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Northeast Bancorp Reports Revised First Quarter Results and Declares Dividend

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LEWISTON, Maine, Nov. 06, 2017 (GLOBE NEWSWIRE) -- **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.

The amended release follows:

Northeast Bancorp Reports Revised First Quarter Results and Declares Dividend

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
   
Loan Portfolio Changes: (Dollars in thousands)
LASG originations and acquisitions $ 44,430  
SBA and USDA funded originations   5,913  
Community Banking Division originations   22,147  
SBA loan sales   (9,135 )
Residential loan sales   (19,153 )
Transfer to real estate owned   (1,214 )
Payoffs, pay-downs and amortization, net   (62,599 )
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:

         
Basis for
Regulatory Condition
  Condition   Availability at September 30, 2017
        (Dollars in millions)
Total Loans   Purchased loans may not exceed 40% of total loans   $ 126.5
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)
Loans purchased or originated during the period:                                  
Unpaid principal balance $ 4,318     $ 40,779     $ -   $ 45,097     $ 16,790     $ 42,002     $ -     $ 58,792  
Net investment basis   3,651       40,779       -     44,430       13,853       42,002       -       55,855  
                                                             
Loan returns during the period:                                                            
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 %
                                                             
                                                             
Total loans as of period end:                                                            
Unpaid principal balance $ 262,144     $ 340,756     $ -  
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