Northeast Bank Reports Second Quarter Results and Declares Dividend
PORTLAND, Maine, Jan. 27, 2021 (GLOBE NEWSWIRE) — Northeast Bank (the “Bank”) (NASDAQ: NBN), a Maine-based full-service bank, today reported net income of $8.2 million, or $0.98 per diluted common share, for the quarter ended December 31, 2020, compared to net income of $4.9 million, or $0.53 per diluted common share, for the quarter ended December 31, 2019. Net income for the six months ended December 31, 2020 was $16.0 million, or $1.92 per diluted common share, compared to $9.6 million, or $1.05 per diluted common share, for the six months ended December 31, 2019.The Board of Directors declared a cash dividend of $0.01 per share, payable on February 24, 2021, to shareholders of record as of February 10, 2021.“We reported strong results in our second fiscal quarter,” said Rick Wayne, Chief Executive Officer. “We closed on our largest single loan pool purchase in the Bank’s history, which contributed to our National Lending team generating $175.9 million of new volume, consisting of $91.3 million of purchased loans and $84.6 million of originations.” Mr. Wayne continued, “For the quarter, we recognized $6.1 million of correspondent fee income under the arrangement with The Loan Source, Inc. (“Loan Source”) and ACAP SME, LLC, who purchased an additional $1.3 billion of Paycheck Protection Program loans during the quarter. As a result, we earned $0.98 per diluted common share, a return on average equity of 18.4%, a return on average assets of 2.7%, and a net interest margin of 5.2%.”As of December 31, 2020, total assets were $1.23 billion, a decrease of $23.5 million, or 1.9%, from total assets of $1.26 billion as of June 30, 2020.1. The following table highlights the changes in the loan portfolio for the three and six months ended December 31, 2020:
Loans generated by the Bank’s National Lending Division for the quarter ended December 31, 2020 totaled $175.9 million, which consisted of $91.3 million of purchased loans, at an average price of 93.4% of unpaid principal balance, and $84.6 million of originated loans.An overview of the Bank’s National Lending portfolio follows:2. Deposits decreased by $28.4 million, or 2.8%, from June 30, 2020. The decrease was attributable to a decrease in time deposits of $116.6 million, or 24.4% due to intentional runoff. The decrease was partially offset by increases in demand deposits of $33.2 million, or 35.0%, savings and interest checking accounts of $47.6 million, or 34.6%, and money market deposits of $7.3 million, or 2.4%.3. Shareholders’ equity increased by $17.2 million, or 10.5%, from June 30, 2020, primarily due to net income of $16.0 million. Shareholders’ equity also increased by $1.0 million as a result of stock options exercised, which resulted in 153 thousand shares of common stock issued.1. Net interest and dividend income before provision for loan losses decreased by $157 thousand to $15.4 million for the quarter ended December 31, 2020, compared to $15.5 million for the quarter ended December 31, 2019. The decrease was primarily due to lower interest income earned on loans, partially offset by a decrease in deposit interest expense. The decrease in interest income earned on loans was primarily due to lower average balances and rates earned on the National Lending originated, SBA, and Community Bank portfolios, partially offset by higher average balances in the National Lending purchased portfolio. The decrease in deposit interest expense was due to lower rates, partially offset by higher average balances.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 quarter ended December 31, 2019, transactional income decreased by $430 thousand for the quarter ended December 31, 2020, while regularly scheduled interest and accretion increased by $588 thousand due to the increase in average balances. The total return on purchased loans for the quarter ended December 31, 2020 was 9.1%, a decrease from 10.2% for the quarter ended December 31, 2019. The following table details the total return on purchased loans:2. Noninterest income increased by $5.2 million for the quarter ended December 31, 2020, compared to the quarter ended December 31, 2019, principally due to the following:
An increase in correspondent fee income of $6.1 million from the recognition of correspondent fees and net servicing income as a result of the correspondent arrangement entered into with Loan Source during the quarter ended June 30, 2020. The correspondent arrangement provides for the Bank to earn a correspondent fee when Loan Source purchases PPP loans and the Bank subsequently shares in net servicing income on such purchased PPP loans. Correspondent income for the quarter is comprised of the following components:A summary of PPP loans purchased by Loan Source and related amounts that the Bank will earn over the expected life of the loans is as follows:The increase in correspondent fee income was partially offset by:
An increase in loss on real estate owned (“REO”) of $501 thousand, due to a writedown and net loss on sales of REO properties in the quarter ended December 31, 2020, as compared to a gain recorded on the transfer of a loan into REO in the quarter ended December 31, 2019;A decrease in gain on sale of SBA loans of $304 thousand, due to no SBA loans sold in the quarter ended December 31, 2020; andA decrease in gain on sale of residential loans held for sale of $193 thousand, due to lower volume of loans sold as compared to the quarter ended December 31, 2019.
3. Noninterest expense increased by $639 thousand for the quarter ended December 31, 2020 compared to the quarter ended December 31, 2019, primarily due to the following:
An increase in loan expense of $343 thousand, primarily due to $424 thousand in correspondent expenses associated with the Loan Source arrangement, partially offset by an increase of $120 thousand of collection expense reimbursements received during the quarter ended December 31, 2020;An increase in occupancy and equipment expense of $198 thousand, primarily due to increases in rent expense, depreciation and IT software expense in connection with the relocation of the Lewiston operations center and opening of a new office in New York City; andAn increase in FDIC insurance premium expense of $102 thousand, due to credits received during the quarter ended December 31, 2019, which have now run out.4. Income tax expense increased by $933 thousand to $2.9 million, or an effective tax rate of 26.3%, for the quarter ended December 31, 2020, compared to $1.9 million, or an effective tax rate of 28.9%, for the quarter ended December 31, 2019. The increase in income tax expense is due to the increase in pre-tax income. The decrease in effective tax rate is primarily due to $472 thousand of tax benefits arising from the exercise of stock options during the quarter ended December 31, 2020.As of December 31, 2020, past due loans totaled $23.1 million, or 2.31% of total loans, as compared to past due loans totaling $16.4 million, or 1.69% of total loans as of June 30, 2020. The increase was primarily due to one National Lending originated loan totaling $2.0 million and fifteen National Lending purchased loans totaling $4.8 million, becoming past due during the six months ended December 31, 2020.As of December 31, 2020, the Bank’s Tier 1 leverage capital ratio was 15.1%, compared to 13.4% at June 30, 2020, and the Total capital ratio was 20.4% at December 31, 2020, as compared to 19.6% at June 30, 2020. Capital ratios were affected by earnings during the six months ended December 31, 2020.Investor Call Information
Rick Wayne, Chief Executive Officer, Jean-Pierre Lapointe, Chief Financial Officer, and Pat Dignan, Executive Vice President and Chief Credit Officer of Northeast Bank, will host a conference call to discuss second quarter earnings and business outlook at 10:00 a.m. Eastern Time on Thursday, January 28th. Investors can access the call by dialing 800.773.2954 and entering the following passcode: 50081035. The call will be available via live webcast, which can be viewed by accessing the Bank’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 Bank
Northeast Bank (NASDAQ: NBN) is a full-service bank headquartered in Portland, Maine. We offer personal and business banking services to the Maine market via nine branches. Our National Lending Division purchases and originates commercial loans on a nationwide basis. 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, efficiency ratio, and net interest margin excluding PPP. The Bank’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 the Bank 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 Bank’s control. The Bank’s actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, the negative impacts and disruptions of the COVID-19 pandemic and measures taken to contain its spread on our employees, customers, business operations, credit quality, financial position, liquidity and results of operations; the length and extent of the economic contraction resulting from the COVID-19 pandemic; continued deterioration in employment levels, general business and economic conditions on a national basis and in the local markets in which the Bank operates, including changes which adversely affect borrowers’ ability to service and repay our loans; changes in customer behavior due to changing political, business and economic conditions or legislative or regulatory initiatives; turbulence in the capital and debt markets; changes in interest rates and real estate values; increases in loan defaults and charge-off rates; decreases 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; competitive pressures from other financial institutions; operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; the risk that the Bank may not be successful in the implementation of its business strategy; the risk that intangibles recorded in the Bank’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 Bank’s Annual Report on Form 10-K and updated by our Quarterly Reports on Form 10-Q and other filings submitted to the Federal Deposit Insurance Corporation. These statements speak only as of the date of this release and the Bank 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-FFor More Information:
Jean-Pierre Lapointe, Chief Financial Officer
Northeast Bank, 27 Pearl Street, Portland, ME 04101
207.786.3245 ext. 3220
www.northeastbank.com
