Welcome to the Northeast Bank Third Quarter Fiscal Year 2022 Earnings Call. My name is Richard, and I'll be your operator for today's call. This call is being recorded. With us today from the bank is Mr. Rick Wayne, President and Chief Executive Officer; JP Lapointe, Chief Financial Officer; and Pat Dignan, Executive Vice President and Chief Credit Officer. Last night, an investor presentation was uploaded to the bank's website, which we will reference 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's 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 will now turn the call over to Mr. Rick Wayne. Mr. Wayne, you may begin.

Thank you. Good morning, and thank all of you for joining the call today. I am Rick Wayne, the Chief Executive Officer of Northeast Bank. And with me on the call are JP Lapointe, our Chief Financial Officer; and Pat Dignan, our Chief Credit Officer and Executive Vice President. After my comments, JP, Pat and I will be happy to answer any of your questions. I'd like to start out with a few highlights on Page 3 of the slide deck. For the quarter that ended, we had net income of $10.6 million, earnings per share of $1.36 diluted, return on equity of 17.6%, return on assets of 2.8%. Our cost of funds for the quarter were 30 basis points. I also want to comment on our share repurchase program. For the quarter, we repurchased 79,588 shares at $34.71, and in April through today, we repurchased an additional 82,000 shares at $34.43. Combined from January through April to date, we have repurchased 162,000 shares at $34.57. We recently filed an 8-K and put out a press release where the Board approved and the regulators approved the repurchase of an additional 1 million shares or $40 million of capital. I also now want to focus a little bit on the originated loan volume. For the quarter, we originated $152 million of loans, which reflected an increase on our originated portfolio of $61.3 million or 9.9% compared to the linked quarter on December 31, 2021. And if we go back to the beginning of our fiscal year, our originated loan book has increased $157 million or 30% compared with June 30, 2021. I want to comment also on our purchased loan activity. For the quarter, we invested $24 million on UPB of $32 million, which is a bigger discount than we previously…

[Operator Instructions] Our first question on line comes from Mr. Alex Twerdahl from Piper Sandler.

First off, Rick, I missed what you said earlier on -- when I got on the call, you were talking about seeing a lot of volume in the quarter so far in the quarter that we just started. I think you were talking about the purchase loans. Can you just confirm that comment? And maybe talk a little bit more about the market for purchased loans as it stands right now with rates kind of poised to go much higher over the next couple of quarters?

Of course. Before I do that, Alex, I just want to clarify, I think I misspoke in my presentation, I said that nonperforming assets increased by $3.3 million, that was wrong. I meant to say they decreased by $3.3 million. So I want to just to clarify that. As to your question, the context was I said that in the quarter that ended March 31, typically a light quarter, the first calendar quarter of the year. and it was even lighter than we would have expected. And then I went on to say that with respect to the quarter we're in, without predicting at all what we're going to do because results are binary, you win or you don't win. We're seeing a fair amount of volume now. And so we'll be able to report how we do. But it's different in terms of what we're seeing now than it was in the quarter that ended March 31. With respect to your question about increasing rates, on the purchase. I'll ask Pat to comment on that, please.

There's some activity we're seeing right now that's concentrated in fixed rate assets, and there's certainly a lot of feedback from the large loan sale advisers that banks who are sitting on a lot of fixed rate assets and who funded short for many years are considering selling before rates continue to increase. So we expect there will be quite a bit of volume coming up. At least that's the feeling among the loan sale advisers and on the street. We haven't seen a ton of volume yet. But again, we're expecting June is typically a -- the quarter ending in June is typically a busy month for loan sales. So we're expecting some volume in the next month.

That's great color. And then one thing that really jumped out at me, I know you didn't do a huge amount of purchases in this -- the quarter end, but it looked like the discount that you got on those loans was a lot larger than what we've been seeing over the past -- I don't know, almost a decade. So is that just indicative of kind of the fixed rate nature of what you purchased and maybe it needs a bigger discount relative to where rates are going? Or is there something else there as the market and the pricing gotten better all around?

No. It's -- I had mentioned this as well, but I'll clarify it. The large discount was really attributable to one sort of unique transaction. And so the pricing other than that one was typically where we are. So I wouldn't overly generalize about the pricing in the market. It was just that -- we've had a really good buy on one transaction, and that's what drove it.

Okay. And then the originate business has obviously been on fire the last couple of quarters, as you alluded to and you're showing in the numbers. I know you made some adjustments and added some people in other geographies, are you continuing to add more people? Can you maybe talk a little bit about the pipes there? And is that something that also should accelerate into a rising rate environment or into the spring months and maybe just give us a little bit more color on what you're seeing in the originated business.

Well, first on the people, as you mentioned, and I've mentioned over the past calls, we have hired more business development folks, not since our last call, to be clear, but we now have 4 outside senior lenders, 2 in New York, 1 in Miami, 1 in Southern California. We are looking to hire more. We'd like to be able to hire a person or persons in Texas and another 1 in California and another 1 in Florida, and we're having conversations. And I'll just point out that all of the credit around that occurs in Boston. So we get senior lenders that can source business for us and then all the underwriting occurs in Boston. And you're right that the volumes on the originated side, closed loans has been great. We're over $150 million last quarter. I want to say $160 million and change. And this quarter, over $150 million. We have reasonable expectation that, that's a pretty good number for us where we are now, with the pipeline is very, very strong. And virtually all of the loans that we're doing now are like the ones we did before, which are floating and in the range of prime plus -- to the prime plus 2.75 , something in that range. And the net interest income that I mentioned, the improvement over a year ago, it really doesn't reflect much of an increase in prime, the 25 basis points that occurred so far happened kind of mid-March or so and that had a very small impact. We're going to start to see a full impact of that for the whole quarter now, plus any of the increases, which the talk is there won't be a bunch, we'll get the benefit of that as well.

Great. And then as you're looking to hire more people, can you give us just a little bit of guidance on what we should expect for expenses, which have ticked up a little bit over the last couple of quarters, but really have remained quite stable given all the growth that you've seen.

Yes. The -- when you -- I want to be careful. I don't want to announce specific salaries for people we hire, but kind of that -- people get a very good base. But the real upside for somebody is a bonus. The lenders are really bonus-driven. But to be clear, there's no commission. No one gets a formulaic payment based on volume. Instead, it's the basic philosophy of the bank is -- first, the bank has to do well, then we have a bonus pool and then we allocate that bonus pool based on people's contribution, but lenders -- it's not a formulaic. They don't get a commission, there's not a formula. But they can come in and they can make fair amount of money if they do a lot of volume. We shoot for lenders to do over time, once they get used to the place, $100 million or more of volume for the bank. And if they do that, with the kind of rates that we're getting, that's profitable for the bank and they deserve to get paid appropriately for doing that.

Okay.

So one point I want to make on the noninterest expense, and I don't have a number on this, but as we go into the fourth quarter, typically, we have more incentive comp at the back end as the compensation committee makes that determination is bank-wide, I'm talking about now based on how we do for the year. So I would expect that, that the salary -- the compensation number in our noninterest expense would go up in the quarter that ends June 30, as it typically does.

[Operator Instructions] Okay. At this time, I see we have no further questions. And now I'll turn the call over to Mr. Wayne for closing remarks.

Thank you, Richard, and thank all of you for participating in our call and supporting our bank. We try and make our material that we provide as helpful and as transparent as possible. If there are additional things that you would like to see in our material that would be helpful, let us know. And if we're able to include that, we will. And with that, I wish you a very good day. Thank you.

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