Northeast Bancorp Reports Third Quarter Results and Declares Dividend

Lewiston, Maine, UNITED STATES


LEWISTON, Maine, April 25, 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 $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)OriginatedSecured Loans to Broker-DealersTotal 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)OriginatedSecured Loans to Broker-DealersTotal 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. 

  1. 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%.
  2. 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. 
 

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 (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 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