Profile: Northeast Bancorp (NBN.O)

NBN.O on Consolidated Issue listed on NASDAQ Global Market

30 Jun 2015
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Northeast Bancorp (Northeast), incorporated on March 20, 1987, is a bank holding company. The Company’s primary subsidiary is its wholly owned banking subsidiary, Northeast Bank (the Bank). The Bank is a state-chartered bank and a member of the Federal Reserve System. Northeast, through the Bank, and third party affiliations, provides a range of financial services to individuals and companies in western and south-central Maine and southeastern New Hampshire. The Company conducts its business from its office in Lewiston, Maine and an office in Boston, Massachusetts. The Company also conducts business from its ten full-service bank branches and six loan production offices located in western and south-central Maine and southern New Hampshire. As of June 30, 2014, the Company had total assets of $761.9 million, total deposits of $574.3 million, and shareholders' equity of $112.1 million. The Company gathers retail deposits through the Community Banking Division's 10 banking offices in Maine and through its online deposit program; ableBanking originates loans through its Community Banking Division, and purchases and originates commercial loans on a nationwide basis through the Loan Acquisition and Servicing Group (LASG).

Lending Activities

The Bank conducts its loan-related activities through two channels: the Community Banking Division and the LASG. The Community Banking Division originates loans directly to consumers and businesses located in its market area. The LASG purchases performing commercial real estate loans, on a nationwide basis, at a discount from their outstanding principal balances, producing yields higher than those normally achieved on the Company's originated loan portfolio. The LASG also originates commercial real estate and commercial business loans on a nationwide basis. As of June 30, 2014, of its total loan portfolio of $516.4 million, $235.4 million, or 45.6%, was originated by the Community Banking Division and $281.0 million, or 54.4%, was purchased or originated by the LASG. It originates residential mortgage loans secured by one- to four-family properties throughout Maine, and southern New Hampshire. It also offers home equity loans and home equity lines of credit, which are secured by first or second mortgages on one- to four-family owner-occupied properties and which are held on its balance sheet. As of June 30, 2014, portfolio residential loans totaled $144.6 million, or 28.0% of total loans.

The Bank originates multi-family and other commercial real estate loans secured by property located in the Community Banking Division's market area. As of June 30, 2014, commercial real estate loans outstanding were $70.7 million, or 13.7% of total loans. It originates commercial business loans, including term loans, lines of credit and equipment and receivables financing to businesses located in the Community Banking Division's market area. As of June 30, 2013, commercial business loans were $10.1 million, or 2.0% of total loans. As of June 30, 2014, there were 140 commercial business loans with an average principal balance of $73 thousand. It originates, on a direct basis, automobile, boat and recreational vehicle loans. As of June 30, 2014, consumer loans were $9.9 million, or 1.9% of total loans. It originates residential construction loans to finance the construction of single-family, owner-occupied homes. As of June 30, 2014, construction loans were $31 thousand. The LASG purchases and originates commercial loans secured by income-producing collateral, and on a nationwide basis. Of the loans originated or purchased by the LASG that were outstanding as of June 30, 2014, $245.4 million, or 87.3%, consisted of commercial real estate loans. As of June 30, 2014, purchased loans had an unpaid principal balance of $242.6 million and a book value of $203.5 million, representing discount across the portfolio of 16.2%.

Investment Activities

The Bank’s securities portfolio and short-term investments provide and maintain liquidity, assist in managing the interest rate sensitivity of its balance sheet, and serve as collateral for certain of its obligations. At June 30, 2014, the Company's investment portfolio was comprised entirely of U.S. Government-sponsored enterprise bonds and mortgage-backed securities guaranteed by government agencies. The available-for-sale securities portfolio totaled $113.9 million at June 30, 2014. Mortgage-backed securities and United States Government-sponsored enterprise bonds totaling $33.1 million were pledged for outstanding borrowings at June 30, 2014. There were no sales of available-for-sale securities in fiscal 2014.

Sources of Funds

The Company’s principal source of funding is its deposit accounts. In addition to deposits, the Bank obtains funds from the amortization and prepayment of loans and mortgage-backed securities, the sale, call or maturity of investment securities, advances from the Federal Home Loan Bank of Boston (FHLB), other term borrowings and cash flows generated by operations. It offers a line of deposit products to customers in western and south-central Maine through its ten-branch network. Its deposit products consist of demand deposit, NOW, money market, savings and certificate of deposit accounts. It offers telephone banking, online banking and bill payment, mobile banking and remote deposit capture services. As of June 30, 2014, it had core deposits of $572.0 million, representing 99.6% of total deposits, which the Company defines core deposits as non-maturity deposits and non-brokered insured time deposits.

The Bank’s online deposit program, ableBanking, provides an additional channel through which to obtain core deposits. ableBanking is a division of Northeast Bank, had $63.2 million in money market and time deposits as of June 30, 2014. As of June 30, 2014, listing service deposits totaled $148.9 million, bearing a weighted average term of 3.57 years. As of June 30, 2014, it had $25.4 million of borrowing capacity available immediately and an additional $62.6 million available based on collateral pledged but subject to the purchase of additional FHLB stock, and lastly an additional $213.8 million of availability, subject to both the purchase of additional FHLB stock and the availability of additional collateral. Northeast Bank can also borrow from the Federal Reserve Bank of Boston, with any such borrowing collateralized by consumer loans pledged to the Federal Reserve.

Subsidiary Activity

As of June 30, 2014, the Bank has four wholly owned non-bank subsidiaries: Northeast Bank Insurance Group, Inc. (NBIG), 200 Elm Realty, LLC, 500 Pine Realty, LLC and 17 Dogwood Realty, LLC. NBIG holds the real estate formerly used in its insurance agency business. 200 Elm Realty, LLC was established to hold commercial real estate acquired as a result of loan workouts. 500 Pine Realty, LLC, was established to hold residential real estate acquired as a result of loan workouts. 17 Dogwood Realty, LLC, was established to hold commercial real estate acquired as a result of loan workouts. The Company's wholly owned subsidiary, ASI Data Services, Inc. (ASI), is an inactive corporate subsidiary.

Company Address

Northeast Bancorp

500 Canal St
LEWISTON   ME   04240-6594
P: +1207.7863245

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