Northeast Bancorp Reports First Quarter Results, 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 net income of $1.9 million, or $0.20 per diluted common share, for the quarter ended September 30, 2015, compared to net income of $1.6 million, or $0.16 per diluted common share, for the quarter ended September 30, 2014.
The Board of Directors has declared a cash dividend of $0.01 per share, payable on November 20, 2015 to shareholders of record as of November 6, 2015.
“In the quarter we originated $79 million of new loans, achieved a net interest margin of 4.5% and held operating expenses in check,” said Richard Wayne, President and Chief Executive Officer. “Our Loan Acquisition and Servicing Group produced $34 million of new loans, residential loan sales in the secondary market were strong at $29 million, our SBA National division closed $11 million of new loans and we grew non-maturity deposits by $23 million. Asset quality remained strong, with non-performing assets at 1.4% of total assets.”
At September 30, 2015, total assets were $858.2 million, an increase of $7.5 million, or 0.9%, compared to June 30, 2015. The principal components of the change in the balance sheet follow:
1. The loan portfolio – excluding loans held for sale – grew by $13.7 million, or 2.2%, compared to June 30, 2015, principally on the strength of $13.0 million of net growth in commercial loans purchased or originated by the Bank’s Loan Acquisition and Servicing Group (“LASG”) and net growth of $4.1 million in commercial originations by the Bank’s Community Banking Division. This net growth was offset by a $5.8 million decrease in the Bank’s Community Banking Division residential and consumer loan portfolio.
Loans generated by the LASG totaled $34.4 million for the quarter ended September 30, 2015. The growth in LASG loans consisted of $23.5 million of purchased loans, at an average price of 99.5%, and $10.9 million of originated loans. Small Business Administration (“SBA”) loans closed during the quarter totaled $10.6 million, of which $7.3 million were funded and $5.5 million were sold in the secondary market. Residential and consumer loan production sold in the secondary market totaled $28.9 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:
2. Deposits increased by $18.7 million, or 2.8% for the quarter, attributable primarily to growth in non-maturity accounts, which increased by $23.0 million, or 7.0%, for the quarter ended September 30, 2015, offset by a decrease of $4.3 million in time deposits.
3. Stockholders’ equity increased by $977 thousand for the quarter, due principally to earnings of $1.9 million, offset by $548 thousand in share repurchases (representing 52,500 shares), a decrease in accumulated other comprehensive income of $231 thousand and $95 thousand in dividends paid on common stock.
Net income increased by $220 thousand to $1.9 million for the quarter ended September 30, 2015, compared to $1.6 million for the quarter ended September 30, 2014.
1. Net interest and dividend income before provision for loan losses decreased by $230 thousand, or 2.4%, for the quarter ended September 30, 2015, compared to the quarter ended September 30, 2014. The decrease is primarily due to lower interest income in the purchased loan portfolio, mainly due to a decline in yield to 12.1% in the current quarter from 12.8% earned in the quarter ended September 30, 2014.
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 ended September 30, 2014, transactional interest income increased by $183 thousand. The following table summarizes interest income and related yields recognized on the loan portfolios:
As noted earlier, the yield on purchased loans for the quarter ended September 30, 2015 decreased to 12.1% from 12.8% in the quarter ended September 30, 2014. The portfolio’s base yield, represented by regularly scheduled interest and accretion, declined to 7.7% from 8.8%, and was offset in part by the effect of increased transactional interest income, which grew to $2.2 million from $2.0 million in the quarter ended September 30, 2014. The following table details the total return on purchased loans:
2. Noninterest income increased by $551 thousand for the quarter ended September 30, 2015, compared to the quarter ended September 30, 2014, principally due to an increase in gains realized on sale of portfolio loans. The recent quarter includes gains realized on sale of SBA loans of $675 thousand, compared to an $80 thousand gain on sale of commercial loans in the quarter ended September 30, 2014.
3. Noninterest expense increased by $100 thousand for the quarter ended September 30, 2015, compared to the quarter ended September 30, 2014, principally due to the following:
• An increase of $177 thousand in loan acquisition and collections expense related to the collections of two loans;
• An increase of $122 thousand in professional fees related to IT consulting;
• An increase of $88 thousand in occupancy and equipment expense, due to increases in rent and IT-related equipment expense; and
• A decrease of $277 thousand in salaries and employee benefits, principally due to the current quarter benefit recognized upon the forfeiture of stock awards and a decrease in incentive compensation. This decrease is partially offset by an increase in employee head count.
At September 30, 2015, nonperforming assets totaled $12.1 million, or 1.4% of total assets, as compared to $12.4 million, or 1.5% of total assets, at June 30, 2015.
At September 30, 2015, the Company’s Tier 1 Leverage Ratio was 14.2%, a decrease from 14.5% at June 30, 2015, and the Total Capital Ratio was 20.0%, a decrease from 20.1% at June 30, 2015. The slight decreases in the ratios resulted primarily from balance sheet growth and the effect of purchases under the Company’s share repurchase program in the quarter ended September 30, 2015.
Investor Call Information
Richard Wayne, Chief Executive Officer of Northeast Bancorp, Claire Bean, Chief Operating Officer of Northeast Bancorp, and Brian Shaughnessy, Chief Financial Officer of Northeast Bancorp, will host a conference call to discuss first quarter earnings and business outlook at 10:00 a.m. Eastern Time on Tuesday, October 27, 2015. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 64428342. 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 Small Business Lending 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 stockholders’ equity, tangible book value per share, and net operating earnings. 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.
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.