Northeast Bancorp NASDAQ: NBN executives highlighted what they described as a record-setting third quarter of fiscal 2026, driven by strong loan originations, higher net interest income and a notable lift in purchase-loan yields tied to accelerated accretion.
President and CEO Rick Wayne said the bank “broke some records” during the quarter, including record quarterly originations and, excluding a fiscal 2021 quarter influenced by PPP loan sale gains, “a record earnings quarter in the history of the bank.” Wayne also called it “a record for the most net interest income in the bank’s history.”
Record originations and balance sheet growth
Wayne reported originated loans of $254 million for the quarter, a bank record that surpassed the prior quarter’s record. Total loan volume “in all areas” was $345 million for the quarter and $1.56 billion year-to-date (nine months). Loans increased $121.5 million during the quarter, Wayne said.
Chief Financial Officer Santino Delmolino said total assets ended the quarter “for the first time just above $5 billion,” while loans ended at $4.4 billion, up about $100 million or 2% from the linked quarter. Growth was concentrated in the originated portfolio, which expanded $145 million or 11% quarter-over-quarter, offset by a $46 million or 2% decline in the purchased portfolio.
Earnings, profitability and margin expansion
Delmolino said the bank posted net income of $29.9 million, or $3.53 per diluted share for the quarter, and $73.1 million, or $8.67 per diluted share year-to-date. Wayne cited quarterly profitability metrics including return on equity of 21.67% and return on assets of 2.43%, and said tangible book value per share rose to $66.35.
Net interest margin expanded to 5.15%, up from 4.49% in the prior quarter, Delmolino said, driving net interest income of $63.1 million for the quarter and $160 million year-to-date.
Management attributed a key portion of the margin and purchased-loan yield strength to paydowns and payoffs that accelerated discount accretion. Delmolino said the purchase portfolio benefited from $7.3 million of accelerated accretion as certain loans paid down or paid off, alongside “increased core yield expansion” from recent purchase activity and repricing.
Wayne also pointed investors to discount marks remaining on the balance sheet. He said that at quarter-end the bank had $154 million of “interest rate discount” and $46 million of “credit mark,” or roughly $200 million combined. Wayne said the interest rate discount typically accretes into income over the life of the loan, but can be recognized sooner if loans pay off early.
Purchase market active, but fewer wins
Despite a robust market for loan purchases, the bank’s purchase activity was lighter in the quarter. Wayne said Northeast reviewed and bid on “in excess of $1 billion” of opportunities, but purchased only $25 million. He framed that as a function of discipline: “We’re disciplined bidders, both in terms of asset quality and yield requirements,” and said the bank would not “buy loans that don’t meet our metrics just so we can have volume on the balance sheet.”
Chief Operating Officer and Chief Credit Officer Patrick Dignan said the $25 million of purchases comprised eight loans across three transactions, with all but one loan sourced from bank sellers. Dignan added the bank was “competitive but ultimately unsuccessful” on two large pools. He said there remains “a lot in the pipeline currently,” with contacts expecting more supply over the next “1 to 3 years.”
On the question-and-answer portion of the call, management described the competitive dynamics as tight. Wayne said on deals not won in the quarter, “it was basis points,” and he reiterated the bank would not stretch for volume.
Origination mix: lender finance strength and small-balance updates
Dignan said the origination business “continues to grow,” with $254 million of closings across 33 loans. He cited an average loan size of about $7 million, loan-to-value ratios “just over 50%,” and an average interest rate “around 7.2.” He said about two-thirds of the quarter’s originated volume was lender finance loans, and described demand as strong for both direct and lender finance opportunities, particularly in the middle market where he said there are fewer competitors.
In the small-balance loan program, Dignan said the bank originated 422 loans for $65 million, including roughly $38 million of SBA loans. He said rule changes again slowed activity, but absent further changes, the bank believes it can reach “a consistent volume of around $20 million a month.”
Dignan also highlighted an SBA program update: the SBA “recently announced a 90% loan guarantee for 7(a) loans in the grocery and manufacturing sectors beginning May 1st.” He said Northeast is working with NEWITY to stand up a program to participate, with more details expected next quarter.
Separately, Dignan said the bank closed $27 million of small-balance insured loans, but emphasized management has “intentionally slowed originations” until it is confident in its ability to sell them. Wayne said the bank is negotiating with several groups and does not intend to “load up” the balance sheet with the product until a reliable forward-flow sale process is established.
Credit, expenses, funding and capital
Delmolino said asset quality metrics were “relatively flat” quarter-over-quarter, with delinquencies, non-accruals and classified loans steady. He noted the bank took two non-performing loans into OREO during the quarter, while total non-performing assets stayed flat and non-performing loans declined “a bit.”
The allowance for credit losses declined to $60.3 million (coverage ratio 136) at March 31 from $63.8 million (coverage ratio 147) at December 31, which Delmolino said reflected positive performance trends in the PCD portfolio and reserve releases there, partly offset by a higher coverage ratio on the SBA book. Net charge-offs were $3.4 million, up from $2.9 million in the linked quarter.
On expenses, Delmolino said non-interest expense increased to $23.6 million from $20.8 million, driven by higher compensation tied to a year-end bonus accrual true-up and higher insurance-related loan expense within the small balance insured loan product. In response to an analyst question, Delmolino said the quarter ended 12/31 is “a good run rate” for compensation expense, and he expected roughly an additional $800,000 of bonus expense in the fiscal fourth quarter.
On funding, Delmolino said the bank’s average cost of funds declined 7 basis points quarter-over-quarter as higher-priced CDs matured and were replaced with cheaper funding. During Q&A, he said some brokered CDs that matured in March were rolled into FHLB borrowings due to a favorable rate disconnect. He also said the bank has $550 million of brokered CDs maturing over the next three months, most toward late June, and $200 million of retail maturities expected to reprice down modestly.
Capital levels remained strong, Delmolino said, with a Tier 1 leverage ratio of 11.4% and tangible book value of $66.35 per share. Dignan added that the current quarter “is already going very strong,” and Wayne said he expects to provide an update following fiscal year-end on the bank’s July call.
About Northeast Bancorp NASDAQ: NBN
Northeast Bancorp is a Maine-based bank holding company and the parent of Northeast Bank, a state‐chartered commercial bank headquartered in Lewiston, Maine. Through its subsidiary, the company provides a variety of financial services, including personal checking and savings accounts, residential mortgage lending, small business and commercial loans, treasury management and private banking services. The bank operates a branch network spanning central and southern Maine, serving individuals, families and local businesses across the region.
Founded in 1872 as Androscoggin County Savings Bank, the institution has evolved through mutual and stock conversions, adopting the Northeast Bank name in 2001 and forming Northeast Bancorp as its mutual holding company in 2013.
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