Northeast Bancorp (NBN) in Lewiston, Maine, can now make owner-occupied commercial real estate loans without fear of exceeding a cap on such loans imposed by regulators.
Since late 2010, the $700 million-asset parent of Northeast Bank has been under orders from the Federal Reserve to keep its total commercial real estate loans to within 300% of total risk-based capital. On Monday the company said in a Securities and Exchange Commission filing that the Fed has modified the guideline to exempt owner-occupied CRE loans from the cap.
At March 31, the company had $226 million of CRE loans on its books, including $65.7 million related to owner-occupied properties.
Four other constraints, including one that requires the company to limit purchased loans to 40% of total loans, remain in place. At March 31, purchased loans totaled 33.63% of total loans.
In a research note to investors, Sandler O'Neill & Partners called the Fed approval on owner-occupied loans "a very encouraging development" and reiterated its "buy" rating on Northeast's shares. It added that the move shows a willingness on the Fed's part to relax other regulatory constraints that have been imposed on the company.