Northeast Bank

Welcome to the Northeast Bank first quarter FY2025 earnings call. My name is Bree and I will be your operator for today's call. This call is being recorded. With us today from the bank is Rick Wayne, President and Chief Executive Officer, Richard Cohen, Chief Financial Officer, and Pat Dignan, Executive Vice President and Chief Operating Officer. Prior to the call, 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 the northeastbank.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. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question and answer session, if you have a question, please press star 11 on your touchtone phone. As a reminder, the conference is being recorded. Please note that this presentation contains forward-looking statements about Northeast Bank. Forward-looking statements are based upon the current expectation 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. I will now turn the call over to Rick Wayne. Mr. Wayne, you may now begin.

Thank you. Good morning. As indicated, I am Rick Wayne, the Chief Executive Officer of Northeast Bank, and with me are Pat Dignan, our Chief Operating Officer and Richard Cohen, our Chief Financial Officer. This morning, I will cover some of the highlights on page three of the slide deck. I also want to focus on some points on our asset quality, which are on slides eight through 10. And for the first time, a more comprehensive discussion on our small balance SBA program. which is slide on slide number 15. Included in the deck are the usual slides on our loan portfolio, including loan to value and other information. That's in the deck for you to review. Of course, it's updated for the quarter ending September 30th, but we won't cover that today unless someone has some questions. We'll discuss the loan activity for the quarter, and Richard will discuss our funding strategy, interest rate risk management, as well as including the funding around the loan purchase we made in the quarter. Now, moving on to slide three, without getting hyperbolic, I would say this was really one great quarter. Our loan production of $942 million was the second best quarter in the bank's history behind only the quarter in December 2022 when we purchased $1 billion of loans in a transaction that most of you are familiar with. This quarter, We had $733 million of purchased loans and $209 million of originated loans. From an earnings perspective, again, another really great quarter, we generated $17.1 million of net income. And except for the quarters in which we had Triple P loans that we sold, And those were in Q3 and Q4 of our fiscal year 21. This quarter was the highest level of net income in the bank's history. So broke a few records. A few other items I'd like to point out on the highlight page. We still have $23 million of availability. under the at the market offering our loan capacity as of september 30th was 462 million that's after the very large loan activity we had in the quarter earnings per share diluted were two dollars and eleven cents return on equity was seventeen point five three percent Our return on assets was 2.09%, and tangible book value per share was $47.80. If we now turn to the slides on page eight, first of all, I want to point out that we had an increase in our allowance of $27 million, which went from 0.97% of loans to 1.25% of loans. So we have a lot more coverage now in our allowance. And while non-performing loans increased by $9 million, it's a few number of loans and We estimate at least 7 million will be resolved in the next six months. So that is obviously good. And I do want to highlight in the bottom chart what happened with the charge-offs, which this quarter were 20 basis points. I'm not really focusing on the light green above that for this quarter or last quarter, because as you may recall from previous conversations, those are just balance sheet items. Those representing the green purchase loans where we had a credit mark and that under CECL, you're now required to increase the balance of the loan, set up the allowance. And the green mark was just simply charging off part of the balance, which we did not pay for. But the blue bar below a 20 basis, that's a real number. And I want to point out of what that was, because we don't have that many charge-offs. It was one loan out of a pool that we purchased 194 loans. The total purchase was had a UPB of 85 million. with $4 million of discount. And of all of those 194 loans, of which only 159 remain because there have been some payoffs, only two loans are non-performing out of that total 85 million or 194 loans, including this one. So the whole pool did really well. And this is one loan that we had a charge-off on.

If we now go to slide 15, I first want to provide some context to this discussion on our small balance SBA loan activity.