Exhibit 99.1

 

FOR IMMEDIATE RELEASE
For More Information: Claire S. Bean, CFO & COO Northeast Bank, 500 Canal Street, Lewiston, ME 04240 207.786.3245 ext. 3202 www.northeastbank.com

 

Northeast Bancorp Reports Third Quarter Results, Announces Stock Repurchase Program and Reduction in Dividend

 

Lewiston, ME (April 23, 2014) — 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 available to common shareholders of $437 thousand, or $0.04 per diluted common share, for the quarter ended March 31, 2014, compared to net income available to common shareholders of $1.7 million, or $0.16 per diluted common share, for the quarter ended March 31, 2013. Net income available to common shareholders for the nine months ended March 31, 2014 was $2.2 million, compared to $3.9 million for the nine months ended March 31, 2013.

 

“The timing of income realized through our loan purchasing activities affected our results this quarter, as transactional income declined to $689 thousand as compared to $4.1 million for the quarter ended March 31, 2013. As we have noted in the past, transactional income on purchased loans can vary significantly from quarter to quarter, and income not recognized currently will benefit future periods,” said Richard Wayne, Chief Executive Officer. “Such fluctuations may continue to cause variability in our quarterly earnings per share, until moderated by the positive effect of growth in our balance sheet and the full leveraging of our capital.”

 

The Board of Directors has also voted to authorize the Company to purchase up to 870,000 shares of its common stock, representing 8.3% of the Company’s outstanding common shares and approximately $8.4 million based on the Company’s closing stock price on April 22, 2014. The Board of Directors has also declared a cash dividend of $0.01 per share, payable on May 19, 2014 to shareholders of record as of May 5, 2014.

 

“We believe that our shares are undervalued, based on current market prices,” said Mr. Wayne. “Our goal in implementing this stock repurchase plan is to enhance shareholder value and, coupled with a reduction in our common stock dividend, provide the Company with greater flexibility in managing its capital position as we continue to implement our growth strategy.”

 

Repurchases under the stock repurchase program will be made in open market or in privately negotiated transactions from time to time and in such amounts as market conditions warrant.  The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements and priorities.  The stock repurchase program may be suspended or terminated at any time without prior notice, and will expire on April 23, 2016.

 

 

At March 31, 2014, total assets were $750.9 million, an increase of $80.3 million, or 12.0%, compared to June 30, 2013. The principal components of the change in the Company’s balance sheet are as follows:

 

1.              The loan portfolio grew by $78.9 million, or 18.1%, compared to June 30, 2013, principally due to net growth of $68.0 million in commercial loans purchased or originated by the Bank’s Loan Acquisition and Servicing Group (“LASG”) and $10.9 million of net growth in loans originated by the Bank’s Community Banking Division.  As has been 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 capacity under these conditions follow.

 

Basis for Regulatory Condition		Condition		Purchased Loan Capacity at March 31, 2014
				(Dollars in millions)
Total Loans		Purchased loans may not exceed 40% of total loans		$	41.1
Regulatory Capital		Commercial real estate loans may not exceed 300% of total risk-based capital		$	153.6

 

An overview of the Bank’s LASG portfolio follows.

 

		Three Months Ended March 31,
		2014									2013
		Purchased			Originated			Total LASG			Purchased			Originated			Total LASG
		(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance		$	19,050		$	11,158		$	30,208		$	13,971		$	2,800		$	16,771
Net investment basis		16,300			11,158			27,458			11,340			2,827			14,167
Loan returns during the period:
Yield		9.51		%	5.13		%	8.11		%	17.76		%	9.43		%	16.84		%
Total Return (1)		10.39		%	5.13		%	8.71		%	22.02		%	9.43		%	20.64		%

 

		Nine Months Ended March 31,
		2014									2013
		Purchased			Originated			Total LASG			Purchased			Originated			Total LASG
		(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance		$	53,044		$	54,722		$	107,766		$	103,539		$	15,625		$	119,164
Net investment basis		46,267			54,722			100,989			75,553			15,652			91,205
Loan returns during the period:
Yield		11.17		%	5.27		%	9.55		%	15.52		%	9.55		%	14.89		%
Total Return (1)		11.60		%	5.27		%	9.87		%	18.66		%	9.55		%	17.70		%
Total loans as of period end:
Unpaid principal balance		$	221,597		$	88,700		$	310,297		$	166,360		$	17,871		$	184,231
Net investment basis		184,959			88,724			273,683			130,502			17,904			148,406

 

(1) 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, on an annualized basis.

 

2.              Deposits and borrowings increased by $78.7 million and $1.6 million, respectively, from June 30, 2013.  Growth in each was tied to the Company’s strategy for funding its loan growth which, through the third quarter of fiscal 2014, included a component of duration-matched funding for residential mortgages.

 

Net income from continuing operations decreased by $1.2 million to $437 thousand for the quarter ended March 31, 2014, compared to $1.6 million for the quarter ended March 31, 2013.  Operating results for the current quarter included the following additional items of significance:

 

1.              Net interest income before provision for loan losses decreased by $1.1 million, or 13.8%, to $7.1 million for the quarter ended March 31, 2014 compared to the quarter ended March 31, 2013, primarily due to lower transactional interest income from purchased loan payoffs.  The various components of transactional income are set forth in the table below entitled “Total Return on Purchased Loans.”  When compared to the quarter ended March 31, 2013, transactional interest income decreased nearly $2.4 million, impacting the net interest margin, which declined to 4.08% from 5.07%.  The following table summarizes interest income and related yields recognized on the loan portfolios.

 

 

		Interest Income and Yield on Loans
		Three Months Ended March 31,
		2014								2013
		Average			Interest					Average			Interest
		Balance			Income			Yield		Balance			Income			Yield
		(Dollars in thousands)
Community Banking Division		$	249,962		$	3,183		5.16	%	$	244,397		$	3,529		5.86	%
LASG:
Originated — traditional		57,534			1,008			7.11	%	16,167			376			9.43	%
Originated — securities loans		25,992			48			0.75	%	—			—			0.00	%
Purchased		177,559			4,164			9.51	%	130,045			5,696			17.76	%
Total LASG		261,085			5,220			8.11	%	146,212			6,072			16.84	%
Total		$	511,047		$	8,403		6.67	%	$	390,609		$	9,601		9.97	%

 

		Nine Months Ended March 31,
		2014								2013
		Average			Interest					Average			Interest
		Balance			Income			Yield		Balance			Income			Yield
		(Dollars in thousands)
Community Banking Division		$	246,539		$	9,809		5.30	%	$	257,760		$	11,449		5.92	%
LASG:
Originated — traditional		44,631			2,513			7.50	%	12,974			930			9.55	%
Originated — securities loans		21,638			109			0.67	%	—			—			0.00	%
Purchased		175,383			14,711			11.17	%	110,151			12,830			15.52	%
Total LASG		241,652			17,333			9.55	%	123,125			13,760			14.89	%
Total		$	488,191		$	27,142		7.41	%	$	380,885		$	25,209		8.82	%

 

The yield on purchased loans in each period shown was increased by unscheduled loan payoffs, which resulted in immediate recognition of the prepaid loans’ discount in interest income. The following table details the “total return” on purchased loans, which includes total transactional income of $689 thousand for the quarter ended March 31, 2014, a decrease of $3.4 million from the quarter ended March 31, 2013.  The following table summarizes the total return recognized on the purchased loan portfolio.

 

		Total Return on Purchased Loans
		Three Months Ended March 31,
		2014					2013
		Income			Return (1)		Income			Return (1)
		(Dollars in thousands)
Regularly scheduled interest and accretion		$	3,880		8.83	%	$	3,043		9.40	%
Transactional income:
Gains on loan sales		349			0.79	%	1,218			3.76	%
Gain on sale of real estate owned		56			0.13	%	211			0.65	%
Other noninterest income		—			0.00	%	—			0.00	%
Accelerated accretion and loan fees		284			0.65	%	2,653			8.20	%
Total transactional income		689			1.57	%	4,082			12.61	%
Total		$	4,569		10.39	%	$	7,125		22.02	%

 

		Nine Months Ended March 31,
		2014					2013
		Income			Return (1)		Income			Return (1)
		(Dollars in thousands)
Regularly scheduled interest and accretion		$	11,632		8.80	%	$	7,813		9.35	%
Transactional income:
Gains on loan sales		576			0.44	%	2,035			2.44	%
Gain on sale of real estate owned		56			0.04	%	684			0.82	%
Other noninterest income		—			0.00	%	36			0.04	%
Accelerated accretion and loan fees		3,079			2.33	%	5,017			6.01	%
Total transactional income		3,711			2.81	%	7,772			9.30	%
Total		$	15,343		11.60	%	$	15,585		18.66	%

 

(1) 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, on an annualized basis.

 

 

2.              Noninterest income decreased by $1.3 million for the quarter ended March 31, 2014, compared to the quarter ended March 31, 2013, principally due to the following:

 

·                  A decrease of $855 thousand in gain on sales of portfolio loans (this is a component of transactional income, as noted above).

 

·                  A decrease of $360 thousand in gain on sales of loans held for sale, principally due to a significant decline in residential loan refinance activity.  The Company sold $15.3 million of residential loans in the quarter ended March 31, 2014, compared to $33.3 million in the quarter ended March 31, 2013.

 

·                  A decrease of $65 thousand in net gains on the disposition of other real estate owned.

 

·                  A decrease of $45 thousand in fee income, principally due to a decrease in transactional deposit account activity.

 

 

3.              Noninterest expense decreased by $612 thousand for the quarter ended March 31, 2014, compared to the quarter ended March 31, 2013, principally due to the following:

 

·                  A decrease of $928 thousand in salaries and employee benefits, principally related to a decline in incentive compensation.

 

·                  An increase of $232 thousand in occupancy and equipment expense, due to increased rent and utilities expense, depreciation, and software expenses.

 

·                  A decrease of $163 thousand in marketing expense, primarily due to a reduction in deposit marketing in fiscal 2014.

 

·                  An increase of $88 thousand in loan acquisition and collection expenses due, in part, to an increase of $5.0 million in loan purchases in the quarter ended March 31, 2014 over the same quarter in 2013.

 

·                  An increase of $204 thousand in other noninterest expense, principally due to non-capital expenditures associated with the Company’s upcoming core banking software system conversion.

 

At March 31, 2014, nonperforming assets totaled $9.4 million, or 1.3% of total assets, compared to $7.0 million, or 1.0% of total assets at June 30, 2013.  At March 31, 2014, $1.9 million of loans on nonaccrual status were current as to principal and interest payments, compared to $887 thousand at June 30, 2013.

 

At March 31, 2014, the Company’s Tier 1 leverage ratio was 16.3%, a decrease from 17.8% at June 30, 2013, and the total risk-based capital ratio was 24.1%, a decrease from 27.5% at June 30, 2013.

 

 

Investor Call Information

 

Richard Wayne, Chief Executive Officer of Northeast Bancorp, and Claire Bean, Chief Financial Officer of Northeast Bancorp, will host a conference call to discuss third quarter earnings and business outlook at 11:00 a.m. Eastern Time on Thursday, April 24, 2014. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 34221296. 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 six loan production offices that serve individuals and businesses located in western and south-central Maine, southern New Hampshire and southeastern Massachusetts. Northeast Bank’s Loan Acquisition and Servicing Group purchases and originates commercial loans for the Bank’s portfolio. 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 continuing weakness in general economic conditions on a national basis or in the local markets in which the Company operates, including changes that adversely affect borrowers’ ability to service and repay 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; increasing 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.

 

NBN-F

 

 

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except share and per share data)

 

		March 31, 2014			June 30, 2013
Assets
Cash and due from banks		$	2,677		$	3,238
Short-term investments		71,686			62,696
Total cash and cash equivalents		74,363			65,934
Available-for-sale securities, at fair value		112,732			121,597
Loans held for sale		9,827			8,594
Loans
Commercial real estate		299,898			264,448
Residential real estate		153,972			127,829
Construction		—			42
Commercial and industrial		49,554			29,720
Consumer		10,828			13,337
Total loans		514,252			435,376
Less: Allowance for loan losses		1,345			1,143
Loans, net		512,907			434,233
Premises and equipment, net		9,211			10,075
Real estate owned and other possessed collateral, net		2,000			2,134
Federal Home Loan Bank and Federal Reserve Bank stock, at cost		5,721			5,721
Intangible assets, net		2,962			3,544
Bank owned life insurance		14,726			14,385
Other assets		6,444			4,422
Total assets		$	750,893		$	670,639
Liabilities and Stockholders’ Equity
Deposits
Demand		$	43,294		$	46,425
Savings and interest checking		100,961			90,970
Money market		86,735			84,416
Time		332,320			262,812
Total deposits		563,310			484,623
Federal Home Loan Bank advances		42,878			28,040
Wholesale repurchase agreements		10,240			25,397
Short-term borrowings		2,585			625
Junior subordinated debentures issued to affiliated trusts		8,396			8,268
Capital lease obligation		1,604			1,739
Other liabilities		7,872			8,145
Total liabilities		636,885			556,837
Commitments and contingencies		—			—
Stockholders’ equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares issued and outstanding at March 31, 2014 and June 30, 2013		—			—
Voting common stock, $1.00 par value, 25,000,000 shares authorized; 9,551,531 and 9,565,680 shares issued and outstanding at March 31, 2014 and June 30, 2013, respectively		9,552			9,566
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized; 880,963 shares issued and outstanding at March 31, 2014 and June 30, 2013		881			881
Additional paid-in capital		93,371			92,745
Retained earnings		11,856			12,524
Accumulated other comprehensive loss		(1,652		)	(1,914		)
Total stockholders’ equity		114,008			113,802
Total liabilities and stockholders’ equity		$	750,893		$	670,639

 

 

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except share and per share data)

 

		Three Months Ended March 31,						Nine Months Ended March 31,
		2014			2013			2014			2013
Interest and dividend income:
Interest on loans		$	8,403		$	9,601		$	27,142		$	25,209
Interest on available-for-sale securities		253			234			797			929
Other interest and dividend income		61			85			208			283
Total interest and dividend income		8,717			9,920			28,147			26,421
Interest expense:
Deposits		1,022			1,084			3,048			3,090
Federal Home Loan Bank advances		324			232			975			750
Wholesale repurchase agreements		93			135			285			515
Short-term borrowings		6			4			17			15
Junior subordinated debentures issued to affiliated trusts		140			190			525			574
Obligation under capital lease agreements		20			22			63			69
Total interest expense		1,605			1,667			4,913			5,013
Net interest and dividend income before provision for loan losses		7,112			8,253			23,234			21,408
Provision for loan losses		180			346			407			821
Net interest and dividend income after provision for loan losses		6,932			7,907			22,827			20,587
Noninterest income:
Fees for other services to customers		385			430			1,246			1,202
Net securities gains		—			—			—			792
Gain on sales of loans held for sale		265			625			1,145			2,295
Gain on sales of portfolio loans		373			1,228			603			2,226
Gain recognized on real estate owned and other repossessed collateral, net		165			230			50			681
Bank-owned life insurance income		108			118			342			599
Other noninterest income		12			12			46			68
Total noninterest income		1,308			2,643			3,432			7,863
Noninterest expense:
Salaries and employee benefits		3,759			4,687			12,624			12,170
Occupancy and equipment expense		1,450			1,218			4,075			3,341
Professional fees		366			388			1,115			1,210
Data processing fees		257			239			770			671
Marketing expense		86			249			225			678
Loan acquisition and collection expense		440			352			1,203			1,285
FDIC insurance premiums		127			125			354			364
Intangible asset amortization		162			205			582			735
Legal settlement recovery		—			—			(250		)	—
Other noninterest expense		869			665			2,284			2,034
Total noninterest expense		7,516			8,128			22,982			22,488
Income from continuing operations before income tax expense		724			2,422			3,277			5,962
Income tax expense		287			792			1,119			1,913
Net Income from continuing operations		437			1,630			2,158			4,049
Income (loss) from discontinued operations before income tax expense (benefit)		—			55			(12		)	253
Income tax expense (benefit)		—			19			(4		)	87
Net income (loss) from discontinued operations		—			36			(8		)	166
Net income		$	437		$	1,666		$	2,150		$	4,215
Net income available to common stockholders		$	437		$	1,666		$	2,150		$	3,860
Weighted-average shares outstanding:
Basic		10,432,494			10,425,576			10,435,300			10,397,280
Diluted		10,432,494			10,425,576			10,435,300			10,397,280
Earnings per common share:
Basic:
Income from continuing operations		$	0.04		$	0.16		$	0.21		$	0.35
Income from discontinued operations		0.00			0.00			0.00			0.02
Net Income		$	0.04		$	0.16		$	0.21		$	0.37
Diluted:
Income from continuing operations		$	0.04		$	0.16		$	0.21		$	0.35
Income from discontinued operations		0.00			0.00			0.00			0.02
Net Income		$	0.04		$	0.16		$	0.21		$	0.37
Cash dividends declared per common share		$	0.09		$	0.09		$	0.27		$	0.27

 

 

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS

(Unaudited)

(Dollars in thousands)

 

		Three Months Ended March 31,
		2014								2013
					Interest			Average					Interest			Average
		Average			Income/			Yield/		Average			Income/			Yield/
		Balance			Expense			Rate		Balance			Expense			Rate
		(Dollars in thousands)
Assets:
Interest-earning assets:
Investment securities		$	114,925		$	253		0.89	%	$	131,006		$	234		0.72	%
Loans (1) (2)		511,047			8,403			6.67	%	390,609			9,601			9.97	%
Regulatory stock		5,721			16			1.13	%	5,391			4			0.30	%
Short-term investments (3)		75,506			45			0.24	%	133,025			81			0.25	%
Total interest-earning assets		707,199			8,717			5.00	%	660,031			9,920			6.10	%
Cash and due from banks		2,833								3,184
Other non-interest earning assets		37,366								36,694
Total assets		$	747,398							$	699,909
Liabilities & Stockholders’ Equity:
Interest-bearing liabilities:
NOW accounts		$	61,028		$	40		0.27	%	$	55,068		$	36		0.27	%
Money market accounts		87,352			112			0.52	%	70,613			102			0.59	%
Savings accounts		35,032			12			0.14	%	32,464			11			0.14	%
Time deposits		325,505			858			1.07	%	297,555			935			1.27	%
Total interest-bearing deposits		508,917			1,022			0.81	%	455,700			1,084			0.96	%
Short-term borrowings		2,192			6			1.11	%	1,889			4			0.86	%
Borrowed funds		59,399			437			2.98	%	64,212			389			2.46	%
Junior subordinated debentures		8,374			140			6.78	%	8,205			190			9.39	%
Total interest-bearing liabilities		578,782			1,605			1.12	%	530,006			1,667			1.28	%
Non-interest bearing liabilities:
Demand deposits and escrow accounts		48,361								48,426
Other liabilities		5,920								5,921
Total liabilities		633,163								584,353
Stockholders’ equity		114,235								115,556
Total liabilities and stockholders’ equity		$	747,398							$	699,909
Net interest income					$	7,112							$	8,253
Interest rate spread								3.87	%							4.82	%
Net interest margin (4)								4.08	%							5.07	%

 

(1)         Includes loans held for sale.

(2)         Nonaccrual loans are included in the computation of average, but unpaid interest has not been included for purposes of determining interest income.

(3)         Short term investments include FHLB overnight deposits and other interest-bearing deposits.

(4)         Net interest margin is calculated as net interest income divided by total interest-earning assets.