Good day, everyone. And welcome to the Northeast Bancorp Fiscal Year 2016 Fourth Quarter Earnings Results Conference Call. This call is being recorded. With us today from the company is Rick Wayne, President and Chief Executive Officer; and Brian Shaughnessy, Chief Financial Officer. Earlier this morning, an investor presentation was uploaded to the company's website, which we will reference in this morning's call. The presentation can be accessed at the Investor Relations section of northeastbank.com under Events & Presentations. You may find it helpful to download this investor presentation and follow along during the call. Also, this call will be available for rebroadcast on the website for future use. The question-and-answer session for this call will be conducted electronically following the presentation. Please note that this presentation contains forward-looking information for Northeast Bancorp. Such information constitutes forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995, which involves significant risks and uncertainties. Actual results may differ materially from the results discussed on the forward-looking statements. At this time, I would like to turn the call over to Rick Wayne. Please go ahead, sir.

Thank you. Good morning and thank you all for joining us today. With me is Brian Shaughnessy, our Chief Financial Officer and Treasurer. Let's start a Slide 3, which provides the highlights of both the fourth fiscal quarter and year-to-date. This quarter was one of our strongest quarter's to-date with net income of $2.2 million of $0.24 per diluted common share. Net income for the year was $7.6 million of $0.80 per diluted common share. Earnings for the quarter and the year were positively affected by strong loan growth, transactional income from LASG purchased loans, gains on the sale of SBA loans originated by our SBA division and the repurchase of our common shares through the repurchase plan announced previously. Bank wise for the quarter, we originated $96.6 million of loans including $18.8 million of purchased loans and $31.8 million of originated loans in LASG. $28.6 million in our community banking division including $25.6 million of residential mortgages and $3 million of commercial loans and $17.4 million in our SBA division while generating a net gain of $1.6 million on the sale of the SBA loans. Net interest margin for the fourth quarter was 4.73%, up 4.25% for the linked quarter ended March 31. All of the above coupled with strong non-interest income and disciplined non-interest expense the company generated quarterly earnings of $2.2 million or $0.24 per share. For the year, we closed $380.9 million of loans, which includes $210.6 million of LASG commercial loan purchases and originations, $54.5 million from the SBA division and $115.8 million in our community banking division, which included $93.8 million in residential loan originations and $22 million in commercial loan originations. We sold $39.1 million of the guaranteed portion of SBA and USDA loans for a gain of $4.2, with $7.3 million transactional…

Thanks, Rick and good morning everyone. Picking it up on Slide 11 to provide a little more color on our financial results. As Rick noted, it was a solid quarter with net income of approximately $2.2 million up $0.05 from the linked quarter and up $0.02 from the comparable fiscal year 2015 quarter. Results were driven in part by $1.6 million of gains on loan sales from our SBA division. Transactional interest income of $1.5 from our purchase portfolio, to benefit of our larger average balance sheet in keeping our operating expenses in check. Turning to Slide 12, over the past year we have seen net loan portfolio growth of $80 million or 13%. The majority of the growth comes from our LASG portfolio with approximately $211 million of purchases and originations. As shown in the chart, in the trailing 12-month period since June 30, 2015, we have originated $54.5 million of SBA loans and we have sold approximately $39 million of the guaranteed portion of these loans into the secondary market. These loan seals have contributed approximately $4.2 million to revenue in the current fiscal year. Well bank-wide loan production has been strong; increases have been partially offset by the following. A high level of paid downs and amortization and the LASG purchased and originated portfolio, which averaged approximately $29 million per quarter over the past year and a pay down of one secured loan to a broker dealer for the $12 million during the quarter. Excluding this broker deal loan payoff, the loan portfolio had net growth of approximately $92 million or 15% over the past fiscal year. These results are further details on Slide 13, which shows the composition of net long growth over the past five quarters. The net loan growth is primarily driven by the…

Thank you. [Operator Instructions] And our first question comes from Alex Twerdahl from Sandler O'Neill. Your line is open.

Good morning guys.

Good morning Alex.

Good morning Alex.

I wanted to dig into something you said in that prepared remarks. Rick you alluded to the percentage of loan that you bid on and versus what you won this quarter as being 57% and being a little bit higher than - is typical. Actually, if I look back, I can see there has been as low as 11% not more than two years ago. So, I'm just wondering if the competitive landscape has changed a little bit for loan bidding or you just happened to get lucky this quarter or kind of what the outlook is and a little bit more into what you are seeing out there from a competitive standpoint?

I think this quarter the reason the percentage was high it's just had to do with the particular transactions we were looking at and the opportunity. There is a trend there, it's in the realm of reasonable possibility that next quarter when we talk that number could be 20% or 25%. I wouldn't read anything into that. With respect to the market, we are still seeing a lot - well we don't include - with the number I provide in this is the number of those loans that review, which I was referring of $118 million or so. We look at a lot more than that. These are just we report on the ones where we actually do a fair amount of work in the file to do that. And relative to our size, we are seeing plenty to meet our your business objectives.

Okay what about from the SBA side of things, I mean the originations have solid, you have now hired a bunch of BDOs and that had good success. Has the competitive landscape changed at all for SBA originations?

You know I think there are a lot of players that are interested in the SBA space. Now, this is directionally correct and then was not absolutely correct, but I’m going to say something like there is about 2,000 banks that are participating in the in the SBA business. There are many fewer of those banks that are doing it on a national scale, there certainly are some and you probably know a bunch of the names. We are trying to build a national platform to leverage the skills we have in lending nationally and with respect to that, there are not as many. I would say one of the things; our model has been and as we have talked about it, is with BDOs. We are looking as into the next year and I don't have a number to put on this. So to increase the channels of originations to include inside sales generation as well, we have retained a local marketing firm to help our presence on the web and provide support to what I expect will be hiring a few inside lenders to solicit business directly. So we would like to increase that volume both through growing the and supporting the BDOs that we have, but also generating leads directly to the bank not only through the BDOs and where we can refinance some of the loans that we purchased in LASG where there is an appropriate fit for refinancing with an SBA guarantee. So we are looking to increase the channels that we have. But your question was, is there lot of competition and there is a lot of competition.

How many BDOs do you have till today?

We are nine as we sit here. We were eight and we just recently hired another one. Recently meaning in the last month.

And do you have intention to continue hiring more or is it more…

We will hire more and we will also try and generate business through inside sales as well.

Inside sales, you mean being loan that are already in the SBA or what exactly do you mean by that?

An inside sales are loan in which either someone who works as a bank is not commission based, but reports of Jonathan Smith. Get's paid up a salary and a bonus, but not tied exactly to production, or hopefully borrowers would be reaching us directly or brokers reaching out to the inside sales person directly or generating leads through trade shows and otherwise.

Okay.

So two models. A commissioned based model and a model with inside sales. As I say, we are just starting that, so I don't want to set the expectations too high and how fast that will grow, but that is another way we are looking at growing that business.

Okay thanks. And then in terms of the deposit growth, you had sequentially the money market deposit growth. Did you have some promotions that you are in during the quarter or has something changed that caused a lot of inflow?

We did one our promotion in the fourth quarter with the - one of the products that we have now is the Peal Money Market product out of the Community Bank, which is a premium rate, it's consistent with the Able Money Market rate that we have out there as well. We ran a promotion in the fourth quarter and that's why a lot of the money came in. Some of it through main and the Community Bank branches and some of it nationally.

Okay. And then, as the mix of loan has shifted a little bit now you have some SBA on there, LASG recognitions in the main and purchased LASG. How should we think about the reserve and provisioning today and going forward?

Obviously one of the things that we think about monthly and quarterly is the reserve that we are providing on these loans. One of the things in the final slide of the presentation, what we tried to do is show the reserve that we present in the release and in our Qs and Ks, but we also show the reserve which excluded loans to broker dealers, because those loans have collateralized by marketable securities, that are mark-to-market each day. And also our purchased loans, because when we acquire those loans, we acquired them in their market to fair value and if they need an allowance subsequent to acquisition, it's done so under purchase accounting methodology. So as we grow our originated portfolio and based on the type of collateral or borrower, we will continue to provide for those loans as necessary and I would say consistent with other peer reserve models.

Okay thanks. And then just a final question with respect to expenses. This quarter comp is higher because of your final fiscal quarter and there is some comp true ups. Should we expect these numbers to near more of what we saw in 2015 through the final quarters of the calendar year?

I think as Brian indicated in his comments, we averaged $8.5 million a quarter, somewhere around $34 million in expenses, I would think about that number increasing slightly over the next year. People get salary, the biggest component of that is comp and as in most organizations people get raises over the year, and we have some headcount increasing, but I think that will be a relatively modest increase over that number. We are not expecting that number to - I think you may want to think about - in the $35 million range on an annual basis, over the next year, that's something unpredictable happening as in buying gigantic loan pool or doing something like. But kind of normal course, we would expect that the increase in that base level will increase only modestly.

Okay, great. Thanks for taking the...

We think of that as mode I don't know if you do, but we do, pretty mindful of expense side of the business.

Very good. Thanks for taking my questions.

Thank you Alex.

Thanks Alex.

Thank you. [Operator Instructions] Now, I will turn the call over Rick Wayne for closing remarks.

Thank you very much and for those of you listening, thank you for listening and supporting us. We try and provide more information on the each quarterly call and to the extent there are other topics that would be helpful and that were permitted to discuss, I'm sure you will continue to let us know. And with that, I wish you a nice weekend coming up and have a nice summer and we will talk to you again in October. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.