Yahoo Finance Northeast Bank (NBN) (Q3 2024) Earnings Call Transcript Highlights: Strong Performance Amidst ...
Net Income: $13.9 million
Earnings Per Share (EPS): $1.83
Return on Equity (ROE): 16.45%
Return on Assets (ROA): 1.87%
Net Interest Margin (NIM): 5.01%
Tangible Book Value: $44.11 at quarter end
Loan Originations: $153 million
Purchased Loans: None in the quarter
Lender Finance Portfolio: $532 million, 63% advance rate, 44% weighted average LTV
Accretable Discount: $174 million on purchased loan book
Nonperforming Loans: Decreased from 118 basis points to 105 basis points
Allowance to Gross Loans: Decreased from 1.06% to 0.98%
Charge-offs: Total of 20 basis points, 15 basis points CECL related
Net Interest Income (NNI): $36.5 million, base NII $35.3 million excluding transactional income
Cost of Funds: 4.23%
Non-Interest Expense: $16.4 million, including $1.05 million accrual for incentive compensation
ATM Offering: 180,000 shares sold, proceeds per share $52.34, total proceeds $9.4 million
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Northeast Bank reported a strong quarter with net income of $13.9 million and earnings per share of $1.83.
The bank achieved a robust return on equity (ROE) of 16.45% and return on assets (ROA) of 1.87%.
Net interest margin (NIM) was reported at 5.01%, indicating efficient management of interest-bearing assets.
The bank has a healthy loan portfolio with a low loan-to-value ratio averaging 44%, providing a strong buffer against potential losses.
Northeast Bank has a significant accretable discount of $174 million on its purchased loan book, which will positively impact future income.
Negative Points
There were no purchased loans in the quarter, which could indicate a slowdown in this area of business.
The originated loan book has decreased since the beginning of the year, with originations at $285 million versus paydowns of $297 million.
The cost of funds increased by 15 basis points compared to the previous quarter, potentially squeezing the interest margin if the trend continues.
Non-interest expense for the quarter was relatively high at $16.4 million, partly due to a $1.05 million accrual for incentive compensation.
The bank's nonperforming loans, although decreased, still pose a risk, with current nonperforming loans at 105 basis points.
Q & A Highlights
Q: Could you explain the additional need for bank leverage in relation to the pickup in CMBSs? A: (Patrick Dignan - EVP, COO) The increase in capital raised by nonbank lenders for real estate, coupled with fewer overall transactions, has heightened competition among these lenders. To remain competitive, they require more leverage, which has been beneficial for Northeast Bank.
Q: Can you discuss the originated loan activity this quarter, particularly the yields which were over 10%? A: (Richard Wayne - CEO) The 9.3% mentioned was for new bookings this quarter. The overall portfolio yield of 10% includes older loans with higher rates. There was no accelerated interest this quarter that would affect these yields.
Q: What is your appetite for loan sizes and pool sizes, and what are your purchase capacity constraints? A: (Richard Wayne - CEO) Northeast Bank has about $550-$600 million in loan capacity, which could increase with earnings and ATM offerings. The bank prefers performing loans in liquid markets, typically ranging from $1 million to $10 million, but can consider larger amounts based on capital availability.
Q: Could you elaborate on the opportunities for loan purchases in upcoming quarters? A: (Richard Wayne - CEO) There are expected meaningful volumes of loan purchases in the fourth fiscal quarter, driven by transactions that have rolled over from the previous quarter. The bank is well-prepared to handle these with its current staffing and operational capacity.
Q: Can you provide insights into the ATM offering and its strategic use? A: (Richard Cohen - CFO) The ATM is used to raise capital sensibly over time without a specific target amount or price. It supports the bank's ability to seize loan origination and acquisition opportunities as they arise.
Q: What are the expectations for the SBA business segment, considering its recent growth? A: (Richard Wayne - CEO) The SBA segment is gradually growing, with $30 million in originations this quarter. While expectations are to continue this growth, specific future projections are cautiously optimistic without setting high expectations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
