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CST: 18/08/2019 08:07:25   

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

18 Days ago

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  
  Purchased   Originated   Total LASG   Purchased   Originated   Total LASG
   
  (Dollars in thousands)
Loans purchased or originated during the period:                                  
Unpaid principal balance $  49,948     $   51,830     $   101,778     $    56,233     $    66,588     $    122,821  
Net investment basis   47,107         51,830         98,937         52,637       66,588         119,225  
                                   
Loan returns during the period:                                  
Yield   12.27 %     7.75 %     9.53 %     10.87 %     7.45 %     8.83 %
Total Return on Purchased Loans (1)   12.27 %     7.75 %     9.53 %     11.49 %     7.45 %     9.08 %
                                   
                                   
                                   
  Year Ended June 30,
  2019     2018  
  Purchased   Originated   Total LASG   Purchased   Originated   Total LASG
   
  (Dollars in thousands)
Loans purchased or originated during the period:                                  
Unpaid principal balance $  144,372     $ 271,179     $   415,551     $    137,249     $   224,546     $   361,795  
Net investment basis   135,848       271,179         407,027         124,111       224,546         348,657  
                                   
Loan returns during the period:                                  
Yield   10.38 %     7.67 %     8.80 %     11.35 %     6.80 %     8.66 %
Total Return on Purchased Loans (1)   10.57 %     7.67 %     8.88 %     11.73 %     6.80 %     8.82 %
                                     
Total loans as of period end:                                    
Unpaid principal balance $ 360,472     $ 493,413     $   853,885     $   326,855     $   397,363     $   724,218  
Net investment basis   326,640       493,413        820,053         290,972         397,363         688,335  
                                   
(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 purchased loans held for sale, on an annualized basis.  The total return on purchased loans does not include the effect of purchased loan charge-offs or recoveries during the period. Total return on purchased loans is considered a non-GAAP financial measure. See reconciliation in below table entitled “Total Return on Purchased Loans.”
  1. Short-term investments decreased by $99.1 million, or 64.5%, from June 30, 2018, primarily due to the payoff of trust preferred securities and the corporate reorganization, which allows the Bank to carry lower levels of excess cash due to the release of previous funding commitments made to the Board of Governors of the Federal Reserve System. The Bank reinvested the short-term investments into funding loan growth.
     
  2. Deposits decreased by $12.6 million, or 1.3%, from June 30, 2018, attributable primarily to decreases in money market accounts of $150.1 million, or 35.7%, and savings and checking accounts of $8.6 million, or 7.8%, partially offset by an increase in time deposits of $149.5 million, or 42.5%.
     
  3. Subordinated debt decreased by $9.1 million, or 38.1%, from June 30, 2018, primarily attributable to the redemption of trust preferred securities held by Northeast Bancorp immediately prior to the corporate reorganization.
     
  4. Shareholders’ equity increased by $15.2 million, or 11.0%, from June 30, 2018, primarily due to net income of $13.9 million for the year, as well as $1.4 million of stock-based compensation for the year.

Net income decreased by $4.9 million to a $603 thousand net loss for the quarter ended June 30, 2019, compared to net income of $4.3 million for the quarter ended June 30, 2018. Net operating earnings increased by $1.1 million to $5.4 million for the quarter ended June 30, 2019, compared to net operating earnings of $4.3 million for the quarter ended June 30, 2018.

  1. Net interest and dividend income before provision for loan losses increased by $2.9 million to $17.3 million for the quarter ended June 30, 2019, compared to $14.4 million for the quarter ended June 30, 2018. The increase was primarily due to higher transactional income in the purchased portfolio, and higher average balances and yields in the loan portfolio. These increases were partially offset by higher funding costs 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
  Three Months Ended June 30,
  2019     2018  
  Average   Interest       Average   Interest    
  Balance (1)   Income   Yield   Balance (1)   Income   Yield
   
  (Dollars in thousands)
Community Banking $ 99,007   $   1,272   5.15 %   $ 128,296   $   1,630   5.10 %
SBA   66,126     1,194   7.24 %     56,088     1,116   7.98 %
LASG:                              
Originated    482,213       9,317   7.75 %      381,783       7,088   7.45 %
Purchased   313,515       9,588   12.27 %      259,119       7,021   10.87 %
Total LASG    795,728       18,905   9.53 %      640,902       14,109   8.83 %
  Total $ 960,861   $   21,371   8.92 %   $  825,286   $   16,855   8.19 %
   
   
  Year Ended June 30,
  2019     2018  
  Average   Interest       Average   Interest    
  Balance (1)   Income   Yield   Balance (1)   Income   Yield
   
  (Dollars in thousands)
Community Banking $ 107,685   $  5,590   5.19 %   $ 139,239   $   6,871   4.93 %
SBA   70,016     5,285   7.55 %     53,030     3,888   7.33 %
LASG:                              
Originated    434,570       33,348   7.67 %      350,427       23,834   6.80 %
Purchased    312,213       32,404   10.38 %      242,652       27,553   11.35 %
Total LASG   746,783       65,752   8.80 %      593,079       51,387   8.66 %
  Total $  924,484   $   76,627   8.29 %   $  785,348   $   62,146   7.91 %
   
 (1) Includes loans held for sale.

The components of total income on purchased loans are set forth in the table below entitled “Total Return on Purchased Loans.” Wh­en compared to the quarter ended June 30, 2018, transactional income for the quarter ended June 30, 2019 increased by $1.2 million, while regularly scheduled interest and accretion increased by $956 thousand due to the increase in average balances. The total return on p­­­­­­­­urchased loans for the quarter ended June 30, 2019 was 12.3%. When compared to the year ended June 30, 2018, transactional income for the year ended June 30, 2019 decreased by $582 thousand, while regularly scheduled interest and accretion increased by $5.1 million due to the increase in average balances. Total return for the year ended June 30, 2019 was 10.6%. The following table details the total return on purchased loans:

  Total Return on Purchased Loans
  Three Months Ended June 30,
  2019     2018  
  Income   Return (1)   Income   Return (1)
   
  (Dollars in thousands)
Regularly scheduled interest and accretion $ 5,999   7.67 %   $ 5,043   7.81 %
Transactional income:                  
Gain on loan sales   -   0.00 %       402   0.62 %
Gain on sale of real estate owned     -   0.00 %       -   0.00 %
Other noninterest income     -    0.00 %       -    0.00 %
Accelerated accretion and loan fees     3,589   4.60 %       1,978   3.06 %
Total transactional income     3,589   4.60 %       2,380   3.68 %
  Total $   9,588   12.27 %   $   7,423   11.49 %
                       



  Year Ended June 30,
  2019     2018  
  Income   Return (1)   Income   Return (1)
   
  (Dollars in thousands)
Regularly scheduled interest and accretion $ 23,849   7.64 %   $ 18,752   7.73 %
Transactional income:                  
Gain on loan sales     582   0.19 %       918   0.38 %
Gain on sale of real estate owned     -   0.00 %       -   0.00 %
Other noninterest income     -    0.00 %       -    0.00 %
Accelerated accretion and loan fees     8,555   2.74 %       8,801   3.62 %
Total transactional income     9,137   2.93 %       9,719   4.00 %
Total $ 32,986   10.57 %   $   28,471   11.73 %
                       
(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 purchased 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 decreased by $808 thousand for the quarter ended June 30, 2019, compared to the quarter ended June 30, 2018, principally due to the following:

  • A decrease in gain on sale of SBA loans of $806 thousand, due to lower volume of SBA loans sold in the quarter; and
  • A decrease in gain on sale of other loans of $402 thousand, due to no loans sold in the current quarter as compared to the sale of two LASG purchased loans in the quarter ended June 30, 2018; partially offset by,
  • An increase in fees for other services to customers of $143 thousand, due to higher commercial loan servicing fees; and
  • A decrease in loss recognized on real estate owned and other repossessed collateral of $98 thousand.

3. Noninterest expense increased by $9.0 million for the quarter ended June 30, 2019 compared to the quarter ended June 30, 2018, primarily due to the following:

  • An increase in pre-tax reorganization expense of $8.3 million, which included the write-off of the fair value mark on trust preferred securities of $7.1 million, the loss associated with the termination of related interest rate swaps and caps of $1.1 million and the related legal and other professional costs of $183 thousand;
  • An increase in salaries and employee benefits of $524 thousand, primarily due to an increase in incentive compensation; and
  • An increase in data processing fees of $403 thousand, primarily due to increased IT outsourcing costs; partially offset by,
  • A decrease in professional fees of $212 thousand, primarily due to a decrease in accounting and audit, legal, and other professional fees for the quarter, unrelated to the corporate reorganization; and
  • A decrease in occupancy and equipment of $208 thousand, primarily due to a decrease in equipment repairs and maintenance expense.

4. Income tax expense decreased by $2.0 million to $276 thousand, for the quarter ended June 30, 2019, compared to $2.3 million for the quarter ended June 30, 2018. The decrease in expense was primarily due to the following:

  • An income tax benefit of $2.3 million recorded in connection with the redemption of the trust preferred securities and the loss associated with the termination of related interest rate swaps and caps; offset by,
  • A decrease in excess tax benefits recognized in the current period of $110 thousand.

    Excluding the effects of the corporate reorganization, the effective tax rate for the quarter ended June 30, 2019 was 32.5%, compared to the effective tax rate for the quarter ended June 30, 2018 of 34.5%. The decrease was related to the decrease in the statutory federal income tax rate for the year ended June 30, 2019 compared to the statutory federal income tax rate for the year ended June 30, 2018, offset by changes in state apportionment and permanent items.                    

As of June 30, 2019, nonperforming assets totaled $16.7 million, or 1.45% of total assets, as compared to $14.2 million, or 1.23% of total assets, as of June 30, 2018. The increase was primarily due to the addition of an originated relationship of $1.0 million, which was placed on nonaccrual during the quarter ended June 30, 2019.

As of June 30, 2019, past due loans totaled $14.6 million, or 1.50% of total loans, as compared to past due loans totaling $7.7 million, or 0.89% of total loans as of June 30, 2018. The increase was primarily due to four originated relationships totaling $4.4 million and four purchased loan relationships totaling $1.8 million that were past due as of June 30, 2019.

As of June 30, 2019, the Bank’s Tier 1 leverage capital ratio was 12.9%, compared to 13.9% at June 30, 2018, and the Total capital ratio was 18.0% at June 30, 2019, as compared to 18.6% at June 30, 2018. Capital ratios were affected by the capital used in the corporate reorganization to redeem the trust preferred debt and the termination of related interest rate swaps and caps , as well as the assumption of the subordinated debt from the Company to the Bank, offset by earnings for the year.

Investor Call Information
Richard Wayne, Chief Executive Officer of Northeast Bank, and Jean-Pierre Lapointe, Chief Financial Officer of Northeast Bank, will host a conference call to discuss fourth quarter earnings and business outlook at 10:00 a.m. Eastern Time on Wednesday, July 31st. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 8699267. The call will be available via live webcast, which can be viewed by accessing the Bank’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 Bank
Northeast Bank (NASDAQ: NBN) is a full-service bank headquartered in Lewiston, Maine. We offer personal and business banking services to the Maine market via ten branches. Our Loan Acquisition and Servicing Group 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 net operating earnings, operating earnings per share, operating return on average assets, operating return on average equity, operating efficiency ratio, operating noninterest expense to average total assets, tangible common shareholders’ equity, tangible book value per share, total return on purchased loans, and efficiency ratio. The Bank’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 the Bank 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 Bank’s control. The Bank’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 Bank 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 Bank may not be successful in the implementation of its business strategy; the risk that intangibles recorded in the Bank’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 Bank’s Annual Report on Form 10-K and updated by our Quarterly Reports on Form 10-Q and other filings submitted to the Securities and Exchange Commission by Northeast Bancorp prior to completion of the corporate reorganization and submitted to the Federal Deposit Insurance Corporation by the Bank after completion of the corporate reorganization. These statements speak only as of the date of this release and the Bank 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 BAN K
BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share data)
  June 30, 2019   June 30, 2018
Assets          
Cash and due from banks $ 2,482     $ 3,889  
Short-term investments   54,425       153,513  
Total cash and cash equivalents   56,907       157,402  
           
           
Available-for-sale securities, at fair value   75,774       81,068  
Equity securities, at fair value   6,938       6,619  
Total investment securities   82,712       87,687  
           
Residential real estate loans held for sale   3,179       3,405  
SBA loans held for sale   731       3,750  
Total loans held for sale   3,910       7,155  
           
           
Loans          
Commercial real estate   668,496       579,450  
Commercial and industrial   232,839       188,852  
Residential real estate   71,218       100,256  
Consumer   2,507       3,244  
Total loans   975,060       871,802  
Less: Allowance for loan losses   5,702       4,807  
Loans, net   969,358       866,995  
           
           
Premises and equipment, net   5,582       6,591  
Real estate owned and other repossessed collateral, net   1,957       2,233  
Federal Home Loan Bank stock, at cost   1,258       1,652  
Intangible assets, net   434       867  
Loan servicing rights, net   2,851       2,970  
Bank-owned life insurance   17,057       16,620  
Other assets   11,832       7,564  
Total assets $ 1,153,858     $ 1,157,736  
           
Liabilities and Shareholders' Equity          
Deposits          
Demand $ 68,782     $ 72,272  
Savings and interest checking   101,061       109,637  
Money market   270,835       420,886  
Time   501,693       352,145  
Total deposits   942,371       954,940  
           
Federal Home Loan Bank advances   15,000       15,000  
Subordinated debt   14,829       23,958  
Capital lease obligation   323       605  
Other liabilities   27,755       24,803  
Total liabilities   1,000,278       1,019,306  
           
 

Commitments and contingencies
    -         -  
           
           
Shareholders' equity          
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares        
  issued and outstanding at June 30, 2019 and 2018     -         -  
Voting common stock, $1.00 par value, 25,000,000 shares authorized;          
8,997,326 and 8,056,527 shares issued and outstanding at        
  June 30, 2019 and 2018, respectively   8,997       8,057  
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized;          
  44,783 and 882,314 shares issued and outstanding at
   June 30, 2019 and 2018, respectively
45       882  
Additional paid-in capital   78,095       77,016  
Retained earnings   67,581       54,236  
Accumulated other comprehensive loss   (1,138 )     (1,761 )
Total shareholders' equity   153,580       138,430  
Total liabilities and shareholders' equity $ 1,153,858     $ 1,157,736  


 
NORTHEAST BANK
STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except share and per share data)
  Three Months Ended June 30,   Year Ended June 30,  
  2019   2018   2019   2018  
Interest and dividend income:                              
Interest and fees on loans $ 21,371     $ 16,855     $ 76,627     $ 62,146    
Interest on available-for-sale securities 455       298       1,684       1,111    
Other interest and dividend income    729       819       3,519       2,636    
Total interest and dividend income   22,555       17,972       81,830       65,893    
                                 
                                 
Interest expense:        
Deposits   4,656       2,896       16,768       9,897    
Federal Home Loan Bank advances 120       109       479       547    
Subordinated debt 486       552       2,238       2,102    
Obligation under capital lease agreements   5       7       24       38    
Total interest expense   5,267       3,564       19,509       12,584    
                                 
Net interest and dividend income before provision for loan losses 17,288       14,408       62,321       53,309    
Provision for loan losses   262       254       1,309       1,410    
Net interest and dividend income after provision for loan losses   17,026       14,154       61,012       51,899    
                                 
                                 
Noninterest income:        
Fees for other services to customers 529       386       1,769       1,822    
Gain on sales of SBA loans 227       1,033       2,588       2,955    
Gain on sales of residential loans held for sale 225       159       611       931    
Gain on sales of other loans -       402       582       918    
Net unrealized gain on equity securities 76       -       151       -    
Loss on real estate owned, other repossessed collateral and premises and equipment, net  

(40
     

(138
     

(104
 

 
 

(123
 

 
and premises and equipment, net ) ) ) )
Bank-owned life insurance income 110       109       437       441    
Other noninterest income   24       8       82       84    
Total noninterest income   1,151       1,959       6,116       7,028    
                                 
                                 
Noninterest expense:                                
Salaries and employee benefits 6,333       5,809       23,323       21,565    
Occupancy and equipment expense 958       1,166       3,650       4,585    
Professional fees 246       458       1,402       1,749    
Data processing fees 1,004       601       3,769       2,447    
Marketing expense 166       143       580       472    
Loan acquisition and collection expense 281       356       1,913       1,354    
FDIC insurance premiums 77       80       320       317    
Intangible asset amortization 108       108       433       433    
Reorganization expense 8,334       -       8,695       -    
Other noninterest expense   997       757       3,428       2,808    
Total noninterest expense   18,504       9,478       47,513       35,730    
                                 
Income (loss) before income tax expense (327 )     6,635       19,615       23,197    
Income tax expense   276       2,291       5,731       7,031    
Net income (loss) $ (603 )   $ 4,344     $ 13,884     $ 16,166    
                                 
                                 
                                 
Weighted-average common shares outstanding:        
Basic   9,041,926       8,934,038       9,032,530       8,906,710    
Diluted   9,041,926       9,116,157       9,156,233       9,129,152    
                                 
Earnings (loss) per common share:        
   
Basic $ (0.07 )   $ 0.49     $ 1.54     $ 1.81    
Diluted   (0.07 )   0.48       1.52       1.77    
                               
 Cash dividends declared per common share $ 0.01     $ 0.01     $ 0.04     $ 0.04    

  

 

NORTHEAST BANK
AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
  Three Months Ended June 30,
  2019     2018  
      Interest   Average       Interest   Average
  Average   Income/   Yield/   Average   Income/   Yield/
  Balance   Expense   Rate   Balance   Expense   Rate
Assets:                              
Interest-earning assets:                              
Investment securities $   83,372   $   455   2.19 %   $   88,933   $   298   1.34 %
Loans (1) (2) (3)     960,861       21,371   8.92 %       825,286       16,855   8.19 %
Federal Home Loan Bank stock     1,258       20   6.38 %       1,655       24   5.82 %
Short-term investments (4)     119,788       709   2.37 %       178,244       795   1.79 %
Total interest-earning assets     1,165,279       22,555   7.76 %       1,094,118       17,972   6.59 %
Cash and due from banks     2,351                 2,611          
Other non-interest earning assets     32,864                 30,430          
Total assets $   1,200,494             $   1,127,159          
                               
Liabilities & Shareholders' Equity:                              
Interest-bearing liabilities:                              
NOW accounts $ 70,645   $   63   0.36 %   $ 73,357   $   59   0.32 %
Money market accounts     279,307       1,124   1.61 %       447,775       1,580   1.42 %
Savings accounts     35,697       14   0.16 %       37,799       14   0.15 %
Time deposits     537,155       3,455   2.58 %       309,362       1,243   1.61 %
  Total interest-bearing deposits     922,804       4,656   2.02 %       868,293       2,896   1.34 %
Federal Home Loan Bank advances     15,000       120   3.21 %       15,000       109   2.91 %
Subordinated debt     19,272       486   10.11 %       23,915       552   9.26 %
Capital lease obligations     348       5   5.76 %       629       7   4.46 %
Total interest-bearing liabilities     957,424       5,267   2.21 %       907,837       3,564   1.57 %
                               
Non-interest bearing liabilities:                              
Demand deposits and escrow accounts   80,538                76,368          
Other liabilities     9,534                 8,654          
Total liabilities     1,047,496                 992,859          
Shareholders' equity     152,998                 134,300          
Total liabilities and shareholders' equity $   1,200,494             $   1,127,159          
                               
Net interest income       $ 17,288             $ 14,408    
                               
Interest rate spread             5.55 %               5.02 %
Net interest margin (5)             5.95 %               5.28 %
                               
(1)  Interest income and yield are stated on a fully tax-equivalent basis using the statutory 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)  Net interest margin is calculated as net interest income divided by total interest-earning assets. 

 

 

 

NORTHEAST BANK
AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
  Year Ended June 30,
  2019     2018  
      Interest   Average       Interest   Average
  Average   Income/   Yield/   Average   Income/   Yield/
  Balance   Expense   Rate   Balance   Expense   Rate
Assets:                              
Interest-earning assets:                              
Investment securities $ 85,232   $   1,684   1.98 %   $ 92,599   $   1,111   1.20 %
Loans (1) (2) (3)     924,484       76,627   8.29 %       785,348       62,156   7.91 %
Federal Home Loan Bank stock     1,475       95   6.44 %       1,803       89   4.94 %
Short-term investments (4)     153,609       3,424   2.23 %       171,360       2,547   1.49 %
Total interest-earning assets     1,164,800       81,830   7.03 %       1,051,110       65,903   6.27 %
Cash and due from banks     2,542                 2,889          
Other non-interest earning assets     30,968                 31,550          
Total assets $   1,198,310             $   1,085,549          
                               
Liabilities & Shareholders' Equity:                              
Interest-bearing liabilities:                              
NOW accounts $ 70,822   $ 246   0.35 %   $ 70,486   $ 210   0.30 %
Money market accounts     344,631       5,383   1.56 %       407,680       5,145   1.26 %
Savings accounts     35,619       56   0.16 %       37,514       57   0.15 %
Time deposits     471,777       11,083   2.35 %       311,544       4,485   1.44 %
  Total interest-bearing deposits     922,849       16,768   1.82 %       827,224       9,897   1.20 %
Federal Home Loan Bank advances     15,000       479   3.19 %       16,947       547   3.23 %
Subordinated debt     22,885       2,238   9.78 %       23,787       2,102   8.84 %
Capital lease obligations     455       24   5.27 %        730       38   5.21 %
Total interest-bearing liabilities     961,189       19,509   2.03 %       868,688       12,584   1.45 %
                               
Non-interest bearing liabilities:                              
Demand deposits and escrow accounts   80,848               79,767          
Other liabilities     8,814                 7,472          
Total liabilities     1,050,851                 955,927          
Shareholders' equity     147,459                 129,622          
Total liabilities and shareholders' equity $   1,198,310             $   1,085,549          
                               
Net interest income (5)       $   62,321             $   53,319    
                               
Interest rate spread             5.00 %               4.82 %
Net interest margin (6)             5.35 %               5.07 %
                               
(1)  Interest income and yield are stated on a fully tax-equivalent basis using the statutory 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 for the year ended June 30, 2018. 
(6)  Net interest margin is calculated as net interest income divided by total interest-earning assets.

 

NORTHEAST BANK
SELECTED FINANCIAL HIGHLIGHTS AND OTHER DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
  Three Months Ended:
  June 30, 2019
  March 31, 2019
  December 31, 2018
  September 30, 2018
  June 30, 2018
 

$


17,288
   

$


15,033
   

$


15,643
   

$


14,359
   

$


14,408
 
Net interest income
Provision for loan losses   262       414       101       532       254  
Noninterest income   1,151       1,866       1,545       1,554       1,959  
Noninterest expense   18,504       9,752       9,903       9,355       9,478  
Net income (loss)   (603     4,828       5,125       4,534       4,344  
                   
Weighted-average common shares outstanding:                  
Basic   9,041,926       9,044,230       9,048,397       8,995,925       8,934,038  
Diluted   9,041,926       9,198,077       9,201,557       9,183,729       9,116,157  
Earnings (loss) per common share:                  
Basic $ (0.07 )   $ 0.53     $ 0.57     $ 0.50     $ 0.49  
Diluted   (0.07     0.52       0.56       0.49       0.48  
                   
Operating earnings per common share:                  
 Basic $ 0.60     $ 0.53     $ 0.57     $ 0.50     $ 0.49  
 Diluted   0.59       0.52       0.56       0.49       0.48  
                   
Dividends declared per common share   0.01       0.01       0.01       0.01       0.01  
                   
Return (loss) on average assets   (0.20 %)     1.63 %     1.70 %     1.51 %     1.55 %
Return (loss) on average equity   (1.58 %)     13.00 %     13.94 %     12.81 %     12.97 %
Net interest rate spread (1)    5.55 %     4.81 %     5.00 %     4.61 %     5.02 %
Net interest margin (2)   5.95 %     5.20 %     5.33 %     4.93 %     5.28 %
Efficiency ratio (non-GAAP) (3)   100.35 %     57.71 %     57.62 %     58.79 %     57.91 %
Noninterest expense to average total assets   6.18 %     3.29 %     3.28 %     3.12 %     3.37 %
Average interest-earning assets to average   121.71 %     121.65 %     120.67 %     120.72 %     120.52 %
interest-bearing liabilities
                   
Operating return on average assets (non-GAAP) (4)   1.81 %     1.63 %     1.70 %     1.51 %     1.55 %
Operating return on average equity (non-GAAP) (4)   14.18 %     13.00 %     13.94 %     12.81 %     12.97 %
Operating efficiency ratio (non-GAAP) (3) (4)   55.15 %     57.71 %     57.62 %     58.79 %     57.91 %
Operating noninterest expense to average total assets (non-GAAP) (4)   3.40 %     3.29 %     3.28 %     3.12 %     3.37 %
                                       
  As of:
  June 30, 2019
  March 31, 2019
  December 31, 2018
  September 30, 2018
  June 30, 2018
Nonperforming loans:                                      
Originated portfolio:                  
Residential real estate $ 2,772     $ 2,317     $ 2,595     $ 2,784     $ 3,212  
Commercial real estate   3,892       3,336       2,764       1,703       1,499  
Commercial and industrial   1,284       1,495       1,420       1,454       1,368  
Consumer    148       236       216       185       134  
Total originated portfolio   8,096       7,384       6,995       6,126       6,213  
Total purchased portfolio   6,671       5,366       5,351       5,375       5,745  
Total nonperforming loans   14,767       12,750       12,346       11,501       11,958  
Real estate owned and other repossessed collateral, net   1,957       2,014       1,463       1,549       2,233  
Total nonperforming assets $ 16,724     $ 14,764     $ 13,809     $ 13,050     $ 14,191  
                   
Past due loans to total loans   1.50 %     2.16 %     1.95 %     1.09 %     0.89 %
Nonperforming loans to total loans   1.51 %     1.33 %     1.32 %     1.30 %     1.37 %
Nonperforming assets to total assets   1.45 %     1.20 %     1.16 %     1.08 %     1.23 %
Allowance for loan losses to total loans   0.58 %     0.59 %     0.57 %     0.60 %     0.55 %
Allowance for loan losses to nonperforming loans   38.61 %     44.38 %     42.99 %     45.98 %     40.20 %
                   
Commercial real estate loans to total capital (5)   282.05 %     251.02 %     242.38 %     230.48 %     200.74 %
Net loans to core deposits (6)   103.33 %     94.19 %     94.84 %     87.17 %     91.54 %
Purchased loans to total loans, including held for sale   33.37 %     33.27 %     35.17 %     33.75 %     33.10 %
Equity to total assets   13.31 %     12.44 %     12.44 %     11.81 %     11.96 %
Common equity tier 1 capital ratio   15.89 %     16.23 %     16.04 %     16.50 %     16.02 %
Total capital ratio    18.01 %     19.33 %     19.15 %     19.81 %     19.28 %
Tier 1 leverage capital ratio   12.86 %     13.58 %     13.20 %     12.83 %     13.12 %
                   
Total shareholders' equity  $ 153,580     $ 153,188     $ 148,491     $ 143,391     $ 138,430  
Less: Preferred stock     -          -          -          -          -   
Common shareholders' equity   153,580       153,188       148,491       143,391       138,430  
Less: Intangible assets (7)   (3,285     (3,485     (3,583     (3,768     (3,837
Tangible common shareholders' equity (non-GAAP) $ 150,295     $ 149,703     $ 144,908     $ 139,623     $ 134,593  
                   
Common shares outstanding   9,042,109       9,041,868       9,048,863       9,047,390       8,938,841  
Book value per common share  $ 16.98     $ 16.94     $ 16.41     $ 15.85     $ 15.49  
Tangible book value per share (non-GAAP) (8)   16.62       16.56       16.01       15.43       15.06  

 

(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) Operating return on average assets, operating return on average equity, operating efficiency ratio, and operating noninterest expense to average total assets utilize net operating earnings (non-GAAP), calculated on page 1 of the earnings release.
(5) 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.
(6) Core deposits include all non-maturity deposits and maturity deposits less than $250 thousand. Loans include loans held for sale.
(7) Includes the core deposit intangible asset and loan servicing rights asset.
(8) 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:
Jean-Pierre Lapointe, Chief Financial Officer
Northeast Bank, 500 Canal Street, Lewiston, ME 04240
207.786.3245 ext. 3220
www.northeastbank.com 

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