NBN Northeast Bank

Northeast Bank (the “Bank”) (NASDAQ: NBN), a Maine-based full-service bank, today reported net income of $10.3 million, or $1.35 per diluted common share, for the quarter ended June 30, 2022, compared to net income of $21.4 million, or $2.54 per diluted common share, for the quarter ended June 30, 2021. Net income for the year ended June 30, 2022 was $42.2 million, or $5.34 per diluted common share, compared to $71.5 million, or $8.55 per diluted common share, for the year ended June 30, 2021. Net income for the quarter and year ended June 30, 2021 included $12.6 million and $46.7 million ($8.9 million and $33.0 million, net of tax), respectively, of net gains on the sale of U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans sold during the quarter and year ended June 30, 2021, which had an after-tax earnings per diluted common share impact of $1.06 and $3.95, respectively.

The Board of Directors declared a cash dividend of $0.01 per share, payable on August 23, 2022, to shareholders of record as of August 9, 2022.

Discussing results, Rick Wayne, Chief Executive Officer, said, “We closed our fiscal year with yet another impressive quarter. Our National Lending Division had a record quarter of originations, with $172.9 million for the quarter, and $587.8 million for the fiscal year. This resulted in net growth in our originated portfolio of $235.7 million, or 45.0%, compared with June 30, 2021. In addition to the growth in loan balances, our National Lending Division’s combined yield increased to 7.9% for the quarter ended June 30, 2022, as compared to 7.7% for the quarter ended June 30, 2021. Asset quality remains strong, with past due loans of $7.0 million, or 0.53% of total loans, compared to $11.3 million, or 1.08% of total loans at June 30, 2021. This represents the lowest level of delinquencies since July 31, 2016, at which time the Bank’s loan book totaled just $688.7 million.” Mr. Wayne continued, “As a result of the increase in the average balances of our loan portfolio, we are reporting earnings of $1.35 per diluted common share, a return on average equity of 16.6%, and a return on average assets of 2.7% for the quarter.”

As of June 30, 2022, total assets were $1.58 billion, a decrease of $591.6 million, or 27.2%, from total assets of $2.17 billion as of June 30, 2021.

1. Cash and short-term investments decreased by $838.4 million, or 83.0%, primarily due to the timing of a large deposit account related to PPP loan payoff collections at June 30, 2021, which has decreased throughout the fiscal year. 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 months and year ended June 30, 2022:

	Loan Portfolio Changes
	Three Months Ended June 30, 2022
	June 30, 2022Balance			March 31, 2022Balance					Change ($)							Change (%)
	(Dollars in thousands)
National Lending Purchased	$	477,682		$	479,824					$		(2,142)							(0.45%)
National Lending Originated		759,229			680,568							78,661							11.56%
SBA National		33,046			34,574							(1,528)							(4.42%)
Community Banking		34,909			37,359							(2,450)						(6.56%)
Total	$	1,304,866		$	1,232,325					$		72,541							5.89%
	Year Ended June 30, 2022
	June 30, 2022Balance			June 30, 2021Balance					Change ($)							Change (%)
	(Dollars in thousands)
National Lending Purchased	$	477,682		$	429,054				$		48,628						11.33%
National Lending Originated		759,229			523,535						235,694						45.02%
SBA National		33,046			39,549						(6,503)						(16.44%)
Community Banking		34,909			48,486						(13,577)						(28.00%)
Total	$	1,304,866		$	1,040,624				$		264,242						25.39%

Loans generated by the Bank's National Lending Division for the quarter ended June 30, 2022 totaled $209.4 million, which consisted of $36.5 million of purchased loans, at an average price of 98.6% of unpaid principal balance, and $172.9 million of originated loans.

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

	National Lending Portfolio
	Three Months Ended June 30,
	2022												2021
	Purchased				Originated				Total				Purchased				Originated				Total
	(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance	$	37,032			$	172,851			$	209,883			$	35,456			$	114,020			$	149,476
Net investment basis		36,502				172,851				209,353				33,732				114,020				147,752
Loan returns during the period:
Yield		9.25	%			7.03	%			7.91	%			8.99	%			6.58	%			7.68	%
Total Return on Purchased Loans (1)		9.25	%			N/A				9.25	%			8.99	%			N/A				8.99	%
	Year Ended June 30,
	2022												2021
	Purchased				Originated				Total				Purchased				Originated				Total
	(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance	$	199,523			$	587,840			$	787,363			$	181,591			$	308,862			$	490,453
Net investment basis		187,914				587,840				775,754				169,489				308,862				478,351
Loan returns during the period:
Yield		8.91	%			6.73	%			7.65	%			8.91	%			6.93	%			7.84	%
Total Return on Purchased Loans (1)		8.92	%			N/A				8.92	%			8.91	%			N/A				8.91	%
Total loans as of period end:
Unpaid principal balance	$	512,006			$	759,229			$	1,271,235			$	466,059			$	523,535			$	989,594
Net investment basis		477,682				759,229				1,236,911				429,054				523,535				952,589

(1) The total return on purchased loans represents scheduled accretion, accelerated accretion, 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 $574.7 million, or 30.9%, from June 30, 2021. The decrease was attributable to decreases in demand deposits of $643.5 million, or 66.2% and time deposits of $150.5 million, or 54.2%, partially offset by an increase in savings and interest checking deposits of $260.2 million, or 80.1%. 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 year ended June 30, 2022.  
4. Shareholders’ equity increased by $15.9 million, or 6.9%, from June 30, 2021, primarily due to net income of $42.2 million, partially offset by the repurchase of 821 thousand shares of common stock at a weighted average price per share of $34.09, which resulted in a $28.0 million decrease to shareholders’ equity. Shareholders’ equity also increased by $1.9 million as a result of stock compensation expense recognized.

Net income decreased by $11.1 million to $10.3 million for the quarter ended June 30, 2022, compared to net income of $21.4 million for the quarter ended June 30, 2021.

1. Net interest and dividend income before provision for loan losses increased by $5.5 million to $23.6 million for the quarter ended June 30, 2022, compared to $18.1 million for the quarter ended June 30, 2021. The increase was primarily due to the following:

• An increase in interest income earned on the National Lending Division’s purchased and originated portfolios of $5.8 million, due to higher average balances and rates earned in both portfolios;
• A decrease in deposit interest expense of $356 thousand, due to lower interest rates and a shift in portfolio composition;
• A decrease of $282 thousand in interest expense due to the payoff of the subordinated debt; and
• A decrease of $98 thousand in interest expense due to advances taken from the PPPLF to fund PPP originations during the quarter ended June 30, 2021; partially offset by,
• A decrease in PPP loan interest income of $884 thousand, due to the significant decrease in PPP loans during the quarter ended June 30, 2022.

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

	Interest Income and Yield on Loans
	Three Months Ended June 30,
	2022									2021
	Average			Interest						Average			Interest
	Balance			Income			Yield			Balance			Income			Yield
	(Dollars in thousands)
Community Banking	$	35,028		$	451		5.16	%		$	49,003		$	585		4.79	%
SBA National		33,788			522		6.20	%			41,331			606		5.88	%
National Lending:
Originated		720,101			12,622		7.03	%			501,646			8,229		6.58	%
Purchased		474,393			10,937		9.25	%			424,102			9,507		8.99	%
Total National Lending		1,194,494			23,559		7.91	%			925,748			17,736		7.68	%
Total excluding SBA PPP	$	1,263,310		$	24,532		7.79	%		$	1,016,082		$	18,927		7.47	%
SBA PPP	$	-		$	-		0.00	%		$	172,787		$	884		2.05	%
Total including SBA PPP	$	1,263,310		$	24,532		7.79	%		$	1,188,869		$	19,811		6.68	%

		Interest Income and Yield on Loans
		Year Ended June 30,
		2022								2021
		Average			Interest					Average			Interest
		Balance			Income			Yield		Balance			Income			Yield
		(Dollars in thousands)
Community Banking		$	41,009		$	2,143		5.23%		$	56,711		$	2,746		4.84%
SBA National			35,678			2,356		6.60%			45,764			2,441		5.33%
National Lending:
Originated			627,786			42,256		6.73%			469,632			32,560		6.93%
Purchased			458,036			40,820		8.91%			400,141			35,649		8.91%
Total National Lending			1,085,822			83,076		7.65%			869,773			68,209		7.84%
Total excluding SBA PPP		$	1,162,509		$	87,575		7.53%		$	972,248		$	73,396		7.55%
SBA PPP		$	633		$	17		2.69%		$	166,230		$	3,522		2.12%
Total including SBA PPP		$	1,163,142		$	87,592		7.53%		$	1,138,478		$	76,918		6.76%

The components of total income on purchased loans are set forth in the table below entitled “Total Return on Purchased Loans.” When compared to the quarter ended June 30, 2021, transactional income increased by $1.1 million for the quarter ended June 30, 2022, and regularly scheduled interest and accretion increased by $362 thousand due to the increase in average balances. The total return on purchased loans for the quarter ended June 30, 2022 was 9.3%, an increase from 9.0% for the quarter ended June 30, 2021. The following table details the total return on purchased loans:

	Total Return on Purchased Loans
	Three Months Ended June 30,
	2022						2021
	Income			Return (1)			Income			Return (1)
	(Dollars in thousands)
Regularly scheduled interest and accretion	$	7,432		6.29	%		$	7,070		6.69	%
Transactional income:
Gain on real estate owned		-		0.00	%			-		0.00	%
Accelerated accretion and loan fees		3,505		2.96	%			2,437		2.30	%
Total transactional income		3,505		2.96	%			2,437		2.30	%
Total	$	10,937		9.25	%		$	9,507		8.99	%
	Year Ended June 30,
	2022						2021
	Income			Return (1)			Income			Return (1)
	(Dollars in thousands)
Regularly scheduled interest and accretion	$	28,811		6.29	%		$	27,536		6.88	%
Transactional income:
Gain on real estate owned		31		0.01	%			-		0.00	%
Accelerated accretion and loan fees		12,009		2.62	%			8,113		2.03	%
Total transactional income		12,040		2.63	%			8,113		2.03	%
Total	$	40,851		8.92	%		$	35,649		8.91	%

(1) The total return on purchased loans represents scheduled accretion, accelerated accretion, 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 decreased by $15.5 million for the quarter ended June 30, 2022, compared to the quarter ended June 30, 2021, principally due to the following:

• A decrease in gain on sale of PPP loans of $12.6 million, due to the sale of PPP loans with a total principal balance of $671.4 million, which resulted in a net gain based on the recognition of net deferred fees in the quarter ended June 30, 2021 as compared to no sales in the quarter ended June 30, 2022; and
• A decrease in correspondent fee income of $3.0 million from the recognition of correspondent fees and related net servicing income. Correspondent income for the quarters ended June 30, 2022 and 2021 is comprised of the following components:

	Three Months Ended June 30,
	2022					2021
			(In thousands)
Correspondent Fee		$	1,067			$	1,080
Amortization of Purchased Accrued Interest			1,451				972
Earned Net Servicing Interest			1,168				4,602
Total		$	3,686			$	6,654

In addition to the net servicing interest income, a summary of PPP loans purchased by The Loan Source, Inc. (“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 Q4 FY 22					(1,067)			(1,451)			(2,518)
Less amounts recognized in previous quarters					(7,342)			(7,883)			(15,225)
Amount remaining to be recognized					$	496		$	1,226		$	1,722

(1) - The Bank's share

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

(3) - Loan Source’s ending PPP loan balance was $1.44 billion as of June 30, 2022

3. Noninterest expense increased by $3.4 million for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021, primarily due to the following:

• An increase in salaries and employee benefits expense of $3.9 million, primarily due to a $2.0 million increase in incentive compensation, which, in the prior year was adjusted during the quarter ended March 31, 2021 due to the high level of PPP-related income generated in that quarter, and also a $1.5 million decrease in deferred salaries contra-expense related to PPP originations in the quarter ended June 30, 2021; and
• An increase in other noninterest expense of $142 thousand, primarily due to a $340 thousand increase in impairment on the SBA servicing asset and a $134 thousand increase in travel and meals and entertainment expense, partially offset by a one-time $338 thousand decrease in non-income tax expense that was reclassified out of other noninterest expense and into income tax expense; partially offset by,
• A decrease in loan expense of $608 thousand, due to a $267 thousand decrease in collection legal expense due to reimbursements, and a $269 thousand decrease in correspondent expense.

4. Income tax expense decreased by $3.4 million to $5.5 million, or an effective tax rate of 34.8%, for the quarter ended June 30, 2022, compared to $8.9 million, or an effective tax rate of 29.4%, for the quarter ended June 30, 2021. The decrease in income tax expense is due to the decrease in pre-tax income. The increase in the effective tax rate from June 30, 2021 is primarily due to changes in state tax apportionment, as well as a one-time income tax accrual adjustment of $290 thousand during the quarter ended June 30, 2022.

As of June 30, 2022, nonperforming assets totaled $12.9 million, or 0.82% of total assets, compared to $20.4 million, or 0.94% of total assets, as of June 30, 2021. The decrease was primarily due to the sale of three other real estate owned properties totaling $1.7 million and the payoff of two nonperforming National Lending Division originated loans totaling $2.4 million and two nonperforming purchased loans totaling $3.3 million during the year ended June 30, 2022.

As of June 30, 2022, past due loans totaled $7.0 million, or 0.53% of total loans, compared to past due loans totaling $11.3 million, or 1.08% of total loans, as of June 30, 2021. The decrease was primarily due to fourteen purchased loans totaling $5.3 million that became current or paid off, partially offset by one purchased loan totaling $1.0 million that became past due during the year ended June 30, 2022.

As of June 30, 2022, the Bank’s Tier 1 leverage capital ratio was 16.1%, compared to 13.6% at June 30, 2021, and the Total capital ratio was 19.5% at June 30, 2022, 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 of Northeast Bank, will host a conference call to discuss fourth quarter earnings and business outlook at 10:00 a.m. Eastern Time on Tuesday, July 26th. Investors can access the call by dialing 866.374.5140 and entering the following PIN: 31924851#. 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 seven branches. Our National Lending Division purchases and originates commercial loans on a nationwide basis. ableBanking, a division of Northeast Bank, offers online savings products to consumers nationwide. Information regarding Northeast Bank can be found at www.northeastbank.com.

Non-GAAP Financial Measures In addition to results presented in accordance with generally accepted accounting principles (“GAAP”), this press release contains certain non-GAAP financial measures, including tangible common shareholders’ equity, tangible book value per share, total return on purchased loans, efficiency ratio, net interest margin excluding PPP, and net interest margin excluding PPP and collection account. The Bank’s management believes that the supplemental non-GAAP information is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names.

Forward-Looking Statements Statements in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although the Bank believes that these forward-looking statements are based on reasonable estimates and assumptions, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and other factors. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Bank’s control. The Bank’s actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, ongoing disruptions due to the COVID-19 pandemic; ongoing turbulence in the capital and debt markets; 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, including concerns about inflation, or legislative or regulatory initiatives; changes in interest rates and real estate values; increases in loan defaults and charge-off rates; decreases in the value of securities and other assets, adequacy of loan loss reserves, or deposit levels necessitating increased borrowing to fund loans and investments; changing government regulation; competitive pressures from other financial institutions; operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; the risk that the Bank may not be successful in the implementation of its business strategy; the risk that intangibles recorded in the Bank’s financial statements will become impaired; changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Bank’s Annual Report on Form 10-K and updated by our Quarterly Reports on Form 10-Q and other filings submitted to the Federal Deposit Insurance Corporation. These statements speak only as of the date of this release and the Bank does not undertake any obligation to update or revise any of these forward-looking statements to reflect events or circumstances occurring after the date of this communication or to reflect the occurrence of unanticipated events.

NBN-F

NORTHEAST BANK
BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share data)
	June 30, 2022			June 30, 2021
Assets
Cash and due from banks	$	2,095		$	2,850
Short-term investments		169,984			1,007,641
Total cash and cash equivalents		172,079			1,010,491
Available-for-sale debt securities, at fair value		54,911			59,737
Equity securities, at fair value		6,798			7,230
Total investment securities		61,709			66,967
Loans:
Commercial real estate		882,187			725,287
Commercial and industrial		352,729			257,604
Residential real estate		69,209			56,591
Consumer		741			1,142
Total loans		1,304,866			1,040,624
Less: Allowance for loan losses		5,028			7,313
Loans, net		1,299,838			1,033,311
Premises and equipment, net		9,606			11,271
Real estate owned and other repossessed collateral, net		-			1,639
Federal Home Loan Bank stock, at cost		1,610			1,209
Loan servicing rights, net		1,285			2,061
Bank-owned life insurance		17,922			17,498
Other assets		18,710			29,955
Total assets	$	1,582,759		$	2,174,402
Liabilities and Shareholders' Equity
Deposits:
Demand	$	329,007		$	972,495
Savings and interest checking		585,274			325,062
Money market		246,095			287,033
Time		127,317			277,840
Total deposits		1,287,693			1,862,430
Federal Home Loan Bank advances		15,000			15,000
Subordinated debt		-			15,050
Lease liability		4,451			6,061
Other liabilities		27,294			43,470
Total liabilities		1,334,438			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 June 30, 2022 and 2021		-			-
Voting common stock, $1.00 par value, 25,000,000 shares authorized; 7,442,103 and 8,150,480 shares issued and outstanding at June 30, 2022 and 2021, respectively		7,442			8,151
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized; No shares issued and outstanding at June 30, 2022 and 2021		-		-
Additional paid-in capital		38,749			64,420
Retained earnings		202,980			161,132
Accumulated other comprehensive loss		(850)			(1,312)
Total shareholders' equity		248,321			232,391
Total liabilities and shareholders' equity	$	1,582,759		$	2,174,402

NORTHEAST BANK
STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except share and per share data)
	Three Months Ended June 30,								Year Ended June 30,
	2022				2021				2022				2021
Interest and dividend income:
Interest and fees on loans	$	24,532			$	19,811			$	87,592			$	76,918
Interest on available-for-sale securities		81				113				316				754
Other interest and dividend income		262				201				628				453
Total interest and dividend income		24,875				20,125				88,536				78,125
Interest expense:
Deposits		1,121				1,477				4,529				8,867
Federal Home Loan Bank advances		115				139				493				535
Paycheck Protection Program Liquidity Facility		-				98				-				400
Subordinated debt		-				282				-				1,126
Obligation under capital lease agreements		20				27				90				111
Total interest expense		1,256				2,023				5,112				11,039
Net interest and dividend income before credit for loan losses		23,619				18,102				83,424				67,086
Credit for loan losses		(879	)			(1,926	)			(2,462	)			(1,396	)
Net interest and dividend income after credit for loan losses		24,498				20,028				85,886				68,482
Noninterest income:
Fees for other services to customers		410				441				1,646				1,869
Gain on sales of PPP loans		-				12,577				86				46,701
Gain on sales of residential loans held for sale		-				1				-				107
Net unrealized gain (loss) on equity securities		(180	)			10				(511	)			(104	)
Gain (loss) on real estate owned, other repossessed collateral and premises and equipment, net		100				(129	)			155				(473	)
Correspondent fee income		3,686				6,654				22,528				23,452
Bank-owned life insurance income		107				106				424				424
Other noninterest income (loss)		21				(10	)			117				57
Total noninterest income		4,144				19,650				24,445				72,033
Noninterest expense:
Salaries and employee benefits		8,912				4,994				31,138				22,430
Occupancy and equipment expense		891				912				3,558				3,825
Professional fees		437				525				1,891				1,930
Data processing fees		1,203				1,076				4,544				4,468
Marketing expense		223				252				733				542
Loan acquisition and collection expense		291				899				3,202				3,267
FDIC insurance premiums		97				109				395				283
Other noninterest expense		802				660				3,322				2,681
Total noninterest expense		12,856				9,427				48,783				39,426
Income before income tax expense		15,786				30,251				61,548				101,089
Income tax expense		5,490				8,881				19,385				29,586
Net income	$	10,296			$	21,370			$	42,163			$	71,503
Weighted-average shares outstanding:
Basic		7,506,465				8,318,689				7,806,626				8,275,577
Diluted		7,617,933				8,397,897				7,902,610				8,360,355
Earnings per common share:
Basic	$	1.37			$	2.57			$	5.40			$	8.64
Diluted		1.35				2.54				5.34				8.55
Cash dividends declared per common share	$	0.01			$	0.01			$	0.04			$	0.04

 

NORTHEAST BANK
AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
	Three Months Ended June 30,
	2022									2021
				Interest			Average						Interest			Average
	Average			Income/			Yield/			Average			Income/			Yield/
	Balance			Expense			Rate			Balance			Expense			Rate
Assets:
Interest-earning assets:
Investment securities	$	62,347		$	81		0.52	%		$	67,423		$	113		0.67	%
Loans (1) (2) (3)		1,263,310			24,532		7.79	%			1,188,869			19,811		6.68	%
Federal Home Loan Bank stock		1,513			7		1.86	%			1,825			9		1.98	%
Short-term investments (4)		168,059			255		0.61	%			561,813			192		0.14	%
Total interest-earning assets		1,495,229			24,875		6.67	%			1,819,930			20,125		4.44	%
Cash and due from banks		2,667									2,805
Other non-interest earning assets		45,742									60,923
Total assets	$	1,543,638								$	1,883,658
Liabilities & Shareholders’ Equity:
Interest-bearing liabilities:
NOW accounts	$	410,628		$	391		0.38	%		$	238,462		$	167		0.28	%
Money market accounts		263,540			215		0.33	%			311,753			258		0.33	%
Savings accounts		141,526			204		0.58	%			46,087			19		0.17	%
Time deposits		119,235			311		1.05	%			289,705			1,033		1.43	%
Total interest-bearing deposits		934,929			1,121		0.48	%			886,007			1,477		0.67	%
Federal Home Loan Bank advances		15,000			115		3.08	%			27,348			139		2.04	%
PPPLF advances		-			-		0.00	%			115,571			98		0.34	%
Subordinated debt		-			-		0.00	%			15,035			282		7.52	%
Capital lease obligations		4,615			20		1.74	%			6,202			27		1.75	%
Total interest-bearing liabilities		954,544			1,256		0.53	%			1,050,163			2,023		0.77	%
Non-interest bearing liabilities:
Demand deposits and escrow accounts		326,690									573,724
Other liabilities		12,881									34,034
Total liabilities		1,294,115									1,657,921
Shareholders' equity		249,523									225,737
Total liabilities and shareholders’ equity	$	1,543,638								$	1,883,658
Net interest income				$	23,619								$	18,102
Interest rate spread							6.14	%								3.67	%
Net interest margin (5)							6.34	%								3.99	%
Cost of funds (6)							0.39	%								0.51	%
(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)
	Year Ended June 30,
	2022									2021
				Interest			Average						Interest			Average
	Average			Income/			Yield/			Average			Income/			Yield/
	Balance			Expense			Rate			Balance			Expense			Rate
Assets:
Interest-earning assets:
Investment securities	$	64,560		$	316		0.49	%		$	69,762		$	754		1.08	%
Loans (1) (2) (3)		1,163,142			87,592		7.53	%			1,138,478			76,918		6.76	%
Federal Home Loan Bank stock		1,306			26		1.99	%			1,750			61		3.49	%
Short-term investments (4)		290,167			602		0.21	%			314,405			392		0.12	%
Total interest-earning assets		1,519,175			88,536		5.83	%			1,524,395			78,125		5.12	%
Cash and due from banks		2,681									2,728
Other non-interest earning assets		49,503									50,909
Total assets	$	1,571,359								$	1,578,032
Liabilities & Shareholders’ Equity:
Interest-bearing liabilities:
NOW accounts	$	330,228		$	960		0.29	%		$	167,505		$	495		0.30	%
Money market accounts		265,116			806		0.30	%			312,537			1,517		0.49	%
Savings accounts		110,145			565		0.51	%			39,844			57		0.14	%
Time deposits		185,347			2,198		1.19	%			424,894			6,798		1.60	%
Total interest-bearing deposits		890,836			4,529		0.51	%			944,780			8,867		0.94	%
Federal Home Loan Bank advances		15,000			493		3.29	%			24,072			535		2.22	%
PPPLF advances		-			-		0.00	%			114,341			400		0.35	%
Subordinated debt		-			-		0.00	%			14,995			1,126		7.51	%
Capital lease obligations		5,228			90		1.72	%			5,895			111		1.88	%
Total interest-bearing liabilities		911,064			5,112		0.56	%			1,104,083			11,039		1.00	%
Non-interest bearing liabilities:
Demand deposits and escrow accounts		403,760									261,322
Other liabilities		14,167									21,643
Total liabilities		1,328,991									1,387,048
Shareholders' equity		242,368									190,984
Total liabilities and shareholders’ equity	$	1,571,359								$	1,578,032
Net interest income				$	83,424								$	67,086
Interest rate spread							5.27	%								4.12	%
Net interest margin (5)							5.49	%								4.40	%
Cost of funds (6)							0.39	%								0.81	%
(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
SELECTED FINANCIAL HIGHLIGHTS AND OTHER DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
	Three Months Ended
	June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021				June 30, 2021
Net interest income	$	23,619			$	20,952			$	20,055			$	18,799			$	18,102
Credit for loan losses		(879	)			(287	)			(1,069	)			(226	)			(1,926	)
Noninterest income		4,144				5,408				6,493				8,399				19,650
Noninterest expense		12,856				11,401				11,187				13,338				9,427
Net income		10,296				10,587				11,403				9,877				21,370
Weighted-average common shares outstanding:
Basic		7,506,465				7,687,737				7,952,938				8,132,131				8,318,689
Diluted		7,617,933				7,790,963				8,041,476				8,212,836				8,397,897
Earnings per common share:
Basic	$	1.37			$	1.38			$	1.43			$	1.21			$	2.57
Diluted		1.35				1.36				1.42				1.20				2.54
Dividends declared per common share	$	0.01			$	0.01			$	0.01			$	0.01			$	0.01
Return on average assets		2.68	%			2.79	%			2.86	%			2.41	%			4.55	%
Return on average equity		16.55	%			17.57	%			18.77	%			16.70	%			37.97	%
Net interest rate spread (1)		6.14	%			5.52	%			4.99	%			4.46	%			3.67	%
Net interest margin (2)		6.34	%			5.71	%			5.24	%			4.74	%			3.99	%
Net interest margin, excluding PPP (non-GAAP) (3)		6.34	%			5.71	%			5.24	%			4.75	%			4.55	%
Net interest margin, excluding PPP and collection account (non-GAAP) (4)		7.07	%			6.72	%			6.44	%			6.00	%			5.56	%
Efficiency ratio (non-GAAP) (5)		46.31	%			43.25	%			42.14	%			49.04	%			24.97	%
Noninterest expense to average total assets		3.34	%			3.01	%			2.80	%			3.26	%			2.01	%
Average interest-earning assets to average interest-bearing liabilities		156.64	%			167.20	%			168.71	%			174.98	%			173.30	%
	As of:
	June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021				June 30, 2021
Nonperforming loans:
Originated portfolio:
Residential real estate	$	550			$	621			$	611			$	619			$	696
Commercial real estate		5,031				6,608				7,963				6,644				5,756
Commercial and industrial		202				230				311				1,510				286
Consumer		11				12				20				39				43
Total originated portfolio		5,794				7,471				8,905				8,812				6,781
Total purchased portfolio		7,152				10,441				12,294				12,527				11,977
Total nonperforming loans		12,946				17,912				21,199				21,339				18,758
Real estate owned and other repossessed collateral, net		-				-				53				821				1,639
Total nonperforming assets	$	12,946			$	17,912			$	21,252			$	22,160			$	20,397
Past due loans to total loans		0.53	%			1.07	%			1.23	%			1.39	%			1.08	%
Nonperforming loans to total loans		0.99	%			1.45	%			1.79	%			1.99	%			1.80	%
Nonperforming assets to total assets		0.82	%			1.14	%			1.46	%			1.60	%			0.94	%
Allowance for loan losses to total loans		0.39	%			0.47	%			0.51	%			0.67	%			0.70	%
Allowance for loan losses to nonperforming loans		38.34	%			32.47	%			28.49	%			33.58	%			38.99	%
Commercial real estate loans to total capital (6)		294.20	%			252.90	%			260.40	%			232.10	%			215.38	%
Net loans to core deposits (7) (10)		100.94	%			97.19	%			102.53	%			98.96	%			55.71	%
Purchased loans to total loans, including held for sale		36.61	%			38.94	%			41.02	%			40.22	%			41.23	%
Equity to total assets		15.69	%			15.80	%			16.39	%			17.32	%			10.69	%
Common equity tier 1 capital ratio		19.08	%			20.13	%			20.27	%			22.03	%			22.16	%
Total capital ratio		19.47	%			20.60	%			20.79	%			22.69	%			24.29	%
Tier 1 leverage capital ratio		16.13	%			16.17	%			15.19	%			14.83	%			13.63	%
Total shareholders’ equity	$	248,321			$	247,469			$	239,237			$	239,508			$	232,391
Less: Preferred stock		-				-				-				-				-
Common shareholders’ equity		248,321				247,469				239,237				239,508				232,391
Less: Intangible assets (8)		(1,285	)			(1,696	)			(1,645	)			(1,906	)			(2,061	)
Tangible common shareholders' equity (non-GAAP)	$	247,036			$	245,773			$	237,592			$	237,602			$	230,330
Common shares outstanding		7,442,103				7,727,312				7,815,566				8,172,776				8,150,480
Book value per common share	$	33.37			$	32.03			$	30.61			$	29.31			$	28.51
Tangible book value per share (non-GAAP) (9)		33.19				31.81				30.40				29.07				28.26
(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 $3 thousand, $2 thousand, $11 thousand, and $884 thousand, PPPLF interest expense of $0, $0, $0, and $98 thousand, as well as PPP loan average balances of $462 thousand, $628 thousand, $1.4 million, and $172.8 million, for the quarters ended March 31, 2022, December 31, 2021, September 30, 2021, and June 30, 2021, 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 $175.2 million, $244.0 million, $287.7 million, $334.3 million, and $405.9 million, and earned $362 thousand, $60 thousand, $73 thousand, $84 thousand, and $100 thousand, in interest income for the quarters ended June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021, and June 30, 2021, respectively.
(5) The efficiency ratio represents noninterest expense divided by the sum of net interest income (before the loan loss provision) plus noninterest income.
(6) For purposes of calculating this ratio, commercial real estate includes all non-owner occupied commercial real estate loans defined as such by regulatory guidance, including all land development and construction loans.
(7) Core deposits include all non-maturity deposits and maturity deposits less than $250 thousand. During the quarter ended June 30, 2022, the Bank changed its internal policy limit to calculate based on deposits, not core deposits. Ratio as of June 30, 2022 reflects loans to deposits. 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 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