Northeast Bank entered into a loan purchase and sale agreement with The Loan Source to sell all loans originated by the bank under the current round of the Small Business Administration’s Paycheck Protection Program.
From Jan. 11 through Feb. 26, Northeast Bank received SBA approval for $1.84 billion in PPP loans, of which $1.65 billion have been funded. After amortizing previously unamortized PPP loan origination fees and other costs, the bank expects to realize a pre-tax gain of approximately $26 million, or an after-tax gain of approximately $18.2 million, in the current fiscal quarter on the sale of the $1.65 billion of funded PPP loans.
Pursuant to Northeast Bank’s previously disclosed correspondent agreement with Loan Source and ACAP SME, the bank will continue to act as correspondent for Loan Source in connection with Loan Source’s pledge of PPP loans to the Federal Reserve Bank of Minneapolis under the Paycheck Protection Program Liquidity Facility and ACAP will continue to act as loan service provider for the PPP loans pledged by Loan Source. Under the correspondent agreement, Northeast Bank receives correspondent fee income in the amount of 50% of the net servicing income earned on the loans pledged by Loan Source.
From Jan. 11 through Feb. 26, Loan Source purchased $4.72 billion in principal amount of PPP loans, which will increase by the $1.65 billion to be purchased from Northeast Bank and any additional PPP loans sold to Loan Source as discussed above.
Northeast Bank will continue to originate PPP loans, which it will sell to Loan Source along with the remaining SBA approved and unfunded PPP loans under the terms of the loan sale agreement until the PPPLF is closed. However, the bank does not expect the volume of PPP loan originations to continue at the same rate of PPP loan originations previously closed.
“At the end of round one of the PPP program in August 2020, we, along with our loan service provider, ACAP, anticipated that Congress would recognize the need for and enact legislation to provide additional PPP funds,” Rick Wayne, president and CEO of Northeast Bank, said. “During the period from the end of round one until [the] Economic Aid Act was passed on Dec. 27, 2020, we made significant investments in marketing to generate more leads and technology to assist in our thorough underwriting process. These investments have paid off well. On Feb. 28, 2021, the SBA reported that Northeast Bank was the 11th largest round two PPP lender in dollar volume. We are proud to continue to assist so many small businesses and employees around the country.”