LEWISTON, Maine--(BUSINESS WIRE)-- Northeast Bancorp ("Northeast" or the "Company") (NASDAQ: NBN), a Maine-based full-service financial services company and parent of Northeast Bank (the "Bank"), today reported net income of $1.0 million, or $0.14 per diluted common share, for the quarter ended June 30, 2012 and net income of $2.2 million, or $0.41 per diluted common share, for the fiscal year ended June 30, 2012.

During the quarter ended June 30, 2012, the Company raised $52.7 million through the sale of 6,875,917 shares of common stock. Earnings per share for the quarter and fiscal year reflect weighted average shares issued and outstanding of 6,605,465 and 4,277,777, respectively. At quarter end, the Company had 10,383,441 shares of common stock issued and outstanding.

The Board of Directors has declared a cash dividend of $0.09 per share, payable on August 27, 2012 to shareholders of record as of August 13, 2012.

Rick Wayne, Chief Executive Officer stated, "We are pleased with the results of the fourth quarter, which reflect the potential of the investment made in our Loan Acquisition and Servicing Group. During the fourth quarter, we purchased loans totaling $41.9 million and generated returns, including transactional income from unscheduled loan payoffs and loan sales, of 24.1%. Our residential lending division also had a strong quarter, producing a 73% increase in net gains realized on secondary market sales." Mr. Wayne continued, "With the additional $52.7 million in capital that we raised in the fourth fiscal quarter of 2012, we are positioned for further growth."

Results for the three and twelve months ended June 30, 2012 include net income from discontinued operations of $10 thousand and $1.1 million, respectively. As announced in the first quarter of fiscal year 2012, the assets of Northeast's insurance agency division were acquired by local agencies in two separate transactions. The sale yielded a pre-tax gain of $1.6 million and increased the Company's tangible capital by $8.4 million.

During the year ended June 30, 2012, the Company purchased commercial loans totaling $107.1 million, and grew the purchased loan portfolio on a net basis by $83.8 million. The total return realized on this portfolio, including transactional income, was 24.1% for the quarter and 18.6% for the fiscal year ended June 30, 2012. Transactional income includes accelerated discount accretion and fees realized on loan payoffs and gains on sales of purchased loans, and may vary significantly from quarter to quarter.

Quarterly results included the following items of significance:

1. The Company's net interest margin was 4.63% for the quarter ended June 30, 2012, compared to 3.44% for the prior quarter and 3.53% in the quarter ended June 30, 2011, an increase tied principally to the growth in the Company's purchased loan portfolio noted above. For the three months ended June 30, 2012, the yield on the purchased loan portfolio and the originated loan portfolio was 20.2% and 6.2%, respectively. The following table summarizes interest income and related yields recognized on the Company's purchased and originated loans.

The yield on purchased loans was increased by unscheduled loan payoffs during the period, which resulted in immediate recognition of the prepaid loans' discount in interest income. The Company also realized $649 thousand of gains related to sales of purchased loans during the quarter ended June 30, 2012. The following table details the "total return" on purchased loans, based on regularly scheduled interest and accretion, accelerated accretion, and other income recognized upon unscheduled loan payoffs or sales.

(1) The total return on purchased loans represents interest and noninterest income recorded during the period divided by the average purchased loan balance, on an annualized basis.

2. A net gain on the sale of residential mortgage loans in the secondary market of $701 thousand for the quarter ended June 30, 2012, an increase of $295 thousand, or 72.7%, compared to the quarter ended June 30, 2011.

3. Increased noninterest expenses of $762 thousand for the quarter ended June 30, 2012 compared to the quarter ended June 30, 2011, principally resulting from increased staffing and infrastructure costs necessary to execute the Company's loan purchasing strategy.

Total assets increased by $72.8 million, or 12.2%, to $669.2 million at June 30, 2012, compared to total assets of $596.4 million at June 30, 2011. The principal components of the change in the balance sheet were as follows:

1. A $44.3 million, or 52.8%, increase in cash and equivalents, principally the result of $52.7 million received through the sale of 6.9 million shares of the Company's common stock in May 2012. At quarter end, the Company continues to maintain a level of balance sheet liquidity that is intended, in part, for future purchases of commercial real estate loans.

2. Loan growth of $46.3 million, or 15.0%, principally due to net growth of $83.8 million in Company's purchased loan portfolio, offset in part by amortization and payoffs from the originated loan portfolio of $37.5 million. In the quarter ended June 30, 2012, purchased loans grew by $27.6 million, consisting of purchases totaling $41.9 million offset by payoffs and sales totaling $14.3 million.

3. An $8.6 million, or 65.8%, decrease in intangible assets, resulting primarily from the sale of insurance agency division assets.

4. A $21.1 million, or 5.3%, increase in deposits raised through Northeast's Community Banking division and its online affinity deposit platform, ableBanking. The ableBanking pilot, which was launched in May 2012, had deposits totaling $2.8 million as of June 30, 2012, and $6.3 million as of July 30, 2012.

During the year ended June 30, 2012, nonperforming assets decreased by $950 thousand to $6.9 million or 1.0% of total assets, from $7.9 million, or 1.3%, of total assets at June 30, 2011, and loans past due 30 days or more as a percentage of total loans decreased to 2.0% at June 30, 2012 from 2.4% at June 30, 2011.

At June 30, 2012, the Company's Tier 1 leverage ratio was 19.9%, an increase from 10.4% at June 30, 2011 and the total risk-based capital ratio was 33.4%, an increase from 19.0% at June 30, 2011.

About Northeast Bancorp

Northeast Bancorp (NASDAQ: NBN) is the holding company for Northeast Bank, a full service bank headquartered in Lewiston, Maine. Northeast Bank derives its income from a combination of traditional banking services as well as from its Loan Acquisition and Servicing Group, which purchases performing commercial loans for the Bank's portfolio. ableBanking, a division of Northeast Bank, offers savings products to consumers online, through affinity partnerships with non-profit organizations. Northeast Bank operates ten full-service branches, four investment centers and three loan production offices that serve individuals and businesses located in western and south-central Maine and southern New Hampshire. Information regarding Northeast Bank can be found on its website at www.northeastbank.com.

On December 29, 2010, FHB Formation LLC ("FHB") merged with and into Northeast, with Northeast as the surviving company. The Company applied the acquisition method of accounting, as described in Accounting Standards Codification 805, Business Combinations, to this transaction, which represents an acquisition by FHB of Northeast, with Northeast as the surviving company. As a result, the Company's financial statements from the periods prior to the transaction date are not directly comparable to the financial statements for periods subsequent to the transaction date. To make this distinction, the Company has labeled balances and results of operations prior to the transaction date as "Predecessor Company" and balances and results of operations for periods subsequent to the transaction date as "Successor Company." The lack of comparability arises from the assets and liabilities having new accounting bases as a result of recording them at their fair values as of the transaction date rather than at historical cost basis. To denote this lack of comparability, the Company has placed a heavy black line between the Successor Company and Predecessor Company columns in its consolidated financial statements and, where applicable, in this discussion.

Richard Wayne, Chief Executive Officer, and Claire Bean, Chief Financial Officer, of Northeast Bancorp, will host a conference call to discuss fourth quarter earnings at 11:00 a.m. Eastern Time on Wednesday, August 1, 2012. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 15850680. The call will be available via live webcast, which can be viewed by accessing the Company'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, an online replay will be available online for one year at www.northeastbank.com.

Non-GAAP Financial Measure

In addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures. Northeast'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.

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. Although Northeast 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 Company's control. The Company's actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, changes in interest rates and real estate values; competitive pressures from other financial institutions; the effects of a continuing deterioration in general economic conditions on a national basis or in the local markets in which the Company operates, including changes which adversely affect borrowers' ability to service and repay our loans; changes in loan defaults and charge-off rates; changes in the value of securities and other assets, adequacy of loan loss reserves, or deposit levels necessitating increased borrowing to fund loans and investments; increasing government regulation, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; changes in the rules of participation for the Troubled Asset Relief Program Capital Purchase Program promulgated by the U.S. Department of the Treasury under the Emergency Economic Stabilization Act of 2008, which may be changed unilaterally and restrictively by legislative or regulatory actions; establishment of a consumer financial protection bureau with broad authority to implement new consumer protection regulations; the risk that we may not be successful in the implementation of our business strategy; the risk that intangibles recorded in the Company'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 Company's Annual Report on Form 10-K and updated by the Company's Quarterly Reports on Form 10-Q and other filings submitted to the Securities and Exchange Commission. These statements speak only as of the date of this release and we do 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.

IMPORTANT NOTE: Securities and Advisory Services offered through Commonwealth Financial Network, Member FINRA, SIPC, and a Registered Investment Adviser. Securities are not FDIC insured, not bank obligations or otherwise bank guaranteed and may lose value. Northeast Financial is located at 202 Rte. 1, Suite 206, Falmouth, ME 04105.

NBN-F

(1) "Successor Company" means Northeast Bancorp and its subsidiary after the closing of the merger with FHB Formation LLC on December 29, 2010.

(2) "Predecessor Company" means Northeast Bancorp and its subsidiary prior to the closing of the merger with FHB Formation LLC on December 29, 2010.

(1) Interest income and yield are stated on a fully tax-equivalent basis using a 34% 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) Short term borrowings include securities sold under repurchase agreements and sweep accounts.

(6) The average balance of borrowings associated with discontinued operations has been excluded from interest expense, interest rate spread, and net interest margin.

(7) Net interest margin is calculated as net interest income divided by total interest-earning assets.

(1) "Successor Company" means Northeast Bancorp and its subsidiary after the closing of the merger with FHB Formation LLC on December 29, 2010.

(2) "Predecessor Company" means Northeast Bancorp and its subsidiary prior to the closing of the merger with FHB Formation LLC on December 29, 2010.

(3) Interest income and yield are stated on a fully tax-equivalent basis using a 34% tax rate.

(4) Includes loans held for sale.

(5) Nonaccrual loans are included in the computation of average, but unpaid interest has not been included for purposes of determining interest income.

(6) Short term investments include FHLB overnight deposits and other interest-bearing deposits.

(7) Short term borrowings include securities sold under repurchase agreements and sweep accounts.

(8) The average balance of borrowings associated with discontinued operations has been excluded from interest expense, interest rate spread, and net interest margin.

(9) Net interest margin is calculated as net interest income divided by total interest-earning assets.

(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) The efficiency ratio represents non-interest expense divided by the sum of net interest income (before the loan loss provision) plus non-interest income.

(4) For purposes of calculating this ratio, commercial real estate includes all those loans defined as such by regulatory guidance, including all land development and construction loans.

(5) Core deposits includes all non-maturity deposits and maturity deposits less than $250 thousand. Net loans includes loans held-for-sale.

(6) Tangible book value per share represents total stockholders' equity less the sum of preferred stock and intangible assets divided by common shares outstanding.

Northeast Bancorp
Claire S. Bean, 207-786-3245 ext. 6202
Chief Financial Officer & C.O.O.
www.northeastbank.com

Source: Northeast Bancorp

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