Northeast Bank · NASDAQ:NBN
Northeast Bank — Northeast Bancorp — Investor Presentation (May 2012)
35 slides from Northeast Bank's investor presentation, May 3, 2012
Slide 1: Investor Presentation: Common Stock Offering
Filed Pursuant to Rule 433 Registration No. 333-180215 Issuer Free Writing Prospectus dated May 3, 2012 Relating to Preliminary Prospectus dated May 3, 2012 Investor Presentation: Common Stock Offering NASDAQ: NBN May 2012
Slide 2: Disclaimer
DISCLAIMER SafeHarborRegardingForward-Looking Statements This presentation contains certain “forward-looking statements” about Northeast Bancorp (the “Company”) 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 ame
Slide 3: Offering Summary
Offering Summary Issuer: Northeast Bancorp (the “Company”) Ticker/Exchange: NBN / NASDAQ Global Market Offering: Follow-on Public Offering Type of Security: Primary and Secondary Shares of Voting and Non-Voting¹ Common Stock Primary Shares to be Issued by NBN: 4,760,000 Shares Secondary Shares to be
Slide 4: FHB Formation LLC Merger Into Northeast Bancorp
FHB Formation LLC Merger Into Northeast Bancorp FHB Formation LLC Merged Northeast Bancorp December 29, Established in 1872 in Maine Management team with an established track record in the loan acquisition business 2010 (Capital Crossing Bank) Seasoned community bank management team Former members o
Slide 5: Executive Summary
Executive Summary • In December 2010, an investment group acquired a majority stake in Northeast Bancorp and implemented a new business plan focused on purchasing commercial loans • New management team consists of seasoned professionals with an established track record of success and time together i
Slide 6: Experienced Management Team
Experienced Management Team • Co-founded Capital Crossing Bank in 1988 Richard Wayne • Served as President and Co-Chief Executive Officer of Capital Crossing Bank from 1991 until President & Chief Executive Officer sale in February 2007 • Capital Crossing Bank was a national leader in the purchase a
Slide 7: Experienced Management Team
Experienced Management Team Risk Management Loan Acquisition & Servicing Group Pender Lazenby Patrick Dignan David Ellingrud Chief Risk Officer Chief Credit Officer Managing Director • Former senior officer at FleetBoston, • Manages all underwriting and due diligence • Focuses on sourcing and underw
Slide 8: Committed Board of Directors
Committed Board of Directors • Chairman of the Company and Northeast John • Director of the Company and Northeast Robert Glauber, Bank since 2010 Bank since 2007 Chairman Orestis • Lecturer at Harvard University’s Kennedy • Owner of Schooner Estates Retirement School of Government Community as well
Slide 9: Significant Insider and Institutional Investment in the Company
Significant Insider and Institutional Investment in the Company Non-Voting Total Investors Voting Shares Voting (%) Shares Shares Total (%) All Directors and Executive Officers 322,636 9.74% 0 322,636 9.20% New Investors ¹ Arlon Capital Partners II LP 317,286 9.58% 0 317,286 9.04% Highfields Capital
Slide 10: Loan Acquisition & Servicing Group (LASG) Overview
Loan Acquisition & Servicing Group (“LASG”) Overview LASG Team Transaction Target Loan Sourcing Profile Team of credit analysts, real estate Variety of sellers: banks, insurance Performing commercial loans secured analysts, servicing specialists and legal companies, investment funds and by real esta
Slide 11: LASG Portfolio Screening Process
LASG Portfolio Screening Process Portfolio Portfolio Understand Price Seller Screening Loan Level Triage Stratification & Decision Point Screening Expectations Yield Analysis • Understand sale • Assess quality of • Identify pool- • Complete • Stratify portfolio • Determine dynamics information level
Slide 12: LASG Asset-Level Underwriting Process
LASG Asset-Level Underwriting Process Underwriting Components Pricing Factors Cash Flow Modeling Underwriting Package • Credit review • Note terms • Cash flow budget • All elements fully • Financial analysis • Performance status prepared for each asset documented in • Real estate valuation • Borrowe
Slide 13: LASG Purchased Loan Book Return Through Nine Months of FY'12
LASG Purchased Loan Book Return – Through Nine Months of FY’12 ¹ • Three components drive return: Regularly Scheduled Interest & Accretion 10.78% - Regularly scheduled interest and accretion - Gain on loan sales Gain on Loan Sales 0.99% - Accelerated accretion and fees recognized on loan payoffs Acc
Slide 14: LASG Summary Purchased Loan Portfolio Statistics
LASG- SummaryPurchasedLoanPortfolioStatistics¹ Investment Size Purchase Price • Average • Weighted average investment was purchase price of $766,000/loan 80.9% • Largest purchased • 3% of portfolio investment was acquired for less $5.5 million than 60% Collateral Type Collateral State • Diverse coll
Slide 15: LASG Purchased Loan Credit Quality
LASG –Purchased Loan Credit Quality Purchased Loan Book Delinquency¹ • Total investment amount of $56.9 million at March 31, 2012 • 2 loans totaling $1.0 million are more than 30 days delinquent • No loans more than 59 days delinquent • No nonperforming loans (1) Based on investment amount at March
Slide 16: Community Banking Division: Overview
Community Banking Division: Overview Locations • Ten branches, four investment centers and three mortgage loan production offices (LPOs) Maine located in south central and western Maine • Diverse loan mix with stable credit profile • Expanded residential mortgage group with broader geographic focus
Slide 17: Loan and Deposit Mix
Loan and Deposit Mix Total Loans Total Deposits $345.8 Million $403.7 Million Diversified Loan Portfolio Stable Core Deposit Base • 1.50% NPLs/loans • Core deposits¹of $396.4 million, or 98.2% of total • Largest originated loan $3.7 million and largest deposits purchased loan $5.5 million (invested
Slide 18: Funding
Funding • The purchase and origination of loans is 2011 Maine Deposit Universe ($ millions) funded 100% by core deposits¹ which totaled Total Maine Bank Deposits $30,694.1 $396 million at March 31, 2012 Portland, ME Bank Deposits $11,582.7 • 98.2% of total deposits Top 10 Banks in NBN's Market² Depo
Slide 19: Financial Data
Financial Data
Slide 20: Summary Overview
Summary Overview Financial Overview¹ Corporate Overview Total Assets $595.0 Bank Headquarters Lewiston, ME Total Loans $345.8 Corporate Offices Lewiston, ME Total Deposits $403.7 Boston, MA Total Common Equity $60.6 Charter / Primary Regulators State of Maine Tangible Book Value per Share ² $15.94 F
Slide 21: Balance Sheet Overview
Balance Sheet Overview Total Assets Total Loans $400 $650 Originated Purchased $623 $346 $350 $596 $310 $595 $600 $1 $57 $300 $382 $550 $250 $309 $289 $500 $200 06/30/2010 06/30/2011 03/31/12 06/30/2010 06/30/2011 03/31/12 Total Deposits Total Common Equity² $500 $70 $18.00 Core Deposits¹ Other Depo
Slide 22: Online Affinity Deposit Program: ableBanking Pilot
Online Affinity Deposit Program: ableBanking Pilot • Build a brand, attract customers and cost- effectively obtain core deposits • Onlineaffinity depositprogram- designed to allow customers to designate bank marketing funds to any 501(c)(3) charity • $25.00 when a new customer opens a savings or tim
Slide 23: Asset Quality Metrics
Asset Quality Metrics NPAs / Total Assets & NPLs / Total Loans Classified Loans³ 6.00% $25.0 5.35% 5.00% NPAs/Assets NPLs/Loans 4.64% $20.0 $17.2 4.00% 3.03% $15.0 3.00% 2.31% 5 2.33% 2.16% $10.1 $10.0 2.00% 1.63% 5 1.50% 1.32% $5.3 1.02% 1.00% $5.0 0.00% $0.0 6/30/10 6/30/11 3/31/12 Regional Nation
Slide 24: Profitability
Profitability • Substantial investments have been Yield on Loans¹ made in staffing, new software, and hardware 16.00% 14.21% 12.00% • Current infrastructure has significant capacity for growth 8.00% 6.71% 5.99% • The yield on purchased loans is 4.00% meaningfully above that for loans originated by t
Slide 25: Pro Forma Capital Ratios
Pro Forma Capital Ratios 35.00% 31.95% As of March 31, 2012 31.75% 30.62% 30.82% Pro Forma Capital Raise¹ 30.00% Pro Forma Capital Raise and TARP Redemption² 25.00% 19.28% 19.49% 20.00% 18.52% 17.94% 16.32% 16.39% 15.00% 11.85% 9.47% 10.00% 5.00% 0.00% 4 TCE / TA ³ Tier 1 Leverage Ratio Tier 1 RBC R
Slide 26: Valuation
Valuation Stock Price Since 2007 May 02, 2012 $25.00 NBN Price $10.19 $20.00 Current Price / TBV 63.9% $15.00 $10.19 $10.00 $5.00 $0.00 12/06 05/07 10/07 02/08 07/08 11/08 04/09 09/09 01/10 06/10 10/10 03/11 08/11 12/11 5/2/12 Price / Tangible Book Value Since 2007 225% NBN NBN Nationwide Peers¹ NBN
Slide 27: Well-Positioned for Performance
Well-Positioned for Performance • Proven ability to execute loan purchasing strategies • Strong position in bidding for performing commercial loans • Experienced management team and committed board of directors • Attractive valuation –opportunity to invest at key growth and profitability juncture 27
Slide 28: Appendix
Appendix
Slide 29: Summary of Recent Financials
Summary of Recent Financials Dollars in thousands Predecessor Successor 1 Company Company ² As of As of As of As of 6/30/2010 12/31/2010 6/30/2011 3/31/2012 Balance Sheet Purchased loans $0 $0 $1 $56,916 Total originated loans $382,309 $361,233 $309,912 $288,861 Total loans $382,309 $361,233 $309,91
Slide 30: Merger Requirements
Merger Requirements ¹ • Maintain a Tier 1 leverage ratio of at least 10%; • Maintain a total risk-based capital ratio of at least 15%; • Limit purchased loans to 40% of total loans; At March 31, 2012 purchased loans of $56.9 million represent 16.2% of total loans; • Fund 100% of loans with core depo
Slide 31: Financial Description of the Merger
Financial Description of the Merger On December 29, 2010, the merger of the Company and FHB Formation LLC was consummated. FHB was the entity through which a group of independent accredited investors purchased 937,933 shares of the Company’s outstanding common stock and 1,161,166 shares of newly-iss
Slide 32: Sale of Northeast Bank Insurance Group, Inc.
Sale of Northeast Bank Insurance Group, Inc. On August 31, 2011, the Company sold customer lists and certain fixed assets of its wholly-owned subsidiary, Northeast Bank Insurance Group, Inc. (“NBIG”) to local insurance agencies in two separate transactions. The Varney Agency, Inc. of Bangor, Maine p
Slide 33: Historical Balance Sheet
Historical Balance Sheet Dollars in thousands Predecessor Successor 2 1 Company Company As of As of As of As of 6/30/2010 12/31/2010 6/30/2011 3/31/2012 Assets Cash and cash equivalents $ 20,435 $ 72,182 $ 83,931 $ 64,880 Available-for-sale Securities, at fair value 164,188 153,521 148,962 136,730 L
Slide 34: Historical Income Statement
Historical Income Statement Dollars in thousands Predecessor Company2 Successor Company¹ 181 184 Nine Year Ended Days Ended Days Ended Months Ended 6/30/2010 12/28/2010 6/30/2011 3/31/2012 Interest and dividend income $ 31,262 $ 14,378 $ 13,304 $ 18,659 Interest expense 13,314 5,877 3,207 4,711 Net
Slide 35: Non-GAAP Reconciliation
Non-GAAP Reconciliation We calculate tangible common equity by excluding the balance of intangible assets from common stockholders’ equity. We calculate tangible book value per share by dividing tangible common equity by actual common shares outstanding, as compared to book value per common share, w