Northeast Bank Reports Fourth Quarter and Fiscal Year Results and Declares Dividend

July 30, 2019 at 4:18 PM EDT

LEWISTON, Maine, July 30, 2019 (GLOBE NEWSWIRE) -- Northeast Bank (the “Bank”) (NASDAQ: NBN), a Maine-based full-service financial institution, today reported a net loss of $603 thousand, or ($0.07) per diluted common share, for the quarter ended June 30, 2019, compared to net income of $4.3 million, or $0.48 per diluted common share, for the quarter ended June 30, 2018. Net income for the year ended June 30, 2019 was $13.9 million, or $1.52 per diluted common share, compared to $16.2 million, or $1.77 per diluted common share, for the year ended June 30, 2018.

The current quarter and year-end results included $6.0 million and $6.4 million, respectively, of non-recurring expenses (after tax) related to the Bank’s recently completed corporate reorganization. Excluding these non-recurring expenses, the Bank recorded net operating earnings (non-GAAP) of $5.4 million, or $0.59 per diluted common share, for the quarter ended June 30, 2019 and $20.3 million, or $2.20 per diluted common share, for the year ended June 30, 2019. We refer to results excluding these non-recurring items as “net operating earnings.”

Reported net income, non-recurring expenses, and net operating earnings for the quarters and years ended June 30, 2019 and 2018, respectively, are set forth below:


	Reconciliation of Net Income (Loss) Available to Common Shareholders (GAAP) to Net Operating Earnings (non-GAAP)¹
	Three Months Ended June 30,					Year Ended June 30,
	2019			2018		2019		2018

	(Dollars in thousands, except share and per share data)
Net income (loss) (GAAP)	$	(603	)	$	4,344	$	13,884	$	16,166
Items excluded from net operating earnings, net of tax:
Write-off of fair value adjustment on trust preferred
securities		5,057			-		5,057		-
Termination of interest rate swaps and caps		793			-		793		-
Related legal and professional fees		162			-		523		-
Total after-tax items		6,012			-		6,373		-
Net operating earnings (non-GAAP)	$	5,409		$	4,344	$	20,257	$	16,166

Weighted average common shares outstanding -diluted		9,041,926			9,116,157		9,156,233		9,129,152

Reported diluted earnings (loss) per share (GAAP)	$	(0.07	)	$	0.48	$	1.52	$	1.77
Items excluded from net operating earnings²		0.66			-		0.68		-
Net operating earnings per share (non-GAAP) -diluted²	$	0.59		$	0.48	$	2.20	$	1.77

¹Management believes operating earnings, which exclude non-recurring items related to the corporate reorganization, provide a more meaningful representation of the Bank's performance. ²The calculation of net operating earnings per share (non-GAAP) -diluted includes dilutive shares of 171,054 and 166,466 for the three months and year ended June 30, 2019, since net operating earnings are in a net income position for the three months ended June 30, 2019.

The Board of Directors declared a cash dividend of $0.01 per share, payable on August 30, 2019, to shareholders of record as of August 16, 2019.

“The growing value of our streamlined business strategy is reflected in this year’s results, in which we achieved 19.1% growth in our LASG portfolio, and 11.8% growth in our total loan portfolio,” said Richard Wayne, Chief Executive Officer. “For the fourth quarter, our Loan Acquisition and Servicing Group originated $51.8 million of loans and purchased loans with a recorded investment of $47.1 million. Removing the effects of the corporate reorganization, which we consider to be non-recurring, our quarterly activity helped us achieve net operating earnings per share of $0.59, an operating return on average equity of 14.2%, an operating return on average assets of 1.8%, and an operating efficiency ratio of 55.2%.”

As of June 30, 2019, total assets were $1.2 billion, a decrease of $4.1 million, or 0.4%, from total assets of $1.2 billion as of June 30, 2018. The principal components of the changes in the balance sheet follow:

The following table highlights the changes in the loan portfolio for the three months and year ended June 30, 2019:


	June 30, 2019 Balance		March 31, 2019 Balance		Change ($)			Change (%)

	(Dollars in thousands)
LASG Purchased	$	326,640	$	320,326	$	6,314		1.97	%
LASG Originated		493,413		478,020		15,393		3.22	%
SBA		63,053		63,653		(600	)	(0.94	%)
Community Banking		91,954		99,654		(7,700	)	(7.73	%)
Total	$	975,060	$	961,653	$	13,407		1.39	%

	June 30, 2019 Balance		March 31, 2019 Balance		Change ($)			Change (%)

	(Dollars in thousands)
LASG Purchased	$	326,640	$	290,972	$	35,668		12.26	%
LASG Originated		493,413		397,363		96,050		24.17	%
SBA		63,053		60,156		2,897		4.82	%
Community Banking		91,954		123,311		(31,357	)	(25.43	%)
Total	$	975,060	$	871,802	$	103,258		11.84	%

Loans generated by the Bank's Loan Acquisition and Servicing Group ("LASG") for the quarter ended June 30, 2019 totaled $98.9 million, which consisted of $47.1 million of purchased loans, at an average price of 94.3% of unpaid principal balance, and $51.8 million of originated loans. The Bank's Small Business Administration ("SBA") Division closed $8.1 million of new loans during the quarter ended June 30, 2019, of which $7.7 million was funded. In addition, the Bank sold $6.6 million of the guaranteed portion of SBA loans in the secondary market, of which $1.2 million were originated in the current quarter and $5.4 million were originated in prior quarters. Residential loan production sold in the secondary market totaled $12.5 million for the quarter.

An overview of the Bank’s LASG portfolio follows:

	LASG Portfolio
	Three Months Ended June 30,
	2019									2018
	Purchased			Originated			Total LASG			Purchased			Originated			Total LASG

	(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance	$	49,948		$	51,830		$	101,778		$	56,233		$	66,588		$	122,821
Net investment basis		47,107			51,830			98,937			52,637			66,588			119,225

Loan returns during the period:
Yield		12.27	%		7.75	%		9.53	%		10.87	%		7.45	%		8.83	%
Total Return on Purchased Loans (1)		12.27	%		7.75	%		9.53	%		11.49	%		7.45	%		9.08	%



	Year Ended June 30,
	2019									2018
	Purchased			Originated			Total LASG			Purchased			Originated			Total LASG

	(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance	$	144,372		$	271,179		$	415,551		$	137,249		$	224,546		$	361,795
Net investment basis		135,848			271,179			407,027			124,111			224,546			348,657

Loan returns during the period:
Yield		10.38	%		7.67	%		8.80	%		11.35	%		6.80	%		8.66	%
Total Return on Purchased Loans (1)		10.57	%		7.67	%		8.88	%		11.73	%		6.80	%		8.82	%

Total loans as of period end:
Unpaid principal balance	$	360,472		$	493,413		$	853,885		$	326,855		$	397,363		$	724,218
Net investment basis		326,640			493,413			820,053			290,972			397,363			688,335

(1) The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on asset sales, gains on real estate owned and other noninterest income recorded during the period divided by the average invested balance, which includes purchased loans held for sale, 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.”

Short-term investments decreased by $99.1 million, or 64.5%, from June 30, 2018, primarily due to the payoff of trust preferred securities and the corporate reorganization, which allows the Bank to carry lower levels of excess cash due to the release of previous funding commitments made to the Board of Governors of the Federal Reserve System. The Bank reinvested the short-term investments into funding loan growth.
Deposits decreased by $12.6 million, or 1.3%, from June 30, 2018, attributable primarily to decreases in money market accounts of $150.1 million, or 35.7%, and savings and checking accounts of $8.6 million, or 7.8%, partially offset by an increase in time deposits of $149.5 million, or 42.5%.
Subordinated debt decreased by $9.1 million, or 38.1%, from June 30, 2018, primarily attributable to the redemption of trust preferred securities held by Northeast Bancorp immediately prior to the corporate reorganization.
Shareholders’ equity increased by $15.2 million, or 11.0%, from June 30, 2018, primarily due to net income of $13.9 million for the year, as well as $1.4 million of stock-based compensation for the year.

Net income decreased by $4.9 million to a $603 thousand net loss for the quarter ended June 30, 2019, compared to net income of $4.3 million for the quarter ended June 30, 2018. Net operating earnings increased by $1.1 million to $5.4 million for the quarter ended June 30, 2019, compared to net operating earnings of $4.3 million for the quarter ended June 30, 2018.

Net interest and dividend income before provision for loan losses increased by $2.9 million to $17.3 million for the quarter ended June 30, 2019, compared to $14.4 million for the quarter ended June 30, 2018. The increase was primarily due to higher transactional income in the purchased portfolio, and higher average balances and yields in the loan portfolio. These increases were partially offset by higher funding costs and higher average deposit balances.

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

	Interest Income and Yield on Loans
	Three Months Ended June 30,
	2019						2018
	Average		Interest				Average		Interest
	Balance (1)		Income		Yield		Balance (1)		Income		Yield

	(Dollars in thousands)
Community Banking	$	99,007	$	1,272	5.15	%	$	128,296	$	1,630	5.10	%
SBA		66,126		1,194	7.24	%		56,088		1,116	7.98	%
LASG:
Originated		482,213		9,317	7.75	%		381,783		7,088	7.45	%
Purchased		313,515		9,588	12.27	%		259,119		7,021	10.87	%
Total LASG		795,728		18,905	9.53	%		640,902		14,109	8.83	%
Total	$	960,861	$	21,371	8.92	%	$	825,286	$	16,855	8.19	%


	Year Ended June 30,
	2019						2018
	Average		Interest				Average		Interest
	Balance (1)		Income		Yield		Balance (1)		Income		Yield

	(Dollars in thousands)
Community Banking	$	107,685	$	5,590	5.19	%	$	139,239	$	6,871	4.93	%
SBA		70,016		5,285	7.55	%		53,030		3,888	7.33	%
LASG:
Originated		434,570		33,348	7.67	%		350,427		23,834	6.80	%
Purchased		312,213		32,404	10.38	%		242,652		27,553	11.35	%
Total LASG		746,783		65,752	8.80	%		593,079		51,387	8.66	%
Total	$	924,484	$	76,627	8.29	%	$	785,348	$	62,146	7.91	%

(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 June 30, 2018, transactional income for the quarter ended June 30, 2019 increased by $1.2 million, while regularly scheduled interest and accretion increased by $956 thousand due to the increase in average balances. The total return on purchased loans for the quarter ended June 30, 2019 was 12.3%. When compared to the year ended June 30, 2018, transactional income for the year ended June 30, 2019 decreased by $582 thousand, while regularly scheduled interest and accretion increased by $5.1 million due to the increase in average balances. Total return for the year ended June 30, 2019 was 10.6%. The following table details the total return on purchased loans:

	Total Return on Purchased Loans
	Three Months Ended June 30,
	2019				2018
	Income		Return (1)		Income		Return (1)

	(Dollars in thousands)
Regularly scheduled interest and accretion	$	5,999	7.67	%	$	5,043	7.81	%
Transactional income:
Gain on loan sales		-	0.00	%		402	0.62	%
Gain on sale of real estate owned		-	0.00	%		-	0.00	%
Other noninterest income		-	0.00	%		-	0.00	%
Accelerated accretion and loan fees		3,589	4.60	%		1,978	3.06	%
Total transactional income		3,589	4.60	%		2,380	3.68	%
Total	$	9,588	12.27	%	$	7,423	11.49	%

	Year Ended June 30,
	2019				2018
	Income		Return (1)		Income		Return (1)

	(Dollars in thousands)
Regularly scheduled interest and accretion	$	23,849	7.64	%	$	18,752	7.73	%
Transactional income:
Gain on loan sales		582	0.19	%		918	0.38	%
Gain on sale of real estate owned		-	0.00	%		-	0.00	%
Other noninterest income		-	0.00	%		-	0.00	%
Accelerated accretion and loan fees		8,555	2.74	%		8,801	3.62	%
Total transactional income		9,137	2.93	%		9,719	4.00	%
Total	$	32,986	10.57	%	$	28,471	11.73	%

(1) The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on asset sales, gains on real estate owned and other noninterest income recorded during the period divided by the average invested balance, which includes purchased loans held for sale, 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. Noninterest income decreased by $808 thousand for the quarter ended June 30, 2019, compared to the quarter ended June 30, 2018, principally due to the following:

A decrease in gain on sale of SBA loans of $806 thousand, due to lower volume of SBA loans sold in the quarter; and
A decrease in gain on sale of other loans of $402 thousand, due to no loans sold in the current quarter as compared to the sale of two LASG purchased loans in the quarter ended June 30, 2018; partially offset by,
An increase in fees for other services to customers of $143 thousand, due to higher commercial loan servicing fees; and
A decrease in loss recognized on real estate owned and other repossessed collateral of $98 thousand.

3. Noninterest expense increased by $9.0 million for the quarter ended June 30, 2019 compared to the quarter ended June 30, 2018, primarily due to the following:

An increase in pre-tax reorganization expense of $8.3 million, which included the write-off of the fair value mark on trust preferred securities of $7.1 million, the loss associated with the termination of related interest rate swaps and caps of $1.1 million and the related legal and other professional costs of $183 thousand;
An increase in salaries and employee benefits of $524 thousand, primarily due to an increase in incentive compensation; and
An increase in data processing fees of $403 thousand, primarily due to increased IT outsourcing costs; partially offset by,
A decrease in professional fees of $212 thousand, primarily due to a decrease in accounting and audit, legal, and other professional fees for the quarter, unrelated to the corporate reorganization; and
A decrease in occupancy and equipment of $208 thousand, primarily due to a decrease in equipment repairs and maintenance expense.

4. Income tax expense decreased by $2.0 million to $276 thousand, for the quarter ended June 30, 2019, compared to $2.3 million for the quarter ended June 30, 2018. The decrease in expense was primarily due to the following:

An income tax benefit of $2.3 million recorded in connection with the redemption of the trust preferred securities and the loss associated with the termination of related interest rate swaps and caps; offset by,
A decrease in excess tax benefits recognized in the current period of $110 thousand.

Excluding the effects of the corporate reorganization, the effective tax rate for the quarter ended June 30, 2019 was 32.5%, compared to the effective tax rate for the quarter ended June 30, 2018 of 34.5%. The decrease was related to the decrease in the statutory federal income tax rate for the year ended June 30, 2019 compared to the statutory federal income tax rate for the year ended June 30, 2018, offset by changes in state apportionment and permanent items.

As of June 30, 2019, nonperforming assets totaled $16.7 million, or 1.45% of total assets, as compared to $14.2 million, or 1.23% of total assets, as of June 30, 2018. The increase was primarily due to the addition of an originated relationship of $1.0 million, which was placed on nonaccrual during the quarter ended June 30, 2019.

As of June 30, 2019, past due loans totaled $14.6 million, or 1.50% of total loans, as compared to past due loans totaling $7.7 million, or 0.89% of total loans as of June 30, 2018. The increase was primarily due to four originated relationships totaling $4.4 million and four purchased loan relationships totaling $1.8 million that were past due as of June 30, 2019.

As of June 30, 2019, the Bank’s Tier 1 leverage capital ratio was 12.9%, compared to 13.9% at June 30, 2018, and the Total capital ratio was 18.0% at June 30, 2019, as compared to 18.6% at June 30, 2018. Capital ratios were affected by the capital used in the corporate reorganization to redeem the trust preferred debt and the termination of related interest rate swaps and caps , as well as the assumption of the subordinated debt from the Company to the Bank, offset by earnings for the year.

Investor Call Information
Richard Wayne, Chief Executive Officer of Northeast Bank, and Jean-Pierre Lapointe, Chief Financial Officer of Northeast Bank, will host a conference call to discuss fourth quarter earnings and business outlook at 10:00 a.m. Eastern Time on Wednesday, July 31^st. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 8699267. 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 Lewiston, Maine. We offer personal and business banking services to the Maine market via ten branches. Our Loan Acquisition and Servicing Group purchases and originates commercial loans on a nationwide basis and our SBA Division supports the needs of growing businesses nationally. 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 net operating earnings, operating earnings per share, operating return on average assets, operating return on average equity, operating efficiency ratio, operating noninterest expense to average total assets, 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. 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 interest rates and real estate values; competitive pressures from other financial institutions; the effects of weakness in general economic conditions on a national basis or in the local markets in which the Bank 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; changing government regulation; operational risks including, but not limited to, cybersecurity, fraud and natural disasters; 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 Securities and Exchange Commission by Northeast Bancorp prior to completion of the corporate reorganization and submitted to the Federal Deposit Insurance Corporation by the Bank after completion of the corporate reorganization. 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)
	June 30, 2019			June 30, 2018
Assets
Cash and due from banks	$	2,482		$	3,889
Short-term investments		54,425			153,513
Total cash and cash equivalents		56,907			157,402


Available-for-sale securities, at fair value		75,774			81,068
Equity securities, at fair value		6,938			6,619
Total investment securities		82,712			87,687

Residential real estate loans held for sale		3,179			3,405
SBA loans held for sale		731			3,750
Total loans held for sale		3,910			7,155


Loans
Commercial real estate		668,496			579,450
Commercial and industrial		232,839			188,852
Residential real estate		71,218			100,256
Consumer		2,507			3,244
Total loans		975,060			871,802
Less: Allowance for loan losses		5,702			4,807
Loans, net		969,358			866,995


Premises and equipment, net		5,582			6,591
Real estate owned and other repossessed collateral, net		1,957			2,233
Federal Home Loan Bank stock, at cost		1,258			1,652
Intangible assets, net		434			867
Loan servicing rights, net		2,851			2,970
Bank-owned life insurance		17,057			16,620
Other assets		11,832			7,564
Total assets	$	1,153,858		$	1,157,736

Liabilities and Shareholders' Equity
Deposits
Demand	$	68,782		$	72,272
Savings and interest checking		101,061			109,637
Money market		270,835			420,886
Time		501,693			352,145
Total deposits		942,371			954,940

Federal Home Loan Bank advances		15,000			15,000
Subordinated debt		14,829			23,958
Capital lease obligation		323			605
Other liabilities		27,755			24,803
Total liabilities		1,000,278			1,019,306

Commitments and contingencies		-			-


Shareholders' equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares
issued and outstanding at June 30, 2019 and 2018		-			-
Voting common stock, $1.00 par value, 25,000,000 shares authorized;
8,997,326 and 8,056,527 shares issued and outstanding at
June 30, 2019 and 2018, respectively		8,997			8,057
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized;
44,783 and 882,314 shares issued and outstanding at June 30, 2019 and 2018, respectively		45			882
Additional paid-in capital		78,095			77,016
Retained earnings		67,581			54,236
Accumulated other comprehensive loss		(1,138	)		(1,761	)
Total shareholders' equity		153,580			138,430
Total liabilities and shareholders' equity	$	1,153,858		$	1,157,736


NORTHEAST BANK
STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except share and per share data)
	Three Months Ended June 30,						Year Ended June 30,
	2019			2018			2019			2018
Interest and dividend income:
Interest and fees on loans	$	21,371		$	16,855		$	76,627		$	62,146
Interest on available-for-sale securities		455			298			1,684			1,111
Other interest and dividend income		729			819			3,519			2,636
Total interest and dividend income		22,555			17,972			81,830			65,893


Interest expense:
Deposits		4,656			2,896			16,768			9,897
Federal Home Loan Bank advances		120			109			479			547
Subordinated debt		486			552			2,238			2,102
Obligation under capital lease agreements		5			7			24			38
Total interest expense		5,267			3,564			19,509			12,584

Net interest and dividend income before provision for loan losses		17,288			14,408			62,321			53,309
Provision for loan losses		262			254			1,309			1,410
Net interest and dividend income after provision for loan losses		17,026			14,154			61,012			51,899


Noninterest income:
Fees for other services to customers		529			386			1,769			1,822
Gain on sales of SBA loans		227			1,033			2,588			2,955
Gain on sales of residential loans held for sale		225			159			611			931
Gain on sales of other loans		-			402			582			918
Net unrealized gain on equity securities		76			-			151			-
Loss on real estate owned, other repossessed collateral and premises and equipment, net		(40			(138			(104			(123
and premises and equipment, net		(40	)		(138	)		(104	)		(123	)
Bank-owned life insurance income		110			109			437			441
Other noninterest income		24			8			82			84
Total noninterest income		1,151			1,959			6,116			7,028


Noninterest expense:
Salaries and employee benefits		6,333			5,809			23,323			21,565
Occupancy and equipment expense		958			1,166			3,650			4,585
Professional fees		246			458			1,402			1,749
Data processing fees		1,004			601			3,769			2,447
Marketing expense		166			143			580			472
Loan acquisition and collection expense		281			356			1,913			1,354
FDIC insurance premiums		77			80			320			317
Intangible asset amortization		108			108			433			433
Reorganization expense		8,334			-			8,695			-
Other noninterest expense		997			757			3,428			2,808
Total noninterest expense		18,504			9,478			47,513			35,730

Income (loss) before income tax expense		(327	)		6,635			19,615			23,197
Income tax expense		276			2,291			5,731			7,031
Net income (loss)	$	(603	)	$	4,344		$	13,884		$	16,166



Weighted-average common shares outstanding:
Basic		9,041,926			8,934,038			9,032,530			8,906,710
Diluted		9,041,926			9,116,157			9,156,233			9,129,152

Earnings (loss) per common share:

Basic	$	(0.07	)	$	0.49		$	1.54		$	1.81
Diluted		(0.07	)		0.48			1.52			1.77

Cash dividends declared per common share	$	0.01		$	0.01		$	0.04		$	0.04

NORTHEAST BANK
AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
	Three Months Ended June 30,
	2019						2018
			Interest		Average				Interest		Average
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate
Assets:
Interest-earning assets:
Investment securities	$	83,372	$	455	2.19	%	$	88,933	$	298	1.34	%
Loans (1) (2) (3)		960,861		21,371	8.92	%		825,286		16,855	8.19	%
Federal Home Loan Bank stock		1,258		20	6.38	%		1,655		24	5.82	%
Short-term investments (4)		119,788		709	2.37	%		178,244		795	1.79	%
Total interest-earning assets		1,165,279		22,555	7.76	%		1,094,118		17,972	6.59	%
Cash and due from banks		2,351						2,611
Other non-interest earning assets		32,864						30,430
Total assets	$	1,200,494					$	1,127,159

Liabilities & Shareholders' Equity:
Interest-bearing liabilities:
NOW accounts	$	70,645	$	63	0.36	%	$	73,357	$	59	0.32	%
Money market accounts		279,307		1,124	1.61	%		447,775		1,580	1.42	%
Savings accounts		35,697		14	0.16	%		37,799		14	0.15	%
Time deposits		537,155		3,455	2.58	%		309,362		1,243	1.61	%
Total interest-bearing deposits		922,804		4,656	2.02	%		868,293		2,896	1.34	%
Federal Home Loan Bank advances		15,000		120	3.21	%		15,000		109	2.91	%
Subordinated debt		19,272		486	10.11	%		23,915		552	9.26	%
Capital lease obligations		348		5	5.76	%		629		7	4.46	%
Total interest-bearing liabilities		957,424		5,267	2.21	%		907,837		3,564	1.57	%

Non-interest bearing liabilities:
Demand deposits and escrow accounts		80,538						76,368
Other liabilities		9,534						8,654
Total liabilities		1,047,496						992,859
Shareholders' equity		152,998						134,300
Total liabilities and shareholders' equity	$	1,200,494					$	1,127,159

Net interest income			$	17,288					$	14,408

Interest rate spread					5.55	%					5.02	%
Net interest margin (5)					5.95	%					5.28	%

(1) Interest income and yield are stated on a fully tax-equivalent basis using the statutory 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) Net interest margin is calculated as net interest income divided by total interest-earning assets.

NORTHEAST BANK
AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
	Year Ended June 30,
	2019						2018
			Interest		Average				Interest		Average
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate
Assets:
Interest-earning assets:
Investment securities	$	85,232	$	1,684	1.98	%	$	92,599	$	1,111	1.20	%
Loans (1) (2) (3)		924,484		76,627	8.29	%		785,348		62,156	7.91	%
Federal Home Loan Bank stock		1,475		95	6.44	%		1,803		89	4.94	%
Short-term investments (4)		153,609		3,424	2.23	%		171,360		2,547	1.49	%
Total interest-earning assets		1,164,800		81,830	7.03	%		1,051,110		65,903	6.27	%
Cash and due from banks		2,542						2,889
Other non-interest earning assets		30,968						31,550
Total assets	$	1,198,310					$	1,085,549

Liabilities & Shareholders' Equity:
Interest-bearing liabilities:
NOW accounts	$	70,822	$	246	0.35	%	$	70,486	$	210	0.30	%
Money market accounts		344,631		5,383	1.56	%		407,680		5,145	1.26	%
Savings accounts		35,619		56	0.16	%		37,514		57	0.15	%
Time deposits		471,777		11,083	2.35	%		311,544		4,485	1.44	%
Total interest-bearing deposits		922,849		16,768	1.82	%		827,224		9,897	1.20	%
Federal Home Loan Bank advances		15,000		479	3.19	%		16,947		547	3.23	%
Subordinated debt		22,885		2,238	9.78	%		23,787		2,102	8.84	%
Capital lease obligations		455		24	5.27	%		730		38	5.21	%
Total interest-bearing liabilities		961,189		19,509	2.03	%		868,688		12,584	1.45	%

Non-interest bearing liabilities:
Demand deposits and escrow accounts		80,848						79,767
Other liabilities		8,814						7,472
Total liabilities		1,050,851						955,927
Shareholders' equity		147,459						129,622
Total liabilities and shareholders' equity	$	1,198,310					$	1,085,549

Net interest income (5)			$	62,321					$	53,319

Interest rate spread					5.00	%					4.82	%
Net interest margin (6)					5.35	%					5.07	%

(1) Interest income and yield are stated on a fully tax-equivalent basis using the statutory 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) Includes tax-exempt interest income of $10 thousand for the year ended June 30, 2018.
(6) Net interest margin is calculated as net interest income divided by total interest-earning assets.

NORTHEAST BANK
SELECTED FINANCIAL HIGHLIGHTS AND OTHER DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
	Three Months Ended:
	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
	$	17,288		$	15,033		$	15,643		$	14,359		$	14,408
Net interest income	$	17,288		$	15,033		$	15,643		$	14,359		$	14,408
Provision for loan losses		262			414			101			532			254
Noninterest income		1,151			1,866			1,545			1,554			1,959
Noninterest expense		18,504			9,752			9,903			9,355			9,478
Net income (loss)		(603	)		4,828			5,125			4,534			4,344

Weighted-average common shares outstanding:
Basic		9,041,926			9,044,230			9,048,397			8,995,925			8,934,038
Diluted		9,041,926			9,198,077			9,201,557			9,183,729			9,116,157
Earnings (loss) per common share:
Basic	$	(0.07	)	$	0.53		$	0.57		$	0.50		$	0.49
Diluted		(0.07	)		0.52			0.56			0.49			0.48

Operating earnings per common share:
Basic	$	0.60		$	0.53		$	0.57		$	0.50		$	0.49
Diluted		0.59			0.52			0.56			0.49			0.48

Dividends declared per common share		0.01			0.01			0.01			0.01			0.01

Return (loss) on average assets		(0.20	%)		1.63	%		1.70	%		1.51	%		1.55	%
Return (loss) on average equity		(1.58	%)		13.00	%		13.94	%		12.81	%		12.97	%
Net interest rate spread (1)		5.55	%		4.81	%		5.00	%		4.61	%		5.02	%
Net interest margin (2)		5.95	%		5.20	%		5.33	%		4.93	%		5.28	%
Efficiency ratio (non-GAAP) (3)		100.35	%		57.71	%		57.62	%		58.79	%		57.91	%
Noninterest expense to average total assets		6.18	%		3.29	%		3.28	%		3.12	%		3.37	%
Average interest-earning assets to average		121.71	%		121.65	%		120.67	%		120.72	%		120.52	%
interest-bearing liabilities		121.71	%		121.65	%		120.67	%		120.72	%		120.52	%

Operating return on average assets (non-GAAP) (4)		1.81	%		1.63	%		1.70	%		1.51	%		1.55	%
Operating return on average equity (non-GAAP) (4)		14.18	%		13.00	%		13.94	%		12.81	%		12.97	%
Operating efficiency ratio (non-GAAP) (3) (4)		55.15	%		57.71	%		57.62	%		58.79	%		57.91	%
Operating noninterest expense to average total assets (non-GAAP) (4)		3.40	%		3.29	%		3.28	%		3.12	%		3.37	%

	As of:
	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
Nonperforming loans:
Originated portfolio:
Residential real estate	$	2,772		$	2,317		$	2,595		$	2,784		$	3,212
Commercial real estate		3,892			3,336			2,764			1,703			1,499
Commercial and industrial		1,284			1,495			1,420			1,454			1,368
Consumer		148			236			216			185			134
Total originated portfolio		8,096			7,384			6,995			6,126			6,213
Total purchased portfolio		6,671			5,366			5,351			5,375			5,745
Total nonperforming loans		14,767			12,750			12,346			11,501			11,958
Real estate owned and other repossessed collateral, net		1,957			2,014			1,463			1,549			2,233
Total nonperforming assets	$	16,724		$	14,764		$	13,809		$	13,050		$	14,191

Past due loans to total loans		1.50	%		2.16	%		1.95	%		1.09	%		0.89	%
Nonperforming loans to total loans		1.51	%		1.33	%		1.32	%		1.30	%		1.37	%
Nonperforming assets to total assets		1.45	%		1.20	%		1.16	%		1.08	%		1.23	%
Allowance for loan losses to total loans		0.58	%		0.59	%		0.57	%		0.60	%		0.55	%
Allowance for loan losses to nonperforming loans		38.61	%		44.38	%		42.99	%		45.98	%		40.20	%

Commercial real estate loans to total capital (5)		282.05	%		251.02	%		242.38	%		230.48	%		200.74	%
Net loans to core deposits (6)		103.33	%		94.19	%		94.84	%		87.17	%		91.54	%
Purchased loans to total loans, including held for sale		33.37	%		33.27	%		35.17	%		33.75	%		33.10	%
Equity to total assets		13.31	%		12.44	%		12.44	%		11.81	%		11.96	%
Common equity tier 1 capital ratio		15.89	%		16.23	%		16.04	%		16.50	%		16.02	%
Total capital ratio		18.01	%		19.33	%		19.15	%		19.81	%		19.28	%
Tier 1 leverage capital ratio		12.86	%		13.58	%		13.20	%		12.83	%		13.12	%

Total shareholders' equity	$	153,580		$	153,188		$	148,491		$	143,391		$	138,430
Less: Preferred stock		-			-			-			-			-
Common shareholders' equity		153,580			153,188			148,491			143,391			138,430
Less: Intangible assets (7)		(3,285	)		(3,485	)		(3,583	)		(3,768	)		(3,837	)
Tangible common shareholders' equity (non-GAAP)	$	150,295		$	149,703		$	144,908		$	139,623		$	134,593

Common shares outstanding		9,042,109			9,041,868			9,048,863			9,047,390			8,938,841
Book value per common share	$	16.98		$	16.94		$	16.41		$	15.85		$	15.49
Tangible book value per share (non-GAAP) (8)		16.62			16.56			16.01			15.43			15.06

(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 noninterest expense divided by the sum of net interest income (before the loan loss provision) plus noninterest income.
(4) Operating return on average assets, operating return on average equity, operating efficiency ratio, and operating noninterest expense to average total assets utilize net operating earnings (non-GAAP), calculated on page 1 of the earnings release.
(5) For purposes of calculating this ratio, commercial real estate includes all non-owner occupied commercial real estate loans defined as such by regulatory guidance, including all land development and construction loans.
(6) Core deposits include all non-maturity deposits and maturity deposits less than $250 thousand. Loans include loans held for sale.
(7) Includes the core deposit intangible asset and loan servicing rights asset.
(8) Tangible book value per share represents total shareholders' equity less the sum of preferred stock and intangible assets divided by common shares outstanding.

For More Information:
Jean-Pierre Lapointe, Chief Financial Officer
Northeast Bank, 500 Canal Street, Lewiston, ME 04240
207.786.3245 ext. 3220
www.northeastbank.com

Source: Northeast Bank

Press Release

Northeast Bank Reports Fourth Quarter and Fiscal Year Results and Declares Dividend