Investment Pitches

Pitch Summary:
ECN is a financial services company that primarily originates loans on behalf of its customers. ECN's customers include banks, credit unions, insurance companies, and other institutional investors. ECN generates revenue from loan origination fees as well as recurring loan servicing fees on most loans originated, with the underlying credit performance being non-recourse to ECN. ECN operates through two segments. The first, Triad, originates and services loans in the manufactured housing (MH) industry. Triad is the second largest manufactured home loan originator in the US and will likely generate over $1.5B of manufactured home loans in 2023 per their estimates (Berkshire Hathaway's 21st Mortgage is #1 in terms of market share). Although there may be some uncertainty on manufactured housing volumes in 2023, we believe Triad is positioned to maintain strong long-term growth. Manufactured housing provides the most affordable housing option for many people amidst a broad and growing housing affordability crisis across the country. By way of comparison, the average rent for a 2-bedroom apartment is $1,332/month versus Triad's average customer's mortgage payment of $829/month. We feel MH's strong value proposition will increase demand for manufactured homes in the years to come. In addition to benefiting from industry tailwinds, Triad has been successful in broadening the menu of loans they are able to originate. Triad's historical core loan product has been super prime (high FICO score) chattel, or property only loans. Over the last few years, Triad has been able to grow related loan originations for Land+Home loans, manufactured home rental loans, and lower FICO score loans (their "Bronze" and "Silver" programs). Triad was able to originate about 27% of its total loans from these related products in 2022, up from only 4% in 2019. We believe the potent mix of industry shipment tailwinds, Triad's ability to take market share in core chattel loans, and their growth through a broadening of loan products offered to lending partners will continue to drive a high revenue growth rate while enjoying strong operating margins in the high 30s range. The second business unit operates under the IFG & Source One banners and originates and services loans in the RV & Marine industry. The businesses in this unit were acquired by ECN in 2021 and 2022 when management saw an opportunity to develop and scale another niche origination platform in the RV & Marine industry, using the expertise they gained from Triad and previously owned Service Finance (home improvement loans) operations. We expect the RV & Marine business to originate about $1.3B in loans for its customers in 2023. IFG & Source One were each regional lenders that are currently in the process of rolling out operations nationally under ECN's ownership. For instance, three years ago Source One was not operating any meaningful business in California, Florida, or New York, despite these three states accounting for about 22% of the total RV & Boat sales in the US. Source One has since worked to secure licenses to expand their operations across the country which we believe will lead to an exceptional CAGR over the coming years as the business continues to expand geographically. ECN has recently developed a related product for its funding partners in the form of inventory financing loans ("IF"). These loans help manufactured home dealers, boat dealers, and RV dealers fund the inventory they keep on site as part of their ongoing operations. ECN's "IF" loans have historically had extremely low losses and currently generate a very attractive earnings yield compared to their risk profile. As such, we believe these are attractive loans for ECN's lending partners to own. ECN is projected to start to meaningfully originate and "flow" these loans to their lending partners in the coming quarters and years. In conjunction with this new product, ECN has kept a fair amount of these loans on their balance sheet, given the attractive economics. ECN borrows against the inventory loans it owns and thus earns a spread between the interest received and the interest paid (both assets and liabilities have variable interest rates). This practice has caused some consternation amongst the investment community (especially given the recent focus on credit amidst rising interest rates and ongoing panic over recession). Our view is that these inventory financing loans will continue to be low risk loans as they have been for many years (<5 bps of cumulative net charge offs over the last three years)—the fact that ECN holds some amount on their balance sheet does not pose an existential risk to the business. We may have buried the lede here, but the kicker is that the Company has received unsolicited inbound interests and therefore hired Goldman Sachs and initiated a formal Strategic Review process. While our team is unsure what exactly will come of this review as many similar processes are failing to land buyers lately, we do believe that ECN would be a phenomenal business to own for an institutional investor with long duration liabilities that could retain the loans that ECN originates on their own balance sheet. ECN's broad and long-standing relationships with manufactured home, RV, and marine dealers across the country is an asset that would be difficult and costly to replicate. ECN's management has been involved in many specialty finance transactions over the years and we believe they understand the significant strategic value of the underwriting platform. If there is a deal to be done, we are confident they will ensure an appropriate value is received. If there is a full buyout of ECN, we think it could be around CAD$4.50/share. The components of this value are CAD$4.30/share for Triad at 14.0x 2023 operating income and CAD$1.60/share for Marine and RV at 12.0x 2023 operating income. These values are netted against capitalized corporate expense and net debt & preferred stock of CAD$1.40/share. If there is no buyout, we think ECN will enjoy strong earnings growth in the years ahead, and at current prices we don't believe the market appreciates this potential growth. Voss has acquired ~13% of the company and it is currently a ~9% position in the Voss Value Master Fund as of today.

BSD Analysis:
Voss Capital presents ECN as a specialty finance platform with significant strategic value and potential M&A upside. The fund has built a substantial 13% stake, representing 9% of the portfolio, demonstrating high conviction in the thesis. ECN's asset-light model generating origination and servicing fees with non-recourse credit risk provides attractive economics and scalability. The Triad manufactured housing segment benefits from secular affordability trends, with monthly payments of $829 versus $1,332 for apartment rentals, positioning manufactured housing as a compelling value proposition. Product diversification from 4% to 27% of non-core loans demonstrates successful platform expansion and revenue growth potential. The RV & Marine segment's national expansion opportunity, particularly in California, Florida, and New York markets, offers significant geographic leverage. The formal strategic review process with Goldman Sachs creates a potential catalyst, with the CAD$4.50 takeout valuation based on reasonable 14x and 12x operating income multiples for the respective segments. Even without a transaction, the company's strong growth prospects and defensive inventory financing business with <5 basis points of losses provide downside protection.

Pitch Summary:
ASO is a sports and outdoor retailer based in Houston, TX, with 268 locations across 18 states. ASO is concentrated in the south and southeast, which contain many of the fastest growing markets in the country in terms of both population and labor force. Of ASO's current footprint, 40% of stores are in Texas with another 40% spread across Florida, Georgia, Alabama, North Carolina, South Carolina, Arkansas, Oklahoma, and Tennessee – all states in the top 20 for net migration since 2020. ASO recently hosted an investor day where they presented their plan to reach $10 billion in revenue, 13.5% operating margins, and 10% net margins by 2027, with a 30% ROIC. This plan includes 120 - 140 new store openings and 3% average same-store sales for existing stores. The company emphasized that these targets were calculated with the assumption that there may be a recession in 2023 or 2024. While there are typically a lot of risks associated with a retailer or restaurant expanding into new markets that aren't familiar with the brand, we believe ASO has a good track record of doing this successfully and profitably. All ASO's stores are profitable, including stores that are the only Academy location in the state such as in West Virginia, Virginia, or Illinois. In fact, ASO's stores are so profitable that even its worst quartile of stores generates the same amount of operating income ($2 million EBIT per location) as its largest competitor's average store. Two of ASO's three distribution centers are currently operating at only 50% of capacity, giving them plenty of space to grow into with lower incremental capital needs. If the company executes on its guidance, it will generate $3.5 billion in free cash flow cumulatively from 2023 - 2027. Given this FCF build (assuming no buybacks or dividends), ASO's enterprise value in 2027 (at the current stock price) would be $1.8 billion or 1.1x 2027 EBIT. The 75th percentile of ASO's retail peer group trades at 14.5x FY2 EBIT. Achieving these targets over the next four years would cement ASO among the best-in-class public retailers, coming in above the 90th percentile in value-driving metrics including revenue growth, margins, and ROIC. However, even if ASO is valued at just the current median EV/EBIT multiple of the peer group (8.5x) in 2026, it would result in an enterprise value of $11.5 billion. If one adds on the estimated $3.2 billion in net cash in 2027, this will equate to an equity value of $14.7 billion or $184/share, 207% upside from today's price of ~$60/share or a 45% 3-year CAGR. This assumes the management team can more or less hit the targets they laid out at their 2023 investor day in April--but should they whiff, there could be a downside buffer (or further upside) if there is any value-additive capital allocation along the way.

BSD Analysis:
Voss Capital presents ASO as a compelling regional retail expansion story with exceptional unit economics and demographic tailwinds. The fund emphasizes ASO's strategic positioning in high-growth Southern markets, with 80% of stores located in states experiencing strong population migration since 2020. Management's ambitious 2027 targets of $10 billion revenue, 13.5% operating margins, and 30% ROIC appear achievable given the company's track record of profitable expansion and superior store-level economics. The fact that ASO's worst-performing quartile generates equivalent operating income to Dick's Sporting Goods' average store demonstrates remarkable operational efficiency. With distribution centers operating at only 50% capacity, the company has significant infrastructure leverage for growth without major capital investment. The projected $3.5 billion cumulative free cash flow through 2027 provides substantial financial flexibility and potential for shareholder returns. Even conservative valuation assumptions using peer median multiples suggest significant upside potential, with the $184 price target representing a 45% CAGR over three years.

Pitch Summary:
PLYA is the only publicly traded, all-inclusive resort owner-operator and has a portfolio of 25 all-inclusive resorts across Mexico, Jamaica, and the Dominican Republic. PLYA built its collection of resorts by acquiring properties from local family owner-operators. These acquisitions were then accompanied by strategic re-branding collaborations with renowned international chains such as Hyatt, Wyndham, and Hilton. Hotels brought under the umbrella of a large global brand benefit from increased consumer awareness, access to the brand's loyalty member network, and increased negotiating power with the online travel agencies (OTAs), driving higher margins. In 2018, the company presented what appeared to be a credible path to $300 million in EBITDA by 2021, which included multiple high-ROI projects that were set to be delivered at the end of 2019 and start generating significant cash flow in 2020. However, the COVID restrictions beginning in March 2020 forced the shutdown of all PLYA's resorts, reducing occupancy to 0% and delaying their path to $300 million. Earlier this year, we bought PLYA at the same enterprise value that it had in 2018 (~$2 billion). This was a bargain price considering the investments made back in 2018 and 2019 have begun to bear fruit and the additional tailwind of a boom in consumer travel to start 2023, which has particularly skewed toward Mexico and PLYA's budget friendly, all-inclusive resorts. Airport traffic numbers for some of PLYA's most important locations (Los Cabos, Puerta Vallarta, Montego Bay, and Cancun - together accounting for 68% of total rooms) show strong passenger traffic growth compared to the same period in 2019 and 2022. Management is being proactive in creating value for shareholders by exploring sale opportunities for the lower to mid-tier assets (presumably at valuations above the stock's current valuation in the public market) with the goal of buying back stock. We also love that they added scales to all the bathrooms to cut down on food costs. Our base case assumes an 11x 2023 EBITDA multiple on $288 million EBITDA (adjusted for the $13 million drag from two resorts being sold) for a $3.1 billion EV. With $783 million in net debt, our price target is $15.20/share, 70% upside from the current price of ~$8.90 per share as of the date of this letter.

BSD Analysis:
Voss Capital presents a compelling turnaround thesis for PLYA, positioning it as a COVID recovery play with significant operational leverage. The fund acquired the position at 2018 enterprise values (~$2 billion) despite meaningful capital investments and improvements made since then, creating an attractive entry point. The manager highlights strong travel demand recovery, particularly to Mexico destinations where PLYA operates 68% of its rooms across key airports showing robust passenger traffic growth. The company's strategic asset optimization through potential lower-tier property sales and share buybacks demonstrates proactive capital allocation. PLYA's unique position as the only publicly traded all-inclusive resort operator provides scarcity value and potential takeout appeal. The 11x EBITDA valuation target on $288 million adjusted EBITDA appears reasonable for a recovering hospitality asset with improving fundamentals. Management's cost control initiatives, including bathroom scales to reduce food waste, show attention to operational efficiency that should drive margin expansion as occupancy normalizes.

Pitch Summary:
ECN is a financial services company that primarily originates loans on behalf of its customers. ECN's customers include banks, credit unions, insurance companies, and other institutional investors. ECN generates revenue from loan origination fees as well as recurring loan servicing fees on most loans originated, with the underlying credit performance being non-recourse to ECN. ECN operates through two segments. The first, Triad, originates and services loans in the manufactured housing (MH) industry. Triad is the second largest manufactured home loan originator in the US and will likely generate over $1.5B of manufactured home loans in 2023 per their estimates (Berkshire Hathaway's 21st Mortgage is #1 in terms of market share). Although there may be some uncertainty on manufactured housing volumes in 2023, we believe Triad is positioned to maintain strong long-term growth. Manufactured housing provides the most affordable housing option for many people amidst a broad and growing housing affordability crisis across the country. By way of comparison, the average rent for a 2-bedroom apartment is $1,332/month versus Triad's average customer's mortgage payment of $829/month. We feel MH's strong value proposition will increase demand for manufactured homes in the years to come. In addition to benefiting from industry tailwinds, Triad has been successful in broadening the menu of loans they are able to originate. Triad's historical core loan product has been super prime (high FICO score) chattel, or property only loans. Over the last few years, Triad has been able to grow related loan originations for Land+Home loans, manufactured home rental loans, and lower FICO score loans (their "Bronze" and "Silver" programs). Triad was able to originate about 27% of its total loans from these related products in 2022, up from only 4% in 2019. We believe the potent mix of industry shipment tailwinds, Triad's ability to take market share in core chattel loans, and their growth through a broadening of loan products offered to lending partners will continue to drive a high revenue growth rate while enjoying strong operating margins in the high 30s range. The second business unit operates under the IFG & Source One banners and originates and services loans in the RV & Marine industry. The businesses in this unit were acquired by ECN in 2021 and 2022 when management saw an opportunity to develop and scale another niche origination platform in the RV & Marine industry, using the expertise they gained from Triad and previously owned Service Finance (home improvement loans) operations. We expect the RV & Marine business to originate about $1.3B in loans for its customers in 2023. IFG & Source One were each regional lenders that are currently in the process of rolling out operations nationally under ECN's ownership. For instance, three years ago Source One was not operating any meaningful business in California, Florida, or New York, despite these three states accounting for about 22% of the total RV & Boat sales in the US. Source One has since worked to secure licenses to expand their operations across the country which we believe will lead to an exceptional CAGR over the coming years as the business continues to expand geographically. ECN has recently developed a related product for its funding partners in the form of inventory financing loans ("IF"). These loans help manufactured home dealers, boat dealers, and RV dealers fund the inventory they keep on site as part of their ongoing operations. ECN's "IF" loans have historically had extremely low losses and currently generate a very attractive earnings yield compared to their risk profile. As such, we believe these are attractive loans for ECN's lending partners to own. ECN is projected to start to meaningfully originate and "flow" these loans to their lending partners in the coming quarters and years. In conjunction with this new product, ECN has kept a fair amount of these loans on their balance sheet, given the attractive economics. ECN borrows against the inventory loans it owns and thus earns a spread between the interest received and the interest paid (both assets and liabilities have variable interest rates). This practice has caused some consternation amongst the investment community (especially given the recent focus on credit amidst rising interest rates and ongoing panic over recession). Our view is that these inventory financing loans will continue to be low risk loans as they have been for many years (<5 bps of cumulative net charge offs over the last three years)—the fact that ECN holds some amount on their balance sheet does not pose an existential risk to the business. We may have buried the lede here, but the kicker is that the Company has received unsolicited inbound interests and therefore hired Goldman Sachs and initiated a formal Strategic Review process. While our team is unsure what exactly will come of this review as many similar processes are failing to land buyers lately, we do believe that ECN would be a phenomenal business to own for an institutional investor with long duration liabilities that could retain the loans that ECN originates on their own balance sheet. ECN's broad and long-standing relationships with manufactured home, RV, and marine dealers across the country is an asset that would be difficult and costly to replicate. ECN's management has been involved in many specialty finance transactions over the years and we believe they understand the significant strategic value of the underwriting platform. If there is a deal to be done, we are confident they will ensure an appropriate value is received. If there is a full buyout of ECN, we think it could be around CAD$4.50/share. The components of this value are CAD$4.30/share for Triad at 14.0x 2023 operating income and CAD$1.60/share for Marine and RV at 12.0x 2023 operating income. These values are netted against capitalized corporate expense and net debt & preferred stock of CAD$1.40/share. If there is no buyout, we think ECN will enjoy strong earnings growth in the years ahead, and at current prices we don't believe the market appreciates this potential growth. Voss has acquired ~13% of the company and it is currently a ~9% position in the Voss Value Master Fund as of today.

BSD Analysis:
Voss presents ECN Capital as a specialty finance play with significant M&A optionality and structural growth drivers. The company operates two complementary loan origination platforms: Triad (manufactured housing) and IFG/Source One (RV/Marine), generating fee income with non-recourse credit risk. Triad benefits from the housing affordability crisis, with manufactured homes offering $829/month payments versus $1,332 for apartment rentals, driving secular demand growth. The platform has successfully diversified beyond core chattel loans, with related products growing from 4% to 27% of originations since 2019. The RV/Marine segment provides geographic expansion opportunities, particularly in California, Florida, and New York markets representing 22% of national sales. ECN's inventory financing product offers attractive risk-adjusted returns with <5bps historical charge-offs over three years. The strategic review process with Goldman Sachs creates near-term catalyst potential, with Voss estimating CAD$4.50/share takeout value based on 14x Triad and 12x RV/Marine operating income multiples. Voss's 13% ownership position and 9% portfolio weighting demonstrates high conviction in both standalone growth and M&A scenarios.

Pitch Summary:
ASO is a sports and outdoor retailer based in Houston, TX, with 268 locations across 18 states. ASO is concentrated in the south and southeast, which contain many of the fastest growing markets in the country in terms of both population and labor force. Of ASO's current footprint, 40% of stores are in Texas with another 40% spread across Florida, Georgia, Alabama, North Carolina, South Carolina, Arkansas, Oklahoma, and Tennessee – all states in the top 20 for net migration since 2020. ASO recently hosted an investor day where they presented their plan to reach $10 billion in revenue, 13.5% operating margins, and 10% net margins by 2027, with a 30% ROIC. This plan includes 120 - 140 new store openings and 3% average same-store sales for existing stores. The company emphasized that these targets were calculated with the assumption that there may be a recession in 2023 or 2024. While there are typically a lot of risks associated with a retailer or restaurant expanding into new markets that aren't familiar with the brand, we believe ASO has a good track record of doing this successfully and profitably. All ASO's stores are profitable, including stores that are the only Academy location in the state such as in West Virginia, Virginia, or Illinois. In fact, ASO's stores are so profitable that even its worst quartile of stores generates the same amount of operating income ($2 million EBIT per location) as its largest competitor's average store. Two of ASO's three distribution centers are currently operating at only 50% of capacity, giving them plenty of space to grow into with lower incremental capital needs. If the company executes on its guidance, it will generate $3.5 billion in free cash flow cumulatively from 2023 - 2027. Given this FCF build (assuming no buybacks or dividends), ASO's enterprise value in 2027 (at the current stock price) would be $1.8 billion or 1.1x 2027 EBIT. The 75th percentile of ASO's retail peer group trades at 14.5x FY2 EBIT. Achieving these targets over the next four years would cement ASO among the best-in-class public retailers, coming in above the 90th percentile in value-driving metrics including revenue growth, margins, and ROIC. However, even if ASO is valued at just the current median EV/EBIT multiple of the peer group (8.5x) in 2026, it would result in an enterprise value of $11.5 billion. If one adds on the estimated $3.2 billion in net cash in 2027, this will equate to an equity value of $14.7 billion or $184/share, 207% upside from today's price of ~$60/share or a 45% 3-year CAGR. This assumes the management team can more or less hit the targets they laid out at their 2023 investor day in April--but should they whiff, there could be a downside buffer (or further upside) if there is any value-additive capital allocation along the way.

BSD Analysis:
Voss presents ASO as a compelling growth story leveraging demographic tailwinds in high-growth Southern markets. The retailer's geographic concentration in states with top-20 net migration since 2020 provides a structural growth advantage, with 80% of stores positioned in Texas and other fast-growing southeastern states. Management's ambitious 2027 targets ($10B revenue, 13.5% operating margins, 30% ROIC) appear achievable given ASO's exceptional store-level profitability, where even worst-quartile locations generate $2M EBIT per store. The expansion plan of 120-140 new stores benefits from existing distribution center capacity at 50% utilization, minimizing incremental capital requirements. ASO's projected $3.5B cumulative free cash flow through 2027 creates significant optionality for value-accretive capital allocation. At current prices, the stock trades at an absurdly low 1.1x 2027 EBIT, suggesting massive upside potential if management executes on guidance. The $184 price target represents 207% upside and 45% CAGR, reflecting the market's failure to appreciate ASO's best-in-class retail metrics and growth trajectory.

Pitch Summary:
PLYA is the only publicly traded, all-inclusive resort owner-operator and has a portfolio of 25 all-inclusive resorts across Mexico, Jamaica, and the Dominican Republic. PLYA built its collection of resorts by acquiring properties from local family owner-operators. These acquisitions were then accompanied by strategic re-branding collaborations with renowned international chains such as Hyatt, Wyndham, and Hilton. Hotels brought under the umbrella of a large global brand benefit from increased consumer awareness, access to the brand's loyalty member network, and increased negotiating power with the online travel agencies (OTAs), driving higher margins. In 2018, the company presented what appeared to be a credible path to $300 million in EBITDA by 2021, which included multiple high-ROI projects that were set to be delivered at the end of 2019 and start generating significant cash flow in 2020. However, the COVID restrictions beginning in March 2020 forced the shutdown of all PLYA's resorts, reducing occupancy to 0% and delaying their path to $300 million. Earlier this year, we bought PLYA at the same enterprise value that it had in 2018 (~$2 billion). This was a bargain price considering the investments made back in 2018 and 2019 have begun to bear fruit and the additional tailwind of a boom in consumer travel to start 2023, which has particularly skewed toward Mexico and PLYA's budget friendly, all-inclusive resorts. Airport traffic numbers for some of PLYA's most important locations (Los Cabos, Puerta Vallarta, Montego Bay, and Cancun - together accounting for 68% of total rooms) show strong passenger traffic growth compared to the same period in 2019 and 2022. Management is being proactive in creating value for shareholders by exploring sale opportunities for the lower to mid-tier assets (presumably at valuations above the stock's current valuation in the public market) with the goal of buying back stock. We also love that they added scales to all the bathrooms to cut down on food costs. Our base case assumes an 11x 2023 EBITDA multiple on $288 million EBITDA (adjusted for the $13 million drag from two resorts being sold) for a $3.1 billion EV. With $783 million in net debt, our price target is $15.20/share, 70% upside from the current price of ~$8.90 per share as of the date of this letter.

BSD Analysis:
Voss Capital presents a compelling turnaround thesis for PLYA, positioning it as a recovery play on travel normalization post-COVID. The fund acquired the position at 2018 enterprise value levels (~$2 billion) despite meaningful capital investments and operational improvements completed since then. The manager highlights strong airport traffic recovery in key markets (Los Cabos, Puerto Vallarta, Montego Bay, Cancun) representing 68% of total rooms, suggesting robust demand recovery. PLYA's unique position as the only publicly traded all-inclusive resort operator provides strategic value and potential M&A appeal. Management's proactive asset optimization strategy, including potential sales of lower-tier properties for share buybacks, demonstrates capital allocation discipline. The 11x EBITDA valuation target on $288 million adjusted EBITDA appears reasonable for a recovering hospitality asset with improving fundamentals. At $15.20 price target versus ~$8.90 current price, the 70% upside reflects significant value creation potential as travel demand normalizes.

Pitch Summary:
Northeast Bank is a Maine state-chartered bank with $2.9 billion of assets and $284 million of equity as of March 31st. Led by industry veteran Rick Wayne, Northeast Bank originates and purchases commercial real estate loans nationwide. It is roughly the same strategy Wayne executed for nearly two decades as CEO of Capital Crossing Bank, a bank he founded with a partner in 1988, took public in 1996 and then sold to Lehman Brothers in 2007 for nearly ten times its IPO price. Although the fears surrounding regional banks at the moment have weighed on Northeast Bank’s stock, Northeast Bank is well insulated from the issues behind the spate of recent bank failures. Unlike most of the banks that have come under stress recently, Northeast Bank has limited interest rate risk on its balance sheet. Northeast Bank’s securities portfolio is relatively small and has a short duration. On March 31st, the Bank held $60.6 million of investment securities with a weighted average duration of just 13 months. That represented just 2.1% of the Bank’s assets and 21.3% of its CET1 capital. All those securities were classified as “available-for-sale” and carried at fair market value. Due to the short duration of Northeast Bank’s securities portfolio, the fair market value of its securities portfolio reflected an unrealized loss relative to amortized cost of just $1.6 million, or less than 1.0% of the Bank’s CET1 capital. In contrast, the carrying value of Silicon Valley Bank’s investment securities portfolio at the end of 2022 amounted to 57% of its total assets, and the unrealized and unrecognized losses on that portfolio due to the surge in interest rates since the beginning of 2022 were sufficient to effectively wipe out Silicon Valley Bank’s capital. Northeast Bank’s loan portfolio has a low level of interest rate risk as well. Northeast Bank’s balance sheet is slightly asset sensitive. In other words, it typically makes somewhat more money overall when interest rates go up, largely due to holding a high proportion of floating rate loans and having a deposit beta somewhat below that figure. At June 30, 2022, 76.8% of Northeast Bank’s loan portfolio had floating interest rates. While a significant portion of the loans Northeast Bank purchased during the final calendar quarter of 2022 have fixed interest rates at the moment, most of those will adjust to floating rates over the next few years. Northeast Bank also plans to put in place long-term funding that matches the maturity of the recently acquired loans as market conditions permit in the future. Northeast Bank’s loan portfolio is further insulated from interest rate-related risks by the relatively short persistence of both its originated and purchased loans, which mitigates the risk of being locked into unfavorable interest rates for an extended period. For a variety of reasons, Northeast Bank’s loans have historically been repaid within a few years. While Northeast Bank’s business model has never been centered on the strength of its deposit franchise, its deposit base appears resilient to the types of issues that have recently overwhelmed some other banks. 92% of Northeast Bank’s deposits are covered by FDIC insurance and 3% are contractually restricted from being withdrawn. That leaves just 5% of Northeast Bank’s deposits uninsured and unrestricted. Northeast Bank also has no exposure to deposits from cryptocurrency firms. In contrast, all the banks that recently failed had distinct risks related to their deposit bases in the form of a high proportion of either uninsured deposits or deposits from cryptocurrency firms. Deposit outflows from regional banks peaked in the immediate wake of the failures of Silvergate, SVB and Signature Bank. Northeast Bank did not experience any change in deposit flows during the most acute period of the recent turmoil in the banking system, and its deposit flows have remained stable since. Although exposure to commercial real estate loans was not a significant factor behind any of the recent bank failures, it has increasingly become an area of concern. Banks facing liquidity and funding cost pressures may tighten lending standards, and regional banks punch above their weight when it comes to commercial real estate lending. Reduced credit availability could add incremental downward pressure on commercial property values and make refinancing existing loans as they come due more challenging. At the same time, certain types of commercial real estate properties, such as large office buildings, enclosed malls, and single tenant big box retail stores, face structural imbalances between supply and demand in the space market that have led to deteriorating property values. While commercial real estate loans are Northeast Bank’s bread and butter, the bank is well positioned to withstand the headwinds facing the commercial real estate market. Northeast Bank holds loans collateralized by both office and retail properties, but it has very limited exposure to the particular types of properties that are facing significant structural challenges. Most of the office properties Northeast Bank has lent against are smaller footprint, neighborhood offices that serve as the principal physical presence for local, service-oriented businesses. Northeast Bank does not hold loans backed by skyscrapers in central business districts leased to multinational corporations looking to rationalize their real estate footprints. Similarly, Northeast Bank has avoided loans backed by enclosed malls and single-tenant big box retail stores since at least when we first invested in the Bank in 2017. More broadly, Northeast Bank’s loan portfolio has substantial collateral coverage sufficient to protect the bank from losses even in highly adverse scenarios. The weighted average loan-to-value ratio of the portfolio was 47% on March 31st, and the values used to calculate that figure are likely understated in most cases. Despite the challenges facing the commercial real estate market, Northeast Bank’s management is highly confident in the credit outlook for its loan portfolio due to the Bank’s conservative approach to underwriting loan originations and purchases.

BSD Analysis:
Northeast Bank enters 2026 with strong financial momentum, having just reported its Q2 2026 results. The bank posted total revenue of $51.8 million and a diluted EPS of $2.49, slightly beating analyst expectations of $2.45 despite a modest revenue miss. The bank’s profitability remains a standout, with a net profit margin of 41.4% and a return on equity of 15.6%. A major driver for 2026 is the surge in loan volume, putting nearly $900 million of new loans on the balance sheet this quarter alone, primarily fueled by a robust Small Business Administration (SBA) 7(a) lending program. Management is projecting SBA loan originations of approximately $20 million per month throughout the year. While higher brokered deposits are being used to fund this aggressive growth, the bank’s 4.49% net interest margin (NIM) remains healthy relative to regional peers.

Pitch Summary:
Interactive Brokers is a highly automated global securities firm that specializes in routing orders and processing trades in securities, futures, foreign exchange instruments, bonds and mutual funds on more than 150 electronic exchanges and market centers around the world. Interactive Brokers custodies and services accounts for hedge and mutual funds, registered investment advisors, proprietary trading groups, introducing brokers and individual investors. Thomas Peterffy, the founder and Chairman of Interactive Brokers, holds a stake in Interactive Brokers with a current market value of more than $20 billion. That stake accounts for the lion’s share of Peterffy’s wealth. Not only that, Interactive Brokers is Peterffy’s passion and legacy. For all those reasons, Peterffy has always ensured that Interactive Brokers is prepared for whatever financial markets and the global economy may throw at it. As a result, the current stresses in the banking system and financial markets will have essentially no impact on Interactive Brokers over time. Interactive Brokers bears very little interest rate risk in its securities portfolio. The duration of IB’s securities portfolio on March 31st was just 24 days. In contrast, the duration of Silicon Valley Bank’s fixed income portfolio was 5.7 years at the end of 2022. The level of interest rate risk in IB’s securities portfolio is so low that it is hard to imagine any plausible scenario in which changes in interest rates would cause Interactive Brokers problems. Interactive Brokers is also well insulated from the liquidity strains currently affecting some banks. Depositors are suddenly much more willing to move cash balances in search of both safety and a competitive yield. If anything, Interactive Brokers may benefit. In addition to being highly profitable, well capitalized and conservatively managed, Interactive Brokers has also always paid some of the highest rates available on client cash balances, up to 4.58% at the moment. Moreover, Interactive Brokers has access to ample excess liquidity, amounting to more than $80 billion at the end of 2022. The expected path of the federal funds rate shifted lower in the wake of recent bank failures. A slightly lower path for the federal funds rate will result in slightly lower net interest income and earnings for Interactive Brokers in the near-term than otherwise would have been the case. The impact of this change on the value of Interactive Brokers is infinitesimally small though. The level to which the federal funds rate is expected to converge over the long-term – not so much the path for getting there – is what matters for the value of Interactive Brokers, and that has not changed.

BSD Analysis:
Interactive Brokers is trading infrastructure built for serious money, not gamified speculation. Its low-cost, high-speed platform attracts active traders and institutions who care about execution, not confetti. Rising rates quietly boosted interest income, but the real moat is scale in clearing, custody, and global market access. Investors fixate on market activity cycles and miss how account growth compounds regardless of volatility. Switching costs are operational and psychological once portfolios are embedded. Capital efficiency is exceptional because the model is technology-heavy, not branch-heavy. This is brokerage as infrastructure, not a retail fad.