Northeast Bank Reports Third Quarter Results and Declares Dividend

April 22, 2020 at 4:20 PM EDT

PORTLAND, Maine, April 22, 2020 (GLOBE NEWSWIRE) -- Northeast Bank (the “Bank”) (NASDAQ: NBN), a Maine-based full-service bank, today reported net income of $1.9 million, or $0.21 per diluted common share, for the quarter ended March 31, 2020, compared to net income of $4.8 million, or $0.52 per diluted common share, for the quarter ended March 31, 2019. Net income for the nine months ended March 31, 2020 was $11.5 million, or $1.25 per diluted common share, compared to $14.5 million, or $1.58 per diluted common share, for the nine months ended March 31, 2019. Results for the quarter and nine months ended March 31, 2020 were negatively impacted by (a) an increased provision for loan losses of $3.3 million ($0.26 per diluted common share), of which $3.0 million was allocated to the SBA portfolio, and (b) a non-recurring income tax expense of $554 thousand ($0.06 per diluted common share) related to the recapture of tax reserve for loan losses triggered by the repurchase of common stock during the quarter ended March 31, 2020.

On April 22, 2020, the Board of Directors declared a cash dividend of $0.01 per share, payable on May 21, 2020, to shareholders of record as of May 7, 2020.

“Our thoughts are with the individuals, families and communities, healthcare workers and first responders affected by COVID-19. We are pleased to participate in the Paycheck Protection Program, having originated in the initial phase 194 loans totaling $37.2 million,” said Rick Wayne, Chief Executive Officer. Mr. Wayne continued, “The Bank is working with our customers impacted by COVID-19 to provide effective solutions during the crisis. While we did not envision that the market event would be this global pandemic, our longstanding credit discipline has generated a strong loan portfolio with a weighted average loan-to-value of approximately 53%. For more information on the Bank’s asset quality, refer to https://investor.northeastbank.com/investor-relations.”

Discussing results, Mr. Wayne said “Our Loan Acquisition and Servicing Group produced $113.8 million of loans, including record purchases of $65.0 million and originations of $48.8 million during the quarter.” Mr. Wayne continued, “We are pleased to report that the remaining regulatory conditions from the 2010 merger have been waived. The Bank’s Tier 1 leverage capital ratio limit has been reduced from 10% to 9%, and Total capital ratio limit has been reduced from 13.5% to 12%. With this change, we are in conformity with many banks’ capital limits and now have more capacity to prudently grow our balance sheet.”

As of March 31, 2020, total assets were $1.23 billion, an increase of $77.6 million, or 6.7%, from total assets of $1.15 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 nine months ended March 31, 2020:

	Loan Portfolio Changes
	Three Months Ended March 31, 2020
	March 31, 2020 Balance		December 31, 2019 Balance		Change ($)			Change (%)

	(Dollars in thousands)
LASG Purchased	$	395,944	$	367,625	$	28,319			7.70	%
LASG Originated		512,964		497,386		15,578			3.13	%
SBA		48,306		54,572		(6,266	)		(11.48	%)
Community Banking		76,706		81,195		(4,489	)		(5.53	%)
Total	$	1,033,920	$	1,000,778	$	33,142			3.31	%


	Nine Months Ended March 31, 2020
	March 31, 2020 Balance		June 30, 2019 Balance		Change ($)			Change (%)

	(Dollars in thousands)
LASG Purchased	$	395,944	$	326,640	$	69,304			21.22	%
LASG Originated		512,964		493,413		19,551			3.96	%
SBA		48,306		63,053		(14,747	)		(23.39	%)
Community Banking		76,706		91,954		(15,248	)		(16.58	%)
Total	$	1,033,920	$	975,060	$	58,860			6.04	%

Loans generated by the Bank's Loan Acquisition and Servicing Group ("LASG") for the quarter ended March 31, 2020 totaled $113.8 million, which consisted of $65.0 million of purchased loans, at an average price of 91.8% of unpaid principal balance, and $48.8 million of originated loans. The Bank sold the guaranteed portion of Small Business Administration ("SBA") loans totaling $4.1 million in the secondary market, all of which was originated or purchased in prior quarters. Residential loan production sold in the secondary market totaled $6.3 million for the quarter.

An overview of the Bank’s LASG portfolio follows:

	LASG Portfolio
	Three Months Ended March 31,
	2020									2019
	Purchased			Originated			Total LASG			Purchased			Originated			Total LASG

	(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance	$	70,860		$	48,772		$	119,632		$	4,675		$	84,546		$	89,221
Net investment basis		65,056			48,772			113,828			4,604			84,546			89,150

Loan returns during the period:
Yield		10.05	%		7.35	%		8.50	%		9.49	%		7.87	%		8.56	%
Total Return on Purchased Loans (1)		10.05	%		7.35	%		8.50	%		10.22	%		7.87	%		8.87	%

	Nine Months Ended March 31,
	2020									2019
	Purchased			Originated			Total LASG			Purchased			Originated			Total LASG

	(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance	$	167,977		$	187,872		$	355,849		$	94,423		$	219,348		$	313,771
Net investment basis		158,518			187,872			346,390			88,741			219,348			308,089

Loan returns during the period:
Yield		9.85	%		7.53	%		8.51	%		9.75	%		7.64	%		8.54	%
Total Return on Purchased Loans (1)		10.00	%		7.53	%		8.57	%		10.00	%		7.64	%		8.65	%

Total loans as of period end:
Unpaid principal balance	$	432,920		$	512,964		$	945,884		$	354,655		$	478,020		$	832,675
Net investment basis		395,944			512,964			908,908			320,326			478,020			798,346

(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 increased by $70.1 million, or 7.4%, from June 30, 2019, attributable primarily to increases in time deposits of $39.7 million, or 7.9%, money market accounts of $15.4 million, or 5.7%, and savings and interest checking accounts of $13.4 million, or 13.2%.

3. Shareholders’ equity increased by $5.9 million, or 3.9%, from June 30, 2019, primarily due to net income of $11.5 million, partially offset by the repurchase of 416,700 shares at a weighted average share price of $12.83, which resulted in a $5.3 million reduction in shareholders’ equity.

Net income decreased by $3.0 million to $1.9 million for the quarter ended March 31, 2020, compared to net income of $4.8 million for the quarter ended March 31, 2019.

1. Net interest and dividend income before provision for loan losses increased by $1.3 million to $16.3 million for the quarter ended March 31, 2020, compared to $15.0 million for the quarter ended March 31, 2019. The increase was primarily due to higher average balances in the LASG portfolio, higher transactional interest income in the purchased portfolio, lower deposit interest expense due to lower average balances and rates, and a decrease in interest expense on subordinated debt from the redemption of trust preferred securities in May 2019. This activity was partially offset by lower average balances and yields from short-term investments, the SBA portfolio, and the Community Banking Portfolio.

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

	Interest Income and Yield on Loans
	Three Months Ended March 31,
	2020						2019
	Average		Interest				Average		Interest
	Balance (1)		Income		Yield		Balance (1)		Income		Yield

	(Dollars in thousands)
Community Banking	$	79,325	$	1,036	5.25	%	$	102,850	$	1,348	5.32	%
SBA		53,643		952	7.14	%		69,247		1,366	8.00	%
LASG:
Originated		497,773		9,092	7.35	%		437,499		8,490	7.87	%
Purchased		367,486		9,186	10.05	%		324,414		7,592	9.49	%
Total LASG		865,259		18,278	8.50	%		761,913		16,082	8.56	%
Total	$	998,227	$	20,266	8.17	%	$	934,010	$	18,796	8.16	%

	Nine Months Ended March 31,
	2020						2019
	Average		Interest				Average		Interest
	Balance (1)		Income		Yield		Balance (1)		Income		Yield

	(Dollars in thousands)
Community Banking	$	85,254	$	3,494	5.45	%	$	110,566	$	4,319	5.20	%
SBA		57,939		3,424	7.87	%		71,309		4,091	7.64	%
LASG:
Originated		474,568		26,834	7.53	%		418,747		24,031	7.64	%
Purchased		347,278		25,707	9.85	%		311,780		22,815	9.75	%
Total LASG		821,846		52,541	8.51	%		730,527		46,846	8.54	%
Total	$	965,039	$	59,459	8.20	%	$	912,402	$	55,256	8.07	%
(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 March 31, 2019, transactional income for the quarter ended March 31, 2020 increased by $509 thousand, while regularly scheduled interest and accretion increased by $503 thousand due to the increase in average balances. The total return on purchased loans for the quarter ended March 31, 2020 was 10.1%, a decrease from 10.2% for the quarter ended March 31, 2019. The following table details the total return on purchased loans:

	Total Return on Purchased Loans
	Three Months Ended March 31,
	2020				2019
	Income		Return (1)		Income		Return (1)

	(Dollars in thousands)
Regularly scheduled interest and accretion	$	6,731	7.36	%	$	6,228	7.79	%
Transactional income:
Gain on loan sales		-	0.00	%		582	0.73	%
Gain on real estate owned		-	0.00	%		-	0.00	%
Other noninterest income		-	0.00	%		-	0.00	%
Accelerated accretion and loan fees		2,455	2.69	%		1,364	1.70	%
Total transactional income		2,455	2.69	%		1,946	2.43	%
Total	$	9,186	10.05	%	$	8,174	10.22	%


	Nine Months Ended March 31,
	2020				2019
	Income		Return (1)		Income		Return (1)

	(Dollars in thousands)
Regularly scheduled interest and accretion	$	19,311	7.40	%	$	17,849	7.63	%
Transactional income:
Gain on loan sales		-	0.00	%		582	0.25	%
Gain on real estate owned		395	0.15	%		-	0.00	%
Other noninterest income		-	0.00	%		-	0.00	%
Accelerated accretion and loan fees		6,396	2.45	%		4,966	2.12	%
Total transactional income		6,791	2.60	%		5,548	2.37	%
Total	$	26,102	10.00	%	$	23,397	10.00	%

(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 periods shown. Total return is considered a non-GAAP financial measure.

2. Provision for loan losses increased by $3.1 million for the quarter ended March 31, 2020, compared to the quarter ended March 31, 2019, of which $3.0 million was allocated to the SBA portfolio.

3. Noninterest income decreased by $1.0 million for the quarter ended March 31, 2020, compared to the quarter ended March 31, 2019, primarily due to the following:

A decrease in gain on sale of other loans of $582 thousand, due to no loans sold during the current quarter, as compared to three LASG purchased loans sold in the quarter ended March 31, 2019;
A decrease in gain on sale of SBA loans of $331 thousand, due to a lower volume of SBA loans sold in the current quarter resulting from lower originations in previous quarters; and,
A decrease of $92 thousand in fees for other services to customers due to lower commercial loans servicing fees resulting from a higher volume of SBA loan payoffs.

4. Noninterest expense increased by $329 thousand for the quarter ended March 31, 2020 compared to the quarter ended March 31, 2019, primarily due to the following:

An increase in other noninterest expense of $203 thousand, due to a $215 thousand impairment charge on the SBA servicing asset, as compared to a $94 thousand recovery in the quarter ended March 31, 2019;
An increase in salaries and employee benefits of $178 thousand, primarily due to increases in regular compensation and incentive compensation, partially offset by a decrease in stock-based compensation;
An increase in data processing fees of $167 thousand, primarily due to increased IT outsourcing costs; and
An increase in loan acquisition and collection expense of $107 thousand, primarily related to increased costs associated with real estate owned properties; partially offset by,
A decrease in professional fees of $144 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; and
A decrease in Federal Deposit Insurance Corporation (“FDIC”) insurance expense of $77 thousand, primarily due to credits issued from the FDIC in the current quarter.

5. Income tax expense decreased by $169 thousand to $1.7 million, or an effective tax rate of 48.1%, for the quarter ended March 31, 2020, compared to $1.9 million, or an effective tax rate of 28.3%, for the quarter ended March 31, 2019. The decrease was primarily due to lower pre-tax income, which decreased by $3.1 million during the quarter ended March 31, 2020 compared to the quarter ended March 31, 2019. Offsetting this activity was the Bank’s recording of a $554 thousand expense related to the recapture of the tax reserve for loan losses as a result of the repurchase of common stock during the quarter ended March 31, 2020. This is a one-time expense as the Bank has now recaptured all of its tax bad debt reserve, which arose from pre-1988 bad debt deductions taken for tax purposes in excess of net charge-offs, which now must be recaptured. Because the Bank had only intended to use the reserve to absorb loan losses, no provision had been made for this liability.

As of March 31, 2020, nonperforming assets totaled $27.5 million, or 2.23% 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 four LASG purchased loans totaling $4.9 million, one LASG originated loan totaling $2.7 million, and two SBA loans totaling $2.1 million that were placed on nonaccrual, and a $1.2 million increase in real estate owned, due to three properties transferred in, partially offset by two properties sold during the nine months ended March 31, 2020.

As of March 31, 2020, past due loans totaled $36.4 million, or 3.52% 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 twenty LASG purchased loans totaling $14.4 million, one LASG originated loan totaling $2.7 million, and six SBA loans totaling $3.8 million, becoming past due during the nine months ended March 31, 2020. Of the twenty LASG purchased loans totaling $14.4 million, seven loans totaling $3.8 million were purchased during the quarter ended March 31, 2020.

As of March 31, 2020, the Bank’s Tier 1 leverage capital ratio was 13.0%, compared to 12.9% at June 30, 2019, and the Total capital ratio was 18.0% at March 31, 2020 and June 30, 2019. Effective April 13, 2020, the Bank’s Tier 1 leverage capital ratio limit is 9% and Total capital ratio limit is 12%.

Investor Call Information
Rick Wayne, Chief Executive Officer of Northeast Bank, Jean-Pierre Lapointe, Chief Financial Officer of Northeast Bank, and Pat Dignan, Executive Vice President and Chief Credit Officer of Northeast Bank, will host a conference call to discuss third quarter earnings and business outlook at 10:00 a.m. Eastern Time on Thursday, April 23^rd. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 8453418. 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 Portland, 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, the negative impacts and disruptions of the COVID-19 pandemic and measures taken to contain its spread on our employees, customers, business operations, credit quality, financial position, liquidity and results of operations; the length and extent of the economic contraction resulting from the COVID-19 pandemic; continued deterioration in general business and economic conditions on a national basis and in the local markets in which the Bank operates, including changes which adversely affect borrowers’ ability to service and repay our loans; changes in customer behavior due to changing business and economic conditions or legislative or regulatory initiatives; continued turbulence in the capital and debt markets; changes in interest rates and real estate values; increases in loan defaults and charge-off rates; decreases 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; competitive pressures from other financial institutions; operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; 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, 27 Pearl Street, Portland, ME 04101
207.786.3245 ext. 3220
www.northeastbank.com

NBN-F

NORTHEAST BANK
BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share data)
	March 31, 2020			June 30, 2019
Assets
Cash and due from banks	$	3,856		$	2,482
Short-term investments		84,919			54,425
Total cash and cash equivalents		88,775			56,907


Available-for-sale debt securities, at fair value		66,318			75,774
Equity securities, at fair value		7,163			6,938
Total investment securities		73,481			82,712

Residential real estate loans held for sale		370			3,179
SBA loans held for sale		-			731
Total loans held for sale		370			3,910


Loans:
Commercial real estate		696,403			668,496
Commercial and industrial		251,688			232,839
Residential real estate		83,830			71,218
Consumer		1,999			2,507
Total loans		1,033,920			975,060
Less: Allowance for loan losses		8,809			5,702
Loans, net		1,025,111			969,358


Premises and equipment, net		9,810			5,582
Real estate owned and other repossessed collateral, net		3,110			1,957
Federal Home Loan Bank stock, at cost		1,306			1,258
Intangible assets, net		109			434
Loan servicing rights, net		2,007			2,851
Bank-owned life insurance		16,965			17,057
Other assets		10,414			11,832
Total assets	$	1,231,458		$	1,153,858

Liabilities and Shareholders' Equity
Deposits:
Demand	$	70,443		$	68,782
Savings and interest checking		114,441			101,061
Money market		286,240			270,835
Time		541,390			501,693
Total deposits		1,012,514			942,371

Federal Home Loan Bank advances		15,000			15,000
Subordinated debt		14,912			14,829
Lease liability		4,846			323
Other liabilities		24,661			27,755
Total liabilities		1,071,933			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 March 31, 2020 and June 30, 2019		-			-
Voting common stock, $1.00 par value, 25,000,000 shares authorized;
8,588,989 and 8,997,326 shares issued and outstanding at
March 31, 2020 and June 30, 2019, respectively		8,589			8,997
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized;
44,783 shares issued and outstanding at March 31, 2020 and June 30, 2019		45			45
Additional paid-in capital		73,700			78,095
Retained earnings		78,824			67,581
Accumulated other comprehensive loss		(1,633	)		(1,138	)
Total shareholders' equity		159,525			153,580
Total liabilities and shareholders' equity	$	1,231,458		$	1,153,858



NORTHEAST BANK
STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except share and per share data)
	Three Months Ended March 31,					Nine Months Ended March 31,
	2020			2019		2020			2019
Interest and dividend income:
Interest and fees on loans	$	20,266		$	18,796	$	59,459		$	55,256
Interest on available-for-sale securities		426			444		1,320			1,229
Other interest and dividend income		395			939		1,061			2,789
Total interest and dividend income		21,087			20,179		61,840			59,274

Interest expense:
Deposits		4,228			4,447		12,725			12,111
Federal Home Loan Bank advances		226			116		569			359
Subordinated debt		282			578		845			1,752
Obligation under capital lease agreements		30			5		98			19
Total interest expense		4,766			5,146		14,237			14,241

Net interest and dividend income before provision for loan losses		16,321			15,033		47,603			45,033
Provision for loan losses		3,489			414		3,595			1,047
Net interest and dividend income after provision for loan losses		12,832			14,619		44,008			43,986

Noninterest income:
Fees for other services to customers		316			408		1,142			1,240
Gain on sales of SBA loans		237			568		793			2,361
Gain on sales of residential loans held for sale		139			108		565			387
Gain on sales of other loans		-			582		-			582
Net unrealized gain on equity securities		87			65		102			75
Gain (loss) on real estate owned, other repossessed collateral and premises and equipment, net		(64	)		-		247			(64	)
Bank-owned life insurance income		108			108		457			328
Other noninterest income		37			27		66			56
Total noninterest income		860			1,866		3,372			4,965

Noninterest expense:
Salaries and employee benefits		5,960			5,782		18,272			16,991
Occupancy and equipment expense		919			957		2,667			2,692
Professional fees		339			483		1,175			1,516
Data processing fees		994			827		2,980			2,764
Marketing expense		91			160		239			413
Loan acquisition and collection expense		716			609		1,807			1,633
FDIC insurance premiums (credits)		4			81		(15	)		242
Intangible asset amortization		109			107		326			325
Other noninterest expense		949			746		2,774			2,433
Total noninterest expense		10,081			9,752		30,225			29,009

Income before income tax expense		3,611			6,733		17,155			19,942
Income tax expense		1,736			1,905		5,637			5,455
Net income	$	1,875		$	4,828	$	11,518		$	14,487


Weighted-average shares outstanding:
Basic		9,004,819			9,044,230		9,032,254			9,029,409
Diluted		9,128,651			9,198,077		9,187,891			9,194,346

Earnings per common share:

Basic	$	0.21		$	0.53	$	1.28		$	1.60
Diluted		0.21			0.52		1.25			1.58

Cash dividends declared per common share	$	0.01		$	0.01	$	0.03		$	0.03


NORTHEAST BANK
AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
	Three Months Ended March 31,
	2020						2019
			Interest		Average				Interest		Average
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate
Assets:
Interest-earning assets:
Investment securities	$	78,369	$	426	2.19	%	$	84,318	$	444	2.14	%
Loans (1) (2) (3)		998,227		20,266	8.17	%		934,010		18,796	8.16	%
Federal Home Loan Bank stock		2,295		29	5.08	%		1,332		26	7.92	%
Short-term investments (4)		114,794		366	1.28	%		152,854		913	2.42	%
Total interest-earning assets		1,193,685		21,087	7.11	%		1,172,514		20,179	6.98	%
Cash and due from banks		3,054						2,647
Other non-interest earning assets		37,634						28,399
Total assets	$	1,234,373					$	1,203,560

Liabilities & Shareholders' Equity:
Interest-bearing liabilities:
NOW accounts	$	78,777	$	104	0.53	%	$	68,869	$	59	0.35	%
Money market accounts		279,852		1,105	1.59	%		318,423		1,251	1.59	%
Savings accounts		33,912		13	0.15	%		35,599		14	0.16	%
Time deposits		519,980		3,006	2.33	%		501,378		3,123	2.53	%
Total interest-bearing deposits		912,521		4,228	1.86	%		924,269		4,447	1.95	%
Federal Home Loan Bank advances		39,011		226	2.33	%		15,000		116	3.14	%
Subordinated debt		14,897		282	7.61	%		24,170		578	9.70	%
Lease obligations		4,997		30	2.41	%		419		5	4.84	%
Total interest-bearing liabilities		971,426		4,766	1.97	%		963,858		5,146	2.17	%

Non-interest bearing liabilities:
Demand deposits and escrow accounts		89,248						79,599
Other liabilities		8,671						9,489
Total liabilities		1,069,345						1,052,946
Shareholders' equity		165,028						150,614
Total liabilities and shareholders' equity	$	1,234,373					$	1,203,560

Net interest income			$	16,321					$	15,033

Interest rate spread					5.14	%					4.81	%
Net interest margin (5)					5.50	%					5.20	%

(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)
	Nine Months Ended March 31,
	2020						2019
			Interest		Average				Interest		Average
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate
Assets:
Interest-earning assets:
Investment securities	$	80,494	$	1,320	2.18	%	$	85,850	$	1,229	1.91	%
Loans (1) (2) (3)		965,039		59,459	8.20	%		912,402		55,256	8.07	%
Federal Home Loan Bank stock		1,876		66	4.68	%		1,547		74	6.37	%
Short-term investments (4)		84,025		995	1.58	%		164,841		2,715	2.19	%
Total interest-earning assets		1,131,434		61,840	7.27	%		1,164,640		59,274	6.78	%
Cash and due from banks		2,820						2,606
Other non-interest earning assets		38,663						30,339
Total assets	$	1,172,887					$	1,197,585

Liabilities & Shareholders' Equity:
Interest-bearing liabilities:
NOW accounts	$	71,614	$	241	0.45	%	$	70,882	$	183	0.34	%
Money market accounts		271,506		3,268	1.60	%		366,326		4,259	1.55	%
Savings accounts		34,236		43	0.17	%		35,592		42	0.16	%
Time deposits		489,396		9,173	2.49	%		450,064		7,627	2.26	%
Total interest-bearing deposits		866,752		12,725	1.95	%		922,864		12,111	1.75	%
Federal Home Loan Bank advances		30,055		569	2.52	%		15,000		359	3.19	%
Subordinated debt		14,869		845	7.56	%		24,084		1,752	9.69	%
Lease obligations		5,352		98	2.44	%		490		19	5.17	%
Total interest-bearing liabilities		917,028		14,237	2.07	%		962,438		14,241	1.97	%

Non-interest bearing liabilities:
Demand deposits and escrow accounts		86,735						80,953
Other liabilities		8,730						8,575
Total liabilities		1,012,493						1,051,966
Shareholders' equity		160,394						145,619
Total liabilities and shareholders' equity	$	1,172,887					$	1,197,585

Net interest income			$	47,603					$	45,033

Interest rate spread					5.20	%					4.81	%
Net interest margin (5)					5.60	%					5.15	%

(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
	March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019
Net interest income	$	16,321		$	15,545		$	15,737		$	17,288		$	15,033
Provision (credit) for loan losses		3,489			243			(136	)		262			414
Noninterest income		860			1,337			1,176			1,151			1,866
Noninterest expense		10,081			9,789			10,354			18,504			9,752
Net income (loss)		1,875			4,867			4,776			(603	)		4,828

Weighted-average common shares outstanding:
Basic		9,004,819			9,048,171			9,043,761			9,041,926			9,044,230
Diluted		9,128,651			9,223,137			9,211,874			9,041,926			9,198,077
Earnings (loss) per common share:
Basic	$	0.21		$	0.54		$	0.53		$	(0.07	)	$	0.53
Diluted		0.21			0.53			0.52			(0.07	)		0.52

Operating earnings per common share (4):
Basic	$	0.21		$	0.54		$	0.53		$	0.60		$	0.53
Diluted		0.21			0.53			0.52			0.59			0.52

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

Return (loss) on average assets		0.61	%		1.68	%		1.68	%		(0.20	%)		1.63	%
Return (loss) on average equity		4.57	%		12.09	%		12.18	%		(1.58	%)		13.00	%
Net interest rate spread (1)		5.14	%		5.19	%		5.31	%		5.55	%		4.81	%
Net interest margin (2)		5.50	%		5.59	%		5.72	%		5.95	%		5.20	%
Efficiency ratio (non-GAAP) (3)		58.68	%		57.98	%		61.22	%		100.35	%		57.71	%
Noninterest expense to average total assets		3.28	%		3.38	%		3.64	%		6.18	%		3.29	%
Average interest-earning assets to average interest-bearing liabilities		122.88	%		123.50	%		123.81	%		121.71	%		121.65	%

Operating return on average assets (non-GAAP) (4)		0.61	%		1.68	%		1.68	%		1.81	%		1.63	%
Operating return on average equity (non-GAAP) (4)		4.57	%		12.09	%		12.18	%		14.18	%		13.00	%
Operating efficiency ratio (non-GAAP) (3) (4)		58.68	%		57.98	%		61.22	%		55.15	%		57.71	%
Operating noninterest expense to average total assets (non- GAAP) (4)		3.28	%		3.38	%		3.64	%		3.40	%		3.29	%

	As of:
	March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019
Nonperforming loans:
Originated portfolio:
Residential real estate	$	1,187		$	1,586		$	1,515		$	2,772		$	2,317
Commercial real estate		7,439			8,032			4,530			3,892			3,336
Commercial and industrial		2,226			622			87			1,284			1,495
Consumer		40			59			136			148			236
Total originated portfolio		10,892			10,299			6,268			8,096			7,384
Total purchased portfolio		13,485			8,489			7,834			6,671			5,366
Total nonperforming loans		24,377			18,788			14,102			14,767			12,750
Real estate owned and other repossessed collateral, net		3,110			2,505			1,936			1,957			2,014
Total nonperforming assets	$	27,487		$	21,293		$	16,038		$	16,724		$	14,764

Past due loans to total loans		3.52	%		2.84	%		1.50	%		1.50	%		2.16	%
Nonperforming loans to total loans		2.36	%		1.88	%		1.51	%		1.51	%		1.33	%
Nonperforming assets to total assets		2.23	%		1.76	%		1.43	%		1.45	%		1.20	%
Allowance for loan losses to total loans		0.85	%		0.54	%		0.57	%		0.58	%		0.59	%
Allowance for loan losses to nonperforming loans		36.14	%		28.77	%		37.44	%		38.61	%		44.38	%

Commercial real estate loans to total capital (5)		304.40	%		292.58	%		262.92	%		282.05	%		251.02	%
Net loans to core deposits (6)		102.04	%		106.52	%		102.59	%		103.33	%		94.19	%
Purchased loans to total loans, including held for sale		38.28	%		36.65	%		35.50	%		33.37	%		33.27	%
Equity to total assets		12.95	%		13.53	%		14.08	%		13.31	%		12.44	%
Common equity tier 1 capital ratio		15.71	%		16.48	%		16.92	%		15.89	%		16.23	%
Total capital ratio		18.03	%		18.52	%		19.07	%		18.01	%		19.33	%
Tier 1 leverage capital ratio		13.04	%		14.26	%		14.06	%		12.86	%		13.58	%

Total shareholders' equity	$	159,525		$	163,400		$	158,101		$	153,580		$	153,188
Less: Preferred stock		-			-			-			-			-
Common shareholders' equity		159,525			163,400			158,101			153,580			153,188
Less: Intangible assets (7)		(2,116	)		(2,641	)		(2,940	)		(3,285	)		(3,485	)
Tangible common shareholders' equity (non-GAAP)	$	157,409		$	160,759		$	155,161		$	150,295		$	149,703

Common shares outstanding		8,633,772			9,052,013			9,038,912			9,042,109			9,041,868
Book value per common share	$	18.48		$	18.05		$	17.49		$	16.98		$	16.94
Tangible book value per share (non-GAAP) (8)		18.23			17.76			17.17			16.62			16.56

(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 for the quarter ended June 30, 2019.
(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 Third Quarter Results and Declares Dividend