Q3 2021 Northeast Bank Earnings Call
Good day, everyone and welcome to the northeast Bank fiscal year 2021 third quarter earnings results Conference call.
This call is being recorded.
With us today from the Bank is right, Rick Wayne President and Chief Executive Officer.
JP Lapointe, Chief Financial Officer, and Pat Dignan, Executive Vice President and Chief Credit Officer.
Last night, and an investor presentation was uploaded to the bank's website, which we'll reference and this morning's call.
The presentation can be accessed at the Investor Relations section of northeast Bank Dot com under events and presentations.
You may find it helpful to download the investor presentation and follow along during the call.
And also this call will be available for rebroadcast on the website for Turkey news.
The question and answer session for this call will be conducted electronically following the presentation.
Please note that this presentation contains forward looking statements about northeast bank.
Forward looking statements are based upon the current expectations of northeast bank's management and are subject to risk and uncertainties.
Actual results may differ materially from those discussed and the forward looking statements.
These bank does not undertake any obligation to update any forward looking statement.
At this time I would now like to turn the call over to Rick Wayne Sir. Please go ahead.
Thank you.
Good morning, and thank you all for joining us today.
Rick Wayne President and Chief Executive Officer of Northeast Bank and.
With me on the call are JP Lapointe, our Chief Financial Officer.
And Pat Dignan.
Our Chief Credit Officer, and Executive Vice President.
After my comments.
J P Pat and I will be happy to.
To answer your questions.
For purposes of my comments I'd like to use the slide deck that we.
Uploaded.
And as a reference tool and.
Turning to.
Slide number.
Tree, which is the slide after the forward looking statement.
I want to highlight a few points here.
One on our purchased loans for.
For the quarter.
We purchase.
We invested $39 $9 million.
On 42, and a half a million dollars of U P. P.
And we bought this literally the last day of the quarter. So the.
Income from this pool.
From this purchase was not reflected on our quarterly results, but will of course on.
On a go forward basis.
Well for the year.
This is now through three quarters, we purchased.
And our invested $136 million.
Yeah and.
I would compare that for the full year of FY 'twenty.
And where we purchase and invested $171 million with them.
Quarter to go for.
For us and like apples to apples comparison on the.
The originated side.
And we originated $69 $3 million of loans.
Which brings us to $194.8 million.
For nine months and our entire volume for FY 'twenty was 100 and <unk>.
71 million and which of course was impacted by Covid.
But we are originating a lot.
And it hasn't.
Pipeline.
And wanted to spend a little time now on the Triple T and then and there's some more and the future slides I'll go into some more detail.
In the quarter.
We originated.
2.25 billion.
And when I say that again, that's a lot to two 5 billion.
Which we sold 2.1 for you.
Billion to the loans source.
Generating.
Pre tax gain of $33 million.
And as you know from our <unk>.
Previous calls.
Reactors, a corresponding for long source.
Actuating their borrowing from the fed.
The purchase loans, and we share and half of their revenue for that.
And the quarter.
March quarter that just ended we earned $6 million and.
For the three quarters of our fiscal year, we have earned 16 point and $8 million.
So far on.
Our average cost of deposits for the quarter.
It was 54 basis points.
And J P is going to have a lot to say about that because we consider that to be up.
Really meaningful accomplishment.
And as we're focusing more and more on improving our funding composition and.
And cost of funds.
And then I want and will also highlight for the quarter.
While our NIM all in was $3 93, if we exclude the impact of the Triple T.
And was five or six.
Obviously, a really strong number.
A little bit down from prior quarters.
Because.
Recently with all of our capital.
And our loan capacity.
And tried to be able to buy loans, where ltvs are really low.
And that is to say performance expectations.
Hi.
Even if some of the yields are lower.
I would point out we sit here today with tier one capital.
$218 million.
Significantly higher because of all of our earnings.
And a little capacity today is $900 million.
Our earnings for the quarter.
Were $34 2 million you may have seen them the headline from our earnings release call and record earnings.
And certainly was that more and have a way to describe it other than record earnings per obviously $34 $2 million.
And for 0.06 earnings per share.
And 70% return on equity.
Yes.
7% return on assets.
It's quite a quarter.
For the year for the nine months, we earned $15 million.
$6 EPS.
37% return on equity and for and a half percent return on assets.
Those are numbers.
We're obviously very.
Proud of.
No.
On page four.
And we will provide as we have and the past.
Some detail on our correspondent and see because and so material.
And I want to first bring your attention to the.
Bottom table first column, where it shows triple P loans purchased by loans source.
Through March 31.
They have purchased six point.
Eight $6 billion.
Loans.
And that includes the $2 1 billion that we sold them.
This quarter.
Which we sold to them our car.
And there was no discount on that to be amortized.
But if you look across the discount when they purchase loans.
And now I'm talking about the aggregate amount.
And was $8 7 million that gets amortized over roughly two.
Two years.
And the quarterly income from that.
It was $1 98000, and you can see that is and the second home and he is also the force number and the tier.
Table above.
Also when they buy loans they pay.
Pay for the accrued interest typically.
The total of all of that was 7.8 million and 922000 was born and to anything this quarter.
And finally.
And we share in Tampa and servicing income as a reminder, and.
Servicing income as the difference between the debt.
The borrowers pay which is 1%.
The cost debt one source.
From the fed which is 35 basis points.
So there is 65 basis points on the.
Outstanding Triple P loans.
The servicing for us when we get half of that.
And that was 3 million $9 50 for the quarter and so that was a total of.
5 million $9 70 that we recognize and the quarter.
On the next slide five.
And I'm just going to go over quickly because it's been for spring.
Part of the discussion on the slides that follow.
This shows that we have and.
The quarter.
Our loan book of billion two.
This does not include our.
Triple P loans on our balance sheet.
And you can see that out of the billion two.
The lion's share of that is and our national lending.
Activity of which purchase loans of $433 million.
$256 million and direct originated loans too.
$216 million and portfolio finance.
I think something really.
Well two things really interesting one on the slide on that.
And what's interesting as you can see how low the ltvs are and.
And Oh.
And the column to the far right.
50% on the whole portfolio.
And even less on our national lending and there's a little bit more.
Detail on slides that follow I'll highlight a little bit of it.
But these slides have been and the deck before and are just updated.
So those of you that.
On a look through look through the detail are able to do so for a point I want to make.
Got it.
On this particular slide is on.
Our whole loan book is 'twenty 200 loans.
2200 loans and we originated triple P loans of 22000.
In the quarter.
It's just a remarkable amount of volume and such a tribute to the just the great team we have.
Except for those working in that and the bank.
Banking centers or.
Disney and Theyre doing a great job and we appreciate them.
And going there.
But virtually everybody else is working at home.
And in addition to the 22000 and Triple P loans.
We were quite busy and our and our core business of originating and purchasing loans, which I will talk about shortly.
And in fact, I'll start to talk about it.
Right now.
You can see this is a bridge that.
Jos what our national lending book looks like.
At 12, 31 and <unk>.
And it looks like.
March 31.
And Theres both good news here.
And then there is a point of I wanted to talk about where we have.
Both a challenge and an opportunity.
So if you look at the originated loans, we originated $69 million. That's a really good numbers on slide that follows.
And that goes back and looks for FY <unk>.
Quarters, and you'll see that's the second best quarter, we've had and a long time.
And the run off so was $74 million.
And I come back to the run off point and the second.
We purchased $40 million and we had run off for $25 million and so.
No.
The really good news is we had a lot of volume.
And I think what we have to do a better job at on a go forward basis.
Retaining more of our portfolio.
And we're going to start to focus on that and reported on that.
And.
And the way that were going on.
And improve on that and I don't want to.
On makeup make a prediction because.
For example on our purchased loan book.
I mean, our portfolio finance book those loans typically get paid off when the underlying loan pays off.
One of the opportunities we're going to look at is to see on some of those loans. If we can refinance those.
On loans that would be one.
And secondly, getting in front of our loan book by a lot looking at 120 days in advance or more and so.
Talking to borrowers about trying to refinance.
And for them and.
And all of that is within the parameter, obviously and making good credit decisions.
And making sensible choices book for example on our purchased loan book, whether the the best thing to do when you do a discounted cash flow analysis.
And as extends or get paid off and also considering credit but.
Our goal is to grow our loan book as I mentioned earlier, we have $900 million of long capacity.
Which is a tremendous opportunity.
This is not a prediction at all we there is a forward looking statement and I will just point out the obvious.
If you can grow on your loan book virtually double at.
One would expect your earnings to increase.
Substantially.
On slide seven is the slide.
The slides that I alluded to earlier, which goes back.
Through Q3 of FY 'twenty.
You can see us and the current period of 69.
Originations.
Which is the blue bar that is better than all but the first quarter that we did $84 6 million.
And the $40 million of purchases is a good number as we've said forever.
And as our transactional it's lumpy.
And again without making any predictions I will tell you that both are.
Purchase pipeline and our originated originated and pipeline.
No.
On slide eight.
As the slide you will have seen this before.
And it takes our national lending portfolio.
And its slices it by different.
Metrics the first one is.
Investment size.
And you can see that on the upper left.
And that only 9% of our loan book.
Loans more than 9 million there is a footnote there.
One, which I would highlight.
The average size overall and 712000.
On our originated book the average loan size is $2 3 million.
And on purchase that's 406000.
I'll remind you that.
We have over $200 million of tier one capital now.
So we are.
And really value that.
On the low concentration risk.
And that we have.
And you can see on the slide below on collateral type we break it up by <unk>.
Category.
I wanted to highlight two things, which I'll talk about it and more detail and the second.
As retailers and 16% of our.
I apologize for that loan.
And the phone ringing and we're all working at home.
Not distracting.
The retail is.
16% of our National loan book.
And hospitality is seven and.
Net.
A question, we get asked frequently.
Given those are areas and.
Of some concern.
And what do we think about our credit risk and I'm going to talk about that and the second.
But first let me go to the.
The.
Chart, that's in the middle.
It shows that collateral distributions.
By state we have we're in and 45 states, we got half of our portfolio and New York and California.
On the rest is spread out.
Throughout the different states.
There is a.
Slide nine this shows our.
Asset quality metrics.
You can see debt they have improved and the quarter.
And.
Particularly I bring your attention to on the cl<expletive>ified commercial loans.
And these are our internal ratings.
Eight nine and 10.
Down from $20 million for 15 million and I'll talk about the allowance briefly and.
Minute or so.
On slide 10. This is always of interest to investors and the houses are.
Loans that we modified.
And the answer is they've done well.
We had two kinds of.
Modification or forbearance.
And borrowers.
One was a principal and interest for Barents.
Typically for three months there were a few that we have to.
Give another one two and we wanted to given the other one.
So you can see that.
If you look at the Grand total.
We did $142 million of these.
Through March.
And with 13 9 million.
We are still outstanding.
And you can look at the delinquency status we have.
Relatively small number of delinquencies there.
$3 8 million on $125 million.
The most of which we expect to be cleared up and.
The near future.
And then we also provided going to slide number 11.
We provide detail on.
On.
Interest only deferrals and you can see that after the $46 7 million.
Only $14 6 million or still on deferral and.
And of those only 100000 or <unk>.
England between 30 and 59 days.
Great performance.
Moving to slide 12.
We always have.
It was.
Probably a higher number of <unk>.
Nonperforming <expletive>ets and.
Other banks do by nature of our nature of our business and one thing we've never pointed out before but I think it's important and we've done it on this slide.
Is to make the point that it's not static we have loans that go into non performing loans that go out of non performing and so if you look at the balance of nonperforming loans at December 31, It was 35.
And $5 million during.
During the quarter, we added $4 7 million with 12 billion and got resolved and that.
That was the nonperforming loans came down by seven and a half million dollars or 25%, but the most.
Important and are important takeaway is there's lots of movement and this nonperforming category.
Hum.
And our allowances on page 13, where we break it out and a lot of.
Retail.
The only point I wanted to make here is that the accounting for purchase loans you do not have.
A general allowance you just have specific allowance or whether its impairment and.
So if you look at the percentage of our allowance for our originated loan book.
And now at 148%.
Which is very high compared to where we used to be much higher compared to where we where we used to be.
And then my final point before I turn it over to J P is on the hospitality and retail.
Credit risk. So you can see here, we break it out and <unk>.
And two categories hospitality and the second listed one and then retail for the second one from the bottom we break it down by different channels directly originated portfolio and finance and purchase.
You can see that in both cases, the loan to values or 51%.
We don't expect at all.
And any meaningful.
Credit losses and those categories.
And they've been performing actually quite well.
It certainly within the realm of possibilities some of those at some point in May.
And have some performance issues, but so far so good.
And with those.
Let me see and I think was that there were a bunch of other slides that follow around this.
But I will let you.
And look at those as you would like and obviously and of course, if you have any questions.
We love to talk to you and with that and I'm going to turn it over to J P. Thank you.
Thank you Rick and good morning, everyone.
I'll pick up on slide 20, which shows our quarterly interest cost from our deposit portfolio, which has decreased significantly over the past five quarters from one 7% and the comparable prior year quarter to 54 basis points and the current quarter and <unk>.
At 49 basis points at the end of the quarter the.
The significant interest expense savings has been achieved from a combination of a low interest rate environment, along with our efforts to shift the makeup of our deposit portfolio from time deposits to transaction accounts.
Turning to slide 21.
This slide shows the change and the composition of our deposit portfolio year over year, our community bank deposits have increased from 44% of our total deposit portfolio a year ago to 73% at the end of the current quarter. Alternatively April banking has decreased from 31% to 17% and Bulletin board seats.
<unk> from 25% to 10%.
And the bottom table shows and the.
The majority of the change and our product composition was and checking accounts, which includes demand deposits, which increased from 15% of our deposit portfolio and the comparable prior year quarter.
To 49% and the current quarter.
As you'll see in more detail on the next slide.
Significant portion of the balance is attributable to the PPP collection account the balance of which we expect to remain elevated over the next few quarters as elevated PPP collection activity continues.
Additionally, there was interest rate savings and all types, but the most significant savings were seen in money market and CD portfolios and which the weighted average rate decrease from 1.0% to 4%.
But excuse me by 1.0% to 4% and 80 basis points, respectively over the one year period.
Turning to slide 22, this slide shows the change and our deposit portfolio and annualized interest expense monthly over the past year.
While also display and the recent significant impact on the PPP collection accounts, which impacts our cash and deposit balances and is subject to significant fluctuation.
This slide also excludes the impact of $400 million of two months brokerage Cds that were taken out in January to help fund PPP loans and matured prior to the end of the quarter.
And on those brokerage Cds was 15 basis points and this funding sources and unexpected to be recurring which is why it's excluded from the analysis.
Over the past year, we have generated approximately $9 $6 million and annual interest expense savings and our deposit portfolio decreasing from 15, 9% and April 2020 to just $6 $3 million in March 2021.
Moving ahead to slide 24.
This slide provides detail on our potential additional future interest expense savings on our CD portfolio of which 78% for $232 million is scheduled to mature within the next 12 months.
Just on the current weighted average interest rate of one for 2%.
This amounts to $3 3 million and annual interest expense to the bank.
Slide 25 shows our quarterly revenues over the past five quarters, which have increased by $36 $2 million from the linked quarter and $49 million from the comparable prior year quarter.
Revenues, excluding PPP gains have increased $3 $2 million from the linked quarter and $7 $9 million from the comparable prior year quarter. Additionally, our noninterest expenses decreased by $792000 from linked quarter and $445000 from the comparable prior year quarter, which demonstrates our continued ability.
And <unk> to continue.
And to increase revenues, while maintaining flat or slightly lower expenses.
Primary driver for the decrease in non interest expense as compared to both the linked quarter and the comparable prior year quarter was a decrease in salaries expense of $850000 and.
$847000, respectively, primarily due to an increase of $4 4 million and deferred salaries contract expense related to PPP loan originations.
We offset by an increase of $3 $3 million and bonus expense attributable to the high level of PPP activity.
Additionally, during the current quarter, we had a recovery of $276000 on our SBA servicing <expletive>ets as compared to a $233000 impairment charge and the linked quarter and a $215000 impairment charge from the comparable prior year quarter.
That concludes our prepared remarks at this time, we would like to open up the line to Q&A.
Sure.
Sure.
Sure.
Sure.
Yes.
Yeah.
Sure.
For the operator there.
<unk>.
Hello.
Alright.
Sure.
Michelle the operator are there any questions.
For those listening we may have a technical difficulty here if you can hang on please.
But if you could follow up please.
And part of me and just a reminder, we have a question. Please press star one.
And we do have a question from Alex <unk> from Piper Sandler.
Hey, Good morning, guys can you hear me.
Alex Good morning, sorry for the technical.
Technical difficulty there.
Good morning on no worries at all.
I'm surprised Rick you might be the only guy on the country with a hometown store.
But no question.
Mobile phone and I guess ask on 12.
Sorry about that.
A couple of questions for me first off.
And we can look from the SBA data.
I think through the second week of April you guys had originated a total of 2.5 dollars 6 billion loans and the round. Two obviously you disclosed and the press release, where you did through the end of the first quarter are you able to give us an update on kind of where that what that total origination volume is.
Through I guess now the third week in April.
Yes.
And it's in that range still it's maybe $2 6 billion and a little more.
Roughly that it's not meaningfully it's higher than that number but not meaningfully higher.
No.
And that slowed them, but.
Obvious point is we have and this quarter another day.
Linda and her 600 million that we'll wind up selling and the current quarter.
Is that range.
And part of your question and I anticipated.
Yeah, I <expletive>ume everything has to be sold correctly by if I'm correct by the end of June is that right.
That's currently correct, yes, now it's possible that.
The fed will extend the triple T.
Window, we will certainly sell virtually all of our.
Production before the end of June.
Zinc and opening question and there is no prediction and applied and this is.
And if they extend the window.
There'll be an opportunity to buying more loans that we don't know.
For long source okay.
And then I wanted to drill in on on.
On some of the commentary you had on changing the pricing strategy around the loan purchases and I was wondering if you could maybe help us understand if thats certainly that should result in more volume, but are you underwriting them now to try to get a certain number of volume and the door per quarter per year sort of what are the acceptable yields and.
How was the complexion of the portfolio change and the result of some minor tweaks to the strategy.
Well I would say that the.
Is this is an incremental.
<unk> and our strategy we of course.
We will.
And when there are opportunities arise.
Be it on loans.
And as we did as we did previously.
Generated higher yields.
We have taken a look at how much capacity that we have.
And and say that if we can.
Paid loans.
And our view there is not a credit risk component.
And we can bid loans.
Debt.
And I don't want to say on the phone with our bidding strategy is exactly because there are other people.
And for obvious reasons and I think the point is.
The way I can say it is debt in addition to whatever we did before.
If we can bid loans and earn.
Roughly what we would do on on originated loan environment book.
It's a good strategy.
Okay.
Agreed and then sometimes on the call you give an update on sort of on the.
Sort of the volumes of loans that you are able to look at during the quarter and what you bid on and.
And obviously, we know what you actually want to purchasing are you able to provide those figures to US yes, I can let me just if you'd give me if you ask one more question, while I'm looking I will I will tell you that.
Yes.
I wanted to ask a question on the deposit cost strategy obviously.
Growth and the community bank is pretty impressive and I know that you've changed your strategy there a little bit over the past year I was hoping maybe you can kind of remind us what the change and the strategy is and.
That's going to be there's still some runway to grow deposits there and go on.
On forward, if thats going to be the primary funding source for everything.
JP you want to comment on that well and searching for Alex's other question.
Sure.
Thanks, Alex So the focus there was looking at our branch network and looking at some of the opportunities that we have to generate some retail deposits and partnering with professional service companies and and other.
They have less lending needs, but have deposit needs and reaching out to them and trying to grow the community bank that way and it's been.
Successful, we've been looking outside of our normal.
What we had always done and <unk>.
Community Bank for deposit growth.
And you know looking at different opportunities that might present themselves and in the main market and elsewhere, which has allowed us to.
To grow that successfully.
Over the past year, or so and hopefully continue to do so and the future and becoming less reliant on the evil.
Funding arm and the bowls have boards that we have there.
So a lot of and it has been gr<expletive>roots efforts outreach to some of these professional service companies and.
Just making sure that our product mix.
<unk> the needs of some of these companies to be able to offer them.
They need from a and institution to place for deposit growth.
Okay. Thank you for that.
I think.
Yeah.
I'm sorry go on out.
And I know you go on.
Well first I was going to acknowledge you're right. We do have an old phone and it just rang I always think I was talking on my cell phone yes.
Yes, we do have.
And I guess I'm aging myself here.
And.
And the.
We looked at on the purchase side.
We've reviewed 200 and.
80 million and I'll do some rounding here.
On.
Loans.
We bid on.
$70 million and we were awarded $42 million.
Okay.
And they all those orders.
And one.
I was going to say a couple of quarters ago.
And we also have the world is coming to you and and and we're looking at sort of the opportunity to purchase loans it was seemingly.
Very strong.
Based on sort of distressed <expletive>ets and companies need to shed certain types of loans.
Now fast forward a couple of quarters, where we are today. It seems like credit is no longer as big a concern. However, we've had a lot more M&A than than we probably were anticipating a couple of quarters ago, which I know sometimes drives some of these loans sales. So I was hoping you could give us a little bit of <unk>.
Commentary on sort of how you see the picture today.
For the loan purchase market.
And I'm going to start and I'm going to ask Pat to.
To jump in and add to this.
I would say.
It Hasnt turned out as we originally thought as you said there.
They are not there is not a ton of.
Loans that we can buy which I thought maybe we would have bought at 80.
You said that earlier.
It's just not the case.
And what we're really seeing a fair amount of although its not.
And it wasn't so much on the quarter that just anything but kind of what we look forward to us.
We are seeing a fair number of loans and.
And our low LTV.
That are there.
And it may be winning it.
6% yield to maturity and with some prepayment youre going to make a seven.
We are seeing.
A fair amount of loans like that.
But it's not what we thought and I mean and I do.
I think there's probably a universally held view.
Yes.
Credit is a lot better than everybody would've thought it would've been at.
At least on our world It seems to be Bert you want to answer that provide Alex and more color.
That's right you know a few quarters ago. There were it seemed like there were two markets. There was the cleaner low LTV stuff, which was trading.
Aggressively or there was a lot of competition for them and higher yielding loans, which were a lot of which we're just not selling because of the bid ask gap on.
And that seems to have that piece of the market seems to have dried up and right now it's kind of a typical sellers, we're seeing out there theres a lot of talk of.
And some big sales coming due to M&A.
We haven't seen any any materialize yet.
Okay. So if we look back and maybe 2019 as an example year for what you did and obviously theres a lot of Lumpiness and the quarters would you say the market is looking similar to the way. It was in 2019 or is that or is the competitive landscapes landscape changed as well as for the purchase market.
Yes.
Net.
I don't think yes, I don't think it's changed as much as we thought it was going to change at the beginning of this year.
Year ago, we anticipated.
Significant changes and there's a few players that are no longer and.
On the market, but.
The for the most part.
On the market has not has not changed that much.
Except what we've seen I guess over the past year has more cleaner.
Higher quality loans.
This is a point and I would make though.
As.
Rather than looking just at the yield on the purchased loans, let's think about spread.
Alright so.
And by loans.
And you earned a seven on.
Our money cause us right.
Right now 50 basis points.
And all day long at 650 basis points as a really great spreads.
On on purchase loans, and I'm not suggesting that.
And that's where the number will be for.
For the quarter.
We and I don't have that slide open, though we were.
And.
And half roughly I can open up and be more precise and my language.
But we're still earning a really great.
Return on.
On our purchased loan book.
With much lower funding cost I think debt is really bad.
A key part of this.
Agreed and then on the originated <unk>, which has become a much larger percentage of the portfolio over the last few years as you talked about the change in.
This slight shift and the strategy there to try to keep more loans or tried to help from refinance with northeast.
With the refinance loan look a lot like the loans that you would have on the balance sheet today or would the characteristics be different for any reason.
Well the debt.
Obviously the credit.
Part of it would look the same if we didn't like the credit we would not extend it.
It has to be negotiated.
It really depends on kind of where the loan was sourced from if we bought on.
On a per on a purchase loans.
Net.
They may have been.
And.
Had a low rate of.
Three or three and a half when it was underwritten and we've.
Quoted at a discount to get a better yield.
Thats alone that you would.
Spec that we would.
Extend.
Five 5%, maybe six maybe lower depends on what you could negotiate.
But our goal would be to.
At least on the right part of it.
And maybe the rate would come down a little bit.
Enticement.
For the borrower to.
Stay with us and there's a lot of reasons why.
Borrowers should want to stay there.
No closing costs Theres, no appraisal and Theres no legal is very cute.
<unk> friction costs are already there.
Hopefully we have a good relationship with them and so there may be a little bit of pricing concessions.
And then there'll be some cases, where the pricing for the pricing goes up.
Our goal I'm, not suggesting at all and where.
Going to take the portfolio.
And and originated portfolio.
Or.
Portfolio Finance one.
We're earning a six we're going to earn it for we're still going on and very good returns on it.
And just making them and then.
Look at on the originated side last quarter.
We had.
More pay downs and we had originations.
We think it's a huge opportunity with the $1 billion loan book too.
No.
Try and get loans that are.
Longer and stickier and.
Develop closer ties with those customers.
Understood.
And more questions for me.
First off you guys essentially raised a bunch of capital this quarter through other PPP work that you did and which is awesome.
As you think about the capital position certainly growing loans is probably your first priority, but where does repurchasing shares fit and the sort of and the scheme of capital allocation.
And we have a lot of capital.
And now.
We always have to.
Think about it.
Whether we can use our capital and our and the business or if not.
Think about whether we ought to think about repurchasing shares or some other return of.
Capital.
And part of it depends upon the price.
Maybe if we talked about this.
Okay.
Sometime when.
And when we were trading at 25 Bucks would've been one thought now for sooner.
Who knows how long it will have some look for my.
And with 30 book, so it depends it depends on where the stock prices relative.
Two our tangible book.
And certainly within the realm of possibility that we could repurchase more shares so if we don't.
I feel comfortable that we have a way to use the capital on our.
The lending business.
Got it and then final question for me.
You sort of went through it already but on slide for with a corresponding fee.
On the.
And the moving parts there.
Perhaps it would be worth just kind of going through one more time.
And how the revenue that $11 $8 million of revenue that's yet to be recognized from the correspondent fee summary will actually sort of the timing on that especially as maybe some of these loans and start to be forgiven and the next couple of quarters and then also how that will impact the servicing interest which wed.
I expect probably to go up next quarter, just because of other loans that the loans sources purchased from you guys.
But maybe if there's a way to sort of frame what the expectation could be over the next couple of quarters that some of the forgiveness starts to play into and to the numbers.
P do you want to do that please.
Sure.
Thank you Alex.
Ill.
Take your question and answer a couple parts. The first I think Youre correct I think we will see the servicing component.
Increase next quarter.
And if thats the end of the PPP and the end of the PPP Lf and those sorts of and have.
And the ability to purchase any additional loans.
That will kind of be the highest point that it'll be at and then they are forgiven and overtime will gradually come down and it does servicing portfolio runs down.
On the other aspect on the.
The amortization of the corresponding fee and the purchase of accrued interest.
We had set that up.
Originally when all of these loan purchases occurred.
To be recognized over and approximate life for the loans, which we determined to be.
About two years, so we do have that amortizing over that life.
We do look at it each month to see if the.
On loans are.
Forgiven quicker than how we're recognizing that so.
Right now there hasnt been any.
Pick up there where the loans are running off faster than how we're recognizing those fees.
But if it comes to a time where there.
Those are being forgiven and at a pace faster than how we're recognizing net fee income.
Could accelerate a recognition at that point.
Great. That's helpful. Thanks for taking my questions.
Alex Great. Thank you very much.
And as a reminder, please press star one to ask a question at this time.
Okay, Sir I will now turn the call over to Rick Wayne for any closing remarks, as we have no further questions.
Yeah.
Thank you first Alex Thank you for.
And that set of questions I hope that was helpful.
For you and others on the call.
And so everyone else on the call.
And Alex of course thank.
Thank you for listening and supporting us.
And we will have another call and.
On July when we talk about our fourth quarter and our fiscal year and results.
In the meantime, and.
As I always suggest if you have any.
Questions feel free to call anyone of us and to the extent that were.
Able to answer those.
And we will do that.
And with that and we'll say goodbye and thank you.
Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect.
And then.
Yes.
And.
Yes.
Yes.
And.
And.
Okay.
[music].