Northeast Bank Announces Sale of Paycheck Protection Program Loans

Northeast Bank (the “Bank”) (NASDAQ: NBN), a Maine-based full-service bank, announced today that it has entered into a Loan Purchase and Sale Agreement (the “Loan Sale Agreement”) with The Loan Source, Inc. (“Loan Source”) and agreed to sell to Loan Source $457.6 million of loans originated by the Bank in connection with the Small Business Administration’s Paycheck Protection Program (“PPP”). After amortizing previously unamortized PPP loan origination fees, the Bank will realize a pre-tax gain of approximately $9.8 million in the current fiscal quarter as a result of the sale. In addition, the Bank will receive fee income on the loans sold until such time as the loans are forgiven or repaid.

The sale reflects originations of PPP loans by the Bank through June 11, 2020. The Bank intends to continue to originate and sell PPP loans to Loan Source under the terms of the Loan Sale Agreement until the PPP is closed; however, the Bank expects PPP loan originations to continue at lower volumes going forward.

The Bank also announced that, through June 24, 2020, Loan Source is in the closing process of purchasing approximately $1.27 billion in outstanding principal amount of PPP loans, including $457.6 million of PPP loans from the Bank and approximately $815.3 million of PPP loans from lenders other than the Bank. Pursuant to the Bank’s previously disclosed Correspondent Agreement with Loan Source and ACAP SME, LLC (“ACAP”), the Bank will act as correspondent for Loan Source in connection with Loan Source’s pledge of PPP loans to the Federal Reserve Bank of Minneapolis under the Paycheck Protection Program Liquidity Facility (the “PPPLF”) and ACAP will act as servicer for the PPP loans pledged by Loan Source. With respect to the approximately $815.3 million of PPP loans purchased by Loan Source from lenders other than the Bank, the Bank will receive correspondent fees of approximately $2.9 million, which will be recognized over a period of approximately two years, and will receive 50% of the net servicing income earned over time on such loans. Loan Source has informed the Bank that it intends to continue to purchase PPP loans and pledge them under the PPPLF as long as the PPPLF remains operational. The Bank expects to earn additional correspondent fees and servicing income on pledged loans.

“Our team is proud to work closely with so many small business owners across the nation, many of whom were in dire need of PPP funds in order to keep their employees, and their businesses, afloat,” said Rick Wayne, President and Chief Executive Officer. “Our employees worked around the clock to ensure small businesses across the country received critical relief during the global COVID-19 pandemic. This collective effort resulted in over 4,100 loans and helped to save tens of thousands of associated jobs.” Mr. Wayne continued, “The loan sale will result in a significant gain in the current quarter and provide additional liquidity for the Bank to originate and purchase loans. We expect that the loan sale and correspondent relationship will generate significant income going forward and are excited to partner with Loan Source and ACAP in connection with these initiatives.”

About Northeast Bank

Northeast Bank (NASDAQ: NBN) is a full-service bank headquartered in Portland, Maine. We offer personal and business banking services to the Maine market via nine branches. Our Loan Acquisition and Servicing Group purchases and originates commercial loans on a nationwide basis. ableBanking, a division of Northeast Bank, offers online savings products to consumers nationwide. Information regarding Northeast Bank can be found at www.northeastbank.com.

For More Information:

Jean-Pierre Lapointe, Chief Financial Officer
Northeast Bank, 27 Pearl Street, Portland, ME 04101
207.786.3245 ext. 3220
www.northeastbank.com