2020 Annual Report NEB-003 Annual Report 2020 - UPDT-print-FINAL2.indd 1 9/23/20 9:02 AM We feel well-positioned to expand on our success, thanks to our team of talented, dedicated professionals, and our ever supportive and engaged Board of Directors. Richard Wayne, President & Chief Executive Officer TO OUR SHAREHOLDERS, CORRESPONDENT ARRANGEMENT As we began the year, our focus was to continue In addition to selling PPP loans to Loan Source, the building on the progress of prior years, including Bank entered into an agreement with Loan Source (i) growing our loan portfolio with high quality, and ACAP SME, LLC to act as a correspondent for higher-yielding loans, (ii) generating low-cost Loan Source in connection with Loan Source’s pledge deposits, primarily in our Community Banking of PPP loans to the PPP Liquidity Facility. Under this Division, (iii) continuing our investment in people and arrangement, the Bank will receive correspondent technology, and (iv) supporting our Maine community. fees on all loans purchased by Loan Source and split With the outbreak of the COVID-19 pandemic, we met servicing income on the pledged loans over their the needs of both our existing customers, by providing lives. Through the end of July 2020, Loan Source thoughtful loan deferments and modifications, and had purchased $2.9 billion of PPP loans, resulting of thousands of small businesses across the nation, in correspondent fees to the Bank of approximately through our participation in the Paycheck $8.5 million, which fees will be recognized over the Protection Program (“PPP”). remaining lives of the related loans. PPP NATIONAL LENDING AND ASSET QUALITY Late in our third fiscal quarter, Northeast Bank, Throughout fiscal 2020, our Loan Acquisition and like so many across the country, was faced with the Servicing Group (“LASG”) continued to build its COVID-19 pandemic. Our team reacted swiftly, national commercial loan portfolio, generating fine-tuning technology solutions on the spot and $392.7 million in purchases and originations, for a net bringing the Bank’s operations virtual in a matter growth of $34.2 million, or 4.2% over June 30, 2019. For of days. This allowed us to work around the clock to fiscal 2020, the purchased and originated portfolios provide PPP loans to over 4,300 small businesses, generated a return of 9.97% and 7.43%, respectively, as helping to save tens of thousands of related jobs. compared to 10.57% and 7.67%, respectively, for fiscal In total, the Bank originated $487.5 million in PPP 2019, despite the Federal Reserve decreasing interest loans. Prior to June 30, the Bank sold $457.6 million rates five times over the course of the fiscal year. of PPP loans to The Loan Source, Inc. (“Loan Source”), These returns benefit from our practice of structuring generating a pre-tax net gain of $9.7 million. loans with interest rate floors. The Bank’s loan portfolio is serviced with a “high PPP Activity touch” approach by our in-house asset managers 600 4,395 loans with the goal of providing a high level of service to $9.7 million gain originated on sale, net our borrowers with sharp attention being paid to 500 each credit. This “high touch” approach has served us well in light of the COVID-19 pandemic, as we 400 $487.5 have proactively worked with our borrowers to provide them with relief as they face the economic 300 $457.6 challenges of the pandemic. During the period from Millions ($) 200 March through June of 2020, we provided 272 short- term deferments on loan balances of approximately 100 $185.9 million, of which a substantial balance has resumed payments. We have been and will continue 0 Originations Loans Sold NEB-003 Annual Report 2020 - UPDT-print-FINAL2.indd 2 9/23/20 9:02 AM to evaluate our borrowers’ abilities to repay as the Tangible Book Value per Share remaining deferment periods come to an end and 25 intend to provide additional relief, as needed. 20 FINANCIAL HIGHLIGHTS 19.4% We had a record earnings year, largely attributable to 15 our PPP origination and related loan sale activity during $ the fourth fiscal quarter, as previously discussed. We recorded net income of $22.7 million, representing 10 an increase of 12.2% over the prior year net operating earnings1 of $20.3 million, and achieved earnings per 5 diluted common share of $2.53, a return on average equity of 14.21%, and a return on average assets of 1.82%. 0 2016 2017 2018 2019 2020 This is the sixth consecutive year of increased net June 30, operating earnings and operating return on average equity. MAINE BANKING We have continued to build the Northeast Bank Net Operating Earnings1 brand and our presence in the Maine deposit market 25 through our nine-branch network. We grew our Community Bank deposits by $85.4 million, or 20.6%, 20 during the year, strengthening our overall deposit mix and increasing non-maturity accounts to 53% of total 15 deposits as of June 30, 2020 as compared to 47% as of Millions ($) June 30, 2019. 10 We focus primarily on CRA lending opportunities in connection with our CRA Strategic Plan, with 5 the goal of providing meaningful support to our local communities. As part of our ongoing 0 efforts in community engagement, we provide 2016 2017 2018 2019 2020 both monetary contributions as well as volunteer Fiscal Year Ended June 30, resources to local non-profit organizations. * * * Operating Return on We are extremely proud of our accomplishments 2 Average Equity in fiscal 2020 and optimistic about the future 15 of the Bank and its ability to generate value for shareholders. We feel well-positioned to expand on our success, thanks to our team of talented, 10 dedicated professionals, and our ever supportive % and engaged Board of Directors. I look forward to 5 reporting to you next year on our accomplishments for fiscal 2021 and appreciate your continued support. 0 2016 2017 2018 2019 2020 Sincerely, Fiscal Year Ended June 30, Richard Wayne During the year, we repurchased 853,098 shares of President and Chief Executive Officer common stock at a weighted average price per share of $13.45. Our stock repurchases at prices below tangible 1 Net operating earnings removes the non-recurring expenses (after tax) book value, along with our record earnings, increased of $6.4 million related to our corporate reorganization in 2019. our tangible book value per share by 19.4% over June 30, 2 Net operating return on average equity removes the non-recurring expenses (after tax) of $6.4 million related to our corporate 2019, to $19.84. reorganization in 2019. NEB-003 Annual Report 2020 - UPDT-print-FINAL2.indd 3 9/23/20 9:02 AM NEB-003 Annual Report 2020 - UPDT-print-FINAL2.indd 4 9/23/20 9:02 AM FEDERAL DEPOSIT INSURANCE CORPORATION Washington, D.C. 20429 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to FDIC Certificate No. 19690 NORTHEAST BANK (Exact name of registrant as specified in its charter) Maine 01-0029040 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 27 Pearl Street, Portland, Maine 04101 (Address of principal executive offices) (Zip Code) (207) 786-3245 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Voting Common Stock, $1.00 par value NBN The NASDAQ Stock Market LLC (Title of each class) (Trading Symbol) (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ 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 ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ☐ ☐ Large Accelerated filer Accelerated filer Non-accelerated filer ☒ Smaller Reporting Company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(a) of the Sarbanes-Oxley Act (15 U.S.C.