NBN Northeast Bank

Northeast Bank (the “Bank”) (NASDAQ: NBN), a Maine-based full-service bank, today reported net income of $8.3 million, or $1.12 per diluted common share, for the quarter ended September 30, 2022, compared to net income of $9.9 million, or $1.20 per diluted common share, for the quarter ended September 30, 2021. Compared to the quarter ended September 30, 2021, earnings declined primarily due to a decrease of $6.4 million in correspondent fee income and an increase of $1.1 million in the provision for loan losses, partially offset by an increase of $4.8 million in net interest and dividend income.

The Board of Directors declared a cash dividend of $0.01 per share, payable on November 28, 2022, to shareholders of record as of November 14, 2022.

Discussing these results, Rick Wayne, Chief Executive Officer, said, “We began the new fiscal year with a strong first quarter. Our National Lending Division generated $259.3 million in originations and purchases for the quarter, including record originations of $181.7 million, growing the National Lending portfolio by $166.8 million, or 13.5%, over June 30, 2022, or an increase of $412.5 million, or 41.6%, over September 30, 2021. The growth in our National Lending portfolio is attributable to both a high level of originations and purchases in the quarter and less runoff, particularly in our purchased loan portfolio. In the current higher interest rate environment, we have seen an increasing number of borrowers extend their loans with the Bank rather than refinance elsewhere. In the current quarter, purchased loan runoff as a percentage of average balance was the lowest in fourteen quarters at 5.08%, compared to an average of 7.93% over the most recent fourteen quarters. A decline in purchased loan payoffs results in less transactional income in the quarter, but a higher balance of loans going forward. For the quarter, we are reporting earnings of $1.12 per diluted common share, a return on average equity of 13.1%, a return on average assets of 2.0%, and an efficiency ratio of 49.9%.”

Mr. Wayne continued, “Our purchase loan activity has been very significant since quarter end, with loan purchases in October aggregating unpaid principal balances of approximately $303.6 million.”

As of September 30, 2022, total assets were $1.74 billion, an increase of $160.2 million, or 10.1%, from total assets of $1.58 billion as of June 30, 2022, primarily due to an increase of $159.4 million in loans. 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 months ended September 30, 2022:

	September 30, 2022 Balance					June 30, 2022 Balance					Change ($)					Change (%)
	(Dollars in thousands)
National Lending Purchased	$	530,393		$	477,682				$	52,711					11.03		%
National Lending Originated		873,292			759,229					114,063					15.02		%
SBA		27,636			33,046					(5,410		)			(16.37		%)
Community Banking		32,899			34,909					(2,010		)			(5.76		%)
Total	$	1,464,220		$	1,304,866				$	159,354					12.21		%

Loans generated by the Bank's National Lending Division for the quarter ended September 30, 2022 totaled $259.3 million, which consisted of $77.5 million of purchased loans, at an average price of 92.5% of unpaid principal balance, and $181.7 million of originated loans.

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

				National Lending Portfolio
				Three Months Ended September 30,
				2022															2021
				Purchased				Originated				Total						Purchased								Originated									Total
				(Dollars in thousands)
Loans purchased or originated during the period:
Unpaid principal balance				$	83,858			$	181,720			$	265,578					$			37,034				$			94,485							$	131,519
Net investment basis					77,537				181,720				259,257								35,357							94,485								129,842
Loan returns during the period:
Yield					7.10%				7.85%				7.57%								9.26%							6.38%								7.65%
Total Return on Purchased Loans (1)					7.10%				N/A				7.10%								9.19%									N/A						9.19%
Total loans as of period end:
Unpaid principal balance				$	569,790			$	873,292			$	1,443,082					$			467,268				$			559,080							$	1,026,348
Net investment basis					530,393				873,292					1,403,685						432,083										559,080							991,163
(1) The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on real estate owned and other noninterest income recorded during the period divided by the average invested balance, which includes purchased loans held for sale, on an annualized basis. The total return on purchased loans does not include the effect of purchased loan charge-offs or recoveries during the period. Total return on purchased loans is considered a non-GAAP financial measure. See reconciliation in below table entitled “Total Return on Purchased Loans.”

2.	Deposits increased by $40.7 million, or 3.2%, from June 30, 2022, attributable to increases in time deposits of $110.6 million, or 86.9%, and savings and interest checking deposits of $91.2 million, or 15.6%, primarily offset by a decrease in demand deposits of $161.2 million, or 49.0%.
3.	Short-term Federal Home Loan Bank advances increased by $120.0 million, or 800%, to fund loan growth.
4.	Shareholders’ equity increased by $3.8 million, or 1.5%, from June 30, 2022, primarily due to net income of $8.3 million and stock-based compensation of $649 thousand, partially offset by the repurchase of 108 thousand shares of common stock at a weighted average price per share of $37.88, which resulted in a $4.1 million decrease in shareholders’ equity.

Net income decreased by $1.6 million to $8.3 million for the quarter ended September 30, 2022, compared to net income of $9.9 million for the quarter ended September 30, 2021.

1.	Net interest and dividend income before provision for loan losses increased by $4.8 million to $23.6 million for the quarter ended September 30, 2022, compared to $18.8 million for the quarter ended September 30, 2021. The increase was primarily due to the following:

• An increase in interest income earned on loans of $6.1 million, primarily due to an increase in interest income earned on National Lending Division originated and purchased portfolios, due to higher average balances in both portfolios and higher rates on the originated portfolio, partially offset by lower rates on the purchased portfolio; and
• An increase in interest income earned on short-term investments of $462 thousand, due to higher rates, partially offset by lower average balances; partially offset by,
• An increase in deposit interest expense of $1.5 million, due to higher interest rates and higher average balances in interest-bearing deposits; and
• An increase in Federal Home Loan Bank advance interest expense of $268 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 September 30,
	2022									2021
	Average			Interest						Average			Interest
	Balance (1)			Income			Yield			Balance (1)			Income			Yield
	(Dollars in thousands)
Community Banking	$	32,888		$	467		5.63	%		$	47,052		$	587		4.95	%
SBA National		30,776			730		9.41	%			38,297			623		6.45	%
SBA PPP		-			-		0.00	%			1,384			11		3.15	%
National Lending:
Originated		815,988			16,150		7.85	%			546,291			8,785		6.38	%
Purchased		488,019			8,732		7.10	%			427,804			9,987		9.26	%
Total National Lending		1,304,007			24,882		7.57	%			974,095			18,772		7.65	%
Total	$	1,367,671		$	26,079		7.57	%		$	1,060,828		$	19,993		7.48	%

         (1) Includes loans held for sale.

The components of total income on purchased loans are set forth in the table below entitled “Total Return on Purchased Loans.” When compared to the quarter ended September 30, 2021, regularly scheduled interest and accretion for the quarter ended September 30, 2022 increased by $692 thousand due to the increase in average balances and transactional income decreased by $1.9 million. The total return on purchased loans for the quarter ended September 30, 2022 was 7.1%, a decrease from 9.2% for the quarter ended September 30, 2021. The following table details the total return on purchased loans:

	Total Return on Purchased Loans
	Three Months Ended September 30,
	2022						2021
	Income			Return (1)			Income				Return (1)
	(Dollars in thousands)
Regularly scheduled interest and accretion	$	7,674		6.24	%		$	6,982			6.47	%
Transactional income:
Loss on real estate owned		-		0.00	%			(74	)		(0.07	%)
Accelerated accretion and loan fees		1,058		0.86	%			3,005			2.79	%
Total transactional income		1,058		0.86	%			2,931			2.72	%
Total	$	8,732		7.10	%		$	9,913			9.19	%

	(1)	The total return on purchased loans represents scheduled accretion, accelerated accretion, 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 periods shown. Total return is considered a non-GAAP financial measure.
2.	Provision (credit) for loan losses increased by $1.1 million to a provision of $850 thousand for the quarter ended September 30, 2022, from a credit of $226 thousand in the quarter ended September 30, 2021. The increase in the provision (credit) for loan losses reflects an increase in the general reserve due to loan growth during the quarter ended September 30, 2022, as compared to decreases in certain qualitative factors during the quarter ended September 30, 2021 as a result of continued improvements relative to the COVID-19 pandemic.
3.	Noninterest income decreased by $6.7 million for the quarter ended September 30, 2022, compared to the quarter ended September 30, 2021, primarily due to the following:

• A decrease in correspondent fee income of $6.4 million. Correspondent income for the quarters ended September 30, 2022 and 2021 is comprised of the following components:

	Three Months Ended September 30,
	2022					2021
			(In thousands)
Correspondent Fee	$		266			$	1,087
Amortization of Purchased Accrued Interest			660				1,794
Earned Net Servicing Interest			456				4,950
Total	$		1,382			$	7,831

A summary of U.S. Small Business Administration Paycheck Protection Program (“PPP”) loans purchased by The Loan Source, Inc. (“Loan Source”) and related amounts that the Bank will earn over the expected life of the loans is as follows:

Quarter		PPP Loans Purchased by Loan Source(3)			Correspondent Fee				Purchased Accrued Interest(1)				Total(2)
	(In thousands)
Q4 FY 2020		$	1,272,900		$	2,891			$	688			$	3,579
Q1 FY 2021			2,112,100			5,348				2,804				8,152
Q2 FY 2021			1,333,500			495				3,766				4,261
Q3 FY 2021			2,141,900			-				598				598
Q4 FY 2021			4,371,000			171				2,703				2,874
Q1 FY 2022			6,300			-				1				1
Total		$	11,237,700		$	8,905			$	10,560			$	19,465
Less amounts recognized in Q1 FY 23						(266	)			(660	)			(926		)
Less amounts recognized in previous quarters						(8,410	)			(9,334	)			(17,744		)
Amount remaining to be recognized					$	229			$	566			$	795

(1) – The Bank’s share(2) – Expected to be recognized into income over life of loans(3) – Loan Source’s ending PPP loan balance was $726.0 million as of September 30, 2022

In addition to this decrease:

• An increase in net unrealized loss on equity securities of $197 thousand; and
• A decrease in fees for customers of $190 thousand, due to lower commercial loan servicing fees resulting from the payoff of U.S. Small Business Administration loans; partially offset by,
• An increase in gain on termination of interest rate swap of $96 thousand, due to the Bank’s termination of its interest rate swaps during the quarter ended September 30, 2022.

4.	Noninterest expense decreased by $704 thousand for the quarter ended September 30, 2022, compared to the quarter ended September 30, 2021, primarily due to the following:

• A decrease in loan expense of $1.6 million, due to $1.6 million of one-time correspondent expenses associated with the wrap-up of PPP origination activity recognized during the quarter ended September 30, 2021; partially offset by,
• An increase in salaries and employee benefits expense of $703 thousand, primarily due to increases in regular employee compensation and stock compensation expense; and
• An increase in other noninterest expense of $241 thousand, primarily due to a $164 thousand increase in deposit expense, primarily from increased excess deposit insurance costs, and a $107 thousand increase in travel and meals and entertainment expense during the quarter ended September 30, 2022 compared to September 30, 2021, when there was relatively minimal travel due to COVID restrictions.

5.

Income tax expense decreased by $672 thousand to $3.5 million, or an effective tax rate of 29.9%, for the quarter ended September 30, 2022, compared to $4.2 million, or an effective tax rate of 29.9%, for the quarter ended September 30, 2021. The decrease was primarily due to lower pre-tax income, which decreased by $2.3 million during the quarter ended September 30, 2022, compared to the quarter ended September 30, 2021.

As of September 30, 2022, nonperforming assets totaled $13.7 million, or 0.79% of total assets, as compared to $12.9 million, or 0.82% of total assets, as of June 30, 2022. The increase was primarily due to three National Lending Division loans totaling $2.5 million that were placed on nonaccrual during the quarter ended September 30, 2022, partially offset by four National Lending Division loans totaling $1.9 million that paid off or returned to accrual. Additionally, REO increased by $90 thousand due to the transfer of a former branch property from fixed assets during the quarter ended September 30, 2022.

As of September 30, 2022, past due loans totaled $14.1 million, or 0.97% 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 nine National Lending Division loans totaling $7.3 million becoming past due during the quarter ended September 30, 2022.

As of September 30, 2022, the Bank’s Tier 1 leverage capital ratio was 15.6%, compared to 16.1% at June 30, 2022, and the Total capital ratio was 17.8% at September 30, 2022, compared to 19.5% at June 30, 2022. Capital ratios were primarily affected by increased assets and increased earnings.

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 first quarter earnings and business outlook at 10:00 a.m. Eastern Time on Tuesday, November 1st. 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 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, net interest margin excluding PPP, and net interest margin excluding PPP and collection account. The Bank’s management believes that the supplemental non-GAAP information is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names.

Forward-Looking Statements Statements in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We may also make forward-looking statements in other documents we file with the FDIC, in our annual reports to our shareholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees. You can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “outlook,” “will,” “should,” and other expressions that predict or indicate future events and trends and which do not relate to historical matters. Although the Bank believes that these forward-looking statements are based on reasonable estimates and assumptions, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and other factors. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Bank’s control. The Bank’s actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, 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 Federal Deposit Insurance Corporation. These statements speak only as of the date of this release and the Bank does not undertake any obligation to update or revise any of these forward-looking statements to reflect events or circumstances occurring after the date of this communication or to reflect the occurrence of unanticipated events.

NBN-F

NORTHEAST BANK
BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share data)
	September 30, 2022				June 30, 2022
Assets
Cash and due from banks	$	2,164			$	2,095
Short-term investments		164,790				169,984
Total cash and cash equivalents		166,954				172,079
Available-for-sale debt securities, at fair value		53,925				54,911
Equity securities, at fair value		6,612				6,798
Total investment securities		60,537				61,709
Loans:
Commercial real estate		996,832				882,187
Commercial and industrial		394,099				352,729
Residential real estate		72,625				69,209
Consumer		664				741
Total loans		1,464,220				1,304,866
Less: Allowance for loan losses		5,898				5,028
Loans, net		1,458,322				1,299,838
Premises and equipment, net		9,102				9,606
Real estate owned and other repossessed collateral, net		90				-
Federal Home Loan Bank stock, at cost		6,710				1,610
Loan servicing rights, net		1,141				1,285
Bank-owned life insurance		18,031				17,922
Other assets		22,057				18,710
Total assets	$	1,742,944			$	1,582,759
Liabilities and Shareholders' Equity
Deposits:
Demand	$	167,857			$	329,007
Savings and interest checking		676,460				585,274
Money market		246,147				246,095
Time		237,935				127,317
Total deposits		1,328,399				1,287,693
Federal Home Loan Bank advances		135,000				15,000
Lease liability		4,039				4,451
Other liabilities		23,343				27,294
Total liabilities		1,490,781				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 September 30, 2022 and June 30, 2022		-				-
Voting common stock, $1.00 par value, 25,000,000 shares authorized;
7,477,158 and 7,442,103 shares issued and outstanding at
September 30, 2022 and June 30, 2022, respectively		7,477				7,442
Non-voting common stock, $1.00 par value, 3,000,000 shares authorized;
no shares issued and outstanding at September 30, 2022 and June 30, 2022		-				-
Additional paid-in capital		34,526				38,749
Retained earnings		211,194				202,980
Accumulated other comprehensive loss		(1,034	)			(850	)
Total shareholders' equity		252,163				248,321
Total liabilities and shareholders' equity	$	1,742,944			$	1,582,759

NORTHEAST BANK
STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except share and per share data)
	Three Months Ended September 30,
	2022					2021
Interest and dividend income:
Interest and fees on loans	$	26,079			$		19,993
Interest on available-for-sale securities		149					94
Other interest and dividend income		636					174
Total interest and dividend income		26,864					20,261
Interest expense:
Deposits		2,801					1,309
Federal Home Loan Bank advances		396					128
Obligation under lease agreements		18					25
Total interest expense		3,215					1,462
Net interest and dividend income before provision (credit) for loan losses		23,649					18,799
Provision (credit) for loan losses		850					(226				)
Net interest and dividend income after provision (credit) for loan losses		22,799					19,025
Noninterest income:
Fees for other services to customers		267					457
Gain on sales of SBA loans		36					-
Gain on sales of PPP loans		-					86
Net unrealized loss on equity securities		(218		)			(21				)
Loss on real estate owned, other repossessed collateral and premises and equipment, net		(44		)			(74				)
Correspondent fee income		1,382					7,831
Gain on termination of interest rate swap		96					-
Bank-owned life insurance income		109					106
Other noninterest income		31					14
Total noninterest income		1,659					8,399
Noninterest expense:
Salaries and employee benefits		8,265					7,562
Occupancy and equipment expense		854					887
Professional fees		516					521
Data processing fees		1,105					1,077
Marketing expense		177					192
Loan expense		640					2,248
FDIC insurance premiums		97					112
Other noninterest expense		980					739
Total noninterest expense		12,634					13,338
Income before income tax expense		11,824					14,086
Income tax expense		3,537					4,209
Net income	$	8,287				$	9,877
Weighted-average common shares outstanding:
Basic		7,312,291					8,132,131
Diluted		7,394,089					8,212,836
Earnings per common share:
Basic	$	1.13				$	1.21
Diluted		1.12					1.20
Cash dividends declared per common share	$	0.01				$	0.01

NORTHEAST BANK
AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
	Three Months Ended September 30,
	2022									2021
				Interest			Average						Interest				Average
	Average			Income/			Yield/			Average			Income/				Yield/
	Balance			Expense			Rate			Balance			Expense				Rate
Assets:
Interest-earning assets:
Investment securities	$	61,727		$	149		0.96	%		$	66,545		$	94			0.56	%
Loans (1) (2)		1,367,671			26,079		7.57	%			1,060,828			19,993			7.48	%
Federal Home Loan Bank stock		3,589			14		1.55	%			1,209			7			2.30	%
Short-term investments (3)		141,489			622		1.74	%			443,447			167			0.15	%
Total interest-earning assets		1,574,476			26,864		6.77	%			1,572,029			20,261			5.11	%
Cash and due from banks		2,534									2,814
Other non-interest earning assets		46,180									49,803
Total assets	$	1,623,190								$	1,624,646
Liabilities & Shareholders' Equity:
Interest-bearing liabilities:
NOW accounts	$	493,693		$	1,595		1.28	%		$	270,034		$	175			0.26	%
Money market accounts		250,654			406		0.64	%			275,905			202			0.29	%
Savings accounts		137,392			210		0.61	%			71,659			69			0.38	%
Time deposits		153,712			590		1.52	%			259,972			863			1.32	%
Total interest-bearing deposits		1,035,451			2,801		1.07	%			877,570			1,309			0.59	%
Federal Home Loan Bank advances		62,337			396		2.52	%			15,000			128			3.39	%
Lease liability		4,178			18		1.71	%			5,817			25			1.71	%
Total interest-bearing liabilities		1,101,966			3,215		1.16	%			898,387			1,462			0.65	%
Non-interest bearing liabilities:
Demand deposits and escrow accounts		261,693									471,451
Other liabilities		8,012									20,166
Total liabilities		1,371,671									1,390,004
Shareholders' equity		251,519									234,642
Total liabilities and shareholders' equity	$	1,623,190								$	1,624,646
Net interest income				$	23,649								$	18,799
Interest rate spread							5.61	%									4.46	%
Net interest margin (4)							5.96	%									4.74	%
Cost of funds (5)							0.94	%									0.42	%
(1) Interest income and yield are stated on a fully tax-equivalent basis using the statutory tax rate.
(2) Nonaccrual loans are included in the computation of average, but unpaid interest has not been included for purposes of determining interest income.
(3) Short-term investments include FHLB overnight deposits and other interest-bearing deposits.(4) Net interest margin is calculated as net interest income divided by total interest-earning assets.(5) 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
	September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
Net interest income	$	23,649			$	23,619			$	20,952			$	20,055			$	18,799
Provision (credit) for loan losses		850				(879	)			(287	)			(1,069	)			(226	)
Noninterest income		1,659				4,144				5,408				6,493				8,399
Noninterest expense		12,634				12,856				11,401				11,187				13,338
Net income		8,287				10,296				10,587				11,403				9,877
Weighted-average common shares outstanding:
Basic		7,312,291				7,506,465				7,687,737				7,952,938				8,132,131
Diluted		7,394,089				7,617,933				7,790,963				8,041,476				8,212,836
Earnings per common share:
Basic	$	1.13			$	1.37			$	1.38			$	1.43			$	1.21
Diluted		1.12				1.35				1.36				1.42				1.20
Dividends declared per common share	$	0.01			$	0.01			$	0.01			$	0.01			$	0.01
Return on average assets		2.03%				2.68%				2.79%				2.86%				2.41%
Return on average equity		13.07%				16.55%				17.57%				18.77%				16.70%
Net interest rate spread (1)		5.61%				6.14%				5.52%				4.99%				4.46%
Net interest margin (2)		5.96%				6.34%				5.71%				5.24%				4.74%
Net interest margin, excluding PPP (non-GAAP) (3)		5.96%				6.34%				5.71%				5.24%				4.75%
Net interest margin, excluding PPP and collection account (non-GAAP) (4)		6.22%				7.07%				6.72%				6.44%				6.00%
Efficiency ratio (non-GAAP) (5)		49.92%				46.31%				43.25%				42.14%				49.04%
Noninterest expense to average total assets		3.09%				3.34%				3.01%				2.80%				3.26%
Average interest-earning assets to average interest-bearing liabilities		142.88%				156.64%				167.20%				168.71%				174.98%
	As of:
	September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
Nonperforming loans:
Originated portfolio:
Residential real estate	$	520			$	550			$	621			$	611			$	619
Commercial real estate		3,528				5,031				6,608				7,963				6,644
Commercial and industrial		452				202				230				311				1,510
Consumer		8				11				12				20				39
Total originated portfolio		4,508				5,794				7,471				8,905				8,812
Total purchased portfolio		9,089				7,152				10,441				12,294				12,527
Total nonperforming loans		13,597				12,946				17,912				21,199				21,339
Real estate owned and other repossessed collateral, net		90				-				-				53				821
Total nonperforming assets	$	13,687			$	12,946			$	17,912			$	21,252			$	22,160
Past due loans to total loans		0.97%				0.53%				1.07%				1.23%				1.39%
Nonperforming loans to total loans		0.93%				0.99%				1.45%				1.79%				1.99%
Nonperforming assets to total assets		0.79%				0.82%				1.14%				1.46%				1.60%
Allowance for loan losses to total loans		0.40%				0.39%				0.47%				0.51%				0.67%
Allowance for loan losses to nonperforming loans		43.38%				38.34%				32.47%				28.49%				33.58%
Commercial real estate loans to total capital (6)		328.35%				294.20%				252.90%				260.40%				232.10%
Net loans to core deposits (7)		109.78%				100.94%				97.19%				102.53%				98.96%
Purchased loans to total loans, including held for sale		32.62%				36.61%				38.94%				41.02%				40.22%
Equity to total assets		14.47%				15.69%				15.80%				16.39%				17.32%
Common equity tier 1 capital ratio		17.36%				19.08%				20.13%				20.27%				22.03%
Total capital ratio		17.77%				19.47%				20.60%				20.79%				22.69%
Tier 1 leverage capital ratio		15.59%				16.13%				16.17%				15.19%				14.83%
Total shareholders’ equity	$	252,163			$	248,321			$	247,469			$	239,237			$	239,508
Less: Preferred stock		-				-				-				-				-
Common shareholders’ equity		252,163				248,321				247,469				239,237				239,508
Less: Intangible assets (8)		(1,141	)			(1,285	)			(1,696	)			(1,645	)			(1,906	)
Tangible common shareholders' equity (non-GAAP)	$	251,022			$	247,036			$	245,773			$	237,592			$	237,602
Common shares outstanding		7,477,158				7,442,103				7,727,312				7,815,566				8,172,776
Book value per common share	$	33.72			$	33.37			$	32.03			$	30.61			$	29.31
Tangible book value per share (non-GAAP) (9)		33.57				33.19				31.81				30.40				29.07
(1) The net interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.
(2) The net interest margin represents net interest income as a percent of average interest-earning assets for the period.
(3) Net interest margin excluding PPP removes the effects of the following: PPP loan interest income of $3 thousand, $2 thousand, and $11 thousand, as well as PPP loan average balances of $462 thousand, $628 thousand, and $1.4 million, for the quarters ended March 31, 2022, December 31, 2021, and September 30, 2021, respectively.(4) Net interest margin excluding PPP and collection account removes the PPP impact above and removes the effects of the cash held by the Bank from the correspondent’s collection account in short-term investments, which had an average balance of $99.2 million, $175.2 million, $244.0 million, $287.7 million, and $334.3 million, and earned $514 thousand, $362 thousand, $60 thousand, $73 thousand, and $84 thousand, in interest income for the quarters ended September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021, and September 30, 2021, respectively.(5) The efficiency ratio represents noninterest expense divided by the sum of net interest income (before the loan loss provision) plus noninterest income.
(6) For purposes of calculating this ratio, commercial real estate includes all non-owner occupied commercial real estate loans defined as such by regulatory guidance, including all land development and construction loans.
(7) Core deposits include all non-maturity deposits and maturity deposits less than $250 thousand. During the quarter ended June 30, 2022, the Bank changed its internal policy limit to calculate based on deposits, not core deposits. Ratios as of September 30, 2022 and June 30, 2022 reflects loans to deposits.(8) Includes the loan servicing rights asset.
(9) Tangible book value per share represents total shareholders’ equity less the sum of preferred stock and intangible assets divided by common shares outstanding.

For More Information:Jean-Pierre Lapointe, Chief Financial OfficerNortheast Bank, 27 Pearl Street, Portland, ME 04101207.786.3245 ext. 3220www.northeastbank.com