Northeast Bancorp Reports Third Quarter Results and Declares Dividend


LEWISTON, Maine, April 29, 2019 (GLOBE NEWSWIRE) -- 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 $4.8 million, or $0.52 per diluted common share, for the quarter ended March 31, 2019, an increase of $896 thousand, or 22.8%, compared to net income of $3.9 million, or $0.43 per diluted common share, for the quarter ended March 31, 2018. Net income for the nine months ended March 31, 2019 was $14.5 million, or $1.58 per diluted common share, an increase of $2.7 million, or 22.5%, compared to $11.8 million, or $1.29 per diluted common share, for the nine months ended March 31, 2018.

The Board of Directors declared a cash dividend of $0.01 per share, payable on May 28, 2019, to shareholders of record as of May 13, 2019.

“In the quarter, we produced $104.7 million of new loan volume,” said Richard Wayne, President and Chief Executive Officer. “Our Loan Acquisition and Servicing Group originated a record volume of $84.5 million of loans during the quarter, representing net growth in our LASG originated portfolio of $42.2 million, or 9.7%, compensating for the lower level of loan purchases, which can be lumpy from quarter to quarter. This quarterly activity helped us achieve a return on average equity of 13.0%, a return on average assets of 1.6%, and an efficiency ratio of 57.7%.”

As of March 31, 2019, total assets were $1.2 billion, an increase of $73.7 million, or 6.4%, from total assets of $1.2 billion as of June 30, 2018. The principal components of the changes in the balance sheet follow:

1.      The following table highlights the changes in the loan portfolio for the three and nine months ended March 31, 2019:

 Loan Portfolio Changes
 Three Months Ended March 31, 2019
 March 31, 2019
Balance
 December 31, 2018
Balance
  
Change ($)
  
Change (%)
        
 (Dollars in thousands)
LASG Purchased$320,326 $330,643  $(10,317)  (3.12%)
LASG Originated 478,020  435,817   42,203  9.68%
SBA 63,653  67,282   (3,629)  (5.39%)
Community Banking 99,654  104,544   (4,890)  (4.68%)
Total$961,653 $938,286  $23,367  2.49%
             
  

Nine Months Ended March 31, 2019
 March 31, 2019
Balance
 June 30, 2018
Balance
  
Change ($)
  
Change (%)
        
 (Dollars in thousands)
LASG Purchased$320,326 $290,972  $29,354  10.09%
LASG Originated 478,020  397,363   80,657  20.30%
SBA 63,653  60,156   3,497  5.81%
Community Banking 99,654  123,311   (23,657)  (19.18%)
Total$961,653 $871,802  $89,851  10.31%

Loans generated by the Bank's Loan Acquisition and Servicing Group ("LASG") for the quarter ended March 31, 2019 totaled $89.1 million, which consisted of $4.6 million of purchased loans, at an average price of 98.5% of unpaid principal balance, and $84.5 million of originated loans. The Bank's Small Business Administration ("SBA") Division closed and funded $6.4 million of new loans during the quarter ended March 31, 2019. In addition, the Company sold $6.7 million of the guaranteed portion of SBA loans in the secondary market, of which $4.8 million were originated in the current quarter and $1.9 million were originated in prior quarters. Residential loan production sold in the secondary market totaled $7.8 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 (“FRB”) 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:

Basis for
Regulatory Condition
 Condition Availability at March 31, 2019
    (Dollars in millions)
Total Loans Purchased loans may not exceed 40% of total loans $  108.1
Regulatory Capital Non-owner occupied commercial real estate loans may not exceed 300% of total capital  90.1

On January 7, 2019, the Company announced a corporate reorganization pursuant to which its bank holding company structure would be eliminated and the Bank would become the top-level company (the “Reorganization”). If the Reorganization is completed, these commitments to the FRB will no longer be applicable. The Bank intends to replace these commitments with standards relating to its capital levels and asset portfolio composition, which will be incorporated into its policies and procedures, and compliance with Federal Deposit Insurance Corporation (“FDIC”) policy on commercial real estate concentration risk.

As a result of the Reorganization, the Bank intends to incorporate the following standards into its policies and procedures:

  • Maintain a Tier 1 leverage ratio of at least 10%, which is unchanged from the requirement in the commitments to the FRB;
  • Maintain a Total capital ratio of at least 13.5% (as opposed to 15%);
  • Limit purchased loans to 60% of total loans (as opposed to 40%);
  • Maintain a ratio of the Bank’s loans to core deposits of not more than 125% (as opposed to 100%); and
  • Hold commercial real estate loans (excluding owner-occupied commercial real estate) to within 500% of Total capital (as opposed to 300%).

These newly established standards are designed to help ensure the Bank will continue to operate in a safe and sound manner, but may permit more growth in the Bank’s loan portfolio as compared to operating under the existing commitments. The Maine Bureau of Financial Institutions’ order approving FHB Formation LLC’s acquisition of the Company in December of 2010 requires the Bank to maintain a Tier 1 leverage ratio of not less than 8.5% and a Total capital ratio of not less than 13.5%. These conditions will continue to apply to the Bank whether or not the Reorganization is completed.

On March 11, 2019, the Company announced that the Bank received approval from the FDIC for the Reorganization. The Reorganization remains subject to various closing conditions including, among others, (i) approval by the holders of the outstanding shares of the Company’s capital stock entitled to vote on the Reorganization, (ii) receipt of all remaining required regulatory approvals, including approval of the Bank’s stock issuance and amended and restated articles of incorporation and bylaws by the Maine Bureau of Financial Institutions, and (iii) approval for listing on NASDAQ of the Bank’s common stock.

An overview of the Bank’s LASG portfolio follows:

 LASG Portfolio
 Three Months Ended March 31,
 2019 2018
 Purchased Originated Total LASG Purchased Originated Total LASG
 (Dollars in thousands)
Loans purchased or originated during the period:                 
Unpaid principal balance$4,675  $84,546  $89,221  $38,493  $72,894  $111,387 
Net investment basis 4,604   84,546   89,150   33,021   72,894   105,915 
                  
Loan returns during the period:                 
Yield 9.49%  7.87%  8.56%  11.29%  6.83%  8.65%
Total Return on Purchased Loans (1) 10.22%  7.87%  8.87%  12.16%  6.83%  9.00%
                  
 Nine Months Ended March 31,
 2019 2018
 Purchased Originated Total LASG Purchased Originated Total LASG
 (Dollars in thousands)
Loans purchased or originated during the period:                 
Unpaid principal balance$94,423  $219,348  $313,771  $81,016  $157,958  $238,974 
Net investment basis 88,741   219,348   308,089   71,474   157,958   229,432 
                  
Loan returns during the period:                 
Yield 9.75%  7.64%  8.54%  11.53%  6.56%  8.60%
Total Return on Purchased Loans (1) 10.00%  7.64%  8.65%  11.82%  6.56%  8.72%
                  
Total loans as of period end:                 
Unpaid principal balance$354,655  $478,020  $832,675  $289,852  $381,990  $671,842 
Net investment basis 320,326   478,020   798,346   254,700   381,990   636,690 
                  
                  

(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.”

  1. Deposits increased by $61.7 million, or 6.5%, from June 30, 2018, attributable primarily to an increase in time deposits of $187.1 million, or 53.1%, as a result of campaigns in the current nine-month period, partially offset by decreases in money market accounts of $124.2 million, or 29.5%.
     
  2. Shareholders’ equity increased by $14.8 million, or 10.7%, from June 30, 2018, primarily due to year to date earnings of $14.5 million.

Net income increased by $896 thousand to $4.8 million for the quarter ended March 31, 2019, compared to net income of $3.9 million for the quarter ended March 31, 2018.

  1. Net interest and dividend income before provision for loan losses increased by $1.9 million to $15.0 million for the quarter ended March 31, 2019, compared to $13.1 million for the quarter ended March 31, 2018. The increase was primarily due to higher yields and higher average balances in the loan portfolio. These increases were partially offset by higher funding costs and higher average deposit balances.

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,
 2019 2018
 Average Interest   Average Interest  
 Balance (1) Income Yield Balance (1) Income Yield
 (Dollars in thousands)
Community Banking$102,850 $  1,348 5.32% $136,824 $  1,743 5.17%
SBA 69,247  1,366 8.00%  53,069  1,017 7.77%
LASG:               
Originated  437,499    8,490 7.87%   351,271    5,916 6.83%
Purchased 324,414    7,592 9.49%   241,793    6,732 11.29%
Total LASG  761,913    16,082 8.56%   593,064    12,648 8.65%
Total$934,010 $  18,796 8.16% $ 782,957 $  15,408 7.98%
                  
  

Nine Months Ended March 31,
 2019 2018
 Average Interest   Average Interest  
 Balance (1) Income Yield Balance (1) Income Yield
 (Dollars in thousands)
Community Banking$110,566 $ 4,319 5.20% $142,873 $  5,242 4.89%
SBA 71,309  4,091 7.64%  52,014  2,772 7.10%
LASG:               
Originated  418,747    24,031 7.64%   340,014    16,746 6.56%
Purchased  311,780    22,815 9.75%   237,183    20,532 11.53%
Total LASG 730,527    46,846 8.54%   577,197    37,278 8.60%
Total$ 912,402 $  55,256 8.07% $ 772,084 $  45,292 7.81%
  
(1)Includes loans held for sale.

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 three months ended March 31, 2018, transactional income for the three months ended March 31, 2019 decreased by $672 thousand, while regularly scheduled interest and accretion increased by $1.6 million due to the increase in average balance. The total return on p­­­­­­­­urchased loans for the three months ended March 31, 2019 was 10.2%. When compared to the nine months ended March 31, 2018, transactional income for the nine months ended March 31, 2019 decreased by $1.8 million, while regularly scheduled interest and accretion increased by $4.1 million due to the increase in average balance. The following table details the total return on purchased loans:

 Total Return on Purchased Loans
 Three Months Ended March 31,
 2019 2018
 Income Return (1) Income Return (1)
 (Dollars in thousands)
Regularly scheduled interest and accretion$6,228 7.79% $4,630 7.77%
Transactional income:         
Gain on loan sales 582 0.73%    516 0.87%
Gain on sale of real estate owned   - 0.00%    - 0.00%
Other noninterest income   - 0.00%    -  0.00%
Accelerated accretion and loan fees   1,364 1.70%    2,102 3.52%
Total transactional income   1,946 2.43%    2,618 4.39%
Total$  8,174 10.22% $  7,248 12.16%
            
  



 Nine Months Ended March 31,
 2019 2018
 Income Return (1) Income Return (1)
 (Dollars in thousands)
Regularly scheduled interest and accretion$17,849 7.63% $13,709 7.70%
Transactional income:         
Gain on loan sales   582 0.25%    516 0.29%
Gain on sale of real estate owned   - 0.00%    - 0.00%
Other noninterest income   - 0.00%    - 0.00%
Accelerated accretion and loan fees   4,966 2.12%    6,823 3.83%
Total transactional income   5,548 2.37%    7,339 4.12%
Total$23,397 10.00% $  21,048 11.82%

(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 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. Noninterest income decreased by $16 thousand for the quarter ended March 31, 2019, compared to the quarter ended March 31, 2018, principally due to the following:

  • A decrease in gain on sale of residential loans of $119 thousand, due to lower volume of residential loans sold in the quarter; and
  • A decrease in fees for other services to customers of $27 thousand, due to lower deposit fees and commercial loan servicing fees; offset by,
  • An increase in gain on sale of other loans of $66 thousand, due to a higher volume of LASG purchased loans sold in the quarter; and
  • An increase in net unrealized gain on equity securities of $65 thousand. 

3. Noninterest expense increased by $777 thousand for the quarter ended March 31, 2019 compared to the quarter ended March 31, 2018, primarily due to the following:

  • An increase in salaries and employee benefits expense of $453 thousand, primarily due to increases in base salary, stock-based compensation expense, incentive compensation, and a decrease in deferred salaries expense;
  • An increase in loan acquisition and collection expense of $345 thousand, largely driven by increased loan expenses and collection expenses incurred on the purchased loan payoffs and real estate owned during the quarter; and
  • An increase in data processing fees of $208 thousand, primarily due to increased IT outsourcing costs; partially offset by,
  • A decrease in occupancy and equipment of $202 thousand, primarily due to a decrease in equipment repairs and maintenance expense.  

4. Income tax expense increased by $160 thousand to $1.9 million, or an effective tax rate of 28.3%, for the quarter ended March 31, 2019, compared to $1.7 million, or an effective tax rate of 30.7%, for the quarter ended March 31, 2018. The increase in expense was primarily due to the increase in pre-tax earnings. The decrease in effective tax rate was primarily due to the decrease in the federal corporate income tax rate to 21.0% for the quarter ended March 31, 2019, as compared to the blended federal corporate income tax rate of 28.0% for the quarter ended March 31, 2018, offset by a decrease in excess tax benefits recognized in the current period.

As of March 31, 2019, nonperforming assets totaled $14.8 million, or 1.20% of total assets, as compared to $14.2 million, or 1.23% of total assets, as of June 30, 2018.

As of March 31, 2019, past due loans totaled $20.8 million, or 2.16% of total loans, as compared to past due loans totaling $7.7 million, or 0.89% of total loans as of June 30, 2018. The increase in past due loans from June 30, 2018 is largely attributed to the thirty-one day month in March, as past due loans totaled $18.3 million, or 1.95% of total loans as of December 31, 2018.

As of March 31, 2019, the Company’s Tier 1 leverage capital ratio was 13.6%, compared to 13.1% at June 30, 2018, and the Total capital ratio was 19.3% at both March 31, 2019 and June 30, 2018.

In connection with the Reorganization, the Company intends to redeem the $16.5 million unpaid principal balance of junior subordinated debentures issued by the Company in connection with the issuance of trust preferred securities by its three Delaware statutory trust subsidiaries, and the Bank will assume the Company’s obligations under the $15.1 million unpaid principal balance of 6.75% Fixed-to-Floating Rate Subordinated Notes due July 1, 2026. On a pro forma basis as of March 31, 2019, after giving effect to these transactions, the Bank’s Tier 1 leverage capital ratio and Total capital ratio would have been 12.3% and 17.8%, respectively, and the Bank would be considered “well capitalized” under all regulatory capital definitions and in excess of the proposed standards.  In addition, the redemption of the junior subordinated debentures is expected to result in a reduction in net income of approximately $5.2 million, after tax, during the quarter in which the redemption occurs, due to the write-off of the carrying value discount on the debentures that was recognized in connection with the merger of FHB Formation LLC with and into the Company in December 2010.

Investor Call Information
Richard Wayne, Chief Executive Officer of Northeast Bancorp, and Jean-Pierre Lapointe, Chief Financial Officer of Northeast Bancorp, will host a conference call to discuss third quarter earnings and business outlook at 10:00 a.m. Eastern Time on Tuesday, April 30th. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 2888769. 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 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 and our SBA Division supports the needs of growing businesses nationally. 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 tangible common shareholders’ equity, tangible book value per share, total return on purchased loans, and efficiency ratio. 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; operational risks including, but not limited to, cybersecurity, fraud and natural disasters; 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; the ability of the Company and the Bank to satisfy the conditions to the completion of the Reorganization; the ability of the Company and the Bank to meet expectations regarding the timing, completion and accounting and tax treatments of the Reorganization; the possibility that any of the anticipated benefits of the Reorganization will not be realized or will not be realized as expected; the failure of the Reorganization to close for any reason; the possibility that the Reorganization may be more expensive to complete than anticipated, including as a result of unexpected factors or events;  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, 2019 June 30, 2018
Assets     
Cash and due from banks$2,507  $3,889 
Short-term investments 150,346   153,513 
Total cash and cash equivalents 152,853   157,402 
      
Available-for-sale securities, at fair value 76,938   81,068 
Equity securities, at fair value 6,819   6,619 
Total investment securities 83,757   87,687 
      
Residential real estate loans held for sale 1,276   3,405 
SBA loans held for sale -   3,750 
Total loans held for sale 1,276   7,155 
      
Loans     
Commercial real estate 641,157   579,450 
Commercial and industrial 231,176   188,852 
Residential real estate 86,754   100,256 
Consumer 2,566   3,244 
Total loans 961,653   871,802 
Less: Allowance for loan losses 5,658   4,807 
Loans, net 955,995   866,995 
      
Premises and equipment, net 5,786   6,591 
Real estate owned and other repossessed collateral, net 2,014   2,233 
Federal Home Loan Bank stock, at cost 1,258   1,652 
Intangible assets, net 542   867 
Loan servicing rights, net 2,943   2,970 
Bank-owned life insurance 16,948   16,620 
Other assets 8,030   7,564 
Total assets$1,231,402  $1,157,736 
      
Liabilities and Shareholders' Equity     
Deposits     
Demand$76,003  $72,272 
Savings and interest checking 104,678   109,637 
Money market 296,720   420,886 
Time 539,223   352,145 
Total deposits 1,016,624   954,940 
      
Federal Home Loan Bank advances 15,000   15,000 
Subordinated debt 24,217   23,958 
Capital lease obligation 395   605 
Other liabilities 21,978   24,803 
Total liabilities 1,078,214   1,019,306 
      
Commitments and contingencies -   - 
      
Shareholders' equity     
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares issued and outstanding at March 31, 2019 and June 30, 2018 -   - 
Voting common stock, $1.00 par value, 25,000,000 shares authorized; 8,241,314 and 8,056,527 shares issued and outstanding at March 31, 2019 and June 30, 2018, respectively 8,241   8,057 
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized; 800,554 and 882,314 shares issued and outstanding at March 31, 2019 and June 30, 2018, respectively801   882 
Additional paid-in capital 77,732   77,016 
Retained earnings 68,274   54,236 
Accumulated other comprehensive loss (1,860)  (1,761)
Total shareholders' equity 153,188   138,430 
Total liabilities and shareholders' equity$1,231,402  $1,157,736 


 

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, 
 2019 2018 2019 2018 
Interest and dividend income:            
Interest and fees on loans$18,796 $15,408 $55,256  $45,292 
Interest on available-for-sale securities 444  280  1,229   813 
Other interest and dividend income 939  795  2,789   1,818 
Total interest and dividend income 20,179  16,483  59,274   47,923 
             
Interest expense:            
Deposits 4,447  2,696  12,111   7,001 
Federal Home Loan Bank advances 116  118  359   438 
Subordinated debt 578  525  1,752   1,550 
Obligation under capital lease agreements 5  10  19   31 
Total interest expense 5,146  3,349  14,241   9,020 
Net interest and dividend income before provision for loan losses 15,033  13,134  45,033   38,903 
Provision for loan losses 414  364  1,047   1,156 
Net interest and dividend income after provision for loan losses 14,619  12,770  43,986   37,747 
             
Noninterest income:            
Fees for other services to customers 408  435  1,240   1,437 
Gain on sales of SBA loans 568  560  2,361   1,921 
Gain on sales of residential loans held for sale 108  227  387   772 
Gain on sales of other loans 582  516  582   537 
Net unrealized gain on equity securities 65  -  75   - 
Gain (loss) on real estate owned, other repossessed collateral and premises and equipment, net -  4  (64)  15 
Bank-owned life insurance income 108  108  328   331 
Other noninterest income 27  32  56   55 
Total noninterest income 1,866  1,882  4,965   5,068 
             
Noninterest expense:            
Salaries and employee benefits 5,782  5,329  16,991   15,756 
Occupancy and equipment expense 957  1,159  2,692   3,418 
Professional fees 483  423  1,516   1,291 
Data processing fees 827  619  2,764   1,846 
Marketing expense 160  172  413   329 
Loan acquisition and collection expense 609  264  1,633   998 
FDIC insurance premiums 81  77  242   236 
Intangible asset amortization 107  107  325   325 
Other noninterest expense 746  825  2,433   2,053 
Total noninterest expense 9,752  8,975  29,009   26,252 
Income before income tax expense 6,733  5,677  19,942   16,563 
Income tax expense 1,905  1,745  5,455   4,741 
Net income$4,828 $3,932 $14,487  $11,822 
             
Weighted-average shares outstanding:            
Basic 9,044,230  8,927,544  9,029,409   8,897,633 
Diluted 9,198,077  9,143,177  9,194,346   9,133,515 
             
Earnings per common share:            
Basic$0.53 $0.44 $1.60  $1.33 
Diluted 0.52  0.43  1.58   1.29 
              
Cash dividends declared per common share$0.01 $0.01 $0.03  $0.03 


NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
 Three Months Ended March 31,
 2019 2018
   Interest Average   Interest Average
 Average Income/ Yield/ Average Income/ Yield/
 Balance Expense Rate Balance Expense Rate
Assets:               
Interest-earning assets:               
Investment securities$84,318 $444 2.14% $91,630 $280 1.24%
Loans (1) (2) (3) 934,010  18,796 8.16%  782,957  15,408 7.98%
Federal Home Loan Bank stock 1,332  26 7.92%  1,758  23 5.31%
Short-term investments (4) 152,854  913 2.42%  202,283  772 1.55%
Total interest-earning assets 1,172,514  20,179 6.98%  1,078,628  16,483 6.20%
Cash and due from banks 2,647       3,079     
Other non-interest earning assets 28,399       32,332     
Total assets$1,203,560      $1,114,039     
                
Liabilities & Shareholders' Equity:               
Interest-bearing liabilities:               
NOW accounts$68,869 $59 0.35% $68,716 $49 0.29%
Money market accounts 318,423  1,251 1.59%  428,946  1,437 1.36%
Savings accounts 35,599  14 0.16%  38,369  17 0.18%
Time deposits 501,378  3,123 2.53%  321,271  1,193 1.51%
Total interest-bearing deposits 924,269  4,447 1.95%  857,302  2,696 1.28%
Federal Home Loan Bank advances 15,000  116 3.14%  15,000  118 3.19%
Subordinated debt 24,170  578 9.70%  23,831  525 8.93%
Capital lease obligations 419  5 4.84%  697  10 5.82%
Total interest-bearing liabilities 963,858  5,146 2.17%  896,830  3,349 1.51%
                
Non-interest bearing liabilities:               
Demand deposits and escrow accounts 79,599       78,209     
Other liabilities 9,489       7,714     
Total liabilities 1,052,946       982,753     
Shareholders' equity 150,614       131,286     
Total liabilities and shareholders' equity$1,203,560      $1,114,039     
                
Net interest income   $15,033      $13,134  
                
Interest rate spread      4.81%       4.69%
Net interest margin (5)      5.20%       4.94%
                
(1)  Interest income and yield are stated on a fully tax-equivalent basis using the statutory tax rate.
(2)  Includes loans held for sale.
(3)  Nonaccrual loans are included in the computation of average, but unpaid interest has not been included for purposes of determining interest income.
(4)  Short-term investments include FHLB overnight deposits and other interest-bearing deposits.
(5)  Net interest margin is calculated as net interest income divided by total interest-earning assets.


NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
 Nine Months Ended March 31,
 2019 2018
   Interest Average   Interest Average
 Average Income/ Yield/ Average Income/ Yield/
 Balance Expense Rate Balance Expense Rate
Assets:               
Interest-earning assets:               
Investment securities$85,850 $1,229 1.91% $93,816 $813 1.15%
Loans (1) (2) (3) 912,402  55,256 8.07%  772,084  45,302 7.82%
Federal Home Loan Bank stock 1,547  74 6.37%  1,852  65 4.68%
Short-term investments (4) 164,841  2,715 2.19%  169,073  1,753 1.38%
Total interest-earning assets 1,164,640  59,274 6.78%  1,036,825  47,933 6.16%
Cash and due from banks 2,606       2,981     
Other non-interest earning assets 30,339       31,924     
Total assets$1,197,585      $1,071,730     
                
Liabilities & Shareholders' Equity:               
Interest-bearing liabilities:               
NOW accounts$70,882 $183 0.34% $69,532 $152 0.29%
Money market accounts 366,326  4,259 1.55%  394,364  3,564 1.20%
Savings accounts 35,592  42 0.16%  37,418  42 0.15%
Time deposits 450,064  7,627 2.26%  312,268  3,243 1.38%
Total interest-bearing deposits 922,864  12,111 1.75%  813,582  7,001 1.15%
Federal Home Loan Bank advances 15,000  359 3.19%  17,594  438 3.32%
Subordinated debt 24,084  1,752 9.69%  23,745  1,550 8.70%
Capital lease obligations 490  19 5.17%  764  31 5.41%
Total interest-bearing liabilities 962,438  14,241 1.97%  855,685  9,020 1.40%
                
Non-interest bearing liabilities:               
Demand deposits and escrow accounts 80,953       80,896     
Other liabilities 8,575       7,080     
Total liabilities 1,051,966       943,661     
Shareholders' equity 145,619       128,069     
Total liabilities and shareholders' equity$1,197,585      $1,071,730     
                
Net interest income (5)   $45,033      $38,913  
                
Interest rate spread      4.81%       4.76%
Net interest margin (6)      5.15%       5.00%
                
(1)  Interest income and yield are stated on a fully tax-equivalent basis using the statutory tax rate.
(2)  Includes loans held for sale.
(3)  Nonaccrual loans are included in the computation of average, but unpaid interest has not been included for purposes of determining interest income.
(4)  Short-term investments include FHLB overnight deposits and other interest-bearing deposits.
(5)  Includes tax exempt interest income of $10 thousand for the nine months ended March 31, 2018.
(6)  Net interest margin is calculated as net interest income divided by total interest-earning assets.


NORTHEAST BANCORP AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL HIGHLIGHTS AND OTHER DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
 Three Months Ended:
 March 31, 2019 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018


Net interest income
$15,033  $15,643  $14,359  $14,408  $13,134 
Provision for loan losses 414   101   532   254   364 
Noninterest income 1,866   1,545   1,554   1,959   1,882 
Noninterest expense 9,752   9,903   9,355   9,478   8,975 
Net income 4,828   5,125   4,534   4,344   3,932 
          
Weighted-average common shares outstanding:         
Basic 9,044,230   9,048,397   8,995,925   8,934,038   8,927,544 
Diluted 9,198,077   9,201,557   9,183,729   9,116,157   9,143,177 
Earnings per common share:         
Basic$0.53  $0.57  $0.50  $0.49  $0.44 
Diluted 0.52   0.56   0.49   0.48   0.43 
Dividends declared per common share 0.01   0.01   0.01   0.01   0.01 
          
Return on average assets 1.63%  1.70%  1.51%  1.55%  1.43%
Return on average equity 13.00%  13.94%  12.81%  12.97%  12.15%
Net interest rate spread (1) 4.81%  5.00%  4.61%  5.02%  4.69%
Net interest margin (2) 5.20%  5.33%  4.93%  5.28%  4.94%
Efficiency ratio (non-GAAP) (3) 57.71%  57.62%  58.79%  57.91%  59.77%
Noninterest expense to average total assets 3.29%  3.28%  3.12%  3.37%  3.27%
Average interest-earning assets to average
interest-bearing liabilities
 121.65%  120.67%  120.72%  120.52%  120.27%
          
 As of:
 March 31, 2019 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018
Nonperforming loans:         
Originated portfolio:         
Residential real estate$2,169  $2,445  $2,633  $2,914  $3,116 
Commercial real estate 3,336   2,764   1,703   1,499   1,408 
Home equity 148   150   151   298   255 
Commercial and industrial 1,495   1,420   1,454   1,368   636 
Consumer 236   216   185   134   136 
Total originated portfolio 7,384   6,995   6,126   6,213   5,551 
Total purchased portfolio 5,366   5,351   5,375   5,745   8,063 
Total nonperforming loans 12,750   12,346   11,501   11,958   13,614 
Real estate owned and other repossessed collateral, net 2,014   1,463   1,549   2,233   947 
Total nonperforming assets$14,764  $13,809  $13,050  $14,191  $14,561 
          
Past due loans to total loans 2.16%  1.95%  1.09%  0.89%  1.37%
Nonperforming loans to total loans 1.33%  1.32%  1.30%  1.37%  1.67%
Nonperforming assets to total assets 1.20%  1.16%  1.08%  1.23%  1.25%
Allowance for loan losses to total loans 0.59%  0.57%  0.60%  0.55%  0.57%
Allowance for loan losses to nonperforming loans 44.38%  42.99%  45.98%  40.20%  34.46%
          
Commercial real estate loans to total capital (4) 251.02%  242.38%  230.48%  200.74%  186.07%
Net loans to core deposits (5) 94.19%  94.84%  87.17%  91.54%  83.65%
Purchased loans to total loans, including held for sale 33.27%  35.17%  33.75%  33.10%  31.02%
Equity to total assets 12.44%  12.44%  11.81%  11.96%  11.47%
Common equity tier 1 capital ratio 16.23%  16.04%  16.50%  16.02%  16.48%
Total capital ratio 19.33%  19.15%  19.81%  19.28%  19.92%
Tier 1 leverage capital ratio 13.58%  13.20%  12.83%  13.12%  12.88%
          
Total shareholders' equity$153,188  $148,491  $143,391  $138,430  $133,787 
Less: Preferred stock -   -   -   -   - 
Common shareholders' equity 153,188   148,491   143,391   138,430   133,787 
Less: Intangible assets (6) (3,485)  (3,583)  (3,768)  (3,837)  (3,973)
Tangible common shareholders' equity (non-GAAP)$149,703  $144,908  $139,623  $134,593  $129,814 
          
Common shares outstanding 9,041,868   9,048,863   9,047,390   8,938,841   8,925,399 
Book value per common share$16.94  $16.41  $15.85  $15.49  $14.99 
Tangible book value per share (non-GAAP) (7) 16.56   16.01   15.43   15.06   14.54 
          
(1) The net interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.
(2) The net interest margin represents net interest income as a percent of average interest-earning assets for the period.
(3) The efficiency ratio represents noninterest expense divided by the sum of net interest income (before the loan loss provision) plus noninterest income.
(4) For purposes of calculating this ratio, commercial real estate includes all non-owner occupied commercial real estate loans defined as such by regulatory guidance, including all land development and construction loans.
(5) Core deposits include all non-maturity deposits and maturity deposits less than $250 thousand. Loans include loans held for sale.
(6) Includes the core deposit intangible asset and loan servicing rights asset.
(7) Tangible book value per share represents total shareholders' equity less the sum of preferred stock and intangible assets divided by common shares outstanding.

For More Information:
Jean-Pierre Lapointe, Chief Financial Officer
Northeast Bank, 500 Canal Street, Lewiston, ME 04240
207.786.3245 ext. 3220
www.northeastbank.com