Northeast Bank Reports Second Quarter Results and Declares Dividend

·34 min read

PORTLAND, Maine, Jan. 26, 2022 (GLOBE NEWSWIRE) -- Northeast Bank (the “Bank”) (NASDAQ: NBN), a Maine-based full-service bank, today reported net income of $11.4 million, or $1.42 per diluted common share, for the quarter ended December 31, 2021, compared to net income of $8.2 million, or $0.98 per diluted common share, for the quarter ended December 31, 2020. Net income for the six months ended December 31, 2021 was $21.3 million, or $2.63 per diluted common share, compared to $16.0 million, or $1.92 per diluted common share, for the six months ended December 31, 2020.

The Board of Directors declared a cash dividend of $0.01 per share, payable on February 24, 2022, to shareholders of record as of February 10, 2022.

“We reported strong results and net loan growth in our second fiscal quarter,” said Rick Wayne, Chief Executive Officer. “Our National Lending Division generated a record $260.5 million in originations and purchases for the quarter, growing the National Lending portfolio by $112.6 million, or 11.4%, over September 30, 2021, and $151.1 million, or 15.9%, over June 30, 2021. The originated yield and purchased return for the quarter was 6.5% and 9.0%, respectively. We continued to benefit from our correspondent arrangement with The Loan Source, Inc. and NEWITY (formerly ACAP SME, LLC), generating $6.0 million of correspondent fee income during the quarter. For the quarter, we earned $1.42 per diluted common share, a return on average equity of 18.8%, a return on average assets of 2.9% and repurchased 354 thousand shares at a weighted average price of $33.94.”

As of December 31, 2021, total assets were $1.46 billion, a decrease of $714.4 million, or 32.9%, from total assets of $2.17 billion as of June 30, 2021, primarily due to the $844.3 million, or 83.6%, decrease in cash and short-term investments, as discussed below. The principal components of the changes in the balance sheet follow:

1. Cash and short-term investments decreased by $844.3 million, or 83.6%, from June 30, 2021, primarily due to the timing of a large deposit account related to U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) elevated loan payoff collections at June 30, 2021. Cash and short-term investments may fluctuate significantly 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 six months ended December 31, 2021:

Loan Portfolio Changes

Three Months Ended December 31, 2021

December 31, 2021
Balance

September 30, 2021
Balance

Change ($)

Change (%)

(Dollars in thousands)

National Lending Purchased

$

484,513

$

432,083

$

52,430

12.13

%

National Lending Originated

619,223

559,080

60,143

10.76

%

SBA National

35,682

38,482

(2,800

)

(7.28

%)

Community Banking

41,766

44,702

(2,936

)

(6.57

%)

Total

$

1,181,184

$

1,074,347

$

106,837

9.94

%

Six Months Ended December 31, 2021

December 31, 2021
Balance

June 30, 2021
Balance

Change ($)

Change (%)

(Dollars in thousands)

National Lending Purchased

$

484,513

$

429,054

$

55,459

12.93

%

National Lending Originated

619,223

523,535

95,688

18.28

%

SBA National

35,682

39,549

(3,867

)

(9.78

%)

Community Banking

41,766

48,486

(6,720

)

(13.86

%)

Total

$

1,181,184

$

1,040,624

$

140,560

13.51

%

Loans generated by the Bank's National Lending Division for the quarter ended December 31, 2021 totaled $260.5 million, which consisted of $92.1 million of purchased loans, at an average price of 98.7% of unpaid principal balance, and $168.4 million of originated loans.

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

National Lending Portfolio

Three Months Ended December 31,

2021

2020

Purchased

Originated

Total

Purchased

Originated

Total

(Dollars in thousands)

Loans purchased or originated during the period:

Unpaid principal balance

$

93,379

$

168,398

$

261,777

$

97,759

$

84,607

$

182,366

Net investment basis

92,136

168,398

260,534

91,284

84,607

175,891

Returns on loan portfolio during the period:

Yield

8.92

%

6.48

%

7.53

%

9.06

%

6.87

%

7.89

%

Total Return on Purchased Loans (1)

8.96

%

N/A

8.96

%

9.06

%

6.87

%

7.89

%

Six Months Ended December 31,

2021

2020

Purchased

Originated

Total

Purchased

Originated

Total

(Dollars in thousands)

Loans purchased or originated during the period:

Unpaid principal balance

$

130,413

$

262,884

$

393,297

$

103,588

$

125,515

$

229,103

Net investment basis

127,492

262,884

390,376

95,862

125,515

221,377

Returns on loan portfolio during the period:

Yield

9.08

%

6.43

%

7.58

%

9.08

%

6.95

%

7.93

%

Total Return on Purchased Loans (1)

9.07

%

N/A

9.07

%

9.08

%

6.95

%

7.93

%

Total loans as of period end:

Unpaid principal balance

$

518,175

$

619,223

$

1,137,398

$

456,524

$

478,423

$

934,947

Net investment basis

484,513

619,223

1,103,736

418,584

478,423

897,007

(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 decreased by $709.2 million, or 38.1%, from June 30, 2021, attributable to decreases in demand deposits of $655.9 million, or 67.5%, time deposits of $101.5 million, or 36.5%, and money market accounts of $29.4 million, or 10.3%, partially offset by an increase in savings and interest-bearing checking accounts of $77.6 million, or 23.9%. The primary reason for the net decrease in deposits was due to timing of the receipt of short-term customer funds related to PPP payoff collections prior to June 30, 2021, which were subsequently used to pay down NEWITY’s PPP Liquidity Facility (“PPPLF”) balance during the six months ended December 31, 2021.

4. Shareholders’ equity increased by $6.8 million, or 3.0%, from June 30, 2021, primarily due to net income of $21.3 million and stock-based compensation of $480 thousand, partially offset by the repurchase of 456 thousand shares of voting common stock at a weighted average price per share of $33.04, which resulted in a $15.1 million decrease in shareholders’ equity.

Net income increased by $3.2 million to $11.4 million for the quarter ended December 31, 2021, compared to net income of $8.2 million for the quarter ended December 31, 2020.

1. Net interest and dividend income before provision for loan losses increased by $4.7 million to $20.1 million for the quarter ended December 31, 2021, compared to $15.4 million for the quarter ended December 31, 2020. The increase was primarily due to the following:

  • An increase in interest income earned on loans of $3.1 million, primarily due to an increase in interest income earned on the National Lending Division’s originated and purchased portfolios, due to higher average balances, partially offset by lower rates earned on both portfolios;

  • A decrease in deposit interest expense of $1.3 million, primarily due to lower interest rates and a repositioning of the Bank’s deposit portfolio; and

  • A decrease in interest expense on subordinated debt of $282 thousand, as the Bank redeemed its $15.1 million subordinated debt in full at par plus accrued interest on July 1, 2021; partially offset by,

  • A decrease of $117 thousand in interest income earned on securities, due to lower rates earned and lower average balances.

The following table summarizes interest income and related yields recognized on the loan portfolios:

Interest Income and Yield on Loans

Three Months Ended December 31,

2021

2020

Average

Interest

Average

Interest

Balance (1)

Income

Yield

Balance (1)

Income

Yield

(Dollars in thousands)

Community Banking

$

42,728

$

556

5.16

%

$

57,801

$

658

4.52

%

SBA National

36,027

635

6.99

%

48,953

616

4.99

%

SBA PPP

628

2

1.26

%

-

-

0.00

%

National Lending:

Originated

601,394

9,827

6.48

%

450,698

7,801

6.87

%

Purchased

452,644

10,175

8.92

%

395,692

9,033

9.06

%

Total National Lending

1,054,038

20,002

7.53

%

846,390

16,834

7.89

%

Total

$

1,133,421

$

21,195

7.42

%

$

953,144

$

18,108

7.54

%

Six Months Ended December 31,

2021

2020

Average

Interest

Average

Interest

Balance (1)

Income

Yield

Balance (1)

Income

Yield

(Dollars in thousands)

Community Banking

$

43,383

$

1,131

5.17

%

$

61,620

$

1,502

4.84

%

SBA National

38,168

1,271

6.61

%

48,444

1,171

4.80

%

SBA PPP

1,006

13

2.56

%

8,608

81

1.87

%

National Lending:

Originated

574,343

18,612

6.43

%

451,721

15,830

6.95

%

Purchased

440,224

20,161

9.08

%

384,946

17,629

9.08

%

Total National Lending

1,014,567

38,773

7.58

%

836,667

33,459

7.93

%

Total

$

1,097,124

$

41,188

7.45

%

$

955,339

$

36,213

7.52

%

(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 December 31, 2020, regularly scheduled interest and accretion for the quarter ended December 31, 2021 increased by $463 thousand due to the increase in average balances and transactional income increased by $728 thousand. The total return on purchased loans for the quarter ended December 31, 2021 was 9.0%, a decrease from 9.1% for the quarter ended December 31, 2020. The following table details the total return on purchased loans:

Total Return on Purchased Loans

Three Months Ended December 31,

2021

2020

Income

Return (1)

Income

Return (1)

(Dollars in thousands)

Regularly scheduled interest and accretion

$

7,576

6.64

%

$

7,113

7.13

%

Transactional income:

Gain on real estate owned

49

0.04

%

-

0.00

%

Accelerated accretion and loan fees

2,599

2.28

%

1,920

1.93

%

Total transactional income

2,648

2.32

%

1,920

1.93

%

Total

$

10,224

8.96

%

$

9,033

9.06

%

Six Months Ended December 31,

2021

2020

Income

Return (1)

Income

Return (1)

(Dollars in thousands)

Regularly scheduled interest and accretion

$

14,557

6.56

%

$

13,677

7.05

%

Transactional income:

Loss on real estate owned

(25

)

(0.01

%)

-

0.00

%

Accelerated accretion and loan fees

5,604

2.52

%

3,952

2.03

%

Total transactional income

5,579

2.51

%

3,952

2.03

%

Total

$

20,136

9.07

%

$

17,629

9.08

%

(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 (credit) for loan losses decreased by $1.4 million to a credit of $1.1 million for the quarter ended December 31, 2021, from a $365 thousand provision in the quarter ended December 31, 2020. The decrease in the provision (credit) for loan losses reflects decreases in certain qualitative factors during the current quarter as a result of continued improvements relative to the COVID-19 pandemic, as compared to increases in certain qualitative factors during the quarter ended December 31, 2020 as a result of impacts from the COVID-19 pandemic.

3. Noninterest income decreased by $4 thousand for the quarter ended December 31, 2021, compared to the quarter ended December 31, 2020, primarily due to the following:

  • An increase in gain on real estate owned (“REO”) of $260 thousand, due to the gain on sale of a REO property during the current quarter, as compared to a large write-down on an existing REO property and a net loss on the sale of two REO properties during the quarter ended December 31, 2020; partially offset by,

  • A decrease in fees for other customers of $184 thousand, due to lower commercial loan servicing fees due to SBA loan payoffs;

  • An increase in unrealized loss on equity securities of $37 thousand; and

  • A decrease in correspondent fee income of $41 thousand from the recognition of correspondent fees and net servicing income. Correspondent income for the quarters ended December 31, 2021 and 2020 is comprised of the following components:

Three Months Ended December 31,

2021

2020

(In thousands)

Correspondent Fee

$

1,087

$

1,061

Amortization of Purchased Accrued Interest

1,614

613

Earned Net Servicing Interest

3,340

4,408

Total

$

6,041

$

6,082

In addition to the net servicing interest income, 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

2,703

2,874

Q1 FY 2022

6,300

-

1

1

Total

$

11,237,700

$

8,905

$

10,560

$

19,465

Less amounts recognized in Q2 FY 22

(1,087

)

(1,614

)

(2,701

)

Less amounts recognized in previous quarters

(5,168

)

(4,579

)

(9,747

)

Amount remaining to be recognized

$

2,650

$

4,367

$

7,017

(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 $4.64 billion as of December 31, 2021

4. Noninterest expense increased by $759 thousand for the quarter ended December 31, 2021 compared to the quarter ended December 31, 2020, primarily due to the following:

  • An increase in salaries and employee benefits expense of $1.4 million, primarily due to increases in regular employee compensation, bonus, and stock compensation expense; and

  • An increase in other noninterest expense of $42 thousand, primarily due to increases in insurance expense, travel and meals and entertainment expense, and correspondent banking fees during the quarter ended December 31, 2021 compared to December 31, 2020; partially offset by,

  • A decrease in loan expense of $613 thousand, due to a decrease in PPP and SBA 7(a) expenses of $424 thousand, and decreases in REO and collection expense due to collection reimbursements during the quarter ended December 31, 2021; and

  • A decrease in occupancy and equipment expense of $183 thousand, primarily due to the closure of an office location during the quarter ended December 31, 2020.

5. Income tax expense increased by $2.1 million to $5.0 million, or an effective tax rate of 30.6%, for the quarter ended December 31, 2021, compared to $2.9 million, or an effective tax rate of 26.3%, for the quarter ended December 31, 2020. The increase was primarily due to higher pre-tax income, which increased by $5.3 million during the quarter ended December 31, 2021 compared to the quarter ended December 31, 2020. The increase in effective tax rate was primarily due to $472 thousand of tax benefits arising from the exercise of stock options during the quarter ended December 31, 2020, as compared to only $44 thousand of tax benefits in the quarter ended December 31, 2021.

As of December 31, 2021, nonperforming assets totaled $21.3 million, or 1.46% of total assets, as compared to $20.4 million, or 0.94% of total assets, as of June 30, 2021. The increase was primarily due to five National Lending Division loans totaling $4.3 million that were placed on nonaccrual during the six months ended December 31, 2021, partially offset by the sale of three REO properties totaling $1.8 million, and paydowns of $1.4 million on nonaccrual loans.

As of December 31, 2021, past due loans totaled $14.6 million, or 1.23% of total loans, as compared to past due loans totaling $11.3 million, or 1.08% of total loans as of June 30, 2021. The increase was primarily due to three National Lending Division loans totaling $4.3 million becoming past due during the six months ended December 31, 2021, partially offset by two purchased loans totaling $1.1 million that became current.

As of December 31, 2021, the Bank’s Tier 1 leverage capital ratio was 15.2%, compared to 13.6% at June 30, 2021, and the Total capital ratio was 20.8% at December 31, 2021, compared to 24.3% at June 30, 2021. Capital ratios were primarily affected by increased earnings and decreased assets, while the total capital ratio was negatively impacted by the redemption of the subordinated debt on July 1, 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, will host a conference call to discuss second quarter earnings and business outlook at 10:00 a.m. Eastern Time on Thursday, January 27th. Investors can access the call by dialing 800.773.2954 and entering the following passcode: 50273456. 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 eight 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. We may also make forward-looking statements in other documents we file with the FDIC, in our annual reports to our shareholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees. You can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “outlook,” “will,” “should,” and other expressions that predict or indicate future events and trends and which do not relate to historical matters. 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 disruption due to 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; changes in employment levels, general business and economic conditions on a national basis and in the local markets in which the Bank operates, including changes which adversely affect borrowers’ ability to service and repay our loans; changes in customer behavior due to political, business and economic conditions or legislative or regulatory initiatives; turbulence in the capital and debt markets; reductions in net interest income resulting from interest rate volatility as well as changes in the balances and mix of loans and deposits; changes in interest rates and real estate values; changes in loan collectability, increases in 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; changes in legislation or regulation and accounting principles, policies and guidelines; 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; reputational risk relating to its participation in the Paycheck Protection Program and other pandemic-related legislative and regulatory initiatives and programs; 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 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)

December 31, 2021

June 30, 2021

Assets

Cash and due from banks

$

2,424

$

2,850

Short-term investments

163,785

1,007,641

Total cash and cash equivalents

166,209

1,010,491

Available-for-sale debt securities, at fair value

57,323

59,737

Equity securities, at fair value

7,194

7,230

Total investment securities

64,517

66,967

Loans:

Commercial real estate

830,095

725,287

Commercial and industrial

289,387

257,604

Residential real estate

60,825

56,591

Consumer

877

1,142

Total loans

1,181,184

1,040,624

Less: Allowance for loan losses

6,040

7,313

Loans, net

1,175,144

1,033,311

Premises and equipment, net

9,977

11,271

Real estate owned and other repossessed collateral, net

53

1,639

Federal Home Loan Bank stock, at cost

1,279

1,209

Loan servicing rights, net

1,645

2,061

Bank-owned life insurance

17,710

17,498

Other assets

23,421

29,955

Total assets

$

1,459,955

$

2,174,402

Liabilities and Shareholders' Equity

Deposits:

Demand

$

316,556

$

972,495

Savings and interest checking

402,689

325,062

Money market

257,593

287,033

Time

176,357

277,840

Total deposits

1,153,195

1,862,430

Federal Home Loan Bank advances

15,000

15,000

Subordinated debt

-

15,050

Lease liability

5,266

6,061

Other liabilities

47,257

43,470

Total liabilities

1,220,718

1,942,011

Commitments and contingencies

Shareholders' equity

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

issued and outstanding at December 31, 2021 and June 30, 2021

-

-

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

7,815,566 and 8,150,480 shares issued and outstanding at

December 31, 2021 and June 30, 2021, respectively

7,816

8,151

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

no shares issued and outstanding at December 31, 2021 and June 30, 2021

-

-

Additional paid-in capital

50,440

64,420

Retained earnings

182,248

161,132

Accumulated other comprehensive loss

(1,267

)

(1,312

)

Total shareholders' equity

239,237

232,391

Total liabilities and shareholders' equity

$

1,459,955

$

2,174,402


NORTHEAST BANK

STATEMENTS OF INCOME

(Unaudited)

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

Three Months Ended December 31,

Six Months Ended December 31,

2021

2020

2021

2020

Interest and dividend income:

Interest and fees on loans

$

21,195

$

18,108

$

41,188

$

36,213

Interest on available-for-sale securities

76

193

170

483

Other interest and dividend income

118

54

292

142

Total interest and dividend income

21,389

18,355

41,650

36,838

Interest expense:

Deposits

1,184

2,529

2,492

5,587

Federal Home Loan Bank advances

127

126

255

250

Paycheck Protection Program Liquidity Facility

-

-

-

2

Subordinated debt

-

282

-

563

Obligation under capital lease agreements

23

30

49

55

Total interest expense

1,334

2,967

2,796

6,457

Net interest and dividend income before provision for loan losses

20,055

15,388

38,854

30,381

Provision (credit) for loan losses

(1,069

)

365

(1,295

)

742

Net interest and dividend income after provision for loan losses

21,124

15,023

40,149

29,639

Noninterest income:

Fees for other services to customers

304

488

761

988

Gain on sales of PPP loans

-

4

86

1,114

Gain on sales of residential loans held for sale

-

19

-

102

Net unrealized loss on equity securities

(53

)

(16

)

(74

)

(16

)

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

73

(187

)

(1

)

(344

)

Correspondent fee income

6,041

6,082

13,872

10,829

Bank-owned life insurance income

106

106

212

212

Other noninterest income

22

1

36

28

Total noninterest income

6,493

6,497

14,892

12,913

Noninterest expense:

Salaries and employee benefits

7,406

5,971

14,968

12,322

Occupancy and equipment expense

864

1,047

1,752

1,974

Professional fees

394

443

915

806

Data processing fees

1,099

1,066

2,174

2,090

Marketing expense

158

120

350

161

Loan acquisition and collection expense

211

824

2,459

1,513

FDIC insurance expense

120

64

200

112

Other noninterest expense

935

893

1,708

1,383

Total noninterest expense

11,187

10,428

24,526

20,361

Income before income tax expense

16,430

11,092

30,515

22,191

Income tax expense

5,027

2,916

9,236

6,221

Net income

$

11,403

$

8,176

$

21,279

$

15,970

Weighted-average shares outstanding:

Basic

7,952,938

8,244,068

8,012,106

8,220,604

Diluted

8,041,476

8,309,252

8,096,728

8,312,330

Earnings per common share:

Basic

$

1.43

$

0.99

$

2.66

$

1.94

Diluted

1.42

0.98

2.63

1.92

Cash dividends declared per common share

$

0.01

$

0.01

$

0.02

$

0.02


NORTHEAST BANK

AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS

(Unaudited)

(Dollars in thousands)

Three Months Ended December 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

$

65,444

$

76

0.46

%

$

70,409

$

193

1.09

%

Loans (1) (2) (3)

1,133,421

21,195

7.42

%

953,144

18,108

7.54

%

Federal Home Loan Bank stock

1,222

6

1.95

%

1,390

13

3.71

%

Short-term investments (4)

319,639

112

0.14

%

143,272

41

0.11

%

Total interest-earning assets

1,519,726

21,389

5.58

%

1,168,215

18,355

6.23

%

Cash and due from banks

2,734

3,058

Other non-interest earning assets

61,013

46,730

Total assets

$

1,583,473

$

1,218,003

Liabilities & Shareholders' Equity:

Interest-bearing liabilities:

NOW accounts

$

288,599

$

192

0.26

%

$

128,337

$

113

0.35

%

Money market accounts

264,731

197

0.30

%

310,074

377

0.48

%

Savings accounts

101,204

124

0.49

%

37,301

12

0.13

%

Time deposits

225,801

671

1.18

%

388,669

2,027

2.07

%

Total interest-bearing deposits

880,335

1,184

0.53

%

864,381

2,529

1.16

%

Federal Home Loan Bank advances

15,000

127

3.36

%

15,000

126

3.33

%

Subordinated debt

-

-

0.00

%

14,981

282

7.47

%

Lease liability

5,446

23

1.68

%

6,501

30

1.83

%

Total interest-bearing liabilities

900,781

1,334

0.59

%

900,863

2,967

1.31

%

Non-interest bearing liabilities:

Demand deposits and escrow accounts

427,550

123,413

Other liabilities

14,072

17,193

Total liabilities

1,342,403

1,041,469

Shareholders' equity

241,070

176,534

Total liabilities and shareholders' equity

$

1,583,473

$

1,218,003

Net interest income

$

20,055

$

15,388

Interest rate spread

4.99

%

4.92

%

Net interest margin (5)

5.24

%

5.23

%

Cost of funds (6)

0.40

%

1.31

%

(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)

Six Months Ended December 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

$

65,994

$

170

0.51

%

$

71,275

$

483

1.34

%

Loans (1) (2) (3)

1,097,124

41,188

7.45

%

955,339

36,213

7.52

%

Federal Home Loan Bank stock

1,216

13

2.12

%

1,390

46

6.56

%

Short-term investments (4)

381,543

279

0.15

%

156,440

96

0.12

%

Total interest-earning assets

1,545,877

41,650

5.34

%

1,184,444

36,838

6.17

%

Cash and due from banks

2,774

2,992

Other non-interest earning assets

55,409

42,792

Total assets

$

1,604,060

$

1,230,228

Liabilities & Shareholders' Equity:

Interest-bearing liabilities:

NOW accounts

$

279,316

$

367

0.26

%

$

125,991

$

240

0.38

%

Money market accounts

270,318

399

0.29

%

311,173

912

0.58

%

Savings accounts

86,432

193

0.44

%

37,414

26

0.14

%

Time deposits

242,887

1,533

1.25

%

412,248

4,409

2.12

%

Total interest-bearing deposits

878,953

2,492

0.56

%

886,826

5,587

1.25

%

Federal Home Loan Bank advances

15,000

255

3.37

%

15,000

250

3.31

%

PPPLF advances

-

-

0.00

%

879

2

0.45

%

Subordinated debt

-

-

0.00

%

14,967

563

7.46

%

Capital lease obligations

5,632

49

1.73

%

5,404

55

2.02

%

Total interest-bearing liabilities

899,585

2,796

0.62

%

923,076

6,457

1.39

%

Non-interest bearing liabilities:

Demand deposits and escrow accounts

449,500

117,857

Other liabilities

17,119

17,441

Total liabilities

1,366,204

1,058,374

Shareholders' equity

237,856

171,854

Total liabilities and shareholders' equity

$

1,604,060

$

1,230,228

Net interest income

$

38,854

$

30,381

Interest rate spread

4.72

%

4.78

%

Net interest margin (5)

4.99

%

5.09

%

Cost of funds (6)

0.41

%

1.23

%

(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

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

December 31, 2020



Net interest income

$

20,055

$

18,799

$

18,102

$

18,603

$

15,388

Provision (credit) for loan losses

(1,069

)

(226

)

(1,926

)

(211

)

365

Noninterest income

6,493

8,399

19,650

39,469

6,497

Noninterest expense

11,187

13,338

9,427

9,636

10,428

Net income

11,403

9,877

21,370

34,162

8,176

Weighted-average common shares outstanding:

Basic

7,952,938

8,132,131

8,318,689

8,344,797

8,244,068

Diluted

8,041,476

8,212,836

8,397,897

8,421,247

8,309,252

Earnings per common share:

Basic

$

1.43

$

1.21

$

2.57

$

4.09

$

0.99

Diluted

1.42

1.20

2.54

4.06

0.98

Dividends declared per common share

$

0.01

$

0.01

$

0.01

$

0.01

$

0.01

Return on average assets

2.86

%

2.41

%

4.55

%

6.99

%

2.66

%

Return on average equity

18.77

%

16.70

%

37.97

%

71.06

%

18.37

%

Net interest rate spread (1)

4.99

%

4.46

%

3.67

%

3.79

%

4.92

%

Net interest margin (2)

5.24

%

4.74

%

3.99

%

3.93

%

5.23

%

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

5.24

%

4.75

%

4.55

%

4.64

%

5.23

%

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

6.44

%

6.00

%

5.56

%

5.06

%

5.23

%

Efficiency ratio (non-GAAP) (5)

42.14

%

49.04

%

24.97

%

16.59

%

47.65

%

Noninterest expense to average total assets

2.80

%

3.26

%

2.01

%

1.97

%

3.40

%

Average interest-earning assets to average interest-bearing liabilities

168.71

%

174.98

%

173.30

%

125.53

%

129.68

%

As of:

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

December 31, 2020

Nonperforming loans:

Originated portfolio:

Residential real estate

$

611

$

619

$

696

$

643

$

6,676

Commercial real estate

7,963

6,644

5,756

4,790

8,329

Commercial and industrial

311

1,510

286

1,408

1,978

Consumer

20

39

43

23

30

Total originated portfolio

8,905

8,812

6,781

6,864

17,013

Total purchased portfolio

12,294

12,527

11,977

16,059

13,497

Total nonperforming loans

21,199

21,339

18,758

22,923

30,510

Real estate owned and other repossessed collateral, net

53

821

1,639

2,885

2,866

Total nonperforming assets

$

21,252

$

22,160

$

20,397

$

25,808

$

33,376

Past due loans to total loans

1.23

%

1.39

%

1.08

%

1.67

%

2.31

%

Nonperforming loans to total loans

1.79

%

1.99

%

1.80

%

2.29

%

3.05

%

Nonperforming assets to total assets

1.46

%

1.60

%

0.94

%

1.51

%

2.70

%

Allowance for loan losses to total loans

0.51

%

0.67

%

0.70

%

0.88

%

0.99

%

Allowance for loan losses to nonperforming loans

28.49

%

33.58

%

38.99

%

38.48

%

32.53

%

Commercial real estate loans to total capital (6)

260.40

%

232.10

%

215.38

%

223.09

%

251.00

%

Net loans to core deposits (7) (10)

102.53

%

98.96

%

55.71

%

76.99

%

101.86

%

Purchased loans to total loans, including held for sale

41.02

%

40.22

%

41.23

%

43.22

%

41.79

%

Equity to total assets

16.39

%

17.32

%

10.69

%

12.65

%

14.74

%

Common equity tier 1 capital ratio

20.27

%

22.03

%

22.16

%

21.07

%

17.93

%

Total capital ratio

20.79

%

22.69

%

24.29

%

23.39

%

20.37

%

Tier 1 leverage capital ratio

15.19

%

14.83

%

13.63

%

14.32

%

15.07

%

Total shareholders' equity

$

239,237

$

239,508

$

232,391

$

216,862

$

181,962

Less: Preferred stock

-

-

-

-

-

Common shareholders' equity

239,237

239,508

232,391

216,862

181,962

Less: Intangible assets (8)

(1,645

)

(1,906

)

(2,061

)

(2,149

)

(2,035

)

Tangible common shareholders' equity (non-GAAP)

$

237,592

$

237,602

$

230,330

$

214,713

$

179,927

Common shares outstanding

7,815,566

8,172,776

8,150,480

8,344,797

8,344,797

Book value per common share

$

30.61

$

29.31

$

28.51

$

25.99

$

21.81

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

30.40

29.07

28.26

25.73

21.56

(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 thousand, $11 thousand, $884 thousand, $2.6 million, and $81 thousand, PPPLF interest expense of $0, $0, $98 thousand, $300 thousand, and $2 thousand, and brokered CD interest expense of $0, $0, $0, $99 thousand, and $0, as well as PPP loan average balances of $628 thousand, $1.4 million, $172.8 million, $481.9 million, and $314 thousand, for the quarters ended December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021, and December 31, 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 $287.7 million, $334.3 million, $405.9 million, and $121.7 million and earned $73 thousand, $84 thousand, $100 thousand, and $29 thousand in interest income for the quarters ended December 31, 2021, September 30, 2021, June 30, 2021, and March 31, 2021, respectively.

(5) The efficiency ratio represents noninterest expense divided by the sum of net interest income (before provision for loan losses) 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 include all non-maturity deposits and maturity deposits less than $250 thousand. Loans include 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.

(10) Net loans and total loans, including loans held for sale, exclude PPP loans held for sale.

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