Northeast Bank Reports Fourth Quarter Results, Record Annual Earnings and Declares Dividend

Northeast Bank
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PORTLAND, Maine, July 28, 2021 (GLOBE NEWSWIRE) -- Northeast Bank (the “Bank”) (NASDAQ: NBN), a Maine-based full-service bank, today reported net income of $21.4 million, or $2.54 per diluted common share, for the quarter ended June 30, 2021, compared to net income of $11.2 million, or $1.33 per diluted common share, for the quarter ended June 30, 2020. Net income for the year ended June 30, 2021 was $71.5 million, or $8.55 per diluted common share, compared to $22.7 million, or $2.53 per diluted common share, for the year ended June 30, 2020. Net income for the quarter and year ended June 30, 2021 included $12.6 million and $46.7 million, respectively, of net gains on the sale of U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans sold during the quarter and year ended June 30, 2021, which had an after-tax earnings per diluted common share impact of $1.06 and $3.95, respectively.

The Board of Directors declared a cash dividend of $0.01 per share, payable on August 27, 2021, to shareholders of record as of August 13, 2021.

“We closed our fiscal year with another strong quarter,” said Rick Wayne, Chief Executive Officer. “For the fourth fiscal quarter, we originated $563.0 million of Round 2 PPP loans, sold $671.4 million to The Loan Source, Inc., and generated $12.6 million of net gains. For the year ended June 30, 2021, we originated $2.84 billion of PPP loans to over 30,000 borrowers with 287,000 associated jobs. Additionally, in the fourth quarter, we generated $6.7 million of correspondent fee income under the arrangement with Loan Source and ACAP SME, LLC. As correspondent, we facilitated for Loan Source purchases of $4.4 billion of PPP loans during the quarter and cumulative purchases of $11.2 billion through June 30, 2021. Our national lending business remained strong, with originated and purchased loans of $147.8 million during the quarter and $478.4 million for the year, representing 11.5% annual growth.” Mr. Wayne continued, “As a result, we are reporting earnings of $2.54 per diluted common share, a return on average equity of 38.0%, a return on average assets of 4.6%, and an efficiency ratio of 25.0% for the quarter.”

As of June 30, 2021, total assets were $2.17 billion, an increase of $916.8 million, or 72.9%, from total assets of $1.26 billion as of June 30, 2020.

1.

Cash and short-term investments increased by $866.8 million, or 603.4%, primarily due to the timing of a large deposit account related to PPP payoff collections and purchases that is subject to significant fluctuation given the PPP activity during the quarter ended June 30, 2021. Cash and short-term investments may fluctuate significantly and remain at an elevated level while PPP collections, including forgiveness amounts, continue, depending on the timing of receipts and remittances of cash amounts.

2.

The following table highlights the changes in the loan portfolio for the three months and year ended June 30, 2021:

Loan Portfolio Changes

Three Months Ended June 30, 2021

June 30, 2021
Balance

March 31, 2021
Balance

Change ($)

Change (%)

(Dollars in thousands)

National Lending Purchased

$

429,054

$

433,497

$

(4,443)

(1.02%)

National Lending Originated

523,535

473,930

49,605

10.47%

SBA National

39,549

42,707

(3,158)

(7.39%)

Community Banking

48,486

52,674

(4,188)

(7.95%)

Total

$

1,040,624

$

1,002,808

$

37,816

3.77%

Year Ended June 30, 2021

June 30, 2021
Balance

June 30, 2020
Balance

Change ($)

Change (%)

(Dollars in thousands)

National Lending Purchased

$

429,054

$

386,624

$

42,430

10.97%

National Lending Originated

523,535

467,612

55,923

11.96%

SBA National

39,549

47,095

(7,546)

(16.02%)

Community Banking

48,486

70,271

(21,785)

(31.00%)

Total

$

1,040,624

$

971,602

$

69,022

7.10%

Loans generated by the Bank's National Lending Division for the quarter ended June 30, 2021 totaled $147.8 million, which consisted of $33.8 million of purchased loans, at an average price of 95.1% of unpaid principal balance, and $114.0 million of originated loans.

Additionally, the Bank originated $563.0 million of loans in connection with the PPP and sold $671.4 million of PPP loans during the quarter ended June 30, 2021. The Bank recorded a net gain of $12.6 million from the sale of PPP loans, primarily resulting from the recognition of net deferred origination fees upon the sale of the loans.

An overview of the Bank’s National Lending Division portfolio follows:

National Lending Portfolio

Three Months Ended June 30,

2021

2020

Purchased

Originated

Total

Purchased

Originated

Total

(Dollars in thousands)

Loans purchased or originated during the period:

Unpaid principal balance

$

35,456

$

114,020

$

149,476

$

14,611

$

33,612

$

48,223

Net investment basis

33,732

114,020

147,752

12,744

33,612

46,356

Loan returns during the period:

Yield

8.99

%

6.58

%

7.68

%

9.89

%

7.13

%

8.34

%

Total Return on Purchased Loans (1)

8.99

%

6.58

%

7.68

%

9.89

%

7.13

%

8.34

%

Years Ended June 30,

2021

2020

Purchased

Originated

Total

Purchased

Originated

Total

(Dollars in thousands)

Loans purchased or originated during the period:

Unpaid principal balance

$

181,591

$

308,862

$

490,453

$

182,588

$

221,484

$

404,072

Net investment basis

169,489

308,862

478,351

171,262

221,484

392,746

Loan returns during the period:

Yield

8.91

%

6.93

%

7.84

%

9.86

%

7.43

%

8.47

%

Total Return on Purchased Loans (1)

8.91

%

6.93

%

7.84

%

9.97

%

7.43

%

8.51

%

Total loans as of period end:

Unpaid principal balance

$

466,059

$

523,535

$

989,594

$

421,659

$

467,612

$

889,271

Net investment basis

429,054

523,535

952,589

386,624

467,612

854,236

(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.”

3.

Deposits increased by $850.1 million, or 84.0%, from June 30, 2020. The increase was attributable to increases in demand deposits of $877.7 million, or 926.4%, and savings and interest checking accounts of $187.2 million, or 135.9%, partially offset by a decrease in time deposits of $199.6 million, or 41.8%, due to intentional runoff. The increase in demand deposits was primarily due to the timing of a large deposit account related to PPP collections and payoffs that is subject to significant fluctuation given the PPP forgiveness activity during the quarter ended June 30, 2021.

4.

Shareholders’ equity increased by $67.7 million, or 41.1%, from June 30, 2020, primarily due to net income of $71.5 million. Shareholders’ equity also increased by $965 thousand as a result of stock options exercised, which resulted in 153 thousand shares of common stock issued, and increased by $978 thousand due to stock-based compensation. Partially offsetting these increases was the repurchase of 194,317 shares of common stock at a weighted average price per share of $29.56, which resulted in a $5.7 million decrease in shareholders’ equity.

Net income increased by $10.2 million to $21.4 million for the quarter ended June 30, 2021, compared to net income of $11.2 million for the quarter ended June 30, 2020.

1.

Net interest and dividend income before provision for loan losses increased by $718 thousand to $18.1 million for the quarter ended June 30, 2021, compared to $17.4 million for the quarter ended June 30, 2020. The increase was primarily due to the following:

  • A decrease in deposit interest expense of $2.4 million, due to lower interest rates and lower average balances in interest-bearing deposits; partially offset by,

  • A decrease in PPP loan interest income of $677 thousand, due to lower average balances;

  • A decrease in interest income earned on the National Lending Division’s originated portfolio of $509 thousand, due to lower rates earned, partially offset by higher average balances; and

  • A decrease of $390 thousand in interest income earned on the Community Bank portfolio, due to lower average balances and average rates earned.

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,

2021

2020

Average

Interest

Average

Interest

Balance (1)

Income

Yield

Balance (1)

Income

Yield

(Dollars in thousands)

Community Banking

$

49,003

$

585

4.79

%

$

74,059

$

975

5.30

%

SBA National

41,331

606

5.88

%

48,191

642

5.36

%

National Lending:

Originated

501,646

8,229

6.58

%

492,612

8,738

7.13

%

Purchased

424,102

9,507

8.99

%

386,212

9,495

9.89

%

Total National Lending

925,748

17,736

7.68

%

878,824

18,233

8.34

%

Total excluding SBA PPP

$

1,016,082

$

18,927

7.47

%

$

1,001,074

$

19,850

8.17

%

SBA PPP

$

172,787

$

884

2.05

%

$

223,804

$

1,561

2.81

%

Total including SBA PPP

$

1,188,869

$

19,811

6.68

%

$

1,224,878

$

21,411

7.03

%



Year Ended June 30,

2021

2020

Average

Interest

Average

Interest

Balance (1)

Income

Yield

Balance (1)

Income

Yield

(Dollars in thousands)

Community Banking

$

56,711

$

2,746

4.84%

$

82,472

$

4,470

5.42%

SBA National

45,764

2,442

5.33%

55,511

4,066

7.32%

National Lending:

Originated

469,632

32,560

6.93%

479,054

35,572

7.43%

Purchased

400,141

35,649

8.91%

356,958

35,201

9.86%

Total National Lending

869,773

68,209

7.84%

836,012

70,773

8.47%

Total excluding SBA PPP

$

972,248

$

73,396

7.55%

$

973,995

$

59,459

8.20%

SBA PPP

$

166,230

$

3,522

2.12%

$

55,649

$

1,561

2.81%

Total including SBA PPP

$

1,138,478

$

76,918

6.76%

$

1,029,644

$

80,870

7.85%


(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, 2020, transactional income decreased by $166 thousand for the quarter ended June 30, 2021, while regularly scheduled interest and accretion increased by $178 thousand due to the increase in average balances, partially offset by lower rates earned. The total return on purchased loans for the quarter ended June 30, 2021 was 9.0%, a decrease from 9.9% for the quarter ended June 30, 2020. The following table details the total return on purchased loans:

Total Return on Purchased Loans

Three Months Ended June 30,

2021

2020

Income

Return (1)

Income

Return (1)

(Dollars in thousands)

Regularly scheduled interest and accretion

$

7,070

6.69

%

$

6,892

7.18

%

Transactional income:

Accelerated accretion and loan fees

2,437

2.30

%

2,603

2.71

%

Total transactional income

2,437

2.30

%

2,603

2.71

%

Total

$

9,507

8.99

%

$

9,495

9.89

%

Year Ended June 30,

2021

2020

Income

Return (1)

Income

Return (1)

(Dollars in thousands)

Regularly scheduled interest and accretion

$

27,536

6.88

%

$

26,202

7.34

%

Transactional income:

Gain on real estate owned

-

0.00

%

395

0.11

%

Accelerated accretion and loan fees

8,113

2.03

%

8,999

2.52

%

Total transactional income

8,113

2.03

%

9,394

2.63

%

Total

$

35,649

8.91

%

$

35,596

9.97

%

(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 quarter. Total return is considered a non-GAAP financial measure.

2.

Provision for loan losses decreased by $2.8 million to a credit of $1.9 million for the quarter ended June 30, 2021, from a $905 thousand provision in the quarter ended June 30, 2020. The decrease in the provision for loan losses reflects decreases in certain qualitative factors during the current quarter as a result of continued improvements from the COVID-19 pandemic, primarily in the SBA loan portfolio, partially offset by an increase in loan balances during the quarter.

3.

Noninterest income increased by $9.8 million for the quarter ended June 30, 2021, compared to the quarter ended June 30, 2020, principally due to the following:

  • An increase in gain on sale of PPP loans of $2.9 million, due to the sale of PPP loans with a total principal balance of $671.4 million in the quarter ended June 30, 2021, as compared to the sale of PPP loans with a total balance of $457.6 million in the quarter ended June 30, 2020, which resulted in a net gain based on the recognition of net deferred fees; and

  • An increase in correspondent fee income of $6.6 million from the recognition of correspondent fees and net servicing income as a result of the correspondent arrangement entered into with The Loan Source, Inc. (“Loan Source”) during the quarter ended June 30, 2020. Under the correspondent arrangement, the Bank earns a correspondent fee when Loan Source purchases PPP loans and the Bank subsequently shares in net servicing income on such purchased PPP loans. Correspondent income for the quarter is comprised of the following components:

Income Earned

(In thousands)

Correspondent Fee

$

1,080

Amortization of Purchased Accrued Interest

972

Earned Net Servicing Interest

4,602

Total

$

6,654

A summary of PPP loans purchased by Loan Source and related amounts that the Bank will earn over the expected life of the loans is as follows:

Quarter

PPP Loans Purchased by Loan Source(3)

Correspondent Fee

Purchased Accrued Interest(1)

Total(2)

(In thousands)

Q4 FY 2020

$

1,272,900

$

2,891

$

688

$

3,579

Q1 FY 2021

2,112,100

5,348

2,804

8,152

Q2 FY 2021

1,333,500

495

3,766

4,261

Q3 FY 2021

2,141,900

-

598

598

Q4 FY 2021

4,371,000

171

3,452

3,623

Total

$

11,231,400

$

8,905

$

11,308

$

20,213

Less amounts recognized in Q4 FY 21

(1,080)

(972)

(2,052)

Less amounts recognized in previous quarters

(3,001)

(1,813)

(4,814)

Amount remaining to be recognized

$

4,824

$

8,523

$

13,347


(1) - Northeast Bank's share

(2) - Expected to be recognized into income over life of loans

(3) - Loan Source’s ending PPP loan balance was $8.39 billion as of June 30, 2021

In addition to these increases:

  • A decrease in loss on assets held for sale of $337 thousand due to the fair value adjustment for PPP loans held for sale at June 30, 2020, as compared to no PPP loans held for sale at June 30, 2021.

4.

Noninterest expense decreased by $741 thousand for the quarter ended June 30, 2021 compared to the quarter ended June 30, 2020, primarily due to the following:

  • A decrease in salaries expense of $1.7 million, primarily due to a decrease of $1.4 million in incentive compensation due to the annual bonus true-up being recorded during the quarter ended March 31, 2021 as compared to the quarter ended June 30, 2020 and an increase of $733 thousand in deferred salaries contra-expense related to higher PPP originations, partially offset by an increase of $310 thousand in regular compensation, due to salary increases; partially offset by,

  • An increase in loan expense of $648 thousand, primarily due to $522 thousand in correspondent expenses associated with the Loan Source correspondent arrangement and increased collection legal expenses;

  • An increase in other noninterest expense of $158 thousand, primarily due to the quarterly valuation of the SBA servicing asset, which resulted in a $93 thousand recovery during the quarter ended June 30, 2021 as compared to a $190 thousand recovery during the quarter ended June 30, 2020; and

  • An increase in marketing expense of $154 thousand, due to increased website advertising and general production in connection with National Lending Division and deposit initiatives.

5.

Income tax expense increased by $4.0 million to $8.9 million, or an effective tax rate of 29.4%, for the quarter ended June 30, 2021, compared to $4.9 million, or an effective tax rate of 30.4%, for the quarter ended June 30, 2020. The increase in income tax expense is due to the increase in pre-tax income. The decrease in the effective tax rate from June 30, 2020 is primarily due to a smaller year-end true-up adjustment related to state tax apportionment in the quarter ended June 30, 2021.

As of June 30, 2021, nonperforming assets totaled $20.4 million, or 0.94% of total assets, compared to $24.4 million, or 1.94% of total assets, as of June 30, 2020. As of June 30, 2021, past due loans totaled $11.3 million, or 1.08% of total loans, compared to past due loans totaling $16.4 million, or 1.69% of total loans, as of June 30, 2020.

As of June 30, 2021, the Bank’s Tier 1 leverage capital ratio was 13.6%, compared to 13.4% at June 30, 2020, and the Total capital ratio was 24.3% at June 30, 2021, compared to 19.6% at June 30, 2020. Capital ratios were affected by earnings during the year ended June 30, 2021.

Investor Call Information
Rick Wayne, Chief Executive Officer, Jean-Pierre Lapointe, Chief Financial Officer, and Pat Dignan, Executive Vice President and Chief Credit Officer of Northeast Bank, will host a conference call to discuss fourth quarter earnings and business outlook at 10:00 a.m. Eastern Time on Thursday, July 29th. Investors can access the call by dialing 800.773.2954 and entering the following passcode: 50197423. 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 National Lending Division 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 tangible common shareholders’ equity, tangible book value per share, total return on purchased loans, efficiency ratio, net interest margin excluding PPP, and net interest margin excluding PPP and collection account. 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 ongoing 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; 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, 2021

June 30, 2020

Assets

Cash and due from banks

$

2,850

$

2,795

Short-term investments

1,007,641

140,862

Total cash and cash equivalents

1,010,491

143,657

Available-for-sale debt securities, at fair value

59,737

64,918

Equity securities, at fair value

7,230

7,239

Total investment securities

66,967

72,157

Residential real estate loans held for sale

-

601

SBA loans held for sale

-

28,852

Total loans held for sale

-

29,453

Loans:

Commercial real estate

725,287

679,537

Commercial and industrial

257,604

212,769

Residential real estate

56,591

77,722

Consumer

1,142

1,574

Total loans

1,040,624

971,602

Less: Allowance for loan losses

7,313

9,178

Loans, net

1,033,311

962,424

Premises and equipment, net

11,271

9,670

Real estate owned and other repossessed collateral, net

1,639

3,274

Federal Home Loan Bank stock, at cost

1,209

1,390

Loan servicing rights, net

2,061

2,113

Bank-owned life insurance

17,498

17,074

Other assets

29,955

16,423

Total assets

$

2,174,402

$

1,257,635

Liabilities and Shareholders' Equity

Deposits:

Demand

$

972,495

$

94,749

Savings and interest checking

325,062

137,824

Money market

287,033

302,343

Time

277,840

477,436

Total deposits

1,862,430

1,012,352

Federal Home Loan Bank advances

15,000

15,000

Paycheck Protection Program Liquidity Facility advances

-

12,440

Subordinated debt

15,050

14,940

Lease liability

6,061

4,496

Other liabilities

43,470

33,668

Total liabilities

1,942,011

1,092,896

Commitments and contingencies

-

-

Shareholders' equity

Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares

issued and outstanding at June 30, 2021 and 2020

-

-

Voting common stock, $1.00 par value, 25,000,000 shares authorized;

8,150,480 and 8,153,841 shares issued and outstanding at

June 30, 2021 and 2020, respectively

8,151

8,154

Non-voting common stock, $1.00 par value, 3,000,000 shares authorized; zero and 44,783 shares issued and outstanding at June 30, 2021 and 2020, respectively

-

45

Additional paid-in capital

64,420

68,302

Retained earnings

161,132

89,960

Accumulated other comprehensive loss

(1,312)

(1,722)

Total shareholders' equity

232,391

164,739

Total liabilities and shareholders' equity

$

2,174,402

$

1,257,635


NORTHEAST BANK

STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except share and per share data)

Three Months Ended June 30,

Year Ended June 30,

2021

2020

2021

2020

Interest and dividend income:

Interest and fees on loans

$

19,811

$

21,411

$

76,918

$

80,870

Interest on available-for-sale securities

113

375

754

1,695

Other interest and dividend income

201

59

453

1,119

Total interest and dividend income

20,125

21,845

78,125

83,684



Interest expense:

Deposits

1,477

3,858

8,867

16,583

Federal Home Loan Bank advances

139

120

535

689

Paycheck Protection Program Liquidity Facility

98

174

400

174

Subordinated debt

282

282

1,126

1,126

Obligation under capital lease agreements

27

27

111

125

Total interest expense

2,023

4,461

11,039

18,697

Net interest and dividend income before provision for loan losses

18,102

17,384

67,086

64,987

Provision (credit) for loan losses

(1,926

)

905

(1,396

)

4,500

Net interest and dividend income after provision for loan losses

20,028

16,479

68,482

60,487



Noninterest income:

Fees for other services to customers

441

477

1,869

1,619

Gain on sales of PPP loans

12,577

9,702

46,701

9,702

Gain on sales of SBA loans

-

-

-

793

Gain on sales of residential loans held for sale

1

37

107

600

Net unrealized gain (loss) on equity securities

10

46

(104

)

148

Loss on real estate owned, other repossessed collateral and premises and equipment, net

(129

)

(263

)

(473

)

(15

)

Correspondent fee income

6,654

20

23,452

20

Bank-owned life insurance income

106

108

424

566

Loss on assets held for sale

-

(337

)

-

(337

)

Other noninterest income (loss)

(10

)

22

57

88

Total noninterest income

19,650

9,812

72,033

13,184



Noninterest expense:

Salaries and employee benefits

4,994

6,704

22,430

24,976

Occupancy and equipment expense

912

922

3,825

3,588

Professional fees

525

608

1,930

1,783

Data processing fees

1,076

974

4,468

3,954

Marketing expense

252

98

542

337

Loan acquisition and collection expense

899

251

3,267

2,059

FDIC insurance premiums (credits)

109

-

283

(15

)

Intangible asset amortization

-

109

-

434

Other noninterest expense

660

502

2,681

3,277

Total noninterest expense

9,427

10,168

39,426

40,393

Income before income tax expense

30,251

16,123

101,089

33,278

Income tax expense

8,881

4,904

29,586

10,541

Net income

$

21,370

$

11,219

$

71,503

$

22,737

Weighted-average shares outstanding:

Basic

8,318,689

8,337,088

8,275,577

8,859,037

Diluted

8,397,897

8,405,665

8,360,355

8,991,428



Earnings per common share:

Basic

$

2.57

$

1.35

$

8.64

$

2.57

Diluted

2.54

1.33

8.55

2.53



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,

2021

2020

Interest

Average

Interest

Average

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Rate

Balance

Expense

Rate

Assets:

Interest-earning assets:

Investment securities

$

67,423

$

113

0.67

%

$

73,100

$

375

2.06

%

Loans (1) (2) (3)

1,188,869

19,811

6.68

%

1,224,878

21,411

7.03

%

Federal Home Loan Bank stock

1,825

9

1.98

%

3,194

29

3.65

%

Short-term investments (4)

561,813

192

0.14

%

126,499

30

0.10

%

Total interest-earning assets

1,819,930

20,125

4.44

%

1,428,001

21,845

6.15

%

Cash and due from banks

2,805

3,426

Other non-interest earning assets

60,923

37,222

Total assets

$

1,883,658

$

1,468,649

Liabilities & Shareholders' Equity:

Interest-bearing liabilities:

NOW accounts

$

238,462

$

167

0.28

%

$

89,194

$

124

0.56

%

Money market accounts

311,753

258

0.33

%

290,643

828

1.15

%

Savings accounts

46,087

19

0.17

%

35,367

14

0.16

%

Time deposits

289,705

1,033

1.43

%

518,094

2,892

2.25

%

Total interest-bearing deposits

886,007

1,477

0.67

%

933,298

3,858

1.66

%

Federal Home Loan Bank advances

27,348

139

2.04

%

49,615

120

0.97

%

PPPLF advances

115,571

98

0.34

%

202,285

174

0.35

%

Subordinated debt

15,035

282

7.52

%

14,925

282

7.60

%

Capital lease obligations

6,202

27

1.75

%

4,616

27

2.35

%

Total interest-bearing liabilities

1,050,163

2,023

0.77

%

1,204,739

4,461

1.49

%

Non-interest bearing liabilities:

Demand deposits and escrow accounts

573,724

95,062

Other liabilities

34,034

10,197

Total liabilities

1,657,921

1,309,998

Shareholders' equity

225,737

158,651

Total liabilities and shareholders' equity

$

1,883,658

$

1,468,649

Net interest income

$

18,102

$

17,384

Interest rate spread

3.67

%

4.66

%

Net interest margin (5)

3.99

%

4.90

%

Cost of funds (6)

0.51

%

1.38

%

(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 Federal Reserve Bank and FHLB overnight deposits and other interest-bearing deposits.

(5) Net interest margin is calculated as net interest income divided by total interest-earning assets.

(6) Cost of funds is calculated as total interest expense divided by total interest-bearing liabilities plus demand deposits and escrow accounts.


NORTHEAST BANK

AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS

(Unaudited)

(Dollars in thousands)

Year Ended June 30,

2021

2020

Interest

Average

Interest

Average

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Rate

Balance

Expense

Rate

Assets:

Interest-earning assets:

Investment securities

$

69,762

$

754

1.08

%

$

78,656

$

1,695

2.15

%

Loans (1) (2) (3)

1,138,478

76,918

6.76

%

1,029,644

80,870

7.85

%

Federal Home Loan Bank stock

1,750

61

3.49

%

2,204

94

4.26

%

Short-term investments (4)

314,405

392

0.12

%

94,586

1,025

1.08

%

Total interest-earning assets

1,524,395

78,125

5.12

%

1,205,090

83,684

6.94

%

Cash and due from banks

2,728

2,971

Other non-interest earning assets

50,909

38,363

Total assets

$

1,578,032

$

1,246,424

Liabilities & Shareholders' Equity:

Interest-bearing liabilities:

NOW accounts

$

167,505

$

495

0.30

%

$

75,984

$

364

0.48

%

Money market accounts

312,537

1,517

0.49

%

276,264

4,096

1.48

%

Savings accounts

39,844

57

0.14

%

34,517

57

0.17

%

Time deposits

424,894

6,798

1.60

%

496,531

12,066

2.43

%

Total interest-bearing deposits

944,780

8,867

0.94

%

883,296

16,583

1.88

%

Federal Home Loan Bank advances

24,072

535

2.22

%

34,918

689

1.97

%

PPPLF advances

114,341

400

0.35

%

50,295

174

0.35

%

Subordinated debt

14,995

1,126

7.51

%

14,883

1,126

7.57

%

Capital lease obligations

5,895

111

1.88

%

5,169

125

2.42

%

Total interest-bearing liabilities

1,104,083

11,039

1.00

%

988,561

18,697

1.89

%

Non-interest bearing liabilities:

Demand deposits and escrow accounts

261,322

88,805

Other liabilities

21,643

9,097

Total liabilities

1,387,048

1,085,463

Shareholders' equity

190,984

159,961

Total liabilities and shareholders' equity

$

1,578,032

$

1,246,424

Net interest income

$

67,086

$

64,987

Interest rate spread

4.12

%

5.05

%

Net interest margin (5)

4.40

%

5.39

%

Cost of funds (6)

0.81

%

1.74

%

(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 Federal Reserve Bank and FHLB overnight deposits and other interest-bearing deposits.

(5) Net interest margin is calculated as net interest income divided by total interest-earning assets.

(6) Cost of funds is calculated as total interest expense divided by total interest-bearing liabilities plus demand deposits and escrow accounts.


NORTHEAST BANK

SELECTED FINANCIAL HIGHLIGHTS AND OTHER DATA

(Unaudited)

(Dollars in thousands, except share and per share data)

Three Months Ended

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

Net interest income

$

18,102

$

18,603

$

15,388

$

14,993

$

17,384

Provision (credit) for loan losses

(1,926

)

(211

)

365

377

905

Noninterest income

19,650

39,469

6,497

6,416

9,812

Noninterest expense

9,427

9,636

10,428

9,933

10,168

Net income

21,370

34,162

8,176

7,794

11,219

Weighted-average common shares outstanding:

Basic

8,318,689

8,344,797

8,244,068

8,196,828

8,337,088

Diluted

8,397,897

8,421,247

8,309,252

8,315,096

8,405,665



Earnings per common share:

Basic

$

2.57

$

4.09

$

0.99

$

0.95

$

1.35

Diluted

2.54

4.06

0.98

0.94

1.33

Dividends declared per common share

$

0.01

$

0.01

$

0.01

$

0.01

$

0.01

Return on average assets

4.55

%

6.99

%

2.66

%

2.49

%

3.07

%

Return on average equity

37.97

%

71.06

%

18.37

%

18.50

%

28.44

%

Net interest rate spread (1)

3.67

%

3.79

%

4.92

%

4.65

%

4.60

%

Net interest margin (2)

3.99

%

3.93

%

5.23

%

4.95

%

4.90

%

Net interest margin, excluding PPP (Non-GAAP) (3)

4.55

%

4.64

%

5.23

%

5.00

%

5.34

%

Net interest margin, excluding PPP and collection account
(Non-GAAP) (4)

5.56

%

5.06

%

5.23

%

5.00

%

5.34

%

Efficiency ratio (non-GAAP) (5)

24.97

%

16.59

%

47.65

%

46.40

%

37.29

%

Noninterest expense to average total assets

2.01

%

1.97

%

3.40

%

3.17

%

2.78

%

Average interest-earning assets to average
interest-bearing liabilities

173.30

%

125.53

%

129.68

%

127.02

%

118.53

%

As of:

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

Nonperforming loans:

Originated portfolio:

Residential real estate

$

696

$

643

$

6,676

$

704

$

832

Commercial real estate

5,756

4,790

8,329

6,856

6,861

Commercial and industrial

286

1,408

1,978

2,013

2,058

Consumer

43

23

30

26

29

Total originated portfolio

6,781

6,864

17,013

9,599

9,780

Total purchased portfolio

11,977

16,059

13,497

11,848

11,325

Total nonperforming loans

18,758

22,923

30,510

21,447

21,105

Real estate owned and other repossessed collateral, net

1,639

2,885

2,866

4,102

3,274

Total nonperforming assets

$

20,397

$

25,808

$

33,376

$

25,549

$

24,379

Past due loans to total loans

1.08

%

1.67

%

2.31

%

2.03

%

1.69

%

Nonperforming loans to total loans

1.80

%

2.29

%

3.05

%

2.30

%

2.17

%

Nonperforming assets to total assets

0.94

%

1.51

%

2.70

%

2.03

%

1.94

%

Allowance for loan losses to total loans

0.70

%

0.88

%

0.99

%

1.02

%

0.94

%

Allowance for loan losses to nonperforming loans

38.99

%

38.48

%

32.53

%

44.46

%

43.49

%

Commercial real estate loans to total capital (6)

215.38

%

223.09

%

251.00

%

248.47

%

281.32

%

Net loans to core deposits (7)

55.71

%

76.99

%

101.86

%

91.74

%

96.38

%

Purchased loans to total loans, including held for sale

41.23

%

43.22

%

41.79

%

38.40

%

39.77

%

Equity to total assets

10.69

%

12.65

%

14.74

%

13.73

%

13.10

%

Common equity tier 1 capital ratio

22.16

%

21.07

%

17.93

%

18.57

%

17.13

%

Total capital ratio

24.29

%

23.39

%

20.37

%

21.19

%

19.61

%

Tier 1 leverage capital ratio

13.63

%

14.32

%

15.07

%

14.02

%

13.36

%

Total shareholders' equity

$

232,391

$

216,862

$

181,962

$

172,551

$

164,739

Less: Preferred stock

-

-

-

-

-

Common shareholders' equity

232,391

216,862

181,962

172,551

164,739

Less: Intangible assets (8)

(2,061

)

(2,149

)

(2,035

)

(2,323

)

(2,113

)

Tangible common shareholders' equity (non-GAAP)

$

230,330

$

214,713

$

179,927

$

170,228

$

162,626

Common shares outstanding

8,150,480

8,344,797

8,344,797

8,191,786

8,198,624

Book value per common share

$

28.51

$

25.99

$

21.81

$

21.06

$

20.09

Tangible book value per share (non-GAAP) (9)

28.26

25.73

21.56

20.78

19.84

(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 $884 thousand, $2.6 million, $80 thousand, and $1.6 million, PPPLF interest expense of $98 thousand, $300 thousand, $2 thousand, and $174 thousand, and brokered CD interest expense of $0, $99 thousand, $0, and $0, as well as PPP loan average balances of $172.8 million, $481.9 million, $16.9 million and $223.8 million, for the quarters ended June 30, 2021, March 31, 2021, September 30, 2020 and June 30, 2020, respectively.

(4) Net interest margin excluding PPP and collection account removes the PPP impact above and removes the effects of the cash held by the Bank from the correspondent’s collection account in short-term investments, which had an average balance of $405.9 million and $121.7 million and earned $100 thousand and $29 thousand in interest income for the quarters ended June 30, 2021 and March 31, 2021, respectively.

(5) The efficiency ratio represents noninterest expense divided by the sum of net interest income (before the loan loss provision) plus noninterest income.

(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 exclude all maturity deposits greater than $250 thousand. Loans include loans held for sale, excluding PPP loans held for sale.

(8) Includes the 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.

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


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