Northeast Bank Q4 FY2025 earnings call

• Net income of $25.2 million was a record excluding PPP loan sale. - Loan activity: Q4 originations and purchases totaled $362.6 million, FY total $2.1 billion; SBA had strong origination and sales. - Net interest margin was 5.1%, return on purchased loans 8.76%. - Asset quality: Allowance for credit losses over gross loans at 1.28% at June 30. - Revenue in Q4 was $62.7 million, noninterest expense $21.5 million. - Multifamily exposure in NYC: $676 million total, with breakdown of risk levels.

Net income was $25.2 million, which was a record excluding the quarter with a large sale of PPP loans. Loan activity for the quarter: all originations and purchases totaled $362.6 million, with $41.7 million in purchased loan book purchases and $216.6 million originated. For the fiscal year, loan volume was $2.1 billion, with $807.9 million originated. On the SBA front, originated $107.3 million in Q4 and $408.5 million for the year, and sold $107.6 million in Q4. Net interest margin was 5.1%, return on purchased loans was 8.76%. Asset quality: Allowance for credit losses over gross loans was 1.28% at June 30, up from prior periods. Revenue for Q4 was $62.7 million, noninterest expense was $21.5 million. Average loan balance at June 30 was $3.767 billion.

• Optimistic about purchase volume with potential large transactions. - SBA lending volume may dip due to eligibility changes but confident in navigating. - Plan to invest in new technologies with a Chief Innovation role, expecting expense increase but efficiency gains will be disclosed later.

• SBA lending volume dip due to tightened eligibility requirements and longer processing times. - Potential impact of NYC mayoral race on rent controlled/stabilized multifamily properties affecting cash flow.

Q: When does the SBA decline snap back?

A: Hard to say exactly, need to adjust marketing and processing, confident in navigating.

Q: How does the pool of loans for purchase stack up vs last quarter?

A: Lot of activity, more competition on large transactions, optimistic.

Q: How much did transactional income impact the margin?

A: $4.094 million from originated loans, back out would affect margin.

Q: Are the elevated loans problematic?

A: Not necessarily problematic now, monitor rent freeze impact.

Q: What's the expected effective tax rate?

A: Expected 33%-34%.

Q: Any offset on SBA expenses?

A: Variable costs would fall, fixed costs remain.

Q: Investment in new technologies?

A: Hiring innovation chief, expecting expense increase, will disclose later.