SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
_X_ Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarter ended December 31, 1999
_________________
or
___ Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number 1 - 14588
_________
Northeast Bancorp
_______________________________________________________________________________
(Exact name of registrant as specified in its charter)
Maine 01 - 0425066
_____________________________________ ______________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
232 Center Street, Auburn, Maine 04210
_____________________________________ ______________________________________
(Address of principal executive (Zip Code)
offices)
(207) 777 - 6411
_______________________________________________________________________________
Registrant's telephone number, including area code
Not Applicable
2
_______________________________________________________________________________
Former name, former address and former fiscal year,if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Shares outstanding as of
February 1, 2000: 2,742,898 of common stock, $1.00 par value per share.
_______________________________________________________________________________
NORTHEAST BANCORP
Table of Contents
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets
December 31, 1999 and June 30, 1999
Consolidated Statements of Income
Three Months ended December 31, 1999 and 1998
Consolidated Statements of Income
Six Months ended December 31, 1999 and 1998
Consolidated Statements of Changes in Shareholders' Equity
Six Months ended December 31, 1999 and 1998
Consolidated Statements of Cash Flows
Six Months ended December 31, 1999 and 1998
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation
Item 3. Quantitative and Qualitative Disclosure about Market Risk
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NORTHEAST BANCORP AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
December 31, June 30,
1999 1999
_______________ _______________
Assets
Cash and due from bank $ 7,776,735 $ 4,963,985
Interest bearing deposits 433,929 345,585
Federal Home Loan Bank overnight deposits 3,614,000 6,784,000
Available for sale securities 24,093,686 18,054,317
Federal Home Loan Bank stock 6,184,000 5,680,500
Loans held for sale 118,184 311,600
Loans 364,171,362 318,986,247
Less allowance for loan losses 3,167,000 2,924,000
_______________ _______________
Net loans 361,004,362 316,062,247
Bank premises and equipment, net 4,769,233 5,037,026
Assets acquired through foreclosure 130,225 193,850
Goodwill (net of accumulated amortization of
$1,799,718 at 12/31/99 and $1,662,588 at
6/30/99) 1,325,217 1,462,346
Other assets 6,364,148 5,487,449
_______________ _______________
Total Assets $ 415,813,719 $ 364,382,905
=============== ===============
Liabilities and Shareholders' Equity
Liabilities:
Deposits $ 238,727,661 $ 219,364,035
Securities Sold Under Repurchase Agreements 16,078,044 11,867,839
Advances from Federal Home Loan Bank 123,678,957 103,881,716
Notes payable 0 687,500
Other Liabilities 2,633,145 1,898,700
_______________ _______________
Total Liabilities 381,117,807 337,699,790
Guaranteed Preferred Beneficial Interests
in the Company's Junior Subordinated
Debentures 7,172,998 0
Shareholders' Equity:
Common stock, $1.00 par value, 15,000,000
shares authorized. 2,785,815 and 2,768,624
shares issued at 12/31/99 and 06/30/99,
respectively. 2,761,944 and 2,768,624
4
shares outstanding at 12/31/99 and 6/30/99,
respectively. 2,785,815 2,768,624
Additional paid in capital 10,263,734 10,208,299
Retained earnings 15,490,494 14,145,720
Accumulated other comprehensive income (loss) (827,452) (439,528)
_______________ _______________
27,712,591 26,683,115
Treasury Stock at cost, 23,871 and 0 shares
outstanding at 12/31/99 and 6/30/99,
respectively. (189,677) 0
_______________ _______________
Total Shareholders' Equity 27,522,914 26,683,115
_______________ _______________
Total Liabilities and Shareholders' Equity $ 415,813,719 $ 364,382,905
=============== ===============
NORTHEAST BANCORP AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
Three Months Ended
December 31,
1999 1998
_______________ _______________
Interest and Dividend Income
Interest on FHLB overnight deposits $ 57,873 $ 73,860
Interest on loans & loans held for sale 7,444,148 6,179,727
Interest on available for sale securities 347,267 177,051
Dividends on Federal Home Loan Bank stock 101,140 91,635
Other Interest Income 3,741 5,443
_______________ _______________
Total Interest Income 7,954,169 6,527,716
Interest Expense
Deposits 2,550,342 2,157,908
Repurchase agreements 168,791 86,531
Trust preferred securities 73,932 0
Other borrowings 1,658,679 1,379,940
_______________ _______________
Total Interest Expense 4,451,744 3,624,379
_______________ _______________
Net Interest Income 3,502,425 2,903,337
Provision for loan losses 195,885 164,491
_______________ _______________
Net Interest Income after Provision for
Loan Losses 3,306,540 2,738,846
Other Income
Service charges 325,051 269,536
Net securities gains 20,697 47,699
5
Net gain on trading securities 0 5,120
Other 267,960 519,115
_______________ _______________
Total Other Income 613,708 841,470
Other Expenses
Salaries and employee benefits 1,287,104 1,191,497
Net occupancy expense 221,494 219,399
Equipment expense 227,410 210,958
Goodwill amortization 68,564 74,094
Other 813,136 789,131
_______________ _______________
Total Other Expenses 2,617,708 2,485,079
_______________ _______________
Income Before Income Taxes 1,302,540 1,095,237
Income tax expense 465,796 394,669
_______________ _______________
Net Income $ 836,744 $ 700,568
=============== ===============
Earnings Per Common Share
Basic $ 0.30 $ 0.26
Diluted $ 0.30 $ 0.25
NORTHEAST BANCORP AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
Six Months Ended
December 31,
1999 1998
_______________ _______________
Interest and Dividend Income
Interest on FHLB overnight deposits $ 122,664 $ 190,094
Interest on loans & loans held for sale 14,455,123 12,488,988
Interest on available for sale securities 640,390 371,438
Dividends on Federal Home Loan Bank stock 195,410 181,838
Other Interest Income 9,352 10,515
_______________ _______________
Total Interest Income 15,422,939 13,242,873
Interest Expense
Deposits 4,886,065 4,287,652
Repurchase agreements 294,998 139,276
Trust preferred securities 73,932 0
Other borrowings 3,175,027 2,817,018
_______________ _______________
Total Interest Expense 8,430,022 7,243,946
Net Interest Income 6,992,917 5,998,927
6
Provision for loan losses 491,114 369,421
_______________ _______________
Net Interest Income after Provision for
Loan Losses 6,501,803 5,629,506
Other Income
Service charges 590,232 522,921
Net securities gains 25,861 58,490
Net gain on trading securities 0 10,732
Other 624,939 670,997
_______________ _______________
Total Other Income 1,241,032 1,263,140
Other Expenses
Salaries and employee benefits 2,590,896 2,388,228
Net occupancy expense 448,943 354,309
Equipment expense 460,588 392,963
Goodwill amortization 137,129 148,187
Other 1,567,698 1,519,199
_______________ _______________
Total Other Expenses 5,205,254 4,802,886
Income Before Income Taxes 2,537,581 2,089,760
Income tax expense 899,116 753,155
_______________ _______________
Net Income $ 1,638,465 $ 1,336,605
=============== ===============
Earnings Per Common Share
Basic $ 0.59 $ 0.49
Diluted $ 0.59 $ 0.48
NORTHEAST BANCORP AND SUBSIDIARY
Consolidated Statements of Changes in Shareholders' Equity
Six Months Ended December 31, 1999 and 1998
(Unaudited)
Accumulated
Other
Common Additional Comprehensive
Preferred Stock at Paid in Retained Income Treasury
Stock $1.00 Par Capital Earnings (Loss) Stock Total
_____________ ___________ ____________ _____________ _____________ ____________ _____________
Balance at June 30, 1998 999,988 2,614,285 9,258,107 12,331,595 (64,448) -- 25,139,527
Net income for six months
7
ended December 31, 1998 -- -- -- 1,336,605 -- -- 1,336,605
Other comprehensive income,
net of tax:
Adjustment of valuation
reserve for securities
available for sale -- -- -- -- (13,355) -- (13,355)
________
Comprehensive income -- -- -- -- -- -- 1,323,250
Cash dividends declared on
common stock -- -- -- (277,364) -- -- (277,364)
Cash dividends declared on
preferred stock -- -- -- (25,667) -- -- (25,667)
Preferred Stock Converted
to Common Stock (999,988) 136,362 863,626 -- -- -- 0
Common stock issued in
connection with employee
benefit and stock option
plans -- 4,429 35,081 -- -- -- 39,510
_____________ ___________ ____________ _____________ _____________ ____________ _____________
Balance December 31, 1998 $ 0 $2,755,076 $10,156,814 $ 13,365,169 $ (77,803) $ 0 $ 26,199,256
============= =========== ============ ============= ============= ============ =============
Balance at June 30, 1999 -- 2,768,624 10,208,299 14,145,720 (439,528) -- 26,683,115
Net income for six months
ended December 31, 1999 -- -- -- 1,638,465 -- -- 1,638,465
Other comprehensive income,
net of tax:
Adjustment of valuation
reserve for securities
available for sale -- -- -- -- (387,924) -- (387,924)
_________
Comprehensive income -- -- -- -- -- -- 1,250,541
Cash dividends declared on
common stock -- -- -- (293,691) -- -- (293,691)
Common stock issued in
connection with employee
benefit and option plans -- 17,191 55,435 -- -- 5,446 78,072
Treasury stock purchased -- -- -- -- -- (195,123) (195,123)
8
_____________ ___________ ____________ _____________ _____________ ____________ _____________
Balance December 31, 1999 $ 0 $2,785,815 $10,263,734 $ 15,490,494 $ (827,452) $ (189,677) $ 27,522,914
============= =========== ============ ============= ============= ============ =============
NORTHEAST BANCORP AND SUBSIDIARY
Consolidated Statements of Cash Flow
(Unaudited)
Six Months Ended
December 31,
1999 1998
_______________ _______________
Cash provided by (used in) operating
activities $ 1,990,699 $ (338,406)
Cash flows from investing activities:
FHLB stock purchased (503,500) --
Available for sale securities purchased (8,172,527) (8,699,888)
Available for sale securities matured 1,483,317 2,387,746
Available for sale securities sold 93,056 6,537,024
New loans, net of repayments & charge offs (44,304,671) (2,090,976)
Net capital expenditures (144,084) (672,016)
Assets acquired through foreclosure sold 276,324 299,163
Real estate held for investment sold 14,967 50,000
_______________ _______________
Net cash used in investing activities (51,257,118) (2,188,947)
Cash flows from financing activities:
Net change in deposits 19,363,626 17,906,866
Net change in repurchase agreements 4,210,205 4,073,125
Dividends paid (293,691) (303,031)
Proceeds from stock issuance 78,072 39,510
Treasury Stock purchased (195,123) 0
Net increase (decrease) in advances from
Federal Home Loan Bank of Boston 19,797,241 (12,330,408)
Proceeds from issuance of guaranteed
preferred beneficial interests in the
Company's junior subordinated debentures 7,172,998 0
Payments for debt issued costs (448,315) 0
Net change in notes payable (687,500) (152,778)
_______________ _______________
Net cash provided by financing activities 48,997,513 9,233,284
_______________ _______________
Net (decrease) increase in cash and cash
equivalents (268,906) 6,705,931
Cash and cash equivalents, beginning of
period 12,093,570 12,151,966
_______________ _______________
9
Cash and cash equivalents, end of period $ 11,824,664 $ 18,857,897
=============== ===============
Cash and cash equivalents include cash on
hand, amounts due from banks, interest
bearing deposits.
Supplemental schedule of noncash activities:
Net change in valuation for unrealized market
value adjustments on available for sale
securities (387,924) (13,355)
Net transfer from Loans to Other Real Estate
Owned 0 153,657
Supplemental disclosure of cash paid during
the period for:
Income taxes paid, net of refunds 844,000 856,000
Interest paid 8,228,312 7,298,563
NORTHEAST BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999
1. Basis of Presentation
_____________________
The accompanying unaudited condensed and consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the six month
period ended December 31, 1999 are not necessarily indicative of the results
that may be expected for the fiscal year ending June 30, 2000. For further
information, refer to the audited consolidated financial statements and
footnotes thereto for the fiscal year ended June 30, 1999 included in the
Company's Annual Report on Form 10-K.
2. Guaranteed Preferred Beneficial Interests in the Company's Junior
_________________________________________________________________
Subordinated Debentures
_______________________
NBN Capital Trust ("NBNCT"), a Delaware statutory trust, was created on
October 4, 1999. The NBNCT exists for the exclusive purpose of (i) issuing
and selling Common Securities and Preferred Securities of NBNCT (together the
"Trust Securities"), (ii) using the proceeds of the sale of Trust Securities to
acquire 9.60% Junior Subordinated Deferrable Interest Debentures ("Junior
Subordinated Debentures") issued by the Company, and (iii) engaging only in
those other activities necessary, convenient, or incidental thereto (such as
registering the transfer of the Trust Securities). Accordingly the Junior
Subordinated Debentures will be the sole assets of the NBNCT. The preferred
securities accrue and pay distributions quarterly at an annual rate of 9.60% of
the stated liquidation amount of $7.00 per preferred security. The Company has
fully and unconditionally guaranteed all of the obligations of NBNCT. The
10
guaranty covers the quarterly distributions and payment on liquidation or
redemption of the preferred securities, but only to the extent of funds held by
NBNCT. The preferred securities are mandatorily redeemable upon the maturity
of the Junior Subordinated Debentures on December 31, 2029 or upon earlier
redemption as provided in the Indenture. The Company has the right to redeem
the Junior Subordinated Debentures, in whole or in part on or after December
31, 2004 at a redemption price specified in the Indenture plus any accrued but
unpaid interest to the redemption date. The Company owns all of the Common
Securities of NBNCT, the only voting security, and as a result it is a
subsidiary of the Company.
3. Securities
__________
Securities available for sale at cost and approximate market values are
summarized below.
December 31, 1999 June 30, 1999
_________________________ _________________________
Market Market
Cost Value Cost Value
____________ ____________ ____________ ____________
Debt securities issued by
the U.S. Treasury and
other U.S. Government
corporations and agencies $ 595,182 $ 592,885 $ 596,626 $ 598,445
Corporate bonds 201,393 195,441 201,916 199,527
Mortgage-backed securities 23,158,682 22,127,821 16,653,302 16,027,028
Equity securities 1,392,144 1,177,539 1,268,424 1,229,317
____________ ____________ ____________ ____________
$25,347,401 $24,093,686 $18,720,268 $18,054,317
============ ============ ============ ============
December 31, 1999 June 30, 1999
_________________________ _________________________
Market Market
Cost Value Cost Value
____________ ____________ ____________ ____________
Due in one year or less $ 495,182 $ 495,182 $ 496,626 $ 497,820
Due after one year through
five years 201,393 195,441 301,916 300,152
Due after five years
through ten years 100,000 97,703 -- --
Mortgage-backed securities
(including securities with
interest rates ranging
from 5.15% to 9.0%
maturing September 2003
to November 2029) 23,158,682 22,127,821 16,653,302 16,027,028
Equity securities 1,392,144 1,177,539 1,268,424 1,229,317
____________ ____________ ____________ ____________
$25,347,401 $24,093,686 $18,720,268 $18,054,317
============ ============ ============ ============
11
4. Allowance for Loan Losses
_________________________
The following is an analysis of transactions in the allowance for loan losses:
Six Months Ended
December 31,
1999 1998
____________ ____________
Balance at beginning of year $ 2,924,000 $ 2,978,000
Add provision charged to operations 491,114 369,421
Recoveries on loans previously charged off 103,484 63,954
____________ ____________
3,518,598 3,411,375
Less loans charged off 351,598 542,375
____________ ____________
Balance at end of period $ 3,167,000 $ 2,869,000
============ ============
5. Advances from Federal Home Loan Bank
____________________________________
A summary of borrowings from the Federal Home Loan Bank is as follows:
December 31, 1999
_____________________________________________
Principal Interest Maturity
Amounts Rates Dates
______________ _______________ ____________
$ 84,000,000 4.49% - 6.78% 2000
3,761,031 5.38% - 6.49% 2001
7,385,660 5.97% - 6.30% 2002
5,739,305 5.69% - 6.67% 2003
1,792,961 5.55% 2004
9,000,000 5.25% - 6.65% 2005
12,000,000 5.40% - 5.68% 2008
______________
$ 123,678,957
==============
June 30, 1999
_____________________________________________
Principal Interest Maturity
Amounts Rates Dates
______________ _______________ ____________
$ 42,000,000 4.64% - 6.27% 2000
3,148,288 4.98% - 6.40% 2001
2,815,780 5.38% - 6.49% 2002
9,515,546 5.69% - 6.64% 2003
3,402,102 5.55% - 6.67% 2004
9,000,000 5.25% - 6.65% 2005
12
34,000,000 4.89% - 5.68% 2008
______________
$ 103,881,716
==============
Item 2. Management's Discussion and Analysis of Financial Condition and
_______________________________________________________________
Results of Operation
____________________
Description of Operations
_________________________
Northeast Bancorp (the "Company"), is a unitary savings and loan holding
company registered with the Office of Thrift Supervision ("OTS") its primary
regulator. The Company's principal asset is its wholly-owned banking
subsidiary, Northeast Bank, FSB (the "Bank"), which has branches located in
Auburn, Augusta, Bethel, Harrison, South Paris, Buckfield, Mechanic Falls,
Brunswick, Richmond, Lewiston, and Lisbon Falls, Maine. The Bank also
maintains a facility on Fundy Road in Falmouth, Maine, from which loan
applications are accepted and investment, insurance and financial planning
products services are offered. Although the Bank's deposits are primarily
insured through the Bank Insurance Fund ("BIF"), deposits at the Brunswick
branch, which represent approximately 22% of the Bank's total deposits at
December 31, 1999 are SAIF-insured.
Northeast Bancorp through its subsidiary, Northeast Bank and the Bank's
subsidiary Northeast Financial Services, Inc., provide a broad range of
financial services to individuals and companies in western, midcoast and
south-central Maine. Substantially all income and services are derived from
banking products and services in Maine.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations presents a review of the material changes in the financial condition
of the Company from June 30, 1999 to December 31, 1999, and the results of
operations for the three and six months ended December 31, 1999 and 1998. This
discussion and analysis is intended to assist in understanding the financial
condition and results of operations of the Company. Accordingly, this section
should be read in conjunction with the consolidated financial statements and
the related notes and other statistical information contained herein.
Certain statements contained herein are not based on historical facts and are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, such as statements relating to financial
condition and future prospects, loan loss reserve adequacy, simulation of
changes in interest rates, prospective results of operations, capital spending
and financing sources, and revenue sources. These statements relate to
expectations concerning matters that are not historical facts. Forward-looking
statements, which are based on various assumptions (some of which are beyond
the Company's control), may be identified by reference to a future period or
periods, or by the use of forward-looking terminology such as "believe",
"expect", "estimate", "anticipate", "continue", "plan", "approximately",
"intend", or other similar terms or variations on those terms, or future or
conditional verbs such as "will", "may", "should", "could", and "would". Such
forward-looking statements reflect the current view of management and are based
on information currently available to them, and upon current expectations,
estimates, and projections regarding the Company and its industry, management's
13
belief with respect there to, and certain assumptions made by management.
These forward-looking statements are not guarantees of future performance and
are subject to risks, uncertainties, and other factors. Accordingly, actual
results could differ materially from those set forth in forward-looking
statements due to a variety of factors, including, but not limited to, those
related to the economic environment, particularly in the market areas in which
the Company operates, competitive products and pricing, fiscal and monetary
policies of the U.S. Government, changes in government regulations affecting
financial institutions, including regulatory fees and capital requirements,
changes in prevailing interest rates, acquisitions and the integration of
acquired businesses, credit risk management, asset/liability management,
changes in technology, changes in the securities markets, and the availability
of and the costs associated with sources of liquidity. For a more complete
discussion of such risks, please refer to the Company's Form 10-K for the year
ended June 30, 1999 under the section entitled "Business-Forward-Looking
Statements".
Financial Condition
___________________
Total consolidated assets were $415,813,719 on December 31, 1999, which
represents an increase of $51,430,814 from June 30, 1999. The increase in
assets is primarily due to loan growth. Loan volume during the six month period
has been enhanced due to increased generation of consumer loans through the
Bank's participation in indirect automobile loans and mobile home loans as well
as increased volume in residential and commercial loans. The increase in loans
has been funded with increased deposits, repurchase agreements, and Federal
Home Loan Bank ("FHLB") borrowings. In this regard, total net loans and
securities increased by $44,942,115 and $6,039,369, respectively, from June
30, 1999 to December 31, 1999, while cash equivalents decreased by $268,906
during the same period. Total deposits and repurchase agreements increased by
$23,573,831 from June 30, 1999 to December 31, 1999. FHLB borrowings also
increased by $19,797,241 during the same period.
At December 31, 1999, the carrying value of securities available for sale by
the Company was $24,093,686, which is $1,253,715 less than the cost of the
underlying securities. The increase of $6,039,639 in the cost of securities
available for sale, from June 30, 1999 to December 31, 1999, was due to the
Company purchasing mortgage-backed securities, taking advantage of the higher
yields on these investments during the current increasing rate environment.
The difference between the carrying value and the cost of the securities was
primarily attributable to the decline in the market value of mortgage-backed
securities due to rising interest rates. The net unrealized loss on mortgage-
backed securities was $1,030,861 at December 31, 1999. Substantially all of
the mortgage-backed securities are high grade government backed securities. As
in any long term earning asset in which the earning rate is fixed, the market
value of mortgage-backed securities will fluctuate based on changes in market
interest rates from the time of purchase. Since these mortgage-backed
securities are backed by the U.S. Government, there is virtually no risk of
loss of principal. Management believes that the yields currently received on
this portfolio are satisfactory and intends to hold these securities for the
foreseeable future. Management attributes the reduction of $214,605 in the
market value of equity securities to the decline on the market value of the
Company's investments in preferred equity securities. Management reviews the
portfolio of investments on an ongoing basis to determine if there has been an
other-than-temporary decline in value. Some of the considerations management
makes in the determination are market valuations of particular securities and
economic analysis of the securities' sustainable market values based on the
14
underlying companies' profitability.
FHLB stock increased by $503,500 from June 30, 1999 to December 31, 1999, due
to the increase in FHLB borrowings. The FHLB requires institutions to hold a
certain level of FHLB stock based on advances outstanding.
Total loans increased by $45,185,115 for the six months ended December 31,
1999. From June 30, 1999 to December 31, 1999, the loan portfolio increased by
$12,396,532 in real estate mortgage loans, $28,208,225 in consumer and other
loans, and by $4,580,358 in commercial loans. The increase in consumer loans
was primarily due to the increased volume in indirect automobile loans and
mobile home loans. The loan portfolio contains elements of credit and interest
rate risk. The Bank primarily lends within its local market areas, which
management believes helps them to better evaluate credit risk. The Bank's
local market, as well as the secondary market, continues to be very competitive
for loan origination volume. The local competitive environment and customer
response to favorable secondary market rates have affected the Bank's ability
to increase the loan portfolio. The Bank has supplemented its loan portfolio
by purchasing mortgage loans locally and from other states. In December, 1999
the Bank purchased approximately $3,200,000 of 1-4 family mortgages. The
purchase consisted of 1-4 family adjustable rate mortgages secured by property
located in the State of Tennessee. As the Bank expands its purchase of loans
in other states, management researches the strength of the economy in the
respective state and underwrites every loan before purchase. These steps are
taken to better evaluate and minimize the credit risk of out-of-state
purchases. Also, in an effort to increase loan volume, the Bank's offering
rates for its loan products have been reduced to compete in the various
markets. The Bank has experienced margin compression due to decreased loan
rates and anticipates that the margin compression will continue for the
foreseeable future until loan volume increases in the current rising interest
rate environment.
At December 31, 1999, residential real estate mortgages consisting of owner-
occupied residential loans made up 53% of the total loan portfolio, of which
38% of the residential loans are variable rate products, as compared to 60% and
48%, respectively, at December 31, 1998. Although the Bank has purchased fixed
rate loans, it is management's intent, where market opportunities arise, to
increase the volume in variable rate residential loans to reduce the interest
rate risk in this area.
At December 31, 1999, 16% of the Bank's total loan portfolio balance is
commercial real estate mortgages. Commercial real estate loans have minimal
interest rate risk as 86% of the portfolio consists of variable rate products.
At December 31, 1998, commercial real estate mortgages made up 18% of the total
loan portfolio, of which 88% were variable rate products. The Bank tries to
mitigate credit risk by lending in its local market area as well as maintaining
a well collateralized position in real estate.
Commercial loans made up 11% of the total loan portfolio, of which 44% are
variable rate instruments at December 31, 1999. At December 31, 1998
commercial loans made up 10% of the total loan portfolio, of which 53% were
variable rate instruments. The repayment ability of commercial loans is highly
dependent on the cash flow of the customer's business. The Bank mitigates
losses by strictly adhering to the Company's underwriting and credit policies.
Consumer and other loans made up 20% of the loan portfolio as of December 31,
1999 which compares to 12% at December 31, 1998. Since these loans are
15
primarily fixed rate products, they have interest rate risk when market rates
increase. These loans also have credit risk with minimal security. The
increase in consumer loans was primarily due to increased volume in indirect
automobile loans and mobile home loans, which together comprise approximately
89% of the total consumer loans. The consumer loan department underwrites all
the indirect automobile loans and mobile home loans to mitigate credit risk.
The Bank primarily pays a nominal one time origination fee on the loans. The
fees are deferred and amortized over the life of the loans as a yield
adjustment. Management attempts to mitigate credit and interest rate risk by
keeping the products offered short-term, receiving a rate of return
commensurate with the risk, and lending to individuals in the Bank's known
market areas.
The Bank's allowance for loan losses was $3,167,000 as of December 31, 1999 as
compared to $2,924,000 as of June 30, 1999, representing 0.87% and 0.92% of
total loans, respectively. The Bank had non-performing loans totaling
$1,715,000 and $1,144,000 at December 31, 1999 and June 30, 1999, respectively,
which was 0.47% and 0.36% of total loans, respectively. The increase in the
1-4 family and commercial mortgage non-performing loan balances was due to the
increase of two loans in each category. Management anticipates that the
increase in non-performing commercial mortgages will be resolved during the
current quarter with no anticipated losses. The Bank's allowance for loan
losses was equal to 185% and 256% of the total non-performing loans at December
31, 1999 and June 30, 1999, respectively. At December 31, 1999, the Bank had
approximately $372,000 of loans classified substandard, exclusive of the non-
performing loans stated above, that could potentially become non-performing due
to delinquencies or marginal cash flows. These substandard loans decreased by
$369,000 when compared to the $741,000 at June 30, 1999.
The following table represents the Bank's non-performing loans as of December
31, 1999 and June 30, 1999, respectively:
December 31, June 30,
Description 1999 1999
_________________________ _______________ _______________
1-4 Family Mortgages $ 448,000 $ 293,000
Commercial Mortgages 1,026,000 654,000
Commercial Loans 147,000 0
Consumer Installment 94,000 197,000
_______________ _______________
Total non-performing $ 1,715,000 $ 1,144,000
The following table reflects the quarterly trend of total delinquencies 30 days
or more past due, including non-performing loans, for the Bank as a percentage
of total loans:
12-31-99 09-30-99 06-30-99 03-31-99
__________ __________ __________ __________
1.15% 0.72% 0.76% 1.09%
16
At December 31, 1999, loans classified as non-performing of $1,715,000 included
approximately $430,000 of loan balances that are current and paying as agreed,
but which the Bank maintains as non-performing until the borrower has
demonstrated a sustainable period of performance.
The level of the allowance for loan losses as a percentage of total loans has
decreased due to the increase of loan volume as well as the level of allowance
for loan losses as a percentage of non-performing loans decreased due to the
increase in non-performing loans at December 31, 1999, when compared to June
30,1999. The Company has experienced good growth in the commercial and
consumer loan portfolio during the December 31, 1999 quarter, however these
type of loans have additional credit risk as compared to real estate mortgage
loans. Although these types of loans have increased, the decrease in the
allowance for loan losses as a percentage of total loans was supported by
management's ongoing analysis of the adequacy of the allowance for loan losses.
The increase in the delinquency percentage from September 30,1999 to December
31,1999 was due to an increase in the 30 day delinquent category of 1-4 family
and commercial mortgages as well as consumer loans. Although delinquencies and
non-performing loans increased during the quarter, management does not consider
this to be a potential trend at this point in time. Classified loans are also
considered in management's analysis of the adequacy of the allowance for loan
losses. Based on reviewing the credit risk and collateral of classified loans,
management has considered the risks of the classified portfolio and believes
the allowance for loan losses is adequate.
On a regular and ongoing basis, management evaluates the adequacy of the
allowance for loan losses. The process to evaluate the allowance involves a
high degree of management judgement. The methods employed to evaluate the
allowance for loan losses are quantitative in nature and consider such factors
as the loan mix, the level of non-performing loans, delinquency trends, past
charge-off history, loan reviews and classifications, collateral, and the
current economic climate.
Management believes that the allowance for loan losses is adequate considering
the level of risk in the loan portfolio. While management uses its best
judgement in recognizing loan losses in light of available information, there
can be no assurance that the Company will not have to increase its provision
for loan losses in the future as a result of changing economic conditions,
adverse markets for real estate or other factors. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses. Such agencies may
require the Bank to recognize additions to the allowance for loan losses based
on their judgements about information available to them at the time of their
examination. The Bank's most recent examination by the OTS was on November 30,
1998. At the time of the exam the regulators proposed no additions to the
allowance for loan losses.
At December 31, 1999, the Bank had a total of $130,225 in assets acquired
through foreclosure as compared to $193,850 as of June 30, 1999. The reduction
in assets acquired through foreclosure was due to a sale of real estate
property that was acquired through foreclosure.
Other assets increased by $876,699 from June 30, 1999 to December 31, 1999.
The increase was due to the increase in capitalized loan servicing rights and
17
the purchase of non-marketable investments as well as the deferred costs
associated with the Company's trust preferred security offering.
Other liabilities increased by $734,445 compared to June 30, 1999, due
primarily to increases in accrued expenses and escrow accounts.
Capital Resources and Liquidity
_______________________________
The Bank continues to attract new local deposit relationships. The Bank
utilizes, as alternative sources of funds, brokered certificate of deposits
("C.D.s") when national deposit interest rates are less than the interest rates
on local market deposits. Brokered C.D.s are also used to supplement the
growth in earning assets. Brokered C.D.s carry the same risk as local deposit
C.D.s, in that both are interest rate sensitive with respect to the Bank's
ability to retain the funds. The Bank also utilizes FHLB advances, as
alternative sources of funds, when the interest rates of the advances are less
than market deposit interest rates. FHLB advances are also used to fund short-
term liquidity demands.
Total deposits were $238,727,661 and securities sold under repurchase
agreements were $16,078,044 as of December 31, 1999. These amounts represent
an increase of $19,363,626 and $4,210,205, respectively, compared to June 30,
1999. The increase in deposits was primarily due to the increase in time
deposits. The increase in time deposits was attributable to various special
offerings as well as normal growth from the branch market areas. The Bank has
devoted additional staffing to increase its balances in repurchase agreements.
Repurchase agreements enhances the Bank's ability to attain additional
municipal and commercial deposits, improving its overall liquidity position in
a cost effective manner. Brokered deposits represented $19,068,780 of the
total deposits at December 31, 1999, which increased by $5,610,523 compared to
the $13,458,257 balance as of June 30, 1999. Cross selling strategies are
employed by the Bank to enhance deposit growth. Even though deposit interest
rates have remained competitive, the rates of return are potentially higher
with other financial instruments such as mutual funds and annuities. Like
other companies in the banking industry, the Bank will be challenged to
maintain and or increase its core deposits.
Total advances from the FHLB were $123,678,957 as of December 31, 1999, an
increase of $19,797,241 compared to June 30, 1999. The cash received from the
increase in FHLB advances were utilized to fund the Bank's loan growth. The
Bank has unused borrowing capacity from the FHLB through its advances program.
The Bank's current advance availability, subject to the satisfaction of certain
conditions, is approximately $9,500,000 over and above the December 31, 1999
advances. Mortgages, free of liens, pledges and encumbrances are required to
be pledged to secure FHLB advances. The Bank's ability to access principal
sources of funds is immediate and with the borrowing capacity at the Federal
Home Loan Bank, the normal growth in bank deposits and repurchase agreements
and the immediate availability of the Bank's cash equivalents as well as
securities available for sale, management believes that the Company's available
liquidity resources are sufficient to support the Company's needs.
Total equity of the Company was $27,522,914 as of December 31, 1999 as compared
to $26,683,115 at June 30, 1999. Book value per common share was $9.97 as of
December 31, 1999 as compared to $9.64 at June 30, 1999. The total equity to
total assets ratio of the Company was 6.62% as of December 31, 1999 and 7.32%
at June 30, 1999.
18
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
contains various provisions intended to capitalize BIF and also affects a
number of regulatory reforms that impact all insured depository institutions,
regardless of the insurance fund in which they participate. Among other
things, FDICIA grants the OTS broader regulatory authority to take prompt
corrective action against insured institutions that do not meet capital
requirements, including placing undercapitalized institutions into
conservatorship or receivership. FDICIA also grants the OTS broader regulatory
authority to take corrective action against insured institutions that are
otherwise operating in an unsafe and unsound manner.
FDICIA defines specific capital categories based on an institution's capital
ratios. Although no capital requirements are imposed on the Company, the Bank
is subject to such requirements established by the OTS. The OTS has issued
regulations requiring a savings institution to maintain a minimum regulatory
tangible capital equal to 1.5% of adjusted total assets, core capital of 3.0%,
leverage capital of 4.0% and a risk-based capital standard of 8.0%. The prompt
corrective action regulations define specific capital categories based on an
institution's capital ratios. The capital categories, in declining order, are
"well capitalized", "adequately capitalized", "undercapitalized",
"significantly undercapitalized", and "critically undercapitalized". As of
December 31, 1999, the Bank met the definition of a well capitalized
institution. There are no conditions or events since that notification that
management believes has changed the institution's category.
At December 31, 1999, the Bank's regulatory capital, which includes capital
downstreamed of $4,000,000 by the parent as a result of a trust preferred
security offering as described below, was in compliance with regulatory capital
requirements as follows:
To Be "Well
Capitalized" Under
For Capital Prompt Corrective
Actual Capital Adequacy Action Provisions
Amount Ratio Amount Ratio Amount Ratio
_________ _______ _________ _______ __________ _______
(Dollars in Thousands)
As of December 31,
1999:
Tier 1 (Core) capital
(to risk weighted
assets) $ 31,212 10.64% $ 11,728 4.00% $ 17,593 6.00%
Tier 1 (Core) capital
(to total assets) $ 31,212 7.53% $ 16,588 4.00% $ 20,734 5.00%
Total Capital (to risk
weighted assets) $ 33,016 11.26% $ 23,457 8.00% $ 29,321 10.00%
Management believes that there are adequate funding sources to meet its future
19
liquidity needs for the foreseeable future. Primary among these funding
sources are the repayment of principal and interest on loans, the renewal of
time deposits, and the growth in the deposit base. Management does not believe
that the terms and conditions that will be present at the renewal of these
funding sources will significantly impact the Company's operations, due to its
management of the maturities of its assets and liabilities.
During the quarter ended December 31, 1999, the Company also generated
additional liquidity and funding through the issuance of certain debt
instruments. In this regard, on October 4, 1999, the Company formed NBN
Capital Trust, a Delaware statutory trust and a wholly-owned subsidiary of the
Company (the "Trust"), for the purpose of (i) issuing and selling in common
securities to the Company and its trust preferred securities to the public, and
(ii) using the proceeds therefrom to purchase 9.60% Junior Subordinated
Deferrable Interest Debentures ("Junior Subordinated Debentures") from the
Company. Accordingly, the Junior Subordinated Debentures are, and will be, the
sole asset of the Trust. In the quarter ended December 31, 1999, the Trust
sold $7,172,998 of its trust preferred securities to the public and $221,851 of
its common securities to the Company. The Trust used the proceeds to purchase
$7,394,849 in principal amount of the Junior Subordinated Debentures issued by
the Company. The Company will pay interest on the Junior Subordinated
Debentures at a rate of 9.60% to the Trust at the end of each quarter, which is
equal to the dividend rate payable to the holders of the Trust's preferred
securities. The cost of the issuance of the preferred securities was
approximately $485,000 and is treated as a deferred asset and will be amortized
over the life of the securities. Following the offer and sale of the Trust's
securities, the Company owned and currently holds all of the outstanding common
securities of the Trust, its only voting securities, and as a result the Trust
is a subsidiary of the Company. The Company used the net proceeds of the
offering, approximately $6,700,000, for the following purposes: (i) contributed
$4,000,000 as additional capital for the Bank, (ii) allocated $1,000,000 for
the Company's stock buy-back program, (iii) paid off the remaining principal
balance of $535,000 on its note payable, and (iv) retained the remaining
$1,200,000 for general corporate requirements as they may arise from time to
time.
The Company downstreamed $4,000,000 of the funds received from the junior
subordinated debentures to the Bank. The funds are allowed under the Office of
Thrift Supervision regulations to be used as capital at the Bank. As discussed
above, these funds have increased the regulatory capital position at the Bank
and is reported in the capital adequacy chart above. The increase in regulatory
capital will allow the Bank to fund loan growth for the foreseeable future.
In December 1999, the Board of Directors of Northeast Bancorp approved a plan
to repurchase up to $2,000,000 of its common stock. Under the common stock
repurchase plan, Northeast Bancorp may purchase shares of its common stock from
time to time in the open market at prevailing prices. Repurchased shares will
be held in treasury and may be used in connection with employee benefits and
other general corporate purposes. The Company does not believe that the
current market price for its common stock adequately reflects full value and
believes that the purchase of its common stock from time to time in the market
is a good investment and use of its funds.
Cash provided by operating activities in the consolidated statements of cash
flow increased by $2,329,105 from December 31, 1998 to December 31, 1999 as a
result of the increase in net income and the adjustments to reconcile net
income to net cash provided by operating activities. The reconciling items
20
that increased operating activities were the market value adjustment of
available for sale securities, the provision and recoveries to the loan loss
allowance and the depreciation expense for premises and equipment.
Results of Operations
_____________________
Net income for the quarter ended December 31, 1999 was $836,744 or basic and
diluted earnings per share of $0.30, respectively. This compares to earnings
of $700,568 or basic earnings per share of $0.26 and diluted earnings per share
of $0.25 for the quarter ended December 31, 1998. Net income for the six
months ended December 31, 1999 was $1,638,465 versus $1,336,605 for the period
ended December 31, 1998. Basic and diluted earnings per share were $.59,
respectively, for the six months ended December 31, 1999 versus basic earnings
per share of $.49 and diluted earnings per share of $.48 for the period ended
December 31, 1998.
The Company's net interest income was $6,992,917 for the six months ended
December 31, 1999, as compared to $5,998,927 for the six months ended December
31, 1998, an increase of $993,990. Total interest income increased $2,180,066
during the six months ended December 31, 1999 compared to the six months ended
December 31, 1998. Loan interest income increased by $1,264,421 and $1,966,135
for the three and six months ended December 31, 1999 compared to December 31,
1998, respectively. The increase in loan interest income was primarily due to
the increased volume in consumer loans during the three and six month periods
ended December 31, 1999. The increase in interest income was due primarily
from an increase in the volume of loans offset in part by a decrease in rates.
The increase in total interest expense of $1,186,076 for the six months ended
December 31, 1999 was due primarily from the increased volume of deposits and
borrowings offset in part by the decrease in rates.
The changes in net interest income are presented in the schedule below.
Northeast Bancorp
Rate/Volume Analysis for the six months ended
December 31, 1999 versus December 31, 1998
Difference Due to
Volume Rate Total
_______________ _______________ _______________
Investments $ 252,211 $ 29,827 $ 282,038
Loans 2,276,065 (309,930) 1,966,135
FHLB & Other Deposits (62,999) (5,108) (68,107)
_________________________________________________
Total 2,465,277 (285,211) 2,180,066
Deposits 890,421 (292,008) 598,413
Repurchase Agreements 159,821 (4,099) 155,722
Borrowings 453,255 (21,314) 431,941
_________________________________________________
Total 1,503,497 (317,421) 1,186,076
_________________________________________________
Net Interest Income $ 961,780 $ 32,210 $ 993,990
21
=================================================
Rate/Volume amounts spread proportionately between volume and rate.
The Company's business primarily consists of the savings and loan activities of
the Bank. Accordingly, the success of the Company is largely dependent on its
ability to manage interest rate risk. This is the risk that changes in
interest rates may adversely affect net interest income. Generally, interest
rate risk results from differences in repricing intervals or maturities between
interest-earning assets and interest-bearing liabilities, the components of
which comprise the interest rate spread. When such differences exist, a change
in the level of interest rates will most likely result in an increase or
decrease in net interest income. The Bank has shifted to a slightly liability
sensitive position based on its own internal analysis which categorizes its
core deposits as long term liabilities which are then matched to long term
assets. As a result, the Bank will generally experience a contraction in its
net interest margins during a period of increasing rates. Management is
currently addressing the asset/liability mix to reposition the Bank to a
slightly asset sensitive position.
Approximately 19% of the Bank's loan portfolio is comprised of floating rate
loans based on a prime rate index. Interest income on these existing loans
will increase as the prime rate increases, as well as on approximately 20% of
other loans in the Bank's portfolio that are based on short-term rate indices
such as the one-year treasury bill. An increase in short-term interest rates
will also increase deposit and FHLB advance rates, increasing the Company's
interest expense. Although the Company has experienced some net interest
margin compression, the impact on net interest income will depend on, among
other things, actual rates charged on the Bank's loan portfolio, deposit and
advance rates paid by the Bank and loan volume.
The provision for loan losses for the six months ended December 31, 1999
increased by $121,693 when compared to December 31, 1998. Management believes
the increase in the provision for loan losses was prudent to mitigate potential
credit risk, based on the growth in the loan portfolio.
Total non-interest income was $613,708 and $1,241,032 for the three and six
months ended December 31, 1999 versus $841,470 and $1,263,140 for the three and
six months ended December 31, 1998. The decrease in total non-interest income
was primarily due to the decrease in other income. Service fee income was
$325,051 and $590,232 for the three and six months ended December 31, 1999
versus $269,536 and $522,921 for the three and six months ended December 31,
1998. The $55,515 and $67,311 service fee increase for the three and six
months ended December 31, 1999, respectively, was primarily due to an increase
in loan servicing and deposit fee income. Gains from available for sale
securities were $20,697 and $25,861 for the three and six months ended December
31, 1999 versus $47,699 and $58,490 for the three and six months ended December
31, 1998. The Company sold a larger volume of its available for sale
securities during the three and six month period ended December 31, 1998,
taking advantage of the fluctuation in market prices.
Other income was $267,960 and $624,939 for the three and six months ended
December 31, 1999, which was a decrease of $251,155 and $46,058 when compared
to other income of $519,115 and $670,997 for the three and six months ended
December 31, 1998, respectively. The decrease in other income in the three and
22
six months ended December 31,1999, was primarily due to gains from 1-4 family
mortgage and indirect auto loan sales that occurred in 1998, which was offset
by the increased fee income from trust and investment services.
Total non-interest expense for the Company was $2,617,708 and $5,205,254 for
the three and six months ended December 31, 1999, which was an increase of
$132,629 and $402,368, respectively, when compared to total non-interest
expense of $2,485,079 and $4,802,886 for the three and six months ended
December 31, 1998. The increase in non-interest expense for the three and six
months ended December 31, 1999 as compared to the three and six months ended
December 31, 1998 was due, in part, to the following items: (I) compensation
expense increased for the three and six months ended December 31, 1999 and was
primarily due to the additional staffing for the new branch opened in Lewiston,
Maine, the increased commission paid to brokers in the investment sales
division due to growth in sales revenue and increased costs associated with the
Company's health insurance and benefit plans, (II) occupancy expense increased
for the three and six month period due to the additional lease expense in
opening the new Lewiston branch, (III) equipment expense increased for the
three and six month period due to the expenses associated with opening the new
Lewiston branch as well as the conversion of the mainframe hardware and
software and tele-communication system.
Other expenses increased by $24,005 and 48,499 for the three and six months
ended December 31, 1999 compared to the three and six months ended December 31,
1998. The increase was primarily due to the following: an increase in
professional fees due to increased legal and audit services, courier services
and data operations services; an increase due to the Company's growth in tele-
communication lines and fees; and an increase in loan and deposit expenses due
to the costs associated with the growth of loans and deposits. These increases
were offset by the reduction of the Company's other general expenses.
The Company's income tax expense increased by $71,127 and $145,961 for the
three and six months ended December 31, 1999, when compared to the three and
six months ended December 31, 1998. The increase in income tax expense is due
to increased earnings before tax.
Impact of Inflation
___________________
The consolidated financial statements and related notes herein have been
presented in terms of historic dollars without considering changes in the
relative purchasing power of money over time due to inflation. Unlike
industrial companies, substantially all of the assets and virtually all of the
liabilities of the Company are monetary in nature. As a result, interest rates
have a more significant impact on the Company's performance than the general
level of inflation. Over short periods of time, interest rates may not
necessarily move in the same direction or in the same magnitude as inflation.
Year 2000
_________
The Company addressed the Year 2000 issue and believes it has been successful.
The Company has had no adverse affects to date regarding the century rollover
period. There also has been no adverse implications from the Company's
borrowers or depositors. The Company will continue to monitor for any affects
of the Year 2000 issue during the current quarter, but management does not
expect any adverse implications. As of December 31, 1999, the Company had
23
incurred approximately $39,000 of capitalized purchases and $106,600 of
cumulative Year 2000 expenses.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
_________________________________________________________
There have been no material changes in the Company's market risk from June 30,
1999. For information regarding the Company's market risk, refer to the
Company's Annual Report on Form 10-K dated as of June 30, 1999.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
_________________
None.
Item 2. Changes in Securities
_____________________
None.
Item 3. Defaults Upon Senior Securities
_______________________________
None.
Item 4. Submission of Matters to a Vote of Security Holders
___________________________________________________
SUMMARY OF VOTING AT 11/09/99 ANNUAL SHAREHOLDERS' MEETING
__________________________________________________________
At the Annual Meeting of Shareholders held in Auburn, Maine on November 9,
1999, the following matters were submitted to a vote of, and approved by, the
Company's shareholders, each such proposal receiving the vote of the Company's
outstanding common shares, as follows:
Proposal 1 - Election of Directors:
Votes For Votes Withheld
_____________ ________________
John W. Trinward, D.M.D. 2,255,260 82,089
John B. Bouchard 2,256,960 80,389
A. William Cannan 2,256,863 80,486
James D. Delamater 2,256,960 80,389
Ronald J. Goguen 2,256,960 80,389
Judith W. Hayes 2,249,960 87,389
Philip Jackson 2,256,960 80,389
Roland C. Kendall 2,256,960 80,389
John Rosmarin 2,255,960 81,389
John Schiavi 2,249,110 88,239
Stephen W. Wight 2,251,635 85,714
Dennis A. Wilson 2,256,960 80,389
Proposal 2 - Approval of Stock Plan. Proposal to approve and adopt the
Northeast Bancorp 1999 stock Option Plan.
Votes For Votes Against Votes Abstain
_______________ _______________ _______________
2,166,676 151,717 18,956
24
Proposal 3 - Ratification of Appointment of Auditors. Proposal to ratify the
appointment of Baker, Newman & Noyes, Limited Liability Company, as the
Company's auditors for the 2000 fiscal year.
Votes For Votes Against Votes Abstain
_______________ _______________ _______________
2,328,520 5,800 3,029
Item 5. Other Information
_________________
None.
Item 6. Exhibits and Reports on Form 8 - K
__________________________________
(a) Exhibits
________
10 1999 Stock Option Plan of Northeast Bancorp
11 Statement regarding computation of per share earnings.
27 Financial data schedule
(b) Reports on Form 8 - K
_____________________
On December 6, 1999, the Company filed a report on Form 8-K announcing
an adoption of a Stock Repurchase Program.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Date: February 11, 2000 NORTHEAST BANCORP
By: /s/ James D. Delamater
__________________________________
James D. Delamater
President and CEO
By: /s/ Richard Wyman
__________________________________
Richard Wyman
Chief Financial Officer
NORTHEAST BANCORP
Index to Exhibits
EXHIBIT NUMBER DESCRIPTION
10 1999 Stock Option Plan of Northeast Bancorp
11 Statement regarding computation of per share earnings
27 Financial data schedule
25