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Northeast Bancorp Reports Fourth Quarter and Fiscal Year Results and Declares Dividend

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LEWISTON, Maine, July 30, 2018 (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 $4.3 million, or $0.48 per diluted common share, for the quarter ended June 30, 2018, compared to net income of $4.0 million, or $0.45 per diluted common share, for the quarter ended June 30, 2017. Net income for the year ended June 30, 2018 was $16.2 million, or $1.77 per diluted common share, compared to $12.3 million, or $1.38 per diluted common share, for the year ended June 30, 2017.

On July 30, 2018, the Board of Directors declared a cash dividend of $0.01 per share, payable on August 24, 2018, to shareholders of record as of August 10, 2018.

"We closed the year with a strong quarter," said Richard Wayne, President and Chief Executive Officer. "For the quarter, we earned $0.48 per diluted common share, a return on equity of 13.0%, a return on assets of 1.5%, and an efficiency ratio of 57.9%. For the fiscal year, we earned $1.77 per diluted common share, compared to $1.38 for the prior fiscal year, representing an increase of 28%. For the quarter, our Loan Acquisition and Servicing Group ("LASG") produced $119.2 million of loans, including originations of $66.6 million and purchases with a recorded investment of $52.6 million. This represents quarterly net growth in the LASG portfolio of $51.6 million, or 8.1%, and annual net growth of $111.4 million, or 19.3%."

As of June 30, 2018, total assets were $1.2 billion, an increase of $80.9 million, or 7.5%, 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 months and year ended June 30, 2018 compared to the same periods in the prior year:
  Loan Portfolio Changes 
  Three Months Ended June 30, 2018 
  June 30, 2018
Balance
  March 31, 2018
Balance 
  Change ($)    Change (%) 
  (Dollars in thousands)  
LASG Purchased $ 290,972   $ 254,700   $ 36,272       14.24 %
LASG Originated   397,363     381,990     15,373       4.02 %
SBA   60,156     50,583     9,573       18.93 %
Community Banking   123,311     129,156     (5,845 )     (4.53 %)
Total $ 871,802   $ 816,429   $ 55,373       6.78 %
                           
  Year Ended June 30, 2018 
  June 30, 2018
Balance
  June 30, 2017
Balance 
  Change ($)    Change (%) 
  (Dollars in thousands) 
LASG Purchased $ 290,972   $ 246,388     $ 44,584      18.10
%
LASG Originated   397,363     330,515       66,848      20.23
%
SBA   60,156     52,965       7,191     13.58 %
Community Banking   123,311     149,327       (26,016 )    (17.42
%)
Total $ 871,802   $ 779,195     $ 92,607      11.88
%

Loans generated by the Bank's Loan Acquisition and Servicing Group ("LASG") for the quarter ended June 30, 2018 totaled $119.2 million, which consisted of $52.6 million of purchased loans, at an average price of 93.6% of unpaid principal balance, and $66.6 million of originated loans. The Bank's Small Business Administration ("SBA") Division closed $23.9 million and funded $21.3 million of new loans during the quarter ended June 30, 2018. In addition, the Company sold $10.9 million of the guaranteed portion of SBA loans in the secondary market, of which $7.5 million were originated in the current quarter and $3.4 million were originated or purchased in prior quarters. Residential loan production sold in the secondary market totaled $10.7 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 June 30, 2018
        (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   $    166.3
 

 
         

An overview of the Bank's LASG portfolio follows:

  LASG Portfolio
  Three Months Ended June 30,
  2018     2017  
    Purchased   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 $ 56,233   $ 66,588   $    -   $ 122,821     $ 50,202   $ 67,860   $    -   $ 118,062  
Net investment basis   52,637     66,588        -     119,225         45,060     67,860        -     112,920  
                                     
 

Loan returns during the period:
   
Yield   10.87 %   7.45 %     0.00 %   8.83 %     13.64 %   6.45 %     0.00   9.61 %
Total Return (1)   11.49 %   7.45 %     0.00   9.08 %     13.78 %   6.45 %     0.00   9.68 %
                                   


  Twelve Months Ended June 30, 
  2018    2017
    Purchased  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 $ 137,249   $ 224,546   $   -    $   361,795       $ 126,713  
$ 237,691  
$   -     $   364,404  
Net investment basis    124,111       224,546     -      348,657          112,807       237,691     -        350,498  
                                             
Loan returns during the period:                    
Yield   11.35 %   6.80 %   0.00 %   8.66       12.24   6.21   0.82 %     8.69 %
Total Return (1)   11.73 %   6.80 %   0.00 %   8.82       12.30   6.21   0.82 %     8.72 %
                                             
                                             
Total loans as of period end:                    
Unpaid principal balance $ 326,855   $ 397,363   $ -   $ 724,218       $ 279,854  
$ 330,515  
$ -     $ 610,369  
Net investment basis   290,972     397,363     -     688,335         246,388     330,515     -       576,903  

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

  1. Deposits increased by $65.1 million, or 7.3%, from June 30, 2017 to June 30, 2018, attributable primarily to increases in money market accounts of $46.3 million, or 12.4%, and time deposits of $15.1 million, or 4.5%.
     
  2. Shareholders' equity increased by $15.6 million, or 12.7%, from June 30, 2017 to June 30, 2018, primarily due to earnings of $16.2 million. Earnings were partially offset by stock option exercises which decreased additional paid-in-capital by $1.2 million. Additionally, there was stock based compensation of $870 thousand, an increase in accumulated other comprehensive loss of $129 thousand, and dividends paid on common stock of $355 thousand.

Net income increased by $317 thousand to $4.3 million for the quarter ended June 30, 2018, compared to net income of $4.0 million for the quarter ended June 30, 2017.

  1. Net interest and dividend income before provision for loan losses increased by $651 thousand for the quarter ended June 30, 2018, compared to the quarter ended June 30, 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 June 30,  
  2018     2017    
  Average   Interest       Average   Interest      
  Balance (1)   Income   Yield   Balance (1)   Income   Yield  
  (Dollars in thousands)  
Community Banking $ 128,296   $   1,630   5.10 %   $ 163,997   $   1,949   4.77 %  
SBA   56,088     1,116   7.98 %     55,229     848   6.16 %  
LASG:                                
Originated    381,783       7,088   7.45 %      301,988       4,859   6.45 %  
Purchased   259,119     7,021   10.87 %      237,306     8,068   13.64 %  
Total LASG    640,902       14,109   8.83 %      539,294       12,927   9.61 %  
Total $  825,286   $   16,855   8.19 %   $  758,520   $   15,724   8.31 %  
                                 
                                 
                Year Ended June 30,                
  2018     2017    
  Average   Interest       Average   Interest      
  Balance (1)   Income   Yield   Balance (1)   Income   Yield  
  (Dollars in thousands)  
Community Banking $ 139,239   $   6,871   4.93 %   $ 190,704   $   9,102   4.77 %  
SBA   53,030     3,888   7.33 %     42,946     2,619   6.10 %  
LASG:                                
Originated    350,427       23,834   6.80 %      239,796       14,883   6.21 %  
Purchased    242,652       27,553   11.35 %      236,937       28,997   12.24 %  
Secured Loans to Broker-Dealers   -     -   0.00 %     31,085     256   0.82 %  
Total LASG    593,079       51,387   8.66 %      507,818       44,136   8.69 %  
Total $  785,348   $   62,146   7.91 %   $  741,468   $   55,857   7.53 %  
  (1) Includes loans held for sale.                           
                                       

The components of total income on purchased loans are set forth in the table below entitled "Total Return on Purchased Loans." Wh­en compared to the three months and year ended June 30, 2017, transactional income for the three months and year ended June 30, 2018 decreased by $1.2 million and $439 thousand, respectively. The total return on p­­­­­­­­urchased loans for the three months and year ended June 30, 2018 was 11.49% and 11.73%, respectively. The decrease over the prior comparable periods was primarily due to higher accelerated accretion in the three months and year ended June 30, 2017. The following table details the total return on purchased loans:

  Total Return on Purchased Loans
  Three Months Ended June 30,
  2018    2017 
  Income   Return (1)   Income   Return (1)
  (Dollars in thousands)
Regularly scheduled interest and accretion $ 5,043   7.81%   $ 4,588     7.76%
Transactional income:                  
Gain on loan sales     402   0.62%       -     0.00%
Gain on sale of real estate owned     -   0.00%       93     0.16%
Other noninterest income (expense)     -    0.00%       (10 )   -0.02%
Accelerated accretion and loan fees     1,978   3.06%       3,480     5.88%
Total transactional income     2,380   3.68%       3,563     6.02%
Total $   7,423   11.49%   $   8,151     13.78%


   
  Year Ended June 30,
  2018     2017  
  Income   Return (1)   Income   Return (1)
  (Dollars in thousands)
Regularly scheduled interest and accretion $ 18,752   7.73%   $ 18,975     8.01%
Transactional income:                  
Gain on loan sales      918   0.38%       -     0.00%
Gain on sale of real estate owned     -   0.00%       148     0.06%
Other noninterest income (expense)     -    0.00%       (12 )   0.00%
Accelerated accretion and loan fees     8,801   3.62%       10,022     4.23%
Total transactional income     9,719   4.00%       10,158     4.29%
Total $   28,471   11.73%   $   29,133     12.30%

(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 $931 thousand for the quarter ended June 30, 2018, compared to the quarter ended June 30, 2017, principally due to the following:

  • A decrease in gain on sale of SBA loans of $833 thousand, due to a lower volume of SBA loans sold in the quarter;
  • A decrease in fees for other services to customers of $161 thousand, due to lower commercial loan servicing fees; and
  • A decrease in gain on sale of residential loans of $134 thousand, due to lower volume of residential loans sold in the quarter.
  • The decreases in noninterest income were partially offset by an increase in gain on sale of other loans of $402 thousand, due to the sale of two LASG purchased loans in the quarter. 

3. Noninterest expense increased by $114 thousand for the quarter ended June 30, 2018, compared to the quarter ended June 30, 2017, primarily due to the following:

  • An increase in data processing fees of $142 thousand, primarily due to the increased cost associated with the outsourcing of data processing;
  • An increase in loan expense of $123 thousand, largely driven by higher expense related to loan acquisition and refinance activity; and
  • An increase in other noninterest expense of $43 thousand, primarily due to increased travel expense.
  • The increases in noninterest expense were partially offset by a decrease in salaries and employee benefits of $219 thousand, primarily due to lower headcount, and a decrease in incentive compensation for the quarter.   

4. Income tax expense decreased by $576 thousand for the quarter ended June 30, 2018, compared to the quarter ended June 30, 2017, primarily due to the following:

  • 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, which resulted in a $464 thousand decrease in federal income tax expense; and
  • A decrease in income tax expense as a result of a $114 thousand income tax benefit arising from the treatment of stock options exercised under ASU 2016-09, Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, whereby the tax effects of exercised options are treated as a discrete item in the reporting period in which they occur.

As of June 30, 2018, nonperforming assets totaled $14.2 million, or 1.23% of total assets, as compared to $14.6 million, or 1.25% of total assets, as of March 31, 2018, and $14.8 million, or 1.37% of total assets, as of June 30, 2017.

As of June 30, 2018, past due loans totaled $7.7 million, or 0.89% of total loans, as compared to $11.2 million, or 1.37% of total loans as of March 31, 2018, and $13.4 million, or 1.72% of total loans as of June 30, 2017.

As of June 30, 2018, the Company's Tier 1 leverage capital ratio was 13.1%, compared to 12.8% at June 30, 2017, and the Total capital ratio was 19.3%, 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 fourth quarter earnings and business outlook at 10:00 a.m. Eastern Time on Tuesday, July 31st. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 5291318. 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 personal and business banking services to the Maine market via ten branches. Our Loan Acquisition and Servicing Group purchases and originates commercial loans on a nationwide basis 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 on purchased loans, 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.


NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share data)
  June 30, 2018   June 30, 2017
Assets          
Cash and due from banks $ 3,889    $ 3,582 
Short-term investments   153,513      159,701 
Total cash and cash equivalents   157,402      163,283 
           
           
Available-for-sale securities, at fair value   87,687      96,693 
           
Residential real estate loans held for sale   3,405      4,508 
SBA loans held for sale   3,750      191 
Total loans held for sale   7,155      4,699 
           
           
Loans          
Commercial real estate   579,450      498,004 
Commercial and industrial   188,852      175,654 
Residential real estate   100,256      101,168 
Consumer   3,244      4,369 
Total loans   871,802      779,195 
Less: Allowance for loan losses   4,807      3,665 
Loans, net   866,995      775,530 
           
           
Premises and equipment, net   6,591      6,937 
Real estate owned and other repossessed collateral, net   2,233      826 
Federal Home Loan Bank stock, at cost   1,652      1,938 
Intangible assets, net   867      1,300 
Loan servicing rights, net   2,970      2,846 
Bank-owned life insurance   16,620      16,179 
Other assets   7,564      6,643 
Total assets $ 1,157,736    $ 1,076,874 
           
Liabilities and Shareholders' Equity          
Deposits          
Demand $ 72,272    $ 69,827 
Savings and interest checking   109,637      108,417 
Money market   420,886      374,569 
Time   352,145      337,037 
Total deposits   954,940      889,850 
           
Federal Home Loan Bank advances   15,000      20,011 
Subordinated debt   23,958      23,620 
Capital lease obligation   605      873 
Other liabilities   24,803      19,723 
Total liabilities   1,019,306      954,077 
           
 

Commitments and contingencies
    -        - 
           
           
Shareholders' equity          
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares        
issued and outstanding at June 30, 2018 and June 30, 2017     -        - 
Voting common stock, $1.00 par value, 25,000,000 shares authorized;          
8,056,527 and 7,840,460 shares issued and outstanding        
at June 30, 2018 and June 30, 2017, respectively   8,057      7,841 
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized;          
882,314 and 991,194 shares issued and outstanding at June 30, 2018 and June 30, 2017, respectively 882      991 
Additional paid-in capital   77,016      77,455 
Retained earnings   54,236      38,142 
Accumulated other comprehensive loss   (1,761)     (1,632)
Total shareholders' equity   138,430      122,797 
Total liabilities and shareholders' equity $ 1,157,736    $ 1,076,874 



NORTHEAST BANCORP AND SUBSIDIARY  
CONSOLIDATED STATEMENTS OF INCOME  
(Unaudited)  
(Dollars in thousands, except share and per share data)  
  Three Months Ended June 30,    Year Ended June 30, 
  2018     2017     2018     2017  
Interest and dividend income:                      
Interest and fees on loans $ 16,855     $ 15,724     $ 62,146     $ 55,857  
Interest on available-for-sale securities   298       271       1,111       1,018  
Other interest and dividend income   819       376       2,636       1,046  
Total interest and dividend income   17,972       16,371       65,893       57,921  
                       
 

Interest expense:
                     
Deposits   2,896       1,949       9,897       7,357  
Federal Home Loan Bank advances   109       166       547       800  
Subordinated debt   552       487       2,102       1,888  
Obligation under capital lease agreements   7       12       38       51  
Total interest expense   3,564       2,614       12,584       10,096  
                       
Net interest and dividend income before provision for loan losses   14,408       13,757       53,309       47,825  
Provision for loan losses   254       389       1,410       1,594  
Net interest and dividend income after provision for loan losses   14,154       13,368       51,899       46,231  
                       
 

Noninterest income:
                     
Fees for other services to customers   386       547       1,822       1,952  
Gain on sales of residential loans held for sale   159       293       931       1,452  
Gain on sales of SBA loans   1,033       1,866       2,955       5,277  
Gain on sales of other loans   402       -       918       365  
Loss on real estate owned, other repossessed collateral
and premises and equipment, net
    (138 )       (31 )       (123 )       (23 )
Bank-owned life insurance income   109       114       441       454  
Other noninterest income   8       101       84       219  
Total noninterest income   1,959       2,890       7,028       9,696  
                       
 

Noninterest expense:
                     
Salaries and employee benefits   5,809       6,028       21,565       21,706  
Occupancy and equipment expense   1,166       1,222       4,585       5,002  
Professional fees   458       401       1,749       1,666  
Data processing fees   601       459       2,447       1,744  
Marketing expense   143       120       472       392  
Loan acquisition and collection expense   356       233       1,354       1,734  
FDIC insurance premiums   80       79       317       303  
Intangible asset amortization   108       108       433       432  
Other noninterest expense   757       714       2,808       2,810  
Total noninterest expense   9,478       9,364       35,730       35,789  
                       
Income before income tax expense   6,635       6,894       23,197       20,138  
Income tax expense   2,291       2,867       7,031       7,799  
Net income $ 4,344     $ 4,027     $ 16,166     $ 12,339  
                       
                       
Weighted-average common shares outstanding:                      
Basic   8,934,038       8,823,679       8,906,710       8,898,448  
Diluted   9,116,157       8,979,471       9,129,152       8,952,614  
Earnings per common share:                      
                       
Basic $ 0.49     $ 0.46     $ 1.81     $ 1.39  
Diluted   0.48       0.45         1.77          1.38  
 Cash dividends declared per common share $ 0.01     $ 0.01     $ 0.04     $ 0.04  



NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
  Three Months Ended June 30,
  2018    2017 
      Interest   Average       Interest   Average
  Average   Income/   Yield/   Average   Income/   Yield/
  Balance   Expense   Rate   Balance   Expense   Rate
Assets:                              
Interest-earning assets:                              
Investment securities $ 88,933   $   298   1.34%   $   98,033   $   271   1.11 %
Loans (1) (2) (3)   825,286       16,855   8.19%       758,520       15,741   8.32 %
Federal Home Loan Bank stock   1,655       24   5.82%       1,938       19   3.93 %
Short-term investments (4)   178,244       795   1.79%       137,570       357   1.04 %
Total interest-earning assets     1,094,118       17,972   6.59%       996,061       16,388   6.60 %
Cash and due from banks     2,611                 2,753          
Other non-interest earning assets     30,430                 31,910          
Total assets $   1,127,159             $   1,030,724          
                               
Liabilities & Shareholders' Equity:                              
Interest-bearing liabilities:                              
NOW accounts $ 73,357   $   59   0.32%   $ 71,209   $   51   0.29 %
Money market accounts     447,775       1,580   1.42%       345,352       878   1.02 %
Savings accounts   37,799       14   0.15%       37,863       13   0.14 %
Time deposits   309,362       1,243   1.61%       323,399       1,007   1.25 %
Total interest-bearing deposits   868,293       2,896   1.34%       777,823       1,949   1.01 %
Federal Home Loan Bank advances     15,000       109   2.91%       20,014       166   3.33 %
Subordinated debt     23,915       552   9.26%       23,579       487   8.28 %
Capital lease obligations      629       7   4.46%       896       12   5.37 %
Total interest-bearing liabilities     907,837       3,564   1.57%       822,312       2,614   1.28 %
                               
Non-interest bearing liabilities:                              
Demand deposits and escrow accounts    76,368                80,188          
Other liabilities     8,654                 7,181          
Total liabilities     992,859                 909,681          
Shareholders' equity     134,300                 121,043          
Total liabilities and shareholders' equity $   1,127,159             $   1,030,724          
                               
Net interest income (5)       $ 14,408             $ 13,774    
                               
Interest rate spread             5.02%               5.32 %
Net interest margin (6)             5.28%               5.55 %
                               
(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 $17 thousand for the three months ended June 30, 2018 and June 30, 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)
  Year Ended June 30,
  2018    2017 
      Interest   Average       Interest   Average
  Average   Income/   Yield/   Average   Income/   Yield/
  Balance   Expense   Rate   Balance   Expense   Rate
Assets:                              
Interest-earning assets:                              
Investment securities $ 92,599   $   1,111   1.20%   $ 95,624   $   1,018   1.06 %
Loans (1) (2) (3)     785,348       62,156   7.91%       741,468       55,928   7.54 %
Federal Home Loan Bank stock     1,803       89   4.94%       2,172       90   4.14 %
Short-term investments (4)     171,360       2,547   1.49%       133,599       956   0.72 %
Total interest-earning assets     1,051,110       65,903   6.27%       972,863       57,992   5.96 %
Cash and due from banks     2,889                 2,833          
Other non-interest earning assets     31,550                 32,394          
Total assets $   1,085,549             $   1,008,090          
                               
Liabilities & Shareholders' Equity:                              
Interest-bearing liabilities:                              
NOW accounts $ 70,486   $ 210   0.30%   $ 70,912   $ 204   0.29 %
Money market accounts     407,680       5,145   1.26%       322,011       3,120   0.97 %
Savings accounts     37,514       57   0.15%       36,438       50   0.14 %
Time deposits     311,544       4,485   1.44%     326,601     3,983   1.22 %
Total interest-bearing deposits     827,224       9,897   1.20%       755,962       7,357   0.97 %
Federal Home Loan Bank advances     16,947       547   3.23%       24,334      800   3.29 %
Subordinated debt     23,787       2,102   8.84%       23,468       1,888   8.04 %
Capital lease obligations     730       38   5.21%       992       51   5.14 %
Total interest-bearing liabilities     868,688       12,584   1.45%       804,756       10,096   1.25 %
                               
Non-interest bearing liabilities:                              
Demand deposits and escrow accounts   79,767               79,560          
Other liabilities     7,472                 7,599          
Total liabilities     955,927                 891,915          
Shareholders' equity     129,622                 116,175          
Total liabilities and shareholders' equity $   1,085,549             $   1,008,090          
                               
Net interest income (5)       $   53,319             $    47,896    
                               
Interest rate spread             4.82%               4.71 %
Net interest margin (6)             5.07%               4.92 %
                               
(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 $71 thousand for the year ended June 30, 2018 and June 30, 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:
  June 30, 2018   March 31, 2018   December 31, 2017   September 30, 2017   June 30, 2017
 

Net interest income
$   14,408     $   13,134     $   12,457     $    13,311     $   13,757  
Provision for loan losses   254       364       437       354       389  
Noninterest income   1,959       1,882       1,228       1,958       2,890  
Noninterest expense   9,478       8,975       8,563       8,714       9,364  
Net income   4,344       3,932       3,304       4,586       4,027  
                   
Weighted-average common shares outstanding:                  
Basic   8,934,038       8,927,544       8,924,495       8,841,511       8,823,679  
Diluted   9,116,157       9,143,177       9,168,084       9,089,936       8,979,471  
Earnings per common share:                  
Basic $    0.49     $    0.44     $   0.37     $    0.52     $   0.46  
Diluted     0.48         0.43         0.36         0.50         0.45  
Dividends per common share     0.01         0.01         0.01         0.01         0.01  
                   
Return on average assets   1.55 %     1.43 %     1.26 %     1.71 %     1.57 %
Return on average equity   12.97 %     12.15 %     10.20 %     14.61 %     13.34 %
Net interest rate spread (1)   5.02 %     4.69 %     4.68 %     4.89 %     5.32 %
Net interest margin (2)   5.28 %     4.94 %     4.93 %     5.13 %     5.55 %
Efficiency ratio (non-GAAP) (3)   57.91 %     59.77 %     62.57 %     57.07 %     56.25 %
Noninterest expense to average total assets   3.37 %     3.27 %     3.27 %     3.25 %     3.64 %
Average interest-earning assets to average
interest-bearing liabilities
  120.52 %     120.27 %     122.21 %     121.09 %     121.13 %
                   
  As of:
  June 30,2018   March 31, 2018   December 31, 2017   September 30, 2017   June 30, 2017
Nonperforming loans:                  
Originated portfolio:                  
Residential real estate $   2,914     $   3,116     $   3,783     $   3,667     $   3,337  
Commercial real estate   1,499       1,408       2,537       2,409       413  
Home equity   298       255       107       58       58  
Commercial and industrial   1,368       636       2,555       2,629       2,600  
Consumer   134       136       147       131       103  
Total originated portfolio   6,213       5,551       9,129       8,894       6,511  
Total purchased portfolio   5,745       8,063       8,962       7,758       7,452  
Total nonperforming loans   11,958       13,614       18,091       16,652       13,963  
Real estate owned and other repossessed collateral, net   2,233       947       910       2,040       826  
Total nonperforming assets $   14,191     $   14,561     $   19,001     $   18,692     $   14,789  
                   
Past due loans to total loans   0.89 %     1.37 %     3.87 %     1.60 %     1.72 %
Nonperforming loans to total loans   1.37 %     1.67 %     2.34 %     2.19 %     1.79 %
Nonperforming assets to total assets   1.23 %     1.25 %     1.84 %     1.78 %     1.37 %
Allowance for loan losses to total loans   0.55 %     0.57 %     0.56 %     0.53 %     0.47 %
Allowance for loan losses to nonperforming loans   40.20 %     34.46 %     24.07 %     24.23 %     26.25 %
                   
Commercial real estate loans to risk-based capital (4)   200.74 %     186.07 %     187.92 %     166.15 %     181.23 %
Net loans to core deposits (5)   91.54 %     83.65 %     91.46 %     88.68 %     87.68 %
Purchased loans to total loans, including held for sale   33.10 %     31.02 %     31.28 %     30.11 %     31.43 %
Equity to total assets   11.96 %     11.47 %     12.57 %     12.07 %     11.40 %
Common equity tier 1 capital ratio   16.02 %     16.48 %     16.74 %     16.50 %     16.00 %
Total capital ratio   19.28 %     19.92 %     20.30 %     20.04 %     19.48 %
Tier 1 leverage capital ratio   13.12 %     12.88 %     13.41 %     12.77 %     12.81 %
                   
Total shareholders' equity $   138,430     $   133,787     $   130,003     $   126,712     $   122,797  
Less: Preferred stock     -         -         -         -         -  
Common shareholders' equity     138,430         133,787         130,003         126,712         122,797  
Less: Intangible assets (6)     (3,837 )       (3,973 )       (4,087 )       (4,146 )       (4,146 )
Tangible common shareholders' equity (non-GAAP) $   134,593     $   129,814     $    125,916     $   122,566     $   118,651  
                   
Common shares outstanding   8,938,841       8,925,399       8,939,273         8,890,353         8,831,654  
Book value per common share $    15.49     $    14.99     $    14.54     $    14.25     $    13.90  
Tangible book value per share (non-GAAP) (7)     15.06         14.54         14.09         13.79         13.43  
                   
                   
(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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