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
The Board of Directors declared a cash dividend of
“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
As of December 31, 2020, total assets were
1. The following table highlights the changes in the loan portfolio for the three and six months ended December 31, 2020:
| Loan Portfolio Changes | |||||||||||||||
| Three Months Ended December 31, 2020 | |||||||||||||||
| December 31, 2020 Balance | September 30, 2020 Balance | Change ($) | Change (%) | ||||||||||||
| (Dollars in thousands) | |||||||||||||||
| National Lending Purchased | $ | 418,584 | $ | 358,203 | $ | 60,381 | 16.86 | % | |||||||
| National Lending Originated | 478,423 | 462,974 | 15,449 | 3.34 | % | ||||||||||
| SBA National | 48,797 | 48,775 | 22 | 0.05 | % | ||||||||||
| Community Banking | 55,773 | 62,158 | (6,385 | ) | (10.27 | %) | |||||||||
| Total | $ | 1,001,577 | $ | 932,110 | $ | 69,467 | 7.45 | % | |||||||
| Six Months Ended December 31, 2020 | |||||||||||||||
| December 31, 2020 Balance | June 30, 2020 Balance | Change ($) | Change (%) | ||||||||||||
| (Dollars in thousands) | |||||||||||||||
| National Lending Purchased | $ | 418,584 | $ | 386,624 | $ | 31,960 | 8.27 | % | |||||||
| National Lending Originated | 478,423 | 467,612 | 10,811 | 2.31 | % | ||||||||||
| SBA National | 48,797 | 47,095 | 1,702 | 3.61 | % | ||||||||||
| Community Banking | 55,773 | 70,271 | (14,498 | ) | (20.63 | %) | |||||||||
| Total | $ | 1,001,577 | $ | 971,602 | $ | 29,975 | 3.09 | % | |||||||
Loans generated by the Bank's National Lending Division for the quarter ended December 31, 2020 totaled
An overview of the Bank’s National Lending portfolio follows:
| National Lending Portfolio | |||||||||||||||||||||||
| Three Months Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||
| Purchased | Originated | Total | Purchased | Originated | Total | ||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Loans purchased or originated during the period: | |||||||||||||||||||||||
| Unpaid principal balance | $ | 97,759 | $ | 84,607 | $ | 182,366 | $ | 66,784 | $ | 98,563 | $ | 165,347 | |||||||||||
| Net investment basis | 91,284 | 84,607 | 175,891 | 64,840 | 98,563 | 163,403 | |||||||||||||||||
| Loan returns during the period: | |||||||||||||||||||||||
| Yield | 9.06 | % | 6.87 | % | 7.89 | % | 9.76 | % | 7.67 | % | 8.57 | % | |||||||||||
| Total Return on Purchased Loans (1) | 9.06 | % | 6.87 | % | 7.89 | % | 10.21 | % | 7.67 | % | 8.77 | % | |||||||||||
| Six Months Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||
| Purchased | Originated | Total | Purchased | Originated | Total | ||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Loans purchased or originated during the period: | |||||||||||||||||||||||
| Unpaid principal balance | $ | 103,588 | $ | 125,515 | $ | 229,103 | $ | 97,116 | $ | 139,100 | $ | 236,216 | |||||||||||
| Net investment basis | 95,862 | 125,515 | 221,377 | 93,462 | 139,100 | 232,562 | |||||||||||||||||
| Loan returns during the period: | |||||||||||||||||||||||
| Yield | 9.08 | % | 6.95 | % | 7.93 | % | 9.74 | % | 7.62 | % | 8.52 | % | |||||||||||
| Total Return on Purchased Loans (1) | 9.08 | % | 6.95 | % | 7.93 | % | 9.98 | % | 7.62 | % | 8.61 | % | |||||||||||
| Total loans as of period end: | |||||||||||||||||||||||
| Unpaid principal balance | $ | 456,524 | $ | 478,423 | $ | 934,947 | $ | 401,393 | $ | 497,386 | $ | 898,779 | |||||||||||
| Net investment basis | 418,584 | 478,423 | 897,007 | 367,625 | 497,386 | 865,011 | |||||||||||||||||
| (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.” | |||||||||||||||||||||||
2. Deposits decreased by
3. Shareholders’ equity increased by
Net income increased by
1. Net interest and dividend income before provision for loan losses decreased by
The following table summarizes interest income and related yields recognized on the loan portfolios:
| Interest Income and Yield on Loans | ||||||||||||||||||
| Three Months Ended December 31, | ||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||
| Average | Interest | Average | Interest | |||||||||||||||
| Balance (1) | Income | Yield | Balance (1) | Income | Yield | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||||
| Community Banking | $ | 57,801 | $ | 658 | 4.52 | % | $ | 85,989 | $ | 1,193 | 5.52 | % | ||||||
| SBA National | 48,953 | 616 | 4.99 | % | 57,371 | 1,003 | 6.96 | % | ||||||||||
| National Lending: | ||||||||||||||||||
| Originated | 450,698 | 7,801 | 6.87 | % | 456,877 | 8,814 | 7.67 | % | ||||||||||
| Purchased | 395,692 | 9,033 | 9.06 | % | 345,748 | 8,480 | 9.76 | % | ||||||||||
| Total National Lending | 846,390 | 16,834 | 7.89 | % | 802,625 | 17,294 | 8.57 | % | ||||||||||
| Total | $ | 953,144 | $ | 18,108 | 7.54 | % | $ | 945,985 | $ | 19,490 | 8.20 | % | ||||||
| Six Months Ended December 31, | ||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||
| Average | Interest | Average | Interest | |||||||||||||||
| Balance (1) | Income | Yield | Balance (1) | Income | Yield | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||||
| Community Banking | $ | 61,620 | $ | 1,502 | 4.84 | % | $ | 88,187 | $ | 2,458 | 5.54 | % | ||||||
| SBA National | 48,444 | 1,171 | 4.80 | % | 60,062 | 2,472 | 8.19 | % | ||||||||||
| SBA PPP | 8,608 | 81 | 1.87 | % | - | - | 0.00 | % | ||||||||||
| National Lending: | ||||||||||||||||||
| Originated | 451,721 | 15,830 | 6.95 | % | 463,092 | 17,742 | 7.62 | % | ||||||||||
| Purchased | 384,946 | 17,629 | 9.08 | % | 337,284 | 16,521 | 9.74 | % | ||||||||||
| Total National Lending | 836,667 | 33,459 | 7.93 | % | 800,376 | 34,263 | 8.52 | % | ||||||||||
| Total | $ | 955,339 | $ | 36,213 | 7.52 | % | $ | 948,625 | $ | 39,193 | 8.22 | % | ||||||
| (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 quarter ended December 31, 2019, transactional income decreased by
| Total Return on Purchased Loans | |||||||||||
| Three Months Ended December 31, | |||||||||||
| 2020 | 2019 | ||||||||||
| Income | Return (1) | Income | Return (1) | ||||||||
| (Dollars in thousands) | |||||||||||
| Regularly scheduled interest and accretion | $ | 7,113 | 7.13 | % | $ | 6,525 | 7.51 | % | |||
| Transactional income: | |||||||||||
| Gain on real estate owned | - | 0.00 | % | 395 | 0.45 | % | |||||
| Accelerated accretion and loan fees | 1,920 | 1.93 | % | 1,955 | 2.25 | % | |||||
| Total transactional income | 1,920 | 1.93 | % | 2,350 | 2.70 | % | |||||
| Total | $ | 9,033 | 9.06 | % | $ | 8,875 | 10.21 | % | |||
| Six Months Ended December 31, | |||||||||||
| 2020 | 2019 | ||||||||||
| Income | Return (1) | Income | Return (1) | ||||||||
| (Dollars in thousands) | |||||||||||
| Regularly scheduled interest and accretion | $ | 13,677 | 7.05 | % | $ | 12,580 | 7.42 | % | |||
| Transactional income: | |||||||||||
| Gain on real estate owned | - | 0.00 | % | 395 | 0.24 | % | |||||
| Accelerated accretion and loan fees | 3,952 | 2.03 | % | 3,941 | 2.32 | % | |||||
| Total transactional income | 3,952 | 2.03 | % | 4,336 | 2.56 | % | |||||
| Total | $ | 17,629 | 9.08 | % | $ | 16,916 | 9.98 | % | |||
| (1) The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on asset sales and gains on real estate owned 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 increased by
- 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:
| Income Earned | |||
| (In thousands) | |||
| Correspondent Fee | $ | 1,061 | |
| Amortization of Purchased Accrued Interest | 613 | ||
| Earned Net Servicing Interest | 4,408 | ||
| Total | $ | 6,082 | |
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:
| Quarter | PPP Loans Purchased by Loan Source | Correspondent Fee | Purchased Accrued Interest(1) | Total(2) | ||||||||||||||
| (In thousands) | ||||||||||||||||||
| Q4 FY 2020 | $ | 1,272,900 | $ | 2,891 | $ | 688 | $ | 3,579 | ||||||||||
| Q1 FY 2021 | 2,112,100 | 5,348 | 2,804 | 8,152 | ||||||||||||||
| Q2 FY 2021 | 1,333,500 | 495 | 3,766 | 4,261 | ||||||||||||||
| Total | $ | 4,718,500 | $ | 8,734 | $ | 7,258 | $ | 15,992 | ||||||||||
| Less amounts recognized in Q2 FY 21 | (1,061 | ) | (613 | ) | (1,674 | ) | ||||||||||||
| Less amounts recognized in previous quarters | (842 | ) | (279 | ) | (1,121 | ) | ||||||||||||
| Amount remaining to be recognized | $ | 6,831 | $ | 6,366 | $ | 13,197 | ||||||||||||
| (1) - Northeast Bank's share | ||||||||||||||||||
| (2) - Expected to be recognized into income over approximately 2 years | ||||||||||||||||||
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; and - A 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
- 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; and - An 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
As of December 31, 2020, nonperforming assets totaled
As of December 31, 2020, past due loans totaled
As of December 31, 2020, the Bank’s Tier 1 leverage capital ratio was
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-F
For More Information:
Jean-Pierre Lapointe, Chief Financial Officer
Northeast Bank, 27 Pearl Street, Portland, ME 04101
207.786.3245 ext. 3220
www.northeastbank.com
| NORTHEAST BANK | |||||||
| BALANCE SHEETS | |||||||
| (Unaudited) | |||||||
| (Dollars in thousands, except share and per share data) | |||||||
| December 31, 2020 | June 30, 2020 | ||||||
| Assets | |||||||
| Cash and due from banks | $ | 3,264 | $ | 2,795 | |||
| Short-term investments | 106,096 | 140,862 | |||||
| Total cash and cash equivalents | 109,360 | 143,657 | |||||
| Available-for-sale debt securities, at fair value | 62,149 | 64,918 | |||||
| Equity securities, at fair value | 7,275 | 7,239 | |||||
| Total investment securities | 69,424 | 72,157 | |||||
| Residential real estate loans held for sale | 161 | 601 | |||||
| SBA loans held for sale | - | 28,852 | |||||
| Total loans held for sale | 161 | 29,453 | |||||
| Loans: | |||||||
| Commercial real estate | 700,413 | 679,537 | |||||
| Commercial and industrial | 226,770 | 212,769 | |||||
| Residential real estate | 73,060 | 77,722 | |||||
| Consumer | 1,334 | 1,574 | |||||
| Total loans | 1,001,577 | 971,602 | |||||
| Less: Allowance for loan losses | 9,926 | 9,178 | |||||
| Loans, net | 991,651 | 962,424 | |||||
| Premises and equipment, net | 12,539 | 9,670 | |||||
| Real estate owned and other repossessed collateral, net | 2,866 | 3,274 | |||||
| Federal Home Loan Bank stock, at cost | 1,390 | 1,390 | |||||
| Loan servicing rights, net | 2,035 | 2,113 | |||||
| Bank-owned life insurance | 17,286 | 17,074 | |||||
| Other assets | 27,380 | 16,423 | |||||
| Total assets | $ | 1,234,092 | $ | 1,257,635 | |||
| Liabilities and Shareholders' Equity | |||||||
| Deposits: | |||||||
| Demand | $ | 127,944 | $ | 94,749 | |||
| Savings and interest checking | 185,465 | 137,824 | |||||
| Money market | 309,658 | 302,343 | |||||
| Time | 360,870 | 477,436 | |||||
| Total deposits | 983,937 | 1,012,352 | |||||
| Federal Home Loan Bank advances | 15,000 | 15,000 | |||||
| Paycheck Protection Program Liquidity Facility advances | - | 12,440 | |||||
| Subordinated debt | 14,995 | 14,940 | |||||
| Lease liability | 6,796 | 4,496 | |||||
| Other liabilities | 31,402 | 33,668 |
Northeast Bank
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Commercial Banking
Finance and Insurance
United States of America
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