Northeast Bancorp Reports Third Quarter Results and Declares Dividend - Northeast Bank (NASDAQ:NBN)

LEWISTON, Maine, April 25, 2018 (GLOBE NEWSWIRE) -- Northeast Bancorp ("Northeast" or the "Company") NBN, a Maine-based full-service financial services company and parent of Northeast Bank (the "Bank"), today reported net income of $3.9 million, or $0.43 per diluted common share, for the quarter ended March 31, 2018, compared to net income of $3.5 million, or $0.39 per diluted common share, for the quarter ended March 31, 2017. Net income for the nine months ended March 31, 2018 was $11.8 million, or $1.29 per diluted common share, compared to $8.3 million, or $0.93 per diluted common share, for the nine months ended March 31, 2017.

On April 25, 2018, the Board of Directors declared a cash dividend of $0.01 per share, payable on May 25, 2018 to shareholders of record as of May 11, 2018.

"Our strong growth in fiscal year 2018 continued in the third quarter," said Richard Wayne, President and Chief Executive Officer. "We achieved earnings of 43 cents per diluted share through solid loan volume, purchased loan transactional income, gains from sale of SBA and residential loans, disciplined expense management, and a reduction to 28.0% in our federal income tax rate. Our Loan Acquisition and Servicing Group produced $105.9 million of loans, including originations of $72.9 million and purchases with a recorded investment of $33.0 million, for net growth in the LASG portfolio of $45.6 million, or 7.7%, during the quarter. This quarterly activity helped drive our return on equity to 12.2%, our return on assets to 1.4%, and our efficiency ratio to 59.8%."

As of March 31, 2018, total assets were $1.2 billion, an increase of $89.3 million, or 8.3%, from total assets of $1.1 billion as of June 30, 2017. The principal components of the change in the balance sheet follow:

1. The following table highlights the changes in the loan portfolio for the three and nine months ended March 31, 2018:

	Loan Portfolio Changes
	Three Months Ended March 31, 2018
	March 31, 2018 Balance		December 31, 2017 Balance		Change ($)						Change (%)
	(Dollars in thousands)
LASG Purchased	$	254,700	$	244,177		$		10,523			4.31		%
LASG Originated		381,990		346,874				35,116			10.12		%
SBA		50,583		49,109				1,474			3.00		%
Community Banking		129,156		134,030				(4,874		)	(3.64		%)
Total	$	816,429	$	774,190		$		42,239			5.46		%

	Nine Months Ended March 31, 2018
	March 31, 2018 Balance		June 30, 2017 Balance		Change ($)						Change (%)
	(Dollars in thousands)
LASG Purchased	$	254,700	$	246,388	$		8,312					3.37	%
LASG Originated		381,990		330,515			51,745					15.57	%
SBA		50,583		52,965			(2,382		)			(4.50	%)
Community Banking		129,156		149,327			(20,171		)			(13.51	%)
Total	$	816,429	$	779,195	$		37,234					4.78	%

Loans generated by the Bank's Loan Acquisition and Servicing Group ("LASG") for the quarter ended March 31, 2018 totaled $105.9 million, which consisted of $33.0 million of purchased loans, at an average price of 85.8% of unpaid principal balance, and $72.9 million of originated loans. The Bank's Small Business Administration ("SBA") Division closed $8.9 million and funded $8.8 million of new loans during the quarter ended March 31, 2018. In addition, the Company sold $5.8 million of the guaranteed portion of SBA loans in the secondary market, of which $4.1 million were originated in the current quarter and $1.7 million were originated or purchased in prior quarters. Residential loan production sold in the secondary market totaled $16.4 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 March 31, 2018
		(Dollars in millions)
Total Loans	Purchased loans may not exceed 40% of total loans	$	122.8
Regulatory Capital	Non-owner occupied commercial real estate loans may not exceed 300% of total capital	$	185.6

An overview of the Bank's LASG portfolio follows:

	LASG Portfolio
	Three Months Ended March 31,
	2018												2017
	Purchased (1)			Originated			Secured Loans to Broker-Dealers			Total LASG				Purchased (1)			Originated			Secured Loans to Broker-Dealers				Total LASG
	(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance	$	38,493		$	72,894		$	-	$		111,387		$		8,609		$	81,806		$	-		$		90,415
Net investment basis		33,021			72,894			-			105,915				7,861			81,806			-				89,667

Loan returns during the period:
Yield		11.29	%		6.83	%		-			8.65	%			11.89	%		6.44	%		1.13	%			8.68	%
Total Return (2)		12.16	%		6.83	%		-			9.00	%			11.95	%		6.44	%		1.13	%			8.71	%

	Nine Months Ended March 31,
	2018														2017
	Purchased (1)			Originated		Secured Loans to Broker-Dealers					Total LASG					Purchased (1)				Originated				Secured Loans to Broker-Dealers				Total LASG
	(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance	$	81,016		$	157,958			$	-	$		238,974		$			76,511		$		169,831		$		-		$		246,342
Net investment basis		71,474			157,958				-			229,432					67,747				169,831				-				237,578

Loan returns during the period:
Yield		11.53	%		6.56		%		-			8.60	%				11.77	%			6.10	%			0.82	%			8.36	%
Total Return (2)		11.82	%		6.56		%		-			8.72	%				11.80	%			6.10	%			0.82	%			8.37	%


Total loans as of period end:
Unpaid principal balance	$	289,852		$	381,990			$	-	$		671,842		$			268,651		$		299,340		$		-		$		567,991
Net investment basis		254,700			381,990				-			636,690					237,569				299,340				-				536,909

(1) Period end purchased loan balances include loans held for sale of $0 and $973 thousand at March 31, 2018 and March 31, 2017, respectively.
(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 purchased loans held for sale, on an annualized basis. The total return does not include the effect of purchased loan charge-offs or recoveries during the period. Total return is considered a non-GAAP financial measure.

Deposits increased by $86.4 million, or 9.7%, from June 30, 2017, attributable primarily to an increase in money market accounts of $115.7 million, or 30.9%, offset by a decrease in time deposits of $25.7 million, or 7.6%.
Shareholders' equity increased by $11.0 million, or 9.0%, from June 30, 2017, primarily due to earnings of $11.8 million. Earnings were partially offset by stock option exercises which decreased additional paid-in-capital by $1.1 million. Additionally, there was stock based compensation of $635 thousand, an increase in accumulated other comprehensive loss of $128 thousand, and dividends paid on common stock of $266 thousand.

Net income increased by $471 thousand to $3.9 million for the quarter ended March 31, 2018, compared to net income of $3.5 million for the quarter ended March 31, 2017.

1. Net interest and dividend income before provision for loan losses increased by $675 thousand for the quarter ended March 31, 2018, compared to the quarter ended March 31, 2017. The increase is primarily due to higher average balances in the loan portfolio. These increases were partially offset by higher funding costs and higher average deposit balances.

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,
	2018						2017
	Average		Interest				Average		Interest
	Balance (1)		Income		Yield		Balance (1)		Income		Yield
	(Dollars in thousands)
Community Banking	$	136,824	$	1,743	5.17	%	$	188,748	$	2,402	5.16	%
SBA		53,069		1,017	7.77	%		44,538		678	6.17	%
LASG:
Originated		351,271		5,916	6.83	%		256,778		4,075	6.44	%
Purchased		241,793		6,732	11.29	%		245,135		7,184	11.89	%
Secured Loans to Broker-Dealers		-		-	-			27,933		78	1.13	%
Total LASG		593,064		12,648	8.65	%		529,846		11,337	8.68	%
Total	$	782,957	$	15,408	7.98	%	$	763,132	$	14,417	7.66	%
	Nine Months Ended March 31,
	2018						2017
	Average		Interest				Average		Interest
	Balance (1)		Income		Yield		Balance (1)		Income		Yield
	(Dollars in thousands)
Community Banking	$	142,873	$	5,242	4.89	%	$	199,566	$	7,150	4.77	%
SBA		52,014		2,772	7.10	%		36,867		1,771	6.07	%
LASG:
Originated		340,014		16,746	6.56	%		219,140		10,030	6.10	%
Purchased		237,183		20,532	11.53	%		236,822		20,925	11.77	%
Secured Loans to Broker-Dealers		-		-	-			41,409		256	0.82	%
Total LASG		577,197		37,278	8.60	%		497,371		31,211	8.36	%
Total	$	772,084	$	45,292	7.81	%	$	735,804	$	40,132	7.27	%
(1) Includes loans held for sale.
(1) Includes loans held for sale.

The components of total transactional income on purchased loans are set forth in the table below entitled "Total Return on Purchased Loans." When compared to the three months ended March 31, 2017, transactional income increased by $312 thousand. The total return on purchased loans for the three months ended March 31, 2018 was 12.16%. The increase over the prior comparable period was primarily due to the gain on loan sales in the three months ended March 31, 2018. When compared to the nine months ended March 31, 2017, transactional income increased by $742 thousand. The total return on purchased loans for the nine months ended March 31, 2018 was 11.82%. This increase over the prior comparable period was primarily due to the gain on loan sales and higher accelerated accretion in the nine months ended March 31, 2018. The following table details the total return on purchased loans:

	Total Return on Purchased Loans
	Three Months Ended March 31,
	2018				2017
	Income		Return (1)		Income		Return (1)
	(Dollars in thousands)
Regularly scheduled interest and accretion	$	4,630	7.77	%	$	4,914	8.13	%
Transactional income:
Gain on loan sales		516	0.87	%		-	-
Gain on sale of real estate owned		-	-			36	0.06	%
Other noninterest income		-	-			-	-
Accelerated accretion and loan fees		2,102	3.52	%		2,270	3.76	%
Total transactional income		2,618	4.39	%		2,306	3.82	%
Total	$	7,248	12.16	%	$	7,220	11.95	%


	Nine Months Ended March 31,
	2018				2017
	Income		Return (1)		Income		Return (1)
	(Dollars in thousands)
Regularly scheduled interest and accretion	$	13,709	7.70	%	$	14,383	8.09	%
Transactional income:
Gain on loan sales		516	0.29	%		-	-
Gain on sale of real estate owned		-	-			55	0.03	%
Other noninterest income		-	-			-	-
Accelerated accretion and loan fees		6,823	3.83	%		6,542	3.68	%
Total transactional income		7,339	4.12	%		6,597	3.71	%
Total	$	21,048	11.82	%	$	20,980	11.80	%

(1) The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on asset sales, gains on real estate owned and other noninterest income recorded during the period divided by the average invested balance, which includes purchased loans held for sale, on an annualized basis. The total return does not include the effect of purchased loan charge-offs or recoveries in the quarter. Total return is considered a non-GAAP financial measure.

2. Noninterest income decreased by $426 thousand for the quarter ended March 31, 2018, compared to the quarter ended March 31, 2017, principally due to the following:

A decrease in gain on sale of SBA loans of $391 thousand, due to a lower volume of SBA loans sold in the quarter; and
A decrease in gain on sale of residential loans of $54 thousand, due to lower volume of residential loans sold in the quarter.

3. Noninterest expense increased by $133 thousand for the quarter ended March 31, 2018, compared to the quarter ended March 31, 2017, primarily due to the following:

An increase of $312 thousand in other noninterest expense, primarily due to $140 thousand of expense related to the quarterly valuation of SBA servicing rights recorded in the three months ended March 31, 2018, and a $167 thousand recovery from a legacy mortgage insurance premium plan that was recorded in the three months ended March 31, 2017, with no such recovery recorded during the three months ended March 31, 2018;
An increase of $164 thousand in data processing fees, primarily due to the increased cost associated with the outsourcing of data processing; and
An increase of $126 thousand in salaries and employee benefits, primarily due to an increase in incentive compensation and a decrease in deferred salaries driven by loan originations, offset by a decrease in salaries due to a decrease in headcount.
The increases in noninterest expense were partially offset by a decrease in loan expense of $464 thousand, largely driven by lower expense related to loan acquisition, collection, and refinance activity.

4. Income tax expense decreased by $335 thousand for the quarter ended March 31, 2018, compared to the quarter ended March 31, 2017, $397 thousand of which was due to a decrease in the federal corporate income tax rate as a result of the Tax Cuts and Jobs Act signed into law on December 22, 2017, offset by an increase related to a higher pre-tax net income amount.

As of March 31, 2018, nonperforming assets totaled $14.6 million, or 1.25% of total assets, as compared to $19.0 million, or 1.84% of total assets, as of December 31, 2017, and $14.8 million, or 1.37% of total assets, as of June 30, 2017.

As of March 31, 2018, past due loans totaled $11.2 million, or 1.37% of total loans, as compared to $30.0 million, or 3.87% of total loans as of December 31, 2017, and $13.4 million, or 1.72% of total loans as of June 30, 2017.

As of March 31, 2018, the Company's Tier 1 Leverage Ratio was 12.9%, compared to 12.8% at June 30, 2017, and the Total Capital Ratio was 19.9%, compared to 19.5% at June 30, 2017.

Investor Call Information
Richard Wayne, Chief Executive Officer of Northeast Bancorp, and Jean-Pierre Lapointe, 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 Thursday, April 26th. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 8745479. 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 NBN is the holding company for Northeast Bank, a full-service bank headquartered in Lewiston, Maine. We offer personal and business banking services to the Maine and New Hampshire markets via ten branches and one loan production office. Our Loan Acquisition and Servicing Group purchases and originates commercial loans on a nationwide basis and our SBA Division supports the needs of growing businesses nationally. ableBanking, a division of Northeast Bank, offers online savings products to consumers nationwide. Information regarding Northeast Bank can be found at www.northeastbank.com.

Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures, including 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; operational risks including, but not limited to, cybersecurity, fraud and natural disasters; 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)
	March 31, 2018			June 30, 2017
Assets
Cash and due from banks	$	3,621		$	3,582
Short-term investments		218,446			159,701
Total cash and cash equivalents		222,067			163,283


Available-for-sale securities, at fair value		89,741			96,693

Residential real estate loans held for sale		2,686			4,508
SBA loans held for sale		1,853			191
Total loans held for sale		4,539			4,699


Loans
Commercial real estate		530,565			498,004
Commercial and industrial		185,049			175,654
Residential real estate		97,297			101,168
Consumer		3,518			4,369
Total loans		816,429			779,195
Less: Allowance for loan losses		4,691			3,665
Loans, net		811,738			775,530


Premises and equipment, net		6,762			6,937
Real estate owned and other repossessed collateral, net		947			826
Federal Home Loan Bank stock, at cost		1,758			1,938
Intangible assets, net		975			1,300
Loan servicing rights, net		2,998			2,846
Bank-owned life insurance		16,510			16,179
Other assets		8,108			6,643
Total assets	$	1,166,143		$	1,076,874

Liabilities and Shareholders' Equity
Deposits
Demand	$	66,054		$	69,827
Savings and interest checking		108,667			108,417
Money market		490,236			374,569
Time		311,323			337,037
Total deposits		976,280			889,850

Federal Home Loan Bank advances		15,000			20,011
Subordinated debt		23,873			23,620
Capital lease obligation		675			873
Other liabilities		16,528			19,723
Total liabilities		1,032,356			954,077

Commitments and contingencies		-			-


Shareholders' equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares
issued and outstanding at March 31, 2018 and June 30, 2017		-			-
Voting common stock, $1.00 par value, 25,000,000 shares authorized;
8,016,669 and 7,840,460 shares issued and outstanding at
March 31, 2018 and June 30, 2017, respectively		8,017			7,841
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized;
908,730 and 991,194 shares issued and outstanding at March 31, 2018 and June 30, 2017, respectively		908			991
Additional paid-in capital		76,926			77,455
Retained earnings		49,981			38,142
Accumulated other comprehensive loss		(2,045	)		(1,632	)
Total shareholders' equity		133,787			122,797
Total liabilities and shareholders' equity	$	1,166,143		$	1,076,874

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,
	2018		2017		2018		2017
Interest and dividend income:
Interest and fees on loans	$	15,408	$	14,417	$	45,292	$	40,132
Interest on available-for-sale securities		280		261		813		748
Other interest and dividend income		795		282		1,818		669
Total interest and dividend income		16,483		14,960		47,923		41,549

Interest expense:
Deposits		2,696		1,855		7,001		5,407
Federal Home Loan Bank advances		118		159		438		634
Subordinated debt		525		475		1,550		1,401
Obligation under capital lease agreements		10		12		31		39
Total interest expense		3,349		2,501		9,020		7,481

Net interest and dividend income before provision for loan losses		13,134		12,459		38,903		34,068
Provision for loan losses		364		384		1,156		1,205
Net interest and dividend income after provision for loan losses		12,770		12,075		37,747		32,863

Noninterest income:
Fees for other services to customers		435		516		1,437		1,405
Gain on sales of residential loans held for sale		227		281		772		1,160
Gain on sales of SBA loans		560		951		1,921		3,411
Gain on sales of other loans		516		365		537		365
Gain on real estate owned, other repossessed collateral and premises and equipment, net		4		20		15		9
Bank-owned life insurance income		108		113		331		341
Other noninterest income		32		62		55		115
Total noninterest income		1,882		2,308		5,068		6,806

Noninterest expense:
Salaries and employee benefits		5,329		5,203		15,756		15,678
Occupancy and equipment expense		1,159		1,299		3,418		3,781
Professional fees		423		370		1,291		1,265
Data processing fees		619		455		1,846		1,286
Marketing expense		172		89		329		272
Loan acquisition and collection expense		264		728		998		1,502
FDIC insurance premiums		77		78		236		224
Intangible asset amortization		107		107		325		324
Other noninterest expense		825		513		2,053		2,093
Total noninterest expense		8,975		8,842		26,252		26,425

Income before income tax expense		5,677		5,541		16,563		13,244
Income tax expense		1,745		2,080		4,741		4,932
Net income	$	3,932	$	3,461	$	11,822	$	8,312


Weighted-average shares outstanding:
Basic		8,927,544		8,830,442		8,897,633		8,923,280
Diluted		9,143,177		8,893,534		9,133,515		8,963,483
Earnings per common share:

Basic	$	0.44	$	0.39	$	1.33	$	0.93
Diluted		0.43		0.39		1.29		0.93
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,
	2018						2017
			Interest		Average				Interest		Average
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate
Assets:
Interest-earning assets:
Investment securities	$	91,630	$	280	1.24	%	$	96,868	$	261	1.09	%
Loans (1) (2) (3)		782,957		15,408	7.98	%		763,132		14,435	7.67	%
Federal Home Loan Bank stock		1,758		23	5.31	%		1,938		24	5.02	%
Short-term investments (4)		202,283		772	1.55	%		128,082		258	0.82	%
Total interest-earning assets		1,078,628		16,483	6.20	%		990,020		14,978	6.14	%
Cash and due from banks		3,079						2,875
Other non-interest earning assets		32,332						31,606
Total assets	$	1,114,039					$	1,024,501

Liabilities & Shareholders' Equity:
Interest-bearing liabilities:
NOW accounts	$	68,716	$	49	0.29	%	$	69,773	$	49	0.28	%
Money market accounts		428,946		1,437	1.36	%		338,662		807	0.97	%
Savings accounts		38,369		17	0.18	%		36,940		13	0.14	%
Time deposits		321,271		1,193	1.51	%		329,442		986	1.21	%
Total interest-bearing deposits		857,302		2,696	1.28	%		774,817		1,855	0.97	%
Federal Home Loan Bank advances		15,000		118	3.19	%		20,021		159	3.22	%
Subordinated debt		23,831		525	8.93	%		23,506		475	8.20	%
Capital lease obligations		697		10	5.82	%		961		12	5.06	%
Total interest-bearing liabilities		896,830		3,349	1.51	%		819,305		2,501	1.24	%

Non-interest bearing liabilities:
Demand deposits and escrow accounts		78,209						81,901
Other liabilities		7,714						6,659
Total liabilities		982,753						907,865
Shareholders' equity		131,286						116,636
Total liabilities and shareholders' equity	$	1,114,039					$	1,024,501

Net interest income (5)			$	13,134					$	12,477

Interest rate spread					4.69	%					4.90	%
Net interest margin (6)					4.94	%					5.11	%

(1) Interest income and yield are stated on a fully tax-equivalent basis using the statutory tax rate.
(2) Includes loans held for sale.
(3) Nonaccrual loans are included in the computation of average, but unpaid interest has not been included for purposes of determining interest income.
(4) Short term investments include FHLB overnight deposits and other interest-bearing deposits. (5) Includes tax exempt interest income of $0 and $18 thousand for the three months ended March 31, 2018 and March 31, 2017, respectively.
(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,
	2018						2017
			Interest		Average				Interest		Average
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate
Assets:
Interest-earning assets:
Investment securities	$	93,816	$	813	1.15	%	$	94,824	$	748	1.05	%
Loans (1) (2) (3)		772,084		45,302	7.82	%		735,804		40,185	7.28	%
Federal Home Loan Bank stock		1,852		65	4.68	%		2,250		70	4.14	%
Short-term investments (4)		169,073		1,753	1.38	%		132,280		599	0.60	%
Total interest-earning assets		1,036,825		47,933	6.16	%		965,158		41,602	5.74	%
Cash and due from banks		2,981						2,860
Other non-interest earning assets		31,924						32,554
Total assets	$	1,071,730					$	1,000,572

Liabilities & Shareholders' Equity:
Interest-bearing liabilities:
NOW accounts	$	69,532	$	152	0.29	%	$	70,814	$	152	0.29	%
Money market accounts		394,364		3,564	1.20	%		314,259		2,242	0.95	%
Savings accounts		37,418		42	0.15	%		35,964		37	0.14	%
Time deposits		312,268		3,243	1.38	%		327,664		2,976	1.21	%
Total interest-bearing deposits		813,582		7,001	1.15	%		748,701		5,407	0.96	%
Federal Home Loan Bank advances		17,594		438	3.32	%		25,768		634	3.28	%
Subordinated debt		23,745		1,550	8.70	%		23,431		1,401	7.97	%
Capital lease obligations		764		31	5.41	%		1,024		39	5.07	%
Total interest-bearing liabilities		855,685		9,020	1.40	%		798,924		7,481	1.25	%

Non-interest bearing liabilities:
Demand deposits and escrow accounts		80,896						79,352
Other liabilities		7,080						7,738
Total liabilities		943,661						886,014
Shareholders' equity		128,069						114,558
Total liabilities and shareholders' equity	$	1,071,730					$	1,000,572

Net interest income (5)			$	38,913					$	34,121

Interest rate spread					4.76	%					4.49	%
Net interest margin (6)					5.00	%					4.71	%

(1) Interest income and yield are stated on a fully tax-equivalent basis using the statutory tax rate.
(2) Includes loans held for sale.
(3) Nonaccrual loans are included in the computation of average, but unpaid interest has not been included for purposes of determining interest income.
(4) Short term investments include FHLB overnight deposits and other interest-bearing deposits. (5) Includes tax exempt interest income of $10 thousand and $53 thousand for the nine months ended March 31, 2018 and March 31, 2017, 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, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
Net interest income	$	13,134		$	12,457		$	13,311		$	13,757		$	12,459
Provision for loan losses		364			437			354			389			384
Noninterest income		1,882			1,228			1,958			2,890			2,308
Noninterest expense		8,975			8,563			8,714			9,364			8,842
Net income		3,932			3,304			4,586			4,027			3,461

Weighted-average common shares outstanding:
Basic		8,927,544			8,924,495			8,841,511			8,823,679			8,830,442
Diluted		9,143,177			9,168,084			9,089,936			8,979,471			8,893,534
Earnings per common share:
Basic	$	0.44		$	0.37		$	0.52		$	0.46		$	0.39
Diluted		0.43			0.36			0.50			0.45			0.39
Dividends per common share		0.01			0.01			0.01			0.01			0.01

Return on average assets		1.43	%		1.26	%		1.71	%		1.57	%		1.37	%
Return on average equity		12.15	%		10.20	%		14.61	%		13.34	%		12.03	%
Net interest rate spread (1)		4.69	%		4.68	%		4.89	%		5.32	%		4.90	%
Net interest margin (2)		4.94	%		4.93	%		5.13	%		5.55	%		5.11	%
Efficiency ratio (non-GAAP) (3)		59.77	%		62.57	%		57.07	%		56.25	%		59.88	%
Noninterest expense to average total assets		3.27	%		3.27	%		3.25	%		3.64	%		3.50	%
Average interest-earning assets to average interest-bearing liabilities		120.27	%		122.21	%		121.09	%		121.13	%		120.84	%

	As of:
	March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
Nonperforming loans:
Originated portfolio:
Residential real estate	$	3,116		$	3,783		$	3,667		$	3,337		$	3,265
Commercial real estate		1,408			2,537			2,409			413			420
Home equity		255			107			58			58			48
Commercial and industrial		636			2,555			2,629			2,600			2,636
Consumer		136			147			131			103			65
Total originated portfolio		5,551			9,129			8,894			6,511			6,434
Total purchased portfolio		8,063			8,962			7,758			7,452			8,388
Total nonperforming loans		13,614			18,091			16,652			13,963			14,822
Real estate owned and other repossessed collateral, net		947			910			2,040			826			3,761
Total nonperforming assets	$	14,561		$	19,001		$	18,692		$	14,789		$	18,583

Past due loans to total loans		1.37	%		3.87	%		1.60	%		1.72	%		3.25	%
Nonperforming loans to total loans		1.67	%		2.34	%		2.19	%		1.79	%		2.00	%
Nonperforming assets to total assets		1.25	%		1.84	%		1.78	%		1.37	%		1.81	%
Allowance for loan losses to total loans		0.57	%		0.56	%		0.53	%		0.47	%		0.46	%
Allowance for loan losses to nonperforming loans		34.46	%		24.07	%		24.23	%		26.25	%		22.77	%

Commercial real estate loans to risk-based capital (4)		186.07	%		187.92	%		166.15	%		181.23	%		181.83	%
Net loans to core deposits (5)		83.65	%		91.46	%		88.68	%		87.68	%		87.46	%
Purchased loans to total loans, including held for sale		31.02	%		31.28	%		30.11	%		31.43	%		31.87	%
Equity to total assets		11.47	%		12.57	%		12.07	%		11.40	%		11.55	%
Common equity tier 1 capital ratio		16.48	%		16.74	%		16.50	%		16.00	%		15.80	%
Total capital ratio		19.92	%		20.30	%		20.04	%		19.48	%		19.30	%
Tier 1 leverage capital ratio		12.88	%		13.41	%		12.77	%		12.81	%		12.46	%

Total shareholders' equity	$	133,787		$	130,003		$	126,712		$	122,797		$	118,675
Less: Preferred stock		-			-			-			-			-
Common shareholders' equity		133,787			130,003			126,712			122,797			118,675
Less: Intangible assets (6)		(3,973	)		(4,087	)		(4,146	)		(4,146	)		(3,898	)
Tangible common shareholders' equity (non-GAAP)	$	129,814		$	125,916		$	122,566		$	118,651		$	114,777

Common shares outstanding		8,925,399			8,939,273			8,890,353			8,831,654			8,815,279
Book value per common share	$	14.99		$	14.54		$	14.25		$	13.90		$	13.46
Tangible book value per share (non-GAAP) (7)		14.54			14.09			13.79			13.43			13.02

(1) The net interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.
(2) The net interest margin represents net interest income as a percent of average interest-earning assets for the period.
(3) The efficiency ratio represents noninterest expense divided by the sum of net interest income (before the loan loss provision) plus noninterest income.
(4) 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 and loan servicing rights asset.
(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:

Jean-Pierre Lapointe, Chief Financial Officer
Northeast Bank, 500 Canal Street, Lewiston, ME 04240
207.786.3245 ext. 3220
www.northeastbank.com

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