Northeast Community Bancorp Beats Q2 EPS

Key Points

• - Diluted earnings per share (GAAP) were $0.82, surpassing estimates for Q2 2025, beating consensus by $0.03.

• - Revenue (GAAP) decreased to $38.0 million for the three months ended June 30, 2025, down from $40.2 million a year earlier. Revenue (GAAP) missed expectations by $0.028 million.

• - Net interest margin and asset quality showed some pressure, while capital and loan metrics stayed solid.

• These 10 stocks could mint the next wave of millionaires ›

Northeast Community Bancorp (NASDAQ:NECB), a regional bank specializing in construction lending in the New York and Massachusetts markets, reported earnings for Q2 2025 on July 25, 2025. The company posted diluted EPS (GAAP) of $0.82, which was above the analyst estimate of $0.79, while revenue (GAAP) of $25.93 million fell just short of expectations by $0.028 million. Compared to the same quarter last year, both income and returns on assets and equity declined. Despite these headwinds, the results showed the company’s ongoing focus on asset quality and funding diversification, even as shrinking margins and deposit attrition presented challenges. Overall, NECB delivered a quarter marked by profitability outperformance but underlying pressures on revenue and expenses.

Source: Analyst estimates for the quarter provided by FactSet.

The Business and Recent Areas of Focus

Northeast Community Bancorp operates as a savings bank, with its largest focus in construction lending. Its core markets are high-demand areas in New York and Massachusetts, where it maintains strong relationships with developers and a substantial portfolio in construction loans. Construction lending represents a notable share of its business, supporting revenue and customer relationships.

The company’s performance relies on effective lending in its chosen markets, disciplined funding strategies, and compliance with regulatory standards. Key to its success is continuing to match loan demand in urban and suburban regions to prudent risk management. The bank competes with regional and national institutions, leveraging community ties and local expertise to grow its loan and deposit book.

Quarter Highlights and Financial Developments

Northeast Community Bancorp’s diluted EPS (GAAP) outperformed expectations in Q2 2025, driven by higher non-interest income. Net income declined 13% for the three months ended June 30, 2025, compared to the same period in 2024, signaling pressure on core profitability. Mostly due to shrinking net interest income as funding became more expensive and lending yields compressed.

Net interest margin (NIM), which measures the difference between interest earned on loans and paid on deposits as a percentage of interest-earning assets, fell to 5.35% from 5.79%. This drop reflects a decrease in the Federal Funds rate from September to December 2024, which resulted in lower yields on interest-earning assets. Non-interest income, which includes fees and securities gains, increased 17.4%, driven by more loan fees and favorable movement in market valuations of equity securities. At the same time, non-interest expenses climbed by 10.6%. The increase in non-interest expenses was primarily due to higher salaries and employee benefits, real estate owned expense, and outside data processing expense.

Construction loans remained central, with $338.8 million in construction loan originations during the first half of 2025. The total construction portfolio shrank by $102.7 million as repayments outpaced new lending in Q2 2025, but management pointed to rising loan demand as of quarter end and over $636 million in outstanding unfunded commitments as of June 30, 2025. Asset quality was strong, with no nonperforming loans and a very low nonperforming asset ratio of 0.04% as of June 30, 2025. Return on average total assets, an efficiency benchmark, dropped to 2.27%.

Deposit mix shifted notably, as certificates of deposit fell by $251.5 million and were partly replaced by $56.4 million growth in money market accounts over the six months ended June 30, 2025. Deposit outflows of $191.2 million, or 11.5%, in Q2 2025 were accompanied by an increase in Federal Home Loan Bank advances of $135 million, primarily due to management’s strategy to diversify funding sources, which increased by $135 million. This indicates a need for funding diversification as traditional deposits declined. The efficiency ratio, which measures expenses relative to revenue, worsened to 40.52% from 35.24% a year earlier, showing operating expenses rising faster than income. Share repurchases also continued, with over 1.09 million shares bought back at a cost of $17.2 million from May 2023 through June 30, 2025.

Looking Ahead

The company did not provide explicit financial guidance for the next quarter or for fiscal 2025. Management highlighted ongoing efforts to grow the construction and cooperative building lending segments, especially as loan demand remains high. This is with over $636 million in loan commitments yet to be funded as of June 30, 2025.

For the rest of the year, investors should watch for trends in deposit flows, the cost and mix of funding, and the continued performance of construction lending. Net interest margin trends and the company’s ability to manage operating costs will be important to monitor. Asset quality and capital ratios remain sturdy, giving the bank room to respond to changes in market conditions.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,040%* — a market-crushing outperformance compared to 182% for the S&P 500.

They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.

See the stocks »

*Stock Advisor returns as of July 21, 2025

JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.