Maine-based Northeast Bank has agreed to sell a $457.6 million portfolio of Paycheck Protection Program (PPP) loans to a non-bank lender.
According to a statement from Northeast, the bank stands to realize a $9.8 million pre-tax gain for the second quarter through the sale.
The loans – which include all PPP applications processed by Northeast up to June 11 – will be taken on by The Loan Source, a small business lending company based in Long Island, New York.
The loan book forms part of a wider purchase for The Loan Source, which plans to buy almost $1.3 billion worth of PPP loans.
Northeast will also see fee income from the loans until they are either forgiven or repaid, the bank said.
Under a previously announced agreement, Northeast Bank will act as “correspondent” between The Loan Source and the Federal Reserve Bank of Minneapolis, receiving approximately $2.9 million in fees for this service over two years. The correspondent arrangement also includes ACAP SME, another small business lender.
In addition, the bank would take 50% of the net servicing income earned on these loans. The Loan Source intends to continue to purchase PPP loans, it said.
Rick Wayne, president and CEO of Northeast Bank, said the sale would help “provide additional liquidity for the bank to originate and purchase loans” as well as generating “significant income” in the future though an ongoing relationship with The Loan Source and ACAP.
“Our team is proud to work closely with so many small business owners across the nation, many of whom were in dire need of PPP funds in order to keep their employees, and their businesses, afloat,” Wayne added.
“Our employees worked around the clock to ensure small businesses across the country received critical relief during the global COVID-19 pandemic. This collective effort resulted in over 4,100 loans and helped to save tens of thousands of associated jobs.”
Northeast said it would continue to accept and process applications for PPP loans up until the deadline tomorrow (June 30), selling them on to The Loan Source to manage. However, the bank said it expected a lower rate of applications in the final few days of the program.
As of June 26, the Small Business Administration, which is overseeing the program, said it had approved nearly 4.8 million loans worth a combined $517.9 billion, facilitated by 5,458 lenders. This left roughly $100 billion in the PPP still to be allocated.