Form 8-K NORTHEAST BANCORP /ME/ For: Jul 27

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July 27, 2016 5:29 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):	July 27, 2016

Commission File No. 1-14588

NORTHEAST BANCORP

(Exact name of registrant as specified in its charter)

Maine	01-0425066
(State or other jurisdiction of incorporation)	(IRS Employer Identification Number)

500 Canal Street Lewiston, Maine	04240
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (207) 786-3245

Former name or former address, if changed since last Report: N/A

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

| | Written communications pursuant to Rule 425 under the Securities Act

| | Soliciting material pursuant to Rule 14a-12 under the Exchange Act

| | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

| | Pre-commencement to communications pursuant to Rule 13e-4(c) under the Exchange Act

Item 2.02 Results of Operations and Financial Condition

On July 27, 2016, Northeast Bancorp, a Maine corporation (the "Company"), issued a press release announcing its earnings for the fourth quarter of fiscal 2016 and declaring the payment of a dividend. The full text of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information contained herein, including the exhibit attached hereto, is furnished pursuant to Item 2.02 of this Form 8-K and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, the information in this report (including the exhibits hereto) are not to be incorporated by reference into any of the Company's filings with the Securities and Exchange Commission, whether filed prior to or after the furnishing of these certificates, regardless of any general or specific incorporation language in such filing.

Item 9.01 Financial Statements and Exhibits

Exhibit No. Description

99.1 Press Release dated July 27, 2016

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunder duly authorized.


NORTHEAST BANCORP

By: /s/ Brian Shaughnessy
Name:	Brian Shaughnessy
Title:	Chief Financial Officer and Treasurer

Date: July 27, 2016

EXHIBIT INDEX

Exhibit No. Description

99.1 Press Release dated July 27, 2016

Exhibit 99.1

FOR IMMEDIATE RELEASE

For More Information:

Brian Shaughnessy, CFO

Northeast Bank, 500 Canal Street, Lewiston, ME 04240

207.786.3245 ext. 3220

www.northeastbank.com

Northeast Bancorp Reports Fourth Quarter Results, Declares Dividend

Lewiston, ME (July 27, 2016) ‒ Northeast Bancorp (“Northeast” or the “Company”) (NASDAQ: NBN), a Maine-based full-service financial services company and parent of Northeast Bank (the “Bank”), today reported net income of $2.2 million, or $0.24 per diluted common share, for the quarter ended June 30, 2016, compared to net income of $2.2 million, or $0.22 per diluted common share, for the quarter ended June 30, 2015. Net income for the year ended June 30, 2016 was $7.6 million, or $0.80 per diluted common share, compared to $7.1 million, or $0.72 per diluted common share, for the year ended June 30, 2015.

The Board of Directors has also declared a cash dividend of $0.01 per share, payable on August 24, 2016 to shareholders of record as of August 10, 2016.

“We closed the year with a strong quarter,” said Richard Wayne, President and Chief Executive Officer. “For the quarter, we achieved earnings of $0.24 per share driven by solid SBA gains on sale and purchased loan transactional income. In addition to earnings growth, we generated loan volume of $96.6 million, including $50.6 million of loans produced by the Loan Acquisition and Servicing Group, $17.4 million of SBA loans and $28.6 million of residential and commercial loans produced by the Community Bank. The growth of our balance sheet and earnings, coupled with the issuance of $15.05 million of subordinated notes in June, compliments our growth strategy and positions us well for the future.”

As of June 30, 2016, total assets were $986.2 million, an increase of $135.4 million, or 15.9%, compared to June 30, 2015. The principal components of the change in the balance sheet follow:

	1.	The loan portfolio – excluding loans held for sale – has grown by $80.3 million, or 13.1%, compared to June 30, 2015, principally on the strength of $81.8 million of net growth in commercial loans purchased or originated by the Bank’s Loan Acquisition and Servicing Group (“LASG”), net growth of $15.5 million in originations by the Bank’s Small Business Administration (“SBA”) National Division and net growth of $3.9 million in commercial originations by the Bank’s Community Banking Division. This net growth was offset by a pay down of one secured loan to a broker-dealer for $12.0 million in the LASG portfolio and a $20.9 million decrease in the Bank’s Community Banking Division residential and consumer loan portfolio.

		Loans generated by the LASG totaled $50.6 million for the quarter ended June 30, 2016. The growth in LASG loans consisted of $18.8 million of purchased loans, at an average price of 91.1% of unpaid principal balance, and $31.8 million of originated loans. SBA loans closed during the quarter totaled $17.4 million, of which $16.1 million were fully funded in the quarter. In addition, the Company sold $14.2 million of the guaranteed portion of SBA and United States Department of Agriculture (“USDA”) loans in the secondary market, of which $9.4 million were originated in the current quarter and $4.8 million were originated in prior quarters. Residential loan production sold in the secondary market totaled $19.9 million for the quarter.

As previously discussed in the Company’s SEC filings, the Company made certain commitments to the Board of Governors of the Federal Reserve System in connection with the merger of FHB Formation LLC with and into the Company in December 2010. The Company’s loan purchase and commercial real estate loan availability under these conditions follow:

Basis for Regulatory Condition	Condition	Availability at June 30, 2016
		(Dollars in millions)
Total Loans	Purchased loans may not exceed 40% of total loans	$	67.1
Regulatory Capital	Non-owner occupied commercial real estate loans may not exceed 300% of total capital	$	180.0

An overview of the Bank’s LASG portfolio follows:

	LASG Portfolio
	Three Months Ended June 30,
	2016												2015
	Purchased			Originated			Secured Loans to Broker-Dealers			Total LASG			Purchased			Originated			Secured Loans to Broker-Dealers			Total LASG
	(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance	$	20,588		$	31,826		$	-		$	52,414		$	25,785		$	29,193		$	-		$	54,978
Net investment basis		18,754			31,826			-			50,580			24,758			29,193			-			53,951

Loan returns during the period:
Yield (1)		10.88	%		6.98	%		0.51	%		8.19	%		13.11	%		5.56	%		0.49	%		8.79	%
Total Return (1) (2)		10.88	%		6.98	%		0.51	%		8.19	%		13.39	%		5.56	%		0.49	%		9.00	%

	Year Ended June 30,
	2016												2015
	Purchased			Originated			Secured Loans to Broker-Dealers			Total LASG			Purchased			Originated			Secured Loans to Broker-Dealers			Total LASG
	(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance	$	108,716		$	110,578		$	-		$	219,294		$	93,694		$	82,502		$	48,000		$	224,196
Net investment basis		99,999			110,578			-			210,577			82,654			82,502			48,000			213,156

Loan returns during the period:
Yield (1)		11.37	%		6.11	%		0.50	%		8.03	%		13.00	%		6.44	%		0.47	%		9.73	%
Total Return (1) (2)		11.38	%		6.10	%		0.50	%		8.04	%		13.33	%		6.75	%		0.47	%		10.02	%

Total loans as of period end:
Unpaid principal balance	$	271,268		$	174,918		$	48,000		$	494,186		$	239,933		$	118,416		$	60,000		$	418,349
Net investment basis		239,709			174,918			48,000			462,627			202,592			118,416			60,000			381,008

(1) The yield and total return on LASG originated loans includes $385 thousand of fees related to one loan in the quarter ended June 30, 2016.

(2) The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on asset sales, and other noninterest income recorded during the period divided by the average invested balance, on an annualized basis. The total return does not include the effect of purchased loan charge-offs or recoveries in the quarter.

Deposits increased by $47.5 million, or 6.3% for the quarter, attributable primarily to growth in non-maturity (demand, savings and interest checking, and money market) accounts, which increased by $49.8 million, or 12.5%. For the year ended June 30, 2016, deposits increased $125.7 million, or 18.6%, primarily due to growth in non-maturity accounts of $120.3 million, or 36.6%, and growth in time deposits of $5.4 million, or 1.6%.

Stockholders’ equity increased by $3.9 million from June 30, 2015, due principally to earnings of $7.6 million, offset by $3.4 million in share repurchases (representing 322,900 shares). Additionally, there was an increase in stock-based compensation of $613 thousand, offset by a decrease in accumulated other comprehensive income of $618 thousand and $380 thousand in dividends paid on common stock.

Net income increased by $34 thousand to $2.2 million for the quarter ended June 30, 2016, compared to $2.2 million for the quarter ended June 30, 2015.

Net interest and dividend income before provision for loan losses increased by $1.4 million for the quarter ended June 30, 2016, compared to the quarter ended June 30, 2015. The increase is primarily due to higher average balances in the total loan portfolio.

The various components of transactional income are set forth in the table below entitled “Total Return on Purchased Loans.” When compared to the three months and year ended June 30, 2015, transactional income decreased by $906 thousand and $2.6 million, respectively. 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,
	2016							2015
	Average		Interest					Average		Interest
	Balance (1)		Income (2)		Yield			Balance (1)		Income		Yield
	(Dollars in thousands)
Community Banking	$	212,625	$	2,589		4.90	%	$	228,558	$	2,839		4.98	%
SBA		30,599		490		6.44	%		8,860		126		5.70	%
LASG:
Originated		172,678		2,996		6.98	%		106,963		1,483		5.56	%
Purchased		232,610		6,294		10.88	%		195,016		6,375		13.11	%
Secured Loans to Broker-Dealers		54,001		68		0.51	%		60,003		73		0.49	%
Total LASG		459,289		9,358		8.19	%		361,982		7,931		8.79	%
Total	$	702,513	$	12,437		7.12	%	$	599,400	$	10,896		7.29	%

	Year Ended June 30,
	2016							2015
	Average		Interest					Average		Interest
	Balance (1)		Income (2)		Yield			Balance (1)		Income		Yield
	(Dollars in thousands)
Community Banking	$	218,649	$	10,483		4.79	%	$	233,506	$	11,599		4.97	%
SBA		23,786		1,448		6.09	%		2,622		148		5.64	%
LASG:
Originated		147,193		8,987		6.11	%		76,448		4,924		6.44	%
Purchased		216,763		24,638		11.37	%		203,822		26,500		13.00	%
Secured Loans to Broker-Dealers		58,511		293		0.50	%		44,942		212		0.47	%
Total LASG		422,467		33,918		8.03	%		325,212		31,636		9.73	%
Total	$	664,902	$	45,849		6.90	%	$	561,340	$	43,383		7.73	%

(1)Includes loans held for sale.

(2)SBA interest income includes SBA fees of $21 thousand and $33 thousand for the quarter and year ended June 30, 2016, respectively.

The yield on purchased loans for the quarter ended June 30, 2016 was 10.9% as compared to 13.4% in the quarter ended June 30, 2015, due to lower transactional income in the quarter. The following table details the total return on purchased loans:

	Total Return on Purchased Loans
	Three Months Ended June 30,
	2016					2015
	Income		Return (1)			Income		Return (1)
	(Dollars in thousands)
Regularly scheduled interest and accretion	$	4,770		8.25	%	$	4,132		8.43	%
Transactional income:
Gain on loan sales		-		0.00	%		-		0.00	%
Gain on sale of real estate owned		-		0.00	%		188		0.38	%
Other noninterest income		1		0.00	%		-		0.00	%
Accelerated accretion and loan fees		1,524		2.63	%		2,243		4.58	%
Total transactional income		1,525		2.63	%		2,431		4.96	%
Total	$	6,295		10.88	%	$	6,563		13.39	%

	Year Ended June 30,
	2016					2015
	Income		Return (1)			Income			Return (1)
	(Dollars in thousands)
Regularly scheduled interest and accretion	$	17,382		8.02	%	$	17,327			8.48	%
Transactional income:
Gain on loan sales		-		0.00	%		190			0.09	%
Gain on sale of real estate owned		23		0.01	%		607			0.30	%
Other noninterest income (loss)		12		0.00	%		(69	)		-0.03	%
Accelerated accretion and loan fees		7,256		3.35	%		9,173			4.49	%
Total transactional income		7,291		3.36	%		9,901			4.85	%
Total	$	24,673		11.38	%	$	27,228			13.33	%

(1)

The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on asset sales, gains on real estate owned and other noninterest income recorded during the period divided by the average invested balance, on an annualized basis. The total return does not include the effect of purchased loan charge-offs or recoveries in the quarter.

Noninterest income decreased by $656 thousand for the quarter ended June 30, 2016, compared to the quarter ended June 30, 2015, principally due to a decrease in gains realized on sale of portfolio loans. The recent quarter includes gains realized on sale of SBA and USDA loans of $1.6 million, compared to $1.9 million in the quarter ended June 30, 2015. Additionally, there was a decrease of $251 thousand in gain recognized on real estate owned and other repossessed collateral.

Noninterest expense increased by $569 thousand for the quarter ended June 30, 2016, compared to the quarter ended June 30, 2015, primarily due to an increase in salaries and employee benefits of $306 thousand, largely attributable to higher employee headcount.

At June 30, 2016, nonperforming assets totaled $9.5 million, or 0.96% of total assets, as compared to $12.4 million, or 1.46% of total assets, at June 30, 2015.

At June 30, 2016, the Company’s Tier 1 Leverage Ratio was 13.3%, compared to 14.5% at June 30, 2015, and the Total Capital Ratio was 20.4%, an increase from 20.1% at June 30, 2015. The increase resulted primarily from the issuance of $15.05 million of subordinated notes which qualify as Tier 2 Capital, offset by balance sheet growth and the effect of purchases under the Company’s share repurchase program in the current fiscal year.

Investor Call Information

Richard Wayne, Chief Executive Officer of Northeast Bancorp, and Brian Shaughnessy, Chief Financial Officer of Northeast Bancorp, will host a conference call to discuss fourth quarter earnings and business outlook at 10:00 a.m. Eastern Time on Thursday, July 28^th. Investors can access the call by dialing 877.878.2762 and entering the following passcode: 49101566. The call will be available via live webcast, which can be viewed by accessing the Company’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 Bancorp

Northeast Bancorp (NASDAQ: NBN) is the holding company for Northeast Bank, a full-service bank headquartered in Lewiston, Maine. We offer traditional banking services through the Community Banking Division, which operates ten full-service branches that serve customers located in western, central, and southern Maine. From our Maine and Boston locations, we also lend throughout the New England area. Our Loan Acquisition and Servicing Group (“LASG”) purchases and originates commercial loans on a nationwide basis. In addition, our SBA National Division supports the needs of growing businesses nationally. ableBanking, a division of Northeast Bank, offers savings products to consumers online. Information regarding Northeast Bank can be found on its website 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 stockholders’ equity, and tangible book value per share. Northeast’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 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 and real estate values; competitive pressures from other financial institutions; the effects of weakness 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; changing government regulation; the risk that the Company may not be successful in the implementation of its business strategy; the risk that 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 the Company 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.

NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share data)

	June 30, 2016			June 30, 2015
Assets
Cash and due from banks	$	2,459		$	2,789
Short-term investments		148,698			87,061
Total cash and cash equivalents		151,157			89,850

Available-for-sale securities, at fair value		100,572			101,908

Residential real estate loans held for sale		6,449			7,093
SBA loans held for sale		1,070			1,942
Total loans held for sale		7,519			9,035

Loans
Commercial real estate		426,568			348,676
Residential real estate		113,962			132,669
Commercial and industrial		145,956			123,133
Consumer		5,950			7,659
Total loans		692,436			612,137
Less: Allowance for loan losses		2,350			1,926
Loans, net		690,086			610,211

Premises and equipment, net		7,801			8,253
Real estate owned and other possessed collateral, net		1,652			1,651
Federal Home Loan Bank stock, at cost		2,408			4,102
Intangible assets, net		1,732			2,209
Bank owned life insurance		15,725			15,276
Other assets		7,501			8,223
Total assets	$	986,153		$	850,718

Liabilities and Stockholders' Equity
Deposits
Demand	$	66,686		$	60,383
Savings and interest checking		107,218			100,134
Money market		275,437			168,527
Time		351,091			345,715
Total deposits		800,432			674,759

Federal Home Loan Bank advances		30,075			30,188
Wholesale repurchase agreements		-			10,037
Short-term borrowings		-			2,349
Junior subordinated debentures issued to affiliated trusts		23,331			8,626
Capital lease obligation		1,128			1,368
Other liabilities		14,596			10,664
Total liabilities		869,562			737,991

Commitments and contingencies		-			-

Stockholders' equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares issued and outstanding at June 30, 2016 and June 30, 2015		-			-
Voting common stock, $1.00 par value, 25,000,000 shares authorized; 8,089,790 and 8,575,144 shares issued and outstanding at June 30, 2016 and June 30, 2015, respectively		8,089			8,575
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized; 1,227,683 and 1,012,739 shares issued and outstanding at June 30, 2016 and June 30, 2015, respectively		1,228			1,013
Additional paid-in capital		83,020			85,506
Retained earnings		26,160			18,921
Accumulated other comprehensive loss		(1,906	)		(1,288	)
Total stockholders' equity		116,591			112,727
Total liabilities and stockholders' equity	$	986,153		$	850,718

NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except share and per share data)

	Three Months Ended June 30,					Year Ended June 30,
	2016			2015		2016			2015
Interest and dividend income:
Interest and fees on loans	$	12,437		$	10,896	$	45,849		$	43,383
Interest on available-for-sale securities		230			215		930			913
Other interest and dividend income		161			74		456			292
Total interest and dividend income		12,828			11,185		47,235			44,588

Interest expense:
Deposits		1,671			1,329		6,027			5,010
Federal Home Loan Bank advances		253			256		1,027			1,101
Wholesale repurchase agreements		-			72		67			288
Short-term borrowings		1			8		20			29
Junior subordinated debentures issued to affiliated trusts		175			152		651			718
Obligation under capital lease agreements		15			18		63			74
Total interest expense		2,115			1,835		7,855			7,220

Net interest and dividend income before provision for loan losses		10,713			9,350		39,380			37,368
Provision for loan losses		317			240		1,618			717
Net interest and dividend income after provision for loan losses		10,396			9,110		37,762			36,651

Noninterest income:
Fees for other services to customers		393			406		1,657			1,494
Gain on sales of residential loans held for sale		392			493		1,684			1,877
Gain on sales of portfolio loans		1,620			1,926		4,178			2,821
(Loss) gain recognized on real estate owned and other repossessed collateral, net		(127	)		124		(255	)		428
Bank-owned life insurance income		113			111		449			440
Other noninterest income		20			7		60			29
Total noninterest income		2,411			3,067		7,773			7,089

Noninterest expense:
Salaries and employee benefits		5,592			5,286		19,548			18,817
Occupancy and equipment expense		1,291			1,277		5,227			4,939
Professional fees		421			505		1,463			1,658
Data processing fees		379			325		1,487			1,355
Marketing expense		85			41		285			244
Loan acquisition and collection expense		407			362		1,368			1,458
FDIC insurance premiums		135			133		489			504
Intangible asset amortization		108			129		477			589
Other noninterest expense		978			769		3,468			3,040
Total noninterest expense		9,396			8,827		33,812			32,604

Income before income tax expense		3,411			3,350		11,723			11,136
Income tax expense		1,212			1,185		4,104			3,995
Net income	$	2,199		$	2,165	$	7,619		$	7,141

Weighted-average shares outstanding:
Basic		9,319,522			9,773,228		9,474,999			9,980,733
Diluted		9,342,439			9,773,228		9,484,635			9,980,733
Earnings per common share:

Basic	$	0.24		$	0.22	$	0.80		$	0.72
Diluted		0.24			0.22		0.80			0.72
Cash dividends declared per common share	$	0.01		$	0.01	$	0.04		$	0.04

NORTHEAST BANCORP AND SUBSIDIARY

CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS

(Unaudited)

(Dollars in thousands)

	Three Months Ended June 30,
	2016							2015
	Average Balance		Interest Income/ Expense		Average Yield/ Rate			Average Balance		Interest Income/ Expense		Average Yield/ Rate
Assets:
Interest-earning assets:
Investment securities	$	93,289	$	230		0.99	%	$	103,988	$	215		0.83	%
Loans (1) (2) (3)		702,513		12,455		7.13	%		599,400		10,914		7.30	%
Federal Home Loan Bank stock		2,570		23		3.60	%		4,102		18		1.76	%
Short-term investments (4)		113,636		138		0.49	%		91,060		56		0.25	%
Total interest-earning assets		912,008		12,846		5.67	%		798,550		11,203		5.63	%
Cash and due from banks		4,171							2,553
Other non-interest earning assets		36,411							36,334
Total assets	$	952,590						$	837,437
Liabilities & Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts	$	72,012	$	51		0.28	%	$	64,533	$	41		0.25	%
Money market accounts		254,833		573		0.90	%		166,690		336		0.81	%
Savings accounts		36,167		12		0.13	%		35,835		12		0.13	%
Time deposits		356,418		1,035		1.17	%		342,849		940		1.10	%
Total interest-bearing deposits		719,430		1,671		0.93	%		609,907		1,329		0.87	%
Short-term borrowings		441		1		0.91	%		1,754		8		1.83	%
Borrowed funds		30,089		253		3.38	%		40,259		328		3.27	%
Junior subordinated debentures		8,954		175		7.86	%		8,602		152		7.09	%
Capital lease obligations		1,149		15		5.25	%		1,384		18		5.22	%
Total interest-bearing liabilities		760,063		2,115		1.12	%		661,906		1,835		1.11	%
Non-interest bearing liabilities:
Demand deposits and escrow accounts		68,314							56,754
Other liabilities		8,863							6,251
Total liabilities		837,240							724,911
Stockholders' equity		115,350							112,526
Total liabilities and stockholders' equity	$	952,590						$	837,437
Net interest income			$	10,731						$	9,368
Interest rate spread						4.55	%						4.52	%
Net interest margin (5)						4.73	%						4.71	%

(1) Interest income and yield are stated on a fully tax-equivalent basis using a 34% 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.

CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS

(Unaudited)

(Dollars in thousands)

	Year Ended June 30,
	2016							2015
			Interest		Average					Interest		Average
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Rate			Balance		Expense		Rate
Assets:
Interest-earning assets:
Investment securities	$	100,503	$	930		0.93	%	$	108,204	$	913		0.84	%
Loans (1) (2) (3)		664,902		45,921		6.91	%		561,340		43,456		7.74	%
Federal Home Loan Bank stock		2,960		113		3.82	%		4,102		67		1.63	%
Short-term investments (4)		91,563		343		0.37	%		92,354		225		0.24	%
Total interest-earning assets		859,928		47,307		5.50	%		766,000		44,661		5.83	%
Cash and due from banks		3,596							2,704
Other non-interest earning assets		35,607							33,741
Total assets	$	899,131						$	802,445

Liabilities & Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts	$	68,304	$	182		0.27	%	$	63,181	$	162		0.26	%
Money market accounts		212,102		1,845		0.87	%		133,266		1,002		0.75	%
Savings accounts		36,062		48		0.13	%		34,495		46		0.13	%
Time deposits		349,978		3,952		1.13	%		340,046		3,800		1.12	%
Total interest-bearing deposits		666,446		6,027		0.90	%		570,988		5,010		0.88	%
Short-term borrowings		1,634		20		1.22	%		2,578		29		1.12	%
Borrowed funds		32,432		1,094		3.37	%		45,661		1,389		3.04	%
Junior subordinated debentures		8,762		651		7.43	%		8,531		718		8.42	%
Capital lease obligations		1,242		63		5.07	%		1,457		74		5.08	%
Total interest-bearing liabilities		710,516		7,855		1.11	%		629,215		7,220		1.15	%

Non-interest bearing liabilities:
Demand deposits and escrow accounts		67,041							54,940
Other liabilities		7,252							5,913
Total liabilities		784,809							690,068
Stockholders' equity		114,322							112,377
Total liabilities and stockholders' equity	$	899,131						$	802,445

Net interest income			$	39,452						$	37,441

Interest rate spread						4.39	%						4.68	%
Net interest margin (5)						4.59	%						4.89	%

(1) Interest income and yield are stated on a fully tax-equivalent basis using a 34% 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.

NORTHEAST BANCORP AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL HIGHLIGHTS AND OTHER DATA
(Unaudited)
(Dollars in thousands, except share and per share data)

	Three Months Ended:
	June 30, 2016			March 31, 2016			December 31, 2015			September 30, 2015			June 30, 2015
Net interest income	$	10,713		$	9,254		$	10,172		$	9,241		$	9,350
Provision for loan losses		317			236			896			169			240
Noninterest income		2,411			2,035			1,624			1,705			3,067
Noninterest expense		9,396			8,412			8,196			7,810			8,827
Net income		2,199			1,809			1,744			1,867			2,165

Weighted average common shares outstanding:
Basic		9,319,522			9,456,198			9,559,369			9,562,812			9,773,228
Diluted		9,342,439			9,459,611			9,569,585			9,562,812			9,773,228
Earnings per common share:
Basic	$	0.24		$	0.19		$	0.18		$	0.20		$	0.22
Diluted		0.24			0.19			0.18			0.20			0.22
Dividends per common share		0.01			0.01			0.01			0.01			0.01

Return on average assets		0.93	%		0.80	%		0.80	%		0.86	%		1.04	%
Return on average equity		7.67	%		6.33	%		6.07	%		6.55	%		7.72	%
Net interest rate spread (1)		4.55	%		4.06	%		4.67	%		4.25	%		4.51	%
Net interest margin (2)		4.73	%		4.25	%		4.87	%		4.45	%		4.70	%
Efficiency ratio (3)		71.59	%		74.52	%		69.48	%		71.35	%		71.09	%
Noninterest expense to average total assets		3.97	%		3.70	%		3.75	%		3.59	%		4.22	%
Average interest-earning assets to average interest-bearing liabilities		119.99	%		120.62	%		122.48	%		121.63	%		120.90	%

	As of:
	June 30, 2016			March 31, 2016			December 31, 2015			September 30, 2015			June 30, 2015
Nonperforming loans:
Originated portfolio:
Residential real estate	$	2,613		$	3,566		$	3,263		$	3,165		$	3,021
Commercial real estate		474			602			399			529			994
Home equity		48			-			11			20			11
Commercial and industrial		17			2			2			2			2
Consumer		163			216			204			153			190
Total originated portfolio		3,315			4,386			3,879			3,869			4,218
Total purchased portfolio		4,512			4,364			2,221			6,939			6,532
Total nonperforming loans		7,827			8,750			6,100			10,808			10,750
Real estate owned and other possessed collateral, net		1,652			690			1,238			1,279			1,651
Total nonperforming assets	$	9,479		$	9,440		$	7,338		$	12,087		$	12,401

Past due loans to total loans		1.00	%		2.52	%		2.48	%		1.35	%		1.08	%
Nonperforming loans to total loans		1.13	%		1.25	%		0.90	%		1.73	%		1.76	%
Nonperforming assets to total assets		0.96	%		1.02	%		0.82	%		1.41	%		1.46	%
Allowance for loan losses to total loans		0.34	%		0.32	%		0.31	%		0.33	%		0.31	%
Allowance for loan losses to nonperforming loans		30.02	%		25.41	%		34.90	%		19.11	%		17.92	%

Commercial real estate loans to risk-based capital (4)		174.12	%		217.09	%		204.91	%		195.50	%		187.32	%
Net loans to core deposits (5)		87.15	%		93.48	%		94.37	%		91.04	%		91.85	%
Purchased loans to total loans, including held for sale		34.25	%		33.17	%		32.90	%		33.82	%		32.61	%
Equity to total assets		11.82	%		12.41	%		12.82	%		13.25	%		13.25	%
Common equity tier 1 capital ratio		17.97	%		17.46	%		18.11	%		19.69	%		19.82	%
Total capital ratio (6)		20.39	%		17.78	%		18.43	%		20.03	%		20.14	%
Tier 1 leverage capital ratio		13.27	%		13.57	%		14.31	%		14.23	%		14.49	%

Total stockholders' equity	$	116,591		$	114,526		$	114,613		$	113,704		$	112,727
Less: Preferred stock		-			-			-			-			-
Common stockholders' equity		116,591			114,526			114,613			113,704			112,727
Less: Intangible assets (7)		(3,503	)		(3,469	)		(3,336	)		(3,388	)		(3,312	)
Tangible common stockholders' equity (non-GAAP)	$	113,088		$	111,057		$	111,277		$	110,316		$	109,415

Common shares outstanding		9,317,473			9,330,873			9,519,729			9,592,329			9,587,883
Book value per common share	$	12.51		$	12.27		$	12.04		$	11.85		$	11.76
Tangible book value per share (non-GAAP) (8)		12.14			11.90			11.69			11.50			11.41

(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) The efficiency ratio represents non-interest expense divided by the sum of net interest income (before the loan loss provision) plus non-interest income.
(4) 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.
(5) Core deposits include all non-maturity deposits and maturity deposits less than $250 thousand. Loans include loans held-for-sale. (6) The Company’s adoption of Basel III went into effect as of March 31, 2015. The previous period ratios are the “Total Risk-Based Capital Ratio.” (7) Includes the core deposit intangible asset, as well as the servicing rights asset which is included in other assets in the consolidated balance sheets.
(8) Tangible book value per share represents total stockholders' equity less the sum of preferred stock and intangible assets divided by common shares outstanding.

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