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%

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