Northeast Bank

Welcome to the Northeast Bank first quarter fiscal year 2026 earnings call. My name is James 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, Santino Del Molino, Corporate Controller, and Pat Dignan, Chief Operating Officer and Chief Credit 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 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 one one. To remove yourself from the queue, press star one one again. 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 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. I will now turn the call over to Rick Wayne. Mr. Wayne, you may begin.

Thank you, and good morning, everyone. As I go through this presentation, as we go through it, I want to just outline what the agenda will be for this morning. I'm going to first go over some highlights for the quarter and dig a little bit deeper in some of the material that we had put out yesterday. And after that, Pat will discuss the lending activity, and Santino will go over the financial results for the quarter. Finally, I want to make a few comments on Richard Cohen, is moving on after tomorrow, after almost two great years at the bank. So first, as to the highlights, we considered the quarter very strong. We had net income of $22.5 million, a NIM of 4.59%, return on equity of 17.64%, a return on assets of 2.13%, and diluted earnings per share of $2.67. And finally, within a whisker, if that's a technical term, I don't think it is actually, of $60 of tangible book value at 59.98 cents. I want to comment first on loan activity purchases were strong we bought loans with upb of 152.7 million dollars at a invested amount of 144.6 million now as you know in our past we have had two very large quarters where we purchased large transactions the first in the second quarter of our fiscal year 23 and the second one in the first quarter of fiscal year 25. If you exclude those very large purchases, this would have been our second largest purchase quarter going back three years and probably longer. I just looked at the material for three years for this. One of the things that we are frequently asked in investor calls and otherwise is what does the purchase pipeline look like? And with all of the caveats in the forward-looking statements specifically, we may buy a lot or we may not buy any, it's transactional. I would say that the purchase pipeline is as large now as we have seen in quite some time. A lot of it triggered by M&A activity and some balance sheet repositioning by other holders of commercial real estate loans. We have both the capital and the human resources to do the appropriate diligence on the amount that's out there. And we will look at virtually every opportunity that is within our parameters. On originations, we did $134 million with a little rounding this quarter. I would point out that there is some seasonality to the origination business. We went back and looked four years ago, and we only had one first quarter in our fiscal year, which was in Q1 of 23, that had a higher amount of originations, 182 million. That meant, obviously, that for out of the last four years, three of the quarters, we did not do as much origination volume as we have done this quarter. And our origination pipeline is also quite robust. I now want to comment briefly on the SBA activity. This quarter, we funded $42 million and we sold $53 million of loans that, of course, include some that were originated prior to this quarter. As we discussed in the July call, there were changes made to the SBA rules which suggested and we indicated that we would have lower volumes in some number of quarters to come. Because we had less closings, we had less sales, and because we had less sales, we had less gains. The gain in the link quarter was $8.2 million compared to $4.1 million for the current quarter, and that difference of $4.1 million amounted to 34 cents diluted EPS. I think it's very helpful to understand that. We expect a few things to happen. Of course, one, at some point the government will reopen. Pat may touch on the impact of that for us, and we now have Absent the government closing, we have been seeing a ramping up of the volume that was temporarily diminished for the reasons that I described. Finally, a few comments on asset quality, which Santino will expand on relative to our balance sheet size. Overall, our loan book was pretty flat. our purchase loan book increased by 31 million, and our originated loan book decreased by 39 million. Because for purchases, the allowance comes out of the purchase price typically, rather than booking a provision, and because our originated loan book decreased, as I mentioned before, the amount of the allowance also decreased. And finally, I want to make a point on the timing of transactions. As I said, our loan book was mostly flat, but our average loan balances were down 92 million compared to the link quarter because much of the activity around purchasing and some originations occurred late in September. So that had an impact on interest income in the quarter. But for the reasons I described, it bodes well for the future because our average loan balances were higher. And with that, I will now ask Pat to talk about our loan activity. Pat?

That's right. TAB, Mark McIntyre, We had a solid loan activity this quarter, especially for the summer months as required out the real estate and financing markets are very active, and while this is fueling more loan payoffs than we'd like it's also creating a lot of opportunity. TAB, Mark McIntyre, First, another note on the SBA business on the 42 million clothes is comprised of 286 loans at an average rate of 11.7%. Mike SanClements, Although we saw increasing volume in each of the three months of the quarter and felt like we were making real progress toward our volume targets the government shutdown. Mike SanClements, Essentially halted any new origination since October 1 we continue processing loans in the hopes of funding soon after the government is reopening so we won't be wasting any time with that, but obviously it's out of our control. Mike SanClements, Meanwhile we're very optimistic about our new insured small business loan product with nudity. which is off to a great start since launching on October 1st, with about $10 million closed since then. In our purchase business, we bought 522 loans in seven transactions, with $153 million of principal balance and a purchase price of $145 million, or just under $0.95. These were mostly smaller balance loans with no real concentrations of note. Five of the seven transactions were from loan funds, one from a small bank, and one from a national insurance company. As Rick pointed out, over the last few weeks, we've seen a significant uptick in purchased opportunities, mostly from M&A activity, which is likely to continue for some time. This is a lumpy business, and no guarantees we'll win it all, or any of it, but the sheer volume of new opportunities is very encouraging for the next several quarters. In our origination business, we closed $134 million, which included 22 loans with an average balance of $6 million, LTVs just over 50%, and an average interest rate of just under 8%. While lender-financed product continues to dominate the origination business, direct loan opportunities have picked up significantly. The belief from borrowers that interest rates will come down over the next year is fueling new transactions and at the same time creating an aversion to traditional debt which typically includes significant prepayment protection. Our pipeline is as full as it's ever been, and we expect that we can remain disciplined in credit and still show strong growth going forward. Back to you, Rick.