Welcome to the Northeast Bank Second Quarter Fiscal Year 2026 Earnings Call. My name is Marvin, and I'll be your operator for today's call. This call is being recorded. With us today from the bank is Rick Wayne, President and Chief Executive Officer; Santino Delmolino, Chief Financial Officer; and Pat Dignan, Chief Operating Officer and Chief Credit Officer. Prior to the call, an investor presentation was uploaded to the bank's website, which will be referenced in this morning's call. The presentation can be accessed at the Investor Relations section of northeastbank.com under Events and Presentations. You may find it helpful to download this investor presentation and follow along during the call. Also, this call will be available for rebroadcast on the website for future use. [Operator Instructions] As a reminder, the conference is being recorded. Please note that this presentation contains forward-looking statements about Northeast Bank. Forward-looking statements are based upon the current expectations of Northeast Bank management and are subject to risks and uncertainties. Actual results may differ materially from those discussed in the forward-looking statements. Northeast Bank does not undertake any obligation to update any forward-looking statements. I'll now turn the call over to Rick Wayne. Mr. Wayne, you may begin.

Thank you, Marvin. Good morning. I want to start off with just an administrative matter as we're going through the material this morning. During the course of the year and in fact, years we get input from shareholders and others about our slide deck, and we take that input very seriously and appreciate it. This slide deck is mostly the same format and information updated, of course, for the quarter as we've used in prior periods, but there are some differences. We have deleted a few slides. And for -- to make it easier for you, we have taken some of the slides and moved them into the appendix. There's also a new slide, which I just want to start with on Page 5 that those of you familiar with our company, of course, will know this. But as we meet new investors, which we do and enjoy doing, it kind of explains a little bit about our bank, which has been around for 150 years, most of which time it was a traditional community bank. And then when starting at the end of 2010, evolved into a national commercial real estate and small business lender. And on Page 5, you can see there are three pillars. One is the purchased commercial real estate, which is -- at this point, is the largest amount of our commercial real estate loans, those that have been purchased. Secondly, originated commercial real estate loans, which is about -- with a lot of rounding here, about 25% of our loan book. And finally, we have started to do a couple 3 years ago, or maybe even starting with PPP, doing small business lending. Some of the stats over a 3-year period are an average return on equity of 17.7% and a return on assets…

Thanks, Rick. As Rick mentioned, despite some headwinds we had this quarter, it was still a strong quarter for the bank. We reported net income of $20.7 million, or $2.47 per diluted share for the quarter. $43.3 million, or $5.14 per diluted share for the year-to-date. Return on average assets was 1.87% for the quarter and 2% for year-to-date, and return on average equity was 15.6% for the quarter and 16.6% year-to-date. As Rick mentioned, the story this quarter really was focused around balance sheet growth. Total assets ended the quarter a shade under $5 billion at $4.95 billion, and loans ended the quarter at $4.4 billion, up from $3.7 billion as of September 30. This incredible loan growth is attributable to both the purchase and originated side of the house, as Rick had mentioned. For the quarter, we had purchases of $533 million, and originations of $252 million in our National Lending division. Timing of this was heavily weighted towards the tail end of the quarter and had a muted impact on net interest income, but will be accretive to earnings on a go-forward basis. Purchases were funded through a combination of both brokered CDs as well as borrowings from the FHLB, had a weighted average cost of funds of 3.8%. Our banking centers also continue to be a strong source of liquidity to fund our origination volume as we grow our deposit franchise in Maine. Net interest margin for the quarter was 4.49%, down from 4.59% in the linked quarter, resulting in net interest income of $48.8 million for the quarter-to-date, and $97 million year-to-date. The decrease in NIM is largely due to a lag in timing of liabilities repricing as we have approximately $1.25 billion in CDs maturing over the next 6 months at a weighted average…

Thanks, Tino. This is a big quarter for loan volume. We purchased 152 loans in 5 transactions with $576 million of balances at a purchase price of $533 million, or 92.6%, and with weighted average yield to maturity of 10.8%. These were geographically diverse portfolios but with significant concentrations in New York and New Jersey. Three of the five transactions were from banks, but 80% of the balances were from loan funds exiting previously purchased bank portfolios. The current pipeline is as full as we've ever seen, and we're aware of several large transactions that will be coming to the market soon, fueled mostly by M&A. Interestingly, I learned from Sandler that bank M&A is up 45% in 2025 over '24, and '26 is shaping up to be even bigger. You never know in this business, but at least for the next several quarters, there appears to be a lot of opportunity growing. In our Origination business, we closed $252 million. This included 32 loans, of which 2/3 were lender financed with an average balance of $7.5 million, LTVs just over 50%, and an average interest rate of just over 7.5%. There's a lot of inbound loan requests right now despite increasing competition from private lenders. Given our funding costs, ability to close quickly, and sweet spot in the middle market space where there's less competition, we could still be picky on credit without sacrificing too much in yield. I hope that continues. Finally, with respect to our small balance program, we originated 537 loans for $111 million this quarter. SBA loans accounted for $40 million, as previously mentioned. We had some good momentum going into the quarter, but the government shutdown cost us. Looking forward, $20 million a month or so seems like a reasonable run rate for SBA loan volume before any consideration for new product offerings, which we are considering. We also closed $71 million of small balance insured loans during the quarter. As a reminder, these loans are very similar in most characteristics to SBA loans we originate, but carry private insurance instead of an SBA guarantee and with higher rates. Our intention is to sell these loans into the secondary market while retaining residual economics. More to come on that. That's it for loans last quarter. We're already knee-deep into the current quarter, so we hope to keep it going. Rick?

Thank you, Pat. Marvin, we're ready for any questions out there.

[Operator Instructions] And our first question comes from the line of Mark Fitzgibbon of Piper Sandler.

First question, maybe for Tino. I guess I was surprised to see that the share count went down this quarter. Did you guys buy some stock back in the fourth quarter?

No, we did not buy any stock back during the quarter. That was purely a result of stock compensation activity and cancellation of shares to cover taxes.

Okay. But you didn't exercise the ATM at all. Is that correct?

We did not utilize the ATM, no. No share activity this quarter besides stock compensation.

Okay. And then based on your comments before, Tino, it sounds like we should see a bit of lift in the net interest margin going forward given the downward liability repricing that you anticipate over the next 2 quarters. Is that fair?

Yes, I think that would be fair to say.

Okay. And then next, I wondered if, strategically, sort of, how do you think about evolving the funding mix over time as you grow as the balance sheet continues to grow? Will broker deposits continue to be the main source of growth?

I would think so. We're making a real effort to grow our deposits in Maine, which tend to be less expensive than brokered and generally, stickier. And we've had great success in municipal deposits, which have grown meaningfully over the years. And we are also taking a look at other niche possibilities where we could grow deposits as well. But I just think our reality is, because our loan growth is at such a great pace that in order to fund that we'll probably be looking at brokered deposits to do a lot of that. I would also add that broker deposits, I know you would know Mark better than I would, but for a while, had a bad name. But I don't think it's really the case any that it deserves it now. It's a very efficient way of funding without all the cost of either an online presence and marketing, or brick-and-mortar space. And so you pay a little bit more for it, but it's not a problem at all as long as you stay well capitalized, which we certainly do. We have very high capital ratios. You can get the money, you can get it efficiently. And so it's -- I know that it's not -- investors tend to love cheap liabilities. We love that, too, if we can get it, but that's kind of a brick-by-brick building process. But in order to fund ourselves with the kind of growth we have had, broker deposits work well.

Okay. And then lastly for me, can you give us a sense for what percentage of the purchase loans you have that typically sort of you retain at maturity?

You know, we don't have that number right off hand. I mean we -- it's knowable somewhere, but three in this room don't have that. And we can get that and provide that information on another call, for the next call. But I could say to you, anecdotally, we try and keep a lot of the loans when we have them. And the case we make to the borrower is that they can extend it without any friction within, with no cost really, essentially signing an agreement that's 3 pages long or so. And it's easy. And I would say also, it's easier for us to keep them when rates are higher because their refinancing alternatives are not as great when rates come down as they're probably going to be now, the runoff may be greater, because you have a lot of local banks that would be chasing these borrowers. The kind of good and bad news. The bad news is you lose the loan. The good news is you accelerate the income that has not been recognized and you get back on the treadmill again. I guess that's the bad news for those of us who don't like to exercise. I know you're not in that camp, Mark. I know you do.

Our next question comes from the line of Matt Renck of KBW.

Matt Renck filling in for Damon DelMonte. My first question, just with the SBA gain on sale income. It looks like you're projecting like $20 million more of SBA loans for the quarter. Is there any catch-up next quarter from the government shutdown and fee income? Like will more things flow through? Or is it more just a return to normal fee income levels?

One clarification, that's $20 million a month, so roughly in the ballpark of $50 million to $60 million a quarter.

Okay. Got it. And you did $40 million this quarter, right?

Yes, correct. So we expect it to increase next quarter. In terms of the -- you're asking about the percentage gain on sale?

Yes, yes.

Yes. We anticipate that to stay somewhere in the realm of 8% to 9%, compared to the balance of guaranteed balance being sold.

Okay. Got it. And then just on the insured small business product. How much -- how like do you see that growing over the course of the year? Was there any benefit? I think you mentioned from the shutdown driving some outsized demand there? Or is that run rate kind of sustainable into the future?

I think the run rate is sustainable. The demand for it is gigantic. The reality for us is we got to be able to sell it. To date, we haven't sold what we have originated, and we don't want a portfolio, an uncomfortable level of these on our balance sheet. Not because they're bad loans, they're good loans with the insurance protection. I'll remind -- I said this in our last call, but I'll remind anybody who may have forgotten, or those that don't know it, which is these -- when they're insured, the loans have a 4% deductible and 10% of insurance. So the 14% -- with the deductibles funded. So there's 14% of protection on these loans and -- which is significantly higher than the losses on an SBA loan, with loans that are -- the profile is reasonably similar.

Okay. But even when you guys do start to get to sell them, it should be lower than that like 8% to 9% gain you're seeing on the SBAs?

No, because these are different. The SBA loans are -- it's agency paper that that's just the market for selling them. These loans would be sold to a private buyer and the economics of how much is the premium, if any, will there be some, but premium on the sale is not going to be like the SBA. It's going to be much, much smaller than that. But the benefit is once we sell them, we're going to keep a spread, and we split this with annuity, but keep a spread on assets that we don't hold anymore. So it could be -- these are very rough numbers. I'll reference again the forward-looking part of the presentation. But it could be -- we wind up making 2% or 2.5% while the loans are on the outstanding balance when we don't have the loans on our balance sheet, that's our share. [indiscernible] the same. So it's a different kind -- economics are different on this. But if we're able to sell these, the economics will be terrific.

And one thing to note on the accounting side of the house here. It's largely going to depend on how the agreements are structured, but we may very well end up with mortgage servicing assets that get recorded on the balance sheet, and that will flow through the gain line. So until we have the contract finalized and in front of us, it's hard to say what exactly to expect from a gain on sale versus how much will be some sort of spread income that's recognized over time.

We have to go through a loan sale, a couple of loan sales first. And on loan volume, we have -- it's been -- we've kind of described it as a fire hose, as Rick pointed out, but we've got to intentionally kink in that firehose. We're really slowing the incoming volume down until we can prove to ourselves that we could sell these loans and see what the real return will be.

We have no further questions at this time. I'll now turn the call over to Rick Wayne for closing remarks.

Thank you, Marvin, and thank all of you for calling in and listening. And I know we get a lot of listeners after the call will go on our website to hear a replay. And to those, I thank you as well. I wish you all a happy week in this snowy time of the year. As you know, we're in Boston, a lot of snow here. I assume most of you are in New England somewhere in the tri-state area. So you probably have a lot as well. Thank you. Thank you, Marvin.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.