Northeast Bancorp Reports Fourth 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 $2.2 million, or $0.22 per diluted common share, for the quarter ended June 30, 2015, compared to net income of $542 thousand, or $0.05 per diluted common share, for the quarter ended June 30, 2014. Net income for the year ended June 30, 2015 was $7.1 million, or $0.72 per diluted common share, compared to $2.7 million, or $0.26 per diluted common share, for the year ended June 30, 2014.
The Board of Directors has declared a cash dividend of $0.01 per share, payable on August 25, 2015 to shareholders of record as of August 11, 2015.
“We closed the year with our strongest quarter to date,” said Richard Wayne, President and Chief Executive Officer. “Our new SBA Division originated loans totaling $22 million, generating $1.9 million in gains on the sale of $15 million of loans in the secondary market. Overall our loan portfolio increased 6% and strong transactional income of $2.4 million helped drive our net interest margin of 4.7% for the quarter.”
“Looking back on the year, we made significant progress in the execution of our business plan,” Wayne continued. “Loans increased by $96 million or 18%, growth we funded entirely with new deposits. We leveraged our operating platform, growing revenue by $7 million with a $900 thousand increase in noninterest expense. And, in our effort to improve shareholder returns, we repurchased 710,662 shares at a weighted average price of $9.38.”
At June 30, 2015, total assets were $850.8 million, an increase of $88.9 million, or 11.7%, compared to June 30, 2014. The principal components of the change in the balance sheet follow:
1. The loan portfolio – excluding loans held for sale – grew by $95.7 million, or 18.5%, compared to June 30, 2014, the result of net growth of $99.9 million in commercial loans purchased or originated by the Bank’s Loan Acquisition and Servicing Group (“LASG”), offset by a $4.2 million decrease in the Bank’s Community Banking Division loan portfolio.
New loans generated by the LASG totaled $54.0 million and $213.2 million for the quarter and year ended June 30, 2015, respectively. The quarterly growth in LASG loans consisted of $24.8 million of purchased loans, at an average price of 96.0%, and $29.2 million of originated loans. Small Business Administration (“SBA”) loans originated during the quarter totaled $21.5 million, of which $15.2 million were sold in the secondary market. Residential and consumer loan production sold in the secondary market totaled $25.5 million for the quarter.
As discussed in the Company’s prior 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 $19.6 million, or 3.0%, from March 31, 2015, attributable primarily to growth in non-maturity accounts, which increased by $17.1 million, or 5.5%, for the quarter ended June 30, 2015, as well as an increase of $2.5 million in time deposits. For the year, deposits increased by $100.4 million, or 17.5%, mainly the result of increases in money market accounts attracted through the Bank’s online-only ableBanking division.
3. Stockholders’ equity increased by $773 thousand from June 30, 2014, due principally to earnings of $7.1 million, as well as $705 thousand of scheduled amortization of stock-based compensation, offset by $6.7 million in share repurchases (representing 710,662 shares), a decrease in accumulated other comprehensive income of $5 thousand and $402 thousand in dividends paid on common stock. During the quarter, there were 230,726 shares repurchased for $2.3 million.
Net income from continuing operations increased by $1.6 million to $2.2 million for the quarter ended June 30, 2015, compared to $542 thousand for the quarter ended June 30, 2014.
1. Net interest and dividend income before provision for loan losses increased by $866 thousand, or 10.2%, for the quarter ended June 30, 2015 compared to the quarter ended June 30, 2014, due primarily to higher transactional interest income from purchased loan payoffs, and the positive effect of balance sheet growth. Average total interest-earning assets for the three months ended June 30, 2015 increased by $81.9 million, primarily due to an increase in average loans by $83.4 million, when compared to the three months ended June 30, 2014. For the year ended June 30, 2015, average total interest-earning assets increased by $70.6 million, and average loans increased by $66.2 million, compared to the year ended June 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 and year ended June 30, 2014, transactional interest income increased by $616 thousand and $4.5 million, respectively. The following table summarizes interest income and related yields recognized on the loan portfolios:
The yield on purchased loans for the three months and year ended June 30, 2015 increased primarily due to unscheduled loan payoffs, which resulted in immediate recognition in interest income of the discount associated with the prepaid loans. The following table details the “total return” on purchased loans, which includes transactional income of $2.4 million for the quarter ended June 30, 2015, an increase of $756 thousand from the quarter ended June 30, 2014. Additionally, total transactional income for the year ended June 30, 2015 increased by $4.5 million, compared to the year ended June 30, 2014. The following tables summarize the total return recognized on the purchased loan portfolio.
2. Noninterest income increased by $1.6 million for the quarter ended June 30, 2015, compared to the quarter ended June 30, 2014, principally due to the following:
• An increase of $1.5 million in gains realized on sale of portfolio loans. The recent quarter includes gains realized on sale of SBA loans of $1.9 million, compared to a $403 thousand gain on sale of commercial loans in the quarter ended June 30, 2014; and
• An increase of $111 thousand in gains recognized on Real Estate Owned/Other Assets Acquired (“REO/OAA”).
3. Noninterest expense increased by $32 thousand for the quarter ended June 30, 2015, compared to the quarter ended June 30, 2014, principally due to the following:
• An increase of $124 thousand in salaries and employee benefits, principally due to increased employee head count;
• An increase of $189 thousand in professional fees primarily related to an increase in third party services; and
• A decrease of $126 thousand in other noninterest expense, principally due to contract termination costs and one-time non-capital expenses associated with the core banking systems conversion that occurred during the quarter ended June 30, 2014.
At June 30, 2015, nonperforming assets totaled $12.4 million, or 1.5% of total assets, as compared to $8.9 million, or 1.2% of total assets at June 30, 2014. The increase in nonperforming assets during the year was primarily due to the addition of one purchased loan relationship.
At June 30, 2015, the Company’s Tier 1 Leverage Ratio was 14.4%, a decrease from 15.9% at June 30, 2014, and the Total Capital Ratio was 20.1%, a decrease from 23.7% at June 30, 2014. The decreases resulted primarily from balance sheet growth and the effect of purchases under the Company’s share repurchase program in the year ended June 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 fourth quarter earnings and business outlook at 10:00 a.m. Eastern Time on Wednesday, July 29, 2015. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 91797346. 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. Northeast Bank offers traditional banking services through its Community Banking Division, which operates ten full-service branches and two loan production offices that serve individuals and businesses located in western and south-central Maine and southern New Hampshire. Northeast Bank’s Loan Acquisition and Servicing Group purchases and originates commercial loans for the Bank’s portfolio. In addition, the 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 Measure
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.