Good day, everyone, and welcome to the Northeast Bank Fiscal Year 2021 Third Quarter Earnings Results Conference Call. This call is being recorded. With us today from the bank is Rick Wayne, President and Chief Executive Officer JP Lapointe, Chief Financial Officer and Pat Digman, Executive Vice President and Chief Credit Officer. Last night, an investor presentation was uploaded to the bank's website, which we'll 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 the investor presentation and follow along during the call. Also, this call will be available for rebroadcast on The question and answer session for this call will be conducted electronically following the presentation. 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 statement. At this time, I would now like to turn the call over to Rick Wayne. Sir, please go ahead.
Thank you. Good morning, and thank you all for joining us today. I'm Rick Wayne, the President and 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 your questions.
For purposes of my comments, I'd like to use the slide deck that we uploaded as a reference tool. Turning to Slide 3, which is the slide after the forward looking statement, I want to highlight a few points here. One, on our purchase loans for the quarter, we purchased we invested $39,900,000 on $42,500,000 of UPB. We bought this literally the last 8 of the quarter. So the income from this pool from this purchase was not reflected in our quarterly results, but will of course be on a go forward basis.
For the year, this is now through 3 quarters, we purchased or invested $136,000,000 And I would compare that for the full year of FY 'twenty, where we purchased invested $171,000,000 with a quarter to go for us to make apples to apples comparison. On the originated side, we originated $69,300,000 of loans, which brings us to $194,800,000 for 9 months and our entire volume for FY 'twenty was $171,000,000 which, of course, was impacted by COVID. But we are originating a lot and have a big pipeline. I want to spend a little time now on the PPP and then some more in the future slides, I'll go into some more detail. In the quarter, we originated 2,250,000,000 I want to say that again, that's a lot.
Dollars 2,250,000,000 of which we sold $2,140,000,000 to the loan source, generating pretax gain of $33,000,000 As you know from our previous calls, we act as a correspondent to loan source effectuating their borrowing from the Fed to purchase loans and we share in half of the revenue for that. In the quarter, the March the quarter that just ended, we earned $6,000,000 And for the 3 quarters of our fiscal year, we have earned $16,800,000 so far. Our average cost of deposits for the quarter was 54 basis points and JP is going to have a lot to say about that because we consider that to be a really meaningful accomplishment, as we're focusing more and more on improving our funding composition and cost of funds. And then I want to also highlight for the quarter, while our NIM all in was $3.93 if we exclude the impact of the PPP, our NIM was $506,000,000 Obviously, a really strong number, a little bit down from prior quarters because, recently with all of our capital and our loan capacity, we've tried to be able to buy loans where LTVs are really low. That is to say performance expectations are high even if some of the yields are lower.
Just I would point out, we sit here today with Tier 1 capital of $218,000,000 significantly higher because of all of our earnings and our load capacity today is $900,000,000 Our earnings for the quarter were $34,200,000 You may have seen in the headline from our earnings release, we call it record earnings. It's from our earnings release, we call it record earnings. It certainly was added a lot more. We didn't have a way to describe it other than record earnings, but obviously, dollars 34,200,000 4.06 earnings per share and 71% return on equity and 7% almost return on assets, it's quite a quarter. And for the year, for the 9 months, we've earned $50,000,000 $6 EPS, 37% return on equity and 4.5% return on assets.
Those are numbers we're obviously very proud of. On Page 4, we provide as we have in the past some detail on our correspondency because it is so material. I want to first bring your attention to the bottom table, first column where it shows Triple P loans purchased by loan source through March 31, they have purchased 6 point $86,000,000,000 of loans. That includes the $2,100,000,000 that we sold them this quarter, which we sold to them at Carr. So there was no discount on that to be amortized.
But if you look across the discount when they purchased those, I'm now talking about the aggregate amount was $8,700,000 That gets amortized over roughly 2 years. And the quarterly income from that was $1,098,000 You can see that is in the second column and it is also the first number in the table above. Also when they buy loans, they pay for the accrued interest typically. The total of all of that was $7,800,000 and $922,000 was brought into income this quarter. And finally, we share in half of the servicing income.
As a reminder, the servicing income is the difference between the rate the borrowers pay, which is 1%, the cost that LoanSource borrows from the Fed, which is 35 basis points. So there's 65 basis points on the outstanding PPP loans, less the servicing costs and we get half of that and that was $3,950,000 for the quarter. And so that was a total of $5,970,000 that we recognized in the quarter. On the next Slide 5, which I'm just going to go over quickly because it's going to frame part of the discussion on the slides that follow, this shows that we have at the end of the quarter, a loan book of $1,200,000 This does not include our PPP loans on our balance sheet. And you can see that out of the $1,200,000,000 the lion's share of that is in our national lending activity of which purchase loans are $433,000,000 $256,000,000 in direct originated loans, $216,000,000 in portfolio finance.
I think something really well, 2 things really interesting, one on the slide, one not. What's interesting is you can see how low the LTVs are in the column to the far right, 50% on the whole portfolio and even less in our national lending. And there's a little bit more detail on slides that follow. I'll highlight a little bit of it. But these slides have been in the deck before and are just updated.
So those of you that want to look through the detail are able to do so. But a point I want to make that is not on this particular slide is our whole loan book is 2,200 loans. 2,200 loans and we originated PPP loans of 22,000 in the quarter. It's just remarkable amount of volume and such a tribute to the just the great team we have, except for those working in the banking centers who are busy and they're doing a great job and we appreciate them going there. But virtually everybody else is working home.
And in addition to the 22,000 PPP loans, we were quite busy in our core business of originating and purchasing loans, which I will talk about shortly. In fact, I'll start to talk about it right now. You can see this is a bridge that shows what our national lending book looks like at twelvethirty one and what it looks like at March 31. And there's both good news here, and then there's a point of I want to talk about where we have both a challenge and an opportunity. So if you look at the originated loans, we originated 69,000,000 dollars That's a really good number.
There's a slide that follows that goes back and looks back 5 quarters and you'll see that's the 2nd best quarter we've had in a long time. And the runoff though was $74,000,000 I want to come back to the runoff point in a second. We purchased $40,000,000 and we had runoff of $25,000,000 And so the really good news is we had a lot of volume. And I think what we have to do a better job at on a go forward basis is retaining more of our portfolio. And we're going to start to focus on that and report on that.
And the way that we're going to improve on that, I don't want to make a prediction because, for example, on our purchased loan book, I mean, our portfolio finance book, those loans typically get paid off when the underlying loan pays off. One of the opportunities we're going to look at is to see on some of those loans if we can refinance those loans, that would be 1. Secondly, getting in front of our loan book by a lot, looking at 120 days in advance or more and talking to borrowers about trying to refinance for them. And all that's within the parameter, obviously, of making good credit decisions and making sensible choices. But for example, on our purchase loan book, whether the best thing to do when you do a discounted cash flow analysis is extend or get paid off and also considering credit.
But our goal is to grow our loan book. As I mentioned earlier, we have $900,000,000 of loan capacity, which is a tremendous opportunity. This is not a prediction at all. There is a forward looking statement. I will just point out the obvious.
If you can grow your loan book, virtually double it, one would expect your earnings to increase substantially. On Slide 7 is the slide that I alluded to earlier, which goes back through Q3 of FY 'twenty, you can see in the current period of $69,000,000 of originations, which is the blue bar, that is better than all but the Q1 that we did $84,600,000 And the $40,000,000 of purchases is a good number. As we've said forever, purchases are transactional, it's lumpy. Again, without making any predictions, I will tell you that both our purchase pipeline and our originated pipeline are full. On Slide 8 is a slide you have seen this before.
It takes our national lending portfolio and it slices it by different metrics. The first one is investment size, and you can see that in the upper left that only 9% of our loan book are loans more than $9,000,000 There is a footnote there, footnote 1, which I would highlight that the average size overall is $712,000 On our originated book, the average loan size is $2,300,000 and on purchase, it's $406,000 I'll remind you that we have over $200,000,000 of Tier 1 capital now. So we are we can really value the low concentration risk that we have. You can see in the slide below on collateral type, we break it up by category. I want to highlight 2 things, which I'll talk about in more detail in a second, is retail is 16% of our I apologize for that loan the phone ringing, we're all working at home.
Hope it's not distracting. The retail is 16% of our national loan book and hospitality is 7%. And a question we get asked frequently, given those are areas that have been of some concern, what do we think about our credit risk? And I'm going to talk about that in a second. But first, let me go to the chart that's in the middle that shows the collateral distribution by state.
We have we're in 45 states. We had half of our portfolio in New York and California. The rest is spread out throughout the different states. There is a slide on 9 that shows our asset quality metrics. You can see that they have improved in the quarter.
And particularly, I would bring your attention to on the classified commercial loans. These are our internal ratings of 8, 9 and 10, down from $20,000,000 to $15,000,000 I'll talk about the allowance briefly in a minute or so. On Slide 10, this is always of interest to investors is how did our loans that we modify do? The answer is they've done well. We had 2 kinds of modification or forbearances we provided borrowers.
One was a principal and interest forbearance. Typically for 3 months, there were a few that we had to give another one to or we wanted to give another one. So you can see that if you look at the grand total, we did $142,000,000 of these through March, only 13,900,000 dollars were still outstanding. And if you can look at the delinquency status, we have a relatively small number of delinquencies there, dollars 3,800,000 on 125,000,000 dollars the most of which we expect to be cleared up in the near future. And then we also provided going to Slide number 11, we provide detail on interest only deferrals.
And you can see that out of the $46,700,000 only $14,600,000 are still in deferral and out of those only $100,000 are delinquent between 30 59 days, really great performance. Going to Slide 12, we always have probably a higher number of nonperforming assets than other banks do by nature of our business. And one thing we've never pointed out before, but I think it's important and we've done it on this slide, is to make the point that it's not static. We have loans that go into non performing loans that go out of non performing. And so if you look at the balance of nonperforming loans at December 31, it was $30,500,000 During the quarter, we added $4,700,000 The $12,000,000 got resolved.
The net is that was the nonperforming loans came down by $7,500,000 or 25%. But the most important and important takeaway is there's lots of movement in this nonperforming category. Our allowance is on Page 13, where we break it out in a lot of detail. Only point I want to make here is that the accounting for purchase loans, you do not have a general allowance. You just have specific allowance where there's impairment.
And so if you look at the percentage of our allowance for our originated loan book, we're now at 1.48%, which is very high compared to where we used to be or I should say much higher compared to where we used to be. And then my final point before I turn it over to JP is on the hospitality and retail credit risk. So you can see here, we break it out in those two categories. Hospitality is the 2nd listed one and then retail is the second one from the bottom. We break it down by different channels, directly originated, portfolio finance and purchase, but you can see that in both cases, the loan to values are 51%.
So we don't expect at all any meaningful credit losses in those categories, and they've been performing actually quite well. It's certainly within the realm of possibilities some of those at some point may have some performance issues, but so far so good with those. Let me see. And I think with that, there are a bunch of other slides that follow around this, but I will let you look at those as you would like. And obviously, and of course, if you have any questions, we'd love to talk to you.
And with that, I'm going to turn it over to JP. Thank you.
Thank you, Rick, and good morning, everyone. I will pick up on Slide 20, which shows the quarterly interest costs of our deposit portfolio, which has decreased significantly over the past 5 quarters from 1.7% in the comparable prior year quarter to 54 basis points in the current quarter and stood at 49 basis points at the end of the quarter. The significant interest expense savings has been achieved from a combination of a low interest rate environment along with our efforts to shift the makeup of our deposit portfolio from time deposits to transaction accounts. Turning to Slide 21. This slide shows the change in the composition of our deposit portfolio year over year.
Our community bank deposits have increased from 44% of our total deposit portfolio a year ago to 73% at the end of the current quarter. Alternatively, Able Banking has decreased from 31% to 17% and bulletin board CDs from 25% to 10%. As the bottom table shows, the majority of the change in our product composition was in checking accounts, which includes demand deposits, which increased from 15% of our deposit portfolio in the comparable prior year quarter to 49% in the current quarter. As you will see in more detail on the next slide, significant portion of the balance is attributable to the PPP collection account, the balance of which we expect to remain elevated over the next few quarters as elevated PPP collection activity continues. Additionally, there was interest rate savings in all types, but the most significant savings were seen in money market and CD portfolios, in which the weighted average rate decreased from 1.04 percent excuse me, by 1.04% and 80 basis points, respectively, over the 1 year period.
Turning to Slide 22. This slide shows the change in our deposit portfolio and annualized interest expense monthly over the past year, while also displaying the recent significant impact of the PPP collection account, which impacts our cash and deposit balances and is subject to significant fluctuation. This slide also excludes the impact of $400,000,000 of 2 month brokered CDs that were taken out in January to help fund PPP loans and matured prior to the end of the quarter. The rate on those brokered CDs was 15 basis points and this funding source is not expected to be recurring, which is why it's excluded from the analysis. Over the past year, we have generated approximately $9,600,000 in annual interest expense savings in our deposit portfolio, decreasing from 15.9 percent in April 2020 to just $6,300,000 in March 2021.
Moving ahead to Slide 24. This slide provides detail on our potential additional future interest expense savings on our CD portfolio, of which 78% or $232,000,000 is scheduled to mature within the next 12 months. Based on the current weighted average interest rate of 1.42 percent, this amounts to $3,300,000 in annual interest expense to the bank. Slide 25 shows our quarterly revenues over the past 5 quarters, which have increased by $36,200,000 from the linked quarter and $40,900,000 from the comparable prior year quarter. Revenues excluding PPP gains have increased $3,200,000 from the linked quarter and $7,900,000 from the comparable prior year quarter.
Additionally, our non interest expense has decreased by $792,000 from the 1st quarter $445,000 from the comparable prior year quarter, which demonstrates our continued ability to continue to increase revenues while maintaining flat or slightly lower expenses. The primary driver for the decrease in noninterest expense as compared to both the linked quarter and the comparable prior year quarter was a decrease in salaries expense of $858,000 $847,000 respectively, primarily due to an increase of $4,400,000 in deferred salaries contract expense related to PPP loan originations, partially offset by an increase of $3,300,000 in bonus expense attributable to the high level of PPP activity. Additionally, during the current quarter, we had a recovery of $276,000 on our SBA servicing asset as compared to a $233,000 impairment charge in the linked quarter and a $215,000 impairment charge in the comparable prior year quarter. That concludes our prepared remarks. At this time, we would like to open up the line to Q and A.
And we do have a question from Alex from Piper Sandler.
Hey, good morning, guys. Can you hear me?
Alex, good morning. Sorry for the technical difficulty there.
Good morning Alex.
No worries at all. I'm just I'm surprised Rick, you might
be the only guy in
the country with a home phone still.
But a couple of questions. Mobile phone, I got the iPhone, 12. Sorry about that.
A couple of questions for me. First off, I know we can look from the SBA data, which I think through the 2nd week of April, you guys had originated a total of $2,560,000,000 loans in the round 2. Obviously, you disclosed in the press release what you did through the end of the Q1. Are you able to give us an update on kind of where that what that total origination volume is through, I guess, another 3rd week in April?
Yes. It's in that range still. It's maybe $2,600,000,000 and a little more, roughly that. It's not meaningfully it's higher than that number, but not meaningfully higher. It has slowed down.
But the obvious point is we have in this quarter another $500,000,000 or $600,000,000 that we'll wind up selling in the current quarter. Is that the second part of your question I anticipated?
Yes. I assume everything has to be sold correctly by, if I'm correct, by the end of June. Is that right?
That's currently correct, yes. Now it's possible that the Fed will extend the PPP window. We'll certainly sell virtually all of our production before the end of June. I think an open question and there is no prediction implied in this is if they extend the window, will there be an opportunity to buy more loans? That we don't know for loan source.
Okay. And then I wanted to drill in on some of the commentary you had on changing the pricing strategy around the loan purchases. And I was wondering if you could maybe help us understand if that's certainly that should result in more volume, but are you underwriting them now to try to get a certain number of volume in the door per quarter or per year, sort of what are the acceptable yields and how will the complexion of the portfolio change as a result of some minor tweaks to the strategy?
Well, I would say that the this is an incremental change in our strategy. We, of course, will when there are opportunities arise, bid on loans as we did previously, that generated higher yields. But we have taken a look at how much capacity that we have and say that if we can bid loans where we in our view, there's not a credit risk component and we can bid loans that I don't want to say on the phone what our bidding strategy is exactly because there are other people listening for obvious reasons. But I think the point is we're the way I can say it is that in addition to whatever we would bid before, if we can bid loans and earn roughly what we would do on an originated loan and buy them in bulk, that's a good strategy.
Okay.
Agreed. And then sometimes in the call you give an update on the sort of volumes of loans that you are able to look at during the quarter or what you bid on. And obviously we know what you actually want to purchase. Are you able to provide those figures to us?
Yes, I can. Let me just if you give me if you ask one more question while I'm looking, I will tell you that.
Yes. Well, I wanted to ask a question on the deposit cost strategy. Obviously, the growth in the community bank is pretty impressive. And I know that you've changed your strategy there a little bit over the past year. I was hoping maybe you can kind of remind us what the change of the strategy is and if that's going to be if there's still some runway to grow deposits there and going forward if that's going to be the primary funding source for everything?
JP, do you want to comment on that while I'm searching for Alex's other question?
Sure. Thanks, Alex. So the focus there was looking at our branch networking, looking at some of the opportunities that we have to generate some retail deposits, partnering with professional service companies and other that have less lending needs but have deposit needs and reaching out to them and trying to grow the community bank that way. And it's been very successful. We've been looking outside of our normal, what we had always done in the Community Bank for our deposit growth and looking at different opportunities that might present themselves in the main market and elsewhere, which has allowed us to grow that successfully over the past year or so and hopefully continue to do so in the future and becoming less reliant on the ABLE funding arm and the bulletin boards that we have there.
So a lot of it has been grassroots efforts, outreach to some of these professional service companies and just making sure that our product mix meets the needs of some of these companies to be able to offer them what they need from an institution to place their deposit there. Okay.
Thank you for that.
I think I'm sorry. Go on, Alex.
No, no, no. You go on.
Well, first, I was going to acknowledge you're right. We do have an old phone. It just rang. I was thinking I was talking on my cell phone. Yes, we do have because I'm aging myself here.
In the we looked at on the purchase side, we reviewed 2 $80,000,000 I'll do some rounding here of loans. We bid on $70,000,000 and we were awarded 42,000,000 dollars Okay. Now I mean I was going
to say a couple of quarters ago, when we all thought the world was coming to an end and we were looking at sort of the opportunity to purchase loans, it was seemingly very strong based on sort of distressed assets and companies need to shed certain types of loans. Now fast forward a couple of quarters where we are today, it seems like is no longer as big a concern. However, we've had a lot more M and A than we probably were anticipating a couple of quarters ago, which I know sometimes drives some of these loan sales. So I was hoping you could give us a little bit of commentary on sort of how you see the picture today for the loan purchase market?
I'm going to start it. I'm going to ask Pat to jump in and add to this. I would say it hasn't turned out as we originally thought, as you said. There is not a ton of loans that we buy, which I thought maybe we would have bought at $0.80 Probably said that earlier. It's just not the case.
What we're really seeing a fair amount of, although it's not it wasn't so much in the quarter that just ending, but kind of what we look forward to is we are seeing a fair number of loans that are low LTV, that are you may be winning at 6% yield to maturity and with some prepayment, you're going to make a 7%. We're seeing a fair amount of loans like that, but it's not what we thought. And I mean, I don't think I think it's probably a universally held view. Credit is a lot better than everybody would have thought it would have been. At least in our world, it seems to be bad.
You want to add to that, provide Alex some more color?
No, I think that's right. A few quarters ago, there were it seems like there were 2 markets. There was the cleaner low LTV stuff, which was trading aggressively or there was a lot of competition for and then higher yielding loans, which were a lot of which were just not selling because of the bid ask gap. And that seems to have that piece of the market seems to have dried up. And right now, it's kind of the typical sellers we're seeing out there.
There's a lot of talk of some big sales coming due to M and A, but we haven't seen any materialize yet.
Okay. So if we look back at maybe 2019 as an example, a year for what you did and obviously there's a lot of lumpiness in the quarters. Did you say the market is looking similar to the way it was in 2019 or has the competitive landscape changed as well just for the purchase market?
Pat?
I don't think it's changed as much as we thought it was going to change at the beginning of this a year ago. We anticipated significant changes. There's a few players that are no longer in the market, but for the most part, it's the market has not changed that much except what we've seen, I guess, over the past year is more cleaner, higher quality loans.
This is a point I would make though is rather than looking just at the yield on the purchase loans, let's think about spread, right? So if you can buy loans that you earn a 7 on, our money costs us right now 50 basis points. All day long, 6.50 basis points is a really great spread on purchased loans. And I'm not suggesting that that's where the number will be. For the quarter, we I don't have that slide open though.
We were 8.5 roughly. I can open up and be more precise in my language. But we're still earning a really great return on our purchase loan book with much lower funding costs. I think that is really a key part of this.
Agreed. And then on the originated LASG, which has become a much larger percentage of the portfolio over the last few years, as you talk about the change in the slight shift in the strategy there to try to keep more loans or try to help them refinance with Northeast. Would the refinance loan look a lot like the loan that you'd have on the balance sheet today or would the characteristics be different for any reason?
Well, obviously, the credit part of it would look the same. If we didn't like the credit, we would not extend it. It's to be negotiated. It really depends on kind of where the loan was sourced from. If we bought on a purchase loan that may have been had a low rate of 3% or 3.5% when it was underwritten and we bought it at a discount to get a better yield.
That's a loan that you would expect that we would extend at 5.5%, maybe 6%, maybe lower, depends what you could negotiate. But our goal would be to, at least on the rate part of it, is to maybe the rate would come down a little bit as an enticement for the borrower to stay with us. There's a lot of reasons why a borrower should want to stay. There's no closing costs, there's no appraisal, there's no legal, there's very few friction costs are already there. Hopefully, we have a good relationship with them.
And so there may be a little bit of pricing concession. And then there may be some cases where the pricing goes up. Our goal I'm not suggesting at all that we're going to take a portfolio, an originated portfolio or a portfolio finance one where we're earning a 6%, we're going to earn a 4%. We're still going to earn very good returns on it. I'm just making the points.
If you look at on the originated side last quarter, we had more pay downs than we had originations. We think it's a huge opportunity with a $1,000,000,000 loan book to try and get loans that are longer and stickier and develop closer ties with those customers.
Understood. Two more questions for me. First off, you guys essentially raised a bunch of capital this quarter through all the PPP work that you did, which is awesome. As you think about the capital position, certainly growing loans is probably your first priority, but where does repurchasing shares fit in the sort of in the scheme of capital allocation?
We have a lot of capital now. We always have to think about whether we can use our capital in the business or if not, think about whether we ought to think about repurchasing shares or some other return of capital, in part it depends upon the price. Maybe if we talked about this sometime when we were trading at $25 would have been one thought now, of course, who knows how long it will last. I'm looking at my over $30,000,000 So it depends on where the stock price is relative to our tangible book. It's certainly within the realm of possibility that we could repurchase more shares.
So if we don't feel comfortable that we have a way to use the capital on our lending business.
Got it. And then final question for me, which you sort of went through it already, but on Slide 4, with the correspondent fee, the moving parts there, perhaps it'd be worth just kind of going through one more time the how the revenue that $11,800,000 of revenue that's yet to be recognized from the correspondent fee summary will actually sort of the timing on that, especially as maybe some of these loans start to be forgiven in the next couple of quarters? And then also how that will impact the servicing interest, which we'd expect probably to go up next quarter just because of all the loans that the loan sources purchased from you guys. But maybe if there's a way to sort of frame what the expectation could be over the next couple of quarters as some of the forgiveness starts to play into the numbers?
JP, do you want to do that, please?
Sure. Thank you, Alex. I'll break your question into a couple of parts. The first, I think you're correct. I think we'll see the servicing component increase next quarter.
If that's the end of the PPP and the end of the PPP LF and loan sources doesn't have the ability to purchase any additional loans, then that will kind of be the highest point that it will be at. And then as they're forgiven over time, will gradually come down as that servicing portfolio runs down. On the other aspect, on the amortization of the corresponding fee and the purchase accrued interest, We had set that up originally when all of these loan purchases occurred to be recognized over an approximate life of the loans, which we determined to be about 2 years. So we do have that amortizing over that life. But we do look at it each month to see if the loans are being forgiven quicker than how we're recognizing that.
So right now, there hasn't been any pickup there, where the loans are running off faster than how we're recognizing those fees. But if it comes to a time where those are being forgiven at a pace faster than how we're recognizing that fee income, they could accelerate our recognition at that point.
Great. That's helpful. Thanks for taking my questions.
That looks great. Thank you very much.
Okay, sir. I will now turn the call over to Rick Wayne for any closing remarks as we have no further questions.
Thank you. First, Alex, thank you for that set of questions. I hope that was helpful to you and others on the call. To everyone else on the call and Alex, of course, thank you for listening and supporting us. We will have another call in July when we talk about our Q4 and our fiscal year end results.
In the meantime, as I always suggest, if you have any questions, feel free to call any one of us. And to the extent that we're able to answer those, we will do that. And with that, I will say goodbye to you. Thank you.
Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.