Northeast Bank

At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand has been raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. It is now my pleasure to introduce CEO Rick Wayne.

Thank you, and good afternoon to all of you that are listening to this call. With me are Pat Dignan, our Chief Operating Officer and Head of Commercial Credit for the bank, and Richard Cohen, our CFO. After I make some comments, Pat will follow up, in a lively conversation about our loan book, both about commercial real estate loans and the SBA, and some very helpful information about our multifamily portfolio in New York City. I think you'll find all that quite interesting. And after Pat's comments, Richard, Pat, and I are available for any questions that you might have. Let me start by looking at page number one of the investor deck that was uploaded yesterday. My opening comment and headline for the quarter, it was a great quarter. On all cylinders, it was a great quarter. And I'm going to just highlight a few things about the quarter and perhaps a few other items about the year because our fiscal year ended June 30th. So it's a big quarter and also a year end for the quarter. First, net income was $25.2 million. Now, as indicated in the earnings release, if we exclude the quarter in which we had a large sale of Triple P loans, this was a record, $25.2 million, excluding the kind of one time or two time it may have been during the year sale of Triple P loans, $25.2 million was a record. and something we're very, very proud of. If I take a look at the loan activity for the quarter, all originations and purchases total $362.6 million for the quarter and $2.1 billion for the fiscal year. The breakout of the loan volume for the quarter was $41.7 million invested in the purchase loan book on purchases of 44.4 million of UPV at a purchase price of 93.8%. That's $41.7 million. On the originated side, very substantially, we had $216.6 million. The weighted average rate as of March 31 for the loan book was 7.99%, or we can call that 8. For the year we originated $807.9 million. On the SBA front, very strong, we originated $107.3 million for the quarter or $408.5 million for the year. We sold $107.6 million for the quarter, which you may be asking, how could that be if we originated $107.3 million or a slightly smaller number? And the answer to that is that some of the sales in Q4 related to loans that were originated in the preceding quarter. And the gain on the sale of those loans sold was $8.2 million. All in, counting everything, our net interest margin was a very strong 5.1%. And the return on our purchase loans was 8.76%. We did not issue any shares under the at-the-market offering, which had availability at the end of June of $65.4 million. And our loan capacity, something we pay a lot of attention to, at the end of June was $1.1 million. Earnings per share basic, was $3.06 and fully diluted was $3.00. Return on equity was a strong 20.73%. Return on assets was a very strong 2.38%. And tangible book value per share at the end of June was $57.50. and 98 cents or $58 of tangible book value per share with a little bit of rounding. I now want to just talk about a few slides which I hope that you will find interesting. First on the asset quality metrics, The allowance for credit losses over gross loans was 1.28% at the end of June, which is up slightly from March 31 at 1.23%, and up very substantially compared to two years ago at June 30, 23, when the allowance was 0.29%. On page 20 is a slide that shows our revenue for the quarter, our non-interest expense. And I would want to point out that total revenue includes net interest income before provision and non-interest income. So you can see in the group of bars at the far right in the quarter labeled Q4 FY25, the revenue for the quarter was $62.7 million. And again, if we look back at preceding quarters and part of the gain from the sale of PPP loans, that was also a record revenue. And non-interest expense for the quarter was $21.5 million, which you can see on here is higher than in the preceding Q3, Q2, Q1, and Q4 of FY24. The reason for that is that in the quarter, we had a true-up of our compensation expense, which had a big impact. But we're still growing pre-tax net interest income, which was $41.2 million. Why should it be more specific? total revenue, as I've described, minus non-interest expenses, $41.2 million, and again, excluding the quarter in which we had triple P, was a record. If we now go to slide 21, I want to point out that our NIM was 5.1%, substantially higher than the preceding quarter, and primarily due to the fact that we generated a fair amount of transactional income in the quarter. And if you look to the chart on the right, you can see that our average loan balance for the June 30 quarter was $3,767,000. of comparing favorably with the link quarter at $3,650,000. If we go to slide 22, I just want to highlight that in the last bar, we have $216 million of discount for the quarter ending June 30th, of which $179.1 million is the interest rate mark, and $36 million is the credit mark. I will remind you that we don't really suffer, historically have not suffered many dollars in credit losses in this portfolio. And on slide 25, We take a look at net income for the trailing five quarters, and you can see that at $25.2 million for the June 30 quarter, we are substantially ahead of the preceding four trailing five quarters. And I think with that, I will ask Pat to talk to you about our real estate, our portfolio, our SBA business. Pat?

Thanks, Rick. It was a strong finish to the year. The loan portfolio grew by 36% overall, with purchase loan growth at 40%, originated growth at 27%, and SBA growth at over 200%. For purchases this quarter, we bought 14 loans and four transactions. which brought purchase loan volume to $863 million for the year. There's a lot of purchase loan opportunities currently in the market, and we expect a lot more to come this year. There's also a lot more competition in this space, more capital, cheaper leverage, and with larger pools being the most competitive. Having said that, the purchase loan market is large, and we will continue to look at every opportunity, be active, but discipline bidders and expect to win our share. In our origination business, we closed 24 loans with an average balance of $9 million, secured with a variety of collateral types, and LTVs just over 50%. Like last quarter, most of these loans were in our lender finance product, which continues to show strong demand from non-bank lenders who are being squeezed on yield, low in capital entering the market, and then more and more desiring of leverage. We expect lender finance to continue dominating our origination business into next quarter as competition for direct opportunities continues to heat up. In the SBA business, we originated $107 million of loans compared with $121 million in the linked quarter. On last quarter's call, we discussed that the SBA had tightened their eligibility requirements effective June 1st, so the impact from those changes on volume this quarter is somewhat muted. Recall that we anticipate a temporary dip in SBA lending volume over the next quarter or two due to a smaller strike zone at the top of the funnel and more required documentation and longer processing times for new loans. As we adjust to these changes, volume could dip as much as 50% this quarter. Fortunately, the market for small business loans is enormous and we remain very positive about this line of business. and believe we will continue to be a national leader in small business lending. Finally, a quick note on asset quality. We've been watching the New York City mayoral race and are aware of its potential impact on rent-controlled and rent-stabilized multifamily properties. So we thought we'd share some detail on our multifamily exposure in New York City. Referencing slide 11, we had 676 million of total multifamily exposure in New York City as of 6-30. Of that, $378 million has no rent-controlled or rent-stabilized units. We've divided the remaining $297 million into two buckets. First, $214 million, where there is some exposure, but where we believe to be very low risk, given the collateral's ability to continue demonstrating strong debt service coverage, even in the event of a rent freeze. And second, $44 million, which excludes $39 million that paid off in early July, spread across seven loans where a rent freeze could impact debt service coverage if in place for an extended period of time. It's our view that our focus on low LTVs will provide a significant buffer against any headwinds from this issue. We also believe New York City will remain one of the strongest multifamily markets in the country and provide a lot of opportunity for us going forward. Back to you, Rick.