Northeast Bancorp Reports Second Quarter Results, Declares Dividend

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

“We continue to make progress in positioning Northeast for growth and success”

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

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

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

Quarterly results included the following items of significance:

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

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

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

	Three Months Ended December 31, 2011						Six Months Ended December 31, 2011
	Average		Interest		Average		Average		Interest		Average
	Daily		Income/		Yield/		Daily		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate
	(Dollars in thousands)
Regularly scheduled   interest and accretion	$	31,001	$	772	9.88	%	$	18,262	$	972	10.56	%
Accelerated accretion		31,001		482	6.17	%		18,262		482	5.24	%
Total		31,001	$	1,254	16.05	%		18,262	$	1,454	15.79	%

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

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

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

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

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

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

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

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

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

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

About Northeast Bancorp

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

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

Non-GAAP Financial Measure

In addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures. Northeast's management believes that the supplemental non-GAAP information, which consists of tangible book value, is utilized by regulators and market analysts to evaluate a company's financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

Statements in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although Northeast believes that these forward-looking statements are based on reasonable estimates and assumptions, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and other factors. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company's control. The Company's actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, changes in interest rates; competitive pressures from other financial institutions; the effects of a continuing deterioration in general economic conditions on a national basis or in the local markets in which the Company operates, including changes which adversely affect borrowers' ability to service and repay our loans; changes in loan defaults and charge-off rates; changes in the value of securities and other assets, adequacy of loan loss reserves, or deposit levels necessitating increased borrowing to fund loans and investments; increasing government regulation, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; the risk that goodwill and intangibles recorded in the Company's financial statements will become impaired; changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company's Annual Report on Form 10-K and updated by the Company's Quarterly Reports on Form 10-Q; and other filings submitted to the Securities and Exchange Commission. These statements speak only as of the date of this release and we do not undertake any obligation to update or revise any of these forward-looking statements to reflect events or circumstances occurring after the date of this communication or to reflect the occurrence of unanticipated events.

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

NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share data)
	December 31, 2011			June 30, 2011
Assets
Cash and due from banks	$	3,005		$	3,227
Short-term investments		55,358			80,704
Total cash and cash equivalents		58,363			83,931
Available-for-sale securities, at fair value		139,480			148,962
Loans held-for-sale		8,189			5,176
Loans
Residential real estate		98,129			95,417
Commercial real estate		162,999			117,761
Construction		1,280			2,015
Commercial business		19,210			22,225
Consumer		65,441			72,495
Total loans		347,059			309,913
Less: Allowance for loan losses		737			437
Loans, net		346,322			309,476
Premises and equipment, net		9,262			8,271
Acquired assets, net		837			690
Accrued interest receivable		1,761			1,244
Federal Home Loan Bank stock, at cost		4,889			4,889
Federal Reserve Bank stock, at cost		871			871
Intangible assets, net		5,012			13,133
Bank owned life insurance		14,047			13,794
Other assets		5,522			5,956
Total assets	$	594,555		$	596,393
Liabilities and Stockholders' Equity
Liabilities
Deposits
Demand	$	43,682		$	48,215
Savings and interest checking		87,356			89,804
Money market		43,353			48,695
Brokered time deposits		4,905			4,924
Certificates of deposit		221,728			209,480
Total deposits		401,024			401,118
Federal Home Loan Bank advances		43,684			43,922
Structured repurchase agreements		67,089			68,008
Short-term borrowings		1,744			2,515
Junior subordinated debentures issued to affiliated trusts		8,029			7,957
Capital lease obligation		1,994			2,075
Other borrowings		0			2,229
Other liabilities		5,091			3,615
Total liabilities		528,655			531,439
Commitments and contingencies
Stockholders' equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; 4,227  shares issued and outstanding at December 31, 2011 and June 30,  2011; liquidation preference of $1,000 per share		4			4
Voting common stock, $1.00 par value, 13,500,000 shares authorized; 3,312,173  issued and outstanding at December 31, 2011 and June 30, 2011, respectively		3,312			3,312
Non-voting common stock, $1.00 par value, 1,500,000 shares authorized  195,351 issued and outstanding at December 31, 2011 and June 30, 2011, respectively		195			195
Warrants to purchase common stock		406			406
Additional paid-in capital		49,982			49,700
Unearned restricted stock		(145	)		(163	)
Retained earnings		11,846			11,726
Accumulated other comprehensive income (loss)		300			(226	)
Total stockholders' equity		65,900			64,954
Total liabilities and stockholders' equity	$	594,555		$	596,393

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

NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
(Continued)
	Successor Company (1)								Predecessor Company (2)
	Three Months Ended		Six Months Ended			Three Days Ended			89 Days Ended			181 Days Ended
	December 31, 2011		December 31, 2011			December 31, 2010			December 28, 2010			December 28, 2010
Discontinued operations:
Income (loss) from discontinued operations	$	0	$	186		$	(10	)	$	(23	)	$	94
Gain on sale of discontinued operations		0		1,529			0			105			105
Income tax expense (benefit)		0		592			(4	)		29			70
Net income (loss) from discontinued operations		0		1,123			(6	)		53			129
Net income	$	418	$	947		$	11,835		$	836		$	1,796
Net income available to common stockholders	$	320	$	751		$	11,833		$	777		$	1,677
Weighted-average shares outstanding:
Basic		3,494,498		3,494,498			3,492,498			2,331,332			2,330,197
Diluted		3,511,994		3,494,498			3,588,756			2,358,647			2,354,385
Earnings per common share:
Basic:
Income (loss) from continuing operations	$	0.09	$	(0.11	)	$	3.38		$	0.31		$	0.66
Income from discontinued operations		0.00		0.32			0.00			0.02			0.06
Net income	$	0.09	$	0.21		$	3.38		$	0.33		$	0.72
Diluted:
Income (loss) from continuing operations	$	0.09	$	(0.11	)	$	3.29		$	0.31		$	0.66
Income from discontinued operations		0.00		0.32			0.00			0.02			0.05
Net income	$	0.09	$	0.21		$	3.29		$	0.33		$	0.71

(1)	“Successor Company” means Northeast Bancorp and its subsidiary after the closing of the merger with FHB Formation LLC on December 29, 2010.
(2)	“Predecessor Company” means Northeast Bancorp and its subsidiary before the closing of the merger with FHB Formation LLC on December 29, 2010.

NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
	Successor Company (1)
	Three Months Ended December 31, 2011							Six Months Ended December 31, 2011
	Average			Interest		Average		Average			Interest		Average
	Daily			Income/		Yield/		Daily			Income/		Yield/
	Balance			Expense		Rate		Balance			Expense		Rate
	(Dollars in thousands)
Assets:
Interest-earning assets:
Investment securities	$	139,051		$	541	1.54	%	$	143,372		$	1,180	1.63	%
Loans (2) (3)		340,178			5,874	6.85	%		328,210			11,011	6.66	%
Regulatory stock		5,761			21	1.45	%		5,761			33	1.14	%
Short-term investments (4)		67,455			36	0.21	%		72,903			83	0.23	%
Total interest-earning assets		552,445			6,472	4.65	%		550,246			12,307	4.44	%
Non-interest earning assets:
Cash & due from banks		2,981							2,950
Bank premises and equipment, net		8,924							8,598
Other assets		28,935							29,963
Allowance for loan losses		(743	)						(596	)
Total non-interest earning assets		40,097							40,915
Total assets	$	592,542						$	591,161
Liabilities & Stockholders' Equity:
Interest-bearing liabilities:
NOW	$	54,806		$	54	0.39	%	$	55,494		$	123	0.44	%
Money market		44,247			42	0.38	%		45,114			92	0.40	%
Savings		32,360			18	0.22	%		32,899			44	0.27	%
Time		220,670			722	1.30	%		218,133			1,414	1.29	%
Total interest-bearing deposits		352,083			836	0.94	%		351,640			1,673	0.94	%
Short-term borrowings (5)		631			3	1.89	%		886			8	1.79	%
Borrowed funds		113,100			532	1.87	%		113,423			1,064	1.86	%
Junior subordinated debentures		8,009			185	9.16	%		7,990			368	9.14	%
Total interest-bearing liabilities		473,823			1,556	1.30	%		473,939			3,113	1.30	%
Interest-bearing liabilities of discontinued operations (6)		0							570
Non-interest bearing liabilities:
Demand deposits and escrow accounts		47,290							46,524
Other liabilities		5,723							4,498
Total liabilities		526,836							525,531
Stockholders' equity		65,706							65,630
Total liabilities and stockholders' equity	$	592,542						$	591,161
Net interest income				$	4,916						$	9,194
Interest rate spread						3.35	%						3.14	%
Net interest margin (7)						3.53	%						3.31	%

(1)	"Successor Company" means Northeast Bancorp and its subsidiary after the closing of the merger with FHB Formation LLC on December 29, 2010.
(2)	Non-accruing loans are included in the computation of average balances, but unpaid interest on nonperforming loans has not been included for purposes of determining interest income.
(3)	Includes Loans Held-for-Sale
(4)	Short term investments include FHLB overnight deposits and other interest-bearing deposits.
(5)	Short-term borrowings include securities sold under repurchase agreements and sweep accounts.
(6)	The average balance of borrowings associated with discontinued operations has been excluded from interest expense, interest rate spread, and net interest margin.
(7)	Net interest margin is calculated as net interest income divided by total interest-earning assets.

NORTHEAST BANCORP AND SUBSIDIARY
CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(Unaudited)
(Dollars in thousands)
	Predecessor Company (1)
	89 days ended December 28, 2010							181 days ended December 28, 2010
	Average			Interest		Average		Average			Interest		Average
	Daily			Income/		Yield/		Daily			Income/		Yield/
	Balance			Expense		Rate		Balance			Expense		Rate
Assets:
Interest-earning assets:
Investment securities	$	160,332		$	1,439	3.68	%	$	161,894		$	3,111	3.88	%
Loans (2)(3)		381,076			5,468	5.88	%		385,286			11,210	5.87	%
Regulatory stock		5,486			9	0.67	%		5,486			18	0.66	%
Short-term investments (4)		49,403			28	0.23	%		39,212			39	0.20	%
Total interest-earning assets		596,297			6,944	4.78	%		591,878			14,378	4.90	%
Non-interest earning assets:
Cash & due from banks
Bank premises and equipment, net		3,347							3,340
Other assets		7,983							8,006
Allowance for loan losses		32,377							32,620
Total non-interest earning assets		(5,915	)						(5,902	)
Total assets		37,792							38,064
	$	634,089						$	629,942
Liabilities & Stockholders' Equity:
Interest-bearing liabilities:
NOW	$	55,147		$	85	0.63	%	$	53,780		$	183	0.69	%
Money market		55,645			88	0.65	%		55,955			212	0.76	%
Savings		38,234			42	0.45	%		38,303			99	0.52	%
Time		190,650			1,058	2.28	%		196,318			2,302	2.36	%
Total interest-bearing deposits		339,676			1,273	1.54	%		344,356			2,796	1.64	%
Short-term borrowings (5)		61,364			205	1.37	%		53,873			376	1.41	%
Borrowed funds		117,668			1,163	4.05	%		117,688			2,365	4.05	%
Junior subordinated debentures		16,496			167	4.15	%		16,496			340	4.16	%
Total interest-bearing liabilities		535,204			2,808	2.15	%		532,413			5,877	2.23	%
Interest-bearing liabilities of discontinued operations (6)		2,351							2,462
Non-interest bearing liabilities:
Demand deposits and escrow accounts		39,252							37,941
Other liabilities		5,711							5,576
Total liabilities		582,518							578,392
Stockholders' equity		51,571							51,550
Total liabilities and stockholders' equity	$	634,089						$	629,942
Net interest income				$	4,136						$	8,501
Interest rate spread						2.63	%						2.67	%
Net interest margin (7)						2.84	%						2.90	%

(1)	"Predecessor Company" means Northeast Bancorp and its subsidiary prior to the closing of the merger with FHB Formation LLC on December 29, 2010.
(2)	Non-accruing loans are included in the computation of average balances, but unpaid interest on nonperforming loans has not been included for purposes of determining interest income.
(3)	Includes Loans Held-for-Sale
(4)	Short term investments include FHLB overnight deposits and other interest-bearing deposits.
(5)	Short-term borrowings include securities sold under repurchase agreements and sweep accounts.
(6)	The average balance of borrowings associated with discontinued operations has been excluded from interest expense, interest rate spread, and net interest margin.
(7)	Net interest margin is calculated as net interest income divided by total interest-earning assets.

NORTHEAST BANCORP AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL HIGHLIGHTS AND OTHER DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
		Successor Company (1)
		Three Months			Six Months
		Ended			Ended
		December 31, 2011			December 31, 2011
Net interest income		$	4,916		$	9,194
Net income		$	418		$	947
Weighted average shares outstanding:
Basic			3,494,498			3,494,498
Diluted			3,511,994			3,494,498
Earnings per share:
Basic		$	0.09		$	0.21
Diluted		$	0.09		$	0.21
Return on average assets			0.28	%		0.32	%
Return on average equity			2.52	%		2.86	%
Net interest rate spread (4)			3.35	%		3.14	%
Net interest margin (5)			3.53	%		3.31	%
Efficiency ratio (6)			90.39	%		99.02	%
Non-interest expense to average total assets			4.60	%		4.54	%
Average interest-earning assets to average interest-bearing liabilities			116.59	%		116.10	%
		Successor Company (1)
Non-performing loans:		December 31, 2011			September 30, 2011			June 30, 2011
Originated portfolio:
Residential		$	3,264		$	2,733		$	2,195
Commercial			1,998			2,797			3,601
Construction			0			121			121
Home equity			182			205			205
Commercial business			1,119			1,224			559
Consumer			329			356			527
			6,892			7,436			7,208
Purchased portfolio:
Residential			0			0			0
Commercial			0			0			0
Commercial business			0			0			0
			0			0			0
Total non-performing loans			6,892			7,436			7,208
Repossessed collateral			837			463			690
Total non-performing assets		$	7,729		$	7,899		$	7,898
Ratio of nonperforming loans to total loans			1.99	%		2.35	%		2.33	%
Ratio of nonperforming assets to total assets			1.30	%		1.35	%		1.32	%
Allowance for loan losses to total loans			0.21	%		0.22	%		0.14	%
Allowance for loan losses to nonperforming loans			10.69	%		9.55	%		6.06	%
Commercial real estate loans to risk-based capital			236.88	%		194.08	%		200.53	%
Net loans to core deposits (2)			91.34	%		84.75	%		84.46	%
Purchased loans to total loans			14.83	%		3.90	%		0.21	%
Equity to total assets			11.08	%		11.27	%		10.89	%
Tier 1 leverage capital ratio			11.86	%		11.85	%		10.35	%
Total risk-based capital ratio			19.28	%		20.93	%		18.99	%
Number of full service branches			10			10			10
Number of investment and mortgage loan origination offices			7			7			7
Stockholders' equity		$	65,900		$	66,188		$	64,954
Book value per share		$	17.58		$	17.66		$	17.33
Tangible book value per share (3)		$	16.15		$	16.14		$	13.58
(1)	"Successor Company" means Northeast Bancorp and its subsidiary after the closing of the merger with FHB Formation LLC on December 29, 2010.
(2)	Core deposits includes all non-maturity deposits and maturity deposits less than $250 thousand. Net loans includes loans held-for-sale.
(3)	Reconciliation of Non-GAAP Ratio:
					Per Common
		Equity			Share
	Total Stockholders' Equity	$	65,900
	Less Preferred Stock		4,227
	Total Common Equity	$	61,673		$	17.58
	Less Core Deposit Intangible		5,012			1.43
	Tangible Common Equity	$	56,661		$	16.15
	Outstanding Common Shares		3,507,524

(4)	The net interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.
(5)	The net interest margin represents net interest income as a percent of average interest-earning assets for the period.
(6)	The efficiency ratio represents non-interest expense divided by the sum of net interest income (before the loan loss provision) plus non-interest income.