Good day, everyone, and welcome to the Northeast Bank Fiscal Year twenty twenty First Quarter Earnings Results Conference Call. This call is being recorded. With us today from the bank is Rick Wayne, President and Chief Executive Officer and J. P. Lapointe, Chief Financial Officer.
Earlier this morning, 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 will 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. 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 statements. At this time, I would like to turn the call over to Rick Wayne.
Please go ahead, sir.
Good morning, and thank you all for joining us today. I am Rick Wayne, the Chief Executive Officer of Northeast Bank. And with me on the call is J. P. Lapointe, our Chief Financial Officer.
Before turning the call over to JP for a more detailed analysis, I would like to discuss highlights for the quarter ended September 3039, which is the first quarter of our fiscal year. For our first quarter of fiscal year twenty twenty, after the close of the market yesterday, we announced quarterly net income of $4,800,000 or $0.52 per diluted common share, a return of equity of 12.2%, a return on average assets of 1.7% and a net interest margin of 5.7%. Additionally, as announced last week, the bank adopted a share repurchase program to purchase up to 900,000 shares of our common stock, representing approximately 10% of our outstanding common stock. The repurchase program has the potential to enhance shareholder value while returning capital to our shareholders and gives us the opportunity to repurchase our stock at a price to the extent we feel it is undervalued. The repurchase program does not obligate the bank to purchase any particular number of shares.
Turning to Slide three. During the first quarter, bank wide, we generated $79,500,000 of loans, including $69,200,000 in our LASG, of which $40,600,000 were originated and $28,600,000 were purchased. Offsetting the origination and purchase activity was an unusually high number of payoffs and pay downs in the LASG portfolios, which totaled approximately $100,000,000 for the quarter. The weighted average yield of the LASG loans originated in the first quarter was 7.5% of September 30, all of which were variable tied to prime with a weighted average floor of 7.5% as of September 30. The total return on purchased loans for the quarter was 9.7%, which included 2,000,000 of transactional income.
And as previously mentioned, the net interest margin for the quarter was 5.7%. Moving on to Slide four, of the $69,200,000 invested by LASG for the quarter, 28,600,000.0 were purchased loans and $40,600,000 were originated loans. Purchased loans for the quarter have unpaid principal balances of $30,300,000 representing a purchase price of 94.4%. Since 2010, LASG has invested an aggregate of $2,000,000,000 consisting of approximately $900,000,000 of purchased loans and $1,100,000,000 of originated loans. During the past quarter, we reviewed loans with $389,000,000 of unpaid principal balances and bid on loans with $117,000,000 of unpaid principal balances.
As indicated, we purchased loans with a UPB of $30,300,000 at 94.4%. The $28,600,000 invested consisted of 24 loans acquired transactions. Moving on to Slide five. At the end of the quarter, the discount on purchased loans was $33,800,000 as compared to $33,900,000 as of June 30. The decrease is primarily due to accelerated accretion from purchase loan payoffs of 21,400,000.0 in the quarter, which generated 2,000,000 of transactional income, partially offset by the quarter's purchases with a related $1,700,000 discount.
Approximately 88% of the $33,800,000 discount is expected to be realized over the remaining life of the purchased loans through accretion. The nonaccretable portion of the discount represents cash flows contractual cash flows that in our estimation may not be collectible. Turning to Slide six, we provide detail on returns of the LASG portfolio. For the quarter, the purchased portfolio generated a total return of 9.7%, including transactional income of 2,000,000 As we've discussed in the past, transactional income on the purchased loan portfolio as well as the amount of loans purchased may not be consistent from quarter to quarter. The LASG originated portfolio generated a strong return of 7.6% in the quarter.
Turning to slide seven, we provide statistics on the LASG loan portfolio as of September 30 of significance. As noted in the chart in the top right, the purchased loan portfolio has a net investment basis of 91%, which is consistent with the linked quarter. On an invested basis, the average loan size for purchased loans was $418,000 and the average loan size for the originated loans was $2,000,000 81% of LASG loans had an investment size of less than $6,000,000 The loan portfolio has a diverse collateral type primarily focused on multifamily, retail, industrial, hospitality, office and mixed use. By geography, the largest concentrations are New York and California with 2322% of the portfolio, respectively. Collateral is geographically diverse with collateral in 41 states.
Before turning it over to JP, I'd like to discuss our SBA business. Over the past year, it has become increasingly difficult for us to book loans in the hotel vertical with originations that have declined from $19,000,000 in Q1 to $7,700,000 in Q4 of fiscal 'nineteen and zero in the quarter that just ended. While we have seen many loan opportunities in the hotel vertical, it has become increasingly more challenging for us to book loans that meet our credit appetite. And we don't see this changing anytime in the near future. While we will certainly continue to originate SBA loans where they meet our credit and other criteria, we will now do so as part of our LASG and not through a separate SBA division.
As part of this, Fred Schwartz, who headed up our SBA hotel vertical, left the bank at the September. And now I'd like to turn it over to JP who will discuss in more detail our financial results, after which we will be happy to answer your questions. JP?
Thanks, Rick, and good morning, everyone. I'm picking up on Slide eight to provide more information on our financial results. As announced in our earnings release that was made public after the close of business yesterday, net income for the quarter was $4,800,000 or $0.52 per diluted common share. Diluted net operating earnings per common share were down $07 from the quarter ended June 3039, which I shall refer to as the linked quarter, and up $03 from the quarter ended September 3038, which I shall refer to as the comparable prior year quarter. The decrease of $07 per diluted common share from the linked quarter was due to decreased loan interest income, which which amounted to $19,700,000 in the current quarter compared to $21,400,000 in the linked quarter as a result of less transactional interest income compared to linked quarter, which decreased by $1,600,000 Additionally, interest income on other short term investments and dividends decreased by $389,000 compared to the linked quarter.
These decreases in interest income were partially offset by lower interest expense totaling $4,800,000 in the current quarter compared to $5,300,000 in the linked quarter as a result of lower funding costs from the decrease in deposits and the redemption of trust preferred securities as a result of the corporate reorganization completed in the linked quarter. The provision for loan losses amounted to a credit of 136,000 in the current quarter compared to a provision of $262,000 in the linked quarter due to changes in the composition of the loan portfolio due to higher payoffs during the current quarter. Fee income decreased $116,000 compared to the linked quarter due to the write off from servicing assets from the payoff of SBA loans in the current quarter. Additionally, bank owned life insurance income increased $131,000 as a result of death benefit gain related to a former employee. Operating expenses, which exclude reorganization expenses incurred in the linked quarter, amounted to $10,400,000 during the current quarter compared to $10,200,000 in the linked quarter, primarily due to an increase in loan acquisition and collection expense from increased expenses incurred on loan workouts in the LASG portfolios, which can vary due to the timing of recoupment of these expenses, which positively impacted the linked quarter, offset by a decrease in FDIC insurance premiums due to a small business assessment credit received in the current quarter.
Excluding the reorganization expenses in the linked quarter and related tax effects, the effective tax rate for the current quarter was 28.7% compared to 32.5% in the linked quarter. The increase from the comparable prior year quarter of $03 in earnings per diluted common share was due to an increase in loan interest income of $2,200,000 due to an increase in transactional income along with higher average balances in the LASG portfolios and higher rates earned. This increase was partially offset by a decrease in interest income on short term investments of $540,000 from the comparable prior year quarter due to lower cash balances held, an increase in deposit funding costs of $634,000 due to higher rates offered, a decrease in noninterest income due to $599,000 of lower gains from the sale of SBA loans and an increase in noninterest expense of $999,000, primarily due to increased salary and employee benefit costs incurred. Turning to slide nine. Over the past year, we have seen net loan portfolio growth of $46,800,000 or 5%.
The majority of growth over the last twelve months comes from our LASG portfolio with $370,200,000 of purchases and originations. While bank wide loan production has been strong over the trailing twelve months, increases have been significantly offset by paydowns and amortization in the purchased and originated portfolios, which amounted to $326,600,000 over the trailing twelve months. These results are further detailed on slide 10, which shows the composition of the loan portfolio over the most recent five quarters. The net loan growth over this time is primarily driven by the strength of the LASG portfolio, which had net loan growth of $80,000,000 or 11% since 09/30/2018. In the current quarter, LASG originated $40,600,000 of loans and purchased loans with a recorded investment amounted to 28,600,000.0.
82% of the LASG originated loans have an interest rate floor, which was a weighted average floor of 7.23% as of 09/30/2019. Additionally, eight percent of the total LASG originated loan portfolio is fixed at a weighted average rate of 7.9%. Turning to funding on slide 11. Our deposits have decreased by $108,000,000 or 11% over trailing twelve month period. In connection with the corporate reorganization that was completed during the linked quarter, we increased our loan to core deposit ratio from 100% to 125%, which allowed us to reduce our excess deposits along with a reduced need for funding due to higher loan payoffs than expected during the current quarter.
Over the past year, time deposits have grown while money market accounts have decreased. Our non maturity accounts, which include money market, savings, and demand deposit products, as a percent of total deposits has decreased from 57% as of 09/30/2018, but remains high at 48% as of 09/30/2019. Compared to the linked quarter, we experienced $509,000 of interest expense savings, $340,000 of which was associated with interest bearing deposits. However, the weighted average rates of deposits remained constant from the linked quarter. We have $113,000,000 of time deposits maturing between October and January at a current weighted average rate of 2.81%, which we expect to reprice at much lower rates.
Operating results are further detailed on slide 12, which shows trends in total revenue and operating non interest expense, which excludes the corporate reorganization expenses incurred in the linked quarter. Compared to the linked quarter, total revenue has decreased by $1,500,000 due to the decrease in net interest income, primarily caused by lower transactional income. Additionally, operating non interest expense increased by $184,000 from the linked quarter, primarily due to increased loan acquisition and collection expense. Total revenue has helped us achieve an annualized return on average equity of 12.2%, a return on average assets of 1.7% and an efficiency ratio of 61.2% in the current quarter. Compared to the comparable prior year quarter, total revenue has increased by $1,000,000 while noninterest expense also increased by $1,000,000 The increase in revenue is primarily due to an increase in base net interest income due to higher average balances and rates earned in the LASG portfolios, along with an increase in transactional interest income, partially offset by a $378,000 decrease in non interest income due to lower gains on sale of SBA loans.
The increase in non interest expense compared to the comparable prior year quarter is primarily due to an $878,000 increase in salary and employee benefits due to increased stock based compensation, employee salaries, and incentive compensation. Slide 13 shows trends in the key components of our income. Compared to the linked quarter, base net interest income increased $52,000 due to lower average deposit balances along with lower interest expense on subordinated debt due to the redemption of trust preferred securities during the linked quarter. Base interest income decreased $457,000 primarily due to the decrease in the average balance of short term investments from the linked quarter. Transactional interest income from the purchased loan portfolio decreased by $1,600,000 compared to the linked quarter.
The purchased loan portfolio had a total return of 9.7% in the current quarter compared to 12.3% in the linked quarter. Interest expense also decreased by $509,000 from the linked quarter. The increase in net interest income from the comparable prior year quarter is largely attributable to an increase in base net interest income of $885,000 due to higher average balances in the LASG portfolio and higher rates earned on the loans in the portfolio, along with an increase of $493,000 in transactional interest income from the purchased portfolio. The 9.7% return on the purchased portfolio in the current quarter is up from 9.5% in the comparable prior year quarter due to higher transactional interest income along with an increase in regularly scheduled interest and accretion due to higher average balances in the purchased loan portfolio compared to the comparable prior year quarter. Non interest income increased by $25,000 over the linked quarter, while non interest income decreased $378,000 from the comparable prior year quarter, primarily due to a $599,000 decrease in the gain on sale of SBA loans due to lower volumes sold in the current quarter, partially offset by a $182,000 increase in other non interest income, mostly related to a life insurance death benefit gain recognized during the current quarter.
Slide 14 provides additional information on trends and yields, average balances, and our net interest margin, which was 5.72% in the current quarter as compared to 5.95% in the linked quarter and 4.93 in the comparable prior year quarter. As previously discussed, the net interest margin, which decreased from the linked quarter, is largely driven by a decrease in net interest income from lower transactional interest income from the purchased loan portfolio. The average balance of loans for the current quarter was $951,000,000 as compared to $961,000,000 in the linked quarter and $894,000,000 in the comparable prior year quarter, primarily due to net growth in the LASG portfolio, originated purchase portfolios from the comparable prior year quarter, and net pay downs and payoffs in the portfolios from the linked quarter. Slide 15 provides a snapshot of our asset quality metrics. Compared to the linked quarter, nonperforming loans to total loans has remained consistent at 1.51%, and nonperforming assets to total assets has decreased to 1.43 from 1.45%.
The decrease in nonperforming loans is primarily due to one loan that paid off during the quarter. In the top right hand corner, classified commercial loans were $11,100,000 as of 09/30/2019, a decrease from $11,600,000 in the linked quarter. As noted in the chart on the bottom right hand corner of the slide, annualized net charge offs to average loan balances have remained at very low levels over the past several years and were seven basis points in the current quarter, a slight increase over the three previous fiscal years. Our allowance coverage appears appropriate to address the risk inherent in our loan portfolio with consistent adjusted allowance coverage and a slight decrease in the coverage ratio, which is primarily due to the change in the composition of the loan portfolio and management's analysis of qualitative loss factors inherent in the portfolio. That concludes our prepared remarks.
At this time, we would like to open up the call to Q and A.
And our first question comes from Alex Twerdahl with Sandler O'Neill. Please proceed with your question.
Hey, good morning,
guys. Good morning, Alex. Good morning.
First off, want to spend a little bit more time talking about the pay downs that you saw on the LASG originated loans during the quarter, which were a little bit higher than they've been running over the last I guess, really since you've been doing that business. Maybe was that, do you think, tied to a decrease in interest rates or another event or anything else that we should be aware of?
Well, in the, there were some dollars in those loans that were paid down because a business was sold. And in fact, those were they had been on the balance sheet quite a while at a at a at a pretty low rate, which we had booked early on when we needed to increase our originated loans to increase our purchased loans. There may have been some of that, you know, with with lower rates. So I I think it was more just lumpy in the quarter. You know?
We don't really see, you know, the pay down staying at at that rate even, you know, in a what seems to be a continually lower rate environment. So may maybe some of it, but I just think it was more coincidental than anything else.
Okay. So kind of if you look at that business and kind of the pipeline going forward and sort of the origination volume that you're capable of doing in any given quarter, I know that's pretty lumpy too, but the expectation is for that portfolio You don't anticipate I know these things are hard to project going forward, but based on what you know right now, you'd expect that portfolio to start moving higher again into the final quarter of this year, right?
Yes. On the originated side, we booked $40,000,000 which by most any other standard, not as it applies to us because we tend to know, put more loans on the books than than other banks. That was, I don't know, eight or 9%, I'm doing the math in my head, of the original balance, on originated loans, in that. But I I ought to I won't read the whole forward looking statement that was read earlier, but I will point out this is a forward looking statement, and it could change. But, you know, we have a fairly robust pipeline.
And, you know, frankly, we thought we were going to close the quarter at 60,000,000, and we just had some loans that didn't close. You know, if they close on September 30, they're in. And if they close on, October 5, they're in the next quarter. And we had some number of those that rolled into this quarter. I would expect that we will continue to see significant bookings in our originated loan portfolio.
I would expect to see pay downs slow down. I don't think we're gonna see $400,000,000 of pay downs in our LASG portfolio this year, that would be surprising. And we have, as I said, a pretty robust pipeline. JP went over. I just maybe, Alex, I can use this as an opportunity for, I know you know this, but for some of the other callers to underscore a few things JP mentioned.
You know, we have on our or actually repeating, but I wanna under I wanna amplify them that, you know, in our originated loan book, we have a weighted average floor of seven twenty three. It appears that prime is gonna go down again, which is probably $4.75. So we have baked into there pretty good spread. We had to absorb a little bit of it because the floor was less than our rate before, but now what we're going to see are probably significantly less funding costs as all those CDs JP mentioned fund. And our loans, we have the floors baked into those.
And just to elaborate on that a little bit, so based on those floors and based on the average rate or average yield on that portfolio right now, it seems like maybe if we get a cut, I guess, this week, there's a little bit more pricing pressure on the downside, at least for one more cut and then maybe it subsides. But then you also mentioned that some of these payoffs were booked with lower rates and kind of been on the balance sheet for for a while. So so maybe that acts as a little bit of an offset to, any pressure of another rate cut this week?
I'm not sure I followed all of that. Will you one more time? Was just I was just
saying, you know, if we look at the originated loans right now, they're at $7.55. And if you're saying the weighted average floor is around $7.23, then that would suggest maybe a little bit price a more pricing pressure on that portfolio Should we get a cut this week, which I think is largely expected? And then but I was just wondering if there would be any offset to that pressure on those on that portfolio, on the yield of that portfolio due to the fact that some of the loans that paid off were, as you mentioned earlier, lower rate loans?
Yeah, Alex. I think part of that is we had the two rate cuts in the in the previous quarter. So, you know, while we're at $7.55 for the quarter, some of those loans had adjusted at the end of the quarter. So, you know, I'm not sure this rate cut, if it if it happens from the Fed tomorrow, will have much more of an effect on our portfolio from, you know, where we kind of ended the quarter.
No. But he's alright. You were right that if we're at $7.50 and the and the and we have a floor of $7.23, you know, we're gonna take a hit when the when the rate goes down. But then at $7.23, you know, we're then protected.
Right. But my point was that was more by the September rate cut that we'll experience going forward in the next quarter. So hopefully, this next rate cut that may come this week shouldn't have any additional impact on us.
I think the big savings for us will be out. We didn't see any repricing on our we had, as JP mentioned, we saved about $500,000 in interest expense on deposits because our our deposit came down by about $75,000,000 or so. But the but the rate on those didn't change. It was two point o two in the linked quarter and 2.02 this quarter. And the improvement will come when those $120,000,000 of CDs mature in roughly December, give or take a little bit, that are at two eighty six.
Today, they would reprice at two. And suspect that there's another rate cut, they will reprice that number less than two. And that ought to be meaningful interest expense savings.
Yeah, that was going to be my next question is beyond and then even beyond the CDs, given the sort of the nature and the complexion of the ways that you guys gather deposits, should we expect some additional relief on things like money market accounts that seem like they're significantly higher than you might see money market account rates at other banks?
I would hope so. It really depends on what our competitors do, and I would call those we have two groups. We have money mark rates in Maine, and we have you know, through our Able Banking, we have national rates. But it wasn't that long ago that we had a money mark rate at, you know, 1.1 that was the highest, and we're bringing in money like crazy. So, you know, hopefully, rates will come down.
They seem like they should come down. And if they do, we have great opportunity there as well.
Okay. And then, did I hear you right on the SBA business? Is that gonna wind up now, that you're gonna any SBA loans that you originate are gonna wind up staying on the balance sheet as part of the LISG unit? Or will you continue to sell a portion of those, depending on pricing?
You know, I, probably we would depending on pricing, we probably would sell them. I the the point I was really trying to make is previously, we had higher aspirations for that SBA business a while back when the market was different. But we've been, as you know, every quarter, our originations are going down. And we probably have this is a round number, but we probably had about $600,000 of cost in business development and marketing and travel and those things by having it as kind of a separate division. You know, when with Fred, who we like very much in our in our departure was very amicable and understood by both of us, but we're gonna still do SBA loans as we get referrals from, you know, you know, groups currently known to the bank, but we're gonna just run that as part of our through our LASG.
So it's gonna save us some money on the cost side. And the the we previously did all of the underwriting for that out of LASG anyway, so it's not no one's getting displaced in the bank. They're gonna just be you know, continue to work in the LASG activities. And when we have SBA loans, you know, we'll we'll book them through them. But I'm trying to make the point that I I don't wanna emphasize this over emphasize this part of our business.
It's a relatively small part of our revenue, And we think by putting it now where it belongs based on the volume we're doing, it will be clearer we'll save some meaningful amount on the expense side and clearer to you and to investors as to how that fits into our entire business. But on your question, we could sell. If we book them, we could sell them. That's not the change we're making. It's not kind of what where Live Oak decided to move from a model of selling to putting them on their portfolio.
That wasn't really the impetus for the structural change.
And you mentioned in your prepared remarks that really the reason the volumes are way down has to do with the credit quality of what you're seeing out there. However, I know that the pricing has changed materially as rates have gone higher. I mean, you seen any change in the pricing for these things to sell? Or has that product I guess you mentioned that you don't see much changing the way of the underwriting out there, but nothing that would suggest that that market could come back based on what the outlook for interest rates are, correct?
Are you saying the pricing challenge divided into two pieces? When you say the pricing changes, are you referring to the premium on loans sold or the rates that okay. So, I mean, for us, it wasn't we could live with lower rates in there. We were reasonably happy with the premium. For us, it was all about credit, and we saw a lot to, you know, to Fred's credit.
I wanna make sure that's clear on this call. We think the world of many did it. He showed us a lot of deals. But there there is a spectrum of credit quality. You know, you can range from, you know, an exterior corridor hotel, you know, that needs a meaningful, what they call PIP, property improvement.
You know, in a tertiary market sponsored by a borrower that you know, owner that's worked hard and accumulated some money, but post closing doesn't have a lot of capital if there's a problem. You know? Those are the kind of deals that we saw a lot of and turned down. You know, you can obviously, on the other end of the spectrum is as the credits get better, you know, a lot a lot of times, they're, you know, not appropriate SBA loans. We were seeing a lot of deals that, we could have booked.
We probably could have. If we booked everything we saw, I don't know what we would have done. We could have done, you know, $50,000,000 of $60,000,000 of of hotel loans. And now this is gonna be a complimenting the team, not me. But we had the discipline we had the discipline to say no to those because, you know, those are loans we just felt were gonna the credits were gonna be a problem.
You know, we could feel great on day one by booking those, selling those, having meaningful gains, and growing our volume. But when they blow up, it's pretty unpleasant. So we just couldn't find deals that we were comfortable on the credit quality side. And that's really, you know, what happened for us.
Seems like it makes a lot of sense. Question on the buyback, 10% of shares outstanding seems like a pretty large number. Can you give us a little bit more color on sort of the thought process around that size of the buyback and if there's any expectations in what sort of price points you might be interested in actually being in the market buying shares?
For us and the we wanted to have this as a tool in our business. As we've seen recently, the market can be volatile. We're a small company thinly traded. Our thought was if we woke up one day and somebody had to sell a block and we saw our stock trading at a very low price, we wanted to have the opportunity to move in and buy it as a good investment. As I said in my comments, the plan doesn't obligate us, and investors shouldn't assume that we necessarily will buy any stock.
It's really a function of kind of few things. One is what is the stock price relative to what we think it's worth? I'm not just talking about in relationship to tangible book, but in relationship to what we think the company's worth is one. And two, what are our opportunities to use that capital in our business? You know, are we looking at a lot of loans to buy in a pool?
You know, this quarter, we bid on over 100,000,000. Frankly, we thought we were gonna wind up with more than we wound up with. So it's kind of looking at those two things. Do we need what are opportunities in the business and what is the stock price? This will not be a particularly helpful answer in terms of providing guidance, but I wouldn't I don't know whether we'll buy any shares or we'll buy a lot of shares.
It really depends on those factors. But as we talk to investors and we felt the same way, they encouraged us to put in place a buyback plan. So, you know, if it turned out that there was a our stock went up at a price where it made sense for us to do that, you know, we would do that.
Understood. I think that's all my questions for now. Thanks for taking the time.
Thank you, Alex.
Thank you. And our next question comes from David Minkoff with DCM Asset Management. Please proceed with your question.
Good morning, Rick and JP. Congratulations on another very decent quarter. You seem to make it look easy even though I'm sure it's not. Actually my question was on the buyback and Alex probably preempted the question. I think you largely answered it but I'll tackle it a little bit anyway.
It was a large buyback that you announced. And in the past, you've always announced your buybacks and completed them within the year. But each time you did it, the buyback was announced at a time the stock was selling below book value. This is the first time you announced a buyback. Let's see, the book value, think, was $17.17 in the latest quarter.
And even though you caution us not to annualize quarters, zero five two in the first quarter, I'm going to go out on a limb and annualize that despite your lumpiness warnings. And so I'll assume approximately $2 for the year. So that puts the book value up to $19.17 dollars let's say $19 So you announced the buyback at $22.5 I was going to ask you before you basically answered it whether what was different this time? And I think you kind of said that it's fair as a fail safe should the stock fall. That's certainly understandable.
But each time you did it in the past, did it at the then market price. Could you still justify buying the stock at the current price when you announced it, not only being as fail safe or should it fall to 19 or 20 or whatever number you had in mind?
You know, I wouldn't say what a what what price we would buy the stock. I would I know you know this, David, but I'll say it to remind any of the other listeners that, in the past buybacks, we bought two 20% of the bank back at $10. Right. Now obviously, twenty two dollars, $10 look quite smart. I think that kind of the guiding philosophy to this is if we wind up accumulating more capital than we need for our business, it would be appropriate, you know, to return that capital to investors.
And so I I will go go back to the point I made when Alex asked the question. The decision to buy back stock relates to both the price of the stock to what we consider the real value of the company, which is not necessarily it's not tangible book, and it's not necessarily what it's trading at versus our opportunity to use that capital. So to to make that more tangible, if, god forbid, our stock price went back to $10 and we're and we have a $17 tangible book value, I suspect, you know, most rational people would say, you could buy a lot of stock at $10, you would do that. If our stock price, now I would say, please god, went to $40 Right. While we would be thrilled with that, you'd probably know which would be, you know, more than 225% of tangible book in my head, you know, most rational people would say don't buy back stock at that price.
Right. You know, if it turns out that, you know, we're kinda trading in a, you know, a more rational range relative to tangible book, and we have an opportunity to grow our loan book, the most profitable thing we can do, not a buyback, the most profitable thing we can do is leverage our existing capital and put on loans that, you know, and earn a slightly less than 6% NIM on. And so that what you know? And so that's a function of what opportunities do we see both in the purchase and the originated portfolio. I know it's not as helpful an answer as saying, at this price we would do the X and at that price we would do Y.
But it's really a dynamic and we have to take, know, consider all of the things that are going on.
Right, understood. Well understood. Of course the other way and I mentioned this a few times, the other way to return funds to shareholders would be to increase the dividend. That's a lot less expensive than buying back stock. Well, there are two ways to look at it.
You could say it might be more expensive, it might not be. But I think you're earning in the $2 a share range for a year, paying only a penny a share probably leaves plenty of room for an increase should you choose to do it. You haven't chosen to do it in the past. I'm just wondering why you prefer to keep the dividend so low. I think if you look at your peers, Camden, other banks in Maine, the dividend yield may be 1%, 2%, even up to 3% in some cases.
And yours is basically just out there at a fraction of 1%. Just wondering why that is and might you take a harder look this time at perhaps raising the dividend. I think you'll get some mileage in your stock if you did it. So I'm just wondering why you don't do it and how you're thinking about it.
Well, I would say what distinguishes us from other banks is our ability, notwithstanding this quarter where our average loan book went down. But if you take a look at last year, we grew our LASG portfolio by 20% at and with the kind of yields we get as opposed to the growth in that other banks are able to achieve in in their loan book. You know, I do agree with your your underlying principle, which is if we don't have a use for our capital in our bank, you know, it would be appropriate to think about returning it. But it's not as if we have we're sitting here, and we have $900,000,000 of loan capacity. We have maybe 300, 350.
You know, we looked at last quarter, you know, 130,000,000 of purchase opportunities. One of the things, you know, this is my view anyway. Well, it's not really my view. I'm I'm repeating what one of our very smart directors told me about capital, which is, you know, the least expensive capital that we'll ever get is the capital we have now. And so we don't wanna really be in a position where we distribute the capital and then need it to buy loans and to originate loans and need to go in the marketplace and raise it.
That tends to be pretty expensive. I don't just mean in the the well earned fees that Sandler would get, Alex, I say that for the benefit, and your colleagues. But just in terms of, know, when you go out to the market, you know, very often, you know, you don't get the price that you're trading at before you go out to the market. I think this is something, David, we're gonna we obviously, the board thinks about it a lot. We think talk about capital planning.
Management does as well. I think, you know, we you and I and others, we could identify all the issues. We may come to different conclusions as we see the the facts on the ground, but we're paying attention to it.
Okay. I accept that. Very good. Keep up the good work.
David, delightful talking to you. Thank you. You're welcome.
Thank you. I'll now turn the call over to Rick Wayne for any closing remarks.
Thank you very much. For those of you on the call and for those of you that will listen later online on our website, I want to thank you for the time you spend thinking about and reviewing the activities of our company. And I wanna it's a little bit early, but we won't talk before then. Wish all of you and your families a healthy and happy Thanksgiving. And I look forward to talking to you again in January.
I would wish you a happy new year but that's way out there. I'll do it when I talk next. Thank you very much.
Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.