Northeast Bancorp Reports Third Quarter Results and Declares Dividend

LEWISTON, Maine, April 25, 2018 (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 $3.9 million, or $0.43 per diluted common share, for the quarter ended March 31, 2018, compared to net income of $3.5 million, or $0.39 per diluted common share, for the quarter ended March 31, 2017. Net income for the nine months ended March 31, 2018 was $11.8 million, or $1.29 per diluted common share, compared to $8.3 million, or $0.93 per diluted common share, for the nine months ended March 31, 2017.

On April 25, 2018, the Board of Directors declared a cash dividend of $0.01 per share, payable on May 25, 2018 to shareholders of record as of May 11, 2018.

“Our strong growth in fiscal year 2018 continued in the third quarter,” said Richard Wayne, President and Chief Executive Officer. “We achieved earnings of 43 cents per diluted share through solid loan volume, purchased loan transactional income, gains from sale of SBA and residential loans, disciplined expense management, and a reduction to 28.0% in our federal income tax rate. Our Loan Acquisition and Servicing Group produced $105.9 million of loans, including originations of $72.9 million and purchases with a recorded investment of $33.0 million, for net growth in the LASG portfolio of $45.6 million, or 7.7%, during the quarter. This quarterly activity helped drive our return on equity to 12.2%, our return on assets to 1.4%, and our efficiency ratio to 59.8%.”

As of March 31, 2018, total assets were $1.2 billion, an increase of $89.3 million, or 8.3%, from total assets of $1.1 billion as of June 30, 2017. The principal components of the change in the balance sheet follow:

1. The following table highlights the changes in the loan portfolio for the three and nine months ended March 31, 2018:

Loans generated by the Bank's Loan Acquisition and Servicing Group ("LASG") for the quarter ended March 31, 2018 totaled $105.9 million, which consisted of $33.0 million of purchased loans, at an average price of 85.8% of unpaid principal balance, and $72.9 million of originated loans. The Bank's Small Business Administration ("SBA") Division closed $8.9 million and funded $8.8 million of new loans during the quarter ended March 31, 2018. In addition, the Company sold $5.8 million of the guaranteed portion of SBA loans in the secondary market, of which $4.1 million were originated in the current quarter and $1.7 million were originated or purchased in prior quarters. Residential loan production sold in the secondary market totaled $16.4 million for the quarter.

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:

An overview of the Bank’s LASG portfolio follows:

(1) Period end purchased loan balances include loans held for sale of $0 and $973 thousand at March 31, 2018 and March 31, 2017, respectively.
(2) The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on asset sales, and other noninterest income recorded during the period divided by the average invested balance, which includes purchased loans held for sale, on an annualized basis.  The total return does not include the effect of purchased loan charge-offs or recoveries during the period. Total return is considered a non-GAAP financial measure. 

2. Deposits increased by $86.4 million, or 9.7%, from June 30, 2017, attributable primarily to an increase in money market accounts of $115.7 million, or 30.9%, offset by a decrease in time deposits of $25.7 million, or 7.6%.
3. Shareholders’ equity increased by $11.0 million, or 9.0%, from June 30, 2017, primarily due to earnings of $11.8 million. Earnings were partially offset by stock option exercises which decreased additional paid-in-capital by $1.1 million. Additionally, there was stock based compensation of $635 thousand, an increase in accumulated other comprehensive loss of $128 thousand, and dividends paid on common stock of $266 thousand.

Net income increased by $471 thousand to $3.9 million for the quarter ended March 31, 2018, compared to net income of $3.5 million for the quarter ended March 31, 2017.

1. Net interest and dividend income before provision for loan losses increased by $675 thousand for the quarter ended March 31, 2018, compared to the quarter ended March 31, 2017. The increase is primarily due to higher average balances 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:

The components of total transactional income on purchased loans are set forth in the table below entitled “Total Return on Purchased Loans.” When compared to the three months ended March 31, 2017, transactional income increased by $312 thousand. The total return on purchased loans for the three months ended March 31, 2018 was 12.16%. The increase over the prior comparable period was primarily due to the gain on loan sales in the three months ended March 31, 2018. When compared to the nine months ended March 31, 2017, transactional income increased by $742 thousand. The total return on purchased loans for the nine months ended March 31, 2018 was 11.82%. This increase over the prior comparable period was primarily due to the gain on loan sales and higher accelerated accretion in the nine months ended March 31, 2018. The following table details the total return on purchased loans:

(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 $426 thousand for the quarter ended March 31, 2018, compared to the quarter ended March 31, 2017, principally due to the following:

• A decrease in gain on sale of SBA loans of $391 thousand, due to a lower volume of SBA loans sold in the quarter; and
• A decrease in gain on sale of residential loans of $54 thousand, due to lower volume of residential loans sold in the quarter.

3. Noninterest expense increased by $133 thousand for the quarter ended March 31, 2018, compared to the quarter ended March 31, 2017, primarily due to the following:

• An increase of $312 thousand in other noninterest expense, primarily due to $140 thousand of expense related to the quarterly valuation of SBA servicing rights recorded in the three months ended March 31, 2018, and a $167 thousand recovery from a legacy mortgage insurance premium plan that was recorded in the three months ended March 31, 2017, with no such recovery recorded during the three months ended March 31, 2018;
• An increase of $164 thousand in data processing fees, primarily due to the increased cost associated with the outsourcing of data processing; and
• An increase of $126 thousand in salaries and employee benefits, primarily due to an increase in incentive compensation and a decrease in deferred salaries driven by loan originations, offset by a decrease in salaries due to a decrease in headcount.
• The increases in noninterest expense were partially offset by a decrease in loan expense of $464 thousand, largely driven by lower expense related to loan acquisition, collection, and refinance activity.

4. Income tax expense decreased by $335 thousand for the quarter ended March 31, 2018, compared to the quarter ended March 31, 2017, $397 thousand of which was due to a decrease in the federal corporate income tax rate as a result of the Tax Cuts and Jobs Act signed into law on December 22, 2017, offset by an increase related to a higher pre-tax net income amount.

As of March 31, 2018, nonperforming assets totaled $14.6 million, or 1.25% of total assets, as compared to $19.0 million, or 1.84% of total assets, as of December 31, 2017, and $14.8 million, or 1.37% of total assets, as of June 30, 2017.

As of March 31, 2018, past due loans totaled $11.2 million, or 1.37% of total loans, as compared to $30.0 million, or 3.87% of total loans as of December 31, 2017, and $13.4 million, or 1.72% of total loans as of June 30, 2017.

As of March 31, 2018, the Company’s Tier 1 Leverage Ratio was 12.9%, compared to 12.8% at June 30, 2017, and the Total Capital Ratio was 19.9%, compared to 19.5% at June 30, 2017.

Investor Call Information
Richard Wayne, Chief Executive Officer of Northeast Bancorp, and Jean-Pierre Lapointe, Chief Financial Officer of Northeast Bancorp, will host a conference call to discuss third quarter earnings and business outlook at 10:00 a.m. Eastern Time on Thursday, April 26th. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 8745479. 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 personal and business banking services to the Maine and New Hampshire markets via ten branches and one loan production office. 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 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.

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Forward-Looking Statements
Statements in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although Northeast believes that these forward-looking statements are based on reasonable estimates and assumptions, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and other factors. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company’s control. The Company’s actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, changes in interest rates and real estate values; competitive pressures from other financial institutions; the effects of weakness in general economic conditions on a national basis or in the local markets in which the Company operates, including changes which adversely affect borrowers’ ability to service and repay our loans; changes in loan defaults and charge-off rates; changes in the value of securities and other assets, adequacy of loan loss reserves, or deposit levels necessitating increased borrowing to fund loans and investments; changing government regulation; operational risks including, but not limited to, cybersecurity, fraud and natural disasters; the risk that the Company may not be successful in the implementation of its business strategy; the risk that intangibles recorded in the Company’s financial statements will become impaired; changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company’s Annual Report on Form 10-K and updated by the Company’s Quarterly Reports on Form 10-Q and other filings submitted to the Securities and Exchange Commission. These statements speak only as of the date of this release and the Company does not undertake any obligation to update or revise any of these forward-looking statements to reflect events or circumstances occurring after the date of this communication or to reflect the occurrence of unanticipated events.

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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