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Northeast Bancorp Reports Record Quarterly Results, Surpasses $1 Billion in Assets and Declares Dividend

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LEWISTON, Maine, Jan. 30, 2017 (GLOBE NEWSWIRE) -- 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 $3.1 million, or $0.35 per diluted common share, for the quarter ended December 31, 2016, compared to net income of  $1.7 million, or $0.18 per diluted common share, for the quarter ended December 31, 2015. Net income for the six months ended December 31, 2016 was $4.9 million, or $0.54 per diluted common share, compared to $3.6 million, or $0.38 per diluted common share, for the six months ended December 31, 2015.

The Board of Directors has also declared a cash dividend of $0.01 per share, payable on February 28, 2017 to shareholders of record as of February 15, 2017.

"I am very pleased with the progress we made this quarter," said Richard Wayne, President and Chief Executive Officer. "We reached a great milestone for the Company by surpassing $1 billion in assets and we also achieved record earnings of 35 cents per share.  In addition, we had solid loan volume, purchased loan transactional income and SBA gains. Our Loan Acquisition and Servicing Group produced $91.7 million of loans, our SBA Division closed $25.3 million of loans, the purchased loan portfolio yielded 13%, and the SBA gain on sale was $1.7 million. This balance sheet growth and solid income from the Loan Acquisition and Servicing Group and the SBA Division helped drive our efficiency ratio to 61.7%."

As of December 31, 2016, total assets were $1.0 billion, an increase of $26.5 million, or 2.7%, from total assets of $986.2 million as of June 30, 2016. The principal components of the change in the balance sheet follow:

1. The loan portfolio – excluding loans held for sale – has grown by $74.5 million, or 10.8%, compared to June 30, 2016, principally on the strength of $70.7 million of net growth in commercial loans purchased or originated by the Bank's Loan Acquisition and Servicing Group ("LASG") and net growth of $13.2 million in originations by the Bank's Small Business Administration and United States Department of Agriculture ("SBA") Division. This net growth was offset by a $9.4 million decrease in the Bank's Community Banking Division loan portfolio.

Loans generated by the LASG totaled $91.7 million for the quarter ended December 31, 2016. The growth in LASG loans consisted of $46.0 million of purchased loans, at an average price of 90.1% of unpaid principal balance, and $45.7 million of originated loans. SBA loans closed during the quarter totaled $25.3 million, of which $24.7 million were fully funded in the quarter. In addition, the Company sold $17.5 million of the guaranteed portion of SBA loans in the secondary market, of which $9.3 million were originated in the current quarter and $8.2 million were originated or purchased in prior quarters. Residential loan production sold in the secondary market totaled $17.7 million for the quarter.

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 December 31, 2016
        (Dollars in millions)
Total Loans   Purchased loans may not exceed 40% of total loans   $   91.5
Regulatory Capital   Non-owner occupied commercial real estate loans may not exceed 300% of total capital   $   146.2
           

An overview of the Bank's LASG portfolio follows:

  LASG Portfolio
  Three Months Ended December 31,
  2016   2015
  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 $ 51,112   $ 45,647   $ -   $ 96,759     $ 40,145   $ 39,512   $ -   $ 79,657  
Net investment basis    46,033     45,647     -     91,680       35,855     39,512     -     75,367  
                                   
Loan returns during the period:
Yield   13.01 %   5.89 %   0.99 %   8.76 %     12.74 %   5.69 %   0.50 %   8.55 %
Total Return (2)   13.01 %   5.89 %   0.99 %   8.76 %     12.74 %   5.69 %   0.50 %   8.55 %


  Six Months Ended December 31,
  2016   2015
  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 $ 67,903   $ 88,025   $ -   $ 155,928     $ 63,728   $ 50,907   $ -   $ 114,635  
Net investment basis   59,886     88,025     -     147,911       59,311     50,907     -     110,218  
                                   
Loan returns during the period:
Yield   11.71 %   5.88 %   0.74 %   8.19 %     12.41 %   5.68 %   0.50 %   8.40 %
Total Return (2)   11.73 %   5.88 %   0.74 %   8.19 %     12.43 %   5.68 %   0.50 %   8.41 %
                                                   
Total loans as of period end:                                                  
Unpaid principal balance $ 288,455   $ 231,278   $ 48,000   $ 567,733     $ 258,049   $ 155,728   $ 60,000   $ 473,777  
Net investment basis   255,048     231,278     48,000     534,326       226,014     155,728     60,000     441,742  


(1) Purchased loan balances include loans held for sale of $975 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.
 

2. Deposits increased by $34.2 million, or 4.2% for the quarter, attributable primarily to growth in non-maturity (demand, savings and interest checking, and money market) accounts, which increased by $20.3 million, or 4.2%, as well as an increase in time deposits of $13.8 million, or 4.3%. For the six months ended December 31, 2016, deposits increased $39.1 million, or 4.9%, due to growth in non-maturity accounts of $54.7 million, or 12.2%, offset by a decrease in time deposits of $15.6 million, or 4.4%.

3. Shareholders' equity decreased by $1.6 million from June 30, 2016, primarily due to the $6.9 million in share repurchases (representing 645,238 shares), offset by earnings of $4.9 million. Additionally, there was stock-based compensation of $483 thousand, a decrease in accumulated other comprehensive loss of $141 thousand and $181 thousand in dividends paid on common stock.

Net income increased by $1.4 million to $3.1 million for the quarter ended December 31, 2016, compared to $1.7 million for the quarter ended December 31, 2015.

1. Net interest and dividend income before provision for loan losses increased by $1.7 million for the quarter ended December 31, 2016, compared to the quarter ended December 31, 2015. The increase is primarily due to higher average balances in the total loan portfolio and higher transactional income on purchased loans.  This increase was partially offset by higher rates and volume in our deposit portfolio and the effect of the issuance of subordinated debt. 

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 six months ended December 31, 2015, transactional income increased by $331 thousand and decreased by $552 thousand, respectively. The following table summarizes interest income and related yields recognized on the loan portfolios:

  Interest Income and Yield on Loans    
  Three Months Ended December 31,    
  2016     2015      
  Average   Interest       Average   Interest        
  Balance (1)   Income   Yield   Balance (1)   Income   Yield    
  (Dollars in thousands)    
Community Banking $ 203,963   $   2,350   4.57 %   $  217,470   $    2,604   4.75 %    
SBA   41,038     574   5.55 %     23,037     328   5.65 %    
LASG:                                  
Originated    216,353       3,210   5.89 %      137,959       1,978   5.69 %    
Purchased    233,502       7,659   13.01 %      209,605       6,734   12.74 %    
Secured Loans to Broker-Dealers   48,000     120   0.99 %     60,004     75   0.50 %    
Total LASG    497,855       10,989   8.76 %      407,568       8,787   8.55 %    
  Total $  742,856   $   13,913   7.43 %   $  648,075   $   11,719   7.17 %    
                                       
       
  Six Months Ended December 31,    
  2016     2015      
  Average   Interest       Average   Interest        
  Balance (1)   Income   Yield   Balance (1)   Income   Yield    
  (Dollars in thousands)    
Community Banking $ 204,864   $   4,754   4.60 %   $  221,400   $   5,312   4.76 %    
SBA   36,093     1,093   6.01 %     18,289     545   5.91 %    
LASG:                                  
Originated    200,731       5,949   5.88 %      128,267       3,673   5.68 %    
Purchased    232,751       13,740   11.71 %      204,995       12,829   12.41 %    
Secured Loans to Broker-Dealers   48,000     180   0.74 %     60,006     150   0.50 %    
Total LASG    481,482       19,869   8.19 %      393,268       16,652   8.40 %    
  Total $  722,439   $   25,716   7.06 %   $  632,957   $   22,509   7.05 %    
 
  (1) Includes loans held for sale. 

The yield on purchased loans for the quarter ended December 31, 2016 was 13.0% as compared to 12.7% in the quarter ended December 31, 2015, primarily due to higher transactional income in the quarter. The following table details the total return on purchased loans:

  Total Return on Purchased Loans
  Three Months Ended December 31,
  2016   2015
  Income   Return (1)   Income   Return (1)
  (Dollars in thousands)
Regularly scheduled interest and accretion $ 4,716   8.01 %   $ 4,122   7.80 %
Transactional income:                  
Gain on loan sales   -   0.00 %     -   0.00 %
Gain on sale of real estate owned   -   0.00 %     -   0.00 %
Other noninterest income   -   0.00 %     -   0.00 %
Accelerated accretion and loan fees   2,943   5.00 %     2,612   4.94 %
Total transactional income   2,943   5.00 %     2,612   4.94 %
Total $ 7,659   13.01 %   $ 6,734   12.74 %


  Total Return on Purchased Loans
  Six Months Ended December 31,
  2016   2015
  Income   Return (1)   Income   Return (1)
  (Dollars in thousands)
Regularly scheduled interest and accretion $ 9,470   8.07 %   $ 8,009     7.75 %
Transactional income:                  
Gain on loan sales   -   0.00 %     -     0.00 %
Gain on sale of real estate owned   19   0.02 %     22     0.02 %
Other noninterest income   -   0.00 %     (1 )   0.00 %
Accelerated accretion and loan fees   4,270   3.64 %     4,820     4.66 %
Total transactional income   4,289   3.66 %     4,841     4.68 %
Total $ 13,759   11.73 %   $ 12,850     12.43 %


(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.
 

2. Noninterest income increased by $1.1 million for the quarter ended December 31, 2016, compared to the quarter ended December 31, 2015, principally due to an increase in gains realized on sale of SBA loans of $1.1 million.

3. Noninterest expense increased by $760 thousand for the quarter ended December 31, 2016, compared to the quarter ended December 31, 2015, primarily due to the following:

  • An increase in loan expense of $328 thousand, largely driven by the expense related to loan collection in the period;
  • An increase in salaries and employee benefits of $307 thousand, primarily due to increased incentive compensation and severance in the three months ended December 31, 2016, offset by higher deferred salaries due to an increase in loan originations;
  • An increase in professional fees of $135 thousand, largely attributable to increased consulting costs, increased audit costs relating to the Company's transition to accelerated filer status and core system projects; and
  • An increase in other noninterest expense of $99 thousand, largely attributable to $220 thousand of expense related to the quarterly valuation of SBA servicing rights.
  • The increases in noninterest expense were partially offset by a decrease in FDIC deposit insurance premiums of $94 thousand, resulting from changes in the reserve ratio requirements.

As of December 31, 2016, nonperforming assets totaled $13.3 million, or 1.32% of total assets, as compared to $9.5 million, or 0.96% of total assets, as of June 30, 2016.  The increase primarily relates to one loan placed on non-accrual in the quarter ended December 31, 2016, as well as one loan added to other real estate owned in the quarter ended September 30, 2016.

As of December 31, 2016, past due loans totaled $21.9 million, or 2.85% of total loans, compared to $6.9 million, or 1.00% of total loans as of June 30, 2016. The increase is primarily due to the following:

  • $6.0 million of loans purchased in December that were delinquent at month end, of which $4.5 million have been paid current in January; and
  • $6.0 million of loans that were 30 days past due as of December 31, 2016, of which $4.1 million have been paid current in January.

As of December 31, 2016, the Company's Tier 1 Leverage Ratio was 12.6%, compared to 13.3% at June 30, 2016, and the Total Capital Ratio was 18.3%, a decrease from 20.4% at June 30, 2016. The decrease 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 second quarter earnings and business outlook at 10:00 a.m. Eastern Time on Tuesday, January 31st. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 49922895. 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, and total return. 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.

NBN-F

NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share data)
  December 31, 2016   June 30, 2016
Assets          
Cash and due from banks $ 2,586     $ 2,459  
Short-term investments   109,610       148,698  
Total cash and cash equivalents   112,196       151,157  
Available-for-sale securities, at fair value   90,533       100,572  
           
Residential real estate loans held for sale   5,217       6,449  
SBA loans held for sale   3,762       1,070  
Total loans held for sale   8,979       7,519  
           
           
Loans          
Commercial real estate   503,448       426,568  
Residential real estate   106,949       113,962  
Commercial and industrial   151,228       145,956  
Consumer   5,313       5,950  
 Total loans   766,938       692,436  
Less: Allowance for loan losses   3,107       2,350  
 Loans, net   763,831       690,086  
           
           
Premises and equipment, net   7,179       7,801  
Real estate owned and other repossessed collateral, net   3,145       1,652  
Federal Home Loan Bank stock, at cost   1,938       2,408  
Intangible assets, net   1,514       1,732  
Bank owned life insurance   15,953       15,725  
Other assets   7,391       7,501  
Total assets $ 1,012,659     $ 986,153  
           
Liabilities and Shareholders' Equity          
Deposits          
Demand $ 76,721     $ 66,686  
Savings and interest checking   107,386       107,218  
Money market   319,933       275,437  
Time   335,531       351,091  
 Total deposits   839,571       800,432  
           
Federal Home Loan Bank advances   20,024       30,075  
Subordinated debt   23,469       23,331  
Capital lease obligation   1,003       1,128  
Other liabilities   13,650       14,596  
Total liabilities   897,717       869,562  
           
Commitments and contingencies   -       -  
           
Shareholders' equity          
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares        
issued and outstanding at December 31, 2016 and June 30, 2016   -       -  
Voting common stock, $1.00 par value, 25,000,000 shares authorized;          
7,487,552 and 8,089,790 shares issued and outstanding at        
December 31, 2016 and June 30, 2016, respectively   7,487       8,089  
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized;          
1,343,683 and 1,227,683 shares issued and outstanding at
December 31, 2016 and June 30, 2016, respectively
1,344     1,228  
Additional paid-in capital   77,046       83,020  
Retained earnings   30,830       26,160  
Accumulated other comprehensive loss   (1,765 )     (1,906 )
Total shareholders' equity   114,942       116,591  
Total liabilities and shareholders' equity $ 1,012,659     $ 986,153  


NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except share and per share data)
  Three Months Ended December 31,   Six Months Ended December 31,
  2016   2015     2016     2015  
Interest and dividend income:                      
Interest and fees on loans $ 13,913   $ 11,719     $ 25,716     $ 22,509  
Interest on available-for-sale securities   247     236       486       464  
Other interest and dividend income   172     80       387       176  
Total interest and dividend income   14,332     12,035       26,589       23,149  
                       
Interest expense:                      
Deposits   1,798     1,425       3,553       2,789  
Federal Home Loan Bank advances   220     259       475       519  
Wholesale repurchase agreements   -     -       -       67  
Short-term borrowings   -     5       -       13  
Subordinated debt   468     158       927       312  
Obligation under capital lease agreements   13     16       27       33  
Total interest expense   2,499     1,863       4,982       3,733  
Net interest and dividend income before provision for loan losses   11,833     10,172       21,607       19,416  
Provision for loan losses   628     896       820       1,065  
Net interest and dividend income after provision for loan losses   11,205     9,276       20,787       18,351  
                       
Noninterest income:                      
Fees for other services to customers   481     428       889       836  
Gain on sales of residential loans held for sale   337     398       878       957  
Gain on sales of SBA loans   1,734     679       2,476       1,354  
Gain (loss) recognized on real estate owned and other repossessed 
  collateral, net
  3     (14 )     (11 )     (74 )
Bank-owned life insurance income   114     112       228       224  
Other noninterest income   21     21       38       29  
Total noninterest income   2,690     1,624       4,498       3,326  
                       
Noninterest expense:                      
Salaries and employee benefits   5,161     4,854       10,475       9,110  
Occupancy and equipment expense   1,252     1,320       2,481       2,610  
Professional fees   399     264       895       694  
Data processing fees   410     366       832       714  
Marketing expense   97     66       184       136  
Loan acquisition and collection expense   547     219       774       663  
FDIC insurance premiums   22     116       146       229  
Intangible asset amortization   109     131       218       262  
Other noninterest expense   959     860       1,577       1,589  
Total noninterest expense   8,956     8,196       17,582       16,007  
Income before income tax expense   4,939     2,704       7,703       5,670  
Income tax expense   1,839     960       2,852       2,059  
Net income   3,100     1,744       4,851       3,611  
                       
Weighted-average shares outstanding:                      
Basic   8,831,235     9,559,369       8,968,690       9,560,913  
Diluted   8,864,618     9,569,585       8,999,062       9,567,138  
                       
Earnings per common share:                      
Basic $ 0.35   $ 0.18     $ 0.54     $ 0.38  
Diluted   0.35     0.18       0.54       0.38  
                             
Cash dividends declared per common share $ 0.01   $ 0.01     $ 0.02     $ 0.02  


NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
  Three Months Ended December 31,
  2016     2015  
      Interest   Average       Interest   Average
  Average   Income/   Yield/   Average   Income/   Yield/
  Balance   Expense   Rate   Balance   Expense   Rate
Assets:                              
Interest-earning assets:                              
Investment securities $   92,750   $   247   1.06 %   $   105,502   $   236   0.89 %
Loans (1) (2) (3)     742,856       13,931   7.44 %       648,075       11,737   7.19 %
Federal Home Loan Bank stock     2,398       23   3.81 %       2,588       34   5.21 %
Short-term investments (4)     114,276       149   0.52 %       72,299       46   0.25 %
Total interest-earning assets     952,280       14,350   5.98 %       828,464       12,053   5.77 %
Cash and due from banks     2,764                 3,353          
Other non-interest earning assets     35,213                 35,558          
Total assets $   990,257             $   867,375          
                               
Liabilities & Stockholders' Equity:                              
Interest-bearing liabilities:                              
NOW accounts $ 71,795   $   52   0.29 %   $ 65,617   $   42   0.25 %
Money market accounts     312,911       753   0.95 %       199,766       429   0.85 %
Savings accounts     35,206       12   0.14 %       35,269       11   0.12 %
Time deposits     317,318       981   1.23 %       334,925       943   1.12 %
  Total interest-bearing deposits     737,230       1,798   0.97 %       635,577       1,425   0.89 %
Short-term borrowings      -       -   0.00 %       2,002       5   0.99 %
Borrowed funds     27,099       220   3.22 %       30,145       259   3.41 %
Subordinated debt     23,430       468   7.92 %       8,699       158   7.21 %
Capital lease obligations     1,024       13   5.04 %       1,272       16   4.99 %
Total interest-bearing liabilities     788,783       2,499   1.26 %       677,695       1,863   1.09 %
                               
Non-interest bearing liabilities:                              
Demand deposits and escrow accounts    80,538                69,464          
Other liabilities     8,299                 6,302          
Total liabilities     877,620                 753,461          
Stockholders' equity     112,637                 113,914          
Total liabilities and stockholders' equity $   990,257             $   867,375          
                               
  Net interest income (5)       $ 11,851             $ 10,190    
                               
Interest rate spread             4.72 %               4.68 %
Net interest margin (6)             4.94 %               4.88 %
                               
(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 December 31, 2016 and December 31, 2015.
(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)
  Six Months Ended December 31,
  2016     2015  
      Interest   Average       Interest   Average
  Average   Income/   Yield/   Average   Income/   Yield/
  Balance   Expense   Rate   Balance   Expense   Rate
Assets:                              
Interest-earning assets:                              
Investment securities $ 93,825   $   486   1.03 %   $ 103,872   $   464   0.89 %
Loans (1) (2) (3)     722,439       25,752   7.07 %       632,957       22,545   7.07 %
Federal Home Loan Bank stock     2,403       46   3.80 %       3,345       68   4.03 %
Short-term investments (4)     134,334       341   0.50 %       85,974       108   0.25 %
Total interest-earning assets     953,001       26,625   5.54 %       826,148       23,185   5.57 %
Cash and due from banks     2,852                 3,190          
Other non-interest earning assets     33,012                 35,986          
Total assets $   988,865             $   865,324          
                               
Liabilities & Stockholders' Equity:                              
Interest-bearing liabilities:                              
NOW accounts $ 71,323   $ 103   0.29 %   $ 67,617   $ 88   0.26 %
Money market accounts     302,323       1,435   0.94 %       185,166       782   0.84 %
Savings accounts     35,488       25   0.14 %       35,816       23   0.13 %
Time deposits     326,794       1,990   1.21 %       342,896       1,896   1.10 %
  Total interest-bearing deposits     735,928       3,553   0.96 %       631,495       2,789   0.88 %
Short-term borrowings     -       -   0.00 %       1,976       13   1.31 %
Borrowed funds     28,580       475   3.30 %       34,734       586   3.35 %
Subordinated debt     23,395       927   7.86 %       8,674       312   7.14 %
Capital lease obligations     1,056       27   5.07 %       1,302       33   5.03 %
Total interest-bearing liabilities     788,959       4,982   1.25 %       678,181       3,733   1.09 %
                               
Non-interest bearing liabilities:                              
Demand deposits and escrow accounts   78,104               66,736          
Other liabilities     8,255               6,868          
Total liabilities     875,318                 751,785          
Stockholders' equity     113,547                 113,539          
Total liabilities and stockholders' equity $   988,865             $   865,324          
                               
  Net interest income (5)       $   21,643             $   19,452    
                               
Interest rate spread             4.29 %               4.48 %
Net interest margin (6)             4.51 %               4.67 %
                               
(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 $36 thousand for the six months ended December 31, 2016 and December 31, 2015.
(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:
  December 31, 2016   September 30, 2016   June 30, 2016   March 31, 2016   December  31, 2015
Net interest income $    11,833     $    9,775     $    10,713     $    9,254     $    10,172  
Provision for loan losses     628         193         317         236         896  
Noninterest income     2,690         1,808         2,411         2,035         1,624  
Noninterest expense     8,956         8,626         9,396         8,412         8,196  
Net income     3,100         1,751         2,199         1,809         1,744  
                   
Weighted average common shares outstanding:                  
 Basic   8,831,235       9,106,144       9,319,522       9,456,198       9,559,369  
 Diluted   8,864,618       9,133,383       9,342,439       9,459,611       9,569,585  
Earnings per common share:                  
 Basic $    0.35     $    0.19     $    0.24     $    0.19     $    0.18  
 Diluted     0.35         0.19         0.24         0.19         0.18  
Dividends per common share     0.01         0.01         0.01         0.01         0.01  
                   
Return on average assets   1.24 %     0.70 %     0.93 %     0.80 %     0.80 %
Return on average equity   10.92 %     6.07 %     7.67 %     6.33 %     6.07 %
Net interest rate spread (1)   4.72 %     3.86 %     4.55 %     4.06 %     4.67 %
Net interest margin (2)   4.94 %     4.07 %     4.73 %     4.25 %     4.87 %
Efficiency ratio (3)   61.67 %     74.47 %     71.59 %     74.52 %     69.48 %
Noninterest expense to average total assets   3.59 %     3.47 %     3.97 %     3.70 %     3.75 %
Average interest-earning assets to average
interest-bearing liabilities
  120.73 %     120.86 %     119.99 %     120.62 %     122.48 %
                   
  As of:
  December 31, 2016   September 30, 2016   June 30, 2016   March 31, 2016   December 31, 2015
Nonperforming loans:                  
Originated portfolio:                  
Residential real estate $    2,827     $    3,273     $    2,613     $    3,566     $    3,263  
Commercial real estate     396         361         474         602         399  
Home equity     48         48         48         -         11  
Commercial and industrial     2,659          347         17         2         2  
Consumer     48         121         163         216         204  
Total originated portfolio     5,978         4,150         3,315         4,386         3,879  
Total purchased portfolio     4,219         4,773         4,512         4,364         2,221  
Total nonperforming loans     10,197         8,923         7,827         8,750         6,100  
Real estate owned and other possessed collateral, net     3,145         3,774         1,652         690         1,238  
Total nonperforming assets $    13,342     $    12,697     $    9,479     $    9,440     $    7,338  
                   
Past due loans to total loans   2.85 %     1.36 %     1.00 %     2.52 %     2.48 %
Nonperforming loans to total loans   1.33 %     1.24 %     1.13 %     1.25 %     0.90 %
Nonperforming assets to total assets   1.32 %     1.29 %     0.96 %     1.02 %     0.82 %
Allowance for loan losses to total loans   0.41 %     0.35 %     0.34 %     0.32 %     0.31 %
Allowance for loan losses to nonperforming loans   30.47 %     28.08 %     30.02 %     25.41 %     34.90 %
                   
Commercial real estate loans to risk-based capital (4)   197.11 %     179.96 %     174.12 %     217.09 %     204.91 %
Net loans to core deposits (5)   92.04 %     90.22 %     87.15 %     93.48 %     94.37 %
Purchased loans to total loans, including held for sale   32.91 %     32.54 %     34.25 %     33.17 %     32.90 %
Equity to total assets   11.35 %     11.32 %     11.82 %     12.41 %     12.82 %
Common equity tier 1 capital ratio   14.94 %     15.34 %     17.97 %     17.46 %     18.11 %
Total capital ratio   18.31 %     18.81 %     20.39 %     17.78 %     18.43 %
Tier 1 leverage capital ratio   12.60 %     12.25 %     13.27 %     13.57 %     14.31 %
                   
Total shareholders' equity $    114,942     $    111,553     $    116,591     $    114,526     $    114,613  
Less: Preferred stock     -          -          -          -          -   
Common shareholders' equity     114,942         111,553         116,591         114,526         114,613  
Less: Intangible assets (6)     (3,856 )       (3,797 )       (3,503 )       (3,469 )       (3,336 )
Tangible common shareholders' equity (non-GAAP) $    111,086     $    107,756     $    113,088     $    111,057     $    111,277  
                   
Common shares outstanding     8,831,235         8,831,235         9,317,473         9,330,873         9,519,729  
Book value per common share $    13.02     $    12.63     $    12.51     $    12.27     $    12.04  
Tangible book value per share (non-GAAP) (7)     12.58         12.20         12.14         11.90         11.69  
                   
(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.
 

For More Information:
Brian Shaughnessy, CFO
Northeast Bank, 500 Canal Street, Lewiston, ME 04240 
207.786.3245 ext. 3220
www.northeastbank.com

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