Bank in Northeast suggests possible 50% drop in SBA loans over the short term, as origination and loan expansion rates increase rapidly
Northeast Bank (NBN) reported a record net income of $25.2 million for Q4 2025, excluding PPP-related periods, according to its CEO. The bank's total revenue for the quarter reached a record high of $62.7 million.
SBA loan originations for Q4 2025 were $107.3 million, with a gain on sales of $8.2 million. However, management signaled a potential 50% short-term dip in SBA lending due to new regulatory hurdles. Patrick Dignan, COO, predicted this temporary decline, citing tighter eligibility requirements, more required documentation, and longer processing times for new SBA loans.
Despite this setback, Northeast Bank's focus for this quarter includes more emphasis on process adjustments and technology investment. The bank also announced the hiring of a Chief of Innovation to drive these changes.
The bank's multifamily loan portfolio, on the other hand, remains in a robust and competitive market environment. The broader multifamily lending market is currently strong, with solid fundamentals, active lenders, and abundant capital competing to lend on multifamily assets. Although macroeconomic risks and policy uncertainties persist, credit remains available and competitively priced for well-qualified borrowers.
Management believes low loan-to-values offer protection against potential regulatory changes in New York City multifamily exposure. Northeast Bank's focus on low loan-to-values is expected to provide a significant buffer against these changes.
Analysts, however, have become more focused on operational risks and sustainability. Questions have been raised about the timing of SBA recovery, the impact of transactional income on margins, and the risk profile of certain multifamily loans.
In summary, Northeast Bank's SBA segment faces near-term challenges from regulatory tightening, while its multifamily lending benefits from a robust, competitive market environment. The bank is expected to navigate these challenges with its focus on process adjustments, technology investment, and a strong multifamily loan portfolio.
| Aspect | Outlook & Impact | |----------------------------|---------------------------------------------------------------------------------------------------------------------------------------------| | SBA Loan Originations | Expected to decline up to 50% next quarter due to stricter SBA eligibility requirements and longer processing times[3][4]. | | Multifamily Loan Portfolio | Market fundamentals remain strong with plenty of credit and competition; likely positive or stable outlook despite regulatory uncertainties[2].|
Technology investment will play a significant role in Northeast Bank's strategies as they focus on process adjustments, aiming to streamline operations and improve efficiency.
The bank's hiring of a Chief of Innovation underscores their commitment to driving change and staying competitive in the business environment.
Concurrently, analysts are increasingly paying attention to operational risks and sustainability, emphasizing the need for responsible and environmentally friendly practices within the institution's investment policies.
