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First Bank (FRBA) Q3 2020 Earnings Call Transcript

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First Bank (NASDAQ: FRBA)
Q3 2020 Earnings Call
Oct 27, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the First Bank Third Quarter 2020 Earnings Conference Call. [Operator Instructions] I would like to turn the conference over to Patrick Ryan, President and CEO. Please go ahead.

Patrick L. Ryan -- President and Chief Executive Officer

Thank you. I'd like to welcome today to First Bank's third quarter 2020 earnings conference call. I'm 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?

Stephen Carman -- Executive Vice President and Chief Financial Officer

[Technical Issues] 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, 2019, filed with the FDIC. Pat, back to you.

Patrick L. Ryan -- President and Chief Executive Officer

Thank you, Steve. I would just like to start out today by saying how proud I am of our team across all areas. Everybody has done a really amazing job, and we have seen strong execution in what has obviously been a very challenging operating environment. I would like to focus on great progress we have made in four 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 non-interest-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 required 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 nine months of this year compared to the first nine months of the prior year. We believe that our future savings opportunity is 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 to see an 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 continued improvement there, as seen by our dwindling deferral portfolio, our modest delinquency rates and declining non-performing loan levels. By continuing to add to our allowance for loan losses in the quarter, our coverage of non-performing 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, and the plan allows us 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 toward offsetting any potential impacts 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 overly simplify 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, 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.

Stephen Carman -- Executive Vice President and Chief Financial Officer

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 non-interest 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 non-interest 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.

Non-interest expense, excluding merger-related expenses for the comparative periods, was up about 17% as the full impact of expenses associated with the September of 2019 Grand Bank acquisition are reflected in Q3 2020 results.

Our return on assets was 1.03% for Q3 2020 and ROE was 10.20%. That compares to an adjusted ROA of 78 basis points and adjusted ROE of 6.97% for Q3 2019.

Net income for the first nine months of 2020 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 nine-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% to $49.8 million compared to $42.2 million for the nine 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 non-interest income and increased non-interest expense excluding merger related expenses also characterized results for the comparative nine 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 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 three months ended September 30, 2020 was 3.23%, 16 basis points higher than our margin of 3.07% for the three 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 to deposits was 70 basis points for the third quarter. That represents a 59 basis point decline since March 31st 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 non-interest expense growth. This is reflected in lower marketing and travel and entertainment costs for the comparative 2020 quarterly periods. Our largest component of non-interest 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'd like to turn it over to Peter Cahill, our Chief Lending Officer, to discuss lending results. Peter?

Peter Cahill -- Executive Vice President and Chief Lending Officer

Thanks Steve. After two 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 30th were up $281 million for the year. If you back out the $190 million of PPP loans we did earlier, it leaves you with growth for the nine 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 [Phonetic] 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 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 would 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-one 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 will a piece of business that we're still collecting information, etc. At September 30th, 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 on 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 to keep our portfolio balanced and in line with what regulators like to see.

I know Steve as well touched a little bit on asset quality. The asset quality metrics continue to look good. Charge-offs and non-performing 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 zero 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 from 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 staying 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 will now turn things over to Emilio Cooper to talk about deposits. Emilio?

Emilio Cooper -- Executive Vice President and Chief Deposits Officer

Thanks Peter. Deposit performance in Q3 was strong. Despite the challenges of COVID-19, we continued to advance in our journey toward accomplishing our strategic objectives and mission for 2020. As you know, we are focused on reducing our funding cost, shifting our mix, improving non-interest income and growing commercial deposit. I am pleased to report that in Q3, we made progress on all four 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, we reduced our cost of interest-bearing deposits by 43 basis points. This was accomplished as we allowed pure CD rate shoppers to attrite 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, non-interest-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 advisors to our customers and 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 focused value proposition, personal bankers, real relationship.

We implemented a number of initiatives in Q3 designed to boost our deposits-related fee income. Specifically, we have projects under way 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 over-weighted toward non-interest-bearing growth. We are looking forward to finishing the year ahead of where we planned for 2020 and positioning ourselves for an even stronger 2021.

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

Patrick L. Ryan -- President and Chief Executive Officer

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.

Questions and Answers:

Operator

[Operator Instructions] The first question is from Nick Cucharale with Piper Sandler. Please go ahead.

Nicholas Cucharale -- Piper Sandler -- Analyst

Good morning, guys. How are you?

Patrick L. Ryan -- President and Chief Executive Officer

Hey, good morning, Nick.

Nicholas Cucharale -- Piper Sandler -- Analyst

With respect to the lending environment, give us a sense of the competitive dynamics in your market. Has the competition increased with the modifications coming down across the industry?

Patrick L. Ryan -- President and Chief Executive Officer

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 non-bank lenders early on. Some of those folks may be starting to get back into the game, but that's kind of the high level what we've seen. And Peter, why don't you jump in here?

Peter Cahill -- Executive Vice President and Chief Lending Officer

Yeah, and I think that's right. 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. 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, [Indecipherable] banks decided 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.

Nicholas Cucharale -- Piper Sandler -- Analyst

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

Peter Cahill -- Executive Vice President and Chief Lending Officer

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

Nicholas Cucharale -- Piper Sandler -- Analyst

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

Stephen Carman -- Executive Vice President and Chief Financial Officer

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

Nicholas Cucharale -- Piper Sandler -- Analyst

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

Patrick L. Ryan -- President and Chief Executive Officer

The actual dollar amount that the credit marks, I don't have that handy, Nick, but perhaps [Phonetic] we could track down.

Nicholas Cucharale -- Piper Sandler -- Analyst

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

Stephen Carman -- Executive Vice President and Chief Financial Officer

Well, Nick, I think our effective tax rate at this point at least for the remainder of 2020 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.

Nicholas Cucharale -- Piper Sandler -- Analyst

Great. Thanks for taking my questions.

Patrick L. Ryan -- President and Chief Executive Officer

Great. Thank you, Nick.

Operator

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

Christopher Keith -- D.A. Davidson -- Analyst

Good morning, guys. How are you?

Patrick L. Ryan -- President and Chief Executive Officer

Good. Good morning, Chris.

Stephen Carman -- Executive Vice President and Chief Financial Officer

Hey, Chris.

Christopher Keith -- D.A. Davidson -- Analyst

So, just looking at non-interest income, you had a pretty good increase in service fees on deposit accounts, which I think makes sense. I'm just curious, we're even getting 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?

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, I would think so, Chris. 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 just kind as a starting point.

Christopher Keith -- D.A. Davidson -- Analyst

Okay, great. And then, just over -- on the expense side, a 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?

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, 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 declines, 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 an 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 bring it down a little bit. And we've got a lot of projects under way that are going to find us some savings here and there. I kind of use the analogy of we're turning over all the couch cushions, we're finding all the loose changes 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.

Stephen Carman -- Executive Vice President and Chief Financial Officer

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

Christopher Keith -- D.A. Davidson -- Analyst

Got it. Okay, great. Thanks guys. And then, I guess just looking at kind of the excess liquidity on the balance sheet, it looked like you've been investing in the securities book. I'm just curious, if -- obviously, you also had strong loan growth. So, at what point do you think we 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?

Patrick L. Ryan -- President and Chief Executive Officer

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

Stephen Carman -- Executive Vice President and Chief Financial Officer

Yeah. With PPP loan forgiveness, we expect that 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 will take our selective opportunities on the investment side going forward.

Christopher Keith -- D.A. Davidson -- Analyst

Okay, great. And then, just one more if I can. So, on deferrals, can you just talk about your philosophy on migrating? 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?

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, it's done 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 non-accrual, 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 non-accrual. 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 you're almost certainly looking at non-accrual status. But thankfully, we really haven't had any of those. So, most of the folks that we've dealt with, obviously, have seen in the numbers 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 toward full payment status in the not too distant future.

Christopher Keith -- D.A. Davidson -- Analyst

That's great. Thank you guys so much for taking my questions.

Patrick L. Ryan -- President and Chief Executive Officer

Sure. Thank you.

Operator

The next question is from Erik Zwick with Boenning & Scattergood. Please go ahead.

Erik Zwick -- Boenning & Scattergood -- Analyst

Good morning, guys.

Patrick L. Ryan -- President and Chief Executive Officer

Good morning, Erik.

Erik Zwick -- Boenning & Scattergood -- Analyst

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?

Patrick L. Ryan -- President and Chief Executive Officer

I'll let Peter chime in here as well. From my perspective, Erik, it's not really industry-specific. 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 of the bank who knew people that weren't getting taken care of by their banking organization were 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 a number of those folks got referred over, and we're looking to bring that business to us. But Peter, anything you'd add there?

Peter Cahill -- Executive Vice President and Chief Lending Officer

Yeah. 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. Bigger dollars, immediate outstandings, that kind of stuff with real estate. Really no concentrations anywhere. No loans of major size.

Erik Zwick -- Boenning & Scattergood -- Analyst

Great. Thanks for the color there. And that's great to hear that there's some 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, the percentage that will ultimately be forgiven and kind of meet [Phonetic] the timing on those as well?

Patrick L. Ryan -- President and Chief Executive Officer

Yeah. 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 full team dedicated working on applications. I think we've submitted to the SBA approval applications for about 20% of the total portfolio. Unfortunately, I'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, in 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?

Peter Cahill -- Executive Vice President and Chief Lending Officer

Yeah, you're right. Across the board, 20% of the 1,100 or so PPP loans we did have been --forgiveness has been filed, and what we've heard back is positive stuff. So we'll just have to see how that goes.

Erik Zwick -- Boenning & Scattergood -- Analyst

Okay. So, that 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?

Peter Cahill -- Executive Vice President and Chief Lending Officer

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

Patrick L. Ryan -- President and Chief Executive Officer

No, you go ahead.

Peter Cahill -- Executive Vice President and Chief Lending Officer

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 reached out to all 1,100 plus a couple of times to show them what to do, remind them where to go, etc. And they're kind of dribbling it. So that's where we're at right now.

Erik Zwick -- Boenning & Scattergood -- Analyst

Got it. That's helpful. And then just looking at the loan to deposit ratio, it's 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?

Patrick L. Ryan -- President and Chief Executive Officer

Sorry, upper limit on what, Erik?

Erik Zwick -- Boenning & Scattergood -- Analyst

The loan to deposit ratio?

Patrick L. Ryan -- President and Chief Executive Officer

Oh, yeah, 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 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 almost $200 million in loans, which is impacting your numerator, but you got borrowings funding it 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 110%.

Erik Zwick -- Boenning & Scattergood -- Analyst

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 fairly attractive from a financial perspective, given where the stock is trading today.

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, 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 moves significantly or if we see some trends that are problematic, we'll have to revisit it. But I think right now, what you're seeing is a 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 will be moving forward and trying to put that buyback to work.

Erik Zwick -- Boenning & Scattergood -- Analyst

Thanks for taking all my questions this morning.

Patrick L. Ryan -- President and Chief Executive Officer

Sure, no problem. Thank you, Erik.

Operator

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

Nicholas Cucharale -- Piper Sandler -- Analyst

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

Stephen Carman -- Executive Vice President and Chief Financial Officer

Yeah, I think it's both [Phonetic], Nick.

Patrick L. Ryan -- President and Chief Executive Officer

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

Nicholas Cucharale -- Piper Sandler -- Analyst

That's very helpful. Thank you.

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, 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.

Nicholas Cucharale -- Piper Sandler -- Analyst

Terrific. Thank you so much.

Patrick L. Ryan -- President and Chief Executive Officer

Sure.

Operator

[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.

Patrick L. Ryan -- President and Chief Executive Officer

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 on our earnings call in late January. Thanks everybody.

Operator

[Operator Closing Remarks]

Duration: 45 minutes

Call participants:

Patrick L. Ryan -- President and Chief Executive Officer

Stephen Carman -- Executive Vice President and Chief Financial Officer

Peter Cahill -- Executive Vice President and Chief Lending Officer

Emilio Cooper -- Executive Vice President and Chief Deposits Officer

Nicholas Cucharale -- Piper Sandler -- Analyst

Christopher Keith -- D.A. Davidson -- Analyst

Erik Zwick -- Boenning & Scattergood -- Analyst

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