Q2 2022 Independent Bank Corp (Massachusetts) Earnings Call
Good morning, and welcome to the Independent Bank Corp, second quarter 2022 earnings Conference call all.
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<unk> about these non-GAAP measures, including reconciliation to GAAP measures may be found in our earnings release and other SEC filings. These SEC filings can be accessed via the Investor Relations section of our website. Finally, please also note. This event is being recorded.
I would now like to turn the conference over to Chris <unk>, President and CEO . Please go ahead Sir.
Good morning, everyone and thank you for joining us today I am once again, accompanied by Marc <unk>, Our Chief Financial Officer, and Rob, Chris Allen, Our Chief operating Officer.
Our second quarter performance is a strong one which is driven by the business fundamentals of our franchise net income for this past quarter came in at $61.8 million or $1 32 per share nicely above.
Above both prior quarter and prior year results.
Mark will be covering the quarter in greater detail, but highlights include underlying loan activity remains encouraging with net growth of 5% on an annualized basis exclusive of P. P. P loan run off.
Colleagues are quite active in meeting the credit needs of our customers in fact loan closings in the second quarter grew by 35% over the first quarter volumes to nearly $1 billion in loan pipeline stood at healthy levels as well.
Core deposits have now reached 87% of total deposits have remained a source of great strength and economic value higher cost Cds continued to attrite, allowing us to maintain a very low five basis points total deposit costs.
Our balance sheet management has enabled us to clearly benefit from rising rates as evidenced by the notable increase in net interest margin this quarter.
And we are positioned to continue to benefit from further rate increases that are widely expected Mark will comment on this in a moment.
The revenues were strong this quarter across a range of sources, our investment management business continues to excel at and we're encouraged by the volume of new inflows along with the ongoing success of our internal referrals and stuff.
Those remain well managed as our operating efficiency measured declined to 52% this quarter.
Credit quality continues to be benign with minimal that losses and stable nonperforming levels experienced in the second quarter and capital levels remain in fine shape, which gave us the confidence to proceed with a modest share buyback in the second quarter.
We continue to make progress on several important fronts. The assimilation of east Boston saving banks continues to proceed very smoothly.
My New branch colleagues have adapted quite well to our processes and platforms. All major systems have been fully integrated and we are actively pursuing new business opportunities. We've identified in our expanding markets and acquired customer bases all of which we're very excited about.
We successfully opened our new branch in Westborough Onemain.
And then and they are bringing our total retail prices to eight in Western County, our expansion into this market and the broader Metro West area is an important part of our growth strategy, our customer reception to our brand and offerings has been very encouraging thus far.
We remain hard at work enhancing our digital banking capabilities with respect to account.
Access and opening is payment networks, and our York banker platform to ensure we remain responsive to customer preferences. We're also in the process of streamlining our front end processes, especially related to our lending platforms.
Continue more fully leveraged sales force throughout the company.
Turning to the economic picture now the labor market as we all know is showing continuous surfaces.
He was strength.
The focus remains heavily on the inflation.
Surged again in June and the fed has reiterated their commitment to combat increased prices went to rate hikes.
The fed is expected to continue with the rate increases but market uncertainty is on the rise.
Bright spot here is at each increased provide a tailwind to income as mark will discuss in a moment.
We feel we've positioned ourselves in a flexible manner to deal with a highly uncertain operating environment and should we enter a period, a pronounced slowdown or begin to witness unfavorable competitive practices, especially in the lending side.
React with as much discipline as we have in the past, which has served us well over the long term.
In the meantime, all remain highly focused on serving our loyal and growing customer base, we built strong relationships with our customers and provide them with our war our award winning level of service for our highly motivated Rockland Trust colleagues.
In fact, the point that is well worth mentioning again is that during the first quarter. We received the number one ranking in new England and J D power 2022 U S retail banking customer satisfaction study.
Before.
And they often are handing it over to mark I'd like to acknowledge our director Frederick Tau, whereas reached retirement age I have valued his insight and support during his tenure on our board and we wish him well.
With that I'll turn it over to Mark.
Thank you, Chris and similar to last quarter My comments will refer to the information contained within the earnings presentation deck that was included in our 8-K filing last night and is also available on our website and today's investor portal.
So jumping to slide four of that deck.
22 second quarter GAAP net income was 61.8 million and diluted EPS was $1 32, both reflecting notable increases from the prior quarter operating results worth, noting there were no non-GAAP related items within the second quarter.
Key drivers for the quarter include 4.9% annualized net loan growth when excluding PPP loans, driven by strong consumer loan activity and.
In addition to overall reductions in cash balances, we continued modest cash deployment into the securities portfolio continuing to remix the balance sheet for enhanced profitability.
The core net interest margin, which excludes purchase accounting and P. P. P related impact increased to 3.23% for the quarter up from 3% in the prior quarter and the reported margin was up nicely as well and I'll provide some more detail into the impact and benefit of the rising rate environment here in.
A little bit.
New core deposit account activity remained strong with the overall reduction in deposit balances being driven primarily by lower time deposit balances.
Provision for the quarter was zero, reflecting continued strong asset quality metrics.
And in addition, the quarter included higher fee income and a modest increase in operating expenses, both of which I will provide more detail on shortly.
And lastly, the company bought back one 3 million shares under its share repurchase program during the quarter.
So in summary, we certainly view the quarters results is a great reminder of our strong core fundamentals and evidence of our balance sheet position to increase profitability and shareholder value moving forward.
On both a GAAP and operating basis the results reflected a 1.24% return on assets and $8 four 9% return on average common equity and a 13.01% return on tangible common equity for the quarter.
And similar to last quarter. In addition to the aforementioned share repurchase activity tangible book value was also negatively impacted by other comprehensive losses attributable to the available for sale security unrealized losses, and hedge fair valuation declines net of tax.
These factors drove an 84 cent decrease in tangible book value to $40.31 as of June 30th.
As we move to slide five we'll dive into some key components of the quarter results.
Sean here inclusive of P. P. P. The loan portfolio increased slightly to $13 7 billion.
Excluding P. P. P. As I mentioned total loans grew at a healthy four 9% annualized rate for the quarter.
As you can also see on the slide the consumer portfolios were the primary drivers of the overall increase is the vast majority of residential production was retained on balance sheet, while demand for home equity offerings and line utilization increased meaningfully in the quarter.
Also excluding P. P. P loans strong growth occurred in the C&I category as well as construction with both categories also benefiting from increased line utilization.
Commercial real estate balances dropped $106 million or one 3% in the quarter as payoff activity on both the east Boston portfolio and legacy portfolios remains elevated.
Slide six provides some additional details around loan activity for the quarter.
As noted on the left side of this slide our commercial loan origination activity was exceptionally strong for the quarter with total closed commitments of $557 million.
With much of that production coming from construction and other line of credit type fundings total outstandings did not reflect the same level of increase in the second quarter, but bode well for increased utilization going forward in.
In addition, the approved commercial pipeline at June 30th was $372 million up notably from the prior quarter level of $307 million.
As for our opportunities in our market, we continue to see the majority of commercial real estate and construction activity centered around one to four family condo and apartment asset classes, while on the C&I side. The retail trade industry continues to provide solid deal flow.
Also noted on the slide you can see the P. P. P balances paid down to $31 million as of June 30th.
Generating $1 8 million of net fees recognized this quarter compared to $3 5 million in the prior quarter with remaining honoring net fees now only totaling 600000.
On the right side of the slide we reflect some key metrics around the strong consumer book activity for the quarter.
Given the company's balance sheet position and secondary market pricing dynamics during the quarter approximately 92% over the quarters mortgage activity was retained in the portfolio.
As history has proven out in prior cycles as the refinance market slows down in midst of rising rate environment, we see the natural hedge in our strong home equity products that really show its value as well.
Along those lines after a prolonged period of challenge and growth the second quarter, sorry, So a real solid closing activity, which along with increased line utilization led to the home equity balance growth I just previously mentioned.
As we move to slide seven deposit activity for the quarter was in line with expectations with decreases in time deposits and money market driving an overall decline in deposits for the quarter.
And as we enter into a rising rate environment. The long standing focus on core deposit relationships will likely lead to some level of rate sensitive money exited the bank over the remainder of 2022.
And allow for adequate levels of funding, while effectively managing our overall cost of deposits.
With core deposits comprising 86, 8% of total deposits as of June 30th.
Cost of deposits for the quarter remained low at only five basis points for the fourth consecutive quarter.
This serves I think is a nice segue as we move to slide eight and focus on the net interest margin results for the quarter.
And as we presented in prior quarters. This slide provides some details over the reported margin as well as a breakdown of volatile or nonrecurring items to reconcile back to our core net interest margin.
And as you can see here on both the reported and core net interest result increased nicely over the prior quarter.
In particular, we highlight the core net interest margin results, which when excluding the P. P. P fees and purchase accounting impact increased 23 basis points as compared to the prior quarter margin.
This increase is a reflection of the company's asset sensitive positioning as well as a favorable remixing of its excess liquidity.
As an update on the margin guidance provided last quarter. The bottom right section of this slide provides the key aspects of the company's asset sensitivity.
So in summary, with any movement in short term interest rates, primarily fed funds one month LIBOR terms, so far or prime we would see immediate repricing benefit and a federal cash balances Federal reserve cash balances of $1 3 billion and approximately 34% of our loan book that is tied to.
These indices.
During the quarter in an effort to balance its interest rate risk positioning and current earnings we closed on another $300 million of macro level loan hedges with $150 million of that being straight variable to fixed rate instruments and $150 million of interest rate collar hedges.
This strategy, partially offsets the loan benefit of rising rates in the long run while still providing some level of immediate earnings improvement in the near term.
So regarding the longer term impact the total macro hedge portfolio of $1 2 billion combined with a small subset of loans with index floors that are currently in the money would offset a portion of the asset repricing benefit I just described so.
So in summary, approximately 20% to 25% of total loans on a net basis would immediately benefit from rising rates.
As we have noted previously market pressures will certainly heavily influence the pace of deposit rate increases through this rate cycle.
Moving to asset quality slide nine provides some key metrics that are worth highlighting.
Nonperforming loans stayed relatively consistent at $55 9 million as of June 30th.
Net charge offs were a mere 200000 or one basis point on an annualized basis total delinquencies ticked up slightly to 0.4% of the portfolio.
In total loan deferrals at June 30th decreased another 108 million to $197 million or one 4% of the total portfolio with the majority of that set to mature prior to 2023.
So in conjunction with these stable metrics and modest loan growth zero provision for loan loss was recognized maintaining the allowance for credit loss as a percentage of loans at one point over 6%.
Shifting gears now to noninterest items Slide 10 provides details on noninterest income results for the quarter, a few of which I will quickly highlight.
Deposit account interchange and ATM fees, all increased nicely from the prior quarter, driven primarily by seasonal increases in activity and.
And despite a market driven reduction in assets under administration from 5.7 billion last quarter to $5 2 billion as of June 30, our overall investment management fee income increased nicely in the quarter driven by strong retail and insurance Commission income as well as seasonal tax prep fees.
Also on a positive note. Despite the challenging market conditions, we have experienced strong inflows of new money in 2022 seasoned sales reps combined with new hires have rarely seen success in our legacy markets as well as increased momentum in the newly acquired markets and geographies.
And lastly, as mentioned earlier, the company's capacity to absorb straight fixed rate lending products is challenged both mortgage banking and loan level swap income during the second quarter.
Turning to the next slide total operating expenses 96 million reflect a 2.4% increase from the prior quarter when excluding last quarter's $7 1 million of merger related expenses.
Some notable items in the second quarter expenses when compared to last quarter include increased incentive compensation within salaries and benefits decreased snow removal costs within occupancy and equipment.
And within the other noninterest expenses. The increase was primarily was driven primarily by increased consulting costs associated with certain operational initiatives increased unrealized losses on equity Securities and annual director equity Awards.
Lastly, the tax rate for the quarter increased slightly increased slightly to 24, 8% due to the increase in projected earnings.
So finishing up on slide 12, I'll provide a few updates with regards to 2022 guidance.
Regarding commercial loan growth inclusive of P. P. P. In small business total commercial loans are down approximately one 8% on a year to date basis and as we've described that's been driven mostly by P. P. P. Andy's Boston acquired commercial real estate run off as we expected.
We do anticipate flat to low single digit growth in the second half of 'twenty to 'twenty, two which would result in a relatively flat to low single digit percentage decrease in balances for the full year.
Regarding residential loan growth despite reduced demand expected expected in the second half we anticipate additional growth in the mid single digit rate range, which would peg 2022 full year growth at around 20%.
That's for home equity, we anticipate the Q2 positive momentum to continue into the second half of 2022 with low to mid single digit percentage growth for that six month six month window, resulting in full year 2022 growth in the mid to high single digit percentage range.
As for deposit growth, we are extremely pleased with our success of generating new core operating accounts in both our legacy and acquired markets.
Having said that the likely rising rate environment and excess levels of liquidity allow us to be strategic and letting some level of time deposits and rate sensitive balances to have tried out resulting in relatively flat to modest decreases in total deposits expected in the second half of 2022.
Also with the June rate increase and future rate hike expectations at virtually near certain levels. The guidance. We provided earlier regarding the immediate asset repricing impact and.
Strong deposit franchise will continue to drive core net interest margin benefit going forward.
In terms of provision levels, though overall asset quality remains strong looming recessionary fears or real though it certainly tough to predict the impact with so many moving pieces based on today's environment. We anticipate current allowance levels to hold steady for the foreseeable future with current charge offs, serving as the proxy for.
And levels going forward.
Regarding noninterest items total noninterest income could experience modest decrease is driven primarily by decreased investment management income and continued pressure on mortgage banking income.
In addition, as we talked about last quarter. We are also assessing likely changes to our overdraft program, though the final impact is not fully determined at this point and timing of any changes would likely be later in the calendar year.
And finally noninterest expenses are expected to increase in the second half at a low to mid single digit percentage rate driven mostly by wage and other inflationary factors.
And lastly, the tax rate for the second half of the year will likely approximate 25%.
That concludes my comments and we'll now open it up to questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.
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At this time, we will pause momentarily to assemble our roster.
[noise]. Our first question will come from Mark Fitzgibbon with Sandler O'neill. Please go ahead.
Hey, guys, good morning, and happy Friday.
Happy Friday.
Got it.
First I wondered if you could share with us what the commercial line utilization rate was in the second quarter I think it was 30% in the prior quarter.
Sure Yeah. So it's the only uptick slightly but are certainly trending in the right direction. So a cut.
Components within the commercial bucket smart our general C&I line of credit utilization was 31, 5%.
We also look at our ABL subset within C&I or asset based lending that went from 48, 9% to 49 point too so just a modest uptick there.
On the construction side that was slightly modestly up as well from 57.1 to 57.9.
So all just generally up nominally but still well below pre pandemic levels.
Okay, Great and then secondly, I'm wondering if you could give us an update on that one large $24 million syndicated loan that.
Went non accrual last quarter I think you had said previously you thought it would sort of cure in the next quarter or two any update on that.
Yeah, it's it's still going through negotiations. This is a as you mentioned a larger syndicated credit. So we are not the lead bank on that relationship but.
The expectation is still a full refinance.
But the timing has pushed out a bit. So we're now looking at potentially a an early fourth quarter resolution versus the original guidance, but certainly we expect.
No losses on it in a full resolution, it's just pushing it out a bit later in the calendar.
Okay, Great and then.
Then.
Next Marc we don't see a lot of banks buying back stock at two times tangible book can you kind of walk us through your thinking on on buying stock back at that level I guess I'm curious why not let capital build up, especially given what you described as kind of looming recessionary fears or pay it out in the form of a dividend so to avoid that.
Tangible book dilution just curious on that there are certainly a valid question and something we were very careful in assessing and in reviewing when we make that decision I'd say, it's a combination of a couple of things Mark that the first being we we certainly are operating at.
Would still continue to deem as excess levels of capital versus our optimal operating levels. So I think our level of repurchase activity. We've always felt made sense.
Given our overall levels of capital.
And I think really is is this despite the rest in recessionary concerns the rising rate environment gives us significant earnings power going forward.
So we are comfortable that when you look at the buyback levels at the rate. We did we believe our earnings power will accrete that value back in a reasonable amount of time that we still believe gifts shareholder value in the long term. So it it it is at a higher level, but I think our earning.
Power accrete snapped back in a reasonable and sufficient timeline.
Yeah.
Okay, and then lastly.
226 million of resi mortgages, you guys booked in the balance sheet this quarter or are those mostly hybrid arms or is there. Some 30 year volume in there and maybe what what is the average rate looked like on that stuff.
Yeah, it's almost all 30 year volume for the most part Mark and are the average rate in the second quarter had uptick to the high threes that still.
It sounds low given today and certainly the new volume is coming on significantly higher than that but for most of the second quarter. We were still talking mid to high three percentages.
So that's what came on in Q2.
Great. Thank you.
Right.
Yeah.
Our next question will come from Laurie Hunsicker with Compass point. Please go ahead.
Yeah, Hi, good morning.
Alright.
Wonder if you could help us think about accretion income.
Yeah any direction you can give us on accretion income obviously father reversal this quarter, just because it's so impactful into NII.
Yeah.
Got that.
Sure. So so the purchase accounting.
For the current quarter, we actually had yeah. We don't have too many of these left in the portfolio, but there are still some individual loans that have a premium fair value mark associated with them primarily on the east Boston.
Acquired loans, so as those work.
The more higher propensity to reap to prepay them, given the rate environment and refinance out we did see a few loans there with higher premiums on them pay off in the current quarter driving that negative purchase accounting impact.
I continue to feel comfortable that in the long run we still have significant net discount.
Our credit marks within the portfolio that will accrete positive.
Purchase accounting and I think you know I would peg that my expectation would be somewhere in the in the million dollar per quarter range.
Say Q2 is hopefully an anomaly in terms of having that negative impact.
Okay. That's that's very helpful and then kind of.
It looks like on your expenses. Your occupancy went went down can you just remind us I know you had a.
I originally said you were targeting 80% costing with UBS the acquisition by 2022.
Are we already there yet or are you ahead of schedule or how should we be thinking about that number yeah. No. We were there all of the occupancy cost saves have been achieved the biggest driver to be quite honest as snow removal. So.
The first quarter number within those results was $1 $2 million.
So 1.2 of that I believe $1 7 million dollar decline is literally tied to snow removal costs.
And then just the timing of some of the final exits we had on the east Boston portfolio that probably accounted for another two to 250000, a benefit in Q1 versus Q2, but as we sit here on June 30th all of those cost saves had been achieved and you should see now a Q2, serving as a good run rate going forward.
Okay. That's perfect and then just kind of more macro it is we're starting to see some warning signals. Some cracks in credit can you can you help us think about a few things maybe give us a refresh on your off that any details around the office, including wet right in downtown Boston anything on leverage lending and then just Jan.
Really any dressers within the legacy E. B S. B book I know they were very very discounted on an LTV basis, but any stressed or youre seeing there they had larger Cree down compared to you just anything you can help to think about on on those three buckets.
Sure.
You hit on some buckets that we certainly are or have always paid close attention to but I think we would we would view is making sure we understand where there may be emerging risk.
The first asset class you referred to them on the office space side.
In terms of just big picture metrics that makes up about 15% of the commercial real estate book.
About a billion five of outstanding balances and higher on the exposure side.
We have very little downtown Boston exposure within that book.
Less than $300 million of that is in Boston proper, there's probably another 100 million or so that as you know and in neighboring greater Boston, you know cities like Brighton and Jamaica plain et cetera, but you know when you pull in some of those neighboring towns its still well under $400 million.
Downtown Boston exposure. So most of our office space is suburban office.
You know those those properties still seem to be doing well you know we haven't seen any worsening conditions. They are we typically see those with shorter lease terms, which give us some greater comfort on the underwriting side.
And we've always through the good times and Darin risky times, we always.
Try and get a personal guarantees we look to limit our exposure to single tenant relationships. We look to match up no terms in and have evidence of lease terms that extend close to the maturity date. So.
Think that discipline serves us very well and it's as you mentioned, it's an area, we're going to continue to monitor closely but.
Our overall Ltvs are still very strong you know in that portfolio as a whole.
Closer to around 60% and given today's value. So I think we feel as good as we can right now.
In terms of some other categories you mentioned.
The leverage lending is actually down to only about $150 million as of June 30th. So we've had a few relationships exit there. If you recall a big piece of that is primarily our security alarm lending.
And that is always a first lien on tangible and intangible assets on the security side of it you know we have very defined borrowing base certificates that are tied to contractual cash flows that drive the ability to lend on those relationships. So it's very nominal exposure right now but.
It's a it's a credit bucket that we continue to feel good about.
And then lastly, I think the east Boston reference.
As we've been saying all along no secret. They did some larger deals you know part of that is embedded in those office exposure metrics I gave you we had some.
I'm fairly conservative credit marks on that that we think protect us.
But we have seen you know we've seen a lot of outflow in that in that category. So that certainly limits, the ongoing or or future exposure related to downtown Boston, but you know where there's there's a few credits there that we're staying close to.
But again all in all we're not seeing any mass migration of Av.
Negative credit asset quality does it like I said, there's a handful that we're just monitoring more closely but nothing.
Nothing wide scale at this point.
That's great. That's Super helpful. And then just lastly last question grant can.
Can you can you help us think about M&A and how you potentially are thinking about it differently. If you are thinking about it differently with my comment with regard to you know higher interest rate Mark playing on tangible book and obviously, you're very very strong stock currency. How you would think about credit mark you're a very disciplined and very strong.
[noise] acquirer and so would just love your your high level thoughts on.
Generally how you're thinking about it.
Oh, well very very high level the.
We've had a tremendous success with our M&A transactions over the years, you're right. We are very disciplined.
We do believe though we.
I would like that to continue over time, I mean, the and there's franchises become available we'd like to be at the table.
Having said that the uncertainty.
So does it when you're looking down the barrel of the next couple of years certainly would warrant.
Further discussion and probably some additional scenarios thinking about sort of the implications of that and so.
I can't tell you exactly where we come out on any particular scenario, but you're right in saying that he will you require a lot more thought now then I think it has in the past.
Mark do you have anything to add to that.
No I think you summed it up well, Chris Yeah, I mean, we still have a nice currency advantage alright, nice it like to be able to use it.
Great. Thank you.
Yeah.
Again, if you have a question. Please press Star then one.
Our next question will come from Chris O'connell with K B W. Please go ahead.
Hey, good morning, gentlemen.
Circle back I may have missed goodra them with the initial buyback question.
But did you guys indicated you guys would be kind of continuing to utilize that buyback going forward or not.
We didn't provide direct guidance there, Chris but you know through through Q2, the level of activity amounted to about 75% of what we had originally authorized.
So right now there would be you know fairly modest impact if we were to.
To continue repurchasing in the third quarter.
But again it'll be okay.
We'd say, that's going to be dictated by stock price and our decision at the appropriate level to buyback.
<unk>.
Okay got it.
And.
Of the.
Legacy Ebs few loans that you guys are kind of continuing allowed to falloff in the back half of this year.
What's the average rate on those.
Inclusive of.
The marks we put on for the most part I believe they were in the.
I don't have the exact numbers to be honest, Chris, but I'm guessing there were around.
Three 4%.
Because of the marks on them and and to be quite honest, we're seeing.
We're seeing a pretty competitive environment out there. So what we are seeing exit is often priced very competitively.
And at rates that in many instances, where we haven't been willing to to compete at.
Got it and.
And that is growing could you give us an update on <unk>.
Where origination yields are coming on Adam on both the commercial side and the resi side.
Sure you know it's it's.
Then we've been able to really a.
Mirror, what you've seen them occur on the curve. So when you look at the swap curve or the F. H L. B curve that five to seven year.
Part of the curve is up 50 to 60 basis points on average quarter over quarter. So we are experienced in that type of lift in terms of our new originations. So.
So on the commercial side you know, we've we've been getting in the in the mid 4% range on the RAC.
We've moved up on.
Our portfolio of pricing into the high 4% you know close to 5% range in terms of recent volume coming on the books. So certainly we've seen nice increases in terms of new originations quarter over quarter.
Great.
And then on the.
On the deposit costs.
Obviously, you've held flat so far and the runoff should help.
In terms of managing that going forward have.
Have you guys have you guys thought.
What about when there might be more widespread increases in your deposit costs.
Timing of that and.
How you see it progressing in the near term.
Yeah, no very on point question, there, Chris we've already made decisions as of late that will certainly increase deposit cost heading into the third quarter just the timing of those decisions then it manifest themselves yet in the Q2 results. So we.
We do anticipate based.
Based on just the decisions we've made to date the cost of deposits increasing by about four or five basis points in the third quarter, so going to about 10 if.
If we do get another rate increase here in July which is very highly likely I would expect we'll we'll be making additional moves in the quarter.
The timing is a bit TBD, there, but I think you'll see cost of deposits certainly start to move north of 10 basis points and likely uptick towards the 15 basis point range, depending on what we get for rate increases.
Okay. That's very helpful. Thank you.
And then I'll, let you go.
I have deferrals have come down quite a bit.
And then the vast majority it seems like are set to mature in the fourth quarter. This year.
Have you guys evaluated those recently and how do you think that'll play out.
In terms of coming back on principal thing.
Yeah.
For the most part.
We would expect the majority of that to come back to full payment status.
If you recall a number of those.
At the time more and asset classes like hotel and accommodation and we took a pretty proactive approach and extending those out for a fairly lengthy amount of time under the cares Act provisions. That's an asset class space that has really bounced back very strongly in fact, a lot of dock our hotel book is.
Is really performing at a very strong levels. So I don't have all of the breakdown, but I do know that was a meaningful component of our deferral.
And I would expect those asset classes to bounce back without any issues, but I can provide more details if needed Chris after the call.
Okay, that's great.
So I had for now thank you.
Thank you thanks, Chris.
There are no more remaining questions at this time and with that we will conclude our question and answer session I would like to turn the conference back over to Chris Oddly Ipsen for any closing remarks.
Thank you Joe and thank you everybody for joining US today, we look forward to chatting with you in three months regarding our third quarter 2022 results.
Have a good weekend and for those of you are in a hot area of the country, which I imagine as most of you will stay cool this weekend be safe bye.
Yeah.
The conference has now concluded.
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