LEWISTON, Maine, Oct. 28, 2019 (GLOBE NEWSWIRE) — Northeast Bank (the “Bank”) (NASDAQ: NBN), a Maine-based full-service financial institution, today reported net income of $4.8 million, or $0.52 per diluted common share, for the quarter ended September 30, 2019, compared to net income of $4.5 million, or $0.49 per diluted common share, for the quarter ended September 30, 2018.
The Board of Directors declared a cash dividend of $0.01 per share, payable on November 22, 2019, to shareholders of record as of November 8, 2019.“We started fiscal 2020 with a solid first quarter,” said Richard Wayne, Chief Executive Officer. “For the quarter, we earned $0.52 per diluted common share, a return on equity of 12.2%, a return on assets of 1.7%, and a net interest margin of 5.7%. Our Loan Acquisition and Servicing Group produced $69.2 million of loans, including originations of $40.6 million and purchases with an investment of $28.6 million during the quarter. Additionally, we began to realize interest expense savings due to both the redemption of the Trust Preferred Securities and a reduction of deposits held in cash on the balance sheet at a negative spread.”As of September 30, 2019, total assets were $1.1 billion, a decrease of $30.8 million, or 2.7%, from total assets of $1.2 billion as of June 30, 2019. The principal components of the changes in the balance sheet follow:1. The following table highlights the changes in the loan portfolio for the quarter ended September 30, 2019:Loans generated by the Bank’s Loan Acquisition and Servicing Group (“LASG”) for the quarter ended September 30, 2019 totaled $69.2 million, which consisted of $28.6 million of purchased loans, at an average price of 94.4% of unpaid principal balance, and $40.6 million of originated loans. This activity was offset by payoffs, paydowns and amortization in the LASG portfolios of $99.6 million. The Bank’s Small Business Administration (“SBA”) Division sold $2.4 million of the guaranteed portion of SBA loans in the secondary market, all of which were originated in the prior quarter. Residential loan production sold in the secondary market totaled $10.9 million for the quarter.An overview of the Bank’s LASG portfolio follows:(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.”2. Deposits decreased by $34.4 million, or 3.7%, from June 30, 2019, attributable primarily to decreases in time deposits of $29.7 million, or 5.9%, and money market accounts of $5.9 million, or 2.2%, due to the continued intentional run-off of excess deposits.
3. Shareholders’ equity increased by $4.5 million, or 2.9%, from June 30, 2019, primarily due to net income of $4.8 million, offset by an increase in accumulated other comprehensive loss of $298 thousand.Net income increased by $242 thousand to $4.8 million for the quarter ended September 30, 2019, compared to net income of $4.5 million for the quarter ended September 30, 2018.Net interest and dividend income before provision for loan losses increased by $1.4 million to $15.7 million for the quarter ended September 30, 2019, compared to $14.4 million for the quarter ended September 30, 2018. The increase was primarily due to higher transactional income in the purchased portfolio, and higher average balances in the LASG portfolio and yields in the loan portfolio, as well as a decrease in interest expense on subordinated debt due to lower average balances resulting from the redemption of Trust Preferred Securities in May 2019. These changes were partially offset by higher funding costs.The following table summarizes interest income and related yields recognized on the loan portfolios: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 September 30, 2018, transactional income for the quarter ended September 30, 2019 increased by $493 thousand, while regularly scheduled interest and accretion increased by $293 thousand due to the increase in average balances. The total return on purchased loans for the quarter ended September 30, 2019 was 9.7%, an increase from 9.5% for the quarter ended September 30, 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 and gains on real estate owned 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. Provision (credit) for loan losses decreased by $668 thousand for the quarter ended September 30, 2019, compared to the quarter ended September 30, 2018, primarily due to the decrease in loan balances over the current quarter, as compared to an increase in loan balances in the quarter ended September 30, 2018.3. Noninterest income decreased by $378 thousand for the quarter ended September 30, 2019, compared to the quarter ended September 30, 2018, principally due to the following:
A decrease in gain on sale of SBA loans of $599 thousand, due to lower volume of SBA loans sold in the quarter due to lower originations in recent quarters; partially offset by,
An increase in bank-owned life insurance income of $131 thousand, due to a gain from death benefit proceeds recognized in the current quarter; and
An increase in net unrealized gain on equity securities of $80 thousand.
4. Noninterest expense increased by $999 thousand for the quarter ended September 30, 2019 compared to the quarter ended September 30, 2018, primarily due to the following:An increase in salaries and employee benefits of $878 thousand, primarily due to increases in stock-based compensation, regular compensation, and incentive compensation;An increase in data processing fees of $383 thousand, primarily due to increased IT outsourcing costs and the reclassification of IT professional costs from professional fees and occupancy and equipment expense; andAn increase in loan acquisition and collection expenses of $172 thousand, largely driven by increased loan and collection expenses incurred on loan workouts in the LASG portfolios; partially offset by,A decrease in occupancy and equipment expense of $229 thousand, primarily due to a decrease in computer equipment repairs and maintenance expense;A decrease in professional fees of $142 thousand, due to the reclassification of IT professional costs to data processing fees; andA decrease in FDIC insurance premium of $99 thousand, due to the Small Bank Assessment Credit received in the quarter.5. Income tax expense increased by $427 thousand to $1.9 million, or an effective tax rate of 28.7%, for the quarter ended September 30, 2019, compared to $1.5 million, or an effective tax rate of 24.8%, for the quarter ended September 30, 2018. The increase in effective tax rate was primarily due to the update of state tax apportionment rates.
As of September 30, 2019, nonperforming assets totaled $16.0 million, or 1.43% of total assets, as compared to $16.7 million, or 1.45% of total assets, as of June 30, 2019. The decrease was primarily due to the payoff of a nonperforming Community Bank loan of $1.1 million during the current quarter.As of September 30, 2019, past due loans totaled $14.0 million, or 1.50% of total loans, as compared to past due loans totaling $14.6 million, or 1.50% of total loans as of June 30, 2019.As of September 30, 2019, the Bank’s Tier 1 leverage capital ratio was 14.1%, compared to 12.9% at June 30, 2019, and the Total capital ratio was 19.1% at September 30, 2019, as compared to 18.0% at June 30, 2019. Capital ratios were affected by earnings and lower assets in the quarter.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 first quarter earnings and business outlook at 10:00 a.m. Eastern Time on Tuesday, October 29th. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 9979819. 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. 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 Federal Deposit Insurance Corporation. 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.For More Information:
Jean-Pierre Lapointe, Chief Financial Officer
Northeast Bank, 500 Canal Street, Lewiston, ME 04240
207.786.3245 ext. 3220
www.northeastbank.comNBN-F
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