Northeast Bancorp Reports Fourth Quarter Results, Declares Dividend

Lewiston, ME
Wednesday, July 27, 2016

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 $2.2 million, or $0.24 per diluted common share, for the quarter ended June 30, 2016, compared to net income of $2.2 million, or $0.22 per diluted common share, for the quarter ended June 30, 2015. Net income for the year ended June 30, 2016 was $7.6 million, or $0.80 per diluted common share, compared to $7.1 million, or $0.72 per diluted common share, for the year ended June 30, 2015.

The Board of Directors has also declared a cash dividend of $0.01 per share, payable on August 24, 2016 to shareholders of record as of August 10, 2016.

“We closed the year with a strong quarter,” said Richard Wayne, President and Chief Executive Officer. “For the quarter, we achieved earnings of $0.24 per share driven by solid SBA gains on sale and purchased loan transactional income. In addition to earnings growth, we generated loan volume of $96.6 million, including $50.6 million of loans produced by the Loan Acquisition and Servicing Group, $17.4 million of SBA loans and $28.6 million of residential and commercial loans produced by the Community Bank.  The growth of our balance sheet and earnings, coupled with the issuance of $15.05 million of subordinated notes in June, compliments our growth strategy and positions us well for the future.”

As of June 30, 2016, total assets were $986.2 million, an increase of $135.4 million, or 15.9%, 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 – has grown by $80.3 million, or 13.1%, compared to June 30, 2015, principally on the strength of $81.8 million of net growth in commercial loans purchased or originated by the Bank’s Loan Acquisition and Servicing Group (“LASG”), net growth of $15.5 million in originations by the Bank’s Small Business Administration (“SBA”) National Division and net growth of $3.9 million in commercial originations by the Bank’s Community Banking Division. This net growth was offset by a pay down of one secured loan to a broker-dealer for $12.0 million in the LASG portfolio and a $20.9 million decrease in the Bank’s Community Banking Division residential and consumer loan portfolio.

Loans generated by the LASG totaled $50.6 million for the quarter ended June 30, 2016. The growth in LASG loans consisted of $18.8 million of purchased loans, at an average price of 91.1% of unpaid principal balance, and $31.8 million of originated loans. SBA loans closed during the quarter totaled $17.4 million, of which $16.1 million were fully funded in the quarter.  In addition, the Company sold $14.2 million of the guaranteed portion of SBA and United States Department of Agriculture (“USDA”) loans in the secondary market, of which $9.4 million were originated in the current quarter and $4.8 million were originated in prior quarters. Residential loan production sold in the secondary market totaled $19.9 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 $47.5 million, or 6.3% for the quarter, attributable primarily to growth in non-maturity (demand, savings and interest checking, and money market) accounts, which increased by $49.8 million, or 12.5%. For the year ended June 30, 2016, deposits increased $125.7 million, or 18.6%, primarily due to growth in non-maturity accounts of $120.3 million, or 36.6%, and growth in time deposits of $5.4 million, or 1.6%.

3.      Stockholders’ equity increased by $3.9 million from June 30, 2015, due principally to earnings of $7.6 million, offset by $3.4 million in share repurchases (representing 322,900 shares). Additionally, there was an increase in stock-based compensation of $613 thousand, offset by a decrease in accumulated other comprehensive income of $618 thousand and $380 thousand in dividends paid on common stock.

Net income increased by $34 thousand to $2.2 million for the quarter ended June 30, 2016, compared to $2.2 million for the quarter ended June 30, 2015.

1.      Net interest and dividend income before provision for loan losses increased by $1.4 million for the quarter ended June 30, 2016, compared to the quarter ended June 30, 2015. The increase is primarily due to higher average balances in the total loan portfolio.

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 and year ended June 30, 2015, transactional income decreased by $906 thousand and $2.6 million, respectively. The following table summarizes interest income and related yields recognized on the loan portfolios:

The yield on purchased loans for the quarter ended June 30, 2016 was 10.9% as compared to 13.4% in the quarter ended June 30, 2015, due to lower transactional income in the quarter. The following table details the total return on purchased loans:

  1. Noninterest income decreased by $656 thousand for the quarter ended June 30, 2016, compared to the quarter ended June 30, 2015, principally due to a decrease in gains realized on sale of portfolio loans. The recent quarter includes gains realized on sale of SBA and USDA loans of $1.6 million, compared to $1.9 million in the quarter ended June 30, 2015. Additionally, there was a decrease of $251 thousand in gain recognized on real estate owned and other repossessed collateral.
  2. Noninterest expense increased by $569 thousand for the quarter ended June 30, 2016, compared to the quarter ended June 30, 2015, primarily due to an increase in salaries and employee benefits of $306 thousand, largely attributable to higher employee headcount.

At June 30, 2016, nonperforming assets totaled $9.5 million, or 0.96% of total assets, as compared to $12.4 million, or 1.46% of total assets, at June 30, 2015.

At June 30, 2016, the Company’s Tier 1 Leverage Ratio was 13.3%, compared to 14.5% at June 30, 2015, and the Total Capital Ratio was 20.4%, an increase from 20.1% at June 30, 2015. The increase resulted primarily from the issuance of $15.05 million of subordinated notes which qualify as Tier 2 Capital, offset by balance sheet growth and the effect of purchases under the Company’s share repurchase program in the current fiscal year.

Investor Call Information

Richard Wayne, Chief Executive Officer of Northeast Bancorp, and Brian Shaughnessy, Chief Financial Officer of Northeast Bancorp, will host a conference call to discuss fourth quarter earnings and business outlook at 10:00 a.m. Eastern Time on Thursday, July 28th. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 49101566. 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 SBA National 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, and tangible book value per share. 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.

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; 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.