Northeast Bank's Q3 2025: Unpacking Contradictions in SBA Loan Yields, Growth Outlook, and FDIC Costs

SBA loan yield and outlook, loan growth and pipeline, SBA loan yield and pricing, FDIC costs, and loan purchase capacity and strategy are the key contradictions discussed in Northeast Bank's latest 2025Q3 earnings call.



Loan Volume and Growth:
- Northeast Bank reported $414 million in loan volume for Q3 2025, including $74.6 million in purchased loans and $218 million in originated loans.
- The growth in loan volume was driven by strong commercial real estate and SBA loan originations, with the SBA volume increasing to $121.3 million from $100 million in the linked quarter.

Net Income and Earnings Metrics:
- The bank's net income for Q3 2025 was $18.7 million, which was $4.8 million higher than the quarter a year ago but $3.7 million lower than the linked quarter.
- The decrease was due to lower net interest income resulting from less accelerated income from loan payoffs and fewer days in the quarter, as well as the recognition of recurring items such as incentive comp and tax expenses.

SBA Business Expansion:
- Northeast Bank's SBA segment saw significant growth, originating 1,069 loans and reaching $121 million in volume for Q3 2025, compared to 330 loans and $29 million a year ago.
- This growth was attributed to increased demand for SBA loans and the bank's strategic focus on building this annuity business with annuity loans.

Loan Yields and Interest Rates:
- The yield on the SBA portfolio decreased to 9.93% in Q3 2025 from 11.6% in the previous quarter.
- The decline was due to rate cuts totaling 100 basis points in September, November, and December, affecting SBA loans that reset quarterly.