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Northeast Bancorp/ME (NBN) Q3 2021 Earnings Call Transcript

By Motley Fool Transcribing - Apr 22, 2021 at 6:01PM

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NBN earnings call for the period ending March 31, 2021.

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Northeast Bancorp/ME (NBN -4.33%)
Q3 2021 Earnings Call
Apr 22, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

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 Dignan, 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 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 statement.

At this time, I would now like to turn the call over to Rick Wayne. Sir, please go ahead.

Rick Wayne -- President and Chief Executive Officer

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. And turning to slide No. 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 $39.9 million on $42.5 million of UPB. We bought this literally the last date 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 three quarters, we purchased or invested $136 million.

And I would compare that for the full year of FY '20 where we purchased -- invested $171 million with a quarter to go for us to make apples-to-apples comparison. On the originated side, we originated $69.3 million of loans, which brings us to $194.8 million for nine months and our entire volume for FY '20 was $171 million, which, of course, was impacted by COVID. But we are originating a lot and have a big pipeline. I'm going 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 2.25 billion. I want to say that again, that's a lot, 2.25 billion, of which we sold 2.14 billion to The loan Source, generating a pre-tax gain of 33 million. 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 million.

And for the three quarters of our fiscal year, we have earned $16.8 million 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 is 5.06%.

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, and 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 one capital of $218 million, significantly higher because of all of our earnings and our loan capacity today is 900 million. Our earnings for the quarter were 34.2 million. You may have seen in the headlines from our earnings release, we call it record earnings.

It certainly was that and a lot more. We never waited this spread with other than record earnings, but obviously, 34.2 million and $4.06 earnings per share and 71% return on equity, 7% almost return on assets is quite a quarter. And for the year -- for the nine months, we've earned $50 million, $6 EPS, 37% return on equity and 4.5% return on assets. Those are numbers we're, obviously, very proud of.

On page four, we provided, as we have in the past, some detail on our correspondence because it is so material. I want to first bring your attention to the bottom table first column where it shows PPP loans purchased by Loan Source. Through March 31, they have purchased $6.86 billion of loans that includes the $2.1 billion that we sold them this quarter, which we sold to them at par. So there was a little 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 8.7 million, that gets amortized over roughly two 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 7.8 million 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 Loan Source borrowed from the Fed, which is 35 basis points.

So there's 65 basis points on the outstanding PPP loans less the servicing cost, and we get half of that, and that was 3.950 million for the quarter. And so, that was a total of 5.970 million that we recognized in the quarter. On the next slide five, 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 1.2 billion.

This does not include our PPP loans on our balance sheet. And you can see that out of the $1.2 billion, the lion's share of that is in our national lending activity of which purchased loans are 433 million, 256 million in direct originated loans, 216 million in portfolio finance. I think something really -- well, two 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 a 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. The -- you can see this is a bridge that shows what our national lending book looks like at 12/31 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 million, that's a really good number.

There's a slide that follows that goes back and looks back five quarters, and you'll see that's the second best quarter we've had in a long time. And the runoff flow was 74 million. I'm going to come back to the runoff point in a second. We purchased 40 million, and we had run-off of 25 million.

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 one. 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, 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 million 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 seven is the slide that I alluded to earlier, which goes back through Q3 of FY '20, you can see in the current period of $69 million of originations, which is the blue bar that is better than all but the first quarter that we did $84.6 million and the 40 million 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 eight is a slide you have seen this before.

It takes our national lending portfolio and its 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 or loans more than $9 million. There is a footnote there, footnote one, which I would highlight. Note that the average size overall is $712,000.

On our originated book, the average loan size is $2.3 million and on purchased its $406,000. I'll remind you that we have over $200 million of tier one capital now. So we 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 two things, which I'll talk about in more detail in a second is retail is 16% of our -- I apologize for that, the phone ringing, we're all working at home, I 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 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 where you 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 too on the classified commercial loans. These are our internal ratings of eight, nine and 10, down from 20 million to 15 million.

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 to the answers they have done well. We had two kinds of modification or forbearances we've provided borrowers. One was a principal and interest forbearance.

Typically for three months, there were a few that we had to give another one too, where we wanted to give another one. So you can see that if you look at the grand total, we did 142 million of these through March, only 13.9 million were still outstanding. And if you can look at the delinquency status, we have relatively small number of delinquencies there 3.8 million on 125 million, most of which we expect to be cleared up in the near future. And then, we also provided -- going to slide No.

11, we provide detail on interest-only deferrals, and you can see that out of the 46.7 million, only 14.6 million are still in deferral. And out of those, only $100,000 are delinquent between 30 and 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 nonperforming loans that go out and nonperforming. And so, if you look at the balance of nonperforming loans at December 31, it was 30.5 million. During the quarter, we added 4.7 million, the 12 billion got resolved.

At the end of that was -- the nonperforming loans came down by 7.5 million 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. The only point I want to make here is that the accounting for purchased loans, you do not have a general allowance, you just have specific allowance or 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 -- 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, hospitalities. The second 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, which 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, that may have some performance issues, but so far so good with those and we 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, then, 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.

JP Lapointe -- Chief Financial Officer

Thank you, Rick, and good morning, everyone. I will pick up on slide 20, which shows the quarterly interest cost of our deposit portfolio, which has decreased significantly over the past five 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, ableBanking 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, a 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, those interest rate savings in all types. But the most significant savings we're seeing in money market and CD portfolios, in which the weighted average rate decreased from 1.04% -- excuse me, by 1.04% and 80 basis points, respectively, over the one-year period. Turning to slide 22.

This slide shows a 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 million of two-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 9.6 million in annual interest expense savings in our deposit portfolio, decreasing from 15.9% in April 2020 to just 6.3 million 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 million is scheduled to mature within the next 12 months. Based on the current weighted average interest rate of 1.42%, this amounts to $3.3 million in annual interest expense to the bank. Slide 25 shows our quarterly revenues over the past five quarters, which have increased by $36.2 million from the linked quarter and $40.9 million from the comparable prior-year quarter.

Revenues, excluding PPP gains, have increased $3.2 million from the linked quarter and $7.9 million from the comparable prior-year quarter. Additionally, our noninterest expense has decreased by $792,000 from linked quarter and $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 and $847,000, respectively, primarily due to an increase of $4.4 million in deferred salaries contract expense related to PPP loan originations, partially offset by an increase of $3.3 million 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&A.

Rick Wayne -- President and Chief Executive Officer

Is there an operator there JP?

JP Lapointe -- Chief Financial Officer

I think she is here.

Rick Wayne -- President and Chief Executive Officer

Michelle, operator, are there any questions? For those who are listening we may have a technical difficulty here, if you can hang on please.

Questions & Answers:


Operator

[Operator instructions] And we do have a question from Alex from Piper Sandler.

Alex Twerdahl -- Piper Sandler -- Analyst

Hey, good morning, guys. Can you hear me?

Rick Wayne -- President and Chief Executive Officer

Alex, Good morning. Sorry for the technical difficulty there.

Alex Twerdahl -- Piper Sandler -- Analyst

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.

Rick Wayne -- President and Chief Executive Officer

I'm on my mobile phone. I've got that phone as well.

Alex Twerdahl -- Piper Sandler -- Analyst

Oh, I'm sorry about that. Couple of questions for me. First off, I know we can look from the SBA data, which I think through the second week of April, you guys had originated a total of 2.56 billion loans in the round two. Obviously, you disclosed in the press release what you did through the end of the first quarter.

Are you able to give us an update on kind of where that -- what that total origination volume is through, I guess, now the third week in April?

Rick Wayne -- President and Chief Executive Officer

Yeah. It's in that range, though. It's maybe 2.6 billion 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 or 600 million that we'll wind up selling in the current quarter. Is that what was the second part of your question, I anticipated?

Alex Twerdahl -- Piper Sandler -- Analyst

Yeah. I assume everything has to be sold correctly by -- if I'm correct, by the end of June. Is that right?

Rick Wayne -- President and Chief Executive Officer

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 reduction 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.

Alex Twerdahl -- Piper Sandler -- Analyst

OK. 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?

Rick Wayne -- President and Chief Executive Officer

Well, I would say that the -- this is an incremental change in our strategy. We, of course, will, when the opportunities arise, bid on loans as we did previously with the 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.

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 buying in bulk, that's a good strategy.

Alex Twerdahl -- Piper Sandler -- Analyst

OK. Agreed. And then, sometimes in the call, you gave an update on the sort of the volumes of loans that you are able to look at during the quarter, what you bid on. And obviously, we know what you actually want to purchasing.

Are you able to provide those figures to us?

Rick Wayne -- President and Chief Executive Officer

Yeah, I can. Let me just -- if you give me -- if you ask one more question while I'm looking, I will tell you that.

Alex Twerdahl -- Piper Sandler -- Analyst

Yeah. 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?

Rick Wayne -- President and Chief Executive Officer

JP, do you want to comment on that, while I'm searching for Alex's other question?

JP Lapointe -- Chief Financial Officer

Sure. Thanks, Alex. So the focus there was looking at our branch network and looking at some of the opportunities that we have to generate some retail deposits, partnering with professional service companies and other, they 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 the offer with.

Rick Wayne -- President and Chief Executive Officer

I think -- I'm sorry, go on Alex.

Alex Twerdahl -- Piper Sandler -- Analyst

No, no, you go on.

Rick Wayne -- President and Chief Executive Officer

Well, first, I was going to acknowledge, you're right. We do have an old phone. It just ranged. I was thinking I was talking on my cellphone.

Yes, we do have -- because I'm aging myself here. In the -- we looked at on the purchase side, we reviewed 280 million, I'll do some rounding here, of loans. We've bid on 70 million, and we were awarded 42 million.

Alex Twerdahl -- Piper Sandler -- Analyst

OK. Now I mean on the quarters -- 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 credit is no longer as big a concern. However, we've had a lot more M&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?

Rick Wayne -- President and Chief Executive Officer

I'm going to start, and 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 are not -- there is not a ton of loans that we can 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's 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.

Pat, do you want to answer that, provide Alex some more color?

Pat Dignan -- Executive Vice President and Chief Credit Officer

No, I think that's right. A few quarters ago, there were -- it seems like there were two markets that 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&A, but we haven't seen any materialized yet.

Alex Twerdahl -- Piper Sandler -- Analyst

OK. 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 quarter. Would you say the market is looking similar to the way it was in 2019? Or has the competitive landscape changed, as well as you purchase market.

Rick Wayne -- President and Chief Executive Officer

Pat?

Pat Dignan -- Executive Vice President and Chief Credit Officer

I don't think it -- yes, 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 a significant change. There's a few players that are no longer in the market. But the -- 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.

Rick Wayne -- President and Chief Executive Officer

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 cost us right now 50 basis points. All day long, 650 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 eight and a half, roughly, I can open up and be more precise in my language. But we still are earning a really great return on our purchased loan book with much lower funding costs. I think that is really a key part of this.

Alex Twerdahl -- Piper Sandler -- Analyst

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 end.

Rick Wayne -- President and Chief Executive Officer

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 still being negotiated. It really depends kind of where the loan was sourced from.

If we bought a -- on a purchase loan that may have been -- had a low rate of three or thee and a half when it was underwritten, and we've quoted at a discount to get a better yield. That's a loan that you would expect that we would extend at 5.5%, maybe six, maybe lower, depends what you could negotiate. But our goal would be to, at least on the rate part of it, is that 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 will 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 financed one, where we're earning a six, we're going to earn a four. We're still going to earn very good returns on it.

I'm just making this, if you look at -- on the originated side last quarter, we had more paydowns than we had originations. We think it's a huge opportunity with a 1 billion loan book to try and get loans that are longer and stickier and develop closer ties with those customers.

Alex Twerdahl -- Piper Sandler -- Analyst

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?

Rick Wayne -- President and Chief Executive Officer

Well, 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 some time when we were trading at $25, would have been one thought now or who knows how longer it will last, I'm looking at my -- over $30.

And it kind of depends on where the stock price is relative to our tangible book 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 in our lending business.

Alex Twerdahl -- Piper Sandler -- Analyst

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 would be worth just kind of going through one more time the -- how the revenue, that $11.8 million 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.

Rick Wayne -- President and Chief Executive Officer

JP, do you want to do that, please?

JP Lapointe -- Chief Financial Officer

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 PPPLF and Loan Source 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 purchased 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 determine to be about two 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, it could accelerate our recognition at that point.

Alex Twerdahl -- Piper Sandler -- Analyst

Great. That's helpful. Thanks for taking my questions.

Rick Wayne -- President and Chief Executive Officer

That's great. Thank you very much.

Operator

[Operator instructions] OK, sir. I will now turn the call over to Rick Wayne for any closing remarks as we have no further questions.

Rick Wayne -- President and Chief Executive Officer

Thank you. First, Alex, thank you for a 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 fourth quarter 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.

Operator

[Operator signoff]

Duration: 50 minutes

Call participants:

Rick Wayne -- President and Chief Executive Officer

JP Lapointe -- Chief Financial Officer

Alex Twerdahl -- Piper Sandler -- Analyst

Pat Dignan -- Executive Vice President and Chief Credit Officer

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