Northeast Bank Reports Record Third Quarter Results and Declares Dividend

Northeast Bank
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PORTLAND, Maine, April 21, 2021 (GLOBE NEWSWIRE) -- Northeast Bank (the “Bank”) (NASDAQ: NBN), a Maine-based full-service bank, today reported record net income of $34.2 million, or $4.06 per diluted common share, for the quarter ended March 31, 2021, compared to net income of $1.9 million, or $0.21 per diluted common share, for the quarter ended March 31, 2020. Net income for the nine months ended March 31, 2021 was $50.1 million, or $6.01 per diluted common share, compared to $11.5 million, or $1.25 per diluted common share, for the nine months ended March 31, 2020. Net income for the three and nine months ended March 31, 2021 included $33.0 million of net gains on the sale of Paycheck Protection Program (“PPP”) loans originated and sold during the quarter ended March 31, 2021 under the current round of PPP, which had an after-tax earnings per diluted common share impact of $2.75 and $2.80, respectively.

The Board of Directors declared a cash dividend of $0.01 per share, payable on May 20, 2021, to shareholders of record as of May 6, 2021.

“We reported record results in our third fiscal quarter,” said Rick Wayne, Chief Executive Officer. “Over the past six months in anticipation of another round of PPP loans, we invested in technology, marketing and other initiatives to be able to source, underwrite and fund a significant volume of PPP loans in the event the program was reinstated. We are proud to report that our planning and investment paid off. Through March 31, we originated $2.25 billion of PPP loans to over 22,000 borrowers with over 286,000 associated jobs. Of the $2.25 billion of originated PPP loans, we sold $2.14 billion to The Loan Source, Inc. (“Loan Source”) during our third fiscal quarter, generating $33.0 million of net gains. We anticipate selling the remaining loans plus any additional PPP originations to Loan Source in our fourth fiscal quarter. In addition, we generated $6.0 million of correspondent fee income under the arrangement with Loan Source and ACAP SME, LLC. Our national origination and purchase business remained strong, with a total of $109.2 million of originated and purchased loans during the quarter.” Mr. Wayne continued, “As a result, we are reporting earnings of $4.06 per diluted common share, a return on average equity of 71.1%, a return on average assets of 7.0%, and an efficiency ratio of 16.6% for the quarter.”

As of March 31, 2021, total assets were $1.71 billion, an increase of $457.1 million, or 36.3%, from total assets of $1.26 billion as of June 30, 2020.

1. Cash and short-term investments increased by $320.8 million, or 223.3%, primarily due to the timing of a large deposit account related to PPP payoff collections that is subject to significant fluctuation given the PPP activity during the quarter ended March 31, 2021. Cash and short-term investments may 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 and nine months ended March 31, 2021:

Loan Portfolio Changes

Three Months Ended March 31, 2021

March 31, 2021
Balance

December 31, 2020
Balance


Change ($)


Change (%)

(Dollars in thousands)

National Lending Purchased

$

433,497

$

418,584

$

14,913

3.56%

National Lending Originated

473,930

478,423

(4,493)

(0.94%)

SBA National

42,707

48,797

(6,090)

(12.48%)

Community Banking

52,674

55,773

(3,099)

(5.56%)

Total

$

1,002,808

$

1,001,577

$

1,231

0.12%

Nine Months Ended March 31, 2021

March 31, 2021
Balance

June 30, 2020
Balance


Change ($)


Change (%)

(Dollars in thousands)

National Lending Purchased

$

433,497

$

386,624

$

46,873

12.12%

National Lending Originated

473,930

467,612

6,318

1.35%

SBA National

42,707

47,095

(4,388)

(9.32%)

Community Banking

52,674

70,271

(17,597)

(25.04%)

Total

$

1,002,808

$

971,602

$

31,206

3.21%

Loans generated by the Bank's National Lending Division for the quarter ended March 31, 2021 totaled $109.2 million, which consisted of $39.9 million of purchased loans, at an average price of 93.8% of unpaid principal balance, and $69.3 million of originated loans.

Additionally, the Bank originated $2.25 billion of loans in connection with the PPP, of which $2.14 billion were sold during the quarter ended March 31, 2021. The Bank recorded a net gain of $33.0 million from the sale of PPP loans, primarily resulting from the recognition of net deferred origination fees upon the sale of the loans. The remaining $106.1 million of PPP loans are classified as held for sale at March 31, 2021, net of unamortized deferred fees.

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

National Lending Portfolio

Three Months Ended March 31,

2021

2020

Purchased

Originated

Total

Purchased

Originated

Total

(Dollars in thousands)

Loans purchased or originated during the period:

Unpaid principal balance

$

42,547

$

69,327

$

111,874

$

70,860

$

48,772

$

119,632

Net investment basis

39,895

69,327

109,222

65,056

48,772

113,828

Loan returns during the period:

Yield

8.48

%

7.28

%

7.83

%

10.05

%

7.35

%

8.50

%

Total Return on Purchased Loans (1)

8.48

%

7.28

%

7.83

%

10.05

%

7.35

%

8.50

%

Nine Months Ended March 31,

2021

2020

Purchased

Originated

Total

Purchased

Originated

Total

(Dollars in thousands)

Loans purchased or originated during the period:

Unpaid principal balance

$

146,135

$

194,842

$

340,977

$

167,977

$

187,872

$

355,849

Net investment basis

135,757

194,842

330,599

158,518

187,872

346,390

Loan returns during the period:

Yield

8.88

%

7.06

%

7.90

%

9.85

%

7.53

%

8.51

%

Total Return on Purchased Loans (1)

8.88

%

7.06

%

7.90

%

10.00

%

7.53

%

8.57

%

Total loans as of period end:

Unpaid principal balance

$

471,778

$

473,930

$

945,708

$

432,920

$

512,964

$

945,884

Net investment basis

433,497

473,930

907,427

395,944

512,964

908,908

(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 $286.4 million, or 28.3%, from June 30, 2020. The increase was attributable to increases in demand deposits of $318.8 million, or 336.5%, and savings and interest checking accounts of $128.3 million, or 93.1%, partially offset by a decrease in time deposits of $181.4 million, or 38.0%, 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 activity during the quarter ended March 31, 2021.

4. Shareholders’ equity increased by $52.1 million, or 31.6%, from June 30, 2020, primarily due to net income of $50.1 million. Shareholders’ equity also increased by $1.0 million as a result of stock options exercised, which resulted in 153 thousand shares of common stock issued, and increased by $661 thousand due to a decrease in accumulated other comprehensive loss.

Net income increased by $32.3 million to $34.2 million for the quarter ended March 31, 2021, compared to net income of $1.9 million for the quarter ended March 31, 2020.

1. Net interest and dividend income before provision for loan losses increased by $2.3 million to $18.6 million for the quarter ended March 31, 2021, compared to $16.3 million for the quarter ended March 31, 2020. The increase was primarily due to the following:

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

  • An increase in PPP loan interest income of $2.6 million, due to higher interest income earned on PPP loans; partially offset by

  • A decrease in interest income earned on the National Lending Division’s purchased and originated portfolios of $1.3 million, due to lower interest rates in both portfolios and lower average balances in the National Lending Division’s originated portfolio; and

  • An increase of $300 thousand in interest expense due to advances taken from the Paycheck Protection Program Liquidity Facility (“PPPLF”) to fund PPP originations during the quarter ended March 31, 2021.

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,

2021

2020

Average

Interest

Average

Interest

Balance (1)

Income

Yield

Balance (1)

Income

Yield

(Dollars in thousands)

Community Banking

$

52,852

$

658

5.05

%

$

79,325

$

1,036

5.25

%

SBA National

44,775

663

6.01

%

53,643

952

7.14

%

National Lending:

Originated

473,881

8,501

7.28

%

497,773

9,092

7.35

%

Purchased

406,979

8,513

8.48

%

367,486

9,186

10.05

%

Total National Lending

880,860

17,014

7.83

%

865,259

18,278

8.50

%

Total excluding SBA PPP

$

978,487

$

18,335

7.60

%

$

998,227

$

20,266

8.17

%

SBA PPP

$

481,853

$

2,558

2.15

%

$

-

$

-

0.00

%

Total including SBA PPP

$

1,460,340

$

20,893

5.80

%

$

998,227

$

20,266

8.17

%

Nine Months Ended March 31,

2021

2020

Average

Interest

Average

Interest

Balance (1)

Income

Yield

Balance (1)

Income

Yield

(Dollars in thousands)

Community Banking

$

59,272

$

2,160

4.85

%

$

85,254

$

3,494

5.45

%

SBA National

47,236

1,835

5.17

%

57,939

3,424

7.87

%

National Lending:

Originated

459,000

24,331

7.06

%

474,568

26,834

7.53

%

Purchased

392,183

26,142

8.88

%

347,278

25,707

9.85

%

Total National Lending

851,183

50,473

7.90

%

821,846

52,541

8.51

%

Total excluding SBA PPP

$

957,691

$

54,468

7.58

%

$

965,039

$

59,459

8.20

%

SBA PPP

$

164,053

$

2,638

2.14

%

$

-

$

-

0.00

%

Total including SBA PPP

$

1,121,744

$

57,106

6.78

%

$

965,039

$

59,459

8.20

%

(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 March 31, 2020, transactional income decreased by $731 thousand for the quarter ended March 31, 2021, while regularly scheduled interest and accretion increased by $58 thousand due to the increase in average balances. The total return on purchased loans for the quarter ended March 31, 2021 was 8.5%, a decrease from 10.1% for the quarter ended March 31, 2020. The following table details the total return on purchased loans:

Total Return on Purchased Loans

Three Months Ended March 31,

2021

2020

Income

Return (1)

Income

Return (1)

(Dollars in thousands)

Regularly scheduled interest and accretion

$

6,789

6.77

%

$

6,731

7.36

%

Transactional income:

Gain on real estate owned

-

0.00

%

-

0.00

%

Accelerated accretion and loan fees

1,724

1.71

%

2,455

2.69

%

Total transactional income

1,724

1.71

%

2,455

2.69

%

Total

$

8,513

8.48

%

$

9,186

10.05

%

Nine Months Ended March 31,

2021

2020

Income

Return (1)

Income

Return (1)

(Dollars in thousands)

Regularly scheduled interest and accretion

$

20,466

6.95

%

$

19,311

7.40

%

Transactional income:

Gain on real estate owned

-

0.00

%

395

0.15

%

Accelerated accretion and loan fees

5,676

1.93

%

6,396

2.45

%

Total transactional income

5,676

1.93

%

6,791

2.60

%

Total

$

26,142

8.88

%

$

26,102

10.00

%

(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. Noninterest income increased by $38.6 million for the quarter ended March 31, 2021, compared to the quarter ended March 31, 2020, principally due to the following:

  • An increase in gain on sale of PPP loans of $33.0 million, due to the sale of PPP loans with a total principal balance of $2.14 billion, which resulted in a net gain based on the recognition of net deferred fees in the quarter ended March 31, 2021; and

  • An increase in correspondent fee income of $6.0 million from the recognition of correspondent fees and net servicing income as a result of the correspondent arrangement entered into with 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

$

1,098

Amortization of Purchased Accrued Interest

922

Earned Net Servicing Interest

3,950

Total

$

5,970

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


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

Total

$

6,860,400

$

8,734

$

7,856

$

16,590

Less amounts recognized in Q3 FY 21

(1,098

)

(922

)

(2,020

)

Less amounts recognized in previous quarters

(1,903

)

(891

)

(2,794

)

Amount remaining to be recognized

$

5,733

$

6,043

$

11,776


(1) - Northeast Bank's share

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

These increases were partially offset by:

  • A decrease in gain on sale of SBA loans of $237 thousand, since no traditional SBA loans were sold in the quarter ended March 31, 2021; and

  • A decrease in gain on sale of residential loans held for sale of $135 thousand, due to lower volume of loans sold compared to the quarter ended March 31, 2020.

3. Noninterest expense decreased by $445 thousand for the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020, primarily due to the following:

  • A decrease in salaries expense of $847 thousand, primarily due to an increase of $4.4 million in deferred salaries contra-expense related to PPP originations, partially offset by an increase of $3.3 million in bonus expense, attributable to the high level of PPP originations and sales; and

  • A decrease in other noninterest expense of $371 thousand, primarily due to the $276 thousand recovery on the SBA servicing asset during the quarter ended March 31, 2021, as compared to a $215 thousand write-down in the quarter ended March 31, 2020, partially offset by other expenses, including charitable contributions.

These decreases in noninterest expense were partially offset by:

  • An increase in data processing expense of $308 thousand, primarily due to increased IT hardware expense, computer service fees, and implementation fees;

  • An increase in professional fees of $260 thousand; and

  • An increase in loan expense of $139 thousand, primarily due to $422 thousand in correspondent expenses associated with the Loan Source arrangement, partially offset by an increase in collection expense reimbursements received during the quarter ended March 31, 2021.

4. Income tax expense increased by $12.7 million to $14.5 million, or an effective tax rate of 29.8%, for the quarter ended March 31, 2021, compared to $1.7 million, or an effective tax rate of 48.1%, for the quarter ended March 31, 2020. The increase in income tax expense is due to the increase in pre-tax income. The decrease in the effective tax rate from March 31, 2020 is primarily due to the Bank’s recording of a $554 thousand expense related to the recapture of the tax reserve for loan losses as a result of the repurchase of common stock in the quarter ended March 31, 2020. This was a one-time expense as the Bank has now recaptured all of its tax bad debt reserve, which arose from pre-1988 bad debt deductions taken for tax purposes in excess of net charge-offs, which had to be recaptured.

As of March 31, 2021, nonperforming assets totaled $25.8 million, or 1.51% of total assets, compared to $24.4 million, or 1.94% of total assets, as of June 30, 2020. As of March 31, 2021, past due loans totaled $16.7 million, or 1.67% 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 March 31, 2021, the Bank’s Tier 1 leverage capital ratio was 14.3%, compared to 13.4% at June 30, 2020, and the Total capital ratio was 23.4% at March 31, 2021, compared to 19.6% at June 30, 2020. Capital ratios were affected by earnings during the nine months ended March 31, 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 third quarter earnings and business outlook at 10:00 a.m. Eastern Time on Thursday, April 22nd. Investors can access the call by dialing 800.773.2954 and entering the following passcode: 50138487. 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, 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 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)

March 31, 2021

June 30, 2020

Assets

Cash and due from banks

$

2,630

$

2,795

Short-term investments

461,796

140,862

Total cash and cash equivalents

464,426

143,657

Available-for-sale debt securities, at fair value

60,859

64,918

Equity securities, at fair value

7,199

7,239

Total investment securities

68,058

72,157

Residential real estate loans held for sale

177

601

SBA loans held for sale

106,126

28,852

Total loans held for sale

106,303

29,453

Loans:

Commercial real estate

708,477

679,537

Commercial and industrial

225,729

212,769

Residential real estate

67,389

77,722

Consumer

1,213

1,574

Total loans

1,002,808

971,602

Less: Allowance for loan losses

8,820

9,178

Loans, net

993,988

962,424

Premises and equipment, net

11,908

9,670

Real estate owned and other repossessed collateral, net

2,885

3,274

Federal Home Loan Bank stock, at cost

1,390

1,390

Loan servicing rights, net

2,149

2,113

Bank-owned life insurance

17,391

17,074

Other assets

46,221

16,423

Total assets

$

1,714,719

$

1,257,635

Liabilities and Shareholders' Equity

Deposits:

Demand

$

413,570

$

94,749

Savings and interest checking

266,080

137,824

Money market

323,027

302,343

Time

296,027

477,436

Total deposits

1,298,704

1,012,352

Federal Home Loan Bank advances

15,000

15,000

Paycheck Protection Program Liquidity Facility advances

108,101

12,440

Subordinated debt

15,023

14,940

Lease liability

6,471

4,496

Other liabilities

54,558

33,668

Total liabilities

1,497,857

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 March 31, 2021 and June 30, 2020

-

-

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

8,344,797 and 8,153,841 shares issued and outstanding at

March 31, 2021 and June 30, 2020, respectively

8,345

8,154

Non-voting common stock, $1.00 par value, 3,000,000 shares authorized;

zero and 44,783 shares issued and outstanding at March 31, 2021
and June 30, 2020, respectively

-

45

Additional paid-in capital

69,734

68,302

Retained earnings

139,844

89,960

Accumulated other comprehensive loss

(1,061

)

(1,722

)

Total shareholders' equity

216,862

164,739

Total liabilities and shareholders' equity

$

1,714,719

$

1,257,635


NORTHEAST BANK

STATEMENTS OF INCOME

(Unaudited)

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

Three Months Ended March 31,

Nine Months Ended March 31,

2021

2020

2021

2020

Interest and dividend income:

Interest and fees on loans

$

20,893

$

20,266

$

57,106

$

59,459

Interest on available-for-sale securities

158

426

641

1,320

Other interest and dividend income

110

395

252

1,061

Total interest and dividend income

21,161

21,087

57,999

61,840

Interest expense:

Deposits

1,803

4,228

7,390

12,725

Federal Home Loan Bank advances

145

226

395

569

Paycheck Protection Program Liquidity Facility

300

-

302

-

Subordinated debt

282

282

845

845

Obligation under capital lease agreements

28

30

84

98

Total interest expense

2,558

4,766

9,016

14,237

Net interest and dividend income before provision for loan losses

18,603

16,321

48,983

47,603

Provision for loan losses

(211

)

3,489

531

3,595

Net interest and dividend income after provision for loan losses

18,814

12,832

48,452

44,008

Noninterest income:

Fees for other services to customers

441

316

1,427

1,142

Gain on sales of PPP loans

33,010

-

34,124

-

Gain on sales of SBA loans

-

237

-

793

Gain on sales of residential loans held for sale

4

139

105

565

Net unrealized gain (loss) on equity securities

(99

)

87

(115

)

102

Gain (loss) on real estate owned, other repossessed collateral and premises and equipment, net

-

(64

)

(344

)

247

Correspondent fee income

5,970

-

16,798

-

Bank-owned life insurance income

105

108

318

457

Other noninterest income

38

37

69

66

Total noninterest income

39,469

860

52,382

3,372

Noninterest expense:

Salaries and employee benefits

5,113

5,960

17,436

18,272

Occupancy and equipment expense

940

919

2,914

2,667

Professional fees

599

339

1,405

1,175

Data processing fees

1,302

994

3,392

2,980

Marketing expense

130

91

290

239

Loan acquisition and collection expense

855

716

2,368

1,807

FDIC insurance premiums (credits)

119

4

324

(15

)

Intangible asset amortization

-

109

-

326

Other noninterest expense

578

949

1,868

2,774

Total noninterest expense

9,636

10,081

29,997

30,225

Income before income tax expense

48,647

3,611

70,837

17,155

Income tax expense

14,485

1,736

20,705

5,637

Net income

$

34,162

$

1,875

$

50,132

$

11,518

Weighted-average shares outstanding:

Basic

8,344,797

9,004,819

8,261,248

9,032,254

Diluted

8,421,247

9,128,651

8,347,882

9,187,891

Earnings per common share:

Basic

$

4.09

$

0.21

$

6.07

$

1.28

Diluted

4.06

0.21

6.01

1.25

Cash dividends declared per common share

$

0.01

$

0.01

$

0.03

$

0.03



NORTHEAST BANK

AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS

(Unaudited)

(Dollars in thousands)

Three Months Ended March 31,

2021

2020

Interest

Average

Interest

Average

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Rate

Balance

Expense

Rate

Assets:

Interest-earning assets:

Investment securities

$

69,034

$

158

0.93

%

$

78,369

$

426

2.19

%

Loans (1) (2) (3)

1,460,340

20,893

5.80

%

998,227

20,266

8.17

%

Federal Home Loan Bank stock

2,410

6

1.01

%

2,295

29

5.08

%

Short-term investments (4)

387,198

104

0.11

%

114,794

366

1.28

%

Total interest-earning assets

1,918,982

21,161

4.47

%

1,193,685

21,087

7.11

%

Cash and due from banks

2,112

3,054

Other non-interest earning assets

62,127

37,634

Total assets

$

1,983,221

$

1,234,373

Liabilities & Shareholders' Equity:

Interest-bearing liabilities:

NOW accounts

$

180,630

$

90

0.20

%

$

78,777

$

104

0.53

%

Money market accounts

316,116

347

0.45

%

279,852

1,105

1.59

%

Savings accounts

38,500

10

0.11

%

33,912

13

0.15

%

Time deposits

587,440

1,356

0.94

%

519,980

3,006

2.33

%

Total interest-bearing deposits

1,122,686

1,803

0.65

%

912,521

4,228

1.86

%

Federal Home Loan Bank advances

39,306

145

1.50

%

39,011

226

2.33

%

PPPLF advances

345,063

300

0.35

%

-

-

0.00

%

Subordinated debt

15,015

282

7.62

%

14,897

282

7.61

%

Capital lease obligations

6,588

28

1.72

%

4,997

30

2.41

%

Total interest-bearing liabilities

1,528,658

2,558

0.68

%

971,426

4,766

1.97

%

Non-interest bearing liabilities:

Demand deposits and escrow accounts

238,756

89,248

Other liabilities

20,850

8,671

Total liabilities

1,788,264

1,069,345

Shareholders' equity

194,957

165,028

Total liabilities and shareholders' equity

$

1,983,221

$

1,234,373

Net interest income

$

18,603

$

16,321

Interest rate spread

3.79

%

5.14

%

Net interest margin (5)

3.93

%

5.50

%

Cost of funds (6)

0.59

%

1.81

%

(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.

(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)

Nine Months Ended March 31,

2021

2020

Interest

Average

Interest

Average

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Rate

Balance

Expense

Rate

Assets:

Interest-earning assets:

Investment securities

$

70,539

$

641

1.21

%

$

80,494

$

1,320

2.18

%

Loans (1) (2) (3)

1,121,744

57,106

6.78

%

965,039

59,459

8.20

%

Federal Home Loan Bank stock

1,725

51

3.94

%

1,876

66

4.68

%

Short-term investments (4)

232,237

201

0.12

%

84,025

995

1.58

%

Total interest-earning assets

1,426,245

57,999

5.42

%

1,131,434

61,840

7.27

%

Cash and due from banks

2,703

2,820

Other non-interest earning assets

47,581

38,633

Total assets

$

1,476,529

$

1,172,887

Liabilities & Shareholders' Equity:

Interest-bearing liabilities:

NOW accounts

$

143,938

$

330

0.31

%

$

71,614

$

241

0.45

%

Money market accounts

312,797

1,259

0.54

%

271,506

3,268

1.60

%

Savings accounts

37,771

36

0.13

%

34,236

43

0.17

%

Time deposits

469,793

5,765

1.63

%

489,396

9,173

2.49

%

Total interest-bearing deposits

964,299

7,390

1.02

%

866,752

12,725

1.95

%

Federal Home Loan Bank advances

22,984

395

2.29

%

30,055

569

2.52

%

PPPLF advances

113,932

302

0.35

%

-

-

0.00

%

Subordinated debt

14,983

845

7.51

%

14,869

845

7.56

%

Capital lease obligations

5,793

84

1.93

%

5,352

98

2.44

%

Total interest-bearing liabilities

1,121,991

9,016

1.07

%

917,028

14,237

2.07

%

Non-interest bearing liabilities:

Demand deposits and escrow accounts

157,569

86,735

Other liabilities

17,527

5,352

Total liabilities

1,297,087

1,012,493

Shareholders' equity

179,442

160,394

Total liabilities and shareholders' equity

$

1,476,529

$

1,172,887

Net interest income

$

48,983

$

47,603

Interest rate spread

4.35

%

5.20

%

Net interest margin (5)

4.58

%

5.60

%

Cost of funds (6)

0.94

%

1.89

%

(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.

(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

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

March 31, 2020

Net interest income

$

18,603

$

15,388

$

14,993

$

17,384

$

16,321

Provision (credit) for loan losses

(211

)

365

377

905

3,489

Noninterest income

39,469

6,497

6,416

9,812

860

Noninterest expense

9,636

10,428

9,933

10,268

10,081

Net income

34,162

8,176

7,794

11,219

1,875

Weighted-average common shares outstanding:

Basic

8,344,797

8,244,068

8,196,828

8,337,088

9,004,819

Diluted

8,421,247

8,309,252

8,315,096

8,405,665

9,128,651

Earnings per common share:

Basic

$

4.09

$

0.99

$

0.95

$

1.35

$

0.21

Diluted

4.06

0.98

0.94

1.33

0.21

Dividends declared per common share

$

0.01

$

0.01

$

0.01

$

0.01

$

0.01

Return on average assets

6.99

%

2.66

%

2.49

%

3.07

%

0.61

%

Return on average equity

71.06

%

18.37

%

18.50

%

28.44

%

4.57

%

Net interest rate spread (1)

3.79

%

4.92

%

4.65

%

4.60

%

5.14

%

Net interest margin (2)

3.93

%

5.23

%

4.95

%

4.90

%

5.50

%

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

5.06

%

5.23

%

5.00

%

5.34

%

5.50

%

Efficiency ratio (non-GAAP) (4)

16.59

%

47.65

%

46.40

%

37.29

%

58.68

%

Noninterest expense to average total assets

1.97

%

3.40

%

3.17

%

2.78

%

3.28

%

Average interest-earning assets to average interest-bearing liabilities

125.53

%

129.68

%

127.02

%

118.53

%

122.88

%

As of:

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

March 31, 2020

Nonperforming loans:

Originated portfolio:

Residential real estate

$

643

$

6,676

$

704

$

832

$

1,187

Commercial real estate

4,790

8,329

6,856

6,861

7,439

Commercial and industrial

1,408

1,978

2,013

2,058

2,226

Consumer

23

30

26

29

40

Total originated portfolio

6,864

17,013

9,599

9,780

10,892

Total purchased portfolio

16,059

13,497

11,848

11,325

13,485

Total nonperforming loans

22,923

30,510

21,447

21,105

24,377

Real estate owned and other repossessed collateral, net

2,885

2,866

4,102

3,274

3,110

Total nonperforming assets

$

25,808

$

33,376

$

25,549

$

24,379

$

27,487

Past due loans to total loans

1.67

%

2.31

%

2.03

%

1.69

%

3.52

%

Nonperforming loans to total loans

2.29

%

3.05

%

2.30

%

2.17

%

2.36

%

Nonperforming assets to total assets

1.51

%

2.70

%

2.03

%

1.94

%

2.23

%

Allowance for loan losses to total loans

0.88

%

0.99

%

1.02

%

0.94

%

0.85

%

Allowance for loan losses to nonperforming loans

38.48

%

32.53

%

44.46

%

43.49

%

36.14

%

Commercial real estate loans to total capital (5)

223.09

%

251.00

%

248.47

%

281.32

%

304.40

%

Net loans to core deposits (6) (9)

76.99

%

101.86

%

91.74

%

96.38

%

102.04

%

Purchased loans to total loans, including held for sale

43.22

%

41.79

%

38.40

%

39.77

%

38.28

%

Equity to total assets

12.65

%

14.74

%

13.73

%

13.10

%

12.95

%

Common equity tier 1 capital ratio

21.07

%

17.93

%

18.57

%

17.13

%

15.71

%

Total capital ratio

23.39

%

20.37

%

21.19

%

19.61

%

18.03

%

Tier 1 leverage capital ratio

14.32

%

15.07

%

14.02

%

13.36

%

13.04

%

Total shareholders' equity

$

216,862

$

181,962

$

172,551

$

164,739

$

159,525

Less: Preferred stock

-

-

-

-

-

Common shareholders' equity

216,862

181,962

172,551

164,739

159,525

Less: Intangible assets (7)

(2,149

)

(2,035

)

(2,323

)

(2,113

)

(2,116

)

Tangible common shareholders' equity (non-GAAP)

$

214,713

$

179,927

$

170,228

$

162,626

$

157,409

Common shares outstanding

8,344,797

8,344,797

8,191,786

8,198,624

8,633,772

Book value per common share

$

25.99

$

21.81

$

21.06

$

20.09

$

18.48

Tangible book value per share (non-GAAP) (8)

25.73

21.56

20.78

19.84

18.23


(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 $2.6 million, $80 thousand and $1.6 million, interest income on short-term investments of $29 thousand, $0, and $0, related to average PPP collection account deposit balance, PPPLF interest expense of $300 thousand, $2 thousand and $174 thousand, and brokered CD interest expense of $99 thousand, $0, and $0, for the quarters ended March 31, 2021, September 30, 2020 and June 30, 2020, respectively, as well as PPP loan average balances of $481.9 million, $16.9 million and $223.8 million, and short-term investments average balance of $121.7 million, $0, and $0, for the quarters ended March 31, 2021, September 30, 2020 and 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) 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.
(6) Core deposits include all non-maturity deposits and maturity deposits less than $250 thousand. Loans include loans held for sale.
(7) Includes the core deposit intangible asset and loan servicing rights asset.
(8) Tangible book value per share represents total shareholders' equity less the sum of preferred stock and intangible assets divided by common shares outstanding.
(9) 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


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