capital ratio |
16.50 | % | 16.40 | % | ||||
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Total capital ratio |
20.04 | % | 19.93 | % | ||||
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Tier 1 leverage capital ratio |
12.77 | % | 12.70 | % | ||||
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Book value per common share |
$ | 14.25 | $ | 14.16 | ||||
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Tangible book value per share (non-GAAP) |
13.79 | 13.69 | ||||||
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Availability of non-owner occupied commercial real estate loans |
$ | 207,078 | $ | 204,625 | ||||
Item 2.02 Results of Operations and Financial Condition
On November 6, 2017, the Company issued a press release announcing its revised earnings for the first quarter of fiscal 2018. The full text of the press release is attached hereto as Exhibit 99.1 and 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 7.01 Regulation FD Disclosure
The disclosure made under Item 2.02 above is incorporated herein by reference in its entirety. Additionally on November 6, 2017 the Company posted to its website a revised presentation for the investor call held on October 25, 2017. The revised presentation is attached hereto as Exhibit 99.2 and incorporated herein by reference.
The information contained herein, including the exhibit attached hereto, is furnished pursuant to Item 7.01 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 November 6, 2017 | |
| 99.2 | Revised Fiscal 2018 Q1 Investor Call Presentation dated November 6, 2017 |
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.
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NORTHEAST BANCORP |
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By: /s/ Brian Pinheiro |
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Name: |
Brian Pinheiro |
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Title: |
Interim Chief Financial Officer and Chief Risk Officer |
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Date: November 6, 2017
EXHIBIT INDEX
| Exhibit No |
|
Description
|
| 99.1 | Press Release dated November 6, 2017 | |
| 99.2 | Revised Fiscal 2018 Q1 Investor Call Presentation dated November 6, 2017 |
Exhibit 99.1
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FOR IMMEDIATE RELEASE
For More Information: |
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Brian Pinheiro, Interim Chief Financial Officer and Chief Risk Officer Northeast Bank, 500 Canal Street, Lewiston, ME 04240 207.786.3245 ext. 3223 www.northeastbank.com
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**The press release dated October 24, 2017 has been amended to reflect the adoption of ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). For the quarter ended September 30, 2017, the adoption of ASU 2016-09 resulted in the recognition of an income tax benefit of $818 thousand, which increased net income to $4.6 million, and increased earnings per diluted common share by $0.08 to $0.50 per diluted common share. See “Explanatory Note” in Form 8-K/A filed on November 6, 2017 for further detail.
Northeast Bancorp Reports Revised First Quarter Results and Declares Dividend
Lewiston, ME (November 6, 2017) ‒ 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 revised net income of $4.6 million, or $0.50 per diluted common share, for the quarter ended September 30, 2017, compared to net income of $1.8 million, or $0.19 per diluted common share, for the quarter ended September 30, 2016.
On October 24, 2017, the Board of Directors declared a cash dividend of $0.01 per share, payable on November 20, 2017 to shareholders of record as of November 6, 2017.
“We began our fiscal year with a solid quarter,” said Richard Wayne, President and Chief Executive Officer. “Our earnings of $0.50 per diluted common share, compared to $0.19 per diluted share in the quarter ended September 30, 2016, were positively affected by transactional income from loan payoffs in the purchased portfolio and gains from the sale of SBA and residential loans. This helped us achieve a return on equity of 14.6%, compared to 6.1% in the quarter ended September 30, 2016, as well as a return on assets of 1.7% and an efficiency ratio of 57.1%.”
As of September 30, 2017, total assets were $1.0 billion, a decrease of $27.2 million, or 2.5%, from total assets of $1.1 billion as of June 30, 2017. The principal components of the change in the balance sheet follow:
|
1. |
$74.4 million of loans were originated or acquired during the quarter ended September 30, 2017. Loans generated by the Bank's Loan Acquisition and Servicing Group ("LASG") totaled $44.5 million, which consisted of $3.7 million of purchased loans, at an average price of 84.6% of unpaid principal balance, and $40.8 million of originated loans. The Bank's Small Business Administration and United States Department of Agriculture ("SBA") Division closed $7.8 million of new loans during the quarter, of which $5.9 million were funded. In addition, the Company sold $9.1 million of the guaranteed portion of SBA loans in the secondary market, of which $3.1 million were originated in the current quarter and $6.0 million were originated or purchased in prior quarters. Residential loan production sold in the secondary market totaled $19.2 million for the quarter. |
In totality, the loan portfolio – excluding loans held for sale – has decreased by $19.6 million, or 2.5%, compared to June 30, 2017, primarily due to payoffs, pay-downs and sales in the portfolio, partially offset by originations.
The following table highlights the changes in the loan portfolio for the three months ended September 30, 2017:
|
Three Months Ended September 30, 2017 |
||||
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Loan Portfolio Changes: |
(Dollars in thousands) |
|||
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LASG originations and acquisitions |
$ | 44,430 | ||
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SBA and USDA funded originations |
5,913 | |||
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Community Banking Division originations |
22,147 | |||
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SBA loan sales |
(9,135 | ) | ||
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Residential loan sales |
(19,153 | ) | ||
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Transfer to real estate owned |
(1,214 | ) | ||
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Payoffs, pay-downs and amortization, net |
(62,599 | ) | ||
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Net change |
$ | (19,611 | ) | |
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:
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Basis for Regulatory Condition |
Condition |
Availability at September 30, 2017 |
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(Dollars in millions) |
||||||
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Total Loans |
Purchased loans may not exceed 40% of total loans |
$ | 126.5 | |||
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Regulatory Capital |
Non-owner occupied commercial real estate loans may not exceed 300% of total capital |
$ | 207.1 | |||
An overview of the Bank’s LASG portfolio follows:
| LASG Portfolio | ||||||||||||||||||||||||||||||||
| Three Months Ended September 30, | ||||||||||||||||||||||||||||||||
| 2017 | 2016 | |||||||||||||||||||||||||||||||
| Purchased | Originated | Secured Loans to Broker-Dealers | Total LASG | Purchased | Originated | Secured Loans to Broker- Dealers | Total LASG | |||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||
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Loans purchased or originated during the period: |
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Unpaid principal balance |
$ | 4,318 | $ | 40,779 | $ | - | $ | 45,097 | $ | 16,790 | $ | 42,002 | $ | - | $ | 58,792 | ||||||||||||||||
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Net investment basis |
3,651 | 40,779 | - | 44,430 | 13,853 | 42,002 | - | 55,855 | ||||||||||||||||||||||||
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Loan returns during the period: |
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Yield (1) |
12.28 | % | 6.35 | % | - | 8.85 | % | 10.40 | % | 5.88 | % | 0.50 | % | 7.58 | % | |||||||||||||||||
|
Total Return (1) (2) |
12.28 | % | 6.35 | % | - | 8.85 | % | 10.43 | % | 5.88 | % | 0.50 | % | 7.59 | % | |||||||||||||||||
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Total loans as of period end: |
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Unpaid principal balance |
$ | 262,144 | $ | 340,756 | $ | - | $ | 602,900 | $ | 269,462 | $ | 206,748 | $ | 48,000 | $ | 524,210 | ||||||||||||||||
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Net investment basis |
231,232 | 340,756 | - | 571,988 | 237,103 | 206,748 | 48,000 | 491,851 | ||||||||||||||||||||||||
(1) Purchased loan balances include loans held for sale of $1.2 million and $789 thousand as of September 30, 2017 and 2016, respectively.
(2)The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on asset sales, and other noninterest income recorded during the period divided by the average invested balance, which includes 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.
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2. |
Deposits decreased by $27.1 million, or 3.0%, from June 30, 2017, attributable primarily to a decrease in time deposits of $35.7 million, or 10.6%, partially offset by growth in non-maturity (demand, savings and interest checking, and money market) accounts, which increased by $8.6 million, or 1.6%. |
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3. |
Shareholders’ equity increased by $3.9 million from June 30, 2017, primarily due to earnings of $4.6 million, partially offset by stock option exercises which decreased additional paid-in-capital by $917 thousand. Additionally, there was stock-based compensation of $220 thousand, a decrease in accumulated other comprehensive loss of $104 thousand and $87 thousand in dividends paid on common stock. |
Net income increased by $2.8 million to $4.6 million for the quarter ended September 30, 2017, compared to $1.8 million for the quarter ended September 30, 2016.
|
1. |
Net interest and dividend income before provision for loan losses increased by $3.5 million for the quarter ended September 30, 2017, compared to the quarter ended September 30, 2016. The increase is primarily due to higher transactional income on purchased loans and higher average balances in the total loan portfolio. This increase was partially offset by higher rates 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 |
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Three Months Ended September 30, |
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2017 |
2016 |
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Average |
Interest |
Average |
Interest |
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Balance (1) |
Income (2) |
Yield |
Balance (1) |
Income (2) |
Yield |
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(Dollars in thousands) |
||||||||||||||||||||||||
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Community Banking Division |
$ | 150,178 | $ | 1,746 | 4.61 | % | $ | 205,765 | $ | 2,401 | 4.63 | % | ||||||||||||
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SBA |
53,527 | 941 | 6.97 | % | 31,148 | 519 | 6.61 | % | ||||||||||||||||
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LASG: |
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Originated |
328,775 | 5,265 | 6.35 | % | 185,109 | 2,742 | 5.88 | % | ||||||||||||||||
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Purchased |
240,136 | 7,431 | 12.28 | % | 231,999 | 6,081 | 10.40 | % | ||||||||||||||||
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Secured Loans to Broker-Dealers |
- | - | 0.00 | % | 48,000 | 60 | 0.50 | % | ||||||||||||||||
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Total LASG |
568,911 | 12,696 | 8.85 | % | 465,108 | 8,883 | 7.58 | % | ||||||||||||||||
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Total |
$ | 772,616 | $ | 15,383 | 7.90 | % | $ | 702,021 | $ | 11,803 | 6.67 | % | ||||||||||||
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(1) Includes loans held for sale. (2) SBA interest income includes SBA fees of $48 thousand and $50 thousand for the quarters ended September 30, 2017 and 2016, respectively. |
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The components of transactional income are set forth in the table below entitled “Total Return on Purchased Loans.” When compared to the three months ended September 30, 2016, transactional income increased by $1.5 million. The total return on purchased loans for the three months ended September 30, 2017 was 12.28%. The increase over the prior comparable period was primarily due to higher average balances and transactional income in the three months ended September 30, 2017. The following table details the total return on purchased loans:
|
Total Return on Purchased Loans |
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Three Months Ended September 30, |
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2017 |
2016 |
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Income |
Return (1) |
Income |
Return (1) |
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(Dollars in thousands) |
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Regularly scheduled interest and accretion |
$ | 4,613 | 7.62 | % | $ | 4,754 | 8.13 | % | ||||||||
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Transactional income: |
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Gain on loan sales |
- | 0.00 | % | - | 0.00 | % | ||||||||||
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Gain on sale of real estate owned |
- | 0.00 | % | 19 | 0.03 | % | ||||||||||
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Other noninterest income |
- | 0.00 | % | - | 0.00 | % | ||||||||||
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Accelerated accretion and loan fees |
2,818 | 4.66 | % | 1,327 | 2.27 | % | ||||||||||
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Total transactional income |
2,818 | 4.66 | % | 1,346 | 2.30 | % | ||||||||||
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Total |
$ | 7,431 | 12.28 | % | $ | 6,100 | 10.43 | % | ||||||||
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(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 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 increased by $150 thousand for the quarter ended September 30, 2017, compared to the quarter ended September 30, 2016, principally due to the following: |
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● |
An increase in gain on sale of SBA loans of $276 thousand, due to a higher dollar amount sold in the quarter; and |
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● |
An increase in fees for other services to customers of $118 thousand, due to higher loan servicing fees on SBA loans sold. |
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● |
The increases in noninterest income were partially offset by a decrease in gain on sale of residential loans held for sale of $251 thousand, due to a lower volume sold in the quarter. |
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3. |
Noninterest expense increased by $88 thousand for the quarter ended September 30, 2017, compared to the quarter ended September 30, 2016, primarily due to the following: |
|
● |
An increase in data processing fees of $183 thousand, primarily due to the outsourcing of data processing. |
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● |
The increase in data processing fees was partially offset by a decrease in occupancy and equipment expense of $120 thousand, primarily due to lower computer equipment and software deprecation. |
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4. |
Income tax expense increased by $602 thousand for the quarter ended September 30, 2017, compared to the quarter ended September 30, 2016, primarily due to the following: |
|
● |
An increase in income before income tax expense of $3.4 million, due primarily to the increase in net interest and dividend income before provision for loan losses of $3.5 million. |
|
● |
The increase in income before income tax expense was offset by an $818 thousand income tax benefit arising from the Company’s adoption of ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting in the current quarter, whereby the tax effects of exercised or vested awards are now treated as a discrete item in the reporting period in which they occur, and are recorded as an income tax benefit to the income statement. |
As of September 30, 2017, nonperforming assets totaled $18.7 million, or 1.78% of total assets, as compared to $14.8 million, or 1.37% of total assets, as of June 30, 2017.
As of September 30, 2017, past due loans totaled $12.1 million, or 1.60% of total loans, as compared to $13.4 million, or 1.72% of total loans as of June 30, 2017.
As of September 30, 2017, the Company’s Tier 1 Leverage Ratio was 12.8%, compared to 12.8% at June 30, 2017, and the Total Capital Ratio was 20.0%, compared to 19.5% at June 30, 2017. The increase in the Total Capital Ratio resulted primarily from the net decrease in the loan portfolio, offset by earnings.
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 and New Hampshire markets via ten branches and two loan production offices. Our Loan Acquisition and Servicing Group (“LASG”) 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, 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.
NBN-F
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NORTHEAST BANCORP AND SUBSIDIARY |
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CONSOLIDATED BALANCE SHEETS |
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(Unaudited) |
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(Dollars in thousands, except share and per share data) |
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September 30, 2017 |
June 30, 2017 |
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Assets |
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Cash and due from banks |
$ | 3,528 | $ | 3,582 | ||||
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Short-term investments |
147,287 | 159,701 | ||||||
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Total cash and cash equivalents |
150,815 | 163,283 | ||||||
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Available-for-sale securities, at fair value |
94,508 | 96,693 | ||||||
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Residential real estate loans held for sale |
7,106 | 4,508 | ||||||
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SBA loans held for sale |
2,400 | 191 | ||||||
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Total loans held for sale |
9,506 | 4,699 | ||||||
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Loans |
||||||||
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Commercial real estate |
471,846 | 498,004 | ||||||
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Commercial and industrial |
183,493 | 175,654 | ||||||
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Residential real estate |
100,124 | 101,168 | ||||||
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Consumer |
4,121 | 4,369 | ||||||
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Total loans |
759,584 | 779,195 | ||||||
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Less: Allowance for loan losses |
4,034 | 3,665 | ||||||
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Loans, net |
755,550 | 775,530 | ||||||
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Premises and equipment, net |
7,274 | 6,937 | ||||||
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Real estate owned and other repossessed collateral, net |
2,040 | 826 | ||||||
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Federal Home Loan Bank stock, at cost |
1,938 | 1,938 | ||||||
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Intangible assets, net |
1,191 | 1,300 | ||||||
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Servicing rights, net |
2,955 | 2,846 | ||||||
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Bank owned life insurance |
16,291 | 16,179 | ||||||
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Other assets |
7,569 | 6,643 | ||||||
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Total assets |
$ | 1,049,637 | $ | 1,076,874 | ||||
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Liabilities and Shareholders' Equity |
||||||||
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Deposits |
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Demand |
$ | 74,731 | $ | 69,827 | ||||
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Savings and interest checking |
105,691 | 108,417 | ||||||
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Money market |
380,992 | 374,569 | ||||||
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Time |
301,309 | 337,037 | ||||||
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Total deposits |
862,723 | 889,850 | ||||||
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Federal Home Loan Bank advances |
20,004 | 20,011 | ||||||
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Subordinated debt |
23,705 | 23,620 | ||||||
|
Capital lease obligation |
808 | 873 | ||||||
|
Other liabilities |
15,685 | 19,723 | ||||||
|
Total liabilities |
922,925 | 954,077 | ||||||
|
Commitments and contingencies |
- | - | ||||||
|
Shareholders' equity |
||||||||
|
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares issued and outstanding at September 30, 2017 and June 30, 2017 |
- | - | ||||||
|
Voting common stock, $1.00 par value, 25,000,000 shares authorized; 7,899,159 and 7,840,460 shares issued and outstanding at September 30, 2017 and June 30, 2017, respectively |
7,899 | 7,841 | ||||||
|
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized; 991,194 shares issued and outstanding at both September 30, 2017 and June 30, 2017 |
991 | 991 | ||||||
|
Additional paid-in capital |
76,709 | 77,455 | ||||||
|
Retained earnings |
42,641 | 38,142 | ||||||
|
Accumulated other comprehensive loss |
(1,528 | ) | (1,632 | ) | ||||
|
Total shareholders' equity |
126,712 | 122,797 | ||||||
|
Total liabilities and shareholders' equity |
$ | 1,049,637 | $ | 1,076,874 | ||||
|
NORTHEAST BANCORP AND SUBSIDIARY |
||||||||
|
CONSOLIDATED STATEMENTS OF INCOME |
||||||||
|
(Unaudited) |
||||||||
|
(Dollars in thousands, except share and per share data) |
||||||||
|
Three Months Ended September 30, |
||||||||
|
2017 |
2016 |
|||||||
|
Interest and dividend income: |
||||||||
|
Interest and fees on loans |
$ | 15,383 | $ | 11,803 | ||||
|
Interest on available-for-sale securities |
266 | 239 | ||||||
|
Other interest and dividend income |
529 | 215 | ||||||
|
Total interest and dividend income |
16,178 | 12,257 | ||||||
|
Interest expense: |
||||||||
|
Deposits |
2,176 | 1,754 | ||||||
|
Federal Home Loan Bank advances |
172 | 255 | ||||||
|
Subordinated debt |
508 | 459 | ||||||
|
Obligation under capital lease agreements |
11 | 14 | ||||||
|
Total interest expense |
2,867 | 2,482 | ||||||
|
Net interest and dividend income before provision for loan losses |
13,311 | 9,775 | ||||||
|
Provision for loan losses |
354 | 193 | ||||||
|
Net interest and dividend income after provision for loan losses |
12,957 | 9,582 | ||||||
|
Noninterest income: |
||||||||
|
Fees for other services to customers |
526 | 408 | ||||||
|
Gain on sales of residential loans held for sale |
291 | 542 | ||||||
|
Gain on sales of SBA loans |
1,019 | 743 | ||||||
|
Loss recognized on real estate owned and other repossessed collateral, net |
- | (14 | ) | |||||
|
Bank owned life insurance income |
112 | 114 | ||||||
|
Other noninterest income |
10 | 15 | ||||||
|
Total noninterest income |
1,958 | 1,808 | ||||||
|
Noninterest expense: |
||||||||
|
Salaries and employee benefits |
5,254 | 5,314 | ||||||
|
Occupancy and equipment expense |
1,109 | 1,229 | ||||||
|
Professional fees |
442 | 496 | ||||||
|
Data processing fees |
604 | 421 | ||||||
|
Marketing expense |
87 | 87 | ||||||
|
Loan acquisition and collection expense |
365 | 227 | ||||||
|
FDIC insurance premiums |
80 | 124 | ||||||
|
Intangible asset amortization |
109 | 109 | ||||||
|
Other noninterest expense |
664 | 619 | ||||||
|
Total noninterest expense |
8,714 | 8,626 | ||||||
|
Income before income tax expense |
6,201 | 2,764 | ||||||
|
Income tax expense |
1,615 | 1,013 | ||||||
|
Net income |
$ | 4,586 | $ | 1,751 | ||||
|
Weighted-average shares outstanding: |
||||||||
|
Basic |
8,841,511 | 9,106,144 | ||||||
|
Diluted |
9,089,936 | 9,133,383 | ||||||
|
Earnings per common share: |
||||||||
|
Basic |
$ | 0.52 | $ | 0.19 | ||||
|
Diluted |
0.50 | 0.19 | ||||||
|
Cash dividends declared per common share |
$ | 0.01 | $ | 0.01 | ||||
|
NORTHEAST BANCORP AND SUBSIDIARY |
||||||||||||||||||||||||
|
CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS |
||||||||||||||||||||||||
|
(Unaudited) |
||||||||||||||||||||||||
|
(Dollars in thousands) |
||||||||||||||||||||||||
|
Three Months Ended September 30, |
||||||||||||||||||||||||
|
2017 |
2016 |
|||||||||||||||||||||||
|
Interest |
Average |
Interest |
Average |
|||||||||||||||||||||
|
Average |
Income/ |
Yield/ |
Average |
Income/ |
Yield/ |
|||||||||||||||||||
|
Balance |
Expense |
Rate |
Balance |
Expense |
Rate |
|||||||||||||||||||
|
Assets: |
||||||||||||||||||||||||
|
Interest-earning assets: |
||||||||||||||||||||||||
|
Investment securities |
$ | 95,827 | $ | 266 | 1.10 | % | $ | 94,899 | $ | 239 | 1.00 | % | ||||||||||||
|
Loans (1) (2) (3) |
772,616 | 15,393 | 7.90 | % | 702,021 | 11,821 | 6.68 | % | ||||||||||||||||
|
Federal Home Loan Bank stock |
1,938 | 20 | 4.09 | % | 2,408 | 23 | 3.79 | % | ||||||||||||||||
|
Short-term investments (4) |
160,354 | 509 | 1.26 | % | 154,392 | 192 | 0.49 | % | ||||||||||||||||
|
Total interest-earning assets |
1,030,735 | 16,188 | 6.23 | % | 953,720 | 12,275 | 5.11 | % | ||||||||||||||||
|
Cash and due from banks |
3,134 | 2,941 | ||||||||||||||||||||||
|
Other non-interest earning assets |
30,887 | 30,812 | ||||||||||||||||||||||
|
Total assets |
$ | 1,064,756 | $ | 987,473 | ||||||||||||||||||||
|
Liabilities & Shareholders' Equity: |
||||||||||||||||||||||||
|
Interest-bearing liabilities: |
||||||||||||||||||||||||
|
NOW accounts |
$ | 69,577 | $ | 51 | 0.29 | % | $ | 70,850 | $ | 51 | 0.29 | % | ||||||||||||
|
Money market accounts |
387,632 | 1,097 | 1.12 | % | 291,734 | 682 | 0.93 | % | ||||||||||||||||
|
Savings accounts |
37,033 | 13 | 0.14 | % | 35,769 | 12 | 0.13 | % | ||||||||||||||||
|
Time deposits |
312,485 | 1,015 | 1.29 | % | 336,271 | 1,009 | 1.19 | % | ||||||||||||||||
|
Total interest-bearing deposits |
806,727 | 2,176 | 1.07 | % | 734,624 | 1,754 | 0.95 | % | ||||||||||||||||
|
Federal Home Loan Bank advances |
20,007 | 172 | 3.41 | % | 30,061 | 255 | 3.37 | % | ||||||||||||||||
|
Subordinated debt |
23,661 | 508 | 8.52 | % | 23,360 | 459 | 7.80 | % | ||||||||||||||||
|
Capital lease obligation |
830 | 11 | 5.26 | % | 1,087 | 14 | 5.11 | % | ||||||||||||||||
|
Total interest-bearing liabilities |
851,225 | 2,867 | 1.34 | % | 789,132 | 2,482 | 1.25 | % | ||||||||||||||||
|
Non-interest bearing liabilities: |
||||||||||||||||||||||||
|
Demand deposits and escrow accounts |
80,565 | 75,672 | ||||||||||||||||||||||
|
Other liabilities |
8,464 | 8,213 | ||||||||||||||||||||||
|
Total liabilities |
940,254 | 873,017 | ||||||||||||||||||||||
|
Shareholders' equity |
124,502 | 114,456 | ||||||||||||||||||||||
|
Total liabilities and shareholders' equity |
$ | 1,064,756 | $ | 987,473 | ||||||||||||||||||||
|
Net interest income (5) |
$ | 13,321 | $ | 9,793 | ||||||||||||||||||||
|
Interest rate spread |
4.89 | % | 3.86 | % | ||||||||||||||||||||
|
Net interest margin (6) |
5.13 | % | 4.07 | % | ||||||||||||||||||||
|
(1) Interest income and yield are stated on a fully tax-equivalent basis using a 34% tax rate. |
||||||||||
|
(2) Includes loans held for sale. |
||||||||||
|
(3) Nonaccrual loans are included in the computation of average, but unpaid interest has not been included for purposes of determining interest income. |
||||||||||
|
(4) Short term investments include FHLB overnight deposits and other interest-bearing deposits. (5) Includes tax exempt interest income of $10 thousand and $18 thousand for the three months ended September 30, 2017 and 2016, 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: |
||||||||||||||||||||
|
September 30, 2017 |
June 30, 2017 |
March 31, 2017 |
December 31, 2016 |
September 30, 2016 |
||||||||||||||||
|
Net interest income |
$ | 13,311 | $ | 13,757 | $ | 12,459 | $ | 11,833 | $ | 9,775 | ||||||||||
|
Provision for loan losses |
354 | 389 | 384 | 628 | 193 | |||||||||||||||
|
Noninterest income |
1,958 | 2,890 | 2,308 | 2,690 | 1,808 | |||||||||||||||
|
Noninterest expense |
8,714 | 9,364 | 8,842 | 8,956 | 8,626 | |||||||||||||||
|
Net income |
4,586 | 4,027 | 3,461 | 3,100 | 1,751 | |||||||||||||||
|
Weighted-average common shares outstanding: |
||||||||||||||||||||
|
Basic |
8,841,511 | 8,823,679 | 8,830,442 | 8,831,235 | 9,106,144 | |||||||||||||||
|
Diluted |
9,089,936 | 8,979,471 | 8,893,534 | 8,864,618 | 9,133,383 | |||||||||||||||
|
Earnings per common share: |
||||||||||||||||||||
|
Basic |
$ | 0.52 | $ | 0.46 | $ | 0.39 | $ | 0.35 | $ | 0.19 | ||||||||||
|
Diluted |
0.50 | 0.45 | 0.39 | 0.35 | 0.19 | |||||||||||||||
|
Dividends per common share |
0.01 | 0.01 | 0.01 | 0.01 | 0.01 | |||||||||||||||
|
Return on average assets |
1.71 | % | 1.57 | % | 1.37 | % | 1.24 | % | 0.70 | % | ||||||||||
|
Return on average equity |
14.61 | % | 13.34 | % | 12.03 | % | 10.92 | % | 6.07 | % | ||||||||||
|
Net interest rate spread (1) |
4.89 | % | 5.32 | % | 4.90 | % | 4.72 | % | 3.86 | % | ||||||||||
|
Net interest margin (2) |
5.13 | % | 5.55 | % | 5.11 | % | 4.94 | % | 4.07 | % | ||||||||||
|
Efficiency ratio (non-GAAP) (3) |
57.07 | % | 56.25 | % | 59.88 | % | 61.67 | % | 74.47 | % | ||||||||||
|
Noninterest expense to average total assets |
3.25 | % | 3.64 | % | 3.50 | % | 3.59 | % | 3.47 | % | ||||||||||
|
Average interest-earning assets to average interest-bearing liabilities |
121.09 | % | 121.13 | % | 120.84 | % | 120.73 | % | 120.86 | % | ||||||||||
|
As of: |
||||||||||||||||||||
|
September 30, 2017 |
June 30, 2017 |
March 31, 2017 |
December 31, 2016 |
September 30, 2016 |
||||||||||||||||
|
Nonperforming loans: |
||||||||||||||||||||
|
Originated portfolio: |
||||||||||||||||||||
|
Residential real estate |
$ | 3,667 | $ | 3,337 | $ | 3,265 | $ | 2,827 | $ | 3,273 | ||||||||||
|
Commercial real estate |
2,409 | 413 | 420 | 396 | 361 | |||||||||||||||
|
Home equity |
58 | 58 | 48 | 48 | 48 | |||||||||||||||
|
Commercial and industrial |
2,629 | 2,600 | 2,636 | 2,659 | 347 | |||||||||||||||
|
Consumer |
131 | 103 | 65 | 48 | 121 | |||||||||||||||
|
Total originated portfolio |
8,894 | 6,511 | 6,434 | 5,978 | 4,150 | |||||||||||||||
|
Total purchased portfolio |
7,758 | 7,452 | 8,388 | 4,219 | 4,773 | |||||||||||||||
|
Total nonperforming loans |
16,652 | 13,963 | 14,822 | 10,197 | 8,923 | |||||||||||||||
|
Real estate owned and other repossessed collateral, net |
2,040 | 826 | 3,761 | 3,145 | 3,774 | |||||||||||||||
|
Total nonperforming assets |
$ | 18,692 | $ | 14,789 | $ | 18,583 | $ | 13,342 | $ | 12,697 | ||||||||||
|
Past due loans to total loans |
1.60 | % | 1.72 | % | 3.25 | % | 2.85 | % | 1.36 | % | ||||||||||
|
Nonperforming loans to total loans |
2.19 | % | 1.79 | % | 2.00 | % | 1.33 | % | 1.24 | % | ||||||||||
|
Nonperforming assets to total assets |
1.78 | % | 1.37 | % | 1.81 | % | 1.32 | % | 1.29 | % | ||||||||||
|
Allowance for loan losses to total loans |
0.53 | % | 0.47 | % | 0.46 | % | 0.41 | % | 0.35 | % | ||||||||||
|
Allowance for loan losses to nonperforming loans |
24.23 | % | 26.25 | % | 22.77 | % | 30.47 | % | 28.08 | % | ||||||||||
|
Commercial real estate loans to risk-based capital (4) |
166.15 | % | 181.23 | % | 181.83 | % | 197.11 | % | 179.96 | % | ||||||||||
|
Net loans to core deposits (5) |
88.68 | % | 87.68 | % | 87.46 | % | 92.04 | % | 90.22 | % | ||||||||||
|
Purchased loans to total loans, including held for sale |
30.11 | % | 31.43 | % | 31.87 | % | 32.91 | % | 32.54 | % | ||||||||||
|
Equity to total assets |
12.07 | % | 11.40 | % | 11.55 | % | 11.35 | % | 11.32 | % | ||||||||||
|
Common equity tier 1 capital ratio |
16.50 | % | 16.00 | % | 15.80 | % | 14.94 | % | 15.34 | % | ||||||||||
|
Total capital ratio |
20.04 | % | 19.48 | % | 19.30 | % | 18.31 | % | 18.81 | % | ||||||||||
|
Tier 1 leverage capital ratio |
12.77 | % | 12.81 | % | 12.46 | % | 12.60 | % | 12.25 | % | ||||||||||
|
Total shareholders' equity |
$ | 126,712 | $ | 122,797 | $ | 118,675 | $ | 114,942 | $ | 111,553 | ||||||||||
|
Less: Preferred stock |
- | - | - | - | - | |||||||||||||||
|
Common shareholders' equity |
126,712 | 122,797 | 118,675 | 114,942 | 111,553 | |||||||||||||||
|
Less: Intangible assets (6) |
(4,146 | ) | (4,146 | ) | (3,898 | ) | (3,856 | ) | (3,797 | ) | ||||||||||
|
Tangible common shareholders' equity (non-GAAP) |
$ | 122,566 | $ | 118,651 | $ | 114,777 | $ | 111,086 | $ | 107,756 | ||||||||||
|
Common shares outstanding |
8,890,353 | 8,831,654 | 8,815,279 | 8,831,235 | 8,831,235 | |||||||||||||||
|
Book value per common share |
$ | 14.25 | $ | 13.90 | $ | 13.46 | $ | 13.02 | $ | 12.63 | ||||||||||
|
Tangible book value per share (non-GAAP) (7) |
13.79 | 13.43 | 13.02 | 12.58 | 12.20 | |||||||||||||||
|
(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 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. |
Exhibit 99.2
