Northeast Bank

Welcome to the Northeast Bank fourth quarter FY2026 earnings call. My name is Michelle 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, Santino Delmolino, Chief Financial Officer, 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 further 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 telephone. To remove yourself from the queue, please press star 11 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 risk 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. Welcome all to the call. During my comments I will provide an overview of our fourth fiscal quarter and annual results. After my comments, Santino will discuss our financial results and Pat will review our loan activity. At the conclusion of our comments, we will be happy to answer any questions. For the quarter, we earned $34.3 million or $4.05 per share fully diluted with a return on equity of 23.5% and a return on assets of 2.7%. For the year, we earned record net income of $107.5 million, a $24 million or 29% increase over fiscal year net income of $83.4 million, itself a record. Per share, fully diluted earnings was $12.74 with a return on equity of 19.7% and a return on assets of 2.3%. Tangible book value per share increased by $12.60 or 22% to $70.58 compared to June 30, 2025. Loan volume was strong both in the quarter and the year. Loan volume for the quarter was $389.8 million including record-breaking national lending originations of $257.3 million and purchases of $94.4 million. Loan volume for the year was $1.95 billion including national lending originations of $897.4 million and purchases of $797.3 million. At year end, total loans, including loans held for sale, increased by $802 million, or 21% from June 30, 2025. Slide seven has annual loan volumes and our National Lending Division. Loan volumes in both FY25 and FY26 was $1,754,000,000. This is a coincidence, not an error. NIM remains strong, 4.8% for the quarter and the year. As a reminder, CECL changed the accounting for allowance recovery on purchased loans such that it now runs through the provision and not interest income anymore. Allowance recovery in the quarter was 4.7 million, which contributed 37 basis points, would have contributed 37 basis points to NIM Pre Cecil. In previous calls, we have discussed our insured small business loan product. The product was originally structured with 10% insurance and a deductible of approximately 4%. We had the intention of selling the loans. During FY26, we originated 102 million of insured small business loans but have not been able to sell the loans at attractive enough pricing. We have recently increased the insurance protection to 25% with a higher deductible since we are going to keep these loans on our books longer than we had anticipated. Now I will turn the call over to Santino.

Awesome. Thanks, Rick. As Rick mentioned, we finished fiscal year 26 with exceptional results. I'll walk you through the quarterly results beginning on slide 13. As Rick mentioned, we recorded net income of $34.3 million, or $4.05 for diluted share for the quarter, up from $29.9 million, or $3.53, in the length for the fiscal year net income totaled $107.5 million or $12.74 for diluted share. Return on average assets improved quarter over quarter to 2.71%, while return on equity increased to 23.5%. These results reflect continued balance sheet growth, strong loan performance, and disciplined expense management. Total assets ended the quarter at 5.2 billion, up from 5.0 billion at March 31st, while total loans, including loans held for sale, increased to $4.59 billion. During the quarter, we generated $390 million of loan volume, up from $345 million in the linked quarter, driven by record national lending originations of $257 million and purchase loan activity of $94 million. Moving to slides 14 and 15, net interest income before provision totaled $60.3 million during the quarter. While this is modestly below the linked quarter's exceptionally strong $63.1 million, the decline is primarily driven by a lower accelerated accretion on the purchase loan book. We did, however, see higher transactional income related to the release of allowance for credit losses this quarter, which you see played through in the negative provision for credit losses. Net interest margin remains strong at 4.8%, down slightly from 5.15% in the linked quarter. The largest contributor to the strength here continues to be the purchase loan portfolio, which had a total return of 9.3% and a yield of 8.6%. Despite the modest decline, returns on purchase loans continued to benefit from strong credit performance, accelerated payoffs, and allowance releases. Meanwhile, the growth in our originated portfolio continues to bolster interest income. while posting a yield on the portfolio of around silver plus 400. Looking at slide 21, cost of funds improved during the quarter, declining to 3.59% from 3.62% of the prior quarter. While spot rates are below our deposit costs during the quarter, I wouldn't anticipate much further relief on the cost of funds side given the current rate environment. Over the next three months, we have approximately $300 million in brokered CDs, as well as another $300 million in retail CDs that should be maturing and rolling over. On the brokered CD front, rates are up slightly from what is currently on the books, so we would anticipate a little bit of increase in interest expense on that front, though we should see an offsetting relief on the retail side. So ideally, cost of funds should stay pretty flat. over the coming period. Moving to slide 18, we'll talk about the small business division. As Pat's going to discuss, volume remains relatively slow on the SBA front, but we continue to see strong yields in the portfolios and favorable pricing when selling the guaranteed portion of SBA loans. Within the SBA division, gain on sale income remain consistent at approximately $2.9 million. In addition, you'll see this quarter we recognize a $1.6 million gain on recovery of insured credit losses associated with the insured small balance business loans that Rick mentioned. I'll explain the accounting here in a little more detail because it's kind of wonky the way this works. So we have $96 million in insured small balance business loans, including held for sale on the balance sheet. There is about $1.6 million that previously was classified as held for sale that has been transferred into the loan portfolio as of June 30th, given the delinquent status of the loans. So we don't anticipate being able to sell those and have a full allowance booked against those loans. So the way the accounting works here is you essentially gross up both the balance sheet and the P&L. There's a $1.6 million allowance and corresponding $1.6 million insurance receivable. And then on the P&L, we have a $1.6 million provision with an offsetting $1.6 million gain. So at the end of the day, everything washes and we should get our money back on these, but just wanted to highlight kind of the way the accounting is working here. Moving on to slide 19, you'll see credit performance remains strong. We reported $679,000 credit provision compared to a 218 credit provision in the linked quarter. Non-performing assets improved to 67 basis points from 78 basis points in the prior quarter and passed due loans to point to 54 basis points of total loans from 64 in the prior quarter. Looking at non-interest expense on slide 22, you'll see expenses are relatively flat compared to the linked quarter. coming in at $23.5 million as we continue to invest in our personnel, technology, and loan production capabilities. Development of our technology platform picked up in earnest this past quarter, and we should begin harvesting efficiencies on this in FY27 if we go live with our data warehouse and begin developing various automation capabilities. As a result, our efficiency ratio remains excellent at 36% closely aligned with the prior quarter's 35.5%. Tax expense this quarter is $8.1 million, resulting in an effective tax rate of 19.1% for the quarter and 27% for the year. The decline here is primarily driven by the purchase of just under $40 million in transferable production tax credits, which was completed during the quarter and reduced tax expense by $2.8 million. We also had some benefit from reduced state taxes that were recognized this quarter. On a go-forward basis, we will continue to evaluate opportunities to purchase production tax credits as a way of lowering our federal tax liability. Capital levels remain strong despite continued balance sheet growth. Total shareholders' equity increased to $604 million from $568 million in the prior quarter, while tangible book value per share increased to $70.58 from $66.35, representing 6% growth during the quarter and more than 21% growth compared to the prior year. Tier 1 leverage ratio improved to 11.9% from 11.4, and total risk-based capital increased to 14.7. giving us loan capacity of about $1.5 billion. Overall, we entered fiscal year 2027 from a position of strength, generated record annual earnings, delivered our third consecutive quarter of record loan origination volume, saw improved asset quality metrics, expanded capital ratios, and increased tangible book value per share. Now I'll pass it over to Pat to talk through the loan portfolio.