Market Overview

Northeast Bank Reports Fourth Quarter and Fiscal Year Results and Declares Dividend

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LEWISTON, Maine, July 30, 2019 (GLOBE NEWSWIRE) -- Northeast Bank (the "Bank") (NASDAQ:NBN), a Maine-based full-service financial institution, today reported a net loss of $603 thousand, or ($0.07) per diluted common share, for the quarter ended June 30, 2019, compared to net income of $4.3 million, or $0.48 per diluted common share, for the quarter ended June 30, 2018. Net income for the year ended June 30, 2019 was $13.9 million, or $1.52 per diluted common share, compared to $16.2 million, or $1.77 per diluted common share, for the year ended June 30, 2018.

The current quarter and year-end results included $6.0 million and $6.4 million, respectively, of non-recurring expenses (after tax) related to the Bank's recently completed corporate reorganization. Excluding these non-recurring expenses, the Bank recorded net operating earnings (non-GAAP) of $5.4 million, or $0.59 per diluted common share, for the quarter ended June 30, 2019 and $20.3 million, or $2.20 per diluted common share, for the year ended June 30, 2019.  We refer to results excluding these non-recurring items as "net operating earnings."

Reported net income, non-recurring expenses, and net operating earnings for the quarters and years ended June 30, 2019 and 2018, respectively, are set forth below:

   
  Reconciliation of Net Income (Loss) Available to Common Shareholders (GAAP) to Net
Operating Earnings (non-GAAP)1
  Three Months Ended June 30,   Year Ended June 30,
  2019     2018   2019   2018
   
  (Dollars in thousands, except share and per share data)
Net income (loss) (GAAP) $   (603 )   $   4,344   $   13,884   $   16,166
Items excluded from net operating earnings, net of tax:                      
Write-off of fair value adjustment on trust preferred                      
  securities     5,057         -        5,057       -
Termination of interest rate swaps and caps     793         -       793       -
Related legal and professional fees     162         -       523       -
Total after-tax items     6,012         -       6,373       -
Net operating earnings (non-GAAP) $   5,409     $   4,344   $   20,257   $   16,166
                       
Weighted average common shares outstanding -diluted     9,041,926         9,116,157       9,156,233       9,129,152
                       
Reported diluted earnings (loss) per share (GAAP) $   (0.07 )   $   0.48   $   1.52   $   1.77
Items excluded from net operating earnings2     0.66         -       0.68       -
Net operating earnings per share (non-GAAP) -diluted2 $   0.59     $   0.48   $   2.20   $   1.77
                       
1 Management believes operating earnings, which exclude non-recurring items related to the corporate reorganization, provide a more meaningful representation of the Bank's performance.
2 The calculation of net operating earnings per share (non-GAAP) -diluted includes dilutive shares of 171,054 and 166,466 for the three months and year ended June 30, 2019, since net operating earnings are in a net income position for the three months ended June 30, 2019.
 

The Board of Directors declared a cash dividend of $0.01 per share, payable on August 30, 2019, to shareholders of record as of August 16, 2019.

"The growing value of our streamlined business strategy is reflected in this year's results, in which we achieved 19.1% growth in our LASG portfolio, and 11.8% growth in our total loan portfolio," said Richard Wayne, Chief Executive Officer. "For the fourth quarter, our Loan Acquisition and Servicing Group originated $51.8 million of loans and purchased loans with a recorded investment of $47.1 million. Removing the effects of the corporate reorganization, which we consider to be non-recurring, our quarterly activity helped us achieve net operating earnings per share of $0.59, an operating return on average equity of 14.2%, an operating return on average assets of 1.8%, and an operating efficiency ratio of 55.2%."

As of June 30, 2019, total assets were $1.2 billion, a decrease of $4.1 million, or 0.4%, from total assets of $1.2 billion as of June 30, 2018. The principal components of the changes in the balance sheet follow:

  1. The following table highlights the changes in the loan portfolio for the three months and year ended June 30, 2019:
     
  June 30, 2019
Balance
  March 31, 2019 
Balance
 
Change ($)
 
Change (%)
   
  (Dollars in thousands)
LASG Purchased $ 326,640   $ 320,326   $ 6,314     1.97 %
LASG Originated   493,413     478,020     15,393     3.22 %
SBA   63,053     63,653     (600 )   (0.94 %)
Community Banking   91,954     99,654     (7,700 )   (7.73 %)
Total $ 975,060   $ 961,653   $ 13,407     1.39 %
                         
  June 30, 2019
Balance
  March 31, 2019 
Balance
 
Change ($)
 
Change (%)
   
  (Dollars in thousands)
LASG Purchased $ 326,640   $ 290,972   $ 35,668     12.26 %
LASG Originated   493,413     397,363
    96,050     24.17 %
SBA   63,053     60,156     2,897     4.82 %
Community Banking   91,954     123,311     (31,357 )   (25.43 %)
Total $ 975,060   $ 871,802   $ 103,258     11.84 %
                         

Loans generated by the Bank's Loan Acquisition and Servicing Group ("LASG") for the quarter ended June 30, 2019 totaled $98.9 million, which consisted of $47.1 million of purchased loans, at an average price of 94.3% of unpaid principal balance, and $51.8 million of originated loans. The Bank's Small Business Administration ("SBA") Division closed $8.1 million of new loans during the quarter ended June 30, 2019, of which $7.7 million was funded. In addition, the Bank sold $6.6 million of the guaranteed portion of SBA loans in the secondary market, of which $1.2 million were originated in the current quarter and $5.4 million were originated in prior quarters. Residential loan production sold in the secondary market totaled $12.5 million for the quarter.

An overview of the Bank's LASG portfolio follows:

  LASG Portfolio
  Three Months Ended June 30,
  2019     2018  
 
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