Northeast Bank Reports Second Quarter Results and Declares Dividend

January 27, 2020 at 4:17 PM EST

LEWISTON, Maine, Jan. 27, 2020 (GLOBE NEWSWIRE) -- Northeast Bank (the “Bank”) (NASDAQ: NBN), a Maine-based full-service bank, today reported net income of $4.9 million, or $0.53 per diluted common share, for the quarter ended December 31, 2019, compared to net income of $5.1 million, or $0.56 per diluted common share, for the quarter ended December 31, 2018. Net income for the six months ended December 31, 2019 was $9.6 million, or $1.05 per diluted common share, compared to $9.7 million, or $1.05 per diluted common share, for the six months ended December 31, 2018.

On January 24, 2020, the Board of Directors declared a cash dividend of $0.01 per share, payable on February 24, 2020, to shareholders of record as of February 10, 2020.

“During the second quarter, we generated a record level of loan originations and purchases, and at quarter end we surpassed $1 billion in total loans,” said Richard Wayne, Chief Executive Officer. “Our Loan Acquisition and Servicing Group produced $163.4 million of loans, including originations of $98.6 million and purchases with an investment of $64.8 million during the quarter. As a result, we earned $0.53 per diluted common share, a return on average equity of 12.1%, a return on average assets of 1.7%, and a net interest margin of 5.6%.”

As of December 31, 2019, total assets were $1.2 billion, an increase of $53.6 million, or 4.6%, from total assets of $1.2 billion as of June 30, 2019. The principal components of the changes in the balance sheet follow:

1. The following table highlights the changes in the loan portfolio for the three and six months ended December 31, 2019:

	Loan Portfolio Changes
	Three Months Ended December 31, 2019
	December 31, 2019 Balance		September 30, 2019 Balance		Change ($)			Change (%)
	(Dollars in thousands)
LASG Purchased	$	367,625	$	332,227	$	35,398		10.65	%
LASG Originated		497,386		457,350	40,036			8.75	%
SBA		54,572		58,270	(3,698		)	(6.35	%)
Community Banking		81,195		86,192	(4,997		)	(5.80	%)
Total	$	1,000,778	$	934,039	$	66,739		7.15	%


	Six Months Ended December 31, 2019
	December 31, 2019 Balance		June 30, 2019 Balance		Change ($)			Change (%)
	(Dollars in thousands)
LASG Purchased	$	367,625	$	326,640	$	40,985		12.55	%
LASG Originated		497,386		493,413		3,973		0.81	%
SBA		54,572		63,053		(8,481	)	(13.45	%)
Community Banking		81,195		91,954		(10,759	)	(11.70	%)
Total	$	1,000,778	$	975,060	$	25,718		2.64	%

Loans generated by the Bank's Loan Acquisition and Servicing Group ("LASG") for the quarter ended December 31, 2019 totaled $163.4 million, which consisted of $64.8 million of purchased loans, at an average price of 97.1% of unpaid principal balance, and $98.6 million of originated loans. The Bank sold the guaranteed portion of Small Business Administration ("SBA") loans totaling $4.0 million in the secondary market, of which $419 thousand were originated in the current quarter and $3.5 million were originated or purchased in the prior quarter. Residential loan production sold in the secondary market totaled $10.8 million for the quarter.

An overview of the Bank’s LASG portfolio follows:

	LASG Portfolio
	Three Months Ended December 31,
	2019									2018
	Purchased			Originated			Total LASG			Purchased			Originated			Total LASG
	(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance	$	66,784		$	98,563		$	165,347		$	52,672		$	64,117		$	116,789
Net investment basis		64,840			98,563			163,403			49,334			64,117			113,451

Loan returns during the period:
Yield		9.76	%		7.67	%		8.57	%		10.30	%		7.61	%		8.75	%
Total Return on Purchased Loans (1)		10.21	%		7.67	%		8.77	%		10.30	%		7.61	%		8.75	%


	Six Months Ended December 31,
	2019									2018
	Purchased			Originated			Total LASG			Purchased			Originated			Total LASG
	(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance	$	97,116		$	139,100		$	236,216		$	89,748		$	135,253		$	225,001
Net investment basis		93,462			139,100			232,562			84,137			135,253			219,390

Loan returns during the period:
Yield		9.74	%		7.62	%		8.52	%		9.88	%		7.53	%		8.53	%
Total Return on Purchased Loans (1)		9.98	%		7.62	%		8.61	%		9.88	%		7.53	%		8.53	%

Total loans as of period end:
Unpaid principal balance	$	401,393		$	497,386		$	898,779		$	368,345		$	435,817		$	804,162
Net investment basis		367,625			497,386			865,011			330,643			435,817			766,460

(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.”

2. Deposits decreased by $3.5 million, or 0.4%, from June 30, 2019, attributable primarily to decreases in time deposits of $13.7 million, or 2.7%, demand deposits of $1.9 million, or 2.7%, and money market deposits of $1.8 million, or 0.7%, partially offset by an increase in savings and interest checking accounts of $13.9 million, or 13.8%.

3. Shareholders’ equity increased by $9.8 million, or 6.4%, from June 30, 2019, primarily due to net income of $9.6 million.

Net income decreased by $258 thousand to $4.9 million for the quarter ended December 31, 2019, compared to net income of $5.1 million for the quarter ended December 31, 2018.

1. Net interest and dividend income before provision for loan losses decreased by $98 thousand to $15.5 million for the quarter ended December 31, 2019, compared to $15.6 million for the quarter ended December 31, 2018. The decrease was primarily due to higher deposit and borrowing costs and lower transactional interest income in the purchased portfolio, partially offset by higher average balances in the LASG portfolio, as well as a decrease in interest expense on subordinated debt from the redemption of trust preferred securities in May 2019.

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

	Interest Income and Yield on Loans
	Three Months Ended December 31,
	2019						2018
	Average		Interest				Average		Interest
	Balance (1)		Income		Yield		Balance (1)		Income		Yield
	(Dollars in thousands)
Community Banking	$	85,989	$	1,193	5.52	%	$	108,344	$	1,448	5.30	%
SBA		57,371		1,003	6.96	%		73,467		1,440	7.78	%
LASG:
Originated		456,877		8,814	7.67	%		420,816		8,077	7.61	%
Purchased		345,748		8,480	9.76	%		307,094		7,969	10.30	%
Total LASG		802,625		17,294	8.57	%		727,910		16,046	8.75	%
Total	$	945,985	$	19,490	8.20	%	$	909,721	$	18,934	8.26	%
	Six Months Ended December 31,
	2019						2018
	Average		Interest				Average		Interest
	Balance (1)		Income		Yield		Balance (1)		Income		Yield
	(Dollars in thousands)
Community Banking	$	88,187	$	2,458	5.54	%	$	114,342	$	2,970	5.15	%
SBA		60,062		2,472	8.19	%		72,316		2,726	7.48	%
LASG:
Originated		463,092		17,742	7.62	%		409,575		15,541	7.53	%
Purchased		337,284		16,521	9.74	%		305,600		15,223	9.88	%
Total LASG		800,376		34,263	8.52	%		715,175		30,764	8.53	%
Total	$	948,625	$	39,193	8.22	%	$	901,833	$	36,460	8.02	%

(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 December 31, 2018, transactional income for the quarter ended December 31, 2019 increased by $241 thousand, while regularly scheduled interest and accretion increased by $665 thousand due to the increase in average balances. The total return on purchased loans for the quarter ended December 31, 2019 was 10.2%, a decrease from 10.3% for the quarter ended December 31, 2018. The following table details the total return on purchased loans:

	Total Return on Purchased Loans
	Three Months Ended December 31,
	2019				2018
	Income		Return (1)		Income		Return (1)
	(Dollars in thousands)
Regularly scheduled interest and accretion	$	6,525	7.51	%	$	5,860	7.57	%
Transactional income:
Gain on loan sales		-	0.00	%		-	0.00	%
Gain on real estate owned		395	0.45	%		-	0.00	%
Other noninterest income		-	0.00	%		-	0.00	%
Accelerated accretion and loan fees		1,955	2.25	%		2,109	2.73	%
Total transactional income		2,350	2.70	%		2,109	2.73	%
Total	$	8,875	10.21	%	$	7,969	10.30	%


	Six Months Ended December 31,
	2019				2018
	Income		Return (1)		Income		Return (1)
	(Dollars in thousands)
Regularly scheduled interest and accretion	$	12,580	7.42	%	$	11,621	7.54	%
Transactional income:
Gain on loan sales		-	0.00	%		-	0.00	%
Gain on real estate owned		395	0.24	%		-	0.00	%
Other noninterest income		-	0.00	%		-	0.00	%
Accelerated accretion and loan fees		3,941	2.32	%		3,602	2.34	%
Total transactional income		4,336	2.56	%		3,602	2.34	%
Total	$	16,916	9.98	%	$	15,223	9.88	%

(1)		The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on asset sales and gains on real estate owned 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 $208 thousand for the quarter ended December 31, 2019, compared to the quarter ended December 31, 2018, principally due to the following:

A decrease in gain on sale of SBA loans of $638 thousand, due to lower volume of SBA loans sold in the quarter due to lower originations in recent quarters; and
An increase in net unrealized loss on equity securities of $75 thousand; partially offset by,
An increase in gain on real estate owned of $338 thousand, due to the gain recorded on the transfer of a loan into real estate owned, partially offset by a write-down on an existing property; and
An increase in gain on sale of residential loans held for sale of $108 thousand, due to both a higher volume of loans sold and higher pricing on loans sold.

3. Noninterest expense decreased by $114 thousand for the quarter ended December 31, 2019 compared to the quarter ended December 31, 2018, primarily due to the following:

A decrease in professional fees of $211 thousand, due to a decrease in legal expenses related to the corporate reorganization completed in the prior period, as well as lower other professional fees;
A decrease in occupancy and equipment expense of $108 thousand, primarily due to a decrease in computer equipment repairs and maintenance expense; and
A decrease in loan acquisition and collection expense of $104 thousand, primarily due to collection expense reimbursements received during the quarter; partially offset by,
An increase in salaries and employee benefits of $227 thousand, primarily due to increases in regular compensation and incentive compensation, offset by a decrease in stock-based compensation; and
An increase in data processing fees of $172 thousand, primarily due to increased IT outsourcing costs.

4. Income tax expense decreased by $76 thousand to $2.0 million, or an effective tax rate of 28.9%, for the quarter ended December 31, 2019, compared to $2.1 million, or an effective tax rate of 28.7%, for the quarter ended December 31, 2018.

As of December 31, 2019, nonperforming assets totaled $21.3 million, or 1.76% of total assets, as compared to $16.7 million, or 1.45% of total assets, as of June 30, 2019. The increase was primarily due to one LASG originated loan totaling $2.7 million and three LASG purchased loans totaling $2.1 million that were placed on nonaccrual, offset by the payoff of one nonperforming Community Banking loan totaling $1.1 million during the six months ended December 31, 2019.

As of December 31, 2019, past due loans totaled $28.4 million, or 2.84% of total loans, as compared to past due loans totaling $14.6 million, or 1.50% of total loans as of June 30, 2019. The increase was primarily due to nine LASG purchased loans totaling $9.6 million, three LASG originated loans totaling $2.8 million, and six SBA loans totaling $1.9 million, becoming past due during the six months ended December 31, 2019.

As of December 31, 2019, the Bank’s Tier 1 leverage capital ratio was 14.3%, compared to 12.9% at June 30, 2019, and the Total capital ratio was 18.5% at December 31, 2019, as compared to 18.0% at June 30, 2019. Capital ratios were affected by earnings and lower average assets in the quarter.

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 second quarter earnings and business outlook at 10:00 a.m. Eastern Time on Tuesday, January 28^th. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 9080916. 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. 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 common 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 Federal Deposit Insurance Corporation. 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.


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

NBN-F


NORTHEAST BANK
BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share data)
	December 31, 2019			June 30, 2019
Assets
Cash and due from banks	$	2,699		$	2,482
Short-term investments		83,641			54,425
Total cash and cash equivalents		86,340			56,907


Available-for-sale debt securities, at fair value		72,895			75,774
Equity securities, at fair value		7,038			6,938
Total investment securities		79,933			82,712

Residential real estate loans held for sale		989			3,179
SBA loans held for sale		1,342			731
Total loans held for sale		2,331			3,910

Loans:
Commercial real estate		679,959			668,496
Commercial and industrial		234,815			232,839
Residential real estate		84,142			71,218
Consumer		1,862			2,507
Total loans		1,000,778			975,060
Less: Allowance for loan losses		5,405			5,702
Loans, net		995,373			969,358


Premises and equipment, net		10,390			5,582
Real estate owned and other repossessed collateral, net		2,505			1,957
Federal Home Loan Bank stock, at cost		3,010			1,258
Intangible assets, net		217			434
Loan servicing rights, net		2,424			2,851
Bank-owned life insurance		16,858			17,057
Other assets		8,035			11,832
Total assets	$	1,207,416		$	1,153,858

Liabilities and Shareholders' Equity
Deposits:
Demand	$	66,917		$	68,782
Savings and interest checking		114,952			101,061
Money market		269,057			270,835
Time		487,983			501,693
Total deposits		938,909			942,371

Federal Home Loan Bank advances		60,000			15,000
Subordinated debt		14,884			14,829
Lease liability		5,196			323
Other liabilities		25,027			27,755
Total liabilities		1,044,016			1,000,278

Commitments and contingencies		-			-

Shareholders' equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares
issued and outstanding at December 31, 2019 and June 30, 2019		-			-
Voting common stock, $1.00 par value, 25,000,000 shares authorized;
9,007,230 and 8,997,326 shares issued and outstanding at
December 31, 2019 and June 30, 2019, respectively		9,007			8,997
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized;
44,783 shares issued and outstanding at December 31, 2019 and June 30, 2019		45			45
Additional paid-in capital		78,380			78,095
Retained earnings		77,039			67,581
Accumulated other comprehensive loss		(1,071	)		(1,138	)
Total shareholders' equity		163,400			153,580
Total liabilities and shareholders' equity	$	1,207,416		$	1,153,858


NORTHEAST BANK
STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except share and per share data)
	Three Months Ended December 31,						Six Months Ended December 31,
	2019			2018			2019			2018
Interest and dividend income:
Interest and fees on loans	$	19,490		$	18,934		$	39,193		$	36,460
Interest on available-for-sale securities		442			425			893			784
Other interest and dividend income		326			970			665			1,851
Total interest and dividend income		20,258			20,329			40,751			39,095


Interest expense:
Deposits		4,181			3,982			8,497			7,664
Federal Home Loan Bank advances		218			125			343			242
Subordinated debt		282			573			563			1,174
Obligation under capital lease agreements		32			6			68			14
Total interest expense		4,713			4,686			9,471			9,094

Net interest and dividend income before provision for loan losses		15,545			15,643			31,280			30,001
Provision for loan losses		243			101			106			633
Net interest and dividend income after provision for loan losses		15,302			15,542			31,174			29,368


Noninterest income:
Fees for other services to customers		414			340			827			832
Gain on sales of SBA loans		304			942			556			1,793
Gain on sales of residential loans held for sale		212			104			425			279
Net unrealized (loss) gain on equity securities		(25	)		50			15			10
Gain (loss) on real estate owned, other repossessed collateral		314			(24	)		312			(64	)
and premises and equipment, net		314			(24	)		312			(64	)
Bank-owned life insurance income		108			110			350			219
Other noninterest income		10			23			28			29
Total noninterest income		1,337			1,545			2,513			3,098


Noninterest expense:
Salaries and employee benefits		5,926			5,699			12,312			11,208
Occupancy and equipment expense		849			957			1,747			2,084
Professional fees		445			656			837			1,190
Data processing fees		1,002			830			1,986			1,431
Marketing expense		55			130			148			253
Loan acquisition and collection expense		481			585			1,092			1,024
FDIC insurance premiums (credits)		(1	)		81			(19	)		162
Intangible asset amortization		109			109			217			218
Other noninterest expense		923			856			1,824			1,687
Total noninterest expense		9,789			9,903			20,144			19,257

Income before income tax expense		6,850			7,184			13,543			13,209
Income tax expense		1,983			2,059			3,901			3,550
Net income	$	4,867		$	5,125		$	9,642		$	9,659



Weighted-average shares outstanding:
Basic		9,048,171			9,048,397			9,046,004			9,022,161
Diluted		9,223,137			9,201,557			9,217,544			9,192,643

Earnings per common share:

Basic	$	0.54		$	0.57		$	1.07		$	1.07
Diluted		0.53			0.56			1.05			1.05
	$	0.01		$	0.01		$	0.02		$	0.02
Cash dividends declared per common share	$	0.01		$	0.01		$	0.02		$	0.02


NORTHEAST BANK
AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
	Three Months Ended December 31,
	2019						2018
			Interest		Average				Interest		Average
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate
Assets:
Interest-earning assets:
Investment securities	$	81,009	$	442	2.17	%	$	85,325	$	425	1.98	%
Loans (1) (2) (3)		945,985		19,490	8.20	%		909,721		18,934	8.26	%
Federal Home Loan Bank stock		2,079		18	3.44	%		1,652		24	5.76	%
Short-term investments (4)		77,268		308	1.59	%		168,768		946	2.22	%
Total interest-earning assets		1,106,341		20,258	7.28	%		1,165,466		20,329	6.92	%
Cash and due from banks		2,781						2,600
Other non-interest earning assets		42,725						31,344
Total assets	$	1,151,847					$	1,199,410

Liabilities & Shareholders' Equity:
Interest-bearing liabilities:
NOW accounts	$	70,737	$	77	0.43	%	$	74,027	$	69	0.37	%
Money market accounts		269,880		1,094	1.61	%		373,409		1,461	1.55	%
Savings accounts		34,317		15	0.17	%		35,004		14	0.16	%
Time deposits		464,424		2,995	2.57	%		443,779		2,438	2.18	%
Total interest-bearing deposits		839,358		4,181	1.98	%		926,219		3,982	1.71	%
Federal Home Loan Bank advances		36,250		218	2.39	%		15,000		125	3.31	%
Subordinated debt		14,871		282	7.54	%		24,087		573	9.44	%
Capital lease obligations		5,365		32	2.37	%		490		6	4.86	%
Total interest-bearing liabilities		895,844		4,713	2.09	%		965,796		4,686	1.92	%

Non-interest bearing liabilities:
Demand deposits and escrow accounts		85,894						81,223
Other liabilities		9,940						6,513
Total liabilities		991,678						1,053,532
Shareholders' equity		160,169						145,878
Total liabilities and shareholders' equity	$	1,151,847					$	1,199,410

Net interest income			$	15,545					$	15,643

Interest rate spread					5.19	%					5.00	%
Net interest margin (5)					5.59	%					5.33	%

(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)
	Six Months Ended December 31,
	2019						2018
			Interest		Average				Interest		Average
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate
Assets:
Interest-earning assets:
Investment securities	$	81,545	$	893	2.18	%	$	86,599	$	784	1.80	%
Loans (1) (2) (3)		948,625		39,193	8.22	%		901,833		36,460	8.02	%
Federal Home Loan Bank stock		1,669		37	4.41	%		1,652		49	5.88	%
Short-term investments (4)		68,808		628	1.82	%		170,705		1,802	2.09	%
Total interest-earning assets		1,100,647		40,751	7.36	%		1,160,789		39,095	6.68	%
Cash and due from banks		2,705						2,585
Other non-interest earning assets		39,127						31,289
Total assets	$	1,142,479					$	1,194,663

Liabilities & Shareholders' Equity:
Interest-bearing liabilities:
NOW accounts	$	68,071	$	137	0.40	%	$	71,866	$	124	0.34	%
Money market accounts		267,379		2,162	1.61	%		389,757		3,008	1.53	%
Savings accounts		34,397		30	0.17	%		35,590		28	0.16	%
Time deposits		474,270		6,168	2.59	%		424,965		4,504	2.10	%
Total interest-bearing deposits		844,117		8,497	2.00	%		922,178		7,664	1.65	%
Federal Home Loan Bank advances		25,625		343	2.66	%		15,000		242	3.20	%
Subordinated debt		14,856		563	7.54	%		24,042		1,174	9.69	%
Capital lease obligations		5,527		68	2.45	%		525		14	5.29	%
Total interest-bearing liabilities		890,125		9,471	2.12	%		961,745		9,094	1.88	%

Non-interest bearing liabilities:
Demand deposits and escrow accounts		85,491						81,615
Other liabilities		8,760						8,126
Total liabilities		984,376						1,051,486
Shareholders' equity		158,103						143,177
Total liabilities and shareholders' equity	$	1,142,479					$	1,194,663

Net interest income			$	31,280					$	30,001

Interest rate spread					5.25	%					4.80	%
Net interest margin (5)					5.65	%					5.13	%

(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
SELECTED FINANCIAL HIGHLIGHTS AND OTHER DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
	Three Months Ended
	December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018
Net interest income	$	15,545		$	15,737		$	17,288		$	15,033		$	15,643
Provision (credit) for loan losses		243			(136	)		262			414			101
Noninterest income		1,337			1,176			1,151			1,866			1,545
Noninterest expense		9,789			10,354			18,504			9,752			9,903
Net income (loss)		4,867			4,776			(603	)		4,828			5,125

Weighted-average common shares outstanding:
Basic		9,048,171			9,043,761			9,041,926			9,044,230			9,048,397
Diluted		9,223,137			9,211,874			9,041,926			9,198,077			9,201,557
Earnings (loss) per common share:
Basic	$	0.54		$	0.53		$	(0.07	)	$	0.53		$	0.57
Diluted		0.53			0.52			(0.07	)		0.52			0.56

Operating earnings per common share (4):
Basic	$	0.54		$	0.53		$	0.60		$	0.53		$	0.57
Diluted		0.53			0.52			0.59			0.52			0.56

Dividends declared per common share	$	0.01		$	0.01		$	0.01		$	0.01		$	0.01

Return (loss) on average assets		1.68	%		1.68	%		(0.20	%)		1.63	%		1.70	%
Return (loss) on average equity		12.09	%		12.18	%		(1.58	%)		13.00	%		13.94	%
Net interest rate spread (1)		5.19	%		5.31	%		5.55	%		4.81	%		5.00	%
Net interest margin (2)		5.59	%		5.72	%		5.95	%		5.20	%		5.33	%
Efficiency ratio (non-GAAP) (3)		57.98	%		61.22	%		100.35	%		57.71	%		57.62	%
Noninterest expense to average total assets		3.38	%		3.64	%		6.18	%		3.29	%		3.28	%
Average interest-earning assets to average interest-bearing liabilities		123.50	%		123.81	%		121.71	%		121.65	%		120.67	%

Operating return on average assets (non-GAAP) (4)		1.68	%		1.68	%		1.81	%		1.63	%		1.70	%
Operating return on average equity (non-GAAP) (4)		12.09	%		12.18	%		14.18	%		13.00	%		13.94	%
Operating efficiency ratio (non-GAAP) (3) (4)		57.98	%		61.22	%		55.15	%		57.71	%		57.62	%
Operating noninterest expense to average total assets (non- GAAP) (4)		3.38	%		3.64	%		3.40	%		3.29	%		3.28	%
	As of:
	December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018
Nonperforming loans:
Originated portfolio:
Residential real estate	$	1,586		$	1,515		$	2,772		$	2,317		$	2,595
Commercial real estate		8,032			4,530			3,892			3,336			2,764
Commercial and industrial		622			87			1,284			1,495			1,420
Consumer		59			136			148			236			216
Total originated portfolio		10,299			6,268			8,096			7,384			6,995
Total purchased portfolio		8,489			7,834			6,671			5,366			5,351
Total nonperforming loans		18,788			14,102			14,767			12,750			12,346
Real estate owned and other repossessed collateral, net		2,505			1,936			1,957			2,014			1,463
Total nonperforming assets	$	21,293		$	16,038		$	16,724		$	14,764		$	13,809

Past due loans to total loans		2.84	%		1.50	%		1.50	%		2.16	%		1.95	%
Nonperforming loans to total loans		1.88	%		1.51	%		1.51	%		1.33	%		1.32	%
Nonperforming assets to total assets		1.76	%		1.43	%		1.45	%		1.20	%		1.16	%
Allowance for loan losses to total loans		0.54	%		0.57	%		0.58	%		0.59	%		0.57	%
Allowance for loan losses to nonperforming loans		28.77	%		37.44	%		38.61	%		44.38	%		42.99	%

Commercial real estate loans to total capital (5)		292.58	%		262.92	%		282.05	%		251.02	%		242.38	%
Net loans to core deposits (6)		106.52	%		102.59	%		103.33	%		94.19	%		94.84	%
Purchased loans to total loans, including held for sale		36.65	%		35.50	%		33.37	%		33.27	%		35.17	%
Equity to total assets		13.53	%		14.08	%		13.31	%		12.44	%		12.44	%
Common equity tier 1 capital ratio		16.48	%		16.92	%		15.89	%		16.23	%		16.04	%
Total capital ratio		18.52	%		19.07	%		18.01	%		19.33	%		19.15	%
Tier 1 leverage capital ratio		14.26	%		14.06	%		12.86	%		13.58	%		13.20	%

Total shareholders' equity	$	163,400		$	158,101		$	153,580		$	153,188		$	148,491
Less: Preferred stock		-			-			-			-			-
Common shareholders' equity		163,400			158,101			153,580			153,188			148,491
Less: Intangible assets (7)		(2,641	)		(2,940	)		(3,285	)		(3,485	)		(3,583	)
Tangible common shareholders' equity (non-GAAP)	$	160,759		$	155,161		$	150,295		$	149,703		$	144,908

Common shares outstanding		9,052,013			9,038,912			9,042,109			9,041,868			9,048,863
Book value per common share	$	18.05		$	17.49		$	16.98		$	16.94		$	16.41
Tangible book value per share (non-GAAP) (8)		17.76			17.17			16.62			16.56			16.01

(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 earnings per common share, 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). Net operating earnings is calculated as net loss of $603 thousand, less non-recurring reorganization expense, net of tax, of $6.0 million, for net operating earnings of $5.4 million.
(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.

Source: Northeast Bank

Press Release

Northeast Bank Reports Second Quarter Results and Declares Dividend