Northeast Bank's Q2 2025 Earnings Call: Contradictions in SBA Growth, FDIC Costs, and Loan Loss Provisions

These are the key contradictions discussed in Northeast Bank's latest 2025Q2 earnings call, specifically including: SBA Business Growth Expectations, FDIC Costs, and Loan Loss Provision:



Financial Performance and Loan Activity:
- Northeast Bank reported $361 million of loan volume in Q2, which included purchases of loans with $15 million of UPB at a purchase price of $14 million.
- The company originated $246 million in loans, with record SBA loan originations of $100.3 million.
- The financial performance was driven by strong loan activity, including record origination and purchase volumes.

Interest Rate Management and Capital Position:
- The average cost of deposits decreased to 4.15% in Q2, down from 4.34% in the prior quarter, positively impacting the net interest margin.
- The leverage ratio remained healthy at 11.2%, and the total capital ratio was 13.9%.
- The bank benefited from a favorable interest rate environment and maintained a strong capital position.

Asset Quality and Liquidity:
- Non-performing loans to total loans decreased to 84 basis points from 106 basis points in the linked quarter.
- The bank's on-balance sheet liquidity increased to $430 million, with off-balance sheet capacity exceeding $1 billion.
- The improvement in asset quality and liquidity position provided a solid foundation for growth.

SBA Lending and National Real Estate Lending:
- The SBA lending volume closed just over $100 million, up from $82 million in the previous quarter, with a weighted average interest rate of 10.85%.
- National real estate lending closed $246 million, with an average balance of $8.2 million per loan and a weighted average LTV of over 50%.
- The growth in SBA and national real estate lending was attributed to strong market demand and the bank's strategic focus on these areas.