Northeast Bancorp Reports Third Quarter Results, Declares Dividend

Northeast Bancorp Reports Third 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 $1.7 million for the quarter ended March 31, 2013, compared to $168 thousand for the quarter ended March 31, 2012. Net income for the nine months ended March 31, 2013 was $4.2 million, compared to $1.1 million for the nine months ended March 31, 2012. Net income for the nine months ended March 31, 2012 included $1.1 million from discontinued operations.

Net income available to common stockholders was $1.7 million, or $0.16 per diluted common share, for the quarter ended March 31, 2013, compared to $70 thousand, or $0.02 per diluted common share, for the quarter ended March 31, 2012. Net income available to common stockholders for the nine months ended March 31, 2013 was $3.9 million, or $0.37 per diluted common share, compared to $821 thousand, or $0.23 per diluted common share, for the nine months ended March 31, 2012. Weighted average shares outstanding increased to 10.4 million shares in each of the current year periods from 3.5 million shares in 2011 principally 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 May 24, 2013 to shareholders of record as of May 10, 2013.

"We are pleased with our earnings performance this quarter, with strong returns in our loan purchasing division, and further growth in deposits through ableBanking," said Richard Wayne, Chief Executive Officer. "Our loan purchasing division realized $4.1 million of transactional income on loan payoffs and sales, which drove our total purchased loan return to 22.0% and our net interest margin to 5.07% for the quarter. AbleBanking, our online affinity deposit program grew deposits by $29.3 million. Asset quality remained strong with non-performing assets declining by 24% from the quarter ending December 31, 2012."

At March 31, 2013, total assets were $699.6 million, an increase of $30.4 million, or 4.5%, compared to June 30, 2012. The principal components of the year-to-date change in the balance sheet were as follows:

1.

The loan portfolio grew by $24.1 million, or 6.8%, principally due to net growth of $58.9 million in commercial loans purchased or originated by the Bank's Loan Acquisition and Servicing Group ("LASG"), offset by net amortization and payoffs of $34.8 million in the Community Banking Division loan portfolio.

Compared to the quarter ended December 31, 2012, the Bank's LASG loan portfolio declined $1.3 million, reflecting purchases and originations of $11.3 million and $2.8 million, respectively, offset by loan payoffs and asset sales totaling $15.4 million. Loan payoffs and asset sales during the quarter ended March 31, 2013 resulted in $4.1 million of transactional income, compared to $1.9 million in the quarter ended December 31, 2012 and $493 thousand in the quarter ended March 31, 2012.

As has been discussed in more detail in the Company's SEC filings, loan purchases by the LASG are subject to two regulatory conditions, which are summarized below, together with the remaining purchasing capacity available under each of these conditions:

Basis for Regulatory
Condition

Condition

Remaining Purchased Loan
Capacity at March 31, 2013

(Dollars in millions)

Total Loans

Purchased loans may not exceed 40% of total loans

$

41.2

Regulatory Capital

Commercial real estate loans may not exceed 300% of total risk-based capital

$

141.7

To increase its capacity under the "Total Loans" regulatory condition, the Company is currently holding in its portfolio, as necessary and on a duration-matched basis, residential fixed and adjustable rate loans that would otherwise be sold in the secondary market.

An overview of the LASG portfolio follows:

LASG Portfolio Overview

Three Months Ended March 31, 2013

Nine Months Ended March 31, 2013

Purchased

Originated

Total LASG

Purchased

Originated

Total LASG

(Dollars in thousands)

Purchased or originated during the period:

Unpaid principal balance

$

13,971

$

2,800

$

16,771

$

103,539

$

15,625

$

119,164

Net investment basis

11,340

2,827

14,167

75,553

15,652

91,205

Totals as of period end:

Unpaid principal balance

$

166,360

$

17,871

$

184,231

Net investment basis

130,502

17,904

148,406

Returns during the period:

Yield

17.76%

9.43%

16.84%

15.52%

9.55%

14.89%

Total Return (1)

22.02%

9.43%

20.64%

18.66%

9.55%

17.70%

(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 increased by $83.4 million, or 19.8%, due primarily to a $68.0 million increase in deposits raised through ableBanking, the Bank's online affinity deposit platform. At March 31, 2013, ableBanking deposits stood at $70.8 million, consisting of $37.2 million of time deposits and $33.5 million of money market accounts.

3.

Borrowings decreased by $49.9 million, or 41.2%, as a result of the repayment of structured repurchase agreements and FHLB advances.

4.

Stockholders' equity decreased by $3.4 million, or 2.9%, primarily due to the redemption of TARP preferred stock and warrants totaling $4.3 million in the quarter ended December 31, 2012.

Net income increased by $1.5 million to $1.7 million for the quarter ended March 31, 2013, compared to $168 thousand for the quarter ended March 31, 2012. Operating results for the quarter included the following items of significance:

1.

Net interest income increased by $3.5 million, or 73.6%, to $8.3 million for the quarter compared to the quarter ended March 31, 2012, primarily due to growth in the purchased loan portfolio. This result is evident in the net interest margin, which increased to 5.07% for the quarter ended March 31, 2013, compared to 3.44% for the quarter ended March 31, 2012, and 4.28% for the quarter ended December 31, 2012.

2.

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,

2013

2012

Average

Interest

Average

Interest

Balance

Income

Yield

Balance

Income

Yield

(Dollars in thousands)

Community Banking Division

$

244,397

$

3,529

5.86%

$

293,413

$

4,211

5.77%

LASG:

Originated

16,167

376

9.43%

3,687

87

9.49%

Purchased

130,045

5,696

17.76%

51,677

1,572

12.23%

Total LASG

146,212

6,072

16.84%

55,364

1,659

12.05%

Total

$

390,609

$

9,601

9.97%

$

348,777

$

5,870

6.77%

Nine Months Ended March 31,

2013

2012

Average

Interest

Average

Interest

Balance

Income

Yield

Balance

Income

Yield

(Dollars in thousands)

Community Banking Division

$

257,760

$

11,449

5.92%

$

303,064

$

13,557

5.95%

LASG:

Originated

12,974

930

9.55%

2,637

194

9.79%

Purchased

110,151

12,830

15.52%

29,315

3,130

14.21%

Total LASG

123,125

13,760

14.89%

31,952

3,324

13.85%

Total

$

380,885

$

25,209

8.82%

$

335,016

$

16,881

6.71%

The yield on purchased loans 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 transactional income of $4.1 million for the quarter and $7.8 million for the nine months ended March 31, 2013.

Total Return on Purchased Loans

Three Months Ended March 31,

2013

2012

Income

Return (1)

Income

Return (1)

(Dollars in thousands)

Regularly scheduled interest and accretion

$

3,043

9.40%

$

1,298

10.10%

Transactional income:

Gains on loan sales

1,218

3.76%

219

1.70%

Gain on sale of real estate owned

211

0.65%

-

0.00%

Accelerated accretion and loan fees

2,653

8.20%

274

2.13%

Total transactional income

4,082

12.61%

493

3.83%

Total

$

7,125

22.02%

$

1,791

13.94%

Nine Months Ended March 31,

2013

2012

Income

Return (1)

Income

Return (1)

(Dollars in thousands)

Regularly scheduled interest and accretion

$

7,813

9.35%

$

2,374

10.78%

Transactional income:

Gains on loan sales

2,035

2.44%

219

0.99%

Gain on sale of real estate owned

684

0.82%

-

0.00%

Other noninterest income

36

0.04%