Northeast Bancorp ("Northeast" or the "Company") (NASDAQ: NBN), a Maine-based full-service financial services company and parent of Northeast Bank, today reported net income of $418 thousand, or $0.09 per diluted common share, for the quarter ended December 31, 2011. For the six months ended December 31, 2011, the Company earned net income of $947 thousand, or $0.21 per diluted common share.

The Board of Directors has declared a cash dividend of $0.09 per share, payable on February 24, 2012 to shareholders of record as of February 10, 2012.

Results for the six months ended December 31, 2011 include net income from discontinued operations of $1.1 million, which included the gain earned on the sale of the Company's insurance agency business. As announced in the first quarter of fiscal year 2012, the assets of Northeast's insurance agency division were acquired by local agencies in two separate transactions. The sale yielded a pre-tax gain of $1.5 million and served to increase the Company's tangible capital. At December 31, 2011, the Company's tangible book value per share was $16.15, compared to $13.58 at June 30, 2011.

"We continue to make progress in positioning Northeast for growth and success," said Richard Wayne, President and Chief Executive Officer of Northeast. "We made significant investments in 2011 in our new loan purchasing business, and in our online affinity deposit program, ableBanking, which we expect to launch this quarter. We are particularly encouraged by the progress of our Loan Acquisition and Servicing Group, which primarily purchases performing commercial real estate loans, on a nationwide basis, at a discount from their outstanding principal balances, producing yields higher than those normally achievable on the Company's originated loans. During the six month period ending December 31, 2011, we purchased loans totaling $51.7 million. The purchased loan portfolio produced a yield of 15.8%, including accelerated interest income associated with unscheduled loan payoffs during the six months ended December 31, 2011. There were no purchased loans delinquent at quarter-end."

Quarterly results included the following items of significance:

1. An improved net interest margin ("NIM"), which increased to 3.53%, compared to 3.09% in the first quarter of fiscal year 2012. Improvement in the NIM is principally the result of growth in the Company's purchased loan portfolio, which increased to $51.5 million at December 31, 2011 from $637 thousand at June 30, 2011. The yield on the purchased loan portfolio was 16.1% and 15.8% for the three and six months ended December 31, 2011, respectively, compared to a yield of 5.9% and 6.1% for the three and six month periods, respectively, on the Company's originated loan portfolio. The following summarizes interest income and related yields recognized on the Company's purchased loan and originated loan portfolios for the three and six months ended December 31, 2011.

      Three Months Ended December 31, 2011     Six Months Ended December 31, 2011
Average     Interest     Average Average     Interest     Average
Daily Income/ Yield/ Daily Income/ Yield/
Balance Expense Rate Balance Expense Rate
(Dollars in thousands)
 
Loans - originated $ 309,171 $ 4,620 5.93 % $ 309,948 $ 9,557 6.12 %
Loans - purchased   31,001   1,254 16.05 %   18,262   1,454 15.79 %
Total $ 340,172 $ 5,874 6.85 % $ 328,210 $ 11,011 6.66 %

The yield on purchased loans was increased by unscheduled loans payoffs during the period, which resulted in immediate recognition of the prepaid loans' discount in interest income. The following table details the components of the yield on purchased loans during the three and six months ended December 31, 2011. "Accelerated accretion" represents the amount of a loan's discount recognized resulting from an unscheduled payoff or principal payment.

      Three Months Ended December 31, 2011     Six Months Ended December 31, 2011
Average     Interest     Average Average     Interest     Average
Daily Income/ Yield/ Daily Income/ Yield/
Balance Expense Rate Balance Expense Rate
(Dollars in thousands)

Regularly scheduled
  interest and accretion

$ 31,001 $ 772 9.88 % $ 18,262 $ 972 10.56 %
Accelerated accretion 31,001   482 6.17 % 18,262   482 5.24 %
Total 31,001 $ 1,254 16.05 % 18,262 $ 1,454 15.79 %

2. The sale of a commercial real estate loan for a gain of $203 thousand. The loan had been reported as nonperforming in previous quarters.

3. A net gain on sale of available-for-sale investment securities of $433 thousand.

4. Increased noninterest expenses, principally resulting from increased marketing expenses and up-front staffing and infrastructure costs for the Company's new loan purchasing and deposit initiatives.

Total assets declined by $1.8 million or 0.3% to $594.6 million at December 31, 2011, compared to total assets of $596.4 million at June 30, 2011. The principal components of the change in the balance sheet during the six months ended December 31, 2011 were as follows:

1. A $35.1 million, or 15.0%, decrease in cash and investments, principally as a result of growth in loans during the period. Cash and securities, net of holdings pledged as collateral for borrowed funds, represent 21.0% of total assets at quarter-end, a level of balance sheet liquidity that is intended in part for future purchases of commercial loans.

2. Loan growth of $37.1 million or 12.0%, principally due to growth of $50.8 million in loans purchased by the Company's Loan Acquisition and Servicing Group, offset in part by amortization and payoffs from the originated loan portfolio of $13.7 million;

3. A $4.2 million, or 3.0%, reduction in borrowed funds, resulting primarily from the $2.1 million repayment of insurance agency debt in connection with the insurance transaction;

4. An $8.1 million, or 6.2%, decrease in intangible assets, resulting primarily from the insurance agency transaction.

Non-performing assets were essentially unchanged at $7.7 million or 1.3% of total assets at December 31, 2011, compared to $7.9 million or 1.3% of total assets at June 30, 2011.

At December 31, 2011, the Company's tier 1 leverage ratio was 11.9%, an increase from 10.3% at June 30, 2011 and the total risk-based capital ratio was 19.3%, an increase from 19.0% at June 30, 2011.

About Northeast Bancorp

Northeast Bancorp (NASDAQ: NBN) is the holding company for Northeast Bank, a full service bank headquartered in Lewiston, Maine. Northeast Bank derives its income from a combination of traditional banking services as well as from its Loan Acquisition and Servicing Group, which purchases performing commercial loans for the Bank's portfolio. ableBanking, a division of Northeast Bank, launching in 2012 will offer savings products to consumers online, through affinity partnerships with non-profit organizations. Northeast Bank operates ten bank branches, three investment centers and four loan production offices that serve seven counties in Maine and two in New Hampshire. Information regarding Northeast Bank can be found on its website at www.northeastbank.com.

On December 29, 2010, FHB Formation LLC ("FHB") merged with and into Northeast, with Northeast as the surviving company. The Company applied the acquisition method of accounting, as described in Accounting Standards Codification 805, Business Combinations, to this transaction, which represents an acquisition by FHB of Northeast, with Northeast as the surviving company. As a result, the Company's financial statements from the periods prior to the transaction date are not directly comparable to the financial statements for periods subsequent to the transaction date. To make this distinction, the Company has labeled balances and results of operations prior to the transaction date as "Predecessor Company" and balances and results of operations for periods subsequent to the transaction date as "Successor Company." The lack of comparability arises from the assets and liabilities having new accounting bases as a result of recording them at their fair values as of the transaction date rather than at historical cost basis. To denote this lack of comparability, the Company has placed a heavy black line between the Successor Company and Predecessor Company columns in its consolidated financial statements and, where applicable, in this discussion.

Non-GAAP Financial Measure

In addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures. Northeast's management believes that the supplemental non-GAAP information, which consists of tangible book value, 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.

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 Northeast 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 Company's control. The Company's actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, changes in interest rates; competitive pressures from other financial institutions; the effects of a continuing deterioration in general economic conditions on a national basis or in the local markets in which the Company operates, including changes which adversely affect borrowers' ability to service and repay our loans; changes in loan defaults and charge-off rates; changes in the value of securities and other assets, adequacy of loan loss reserves, or deposit levels necessitating increased borrowing to fund loans and investments; increasing government regulation, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; the risk that goodwill and intangibles recorded in the Company'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 Company's Annual Report on Form 10-K and updated by the Company's Quarterly Reports on Form 10-Q; and other filings submitted to the Securities and Exchange Commission. These statements speak only as of the date of this release and we do 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.

IMPORTANT NOTE: Securities and Advisory Services offered through Commonwealth Financial Network, Member FINRA, SIPC, and a Registered Investment Adviser. Securities are not FDIC insured, not bank obligations or otherwise bank guaranteed and may lose value. Northeast Financial is located at 202 Rte. 1, Suite 206, Falmouth, ME 04105.

NORTHEAST BANCORP AND SUBSIDIARY          
CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except per share data)
 
December 31, 2011 June 30, 2011
Assets
Cash and due from banks $ 3,005 $ 3,227
Short-term investments   55,358     80,704  
Total cash and cash equivalents 58,363 83,931
 
Available-for-sale securities, at fair value 139,480 148,962
Loans held-for-sale 8,189 5,176
 
Loans
Residential real estate 98,129 95,417
Commercial real estate 162,999 117,761
Construction 1,280 2,015
Commercial business 19,210 22,225
Consumer   65,441     72,495  
Total loans 347,059 309,913
Less: Allowance for loan losses   737     437  
Loans, net 346,322 309,476
 
Premises and equipment, net 9,262 8,271
Acquired assets, net 837 690
Accrued interest receivable 1,761 1,244
Federal Home Loan Bank stock, at cost 4,889 4,889
Federal Reserve Bank stock, at cost 871 871
Intangible assets, net 5,012 13,133
Bank owned life insurance 14,047 13,794
Other assets   5,522     5,956  
Total assets $ 594,555   $ 596,393  
 
Liabilities and Stockholders' Equity
Liabilities
Deposits
Demand $ 43,682 $ 48,215
Savings and interest checking 87,356 89,804
Money market 43,353 48,695
Brokered time deposits 4,905 4,924
Certificates of deposit   221,728     209,480  
Total deposits 401,024 401,118
 
Federal Home Loan Bank advances 43,684 43,922
Structured repurchase agreements 67,089 68,008
Short-term borrowings 1,744 2,515
Junior subordinated debentures issued to affiliated trusts 8,029 7,957
Capital lease obligation 1,994 2,075
Other borrowings 0 2,229
Other liabilities   5,091     3,615  
Total liabilities   528,655     531,439  
 
Commitments and contingencies
 
Stockholders' equity

Preferred stock, $1.00 par value, 1,000,000 shares authorized; 4,227
 shares issued and outstanding at December 31, 2011 and June 30,
 2011; liquidation preference of $1,000 per share



4

4

Voting common stock, $1.00 par value, 13,500,000 shares authorized; 3,312,173
 issued and outstanding at December 31, 2011 and June 30, 2011, respectively


3,312
3,312

Non-voting common stock, $1.00 par value, 1,500,000 shares authorized
 195,351 issued and outstanding at December 31, 2011 and June 30, 2011, respectively


195
195
Warrants to purchase common stock 406 406
Additional paid-in capital 49,982 49,700
Unearned restricted stock (145 ) (163 )
Retained earnings 11,846 11,726
Accumulated other comprehensive income (loss)   300     (226 )
Total stockholders' equity   65,900     64,954  
Total liabilities and stockholders' equity $ 594,555   $ 596,393  
 
NORTHEAST BANCORP AND SUBSIDIARY                    
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
    Successor Company (1) Predecessor Company (2)
Three Months Ended Six Months Ended Three Days Ended 89 Days Ended 181 Days Ended
December 31, 2011 December 31, 2011 December 31, 2010 December 28, 2010 December 28, 2010
Interest and dividend income:
Interest on loans $ 5,874 $ 11,011 $ 196 $ 5,468 $ 11,210
Interest and dividends on available-for-sale securities 541 1,180 45 1,439 3,111
Dividends on regulatory stock 21 33 0 9 18
Other interest and dividend income   36   83     1     28   39
Total interest and dividend income   6,472   12,307     242     6,944   14,378
 
Interest expense:
Deposits 836 1,673 42 1,273 2,796
Federal Home Loan Bank advances 258 516 15 451 918
Structured repurchase agreements 249 497 23 685 1,392
Short-term borrowings 3 8 6 205 376
Junior subordinated debentures issued to affiliated trusts 185 368 6 167 340
Obligation under capital lease agreements   25   51     1     27   55
Total interest expense   1,556   3,113     93     2,808   5,877
 
Net interest and dividend income before provision for loan losses 4,916 9,194 149 4,136 8,501
 
Provision for loan losses   134   534     0     453   912
Net interest and dividend income after provision for loan losses   4,782   8,660     149     3,683   7,589
 
Noninterest income:
Fees for other services to customers 370 710 14 331 698
Net securities gains 433 380 0 5 17
Gain on sales of residential loans 770 1,426 49 919 1,867
Gain on sale of commercial loan 203 203 0 0 0
Investment commissions 704 1,391 25 625 1,174
Bank-owned life insurance income 126 253 4 123 250
Bargain purchase gain 0 0 14,921 0 0
Other income   86   107     7     153   225
Total noninterest income   2,692   4,470     15,020     2,156   4,231
 
Noninterest expense:
Salaries and employee benefits 3,729 7,446 139 2,493 4,949
Occupancy and equipment expense 916 1,765 23 674 1,352
Professional fees 277 692 10 239 509
Data processing fees 289 563 8 273 521
Marketing expense 254 345 4 123 230
FDIC insurance premiums 122 239 5 170 346
Intangible asset amortization 337 673 0 0 0
Merger expense 0 0 3,050 23 94
Other   953   1,807     103     751   1,454
Total noninterest expense   6,877   13,530     3,342     4,746   9,455
 
Income (loss) from continuing operations before income tax expense (benefit) 597 (400 ) 11,827 1,093 2,365
Income tax expense (benefit)   179   (224 )   (14 )   310   698
 
Net income (loss) from continuing operations $ 418 $ (176 ) $ 11,841   $ 783 $ 1,667
 

NORTHEAST BANCORP AND SUBSIDIARY

                    
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
(Continued)
    Successor Company (1) Predecessor Company (2)
Three Months Ended Six Months Ended Three Days Ended 89 Days Ended 181 Days Ended
December 31, 2011 December 31, 2011 December 31, 2010 December 28, 2010 December 28, 2010
 
Discontinued operations:
Income (loss) from discontinued operations $ 0 $ 186 $ (10 ) $ (23 ) $ 94
Gain on sale of discontinued operations 0 1,529 0 105 105
Income tax expense (benefit)   0   592     (4 )   29     70
Net income (loss) from discontinued operations   0   1,123     (6 )   53     129
 
Net income $ 418 $ 947   $ 11,835   $ 836   $ 1,796
 
Net income available to common stockholders $ 320 $ 751   $ 11,833   $ 777   $ 1,677
 
Weighted-average shares outstanding:
Basic 3,494,498 3,494,498 3,492,498 2,331,332 2,330,197
Diluted 3,511,994 3,494,498 3,588,756 2,358,647 2,354,385
 
Earnings per common share:
Basic:
Income (loss) from continuing operations $ 0.09 $ (0.11 ) $ 3.38 $ 0.31 $ 0.66
Income from discontinued operations   0.00   0.32     0.00     0.02     0.06
Net income $ 0.09 $ 0.21   $ 3.38   $ 0.33   $ 0.72
 
Diluted:
Income (loss) from continuing operations $ 0.09 $ (0.11 ) $ 3.29 $ 0.31 $ 0.66
Income from discontinued operations   0.00   0.32     0.00     0.02     0.05
Net income $ 0.09 $ 0.21   $ 3.29   $ 0.33   $ 0.71
 
(1)     "Successor Company" means Northeast Bancorp and its subsidiary after the closing of the merger with FHB Formation LLC on December 29, 2010.
 
(2) "Predecessor Company" means Northeast Bancorp and its subsidiary before the closing of the merger with FHB Formation LLC on December 29, 2010.
NORTHEAST BANCORP AND SUBSIDIARY                    
CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)      
(Dollars in thousands)
Successor Company (1)
Three Months Ended December 31, 2011 Six Months Ended December 31, 2011
Average Interest Average Average Interest Average
Daily Income/ Yield/ Daily Income/ Yield/
Balance Expense Rate Balance Expense Rate
(Dollars in thousands)
Assets:
Interest-earning assets:
Investment securities $ 139,051 $ 541 1.54 % $ 143,372 $ 1,180 1.63 %
Loans (2) (3) 340,178 5,874 6.85 % 328,210 11,011 6.66 %
Regulatory stock 5,761 21 1.45 % 5,761 33 1.14 %
Short-term investments (4)   67,455     36 0.21 %   72,903     83 0.23 %
Total interest-earning assets   552,445     6,472 4.65 %   550,246     12,307 4.44 %
 
Non-interest earning assets:
Cash & due from banks 2,981 2,950
Bank premises and equipment, net 8,924 8,598
Other assets 28,935 29,963
Allowance for loan losses   (743 )   (596 )
Total non-interest earning assets   40,097     40,915  
Total assets $ 592,542   $ 591,161  
 
Liabilities & Stockholders' Equity:
Interest-bearing liabilities:
NOW $ 54,806 $ 54 0.39 % $ 55,494 $ 123 0.44 %
Money market 44,247 42 0.38 % 45,114 92 0.40 %
Savings 32,360 18 0.22 % 32,899 44 0.27 %
Time   220,670     722 1.30 %   218,133     1,414 1.29 %
Total interest-bearing deposits 352,083 836 0.94 % 351,640 1,673 0.94 %
Short-term borrowings (5) 631 3 1.89 % 886 8 1.79 %
Borrowed funds 113,100 532 1.87 % 113,423 1,064 1.86 %
Junior subordinated debentures   8,009     185 9.16 %   7,990     368 9.14 %
Total interest-bearing liabilities   473,823     1,556 1.30 %   473,939     3,113 1.30 %
 
Interest-bearing liabilities of discontinued operations (6) 0 570
 
Non-interest bearing liabilities:
Demand deposits and escrow accounts 47,290 46,524
Other liabilities   5,723     4,498  
Total liabilities 526,836 525,531
 
Stockholders' equity   65,706     65,630  
Total liabilities and stockholders' equity $ 592,542   $ 591,161  
 
Net interest income $ 4,916 $ 9,194
 
Interest rate spread 3.35 % 3.14 %
Net interest margin (7) 3.53 % 3.31 %
 
(1)     "Successor Company" means Northeast Bancorp and its subsidiary after the closing of the merger with FHB Formation LLC on December 29, 2010.
(2) Non-accruing loans are included in the computation of average balances, but unpaid interest on nonperforming loans has not been included for purposes of determining interest income.
(3) Includes Loans Held-for-Sale
(4) Short term investments include FHLB overnight deposits and other interest-bearing deposits.
(5) Short-term borrowings include securities sold under repurchase agreements and sweep accounts.
(6) The average balance of borrowings associated with discontinued operations has been excluded from interest expense, interest rate spread, and net interest margin.
(7) Net interest margin is calculated as net interest income divided by total interest-earning assets.
NORTHEAST BANCORP AND SUBSIDIARY                          
CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
Predecessor Company (1)
89 days ended December 28, 2010 181 days ended December 28, 2010
Average Interest Average Average Interest Average
Daily Income/ Yield/ Daily Income/ Yield/
Balance Expense Rate Balance Expense Rate
 
Assets:
Interest-earning assets:
Investment securities $ 160,332 $ 1,439 3.68 % $ 161,894 $ 3,111 3.88 %
Loans (2)(3) 381,076 5,468 5.88 % 385,286 11,210 5.87 %
Regulatory stock 5,486 9 0.67 % 5,486 18 0.66 %
Short-term investments (4)   49,403     28 0.23 %   39,212     39 0.20 %
Total interest-earning assets   596,297     6,944 4.78 %   591,878     14,378 4.90 %
 
Non-interest earning assets:
Cash & due from banks
Bank premises and equipment, net 3,347 3,340
Other assets 7,983 8,006
Allowance for loan losses 32,377 32,620
Total non-interest earning assets   (5,915 )   (5,902 )
Total assets   37,792     38,064  
$ 634,089   $ 629,942  
 
Liabilities & Stockholders' Equity:
Interest-bearing liabilities:
NOW $ 55,147 $ 85 0.63 % $ 53,780 $ 183 0.69 %
Money market 55,645 88 0.65 % 55,955 212 0.76 %
Savings 38,234 42 0.45 % 38,303 99 0.52 %
Time   190,650     1,058 2.28 %   196,318     2,302 2.36 %
Total interest-bearing deposits 339,676 1,273 1.54 % 344,356 2,796 1.64 %
Short-term borrowings (5) 61,364 205 1.37 % 53,873 376 1.41 %
Borrowed funds 117,668 1,163 4.05 % 117,688 2,365 4.05 %
Junior subordinated debentures   16,496     167 4.15 %   16,496     340 4.16 %
Total interest-bearing liabilities   535,204     2,808 2.15 %   532,413     5,877 2.23 %
 
Interest-bearing liabilities of discontinued operations (6) 2,351 2,462
 
Non-interest bearing liabilities:
Demand deposits and escrow accounts 39,252 37,941
Other liabilities   5,711     5,576  
Total liabilities 582,518 578,392
 
Stockholders' equity   51,571     51,550  
Total liabilities and stockholders' equity $ 634,089   $ 629,942  
 
Net interest income $ 4,136 $ 8,501
 
Interest rate spread 2.63 % 2.67 %
Net interest margin (7) 2.84 % 2.90 %
 
(1)     "Predecessor Company" means Northeast Bancorp and its subsidiary prior to the closing of the merger with FHB Formation LLC on December 29, 2010.
(2) Non-accruing loans are included in the computation of average balances, but unpaid interest on nonperforming loans has not been included for purposes of determining interest income.
(3) Includes Loans Held-for-Sale
(4) Short term investments include FHLB overnight deposits and other interest-bearing deposits.
(5) Short-term borrowings include securities sold under repurchase agreements and sweep accounts.
(6) The average balance of borrowings associated with discontinued operations has been excluded from interest expense, interest rate spread, and net interest margin.
(7) Net interest margin is calculated as net interest income divided by total interest-earning assets.
NORTHEAST BANCORP AND SUBSIDIARY              
SELECTED CONSOLIDATED FINANCIAL HIGHLIGHTS AND OTHER DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
Successor Company (1)
Three Months Six Months
Ended Ended
December 31, 2011 December 31, 2011
Net interest income $ 4,916 $ 9,194
Net income $ 418 $ 947
 
Weighted average shares outstanding:
Basic 3,494,498 3,494,498
Diluted 3,511,994 3,494,498
Earnings per share:
Basic $ 0.09 $ 0.21
Diluted $ 0.09 $ 0.21
 
Return on average assets 0.28 % 0.32 %
Return on average equity 2.52 % 2.86 %
Net interest rate spread (4) 3.35 % 3.14 %
Net interest margin (5) 3.53 % 3.31 %
Efficiency ratio (6) 90.39 % 99.02 %
Non-interest expense to average total assets 4.60 % 4.54 %
Average interest-earning assets to average interest-bearing liabilities 116.59 % 116.10 %
 
Successor Company (1)
Non-performing loans: December 31, 2011 September 30, 2011 June 30, 2011
Originated portfolio:
Residential $ 3,264 $ 2,733 $ 2,195
Commercial 1,998 2,797 3,601
Construction 0 121 121
Home equity 182 205 205
Commercial business 1,119 1,224 559
Consumer   329     356     527  
6,892 7,436 7,208
Purchased portfolio:
Residential 0 0 0
Commercial 0 0 0
Commercial business   0     0     0  
0 0 0
 
Total non-performing loans 6,892 7,436 7,208
 
Repossessed collateral   837     463     690  
Total non-performing assets $ 7,729   $ 7,899   $ 7,898  
 
Ratio of nonperforming loans to total loans 1.99 % 2.35 % 2.33 %
Ratio of nonperforming assets to total assets 1.30 % 1.35 % 1.32 %
Allowance for loan losses to total loans 0.21 % 0.22 % 0.14 %
Allowance for loan losses to nonperforming loans 10.69 % 9.55 % 6.06 %
 
Commercial real estate loans to risk-based capital 236.88 % 194.08 % 200.53 %
Net loans to core deposits (2) 91.34 % 84.75 % 84.46 %
Purchased loans to total loans 14.83 % 3.90 % 0.21 %
Equity to total assets 11.08 % 11.27 % 10.89 %
Tier 1 leverage capital ratio 11.86 % 11.85 % 10.35 %
Total risk-based capital ratio 19.28 % 20.93 % 18.99 %
 
Number of full service branches 10 10 10
Number of investment and mortgage loan origination offices 7 7 7
Stockholders' equity $ 65,900 $ 66,188 $ 64,954
Book value per share $ 17.58 $ 17.66 $ 17.33
Tangible book value per share (3) $ 16.15 $ 16.14 $ 13.58
 
(1) "Successor Company" means Northeast Bancorp and its subsidiary after the closing of the merger with FHB Formation LLC on December 29, 2010.
(2) Core deposits includes all non-maturity deposits and maturity deposits less than $250 thousand. Net loans includes loans held-for-sale.
(3) Reconciliation of Non-GAAP Ratio:
Per Common
Equity Share
Total Stockholders' Equity $ 65,900
Less Preferred Stock   4,227  
Total Common Equity $ 61,673 $ 17.58
 
Less Core Deposit Intangible   5,012     1.43  
Tangible Common Equity $ 56,661   $ 16.15  
 
Outstanding Common Shares 3,507,524
(4)   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.
(5) The net interest margin represents net interest income as a percent of average interest-earning assets for the period.
(6) The efficiency ratio represents non-interest expense divided by the sum of net interest income (before the loan loss provision) plus non-interest income.

Northeast Bank
Claire S. Bean, 207-786-3245 ext. 6202
Chief Financial Officer & C.O.O.
www.northeastbank.com