Northeast Bank Reports Second Quarter Results and Declares Dividend

1/26, 10:16 PM (Source: GlobeNewswire)

PORTLAND, Maine, Jan. 26, 2022 (GLOBE NEWSWIRE) -- Northeast Bank (the “Bank”) (NASDAQ: NBN), a Maine-based full-service bank, today reported net income of $11.4 million, or $1.42 per diluted common share, for the quarter ended December 31, 2021, compared to net income of $8.2 million, or $0.98 per diluted common share, for the quarter ended December 31, 2020. Net income for the six months ended December 31, 2021 was $21.3 million, or $2.63 per diluted common share, compared to $16.0 million, or $1.92 per diluted common share, for the six months ended December 31, 2020.

The Board of Directors declared a cash dividend of $0.01 per share, payable on February 24, 2022, to shareholders of record as of February 10, 2022.

“We reported strong results and net loan growth in our second fiscal quarter,” said Rick Wayne, Chief Executive Officer. “Our National Lending Division generated a record $260.5 million in originations and purchases for the quarter, growing the National Lending portfolio by $112.6 million, or 11.4%, over September 30, 2021, and $151.1 million, or 15.9%, over June 30, 2021. The originated yield and purchased return for the quarter was 6.5% and 9.0%, respectively. We continued to benefit from our correspondent arrangement with The Loan Source, Inc. and NEWITY (formerly ACAP SME, LLC), generating $6.0 million of correspondent fee income during the quarter. For the quarter, we earned $1.42 per diluted common share, a return on average equity of 18.8%, a return on average assets of 2.9% and repurchased 354 thousand shares at a weighted average price of $33.94.”

As of December 31, 2021, total assets were $1.46 billion, a decrease of $714.4 million, or 32.9%, from total assets of $2.17 billion as of June 30, 2021, primarily due to the $844.3 million, or 83.6%, decrease in cash and short-term investments, as discussed below. The principal components of the changes in the balance sheet follow:

1.  Cash and short-term investments decreased by $844.3 million, or 83.6%, from June 30, 2021, primarily due to the timing of a large deposit account related to U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) elevated loan payoff collections at June 30, 2021. Cash and short-term investments may fluctuate significantly while PPP collections, including forgiveness amounts, continue, depending on the timing of receipts and remittances of cash amounts.

2.  The following table highlights the changes in the loan portfolio for the three and six months ended December 31, 2021:

 Loan Portfolio Changes
 Three Months Ended December 31, 2021
 December 31, 2021
Balance
 September 30, 2021
Balance
 Change ($) Change (%)
        
 (Dollars in thousands)
National Lending Purchased$484,513  $432,083  $52,430  12.13%
National Lending Originated 619,223   559,080   60,143  10.76%
SBA National 35,682   38,482   (2,800) (7.28%)
Community Banking 41,766   44,702   (2,936) (6.57%)
Total$1,181,184  $1,074,347  $106,837  9.94%
               
 Six Months Ended December 31, 2021
 December 31, 2021
Balance
 June 30, 2021
Balance
 Change ($) Change (%)
        
 (Dollars in thousands)
National Lending Purchased$484,513  $429,054  $55,459  12.93%
National Lending Originated 619,223   523,535   95,688  18.28%
SBA National 35,682   39,549   (3,867) (9.78%)
Community Banking 41,766   48,486   (6,720) (13.86%)
Total$1,181,184  $1,040,624  $140,560  13.51%

Loans generated by the Bank's National Lending Division for the quarter ended December 31, 2021 totaled $260.5 million, which consisted of $92.1 million of purchased loans, at an average price of 98.7% of unpaid principal balance, and $168.4 million of originated loans.

An overview of the Bank’s National Lending portfolio follows:

 National Lending Portfolio
 Three Months Ended December 31,
 2021 2020
 Purchased Originated Total Purchased Originated Total
            
 (Dollars in thousands)
Loans purchased or originated during the period:                 
Unpaid principal balance$93,379  $168,398  $261,777  $97,759  $84,607  $182,366 
Net investment basis 92,136   168,398   260,534   91,284   84,607   175,891 
                  
Returns on loan portfolio during the period:                 
Yield 8.92%  6.48%  7.53%  9.06%  6.87%  7.89%
Total Return on Purchased Loans (1) 8.96%  N/A   8.96%  9.06%  6.87%  7.89%
                  
                  
 Six Months Ended December 31,
 2021 2020
 Purchased Originated Total Purchased Originated Total
            
 (Dollars in thousands)
Loans purchased or originated during the period:                 
Unpaid principal balance$130,413  $262,884  $393,297  $103,588  $125,515  $229,103 
Net investment basis 127,492   262,884   390,376   95,862   125,515   221,377 
                  
Returns on loan portfolio during the period:                 
Yield 9.08%  6.43%  7.58%  9.08%  6.95%  7.93%
Total Return on Purchased Loans (1) 9.07%  N/A   9.07%  9.08%  6.95%  7.93%
                  
Total loans as of period end:                 
Unpaid principal balance$518,175  $619,223  $1,137,398  $456,524  $478,423  $934,947 
Net investment basis 484,513   619,223   1,103,736   418,584   478,423   897,007 

(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.”

3.  Deposits decreased by $709.2 million, or 38.1%, from June 30, 2021, attributable to decreases in demand deposits of $655.9 million, or 67.5%, time deposits of $101.5 million, or 36.5%, and money market accounts of $29.4 million, or 10.3%, partially offset by an increase in savings and interest-bearing checking accounts of $77.6 million, or 23.9%. The primary reason for the net decrease in deposits was due to timing of the receipt of short-term customer funds related to PPP payoff collections prior to June 30, 2021, which were subsequently used to pay down NEWITY’s PPP Liquidity Facility (“PPPLF”) balance during the six months ended December 31, 2021.

4.  Shareholders’ equity increased by $6.8 million, or 3.0%, from June 30, 2021, primarily due to net income of $21.3 million and stock-based compensation of $480 thousand, partially offset by the repurchase of 456 thousand shares of voting common stock at a weighted average price per share of $33.04, which resulted in a $15.1 million decrease in shareholders’ equity.

Net income increased by $3.2 million to $11.4 million for the quarter ended December 31, 2021, compared to net income of $8.2 million for the quarter ended December 31, 2020.

1.  Net interest and dividend income before provision for loan losses increased by $4.7 million to $20.1 million for the quarter ended December 31, 2021, compared to $15.4 million for the quarter ended December 31, 2020. The increase was primarily due to the following:

  • An increase in interest income earned on loans of $3.1 million, primarily due to an increase in interest income earned on the National Lending Division’s originated and purchased portfolios, due to higher average balances, partially offset by lower rates earned on both portfolios;
  • A decrease in deposit interest expense of $1.3 million, primarily due to lower interest rates and a repositioning of the Bank’s deposit portfolio; and
  • A decrease in interest expense on subordinated debt of $282 thousand, as the Bank redeemed its $15.1 million subordinated debt in full at par plus accrued interest on July 1, 2021; partially offset by,
  • A decrease of $117 thousand in interest income earned on securities, due to lower rates earned and lower average balances.

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,
 2021 2020
 Average Interest   Average Interest  
 Balance (1) Income Yield Balance (1) Income Yield
            
 (Dollars in thousands)
Community Banking$42,728  $556  5.16% $57,801  $658  4.52%
SBA National 36,027   635  6.99%  48,953   616  4.99%
SBA PPP 628   2  1.26%  -   -  0.00%
National Lending:                   
Originated 601,394   9,827  6.48%  450,698   7,801  6.87%
Purchased 452,644   10,175  8.92%  395,692   9,033  9.06%
Total National Lending 1,054,038   20,002  7.53%  846,390   16,834  7.89%
Total$1,133,421  $21,195  7.42% $953,144  $18,108  7.54%
  
 Six Months Ended December 31,
 2021 2020
 Average Interest   Average Interest  
 Balance (1) Income Yield Balance (1) Income Yield
            
 (Dollars in thousands)
Community Banking$43,383  $1,131  5.17% $61,620  $1,502  4.84%
SBA National 38,168   1,271  6.61%  48,444   1,171  4.80%
SBA PPP 1,006   13  2.56%  8,608   81  1.87%
National Lending:                   
Originated 574,343   18,612  6.43%  451,721   15,830  6.95%
Purchased 440,224   20,161  9.08%  384,946   17,629  9.08%
Total National Lending 1,014,567   38,773  7.58%  836,667   33,459  7.93%
Total$1,097,124  $41,188  7.45% $955,339  $36,213  7.52%
  (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, 2020, regularly scheduled interest and accretion for the quarter ended December 31, 2021 increased by $463 thousand due to the increase in average balances and transactional income increased by $728 thousand. The total return on purchased loans for the quarter ended December 31, 2021 was 9.0%, a decrease from 9.1% for the quarter ended December 31, 2020. The following table details the total return on purchased loans:

 Total Return on Purchased Loans
 Three Months Ended December 31,
 2021 2020
 Income Return (1) Income Return (1)
        
 (Dollars in thousands)
Regularly scheduled interest and accretion$7,576  6.64% $7,113 7.13%
Transactional income:          
Gain on real estate owned 49  0.04%  - 0.00%
Accelerated accretion and loan fees 2,599  2.28%  1,920 1.93%
Total transactional income 2,648  2.32%  1,920 1.93%
Total$10,224  8.96% $9,033 9.06%
  
 Six Months Ended December 31,
 2021 2020
 Income Return (1) Income Return (1)
        
 (Dollars in thousands)
Regularly scheduled interest and accretion$14,557  6.56% $13,677 7.05%
Transactional income:         
Loss on real estate owned (25) (0.01%)  - 0.00%
Accelerated accretion and loan fees 5,604  2.52%  3,952 2.03%
Total transactional income 5,579  2.51%  3,952 2.03%
Total$20,136  9.07% $17,629 9.08%

(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.  Provision (credit) for loan losses decreased by $1.4 million to a credit of $1.1 million for the quarter ended December 31, 2021, from a $365 thousand provision in the quarter ended December 31, 2020. The decrease in the provision (credit) for loan losses reflects decreases in certain qualitative factors during the current quarter as a result of continued improvements relative to the COVID-19 pandemic, as compared to increases in certain qualitative factors during the quarter ended December 31, 2020 as a result of impacts from the COVID-19 pandemic.

3. Noninterest income decreased by $4 thousand for the quarter ended December 31, 2021, compared to the quarter ended December 31, 2020, primarily due to the following:

  • An increase in gain on real estate owned (“REO”) of $260 thousand, due to the gain on sale of a REO property during the current quarter, as compared to a large write-down on an existing REO property and a net loss on the sale of two REO properties during the quarter ended December 31, 2020; partially offset by,
  • A decrease in fees for other customers of $184 thousand, due to lower commercial loan servicing fees due to SBA loan payoffs;
  • An increase in unrealized loss on equity securities of $37 thousand; and
  • A decrease in correspondent fee income of $41 thousand from the recognition of correspondent fees and net servicing income. Correspondent income for the quarters ended December 31, 2021 and 2020 is comprised of the following components:
 Three Months Ended December 31,
 2021 2020
    
  (In thousands)
Correspondent Fee$1,087  $1,061 
Amortization of Purchased Accrued Interest 1,614   613 
Earned Net Servicing Interest 3,340   4,408 
Total$6,041  $6,082 
        

In addition to the net servicing interest income, 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(3) 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 
Q3 FY 2021  2,141,900   -   598   598 
Q4 FY 2021  4,371,000   171   2,703   2,874 
Q1 FY 2022  6,300   -   1   1 
Total $11,237,700  $8,905  $10,560  $19,465 
Less amounts recognized in Q2 FY 22   (1,087)  (1,614)  (2,701)
Less amounts recognized in previous quarters   (5,168)  (4,579)  (9,747)
Amount remaining to be recognized  $2,650  $4,367  $7,017 

(1) - Northeast Bank's share
(2) - Expected to be recognized into income over life of loans
(3) - Loan Source’s ending PPP loan balance was $4.64 billion as of December 31, 2021

4.  Noninterest expense increased by $759 thousand for the quarter ended December 31, 2021 compared to the quarter ended December 31, 2020, primarily due to the following:

  • An increase in salaries and employee benefits expense of $1.4 million, primarily due to increases in regular employee compensation, bonus, and stock compensation expense; and
  • An increase in other noninterest expense of $42 thousand, primarily due to increases in insurance expense, travel and meals and entertainment expense, and correspondent banking fees during the quarter ended December 31, 2021 compared to December 31, 2020; partially offset by,
  • A decrease in loan expense of $613 thousand, due to a decrease in PPP and SBA 7(a) expenses of $424 thousand, and decreases in REO and collection expense due to collection reimbursements during the quarter ended December 31, 2021; and
  • A decrease in occupancy and equipment expense of $183 thousand, primarily due to the closure of an office location during the quarter ended December 31, 2020.

5.  Income tax expense increased by $2.1 million to $5.0 million, or an effective tax rate of 30.6%, for the quarter ended December 31, 2021, compared to $2.9 million, or an effective tax rate of 26.3%, for the quarter ended December 31, 2020. The increase was primarily due to higher pre-tax income, which increased by $5.3 million during the quarter ended December 31, 2021 compared to the quarter ended December 31, 2020. The increase in effective tax rate was primarily due to $472 thousand of tax benefits arising from the exercise of stock options during the quarter ended December 31, 2020, as compared to only $44 thousand of tax benefits in the quarter ended December 31, 2021.

As of December 31, 2021, nonperforming assets totaled $21.3 million, or 1.46% of total assets, as compared to $20.4 million, or 0.94% of total assets, as of June 30, 2021. The increase was primarily due to five National Lending Division loans totaling $4.3 million that were placed on nonaccrual during the six months ended December 31, 2021, partially offset by the sale of three REO properties totaling $1.8 million, and paydowns of $1.4 million on nonaccrual loans.

As of December 31, 2021, past due loans totaled $14.6 million, or 1.23% of total loans, as compared to past due loans totaling $11.3 million, or 1.08% of total loans as of June 30, 2021. The increase was primarily due to three National Lending Division loans totaling $4.3 million becoming past due during the six months ended December 31, 2021, partially offset by two purchased loans totaling $1.1 million that became current.

As of December 31, 2021, the Bank’s Tier 1 leverage capital ratio was 15.2%, compared to 13.6% at June 30, 2021, and the Total capital ratio was 20.8% at December 31, 2021, compared to 24.3% at June 30, 2021. Capital ratios were primarily affected by increased earnings and decreased assets, while the total capital ratio was negatively impacted by the redemption of the subordinated debt on July 1, 2021.

Investor Call Information
Rick Wayne, Chief Executive Officer, Jean-Pierre Lapointe, Chief Financial Officer, and Pat Dignan, Executive Vice President and Chief Credit Officer, will host a conference call to discuss second quarter earnings and business outlook at 10:00 a.m. Eastern Time on Thursday, January 27th. Investors can access the call by dialing 800.773.2954 and entering the following passcode: 50273456. 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 eight 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, net interest margin excluding PPP, and net interest margin excluding PPP and collection account. 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. We may also make forward-looking statements in other documents we file with the FDIC, in our annual reports to our shareholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees. You can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “outlook,” “will,” “should,” and other expressions that predict or indicate future events and trends and which do not relate to historical matters. 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 ongoing disruption due to 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; changes 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 political, business and economic conditions or legislative or regulatory initiatives; turbulence in the capital and debt markets; reductions in net interest income resulting from interest rate volatility as well as changes in the balances and mix of loans and deposits; changes in interest rates and real estate values; changes in loan collectability, increases in 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; changes in legislation or regulation and accounting principles, policies and guidelines; 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; reputational risk relating to its participation in the Paycheck Protection Program and other pandemic-related legislative and regulatory initiatives and programs; 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 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

 
NORTHEAST BANK
BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share data)
 December 31, 2021 June 30, 2021
Assets     
Cash and due from banks$2,424  $2,850 
Short-term investments 163,785   1,007,641 
Total cash and cash equivalents 166,209   1,010,491 
      
      
Available-for-sale debt securities, at fair value 57,323   59,737 
Equity securities, at fair value 7,194   7,230 
Total investment securities 64,517   66,967 
      
Loans:     
Commercial real estate 830,095   725,287 
Commercial and industrial 289,387   257,604 
Residential real estate 60,825   56,591 
Consumer 877   1,142 
Total loans 1,181,184   1,040,624 
Less: Allowance for loan losses 6,040   7,313 
Loans, net 1,175,144   1,033,311 
      
      
Premises and equipment, net 9,977   11,271 
Real estate owned and other repossessed collateral, net 53   1,639 
Federal Home Loan Bank stock, at cost 1,279   1,209 
Loan servicing rights, net 1,645   2,061 
Bank-owned life insurance 17,710   17,498 
Other assets 23,421   29,955 
Total assets$1,459,955  $2,174,402 
      
Liabilities and Shareholders' Equity     
Deposits:     
Demand$316,556  $972,495 
Savings and interest checking 402,689   325,062 
Money market 257,593   287,033 
Time 176,357   277,840 
Total deposits 1,153,195   1,862,430 
      
Federal Home Loan Bank advances 15,000   15,000 
Subordinated debt -   15,050 
Lease liability 5,266   6,061 
Other liabilities 47,257   43,470 
Total liabilities 1,220,718   1,942,011 
      
Commitments and contingencies     
      
      
Shareholders' equity     
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares    
issued and outstanding at December 31, 2021 and June 30, 2021 -   - 
Voting common stock, $1.00 par value, 25,000,000 shares authorized;     
7,815,566 and 8,150,480 shares issued and outstanding at    
December 31, 2021 and June 30, 2021, respectively 7,816   8,151 
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized;     
no shares issued and outstanding at December 31, 2021 and June 30, 2021-  - 
Additional paid-in capital 50,440   64,420 
Retained earnings 182,248   161,132 
Accumulated other comprehensive loss (1,267)  (1,312)
Total shareholders' equity 239,237   232,391 
Total liabilities and shareholders' equity$1,459,955  $2,174,402 
        


 
NORTHEAST BANK
STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except share and per share data)
 Three Months Ended December 31, Six Months Ended December 31,
 2021 2020 2021 2020
Interest and dividend income:           
Interest and fees on loans$21,195  $18,108  $41,188  $36,213 
Interest on available-for-sale securities 76   193   170   483 
Other interest and dividend income 118   54   292   142 
Total interest and dividend income 21,389   18,355   41,650   36,838 
            
Interest expense:           
Deposits 1,184   2,529   2,492   5,587 
Federal Home Loan Bank advances 127   126   255   250 
Paycheck Protection Program Liquidity Facility -   -   -   2 
Subordinated debt -   282   -   563 
Obligation under capital lease agreements 23   30   49   55 
Total interest expense 1,334   2,967   2,796   6,457 
Net interest and dividend income before provision for loan losses 20,055   15,388   38,854   30,381 
Provision (credit) for loan losses (1,069)  365   (1,295)  742 
Net interest and dividend income after provision for loan losses 21,124   15,023   40,149   29,639 
            
Noninterest income:           
Fees for other services to customers 304   488   761   988 
Gain on sales of PPP loans -   4   86   1,114 
Gain on sales of residential loans held for sale -   19   -   102 
Net unrealized loss on equity securities (53)  (16)  (74)  (16)
Gain (loss) on real estate owned, other repossessed collateral and premises and equipment, net 73   (187)  (1)  (344)
Correspondent fee income 6,041   6,082   13,872   10,829 
Bank-owned life insurance income 106   106   212   212 
Other noninterest income 22   1   36   28 
Total noninterest income 6,493   6,497   14,892   12,913 
            
Noninterest expense:           
Salaries and employee benefits 7,406   5,971   14,968   12,322 
Occupancy and equipment expense 864   1,047   1,752   1,974 
Professional fees 394   443   915   806 
Data processing fees 1,099   1,066   2,174   2,090 
Marketing expense 158   120   350   161 
Loan acquisition and collection expense 211   824   2,459   1,513 
FDIC insurance expense 120   64   200   112 
Other noninterest expense 935   893   1,708   1,383 
Total noninterest expense 11,187   10,428   24,526   20,361 
Income before income tax expense 16,430   11,092   30,515   22,191 
Income tax expense 5,027   2,916   9,236   6,221 
Net income$11,403  $8,176  $21,279  $15,970 
            
Weighted-average shares outstanding:           
Basic 7,952,938   8,244,068   8,012,106   8,220,604 
Diluted 8,041,476   8,309,252   8,096,728   8,312,330 
            
Earnings per common share:           
Basic$1.43  $0.99  $2.66  $1.94 
Diluted 1.42   0.98   2.63   1.92 
                
Cash dividends declared per common share$0.01  $0.01  $0.02  $0.02 
                


 
NORTHEAST BANK
AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
 Three Months Ended December 31,
 2021 2020
   Interest Average   Interest Average
 Average Income/ Yield/ Average Income/ Yield/
 Balance Expense Rate Balance Expense Rate
Assets:                  
Interest-earning assets:                  
Investment securities$65,444  $76  0.46% $70,409  $193  1.09%
Loans (1) (2) (3) 1,133,421   21,195  7.42%  953,144   18,108  7.54%
Federal Home Loan Bank stock 1,222   6  1.95%  1,390   13  3.71%
Short-term investments (4) 319,639   112  0.14%  143,272   41  0.11%
Total interest-earning assets 1,519,726   21,389  5.58%  1,168,215   18,355  6.23%
Cash and due from banks 2,734         3,058      
Other non-interest earning assets 61,013         46,730      
Total assets$1,583,473        $1,218,003      
                   
Liabilities & Shareholders' Equity:                  
Interest-bearing liabilities:                  
NOW accounts$288,599  $192  0.26% $128,337  $113  0.35%
Money market accounts 264,731   197  0.30%  310,074   377  0.48%
Savings accounts 101,204   124  0.49%  37,301   12  0.13%
Time deposits 225,801   671  1.18%  388,669   2,027  2.07%
Total interest-bearing deposits 880,335   1,184  0.53%  864,381   2,529  1.16%
Federal Home Loan Bank advances 15,000   127  3.36%  15,000   126  3.33%
Subordinated debt -   -  0.00%  14,981   282  7.47%
Lease liability 5,446   23  1.68%  6,501   30  1.83%
Total interest-bearing liabilities 900,781   1,334  0.59%  900,863   2,967  1.31%
                   
Non-interest bearing liabilities:                  
Demand deposits and escrow accounts 427,550         123,413      
Other liabilities 14,072         17,193      
Total liabilities 1,342,403         1,041,469      
Shareholders' equity 241,070         176,534      
Total liabilities and shareholders' equity$1,583,473        $1,218,003      
                   
Net interest income    $20,055        $15,388   
                   
Interest rate spread        4.99%        4.92%
Net interest margin (5)        5.24%        5.23%
                   
Cost of funds (6)        0.40%        1.31%
                   
(1) Interest income and yield are stated on a fully tax-equivalent basis using the statutory tax rate.
(2) Includes loans held for sale.
(3) Nonaccrual loans are included in the computation of average, but unpaid interest has not been included for purposes of determining interest income.
(4) Short-term investments include FHLB overnight deposits and other interest-bearing deposits.
(5) Net interest margin is calculated as net interest income divided by total interest-earning assets.
(6) Cost of funds is calculated as total interest expense divided by total interest-bearing liabilities plus demand deposits and escrow accounts.
 


 

 
NORTHEAST BANK
AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
 Six Months Ended December 31,
 2021 2020
   Interest Average   Interest Average
 Average Income/ Yield/ Average Income/ Yield/
 Balance Expense Rate Balance Expense Rate
Assets:                 
Interest-earning assets:                 
Investment securities$65,994  $170  0.51% $71,275  $483  1.34%
Loans (1) (2) (3) 1,097,124   41,188  7.45%  955,339   36,213  7.52%
Federal Home Loan Bank stock 1,216   13  2.12%  1,390   46  6.56%
Short-term investments (4) 381,543   279  0.15%  156,440   96  0.12%
Total interest-earning assets 1,545,877   41,650  5.34%  1,184,444   36,838  6.17%
Cash and due from banks 2,774        2,992       
Other non-interest earning assets 55,409        42,792       
Total assets$1,604,060       $1,230,228       
                  
Liabilities & Shareholders' Equity:                 
Interest-bearing liabilities:                 
NOW accounts$279,316  $367  0.26% $125,991  $240  0.38%
Money market accounts 270,318   399  0.29%  311,173   912  0.58%
Savings accounts 86,432   193  0.44%  37,414   26  0.14%
Time deposits 242,887   1,533  1.25%  412,248   4,409  2.12%
Total interest-bearing deposits 878,953   2,492  0.56%  886,826   5,587  1.25%
Federal Home Loan Bank advances 15,000   255  3.37%  15,000   250  3.31%
PPPLF advances -   -  0.00%  879   2  0.45%
Subordinated debt -   -  0.00%  14,967   563  7.46%
Capital lease obligations 5,632   49  1.73%  5,404   55  2.02%
Total interest-bearing liabilities 899,585   2,796  0.62%  923,076   6,457  1.39%
                  
Non-interest bearing liabilities:                 
Demand deposits and escrow accounts 449,500        117,857       
Other liabilities 17,119        17,441       
Total liabilities 1,366,204        1,058,374       
Shareholders' equity 237,856        171,854       
Total liabilities and shareholders' equity$1,604,060       $1,230,228       
                  
Net interest income    $38,854       $30,381   
                  
Interest rate spread       4.72%        4.78%
Net interest margin (5)       4.99%        5.09%
                  
Cost of funds (6)       0.41%        1.23%
                  
(1) Interest income and yield are stated on a fully tax-equivalent basis using the statutory tax rate.
(2) Includes loans held for sale.
(3) Nonaccrual loans are included in the computation of average, but unpaid interest has not been included for purposes of determining interest income.
(4) Short-term investments include FHLB overnight deposits and other interest-bearing deposits.
(5) Net interest margin is calculated as net interest income divided by total interest-earning assets.
(6) Cost of funds is calculated as total interest expense divided by total interest-bearing liabilities plus demand deposits and escrow accounts.
 


 
NORTHEAST BANK
SELECTED FINANCIAL HIGHLIGHTS AND OTHER DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
 Three Months Ended
 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020


Net interest income
$20,055  $18,799  $18,102  $18,603  $15,388 
Provision (credit) for loan losses (1,069)  (226)  (1,926)  (211)  365 
Noninterest income 6,493   8,399   19,650   39,469   6,497 
Noninterest expense 11,187   13,338   9,427   9,636   10,428 
Net income 11,403   9,877   21,370   34,162   8,176 
          
Weighted-average common shares outstanding:         
Basic 7,952,938   8,132,131   8,318,689   8,344,797   8,244,068 
Diluted 8,041,476   8,212,836   8,397,897   8,421,247   8,309,252 
Earnings per common share:         
Basic$1.43  $1.21  $2.57  $4.09  $0.99 
Diluted 1.42   1.20   2.54   4.06   0.98 
          
Dividends declared per common share$0.01  $0.01  $0.01  $0.01  $0.01 
          
Return on average assets 2.86%  2.41%  4.55%  6.99%  2.66%
Return on average equity 18.77%  16.70%  37.97%  71.06%  18.37%
Net interest rate spread (1) 4.99%  4.46%  3.67%  3.79%  4.92%
Net interest margin (2) 5.24%  4.74%  3.99%  3.93%  5.23%
Net interest margin, excluding PPP (Non-GAAP) (3) 5.24%  4.75%  4.55%  4.64%  5.23%
Net interest margin, excluding PPP and collection account (Non-GAAP) (4) 6.44%  6.00%  5.56%  5.06%  5.23%
Efficiency ratio (non-GAAP) (5) 42.14%  49.04%  24.97%  16.59%  47.65%
Noninterest expense to average total assets 2.80%  3.26%  2.01%  1.97%  3.40%
Average interest-earning assets to average interest-bearing liabilities 168.71%  174.98%  173.30%  125.53%  129.68%
          
 As of:
 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020
Nonperforming loans:         
Originated portfolio:         
Residential real estate$611  $619  $696  $643  $6,676 
Commercial real estate 7,963   6,644   5,756   4,790   8,329 
Commercial and industrial 311   1,510   286   1,408   1,978 
Consumer 20   39   43   23   30 
Total originated portfolio 8,905   8,812   6,781   6,864   17,013 
Total purchased portfolio 12,294   12,527   11,977   16,059   13,497 
Total nonperforming loans 21,199   21,339   18,758   22,923   30,510 
Real estate owned and other repossessed collateral, net 53   821   1,639   2,885   2,866 
Total nonperforming assets$21,252  $22,160  $20,397  $25,808  $33,376 
          
Past due loans to total loans 1.23%  1.39%  1.08%  1.67%  2.31%
Nonperforming loans to total loans 1.79%  1.99%  1.80%  2.29%  3.05%
Nonperforming assets to total assets 1.46%  1.60%  0.94%  1.51%  2.70%
Allowance for loan losses to total loans 0.51%  0.67%  0.70%  0.88%  0.99%
Allowance for loan losses to nonperforming loans 28.49%  33.58%  38.99%  38.48%  32.53%
          
Commercial real estate loans to total capital (6) 260.40%  232.10%  215.38%  223.09%  251.00%
Net loans to core deposits (7) (10) 102.53%  98.96%  55.71%  76.99%  101.86%
Purchased loans to total loans, including held for sale 41.02%  40.22%  41.23%  43.22%  41.79%
Equity to total assets 16.39%  17.32%  10.69%  12.65%  14.74%
Common equity tier 1 capital ratio 20.27%  22.03%  22.16%  21.07%  17.93%
Total capital ratio 20.79%  22.69%  24.29%  23.39%  20.37%
Tier 1 leverage capital ratio 15.19%  14.83%  13.63%  14.32%  15.07%
          
Total shareholders' equity$239,237  $239,508  $232,391  $216,862  $181,962 
Less: Preferred stock -   -   -   -   - 
Common shareholders' equity 239,237   239,508   232,391   216,862   181,962 
Less: Intangible assets (8) (1,645)  (1,906)  (2,061)  (2,149)  (2,035)
Tangible common shareholders' equity (non-GAAP)$237,592  $237,602  $230,330  $214,713  $179,927 
          
Common shares outstanding 7,815,566   8,172,776   8,150,480   8,344,797   8,344,797 
Book value per common share$30.61  $29.31  $28.51  $25.99  $21.81 
Tangible book value per share (non-GAAP) (9) 30.40   29.07   28.26   25.73   21.56 
          
(1) The net interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.
(2) The net interest margin represents net interest income as a percent of average interest-earning assets for the period.
(3) Net interest margin excluding PPP removes the effects of the following: PPP loan interest income of $2 thousand, $11 thousand, $884 thousand, $2.6 million, and $81 thousand, PPPLF interest expense of $0, $0, $98 thousand, $300 thousand, and $2 thousand, and brokered CD interest expense of $0, $0, $0, $99 thousand, and $0, as well as PPP loan average balances of $628 thousand, $1.4 million, $172.8 million, $481.9 million, and $314 thousand, for the quarters ended December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021, and December 31, 2020, respectively.
(4) Net interest margin excluding PPP and collection account removes the PPP impact above and removes the effects of the cash held by the Bank from the correspondent’s collection account in short-term investments, which had an average balance of $287.7 million, $334.3 million, $405.9 million, and $121.7 million and earned $73 thousand, $84 thousand, $100 thousand, and $29 thousand in interest income for the quarters ended December 31, 2021, September 30, 2021, June 30, 2021, and March 31, 2021, respectively.
(5) The efficiency ratio represents noninterest expense divided by the sum of net interest income (before provision for loan losses) plus noninterest income.
(6) For purposes of calculating this ratio, commercial real estate includes all non-owner occupied commercial real estate loans defined as such by regulatory guidance, including all land development and construction loans.
(7) Core deposits include all non-maturity deposits and maturity deposits less than $250 thousand. Loans include loans held for sale.
(8) Includes the loan servicing rights asset.
(9) Tangible book value per share represents total shareholders' equity less the sum of preferred stock and intangible assets divided by common shares outstanding.
(10) Net loans and total loans, including loans held for sale, exclude PPP loans held for sale.
 

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


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