Q3 2021 FIRST BANK (Hamilton) Earnings Call
Hello, everyone and welcome to city, South Bank said quarter 2021 earnings conference call. My name is Bethany and I'll be coordinating this call for you today, if you'd like to register a question during the Q&A session. Please press star followed by one on your telephone keypad I will now hand, the call over to hoist Patrick.
Brian <unk>, President and Chief Executive Officer of Softbank, maybe to you Patrick.
Thank you I'd like to welcome everyone today to first bank's third quarter 2021 earnings call I'm joined today by Andrew Hibshman, Our Chief Financial Officer, and Peter Cahill, Our Chief lending officer before we begin however, Andrew will read the Safe Harbor statement.
Yes.
The following discussion may contain forward looking statements concerning the financial condition results of operations and business of first bank. We caution that such statements are subject to a number of uncertainties and actual results could differ materially and therefore, you should not place undue reliance on any forward looking statements. We make we may not update any forward.
Looking statements, we make today for future events or developments information about risks and uncertainties are described under item one a risk factors in our annual report on Form 10-K for the year ended December 31, 2020 filed with the FDIC Pat back to you.
Yeah.
Thanks, Andrew I'd like to start today with a discussion of the overall results before I turn it over to Andrew and Peter to dive in on the details I think the third quarter was a continuation of a very strong financial results year to date in 2021 I'd like to hit on a few of the key financial performance metric.
Over the past few quarters.
Q3 was the third straight quarter with a return on assets over 1.4% and return on tangible common equity over 15% our efficiency ratio has been below 50% for four of the past five quarters pre provision net revenue continues to move higher than our pre provision.
Our away has been over 1.7% each of the past five quarters. Furthermore, noninterest income has been averaging 1.8 million per quarter over the past five quarters, which was up 37% compared to $1 3 million, which was the average of the prior five.
Quarters.
This strong financial performance allowed us to both increase our dividend and renew our stock buyback plan, even as we continue to grow our earnings profile is generating strong capital cushions.
From a lending perspective net loan growth was muted during the quarter, but this is being driven by pay offs and strong growth in Q2, more so than a lack of new activity Peter Kols. Some good data that he will share later in the presentation on this point I would just add the total new loan production year to date in 2012.
One is consistent with prior years and our lending pipeline is near all time highs, we have seen reduced C&I line usage as contributing to so far the slower net loan growth year to date.
Continuing with trends in lending our asset quality is holding up well our SBA group continues to perform very well we've seen great results from this team and their results are helping to drive our consistently improved noninterest income. We're also excited to add new team leader in market executive Anthony Dicenzo to help drive in.
<unk> our team in Northern New Jersey.
From a deposit perspective, we're very excited in early December to be adding over 2000, new customers in over 100 million in new deposits from two branches. We're acquiring from Ocean first bank, we receive regulatory approval and we expect to close in early December.
The addition of these deposits as timely as our expectations for growth in Q4 shows that we should have strong net loan growth and the need for funding in the quarter.
Overall deposit growth was limited during the quarter, but this was partly by design as we work to manage excess liquidity.
We continue to drive our cost of deposits lower reducing them to 25 basis points from 30 basis points in the prior quarter.
And our continued success in our commercial deposit and cash management area.
Led to additional users increase fees and increased services use per customer and.
In summary, we were we view this as another overall very strong quarter, while loan growth Didnt materialize as expected the new business engine is churning in Q4 looks very good deposit results remained solid with good noninterest bearing growth and improving mix and a continued reduction of our cost of funds.
And our dividend and stock buyback announcements reinforce our position of strength and strong financial results. We feel the model is working we're able to grow AD customers grow earnings reward employees and return capital to shareholders via dividends and buybacks at this time I'd like to turn it over to Andrew to discuss.
The financial details for the third quarter.
Thanks Pat.
For the three months ended September 32021, we earned $9 million and net income or <unk> 46 per diluted share. This was the second highest net income quarter in the history of the bank and the highest quarter in the history of the bank in regards to pre provision net revenue of $12 3 million pre provision net revenue as net interest income plus noninterest income.
Minus noninterest expense adjusted for merger related expenses the factors contributing to another strong quarter included a stable net interest margin improved noninterest income and controlling noninterest expense growth.
From a balance sheet perspective, as Pat mentioned, both loan and deposit growth was muted during the quarter, excluding PPP loan forgiveness loans were up approximately $13 million in Q3 2021 compared to an increase in non PPP loans that were approximately $86 million in Q2.
During Q3, 2021, $62 2 million in P. P. P loans were forgiven, leaving $77 $8 million in PPP loans outstanding as of September 32020.
During Q3, 2000, Twenty's 2021 we realized $1 8 million in PPP fee income compared to $1 3 million in Q2 2021 as of September 30th 2021, we had $2 8 million in deferred PPP loans remain going forward, we feel good about the strength of our commercial pipeline and prospects for loan growth.
In Q4, as Pat had mentioned Peter will expand on loan activity year to date and the pipeline in his remarks.
Deposits were up $9 7 million during Q3, while we continue to reduce our reliance on higher cost time deposits.
Interest bearing demand deposits as a percentage of total deposits stayed flat compared to the prior quarter at 26, 3%.
Todd it's dropped to 26% of total deposits at September 30th compared to 23, 2% at June 30th with a significant amount of liquidity in our markets are strong deposit pipeline and the new customers that we will gain via the Ocean first branch acquisition, we remain confident in our ability to grow our low cost core deposits.
In addition to shifting our deposit mix, we have been able to lower the cost on our interest bearing deposits, which coupled with the deposit mix shift has contributed to a significantly lower cost of deposits. Our total deposits cost of deposits as Pat mentioned was down five basis points in Q3, but it was down significantly from Q3 of last year.
Year of 70 basis points, we believe we can lower the cost of interest bearing deposits further as we have over $200 million in time deposits maturing over the next six months with a weighted average cost of approximately 55 basis points, which is 40 basis points lower than our higher highest standards current highest standards CD rate.
Our tax equivalent net interest margin, which bottomed out during the second quarter of 2020% to 3.07% held steady at 354% for the quarter Q3, 2021 compared to $3 five seven in the previous quarter. Our margin continues to benefit from the lower cost of deposits and minimizing the decline in the.
Average yield on our interest, earning asset our margin in Q3 benefited from approximately 500000 more and PPP fee income when compared to Q2, but this was offset by lower prepayment penalty income of almost 563000, which was 729000 in Q2 and only 166000 in Q3.
Our margin in Q3 was also impacted by the amount of liquidity, we carried during the quarter.
If during Q3 2021 our average amount of interest bearing deposits with banks had mirrored our Q2 2021 levels our margin would have improved to $3 six 1%.
As a result of limited amount of loan growth during Q3 year to date net recoveries and continued strong asset quality profile and an improving economic outlook, we recorded a $158000 provision for loan losses in Q3, 2021 compared to a credit to the provision of 168000 in Q2 2021.
With a small provision during Q3 2021 our allowance for loan losses as a percentage of loans increased slightly to 1.19% excluding the impact of PPP loans from 1.18% at June 30 of 2021 nonperforming loans were up slightly from the prior quarter, but were still lower as a person.
Senator loans compared to one year ago at September 32020.
Covid related deferrals were down again this quarter and we've continued to see expanded economic activity in our region.
Spite some of these positive trends our allowance as a percentage of loans continues to be elevated compared to pre COVID-19 levels, which were 1% at December 31, 2019, and this is primarily due to continued level of economic uncertainty.
In the third quarter of 2021 total noninterest income increased to $1 9 million from $1 3 million in Q2 2021, the increase from Q2, mainly related to gains on sales of loans and an increase in other income the increase in gains on sale of loans was primarily due to a gain of 364000 from the sale of certain lower credit quality.
Owns which helped reposition our loan portfolio. Many of these loans were acquired loans that were marked down to fair value at the time of acquisition, we were able to sell these loans at a slightly higher price than the markdown value. The increase in other income was primarily due to a $159000 gain on the sale of a closed branch building that was done in Q3.
'twenty one.
Q3 was a relatively slow quarter in regards to SBA loan sales and loan swap income. While these noninterest income levels may continue to fluctuate the underlying strength of our noninterest income generation capabilities has improved from prior years, especially related to loan swap income and SBA loan sales. So we expect good things from both of these areas.
As in Q4 and.
In Q3, 2021 we continue to focus on controlling noninterest expense, which resulted in a less than 46% efficiency ratio compared to a $46 six 6% efficiency ratio for Q2.
During the quarter, we benefited from the branch and admin space closures that we disclosed in the prior quarters and our other cost containment strategies that we've implemented noninterest expense was up slightly or three 6%. During Q3 2021, when compared to Q2 2021. The increase was due to an increase in salaries and employee benefits.
And merger related expenses, the increase in salary and employee benefits was primarily due to an increase in certain incentive based compensation based on our current year to date results and the merger related expenses were related to the three I mentioned Ocean first branch acquisition with a strong commercial loan pipeline continued trend of lower cost funding base.
And effective management of noninterest expense, we are well positioned to continue our strong and improving core profitability trends.
I'll turn it over to Peter Cahill, our Chief lending officer for his remarks Peter.
Yeah.
Thanks, Andrew.
As outlined in the earnings release mentioned Bible patent Andrew total loans in the third quarter were down two 4% from the second quarter.
This decline was driven mainly by forgiveness with P. P P loans.
All lending staff and spend quite a bit of time on P. P. P loans.
And forgiveness of them and those loan volume movements and fee income earned have both been outlined in this in previous earnings releases, but that program winding down I'll focus my comments today on non PPP lending.
As you can see from our numbers. So far this year non P. P. P loan growth quarter to quarter has experienced some big swings.
This has been driven for the most part by loan prepayments that were not expected at the level we experienced them.
New P. P. P loans I'm, sorry, non P. P. P loans in the first quarter were down by approximately $82 million, we had about 100 million and loan prepayments in that quarter.
In Q2 alone we had gross non P. P P loans of $85 million, which offset the $82 million loan decline in Q1. It was an excellent quarter and we finished the first half of the year a little over breakeven in terms of loan growth.
Now for the third quarter, we grew non P. P. P loans $13 million. So for the nine months were up around $16 million.
To give you some idea of the number of new loans funded as well as loans prepaid year to date I will provide some comparisons to 2020, where we had very solid loan growth.
Through the third quarter last year, we closed and funded $219 million in new loans through.
Through the third quarter of this year, new loans closed and funded totaled $295 million, that's 35% more new loans this year.
On the loan payoff side, however, last year at Q3 for the nine months, we had $103 million in payoffs as I've mentioned before we had that in the first quarter. This year alone and a 930 21 total payoffs for the nine months were $200 million.
Almost twice as many as last year.
For those who might be interested in where these $200 million of payoffs came from.
95% were commercial in nature, the remainder were consumer loans.
Of the commercial loans, 72% were investor real estate loans.
Well, we looked at the reasons behind the one approximately $190 million of commercial pay offs, we tried to place them into buckets C where they came from the largest group 35% of the total were from borrowers who sold their underlying asset.
Fell almost exclusively in the Investor Real estate segment that are basically out of our control.
The next largest group of 34%.
For borrowers to refinance their loans elsewhere. Most of these loans were investor real estate loans as well.
Most of the remaining loans were a combination of things loan participations that either that paid off were refi.
Out of the lead bank.
Loans, where average risk average.
Above average risks.
And we just thought a rate reduction was not warranted and we had some loans in a workout area that paid off or paid off as well.
Clearly a sizable portion of the payoffs were loans, where we made the strategic decision to maintain our margins while upgrading the quality of the portfolio.
Something else that has impacted the loan outstanding so far this year as it has been a steady reduction in the utilization of working capital lines of credit that referenced this.
While we experienced a 5% growth in the dollar amount of total line of credit commitments through the nine months, we experienced almost a 10% decline.
Usage.
Utilization rates went from 52% at 12 31, 20% to 43% at 930 <unk> 'twenty one.
Despite all the payoffs I remain optimistic of how we're going to finish the year back in July I described the loan pipeline at June 30th which remains strong even after a big second quarter.
And it's the $200 million right in line with with the March 31st figure of $209 million.
I commented that the $200 million pipeline in June was the third highest its ever been and I provided a comparison to the 12 month average for 2020, which was $154 million.
I'm happy to report now that the loan pipeline for the third quarter grew even stronger.
And at 930, 21 stood at $265 million up 33% from the end of last quarter.
The pipeline continues to be well diversified and contains a greater number of loans than ever before.
We also project loan fundings and payoffs out 60 days from each month and.
We've finally seen some slowing in projected pay offs and with the pipeline I. Just described I think we still have an opportunity to need our non PPP loan growth plans for the year.
Also regarding the <unk> 2021 loan growth and not included in everything Ive mentioned, but included in the earnings release.
Theres $14 million of consumer loans that will pick up the ocean first branch acquisition.
So despite loan growth being back ended for the year the outlook continues to be positive.
Relationship managers are out calling on customers and prospects keeping the pipeline is strong.
After reporting last quarter that we hired a very solid team leader for our Pennsylvania market.
Todd mentioned earlier, we also had started this past Monday, a strong team leader in our northern New Jersey team and we expect great things there.
Todd mentioned, our SBA lending group earlier.
Head of its plan for the year.
It said fee income of almost $1 $1 million through nine months and is a very strong pipeline.
The income for the year should increase 30% to 40% before year end.
We also just came to terms with additional SBA relationship manager and the SBA group should have a good finish to the year and a very strong 2022.
We've also seen an uptick in construction lending.
Never had large exposures there, but we currently have approved but not yet closed eight loans that totaled $55 million that will close shortly and fund as construction takes place over the next year or so.
This should all of the fourth quarter and 2020 to loan growth.
Lastly regarding asset quality. The earnings release provides the normal date on where we are and you've touched upon it I'll just reiterate.
Things from my perspective to continue to look good and metrics are still very solid.
Shifts in the loan mix are evident C&I loans were down due to PPP forgiveness and reduced line of credit utilization on the positive side owner occupied real estate loans and Investor real estate loans have increased.
Nonperforming loans were up slightly.
Delinquencies remain manageable with past news at the quarter end of 84 basis points, a modest increase from last quarter.
And our deferred loans related to COVID-19 continued to improve what's left are in lodging and hospitality as well as some in transportation.
Just a few borrowers who we know very well.
We believe all of the loans are adequately secured.
Total deferrals declined from 11 $7 million at June to $10 $3 million at 930, and we expect most of them to be off deferral by year end.
That's my report for lending for the third quarter I'm going to turn it back down to Pat for some final comments.
Thank you Peter and Thanks, Andrew I'll turn it back to the operator to open up for Q&A.
Thank you if you would like to ask a question today. Please press star followed by one on your telephone keypad. If you change your mind you compress Stasi.
Our first question comes from Nick <unk> from Piper Sandler. Please go ahead.
Good morning, everyone.
Good morning, Nick.
So with the branch acquisition coming on in December or are you planning on paying down some borrowings with the excess liquidity or how are you thinking about the near term transition with those branches and its impact on the margin.
Yeah. It's a good question I'll hit on a brief and then turn it over to Andrew Nick but I think right now given the strong pipeline. We're looking at a we think a fair amount of that money wind up getting deployed into <unk>.
Commercial loans pretty quickly, but there may be some opportunities for some other things as well in terms of reducing overall liquidity, but Andrew do you want to hit on a couple of things you're looking at.
Yes, Nick I mean, I think those branches are going to give us the opportunity to do a bunch of different things, we've where we've started to let some brokered deposits that are maturing those have rolled off we have been paying off advances as they mature we've been letting some high cost kind of hot money or we call. It leave so I think it's going to be a combination of a lot of <unk>.
Things were also we were a little bit more active in the investment portfolio. During the third quarter than we typically are so I'd say, yes, we are going to pay off some advances, but we're also doing a.
A few other things to manage liquidity.
This the branches are allowing us to be be a little bit more aggressive on letting some higher cost money roll off.
Okay, Great and then you were able to maintain a pretty stable margin. This quarter can you walk us through your expectations for the margin kind of in the near term.
Yeah, I can I can answer that pad and then you can jump on it I mean, I think I think we feel like we can we can maintain the level. Obviously PPP fees are flowing through the margin. So those are going to roll off.
We have about $2 8 million as I mentioned last we expect.
The majority of that to be realized in the fourth quarter with some rolling into early next year. We have seen very few PPP loans that are not been forgiving. When we have a small number that will extend out so we'll still be earning some PPP fee income out past March of next year, but it'll be very immaterial.
Outside of that I think we can hold pretty steady I mean, we're bringing in low cost money from the from the branch deal, we're going to manage our liquidity, probably a little bit tighter than we did in the third quarter, which.
Mentioned impacted the margin by about seven basis points by carrying as much liquidity as we did so I feel good about a fairly stable margin I don't know that there's much we can do to improve it significantly again stripping out the impact of PPP, but I think we are we've been doing a good job of bringing in money at very low costs in <unk>.
The line on loans so are we.
We hope to be stable, but I don't know that we can do do much better in terms of margin, but we do believe we can hold a pretty pretty stable going forward.
Great. Thank you for taking my questions.
Thanks, Nick.
Our next question comes from Manuel Nava of D. A Davidson Manuel your line is open.
Hey, good morning.
Good morning, good morning.
So have there been any.
Structural change and like deposit trends are you being more selective or is it just.
This quarter was 1% versus other quarters.
Anything to take away from there.
Yeah, I'm not sure I would draw any huge trends there I mean.
As we looked at where we were from an overall deposit standpoint, and we knew we had the the branch deposits promotion first coming on board I think we did take a little bit of a harder line in terms of pricing and you know we didn't see the need to.
To push the envelope as much on the on the deposit side. So I think it was more a bit of a balancing act, but there continue to be a good opportunity, especially on the commercial deposit side and the cash management pipeline is.
It's very active so yeah.
Not.
Necessarily seeing a a massive shift out if you will but yeah, sometimes we'll certainly be keeping an eye on as we go forward here.
That's helpful.
We're going together side, where are yields like in the loan pipeline right now.
Kind of what are you seeing it in pricing competition in the marketplace.
Yeah, I mean I'll hit on it briefly turn it to Peter but I think I think the alone.
Yields have been pretty consistent so far this year. There certainly is is competition, but.
In our markets that's nothing new there so there's always a healthy level of competition for quality loans, and obviously, where we're competing is as relationship driven not price driven lenders and so.
We try to use that to make sure we're earning good good yields, but I think we've done it at a pretty consistent level, Peter or anything you'd add there.
Yeah, I actually I pulled the yesterday we.
We get a report of all new loans booked on a monthly basis I pulled that report for July August and September.
And interestingly as Pat mentioned the rates or you know the average yield is very close going July to September it was.
388, four O five and 397, so you know call. It 395 is.
The average rate for the quarter.
It's not too bad and consistent over that period.
That's helpful can I just add one last question on kind of.
Thought process and sensitivities on the buyback.
Can you.
Generate the growth that youre kind of expecting in the fourth quarter and still buy back shares.
Well I think from a.
Capital perspective, right now our capital levels are pretty strong but.
Italy.
If you looked at where we bought back shares in the third quarter. It was kind of 13 sub 13 and more recently the stocks been trading a bit higher so I think.
I'm not sure capital is a constraint, we're obviously going to keep an eye on overall pricing levels and you know our job is to try to.
Scoop up shares and we think they are attractively priced and.
The other piece of the capital equation, obviously is on the dividend, which we are which we did an increase.
That we announced a couple of days ago. So I think we have the opportunity to continue to to grow at a nice level, but also you know.
Be active either in terms of buybacks dividends or some combination of so.
Thank you.
No problem. Thank you.
Our next question comes from Bryce Rowe at Husky.
Please go ahead.
Thanks, a lot.
Maybe I'll follow up to that last discussion there on the dividend and and the decision obviously.
A big percentage increase going from three to six cents on a on a on a quarterly basis.
Kind of curious, how how you're kind of.
Thinking about the dividend and the payout ratio, especially as you put that against.
What what seems to be an inflection in profitability in core profitability really getting meaningfully better here over the over.
Over the recent past.
Yeah, I mean, I think the increase in the dividend when you're looking at on a percentage basis looks quite large although I think if you look back at where we were kind of pre COVID-19, we were a little bit lower than our peers, both in terms of payout ratio and yield and.
You know, we obviously chose not to do anything more with the dividend as a as Covid was playing out just to be conservative. So I would say part of the increase price was it was really candidly a catch up in terms of having been a little bit a little bit behind I think another part of the increase was an acknowledgment that our.
We can.
Continue to deliver on that dividend and if we can continue to to grow and improve profitability that may create opportunities to do.
To do something more on that down the road, but it was a it was a level. We felt was a it was the right move today given you know.
Historically, when we are in startup mode, we didn't pay any dividends and then we introduced a a very modest dividend and then we kind of paused would see dividend increases due to COVID-19 and sell a little bit a little bit of catch up and then a little bit as you acknowledged a reflection of the reality of the.
The very strong financial results, we're seeing right now so.
Okay. That's helpful.
And then maybe I wanted to shift to the expense side of things.
You noted.
Couple of hires here recently.
And maybe maybe higher profile type type hires.
Could you speak to what you expect from a from an expense run rate perspective.
Here going forward, especially as we layer in.
The two new branches that you're that you're buying in the fourth quarter here.
Yeah. It's it's a it's a good question I mean, I think we continue to believe we can manage noninterest expense growth in the in the low single digits.
Sub sub 5% and.
I think we've shown a pretty good track record recently of being able to do that we did have some some nice hires but.
Some of those are replacements and.
You know doing doing some different things so not all not all new hires ended up being additive from an expense standpoint, and you know as I'm sure you're seeing and hearing from a lot of folks that you're following and just the trends overall turnover is up right now so we're bringing people in some of our people are are looking to do other things and so net net.
I don't think those those hires.
Have a.
<unk> the profile in terms of our overall expense management and obviously.
Obviously, adding some branches in the short run will add some will add some expenses, but we're obviously looking add significant revenue.
Along with that and you know we.
We think there may be some opportunities to find some expense savings there as well over time. So yeah. I think yeah I don't think our expense management profile is really changing despite some of the recent announcements.
Right, Yeah, I would just say that yes.
I think pat's right on the money with that 5%, obviously, excluding the branches that will be adding I think the branches are are fairly similar in terms of size and expense to our current branch network. So.
Would would add kind of what you would expect from the management of those branches.
Pat said, there may be some cost saving opportunities going forward out on those branches, but they're pretty standard branches, though they should be similar in terms of the cost to our our current branch network.
Yeah.
Thanks for answering the question.
Appreciate your time.
Thank you Bryce.
Another reminder, participants to press star followed by one on just kind of think he path to ask a question.
Our next question comes from Erik Zwick of Boenning and Scattergood. Your line is open.
Thank you good morning, everyone.
Good morning, Eric.
I joined a couple of minutes late so apologies if I ask something that's already been covered but maybe first just starting on the the success you're having in the SBA lending program and in selling those loans, how should we think about the <unk>.
And the contribution from that source going forward.
Yeah, I mean listen it's a it's not a huge component of our overall revenue stream, but it is a significant component of our noninterest income, which you know for US has always been on the on the lower end, but it's certainly an area. We're in the right in the right areas and write lines of business, we certainly want to add.
Our noninterest income and we you know.
View SBA is a logical extension of our core strengths in small and mid size business lending and so yeah. We're happy with the the results year to date as Peter mentioned the pipeline is strong. So I think if you look at you know try to annualize what we've done so far this year to give you a sense of you know.
Kind of an annual amount of income from that area and quite honestly I think we can do that or or even better next year, given the pipeline and the addition of the new member to the team. So we're yeah, we're pretty optimistic about what the group could do there Peter anything you'd add.
No I mean, I think you covered it.
No one knows with 2022 is going to bring but.
We're going to finish this year, probably at least doubling up the plan.
200% of plan and then.
More aggressive plan next year, but.
I'm expecting pretty big things.
That's helpful. Thank you and then with regard to the branch acquisitions can you remind me what you expect to bring over in terms of deposit balances and also maybe just hit on your strategy in the reach out you have to the customers of those branches and how you plan to manage any potential attrition.
Yeah, I mean, the overall numbers and we'll get will get locked in as we get a little bit closer to the actual date of conversion as I'm sure. You can appreciate right now those are so customers of ocean first and theres fluctuations and new customers coming in and in some some leaving so the final numbers, we'll have to see I think Andrew.
When we announced it we're at about $120 million in deposits is that right.
Yeah, I think we had it in the release to be 824 million in deposits $14 million in loans, but as Pat mentioned that number may may fluctuate a little bit before we get to the close in early December.
But I think in terms of your second question, Eric I mean, we have.
Locations, not you know not too close, but not too far from the locations. We're buying so we think you know.
From a micro market management perspective.
We're getting some critical mass within these are couple of areas and we think that.
The fact that we have a presence in the area, but not right across the street creates an opportunity to you know.
Give folks a little more out of convenience in terms of the products and services will be offering their you know nearly identical to our to what they've had so you know we're we're optimistic that retention will be high and that with a you know a little stronger presence in these markets. We can continue to build and grow in those areas.
And within your purchase agreement are you able to contact with customers before they kind of closer or how did there.
When and how did the customers get notified of the switch.
Yeah. The customer notifications are either you know on their way out or are heading out soon and obviously, we need to give people the heads up in advance of the conversion. So you know those those are you know it was.
<unk> and milestones our.
Are things our teams tracking closely and.
Everything is kind of following the normal process, there, but yeah, everybody will be will be notified and they'll.
You'll have the opportunity to touch base with us and make sure they're comfortable that it'll be a smooth transition.
Okay.
Thank you thanks for taking my questions.
Sure. Thank you Eric.
We have a follow up question from Manuel nervous at D. A Davidson your line is open.
Hey, just back on to ask about the the loan outlook.
Any update to that are you still hoping for.
That's simple and $120 million for the year and should we think about that at a similar pace for next year are you.
We're getting a little bit more confident in them.
Returning to like a higher rate of growth next year.
You want me to jump in there yeah, I mean, I I'll I'll I'll address it quickly Peter and then turn it back to you, but yeah I mean, I think you know the.
120, and net growth. This year is you know as Peter said, it's achievable. Although that's now the higher end of the range in terms of what we might expect in terms of.
Net loan growth for this year, but I, certainly think given our given market dynamics, given our larger size and scale and what.
What we continue to see is a very active pipeline that our net growth net loan growth in 'twenty, two I think can be.
Can be a an increase over what our target was for this year.
Yeah, I'll just add that as we finish the year you know I mentioned in my comments that we kind of look forward every months 60 days so.
When we look at our October November.
We're kind of in the middle of.
We forecast fundings.
And payoffs and payoffs have gone way down fundings.
Our around $115 million projected so.
Call. It one I think we're about 110 $110 million for 60 days I mean, even if a lot of that pushes back into December with.
Sometimes happens things never seem to go with.
Movie as possible I mean, we're gonna come fairly close we need about 100.
We're up 16 million, we need 104.
Net loan growth to hit that 120 plan, so we're going to come close.
Also have December and well, we don't close in December and its going to rollover and start January off.
Strong so we're.
We're feeling pretty good about the pipeline.
That's really helpful.
It seemed like you had pretty strong origination growth year over year on.
The trend is.
You've added two new people it sounds like it there.
Greater pipeline.
Kept those originations even higher.
Well sure I mean, we hope to.
Grow at a higher rate next year than we did this year or last year.
But keep in mind, Pat said a couple of the.
Announcement announced.
Additions to staff where replacement so.
We have won the P. A team leader is in addition to staff focused on the new market. So you should see growth there and the SBA.
First one is going to be generating primarily fee income cause.
Closed alone and then sell the guaranteed portion that generate that C. So but.
Well, yeah, I mean, we're seeing we expect more growth next year than we've had this year.
Yeah.
Thank you that was helpful. I appreciate that.
A final reminder, participants to press star one if you'd like to ask a question I'll just pause to see if there are any final questions coming through.
We don't appear to be having any more questions coming through so I'll hand, the call back over to Patrick for any closing remarks.
Okay, great. Thank you I just would like to thank everybody for the time to listen in on the call. We appreciate your interest and well look forward to being back at the end of Q4 with him with another update so thank you everyone.
Yeah.
This concludes today's conference call. Thank you for joining you may now disconnect your lines.
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