Earnings call transcript: Northeast Bancorp Q4 2025 beats expectations

Northeast Bancorp reported strong financial results for the fourth quarter of 2025, surpassing analysts’ expectations. The company achieved an earnings per share (EPS) of $3.00, exceeding the forecasted $2.57 by 16.73%. Revenue reached $62.69 million, also beating the forecast of $56.5 million by 10.96%. This performance continues the company’s impressive 24.54% year-over-year revenue growth trend. Following the announcement, Northeast Bancorp’s stock rose by 2.13% in regular trading and an additional 3.42% in premarket trading, reflecting investor confidence in the company’s performance. InvestingPro analysis reveals the bank maintains a strong financial health score of GOOD, with particularly high marks in profitability and price momentum.

Key Takeaways

• Northeast Bancorp’s EPS and revenue both exceeded forecasts significantly.
• The company’s stock saw a notable increase post-earnings announcement.
• Loan originations and purchases reached record levels for the quarter and fiscal year.
• The bank is investing in technology and innovation to drive future growth.
• SBA lending faces temporary challenges due to regulatory changes.

Company Performance

Northeast Bancorp demonstrated robust performance in Q4 2025, with net income reaching $25.2 million, marking a record quarter. The bank’s total loan originations and purchases amounted to $362.6 million for the quarter and $2.1 billion for the fiscal year. The net interest margin stood at 5.1%, while return on equity and return on assets were 20.73% and 2.38%, respectively. The bank’s strategic focus on innovation and loan portfolio diversification has positioned it as a leader in small business lending.

Financial Highlights

• Revenue: $62.69 million, a 10.96% surprise over forecast
• Earnings per share: $3.00 (diluted), a 16.73% surprise over forecast
• Net income: $25.2 million, record quarter
• Net interest margin: 5.1%
• Return on equity: 20.73%
• Return on assets: 2.38%

Earnings vs. Forecast

Northeast Bancorp’s Q4 2025 earnings exceeded expectations, with EPS at $3.00 compared to the forecasted $2.57, a 16.73% surprise. Revenue also surpassed projections, reaching $62.69 million against a forecast of $56.5 million, a 10.96% surprise. This strong performance demonstrates the company’s ability to outperform market expectations consistently.

Market Reaction

Following the earnings announcement, Northeast Bancorp’s stock rose by 2.13% in regular trading to $99.74 and further increased by 3.42% in premarket trading to $101. This positive movement reflects investor confidence in the bank’s strong financial performance and strategic initiatives. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations. The stock is approaching its 52-week high of $110.35, indicating strong market sentiment. With a modest P/E ratio of 11.09 and an attractive PEG ratio of 0.48, the bank shows compelling value metrics relative to its growth potential. Discover more insights about undervalued opportunities at Most Undervalued Stocks.

Outlook & Guidance

Looking ahead, Northeast Bancorp expects continued strong performance in its base business, with potential for large loan transactions. The bank anticipates a temporary reduction in SBA loan volume due to regulatory changes but remains optimistic about exploring new lending verticals. The effective tax rate is projected to be between 33% and 34%. InvestingPro subscribers can access additional insights through the comprehensive Pro Research Report, which provides deep-dive analysis of Northeast Bancorp’s performance metrics, growth trajectory, and competitive positioning among the 1,400+ US equities covered.

Executive Commentary

CEO Rick Wayne remarked, "It was a great quarter. On all cylinders," highlighting the company’s robust performance. COO Pat Dignan emphasized the vast market potential, stating, "The market for small business loans is enormous." Wayne also noted plans for significant technology investments, saying, "We’re going to redo that in the current year in a fairly major way."

Risks and Challenges

• Regulatory changes in the SBA lending market may impact loan volumes.
• Increasing competition in the loan purchase market could pressure margins.
• Economic uncertainty may affect borrower demand and credit quality.
• The bank’s aggressive growth strategy may pose operational challenges.
• Technological implementation risks could affect planned innovations.

Q&A

During the earnings call, analysts inquired about the challenges in SBA lending and the impact of transactional income on results. Executives detailed their exposure to the New York City multifamily loan market and outlined technology investment plans, addressing concerns about future growth and operational efficiency.

Full transcript - Northeast Bancorp (NBN) Q4 2025:

Conference Operator: Hello, and welcome to the Northeast Bank Fourth Quarter and Fiscal Year twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear automated message advising your hand has been raised.

To withdraw your question, please press 11 again. Please be advised that today’s conference is being recorded. It is now my pleasure to introduce CEO, Rick Wayne.

Rick Wayne, CEO, Northeast Bank: Thank you, and, good afternoon to all of you that are listening to this call. With me are Pat Dignan, our chief operating officer and head of commercial credit for the bank, and Richard Cohen, our CFO. After I make some comments, Pat will follow-up in a a lively conversation about our our loan book, both about commercial real estate loans and the SBA, and some very helpful information about our multifamily portfolio in New York City. I think you’ll find all that quite interesting. And after Pat’s comments, Richard, Pat, and I are available for any questions that you might have.

Let me start by looking at page number one of the investor deck that was uploaded yesterday. My opening comment and headline for the quarter, it was a great quarter. On all cylinders, it was it was a great quarter. And I’m gonna just highlight a few things about the quarter and perhaps a few other items about the the year because our fiscal year ended June 30. So it’s a big quarter and also a year end for the quarter.

First, net income was $25,200,000. Now as indicated in the earnings release, if we exclude the quarter in which we had a large sale of triple p loans. This was a record, 25,200,000.0, excluding the kind of one time or two time it may have been during the year of sale of this, of triple p loans, $25,200,000 was a record. It and something we’re very, very proud of. If I take a look at the loan activity for the quarter, all originations and purchases totaled $362,600,000 for the quarter and $2,100,000,000 for the fiscal year.

The breakout of the loan volume for the quarter was $41,700,000 invested in the purchased loan book on purchases of 44,400,000.0 of UPB at a purchase price of 93.8%. That’s 41,700,000.0. On the originated side, very substantially, we had $216,600,000. The weighted average rate as of March 31 for the loan book was 7.99%, or we can call that eight. For the year, we we originated $807,900,000.

On the SBA front, very strong. We originated $107,300,000 for the quarter or $408,500,000 for the year. We sold $107,600,000 for the quarter, which you may be asking how could that be if we originated $107,300,000 or a slightly smaller number. And the answer to that is that some of the sales in the in q four related to loans that were originated in the preceding quarter. And the gain on the sale of those loans sold was $8,200,000.

All in, counting everything, our net interest market margin was a very strong 5.1%, and the return on our purchased loans was 8.76. We did not issue any shares under the at the market offering, which had availability at the June of $65,400,000. And our loan capacity, something we pay a lot of attention to, at the June was $1,100,000. Earnings per share basic was $3.06, and fully diluted was $3. Return on equity was a strong 20.73%.

Return on assets was a very strong 2.38%. And tangible book value per share at the June was $57.98 or $58 of tangible book value per share with a little bit of rounding. I now want to just talk about a few slides, which I hope that you will find interesting. First, on the asset quality metrics, the allowance for credit losses over grow gross loans was 1.28% at the June, which is up slightly from March 31 at 1.23% and up very substantially compared to two years ago at June 3023, when the allowance was 0.29%. On page 20 is a slide that shows our revenue for the quarter, our non interest expense.

And and I would want to point out that total revenue includes net interest income before provision and noninterest income. So you can see in the group of bars at the far right in the quarter labeled q four f y twenty five, the revenue for the quarter was $62,700,000 And again, if we look back at preceding quarters and carve out the gain from the sale of PPP loans, that was also a record revenue. And noninterest expense for the quarter was $21,500,000 which you can see on here is higher than in the preceding q three, q two, Q1, and Q4 of FY24. Reason for that is that in the quarter, we had a true up of our compensation expense, which had a which had a big impact. But we’re still growing pretax net interest income, which was $41,200,000 Why should be more specific?

Total revenue, as I’ve described, minus noninterest expense was $41,200,000 and again excluding the quarter in which we had PPP was a record. If we now go to slide 21, I want to point out that our NIM was 5.1%, substantially higher than the preceding quarter, and primarily due to the fact that we generated a fair amount of transactional income in the quarter. And if you look to the chart on the right, you can see that our average loan balance for the June was $3,000,000,007.67, but comparing favorably with the linked quarter at $3,000,000,006.50. If we go to slide 22, I just want to highlight that in the last bar, we have $216,000,000 of discount for the quarter ending June 30, of which a 179,100,000.0 is the interest rate mark, and $36,000,000 is the credit mark. I will remind you that we don’t really suffer there was historically have not suffered many dollars in credit losses in this portfolio.

And on slide 25, we take a look at net income for the trailing five quarters. And you can see that at $25,200,000 for the June, we are substantially ahead of the preceding four trailing five quarters. And I think with that, I will ask Pat to talk to you about our real estate, our portfolio, or SBA business. Pat?

Pat Dignan, Chief Operating Officer, Head of Commercial Credit, Northeast Bank: Thanks, Rick. It was a strong finish to the year. The loan loan portfolio grew by 36% overall with purchased loan growth of 40%, originated growth of 27%, and SBA growth of over 200%. For purchases this quarter, we bought 14 loans in four transactions, which brought purchased loan volume to $863,000,000 for the year. There’s a lot of purchased loan opportunities currently in the market, and we expect a lot more to come this year.

There’s also a lot more competition in this space, more capital, cheaper leverage, and with larger pools being the most competitive. Having said that, the purchase loan market is large, and we will continue to look at every opportunity, be active but disciplined bidders, and expect to win our share. In our origination business, we closed 24 loans with an average balance of $9,000,000 secured with a variety of collateral types and LTVs just over 50%. Like last quarter, most of these loans were in our lender finance product, which continues to show strong demand from non bank lenders who are being squeezed on yield with all new capital entering the market and then more and more desiring of leverage. We expect lender finance to continue dominating our origination business into next quarter as competition for direct opportunities continues to heat up.

In the SBA business, we originated $107,000,000 of loans compared with $121,000,000 in the linked quarter. On last quarter’s call, we discussed that the SBA had tightened their eligibility requirements effective June 1, so the impact from those changes on volume this quarter is somewhat muted. Recall, we anticipate a temporary dip in SBA lending volume over the next quarter or two due to a smaller strike zone at the top of the funnel and more required documentation and longer processing times for new loans. As we adjust to these changes, volume could dip as much as 50% this quarter. Fortunately, the market for small business loans is enormous, and we remain very positive about this line of business and believe we will continue to be a national leader in small business lending.

Finally, a quick note on asset quality. We’ve been watching the New York City mayoral race and are aware of its potential impact on rent controlled and rent stabilized multifamily properties. So we thought we’d share some detail on our multifamily exposure in New York City. Referencing slide 11, we had $676,000,000 of total multifamily exposure in New York City as of sixthirty. Of that, $378,000,000 has no rent controlled or rent stabilized units.

We’ve divided the remaining $297,000,000 into two buckets. First, dollars $214,000,000 where there is some exposure, but where we believe it to be very low risk given the collateral’s ability to continue demonstrating strong debt service coverage even in the event of a rent freeze. And second, dollars 44,000,000, which excludes $39,000,000 that paid off in early July, spread across seven loans where a rent freeze could impact debt service coverage if in place for an extended period of time. It’s our view that our focus on low LTVs will provide a significant buffer against any headwinds from this issue. We also believe New York City will remain one of the strongest multifamily markets in the country and provide a lot of opportunity for us going forward.

Back to you, Rick.

Rick Wayne, CEO, Northeast Bank: Thank you, Pat. That was excellent. Now if there are any questions, we would be happy to entertain them.

Conference Operator: Certainly. First question comes from the line of Mark Fitzgibbon with Piper Sandler.

Mark Fitzgibbon, Analyst, Piper Sandler: Hey guys, good afternoon.

Rick Wayne, CEO, Northeast Bank: Hi Mark. Hello Mark. Hi Mark.

Mark Fitzgibbon, Analyst, Piper Sandler: Just first a couple of clarification questions. Pat, regarding your comments on the SBA declining by potentially as much as 50% in the third quarter. When does that snap back, you think? Is that a fourth quarter event? Or is it not till next year where you see SBA volumes come back and you sort of adjust to the new process?

Pat Dignan, Chief Operating Officer, Head of Commercial Credit, Northeast Bank: It’s hard to say exactly. I believe we will climb back both from in this particular product, and we’re also looking at adding new verticals to our table. But there’s a number of factors involved in in the top of the funnel. First of all, the SBA decreased the the cap from 500,000 to $3.50, so that excludes a lot of borrowers right there. They also increased the minimum credit scores for borrowers, which excludes a of other borrowers.

And they’ve added, and there’s been some deterioration of credit generally in certain sectors due to the tariffs and other economic factors. So that’s going to require us to change the annuity, to change the marketing efforts at the top of the funnel to be more surgical about attracting the right kinds of business. Keep in mind that this market is enormous. And so we have no doubt that we’ll be able to do this. It’s just a question of how quickly we can set this up.

And then on the processing side, there’s new collateral requirements and new capital requirements, which requires a lot more documentation and information collection from borrowers and verification, and that’s just gonna take longer. So you’ve got, some adjustment at the top of the funnel and then a longer processing period, and it’ll take some time before we catch up to that to that slowdown. So we want to we don’t want to overstate or understate what we’ll be able to do. But, you know, again, this is an enormous market and, you know, we’re the same issue is affecting every other lender. And we’re pretty confident that we’ll be able to navigate through it.

Mark Fitzgibbon, Analyst, Piper Sandler: Okay, great. And then secondly, I was curious if you could sort of size for us the pool of loans that you’re looking at today for loan purchases. How does that maybe stack up versus this time last quarter?

Pat Dignan, Chief Operating Officer, Head of Commercial Credit, Northeast Bank: Pretty good. Go ahead, Rick.

Rick Wayne, CEO, Northeast Bank: There is a is a lot of activity out there. And and we while while we purchased 41,000,000, we bid on a lot more than that in the June. We saw a lot of action, and we see a lot of action now, which is a good sign because it’s not you know, a lot of times the summer is a little slower. We, you we also see more competition now on some of the larger transactions that are out there from some of the bigger banks that are buying, you know, these are big transactions I’m describing. They’re buying and securitizing.

You know, in our in the field we, you know, mostly play in, You know, there’s there’s a lot for us to look at and underwrite and bid, and so we are optimistic about it. You know, maybe a little bit before your time, Mark, when Alex was at Piper Sandler. But, you know, for a lot of years, our purchase volume was in the range of 150 to 2,000,000, and in fact, our origination business was greater. What no guarantee on this. I won’t bore you by reading the forward looking statement, But we’re expecting kind of the base business that I just described will continue.

And if we’re able to, you know, buy a a large transaction, sometimes referred to as a whale, you know, then we’ll it’ll look more like it did in the preceding years where in September ’24, we bought 700,000,000. In December ’22, we bought a billion. And so we will wait and see. But it’s a long answer to your question, which is there’s a lot of volume, a lot of activity out there now.

Mark Fitzgibbon, Analyst, Piper Sandler: Fair enough. And then, Rick, you had mentioned there was some transactional income in the the net interest margin this quarter. Could you, you know, tell us how much that was, how much it impacted the margin?

Rick Wayne, CEO, Northeast Bank: I can I I can tell you that? We I’m now looking at slide number 11, and you can see there was a for originated loans, there was a total of $4,094,000 of transactional income, which is pretty high for the originated book. It’s sent from a loan we had made six or seven years ago that had been on nonaccrual for quite a while, and we got paid in full on that loan, which generated a lot of interest income, which we’re categorizing as transactional.

Mark Fitzgibbon, Analyst, Piper Sandler: So if we were to back most of that out of next quarter’s numbers, we’d be in the ballpark for what you’d expect the margin to look like?

Rick Wayne, CEO, Northeast Bank: Yes. Well, that that was worth what I just described was worth 1.4% on the return. And so if that came out, it would be 855%. But I don’t think it’s the right way to think about it is going to zero because we always have some. That just happened to be a loan that had been around for quite a while.

And a shout out to our our brilliant asset manager, Chris Siggy, resolved that credit, you know, really thoughtfully and creatively.

Mark Fitzgibbon, Analyst, Piper Sandler: Okay. Great. And then thank you for the information on page 11. It was really helpful. Just one question on those elevated loans, the $44,000,000 Yep.

Should we should we read into that, that those are loans that are either classified or may sort of migrate to non accrual or be potentially problematic or not necessarily?

Pat Dignan, Chief Operating Officer, Head of Commercial Credit, Northeast Bank: Not necessarily. There are loans that, you know, given the they’re in they’re in Northern Manhattan where rent increases have not kept up with expense increases. And, all but 2,500,000.0 of those are performing. And most of that, that’s, most of the $2,500,000 is performing as a loan where it’s really not a cash flow issue. It’s the borrowers fighting with each other.

But the, you know, right now, these loans are are cash flowing and there’s there’s not an issue. I was simply pointing out that if if if there turns out to be a rent freeze on rent control or rent stabilized units for, you know, more than for an extended period of time. These are properties that are vulnerable to compression on cash flow, and we’re going to keep an eye on it. But right now, there’s nothing no concern at all.

Mark Fitzgibbon, Analyst, Piper Sandler: Okay. And then just one last quick one. On the effective tax rate going forward, does it Richard, does it kind of migrate back to sort of 36.5% on a go forward basis, would you say?

Rick Wayne, CEO, Northeast Bank: No, it’s a good question. So there’ve been

Richard Cohen, CFO, Northeast Bank: a few moving parts on the effective tax rate, mainly about state taxes. And there have been some changes in both California as well as Massachusetts. Massachusetts tax rate for us was favorable, the moving to one factor. And in California, the moving to one factor was increase our tax rate. Those two were relatively offset.

We think as it stands, 33 to 34% expected.

Mark Fitzgibbon, Analyst, Piper Sandler: Great. Thank you very much.

Rick Wayne, CEO, Northeast Bank: Thank you, Mark. Thanks, Mark.

Conference Operator: Thank you. Our next question comes from the line of Matt Rank with KBW.

Matt Rank, Analyst, KBW: Hey, guys. Matt Rank filling in for Damon DelMotta. Hope everybody is doing well today. Just as a follow-up to the SBA income, I was just wondering, in the next couple of quarters, is there any offset on the expense side as volumes are lower? Or will what you have to do on the back end with the new processes kind of outweigh any reduction in volume?

Richard Cohen, CFO, Northeast Bank: I’m happy to take that. So a fairly significant amount of the cost would be variable. In other words, if the income was to reduce, so would the cost. So the loan expense would fall if the volume in SBA were to fall. Think that’s the short answer to your question.

We’ve obviously got some fixed costs that relates to the SBA business, for example, in the payroll line, and that clearly would not change.

Matt Rank, Analyst, KBW: Okay. Great. And then just a follow-up. Mean, you guys are pretty efficiently run bank. I’m just kind of curious if you’re investing in any new technologies, whether it be automation or different types of processes that you see driving, you know, additional efficiency gains over the the coming years?

Rick Wayne, CEO, Northeast Bank: You know, we’re we’re it’s a timely question. We’re going to redo that going to in the in the current year in a fairly major way.

Matt Rank, Analyst, KBW: Just as a follow-up, in a fairly major way, does that mean you expect a a big uptick in expenses? Or do you think you’ll you’ll be able to leverage it and it’ll it’ll kind of work itself out in the efficiency ratio?

Rick Wayne, CEO, Northeast Bank: I think we’ll our expenses will increase. We just have made a very significant hire in the role of innovation chief or chief of innovation so that we’re gonna be able to take a look at workflow AI in in all areas of the bank. And we and we I would expect that we’ll have some more hires in that area as well as some investments in technology. As we have a better handle on what that might be, we will, you know, we will cover that in subsequent call. Not necessarily the next one, but we’ll have disclosure around that.

Matt Rank, Analyst, KBW: Okay. Great. That’s all for me. Thanks, guys.

Rick Wayne, CEO, Northeast Bank: Thank you very much.

Conference Operator: you. And I’m showing no further questions. So with that, I’ll hand the call back over to CEO, Rick Wayne, for any closing remarks.

Rick Wayne, CEO, Northeast Bank: Thank you. Thank you, Mark and Matt, for your thoughtful questions and, and others for dialing in and those that, listen to the call, on our website after today. Thank you as well. Look forward to talking again at our next meeting, would be in October, towards the October. And on that note, I wish you all stay cool.

We’re in New York City today. It’s very warm. And I wish you a a nice week and a nice weekend as when it approaches. Thank you very much. Operator, we are all set.

Conference Operator: Ladies and gentlemen, thank you for participating. This does conclude today’s program, and you may now disconnect.

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