Northeast Bank Reports First Quarter Results and Declares Dividend
PORTLAND, Maine, Oct. 29, 2024 (GLOBE NEWSWIRE) -- Northeast Bank (the "Bank") (NASDAQ:NBN), a Maine-based full-service bank, today reported net income of $17.1 million, or $2.11 per diluted common share, for the quarter ended September 30, 2024, compared to net income of $15.2 million, or $2.01 per diluted common share, for the quarter ended September 30, 2023.
The Board of Directors declared a cash dividend of $0.01 per share, payable on November 26, 2024, to shareholders of record as of November 12, 2024.
"With $859.8 million of loan generation from our National Lending Division, we had our second largest quarterly loan volume in the Bank's history, consisting of $732.9 million of purchases and $126.9 million of originations," said Rick Wayne, Chief Executive Officer. "Our National Lending Division portfolio grew by $742.2 million, or 27.6%, over June 30, 2024. Our small balance SBA 7(a) program with Newity LLC as our loan service provider has gained real traction. For the quarter, we originated $82.4 million, compared to $40.2 million for the quarter ended June 30, 2024 and $9.7 million for the quarter ended September 30, 2023. During the current quarter we sold $63.1 million of the guaranteed portion of our SBA loans, compared with $26.8 million for the quarter ended June 30, 2024 and $5.3 million for the quarter ended September 30, 2023. We are reporting earnings of $2.11 per diluted common share, a return on average equity of 17.5%, and a return on average assets of 2.1%."
As of September 30, 2024, total assets were $3.94 billion, an increase of $807.7 million, or 25.8%, from total assets of $3.13 billion as of June 30, 2024.
1. The following table highlights the changes in the loan portfolio, including loans held for sale, for the three months ended September 30, 2024:
Loan Portfolio Changes
September 30, 2024 Balance
June 30, 2024 Balance
Change ($)
Change (%)
(Dollars in thousands)
National Lending Purchased
$
2,420,883
$
1,708,551
$
712,332
41.69
%
National Lending Originated
1,011,374
981,497
29,877
3.04
%
SBA National
66,919
48,405
18,514
38.25
%
Community Banking
21,426
22,704
(1,278
)
(5.63
%)
Total
$
3,520,602
$
2,761,157
$
759,445
27.50
%
Loans generated by the Bank's National Lending Division for the quarter ended September 30, 2024 totaled $859.8 million, which consisted of $732.9 million of purchased loans at an average price of 90.7% of unpaid principal balance, and $126.9 million of originated loans.
An overview of the Bank's National Lending Division portfolio follows:
National Lending Portfolio
Three Months Ended September 30,
2024
2023
Purchased
Originated
Total
Purchased
Originated
Total
(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance
$
807,733
$
126,893
$
934,626
$
63,695
$
68,042
$
131,737
Initial net investment basis (1)
732,893
126,893
859,786
52,346
68,042
120,388
Loan returns during the period:
Yield
8.83
%
9.31
%
9.00
%
8.99
%
10.03
%
9.40
%
Total Return on Purchased Loans (2)
8.84
%
N/A
8.84
%
9.04
%
N/A
9.04
%
Total loans as of period end:
Unpaid principal balance
$
2,644,390
$
1,011,374
$
3,655,764
$
1,693,627
$
958,232
$
2,651,859
Net investment basis
2,420,883
1,011,374
3,432,257
1,516,379
958,232
2,474,611
(1) Initial net investment basis on purchased loans is the initial amortized cost basis net of initial allowance for credit losses (credit mark).(2) The total return on purchased loans represents scheduled accretion, accelerated accretion, gains (losses) on real estate owned, release of allowance for credit losses on purchased loans, and other noninterest income recorded during the period divided by the average invested balance 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 increased by $785.5 million, or 33.6%, from June 30, 2024. The increase was primarily attributable to increases in time deposits of $785.4 million, or 60.1%. The significant drivers in the change in time deposits were the increase in brokered time deposits, which increased by $712.6 million, and Community Banking Division time deposits, which increased by $52.9 million compared to June 30, 2024.
3. Federal Home Loan Bank ("FHLB") advances decreased by $6.1 million, or 1.8%, from June 30, 2024. The decrease was attributable to net paydowns on amortizing advances.
4. Shareholders' equity increased by $15.9 million, or 4.2%, from June 30, 2024, primarily due to net income of $17.1 million and stock-based compensation of $1.8 million, partially offset by the cancelation of restricted stock to cover tax obligations on restricted stock vests, which had a $3.2 million impact on shareholders' equity.
Net income increased by $1.9 million to $17.1 million for the quarter ended September 30, 2024, compared to net income of $15.2 million for the quarter ended September 30, 2023.
1. Net interest and dividend income before provision for credit losses increased by $1.9 million to $39.0 million for the quarter ended September 30, 2024, compared to $37.1 million for the quarter ended September 30, 2023. The increase was primarily due to the following:
An increase in interest income earned on loans of $6.2 million, primarily due to higher average balances in the National Lending Division purchased and Small Business Administration ("SBA") portfolios and higher rates earned on the SBA portfolio;
An increase in interest income earned on short-term investments of $821 thousand, due to higher average balances and higher rates earned; and
A decrease in FHLB borrowings interest expense of $2.1 million, primarily due to lower average balances; partially offset by,
An increase in deposit interest expense of $7.3 million, primarily due to higher average balances as well as higher rates in interest-bearing deposits.
The following table summarizes interest income and related yields recognized on the loan portfolios:
Interest Income and Yield on Loans
Three Months Ended September 30,
2024
2023
Average
Interest
Average
Interest
Balance (1)
Income
Yield
Balance (1)
Income
Yield
(Dollars in thousands)
Community Banking
$
22,409
$
370
6.55
%
$
27,149
$
438
6.42
%
SBA National
59,745
2,419
16.06
%
26,257
786
11.91
%
National Lending:
Originated
997,397
23,408
9.31
%
960,629
24,219
10.03
%
Purchased
1,758,801
39,141
8.83
%
1,489,394
33,671
8.99
%
Total National Lending
2,756,198
62,549
9.00
%
2,450,023
57,890
9.40
%
Total
$
2,838,352
$
65,338
9.13
%
$
2,503,429
59,114
9.39
%
(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 September 30, 2023, transactional income decreased by $776 thousand for the quarter ended September 30, 2024, and regularly scheduled interest and accretion increased by $6.1 million primarily due to the increase in average balances. The total return on purchased loans for the quarter ended September 30, 2024 was 8.8%, a decrease from 9.0% for the quarter ended September 30, 2023. The following table details the total return on purchased loans:
Total Return on Purchased Loans
Three Months Ended September 30,
2024
2023
Income
Return (1)
Income
Return (1)
(Dollars in thousands)
Regularly scheduled interest and accretion
$
37,160
8.38
%
$
31,030
8.29
%
Transactional income:
Release of allowance for credit losses on purchased loans
64
0.01
%
180
0.05
%
Accelerated accretion and loan fees
1,981
0.45
%
2,641
0.70
%
Total transactional income
2,045
0.46
%
2,821
0.75
%
Total
$
39,205
8.84
%
$
33,851
9.04
%
(1) The total return on purchased loans represents scheduled accretion, accelerated accretion, and gains (losses) on real estate owned, and release of allowance for credit losses on purchased loans recorded during the period divided by the average invested balance 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 for credit losses increased by $232 thousand to $422 thousand for the quarter ended September 30, 2024, compared to $190 thousand in the quarter ended September 30, 2023. The increase was primarily related to the increase in originated loans during the quarter ended September 30, 2024.
3. Noninterest income increased by $3.3 million for the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, primarily due to an increase in gain on sale of SBA loans of $3.1 million, due to the sale of $63.1 million in SBA loans during the quarter ended September 30, 2024 as compared to the sale of $5.3 million during the quarter ended September 30, 2023.
4. Noninterest expense increased by $2.3 million for the quarter ended September 30, 2024 compared to the quarter ended September 30, 2023, primarily due to the following:
An increase in salaries and employee benefits expense of $1.5 million, primarily due to increases in regular and stock compensation expense; and
An increase in loan expense of $643 thousand primarily related to increased expenses in connection with the origination of SBA 7(a) loans.
5. Income tax expense increased by $754 thousand to $7.9 million, or an effective tax rate of 31.6%, for the quarter ended September 30, 2024, compared to $7.2 million, or an effective tax rate of 32.0%, for the quarter ended September 30, 2023. The decrease in effective tax rate is primarily due a $243 thousand increase in tax benefit on the vest of restricted stock and exercise of stock options during the quarter ended September 30, 2024 as compared to the quarter ended September 30, 2023.
As of September 30, 2024, nonperforming assets totaled $37.2 million, or 0.94% of total assets, compared to $28.3 million, or 0.90% of total assets, as of June 30, 2024. The increase is primarily related to four National Lending loans placed on non-accrual, which are individually evaluated in the allowance for credit losses and are well-collateralized.
As of September 30, 2024, past due loans totaled $31.3 million, or 0.89% of total loans, compared to past due loans totaling $26.3 million, or 0.95% of total loans, as of June 30, 2024.
As of September 30, 2024, the Bank's Tier 1 leverage capital ratio was 12.1%, compared to 12.3% at June 30, 2024, and the Total risk-based capital ratio was 12.7% at September 30, 2024, compared to 14.8% at June 30, 2024. The Total risk-based capital ratio decreased primarily due to the increase in risk-weighted assets from significant loan growth during the quarter ended September 30, 2024.
Investor Call InformationRick Wayne, Chief Executive Officer, Richard Cohen, Chief Financial Officer, and Pat Dignan, Chief Operating Officer of Northeast Bank, will host a conference call to discuss first quarter earnings and business outlook at 10:00 a.m. Eastern Time on Wednesday, October 30th. 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 BankNortheast 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 MeasuresIn 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 StatementsStatements 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, contingencies, 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 expressed or implied by such the forward-looking statements as a result of, among other factors, changes in employment levels, general business and economic conditions on a national basis and in the local markets in which the Bank operates; changes in customer behavior due to changing business and economic conditions (including inflation and concerns about liquidity) or legislative or regulatory initiatives; the possibility that future credits losses are higher than currently expected due to changes in economic assumptions, customer behavior or adverse economic developments; turbulence in the capital and debt markets; changes in interest rates and real estate values; competitive pressures from other financial institutions; changes in loan defaults and charge-off rates; changes in the value of securities and other assets, adequacy of credit loss reserves, or deposit levels necessitating increased borrowing to fund loans and investments; changing government regulation; operational risks including, but not limited to, cybersecurity, fraud, natural disasters, climate change 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.
NBN-F
NORTHEAST BANK
BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share data)
September 30, 2024
June 30, 2024
Assets
Cash and due from banks
$
768
$
2,711
Short-term investments
316,519
239,447
Total cash and cash equivalents
317,287
242,158
Available-for-sale debt securities, at fair value
36,836
48,978
Equity securities, at fair value
7,269
7,013
Total investment securities
44,105
55,991
SBA loans held for sale
17,639
14,506
Loans:
Commercial real estate
2,715,536
2,028,280
Commercial and industrial
681,118
618,846
Residential real estate
106,075
99,234
Consumer
234
291
Total loans
3,502,963
2,746,651
Less: Allowance for credit losses
43,640
26,709
Loans, net
3,459,323
2,719,942
Premises and equipment, net
26,452
27,144
Federal Home Loan Bank stock, at cost
15,499
15,751
Loan servicing rights, net
926
984
Bank-owned life insurance
18,954
18,830
Accrued interest receivable
17,294
15,163
Other assets
22,419
21,734
Total assets
$
3,939,898
$
3,132,203
Liabilities and Shareholders' Equity
Deposits:
Demand
$
149,669
$
146,727
Savings and interest checking
752,806
732,029
