FIRST BANK (Hamilton) (FRBA) 2020 Q3 法說會逐字稿

Good morning, and welcome to the First Bank Third Quarter 2020 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would like to turn the conference over to Patrick Ryan, President and CEO. Please go ahead.

Thank you. I'd like to welcome everyone today to First Bank's Third Quarter 2020 Earnings Conference Call. I am joined by Steve Carman, our Chief Financial Officer; Peter Cahill, our Chief Lending Officer; and Emilio Cooper, our Chief Deposits Officer.

Before we begin, however, Steve will read the safe harbor statement. Steve?

(technical difficulty) 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 the Item 1A, Risk Factors, in our annual report on Form 10-K for the year ended December 31, 2019, filed with the FDIC. Pat, back to you.

Thank you, Steve. I'd just like to start off today by saying how proud I am of our team across all areas. Everybody has done a really amazing job, and we've seen strong execution in what is obviously been a very challenging operating environment. I'd like to focus on great progress we've made in 4 key areas: number one, lowering our deposit costs; number two, improving our fee income; number three, our cost control efforts; and number four, our improving asset quality profile.

Starting with the deposit costs, as many of you may have seen in our release, our deposit costs came down by 28 basis points in the quarter, thanks to both disciplined pricing and an improving mix. Today, our noninterest-bearing deposits sit at 24% of total deposits, which is up significantly from 17% at the start of this year. We also had a good quarter for ancillary fee income. Our loan swap fee income was $631,000 in the quarter, which was in line with our past couple of quarters, but up from prior years. Our gains on recovery of acquired loans were over $500,000 in the quarter, slightly above where we've been in the last few quarters.

Prepayment penalty income was $115,000 in the quarter, slightly below where we've been in prior quarters, and our gains on sale of SBA loans generated $43,000 of income during the quarter, which again was slightly below average. So a good quarter but not necessarily out of line with where we've been so far this year.

Our efficiency ratio came in at 50%, which highlights our strong cost controls. We expect to be able to keep a lid on expense growth moving forward. We have a dedicated team looking at efficiency opportunities. They've already uncovered and executed on several projects, and we expect to see additional savings as we move into 2021. For example, year-to-date, our marketing, advertising and travel and entertainment expense is down 50% when you look at the first 9 months of this year compared to the first 9 months of the prior year.

We believe there are future savings opportunities in both salaries and benefits and occupancy and equipment as we're taking a hard look at our office space leases and our overall branch footprint. We do expect the same increase in technology spending going forward, but that should only partially offset the savings I mentioned in other areas.

In terms of asset quality, we saw a continued improvement there as seen by our dwindling deferral portfolio, our modest delinquency rates and declining nonperforming loan levels. By continuing to add our allowance for loan losses in the quarter, our coverage of nonperforming loans increased to 180%. As we sit here today, our allowance plus our off-balance sheet credit marks on acquired loans come to 1.67% of total loans, excluding PPP.

We saw a nice improvement in our net interest margin in the quarter, which increased 16 basis points from 3.07% in the second quarter to 3.23% in the third quarter as our earning asset yields only declined slightly, while our liability costs came down significantly, as I mentioned earlier. We did approve at our Board and get regulatory approval for a new stock buyback plan. The plan allows to buy back up to 1.5 million shares, which comes to about 7.5% of total shares outstanding.

Looking forward to the fourth quarter and early 2021. Obviously, COVID-19 remains the big unknown, but the downside risk today looks quite manageable compared to some early stress scenarios that we were running in the spring of this year. We believe our lower funding costs should continue to offset modestly declining earning asset yields, potentially moving the margin up a little bit from our current levels.

PPP income and expense management will go a long way towards offsetting any potential impact from higher credit costs. An overly simplistic view of where we stand today, in the third quarter, you could say PPP income basically offset what was still an elevated provision for us in the third quarter. Our provision was about $2 million. And prior to COVID, our quarterly provisions were actually running under $1 million per quarter. So to oversimplify things, you could say, in the third quarter that our PPP income basically moved to offset the additional provision that we set aside during the quarter.

And if you take a look, the only real unusual item in the quarter is we did have a significant recovery of about $250,000 on an OREO sale, which was probably the only unusual event in the quarter, if you will. So we feel good that the quarter represented strong core earnings as we move forward. And I'd also note that we have about $4.8 million in unamortized PPP fees that can be used to either enhance earnings in 2020 or to help offset credit costs should they materialize.

At this point, I'd like to pause and turn it over to Steve Carman for him to make his remarks. Go ahead, Steve.

Thanks, Pat. Third quarter 2020 results were highlighted by strong organic commercial real estate loan activity with existing and new borrowing relationships, double-digit net revenue growth, margin expansion, continued solid asset quality metrics and effective noninterest expense management despite the logistical and economic challenges resulting from the COVID-19 pandemic. Since the Fed dramatically lowered the Fed funds rate in March, we have aggressively lowered deposit rates, reflective of our strong liquidity position. Our strong third quarter earnings performance reflects in part, core net interest income gains, resulting primarily from lower interest expense and an improving net interest margin.

Net income for Q3 2020 was $5.9 million or $0.30 per diluted share compared to $1.1 million or $0.06 per diluted share for the third quarter of 2019. Net interest income was $17.6 million for Q3 2020, an increase of $3.7 million or 26.1% compared to $14 million for Q3 of 2019. Lower interest expense on deposits was the principal driver for the growth in net interest income for the comparative period. Also contributing to the growth was the increase in interest income on loans, primarily commercial.

The higher provision for loan losses for the comparative third quarters in 2020 and 2019, as was the case for the Q1 and Q2 comparative quarters, was primarily due to qualitative assessments of challenging economic conditions due to the COVID-19 pandemic. Net income in Q3 2020 was enhanced by higher noninterest income compared to the same period in 2019 due to increased loan swap fee income, which totaled $631,000 for Q3 2020 and gains on recovery of acquired loans, which totaled $500,000 for the quarter.

Noninterest expense, excluding merger-related expenses for the comparative periods, was up about 17% as the full impact of expenses associated with September 2019 Grand Bank acquisition are reflected in Q3 2020 results. Our return on assets was 1.03% for Q3 2020 and ROE was 10.2%. That compares to an adjusted ROA of 78 basis points and adjusted ROE of 6.97% for Q3 2019.

Net income for the first 9 months of 2010 was $13.3 million or $0.66 per diluted share compared to $8.2 million or $0.43 per diluted share for the same period in 2019. The results for the 9-month period ended September 30, 2020, were similar to the results for the quarterly comparison.

Net interest income increased $7.7 million or 18.1% and to $49.8 million compared to $42.2 million for the 9 months ended September 30, 2019. The increase in the 2020 year-to-date net interest income was driven by strong growth in average loans, which increased by $356.1 million or 23.4% from the prior year period. Average loan growth includes the impact of PPP loans originated in 2020 as well as loans added from Grand Bank. A higher provision for loan losses, higher noninterest income and increased noninterest expense, excluding merger-related expenses, also characterized results for the comparative 9 month periods.

Our tax equivalent net interest margin for the third quarter of 2020 was 3.23% compared to 3.15% for Q3 2019, an increase of 8 basis points. The improvement in our margin is primarily due to the 91 basis point reduction in the cost of interest-bearing deposits, partially offset by a 66 basis point reduction in interest-earning asset yields, particularly loans in a dramatically different and lower interest rate environment.

On a linked-quarter basis, our tax equivalent margin for the 3 months ended September 30, 2020, was 3.23%, 16 basis points higher than our margin of 3.07% for the 3 months ended June 30, 2020. As I noted earlier, our emphasis has been on lowering deposit costs, which is reflected in lower interest-bearing deposit costs of 34 basis points for the third quarter. Our overall cost of deposits was 70 basis points for the third quarter. That represents a 59 basis point decline since March 31 of this year when our cost of deposits was 1.29%. We expect that positive trend to continue for the remainder of 2020.

Lastly, as Pat mentioned, we've continued our focus on effectively managing the level of noninterest expense growth. This is reflected in lower marketing and travel and entertainment costs for the comparative 2020 quarterly periods.

Our largest component of noninterest expense, salaries and employee benefits has been a management focus. Over the last several months, we have managed the timing of new and replacement hires, reflective of the current business environment. Absent the accounting associated with PPP loan originations in the second quarter of 2020, salaries and employee benefits expense would have been modestly lower in Q3 compared to Q2. Effective management of expenses has resulted in an efficiency ratio of 50.08% at September 30, 2020. That compares to 57.19% at September 30, 2019, and 53.66% to the linked second quarter of 2020.

At this time, I would like to turn it over to Peter Cahill, our Chief Lending Officer, to discuss lending results. Peter?

Thanks, Steve. After 2 quarters, where the driving force behind loan growth was PPP loans, we experienced very solid third quarter growth that was organic in nature and not related to the impact of the pandemic. Loans at September 30 were up $281 million for the year. If you back out the $190 million in PPP loans we did earlier, that leaves you with growth for the 9 months of $91 million. This is right on our pre pandemic projected growth plan of $120 million for the year. I think the third quarter growth of $50 million was a good performance, it's well above the $10 million per month growth plan that I just mentioned.

The financial tables in the earnings release break down the segments of the loan portfolio on a quarter-by-quarter basis. When you look at the segment percentages, the results get skewed a bit by the inclusion of the PPP loans, which fall into C&I. But in terms of dollars, you can see increases in all segments of the portfolio, except consumer.

I'd like to highlight our loan pipeline for a minute. One thing I mentioned last quarter was that we're doing to augment the sales process is that we're using this period where face-to-face sales efforts are difficult to provide sales training to relationship managers and key retail staff. The goal is getting folks more proactive, better organized and focused on the types of customers that we want to do business with. This training is still going on, and while it's too early to see if all the benefits we hope will accrue will, in fact, happen, our loan pipeline, despite the pandemic, continues to be in very good shape.

I think we've talked about before, we look at deals in the pipeline on a probable funding basis, where we take projected year 1 funding and provide a likelihood to close factor to it, depending upon where in the process the deals are. Loans committed in closing next week, for example, have a much higher likelihood to close than lower piece of business that we were still collecting information, et cetera.

At September 30, the pipeline stood at $158 million, which after a strong quarter from a loan funding perspective, I think, is very good. Importantly, the ratio of investor real estate loans to total loans in the pipeline is right at 50%, lower than we've experienced at a quarter end in quite a while. This means we're looking at more C&I loans that bring with them more deposits, and this outcome meets our goals on a -- to keep our portfolio balanced and in line with what regulators like to see.

I know and Steve as well touched a little bit on asset quality. The asset quality metrics continue to look good. Charge-offs and nonperforming loans, both are down. Delinquencies are manageable and remain in line with recent quarters. The earnings release outlines our actions on the allowance. After a $2 million provision in the quarter, our allowance stands at 1.25% of the total portfolio, exclusive of PPP loans, and 180% of our nonperformers.

Regarding COVID-19 payment deferrals, we provided a lot of detail on these after the first quarter and provided updates last quarter and in yesterday's earnings release as well. At this point, we're seeing just about 0 requests for new deferrals. Deferrals in place are down substantially from around 25% of the total loan portfolio, again, exclusive of PPP loans earlier this year to less than 2% of the portfolio now. As we said last quarter, it's still early to know the extent to which the pandemic will impact some of these borrowers, but signs so far are very positive.

That's about it for me. While the sales effort is more difficult due to the pandemic, we're working hard, doing our best to grow our business while focusing on credit quality and stay in close contact with borrowers. The important task of processing PPP forgiveness for our customers is still in front of us, but we're ready to respond to applications as quickly as they arrive.

I'll now turn things over to Emilio Cooper to talk about deposits. Emilio?

Thanks, Peter. Deposit performance in Q3 was strong. Despite the challenge of the COVID-19, we continue to advance in our journey toward accomplishing our strategic objectives and mission for 2020. As you know, we are focused on reducing our funding costs, shifting our mix, improving noninterest income and growing commercial deposits. I am pleased to report that in Q3, we made progress on all 4 fronts.

We reduced our cost of interest-bearing deposits by 91 basis points compared to third quarter of 2019. Point-to-point, end of Q2 versus the end of Q3, reduced our cost of interest-bearing deposits by 43 basis points. This was accomplished as we allowed pure CD rate shoppers to a trite, while we focused on the retention of our core relationship-oriented CD customer base. Over $239 million in CD balances matured in the quarter, we were able to retain nearly 60% at rates on average that were 180 basis points lower. We expect to benefit from continued reduction in our interest expense from our CD portfolio through the greater part of next year as well.

In addition, through strong relationship management, our team of lenders and branch bankers were able to effectively navigate with our customers the aggressive rate reduction of our money market portfolio and promotional high-yield savings accounts in the quarter, while largely preserving balances. As Steve mentioned, noninterest-bearing deposits now comprise over 24% of total deposits, up from 17% in Q3 of 2019. CDs represent less than 30% of total deposits, down from over 42% in the same time period. Our investments in enhanced cash management services, business banking resources, increased partnership and collaboration, product development and marketing, along with an optimized retail leadership team and structure are enabling our success in adjusting the mix, and it is exciting to watch.

We also made an investment in the growth and development, as Peter mentioned, of our team over the past quarter through sales training that is focused on helping our team be better advisers to our customers in targeted prospects. We recognize businesses have evolved due to the pandemic, and we are ensuring our team is equipped to have a distinct competitive advantage aligned with our brand promise and focus value propositions, personal bankers' real relationships. We implemented a number of initiatives in Q3 designed to boost our deposits-related fee income.

Specifically, we have projects underway to increase revenue connected to check printing, NSF fee collection, remote deposit capture and other cash management services. We are just beginning to see some early results from these efforts, and I look forward to reporting in more detail on the outcomes from these initiatives on future calls. Commercial deposits are up $249 million or 52% year-to-date, bolstered by our strong PPP execution and solid underlying organic growth.

Our deposit pipeline is strong and overweighted towards noninterest-bearing growth. We are looking forward to finishing the year of -- ahead of where we plan for 2020 and positioning ourselves for an even stronger 2021.

With that, I'll turn it back to you, Pat.

Thank you, Emilio, and thanks, Steve and Peter. Appreciate those comments. And at this point, I'd like to turn it back to the moderator to open things up for the question-and-answer session.

(Operator Instructions) The first question is from Nick Cucharale with Piper Sandler.

With respect to the lending environment, could you give us a sense of the competitive dynamics in your market? Has the competition increase with the modifications coming out across the industry?

I'll give you my quick sense and then turn it to Peter. I think within the bank competitive set, I think the environment remains competitive. I think in certain areas, we saw a pullback from more of the CMBS and the nonbank lenders early on. Some of those was maybe starting to get back into the game. But yes, that's kind of the high level what we've seen. And Peter, why don't you jump in here?

Yes. No, I think that's right. I mean when the pandemic kind of first hit, the first 90 to 120 days, there wasn't much going on. But I think most banks now are kind of back into it, and competition is back where it's kind of always been. I know we're looking at, obviously, credit a lot closer now than we did in the past, and I'm sure other banks are as well. But there still seems to be banks on every deal and pricing that's out there in the market, I guess, these things to the fact decide they want to lend, has been aggressive. And we've been doing what we can to kind of hold the line on pricing. But again, there seems to be a decent amount of business out there still. So...

Related to that, what are you getting on pricing on your [rates]?

Well, a lot of our loans end up getting -- most of our loans are not -- don't have slops attached, right? So we like to fix the rate for no longer than 5 years, if we can do that. And yes, we're still trying to keep our rates up around 3.75%, 4%, depending upon the credit. I mean it could be higher, obviously, smaller kind of retail-related commercial accounts should bring you a little higher rate than your top C&I yield or investor real estate deal. But probably around 3.75% would probably be a good number to look at.

Okay. That's very helpful. And with respect to the CD book, can you update us on the mountain rate due to mature in the December quarter?

Yes, I can. So we have a $75 million coming due in the fourth quarter. And they're going to renew on average at a rate, that will be about 100 basis points lower than our existing rate.

Okay. Perfect. And then, Pat, you mentioned fair value marks in the allowance commentary. Do you have the value of those credit marks?

The actual dollar amount that the credit mark -- I don't have that handy, Nick, but if we have some, we could track down.

Okay. Great. And then just lastly on the tax rate. I'm not surprised to see an increase with the state surcharge. What is your expectation for the effective tax rate?

Well, Nick, I think our effective tax rate at this point, at least for the remainder of 2020, it will probably be somewhere around 25% or slightly below. So I think that's probably a pretty good number until we see what happens in November.

The next question is from Christopher Keith with D.A. Davidson.

So just looking at noninterest income, you had a pretty good increase in service fees on deposit accounts, which I think makes sense. I'm just curious, where do you get to a point where it looks slightly above kind of pre-COVID or at pre-COVID numbers, is that a good run rate for the next few quarters?

Yes. I would think so, Chris. I mean there wasn't anything really unusual in the quarter from an overall deposit fee perspective. So I think it's a good number to have as kind of the starting point.

Okay. Great. And then I just -- over on the expense side, slight uptick in salaries and employee benefits. I'm just curious, do you have -- are you comfortable with your staffing levels? Or do you have any plans for expansion there in the future?

Yes. I mean, I think overall, we're looking for opportunities to find savings there. Sometimes what happens is you find some savings in one place and you need to augment your team in another. So I don't think we're projecting significant decline, but I do think we can keep our expense level close to where we are and potentially even get it down a little bit. But the reason you see the change from second quarter to third quarter is partly a function of the way the accounting for the PPP worked out in the second quarter, there was kind of a unusual salary reduction line item in Q2 that kind of artificially represented what the true employee expense base was, and that onetime expense reduction from PPP didn't show up again in the third quarter. So comparing Q2 to Q3 is a little bit misleading.

But I think where we are in terms of overall expense base in Q3 is pretty much in line with where we thought we would be. And again, I think our goal is to not let it get much higher and potentially even bring it down a little bit. And we've got a lot of projects underway that are going to find us some savings here and there and kind of use the analogy of we're turning over all the couch cushions, we're finding all the loose chains that's around. And I think if you do that regularly and consistently, you'll be able to effectively manage your costs. And that's what we plan to do going forward. Steve, I don't know if there's anything you wanted to add around the PPP impact in Q2.

I would just add to your comments, Pat, which we're comprehensive on that front that, absent that accounting you just referred to, salary expense in the third quarter would have about -- been between $50,000 and $100,000 less compared to Q2.

Got it. Okay. Great. And then I guess just looking at kind of the excess liquidity on the balance sheet, it looks like you've been investing in the securities book. I'm just curious if it's -- obviously, you also had strong loan growth. So at what point do you think you'll start getting some rundown in liquidity via loan growth versus securities? Or do you think that the securities book will continue to go up over the next few quarters?

Yes. I mean I don't think you're going to see a big increase in the investment portfolio. But Steve, chime in here.

Well, yes, with PPP loan forgiveness, we expect that to probably will enhance our liquidity position. But we'll be opportunistic as it relates to what we do on the investment side, obviously, due to the challenges presented there from a yield curve perspective. But we certainly, with excess liquidity yielding 30 basis points or less, we'll take our selective opportunities on the investment side going forward.

Okay. Great. And then, sorry, just one more, if I can. So on deferrals, can you just talk about your philosophy on migrating? I mean I know deferrals are quite low. But your philosophy on migrating loans that are currently on deferral status kind of through the credit classifications, are you viewing those as performing loans until the end of the deferral period? Or are you continuing to migrate them even while they're on deferral?

Yes. Well, I mean, it's not on a case-by-case basis, Chris, but certainly, as a general rule, I would say, an initial 90-day deferral didn't necessarily trigger a risk rating downgrade. In most cases, if not all cases, a second 90-day deferral would almost certainly have triggered a downgrade. And for folks that need support beyond 180 days, that's almost certainly going to trigger additional downgrades.

We're not necessarily putting folks on nonaccrual, but we've moved away from, "Hey, if you think you need help, we're happy to do a deferral," to, "We're really going to dig into the numbers. Let's see what the cash flow is. Let's see what you can handle." And on a temporary basis, if folks can perform according to terms of the additional deferral, that wouldn't necessarily trigger a move to nonaccrual, but it's really done on a case-by-case basis. And obviously, if you have folks that haven't paid at all and can't pay anything going forward, then those are situations where we're almost certainly looking at nonaccrual status. But thankfully, we really haven't had any of those.

So most of the folks that we dealt with, obviously, seen in the numbers, that the percentage of deferrals are way down, the dollars are way down. And even the folks that need a little bit of additional time, they're seeing some decent improvement in trends to the point where, in almost all cases, folks that maybe had a full P&I deferral initially are at least coming back to making interest-only payments as a way to hopefully get them back towards full payment status in the not-too-distant future.

The next question is from Erik Zwick with Boenning and Scattergood.

First, I just wanted to follow up a little bit on your comments about seeing some good new opportunities in the C&I portfolio. Curious if you could provide any color to what any particular industries and markets within your footprint that are driving those new opportunities today.

I'll let Peter chime in here as well. I mean from my perspective, Erik, it's not really industry specific. I mean the opportunities that we're seeing, quite honestly, a lot of them were generated by our ability to get a quality PPP process up and running quickly to the point where a number of local CPAs and other friends as a bank who knew people that weren't getting taken care of by their banking organization or getting referred over to us. And that was kind of across the board.

So it wasn't really a function of, there was an industry trend, it was more a function of folks were sort of realizing the importance and the value of having that relationship with their bank and number of less folks got referred over, and we're looking to bring that business to us. But Peter, anything you'd add there?

Yes. No, I agree. No concentrations anywhere. As you would imagine, a lot of service-related companies that haven't been impacted directly by PPP much, professionals, doctors, those kind of things. Typically, I would consider C&I to include owner-occupied real estate as well. So as those -- that side of the C&I stuff is a little bit lumpier, right? Bigger dollars, immediate outstandings, that kind of stuff with real estate. Well no, really no concentrations anywhere. No loans of major size.

Great. It's great to hear that there's a secondary benefit coming off of their PPP participation as well. I guess that's a good segue. I think you mentioned about $4.8 million in unamortized PPP fees remaining. What are your current expectations for, I guess, a percentage that will ultimately be forgiven and kind of remeet at the timing on those as well?

Yes. I mean, we -- I know some banks sort of held off on starting the forgiveness process. We didn't. We have our portal up and running, and we have our whole team dedicated working on applications. I think we've submitted to the SBA approval applications for about 20% of the total portfolio, unfortunately, we've only heard back on a small fraction of that, although we have gotten a few loans where we've heard back, and they've been forgiven.

But I think, and Peter, maybe you can provide a little more detail. I think what we're seeing is most of the applications, the vast majority, if not all, of the PPP loan amount is being forgiven. There are, in some cases, some small stub periods remaining. But I think, Peter, for the most part, it looks like a big chunk of that is getting forgiven. Is that right?

Yes. You're right across the board. 20% of the 1,100 or so PPP loans we did have been forgiven the system filed and what we've heard back is positive, positive stuff. So we'll just have to see how that goes.

Okay. So about 20% submitted so far. And I think once the SBA gets that they have, technically, I think, up to what, 90 days to respond, how long do you think it takes you to get that remaining 80% submitted?

Well...

Well, it's kind of -- go ahead.

No, you go ahead.

I was just going to say, we're kind of at the -- the borrower has to initiate the process, right, the way we're set up. So we have a portal for them to supply the information, the application for forgiveness with the supporting documentation. So we have reached out to all 1,100 plus a couple of times to show them what to do, remind them where to go, et cetera. And they're kind of dribbling it. So that's where we're at right now.

Got it. That's helpful. And then just looking at the loan-to-deposit ratio, it was up a little bit this quarter. And I know these PPP loans and related deposits are impacting both the numerator and the denominator. You mentioned also that the deposit pipeline is strong and kind of on track for your goals. Just curious about kind of where -- if you're kind of targeting a certain ratio or where the upper limit kind of comfort range is at this point?

Sorry, upper limit on what, Erik?

The loan-to-deposit ratio?

Yes. Listen, that's something in a normal environment, we track pretty closely. I think right now, the primary issue is overall liquidity levels, and we have a strange situation where you've got these PPP loans that we didn't end up funding them dollar-for-dollar with PPPLF funds, but obviously, if you did, right, you'd be adding this portfolio of about $200 million in loans, which is impacting your numerator, but you got borrowings funding in instead of deposits. So the loan deposit ratio temporarily looks a little bit out of whack.

So in normal times, we want to keep it under 110%, closer to 100% or lower. But right now, because it's getting artificially inflated, if you will, by the PPP. I think we're more focused on what does it look like once the PPP loans are forgiven, the borrowers are paid off and the balance sheet kind of deflates back to where it was. And certainly, in that environment, we'd like to see it down closer to 100% than a 110%. So...

And then just last one for me on the new share repurchase authorization. Curious about your appetite to utilize that today. Kind of how active will you be, whether it'll take several quarters, if that's your full intent to use it, just given where -- it seems like a fairly attractive from a financial perspective, given where the stock is trading today?

Yes, exactly. And that's obviously going to be the big driver. Trading at a significant discount to book value and given what we're seeing in terms of core performance and improving asset quality metrics, the best investment opportunity out there right now is probably buying back the stock. Obviously, the stock price moved significantly or if we see trends that are problematic, we'll have to revisit it. But I think right now, what you're seeing is the clear signal from the Board that based on everything we're seeing, buying back our stock at these levels looks attractive to us. So I suspect we'll be moving forward and trying to put that buyback to work.

The next question is a follow-up from Nick Cucharale with Piper Sandler.

Just a quick follow-up on the PPP remarks. The 20% you have applied for forgiveness, is that by number of loans or by dollar amount?

I think it's...

Yes. [It's that both, I think].

Yes. Yes. I think, again, it's 20% that have applied. I think what -- part of what was being asked of those that have applied, what percentage of the loan amount was applied to be forgiven. And it wasn't 100%, but it was pretty high number, I think, north of 90% on average. And that obviously includes a bunch of loans that would -- should be 100% forgiven and some others that are maybe more 70%, 80%. But 20% is what we've submitted. Unfortunately, we haven't actually heard back from the SBA on more than a handful of them, so.

Yes. Nick, I know you had asked a question about the credit -- the purchase accounting credit marks from acquisitions. And that number, we were able to track down, I think, it's $7.7 million.

(Operator Instructions) This concludes our question-and-answer session. I would like to turn the conference back over to Patrick Ryan for any closing remarks.

Thank you. I just would like to thank those who called in for their interest and their questions, and we look forward to providing an update for the full year in -- on our earnings call in late January. Thanks, everybody.

The conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.