PORTLAND, Maine, July 29, 2020 (GLOBE NEWSWIRE) -- Northeast Bank (the “Bank”) (NASDAQ: NBN), a Maine-based full-service bank, today reported net income of $11.2 million, or $1.33 per diluted common share, for the quarter ended June 30, 2020, compared to a net loss of $603 thousand, or ($0.07) per diluted common share, for the quarter ended June 30, 2019. Net income for the year ended June 30, 2020 was $22.7 million, or $2.53 per diluted common share, compared to $13.9 million, or $1.52 per diluted common share, for the year ended June 30, 2019. Earnings were positively impacted in the quarter ended June 30, 2020 by the sale of $457.6 million in Paycheck Protection Program (“PPP”) loans to The Loan Source, Inc. (“Loan Source”) which resulted in a pre-tax net gain of $9.7 million, or approximately $6.7 million net of tax.

The quarter and year ended June 30, 2019 included $6.0 million and $6.4 million of non-recurring expenses (after tax) related to the Bank’s corporate reorganization, respectively. Excluding these non-recurring expenses, the Bank recorded net operating earnings of $5.4 million, or $0.59 per diluted common share, for the quarter ended June 30, 2019 and $20.3 million, or $2.20 per diluted common share, for the year ended June 30, 2019.  We refer to results excluding these non-recurring items as “net operating earnings.”

The Board of Directors declared a cash dividend of $0.01 per share, payable on August 28, 2020, to shareholders of record as of August 14, 2020.

Discussing results, Rick Wayne, Chief Executive Officer, said “We achieved record quarterly results, including diluted earnings per share of $1.33, a return on average equity of 28.4%, a return on average assets of 3.1%, and an efficiency ratio of 37.4%. Additionally, we achieved a quarterly net interest margin, excluding the effects of PPP, of 5.3%. We are proud of our participation in the Paycheck Protection Program, providing PPP loans to over 4,300 small businesses with tens of thousands of related jobs.  We are excited for our correspondent banking relationship with Loan Source, in which we earn a correspondent fee when Loan Source purchases PPP loans and we subsequently share in net servicing income on such purchased PPP loans.” 

Mr. Wayne continued, “During the quarter, Loan Source purchased $1.3 billion of PPP loans, including $457.6 million of PPP loans from the Bank and approximately $815.3 million of PPP loans from lenders other than the Bank, which generated a correspondent fee for the Bank of $2.9 million. Subsequent to the quarter, Loan Source purchased an additional $1.6 billion of PPP loans, which generated an additional correspondent fee for the Bank of $5.6 million which will be recognized over the expected life of the loans. We will also receive one half of the net servicing income on the $2.9 billion PPP portfolio owned by Loan Source. To the extent Loan Source purchases additional PPP loans, the Bank will generate additional correspondent banking fees and receive its share of additional net servicing income.”

As of June 30, 2020, total assets were $1.26 billion, an increase of $103.8 million, or 9.0%, from total assets of $1.15 billion as of June 30, 2019. The principal components of the changes 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, 2020:
 Loan Portfolio Changes 
 Three Months Ended June 30, 2020 
 June 30, 2020 Balance March 31, 2020 Balance  Change ($)   Change (%) 
         
 (Dollars in thousands) 
LASG Purchased$386,624 $395,944 $(9,320)  (2.35%) 
LASG Originated 467,612  512,964  (45,352)  (8.84%) 
SBA 47,095  48,306  (1,211)  (2.51%) 
Community Banking 70,271  76,706  (6,435)  (8.39%) 
Total$971,602 $1,033,920 $(62,318)  (6.03%) 
               
   
 Year Ended June 30, 2020 
 June 30, 2020 Balance June 30, 2019 Balance  Change ($)  
Change (%) 
         
 (Dollars in thousands) 
LASG Purchased$386,624 $326,640 $59,984   18.36% 
LASG Originated 467,612  493,413  (25,801  (5.23%) 
SBA 47,095  63,053  (15,958  (25.31%) 
Community Banking 70,271  91,954  (21,683  (23.58%) 
Total$971,602 $975,060 $(3,458  (0.35%) 

Loans generated by the Bank's Loan Acquisition and Servicing Group ("LASG") for the quarter ended June 30, 2020 totaled $46.3 million, which consisted of $12.7 million of purchased loans, at an average price of 87.2% of unpaid principal balance, and $33.6 million of originated loans. Residential loan production sold in the secondary market totaled $2.1 million for the quarter.

Additionally, the Bank originated $487.5 million of loans in connection with the PPP. The Bank subsequently sold PPP loans with a total principal balance of $457.6 million during the quarter ended June 30, 2020, recording a net gain of $9.7 million on the sale primarily resulting from the recognition of net deferred fees, offset by purchase price discounts. The remaining $29.9 million of PPP loans are classified as held for sale at June 30, 2020, offset by a valuation adjustment to reflect the fair value of the loans and unamortized net deferred fees.

An overview of the Bank’s LASG portfolio follows:

 LASG Portfolio
 Three Months Ended June 30,
 2020  2019 
 Purchased Originated Total LASG Purchased Originated Total LASG
            
 (Dollars in thousands)
Loans purchased or originated during the period:                 
Unpaid principal balance$  14,611  $  33,612  $  48,223  $ 49,948  $  51,830  $  101,778 
Net investment basis 12,744     33,612     46,356   47,107     51,830     98,937 
                  
Loan returns during the period:                 
Yield 9.89%   7.13%   8.34%   12.27%   7.75%   9.53% 
Total Return on Purchased Loans (1) 9.89%   7.13%   8.34%   12.27%   7.75%   9.53% 
                  



 Year Ended June 30,
 2020  2019 
 Purchased Originated Total LASG Purchased Originated Total LASG
            
 (Dollars in thousands)
Loans purchased or originated during the period:                 
Unpaid principal balance$  182,588  $221,484  $  404,072  $ 144,372  $271,179  $  415,551 
Net investment basis 171,262   221,484     392,746   135,848   271,179     407,027 
                  
Loan returns during the period:                 
Yield 9.86%   7.43%   8.47%   10.38%   7.67%   8.80% 
Total Return on Purchased Loans (1) 9.97%   7.43%   8.51%   10.57%   7.67%   8.88% 
                  
Total loans as of period end:                 
Unpaid principal balance$421,659  $467,612  $  889,271  $360,472  $493,413  $  853,885 
Net investment basis 386,624   467,612     854,236   326,640   493,413    820,053 
                  

(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. See reconciliation in below table entitled “Total Return on Purchased Loans.”

  1. Short-term investments increased by $86.4 million, or 158.8%, from June 30, 2019, primarily due to a $70.0 million increase in deposits.
     
  2. Deposits increased by $70.0 million, or 7.4%, from June 30, 2019, attributable to increases in savings and interest-bearing checking accounts of $36.8 million, or 36.4%, money market accounts of $31.5 million, or 11.6%, and demand deposits of $26.0 million, or 37.8%, partially offset by a decrease in time deposits of $24.3 million, or 4.8%.
     
  3. Shareholders’ equity increased by $11.2 million, or 7.3%, from June 30, 2019, primarily due to net income of $22.7 million, partially offset by the repurchase of 853,098 shares at a weighted average price per share of $13.45, which resulted in an $11.5 million reduction in shareholders’ equity.

Net income increased by $11.8 million to $11.2 million for the quarter ended June 30, 2020, compared to a net loss of $603 thousand for the quarter ended June 30, 2019. Net operating earnings increased by $5.8 million to $11.2 million for the quarter ended June 30, 2020, compared to net operating earnings of $5.4 million for the quarter ended June 30, 2019.

  1. Net interest and dividend income before provision for loan losses increased by $96 thousand to $17.4 million for the quarter ended June 30, 2020, compared to $17.3 million for the quarter ended June 30, 2019. The increase was primarily due to lower deposit rates, higher average loan balances, and decreased interest expense on subordinated debt from the redemption of trust preferred securities in May 2019, partially offset by increased interest expense in connection with the Bank’s participation in the  Paycheck Protection Program Liquidity Facility (“PPPLF”) used to fund PPP originations during the quarter, and lower rates earned on loans and short-term investments.

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,
 2020  2019 
 Average Interest   Average Interest  
 Balance (1) Income Yield Balance (1) Income Yield
            
 (Dollars in thousands)
Community Banking$74,059 $  975 5.30% $99,007 $  1,272 5.15%
SBA National 48,191  642 5.36%  66,126  1,194 7.24%
SBA PPP 223,804  1,561 2.81%  -  - 0.00%
LASG:               
Originated  492,612  8,738 7.13%   482,213    9,317 7.75%
Purchased  386,212    9,495 9.89%  313,515    9,588 12.27%
Total LASG  878,824    18,233 8.34%   795,728    18,905 9.53%
Total$ 1,224,878 $  21,411 7.03% $960,861 $  21,371 8.92%


 Year Ended June 30,
 2020  2019 
 Average Interest   Average Interest  
 Balance (1) Income Yield Balance (1) Income Yield
            
 (Dollars in thousands)
Community Banking$82,472 $  4,470 5.42% $107,685 $ 5,590 5.19%
SBA National 55,511  4,066 7.32%  70,016  5,285 7.55%
SBA PPP 55,649  1,561 2.81%  -  - 0.00%
LASG:               
Originated  479,054    35,572 7.43%   434,570    33,348 7.67%
Purchased  356,958    35,201 9.86%   312,213    32,404 10.38%
Total LASG  836,012    70,773 8.47%  746,783    65,752 8.80%
Total$1,029,644 $  80,870 7.85% $ 924,484 $  76,627 8.29%
(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 quarter ended June 30, 2019, transactional income for the quarter ended June 30, 2020 decreased by $986 thousand due to thinning discounts, while regularly scheduled interest and accretion increased by $893 thousand due to the increase in average balances. The total return on p­­­­­­­­urchased loans for the quarter ended June 30, 2020 was 9.9%, a decrease from 12.3% for the quarter ended June 30, 2019. The following table details the total return on purchased loans:

 Total Return on Purchased Loans
 Three Months Ended June 30,
 2020 2019
 Income Return (1) Income Return (1)
        
 (Dollars in thousands)
Regularly scheduled interest and accretion$6,892 7.18% $5,999 7.67%
Transactional income:         
Gain on loan sales   - 0.00%  - 0.00%
Gain on real estate owned   - 0.00%    - 0.00%
Other noninterest income   -  0.00%    -  0.00%
Accelerated accretion and loan fees   2,603 2.71%    3,589 4.60%
Total transactional income   2,603 2.71%    3,589 4.60%
Total$  9,495 9.89% $  9,588 12.27%
  


 Year Ended June 30,
 2020 2019
 Income Return (1) Income Return (1)
        
 (Dollars in thousands)
Regularly scheduled interest and accretion$26,202 7.34% $23,849 7.64%
Transactional income:         
Gain on loan sales   - 0.00%    582 0.19%
Gain on real estate owned   395 0.11%    - 0.00%
Other noninterest income   -  0.00%    -  0.00%
Accelerated accretion and loan fees   8,999 2.52%    8,555 2.74%
Total transactional income   9,394 2.63%    9,137 2.93%
Total$  35,596 9.97% $32,986 10.57%

(1) The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on asset sales and gains on real estate owned 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 periods shown. Total return is considered a non-GAAP financial measure.

  1. Provision for loan losses increased by $643 thousand for the quarter ended June 30, 2020, compared to the quarter ended June 30, 2019, primarily due to a $477 thousand increase in specific reserves as compared to a $231 thousand decrease in specific reserves in the quarter ended June 30, 2019. 
     
  2. Noninterest income increased by $8.7 million for the quarter ended June 30, 2020, compared to the quarter ended June 30, 2019, primarily due to the following:
    • An increase in gain on sale of PPP loans of $9.7 million, due to the sale of PPP loans with a total principal balance of $457.6 million, which resulted in a net gain based on the recognition of net deferred fees, offset by purchase price discounts in the quarter ended June 30, 2020; partially offset by,
    • A $337 thousand loss on assets held for sale, representing the fair value adjustment for PPP loans held for sale at June 30, 2020;
    • A $227 thousand decrease in gain on Small Business Administration (“SBA”) loan sales, as no segment loans (SBA loans other than PPP loans) were sold during the current quarter;
    • A $223 thousand increase in loss on real estate owned (“REO”), due to a write-down on an existing REO property during the quarter, as compared to two smaller write-downs on REO properties during the quarter ended June 30, 2019; and
    • A $188 thousand decrease in gain on sale of residential loans held for sale, due to lower volume sold as compared to the quarter ended June 30, 2019.

  3. Noninterest expense decreased by $8.3 million for the quarter ended June 30, 2020 compared to the quarter ended June 30, 2019, primarily due to the following:
    • A decrease in reorganization expense of $8.3 million, as the prior year quarter included expenses related to the May 2019 corporate reorganization; and
    • A decrease in other noninterest expense of $495 thousand, primarily due to a $190 thousand recovery on SBA servicing assets, as compared to an $85 thousand impairment charge in the quarter ended June 30, 2019, and decreased travel expense; partially offset by,
    • An increase in salaries and employee benefits of $371 thousand, primarily due to increases in incentive compensation and regular compensation, partially offset by an increase in deferred salaries and a decrease in stock-based compensation; and
    • An increase in professional fees of $371 thousand, primarily due to increased legal fees associated with the correspondent relationship with Loan Source, as well as increased accounting and internal audit expense.

  4. Income tax expense increased by $4.6 million to $4.8 million, or an effective tax rate of 30.4%, for the quarter ended June 30, 2020, compared to $276 thousand, or an effective tax rate of (84.4%), for the quarter ended June 30, 2019. The increase was primarily due to higher pre-tax income, which increased by $16.5 million during the quarter ended June 30, 2020 compared to the quarter ended June 30, 2019.

    Income tax expense and the effective tax rate for the quarter ended June 30, 2019 were affected by an income tax benefit of $2.3 million recorded in connection with the redemption of the trust preferred securities and the loss associated with the termination of related interest rate swaps and caps, in connection with the corporate reorganization in May 2019.

    Excluding the effects of the corporate reorganization, the effective tax rate for the quarter ended June 30, 2019 was 32.5%, as compared to 30.4% for the quarter ended June 30, 2020. The decrease was primarily related to a smaller year-end true-up adjustment related to state tax apportionment in the quarter ended June 30, 2020.

As of June 30, 2020, nonperforming assets totaled $24.4 million, or 1.94% of total assets, as compared to $16.7 million, or 1.45% of total assets, as of June 30, 2019. The increase was primarily due to two LASG purchased loans totaling $1.9 million, one LASG originated loan totaling $2.7 million, and one SBA loan totaling $1.5 million that were placed on nonaccrual, and a $1.3 million increase in real estate owned, due to four properties transferred in, partially offset by two properties sold and write-downs during the year ended June 30, 2020.

As of June 30, 2020, past due loans totaled $16.4 million, or 1.69% of total loans, as compared to past due loans totaling $14.6 million, or 1.50% of total loans as of June 30, 2019. The increase was primarily due to one LASG originated loan totaling $2.7 million and one SBA loan totaling $1.5 million becoming past due during the year ended June 30, 2020, partially offset by one LASG originated loan totaling $1.3 million and one Community Bank loan totaling $1.1 million that paid off during the year ended June 30, 2020.

As of June 30, 2020, the Bank’s Tier 1 leverage capital ratio was 13.4%, compared to 12.9% at June 30, 2019, and the Total capital ratio was 19.6% at June 30, 2020, compared to 18.0% at June 30, 2019. Capital ratios were primarily affected by increased earnings.

Investor Call Information
Rick Wayne, Chief Executive Officer, Jean-Pierre Lapointe, Chief Financial Officer, and Pat Dignan, Executive Vice President and Chief Credit Officer, will host a conference call to discuss fourth quarter earnings and business outlook at 10:00 a.m. Eastern Time on Thursday, July 30th. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 2496196. The call will be available via live webcast, which can be viewed by accessing the Bank’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 Bank
Northeast Bank (NASDAQ: NBN) is a full-service bank headquartered in Portland, Maine. We offer personal and business banking services to the Maine market via nine branches. Our Loan Acquisition and Servicing Group purchases and originates commercial loans on a nationwide basis. 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 net operating earnings, operating earnings per common share, operating return on average assets, operating return on average equity, operating efficiency ratio, operating noninterest expense to average total assets, tangible common shareholders’ equity, tangible book value per share, total return on purchased loans, efficiency ratio, and net interest margin excluding PPP. The Bank’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 the Bank 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 Bank’s control. The Bank’s actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, the negative impacts and disruptions of the COVID-19 pandemic and measures taken to contain its spread on our employees, customers, business operations, credit quality, financial position, liquidity and results of operations; the length and extent of the economic contraction resulting from the COVID-19 pandemic; continued deterioration in employment levels, general business and economic conditions on a national basis and in the local markets in which the Bank operates, including changes which adversely affect borrowers’ ability to service and repay our loans; changes in customer behavior due to changing political, business and economic conditions or legislative or regulatory initiatives; turbulence in the capital and debt markets; changes in interest rates and real estate values; increases in loan defaults and charge-off rates; decreases 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; competitive pressures from other financial institutions; operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; the risk that the Bank may not be successful in the implementation of its business strategy; the risk that intangibles recorded in the Bank’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 Bank’s Annual Report on Form 10-K and updated by our Quarterly Reports on Form 10-Q and other filings submitted to the Federal Deposit Insurance Corporation. These statements speak only as of the date of this release and the Bank 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 BANK
BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share data)
 June 30, 2020 June 30, 2019
Assets     
Cash and due from banks$2,795  $2,482 
Short-term investments 140,862   54,425 
Total cash and cash equivalents 143,657   56,907 
      
      
Available-for-sale debt securities, at fair value 64,918   75,774 
Equity securities, at fair value 7,239   6,938 
Total investment securities 72,157   82,712 
      
Residential real estate loans held for sale 601   3,179 
SBA loans held for sale 28,852   731 
Total loans held for sale 29,453   3,910 
      
      
Loans:     
Commercial real estate 679,537   668,496 
Commercial and industrial 212,769   232,839 
Residential real estate 77,722   71,218 
Consumer 1,574   2,507 
Total loans 971,602   975,060 
Less: Allowance for loan losses 9,178   5,702 
Loans, net 962,424   969,358 
      
      
Premises and equipment, net 9,670   5,582 
Real estate owned and other repossessed collateral, net 3,274   1,957 
Federal Home Loan Bank stock, at cost 1,390   1,258 
Intangible assets, net -   434 
Loan servicing rights, net 2,113   2,851 
Bank-owned life insurance 17,074   17,057 
Other assets 16,423   11,832 
Total assets$1,257,635  $1,153,858 
      
Liabilities and Shareholders' Equity     
Deposits:     
Demand$94,749  $68,782 
Savings and interest checking 137,824   101,061 
Money market 302,343   270,835 
Time 477,436   501,693 
Total deposits 1,012,352   942,371 
      
Federal Home Loan Bank advances 15,000   15,000 
Paycheck Protection Program Liquidity Facility 12,440   - 
Subordinated debt 14,940   14,829 
Lease liability 4,496   323 
Other liabilities 33,668   27,755 
Total liabilities 1,092,896   1,000,278 
      
Commitments and contingencies   -     - 
      
Shareholders' equity     
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares    
issued and outstanding at June 30, 2020 and 2019   -     - 
Voting common stock, $1.00 par value, 25,000,000 shares authorized;     
8,153,841 and 8,997,326 shares issued and outstanding at    
June 30, 2020 and 2019, respectively 8,154   8,997 
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized;     
44,783 shares issued and outstanding at June 30, 2020 and 201945    45 
Additional paid-in capital 68,302   78,095 
Retained earnings 89,960   67,581 
Accumulated other comprehensive loss (1,722)  (1,138)
Total shareholders' equity 164,739   153,580 
Total liabilities and shareholders' equity$1,257,635  $1,153,858 


NORTHEAST BANK
STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except share and per share data)
 Three Months Ended June 30, Year Ended June 30, 
 2020  2019  2020  2019  
Interest and dividend income:            
Interest and fees on loans$21,411  $21,371  $80,870  $76,627  
Interest on available-for-sale securities 375   455   1,695   1,684  
Other interest and dividend income 59   729   1,119   3,519  
Total interest and dividend income 21,845   22,555   83,684   81,830  

Interest expense:
            
Deposits 3,858   4,656   16,583   16,768  
Federal Home Loan Bank advances 120   120   689   479  
Paycheck Protection Program Liquidity Facility 174   -   174   -  
Subordinated debt 282   486   1,126   2,238  
Obligation under capital lease agreements 27   5   125   24  
Total interest expense 4,461   5,267   18,697   19,509  
Net interest and dividend income before provision for loan losses 17,384   17,288   64,987   62,321  
Provision for loan losses 905   262   4,500   1,309  
Net interest and dividend income after provision for loan losses 16,479   17,026   60,487   61,012  

Noninterest income:
            
Fees for other services to customers 477   529   1,619   1,769  
Gain on sales of PPP loans 9,702   -   9,702   -  
Gain on sales of SBA loans -   227   793   2,588  
Gain on sales of residential loans held for sale 37   225   600   611  
Gain on sales of other loans -   -   -   582  
Net unrealized gain on equity securities 46   76   148   151  
Loss on real estate owned, other repossessed collateral
and premises and equipment, net
   (263)  (40)    (15)    (104) 
Bank-owned life insurance income 108   110   566   437  
Loss on assets held for sale (337)  -   (337)  -  
Correspondent fee income 20   -   20   -  
Other noninterest income 22   24   88   82  
Total noninterest income 9,812   1,151   13,184   6,116  

Noninterest expense:
            
Salaries and employee benefits 6,704   6,333   24,976   23,323  
Occupancy and equipment expense 922   958   3,588   3,650  
Professional fees 608   246   1,783   1,402  
Data processing fees 974   1,004   3,954   3,769  
Marketing expense 98   166   337   580  
Loan acquisition and collection expense 251   281   2,059   1,913  
FDIC insurance premiums (credits) -   77   (15)  320  
Intangible asset amortization 109   108   434   433  
Reorganization expense -   8,334   -   8,695  
Other noninterest expense 502   997   3,277   3,428  
Total noninterest expense 10,168   18,504   40,393   47,513  
Income (loss) before income tax expense 16,123   (327)  33,278   19,615  
Income tax expense 4,904   276   10,541   5,731  
Net income (loss)$11,219  $(603) $22,737  $13,884  
             

Weighted-average shares outstanding:
            
Basic 8,337,088   9,041,926   8,859,037   9,032,530  
Diluted 8,405,665   9,041,926   8,991,428   9,156,233  

Earnings (loss) per common share:
            
Basic$1.35  $(0.07) $2.57  $1.54  
Diluted 1.33   (0.07)    2.53      1.52   

Cash dividends declared per common share
$0.01  $0.01  $0.04  $0.04  


NORTHEAST BANK
AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
 Three Months Ended June 30,
 2020 2019
   Interest Average   Interest Average
 Average Income/ Yield/ Average Income/ Yield/
 Balance Expense Rate Balance Expense Rate
Assets:               
Interest-earning assets:               
Investment securities$  73,100 $  375 2.06% $  83,372 $  455 2.19%
Loans (1) (2) (3)   1,224,878    21,411 7.03%    960,861    21,371 8.92%
Federal Home Loan Bank stock   3,194    29 3.65%    1,258    20 6.38%
Short-term investments (4)   126,499    30 0.10%    119,788    709 2.37%
Total interest-earning assets   1,428,001    21,845 6.15%    1,165,279    22,555 7.76%
Cash and due from banks   3,426         2,351     
Other non-interest earning assets   37,222         32,864     
Total assets$  1,468,649      $  1,200,494     
                
Liabilities & Shareholders' Equity:               
Interest-bearing liabilities:               
NOW accounts$89,194 $  124 0.56% $70,645 $  63 0.36%
Money market accounts   290,643    828 1.15%    279,307    1,124 1.61%
Savings accounts   35,367    14 0.16%    35,697    14 0.16%
Time deposits   518,094    2,892 2.25%    537,155    3,455 2.58%
Total interest-bearing deposits   933,298    3,858 1.66%    922,804    4,656 2.02%
Federal Home Loan Bank advances   49,615    120 0.97%    15,000    120 3.21%
PPPLF 202,285  174 0.35%  -  - 0.00%
Subordinated debt   14,925    282 7.60%    19,272    486 10.11%
Lease obligations   4,616    27 2.35%    348    5 5.76%
Total interest-bearing liabilities   1,204,739    4,461 1.49%    957,424    5,267 2.21%
                
Non-interest bearing liabilities:               
Demand deposits and escrow accounts  95,062       80,538     
Other liabilities   10,197         9,534     
Total liabilities   1,309,998         1,047,496     
Shareholders' equity   158,651         152,998     
Total liabilities and shareholders' equity$  1,468,649      $  1,200,494     
                
Net interest income   $17,384      $17,288  
                
Interest rate spread      4.66%       5.55%
Net interest margin (5)      4.90%       5.95%
                
(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)  Net interest margin is calculated as net interest income divided by total interest-earning assets.
 


NORTHEAST BANK
AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
 Year Ended June 30,
 2020 2019
   Interest Average   Interest Average
 Average Income/ Yield/ Average Income/ Yield/
 Balance Expense Rate Balance Expense Rate
Assets:               
Interest-earning assets:               
Investment securities$78,656 $  1,695 2.15% $85,232 $  1,684 1.98%
Loans (1) (2) (3)   1,029,644    80,870 7.85%    924,484    76,627 8.29%
Federal Home Loan Bank stock   2,204    94 4.26%    1,475    95 6.44%
Short-term investments (4)   94,586    1,025 1.08%    153,609    3,424 2.23%
Total interest-earning assets   1,205,090   83,684 6.94%    1,164,800    81,830 7.03%
Cash and due from banks   2,971         2,542     
Other non-interest earning assets   38,363         30,968     
Total assets$  1,246,424      $  1,198,310     
                
Liabilities & Shareholders' Equity:               
Interest-bearing liabilities:               
NOW accounts$75,984 $364 0.48% $70,822 $246 0.35%
Money market accounts   276,264    4,096 1.48%    344,631    5,383 1.56%
Savings accounts   34,517    57 0.17%    35,619    56 0.16%
Time deposits   496,531    12,066 2.43%    471,777    11,083 2.35%
Total interest-bearing deposits   883,296    16,583 1.88%    922,849    16,768 1.82%
Federal Home Loan Bank advances   34,918    689 1.97%    15,000    479 3.19%
PPPLF 50,295  174 0.35%        
Subordinated debt   14,883    1,126 7.57%    22,885    2,238 9.78%
Lease obligations   5,169    125 2.42%    455    24 5.27%
Total interest-bearing liabilities   988,561    18,697 1.89%    961,189    19,509 2.03%
                
Non-interest bearing liabilities:               
Demand deposits and escrow accounts 88,805       80,848     
Other liabilities   9,097         8,814     
Total liabilities   1,086,463         1,050,851     
Shareholders' equity   159,961         147,459     
Total liabilities and shareholders' equity$  1,246,424      $  1,198,310     
                
  Net interest income   $  64,987      $  62,321  
                
Interest rate spread      5.05%       5.00%
Net interest margin (5)      5.39%       5.35%
                
(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)  Net interest margin is calculated as net interest income divided by total interest-earning assets.


NORTHEAST BANK
SELECTED FINANCIAL HIGHLIGHTS AND OTHER DATA
(Unaudited)
(Dollars in thousands, except share and per share data)

 Three Months Ended
 June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019

Net interest income
$  17,384  $  16,321  $  15,545  $  15,737  $   17,288 
Provision (credit) for loan losses 905   3,489   243   (136)  262 
Noninterest income 9,812   860   1,337   1,176   1,151 
Noninterest expense 10,168   10,081   9,789   10,354   18,504 
Net income (loss) 11,219   1,875   4,867   4,776   (603)
          
Weighted-average common shares outstanding:         
Basic 8,337,088   9,004,819   9,048,171   9,043,761   9,041,926 
Diluted 8,405,665   9,128,651   9,223,137   9,211,874   9,041,926 
 

Earnings (loss) per common share:
         
Basic$   1.35  $  0.21  $  0.54  $   0.53  $   (0.07)
Diluted   1.33     0.21     0.53     0.52     (0.07)
          
Operating earnings per common share (5):         
Basic$  1.35  $  0.21  $  0.54  $  0.53  $   0.60 
Diluted   1.33     0.21     0.53     0.52     0.59 
          
Dividends declared per common share$  0.01  $  0.01  $   0.01  $   0.01  $   0.01 
          
Return (loss) on average assets 3.07%   0.61%   1.68%   1.68%   (0.20%) 
Return (loss) on average equity 28.44%   4.57%   12.09%   12.18%   (1.58%) 
Net interest rate spread (1) 4.66%   5.14%   5.19%   5.31%   5.55% 
Net interest margin (2) 4.90%   5.50%   5.59%   5.72%   5.95% 
Net interest margin, excluding PPP (3) 5.34%   5.50%   5.59%   5.72%   5.95% 
Efficiency ratio (non-GAAP) (4) 37.39%   58.68%   57.98%   61.22%   100.35% 
Noninterest expense to average total assets 2.78%   3.28%   3.38%   3.64%   6.18% 
Average interest-earning assets to average
  interest-bearing liabilities
 118.53%   122.88%   123.50%   123.81%   121.71% 
          
Operating return on average assets (non-GAAP) (5) 3.07%   0.61%   1.68%   1.68%   1.81% 
Operating return on average equity (non-GAAP) (5) 28.44%   4.57%   12.09%   12.18%   14.18% 
Operating efficiency ratio (non-GAAP) (4) (5) 37.39%   58.68%   57.98%   61.22%   55.15% 
Operating noninterest expense to average total assets (non-
  GAAP) (5)
 2.78%   3.28%   3.38%   3.64%   3.40% 
 As of:
 June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019
Nonperforming loans:         
Originated portfolio:         
Residential real estate$  832  $  1,187  $   1,586  $  1,515  $  2,772 
Commercial real estate 6,861   7,439   8,032   4,530   3,892 
Commercial and industrial 2,058   2,226   622   87   1,284 
Consumer 29   40   59   136   148 
Total originated portfolio 9,780   10,892   10,299   6,268   8,096 
Total purchased portfolio 11,325   13,485   8,489   7,834   6,671 
Total nonperforming loans 21,105   24,377   18,788   14,102   14,767 
Real estate owned and other repossessed collateral, net 3,274   3,110   2,505   1,936   1,957 
Total nonperforming assets$  24,379  $  27,487  $  21,293  $  16,038  $  16,724 
          
Past due loans to total loans 1.69%   3.52%   2.84%   1.50%   1.50% 
Nonperforming loans to total loans 2.17%   2.36%   1.88%   1.51%   1.51% 
Nonperforming assets to total assets 1.94%   2.23%   1.76%   1.43%   1.45% 
Allowance for loan losses to total loans 0.94%   0.85%   0.54%   0.57%   0.58% 
Allowance for loan losses to nonperforming loans 43.49%   36.14%   28.77%   37.44%   38.61% 
          
Commercial real estate loans to total capital (6) 281.32%   304.40%   292.58%   262.92%   282.05% 
Net loans to core deposits (7) (10) 96.38%   102.04%   106.52%   102.59%   103.33% 
Purchased loans to total loans, including held for sale (10) 39.77%   38.28%   36.65%   35.50%   33.37% 
Equity to total assets 13.10%   12.95%   13.53%   14.08%   13.31% 
Common equity tier 1 capital ratio 17.13%   15.71%   16.48%   16.92%   15.89% 
Total capital ratio 19.61%   18.03%   18.52%   19.07%   18.01% 
Tier 1 leverage capital ratio 13.36%   13.04%   14.26%   14.06%   12.86% 
          
Total shareholders' equity$  164,739  $  159,525  $  163,400  $   158,101  $   153,580 
Less: Preferred stock   -     -     -     -     - 
Common shareholders' equity   164,739     159,525     163,400     158,101     153,580 
Less: Intangible assets (8)   (2,113)    (2,116)    (2,641)    (2,940)    (3,285)
Tangible common shareholders' equity (non-GAAP)$  162,626  $  157,409  $  160,759  $   155,161  $  150,295 
          
Common shares outstanding 8,198,624   8,633,772   9,052,013   9,038,912   9,042,109 
Book value per common share$   20.09  $   18.48  $   18.05  $   17.49  $   16.98 
Tangible book value per share (non-GAAP) (9)   19.84     18.23     17.76     17.17     16.62 
          
(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) Net interest margin excluding PPP removes the effects of the following: PPP loan interest income of $1.6 million and PPPLF interest expense of $174 thousand for both the three months and year ended June 30, 2020, as well as PPP loan average balances of $223.8 million and
   $55.6 million for the three months ended June 30, 2020 and the year ended June 30, 2020, respectively.
(4) The efficiency ratio represents noninterest expense divided by the sum of net interest income (before the loan loss provision) plus noninterest income.
(5) Operating earnings per common share, operating return on average assets, operating return on average equity, operating efficiency ratio, and operating noninterest expense to average total assets utilize net operating earnings (non-GAAP). Net operating 
  earnings is calculated as net loss of $603 thousand, less non-recurring reorganization expense, net of tax, of $6.0 million, for net operating earnings of $5.4 million for the quarter ended June 30, 2019.
(6) 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.
(7) Core deposits include all non-maturity deposits and maturity deposits less than $250 thousand. Loans include loans held for sale.
(8) Includes the core deposit intangible asset and loan servicing rights asset.
(9) Tangible book value per share represents total shareholders' equity less the sum of preferred stock and intangible assets divided by common shares outstanding.
(10) Net loans and total loans, including loans held for sale, exclude PPP loans held for sale.



For More Information:
Jean-Pierre Lapointe, Chief Financial Officer
Northeast Bank, 27 Pearl Street, Portland, ME 04101
207.786.3245 ext. 3220
www.northeastbank.com