Northeast Bank: Well-Managed, Opportunistic Purchaser of CRE Loans

Javier López Bernardo of BrightGate Capital presented his in-depth investment thesis on Northeast Bank (US: NBN) at Best Ideas 2024.

Thesis summary:

Northeast Bank is a small US regional bank based in Maine, with a market capitalization of USD ~400 million. The bank is led by Rick Wayne, a banker with an excellent three-decade track record of around 20% CAGR, focused on buying CRE loans in the secondary market.

NBN has structural advantages over its competitors, both regional banks and private debt funds, that the market does not recognise. Although structured as a bank, it has an investment philosophy of opportunistic loan purchases and a vision of long-term shareholder value creation.

The recent turmoil in the banking sector has enabled the management team to acquire loan portfolios at deep discounts, which will add significantly to NBN’s book value over the next few years. Rick and his team have had no credit losses on their loan portfolio over the past decade.

Finally, the bank is trading at a fair valuation. NBN’s ROA and ROE have recently been 2% and 20%, respectively. By trading close to book value, the valuation is reasonable and does not take into account other one-off opportunities the management team may encounter, as they have done in the past.

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About the instructor:

Javier López Bernardo is Portfolio Manager (equities and high yield) at BrightGate Capital SGIIC, an independent asset management boutique company based in Madrid, Spain.

He holds a Bachelor in Business Administration (major in finance) from the Universidad Complutense de Madrid, a Master in Corporate Finance and Investment Banking from the IEB and a Master in Economics from Kingston University, where he also earned a Ph.D. in Economics. His academic research on equity markets and growth theory has been published in leading international journals.

He is a CFA Charterholder and was a two-year full scholarship recipient of the Ramón Areces Foundation. He is a lecturer for the CFA programme and also at the Advantere School of Management, where he teaches asset management and behavioural finance.