Northeast Bank (NBN) 8-K Northeast Bancorp Reports Fourth Quarter Results, Declares Dividend

FOR IMMEDIATE RELEASE For More Information:
Claire S. Bean, Chief Financial Officer & C.O.O. Northeast Bank, 500 Canal Street, Lewiston, ME 04240 207-786-3245ext. 6202 www.northeastbank.com

Northeast Bancorp Reports Fourth Quarter Results, Declares Dividend

Lewiston, MAINE (August 1, 2011) -- 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 $561,000 or $0.13 per diluted common share for the quarter ended June 30, 2011, which includes the effect of certain one-time gains described below. For the 184-day period ended June 30, 2011, the Company earned $12.6 million or $3.47 per diluted common share, results that included a $15.4 million bargain purchase gain and $3.2 million of transaction costs related to the merger of Northeast and FHB Formation LLC (“FHB”), which was consummated on December 29, 2010, and contributed approximately $16.2 million of new capital to the Company.

The Board of Directors has declared a cash dividend of $0.09 per share, payable on August 26, 2011 to shareholders of record as of August 12, 2011.

“We are very pleased with the progress that we’ve made in positioning Northeast Bank for growth,” said Richard Wayne, President and Chief Executive Officer of Northeast Bancorp. “This year, Northeast completed a successful transaction with FHB that brought new capital to the Company, enabling us to grow core deposits in our markets and increase our capital ratios. This, combined with our investments in building a Loan Acquisition and Servicing Group and an Online Deposit Program, will provide Northeast with a solid platform for future success.”

Earnings for the quarter ended June 30, 2011 included two non-recurring items, as follows:

1.   Gains on sales of securities totaling $1.15 million; and

2.   A $225,000 positive adjustment to the bargain purchase gain recorded in connection with the accounting for the merger with FHB.

Total assets as of June 30, 2011 were $596.4 million, a decrease of approximately 4.2%, or $26.2 million, compared to total assets of $622.6 million as of June 30, 2010. The principal components of the change in the balance sheet over the past year were as follows:

1.   An $81.5 million, or 20.6%, reduction in loans outstanding, approximately half of which is attributable to loan sales, principally from the Company’s indirect consumer loan portfolio. The remainder of the reduction in loans is the result of net amortization and pay-offs of residential and commercial loans and a $9.1 million decrease in loans held for sale;

2.   A $5.4 million reduction in the allowance for loan losses, a result of acquisition accounting that does not permit the carryover of the predecessor company’s allowance for loan losses. Credit considerations for loans on the date of consummation of the merger with FHB are instead reflected in fair value adjustments on that date;

3.   A $43.7 million, or 94.6%, reduction in short-term borrowed funds;

4.   A $16.9 million, or 4.4%, net increase in deposits, centered principally in demand deposit accounts and time deposits; and

5.   A $48.3 million, or 26.1%, increase in cash and securities, the net result of changes in loans and funding sources, and the infusion of new capital in conjunction with the merger.

Non-performing loans totaled $7.9 million at June 30, 2011, a reduction of $900,000, or 10.1 %, from June 30, 2010.

As a result of the merger with FHB, coupled with the reduction in balance sheet size, the Company’s capital ratios have increased: the tier 1 leverage ratio increased to 10.3% compared to 8.4% at June 30, 2010 and the total risk-based capital ratio increased to 19.0% from 14.1% at June 30, 2010.

About Northeast Bancorp

Northeast Bancorp (NASDAQ: NBN) is the holding company for Northeast Bank, a full service community bank headquartered in Lewiston, Maine. Northeast Bank, together with its wholly owned subsidiary Northeast Bank Insurance Group, Inc., derives its income from a combination of traditional banking services and non-traditional financial products and services, including insurance and investments. Northeast Bank operates ten traditional bank branches, ten insurance offices, 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 or by contacting 1-800-284-5989.

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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 Advisor. 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
(Dollars in thousands)
	Successor			Predecessor
	Company (1)			Company (2)
	June 30,			June 30,
	2011			2010
	(Unaudited)			(Audited)
Assets
Cash and due from banks	$	3,227		$	7,019
Short-term investments		80,704			13,416
Total cash and cash equivalents		83,931			20,435
Available-for-sale securities, at fair value		148,962			164,188
Loans held-for-sale		5,176			14,254
Loans receivable
Residential real estate		145,530			155,613
Commercial real estate		117,703			121,175
Construction		2,018			5,525
Commercial business		22,227			30,214
Consumer		22,435			69,782
Total loans, gross		309,913			382,309
Less allowance for loan losses		437			5,806
Loans, net		309,476			376,503
Premises and equipment, net		8,271			7,997
Acquired assets, net		690			1,292
Accrued interest receivable		1,244			2,081
Federal Home Loan Bank stock, at cost		4,890			4,889
Federal Reserve Bank stock, at cost		871			597
Intangible assets		13,133			11,371
Bank owned life insurance		13,794			13,286
Other assets		5,955			5,714
Total assets	$	596,393		$	622,607
Liabilities and Stockholders' Equity
Liabilities:
Deposits
Demand	$	48,215		$	35,266
Savings and interest checking		89,804			89,024
Money market		48,695			55,556
Brokered time deposits		4,924			4,883
Certificates of deposit		209,480			199,468
Total deposits		401,118			384,197
Federal Home Loan Bank advances		43,922			50,500
Structured repurchase agreements		68,008			65,000
Short-term borrowings		2,515			46,168
Junior subordinated debentures issued to affiliated trusts		7,957			16,496
Capital lease obligation		2,075			2,231
Other borrowings		2,229			2,630
Other liabilities		3,615			4,479
Total liabilities		531,439			571,701
Commitments and contingent liabilities
Stockholders' equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; 4,227 shares issued and outstanding
at June 30, 2011 and June 30, 2010 liquidation preference of $1,000 per share		4			4
Voting common stock, at stated value, 13,500,000 shares authorized; 3,312,173 and 2,323,832 shares
issued and outstanding at June 30, 2011 and June 30, 2010, respectively		3,312			2,324
Non-voting common stock, at stated value, 1,500,000 shares authorized; 195,351 and 0 shares
issued and outstanding at June 30, 2011 and June 30, 2010, respectively		195			-
Warrants		406			133
Additional paid-in capital		49,700			6,761
Unearned restricted stock award		(163	)		-
Retained earnings		11,726			37,338
Accumulated other comprehensive (loss) income		(226	)		4,346
Total stockholders' equity		64,954			50,906
Total liabilities and stockholders' equity	$	596,393		$	622,607

(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 STATEMENTS OF INCOME
(Dollars in thousands, except share and per share data)
	Successor					Predecessor
	Company (1)					Company (2)
	Unaudited		Unaudited			Unaudited		Unaudited			Audited
	Three Months		184 Days			181 Days		Three Months			Twelve Months
	Ended		Ended			Ended		Ended			Ended
	June 30,		June 30,			December 28,		June 30,			June 30,
	2011		2011			2010		2010			2010
Interest and dividend income:
Interest on loans	$	5,699	$	11,544		$	11,210	$	5,768		$	23,803
Taxable interest on available-for-sale securities		684		1,555			2,866		1,689			6,860
Tax-exempt interest on available-for-sale securities		-		76			231		119			476
Dividends on available-for-sale securities		4		11			14		29			75
Dividends on Federal Home Loan Bank  and Federal Reserve Bank stock		15		28			18		9			36
Other interest and dividend income		56		90			39		3			12
Total interest and dividend income		6,458		13,304			14,378		7,617			31,262
Interest expense:
Deposits		849		1,665			2,796		1,608			7,115
Federal Home Loan Bank advances		236		535			918		461			1,798
Structured repurchase agreements		240		512			1,392		700			654
Short-term borrowings		9		76			376		169			759
Junior subordinated debentures issued to affiliated trusts		185		365			340		172			2,872
Obligation under capital lease agreements		26		54			55		28			116
Other borrowings		19		54			75		43			199
Total interest expense		1,564		3,261			5,952		3,181			13,513
Net interest and dividend income before provision for loan losses		4,894		10,043			8,426		4,436			17,749
Provision for loan losses		658		707			912		360			1,864
Net interest and dividend income after provision for loan losses		4,236		9,336			7,514		4,076			15,885
Noninterest income:
Fees for other services to customers		347		670			698		387			1,504
Net securities gains (losses)		1,153		1,200			17		3			(18	)
Gain on sales of loans		486		830			1,867		556			1,264
Investment commissions		701		1,435			1,174		599			2,054
Insurance commissions		1,277		2,772			2,661		1,508			6,213
BOLI income		128		259			250		126			502
Bargain purchase gain		225		15,441			-		-			-
Other  income		195		351			330		118			627
Total noninterest income		4,512		22,958			6,997		3,297			12,146
Noninterest expense:
Salaries and employee benefits		4,448		9,439			6,670		3,527			13,920
Occupancy and equipment expense		934		1,864			1,556		773			3,338
Professional fees		443		830			527		616			1,026
Data processing fees		314		651			618		318			1,245
Intangible assets amortization		635		1,079			344		175			724
Merger expense		7		3,189			94		395			547
Goodwill impairment		-		-					408			408
Other		1,295		2,750			2,138		764			4,209
Total noninterest expense		8,076		19,802			11,947		6,976			25,417
Income before income tax expense		672		12,492			2,564		397			2,614
Income tax expense (benefit)		111		(60	)		768		353			895
Net income	$	561	$	12,552		$	1,796	$	44		$	1,719
Net income available to common stockholders	$	464	$	12,355		$	1,677	$	(18	)	$	1,432
Weighted-average shares outstanding
Basic		3,493,377		3,492,933			2,330,197		2,322,332			2,321,894
Diluted		3,522,845		3,548,164			2,354,385		2,342,153			2,334,339
Earnings per common share:
Basic	$	0.13	$	3.52		$	0.72	$	(0.01	)	$	0.64
Diluted	$	0.13	$	3.47		$	0.71	$	(0.01	)	$	0.63

(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
SELECTED CONSOLIDATED FINANCIAL HIGHLIGHTS AND OTHER DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
	Successor						Predecessor
	Company (1)						Company (2)
	Three Months			184 Days			181 Days			Three Months			Twelve Months
	Ended			Ended			Ended			Ended			Ended
	June 30,			June 30,			December 28,			June 30,			June 30,
	2011			2011			2010			2010			2010
Financial Highlights:
Net interest income	$	4,894		$	10,043		$	8,426		$	4,436		$	17,749
Net income	$	561		$	12,552		$	1,796		$	44		$	1,719
Weighted average shares outstanding:
Basic		3,493,377			3,492,933			2,330,197			2,322,332			2,321,894
Diluted		3,522,845			3,548,164			2,354,385			2,342,153			2,334,339
Earnings per share:
Basic	$	0.13		$	3.52		$	0.72		$	(0.01	)	$	0.64
Diluted	$	0.13		$	3.47		$	0.71		$	(0.01	)	$	0.63
Stockholders' equity - end of period	$	64,954								$	50,906
Book value per share - end of period	$	17.33								$	20.08
Tangible book value per share - end of period	$	13.58								$	15.18
Ratios and Other Information:
Return on average assets		0.37	%		4.09	%		0.57	%		0.03	%		0.28	%
Return on average equity		3.44	%		38.23	%		6.94	%		0.35	%		3.47	%
Net interest rate spread (3)		3.35	%		3.41	%		2.69	%		2.94	%		2.94	%
Net interest margin (4)		3.52	%		3.56	%		2.91	%		3.14	%		3.15	%
Efficiency ratio (5)		86	%		60	%		77	%		90	%		85	%
Non-interest expense to average total assets		5.36	%		6.45	%		3.83	%		4.54	%		4.16	%
Average interest-earning assets to average interest-bearing liabilities		115.00	%		113.27	%		110.66	%		108.39	%		108.73	%
At period end:
Non-performing assets to total assets		1.45	%								1.63	%
Non-performing loans to total loans		2.57	%								2.31	%
Allowance for loan losses to total loans		0.14	%								1.52	%
Equity to total assets		10.89	%								8.18	%
Tier 1 leverage capital  ratio		10.33	%								8.40	%
Total risk-based capital ratio		18.96	%								14.09	%
Number of full service branches		10									11
Number of insurance agency offices		10									11
Number of investment and mortgage loan origination offices		7									5

(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.
(3)	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.
(4)	The net interest margin represents net interest income as a percent of average interest-earning assets for the period.
(5)	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 BANCORP AND SUBSIDIARY
CONSOLIDATED AVERAGE BALANCES AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
	Three months ended June 30,
	2011							2010
					Average							Average
	Average				Yield/			Average				Yield/
	Balance		Q-T-D Inc.		Rate (1)			Balance		Q-T-D Inc.		Rate
Assets:
Interest earning-assets:
Securities	$	143,965	$	688		1.92	%	$	167,383	$	1,837		4.53	%
Loans (2)(3)		317,034		5,699		7.21	%		390,172		5,768		5.93	%
Bank Regulatory Stock		5,616		15		1.07	%		5,486		9		0.66	%
Short-term investments (4)		91,655		56		0.25	%		9,707		3		0.12	%
Total interest-earning assets		558,270		6,458		4.64	%		572,748		7,617		5.37	%
Total non-interest earning assets		46,588							42,899
Total assets	$	604,858						$	615,647
Liabilities & Net Worth:
Interest-bearing liabilities:
Now	$	56,734	$	78		0.55	%	$	50,620	$	103		0.82	%
Money Market		50,320		62		0.49	%		49,620		141		1.14	%
Savings		33,898		32		0.38	%		36,831		65		0.71	%
Time		216,772		677		1.25	%		209,342		1,299		2.49	%
Total interest-bearing deposits		357,724		849		0.95	%		346,413		1,608		1.86	%
Short-term borrowings (5)		3,460		9		1.04	%		45,069		169		1.50	%
Borrowed funds		116,346		521		1.80	%		120,430		1,232		4.10	%
Junior Subordinated Debentures		7,940		185		9.35	%		16,496		172		4.18	%
Total interest-earning liabilities		485,470		1,564		1.29	%		528,408		3,181		2.41	%
Total non-interest bearing liabilities:
Demand deposits and escrow accounts		50,260							33,198
Other liabilities		3,724							3,438
Total liabilities		539,454							565,044
Stockholders' equity		65,405							50,603
Total liabilities and stockholders' equity	$	604,859						$	615,647
Net interest income			$	4,894						$	4,436
Interest rate spread						3.35	%						2.96	%
Net yield on interest earning assets (6)						3.52	%						3.14	%

(1)	Yields are stated on a fully tax-equivalent basis using a 30.84% tax rate.
(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 net yield on interest-earning assets is net interest income divided by total interest-earning assets.

NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED AVERAGE BALANCES AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
	Twelve months ended June 30,
	2011							2010
					Average							Average
	Average				Yield/			Average				Yield/
	Balance		Y-T-D Inc.		Rate (1)			Balance		Y-T-D Inc.		Rate
Assets:
Interest earning-assets:
Securities	$	152,820	$	4,753		3.20	%	$	163,601	$	7,411		4.66	%
Loans (2)(3)		361,262		22,754		6.30	%		392,398		23,803		6.07	%
Bank Regulatory Stock		5,518		46		0.83	%		5,486		36		0.66	%
Short-term investments (4)		57,330		129		0.23	%		8,761		12		0.14	%
Total interest-earning assets		576,930		27,682		4.82	%		570,246		31,262		5.52	%
Total non-interest earning assets		42,070							41,219
Total assets	$	619,000						$	611,465
Liabilities & Net Worth:
Interest-bearing liabilities:
Now	$	55,094	$	344		0.62	%	$	48,271	$	379		0.79	%
Money Market		54,081		347		0.64	%		43,974		532		1.21	%
Savings		36,536		166		0.45	%		29,366		181		0.62	%
Time		201,830		3,604		1.79	%		224,399		6,023		2.68	%
Total interest-bearing deposits		347,541		4,461		1.28	%		346,010		7,115		2.06	%
Short-term borrowings (5)		36,679		452		1.23	%		42,940		759		1.77	%
Borrowed funds		119,032		3,595		3.02	%		119,002		2,767		2.33	%
Junior Subordinated Debentures		12,173		705		5.79	%		16,496		2,872		17.41	%
Total interest-earning liabilities		515,425		9,213		1.79	%		524,448		13,513		2.58	%
Total non-interest bearing liabilities:
Demand deposits and escrow accounts		40,875							34,186
Other liabilities		4,302							3,332
Total liabilities		560,602							561,966
Stockholders' equity		58,397							49,499
Total liabilities and stockholders' equity	$	618,999						$	611,465
Net interest income			$	18,469						$	17,749
Interest rate spread						3.03	%						2.94	%
Net yield on interest earning assets (5)						3.23	%						3.15	%

(1)	Yields are stated on a fully tax-equivalent basis using a 30.84% tax rate.
(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 net yield on interest-earning assets is net interest income divided by total interest-earning assets.