Northeast Bancorp Reports First Quarter Results, Declares Dividend

Northeast Bancorp Reports First Quarter Results, Declares Dividend

LEWISTON, Maine--(BUSINESS WIRE)-- Northeast Bancorp ("Northeast" or the "Company") (NAS: NBN) , a Maine-based full-service financial services company and parent of Northeast Bank (the "Bank"), today reported net income of $1.0 million, or $0.09 per diluted common share, for the quarter ended September 30, 2012, compared to net income of $529 thousand, or $0.12 per diluted common share, for the quarter ended September 30, 2011. The 2011 quarter included a $594 thousand net loss, or $0.13 per diluted share, from continuing operations and $1.1 million of net income, or $0.25 per diluted common share, from discontinued operations. Weighted average shares outstanding increased to 10.4 million in the current quarter from 3.5 million in the 2011 quarter as a result of the Company's public offering of common stock in May 2012.

The Board of Directors has declared a cash dividend of $0.09 per share, payable on November 19, 2012 to shareholders of record as of November 5, 2012.


"We are pleased to report even further growth in our key business lines this quarter," said Richard Wayne, Chief Executive Officer. "Our Loan Acquisition and Servicing Group invested $40.1 million in new commercial loans, consisting of both purchased loans and commercial loan originations. The purchased portfolio generated a total return of 17.4%, including transactional income from unscheduled loan payoffs and asset sales, while maintaining strong asset quality. Deposits increased by 8%, on strong results from both the Community Banking Division and ableBanking, our new online affinity deposit program. Our residential lending group had another solid quarter, achieving a year over year increase in loan sale gains of 15%. These results demonstrate real progress in the execution of our business strategy, and position us well for future success."

During the quarter ended September 30, 2012, the Bank's Loan Acquisition and Servicing Group ("LASG") purchased loans totaling $31.3 million, and grew the purchased loan portfolio on a net basis to $107.4 million at quarter end. Additionally, the LASG originated $8.8 million in commercial loans, thereby increasing its originated book to $12.6 million at quarter end. An overview of LASG portfolio results for the three months ended September 30, 2012 follows:

LASG Portfolio Overview

Purchased

Originated

Total LASG

(Dollars in thousands)

Purchased or originated during the three months ended September 30, 2012:

Unpaid principal balance

$

42,273

$

8,799

$

51,072

Net investment basis

31,349

8,799

40,148

Totals as of September 30, 2012:

Unpaid principal balance

$

133,510

$

12,594

$

146,104

Net investment basis

107,440

12,594

120,034

Returns during the three months ended September 30, 2012:

Yield

15.13

%

9.54

%

14.58

%

Total Return (1)

17.41

%

9.54

%

16.63

%

(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.

Quarterly results included the following items of significance:

1. The Company's net interest margin was 3.80% for the quarter ended September 30, 2012, compared to 3.11% in the quarter ended September 30, 2011, an increase principally attributable to the growth in the Company's purchased loan portfolio. The following table summarizes interest income and related yields recognized on the Company's loans.

Interest Income and Yield on Loans

Three Months Ended September 30, 2012

Three Months Ended September 30, 2011

Average

Interest

Average

Interest

Balance

Income

Yield

Balance

Income

Yield

(Dollars in thousands)

Community Banking Division

$

270,758

$

3,936

5.77

%

$

304,041

$

4,937

6.46

%

LASG:

Originated

9,193

221

9.54

%

1,141

29

10.11

%

Purchased

83,475

3,184

15.13

%

11,066

200

7.19

%

Total LASG

92,668

3,405

14.58

%

12,207

229

7.44

%

Total

$

363,426

$

7,341

8.01

%

$

316,248

$

5,137

6.46

%

The yield on purchased loans was increased by unscheduled loan payoffs during the period, which resulted in immediate recognition of the prepaid loans' discount in interest income. The following table details the "total return" on purchased loans, based on transactional income earned totaling $1.8 million for the quarter. This amount includes accelerated accretion, a $473 thousand gain realized on the sale of real estate previously securing a purchased loan and other income recognized upon unscheduled loan payoffs or sales.

Total Return on Purchased Loans

Three Months Ended
September 30, 2012

Three Months Ended
September 30, 2011

Income

Return (1)

Income

Return (1)

(Dollars in thousands)

Regularly scheduled interest and accretion

$

1,911

9.01

%

$

200

7.19

%

Transactional income:

Gain on sale of real estate owned

473

2.23

%

-

0.00

%

Other noninterest income

36

0.17

%

-

0.00

%

Accelerated accretion and loan fees

1,273

6.00

%

-

0.00

%

Total

$

3,693

17.41

%

$

200

7.19

%

(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. A net gain on the sale of residential mortgage loans in the secondary market of $756 thousand for the quarter ended September 30, 2012, an increase of $100 thousand, or 15.2%, compared to the quarter ended September 30, 2011.

3. Net securities gains of $792 thousand for the quarter ended September 30, 2012, compared to a net loss of $53 thousand in the quarter ended September 30, 2011.

4. Increased noninterest expense of $903 thousand for the quarter ended September 30, 2012, compared to the quarter ended September 30, 2011, principally resulting from increases of $172 thousand in loan acquisition and collection costs, $340 thousand in employee compensation, and $229 thousand in occupancy and equipment expense. These increases were associated with the implementation of the Company's business strategy over the past twelve months.

Total assets increased by $1.7 million, or 0.3%, to $670.9 million at September 30, 2012, compared to June 30, 2012. The principal components of the change in the balance sheet were as follows:

1. Loan growth of $18.9 million, or 5.3%, principally due to net growth of $22.9 million in the Company's purchased loan portfolio ($31.3 million of purchases less $8.4 million of amortization and payoffs) and $8.8 million of commercial loans originated by the LASG, offset in part by net amortization and payoffs of $12.8 million in the Community Banking Division loan portfolio. In conjunction with one purchased pool, the Company acquired the right to service the guaranteed portion of $44 million of SBA loans at an average annual gross servicing fee equal to approximately 1%.

2. Deposit growth of $33.6 million, or 8.0%, consisting of a $10.5 million increase in deposits raised through ableBanking, the Company's online affinity deposit platform, $15.5 million raised through the Company's Community Banking branch network, and $7.6 million generated through deposit listing service referrals.

3. A $31.2 million, or 25.8%, decrease in borrowings, the result primarily of the repayment of structured repurchased agreements totaling $30.0 million during the quarter.

4. A $25.7 million decrease in cash and equivalents, principally the result of loan growth during the quarter.

During the quarter ended September 30, 2012, nonperforming assets increased by $777 thousand to $7.7 million or 1.2% of total assets, from $6.9 million, or 1.0%, of total assets at June 30, 2012.

At September 30, 2012, the Company's Tier 1 leverage ratio was 18.4%, a decrease from 19.9% at June 30, 2012, and the total risk-based capital ratio was 31.3%, a decrease from 33.3% at June 30, 2012.

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 first quarter earnings at 11:00 a.m. Eastern Time on Tuesday, October 23, 2012. Investors can access the call by dialing 877.844.6886 and entering the following passcode: 42311260. 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, an online replay will be available online for one year at www.northeastbank.com.

About Northeast Bancorp

Northeast Bancorp (NAS: 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, some with investment centers, and four 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. 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. 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 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; increasing government regulation; changes in the rules of participation for the Troubled Asset Relief Program Capital Purchase Program promulgated by the U.S. Department of the Treasury under the Emergency Economic Stabilization Act of 2008, which may be changed unilaterally and restrictively by legislative or regulatory actions; the risk that we may not be successful in the implementation of our 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 we do 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.

IMPORTANT NOTE: Securities and Advisory Services offered through Commonwealth Financial Network, Member FINRA, SIPC, and a Registered Investment Adviser. Securities are not FDIC insured, not bank obligations or otherwise bank guaranteed and may lose value. Northeast Financial is located at 77 Middle Street, Portland, ME 04101.

NBN-F

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

September 30, 2012

June 30, 2012

Assets

Cash and due from banks

$

3,341

$

2,538

Short-term investments

99,231

125,736

Total cash and cash equivalents

102,572

128,274

Available-for-sale securities, at fair value

137,069

133,264

Loans held for sale

12,986

9,882

Loans

Commercial real estate

205,875

180,735

Residential real estate

133,776

137,571

Construction

508

1,187

Commercial business

19,201

19,612

Consumer

15,833

17,149

Total loans

375,193

356,254

Less: Allowance for loan losses

668

824

Loans, net

374,525

355,430

Premises and equipment, net

9,295

9,205

Repossessed collateral, net

2,645

834

Accrued interest receivable

1,751

1,840

Federal Home Loan Bank stock, at cost

4,602

4,602

Federal Reserve Bank stock, at cost

871

871

Intangible assets, net

4,222

4,487

Bank owned life insurance

14,418

14,295

Other assets

5,952

6,212

Total assets

$

670,908

$

669,196

Liabilities and Stockholders' Equity

Liabilities

Deposits

Demand

$

47,071

$

45,323

Savings and interest checking

87,010

90,204

Money market

48,896

45,024

Time deposits

272,798

241,637

Total deposits

455,775

422,188

Federal Home Loan Bank advances

43,331

43,450

Structured repurchase agreements

35,821

66,183

Short-term borrowings

484

1,209

Junior subordinated debentures issued to affiliated trusts

8,146

8,106

Capital lease obligation

1,869

1,911

Other liabilities

6,625

7,010

Total liabilities

552,051

550,057

Commitments and contingencies

Stockholders' equity

Preferred stock, $1.00 par value, 1,000,000 shares authorized; 4,227
shares issued and outstanding at September 30, 2012 and June 30, 2012;
liquidation preference of $1,000 per share

4

4

Voting common stock, $1.00 par value, 13,500,000 shares authorized;
9,412,972 and 9,307,127 issued and outstanding at September 30, 2012 and
June 30, 2012, respectively

9,413

9,307

Non-voting common stock, $1.00 par value, 1,500,000 shares authorized;
970,469 and 1,076,314 issued and outstanding at September 30, 2012 and
June 30, 2012, respectively

970

1,076

Warrants to purchase common stock

406

406

Additional paid-in capital

96,215

96,080

Unearned restricted stock

(118

)

(127

)

Retained earnings

12,236

12,235

Accumulated other comprehensive (loss) income

(269

)

158

Total stockholders' equity

118,857