Northeast Bank (the “Bank”) (NASDAQ: NBN), a Maine-based full-service bank, today reported net income of $11.3 million, or $1.54 per diluted common share, for the quarter ended December 31, 2022, compared to net income of $11.4 million, or $1.42 per diluted common share, for the quarter ended December 31, 2021. Net income for the six months ended December 31, 2022 was $19.6 million, or $2.65 per diluted common share, compared to $21.3 million, or $2.63 per diluted common share, for the six months ended December 31, 2021. Net income per diluted common share excluding correspondent fee income would be $1.48 and $0.90 for the three months ended December 31, 2022 and 2021, respectively, and $2.46 and $1.43 for the six months ended December 31, 2022 and 2021, respectively.

The Board of Directors declared a cash dividend of $0.01 per share, payable on February 23, 2023, to shareholders of record as of February 9, 2023.

“Our second fiscal quarter represented a milestone for Northeast Bank,” said Rick Wayne, Chief Executive Officer. “Our National Lending Division generated a record $1.17 billion in purchases and originations for the quarter, growing the National Lending portfolio by $1.04 billion, or 74.4%, over September 30, 2022, and $1.21 billion, or 97.9%, over June 30, 2022. Our disciplined approach proved valuable, as we were able to deploy significant capital into purchased loans, poising the Bank for future success. The originated yield and purchased return for the quarter was 8.5% and 8.7%, respectively. Additionally, we approved and initiated an at-the-market offering of up to $50.0 million of our voting common stock, which provides the Bank with the ability to raise capital if and as needed. For the quarter, we earned $1.54 per diluted common share, a return on average equity of 17.5%, and a return on average assets of 2.1%.”

As of December 31, 2022, total assets were $2.81 billion, an increase of $1.23 billion, or 77.5%, from total assets of $1.58 billion as of June 30, 2022. The principal components of the changes in the balance sheet follow:

1. The following table highlights the changes in the loan portfolio for the three and six months ended December 31, 2022:

  Loan Portfolio Changes
  Three Months Ended December 31, 2022
  December 31, 2022Balance   September 30, 2022Balance   Change ($)   Change (%)
  (Dollars in thousands)  
National Lending Purchased $ 1,483,567     $ 530,393     $ 953,174     179.71 %
National Lending Originated   963,775       873,292       90,483     10.36 %
SBA National   27,239       27,636       (397 )   (1.44 %)
Community Banking   30,176       32,899       (2,723 )   (8.28 %)
Total $ 2,504,757     $ 1,464,220     $ 1,040,537     71.06 %
  Six Months Ended December 31, 2022
  December 31, 2022Balance   June 30, 2022Balance   Change ($)   Change (%)
  (Dollars in thousands)
National Lending Purchased $ 1,483,567     $ 477,682     $ 1,005,885     210.58 %
National Lending Originated   963,775       759,229       204,546     26.94 %
SBA National   27,239       33,046       (5,807 )   (17.57 %)
Community Banking   30,176       34,909       (4,733 )   (13.56 %)
Total $ 2,504,757     $ 1,304,866     $ 1,199,891     91.96 %
                             

Loans generated by the Bank's National Lending Division for the quarter ended December 31, 2022 totaled $1.17 billion, which consisted of $998.5 million of purchased loans, at an average price of 86.6% of unpaid principal balance, and $174.0 million of originated loans.

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

  National Lending Portfolio
  Three Months Ended December 31,
  2022   2021
  Purchased   Originated   Total   Purchased   Originated   Total
  (Dollars in thousands)  
Loans purchased or originated during the period:                                              
Unpaid principal balance $ 1,152,957     $ 173,992     $ 1,326,949     $ 93,379     $ 168,398     $ 261,777  
Net investment basis   998,527       173,992       1,172,519       92,136       168,398       260,534  
                                               
Returns on loan portfolio during the period:                                              
Yield   8.69 %     8.50 %     8.59 %     8.92 %     6.48 %     7.53 %
  Six Months Ended December 31,
  2022   2021
  Purchased   Originated   Total   Purchased   Originated   Total
  (Dollars in thousands)
Loans purchased or originated during the period:                                  
Unpaid principal balance $ 1,236,815     $ 355,712     $ 1,592,527     $ 130,413     $ 262,884     $ 393,297  
Net investment basis   1,076,064       355,712       1,431,776       127,492       262,884       390,376  
                                   
Returns on loan portfolio during the period:                                  
Yield   8.07 %     8.19 %     8.14 %     9.08 %     6.43 %     7.58 %
                                   
Total loans as of period end:                                  
Unpaid principal balance $ 1,673,158     $ 963,775     $ 2,636,933     $ 518,175     $ 619,223     $ 1,137,398  
Net investment basis   1,483,567       963,775       2,447,342       484,513       619,223       1,103,736  
                                               

2. Deposits increased by $947.7 million, or 73.6%, from June 30, 2022, attributable to increases in time deposits of $951.1 million, or 747.1%, and savings and interest-bearing checking accounts of $140.1 million, or 23.9%, partially offset by a decrease in demand deposits of $145.5 million, or 44.2%. The significant increase in time deposits is primarily due to the increase in brokered time deposits, which increased to $843.3 million compared to none outstanding at June 30, 2022. The use of brokered time deposits was part of the Bank’s strategy to fund the loan purchases for the short-term.

3. Shareholders’ equity increased by $15.1 million, or 6.1%, from June 30, 2022, primarily due to net income of $19.6 million, stock-based compensation of $1.7 million and the issuance of 34 thousand shares of voting common stock, adding $1.1 million to shareholders’ equity, net of issuance costs, partially offset by the repurchase of 136 thousand shares of voting common stock at a weighted average price per share of $37.99, which resulted in a $5.2 million decrease in shareholders’ equity.

Net income decreased by $105 thousand to $11.3 million for the quarter ended December 31, 2022, compared to net income of $11.4 million for the quarter ended December 31, 2021.

1. Net interest and dividend income before provision for loan losses increased by $8.7 million to $28.8 million for the quarter ended December 31, 2022, compared to $20.1 million for the quarter ended December 31, 2021. The increase was primarily due to the following:

  • An increase in interest income earned on loans of $16.0 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 in both portfolios and higher rates earned on the originated portfolio, partially offset by lower rates earned on the purchased portfolio; and
  • An increase in interest income earned on short-term investments of $1.6 million, due to higher rates earned, partially offset by lower average balances; partially offset by,
  • An increase in deposit interest expense of $8.7 million, due to higher interest rates and higher average balances in interest-bearing deposits; and
  • An increase in FHLB borrowings interest expense of $411 thousand, due to higher 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,
  2022   2021
  Average   Interest       Average   Interest    
  Balance   Income   Yield   Balance   Income   Yield
  (Dollars in thousands)
Community Banking $ 30,920     $    586     7.52 %   $ 42,728     $ 556     5.16 %
SBA National   27,757       610     8.72 %     36,027       635     6.99 %
SBA PPP   -       -     0.00 %     628       2     1.26 %
National Lending:                                      
Originated   899,562       19,274     8.50 %     601,394       9,827     6.48 %
Purchased   765,085       16,758     8.69 %     452,644       10,175     8.92 %
Total National Lending   1,664,647           36,032     8.59 %     1,054,038       20,002     7.53 %
Total $ 1,723,324     $    37,228     8.57 %   $ 1,133,421     $ 21,195     7.42 %
   
                 Six Months Ended December 31,
  2022   2021
  Average   Interest       Average   Interest    
  Balance   Income   Yield   Balance   Income   Yield
  (Dollars in thousands)
Community Banking $ 31,904     $ 1,052     6.54 %   $ 43,383     $ 1,131     5.17 %
SBA National   29,267       1,340     9.08 %     38,168       1,271     6.61 %
SBA PPP   -       -     0.00 %     1,006       13     2.56 %
National Lending:                                      
Originated   857,775           35,425     8.19 %     574,343       18,612     6.43 %
Purchased   626,552       25,490     8.07 %     440,224       20,161     9.08 %
Total National Lending   1,484,327           60,915     8.14 %     1,014,567       38,773     7.58 %
Total $ 1,545,498     $    63,307     8.13 %   $ 1,097,124     $ 41,188     7.45 %
                                           

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, 2021, regularly scheduled interest and accretion for the quarter ended December 31, 2022 increased by $5.4 million due to the increase in average balances and transactional income increased by $1.1 million. The total return on purchased loans for the quarter ended December 31, 2022 was 8.7%, a decrease from 9.0% for the quarter ended December 31, 2021. The following table details the total return on purchased loans:

  Total Return on Purchased Loans
  Three Months Ended December 31,
  2022   2021
  Income   Return (1)   Income   Return (1)
  (Dollars in thousands)
Regularly scheduled interest and accretion $ 13,014     6.75 %   $ 7,576     6.64 %
Transactional income:                        
Gain on real estate owned   -     0.00 %     49     0.04 %
Accelerated accretion and loan fees   3,744     1.94 %     2,599     2.28 %
Total transactional income   3,744     1.94 %     2,648     2.32 %
Total $ 16,758     8.69 %   $ 10,224     8.96 %
                           
  Six Months Ended December 31,
  2022   2021
  Income   Return (1)   Income   Return (1)
  (Dollars in thousands)
Regularly scheduled interest and accretion $ 20,688     6.55 %   $ 14,557     6.56 %
Transactional income:                      
Loss on real estate owned   -     0.00 %     (25 )   (0.01 %)
Accelerated accretion and loan fees   4,802     1.52 %     5,604     2.52 %
Total transactional income   4,802     1.52 %     5,579     2.51 %
Total $ 25,490     8.07 %   $ 20,136     9.07 %
                           

(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 increased by $1.4 million to a provision of $325 thousand for the quarter ended December 31, 2022, from a credit of $1.1 million for the quarter ended December 31, 2021. The increase in the provision (credit) for loan losses reflects increases in the loan portfolio and increases in specific reserves during the quarter ended December 31, 2022, as compared to decreases in certain qualitative factors as a result of continued improvements relative to the COVID-19 pandemic and decreases in specific reserves during the quarter ended December 31, 2021.

3. Noninterest income decreased by $5.2 million for the quarter ended December 31, 2022, compared to the quarter ended December 31, 2021, primarily due to the following:

  • A decrease in correspondent fee income of $5.4 million from the recognition of correspondent fees and net servicing income. Correspondent income for the quarters ended December 31, 2022 and 2021 is comprised of the following components:
  Three Months Ended December 31,
    2022     2021
               
    (In thousands)
Correspondent Fee $ 29     $ 1,087  
Amortization of Purchased Accrued Interest   275       1,614  
Earned Net Servicing Interest   314       3,340  
Total $ 618     $ 6,041  
               

The Bank has $491 thousand of unamortized correspondent fee and purchased accrued interest remaining. This decrease was offset by:

  • An increase in fees for other customers of $199 thousand, primarily due to increased commercial loan servicing fees during the quarter ended December 31, 2022.

4. Noninterest expense increased by $2.5 million for the quarter ended December 31, 2022 compared to the quarter ended December 31, 2021, primarily due to the following:

  • An increase in salaries and employee benefits expense of $1.0 million, primarily due to increases in regular employee compensation, stock compensation, and bonus expense;
  • An increase in loan expense of $538 thousand, due to an increase in correspondent expense;
  • An increase in occupancy and equipment expense of $336 thousand, primarily due to expenses associated with the new lease of office space in Boston, Massachusetts; and
  • An increase in other noninterest expense of $325 thousand, primarily due to an increase in deposit expense of $179 thousand, primarily from increased excess deposit insurance costs and debit card expense, and an increase in meals and entertainment expense of $142 thousand.

5. Income tax expense decreased by $301 thousand to $4.7 million, or an effective tax rate of 29.5%, for the quarter ended December 31, 2022, compared to $5.0 million, or an effective tax rate of 30.6%, for the quarter ended December 31, 2021. The decrease was primarily due to lower pre-tax income, which decreased by $406 thousand during the quarter ended December 31, 2022 compared to the quarter ended December 31, 2021. The decrease in effective tax rate was primarily due to $673 thousand of tax benefits arising from the exercise of stock options and restricted stock vests during the quarter ended December 31, 2022, as compared to only $44 thousand of tax benefits in the quarter ended December 31, 2021, which reduced the effective tax rate from 33.7% to 29.5%.

As of December 31, 2022, nonperforming assets totaled $12.9 million, or 0.46% of total assets, as compared to $12.9 million, or 0.82% of total assets, as of June 30, 2022.

As of December 31, 2022, past due loans totaled $18.5 million, or 0.74% of total loans, as compared to past due loans totaling $7.0 million, or 0.53% of total loans as of June 30, 2022. The increase was primarily due to twenty-three National Lending Division purchased loans totaling $11.5 million that were past due at December 31, 2022 but not at June 30, 2022.

As of December 31, 2022, the Bank’s Tier 1 leverage capital ratio was 12.5%, compared to 16.1% at June 30, 2022, and the Total capital ratio was 11.1% at December 31, 2022, compared to 19.5% at June 30, 2022. Capital ratios were primarily affected by increased earnings and increased assets, primarily loans.

Investor Call InformationRick Wayne, Chief Executive Officer, Jean-Pierre Lapointe, Chief Financial Officer, and Pat Dignan, Executive Vice President and Chief Operating Officer, will host a conference call to discuss second quarter earnings and business outlook at 10:00 a.m. Eastern Time on Thursday, January 26th. To access the conference call by phone, please go to this link (Phone Registration), and you will be provided with dial in details. 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 seven banking centers. 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 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 Federal Deposit Insurance Corporation (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, changes in 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, including inflation; 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; cybersecurity incidents, fraud, natural disasters, the ongoing COVID-19 pandemic 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 our 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 our Quarterly Reports on Form 10-Q and other filings submitted to the FDIC. 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, 2022   June 30, 2022
Assets          
Cash and due from banks $ 2,540     $ 2,095  
Short-term investments   161,776       169,984  
Total cash and cash equivalents   164,316       172,079  
           
           
Available-for-sale debt securities, at fair value   53,698       54,911  
Equity securities, at fair value   6,665       6,798  
Total investment securities   60,363       61,709  
           
Loans:          
Commercial real estate   1,939,151       882,187  
Commercial and industrial   479,215       352,729  
Residential real estate   85,782       69,209  
Consumer   609       741  
Total loans   2,504,757       1,304,866  
Less: Allowance for loan losses   6,411       5,028  
Loans, net   2,498,346       1,299,838  
           
           
Premises and equipment, net   27,333       9,606  
Federal Home Loan Bank stock, at cost   11,481       1,610  
Loan servicing rights, net   1,860       1,285  
Bank-owned life insurance   18,141       17,922  
Other assets   27,577       18,710  
Total assets $ 2,809,417     $ 1,582,759  
           
Liabilities and Shareholders' Equity          
Deposits:          
Demand $ 183,485     $ 329,007  
Savings and interest checking   725,356       585,274  
Money market   248,129       246,095  
Time   1,078,439       127,317  
Total deposits   2,235,409       1,287,693  
           
Federal Home Loan Bank advances   260,000       15,000  
Lease liability   20,903       4,451  
Other liabilities   29,678       27,294  
Total liabilities   2,545,990       1,334,438  
           
Commitments and contingencies          
           
           
Shareholders' equity          
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares issued and outstanding at December 31, 2022 and June 30, 2022   -       -  
Voting common stock, $1.00 par value, 25,000,000 shares authorized; 7,511,044 and 7,442,103 shares issued and outstanding at December 31, 2022 and June 30, 2022, respectively   7,511       7,442  
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized; no shares issued and outstanding at December 31, 2022 and June 30, 2022 -       -  
Additional paid-in capital   34,423       38,749  
Retained earnings   222,417       202,980  
Accumulated other comprehensive loss   (924 )     (850 )
Total shareholders' equity   263,427       248,321  
Total liabilities and shareholders' equity $ 2,809,417     $ 1,582,759  
               
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,
  2022   2021   2022   2021
Interest and dividend income:                      
Interest and fees on loans $ 37,228     $ 21,195     $ 63,307     $ 41,188  
Interest on available-for-sale securities   270       76       419       170  
Other interest and dividend income   1,703       118       2,339       292  
Total interest and dividend income   39,201       21,389       66,065       41,650  
                       
Interest expense:                      
Deposits   9,896       1,184       12,698       2,492  
Federal Home Loan Bank advances   538       127       933       255  
Obligation under capital lease agreements   15       23       33       49  
Total interest expense   10,449       1,334       13,664       2,796  
                       
Net interest and dividend income before provision for loan losses   28,752       20,055       52,401       38,854  
Provision (credit) for loan losses   325       (1,069 )     1,175       (1,295 )
Net interest and dividend income after provision for loan losses   28,427       21,124       51,226       40,149  
                       
Noninterest income:                      
Fees for other services to customers   503       304       770       761  
Gain on sales of SBA loans   35       -       71       -  
Gain on sales of PPP loans   -       -       -       86  
Net unrealized gain (loss) on equity securities   11       (53 )     (207 )     (74 )
Gain (loss) on real estate owned, other repossessed collateral and premises and equipment, net   (29 )     73       23       (1 )
Correspondent fee income   618       6,041       2,000       13,872  
Gain on termination of interest rate swap   -       -       96       -  
Bank-owned life insurance income   110       106       219       212  
Other noninterest income   53       22       (12 )     36  
Total noninterest income   1,301       6,493       2,960       14,892  
                       
Noninterest expense:                      
Salaries and employee benefits   8,452       7,406       16,717       14,968  
Occupancy and equipment expense   1,200       864       2,052       1,752  
Professional fees   464       394       979       915  
Data processing fees   1,216       1,099       2,320       2,174  
Marketing expense   219       158       395       350  
Loan acquisition and collection expense   749       211       1,390       2,459  
FDIC insurance expense   144       120       241       200  
Other noninterest expense   1,260       935       2,243       1,708  
Total noninterest expense   13,704       11,187       26,337       24,526  
                       
Income before income tax expense   16,024       16,430       27,849       30,515  
Income tax expense   4,726       5,027       8,264       9,236  
Net income $ 11,298     $ 11,403     $ 19,585     $ 21,279  
                       
                       
Weighted-average shares outstanding:                      
Basic   7,256,281       7,952,938       7,305,331       8,012,106  
Diluted   7,323,402       8,041,476       7,379,790       8,096,728  
                       
Earnings per common share:                      
                       
Basic $ 1.56     $ 1.43     $ 2.68     $ 2.66  
Diluted   1.54       1.42       2.65       2.63  
                               
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,
  2022   2021
      Interest   Average       Interest   Average
  Average   Income/   Yield/   Average   Income/   Yield/
  Balance   Expense   Rate   Balance   Expense   Rate
Assets:                                      
Interest-earning assets:                                      
Investment securities $ 60,402     $ 270     1.77 %   $ 65,444     $ 76     0.46 %
Loans (1) (2) (3)   1,723,324       37,228     8.57 %     1,133,421       21,195     7.42 %
Federal Home Loan Bank stock   4,549       47     4.10 %     1,222       6     1.95 %
Short-term investments (4)   170,756       1,656     3.85 %     319,639       112     0.14 %
Total interest-earning assets   1,959,031       39,201     7.94 %     1,519,726       21,389     5.58 %
Cash and due from banks   2,495                   2,734              
Other non-interest earning assets   143,481                   61,013              
Total assets $ 2,105,007                 $ 1,583,473              
                                       
Liabilities & Shareholders' Equity:                                      
Interest-bearing liabilities:                                      
NOW accounts $ 551,998     $ 3,575     2.57 %   $ 288,599     $ 192     0.26 %
Money market accounts   243,953       805     1.31 %     264,731       197     0.30 %
Savings accounts   124,990       356     1.13 %     101,204       124     0.49 %
Time deposits   621,248       5,160     3.30 %     225,801       671     1.18 %
Total interest-bearing deposits   1,542,189       9,896     2.55 %     880,335       1,184     0.53 %
Federal Home Loan Bank advances   83,560       538     2.55 %     15,000       127     3.36 %
Lease liability   16,679       15     0.36 %     5,446       23     1.68 %
Total interest-bearing liabilities   1,642,428       10,449     2.52 %     900,781       1,334     0.59 %
                                       
Non-interest bearing liabilities:                                      
Demand deposits and escrow accounts   195,907                   427,550              
Other liabilities   10,226                   14,072              
Total liabilities   1,848,561                   1,342,403              
Shareholders' equity   256,446                   241,070              
Total liabilities and shareholders' equity $ 2,105,007                 $ 1,583,473              
                                       
Net interest income         $ 28,752                 $ 20,055      
                                       
Interest rate spread                 5.42 %                   4.99 %
Net interest margin (5)                 5.82 %                   5.24 %
                                       
Cost of funds (6)                 2.26 %                   0.40 %
                                           

(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,
  2022   2021
      Interest   Average       Interest   Average
  Average   Income/   Yield/   Average   Income/   Yield/
  Balance   Expense   Rate   Balance   Expense   Rate
Assets:                                      
Interest-earning assets:                                      
Investment securities $ 61,064     $ 419     1.36 %   $ 65,994     $ 170     0.51 %
Loans (1) (2) (3)   1,545,498       63,307     8.13 %     1,097,124       41,188     7.45 %
Federal Home Loan Bank stock   4,069       61     2.97 %     1,216       13     2.12 %
Short-term investments (4)   156,123       2,278     2.89 %     381,543       279     0.15 %
Total interest-earning assets   1,766,754       66,065     7.42 %     1,545,877       41,650     5.34 %
Cash and due from banks   2,514                   2,774              
Other non-interest earning assets   94,831                   55,409              
Total assets $ 1,864,099                 $ 1,604,060              
                                       
Liabilities & Shareholders' Equity:                                      
Interest-bearing liabilities:                                      
NOW accounts $ 522,845     $ 5,169     1.96 %   $ 279,316     $ 367     0.26 %
Money market accounts   247,304       1,211     0.97 %     270,318       399     0.29 %
Savings accounts   131,191       567     0.86 %     86,432       193     0.44 %
Time deposits   387,480       5,751     2.94 %     242,887       1,533     1.25 %
Total interest-bearing deposits   1,288,820       12,698     1.95 %     878,953       2,492     0.56 %
Federal Home Loan Bank advances   72,949       933     2.54 %     15,000       255     3.37 %
Capital lease obligations   10,429       33     0.63 %     5,632       49     1.73 %
Total interest-bearing liabilities   1,372,198       13,664     1.98 %     899,585       2,796     0.62 %
                                       
Non-interest bearing liabilities:                                      
Demand deposits and escrow accounts   228,800                   449,500              
Other liabilities   9,118                   17,119              
Total liabilities   1,610,116                   1,366,204              
Shareholders' equity   253,983                   237,856              
Total liabilities and shareholders' equity $ 1,864,099                 $ 1,604,060              
                                       
Net interest income         $ 52,401                 $     38,854      
                                       
Interest rate spread                 5.44 %                   4.72 %
Net interest margin (5)                 5.88 %                   4.99 %
                                       
Cost of funds (6)                 1.69 %                   0.41 %
                                       

(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, 2022   September 30, 2022   June 30, 2022   March 31, 2022   December 31, 2021
                                       
Net interest income $ 28,752     $ 23,649     $ 23,619     $ 20,952     $ 20,055  
Provision (credit) for loan losses   325       850       (879 )     (287 )     (1,069 )
Noninterest income   1,301       1,659       4,144       5,408       6,493  
Noninterest expense   13,704       12,634       12,856       11,401       11,187  
Net income   11,298       8,287       10,296       10,587       11,403  
                   
Weighted-average common shares outstanding:                  
Basic   7,256,281       7,312,291       7,506,465       7,687,737       7,952,938  
Diluted   7,323,402       7,394,089       7,617,933       7,790,963       8,041,476  
Earnings per common share:                  
Basic $ 1.56     $ 1.13     $ 1.37     $ 1.38     $ 1.43  
Diluted   1.54       1.12       1.35       1.36       1.42  
                   
Dividends declared per common share $ 0.01     $ 0.01     $ 0.01     $ 0.01     $ 0.01  
                   
Return on average assets   2.13 %     2.03 %     2.68 %     2.79 %     2.86 %
Return on average equity   17.48 %     13.07 %     16.55 %     17.57 %     18.77 %
Net interest rate spread (1)   5.42 %     5.61 %     6.14 %     5.52 %     4.99 %
Net interest margin (2)   5.82 %     5.96 %     6.34 %     5.71 %     5.24 %
Net interest margin, excluding collection account (Non-GAAP) (3)   5.85 %     6.22 %     7.07 %     6.72 %     6.44 %
Efficiency ratio (non-GAAP) (4)   45.60 %     49.92 %     46.31 %     43.25 %     42.14 %
Noninterest expense to average total assets   2.58 %     3.09 %     3.34 %     3.01 %     2.80 %
Average interest-earning assets to average interest-bearing liabilities   119.28 %     142.88 %     156.64 %     167.20 %     168.71 %
                   
  As of:
  December 31, 2022   September 30, 2022   June 30, 2022   March 31, 2022   December 31, 2021
Nonperforming loans:                  
Originated portfolio:                  
Residential real estate $ 448     $ 520     $ 550     $ 621     $ 611  
Commercial real estate   3,297       3,528       5,031       6,608       7,963  
Commercial and industrial   631       452       202       230       311  
Consumer   8       8       11       12       20  
Total originated portfolio   4,384       4,508       5,794       7,471       8,905  
Total purchased portfolio   8,515       9,089       7,152       10,441       12,294  
Total nonperforming loans   12,899       13,597       12,946       17,912       21,199  
Real estate owned and other repossessed collateral, net   -       90       -       -       53  
Total nonperforming assets $ 12,899     $ 13,687     $ 12,946     $ 17,912     $ 21,252  
                   
Past due loans to total loans   0.74 %     0.97 %     0.53 %     1.07 %     1.23 %
Nonperforming loans to total loans   0.51 %     0.93 %     0.99 %     1.45 %     1.79 %
Nonperforming assets to total assets   0.46 %     0.79 %     0.82 %     1.14 %     1.46 %
Allowance for loan losses to total loans   0.26 %     0.40 %     0.39 %     0.47 %     0.51 %
Allowance for loan losses to nonperforming loans   49.70 %     43.38 %     38.34 %     32.47 %     28.49 %
                   
Commercial real estate loans to total capital (5)   661.48 %     328.35 %     294.20 %     252.90 %     260.40 %
Net loans to deposits (6)   113.74 %     109.78 %     100.94 %     97.19 %     102.53 %
Purchased loans to total loans (7)   59.23 %     32.62 %     36.61 %     38.94 %     41.02 %
Equity to total assets   9.38 %     14.47 %     15.69 %     15.80 %     16.39 %
Common equity tier 1 capital ratio   10.84 %     17.36 %     19.08 %     20.13 %     20.27 %
Total capital ratio   11.11 %     17.77 %     19.47 %     20.60 %     20.79 %
Tier 1 leverage capital ratio   12.53 %     15.59 %     16.13 %     16.17 %     15.19 %
                   
Total shareholders' equity $ 263,427     $ 252,163     $ 248,321     $ 247,469     $ 239,237  
Less: Preferred stock   -       -       -       -       -  
Common shareholders' equity   263,427       252,163       248,321       247,469       239,237  
Less: Intangible assets (8)   -       (1,141 )     (1,285 )     (1,696 )     (1,645 )
Tangible common shareholders' equity (non-GAAP) $ 263,427     $ 251,022     $ 247,036     $ 245,773     $ 237,592  
                   
Common shares outstanding   7,511,044       7,477,158       7,442,103       7,727,312       7,815,566  
Book value per common share $ 35.07     $ 33.72     $ 33.37     $ 32.03     $ 30.61  
Tangible book value per share (non-GAAP) (9)   35.07       33.57       33.19       31.81       30.40  
                                       

(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 collection account 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 $25.4 million, $99.2 million, $175.2 million, $244.0 million, and $287.7 million and earned $233 thousand, $514 thousand, $362 thousand, $60 thousand, and $73 thousand in interest income for the quarters ended December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022, and December 31, 2021, respectively.(4) The efficiency ratio represents noninterest expense divided by the sum of net interest income (before provision for loan losses) 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. Beginning with the quarter ended December 31, 2022 and going forward, the Bank removed this internal policy limit (previously 500%).(6) During the quarter ended June 30, 2022, the Bank changed its internal policy limit to calculate based on deposits, not core deposits (non-maturity deposits and maturity deposits less than $250 thousand). Ratios as of March 31, 2022 and December 31, 2021 reflect loans to core deposits. Beginning with the quarter ended December 31, 2022 and going forward, the Bank removed this internal policy limit (previously 125%).(7) Beginning with the quarter ended December 31, 2022 and going forward, the Bank removed this internal policy limit (previously 60%).(8) Includes the loan servicing rights asset. Beginning with the quarter ended December 31, 2022 and going forward, the Bank no longer excludes the loan servicing rights asset from tangible common shareholders’ equity.(9) Tangible book value per share represents total shareholders' equity less the sum of preferred stock and intangible assets divided by common shares outstanding.  

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

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