Expects Almost $10 Million Pre-Tax Gain From Move
June 30, 2020
Northeast Bank, based in Portland, Maine, agreed to sell to Loan Source $457.6 million of loans originated in connection with the Small Business Administration’s Paycheck Protection Program.
Bank officials said in a statement, “After amortizing previously unamortized PPP loan origination fees, the bank will realize a pre-tax gain of approximately $9.8 million in the current fiscal quarter as a result of the sale. In addition, the bank will receive fee income on the loans sold until such time as the loans are forgiven or repaid.”
Rick Wayne, Northeast Bank’s president and CEO, said, “The loan sale will result in a significant gain in the current quarter and provide additional liquidity for the bank to originate and purchase loans. We expect that the loan sale and correspondent relationship will generate significant income going forward and are excited to partner with Loan Source and ACAP in connection with these initiatives.”
The sale reflects originations of PPP loans by the bank through June 11, 2020. The bank intends to continue to originate and sell PPP loans to Loan Source under the terms of the loan sale agreement until the PPP is closed; however, the bank expects PPP loan originations to continue at lower volumes going forward.
The bank also announced that, through June 24, 2020, Loan Source is in the closing process of purchasing approximately $1.27 billion in outstanding principal amount of PPP loans, including $457.6 million of PPP loans from the bank and approximately $815.3 million of PPP loans from lenders other than Northeast Bank.
The bank will act as correspondent for Loan Source and ACAP in connection with its pledge of PPP loans to the Federal Reserve Bank of Minneapolis under the Paycheck Protection Program Liquidity Facility (the “PPPLF”) and ACAP will act as servicer for the PPP loans pledged by Loan Source.
With respect to the approximately $815.3 million of PPP loans purchased by Loan Source from lenders other than the bank, Northeast will receive correspondent fees of approximately $2.9 million, which will be recognized over a period of approximately two years, and will receive 50% of the net servicing income earned over time on such loans.