june128k.htm
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
 
        Washington, D.C. 20549        
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the
 
Securities Exchange Act of 1934



Date of Report (Date of earliest event reported):           July 31, 2012           
 
                                 NORTHEAST BANCORP                                  
(Exact Name of Registrant as Specified in its Charter)


             Maine            
            1-14588           
        01-0425066      
(State or Other Jurisdiction Incorporation)
(Commission File Number)
(IRS Employer Identification Number)


     500 Canal Street, Lewiston, Maine    
          04240         
  (Address of Principal Executive Offices)
(Zip Code)


Registrant's telephone number, including area code:
     (207) 786-3245        


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions.
 
o  
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425).
 
o  
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12).
 
o  
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)).
 
o  
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240. Rule 13e-4(c)).

   
Item 2.02     Results of Information and Financial Condition.

On July 31, 2012, Northeast Bancorp, a Maine corporation (the "Company"), issued a press release announcing its earnings for the fourth quarter ended June 30, 2012 and declaring the payment of a dividend. The full text of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information contained herein, including the exhibit attached hereto,  is furnished pursuant to Item 2.02 of this Form 8-K and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  Further, the information in this report (including the exhibits hereto) are not to be incorporated by reference into any of the Company's filings with the Securities and Exchange Commission, whether filed prior to or after the furnishing of these certificates, regardless of any general or specific incorporation language in such filing.

Item 9.01
Financial Statements and Exhibits.
(c)
Exhibits.

Exhibit No.
     Description
99.1
Press Release of the Company, dated July 31, 2012


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
   
NORTHEAST BANCORP
Date:  July 31, 2012
By:
/s/ Claire S. Bean
   
     Claire S. Bean
   
     Chief Financial Officer
 

EXHIBIT INDEX
 
Exhibit No.
     Description
99.1
Press Release of the Company, dated July 31, 2012

 


june12ex99.htm


FOR IMMEDIATE RELEASE
 
 
For More Information:
logo]
Claire S. Bean, Chief Financial Officer & C.O.O.
Northeast Bank, 500 Canal Street, Lewiston, ME 04240
207.786.3245 ext. 6202
www.northeastbank.com
 
 
Northeast Bancorp Reports Fourth Quarter Results, Declares Dividend

 
Lewiston, ME (July 31, 2012) Northeast Bancorp (“Northeast” or the “Company”) (NASDAQ: NBN), a Maine-based full-service financial services company and parent of Northeast Bank (the “Bank”), today reported net income of $1.0 million, or $0.14 per diluted common share, for the quarter ended June 30, 2012 and net income of $2.2 million, or $0.41 per diluted common share, for the fiscal year ended June 30, 2012.

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

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

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

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

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

Quarterly results included the following items of significance:
 
1.  
The Company’s net interest margin was 4.63% for the quarter ended June 30, 2012, compared to 3.44% for the prior quarter and 3.53% in the quarter ended June 30, 2011, an increase tied principally to the growth in the Company’s purchased loan portfolio noted above.  For the three months ended June 30, 2012, the yield on the purchased loan portfolio and the originated loan portfolio was 20.2% and 6.2%, respectively.  The following table summarizes interest income and related yields recognized on the Company’s purchased and originated loans.
 
 
Interest Income and Yield on Loans
 
 
Three Months Ended June 30, 2012
 
Year Ended June 30, 2012
 
 
Average
 
Interest
       
Average
 
Interest
       
 
Balance
 
Income
   
Yield
 
Balance
 
Income
   
Yield
 
 
(Dollars in thousands)
 
Loans - originated
  $ 285,294     $ 4,413       6.22 %   $ 300,626     $ 18,355       6.11 %
Loans - purchased
    68,352       3,440       20.24 %     39,022       6,379       16.35 %
Total
  $ 353,646     $ 7,853       8.93 %   $ 339,648     $ 24,734       7.28 %
 
The yield on purchased loans was increased by unscheduled loan payoffs during the period, which resulted in immediate recognition of the prepaid loans’ discount in interest income. The Company also realized $649 thousand of gains related to sales of purchased loans during the quarter ended June 30, 2012.  The following table details the “total return” on purchased loans, based on regularly scheduled interest and accretion, accelerated accretion, and other income recognized upon unscheduled loan payoffs or sales.

 
Total Return on Purchased Loans
 
 
Three Months Ended
June 30, 2012
   
Year Ended
June 30, 2012
 
 
Income
 
Return (1)
   
Income
 
Return (1)
 
 
(Dollars in thousands)
 
Regularly scheduled interest and accretion
$
         1,580 
 
9.30 
%
 
$
         3,762 
 
9.64 
%
Transactional income:
                     
Gains on loan sales
 
            649 
 
3.82 
%
   
            868 
 
2.22 
%
    Accelerated accretion and fees recognized on loan payoffs   1,860    10.94 
%
    2,617    6.71 
%
Total
$
         4,089 
 
24.06 
%
 
$
         7,247 
 
18.57 
%
                       
(1) The total return on purchased loans represents interest and noninterest income recorded during the period divided by the average purchased loan balance, on an annualized basis.
 

2.  
A net gain on the sale of residential mortgage loans in the secondary market of $701 thousand for the quarter ended June 30, 2012, an increase of $295 thousand, or 72.7%, compared to the quarter ended June 30, 2011.
 
3.  
Increased noninterest expenses of $762 thousand for the quarter ended June 30, 2012 compared to the quarter ended June 30, 2011, principally resulting from increased staffing and infrastructure costs necessary to execute the Company’s loan purchasing strategy.

 
Total assets increased by $72.8 million, or 12.2%, to $669.2 million at June 30, 2012, compared to total assets of $596.4 million at June 30, 2011. The principal components of the change in the balance sheet were as follows:
 
1.  
A $44.3 million, or 52.8%, increase in cash and equivalents, principally the result of $52.7 million received through the sale of 6.9 million shares of the Company’s common stock in May 2012.  At quarter end, the Company continues to maintain a level of balance sheet liquidity that is intended, in part, for future purchases of commercial real estate loans.
 
2.  
Loan growth of $46.3 million, or 15.0%, principally due to net growth of $83.8 million in Company’s purchased loan portfolio, offset in part by amortization and payoffs from the originated loan portfolio of $37.5 million. In the quarter ended June 30, 2012, purchased loans grew by $27.6 million, consisting of purchases totaling $41.9 million offset by payoffs and sales totaling $14.3 million.
 
3.  
An $8.6 million, or 65.8%, decrease in intangible assets, resulting primarily from the sale of insurance agency division assets.
 
4.  
A $21.1 million, or 5.3%, increase in deposits raised through Northeast’s Community Banking division and its online affinity deposit platform, ableBanking.  The ableBanking pilot, which was launched in May 2012, had deposits totaling $2.8 million as of June 30, 2012, and $6.3 million as of July 30, 2012.
 

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

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

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

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

Richard Wayne, Chief Executive Officer, and Claire Bean, Chief Financial Officer, of Northeast Bancorp, will host a conference call to discuss fourth quarter earnings at 11:00 a.m. Eastern Time on Wednesday, August 1, 2012.  Investors can access the call by dialing 877.878.2762 and entering the following passcode: 15850680. The call will be available via live webcast, which can be viewed by accessing the Company's website at www.northeastbank.com and clicking on the About Us - Investor Relations section. To listen to the webcast, attendees are encouraged to visit the website at least fifteen minutes early to register, download and install any necessary audio software. Please note there will also be a slide presentation that will accompany the webcast. For those who cannot listen to the live broadcast, an online replay will be available online for one year at www.northeastbank.com .
 
Non-GAAP Financial Measure
 
In addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures. Northeast's management believes that the supplemental non-GAAP information is utilized by regulators and market analysts to evaluate a company's financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.
 
 
 
Statements in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although Northeast believes that these forward-looking statements are based on reasonable estimates and assumptions, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and other factors. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company's control. The Company's actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, changes in interest rates and real estate values; competitive pressures from other financial institutions; the effects of a continuing deterioration in general economic conditions on a national basis or in the local markets in which the Company operates, including changes which adversely affect borrowers' ability to service and repay our loans; changes in loan defaults and charge-off rates; changes in the value of securities and other assets, adequacy of loan loss reserves, or deposit levels necessitating increased borrowing to fund loans and investments; increasing government regulation, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; changes in the rules of participation for the Troubled Asset Relief Program Capital Purchase Program promulgated by the U.S. Department of the Treasury under the Emergency Economic Stabilization Act of 2008, which may be changed unilaterally and restrictively by legislative or regulatory actions; establishment of a consumer financial protection bureau with broad authority to implement new consumer protection regulations; the risk that we may not be successful in the implementation of our business strategy; the risk that intangibles recorded in the Company's financial statements will become impaired; changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company's Annual Report on Form 10-K and updated by the Company's Quarterly Reports on Form 10-Q and other filings submitted to the Securities and Exchange Commission. These statements speak only as of the date of this release and we do not undertake any obligation to update or revise any of these forward-looking statements to reflect events or circumstances occurring after the date of this communication or to reflect the occurrence of unanticipated events.
 
IMPORTANT NOTE: Securities and Advisory Services offered through Commonwealth Financial Network, Member FINRA, SIPC, and a Registered Investment Adviser. Securities are not FDIC insured, not bank obligations or otherwise bank guaranteed and may lose value. Northeast Financial is located at 202 Rte. 1, Suite 206, Falmouth, ME 04105.
 

 
NBN-F
 
 

NORTHEAST BANCORP AND SUBSIDIARY
           
CONSOLIDATED BALANCE SHEETS
           
(Unaudited)
           
(Dollars in thousands, except share and per share data)
           
             
   
June 30, 2012
   
June 30, 2011
 
Assets
           
Cash and due from banks
  $ 2,538     $ 3,227  
Short-term investments
    125,736       80,704  
      Total cash and cash equivalents
    128,274       83,931  
                 
Available-for-sale securities, at fair value
    133,264       148,962  
Loans held for sale
    9,882       5,176  
                 
Loans
               
    Commercial real estate
    180,734       117,761  
    Residential real estate
    137,572       145,477  
    Construction
    1,187       2,015  
    Commercial business
    19,612       22,225  
    Consumer
    17,149       22,435  
      Total loans
    356,254       309,913  
    Less: Allowance for loan losses
    824       437  
      Loans, net
    355,430       309,476  
                 
Premises and equipment, net
    9,205       8,271  
Repossessed collateral, net
    834       690  
Accrued interest receivable
    1,840       1,244  
Federal Home Loan Bank stock, at cost
    4,602       4,889  
Federal Reserve Bank stock, at cost
    871       871  
Intangible assets, net
    4,487       13,133  
Bank owned life insurance
    14,295       13,794  
Other assets
    6,212       5,956  
  Total assets
  $ 669,196     $ 596,393  
                 
Liabilities and Stockholders' Equity
               
Liabilities
               
  Deposits
               
    Demand
  $ 45,323     $ 48,215  
    Savings and interest checking
    90,204       89,804  
    Money market
    45,024       48,695  
    Time deposits
    241,637       214,404  
      Total deposits
    422,188       401,118  
                 
  Federal Home Loan Bank advances
    43,450       43,922  
  Structured repurchase agreements
    66,183       68,008  
  Short-term borrowings
    1,209       2,515  
  Junior subordinated debentures issued to affiliated trusts
    8,106       7,957  
  Capital lease obligation
    1,911       2,075  
  Other borrowings
    -       2,229  
  Other liabilities
    7,010       3,615  
      Total liabilities
    550,057       531,439  
                 
Commitments and contingencies
               
                 
Stockholders' equity
               
  Preferred stock, $1.00 par value, 1,000,000 shares authorized; 4,227
               
    shares issued and outstanding at June 30, 2012 and June 30,
               
    2011; liquidation preference of $1,000 per share
    4       4  
  Voting common stock, $1.00 par value, 13,500,000 shares authorized; 9,307,127
               
    and 3,312,173 issued and outstanding at June 30, 2012 and June 30, 2011, respectively
    9,307       3,312  
  Non-voting common stock, $1.00 par value, 1,500,000 shares authorized; 1,076,314
               
    and 195,351 issued and outstanding at June 30, 2012 and June 30, 2011, respectively
    1,076       195  
Warrants to purchase common stock
    406       406  
Additional paid-in capital
    96,080       49,700  
Unearned restricted stock
    (127 )     (163 )
Retained earnings
    12,235       11,726  
Accumulated other comprehensive income (loss)
    158       (226 )
    Total stockholders' equity
    119,139       64,954  
    Total liabilities and stockholders' equity
  $ 669,196     $ 596,393  

 
NORTHEAST BANCORP AND SUBSIDIARY
                             
CONSOLIDATED STATEMENTS OF INCOME
                             
(Unaudited)
                             
(Dollars in thousands, except share and per share data)
                             
   
Successor Company (1)
   
Predecessor Company (2)
 
   
Three Months Ended
   
Year Ended
   
184 Days Ended
   
181 Days Ended
 
   
June 30, 2012
   
June 30, 2011
   
June 30, 2012
   
June 30, 2011
   
December 28, 2010
 
Interest and dividend income:
                             
  Interest on loans
  $ 7,853     $ 5,699     $ 24,734     $ 11,544     $ 11,210  
  Interest and dividends on available-for-sale securities
    417       688       2,019       1,642       3,111  
  Dividends on regulatory stock
    24       15       72       28       18  
  Other interest and dividend income
    61       56       189       90       39  
    Total interest and dividend income
    8,355       6,458       27,014       13,304       14,378  
                                         
Interest expense:
                                       
  Deposits
    878       849       3,426       1,665       2,796  
  Federal Home Loan Bank advances
    256       236       1,028       535       918  
  Structured repurchase agreements
    247       240       991       512       1,392  
  Short-term borrowings
    6       10       21       76       376  
  Junior subordinated debentures issued to affiliated trusts
    195       185       751       365       340  
  Obligation under capital lease agreements
    24       26       100       54       55  
    Total interest expense
    1,606       1,546       6,317       3,207       5,877  
                                         
Net interest and dividend income before provision for loan losses
    6,749       4,912       20,697       10,097       8,501  
Provision for loan losses
    312       658       946       707       912  
Net interest and dividend income after provision for loan losses
    6,437       4,254       19,751       9,390       7,589  
                                         
Noninterest income:
                                       
  Fees for other services to customers
    347       347       1,383       670       698  
  Net securities gains
    -       1,153       1,111       1,200       17  
  Gain on sales of loans held for sale
    701       406       2,761       945       1,867  
  Gain (loss) on sales of portfolio loans
    649       80       1,071       (115 )     -  
  Investment commissions
    671       701       2,782       1,435       1,174  
  Bank-owned life insurance income
    123       127       500       258       250  
  Bargain purchase gain
    -       225       -       15,441       -  
  Other noninterest income (expense)
    (27 )     197       93       348       225  
    Total noninterest income
    2,464       3,236       9,701       20,182       4,231  
                                         
Noninterest expense:
                                       
  Salaries and employee benefits
    4,095       3,584       15,634       7,681       4,949  
  Occupancy and equipment expense
    1,091       832       3,826       1,627       1,352  
  Professional fees
    477       436       1,708       819       509  
  Data processing fees
    265       260       1,088       543       521  
  Marketing expense
    204       290       691       510       230  
  FDIC insurance premiums
    118       94       482       269       346  
  Intangible asset amortization
    262       357       1,197       663       -  
  Merger expense
    -       7       -       3,189       94  
  Other noninterest expense
    961       851       3,629       1,847       1,454  
    Total noninterest expense
    7,473       6,711       28,255       17,148       9,455  
                                         
Income from continuing operations before income tax expense (benefit)
    1,428       779       1,197       12,424       2,365  
Income tax expense (benefit)
    390       148       181       (83 )     698  
Net income from continuing operations
  $ 1,038     $ 631     $ 1,016     $ 12,507     $ 1,667  
                                         
Discontinued operations:
                                       
  Income (loss) from discontinued operations
  $ -     $ (108 )   $ 186     $ 68     $ 94  
  Gain on sale of discontinued operations
    15       -       1,566       -       105  
  Income tax expense (benefit)
    5       (39 )     605       23       70  
Net income (loss) from discontinued operations
    10       (69 )     1,147       45       129  
                                         
Net income
  $ 1,048     $ 562     $ 2,163     $ 12,552     $ 1,796  
                                         
Net income available to common stockholders
  $ 950     $ 464     $ 1,771     $ 12,355     $ 1,677  
                                         
Weighted-average shares outstanding:
                                       
  Basic
    6,605,465       3,493,377       4,277,777       3,492,933       2,330,197  
  Diluted
    6,607,171       3,522,845       4,291,352       3,548,164       2,354,385  
Earnings per common share:
                                       
  Basic:
                                       
    Income from continuing operations
  $ 0.14     $ 0.15     $ 0.15     $ 3.51     $ 0.66  
    Income (loss) from discontinued operations
    -       (0.02 )     0.26       0.01       0.06  
    Net income
  $ 0.14     $ 0.13     $ 0.41     $ 3.52     $ 0.72  
  Diluted:
                                       
    Income from continuing operations
  $ 0.14     $ 0.15     $ 0.15     $ 3.46     $ 0.66  
    Income (loss) from discontinued operations
    -       (0.02 )     0.26       0.01       0.05  
    Net income
  $ 0.14     $ 0.13     $ 0.41     $ 3.47     $ 0.71  

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


NORTHEAST BANCORP AND SUBSIDIARY
                                   
CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
                                   
(Unaudited)
                                   
(Dollars in thousands)
                                   
   
Three Months Ended June 30
 
   
2012
   
2011
 
         
Interest
   
Average
         
Interest
   
Average
 
   
Average
   
Income/
   
Yield/
   
Average
   
Income/
   
Yield/
 
   
Balance
   
Expense
   
Rate
   
Balance
   
Expense
   
Rate
 
Assets:
                                   
Interest-earning assets:
                                   
Investment securities (1)
  $ 135,306     $ 417       1.24 %   $ 143,965     $ 688       1.92 %
Loans (2) (3)
    353,646       7,853       8.93 %     317,034       5,699       7.21 %
Regulatory stock
    5,473       24       1.76 %     5,616       15       1.07 %
Short-term investments (4)
    91,249       61       0.27 %     91,655       56       0.25 %
Total interest-earning assets
    585,674       8,355       5.74 %     558,270       6,458       4.64 %
Cash and due from banks
    2,858                       3,043                  
Other non-interest earning assets
    35,449                       43,545                  
Total assets
  $ 623,981                     $ 604,858                  
                                                 
Liabilities & Stockholders' Equity:
                                               
Interest-bearing liabilities:
                                               
NOW accounts
  $ 55,638     $ 43       0.31 %   $ 56,734     $ 78       0.55 %
Money market accounts
    44,928       45       0.40 %     50,320       62       0.49 %
Savings accounts
    32,472       11       0.14 %     33,898       32       0.38 %
Time deposits
    231,805       779       1.35 %     216,772       677       1.25 %
    Total interest-bearing deposits
    364,843       878       0.97 %     357,724       849       0.95 %
Short-term borrowings (5)
    1,210       6       1.99 %     3,460       9       1.04 %
Borrowed funds
    111,857       527       1.89 %     114,212       503       1.77 %
Junior subordinated debentures
    8,085       195       9.70 %     7,940       185       9.35 %
Total interest-bearing liabilities
    485,995       1,606       1.33 %     483,336       1,546       1.28 %
                                                 
Interest-bearing liabilities of discontinued operations (6)
    -                       2,134                  
                                                 
Non-interest bearing liabilities:
                                               
Demand deposits and escrow accounts
    46,415                       50,260                  
Other liabilities
    2,605                       3,724                  
Total liabilities
    535,015                       539,454                  
Stockholders' equity
    88,966                       65,404                  
Total liabilities and stockholders' equity
  $ 623,981                     $ 604,858                  
                                                 
   Net interest income
          $ 6,749                     $ 4,912          
                                                 
Interest rate spread
                    4.41 %                     3.36 %
Net interest margin (7)
                    4.63 %                     3.53 %

(1)   Interest income and yield are stated on a fully tax-equivalent basis using a 34%  tax rate.
(2)   Includes loans held for sale.
(3)   Nonaccrual loans are included in the computation of average, but unpaid interest has not been included for purposes of determining interest income.
(4)   Short term investments include FHLB overnight deposits and other interest-bearing deposits.
(5)   Short term borrowings include securities sold under repurchase agreements and sweep accounts.
(6)   The average balance of borrowings associated with discontinued operations has been excluded from interest expense, interest rate spread, and net interest margin.
(7)   Net interest margin is calculated as net interest income divided by total interest-earning assets.

 
NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
 
(Unaudited)
   
(Dollars in thousands)
   
 
Successor Company (1)
   
Predecessor Company (2)
 
 
Year Ended June 30, 2012
   
184 Days Ended June 30, 2011
   
181 Days Ended December 28, 2010
 
       
Interest
   
Average
         
Interest
   
Average
         
Interest
   
Average
 
 
Average
   
Income/
   
Yield/
   
Average
   
Income/
   
Yield/
   
Average
   
Income/
   
Yield/
 
 
Balance
   
Expense
   
Rate
   
Balance
   
Expense
   
Rate
   
Balance
   
Expense
   
Rate
 
Assets:
                                                     
Interest-earning assets:
                                                     
Investment securities (3)
  $ 138,708     $ 2,019       1.46 %   $ 143,894     $ 1,642       2.32 %   $ 161,894     $ 3,111       3.96 %
Loans (4) (5)
    339,648       24,734       7.28 %     337,630       11,544       6.78 %     385,286       11,210       5.87 %
Regulatory stock
    5,673       72       1.27 %     5,550       28       1.00 %     5,486       18       0.66 %
Short-term investments (6)
    76,217       189       0.25 %     75,080       90       0.24 %     39,212       39       0.20 %
Total interest-earning assets
    560,246       27,014       4.82 %     562,154       13,304       4.71 %     591,878       14,378       4.92 %
Cash and due from banks
    2,910                       3,432                       3,340                  
Other non-interest earning assets
    36,803                       43,668                       34,724                  
Total assets
  $ 599,959                     $ 609,254                     $ 629,942                  
                                                                         
Liabilities & Stockholders' Equity:
                                                                       
Interest-bearing liabilities:
                                                                       
NOW accounts
  $ 55,218     $ 213       0.39 %   $ 56,386     $ 160       0.56 %   $ 53,780     $ 183       0.69 %
Money market accounts
    44,692       175       0.39 %     52,238       135       0.51 %     55,955       213       0.77 %
Savings accounts
    32,799       67       0.20 %     34,799       67       0.38 %     38,303       99       0.52 %
Time deposits
    223,782       2,971       1.33 %     207,251       1,303       1.25 %     196,318       2,301       2.36 %
    Total interest-bearing deposits
    356,491       3,426       0.96 %     350,674       1,665       0.94 %     344,356       2,796       1.64 %
Short-term borrowings (7)
    1,075       21       1.95 %     19,764       76       0.76 %     53,873       376       1.41 %
Borrowed funds
    113,083       2,119       1.87 %     115,798       1,101       1.89 %     117,688       2,365       4.05 %
Junior subordinated debentures
    8,028       751       9.35 %     7,921       365       9.14 %     16,496       340       4.16 %
Total interest-bearing liabilities
    478,677       6,317       1.32 %     494,157       3,207       1.29 %     532,413       5,877       2.23 %
                                                                         
Interest-bearing liabilities of discontinued operations (8)
    -                       2,134                       2,462                  
                                                                         
Non-interest bearing liabilities:
                                                                       
Demand deposits and escrow accounts
    45,933                       43,761                       37,941                  
Other liabilities
    3,932                       4,075                       5,576                  
Total liabilities
    528,542                       544,127                       578,392                  
Stockholders' equity
    71,417                       65,127                       51,550                  
Total liabilities and stockholders' equity
  $ 599,959                     $ 609,254                     $ 629,942                  
                                                                         
    Net interest income            $ 20,697                      $ 10,097                      $ 8,501          
                                                                         
Interest rate spread                     3.50  %                     3.42  %                     2.69  %
Net interest margin (9)                     3.69  %                     3.58  %                     2.90  %

(1)   "Successor Company" means Northeast Bancorp and its subsidiary after the closing of the merger with FHB Formation LLC on December 29, 2010.
(2)   "Predecessor Company" means Northeast Bancorp and its subsidiary prior to the closing of the merger with FHB Formation LLC on December 29, 2010.
(3)   Interest income and yield are stated on a fully tax-equivalent basis using a 34%  tax rate.
(4)   Includes loans held for sale.
(5)   Nonaccrual loans are included in the computation of average, but unpaid interest has not been included for purposes of determining interest income.
(6)   Short term investments include FHLB overnight deposits and other interest-bearing deposits.
(7)   Short term borrowings include securities sold under repurchase agreements and sweep accounts.
(8)   The average balance of borrowings associated with discontinued operations has been excluded from interest expense, interest rate spread, and net interest margin.
(9)   Net interest margin is calculated as net interest income divided by total interest-earning assets.


NORTHEAST BANCORP AND SUBSIDIARY
             
SELECTED CONSOLIDATED FINANCIAL HIGHLIGHTS AND OTHER DATA
                         
(Unaudited)
             
(Dollars in thousands, except share and per share data)
             
   
Year Ended
   
Three Months Ended
 
   
June 30,
2012
   
June 30,
2012
   
March 31,
2012
   
December 31,
2011
   
September 30,
2011
 
Net interest income
  $ 20,697     $ 6,749     $ 4,754     $ 4,916     $ 4,278  
Provision for loan losses
    946       312       100       134       400  
Noninterest income
    9,701       2,464       2,767       2,692       1,778  
Noninterest expense
    28,255       7,473       7,252       6,877       6,653  
Net income from discontinued operations
    1,147       10       14       0       1,123  
Net income
    2,163       1,048       168       418       529  
                                         
Weighted average common shares outstanding:
                                       
   Basic
    4,277,777       6,605,465       3,494,498       3,494,498       3,494,498  
   Diluted
    4,291,352       6,607,171       3,512,273       3,512,273       3,512,545  
Earnings per common share:
                                       
   Basic
  $ 0.41     $ 0.14     $ 0.02     $ 0.09     $ 0.12  
   Diluted
    0.41       0.14       0.02       0.09       0.12  
Dividends per common share
    0.36       0.09       0.09       0.09       0.09  
                                         
Return on average assets
    0.36 %     0.68 %     0.11 %     0.28 %     0.36 %
Return on average equity
    3.03 %     4.74 %     1.03 %     2.52 %     3.21 %
Net interest rate spread (1)
    3.50 %     4.41 %     3.26 %     3.35 %     2.91 %
Net interest margin (2)
    3.69 %     4.63 %     3.44 %     3.53 %     3.09 %
Efficiency ratio (3)
    92.95 %     81.11 %     96.42 %     90.39 %     109.91 %
Noninterest expense to average total assets
    4.71 %     4.82 %     4.91 %     4.60 %     4.49 %
Average interest-earning assets to average interest-bearing liabilities
    117.04 %     120.51 %     115.69 %     116.59 %     115.33 %
                                         
 Nonperforming loans:     June 30,
2012
      March 31,
2012
      December 31,
2011
      September 30,
2011
      June 30,
2011
 
Originated portfolio:
                             
Residential real estate
    3,090     $ 3,067     $ 3,264     $ 2,733     $ 2,195  
Commercial real estate
    417       442       1,998       2,797       3,601  
Construction
    0       0       0       121       121  
Home equity
    220       255       182       205       205  
Commercial business
    1,008       1,108       1,119       1,224       559  
Consumer
    324       309       329       356       527  
      5,059       5,181       6,892       7,436       7,208  
Purchased portfolio:
                                       
Residential real estate
    0       0       0       0       0  
Commercial real estate
    1,055       0       0       0       0  
Commercial business
    0       0       0       0       0  
      1,055       0       0       0       0  
Total nonperforming loans
    6,114       5,181       6,892       7,436       7,208  
Repossessed collateral
    834       915       837       463       690  
Total nonperforming assets
  $ 6,948     $ 6,096     $ 7,729     $ 7,899     $ 7,898  
                                         
Past due loans to total loans
    1.95 %     2.06 %     2.29 %     2.20 %     2.41 %
Nonperforming loans to total loans
    1.72 %     1.50 %     1.99 %     2.35 %     2.33 %
Nonperforming assets to total assets
    1.04 %     1.02 %     1.30 %     1.35 %     1.32 %
Allowance for loan losses to total loans
    0.23 %     0.22 %     0.21 %     0.22 %     0.14 %
Allowance for loan losses to nonperforming loans
    13.48 %     14.44 %     10.69 %     9.55 %     6.06 %
                                         
Commercial real estate loans to risk-based capital (4)
    148.28 %     238.25 %     236.88 %     194.08 %     200.53 %
Net loans to core deposits (5)
    88.29 %     88.65 %     91.34 %     84.75 %     84.40 %
Purchased loans to total loans, including held for sale
    23.07 %     16.16 %     14.83 %     3.90 %     0.21 %
Equity to total assets
    17.83 %     10.90 %     11.08 %     11.27 %     10.89 %
Tier 1 leverage capital  ratio
    19.91 %     11.85 %     11.86 %     11.85 %     10.35 %
Total risk-based capital ratio
    33.36 %     19.49 %     19.28 %     21.02 %     18.99 %
                                         
Total stockholders' equity
  $ 119,139     $ 64,870     $ 65,900     $ 66,188     $ 64,954  
Less:  Preferred stock
    (4,227 )     (4,227 )     (4,227 )     (4,227 )     (4,227 )
Common stockholders' equity
    114,912       60,643       61,673       61,961       60,727  
Less: Intangible assets
    (4,487 )     (4,749 )     (5,012 )     (5,348 )     (13,133 )
Tangible common stockholders' equity (non-GAAP)
  $ 110,425     $ 55,894     $ 56,661     $ 56,613     $ 47,594  
                                         
Common shares outstanding
    10,383,441       3,507,524       3,507,524       3,507,524       3,507,524  
Book value per common share
  $ 11.07     $ 17.29     $ 17.58     $ 17.66     $ 17.33  
Tangible book value per share (non-GAAP) (6)
  $ 10.63     $ 15.94     $ 16.15     $ 16.14     $ 13.58  

(1) The net interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.
(2) The net interest margin represents net interest income as a percent of average interest-earning assets for the period.
(3) The efficiency ratio represents non-interest expense divided by the sum of net interest income (before the loan loss provision) plus non-interest income.
(4) For purposes of calculating this ratio, commercial real estate includes all those loans defined as such by regulatory guidance, including all land development and construction loans.
(5) Core deposits includes all non-maturity deposits and maturity deposits less than $250 thousand.  Net loans includes loans held-for-sale.
(6) Tangible book value per share represents total stockholders' equity less the sum of preferred stock and intangible assets divided by common shares outstanding.