Northeast Bank(US:NBN)2023-01-27 18:58Financial Data and Key Metrics Changes - The company reported a net income of $11.3 million and earnings per share of $1.54, with a return on equity of 17.5% and return on assets of 2.1% for the quarter [4] - The total capital stood at $270 million, with a weighted average loan-to-value on purchases at 33.5% [7][6] - The loan discount combined increased to $189.6 million, up by $150 million from the previous quarter [10] Business Line Data and Key Metrics Changes - The company originated $174 million in loans with a weighted average yield of 8.72%, while the entire loan book earned 8.48% [23] - The purchased loans yielded a return of 8.69%, with significant purchases in multi-family and retail collateral types [24] - The average cost of deposits increased by 141 basis points from 0.87% in Q1 to 2.28% at the end of December [26] Market Data and Key Metrics Changes - The largest portion of the loan purchases was in California, amounting to $570 million, followed by New York at $216 million and Washington state at $89 million [25] - The company’s national lending portfolio is diversified across 42 states, with New York and California representing 33% and 31% of the portfolio, respectively [7] Company Strategy and Development Direction - The company aims to replace correspondent fee income with net interest income, achieving a net interest income of $28.7 million, up from $20 million a year ago [29] - An at-the-market offering for up to $50 million was approved, indicating a proactive approach to capital management [5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the loan market, indicating potential for continued purchases in the upcoming quarters [19] - The company anticipates an increase in non-interest expenses due to the addition of personnel to service the expanded loan book, although it remains highly profitable [28] Other Important Information - The company purchased loans with an unpaid principal balance (UPB) of $1.15 billion at a price of $998.5 million, representing an 86.6% investment on the purchase price [4] - The brokered CDs had a cost of 4.43%, with expectations to replace them with funding at about 4% as they mature [27] Q&A Session Summary Question: What is the outlook for future loan purchases? - Management indicated that the market remains solid, and there is a possibility of continued purchases over the next couple of quarters [19] Question: What are the constraints on the balance sheet regarding future purchases? - The company has a loan capacity of $150 million as of December 31, down from $1 billion a year ago, but does not see capital constraints for future opportunities [38][48] Question: Can you provide details on the characteristics of the purchased loans? - The purchased loans are longer-term assets with a weighted average maturity of over 10 years and lower coupon rates, which contributed to the significant discount [42] Question: How will the increase in expenses be managed? - Management stated that they would provide more clarity on the number of hires and efficiency ratios in the next call, emphasizing that the increase in expenses would be relatively small compared to the loan book size [50]