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nbn20170425_8k.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):	April 25, 2017

Commission File No. 1-14588

NORTHEAST BANCORP

(Exact name of registrant as specified in its charter)

Maine	01-0425066
(State or other jurisdiction of incorporation)	(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

Former name or former address, if changed since last Report: N/A

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:

| | Written communications pursuant to Rule 425 under the Securities Act

| | Soliciting material pursuant to Rule 14a-12 under the Exchange Act

| | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

| | Pre-commencement to communications pursuant to Rule 13e-4(c) under the Exchange Act

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02

Results of Operations and Financial Condition

On April 25, 2017, Northeast Bancorp, a Maine corporation (the "Company"), issued a press release announcing its earnings for the third quarter of fiscal 2017 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 dated April 25, 2017

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 hereunder duly authorized.

	NORTHEAST BANCORP


	By:	/s/ Brian Shaughnessy
	Name: Brian Shaughnessy
	Title: Chief Financial Officer and Treasurer

Date: April 25, 2017

EXHIBIT INDEX

Exhibit No.	Description

99.1	Press Release dated April 25, 2017

ex99-1.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE

For More Information:

Brian Shaughnessy, CFO

Northeast Bank, 500 Canal Street, Lewiston, ME 04240

207.786.3245 ext. 3220

www.northeastbank.com

Northeast Bancorp Reports Record Quarterly Results and Declares Dividend

Lewiston, ME (April 25, 2017) ‒ 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 $3.5 million, or $0.39 per diluted common share, for the quarter ended March 31, 2017, compared to net income of $1.8 million, or $0.19 per diluted common share, for the quarter ended March 31, 2016. Net income for the nine months ended March 31, 2017 was $8.3 million, or $0.93 per diluted common share, compared to $5.4 million, or $0.57 per diluted common share, for the nine months ended March 31, 2016.

The Board of Directors has also declared a cash dividend of $0.01 per share, payable on May 22, 2017 to shareholders of record as of May 8, 2017.

“Our strong growth in fiscal year 2017 continued in the third quarter,” said Richard Wayne, President and Chief Executive Officer. “We achieved record earnings of 39 cents per share through solid loan volume, purchased loan transactional income and SBA gains. Our Loan Acquisition and Servicing Group produced $89.7 million of loans, our SBA Division closed $22.6 million of loans, the purchased loan portfolio yielded 11.9%, and the SBA gain on sale was $951 thousand. In addition, in the current quarter, we strategically repositioned our balance sheet with the payoff of $48.0 million of secured loans to broker-dealers and the sale of a commercial loan portfolio of $18.3 million. The payoff of these lower yielding assets provides capacity for higher yielding loan growth in the future. This quarterly activity helped drive our return on equity to 12.0%, our return on assets to 1.4%, and our efficiency ratio to 59.9%.”

As of March 31, 2017, total assets were $1.0 billion, an increase of $40.9 million, or 4.2%, from total assets of $986.2 million as of June 30, 2016. The principal components of the change in the balance sheet follow:

Bank wide, the Company originated $125.4 million of loans during the quarter ended March 31, 2017. Loans generated by the Bank’s Loan Acquisition and Servicing Group (“LASG”) totaled $89.7 million, which consisted of $7.9 million of purchased loans, at an average price of 91.3% of unpaid principal balance, and $81.8 million of originated loans. The Bank’s Small Business Administration and United States Department of Agriculture (“SBA”) Division closed $22.6 million of new loans during the quarter, of which $16.5 million were funded. In addition, the Company sold $9.9 million of the guaranteed portion of SBA loans in the secondary market, of which $2.6 million were originated in the current quarter and $7.3 million were originated or purchased in prior quarters. Residential loan production sold in the secondary market totaled $15.5 million for the quarter.

In totality, the loan portfolio – excluding loans held for sale – increased by $49.3 million, or 7.1%, compared to June 30, 2016, and decreased by $25.2 million, or 3.3%, compared to December 31, 2016. The decrease from December 31, 2016 is primarily attributable to the payoff of $48.0 million of secured loans to broker-dealers and the sale of a commercial loan portfolio of $18.3 million which, combined, had a weighted average yield of 1.92%.

The following table highlights the changes in the loan portfolio for the three and nine months ended March 31, 2017:

	Loan Portfolio Changes
	Three months ended March 31, 2017			Nine months ended March 31, 2017
	(Dollars in thousands)
LASG originations and acquisitions	$	89,667		$	237,578
SBA and USDA funded originations		16,549			56,853
Community Banking Division originations		13,036			63,776
Payoff of secured loans to broker-dealers		(48,000	)		(48,000	)
Commercial loan portfolio sale		(18,259	)		(18,259	)
SBA and residential loan sales		(25,471	)		(92,956	)
Payoffs, pay-downs and amortization, net		(52,732	)		(149,700	)
Net change	$	(25,210	)	$	49,292

As previously discussed in the Company’s SEC filings, the Company made certain commitments to the Board of Governors of the Federal Reserve System in connection with the merger of FHB Formation LLC with and into the Company in December 2010. The Company’s loan purchase and commercial real estate loan availability under these conditions follow:

Basis for Regulatory Condition	Condition	Availability at March 31, 2017
		(Dollars in millions)
Total Loans	Purchased loans may not exceed 40% of total loans	$	101.0
Regulatory Capital	Non-owner occupied commercial real estate loans may not exceed 300% of total capital	$	172.3

An overview of the Bank’s LASG portfolio follows:

	LASG Portfolio
	Three Months Ended March 31,
	2017												2016
	Purchased (1)			Originated			Secured Loans to Broker- Dealers			Total LASG			Purchased			Originated			Secured Loans to Broker-Dealers			Total LASG
	(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance	$	8,609		$	81,806		$	-		$	90,415		$	24,400		$	27,846		$	-		$	52,246
Net investment basis		7,861			81,806			-			89,667			21,934			27,846			-			49,780
Loan returns during the period:
Yield		11.89	%		6.44	%		1.13	%		8.68	%		9.88	%		5.83	%		0.50	%		7.15	%
Total Return (2)		11.95	%		6.44	%		1.13	%		8.71	%		9.88	%		5.82	%		0.50	%		7.15	%

	Nine Months Ended March 31,
	2017												2016
	Purchased (1)			Originated			Secured Loans to Broker- Dealers			Total LASG			Purchased			Originated			Secured Loans to Broker-Dealers			Total LASG
	(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance	$	76,511		$	169,831		$	-		$	246,342		$	88,128		$	78,752		$	-		$	166,880
Net investment basis		67,747			169,831			-			237,578			81,245			78,752			-			159,997
Loan returns during the period:
Yield		11.77	%		6.10	%		0.82	%		8.36	%		11.54	%		5.75	%		0.50	%		7.97	%
Total Return (2)		11.80	%		6.10	%		0.82	%		8.37	%		11.57	%		5.74	%		0.50	%		7.98	%

Total loans as of period end:
Unpaid principal balance	$	268,651		$	299,340		$	-		$	567,991		$	266,223		$	170,085		$	60,000		$	496,308
Net investment basis		237,569			299,340			-			536,909			233,650			170,085			60,000			463,735

(1) Purchased loan balances include loans held for sale of $973 thousand.

(2) The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on asset sales, and other noninterest income recorded during the period divided by the average invested balance, which includes 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.

Deposits increased by $9.9 million, or 1.2% for the quarter, attributable primarily to growth in non-maturity (demand, savings and interest checking, and money market) accounts, which increased by $24.5 million, or 4.9%, offset by a decrease in time deposits of $14.6 million, or 4.3%. For the nine months ended March 31, 2017, deposits increased $49.0 million, or 6.1%, due to growth in non-maturity accounts of $79.2 million, or 17.6%, offset by a decrease in time deposits of $30.1 million, or 8.6%.

Shareholders’ equity increased by $2.1 million from June 30, 2016, primarily due to earnings of $8.3 million, offset by $6.9 million in share repurchases (representing 645,238 shares). Additionally, there was stock-based compensation of $689 thousand, a decrease in accumulated other comprehensive loss of $313 thousand and $268 thousand in dividends paid on common stock.

Net income increased by $1.7 million to $3.5 million for the quarter ended March 31, 2017, compared to $1.8 million for the quarter ended March 31, 2016.

Net interest and dividend income before provision for loan losses increased by $3.2 million for the quarter ended March 31, 2017, compared to the quarter ended March 31, 2016. The increase is primarily due to higher transactional income on purchased loans and higher average balances in the total loan portfolio. This increase was partially offset by higher rates and volume in the deposit portfolio and the effect of the issuance of subordinated debt.

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,
	2017							2016
	Average		Interest					Average		Interest
	Balance (1)		Income		Yield			Balance (1)		Income		Yield
	(Dollars in thousands)
Community Banking Division	$	188,748	$	2,402		5.16	%	$	219,001	$	2,592		4.76	%
SBA		44,538		678		6.17	%		28,193		402		5.73	%
LASG:
Originated		256,778		4,075		6.44	%		159,976		2,317		5.83	%
Purchased		245,135		7,184		11.89	%		224,710		5,518		9.88	%
Secured Loans to Broker-Dealers		27,933		78		1.13	%		60,001		75		0.50	%
Total LASG		529,846		11,337		8.68	%		444,687		7,910		7.15	%
Total	$	763,132	$	14,417		7.66	%	$	691,881	$	10,904		6.34	%

	Nine Months Ended March 31,
	2017							2016
	Average		Interest					Average		Interest
	Balance (1)		Income		Yield			Balance (1)		Income		Yield
	(Dollars in thousands)
Community Banking Division	$	199,566	$	7,150		4.77	%	$	220,582	$	7,893		4.76	%
SBA		38,867		1,771		6.07	%		21,590		957		5.90	%
LASG:
Originated		219,140		10,030		6.10	%		138,760		5,991		5.75	%
Purchased		236,822		20,925		11.77	%		211,519		18,347		11.54	%
Secured Loans to Broker- Dealers		41,409		256		0.82	%		60,004		225		0.50	%
Total LASG		497,371		31,211		8.36	%		410,283		24,563		7.97	%
Total	$	735,804	$	40,132		7.27	%	$	652,455	$	33,413		6.82	%

(1) Includes loans held for sale.

The various components of transactional income are set forth in the table below entitled “Total Return on Purchased Loans.” When compared to the three and nine months ended March 31, 2016, transactional income increased by $1.4 million and $831 thousand, respectively. The total return on purchased loans for the three and nine months ended March 31, 2017 was 11.95% and 11.80%, respectively. The increase over the prior comparable periods was primarily due to higher average balances and transactional income in the three and nine months ended March 31, 2017. The following table details the total return on purchased loans:

	Total Return on Purchased Loans
	Three Months Ended March 31,
	2017					2016
	Income		Return (1)			Income		Return (1)
	(Dollars in thousands)
Regularly scheduled interest and accretion	$	4,914		8.13	%	$	4,606		8.25	%
Transactional income:
Gain on loan sales		-		0.00	%		-		0.00	%
Gain on sale of real estate owned		36		0.06	%		1		0.00	%
Other noninterest income		-		0.00	%		-		0.00	%
Accelerated accretion and loan fees		2,270		3.76	%		912		1.63	%
Total transactional income		2,306		3.82	%		913		1.63	%
Total	$	7,220		11.95	%	$	5,519		9.88	%

	Nine Months Ended March 31,
	2017					2016
	Income		Return (1)			Income		Return (1)
	(Dollars in thousands)
Regularly scheduled interest and accretion	$	14,383		8.09	%	$	12,615		7.94	%
Transactional income:
Gain on loan sales		-		0.00	%		-		0.00	%
Gain on sale of real estate owned		55		0.03	%		23		0.01	%
Other noninterest income		-		0.00	%		11		0.01	%
Accelerated accretion and loan fees		6,542		3.68	%		5,732		3.61	%
Total transactional income		6,597		3.71	%		5,766		3.63	%
Total	$	20,980		11.80	%	$	18,381		11.57	%

(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 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.

Noninterest income increased by $273 thousand for the quarter ended March 31, 2017, compared to the quarter ended March 31, 2016, principally due to the following:

●

An increase in gain on sale of other loans of $365 thousand, due to the sale of a Community Banking Division commercial loan portfolio;

●

An increase in fees for other services to customers of $88 thousand, due to an increase in SBA loan servicing fees; and

●

An increase in gain recognized on real estate owned and other repossessed collateral, net of $74 thousand, due to the sale of Community Banking Division real estate owned (“REO”).

●

The increases in noninterest income were partially offset by a decrease in gain on sale of SBA loans of $254 thousand, due to a lower volume sold in the quarter.

Noninterest expense increased by $430 thousand for the quarter ended March 31, 2017, compared to the quarter ended March 31, 2016, primarily due to the following:

●

An increase in loan expense of $431 thousand, largely driven by the expense related to increased loan acquisition and refinance activity, as well as increased REO activity and expense in the period; and

●

An increase in salaries and employee benefits of $357 thousand, primarily due to severance expense of $304 thousand recognized in the three months ended March 31, 2017.

●

The increases in noninterest expense were partially offset by a decrease in other noninterest expense of $390 thousand, primarily resulting from a mortgage insurance recovery from a legacy mortgage insurance premium plan of $167 thousand and a decrease in impairment on servicing assets as no impairment was booked in the three months ended March 31, 2017.

As of March 31, 2017, nonperforming assets totaled $18.6 million, or 1.81% of total assets, as compared to $13.3 million, or 1.32% of total assets, as of December 31, 2016, and $9.5 million, or 0.96% of total assets, as of June 30, 2016. The increase of $5.3 million from December 31, 2016 is primarily due to three loans placed on non-accrual totaling $4.6 million.

As of March 31, 2017, past due loans totaled $24.1 million, or 3.25% of total loans, as compared to $21.9 million, or 2.85% of total loans, as of December 31, 2016, and $6.9 million, or 1.00% of total loans as of June 30, 2016. The increase of $2.2 million from December 31, 2016 includes two loans totaling $2.1 million which were 30-59 days past due as of March 31, 2017, and have been paid current in April.

As of March 31, 2017, the Company’s Tier 1 Leverage Ratio was 12.5%, compared to 13.3% at June 30, 2016, and the Total Capital Ratio was 19.3%, compared to 20.4% at June 30, 2016. The decreases resulted primarily from loan growth and the effect of purchases under the Company’s share repurchase program.

Investor Call Information

Richard Wayne, Chief Executive Officer of Northeast Bancorp, and Brian Shaughnessy, Chief Financial Officer of Northeast Bancorp, will host a conference call to discuss third quarter earnings and business outlook at 10:00 a.m. Eastern Time on Wednesday, April 26^th. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 10568713. 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, a replay will be available online for one year at www.northeastbank.com.

About Northeast Bancorp

Northeast Bancorp (NASDAQ: NBN) is the holding company for Northeast Bank, a full-service bank headquartered in Lewiston, Maine. We offer traditional banking services through the Community Banking Division, which operates ten full-service branches that serve customers located in western, central, and southern Maine. From our Maine and Boston locations, we also lend throughout the New England area. Our Loan Acquisition and Servicing Group (“LASG”) purchases and originates commercial loans on a nationwide basis. In addition, our SBA Division supports the needs of growing businesses nationally. ableBanking, a division of Northeast Bank, offers savings products to consumers online. Information regarding Northeast Bank can be found on its website 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 tangible common shareholders’ equity, tangible book value per share, total return, and efficiency ratio. 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.

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 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 weakness 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; changing government regulation; the risk that the Company may not be successful in the implementation of its 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 the Company 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.

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except share and per share data)

	March 31, 2017			June 30, 2016
Assets
Cash and due from banks	$	3,559		$	2,459
Short-term investments		143,883			148,698
Total cash and cash equivalents		147,442			151,157

Available-for-sale securities, at fair value		98,865			100,572

Residential real estate loans held for sale		1,424			6,449
SBA loans held for sale		3,210			1,070
Total loans held for sale		4,634			7,519

Loans
Commercial real estate		479,260			426,568
Residential real estate		103,254			113,962
Commercial and industrial		154,343			145,956
Consumer		4,871			5,950
Total loans		741,728			692,436
Less: Allowance for loan losses		3,375			2,350
Loans, net		738,353			690,086

Premises and equipment, net		7,002			7,801
Real estate owned and other repossessed collateral, net		3,761			1,652
Federal Home Loan Bank stock, at cost		1,938			2,408
Intangible assets, net		1,408			1,732
Bank owned life insurance		16,065			15,725
Other assets		7,578			7,501
Total assets	$	1,027,046		$	986,153
Liabilities and Shareholders' Equity
Deposits
Demand	$	72,369		$	66,686
Savings and interest checking		108,507			107,218
Money market		347,658			275,437
Time		320,945			351,091
Total deposits		849,479			800,432

Federal Home Loan Bank advances		20,017			30,075
Subordinated debt		23,544			23,331
Capital lease obligation		938			1,128
Other liabilities		14,393			14,596
Total liabilities		908,371			869,562

Commitments and contingencies		-			-

Shareholders' equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares issued and outstanding at March 31, 2017 and June 30, 2016		-			-
Voting common stock, $1.00 par value, 25,000,000 shares authorized; 7,824,085 and 8,089,790 shares issued and outstanding at March 31, 2017 and June 30, 2016, respectively		7,824			8,089
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized; 991,194 and 1,227,683 shares issued and outstanding at March 31, 2017 and June 30, 2016, respectively		991			1,228
Additional paid-in capital		77,249			83,020
Retained earnings		34,204			26,160
Accumulated other comprehensive loss		(1,593	)		(1,906	)
Total shareholders' equity		118,675			116,591
Total liabilities and shareholders' equity	$	1,027,046		$	986,153

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except share and per share data)

	Three Months Ended March 31,					Nine Months Ended March 31,
	2017		2016			2017		2016
Interest and dividend income:
Interest and fees on loans	$	14,417	$	10,904		$	40,132	$	33,413
Interest on available-for-sale securities		261		236			748		700
Other interest and dividend income		282		119			669		295
Total interest and dividend income		14,960		11,259			41,549		34,408

Interest expense:
Deposits		1,855		1,566			5,407		4,356
Federal Home Loan Bank advances		159		255			634		774
Wholesale repurchase agreements		-		-			-		65
Short-term borrowings		-		5			-		19
Subordinated debt		475		164			1,401		476
Obligation under capital lease agreements		12		15			39		49
Total interest expense		2,501		2,005			7,481		5,739
Net interest and dividend income before provision for loan losses		12,459		9,254			34,068		28,669
Provision for loan losses		384		236			1,205		1,301
Net interest and dividend income after provision for loan losses		12,075		9,018			32,863		27,368

Noninterest income:
Fees for other services to customers		516		428			1,405		1,264
Gain on sales of residential loans held for sale		281		335			1,160		1,292
Gain on sales of SBA loans		951		1,205			3,411		2,558
Gain on sale of other loans		365		-			365		-
Gain (loss) recognized on real estate owned and other repossessed collateral, net		20		(54	)		9		(127	)
Bank-owned life insurance income		113		112			341		336
Other noninterest income		62		9			115		39
Total noninterest income		2,308		2,035			6,806		5,362

Noninterest expense:
Salaries and employee benefits		5,203		4,846			15,678		13,956
Occupancy and equipment expense		1,299		1,327			3,781		3,937
Professional fees		370		348			1,265		1,042
Data processing fees		455		394			1,286		1,109
Marketing expense		89		64			272		200
Loan acquisition and collection expense		728		297			1,502		961
FDIC insurance premiums		78		125			224		354
Intangible asset amortization		107		108			324		369
Other noninterest expense		513		903			2,093		2,489
Total noninterest expense		8,842		8,412			26,425		24,417
Income before income tax expense		5,541		2,641			13,244		8,313
Income tax expense		2,080		832			4,932		2,892
Net income		3,461		1,809			8,312		5,421

Weighted-average shares outstanding:
Basic		8,830,442		9,456,198			8,923,280		9,526,302
Diluted		8,893,534		9,459,611			8,963,483		9,531,747

Earnings per common share:
Basic	$	0.39	$	0.19		$	0.93	$	0.57
Diluted		0.39		0.19			0.93		0.57

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

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS

(Unaudited)

(Dollars in thousands)

	Three Months Ended March 31,
	2017						2016
			Interest		Average				Interest		Average
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate
Assets:
Interest-earning assets:
Investment securities	$	96,868	$	261		1.09%	$	100,904	$	236		0.94%
Loans (1) (2) (3)		763,132		14,435		7.67%		691,881		10,922		6.35%
Federal Home Loan Bank stock		1,938		24		5.02%		2,571		22		3.44%
Short-term investments (4)		128,082		258		0.82%		80,789		97		0.48%
Total interest-earning assets		990,020		14,978		6.14%		876,145		11,277		5.18%
Cash and due from banks		2,875						3,841
Other non-interest earning assets		31,606						34,045
Total assets	$	1,024,501					$	914,031

Liabilities & Stockholders' Equity:
Interest-bearing liabilities:
NOW accounts	$	69,773	$	49		0.28%	$	65,985	$	42		0.28%
Money market accounts		338,662		807		0.97%		223,835		491		0.88%
Savings accounts		36,940		13		0.14%		36,453		12		0.13%
Time deposits		329,442		986		1.21%		357,857		1,021		1.15%
Total interest-bearing deposits		774,817		1,855		0.97%		684,130		1,566		0.92%
Short-term borrowings		-		-		0.00%		2,136		5		0.94%
Federal Home Loan Bank advances		20,021		159		3.22%		30,117		255		3.41%
Subordinated debt		23,506		475		8.20%		8,746		164		7.54%
Capital lease obligations		961		12		5.06%		1,211		15		4.98%
Total interest-bearing liabilities		819,305		2,501		1.24%		726,340		2,005		1.11%

Non-interest bearing liabilities:
Demand deposits and escrow accounts		81,901						66,384
Other liabilities		6,659						6,429
Total liabilities		907,865						799,153
Stockholders' equity		116,636						114,878
Total liabilities and stockholders' equity	$	1,024,501					$	914,031

Net interest income (5)			$	12,477					$	9,272

Interest rate spread						4.90%						4.07%
Net interest margin (6)						5.11%						4.26%

(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)	Includes tax exempt interest income of $18 thousand for the three months ended March 31, 2017 and March 31, 2016.
(6)	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)

	Nine Months Ended March 31,
	2017						2016
			Interest		Average				Interest		Average
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate
Assets:
Interest-earning assets:
Investment securities	$	94,824	$	748		1.05%	$	102,890	$	700		0.91%
Loans (1) (2) (3)		735,804		40,185		7.28%		652,455		33,467		6.83%
Federal Home Loan Bank stock		2,250		70		4.14%		3,089		90		3.88%
Short-term investments (4)		132,280		599		0.60%		84,258		205		0.32%
Total interest-earning assets		965,158		41,602		5.74%		842,692		34,462		5.44%
Cash and due from banks		2,860						3,405
Other non-interest earning assets		32,554						35,345
Total assets	$	1,000,572					$	881,442

Liabilities & Stockholders' Equity:
Interest-bearing liabilities:
NOW accounts	$	70,814	$	152		0.29%	$	67,078	$	130		0.26%
Money market accounts		314,259		2,242		0.95%		197,962		1,273		0.86%
Savings accounts		35,964		37		0.14%		36,027		36		0.13%
Time deposits		327,664		2,976		1.21%		347,847		2,917		1.12%
Total interest-bearing deposits		748,701		5,407		0.96%		648,914		4,356		0.89%
Short-term borrowings		-		-		0.00%		2,029		19		1.25%
Federal Home Loan Bank advances		25,768		634		3.28%		33,207		839		3.36%
Subordinated debt		23,431		1,401		7.97%		8,698		476		7.28%
Capital lease obligations		1,024		39		5.07%		1,272		49		5.13%
Total interest-bearing liabilities		798,924		7,481		1.25%		694,120		5,739		1.10%

Non-interest bearing liabilities:
Demand deposits and escrow accounts		79,352						66,619
Other liabilities		7,738						6,720
Total liabilities		886,014						767,459
Stockholders' equity		114,558						113,983
Total liabilities and stockholders' equity	$	1,000,572					$	881,442

Net interest income (5)			$	34,121					$	28,723

Interest rate spread						4.49%						4.34%
Net interest margin (6)						4.71%						4.54%

(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)	Includes tax exempt interest income of $53 thousand and $54 thousand for the nine months ended March 31, 2017 and March 31, 2016, respectively.
(6)	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)

	Three Months Ended:
	March 31, 2017			December 31, 2016			September 30, 2016			June 30, 2016			March 31, 2016
Net interest income	$	12,459		$	11,833		$	9,775		$	10,713		$	9,254
Provision for loan losses		384			628			193			317			236
Noninterest income		2,308			2,690			1,808			2,411			2,035
Noninterest expense		8,842			8,956			8,626			9,396			8,412
Net income		3,461			3,100			1,751			2,199			1,809

Weighted average common shares outstanding:
Basic		8,830,442			8,831,235			9,106,144			9,319,522			9,456,198
Diluted		8,893,534			8,864,618			9,133,383			9,342,439			9,459,611
Earnings per common share:
Basic	$	0.39		$	0.35		$	0.19		$	0.24		$	0.19
Diluted		0.39			0.35			0.19			0.24			0.19
Dividends per common share		0.01			0.01			0.01			0.01			0.01

Return on average assets		1.37	%		1.24	%		0.70	%		0.93	%		0.80	%
Return on average equity		12.03	%		10.92	%		6.07	%		7.67	%		6.33	%
Net interest rate spread (1)		4.90	%		4.72	%		3.86	%		4.55	%		4.06	%
Net interest margin (2)		5.11	%		4.94	%		4.07	%		4.73	%		4.25	%
Efficiency ratio (non-GAAP) (3)		59.88	%		61.67	%		74.47	%		71.59	%		74.52	%
Noninterest expense to average total assets		3.50	%		3.59	%		3.47	%		3.97	%		3.70	%
Average interest-earning assets to average interest-bearing liabilities		120.84	%		120.73	%		120.86	%		119.99	%		120.62	%

	As of:
	March 31, 2017			December 31, 2016			September 30, 2016			June 30, 2016			March 31, 2016
Nonperforming loans:
Originated portfolio:
Residential real estate	$	3,265		$	2,827		$	3,273		$	2,613		$	3,566
Commercial real estate		420			396			361			474			602
Home equity		48			48			48			48			-
Commercial and industrial		2,636			2,659			347			17			2
Consumer		65			48			121			163			216
Total originated portfolio		6,434			5,978			4,150			3,315			4,386
Total purchased portfolio		8,388			4,219			4,773			4,512			4,364
Total nonperforming loans		14,822			10,197			8,923			7,827			8,750
Real estate owned and other possessed collateral, net		3,761			3,145			3,774			1,652			690
Total nonperforming assets	$	18,583		$	13,342		$	12,697		$	9,479		$	9,440

Past due loans to total loans		3.25	%		2.85	%		1.36	%		1.00	%		2.52	%
Nonperforming loans to total loans		2.00	%		1.33	%		1.24	%		1.13	%		1.25	%
Nonperforming assets to total assets		1.81	%		1.32	%		1.29	%		0.96	%		1.02	%
Allowance for loan losses to total loans		0.46	%		0.41	%		0.35	%		0.34	%		0.32	%
Allowance for loan losses to nonperforming loans		22.77	%		30.47	%		28.08	%		30.02	%		25.41	%

Commercial real estate loans to risk-based capital (4)		181.83	%		197.11	%		179.96	%		174.12	%		217.09	%
Net loans to core deposits (5)		87.46	%		92.04	%		90.22	%		87.15	%		93.48	%
Purchased loans to total loans, including held for sale		31.87	%		32.91	%		32.54	%		34.25	%		33.17	%
Equity to total assets		11.55	%		11.35	%		11.32	%		11.82	%		12.41	%
Common equity tier 1 capital ratio		15.80	%		14.94	%		15.34	%		17.97	%		17.46	%
Total capital ratio		19.30	%		18.31	%		18.81	%		20.39	%		17.78	%
Tier 1 leverage capital ratio		12.46	%		12.60	%		12.25	%		13.27	%		13.57	%

Total shareholders' equity	$	118,675		$	114,942		$	111,553		$	116,591		$	114,526
Less: Preferred stock		-			-			-			-			-
Common shareholders' equity		118,675			114,942			111,553			116,591			114,526
Less: Intangible assets (6)		(3,898	)		(3,856	)		(3,797	)		(3,503	)		(3,469	)
Tangible common shareholders' equity (non-GAAP)	$	114,777		$	111,086		$	107,756		$	113,088		$	111,057

Common shares outstanding		8,815,279			8,831,235			8,831,235			9,317,473			9,330,873
Book value per common share	$	13.46		$	13.02		$	12.63		$	12.51		$	12.27
Tangible book value per share (non-GAAP) (7)		13.02			12.58			12.20			12.14			11.90

(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 non-owner occupied commercial real estate loans defined as such by regulatory guidance, including all land development and construction loans.
(5)	Core deposits include all non-maturity deposits and maturity deposits less than $250 thousand. Loans include loans held-for-sale.
(6)	Includes the core deposit intangible asset, as well as the servicing rights asset which is included in other assets in the consolidated balance sheets.
(7)	Tangible book value per share represents total shareholders' equity less the sum of preferred stock and intangible assets divided by common shares outstanding.