NBN Northeast Bank

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 InformationRick 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 BankNortheast 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 MeasuresIn 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 OfficerNortheast Bank, 27 Pearl Street, Portland, ME 04101207.786.3245 ext. 3220www.northeastbank.com