Northeast Bank(NBN) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The net income for the quarter was $14.1 million, with an EPS of $1.85, a return on equity of 17.35%, and a return on assets of 1.93% [10] - The weighted average rate on the entire loan portfolio was 9.45%, indicating strong performance [10] - The tangible book value grew to $41.97, just under $42 [10] Business Line Data and Key Metrics Changes - The company originated $63.5 million in loans, consistent with prior quarters, but expects higher numbers in the current quarter [33] - Purchased loans activity was $186.1 million, with a purchase price of 89.5% of UPB, marking the second strongest purchase quarter [3] - Nonperforming loans increased from approximately $17.5 million to $30.7 million, primarily due to three loans designated as non-accrual [7] Market Data and Key Metrics Changes - Deposits in banking centers increased by $216 million, or 38% year-over-year [13] - The quarterly cost of deposits was 4.16%, with a spot rate of 4.23% at the end of the quarter [37] Company Strategy and Development Direction - The company is focusing on building core deposits in branches to replace higher-cost deposits [13] - There is an expectation for growth in both purchase and origination numbers, with a shift from a primarily origination-focused model to a more balanced approach [25][57] Management's Comments on Operating Environment and Future Outlook - Management noted a fair amount of good supply in the marketplace for purchases, indicating optimism about future opportunities [3][42] - The company is seeing increased activity in the market, with expectations for continued growth in origination volumes [25][33] Other Important Information - The company experienced a $957,000 charge-off related to a deferred tax asset due to changes in Massachusetts apportionment factors [10] - There was a full quarter of stock compensation expense recorded, contributing to a $300,000 increase in expenses from the previous quarter [38] Q&A Session All Questions and Answers Question: Can you provide more context on the supply in the marketplace for purchases? - Management indicated that the current quarter has seen a much better supply compared to the last quarter, with banks selling assets for various reasons, including shedding commercial real estate [42] Question: How does the recent pullback in rates impact the sales process and pricing? - Management stated that while rates declining could impact pricing, they have not yet seen a significant effect on their purchasing strategy [22] Question: Is the increase in gain on sale of SBA loans indicative of success in that product? - Management noted that the revenue from SBA loans has been increasing, but they are reluctant to predict future contributions from this product [50]