Northeast Bank Reports Strong Q2 2024 Earnings Amidst Leadership Change

On January 31, 2024, Northeast Bank held its second-quarter earnings call for the fiscal year with key executives delivering the latest financial updates. The bank has demonstrated a robust performance for the quarter, with notations of both high loan purchase activities and a significant growth in its tangible book value.

Major Financial Highlights

Northeast Bank's loan purchases reached $186.1 million invested on $208 million of unpaid principal balance, marking a steadfast quarter in loan acquisition. The originating loan portfolio fetched a weighted average rate of 9.45%, contributing to a vigorous net income of $14.1 million. The bank recorded a $1.85 earnings per share with an impressive 17.35% return on equity and a 1.93% return on assets, concluding the quarter with a nearly $42 tangible book value per share.

Assets Quality and Charge-Offs

The bank signaled an uptick in nonperforming loans due to three specific loans that went non-accrual. Despite this increase, there's confidence that these will be resolved without principal losses. Understanding the reporting under the CECL model is critical, as it requires banks to report charge-offs differently, potentially affecting the perceived asset quality without actual material losses.

Deposit Rates and Expenses

The bank has seen its cost of deposits rise to 4.16%, with a potential reduction anticipated as high-cost brokered CDs mature. Northeast Bank also reported an increase in their banking center deposits by $216 million over the past year, emphasizing efforts to replace costlier deposit channels. On the expenses front, an increase primarily in compensation costs was due to year-end bonuses and full-quarter stock compensation expenses.

Leadership Transition

A bittersweet announcement marked the call as JP Lapointe, the Chief Financial Officer, exited the bank to pursue a new opportunity after a six-year tenure. The leadership commended his professionalism and contributions, ensuring seamless operation throughout the transition.

Future Outlook

With an increasing origination volume, Northeast Bank positions itself for potential growth in the originating loan portfolio. Additionally, a hike in the sales of the guaranteed portion of SBA loans suggested rising success in that product segment. The bank's management remains cautiously optimistic about the opportunities and challenges ahead.

Earnings, Finance, Leadership