Northeast Bank (Maine) Q1 FY2025 earnings call

• Loan Production: Second best quarter in history with $942 million loan production, including $733M purchased and $209M originated. • Net Income: Generated $17.1M net income, the highest since non-PPP quarters in 2021. • Asset Quality: Allowance increased to 1.25% of loans, non-performing loans up $9M but estimated $7M resolved in 6 months; charge-offs 20 basis points from one loan in a pool. • Small Balance SBA Program: Started in 2021 with NEWITY, extended agreement, FY2024 had 1,039 loans for $92.5M, Q4 FY2024 had 766 loans for $82.4M. • Loan Purchases: Pat Dignan discussed purchasing 191 loans in 7 transactions, $808M gross balance, $733M purchase price, weighted average LTV 55%. • Origination: $127M closed in Q4, 17 loans, average balance $7.5M, LTV ~50%, rates ~9%. • Funding and Interest Rate Risk: Richard Cohen discussed funding purchases with brokered CDs, interest rate risk management, and impact of rate changes on net interest income.

Loan production was $942 million, the second best quarter in the bank's history, with $733 million of purchased loans and $209 million of originated loans. Net income was $17.1 million, the highest since non-PPP quarters in 2021. EPS diluted was $2.11, return on equity was 17.53%, return on assets was 2.09%, and tangible book value per share was $47.80. For the small balance SBA program, in Q4 FY 2024, the bank did 766 loans for $82.4 million. The loan purchase in the quarter: Pat Dignan discussed purchasing 191 loans in seven transactions with gross balances of $808 million at a purchase price of $733 million, with a weighted average loan to value of around 55%. In real estate origination, the bank closed $127 million for the quarter, including 17 loans with an average balance of $7.5 million.

• Expect net interest income to be positively affected by rate down environment but not significantly due to interest rate risk management. • ATM has $23M availability, board may evaluate adding to it for flexibility. • Loan purchase volume is typical but busy in market, hard to predict another large purchase but active.

• Potential for loan prepayments affecting income. • Uncertainty in loan purchase opportunities translating to actual deals. • Dependence on broker deposits and potential challenges in growing core deposits.

Q: Margin for October?

A: No information available for October yet.

Q: Loan pool volume and future purchases?

A: The loan sale advisors are busy, but it's hard to predict another very large purchase; the market is busy but binary in terms of winning deals.

Q: CRE concentration and core deposits?

A: High CRE concentration due to strong team and risk controls; core deposit growth is gradual, with some progress in Maine but broker deposits are efficient for now.

Q: 7(a) business growth and charge-offs?

A: Small balance SBA is growing, with a 3% reserve on unguaranteed portion; charge-offs have been low so far, but peaks and troughs are knowable but not offhanded