Q2 2022 Northeast Bank Earnings Call
Ladies and gentlemen, thank you for holding your northeast Bank fiscal year 2022 second quarter earnings results Conference call will begin shortly.
Thank you for your patience.
[music].
Good day, everyone and welcome to the northeast Bank fiscal year 2022 second 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 northeast Bank Dot com under events and 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.
A 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 Port 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, Barry.
All of you for joining us today.
Hey.
With me.
On this call are JP Lapointe, our chief Financial Officer, and Pat Dignan, Our Chief Credit Officer, and Executive Vice President.
After my comments, JP, Pat and I will be happy.
Answer your questions.
Hum.
Last night, we uploaded.
Mr <unk>.
Good morning, I'm not going to go through page by page.
The assumption that we.
We provided the information that I'm sure.
On the call have read it but I do want to amplify.
A few points.
More than appeal.
First.
Let me just say we thought it was a great quarter in almost every aspect.
And I will.
My following comments explain why we think that is true.
First just some earnings and key ratio.
Eight.
We had net income of.
11 4 million.
Which compared with $9 $9 million in the linked quarter of <unk>.
10%.
Earnings per share were $1 42 I alluded.
Turn on equity was 18, 8%.
Return on assets was two 9%.
NIM was five 4%, notably exclude.
Triple T from the NIM calculation.
The NIM would have been 6.4.
4%.
Obviously those are really outstanding numbers.
Let me first start with the discussion.
The loan activity.
To state the obvious if you increase your loan balance and maintain high rates, we're going to have an increase in net interest income, which is what occurred we had a record $261 million.
Purchases and originations.
Okay.
It's a record by a lot the originations were $168 4 million.
And the purchase loans were $92 1 million.
Also.
Our rates.
Our portfolio remains high.
At $8, 96% on our purchased portfolio and 6.48% on our originated.
Portfolio.
Remind you that.
Hum.
Most of our originated portfolio virtually all of it.
Is tied to prime and floats and so as rates go up.
Yes.
As they will.
We're going to be picking up additional interest income from that portfolio.
Just to put this in context.
Our loan.
National lending portfolio increased by 112.
Or 11% from the linked quarter and if we go back a year.
It increased $207 million or 23% over the past year.
And then the final point I want to make on this is that our because our loan book grew.
We've maintained our rates our base net interest income that is before transactional income increased by one 7 million.
From the linked quarter.
And so witnesses.
Sure.
<unk>.
Is that as the corresponding fee over time goes down.
We will make up for that.
Hopefully more much more.
By growing our loan book and so with that let me turn to the correspondent.
For a second and produced I would ask you to slide.
Slide four.
With the correspondent fee income.
It went down to the linked quarter from the linked quarter from $7 $8 million to <unk>.
$6 million this quarter.
And the reasonable debt.
Went down is the biggest component.
Of the corresponding fee income is.
Hi, Paul.
Our servicing into.
Interest, which is our share.
The servicing income that is.
Earned.
One source.
On the loans that they purchased.
And that was.
That one line item went down by $1 $6 million from the linked quarter.
And the reason for that is that loans are being forgiven.
Fast clip now.
And describe.
Describe that a little bit more.
In total.
<unk> purchased $11.2 billion of loans.
It was the balance at the end of December 31 was 4.6 billion.
Which is down $2 billion from.
September 30th and so when those triple P loans get forgiven.
There is obviously no servicing income on those.
And therefore that number goes down.
They are paying down debt roughly the pace of 500.
For months.
I suspect that will continue at that pace.
For a while and then there'll be some tail to it but we can expect that over time the corresponding fee income will go down as I said over time I suspect most of it will be recognized not all but most of it.
Through September 30.
Of this year.
I wanted to make a comment on our provision because we had a credit provision of $1 million one.
And that was true.
So the.
Performance of the SBA portfolio at the start of Covid, when we looked at the SBA port folio, which by its nature.
Has.
Higher credit risk.
Guaranteed piece.
When Covid started we put in an additional $3 million.
On the non guarantee portion of SBA portfolio.
<unk>.
Fortunately.
That portfolio has performed.
Market really well.
In this quarter.
We reversed out about $1 million, one or so.
From the reserve against that portfolio, but it's still at the healthy reserve.
On a five 2%, but it's not the 10% that we that we previously had.
<unk>.
Non interest expense.
It decreased $2 $1 million from the linked quarter to $11.2 million, primarily because the linked quarter had $1 6 million.
Nonrecurring corresponds and expenses associated with the wrap up of the Triple T.
And so.
Non interest expense.
For the quarter was $11 2 million.
Was it like to do the modeling.
That's a pretty good number.
You may think about $45 million.
For the year.
On asset quality those slides 10 through 12 again strong delinquencies were.
$14 6 million.
Or one 3% of total loans.
I've said before in the case of our business, particularly around the purchase loans those delinquencies will look higher.
Then.
A traditional community bank.
And there's a real question as to look at at the.
Charge offs.
On our originated loan book.
Where we've done that on a $1 eight or so.
And that range our charge offs are.
Zero.
And in the case of the.
Purchase portfolio, where the returns are on a weighted average about 11, 5% more or less.
The weighted average charge offs or eight or nine basis points.
Terrific asset quality.
100 Covid.
<unk>.
Virtually all worked out.
The ones that we provided of P&I deferral, 99% are current.
And in the case of interest only.
They're also performing remarkably well.
No.
Now I want to make a comment on deposits which are.
Slides.
'twenty through 'twenty four.
And over the last year year, and a half we've made a conscious effort.
To reduce our reliance on higher cost.
Bulletin Board and April CD and money market.
Closets.
With our focus of.
Bringing down that cost by.
Growing our deposits through our community banking division, which includes deposits.
Yes.
And our footprint of course, both consumer and business.
Also.
Yes.
Meaningful number.
For deposits from municipalities, which we're trying to state and municipalities, which we're continuing to grow as well as a focus on getting deposits from our national lending customers.
And that's really paid off.
Our average cost of deposits.
For the quarter were 36 days.
<unk> points, which compared to a year ago. It was 103 basis points in two years was 198 basis points of course some of that.
A fair amount of that is rate driven but if you look at the slides you'll see.
How we have changed the composition of the deposits.
Also on the share repurchase activity I know this is near and Dear.
A bunch of our investors.
For the quarter, we repurchased 340.
And shares at a weighted average price of just under $34.
Finally, I want to make a comment.
Seven a program.
With new <unk>.
As you recall, we signed a five year.
Exclusive.
Marketing agreement.
With new <unk>, which is formerly a cap.
People are the same people I should say more accurately.
And starting with trying to market small balance.
Starting to market SBA seven loans too.
Most of the 115000 customers that loan source has from purchasing their loans.
Our first foray is looking.
Looking at small balanced working capital loans under $25000.
We've spent a lot of time, along with nudity building out the technology, which is substantially complete.
We've just annuities just started.
Two in white.
Existing loan source customers.
Phase rollout.
Two.
Apply for these small balance working capital lines.
As I've said before I don't want to over promise are under promise, we'll see how this performs well.
Certainly.
Optimistic.
But we will see.
And we will have some better numbers to report to you.
After the quarter, we know when we meet again.
In April .
And with that.
I would like to turn it over to you for questions.
If you'd like to ask a question. Please do so by pressing the Starkey followed by the digit one on your Touchtone telephone if you're using a speaker phone to ask a question. Please make sure. Your mute button is turned off to allow you signaled to reach our equipment. We will proceed in the order that you signal us and we will take as many questions.
As time permits once again, please press star one on your Touchtone telephone to ask a question.
And our first question on line comes from Mr. Jeffrey <unk> from Piper Sandler.
Good morning.
Good morning, Jeff.
Thanks for taking my questions.
First wanted to start on the National origination business you guys had a really nice quarter. There can you talk about what factors drove the big growth and how sustainable that is over the next handful of quarters.
Of course.
But we've hired as we've as I've mentioned before some outside business development offers additional ones officers we have.
And now two in New York, one in Miami, one in California.
We have a lot of.
Organic growth two customers that just our existing customers.
And have additional financing needs.
We've done a lot too.
Market.
Our origination.
Business.
<unk>.
And.
We have a very very good niche, which is focusing on.
Loans, particularly in the portfolio of finance business that the borrowers are borrowing needs are too small for the big banks.
And what a traditional community bank would do.
And I think we have momentum with us I don't know if every quarter will be $168 million, but we do expect.
We're going to have very good volume.
Each quarter.
Pat do you want to add anything to that.
Oh that was a good summary.
We're able to floating.
In the midst right below non bank lenders with respect to pricing and there seems to be growing demand.
Sure.
Four four quick execution and pricing.
Advantage is paying off.
Thanks, I appreciate the color.
Next up I wanted to talk about the purchase market has something in the market for loan purchases changed which could suggest that volume would pick up going forward or was this quarter strong volume more function of seasonality.
I think it was.
This quarter, we had a big purchase.
60% or $70 million included in that number.
No.
Often did on pools that large.
Very competitive and so I think that was a big and that I think that was up.
A big.
Contributor to these large portfolio.
The purchase.
For the.
For the quarter.
No I expect we will.
I wouldn't predict it every quarter is going to be as large as this one on the purchase side.
I would expect that.
We will get our fair share as we have in the past, but I don't think anything has particularly changed in that market from the previous quarter per quarters.
Got it thanks.
I wanted to ask a little more about the annuity deal.
What is it about the small balance working capital loans under 25000 that got.
You guys really like as a lending product and what is it about that product that you think will particularly appeal to.
To the customers so that that a cat brought on.
So.
First of all it is.
Okay.
You can get very good pricing on the product.
Plus 475.
Typically with SBA loans. The maximum you can get is $2 75.
<unk> Prime.
A big underserved market.
That will benefit from this working capital.
Loan.
It's also.
If you want to do it in a lot of volume.
It's simple simple, but it's easier.
The size and Ts.
Across than the larger SBA.
So it can be highly automated.
And we think when you compare this product with some of the other.
Loans that come to small balance loans for businesses.
This has a lot of benefit over those.
It's got a seven or 10 year amortization as opposed to be doing.
Six months or a year or two or three years.
That's the big advantage in the rate.
It's much better than typically what you see for some of the non.
Nonbank lenders doing these loans that they approve in a day.
And it's also a product that most banks are not doing and don't want to do because unless you do it in volume, which is our expectation.
It is very.
<unk> expenses too.
Offer one of these $25000 loans to a borrower so kind of wrap that up.
I don't think Theres a lot of competition for this we think theres a lot of need for it.
Reising is good for it.
Our expectation is we will sell these off.
And hold and the guarantees large on these is currently 90%.
And so it's got a big guarantee on it.
And we think there'll be a lot of demand, but as I said I don't want to overstate that until we can report what the actual numbers are.
And after we do this and we will take a look at other 700 products as well, but we're starting.
With this in one of the things that is not only.
Marketing too.
The existing loan source customers.
Boeing because different states to talk to.
The economic and development offices of those states.
You can see what we can provides us because as I said there is a big big underserved population.
Or is this kind of loan product and then also going to other banks and try and white label the product for them.
For example on our website.
There is a link where customers can come they click on it and then they wind up on the annuity website to do it and our hope is that we can do that with other banks as well.
I appreciate the color. Thanks.
Did you say the intention is to sell off the.
The guaranteed portion and hold the non guaranteed portion on balance sheet.
Exactly.
Okay. Thanks.
Next I wanted to talk about asset sensitivity I know you mentioned earlier in the call. Most of the originated book is tied to prime and floats can you go through the rest of the portfolio. Please.
Find us which buckets of the loan book are variable and what they reprice off of and also is any of the loans are sitting on floors.
J P.
Sure. Thanks, Jeff.
It's around 92% of the <unk>.
So lending originated portfolio is variable with.
With just about all of those loans tied to prime.
Ed.
All of those loan primarily have floors built in.
Which is typically the rate that origination.
So I would say the majority of the originated book is variable.
The purchase portfolio.
That varies based on the loans some of those are big and some of those are our variable.
Don't have a breakout of what that percentage is but.
There is a portion of those to float.
Pat has any more color on the purchase portfolio for <unk>.
Those might be variable.
I don't I think it's somewhat slight.
Slightly more variable than fixed.
And I would say on the on the purchase bulk of course.
A big part of the.
Income comes in from.
Transaction early pay off of those loans I shouldn't say, it but I don't want to overstate it but if.
If we go to slide <unk>.
As funds for a second.
Slide 28, Rick and that'll show.
Between the.
Coupons and the regularly scheduled accretion and then the acceleration.
Accretion can pay offs, yes. Thank you. Thank you J P. So on this slide.
Regularly scheduled interest and accretion on our purchase pulp was 664, but then we pick up.
Other two 3% from.
Payoff of loans to get us to about nine.
And.
That was an expansion of your question, Jeff but.
I think the headline is the originated portfolio was tied virtually all of it.
Tied to prime.
Thank you.
Switching to capital.
Nice quarter for buybacks was wondering if you could give us an update please on what remains on the program and how you're thinking about buybacks as an allocation of capital in 2022 in comparison with although wound growth initiatives you have in place.
Can you just how much how many shares are left out of the.
We have about 396000 shares left to buy back as part of our approved plan.
And to answer your question on the the way we think about it.
For the longest time.
We only bought stock.
Yes.
Under tangible book.
Dan.
Hey, JP, how many shares that we bought back total.
And then what's the weighted average price.
One second here.
To date, we have.
Repurchased.
Three almost three 5 million shares at about $15 per share.
So thats, obviously been terrific, but the price was much lower.
About it if we take a look at.
What our needs for capital and of course, we do have as Ed pointed out to me.
Frequently.
A lot of.
Capital.
And what we need to do the most profitable thing we can possibly do is leverage that capital.
And grow our earnings.
And we made good progress this.
Quarter.
Well, we take a look at.
How much capital we have what we think we're going to need what do we think the opportunities are.
Where is the stock price.
All of us at tangible book.
This quarter.
<unk>.
I mentioned earlier, we bought.
Sure is that a little bit less than 34 books.
As a tangible book J P. We ended up at $30 40.
We're all in different places Thats, obviously, that's why we're talking.
Having a conversation around this was at $30 40.
It was Rick Yes, that's correct yeah. So we bought a 34.
No.
I think thats about as much as I can add obviously I can't say at what price, we would buy back stock.
Those are the factors that we think about when we do it.
Thanks.
Question was on expenses.
In your prepared remarks, you mentioned something about $45 million was that referring to historical expenses or was that a forward looking.
Forward looking I think.
We were 11 two.
Quarter, and I think thats a reasonably good number.
For the for the year.
Yes.
So you can annualize.
If we get strong strong loan growth does that mean that there would be that expenses would come in higher than that $45 million number or does that $45 million contemplate the strong loan growth.
If we haven't already strong loan growth.
That number could get higher.
Got it okay. Thanks, so much for taking my questions Congrats on a great quarter.
They were excellent questions, Jeff I have to tell Alex Thank you.
Thank you once again for any questions. That's star then one on your Touchtone phone.
And I'm showing we have no further questions at this time I will turn the call over to Rick Wayne for closing remarks.
Thank you.
You all for joining us and supporting us.
And we look forward to talking to you in April .
Thank you very much.
And thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
[music].
[music].
Good day, everyone and welcome to the northeast Bank fiscal year 2022 second quarter earnings results Conference call. This.
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 northeast Bank Dot com under events and 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.
A 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 risks and uncertainties.
Actual results may differ materially from those discussed in the forward looking statements nor.
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.
All of you for joining us today.
With me.
On this call are JP Lapointe, our chief Financial Officer, and Pat Dignan, Our Chief Credit Officer, and Executive Vice President.
After my comments JP.
And I will be happy to answer your questions.
Last night, we uploaded and investor deck.
This morning, I'm not going to go through page by page on the assumption that.
We provided the information that I'm sure.
Those on the call have read it but I do want to amplify.
A few points.
More than appeal.
First.
Let me just say it.
It was a great quarter in almost every aspect.
And then I will.
In my following comments explain why we think that is true.
First just some.
Earnings and key ratio.
Right.
We had net income.
11.
11 4 million.
Which compared with $9 $9 million in the linked quarter.
15%.
Earnings per share were $1 42.
Looted.
Return on equity was 18, 8%.
<unk>.
It was two 9%.
NIM was $5 two 4% and if we exclude triple P from the NIM calculation.
The NIM would have been 644%, obviously those are really outstanding numbers.
Let me first start with a discussion of the loan activity.
To state the obvious if you increase your loan balance and maintain high rates.
An increase in net interest income, which is what occurred late a record $261 million.
Purchases and originations.
Okay.
That's a record by a lot the originations were $168 4 million and the purchase loans were $92 1 million.
Also.
Our rates.
Our portfolio remains high.
At $8, 96% on our purchased portfolio and 6.48% on our originated.
Portfolio.
Remind you that.
Hum.
Most of our originated portfolio virtually all of it.
Is tied to prime and floats and so as rates go up.
Yes.
Yes, they will.
Going to be picking up additional interest income from that portfolio.
Just to put this in context.
Alone.
National lending portfolio increased by $112 million or 11% from the linked quarter and if we go back a year.
It increased $207 million or 23% over the past year.
And then the final point I want to make on this is that our because our loan book growth.
We've maintained our rates our base net interest income that is before transactional.
Income increased by $1 $7 million from the <unk>.
Linked quarter.
And so what it says.
Sure.
<unk>.
Is that as the corresponding fee over time goes down.
We will make up for that and hopefully more much more.
By growing our loan book.
So with that let me turn to the correspondent.
For a second and for this I would ask you to go to slide four.
With the correspondent fee income.
It went down to the linked quarter.
The linked quarter from $78 million to $6 million in this quarter.
And the reason for that.
It went down is the biggest component.
The corresponding fee income.
On the line called <unk>.
Servicing.
Interest, which is our share.
The servicing income that is.
Earned.
One source.
On the loans that they purchased.
And that was.
That one line item went down by $1 $6 million from the linked quarter.
And the reason for that is that loans are being forgiven.
Fast clip now.
<unk>.
And describe that a little bit more.
In total loans.
<unk> purchased $11.2 billion of loans.
It was the balance at the end of December 31 was $4 6 billion, which is down $2 billion from <unk>.
September 30th and so when that was triple P loans get forgiven.
There's obviously no servicing income on those.
And therefore that number goes down.
They are paying down debt roughly that pace of $500 million.
<unk>.
I suspect that will continue at that pace.
For a while and then there'll be some tail to it.
But we can expect that over time, the corresponding fee income.
Over time I suspect most of it will be recognized not all but most of it.
Through September 30.
Of this year.
I wanted to make a comment on our provision because we had a credit provision of 1 million one.
And that was true.
So the.
Performance of the SBA portfolio at the start of Covid, when we looked at the SBA port folio, which by its nature.
It has.
Higher credit risk.
Guaranteed piece.
When Covid started and we put in an additional $3 million.
Elliot guaranteed portion of SBA portfolio.
<unk>.
Fortunately.
That portfolio has performed.
Market really well.
And this quarter.
We reversed out about $1 million, one or so.
From the reserve against that portfolio.
The healthy reserve.
On a five 2%, but it's not the 10% that we that we previously had.
Non interest.
First expense.
Is decreased $2 $1 million from the linked quarter to 11.2.
$2 million.
Primarily because the linked quarter had $1 6 million of <unk>.
Non recurring correspond and expenses associated with the wrap up of the Triple T.
And so or not.
Non interest expense.
For the quarter was $11 2 million.
And those who like to do the modeling.
That's a pretty good number.
You may think about $45 million.
For the year.
On asset quality those slides 10 through 12 again strong delinquencies were.
$14 6 million.
Or one 3% of total loans.
As I've said before in the case of our business, particularly around the purchase loans.
Delinquencies will look higher.
And then.
A traditional community bank.
And there's a real question as to look at.
The charge.
Charge offs.
On our originated loan book.
Where we've done that on a $1 eight or so.
And that range our charge offs are.
Zero.
And in the case of the.
The purchased portfolio, where the returns are on a weighted average about 11, 5% more or less.
The weighted average charge offs or eight or nine basis points, so really terrific assay quality.
On the Covid.
<unk>.
Virtually all worked out.
The ones that we provided of P&I.
99% are current.
And in the case of interest only.
They are also performing remarkably well.
Yeah.
And now I want to make a comment on deposits which are.
Slides.
'twenty through 'twenty four.
Over the last year year, and a half we've made a conscious effort.
To reduce our reliance on higher cost.
Bulletin Board and April CD and money market.
<unk>.
With our focus.
Bringing down that cost by.
Growing our deposits to our community banking division.
Which includes deposits.
Thank you.
Our footprint of course, both consumer and business.
Also.
Meaningful number.
For deposits from municipalities, which we're trying to state and municipalities, which we're continuing to grow as well as a focus on getting deposits from our national lending customers.
That's really paid off.
Our average cost of deposits.
For the quarter were 36 basis points, which compared to a year ago. It was 100.
Three basis points.
Two years was 198 basis points of course some of that.
A fair amount of that is rate driven.
If you look at the slides Youll see.
Now we have changed the composition of the deposits.
Also on the share repurchase activity I know this is near and Dear.
Bunch of our investors.
For the quarter, we repurchased 340.
And shares.
At a weighted average price of just under $34.
And finally, I want to make a comment.
On our <unk> program.
With new <unk>.
As you recall, we signed a five year.
Exclusive Maher.
Marketing agreement.
With newer D, which is formerly a cap.
People are the same people I should say more accurately.
And starting with trying to market.
All balance.
Starting to market SBA seven loans too.
Most of the 115000 customers that loan source has from purchasing their loans.
Our first foray is.
Looking at small balance working capital loans under $25000.
We spend a lot of time, along with annuity building out the technology, which is substantially complete.
We've just annuities just started.
To invite.
Existing loan source customers in a phased rollout.
Two.
Apply for these small balance working capital lines.
As I've said before I don't want to over promise are under promise, we'll see how this performs.
Certainly.
Optimistic, but we will see.
We will have them.
<unk> numbers to report to you.
After the quarter, we know when we meet again.
In April .
And with that.
I would like to turn it over to you for questions.
If you'd like to ask a question. Please do so by pressing the Starkey followed by the digit one on your Touchtone telephone if you're using a speaker phone to ask a question. Please make sure. Your mute button is turned off to allow your signal to reach our equipment. We will proceed in the order that you signal us and we will take as many questions as time.
Permits once again, please press star one on your Touchtone telephone to ask a question.
And our first question on line comes from Mr. Jeffrey <unk> from Piper Sandler.
Good morning.
Good morning, Jeff.
Thanks for taking my questions.
First wanted to start on the National origination business you guys had a really nice quarter. There can you talk about what factors drove the big growth and how sustainable that is over the next handful of quarters.
Of course.
But it was hired as we as I've mentioned before some outside business development offers some additional ones officers we have.
And now two in New York, one in Miami, one in California.
We have a lot of.
Organic growth two customers that just our existing customers.
And have additional financing needs.
We've done a lot too.
Market.
Our origination.
Business.
<unk>.
<unk>.
We have a very very good niche, which is focusing on.
Loans, particularly in the portfolio of finance business that the borrowers are borrowing needs are too small for the big banks.
And what a traditional community bank would do.
And I think we have momentum with us I don't know if every quarter will be.
Hundred $68 million, but we do expect.
We're going to have very good volume.
Each quarter.
Pat do you want to add anything to that.
Oh that was a good somehow we think that the.
We're able to floating.
In the midst right below non bank lenders with respect to pricing and there seems to be growing demand for.
Four for a quick execution and pricing.
<unk> advantage is.
It's paying off.
Thanks, I appreciate the color.
Next up I wanted to talk about the purchase market has something in the market for loan purchases changed which could suggest that volume will pick up going forward or was this quarter strong volume more function of seasonality.
I think it was.
This quarter, we had a big purchase.
68 or $70 million included in that number.
No.
We often get on pools that large.
They're very competitive and so I think that was a big and that I think that was up.
A big.
Contributor to these large portfolio.
The purchase.
For the quarter.
It's Craig.
I wouldn't predict it every quarter is going to be as large as this one on the purchase side.
I would expect that.
We will get our fair share as we have in the past, but I don't think anything has particularly changed in that market from the previous quarter per quarters.
Got it thanks.
I wanted to ask a little more about the annuity deal.
What is it about the small balance working capital loans under 25000 net debt that you guys really like as a lending product and what is it about that product that you think will particularly appeal to.
To the customers so that that a cat brought on.
So.
First of all it is.
Okay.
You can get very good pricing on the <unk>.
It's prime plus $4 75.
Typically with SBA loans. The maximum you can get is $2 75.
Prime.
A big underserved market.
That will benefit from this working capital.
Loan.
It's also.
If you want to do it in a lot of volume.
It's simple simple, but it's easier.
The size and Ts.
To cross then the larger SBA.
So it can be highly automated.
And we think when you compare this product with some of the other.
Loans that come to small balance loans for businesses.
This has a lot of benefit over those.
It's got a seven or 10 year amortization as opposed to be doing.
Six months or a year or two or three years.
That's a big advantage in the rate.
It's much better than typically what you see for some of the.
Non bank lenders doing these loans that they approve in a day.
And it's also a product that most banks are not doing and don't want to do because unless you do it in <unk>.
And which is our expectation.
It is very pretty expensive too.
All for one of these $25000 loans to a borrower so kind of wrap that up.
We don't think Theres a lot of competition for this we think theres a lot of need for it.
Pricing is good for it.
Our expectation is we will sell these off.
And hold and the guarantee is large on these is currently 90%.
And so it's got a big guarantee on it.
And we think there'll be a lot of demand, but as I say I don't want overstate that until we can report what the actual numbers are.
And I would even after we do this and we will take a look at other 700 products as well, but we're starting.
With this in one of the things that's not only.
Marketing too.
The existing load source customers.
Only because different states to talk to.
The economic and development offices of those states and to see where we can provides us because as I said there is a big big underserved population.
Or is this kind of loan products and then also going to other banks and try and white label the product for them for example on our website.
There is a link where customers can come they click on it and then they wind up on the annuity website to do it and our hope is that we can do that with other banks as well.
I appreciate the color. Thanks.
Did you say the intention is to sell off the.
The guaranteed portion and holds the non guaranteed portion on balance sheet.
<unk>.
Got it okay. Thanks.
Next I wanted to talk about asset sensitivity I know you mentioned earlier in the call. Most of the originated book is tied to prime and floats can you go through the rest of the portfolio. Please remind us which buckets of the loan book are variable and what they reprice off of and also if you saw any of the loans are sitting on floors.
J P.
Sure. Thanks, Jeff.
Uh huh.
Around 92% of the national lending originated portfolio is variable.
With just about all of those loans tied to prime and all.
All of those loan primarily have floors built in which is typically the rate that origination.
So I would say the majority of the originated book is variable.
The purchase portfolio.
That varies based on the loans some of those are fixed and some of those are our variable.
Don't have a breakout of what that percentage is but.
There is a portion of those to float.
I don't know if past is any more color on the purchase portfolio what percentage of those might be variable.
I don't I think it's somewhat slight.
Slightly more variable than fixed.
And so I would say on the on the purchase bulk of course.
A big part of it.
Income comes in from.
Transaction early pay off of those loans I shouldn't say I think I don't want to overstate it but if.
If we go to slide <unk>.
As funds for a second.
Slide 28 rig and that will show the.
The breakout between the coupon and the regularly scheduled accretion and then the accelerated accretion can pay offs. Yes. Thank you. Thank you J P and so on the on this slide the regularly scheduled interest and accretion on our purchase pulp was $6 64.
But then we picked up another two 3% from.
Payoffs of loans to get us to about nine.
<unk>.
That was an expansion of your question, Jeff, but I think.
The headline is all of the originated portfolio was tied virtually all of it.
Hi, Brian .
Okay.
Switching to capital.
It was a nice quarter for buybacks was wondering if you could give us an update please on what remains on the program and how you're thinking about buybacks as an allocation of capital in 2022 in comparison with although wound growth initiatives you have in place.
J P could you just how much how many shares are left out of the.
We have about 396000 shares left to buy back as part of our approved plan.
And to answer your question and the way we think about it.
For the longest time.
We only bought stock.
Under tangible book.
And date JP, how many shares that we bought back total.
And then what's the weighted average price.
One second here.
To date, we have.
We repurchased.
Three almost $3 5 million shares at about $15 per share.
So that's obviously been terrific, but the price was much lower.
About if we take a look at.
What our needs for capital and of course, we do have as Ed pointed out to me.
Frequently.
Have a lot of.
Capital.
And what we need to do the.
Most profitable thing, we can possibly do is leverage that capital.
And grow our earnings.
And we made.
Good progress this quarter.
Well, we take a look at.
How much capital we have what we think we're going to need what do we think the opportunities are and where is the stock price.
Relative to tangible book.
This quarter.
We.
As I mentioned earlier, we bought.
Sure is that a little bit less than 34 Bucks.
Once they tangible book J P. We ended up at $30 40.
We're all in different places that's obviously, that's why we're talking.
Having a conversation around this was at $30 40.
It was Rick Yes, that's correct, yes, so we bought a 34.
No.
I think thats about as much as I can and obviously I can't say at what price, we went back to buyback stock.
But those are the factors that we think about when we do it.
Thanks.
Last question was on expenses.
In your prepared remarks, you mentioned something about $45 million was that referring to historical expenses or was that a forward looking.
Forward looking I think.
We were left were 11, two this quarter and I think thats a reasonably good number.
For the for the year.
Yes.
Annualized.
If we get strong strong loan growth does that mean that there would be.
As we come in higher than that $45 million number or does that $45 million contemplate the strong loan growth.
If we haven't already strong loan growth then that number could get higher.
Got it okay. Thanks, so much for taking my questions Congrats on a great quarter.
They were excellent questions, Jeff I have to tell Alex Thank you.
Thank you once again for any questions. That's star then one on your Touchtone phone.
And I'm showing we have no further questions at this time.
I'll turn the call over to Rick Wayne for closing remarks.
Thank you.
Thank you all for joining us and supporting us.
And we look forward to talking to you in April .
Thank you very much.
And thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.