NBN - Northeast Bank Reports Third Quarter Results and Declares Dividend

PORTLAND, Maine, April 24, 2023 (GLOBE NEWSWIRE) -- Northeast Bank (the “Bank”) (NASDAQ: NBN), a Maine-based full-service bank, today reported net income of $12.5 million, or $1.69 per diluted common share, for the quarter ended March 31, 2023, compared to net income of $10.6 million, or $1.36 per diluted common share, for the quarter ended March 31, 2022. Net income for the nine months ended March 31, 2023 was $32.1 million, or $4.35 per diluted common share, compared to $31.9 million, or $3.98 per diluted common share, for the nine months ended March 31, 2022.

The Board of Directors declared a cash dividend of $0.01 per share, payable on May 19, 2023, to shareholders of record as of May 5, 2023.

“We reported strong results in our third fiscal quarter,” said Rick Wayne, Chief Executive Officer. “As a result of the historic loan growth during our second fiscal quarter, we increased the National Lending Division’s interest income by $29.1 million, or 140.2%, compared to the quarter ended March 31, 2022 and by $13.8 million, or 38.3%, compared with the quarter ended December 31, 2022. We successfully integrated $998.5 million in loans purchased during the second fiscal quarter into our existing loan portfolio and maintained careful underwriting standards. Utilizing our at-the-market stock offering plan, we issued 160 thousand shares of common stock during the quarter at a weighted average net proceeds per share of $42.78.” Mr. Wayne continued, “As a result of this activity, we are reporting earnings of $1.69 per diluted common share, a return on average equity of 18.5%, and a return on average assets of 1.8% for the quarter.”

As of March 31, 2023, total assets were $2.87 billion, an increase of $1.28 billion, or 81.1%, from total assets of $1.58 billion as of June 30, 2022.

1.  The following table highlights the changes in the loan portfolio for the three and nine months ended March 31, 2023:

Loans generated by the Bank's National Lending Division for the quarter ended March 31, 2023 totaled $138.6 million, which consisted of $21.5 million of purchased loans, at an average price of 90.6% of unpaid principal balance, and $117.1 million of originated loans.

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

2.  Deposits increased by $841.2 million, or 65.3%, from June 30, 2022. The increase was attributable to increases in time deposits of $883.9 million, or 694.3%, and savings and interest checking deposits of $108.6 million, or 18.6%, partially offset by a decrease in demand deposits of $153.9 million, or 46.8%. The primary reason for the net increase in deposits was due to the increase in brokered time deposits, which increased to $744.1 million compared to none outstanding at June 30, 2022. The use of brokered time deposits is part of the Bank’s strategy to fund the loan purchases in the short-term. The decrease in demand deposits was primarily due to a $165.0 million decrease in the Paycheck Protection Program (“PPP”) Liquidity Facility (“PPPLF”) balance during the nine months ended March 31, 2023 as the balance of PPP loans purchased by ACAP that remain outstanding has decreased significantly during this period.

3.  Shareholders’ equity increased by $35.6 million, or 14.3%, from June 30, 2022, primarily due to net income of $32.1 million, the issuance of 194 thousand shares of voting common stock, adding $8.0 million to shareholders’ equity, and stock-based compensation of $2.6 million, partially offset by the repurchase of 136 thousand shares of voting common stock at a weighted average price per share of $37.99, which resulted in a $5.2 million decrease to shareholders’ equity.

Net income increased by $1.9 million to $12.5 million for the quarter ended March 31, 2023, compared to net income of $10.6 million for the quarter ended March 31, 2022.

1.  Net interest and dividend income before provision for loan losses increased by $11.2 million to $32.2 million for the quarter ended March 31, 2023, compared to $21.0 million for the quarter ended March 31, 2022. The increase was primarily due to the following:

• An increase in interest income earned on loans of $29.2 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 in both portfolios and higher rates earned on the originated portfolio, partially offset by lower rates earned on the purchased portfolio; and
• An increase in interest income earned on short-term investments of $1.8 million, primarily due to higher rates earned; partially offset by,
• An increase in deposit interest expense of $16.3 million, due to higher interest rates and higher average balances in interest-bearing deposits; and
• An increase in FHLB borrowings interest expense of $3.7 million, primarily due to higher average balances.
  

The following table summarizes interest income and related yields recognized on the loan portfolios:

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 March 31, 2022, transactional income increased by $583 thousand for the quarter ended March 31, 2023, and regularly scheduled interest and accretion increased by $17.1 million due to the increase in average balances. The total return on purchased loans for the quarter ended March 31, 2023 was 7.6%, a decrease from 8.3% for the quarter ended March 31, 2022. The following table details the total return on purchased loans:

2.  Noninterest income decreased by $4.2 million for the quarter ended March 31, 2023, compared to the quarter ended March 31, 2022, principally due to the following:

• A decrease in correspondent fee income of $4.6 million from the recognition of correspondent fees and net servicing income. Correspondent income for the quarters ended March 31, 2023 and 2022 is comprised of the following components:

The Bank has $317 thousand of unamortized correspondent fee and purchased accrued interest remaining at March 31, 2023. The decrease in correspondent fee income was partially offset by:

• A decrease in unrealized loss on equity securities of $338 thousand; and
• An increase in gain on sale of SBA loans of $228 thousand, due to the sale of $3.7 million in SBA loans during the quarter ended March 31, 2023.

3.  Noninterest expense increased by $2.4 million for the quarter ended March 31, 2023 compared to the quarter ended March 31, 2022, primarily due to the following:

• An increase in salaries and employee benefits expense of $1.2 million, primarily due to increases in regular employee compensation and stock compensation expense;
• An increase in professional fees of $411 thousand, primarily due to increased legal expense;
• An increase in deposit insurance expense of $345 thousand, primarily due to the increase in average assets and decrease in Tier 1 leverage ratio, which increased the Bank’s assessment rate; and
• An increase in data processing fees of $202 thousand, primarily due to increases in IT hardware and software expense, IT professional implementation expense, and IT outsourced processing expense.
  

4.  Income tax expense increased by $1.7 million to $6.4 million, or an effective tax rate of 33.8%, for the quarter ended March 31, 2023, compared to $4.7 million, or an effective tax rate of 30.6%, for the quarter ended March 31, 2022. The increase in income tax expense is due to the increase in pre-tax income. The increase in the effective tax rate from March 31, 2022 is primarily due to changes in state tax apportionment and changes to permanent tax differences.

As of March 31, 2023, nonperforming assets totaled $14.5 million, or 0.51% of total assets, compared to $12.9 million, or 0.82% of total assets, as of June 30, 2022. The increase was primarily due to six National Lending loans totaling $4.3 million that were placed on nonaccrual status, partially offset by two National Lending loans totaling $2.5 million that paid off during the nine months ended March 31, 2023.

As of March 31, 2023, past due loans totaled $17.5 million, or 0.70% of total loans, compared to past due loans totaling $7.0 million, or 0.53% of total loans, as of June 30, 2022. The increase was primarily due to 74 National Lending loans totaling $12.6 million that became past due, partially offset by the payoff of one National Lending purchased loan totaling $1.0 million during the nine months ended March 31, 2023.

As of March 31, 2023, the Bank’s Tier 1 leverage capital ratio was 10.1%, compared to 16.1% at June 30, 2022, and the Total capital ratio was 11.9% at March 31, 2023, compared to 19.5% at June 30, 2022. Capital ratios decreased from an increase in assets, primarily loans, partially offset by increased earnings.

Investor Call Information
Rick Wayne, Chief Executive Officer, Jean-Pierre Lapointe, Chief Financial Officer, and Pat Dignan, Executive Vice President and Chief Operating Officer, will host a conference call to discuss third quarter earnings and business outlook at 10:00 a.m. Eastern Time on Tuesday, April 25 ^th . To access the conference call by phone, please go to this link ( Phone Registration ), and you will be provided with dial in details. 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 seven 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, and efficiency ratio. 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 Federal Deposit Insurance Corporation (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, changes in 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 loans; changes in customer behavior due to political, business and economic conditions, including inflation and concerns about liquidity; 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 and 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; 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 FDIC. 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.

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