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Northeast Bancorp Reports Record Quarterly Results and Declares Dividend

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LEWISTON, Maine, July 27, 2017 (GLOBE NEWSWIRE) -- Northeast Bancorp ("Northeast" or the "Company") (NASDAQ:NBN), a Maine-based full-service financial services company and parent of Northeast Bank (the "Bank"), today reported net income of $4.0 million, or $0.45 per diluted common share, for the quarter ended June 30, 2017, compared to net income of  $2.2 million, or $0.24 per diluted common share, for the quarter ended June 30, 2016. Net income for the year ended June 30, 2017 was $12.3 million, or $1.38 per diluted common share, compared to $7.6 million, or $0.80 per diluted common share, for the year ended June 30, 2016.

The Board of Directors has also declared a cash dividend of $0.01 per share, payable on August 25, 2017 to shareholders of record as of August 11, 2017.

"We closed the year with a strong quarter," said Richard Wayne, President and Chief Executive Officer. "For the quarter, our earnings of $0.45 per diluted common share helped us achieve a return on equity of 13.3%, a return on assets of 1.6% and an efficiency ratio of 56.3%. These solid results were driven by continued growth in our LASG portfolio, purchased loan total return of 13.8%, and SBA gains on sale of $1.9 million. In addition to earnings growth, in the fourth quarter we generated loan volume of $152.2 million, which included $113.0 million of loans produced by the Loan Acquisition and Servicing Group, $19.0 million of loans closed by the SBA division and $20.2 million of residential and commercial community bank loans. The growth of our balance sheet and earnings compliments our growth strategy and positions us well for the future."

As of June 30, 2017, total assets were $1.1 billion, an increase of $90.7 million, or 9.2%, from total assets of $986.2 million as of June 30, 2016. The principal components of the change in the balance sheet follow:

  1. The Company originated $152.2 million of new loans during the quarter ended June 30, 2017. Loans generated by the Bank's Loan Acquisition and Servicing Group ("LASG") totaled $113.0 million, which consisted of $45.1 million of purchased loans, at an average price of 89.8% of unpaid principal balance, and $67.9 million of originated loans. The Bank's Small Business Administration and United States Department of Agriculture ("SBA") Division closed $19.0 million of new loans during the quarter, of which $18.4 million were funded. In addition, the Company sold $19.0 million of the guaranteed portion of SBA loans in the secondary market, of which $10.2 million were originated in the current quarter and $8.8 million were originated or purchased in prior quarters. Residential loan production sold in the secondary market totaled $16.5 million for the quarter. The loan portfolio, excluding both loans held for sale and the $48.0 million of secured loans to broker-dealers repaid in the prior quarter, increased by $134.8 million, or 19.5%, compared to June 30, 2016.

As previously discussed in the Company's SEC filings, the Company made certain commitments to the Board of Governors of the Federal Reserve System in connection with the merger of FHB Formation LLC with and into the Company in December 2010. The Company's loan purchase and commercial real estate loan availability under these conditions follow:

Basis for
Regulatory Condition
  Condition   Availability at June 30, 2017
        (Dollars in millions)
Total Loans   Purchased loans may not exceed 40% of total loans   $   111.9
Regulatory Capital   Non-owner occupied commercial real estate loans may not exceed 300% of total capital   $   178.5
           

An overview of the Bank's LASG portfolio follows:

  LASG Portfolio
  Three Months Ended June 30,
  2017    2016 
  Purchased  Originated  Secured Loans to Broker-Dealers  Total LASG   Purchased Originated Secured Loans to Broker-Dealers Total LASG
  (Dollars in thousands)
Loans purchased or originated during the period:                                                                
Unpaid principal balance $ 50,202   $ 67,860   $   -     $ 118,062     $ 20,588   $ 31,826   $   -     $   52,414  
Net investment basis    45,060     67,860     -       112,920        18,754      31,826     -        50,580  
                                                                 
Loan returns during the period:                                                                
Yield (1)   13.64 %   6.45 %   0.00 %   9.61 %     10.88 %   6.98 %   0.51 %     8.19 %
Total Return (1) (2)   13.78 %   6.45 %   0.00 %   9.68 %     10.88 %   6.98 %   0.51 %     8.19 %
                                   


  Year Ended June 30,
  2017   2016 
    Purchased   Originated  Secured Loans to Broker-Dealers    Total LASG    Purchased Originated Secured Loans to Broker-Dealers Total LASG 
  (Dollars in thousands)
Loans purchased or originated during the period:                                                  
Unpaid principal balance $ 126,713   $ 237,691     $   -     $ 364,404     $ 108,716   $ 110,578     $   -     $ 219,294  
Net investment basis   112,807     237,691       -       350,498        99,999     110,578       -        210,577  
                                                               
Loan returns during the period:                                                              
Yield (1)   12.24 %   6.21 %     0.82 %     8.69 %     11.37 %   6.11 %   0.50 %     8.03 %
Total Return (1) (2)   12.30 %   6.21 %     0.82 %     8.72 %     11.38 %   6.10 %   0.50 %     8.04 %
                                               
                                                               
Total loans as of period end:                                                              
Unpaid principal balance $ 279,854   $ 330,515     $ -     $ 610,369     $ 271,268   $ 174,918     $ 48,000     $ 494,186  
Net investment basis   246,388     330,515       -     576,903       239,709     174,918       48,000       462,627  
                                                         
(1) The yield and total return on LASG originated loans includes $385 thousand of fees related to one loan in the quarter ended June 30, 2016.
(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.
 
  1. Deposits increased by $40.4 million, or 4.8%, from March 31, 2017, attributable primarily to growth in non-maturity (demand, savings and interest checking, and money market) accounts, which increased by $24.3 million, or 4.6%, and an increase in time deposits of $16.1 million, or 5.0%. Deposits increased by $89.4 million, or 11.2%, from June 30, 2016 due to growth in non-maturity accounts of $103.5 million, or 23.0%, offset by a decrease in time deposits of $14.1 million, or 4.0%.
     
  2. Shareholders' equity increased by $6.2 million from June 30, 2016, primarily due to earnings of $12.3 million, offset by $6.9 million in share repurchases (representing 645,238 shares). Additionally, there was stock-based compensation of $945 thousand, a decrease in accumulated other comprehensive loss of $274 thousand and $357 thousand in dividends paid on common stock.

Net income increased by $1.8 million to $4.0 million for the quarter ended June 30, 2017, compared to $2.2 million for the quarter ended June 30, 2016.

  1. Net interest and dividend income before provision for loan losses increased by $3.0 million for the quarter ended June 30, 2017, compared to the quarter ended June 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 volume in the deposit portfolio and the effect of the issuance of subordinated debt. 

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,  
  2017    2016   
  Average   Interest       Average   Interest      
  Balance (1)   Income   Yield   Balance (1)   Income (2)   Yield  
  (Dollars in thousands)  
Community Banking Division $ 163,997   $ 1,949   4.77 %   $ 212,625   $   2,589   4.90 %  
SBA   55,229     848   6.16 %     30,599     490   6.44 %  
LASG:                                
Originated   301,988     4,859   6.45 %      172,678       2,996   6.98 %  
Purchased   237,306     8,068   13.64 %      232,610       6,294   10.88 %  
Secured Loans to Broker-Dealers   -     -   0.00 %     54,001     68   0.51 %  
Total LASG   539,294     12,927   9.61 %      459,289       9,358   8.19 %  
   Total $ 758,520   $ 15,724   8.31 %   $  702,513   $   12,437   7.12 %  
     
  Year Ended June 30,  
  2017     2016    
  Average   Interest       Average   Interest      
  Balance (1)   Income   Yield   Balance (1)   Income (2)   Yield  
  (Dollars in thousands)  
Community Banking Division $ 190,704   $ 9,102   4.77 %   $  218,649   $   10,483   4.79 %  
SBA   42,946     2,619   6.10 %     23,786     1,448   6.09 %  
LASG:                                
Originated   239,796     14,883   6.21 %      147,193       8,987   6.11 %  
Purchased   236,937     28,997   12.24 %      216,763       24,638   11.37 %  
Secured Loans to Broker-Dealers   31,085     256   0.82 %     58,511     293   0.50 %  
Total LASG   507,818       44,136   8.69 %      422,467       33,918   8.03 %  
   Total $ 741,468   $ 55,857   7.53 %   $  664,902   $   45,849   6.90 %  
(1) Includes loans held for sale.

(2) SBA interest income includes SBA fees of $21 thousand and $33 thousand for the quarter and year ended June 30, 2016, respectively.
 

The various components of transactional income are set forth in the table below entitled "Total Return on Purchased Loans." When compared to the three months and year ended June 30, 2016, transactional income increased by $2.0 million and $2.9 million, respectively. The total return on purchased loans for the three months and year ended June 30, 2017 was 13.78% and 12.30%, respectively. The increase over the prior comparable periods was primarily due to higher average balances and transactional income in the three months and year ended June 30, 2017. The following table details the total return on purchased loans:

  Total Return on Purchased Loans
  Three Months Ended June 30,
  2017    2016 
  Income   Return (1)   Income   Return (1)
  (Dollars in thousands)
Regularly scheduled interest and accretion $ 4,588     7.76 %   $ 4,770   8.25 %
Transactional income:                  
Gain on loan sales     -     0.00 %       -   0.00 %
Gain on sale of real estate owned   93     0.16 %       -   0.00 %
Other noninterest income     (10 )   -0.02 %       1    0.00 %
Accelerated accretion and loan fees     3,480     5.88 %       1,524   2.63 %
Total transactional income     3,563     6.02 %       1,525   2.63 %
   Total $   8,151     13.78 %   $   6,295   10.88 %


  Year Ended June 30,
  2017    2016 
  Income   Return (1)   Income   Return (1)
  (Dollars in thousands)
Regularly scheduled interest and accretion $ 18,975     8.01 %   $ 17,382   8.02 %
Transactional income:                  
Gain on loan sales     -     0.00 %       -   0.00 %
Gain on sale of real estate owned      148     0.06 %        23   0.01 %
Other noninterest income   (12 )   0.00 %        12   0.00 %
Accelerated accretion and loan fees   10,022     4.23 %       7,256   3.35 %
Total transactional income   10,158     4.29 %       7,291   3.36 %
   Total $ 29,133     12.30 %   $   24,673   11.38 %
                         
(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.
 
  1. Noninterest income increased by $479 thousand for the quarter ended June 30, 2017, compared to the quarter ended June 30, 2016, principally due to the following:
    • An increase in gain on sale of SBA loans of $246 thousand, due to a higher volume sold in the quarter;
    • An increase in fees for other services to customers of $154 thousand, due to higher loan servicing fees on SBA loans sold; and
    • A decrease in loss recognized on real estate owned and other repossessed collateral, net of $96 thousand, due to the sale of real estate owned ("REO").
    • This net increase in noninterest income was partially offset by a lower gain on sale of residential loans held for sale of $99 thousand, due to a lower volume sold in the quarter.
       
  2. Noninterest expense decreased by $32 thousand for the quarter ended June 30, 2017, compared to the quarter ended June 30, 2016, primarily due to the following:
    • A decrease in other noninterest expense of $264 thousand, primarily due to a decrease in impairment on servicing assets as no impairment was booked in the three months ended June 30, 2017; and
    • A decrease in loan expense of $174 thousand, largely driven by lower expense related to loan acquisition and refinance activity.
    • The decreases in noninterest expense were partially offset by an increase in salaries and employee benefits of $436 thousand, primarily due to higher incentive compensation recognized in the three months ended June 30, 2017.

As of June 30, 2017, nonperforming assets totaled $14.8 million, or 1.37% of total assets, as compared to $9.5 million, or 0.96% of total assets, as of June 30, 2016.

As of June 30, 2017, past due loans totaled $13.4 million, or 1.72% of total loans, as compared to $6.9 million, or 1.00% of total loans as of June 30, 2016.

As of June 30, 2017, the Company's Tier 1 Leverage Ratio was 12.8%, compared to 13.3% at June 30, 2016, and the Total Capital Ratio was 19.5%, compared to 20.4% at June 30, 2016. The decreases resulted primarily from loan growth and the effect of purchases under the Company's share repurchase program.

Investor Call Information
Richard Wayne, Chief Executive Officer of Northeast Bancorp, and Brian Shaughnessy, Chief Financial Officer of Northeast Bancorp, will host a conference call to discuss fourth quarter earnings and business outlook at 10:00 a.m. Eastern Time on Friday, July 28th. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 58436017. The call will be available via live webcast, which can be viewed by accessing the Company's website at www.northeastbank.com and clicking on the About Us - Investor Relations section. To listen to the webcast, attendees are encouraged to visit the website at least fifteen minutes early to register, download and install any necessary audio software. Please note there will also be a slide presentation that will accompany the webcast. For those who cannot listen to the live broadcast, a replay will be available online for one year at www.northeastbank.com.

About Northeast Bancorp
Northeast Bancorp (NASDAQ:NBN) is the holding company for Northeast Bank, a full-service bank headquartered in Lewiston, Maine. We offer traditional banking services through the Community Banking Division, which operates ten full-service branches that serve customers located in western, central, and southern Maine. From our Maine and Boston locations, we also lend throughout the New England area. Our Loan Acquisition and Servicing Group ("LASG") purchases and originates commercial loans on a nationwide basis. In addition, our SBA Division supports the needs of growing businesses nationally. 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 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; 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, 2017   June 30, 2016
Assets          
Cash and due from banks $ 3,582     $ 2,459  
Short-term investments   159,701         148,698  
  Total cash and cash equivalents   163,283         151,157  
           
           
Available-for-sale securities, at fair value   96,693       100,572  
           
Residential real estate loans held for sale   4,508       6,449  
SBA loans held for sale   191       1,070  
  Total loans held for sale   4,699       7,519  
           
           
Loans          
  Commercial real estate   498,004       426,568  
  Residential real estate   101,168         113,962  
  Commercial and industrial   175,654         145,956  
  Consumer   4,369       5,950  
  Total loans   779,195         692,436  
  Less: Allowance for loan losses   3,665         2,350  
  Loans, net   775,530         690,086  
           
           
Premises and equipment, net   6,937         7,801  
Real estate owned and other repossessed collateral, net   826         1,652  
Federal Home Loan Bank stock, at cost   1,938         2,408  
Intangible assets, net   1,300         1,732  
Servicing rights, net   2,846       1,771  
Bank owned life insurance   16,179         15,725  
Other assets   6,643       5,730  
  Total assets $ 1,076,874     $   986,153  
           
Liabilities and Shareholders' Equity          
Deposits          
  Demand $ 69,827     $ 66,686  
  Savings and interest checking   108,417         107,218  
  Money market   374,569         275,437  
  Time   337,037         351,091  
  Total deposits   889,850         800,432  
           
Federal Home Loan Bank advances   20,011         30,075  
Subordinated debt   23,620         23,331  
Capital lease obligation   873         1,128  
Other liabilities   19,723       14,596  
  Total liabilities   954,077         869,562  
           
Commitments and contingencies     -           -    
           
           
Shareholders' equity          
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares issued and outstanding at June 30, 2017 and June 30, 2016     -           -    
Voting common stock, $1.00 par value, 25,000,000 shares authorized; 7,840,460 and 8,089,790 shares issued and outstanding at June 30, 2017 and June 30, 2016, respectively   7,841         8,089  
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized; 991,194 and 1,227,683 shares issued and outstanding at June 30, 2017 and June 30, 2016, respectively   991         1,228  
Additional paid-in capital   77,455       83,020  
Retained earnings   38,142         26,160  
Accumulated other comprehensive loss   (1,632 )       (1,906 )
  Total shareholders' equity   122,797         116,591  
  Total liabilities and shareholders' equity $ 1,076,874     $   986,153  


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,
  2017     2016     2017     2016  
Interest and dividend income:                      
  Interest and fees on loans $ 15,724     $ 12,437     $ 55,857     $ 45,849  
  Interest on available-for-sale securities   271       230       1,018       930  
  Other interest and dividend income   376       161       1,046       456  
  Total interest and dividend income   16,371       12,828       57,921       47,235  
                       
Interest expense:                      
  Deposits   1,949       1,671       7,357       6,027  
  Federal Home Loan Bank advances   166       253       800       1,027  
  Wholesale repurchase agreements   -       -       -       67  
  Short-term borrowings   -       1       -       20  
  Subordinated debt   487       175       1,888       651  
  Obligation under capital lease agreements   12       15       51       63  
  Total interest expense   2,614       2,115       10,096       7,855  
                       
Net interest and dividend income before provision for loan losses   13,757       10,713       47,825       39,380  
Provision for loan losses   389       317       1,594       1,618  
Net interest and dividend income after provision for loan losses   13,368       10,396       46,231       37,762  
                       
Noninterest income:                      
  Fees for other services to customers   547       393       1,952       1,657  
  Gain on sales of residential loans held for sale   293       392       1,452       1,684  
  Gain on sales of SBA loans   1,866       1,620       5,277       4,178  
  Gain on sale of other loans   -       -       365       -  
  Loss recognized on real estate owned and other repossessed collateral, net     (31 )       (127 )     (23 )       (255 )
  Bank-owned life insurance income   114       113       454       449  
  Other noninterest income   101       20       219       60  
  Total noninterest income   2,890       2,411       9,696       7,773  
                       
Noninterest expense:                      
  Salaries and employee benefits   6,028       5,592       21,706       19,548  
  Occupancy and equipment expense   1,222       1,291       5,002       5,227  
  Professional fees   401       421       1,666       1,463  
  Data processing fees   459       379       1,744       1,487  
  Marketing expense   120       85       392       285  
  Loan acquisition and collection expense   233       407       1,734       1,368  
  FDIC insurance premiums   79       135       303       489  
  Intangible asset amortization   108       108       432       477  
  Other noninterest expense   714       978       2,810       3,468  
  Total noninterest expense   9,364       9,396       35,789       33,812  
                       
Income before income tax expense   6,894       3,411       20,138       11,723  
Income tax expense   2,867       1,212       7,799       4,104  
Net income 4,027     $ 2,199     12,339     7,619  
                       
                       
Weighted-average shares outstanding:                      
  Basic   8,823,679       9,319,522       8,898,448       9,474,999  
  Diluted   8,979,471       9,342,439       8,952,614       9,484,635  
Earnings per common share:                      
                       
  Basic $ 0.46     $ 0.24     $ 1.39     $ 0.80  
  Diluted   0.45       0.24         1.38         0.80  
Cash dividends declared per common share $ 0.01     $ 0.01     $ 0.04     $ 0.04  


NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
  Three Months Ended June 30,
  2017    2016 
      Interest   Average       Interest   Average
  Average   Income/   Yield/   Average   Income/   Yield/
  Balance   Expense   Rate   Balance   Expense   Rate
Assets:                              
Interest-earning assets:                              
Investment securities $ 98,033   $ 271   1.11 %   $ 93,289   $   230   0.99 %
Loans (1) (2) (3)   758,520     15,741   8.32 %       702,513       12,455   7.13 %
Federal Home Loan Bank stock   1,938     19   3.93 %       2,570       23   3.60 %
Short-term investments (4)   137,570     357   1.04 %       113,636       138   0.49 %
Total interest-earning assets   996,061     16,388   6.60 %     912,008       12,846   5.67 %
Cash and due from banks   2,753                 4,171          
Other non-interest earning assets   31,910               36,411          
Total assets $ 1,030,724             $   952,590          
                               
Liabilities & Shareholders' Equity:                              
Interest-bearing liabilities:                              
NOW accounts $ 71,209   $ 51   0.29 %   $ 72,012   $   51   0.28 %
Money market accounts   345,352     878   1.02 %       254,833       573   0.90 %
Savings accounts   37,863     13   0.14 %       36,167       12   0.13 %
Time deposits   323,399     1,007   1.25 %       356,418       1,035   1.17 %
  Total interest-bearing deposits   777,823     1,949   1.01 %       719,430       1,671   0.93 %
Short-term borrowings     -       -   0.00 %     441       1   0.91 %
Federal Home Loan Bank advances   20,014     166   3.33 %       30,089       253   3.38 %
Subordinated debt   23,579     487   8.28 %       8,954       175   7.86 %
Capital lease obligations   896       12   5.37 %       1,149       15   5.25 %
Total interest-bearing liabilities   822,312     2,614   1.28 %       760,063       2,115   1.12 %
                               
Non-interest bearing liabilities:                              
Demand deposits and escrow accounts   80,188                68,314          
Other liabilities   7,181               8,863          
Total liabilities   909,681               837,240          
Shareholders' equity   121,043                 115,350          
Total liabilities and shareholders' equity $ 1,030,724             $   952,590          
                               
  Net interest income (5)       $ 13,774             $ 10,731    
                               
Interest rate spread             5.32 %               4.55 %
Net interest margin (6)             5.55 %               4.73 %
                               
(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 $17 thousand and $18 thousand for the three months ended June 30, 2017 and June 30, 2016, respectively.
(6)  Net interest margin is calculated as net interest income divided by total interest-earning assets.


NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
  Year Ended June 30,
  2017    2016 
      Interest   Average       Interest   Average
  Average   Income/   Yield/   Average   Income/   Yield/
  Balance   Expense   Rate   Balance   Expense   Rate
Assets:                              
Interest-earning assets:                              
Investment securities $ 95,624   $   1,018   1.06 %   $ 100,503   $   930   0.93 %
Loans (1) (2) (3)   741,468     55,928   7.54 %        664,902      45,921   6.91 %
Federal Home Loan Bank stock   2,172     90   4.14 %        2,960       113   3.82 %
Short-term investments (4)   133,599     956   0.72 %        91,563       343   0.37 %
Total interest-earning assets   972,863     57,992   5.96 %        859,928      47,307   5.50 %
Cash and due from banks   2,833                  3,596          
Other non-interest earning assets   32,394               35,607          
Total assets $ 1,008,090             $    899,131          
                               
Liabilities & Shareholders' Equity:                              
Interest-bearing liabilities:                              
NOW accounts $ 70,912   $ 204   0.29 %   $ 68,304   $ 182   0.27 %
Money market accounts   322,011     3,120   0.97 %     212,102       1,845   0.87 %
Savings accounts   36,438     50   0.14 %        36,062       48   0.13 %
Time deposits   326,601     3,983   1.22 %        349,978       3,952   1.13 %
  Total interest-bearing deposits   755,962     7,357   0.97 %     666,446        6,027   0.90 %
Short-term borrowings     -       -   0.00 %        1,634       20   1.22 %
Federal Home Loan Bank advances   24,334     800   3.29 %        32,432       1,094   3.37 %
Subordinated debt   23,468     1,888   8.04 %       8,762       651   7.43 %
Capital lease obligations   992     51   5.14 %       1,242       63   5.07 %
Total interest-bearing liabilities   804,756     10,096   1.25 %     710,516       7,855   1.11 %
                               
Non-interest bearing liabilities:                              
Demand deposits and escrow accounts   79,560               67,041          
Other liabilities   7,599                 7,252          
Total liabilities   891,915                 784,809          
Shareholders' equity   116,175                 114,322          
Total liabilities and shareholders' equity $ 1,008,090             $   899,131          
                               
  Net interest income (5)       $ 47,896             $   39,452    
                               
Interest rate spread             4.71 %               4.39 %
Net interest margin (6)             4.92 %               4.59 %
                               
(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 $71 thousand and $72 thousand for the year ended June 30, 2017 and June 30, 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:
  June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016
Net interest income $   13,757     $   12,459     $   11,833     $   9,775     $    10,713  
Provision for loan losses   389         384         628         193         317  
Noninterest income   2,890         2,308         2,690         1,808         2,411  
Noninterest expense   9,364         8,842         8,956         8,626         9,396  
Net income   4,027         3,461         3,100         1,751         2,199  
                   
Weighted average common shares outstanding:                  
  Basic   8,823,679       8,830,442       8,831,235       9,106,144       9,319,522  
  Diluted   8,979,471       8,893,534       8,864,618       9,133,383       9,342,439  
Earnings per common share:                  
  Basic $    0.46     $   0.39     $    0.35     $   0.19     $    0.24  
  Diluted     0.45         0.39         0.35         0.19         0.24  
Dividends per common share     0.01         0.01         0.01         0.01         0.01  
                   
Return on average assets   1.57 %     1.37 %     1.24 %     0.70 %     0.93 %
Return on average equity   13.34 %     12.03 %     10.92 %     6.07 %     7.67 %
Net interest rate spread (1)   5.32 %     4.90 %     4.72 %     3.86 %     4.55 %
Net interest margin (2)   5.55 %     5.11 %     4.94 %     4.07 %     4.73 %
Efficiency ratio (non-GAAP) (3)   56.25 %     59.88 %     61.67 %     74.47 %     71.59 %
Noninterest expense to average total assets   3.64 %     3.50 %     3.59 %     3.47 %     3.97 %
Average interest-earning assets to average
interest-bearing liabilities
  121.13 %     120.84 %     120.73 %     120.86 %     119.99 %
                   
  As of:
  June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016
Nonperforming loans:                  
Originated portfolio:                  
Residential real estate $   3,337     $    3,265     $   2,827     $   3,273     $    2,613  
Commercial real estate   413         420         396          361         474  
Home equity   58         48         48         48         48  
Commercial and industrial   2,600         2,636          2,659         347         17  
Consumer   103         65         48         121         163  
Total originated portfolio   6,511         6,434         5,978         4,150         3,315  
Total purchased portfolio   7,452         8,388         4,219         4,773         4,512  
Total nonperforming loans   13,963         14,822         10,197         8,923         7,827  
Real estate owned and other possessed collateral, net   826         3,761         3,145         3,774         1,652  
Total nonperforming assets $   14,789     $    18,583     $   13,342     $    12,697     $    9,479  
                   
Past due loans to total loans   1.72 %     3.25 %     2.85 %     1.36 %     1.00 %
Nonperforming loans to total loans   1.79 %     2.00 %     1.33 %     1.24 %     1.13 %
Nonperforming assets to total assets   1.37 %     1.81 %     1.32 %     1.29 %     0.96 %
Allowance for loan losses to total loans   0.47 %     0.46 %     0.41 %     0.35 %     0.34 %
Allowance for loan losses to nonperforming loans   26.25 %     22.77 %     30.47 %     28.08 %     30.02 %
                   
Commercial real estate loans to risk-based capital (4)   181.23 %     181.83 %     197.11 %     179.96 %     174.12 %
Net loans to core deposits (5)   87.68 %     87.46 %     92.04 %     90.22 %     87.15 %
Purchased loans to total loans, including held for sale   31.43 %     31.87 %     32.91 %     32.54 %     34.25 %
Equity to total assets   11.40 %     11.55 %     11.35 %     11.32 %     11.82 %
Common equity tier 1 capital ratio   16.00 %     15.80 %     14.94 %     15.34 %     17.97 %
Total capital ratio   19.48 %     19.30 %     18.31 %     18.81 %     20.39 %
Tier 1 leverage capital ratio   12.81 %     12.46 %     12.60 %     12.25 %     13.27 %
                   
Total shareholders' equity $   122,797     $    118,675     $    114,942     $    111,553     $    116,591  
Less: Preferred stock     -          -          -          -          -   
Common shareholders' equity     122,797         118,675         114,942         111,553         116,591  
Less: Intangible assets (6)     (4,146 )       (3,898 )       (3,856 )       (3,797 )       (3,503 )
Tangible common shareholders' equity (non-GAAP) $   118,651     $    114,777     $    111,086     $    107,756     $    113,088  
                   
Common shares outstanding   8,831,654         8,815,279         8,831,235         8,831,235         9,317,473  
Book value per common share $    13.90     $    13.46     $    13.02     $    12.63     $    12.51  
Tangible book value per share (non-GAAP) (7)     13.43         13.02         12.58         12.20         12.14  
                   
(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 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.
 


For More Information:
Brian Shaughnessy, CFO
Northeast Bank, 500 Canal Street, Lewiston, ME 04240 
207.786.3245 ext. 3220
www.northeastbank.com

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