• Loan Volume: $414 million total, with $74.6 million purchased and $218 million originated.
• SBA Loan Volume: $121.3 million, up from $100 million in the previous quarter.
• Net Income: $18.7 million, $4.8 million higher than the same quarter last year, but $3.7 million lower than the previous quarter.
• Return on Equity (ROE): 16.47%.
• Return on Assets (ROA): 1.86%.
• Tangible Book Value: Just under $55.
• Net Interest Income: Down $2.5 million from the previous quarter.
• Non-Interest Income: $6.6 million, $700,000 higher than the previous quarter.
• Non-Interest Expense: Included $1.3 million in incentive compensation.
• Tax Rate: Increased to 36.7% from 33% in the previous quarter.
• SBA Loan Originations: 1,069 loans, up from 330 loans in the same quarter last year.
• SBA Loan Sales: $73.6 million, up from $18.9 million in the same quarter last year.
• Provision for Loan Losses: Increased allowance by 40 basis points to 3.6%.
• Commercial Real Estate Loan Originations: $218 million, with an average interest rate of 8.25%.

• Warning! GuruFocus has detected 4 Warning Signs with NBN.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Northeast Bank (NASDAQ:NBN) reported a strong quarter with $414 million in loan volume, marking the second-best quarter for commercial real estate loan originations.
• The SBA loan volume increased to $121.3 million, up from $100 million in the previous quarter, showcasing significant growth in this segment.
• Net income for the quarter was $18.7 million, which is $4.8 million higher than the same quarter a year ago.
• The bank's tangible book value grew to just under $55, indicating a solid financial position.
• Northeast Bank (NASDAQ:NBN) has a robust pipeline for future loan originations, with strong demand in the lender finance product and a positive outlook for SBA business growth.

Negative Points

• Net interest income decreased by $2.5 million from the previous quarter due to less accelerated income from loan payoffs and a shorter quarter.
• The tax rate increased to 36.7% from 33% in the prior quarter, partly due to non-recurring charges related to changes in Massachusetts tax law.
• Loan yields on the SBA portfolio decreased from 11.6% to 9.93%, impacting overall margins.
• Non-interest expenses increased due to a $1.3 million incentive compensation catch-up, which may not be sustainable in future quarters.
• The bank faces challenges in adjusting to new SBA regulations, which could temporarily impact origination volumes.

Q & A Highlights

Q: Can you explain the decline in loan yields, particularly in the SBA portfolio, and what the outlook might be for these yields? A: Richard Wayne, CEO, explained that all SBA loans are currently priced at 275 basis points. The decline in yield, as noted by Rebecca Rand, Director of Accounting, was due to rate cuts totaling 100 basis points in September, November, and December, which affected the quarterly reset of these loans. The impact was more visible in Q3.

Q: Regarding expenses, was this quarter a catch-up on compensation accruals, and should we expect similar levels going forward? A: Richard Wayne, CEO, clarified that the compensation was a partial catch-up in the third quarter, estimating about 75% of the incentive compensation. Another adjustment is expected in the fourth quarter, but such catch-ups are not anticipated in the next fiscal year.

Q: What is the outlook for loan growth, and how do you see the pipeline developing in the coming months? A: Richard Wayne, CEO, noted that while there are meaningful transactions in the market, the origination pipeline is full. However, economic uncertainties could impact origination volumes. The bank remains focused on making quality loans rather than pursuing volume for its own sake.

Q: Could you provide insight into the balance sheet capacity for loan pool purchases? A: Richard Wayne, CEO, stated that the bank has a capacity of $870 million for loan pool purchases through March 2025. This capacity could increase with earnings growth or potential stock sales under the ATM program.

Q: How do you view the long-term growth potential of the SBA business, especially considering recent regulatory changes? A: Patrick Dignan, COO, expressed optimism about the SBA business, noting that while there might be a short-term decline in origination volume due to regulatory changes, the long-term demand remains strong. The bank is refining its technology and processes to enhance efficiency and meet market demand.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.