FIRST BANK (Hamilton) (FRBA) 2021 Q3 法說會逐字稿

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.

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 1A, 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.

Thanks, Andrew. Well, I'd like to start today with the 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 our very strong financial results year-to-date in 2021. I'd like to hit on a few of the key financial performance metrics over the past few quarters. Q3 was the third straight quarter with return on assets over 1.4% and return on tangible common equity over 15%. Our efficiency ratio has been below 50% for 4 of the past 5 quarters, pre-provision net revenue continues to move higher, and our pre-provision ROA has been over 1.7% each of the past 5 quarters. Furthermore, non-interest income has been averaging $1.8 million per quarter over the past 5 quarters, which is up 37% compared to $1.3 million, which was the average of the prior 5 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 payoffs and strong growth in Q2, more so than a lack of new activity. Peter call has some good data that he'll share later in the presentation on this point. I would just add that total new loan production year-to-date in 2021 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 non-interest income. We're also excited to add new team leader and market executive, Anthony Dicenso, to help drive and lead our team in Northern New Jersey. From a deposit perspective, we're very excited in early December to be adding over 2,000 new customers and over $100 million in new deposits from 2 branches we're acquiring from OceanFirst Bank. We received regulatory approval, and we expect to close in early December. The addition of these deposits is 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, increased fees and increased services used per customer. In summary, we view this as another overall very strong quarter. While loan growth didn't materialize as expected, the new business engine is churning and 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, add 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 3 months ended September 30, 2021, we earned $9 million in net income or $0.46 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 is 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 controlled 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 of approximately $86 million in Q2. During Q3 2021, $62.2 million in PPP loans were forgiven, leaving $77.8 million in PPP loans outstanding as of September 30, 2021. During Q3 2021, we realized $1.8 million in PPP fee income compared to $1.3 million in Q2 2021. As of September 30, 2021, we had $2.8 million in deferred PPP loans for main. 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.

Total deposits were up $9.7 million during Q3, while we continue to reduce our reliance on higher cost time deposits. Noninterest-bearing demand deposits as a percentage of total deposits stayed flat compared to the prior quarter at 26.3%, while top deposits dropped to 20.6% of total deposits at September 30 compared to 23.2% at June 30. With the significant amount of liquidity in our markets, our strong deposit pipeline and the new customers that we will gain via the OceanFirst 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 cost of deposits, as Pat mentioned, was down 5 basis points in Q3, but it was down significantly from Q3 of last 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 6 months with a weighted average cost of approximately 55 basis points, which is 40 basis points lower than our highest standard current highest standard CD rate. Our tax equivalent net interest margin, which bottomed out during the second quarter of 2,020 to 3.07 held steady at 3.54% for the quarter, Q3 2021 compared to 3.57 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 assets.

Our margin in Q3 benefited from approximately $500,000 more in PPP fee income when compared to Q2, but this was offset by lower prepayment penalty income of almost $563,000, which was $729,000 in Q2 and only $166,000 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 3.61%. As a result of limited amount of loan growth during Q3, year-to-date net recoveries, a continued strong asset quality profile and an improving economic outlook, we recorded a $158,000 provision for loan losses in Q3 2021 compared to a credit to the provision of $168,000 in Q2 2021. With the small provision during Q3 2021, our allowance for loan loss as a percentage of loans increased slightly to 1.19%, excluding the impact of PPP loans from 1.18% at June 30, 2021.

Nonperforming loans were up slightly from the prior quarter, but were still lower as a percentage of loans compared to 1 year ago at September 30, 2020. COVID related deferrals were down again this quarter, and we have continued to see expanded economic activity in our region. In spite some of these positive trends, our allowance as a percentage of loans continues to be elevated compared to pre-COVID 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 $364,000 from the sale of certain lower credit quality loans, 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 $159,000 gain on the sale of a closed branch building that was done in Q3 2021.

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 in Q4. In Q3 2021, we continue to focus on controlling noninterest expense, which resulted in a less than 46% efficiency ratio compared to a 46.66% 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 have implemented.

Noninterest expense was up slightly or 3.6% 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 pre-mentioned OceanFirst 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.

At this time, I'll turn it over to Peter Cahill, our Chief Lending Officer, for his remarks. Peter?

Thanks, Andrew. As outlined in the earnings release and mentioned by both Pat and Andrew, total loans in the third quarter were down 2.4% from the second quarter. This decline was driven mainly by forgiveness of PPP loans. All lending staff has spent quite a bit of time on PPP loans and forgive this off them. And those loan volume movements and fee income earned have both been outlined in this in previous earnings releases. With 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-PPP 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 PPP loans -- or I'm sorry, non-PPP loans in the first quarter were down by approximately $82 million. We had about $100 million in loan prepayments in that quarter. In Q2 alone, we had growth in non-PPP 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-PPP loans, $13 million. So for the 9 months, we're 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'll 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. During 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 9 months, we had $103 million in payoffs. As I mentioned before, we had that in the first quarter this year alone. And at 9/30/21 total payoffs for the 9 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. When we looked at the reasons behind the one -- approximately $190 million of commercial payoffs, we tried to place them into buckets to see where they came from. The largest group, 35% of the total were from borrowers who sold their underlying assets. These fell almost exclusively in the Investor Real Estate segment that are basically out of our control.

The next largest group of 34%, where borrowers have refinanced 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 got paid off or refied out of the lead, bank loans where average risk, average above-average risk. And we just saw a rate reduction was not warranted. And we had some loans in our workout area that paid off as well. Clearly, a sizable portion of the payoffs were loans where we made a 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 has been a steady reduction in the utilization of working capital lines of credit. Pat referenced this. While we experienced a 5% growth in the dollar amount of total line of credit commitments through the 9 months, we experienced almost a 10% decline in usage.

Utilization rates went from 52% at 12/31/20 to 43.0 at 9/30/21. Despite all the payoffs, I remain optimistic of how we're going to going to finish the year. Back in July, I described the loan pipeline at June 30, which remains strong even after a big second quarter, and it stood at $200 million, right in line with the March 31 figure of $209 million. I commented that the $200 million pipeline in June was the third highest it's 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 9/30/21 stood at $265 million, up 33% from the end of the 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 end.

We've finally seen some slowing projected payoffs and with the pipeline I just described, I think we still have an opportunity to meet our non-PPP loan growth plans for the year. Also, regarding the 2021 loan growth and not included in anything not mentioned, but included in the earnings release, there's $14 million in consumer loans that will pick up via the OceanFirst 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 strong. After reporting last quarter that we hired a very solid team leader for our Pennsylvania market.

And as Pat mentioned earlier, we also had started with past Monday, a strong team leader in our Northern New Jersey team, and we expect great things there. Pat mentioned our SBA lending group earlier. It's ahead of its plan for the year. It's had fee income of almost $1.1 million through 9 months and has a very strong pipeline. Fee income for the year should increase 30% to 40% before year-end. We also just came to terms with an 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. We've never had large exposures there, but we currently have approved but not yet closed 8 loans that totaled $55 million that will close shortly and fund as construction pace place over the next year or so. This should augment fourth quarter and 2022 loan growth. Lastly, regarding asset quality, the earnings release provides some normal data on where we are and Pat touched upon it. I'll just reiterate that things, from my perspective, 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 industrial real estate loans have increased. Nonperforming loans are up slightly. Delinquencies remain manageable with past dues at the quarter end at 84 basis points, a modest increase from last quarter. And our deferred loans related to COVID-19 continues to improve. What's left there in lodging and hospitality as well as some in transportation and from just a few borrowers that 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 9/30, and we expect most events 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.

(Operator Instructions) Our first question comes from Nick Cucharale from Piper Sandler.

So with the branch acquisition coming on in December, are you planning on paying down some borrowings with the ex liquidity? Or how are you thinking about the near-term transition with those branches and its impact on the margin?

Yes, 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, we think, a fair amount of that money winds up getting deployed into 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 started to let some brokered deposits that are maturing. Those have rolled off. We've been paying off advances as they mature. We've been letting some high-cost, kind of hot money, and we call it leave. So I think it's going to be a combination of a lot of things. We're also -- we are 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 few other things to manage liquidity. And this -- the branches are allowing us to 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 there?

Yes, I can answer that, Pat, and then you can jump on. And I think, I think we feel like 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, left, we expect probably the majority of that to be realized in the fourth quarter with some rolling into the early next year. We have seen very few PPP loans that are not been forgiven.

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 will be very immaterial. But outside of that, I think we can hold pretty steady. I mean, we're bringing in low-cost money from the branch deal. We're going to manage our liquidity, probably a little bit tighter than we did in the third quarter, which I mentioned, impacted the margin by about 7 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 kind of the impact of PPP. But I think we've been doing a good job of bringing in money at very low-cost and holding the line on loans. So we hope to be stable, but I don't know that we can do much better in terms of margin, but we do believe we can hold it pretty stable going forward.

Our next question comes from Manuel Navas of D.A. Davidson.

Okay. So have there been any structural change in like deposit trends? Are you being more selective? Or is it just this quarter, it was 1% versus other quarters. Anything to take away from there?

Yes. 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 branch deposit promotion first coming on board. I think we did take a little bit of a harder line in terms of pricing, and we didn't see the need to push the envelope as much on the deposit side. So I think it was more a bit of a balancing act. But there continue to be good opportunities, especially on the commercial deposit side and the cash management pipeline is very active. So we're not necessarily seeing a massive shift out, if you will, but something we'll certainly be keeping an eye on as we go forward here.

That's helpful. What are -- going to the other side, what are yields like in the loan pipeline right now? And kind of what are you seeing in pricing competition in the marketplace?

I mean I'll hit on it briefly and turn it to Peter. But I think the loan yields have been pretty consistent so far this year. There certainly is competition. But in our markets, that's nothing new. There's always a healthy level of competition for quality loans. And obviously, we're competing as relationship driven, not price-driven lenders. And so we try to use that to make sure we're earning good yields. But I think we've been at a pretty consistent level, Peter, anything you'd add there?

Yes. I actually called yesterday, we got a report of all new loans booked on a monthly basis. I pulled that report for dry-off in September. And interestingly, as Pat mentioned, the rates are -- the average yield is very close. Going July to September, it was $0.0388, 405 and 3.97%. So call it, 3.95% as 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 you're 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 obviously, if you look at where we bought back shares in the third quarter, it was kind of 13%, sub-13. And more recently, the stock has been trading a bit higher. So I think -- I'm not sure capital is the constraint. We're obviously going to keep an eye on overall pricing levels. And our job is to try to scoop up shares, and we think they're attractively priced. And the other piece of the capital equation, obviously, on the dividend, which we did an increase that we announced a couple of days ago. So I think we have the opportunity to continue to grow at a nice level, but also be active either in terms of buybacks, dividends or some combination of so.

Our next question comes from Bryce Rowe at Hovde.

I -- maybe I'll follow-up to that last discussion there on the dividend and the decision, obviously, a big percentage increase going from $0.03 to $0.06 on a quarterly basis. Just kind of curious how you're kind of thinking about the dividend and the payout ratio, especially as you put that against what seems to be an inflection in profitability and core profitability really getting meaningfully better here over the recent past?

Yes. I mean, I think the increase in the dividend, when you look at it on a percentage basis looks quite large, although I think if you look back at where we were kind of pre-COVID, we were a little bit lower than our peers, both in terms of payout ratio and yield. And we obviously chose not to do anything more with the dividend as COVID was playing out just to be conservative.

So I would say part of the increased price was really candidly a catch-up in terms of having been a little bit behind. I think another part of the increase was an acknowledgment that our retained profitability relative to our growth has improved nicely. So there was a little more capacity there. And part of it, quite honestly, is we want to make sure that we can continue to deliver on that dividend.

And if we can continue to grow and improve profitability, that might create opportunities to do something more on that down the road. But it was a level we felt was the right move today given historically, when we were in start-up mode, we didn't pay any dividends, and then we introduced a very modest dividend. And then we kind of pause with the dividend increases due to COVID. And so a little bit of catch-up and then a little bit as you acknowledged a reflection of the reality of 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 a couple of hires here recently and maybe higher profile type hires. Could you speak to what you expect from an expense run rate perspective here going forward, especially as we layer in the 2 new branches that you're buying in the fourth quarter here?

Yes. It's a good question. I mean I think we continue to believe we can manage non-interest expense growth in the low single digits, sub-5%. And I think we've shown a pretty good track record recently of being able to do that. We did have some nice hires, but some of those are replacements and doing some different things. So not all new hires end up being additive from an expense standpoint. And as I'm sure you're seeing in 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 looking to do other things. And so net-net, I don't think those hires have changed the profile in terms of our overall expense management. And obviously, adding some branches in the short run, will add some expenses, but we're obviously looking to at significant revenue along with that. And we think there may be some opportunities to find some expense savings there as well over time. So I think -- I don't think our expense management profile is really changing despite some of the recent announcements.

Yes. I would just piggyback on that. I think Pat is right on the money with that 5%, obviously, excluding the branches that we'll be adding, I think the branches are fairly similar in terms of size and expense to our current branch network. So would add kind of what you would expect from the management of those branches. And as Pat said, there may be some cost-saving opportunities going forward on those branches. But they're pretty standard branches, they should be similar in terms of cost to our current branch network.

(Operator Instructions) Our next question comes from Erik Zwick at Boenning and Scattergood.

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 success you're having in the FDA lending program and then selling those loans. How should we think about the growth and the contribution from that source going forward?

Yes. I mean, listen, it's not a huge component of our overall revenue stream, but it is a significant component of our non-interest income, which for us has always been on the lower end, but it's certainly an area wherein the right areas and right lines of business, we certainly want to add to our noninterest income. And we view SBA as a logical extension of our core strength in small and mid-sized business lending. And so we're happy with the results year-to-date. As Peter mentioned, the pipeline is strong. So I think if you look at -- try to annualize what we've done so far this year to give you a sense of kind of an annual amount of income from that area. And quite honestly, I think we can do that or even better next year given the pipeline and the addition of the new member to the team. So we're pretty optimistic about what the group can do there. Peter, anything you'd add?

No. I mean, I think you covered it. I mean, no one knows what 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 we'll have a more aggressive plan next year, but I'm expecting pretty big things.

That's helpful. 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 and the reach out you have to the customers of those branches and how you plan to manage any potential attrition?

Yes. I mean the overall numbers 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 still customers of OceanFirst and there's fluctuations and new customers coming in and 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?

Yes. I think we had in the release to -- we had $124 million in deposits, $14 million in loans. But as Pat mentioned, that number may fluctuate a little bit before we get to the close in early December.

But I think in terms of your second question, Erik, I mean, we have locations, not too close, but not too far from the locations we're buying. So we think from a micro-market management perspective, we're getting some critical mass within these 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 give folks a little more at a convenience in terms of the products and services we'll be offering that are nearly identical to what they've had. So we're optimistic that retention will be high and that with a little stronger presence in these markets, we can continue to build and grow in those areas.

And within your purchase agreements, are you able to contact the customers before they kind of close? Or how do they -- when and how do the customers get notified of the switch?

Yes, the customer notifications are either on their way out or heading out soon. And obviously, we need to get people the heads up in advance of the conversion. So those dates and milestones are things our teams tracking closely, and everything is kind of following the normal process there. But yes, everybody will be notified, and they'll have the opportunity to touch base with us and make sure they're comfortable that it will be a smooth transition.

We have a follow-up question from Manuel Navas at D.A. Davidson.

Just back on to ask about the loan outlook. Any update to that? You're still hoping for that similar to $120 million for the year? And should we think about that at a similar pace for next year? Or you're getting a little bit more confident in returning to like a higher rate of growth next year?

Pat, do you want me to jump in there?

Yes. I mean, I'll address it quickly, Peter, and then turn it back to you. But yes, I mean, I think the $120 million in net growth this year is, 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 market dynamics, given our larger size and scale and what we continue to see is a very active pipeline that net loan growth in 22, I think, can be an increase over what our target was for this year?

Yes. I'll just add that as we finish the year, I mentioned in my comments that we kind of look forward every month, 60 days. So when we look at October, November that we're kind of in the middle of, we forecast fundings and payoffs. And payoffs have gone way down. Fundings around $115 million projected. So at one -- I think we're about $110 million for 60 days. I mean, even if a lot of that pushes back into December, which sometimes happens thing never seem to go as smoothly as possible. I mean, we're going to come fairly close. We need about $100 -- we're up $16 million. We need $104 million net loan growth to hit that 120 plan. So we're going to come close. We also have December. And what we don't close in December is going to roll over and start January off strong. So 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. You've added 2 new people, it sounds like, is there a greater pipeline to even get 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 at a couple of the announcement -- announced additions to staff or replacement. So we have one -- the PA team leader is in addition to staff, focused on a new market. So we should see growth there. And the SBA person is going to be generating primarily fee income because we will close the loan and then sell the guaranteed portion and generate that fee. So -- but yes, I mean, we're seeing -- we expect more growth next year than we've had this year. That was helpful. Appreciate that.

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 we look forward to being back at the end of Q4 with another update. So thank you, everyone.