Northeast Bank: Maine Bank With $3.3B in PPP Loans

Type: Bank; PPP lender of record, loan seller and Federal Reserve correspondent
Legal entity: Northeast Bank (NASDAQ: NBN); not the unrelated Northeast Bank of Minneapolis
Headquarters: Portland, Maine

Northeast Bank made PPP loans to sell. SBA's loan-level file lists 34,679 PPP loans for $3.33 billion under the Maine bank's lender location in Lewiston, and names The Loan Source as servicer on 34,673 of them.¹ Our lender page shows 35,452 loans because it also counts 773 loans ($155.5 million) made by Northeast Bank of Minneapolis, a different bank.² It sold what it originated to The Loan Source, Inc., and acted as The Loan Source's correspondent for pledging PPP loans to the Federal Reserve's PPP Liquidity Facility.³⁴ American Banker reported in December 2022 that the arrangement had generated $103.9 million for Northeast from loan sales and correspondent fees through September 30, when the bank had $1.74 billion in assets.⁵

The PPP book

The loans in the SBA file averaged $98,358 and went to 33,875 borrowers, who reported 402,052 jobs. Modeled loan by loan from SBA's published fee schedule, Northeast's processing fees come to $166.7 million, 35th of 4,688 originating lenders. Most of it came from 2021 loans: $23.7 million on 2020 first-draw loans, $19.3 million on 2021 first-draw loans and $123.6 million on 2021 second-draw loans.² SBA never published what it paid each lender.

Selling the loans

Northeast announced the first sale on June 25, 2020: $457.6 million of the PPP loans it had originated through June 11, sold to The Loan Source under a loan purchase and sale agreement. "After amortizing previously unamortized PPP loan origination fees," the bank said, it would book a pre-tax gain of about $9.8 million that quarter, and it would keep receiving fee income on the sold loans until they were forgiven or repaid.³

The same release laid out the rest of the structure. The Loan Source was buying about $1.27 billion of PPP loans in all, $815.3 million of them from other lenders. Under a correspondent agreement with The Loan Source and ACAP SME, LLC, Northeast would act as correspondent for The Loan Source's pledges of those loans to the Federal Reserve Bank of Minneapolis under the liquidity facility, and ACAP would service them. On the $815.3 million, Northeast expected correspondent fees of about $2.9 million.³

The 2021 round was larger. From January 11 to February 26, 2021, SBA approved $1.84 billion of Northeast PPP loans, of which $1.65 billion had been funded, and Northeast agreed to sell The Loan Source every loan it made in the round. It expected a pre-tax gain of about $26.0 million on the $1.65 billion. The correspondent fee was now defined as 50 percent of the net servicing income on the loans The Loan Source pledged, which by then totaled $4.72 billion in purchases.⁴ American Banker later put the total purchases Northeast facilitated at $11.24 billion.⁵ The Loan Source's side of the chain, including the other banks that sold to it, is on its profile.

In its fiscal year to June 30, 2021, Northeast originated $2.84 billion of PPP loans to more than 30,000 borrowers and booked $46.7 million of net gains from selling them.⁶ Its July 2021 results described the arrangement: the bank "earns a correspondent fee when Loan Source purchases PPP loans and the Bank subsequently shares in net servicing income on such purchased PPP loans." Correspondent fee income was $6.7 million in April–June 2021, and The Loan Source's PPP balance stood at $8.39 billion on June 30, 2021. "For the fourth fiscal quarter, we originated $563.0 million of Round 2 PPP loans, sold $671.4 million to The Loan Source, Inc., and generated $12.6 million of net gains," Wayne said.⁶

What the money bought

American Banker's December 2022 account quotes chief executive Rick Wayne on what the program left behind: "We had a lot of capital because of the money we made in the PPP. We were able to use that capital to purchase a high volume of loans." Northeast reported $252 million of shareholders' equity at September 30, 2022, and bought $1.16 billion of loans, mostly commercial real estate, in the following weeks. It also began making small SBA 7(a) loans with Newity, the company that had done business as The Loan Source, whose co-chief executive at the time was Luke LaHaie.⁵

In the fraud files

In the Southern District of Florida, Eric Dean Sheppard was charged with defrauding lenders including "ACAP SME/Northeast Bank" with false PPP applications; a Northeast Bank witness testified, and he was convicted on four wire-fraud counts and sentenced in 2024 to 18 months in prison.⁷ The U.S. Attorney's Office for the District of Utah said Allison Baver sought PPP loans through applications to Northeast Bank and Meridian Bank from April 13 through April 26, 2020.⁸

The Loan Source — bought Northeast's PPP loans and pledged them to the Federal Reserve with Northeast as correspondent.
Rick Wayne — Northeast's president and chief executive.
Luke LaHaie — co-chief executive of Newity.

Northeast Bank

The PPP book

Selling the loans

What the money bought

In the fraud files

Related profiles

Sources