Northeast Bank Sees Deposit Costs Rising 50 Basis Points, With $1.58 Billion in Lending Capacity
Key Facts
Northeast Bank management said about $1.4 billion in certificates of deposit mature during the three months following its first-quarter fiscal 2027 earnings call, and renewing them could raise their cost by about 50 basis points, depending on market rates at maturity. The bank said repricing could increase its cost of funds by about 15 basis points in the second fiscal quarter. The upcoming funding obligations compare with lending capacity of $1.58 billion, which Chief Executive Rick Wayne said is available using existing capital and without a capital raise. That reflects the challenge the bank faces in continuing to expand lending as a large portion of deposits renews at higher rates. The bank’s shares closed at $132.98 on October 27, 2026.
Results for the quarter ended September 30, 2026, showed net income of $29.0 million, or $3.42 per diluted share, compared with $22.5 million and $2.67 per share in the same period of 2025. Wayne said the bank entered fiscal 2027 with “strong momentum,” citing net income and loan production during the quarter. Loans generated totaled $534.3 million, including $237.6 million in purchased national loans at an average price of 93.5% of unpaid principal and $258.6 million in originated national loans. These figures show the contributions of both loan purchases and originations to quarterly production, while the chief executive said national lending opportunities are attractive. He also described asset-quality measures as remaining healthy.
Net interest and dividend income before the provision for credit losses rose to $58.9 million, up $10.7 million from $48.2 million in the year-earlier quarter. The bank attributed the increase mainly to $16.7 million in growth in loan interest income, while deposit interest expense rose $1.2 million. But net interest margin was 4.57% in the first quarter of fiscal 2027, compared with 4.80% in the previous quarter and 4.59% a year earlier. The cost of funds fell to 3.58% from 3.83% year over year, with the expected repricing of certificates of deposit remaining a factor that could push it higher in the next quarter. The comparison shows that growth in interest income did not prevent the margin from falling from its previous-quarter level.
Total deposits increased $95.3 million, or 2.6%, between June 30 and September 30, 2026. The increase came as time deposits rose $143.4 million, driven by a $151.9 million increase in brokered time deposits. That was partly offset by an $8.5 million decline in time deposits in the community banking division. The movement shows that deposit growth during the quarter relied on brokered funding, as certificates worth $1.4 billion approach maturity and are expected to be renewed. On the earnings call, bank officials said the renewal cost “will likely increase in the range of 50 basis points,” subject to market rates at the time.
Wayne said the bank reviewed 29 loan pools comprising 3,700 loans with total balances of $3.5 billion during the quarter. The bank bid on 10 pools worth about $600 million and won eight. This activity is part of the national lending market that the chief executive described as attractive, while lending capacity of $1.58 billion provides room to expand using current capital. On asset quality, nonaccrual loans totaled $22.5 million, or 48 basis points of total loans, at quarter-end. Nonperforming assets were $31.9 million, or 0.6% of total assets, on September 30, compared with $34.8 million and 0.7% on June 30; past-due loans also fell to $22.4 million from $24.0 million.
The Tier 1 leverage capital ratio was 12.1% on September 30, 2026, up from 11.9% on June 30, while the total risk-based capital ratio held at 14.7% on both dates. The bank also declared a cash dividend of $0.01 per share, payable November 23 to shareholders of record on November 9. The bank is scheduled to report second-quarter fiscal results near the end of January, Wayne said on the earnings call. Those results will draw attention to the effect of certificate renewals on the cost of funds, alongside the deployment of available lending capacity. The bank reported first-quarter results on October 26 and held its earnings call the following day at 10 a.m. Eastern time.