노스이스트 뱅크(NBN) 2027 회계연도 1분기 실적 콘퍼런스 콜: 사상 최대 대출 집행액 및 순이익 2,900만 달러

핵심 요약

• 노스이스트 은행(Northeast Bank)은 2027 회계연도 1분기 순이익이 2,900만 달러(희석 주당순이익 3.42달러)를 기록해 전분기의 3,430만 달러 및 4.05달러 대비 감소했다고 발표했습니다.
• 평균자산순이익률(ROA)은 2.21%, 평균자기자본이익률(ROE)은 18.65%를 기록했습니다. 주당 유형자산장부가치는 전년 동기 대비 22% 증가한 73.22달러를 기록했습니다.
• 내셔널 랜딩(National Lending) 부문은 2억 5,860만 달러의 신규 대출을 집행하며 4분기 연속 사상 최대 실적을 달성했습니다. 매입 대출, 신규 대출 및 SBA 대출을 포함한 전체 대출 집행액은 5억 3,400만 달러였습니다.
• 순이자마진(NIM)은 4.57%로 전분기의 4.80%에서 하락했으며, 이는 매입 대출 조기 상환 시점과 수익률이 상대적으로 낮은 신규 집행 대출 비중 확대를 반영한 결과입니다.
• 자산 건전성은 양호한 수준을 유지했습니다. 매각예정대출을 제외한 무수익 여신은 2,250만 달러로 총대출의 48bp(0.48%) 수준이었습니다.
• 경영진은 노스이스트 은행이 신규 자본 조달 없이도 기존 자본 구조 하에서 15억 8,000만 달러의 추가 대출 여력을 보유하고 있다고 밝혔습니다.

주요 재무 데이터

사업 및 영업 실적

총대출 집행액은 5억 3,400만 달러에 달했습니다. 여기에는 내셔널 랜딩 매입 대출 2억 3,700만 달러, 신규 대출 2억 5,800만 달러, SBA 대출 3,500만 달러가 포함됩니다. 매입 대출 활동 대부분이 분기 말에 발생하여 2027 회계연도 1분기 실적 기여도는 제한적이었습니다.

매입 대출 포트폴리오의 총수익률은 9.11%(6,200만 달러)를 기록했습니다. 노스이스트 은행은 또한 여러 대출이 완제된 후 대손충당금을 통해 590만 달러의 신용 관련 매입 할인액을 환입했습니다. 경영진은 이 수익이 이자수익이 아닌 CECL 회계기준에 따라 대손충당금을 통해 인식된다고 강조했습니다.

대출 매입 시장에서 은행은 약 3,700건의 대출과 35억 달러의 잔액이 포함된 29개 풀(Pool)을 검토했습니다. 총 약 6억 달러 규모의 10개 풀에 입찰하여 잔액 2억 5,400만 달러 규모의 8개 풀을 낙찰받았습니다. 인수된 풀의 가중평균 매입가는 0.935달러, LTV는 60%를 약간 상회하며, 추정 가중평균 만기수익률은 약 8.5%입니다.

상업용 부동산 대출은 활발하게 유지되었습니다. 노스이스트 은행은 총 약 30억 달러 규모의 201건 요청을 검토하였고 분기 중 2억 5,900만 달러를 집행 완료했습니다. 체결된 23건 대출의 평균 금액은 1,100만 달러, 평균 LTV는 54%, 평균 금리는 7%를 약간 상회했습니다. 직접 대출이 잔액의 약 3분의 2를 차지하며, 일반적으로 대출기관 파이낸싱 대출보다 듀레이션이 깁니다.

매각예정대출을 제외한 대출 포트폴리오는 총 46억 5,000만 달러를 기록했습니다. 내셔널 랜딩의 매입 및 신규 대출이 45억 1,000만 달러로 포트폴리오의 97%를 차지했습니다.

예금은 주로 중개 CD가 1억 5,200만 달러 증가함에 따라 9,500만 달러(2.6%) 늘어났으나, 정부 금융 예금의 계절적 유출로 일부 상쇄되었습니다. 자기자본은 분기 동안 2,450만 달러(4.1%) 증가했습니다.

경영진 가이던스

경영진은 향후 3개월 이내에 약 14억 달러 규모의 CD가 만기 도래하여 차환될 것으로 예상하고 있습니다. 중개 시장 금리에 따라 재조달 비용이 약 50bp 높아질 수 있으며, 이는 다음 분기 은행의 조달 비용을 약 15bp 상승시킬 수 있습니다.

회사는 SBA 대출 활동의 향후 적정 런레이트(run rate)를 분기당 약 3,500만 달러 수준으로 제시했습니다. 경영진은 또한 추가적인 세액공제 매입이 없다고 가정할 때 실효세율이 약 29%가 될 것으로 예상하고 있습니다.

경영진은 대출 상환이 둔화할 경우 최근 인수한 매입 대출 수익률이 순이자마진을 뒷받침할 것으로 보인다고 말했습니다. 그러나 조기 상환 및 할인 인식 시점으로 인해 분기별 마진 실적을 예측하기는 어렵습니다.

신규 집행 대출 포트폴리오는 현재의 성장세를 이어갈 것으로 예상되나, 순증가폭은 신규 집행액과 상환액 모두에 달려 있습니다. 경영진은 또한 활발한 매입 대출 및 신규 대출 파이프라인을 바탕으로 다음 분기에도 견조한 대출 실적을 달성할 것이라고 자신감을 나타냈습니다.

리스크 및 관전 포인트

• 매입 대출의 조기 상환은 수익률, 순이자마진 및 대손충당금 환입액에 상당한 분기별 변동성을 유발할 수 있습니다.
• 매입 대출 수익률이 8.24%인 반면 신규 집행 대출 포트폴리오 수익률은 7.70%에 그쳐, 신규 집행 대출 비중 확대가 마진에 하방 압력으로 작용했습니다.
• 14억 달러 규모의 CD 만기 도래 및 금리 재조정에 따라 조달 비용이 상승할 것으로 예상됩니다.
• 보증 대출을 제외한 손실 상각액은 주로 SBA 포트폴리오에서 발생하였으며 약 300만 달러였습니다.
• 보증 소상공인 대출 회계처리는 대손충당금 전입액과 비이자이익을 모두 증가시킵니다. 경영진은 두 항목이 서로 상쇄되어 순이익에 미치는 영향은 없다고 설명했습니다.

애널리스트 Q&A 주요 내용

경영진은 금리 상승에 따라 매입 대출 상환 속도가 둔화되기를 기대한다고 밝혔습니다. 상환 둔화와 최근 매입한 포트폴리오의 견조한 수익률 덕분에 순이자마진이 소폭 회복될 수 있으나, 할인 인식 시점과 규모는 여전히 예측하기 어렵습니다.

대출 성장과 관련해 경영진은 상환 활동에 따라 달라질 수 있지만, 내셔널 랜딩의 최근 연율화 신규 대출 집행 속도를 합리적인 기준틀로 간주했습니다. 또한 직접 대출로의 전환은 대출기관 파이낸싱 실적보다 포트폴리오 듀레이션을 길게 유지하는 데 기여할 수 있습니다.

경영진은 금리 상승 환경이 은행들의 고정금리 자산 및 유동성 관리를 촉진해 매입 기회를 늘릴 수 있는 반면, 조달 비용 상승은 비은행 경쟁사들을 제약할 수 있다고 말했습니다. 또한 금리 상승은 노스이스트 은행 포트폴리오에서의 리파이낸싱 이탈을 둔화시킬 수 있습니다.

은행의 15억 8,000만 달러 대출 여력과 관련해, 경영진은 해당 여력을 활용하는 데 드는 추가 영업비용이 잠재적인 추가 순이자이익에 비해 미미할 것이라며 상당한 영업 레버리지 효과를 강조했습니다.

실적 발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Welcome to the Northeast Bank First Quarter Fiscal Year 2027 Earnings Call. My name is Towanda, and I will be your operator for today's call. This call is being recorded. With us today from the bank is Rick Wayne, President and Chief Executive Officer; Santino Delmolino, Chief Financial Officer; and Pat Dignan, Chief Operating Officer and Chief Credit Officer.

Prior to the call, 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 may 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.

[Operator Instructions] As a reminder, the conference is being recorded. 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.

I would now like to turn the call over to Rick Wayne. Mr. Wayne, you may begin.

Richard Wayne

Thank you. Good morning. And welcome to our investor call for the quarter ending September 30. I'm going to provide an overview of our -- this is our first fiscal quarter. And after my comments, Santino will discuss our financial results, and Pat will review our loan activity. At the conclusion of our comments, we will be happy to answer your questions. I'm going to first make some comments on the financial highlights page, which is Page #3 in the investor deck that was posted last night.

Some of the highlights I want to mention are as follows: we had quarterly net income of $29 million, return on equity of 18.65%, return on assets of 2.21%. Tangible book value continues -- per share continues to rise, ended the quarter at $73.22, representing a 22% increase over a year ago and a 58% increase over the last 3 years. The total return on our purchased loans in the first quarter was 9.11% or $62 million, which includes $5.9 million of recovery on credit discount on loans we purchased.

Let me just pause on this point for a second and just briefly talk about our purchase loan business, which is a very, very large part of our business. We purchased loans at a discount either because there is an interest rate mark, that is to say the coupon that the customer is paying is less than what the current market rates are for interest. Think of this as bond math. And then we also buy loans where we pay a discount because it may turn out that we won't collect everything, the entire unpaid principal balance from the customer.

And the credit mark is interesting because of the required accounting for it and it's not as obvious as to how much that is as it was before CECL. I know that's a lot to understand. So I'll just try and put some numbers to it as it occurred in the current quarter. In the current quarter, we had about $6 million of discount due to a credit mark that were loans that wound up paying off in the quarter.

It is primarily 4 loans, which accounted for most of it. So with respect to these 4 loans, we had $6 million of a credit mark, which we didn't accrete into income and the loans paid off in full, and we earned $6 million. The way the accounting for that is now under CECL is that it runs through the allowance. And so it's not obvious -- so obvious on the financial statements because it runs through the allowance along with a bunch of other matters.

But that's a core part of our business. And I think it's worth highlighting that number, and I want to do that by turning to page -- I'm getting there, still getting there. If you could turn to Page 32, which is the last page in the deck, you can see that -- the total return, I mentioned that it was 9.11% on the total portfolio, but there is a line there that says release of allowance for credit losses on purchased loans, $5.921 million.

Previously, that would have been reported in interest rate, meaning before CECL, that would have been included in our interest income, but now it goes to the allowance. So I did want to highlight that. I think Tino is going to provide a little more granularity on that point. For the quarter, it was our fourth consecutive quarter of record originations in our national lending business, $258.6 million.

Our pipeline was very large during the quarter. It continues to be very large, and we're seeing a lot of traction in that business line. We also highlight on Page 3 that we have $1.58 billion of loan capacity, and this is without doing any capital raise. It's just what's available to us with our existing capital. So we consider that to be very valuable to us. Let me now just make a few more points as I turn. If we take a look at the -- I want to talk about the asset quality next of our purchased and originated loan book. With the loan portfolio of $4.650 billion, that's excluding any loans that we're holding for sale.

It represents 97% of that number, $4.51 billion are national lending loans, that's purchased and originated. And of that, at the quarter end, only $22.5 million were on nonaccrual, representing 48 basis points of total loans. So it's really a remarkably low number for our loan portfolio, as you can see that. And just for purposes of the full picture, we had some OREO on the balance sheet as well.

And with those comments, I'd like to turn it over to Tino, please. Santino.

Santino Delmolino

Awesome. Thanks, Rick. As Rick mentioned, this quarter was a good start to the year and created strong momentum heading into Q2. Net income for the quarter was $29 million or $3.42 per diluted share compared to $34.3 million or $4.05 per diluted share in the linked quarter. Return on average assets was 2.21% and return on average equity was 18.65%. Total assets ended the quarter at $5.35 billion, an increase of $125 million or 2.4% from June 30. The loan portfolio, including loans held for sale, grew $163 million or 3.6% during the quarter.

Loan generation totaling $534 million was split between $237 million of National Lending purchased loans, $258 million of originated loans and $35 million of SBA loans. It's worth pointing out that most of the purchase loan activity occurred at the tail end of the quarter. Therefore, there is limited impact on the current quarter's earnings. Net interest income for the quarter was $58.9 million compared to $60.3 million in the linked quarter and $48.2 million in the prior year quarter.

Net interest margin was 4.57% compared to 4.8% in the linked quarter and 4.59% in the prior year quarter. The decrease in margin is largely attributable to yields on the purchased loans, which can be volatile, as we know, due to timing of prepays, which caused accelerated accretion, i.e., transactional income. While we did have a fair number of prepayments, both in [ this ] quarter and the current quarter, which caused yields to decrease a little bit, the current quarter prepays were largely on loans that did not have significant rate mark discounts.

As Rick mentioned, most of the prepays we saw this quarter were actually on loans that have credit marks. So we released just under $6 million of credit mark through the allowance within the purchase portfolio. I'll come back to this to discuss in a little more detail later. Yield on the total loan portfolio was 8.11% compared to 8.37% in the linked quarter. Within National Lending, the purchase portfolio yielded 8.24%, while the originated portfolio yielded 7.7%. We saw a little bit of a shift in portfolio mix this quarter with originated loans making up a higher percentage of the balance sheet. Given the yields here, that also put a little bit of pressure that we're seeing on NIM.

Turning over to funding. Total deposits increased $95 million or 2.6% during the quarter, largely driven by $152 million increase in brokered CDs, offset by seasonal runoff in our government banking portfolio. FHLB advances were relatively flat quarter-over-quarter, though average balances were up as we utilized short-term borrowings to fund growth between brokered CD issuances.

As you'll see on Slide 21 of our deck, cost of funds came down 1 basis point from the linked quarter and our spot rate is at the same level. We've made all rate changes that we anticipate making on our nonmaturity deposit portfolio, barring any further changes by the Fed. So the only real movement I'd expect in our cost of funds going forward is as CDs roll over.

On that front, we do have about $1.4 billion of CDs maturing within the next 3 months that we anticipate rolling over. The cost on that likely is going to go up somewhere in the realm of 50 basis points, depending on where rates are in the brokered market at that time. That's going to equate to somewhere around 15 basis points of increase in our cost of funds next quarter.

Now if we could take a look at Slide 30, I'd like to spend a little time on the nuts and bolts of the provision. So there's a lot to unpack here. First, I'll talk through kind of the typical components of the allowance for loan loss. So first is just your typical changes within the allowance, which is a result of loan originations as well as changes in the coverage ratio on the existing portfolio.

This accounts for about $1 million of provision during the quarter as we increased the coverage ratio on both our SBA and our purchase portfolios. The other side of this that you'll see in most banks is charge-offs and recoveries, whether it be on purchase or originating loans. Excluding the insured loans, we had about $3 million in charge-offs this quarter, which you can see are mostly within the SBA portfolio.

The 2 unique components to our provision are as follows: the first is, release of credit discount on purchased loans. So Rick got into this a little bit. But as you look at the allowance roll forward here, you'll see that we have a column for initial ACL on purchased loans. So when we're buying loans at a discount and there's a bit of uncertainty as to whether or not we will be able to fully collect the principal balance of those loans, we actually will set up an allowance that comes out of the purchase price on those.

So unlike your typical allowance that runs through the provision, there's no net income impact of that initial $4.4 million. Ultimately, as loans go through the process and if we're able to get those loans to pay off without having to take a charge-off or take a charge-off equal to that initial credit mark, we end up taking a release. So we end up recovering a good amount of that allowance. As you can see this quarter, Rick mentioned, we picked up $5.9 million that runs as a credit to the provision.

The other unique component to our allowance relates to the insured small balance business. The way -- all of the loans within this portfolio, we've got a little over $90 million of them right now. Part of them -- most of them are in held for sale and part of them are in the portfolio. The way the accounting works for this is you have to treat -- even though the insurance exists to cover us from a credit loss standpoint, and we believe it's more than ample to cover any expected credit losses within this portfolio.

The accounting standards require you to account for those 2 items completely separate and distinct. So what ends up happening is we book an allowance on the insured small business loans as if we did not have any sort of credit insurance. So that's what you can see here. You can see we booked $2.5 million of provision during the quarter in relation to these loans.

On the flip side of that, because we expect the insurance company to make us whole on any losses we incur here, we end up booking a gain in an insurance receivable and that gain runs through noninterest income. So there's a little bit of grossing up happening between our provision and noninterest income, which is a bit unique.

Switching over to noninterest income. I already discussed the gain on insurance recoveries. The other bigger component here is the gain on SBA sales. So we sold $23.7 million of SBA loans during the quarter. We also sold $9.9 million of small balance insured loans during the quarter. The combined gain on sale from both of those items was $2.7 million. I think where we're at right now from an SBA standpoint, probably is a good run rate for us to think about on a go-forward basis, somewhere in that $35 million a quarter range.

Looking at noninterest expense came in at $24.2 million compared to $23.5 million in the linked quarter. Quarter-over-quarter increase here is spread pretty evenly across the categories with employee and director compensation accounting for the largest dollar increases here as we adjust compensation in Q1 of each year.

Lastly, income tax expense came in at 10.3% (sic) [ $10.3 million ], representing an effective tax rate of 26.2% compared with an effective tax rate of 28.3% in the prior year quarter. The lower effective tax rate is primarily reflected as a result of a greater benefit that we get. So all of our stock vesting grants occur in Q1, and we recognize a tax benefit for that. On a run rate, I'd expect our ETR to be around 29% on a go-forward basis, assuming we do not buy any further tax credits, which is something we are looking at, but not something we would forecast.

Finally, capital remains strong. Shareholders' equity increased $24.5 million or 4.1% during the quarter. Tangible book increased to $73.22 compared to $70.58 at June 30. Tier 1 leverage ratio came in at 12.11%. Overall, the quarter reflected strong loan production, healthy purchase loan returns, favorable asset quality trends and continued capital growth. The loan volume we saw this quarter is a catalyst as we go into the second quarter of the year.

Now I'll hand it over to Pat.

Patrick Dignan

Thanks, Tino. It's another good quarter on the lending front. In the purchase space, we looked at 29 loan pools containing 3,700 loans and $3.5 billion in balances. 8 of these had balances over $100 million. We bid on 10 of these pools for about $600 million, and were successful in 8 of them, winning just over 40% of the balances bid or $254 million at a weighted average purchase price of $0.935.

These pools were sourced mainly from banks who are managing internal concentrations and also M&A deals. Included in the pools we won are 89 loans located primarily in the Northeast, California and Florida, purchased at a weighted average LTV of just over 60% and a weighted average yield to maturity of approximately 8.5%. Of the 8 pools with balances over $100 million, we passed on half of them due to performance issues, undesirable collateral or unacceptable price expectations.

In 3 cases, we bid on and won smaller subsets of larger pools. In some cases, particularly on larger pools where we think we might not be the best all bid and depending upon the loan composition, performance, price expectations and competitive set, we bid on combinations or subsets of loans within larger pools or partner with complementary bidders in order to maximize the chances of winning something. We did win one large pool with balances of just over $100 million. This was a 23 loan pool from a New York area bank that needed to manage its balance sheet and close quickly.

Moving on to originations. In our small balance loan program, we originated 190 SBA loans and 10 GTL loans for just under $40 million. No significant updates there. For commercial real estate lending, we reviewed 201 loan requests this quarter for around $3 billion. We issued 69 term sheets for $887 million, of which 36 for $457 million were executed and returned. Many of these remain active with $259 million closed within the quarter.

This included 23 loans with an average balance of $11 million, LTVs of 54% and an average interest rate of just over 7%. Direct loans represent about 2/3 of these balances. This is a shift from recent quarters where lender finance was predominant, not surprising given increased market demand and rising funding costs for nonbank lenders. A rising or volatile rate environment has always been good for the purchased loan business and puts us at a competitive advantage relative to nonbanks in both the purchased and originated space. Both pipelines are currently very active, and we're confident of another strong quarter to come. Rick?

Richard Wayne

Thank you, Pat. Thank you, Tino. Now we'd be happy to take any questions that you have.

Operator

[Operator Instructions] Our first question comes from the line of Damon DelMonte with KBW.

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Damon Del Monte

First question is on the margin. Clearly, lots of moving parts going through each quarter. And as you pointed out, part of the movement this quarter was because of the elevated payoffs. So I guess my question is kind of twofold. Do you expect the pace of payoffs on the purchased loans to slow in the coming quarters? Or do you think we'll continue to see increased activity like we have in the last couple of quarters?

Santino Delmolino

I guess I would say I'm hopeful that the pace of paydown slows down. I mean it's not something we can necessarily forecast very well. I mean with rates going up, that should be favorable for us on that front. The other thing I'd say is, as it relates to the couple of loans that Rick mentioned at higher credit marks, given the fact that we were expecting to take some sort of a loss on those loans, those are probably the types of loans that we're happy to manage out of the bank. But overall, I would hope to see paydowns come down going forward.

Damon Del Monte

Okay. So if all else was like kind of equal, if the paydowns slowed, I mean, do you -- would we see like a rebound in the margin maybe closer back to what we had in the previous quarter? Or do you think you kind of stay in this 4.55% to 4.65% range?

Santino Delmolino

I think it might rebound a little bit. A couple of things there. One is, we do -- depending on the rate mark that's on a given loan that prepays, you could see a bump in margin depending on any level of interest rate mark that we're able to recover at the time of payoff. So there are instances where it is actually beneficial to us, at least in the short term for those loans to pay off. And the other thing I'd say, assuming that paydowns do slow, the yields that we have on the portfolios we purchased this past quarter are all pretty healthy. So it should be net accretive to the margin. So hopefully, it should bounce back a little bit.

Richard Wayne

This is Rick. A feature of our bank, which makes your job more challenging, is that we frequently use the word lumpy in our business. So for example, we could have a loan with a small balance on it and a large credit mark. And then when that loan pays off, we have a big -- a large amount of income running through the allowance.

We could alternatively have a loan that we purchased recently that has a lot of interest rate mark on it, and it pays off early. It could be a loan with, let's say, 5 years remaining. So we anticipate we're going to accrete that interest mark over 5 years, but it pays off in 2 weeks. That happens also. And so it's -- it would be difficult for us to provide you with and the other listeners any help on that.

But I would make the point, that's why -- and maybe this is the fantasy world, but we have to be looked at on a yearly basis where these things sort themselves out. Quarter-to-quarter, that number can jump around. And I would just add for the record, 4.57%, while lower than some of the previous quarters is a very healthy NIM, as you know.

Damon Del Monte

Yes. Totally, totally get that, for sure. Yes. Okay. And then maybe like on the fee income line, you had the insurance recovery gains that were booked. Is this something that we should expect kind of more consistently in future quarters? Or is this kind of an anomaly this quarter?

Santino Delmolino

It's going to occur in future quarters also. I would -- it's hard to tell you guys how to forecast this necessarily because ultimately, what's happening is there's no P&L impact of that because while it shows in noninterest income, it's also an increase in the provision. So the 2 items net to 0, and it just grosses up those 2 line items in the P&L.

Damon Del Monte

Got it. Okay. So while our provision or our fee income may be off, the net of those 2 should hopefully cancel each other out.

Santino Delmolino

Yes, exactly.

Damon Del Monte

Got it. Okay. And then if I could just squeeze one more in. On the loan growth outlook, the commentary around the originated loans seems to be very favorable. If you look back over the last 12 months, I think you're probably around 40% growth in that portfolio. Can we kind of expect something that we've seen over each of the last few quarters, something that's comfortably in the 25% to 35% quarterly growth rate? Or do you think that dials back a little bit?

Richard Wayne

Let's make sure we're dealing with the same headline. We expect that originated loan book to continue on the path that it's on. But you're not saying -- are you saying that you think it increased 25% from the linked quarter?

Damon Del Monte

Linked quarter annualized, yes, the...

Richard Wayne

Well, if you annualize it.

Damon Del Monte

Yes, the National Lending originated loans, if you annualize that, it was like 34% this quarter?

Richard Wayne

Yes. Yes, I think that's probably a reasonable way to think about it, but it all has to do with the level of payoffs. So there are, of course, 2 components to that. One, how much do you originate. And two, what are your payoffs. And in that origination business, we're primarily a bridge lender, either directly -- when we're making loans directly to the owner of the property or indirectly if we're providing leverage to a nonbank lender who in turn is making bridge loans. So that number, the net growth, again, could vary. This is what may be difficult for you. You still like us, Damon, they are hard to predict.

Patrick Dignan

The shift -- one thing that's good is the shift toward direct loans tends to have a longer duration than lender finance loans. So the volume of direct loans is encouraging from that perspective and with respect to payoffs.

Operator

Our next question comes from the line of Justin Crowley with Piper Sandler.

Bader Hijleh

This is Bader for Justin. I just had a question on the purchase side. You guys had a pretty healthy amount of activity, and I appreciate the detail at quarter end. I know there are a lot of variables that go into it, but curious how you think higher rates, especially you have a couple of hikes coming in the next 12 months could impact opportunity here and how that could create more transaction volume maybe after the next quarter, heading in the next 12 months?

Patrick Dignan

I think there's 2 -- if you remember back to 2022, 2023 in that rising rate environment, there was a lot of purchase opportunity back then. And I think there's a lot of reasons for it, but one of the principal reasons with banks is they tend to do fixed rate lending and fund short. And so in a rising rate environment, there's some portfolio management there for liquidity purposes. Rising rates also increases the cost of funding for -- more than us for our chief competition, which are nonbanks. So I think those are the 2 basic reasons why a rising rate environment is good for the purchase business.

Richard Wayne

The other thing a rising rate environment tends to do is slow down the pace of refinancing out of our portfolio.

Bader Hijleh

Got you. That's helpful. And then just thinking about the balance sheet capacity here, if we were to hypothetically assume you'd be able to deploy the $1.6 billion, how much In added expense would need to go along with that? And like how would you generally frame the operating leverage that could create?

Richard Wayne

We have tremendous operating leverage. Of course, $1.6 billion depends on the amount of loans that you have there. But relative to the net interest income you would pick up, it would be very small. But you could do the math. You could take the $1.6 billion and assume a spread -- and then it will give you your net interest income. And I would expect the operating additional cost to do that. It won't be 0, but it's going to be very small to put on another $1.6 billion of loans.

Operator

Ladies and gentlemen, I'm showing no further questions. Now I'll turn the call back over to Rick Wayne for closing remarks.

Richard Wayne

Thank you. Thank you, Damon. Thank you, Bader, for your insightful questions. Thank you to those on the call listening and to those who will listen if they go to our website to hear the tape. There is also a transcript published as well. We look forward to meeting again in January, it's towards the end of January when we will be reporting our results for our second fiscal quarter or the fourth calendar quarter ending December 31.

And in the meantime, if you have any questions, feel free to call one of us if we're able to answer it. We will be happy to. And if you have any suggestions or material that you think would be helpful to include both in the investor deck and on the call, let us know that as well. That's all for today. Thank you.

Operator

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.