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Financial Services - Banks - Regional - NASDAQ - US
$ 20.49
0.147 %
$ 1.2 B
Market Cap
11.71
P/E
EARNINGS CALL TRANSCRIPT
EARNINGS CALL TRANSCRIPT 2021 - Q3
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Operator

Welcome everyone to the OceanFirst Corp. Earnings Conference Call. My name is Victoria, and I’ll be coordinating your call today. [Operator Instructions] I’ll now hand over to your host Jill Hewitt from OceanFirst to begin. Jill, please go ahead..

Jill Hewitt

Thank you, Victoria. Good morning all, and thank you for joining us. I’m Jill Hewitt, Senior Vice President and Investor Relations Officer at OceanFirst Financial Corp. We will begin this morning’s call with our forward-looking statement disclosure.

Please remember that many of our remarks today contain forward-looking statements based on current expectations. Refer to our press release and other public filings, including the risk factors in our 10-K, where you will find factors that could cause actual results to differ materially from these forward-looking statements. Thank you.

And now, I will turn the call over to our host, Chairman and Chief Executive Officer, Christopher Maher..

Christopher Maher Chairman & Chief Executive Officer

Thank you, Jill, and good morning to all who’ve been able to join our third quarter 2021 earnings conference call today. This morning, I’m joined by our President, Joe Lebel; and Chief Financial Officer, Mike Fitzpatrick. As always, we appreciate your interest in our performance and are pleased to be able to discuss our operating results with you.

This morning, we’ll cover our financial and operating performance for the quarter and provide some color regarding the outlook for our business. Please note that our earnings release was accompanied by an investor presentation that is available on the company’s website. We may refer to these slides during the call.

After our discussion, we look forward to taking your questions. In terms of financial results for the third quarter, GAAP diluted earnings per share were $0.39.

Earnings reflect the continuing economic recovery, with the bank demonstrating material loan growth, a pickup in net interest income and a committed loan pipeline that indicates that our commercial banking expansion continues to gain traction.

Credit quality improved again with a company posting exceptional non-performing assets and delinquency figures, which drove $3.2 million negative provision for the quarter. Core earnings were somewhat stronger than GAAP earnings at $0.45 per share as branch consolidation expenses totaled approximately $4 million on a pre-tax basis.

The branch consolidation plan announced as part of our Investor Day in August remains on track with 10 locations scheduled for consolidation in December and the remaining locations scheduled for January of 2022. In addition, the sale of two branches has received regulatory approval and should settle in early December.

Regarding capital management, the board declared a quarterly cash dividend of $0.17 per common share and approximately $0.44 cents per depository share of preferred stock. The common share dividend is the company’s 99th consecutive quarterly cash dividend. The $0.17 common share dividend represents just 38% of core earnings.

Given the robust outlook for loan growth, which will be discussed later in the call, we elected to maintain the current dividend level as we evaluate our ability to deploy internally generated capital.

Over the past year, maintaining a conservative dividend payout ratio has allowed tangible book value per share to increase by $1.20, an increase of 8.2%. Tangible stockholders’ equity to tangible assets decreased slightly to 8.78% as deposit growth of $359 million increased the balance sheet to $11.8 billion.

Our balance sheet remains inflated as we carried approximately $1 billion of cash at quarter end, but the cash is now trending down as loan and securities growth increases. The deployment of cash accelerated through the quarter with the majority of loan growth occurring in September.

The fourth quarter will benefit from a full quarter of elevated earning assets. The company’s share repurchase activities continued during the third quarter with approximately 460,000 shares repurchased. On a year-to-date basis, the company has repurchased 1,460,000 shares at a weighted average price of $20.98.

There are 3,559,000 shares available into the current repurchase program where 6% of the total shares outstanding. Operating expenses were elevated during the quarter as we completed two significant core systems conversions, the conversion of our main core banking platform and the systems integration of the former Country Bank operation in New York.

We also had additional work related to the sale of two branches and the ongoing branch consolidation project. These activities and a few other unusual items added approximately $1.5 million of expenses in the third quarter. As we move into the fourth quarter, these expenses should moderate.

The sale of two branches and the consolidation of 10 additional locations in December, we’ll also provide a tailwind for operating expenses this quarter. Before I turn it over to Joe, I will note the company’s preparations for an inflationary period and the potential impact of interest rate movements.

Our expanded investor presentation, which was filed with our earnings release last night, provides detailed information regarding several important areas, including credit quality and interest rate risk positions.

Among the disclosures is a quantitative comparison of the bank’s asset sensitivity versus national banks with more than $10 billion in assets. As the charts demonstrate in a rising rate environment our balance sheet is well protected against rising interest rates should they materialize.

One key factor is that our deposit beta in the last rising rates cycle reaches 50% of our peers. In addition, our emphasis on the origination of floating rate loans forges short-term income in favor of a better protected balance sheet. Joe will discuss that in more detail.

At this point, I’ll turn the call over to Joe for a discussion regarding progress this past quarter, including an update on the expansion of our commercial bank..

Joe Lebel

Thanks, Chris. Loan originations of $772 million were the highest on record for the company and commercial originations of $585 million also set a record. More importantly, we saw loan closings from renewed geographic regions of Baltimore and Boston with continued strength in our core markets in New Jersey, Philadelphia and New York.

Even after record originations, we enter Q4 with a committed pipeline of $651 million an all time high and fully expect momentum to continue as we are just hitting our stride in our new markets as we build brand awareness through the lending teams.

Excluding PPP forgiveness of $31 million record originations led to loan growth of $392 million, which included $179 million in organic commercial growth and a residential pool purchase of $220 million. The remaining PPP portfolio totaled just $53 million as of September 30, so it won’t drag against loan growth in the coming quarters.

The residential pool purchase occurred on the last day of August and the bulk of the commercial growth in late September, so we will see the benefit of the added interest income in Q4 and beyond.

We closed over $100 million in construction projects year-to-date in our newly created construction vertical and initial fundings were less than $13 million or 12% of originations. As these projects mature, we will see the benefit of stronger interest income from larger outstanding loan balances.

We remain bullish on our core residential business, which continues to humble along and is only restricted by limited housing inventory in the market. The liquidity on the balance sheet fueled by continued deposit growth influenced our decision to buy a residential pool. This pool is comprised of residential loans dispersed throughout the country.

We bought pools in the past and we’ll continue to look for supplemental purchases to soak up some of our excess liquidity, diversify credit risk and build interest income. While our preference is to use our liquidity to fund commercial activity as evidenced by the loan originations, our focus is putting the cash to work in rapid fashion.

Our asset sensitivity, which will bode well in a rising rate environment, gives us some flexibility to purchase some fixed rate residential paper, putting our liquidity in play. The pool purchase of $221 million only resets our residential loan portfolio size to where it was back in September 2020.

And I’ll note that $396 million of our commercial originations in the quarter were floating rate loans, which should carry some upside in mid to late 2022 and beyond. Our deposit increase of $359 million for the quarter is low yielding and had the effect of reducing our cost of deposits.

Core deposits, excluding CDs grew $460 million, which reflects continuing improvement deposit – continuing improving deposit quality. As a result, our cost of deposit, sit at 22 basis points, almost a record low for the company.

We still see the cost of the deposits trending lower as we have over $125 million in CDs, maturing in Q4 and another $176 million in the first quarter of 2022. I do expect some deposit runoff in Q4 due to seasonality, but nothing meaningful. Core NIM improved quarter-over-quarter by four basis points.

And we see modest continued improvement moving forward. On the expense line, exclusive of the branch consolidation expenses, elevated professional and data processing expenses, partly related to the core conversion, which should reverse and improve the Q4 run rate as well the branch consolidation savings in 2022.

The branch consolidations and the two branch sales remain on track with regulatory notice requirements and approvals with the sale of the branches impacting the timing of the process. The ultimate expense savings will be seen beginning in Q4 and Q1, 2022 as branches sell or close. With that I’ll turn it back to Chris..

Christopher Maher Chairman & Chief Executive Officer

Thank you, Joe. At this point, we’ll move to the question-and-answer portion of the call..

Operator

Thank you, Chris. We will now start the Q&A Session. [Operator Instructions] Our first question comes from Frank Schiraldi from Piper Sandler. Frank, please go ahead..

Frank Schiraldi

Good morning..

Christopher Maher Chairman & Chief Executive Officer

Good morning, Frank..

Frank Schiraldi

Just wanted to ask specifically on some of the expansion markets like Boston and Baltimore, if you could provide where you are in footings in those areas and what the pipeline looks like?.

Mike Fitzpatrick

So, we’re happy Boston and Baltimore footings are in the $50 million range each, year-to-date. And pipelines for those are pretty substantial, are changing every day. Frank, I can get back to you with a number specifically. But we’re just really touching the fringes here. I think the momentum has been significant, especially for the new markets.

So we’re pretty bullish..

Frank Schiraldi

Okay. And then just given where you are seeing pay downs obviously pretty elevated, it sounds like you anticipate some of the excess cash could get sopped up by additional resi loan purchases.

Is that somewhat more likely than build in the securities book, or how should we look at that from a modeling standpoint?.

Christopher Maher Chairman & Chief Executive Officer

I think that’s right, Frank. The residential portfolio has not typically been a growth portfolio for us, but we do like the way that it moderates our risk position across the balance sheet. So, the purchases we made in the third quarter, as Joe mentioned, brought us back to where we were about a year ago.

I think we might try and engineer some modest growth in the residential book, but it won’t be growing anywhere near as quickly as the commercial loan book. The other thing is, as you point out, although we did deploy some liquidity into securities in the third quarter, we may do a little more in the fourth quarter.

Ultimately, we’d like most of the liquidity to go into the loan book..

Frank Schiraldi

Got you, okay. And then just finally, if I could just on expenses, you talked a bit about the elevated levels and the tailwinds going forward.

Is there – I’m just wondering if you could remind us of thoughts on expense based on a quarterly run rate, as we get into say 2Q 2022 after branch consolidation or at least this round has completed?.

Joe Lebel

You are absolutely right Frank. At the Investor Day in August, we talked about the fact that expenses were coming up into third and fourth quarter, but then they would moderate and decrease in an absolute level going into 2022. It’s not a significant decrease, but Mike might give you give a better sense of that, of course, for the full year. .

Mike Fitzpatrick

Yes. So, we have two things going on. First of all, we did the country conversion, core conversion in September. We finished that. So, we took out some data processing costs from country, and some we reduced headcount as of the end of the quarter. So those will flow into the fourth quarter.

Christopher talked about our core conversion for the bank, overall, there were elevated costs related to that data processing professional fees and some others. We have the sale of the two branches coming in December, we have the branch consolidation, 10 branches in December and other 10 branches in January.

And those cost savings were identified in our Investor Day last month. So, one of those will reduce expenses going forward..

Christopher Maher Chairman & Chief Executive Officer

We’re not producing a quarter-by-quarter projections on expenses that we’ll be releasing, but I think we gave you some full year guidance, which we’re still comfortable with..

Frank Schiraldi

Okay. Got it. Thank you very much..

Christopher Maher Chairman & Chief Executive Officer

Thanks, Frank..

Operator

Thank you, Frank. Our next question comes from Michael Perito from KBW..

Michael Perito

Hey guys good morning. Thanks for taking my questions. .

Christopher Maher Chairman & Chief Executive Officer

Good morning, Mike..

Michael Perito

I wonder if you stick on the expense side for a second, I mean, it sounds like based on your last comment there, Chris, that this is the case. But obviously there has been a lot of wage pressure out there and competition for talent. It seems like you guys actually kind of timed it really well, right.

When most of your hires having taken place already before this has kind of manifested, but I guess just wanting to confirm that that’s the case that’s not really a threat to maybe knock you off your expense outlook for next year. It doesn’t sound like it is, but just like to confirm if that is possible..

Mike Fitzpatrick

I can confirm that for you Mike. So, the way we’re looking at it is that the wages that are under the most pressure that we’ve seen are obviously the more entry-level wages and branches and things like that. So, the transition to digital will really help there. There will be some wage pressure.

So, I think the average salary increase will be a little higher than in years past, but the total number of headcount will be coming down to offset that. So, we still feel pretty comfortable. The items that were a little bit elevated in the third quarter were non-compensation related. So, these were professional fees and technology fees.

So, they were not driven by compensation issues. Although there is a lot of compensation pressure in the market, we’re still comfortable with the guidance we gave for the full year expenses for 2022..

Michael Perito

Great, helpful. Thank you. And then just on the margin, so it sounds like you guys have a couple chunks of higher cost funding that’ll run off the resi loan purchase was later in the quarter. Now it seems, I guess, putting all those pieces together.

I mean, is the margin kind of continuing to – the core margin rather kind of continue to inflect upward from here.

I mean, do you guys have any line of sight on kind of how you expected liquidity position to act near term? And I guess, are there any other kind of inputs that we should be mindful of as we kind of think of the core NIM trajectory, because it seems like there’s more tailwinds and headwinds coming off the low figure that we’re at in the last couple of quarters?.

Christopher Maher Chairman & Chief Executive Officer

I think that’s definitely the case. So, we’re coming kind of bouncing off the bottom here. You’re correct that in the third quarter, although NIM expanded, we really didn’t get the full benefit of the loans that were brought on in September or even the pool purchase that was in late August, nor we did deploy about $50 million into securities as well.

So, I think in the fourth quarter, when you have the full quarter impact of that growth, you are going to see expanded margins. The other outlook item is we’re feeling very bullish about the teams we brought on Board, they are doing great building pipelines.

It’s too early to be able to really fine-tune how productive they may be, but it’s possible we may be able to deploy all of our excess liquidity as early as mid-year, next year, which would be one or two quarters earlier than we thought. And that bodes well for margin as well as net interest income..

Michael Perito

And just lastly, then I’ll step back just on that point. Can you remind us how you think about – I realize, it’s kind of a hard question in the current environment.

But how we should think about the normalized liquidity cash and the bond book for you guys moving forward? I mean, is this level of securities probably fairly steady state or do you think it could move down? Or is it really just when you say kind of deploy liquidity, do you mean just getting this cash kind of back down to $100 million or plus or minus more normalized level and not necessarily any kind of compression on those securities portfolio?.

Christopher Maher Chairman & Chief Executive Officer

The primary thing I was referring to is deploying the cash, getting that down. Historically, we’ve got a very strong liquidity position, core deposit funded, no wholesale advances at the Federal Home Loan Bank. So we have the ability to run that liquidity down plus or minus $100 million, and that’s where we’d like to operate.

So that’d be the primary thing. But I would share that we’ve got a healthy cash flow coming off the securities portfolio. And once we deploy the cash, we would probably redirect the redemption cash is coming off the securities book into loans as well. So traditionally we’ve had a pretty high percentage of loans in the balance sheet.

And we’d like to build ourselves back to that position. We think that that’s kind of drives our core profitability. So if you think in the next say by mid second, third quarter of 2022, it may be possible to deploy the cash. After that we’ll begin to mix shift of letting the securities cash flows come off.

But as early as 2023, we might be looking at true balance sheet growth as well, which will be – if we’re in that position that would be a terrific thing..

Mike Fitzpatrick

And just to add a couple of things to that, Michael. So loans at quarter end – actually quarter end balance was $274 million above the average and securities at quarter end were $52 million above the average for the quarter.

So both of those, so just if you roll that into the fourth quarter, it’s going to be probably an extra 4 or 5 basis points in terms of margins. So that’s the biggest tailwind. And the securities book, actually, if you look year-over-year it’s up $600 million in the last year, that’s about a 60% increase and that’s soaking up to liquidity.

So we’ve built that book in light of liquidity, but there’s a lot of cash flow coming off of it because a lot of it’s an MBS with monthly cash flow and then you have maturity. So that’ll be redirected to the loan book eventually. Maybe not in the near-term, but eventually it’ll rotate into loans..

Michael Perito

Got it. Awesome. Thank you guys for taking my questions. Very helpful..

Mike Fitzpatrick

Thanks, Mike..

Operator

Thank you, Michael. The next question comes from Dave Bishop from Seaport Research Partners..

Dave Bishop

Yes. Good morning, gentlemen..

Christopher Maher Chairman & Chief Executive Officer

Good morning, Dave..

Dave Bishop

Hey Chris, just curious some headwind out there in the market, we hear a lot of banks talking about supply chain issues, inventory issues. Just curious if that forcing you or driving you to maybe reset your expectations in terms of longer-term growth outlook as a numerator at the Analyst Day.

Just maybe any update in terms of how you’re thinking about loan growth into 2022 relative to what we spoke about up in New Jersey..

Christopher Maher Chairman & Chief Executive Officer

There’s no question that supply chain issues are being fell throughout our client base, I’m sure the whole economy. And what it’s doing is it’s taking the opportunity for even better earnings or expansion to take place.

So at the end of the day, if you can’t deliver product, whatever your product is, whether that’s a car or a building or whatever, you can’t record the revenue and you’re not showing that kind of progress. Fortunately, we haven’t seen a change in court demand.

So although we’re not seeing some of these projects complete or customers ramping up as quickly as they’d like, their order backlogs remain strong, if anything they’re growing. I also think that because of the supply chain issues, we’re seeing a continued very strong demand in the logistics world around warehousing.

So to a certain degree, people are going to be keeping little higher inventories when they’re able to get their hands on things. So that higher level of inventories we looked through, it’s probably more of line draws. Our line draws are very well right now, so we think there’s opportunity there.

So as we go into next year, I think we’re still very comfortable with the projections we talked about in August. So I’m pretty comfortable.

That said, if the supply chain doesn’t start coming, say back online in Q1 or Q2 of next year, the more persistent it is it’s possible it could destroy demand, meaning that people that just can’t get stuff stop trying. And we’re not at that point yet. But we’re watching it closely..

Dave Bishop

Got it. And then in terms of the newer markets, the Boston and Baltimore markets. And I apologize if you have a new market before.

But as you look out into maybe the end of 2022, I don’t know if the right way to think about it the dollar of loans and deposits outstanding or percent of loans, just curious, maybe where you foresee those potentially getting to?.

Christopher Maher Chairman & Chief Executive Officer

I think it starts with what we expect before we hire anyone. It doesn’t matter whether it’s a new market or an existing market. And you’re – if you’re bringing on teams or producers you’re expecting several hundred million dollars worth of growth over time.

And I will say that we will not enter a market if we don’t think it has the potential to get to $1 billion dollars or more in outstanding over several years, right. It could take a number of years to get there. So we’re not interested in being in a market that might top, let’s say $200 million or $400 million.

So I think in terms of expectations, we’re seeing a lot of good progress and Joe can talk more to that. But we feel we have the right people in the right place. We’re being well-received in the market. The fact that transactions are happening already, I think is a little proof of that. And based on the pipelines, I think we’re right on track.

But to reiterate, we’re not launching a team, unless we think we can produce several hundred million dollars of outstandings and we’re not getting into a market, unless we think that market has the potential to grow to $1 billion. Joe anything you’d add on that..

Joe Lebel

As I mentioned earlier, Dave, we’ve closed over $100 million in totality in both of the regions so far. And the pipelines are strong, and I think we’re really just starting to hit stride. Just the activity in the last week and what I’ve seen from both teams is really bullish. And I’ll get back to Chris’s comment about the supply chain.

Interestingly, we do have a – variety of our larger C&I clients that have starting with the pandemic been pretty well-prepared in inventory management. And I have the opposite problem. Chris mentioned earlier, I have $870 million in unused lines because a lot of these folks have actually done fairly well and it paid us down or paid us off.

So I’d actually like them to work through some of that inventory. That’s a good problem for some of them to happen and maybe borrow some money..

Dave Bishop

Got appreciate the color..

Operator

Thank you, Dave. [Operator Instructions] And our next question comes from Russell Gunther with D.A. Davidson. Russell, please go ahead..

Russell Gunther

Hey, good morning, guys..

Christopher Maher Chairman & Chief Executive Officer

Good morning, Russell..

Russell Gunther

I just wanted to ask if you’re able to share what the level of pay downs were this quarter versus last? And just any line of sight to that headwind near-term..

Mike Fitzpatrick

So we really didn’t have and we had the ordinary course pay downs, Russell. It wasn’t – didn’t increase your decrease. And one of the advantages of having sold off the majority of our PPP loans last year is that PPP wasn’t that much of a headwind. It was $30 million. And as Joe said it was not a lot left on the balance sheet.

So I don’t think that’s kind of a barrier for us growing the loan book. It was a little about – however, they would pay us for $440 million and then pay downs and prepayment worth of $170 million. So we had to the – the originations were heavy, but it’s partly offset by sales and payoff. Not sale, payoff and other pay downs..

Russell Gunther

Great. Thanks Mike. Thanks, Chris. And then, I appreciate the disclosure you’ve called out and spoke about in the prepared remarks with regard to positioning for higher rate. You guys have put out in the past, I think at $320 million to $340 million margin guide.

Does that guidance contemplate any of that benefit from rates or not?.

Christopher Maher Chairman & Chief Executive Officer

So I think that’s within that range that you’re talking about. So let’s say we get fully deployed and we took, remember there are two things here. We want to deploy the cash, and as Mike pointed out we have $600 million in securities, more than we were holding just about a year-and-a-half ago.

So between the cash being deployed in the first several quarters of next year, the securities mix going on, maybe another two or three quarters after that, that should normalize our balance sheet. So that we’ve got kind of the earning asset mix that we think is optimal for us.

At that point, I think you’re probably in the historical margin range of 325 to could be as high as 350. To get to 350 though, I think you’re going to have to have movement in the yield curve. But even without moving in the yield curve, we can make a lot of progress towards that 325 in today’s kind of flat-ish yield curve..

Russell Gunther

That’s very helpful. Thank you. And then just last one for me, fees are not a big part of the story here. But I did just want to ask you then service charges were a bit lower than, than expected, gain on sale as well.

So any color on the fee dynamic this quarter and going forward?.

Christopher Maher Chairman & Chief Executive Officer

I’ll take them into the two separate topics there. In terms of gain on sale, I mean as long as we have this protracted cash position and we have a very strong asset sensitivity position we’re going to take advantage of whatever residential origination we can and put that on the balance sheet.

So I wouldn’t be looking for much in gain on sale for awhile. In terms of deposit fees, those are cyclical so it was nice to see some of the interchange fees came up, but with this level of liquidity out there in the market, things like overdraft fees are going to be down even minimum balance fees.

You really – are you not collecting them when people have so much cash in their accounts. So....

Joe Lebel

We also took advantage of really supporting clients during the conversion process. I think there are times during conversion, you just want to make sure you rebate the appropriate fees to get people through the new systems..

Russell Gunther

Okay, great. Thanks, Chris. Thanks, Joe. That’s it for me guys..

Christopher Maher Chairman & Chief Executive Officer

Thanks, Russell..

Operator

Thank you, Russell. Our next question comes from Matthew Breese from Stephens Inc. Matthew, please go ahead..

Matthew Breese

Good morning. Real quick on the share repurchases been pretty consistent year-to-date about 500,000 shares a quarter.

Should we expect that pace to continue for at least the near-term?.

Christopher Maher Chairman & Chief Executive Officer

That pace may pick up, Matt? Some of the challenge we’ve had is more logistical about kind of the rules about when you can buy and how much you can buy in blackout periods, and we may try and be a little more proactive on that.

So I think given the authorization that’s out and our level of earnings we had the capacity to do between 0.5 million and 1 million shares a quarter, and with the current values, we think it’s a good move for our shareholders..

Matthew Breese

Okay. And then go to the portfolio purchase, so given the expansion to new markets and hires, the read last quarter was that there was going to be a swell of organic origination sufficient to achieve that $250 million in net growth per quarter that we’ve discussed. And the first sell indication was the 2Q pipeline was $628 million.

I guess my question is; should we look at the portfolio purchase as an indication that your confidence in achieving the $250 million in organic growth has changed? I mean, maybe I’m reading too much into it, but curious your thoughts on the matter?.

Christopher Maher Chairman & Chief Executive Officer

We’re still very comfortable with that $250 million target. I think as Joe pointed out, some of the loans we put on especially in the new construction vertical, they withdraw over time. So you get a little tailwind from that where you’re booking the loans, but you’re not getting the dollars out in the portfolio quite as fast.

But based on the pipelines we have now that, the pipeline is even a little larger than it was in Q2 and continues to grow, we don’t do intro-quarter updates, but I will generally say that October has had a nice level of closings. Nice to see that early in the fourth quarter. So the pipelines look good.

If anything they’re larger than they were at quarter end, teams are productive. The residential play was really as the housing inventory dried up; our residential side is really a purchase business, right? We’re not doing a lot of refinances.

So is the residential inventory dried up, unit sales dropped and we started to see attrition in the residential book. And we said what, let’s try and bring that residential book back up. But commercial has been strong. I think it will remain strong, and if from time-to-time, residential is not as strong.

We may supplement it with asset purchases, but we’re very pleased to see the primary earning asset business for us commercial banking is growing nicely..

Joe Lebel

Matt, the deposits continue to grow for us. So we want to just put the – we want to put stuff to work with the asset sensitivity we have. Residential pool purchases do provide us with a little bit of a credit diversity play and it’s fully funded dollars and we’re looking to buy seasoned pools typically. So we just want to put cash to work..

Christopher Maher Chairman & Chief Executive Officer

And there may be periods where net loan growth is more than $250 million, because we’re opting to do things like that in a quarter..

Matthew Breese

Got it.

So we stick with the $250 million per quarter with upside depending on portfolio purchases, is that the right read?.

Christopher Maher Chairman & Chief Executive Officer

Yes..

Matthew Breese

Okay. I guess where I come off of skeptical is, if I take the $625 million or $630 million pipeline last quarter, which resulted in like $140 million, $145 million of organic net growth this quarter. We’re looking at $650 million pipeline this quarter, but a materially higher amount of organic growth.

Maybe I’m – maybe I’m looking at those ratios the wrong way, but maybe helping connect with that?.

Joe Lebel

Yes. I would point, you know what, look at any given quarter what you originating, what actually goes into growth in the balance sheet are always a little bit off. But net of the PPP, which would be less of a drag going forward is about $170 million of growth.

So there’s not a big Delta between $170 million and $250 million, that could be five or 10 extra deals in a quarter. So we feel pretty good that the 250, and I think the way we guided in August that that would be a pretty consistent thing in 2022, when these, especially the new teams have gotten maturity and we’re very happy with what they’ve done.

But until you establish your reputation in a market like Baltimore or Boston, you got to do a few deals to be credible to do a few more, and then it kind of starts to build more strongly.

So we think Q4 is going to be good and we continue to expect in 2022 that kind of consistent $250 million a quarter should be achievable with the teams we have put on so far..

Christopher Maher Chairman & Chief Executive Officer

And we have Matt in the quarter, in the commercial bank we had over $160 million of undrawn whether its construction runs on commercial lines and the closings. So you put $585 million on, but you got outstanding of 400 and change. So you do – you’re going to see some of that and that’s okay.

We’re going to have that activity and that money will be drawn over time..

Matthew Breese

Great. Okay. That’s all I had. Thanks for taking them..

Christopher Maher Chairman & Chief Executive Officer

Thanks, Matt..

Operator

Thank you for your question, Matthew. [Operator Instructions] We currently have no further questions. I will now pass over to Chris for final remarks..

Christopher Maher Chairman & Chief Executive Officer

Alright. Thank you. With that I would like to thank everyone for participating on the call this morning. We remain focused on building the business, deploying cash and improving earnings.

They look forward to speaking with you following our year-end results in January until then we hope you have the opportunity to enjoy a slightly more normal holiday season this year. Thank you..

Operator

Thank you everybody for joining today’s call. You may now disconnect your lines..

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