Q1 2022 Northeast Bank Earnings Call

October 28, 2021

[music].

Yeah.

Okay.

Good day, everyone and welcome to the northeast Bank fiscal year 2022 first quarter earnings results Conference call. This call is being recorded with US today from the bank is Rick.

Wayne President and Chief Executive Officer, JP, Lapointe, Chief Financial Officer, and Pat Dignan, Executive Vice President and Chief Credit Officer.

Last night, an investor presentation was uploaded to the bank website, which we will reference in this morning's call. The presentation can be accessed at the Investor Relations section of Northland Dot com under events and presentations you may find it helpful to download this investor.

The 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 the.

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 risks and uncertainties.

Actual results may differ materially from those discussed in the forward looking statements northeast Bank does not undertake any obligation to update any 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 to all of you for joining us today.

Noted I am Rick Wayne.

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.

Presidents.

After my comments.

J P Pat and I would be happy to answer your questions.

And I'd like to start with.

With some comments on our financial.

Highlights.

On page three of this of this of the slide deck.

Hum.

First.

Point out that we.

We earned a nine point.

$9 million for the quarter.

Which was a $1 20 per earnings per share.

Return on equity was 16.7%.

And return on assets was 2.41%.

<unk> we were.

We're very pleased with.

If we take a look at our Nash still on page three of our Nashville lending activity.

For the quarter.

We.

Purchased 35.4.

We invested $35 $4 million on the $37 million.

Of UBB.

And we originated.

$94 $5 million.

Loans.

With a weighted average rate.

5.87%.

As I've mentioned in previous calls are.

Originated loans or.

Very predominantly floating rate.

The crime with floors baked.

Baked into them in today's rate environment.

587 on new originations was very strong.

And.

Those factors contributed to we've got a few.

Different numbers around net interest margin one is kind of the typical one counting everything all in which was $4 74.

But if we take the Triple T.

The impact out of that.

And subject to the language in footnote four.

So the 6% NIM, which kind of would be what.

Would be standard if we didn't have the impact of the.

Triple T activity in that account.

On the purchased loan return was 9.19%.

Very very strong with.

Fair amount of.

Discount.

That was accelerated because of <unk>.

Prepayment.

During the quarter, we repurchased.

102311 shares at 29.

And 91.

<unk>.

Finally, before I get into a little bit more detail.

I wanted to comment on.

Our.

Joint marketing agreement.

With nobody.

New names new annuities.

Substantively the successor to eight cap.

We originally entered into the agreement with the.

The principles are the same they started a new entity.

Change the name.

I don't really want to over promise on this is Scott.

A lot of potential on the other hand, it could turn out.

Not to generate that much. So I don't really I don't want to provide any numbers until we have them I can say that.

The platform.

Is substantially.

Complete.

They're going out to as you may recall.

Nobody has.

Subject to getting some approvals from some of the sellers of the loans the loan sorts.

Over 100000 customers potentially that they can market to who already have triple P loans.

Generating this kind of loan activity.

Customer acquisition costs.

It can be high in the queue.

Would they have it's going to be.

Very very small because they have access to all the customers already.

Yes.

The portal is going to open up.

Over the next couple of months of this calendar year.

With the soft opening to make sure it all works.

The initial product is a $25000.

Loan under the SBA seven program.

I would say.

A product that the.

Doing all of that.

Paperwork that you need to do under the SBA program is.

Yes.

It carries with it an 85% guarantee.

And you can.

Get very good pricing on those loans in our.

Expectation, if we get some volume would be to sell.

Sell those loans that the 85% guaranteed piece.

And the secondary market.

So there's not a lot to report as to what has happened.

I would expect that when we speak again in January.

We will be able to provide some.

More news.

Debt.

If we now turn to page four.

Which is provide some detail on our correspondent fee income, which of course has been a substantial portion of our income.

<unk>.

While this has been around and it hasn't been around that long.

If you look at the bottom of page four.

You can see.

Since the <unk>.

Fourth quarter.

2020.

Through the first quarter.

2022.

That's our fiscal quarter.

Loan source has purchased 11 $2 billion of Triple P loans.

And as of September 30th isn't isn't the last footnote.

There has been $6 $6 billion. There is $6 6 billion remaining at September 30th.

And I will talk a little bit more on the next slide about.

What's happened in round, one what's happened around so.

Again on the bottom you can see in the total line.

Total income.

To be amortized.

Was 19.46 million.

And as of the end of September $9.7 million.

It remains.

And if you look up at the top.

Three numbers.

One I wanted to point out for a second is the amortization of purchased of crude.

Chris.

Initial.

This is these are the loans that paid off sooner.

Than we had thought so we need.

I needed to accelerate.

$720000 in this quarter. So we have the right relationship between that.

And where does that purchased a crude interest and <unk>.

<unk> balances.

If we turn to the next page.

You can see we've broken up on round, one and round two.

One which was $5 billion of purchases is now.

549 is the only 11% remaining.

In round two.

There is 99% remaining of the $6 5 billion at the end of September but they just recently opened up their portal.

And art.

I won't bore you by reading a whole forward looking statement again, but.

Roughly speaking we think most of this.

Income from our.

Corresponding activity will be recognized.

By the end of this fiscal year for us or maybe a little bit into the following year.

Following a quarter of the next year, but that'll give you some ideas.

Yes.

Page six is a slide of our.

Portfolio you can see we have.

Almost 2100 law in sort of $1 74.

What I do want to highlight that.

So they get to the page is that our our national.

Lending division.

The $1 billion in its portfolio of 900 and <unk>.

$90 million.

And then we did see I think we will move to page nine which provide some statistics on there.

National lending portfolio of the top one is size.

You can see that only 11% of our portfolio has our loans greater than $9 million.

Provide all of the breakdown of the collateral types.

And.

We are now in.

45 states.

Really is a national lending business.

Going to the next.

On asset quality.

You can see that the.

Percentage of.

Nonperforming assets too.

Total assets is $1 60, which is high compared to the linked quarter, but the linked quarter as we talked about.

The balance sheet was inflated because of all of the cash and debt.

Collection account.

I'll highlight two other things on the right side. The classified loans are $12 7 million up a little bit from June 30, but down from the preceding quarters and charge offs are.

Three basis points, there were four basis points last quarter.

And Thats really what we think are really good.

Statistic when you think about the.

The rates that we're earning.

Our purchase and originated loan books.

On slide 11.

You can see that the deferral program was virtually.

Done.

Out of the.

We had $118 million.

Loans in our deferred where we gave.

P&I deferrals to their known parties under.

Deferral anymore.

Delinquencies are pretty low on that.

And on interest only out of the $40 million only $4 5 million remain in the.

The performance of those loans also excellent.

On the next slide we show kind of a rollover of our.

So bridge, rather I should say on our nonperforming assets I'll just highlight in the case of loans.

Added 5 million than two and a half million came off so there was a.

Slight increase in there.

Our Oreo.

The balances came down by about 880 <unk>.

Grant compared to June 30.

Theres a lot of information in the deck.

Having to do with allowance and how much we have in each group.

We provide that so you can look at that we've done that in other quarters I'm not going to do it now and then also the.

Loan to value.

Our national lending portfolio on page four.

I won't go through all of I will not go through all of this by collateral types, but in summary, I would point out that the $990 million.

The weighted average loan to value of 48%.

Which is really what we do is we try and.

Alone, where we have really high confidence in the collateral value.

Hum against slipped through the remaining slides that I'm going to now.

J P.

Starting on page 20.

J P.

Okay.

J P are you muted do you.

Have yourself muted.

You know what I'm, not sure where JP operators everyone's still on the call and get me hear me because.

I can continue with this.

Yeah, I can see J P.

But and that's why I interjected with are you moderated.

Okay, but it doesn't seem to be.

Okay, why don't I can everyone hear me, though I am sorry to everyone listening.

Technical difficulty.

From places.

Uh huh.

Operator can everyone hear me I can continue.

You you can go ahead.

Okay. Thank you.

We won't do as good a job as.

J P would but I will I will try and going through the slides and doing this.

On page 20 is really a great slide on the quarterly cost of.

Deposits.

And the.

The Green line shows what our average cost of deposits are by quarter and if we go back a year it was $1 20.

And then on for the quarter that just finished our first fiscal quarter. It was 39 basis points.

And we have a little thought they're showing 45 basis points, which is what it was at the very last day of the quarter at slightly elevated.

Because the amount of.

Deposits and the collection account.

From the loan source was probably lower at that point in time, but.

But that is a very good trajectory.

That we're working on.

If we go to slide 21.

And I've talked about this before as has JP.

One of our objectives is to change.

Change the composition of our liabilities.

Reduce the amount of higher cost.

Yes.

Composites.

Both through April banking.

And on the Bulletin Board, which is a place that.

Banks and others most of the banks.

With by Cds from Us using our <unk>.

Products as part of their treasury function.

And increasing the amount of deposits in our community banking Division.

And so if we look at the.

The top of the slide 21.

You can see that if we compare the year September 32020.

Just the September 32021.

Our deposits in our community banking Division.

Have grown $174 million.

And the deposits and the enable banking, which are higher price.

<unk> been reduced by $120 million.

And on the.

Great border Bulletin Board.

$63 million.

We just think Thats really really great and it's a lot of work.

By our.

Folks and our community banking Division and.

Main to do that.

And we have.

We've reorganize that group.

We have a.

The person in charge of business banking, where we're seeking.

Deposits from.

Businesses in Maine.

Generally without big borrowing needs.

We have hired the.

Former deputy Treasurer and made to go after municipal deposits, which we've had great success in.

And we have a whole program to try and bring in retail deposits as well.

So and then I'll just finally come in if you look at the bottom of page 21.

That.

Mark checking deposits.

Counts are up $148 million.

Year to year, and you can see the higher priced money market below and the Cds are down in the aggregate about $205 million.

Rick can you hear me now.

I can't but I was on such a role but.

Please go ahead Sir.

Okay, you're going to start on slide 22. Please thank you sorry about that.

Turning to slide 22. This slide shows the changes in our deposit portfolio in annualized interest expense monthly over the past year, while also displaying the impact of the PPP collection account, which impacts our short term investment and deposit balances and is subject to significant fluctuation.

This slide also excludes the impact of $400 million of short term brokered Cds that were taken out in January 2021 to help fund PPP loans and matured during the quarter ended March 31, 2021, the rate on the brokerage Cds was 15 basis points and this funding source is not expected to be recurring which is why it has been excluded.

From the analysis over.

Over the past year, we have generated approximately $5 $6 million in annualized interest expense savings.

Positive portfolio decreasing from $10 $4 million in October 2020 to just $4 $8 million in.

In September 2021.

Moving ahead to slide 24. This slide provides detail on our potential additional future interest expense savings on our CD portfolio of which $191 million scheduled to mature within the next 12 months.

The current weighted average interest rate of one 107% this cost amounts of $2 $2 million in annual interest expense.

Slide 25 shows our quarterly revenues over the past five quarters, which when you exclude the PPP game have increased by $1 $9 million from the linked quarter and increased by $6 $8 million from the comparable prior year quarter. Additionally, our noninterest expense has increased $3 9 million.

From the linked quarter and $3 $4 million from the comparable prior year quarter.

This increase from the linked quarter is primarily related to an increase of $2 $6 million in salary and benefit expense primarily related to lower deferred salary contract expense during the current quarter due to minimal PPP originations during this quarter.

Along with increases in salary bonus and payroll tax expense. Additionally, there was a one point increase in loan expense of $1 4 million.

Primarily related to expenses incurred in connection with the wrap up of the PPP loan origination activity.

The increase from the comparable prior year quarter is primarily related to a $1 $6 million increase in loan expense related to the previously mentioned expenses.

Expenses from PPP activity, along with a $1 $2 million increase in salary and benefit expense again related to higher salary and bonus numbers, along with lower deferred contract salary Contra expense.

On page 26, we show our net interest margin, which was 474% for the current quarter, an increase from $3, 99% in the linked quarter and a decrease from 495% in the comparable prior year quarter.

Given the significant balance of short term investments that we hold related to the corresponding relationship collection account.

Net interest margin gets compressed excluding the cash of the correspondent relationship and our PPP loan activity.

Margin in the current quarter amounted to 6% an increase from 556% in the linked quarter and from 5% in the comparable prior year quarter.

As shown on slide 31, as we have continued to grow our national lending division portfolio and reduce the cost of our deposits. Our base net interest income has consistently increased over the last five quarters, increasing $2 9 million or 23% over the comparable prior year quarter.

That concludes our prepared remarks at this time, we would like to open up the line to Q&A.

Yeah.

Okay.

If you would like to ask a question.

Please press the star can you followed by the digit one on your Touchtone telephone. If you are using a speaker phone to ask a question. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. We will push seed in the order that you signal us and will take us.

Many questions as time permits once again, please press star one on your Touchtone telephone to ask a question.

And we have a first question.

From Alex Tour Dahl from Piper Sandler Mr. Tor Doll. Please go ahead.

Hey, good morning, guys.

Good morning, Alex.

Good morning.

I first off J P. I was hoping you could just go back to the expense commentary that you had and.

I know, there's a couple of things in there that are kind of I'm not sure of nonrecurring is the right term, but I think you cited one six related to wrap up.

Of the PPP program can you just confirm that that's the end of that expense or is there anything that's going to linger into the into subsequent quarters and then I also wanted to ask about anything.

Anything else like I know the agreement that you announced this new SBA program that you announced during the quarter.

Was gonna have a shared shared marketing expenses is there anything associated with that program. That's already in the expense line or anything that we should be thinking about for future quarters.

Okay.

On your first question that is correct that is the end of expenses related to the PPP activity. There is nothing that will be incurred going forward as part of that.

Hmm.

<unk>.

As far as the shared marketing expenses as part of the <unk> program. There is some small dollars up some expenses related to getting the system up and running.

That was incurred in Q1.

Small dollars that we've incurred to date as part of that seven day.

Arrangement that we have with <unk>.

Okay, and then as I think about just sort of the right run rate for expenses going into the next quarter I know that salaries and benefits and comp expenses were elevated in the third quarter or is that kind of settle back down.

Slightly some of the stock comp.

Fully expense during Q1, so there will be a little bit coming out of there.

It won't be incurring going forward.

As far as the bonus and salary goes the bonus where we come up with an estimate at the beginning of the year and we typically true it up at the end of the year, but compared to the same quarter last year our base bonus.

Assumptions are higher than where we were a year ago. So we expect that to.

They stayed flat during the year and salaries are head counts just up a little bit from last year.

<unk> also taken into account raises that we do in Q1.

During the current year.

But one thing that was incurred during the current quarter.

We'll come out with when.

When we pay our bonus in Q1 every year, we do have some elevated payroll taxes that.

Coming to that quarter, so that will that will come out from future quarters.

Hey, J P. Alex we're in different places so we're going to try and work through this together.

J P. We have non.

Noninterest expense for the quarter of $13 3 million.

Correct.

I'm just looking at the press release, and we have one six.

It is Alex asked about that is.

Going away, which I think gets us to 11 seven.

Added 11, seven how much of that those roughly so he can give us some sense.

Of those expenses Youre, describing kind of the bar the payroll taxes.

How much of that is.

Onetime in the quarter.

Probably four to $500000.

So it kind of gets us to.

11.2.

Hum.

And then we had some.

Well, we have some ongoing marketing relating to that.

Seven eight.

How much was that.

That was a pretty small dollars that we incurred in the quarter I don't I don't have the exact number.

Smartphone we've done so far.

So as we're thinking on the fly and this I think is safely to say from the numbers are here Alex It you know it looks like $11 million.

Kind of run rate when you knock out those items I think that was with some more with some more granularity to your question.

That's very helpful. Thank you.

And then I wanted to switch gears to to the organic loan growth.

Saw some really nice generation again in that National CRE generation.

Platform I was hoping maybe you can give us some sort of sense for where the pipeline is and sort of what youre seeing in <unk> and.

And that portfolio I know that you did some hiring in some new geographies and kind of where you are in terms of getting some new geographies up and running.

With that with the National CRE origination book.

Would love to talk about that Alex because there's a lot going on and as you noted in your report.

It's always a lot going on.

And our company, we've really had a big focus.

Yeah.

Growing our originated.

Book.

I'll just remind case, there's someone on the call that don't recall we.

We.

<unk> hired a new person and these are all senior business development folks in.

Miami.

And another one in.

Southern California.

Both places, where we have a meaningful portfolio.

And then we have.

Two in.

New York.

You know these are kind of outside of this.

This development officers and of course, we have a lot of organic growth.

From.

Existing customers and then you know of.

Other borrowers so.

No northeast bank, and they're not coming in through the business development officers, so $95 million of originations.

We thought was a really really great number.

Sure.

Pipeline is robust.

Hum.

Love the business, we're in low ltvs.

Breads over prime floors structured with special.

Special purpose entities generally bankruptcy remote.

With typically.

Sometimes recourse, but if not recourse carve out guarantees from.

Jay you know usually substantial.

Individuals or entities and our borrowers are.

No.

Families, where it's appreciate because that's not what I mean, but they're they know what they're doing.

And they are and the way they were deals are structured generally.

All of the loans to one borrower and the guidance lines and portfolio Finance are cross collateralized and cross defaulted, so they're highly motivated to.

Pay their loans, we haven't lost a one penny of principal.

And our originated.

Book.

And so that's a great place and your question is what's the pipeline the pipeline as I mentioned is robust.

And I would.

We expect to continue to see very solid numbers in there.

Well, we also saw in the quarter.

We had I would describe as an average quarter on the purchase side.

$35 million.

And.

Sort of disappointing because we have a lot of payoffs in there the net loan growth was only 3 million in debt.

But I would say that.

The purchases of said Ad-nauseum almost the purchased loan business is lumpy.

And they really are.

We're doing it we need to kind of evaluate kind of on a year by year basis, not a quarterly basis.

And I have a oh hi.

High level of confidence that we will put some good numbers on the scoreboard.

In that business I, probably meant I mentioned before with all the capital we have you know even.

Even if we did loans, which we need to sometimes the window Matt.

With much less discount than we were previously get you know we're looking at it if we can buy loans with low ltvs short duration.

And just a respectable.

Yield.

All of the capital we have it's just incrementally profitable and I'm I suspect, we're going to start to see some some of that.

Being booked as we move through the current quarter and following quarters.

That's really helpful. I mean, just kind of elaborating a little bit on the on the purchased.

Portfolio It strikes me that.

One we're now getting to the phase for a lot of these COVID-19 related deferrals were there.

The deferral periods are ending.

I know that a lot of these portfolios have performed very well for banks across the industry, but I'm curious if.

If we're going to start to see some loan sales and reduce concentrations in some lines, where banks kind of look back a year later and say well, maybe we don't want to be as heavy in this type of loan.

Following what happened over the last year.

And the other thing in the industry that.

As all of the M&A activity.

And can you just sort of remind us when you're looking at these loans.

And you sort of see where theyre coming from how much of it might be generated by M&A activity and I mean, two banks come together and they look at their combined portfolio theres a need to reduce concentrations in various.

Asset classes is that is that something that you would expect to drive volume in future quarters.

You would expect so because that's historically is what happened.

Not what happened in the <unk>.

First quarter.

You know.

So any meaningful.

Degree you would expect that to happen you know you hear that.

And you know better than I do that.

I expect that there'll be a fair amount of M&A activity and you would you would expect that to happen.

And so you know so we'll see where we do see where the potential is for kind of bigger transactions for us there.

Some of the big banks.

<unk> sales Reg I mean every year a couple of sales a year of some meaningful volume.

And where we're starting to see that we're continuing to see that I should say more accurately.

And so those banks that typically sell loans are continuing to I know loan growth has been challenging across the industry and I'm wondering if I need to retain assets has changed the way other banks think about.

There are their desire to sort of hold those sales I think that that is a true statement that.

But in some cases, you just read it in American banker received with what's going on.

Banks are having trouble generating assets.

It was an art, there's always articles about that and I just wanted to pause and.

Make the self serving statement.

Regard I think one of the things that we like the highlight and I think.

It's important when we people think about <unk>.

Our company is thinking about us as an asset generator.

One of the I can't recall, if we went over the stat in the.

Prepared remarks.

But apart from the growth linked quarter.

Linked quarter, if you take a look at.

Our growth in our national lending business that means purchase loans and originated loans either portfolio can answer directly originated.

And you take a look at the average balance.

For the quarter that just ended.

With the average balance.

For the same quarter, one year ago, it's up almost 18%.

And I think it will.

You would know.

That's a big deal I don't think many banks are.

That when you look at.

And we do report this way because you know its.

People want to hear and it's appropriate if you just look at a point in time quarter to quarter.

You've got one big loan pays off and doesn't really reflect.

What the averages, but almost a little bit more it's like 17, 8% when I say almost 18, I don't mean, 14%.

17, 817.8 or thereabouts.

That is really great growth average balances the average balance and that's what we're able to do.

Hum.

But as a company is generate assets, what we wanted to do is slowdown.

Pay downs of course.

But now to your question there are a whole bunch of banks that don't want to sell loans, because they're having trouble generating assets.

Yet there are other you know.

Big banks that come out with.

For us what would be meaningful transactions during.

During the year.

Two times three times et cetera.

And because we have so much capital.

And because our funding cost is so incredibly low now.

We can.

Bid much more when I say aggressively not on collateral value.

We want that to be you know really rock solid, but giving up some yield because it's incrementally profitable for us.

And I expect we will see more of that.

Right.

Our final question from me is just on the pace of buybacks as we saw during the quarter slowed down a little bit I was just wondering is that a function of an appetite for repurchases or is it more of a function of where youre able to actually accomplish given liquidity in the market.

No, it's more a function of where the where the prices.

And then anything we could.

You just take a look at.

Let me put that in the full sentence, so it's really that.

You know our appetite at certain price levels, we ended the quarter with tangible book at around <unk>.

29 Bucks in the average was just under $30.

Hum.

On the buyback.

You know that that's that Serena.

It's not like we're not really.

It's not a level of volume and trading our stock.

And so the last time, we had the buyback we wound up buying a lot of shares that I forget $13 or something like that and while our stock price is substantially higher than that now.

Hum.

It's not impossible that.

Our stock price to go down further.

Looking at it now with a with I thought it was a really great quarter, we had.

But obviously I'm not objective because we're down today on.

Yeah, It was down to about 70.

59000 shares so as well.

Kind of looking at where the stock price, where our appetite would be.

Okay. So the buyback.

Depending on the stock price you intend to remain active with the buyback.

At least reduce the shares that you issued during the quarter.

Well we had.

About 700000 shares remaining in the buyback that could be up a little bit, but you know we have that.

And we have a lot of capital and so.

No.

The right price we would.

Most likely would be a buyer.

Thanks for taking my questions.

Those are good ones.

Thank you Alex.

Okay. Once again, if you have a question. Please hit star one on your Touchtone telephone.

That would be star one too.

To ask a question.

Okay.

And since there are no other questions coming in I will now turn the call over to Rick Wayne for closing remark.

Thank you very much. Thank you for those of you on the call.

I think at the next call, we're going to find out.

What happened to J P.

Whereas when I might like it's either a technology problem, where he has a beautiful little Sunday miles.

Just turned three and maybe got distracted we don't know.

But he did a great job coming back better than I would have.

In any case, we look forward to talking again in January after our December 31.

Quarter.

It's a little bit early for this purpose all of you.

Happy holidays, as we moved through Thanksgiving.

Thanks, giving and the holidays and.

December and on that note I would say goodbye to you. Thank you.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.

Yeah.

[music].

Good day, everyone and welcome to the northeast Bank fiscal year 2022 first quarter earnings results Conference call. This call is being recorded with US today from the bank is Rick Wayne President and Chief Executive Officer.

JP Lapointe, Chief Financial Officer, and Pat Dignan, Executive Vice President and Chief Credit Officer.

Last night, an investor presentation was uploaded to the bank's website, which we will reference in this morning's call. The presentation can be accessed at the Investor Relations section of North East Dot com under events and presentations you may find it helpful to download this inverse.

Thank you.

Good morning, and thank you to all of you for joining us today.

<unk> noted I am Rick Wayne.

Chief Executive Officer of Northeast Bank.

And with me on the call are JP Lapointe, our COO.

Chief Financial Officer.

And Pat Dignan, our Chief credit Officer and executive.

Vice presidents.

After my comments.

JP, Pat and I would be happy to answer your questions.

And I'd like to start.

With some comments on our financial.

Highlights.

On page three of this of this of the slide deck.

First.

Pointed out that.

We earned nine point <unk>.

$9 million for the quarter.

Which was $1 20 per earnings per share.

Turn on equity was 16.7%.

And return on assets was 2.41%.

<unk>, we were very.

Very pleased with it.

We take a look at our Nash still on page three at our national lending activity.

For the quarter.

We.

Purchased 35.4.

We invested $35 $4 million on a $37 million.

Of U P b.

And we originated.

$94 $5 million.

Of loans.

With a weighted average rate.

5.87.

Thank you.

As I've mentioned in previous calls our <unk>.

Our originated loans or.

<unk>.

Very predominantly floating rate tied to prime with floors.

Baked into them and in today's rate environment.

587 on new originations was very strong.

And those factors contributed to where we bought a few.

Different numbers around net interest margin one is kind of the typical one counting everything all in which is $4 74, but if we take the triple T impact out of that.

And.

And subject to the language in footnote four.

We it's a 6% NIM, which kind of.

Would be what would be standard if we didn't have the impact of the.

Triple T activity.

In that account.

On the purchased loan return was 9.19%.

Very very strong with a.

Fair amount of discount that.

That was accelerated because of prepayment.

Prepayment.

During the quarter, we repurchased.

102311 shares at 29.

And 91.

<unk>.

Finally, before I get into a little bit more detail.

I wanted to comment on.

Uh huh.

Joint marketing agreement.

With nobody that's new.

James you annuities.

[noise] substantively the successor to eight cap.

We originally entered into the agreement with the.

The principles are the same they open they started a new entity and changed the name.

I don't really want to over promise on this is Scott.

A lot of potential on the other hand, it could turn out.

Not to generate that much. So I don't really I don't want to provide any numbers until we have them I can't say that.

The platform.

Is substantially.

Complete.

They're going out to as you may recall.

Nobody has.

Subject to getting some approvals from some of the sellers of the loans the loan source.

Over 100000 customers potentially that they can market to already have triple P loans.

Generating this kind of loan activity.

Customer acquisition cost.

It can be high end.

That's the case, what they have it's going to be very very small because they have access to all the customers already.

Yes.

The portal is going to open up.

Over the next couple of months of this calendar year.

With the soft opening to make sure it all works.

The initial product is a $25000.

Loan under the SBA seven program.

Say a product that the.

Doing all of the.

Paperwork that you need to do under the SBA program is less.

Cook carries with it an 85% guarantee.

And you can.

Get very good pricing on those loans and our.

The expectation if we get some volume would be too.

Sell those loans that the 85% guaranteed piece.

And the secondary market.

So there's not a lot to report as to what has happened.

I would expect that when we speak again in January.

We will be able to provide some more news on <unk>.

Debt.

If we now turn to page four.

Which is provide some detail on our correspondent fee income, which of course has been a substantial portion of our income.

While this has been around and it hasn't been around that long.

If you look at the bottom of page four.

You can see since the fourth quarter.

Our 2020.

Through the first quarter of two.

2022.

That's our fiscal quarter.

Loan source has purchased 11 $2 billion of Triple P loans.

And as of September 30th isn't isn't the last footnote.

There has been $6 $6 billion. There is $6 6 billion remaining at September 30th.

And I'll talk a little bit more on the next slide about.

What's happened in round, one what's happening around.

Again on the bottom you can see in the total line.

Total income that was to be amortized.

Was 19.46 million.

And as of the end of September 9.7 million.

Remains.

And if you look up at the top three.

Three numbers.

People and I want to point out for a second is the amortization of purchased accrued interest.

Our initial.

This is these are the loans that paid off sooner.

Than we had thought so we I needed to accelerate.

$720000 in this quarter. So we have the right relationship between that.

Hmm or is it that purchased accrued interest.

Outstanding.

Ounces.

If we turn to the next page.

You can see we've broken up on round, one and round two round, one which was 5 billion of purchases is now 549 is only 11% remaining in round two.

There is 99% remaining of the 615 billion at the end of September but they just recently opened up their portal.

And art.

I won't bore you by reading a whole forward looking statement again, but.

Roughly speaking we think most of this income from our COO.

Corresponding activity will be recognized.

You know by the end of this fiscal year for us or maybe a little bit into the following year.

Following a quarter of the next year, but that'll give you some ideas.

Do you.

Hum.

Yeah.

Page six is a slide of our.

Portfolio you can see we have.

Almost 2100 launch where 1 billion 74, and what I do want to highlight that so they get to the page is that.

Our national.

Lending division.

Almost $1 billion in its portfolio of $990 million.

And then we did see I think we'll move to page nine which provides some statistics on there.

National lending portfolio of the top one is size.

You can see that only 11% of our portfolio has.

Loans greater than $9 million.

We provide all of the breakdown of the collateral types.

And.

We're now in.

45 states.

It really is a national lending business.

Going to the next.

Slide on asset quality.

You can see that the.

Percentage of.

Nonperforming assets to.

Total assets is $1 60, which is high compared to the linked quarter, but the linked quarter as we talked about the <unk>.

Balance sheet was inflated because of all of the cash and debt.

And the collection of accounts.

I'll highlight two other things on the right side. The classified loans are $12 7 million up a little bit from June 30th but down from the preceding quarters and charge offs are.

Three basis points, there were four basis points last quarter.

And that's really what we think are really good.

Statistic when you think about the.

The rates that we're earning.

Our purchase and originated loan books.

On Slide 11, you can see that the deferral program is virtually.

Done nor do we have out of the.

We had 118 point million of.

Loans in our deferred where we gave.

P&I deferrals to their known parties under.

Deferral anymore and that the delinquencies are pretty low on that.

And on interest only out of the 40 million only four and a half a million remaining.

The performance of those loans is also excellent.

On the next slide we show kind of a rollover of our bridge, rather I should say on our nonperforming assets I've just highlighted in the case of loans.

We added 5 million than two and a half million came off so there was a slight increase in there and in our Oreo.

The balances came down by about 880 <unk>.

And compared to June 30, you know Theres a.

A lot of information in the deck, having to do with them you know allowance and how much we have in each group.

We provide that so you can look at that we've done that in other quarters I'm not going to do it now and then also the.

Loan to value.

And our national lending portfolio on page four.

I won't go through all that I will not go through all of this by collateral types, but in summary, I would point out that the.

$919 million.

Weighted average loan to value of 48%.

<unk>, which is really what we do is really try and let.

That alone, where we have really high confidence in the collateral value.

Hum against slipped through the remaining slides that I'm going to now is.

J P.

Starting on page 20 J P.

Yeah.

J P are you muted do you have yourself muted.

Yeah.

You know what I'm, not sure where J P operators everyone's still on the call. When you get them to hear me because I can continue with this.

Yeah, I can see J P, but high and that's why I interjected with or you might have read it.

Okay, but it doesn't seem to be key.

Okay, why don't I can everyone hear me, though I'm sorry, everyone listening with the technical difficulty we're in different places.

Operator can everyone hear me I can continue.

You you can go ahead.

Okay. Thank you I won't do as good a job as.

J P would but I will I will try going through these slides in doing this.

On page 20 is really a great slide on the quarterly cost of deposits.

And the like.

Green line shows where our average cost of deposits are by quarter and if we go back a year. It was 120 <unk>.

And then on <unk> for the quarter that just finished our first fiscal quarter. It was 39 basis points.

That and we have a little thought they're showing 45 basis points, which is what it was at the very last day of the quarter at slightly elevated.

Because the amount of.

Posits and the collection account.

From the loan source was probably lower at that point in time.

But that is a very good trajectory.

That we're working on.

We go to slide 21.

And I've talked about this before as has J P.

One of our objectives.

Is to change the composition of our liabilities and reduce the amount of higher cost.

Deposits.

Through April banking.

And I'm on the Bulletin board, which is a place that.

Banks and others, mostly banks.

Woodbine Cds from us using our.

Products as part of their treasury function.

And increasing the amount of deposits in our community banking Division.

And so if we look at the.

Q1 2022 Northeast Bank Earnings Call

Request a DemoDemo

NBN

Northeast Bank

Earnings