Northeast Bank(US:NBN)2022-07-26 17:17Financial Data and Key Metrics Changes - For Q4 2022, the company reported net income of $10.3 million, or $1.35 per diluted share, with a return on equity of 16.55% and a return on assets of 2.68% [4] - The yield on the loan book for originated loans was 7%, up from 6.9% in the prior quarter, reflecting a 10 basis point increase [6] - Net interest income increased by $16 million for FY 2022 compared to FY 2021, driven by a 30% growth in the National Lending portfolio [12] Business Line Data and Key Metrics Changes - The company originated $172.9 million in loans for the quarter and $587.8 million for the year, marking record highs for both periods [5] - The National Lending portfolio grew by $284 million or 30% by the end of FY 2022 compared to FY 2021, with originated loans growing by $236 million or 45% [12] Market Data and Key Metrics Changes - Delinquencies were reported at around $7 million, and non-accruals decreased to about $13 million, indicating improved asset quality [18] - The loan book size is approximately $1.3 billion, which is significantly larger than in previous periods [19] Company Strategy and Development Direction - The company is focused on growing its loan book to offset the decline in correspondent fee income, which decreased by $4.1 million due to the payoff or forgiveness of PPP loans [10][11] - Management expressed optimism about the loan purchase market, anticipating increased activity due to rising interest rates and credit quality concerns among banks [25][26] Management's Comments on Operating Environment and Future Outlook - Management noted that the higher interest rate environment is expected to create opportunities for loan purchases, as some competitors are becoming sellers of their portfolios [25][28] - The company plans to hire more personnel to support growth in both purchased and originated loans, ensuring that underwriting standards remain high [30] Other Important Information - Non-interest expenses grew by $1.5 million in Q4 due to increased incentive compensation [13] - The company repurchased 285,000 shares during the quarter and 821,000 shares for the year, totaling 3.8 million shares repurchased since the program began [15] Q&A Session Summary Question: Commentary on loan purchase market amid volatility - Management indicated that there is significant activity in the pipeline and expects to see more opportunities due to rising interest rates and credit quality concerns [25][26] Question: Capacity to increase loan purchases while maintaining growth - Management confirmed that they have the capacity to increase loan purchases and maintain growth rates in originated portfolios, with plans to hire more staff as needed [30] Question: Factors driving lower loan volumes - Management explained that the market supply was limited, and they were actively bidding on available loans, with expectations for increased supply towards the end of the quarter [32] Question: Commentary on new loan yields - New loans are expected to yield between Prime + 1.5% and 2.5%, which will increase with anticipated rate hikes [33][36] Question: Pressures on deposit costs - Management acknowledged upward pressure on deposit costs but emphasized that loan rates are expected to rise significantly more than deposit rates [37] Question: Increase in non-interest expenses - The increase is attributed to higher headcount, inflation-related salary increases, and moving to a more expensive office space [40] Question: Impact of CECL adoption on loan portfolios - Management indicated that CECL adoption will likely reduce the allowance for credit losses for most portfolios, with some reclassification on the balance sheet but no significant capital or earnings impact [41][44] Question: Impact of NEWITY 7(a) program on income statement - Management explained that if volumes pick up, there would be a gain on sale component and a share of the premium from sold loans, which would positively impact earnings [46][48]