Q4 2022 Independent Bank Corp (Massachusetts) Earnings Call
Good day and welcome to the I N D. B Independent Bank Corp, fourth quarter 2022 earnings call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two.
Before proceeding. Please note that during this call we will be making forward looking statements actual results may differ materially from these statements due to a number of factors, including those described in our earnings release and other S. E C.
Pilings, we undertake no obligation to publicly update any such statements. In addition, some of our discussion today may include references to certain non-GAAP financial measures.
Information about these non-GAAP measures include REIT conciliation to GAAP measures.
It 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.
Please.
Also note that this event is being recorded I would now like to turn the conference over to Christopher I believe Syn <unk>.
President and CEO . Please go ahead.
Oh, good morning, everyone and happy new year.
Thank you for joining us today.
I'm once again joined by Mark Ruggiero, our Chief Financial Officer, and Rockers own our Chief operating officer.
As I'm sure. Most of you know by now we recently announced my decision to retire as CEO . After 20 years at the helm of our terrific Bank.
It really is no mystery here, just customary thoughtful succession planning overseen by.
Our independent directors.
Station to retire was mine I am healthy and well and after two decades just felt it was time to pass the baton to someone else to lead the next phase of our growth and long term success.
The board has made a great choice and Jeff tangled to lead that effort chapel, formerly assumed the CEO role on Monday February six.
I remain an executive and an executive advisor role until the end of this year I don't want to continue to serve as a director until my term expires in May 2023.
The CEO transition does not reflect a change in our strategic direction whatsoever.
Also after many years of succession planning, where he recently elevated to long term commercial colleagues, Jim Resettling, Catherine O'malley to our executive leadership team. Both will continue to report to our President Gerry Nadeau.
On the earnings front, we capped the year with another strong and fundamentally sound performance that income in the fourth quarter rose to $77 million or $1 69 per share.
Mark will take you through the quarter shortly well I'll be focusing my comments on our full year just concluded.
And actually it was another in a string of strong annual performances in a difficult economy, our operating EPS grew by 8% in 2022.
Loan activity remained robust with commercial loan closings rising 14% to $2.1 billion will combine your residential mortgage and home equity originations totaled $1 $2 billion.
We continue to generate record of level of consumer checking account openings and core deposits core deposits comprise comprised 88% of total deposits.
Astute balance sheet management drove a 44 basis point improvement in our full year net interest margin.
The strength of our investment management business was on full display this year as strong new inflows totaled $1.2 billion way above previous levels.
Our assets under administration or management increase versus a year ago to $5 $8 billion. Despite the sharp decline in market valuations.
Yeah, one fun, one fun a footnote our historic side note I'd like to share with you is that a $1.2 billion of new money.
In 'twenty to 'twenty two is almost three times. The total assets are managed and we had when I arrived in 2003. This business has come a long way.
Credit quality continued in excellent shape with a total loss rate of a mere one basis points for the full year capital remains at Apple levels, which accommodated ongoing share repurchases and healthy dividend increases.
And expense levels are being well managed bringing our operating efficiency measure to nearly 50%.
We also made significant strides in advancing our franchise on a number of French most significant has been the seamless integration of East Boston savings Bank, our largest acquisition to date, which has materially strengthened our presence in a coveted Boston market, while being both accretive to both earnings and tangible book value.
Hugh.
We continue our expansion in in and around what are the second largest city in Massachusetts.
Reception to our brand has been excellent.
We continue to make critical enhancements to our digital banking offerings covering a full range of account access and openings payment networks in front end loan processing.
And our ability to attract experienced senior talent into our company continued throughout the year, including the hiring of a chief risk officer successor initial able us to capitalize on our new business opportunities arising out of our larger size and expanded footprint.
Looking ahead, our near term priorities lie and Hum.
In the following areas talent.
Our real focus there to accomplish our long term goals and capitalize on opportunities building our businesses in areas, where we enjoy competitive advantages.
Streamlining and modernizing to remain competitive and nimble, while keeping pace with the rapid technology advances our branch network optimization continuous finding that right balance between our physical presence.
And satisfying the widely varying preferences of different generational consumer groups of course E. R. M Enterprise risk management continues to evolve.
Sharing that our risk management infrastructure and skill sets to keep pace with our growth.
Course contingent integration of new businesses, and new colleagues must continue to develop that motivate our our colleagues to meet the challenges of both organic and acquired growth.
These priorities are all supported by detailed plans, which will approve of great helped it Jeff as he comes onboard.
A few quick observations on the economic front the job market continues to be a bright spot for economic activity with consistent and strong paywall cranes are retail sales printed back back monthly declines are probably still a cooling in the overall economic activity, which maybe consistent with their <unk>.
Inflation or a poor showing signs of easing with broad based declines in prices of.
The fed remains hawkish has indicated that there is more room for rate hikes in 2023, so as a final economic prognostication as CEO I'll say that while the risk of or tightening shouldn't be overlooked the window for a soft landing or remains a possibility.
So before signing off my last up 80 earnings calls.
I'd like to say that it has been an honor and a privilege to serve as CEO of IDB and Rockledge Rockland Trust for the last 20 years.
I've seen our company grow from $2.3 billion in assets to nearly 20 billion.
From annual operating income of 24 million to $269 million or market crap.
Market cap has gone from a $339 million to $3 9 billion.
Our investment management grew assets under management from 334 million to $5 8 billion.
No from my precise February 24, 2003, CEO start date share prices increased 305% versus a K B W.
Index increase of 42% and NASDAQ Bank index increase of 84% tangible book value per share has gone from $8.64 too.
$41.12, an increase of 376%.
We've accomplished a great deal by nurturing and building a relationship oriented culture of care and respect.
We believe that a great place to work and are attaining excellent colleagues as the essential foundation of a high performing bank over the long term.
And we've been recognized by the Boston Globe Top places to work employee survey for 14 consecutive years.
And we've heard high rankings across a range of customer satisfaction service and loyalty categories as <unk>.
Survey by J D power Greenwich Associates in Forbes, among others J D. Power currently ranks number one in retail customer satisfaction in new England.
I'm extremely proud of all my colleagues now while culture may start at the top of our entire team deserves credit for the culture of the bank and the success and momentum of I N D B.
I am so grateful that ive been able to work alongside my amazing colleagues to build <unk> into what it is today I can't thank them enough they've been extraordinarily engaged and resilient over the years and brings so much enthusiasm and passion to excel day in day out.
So I say assessor, Jeff Tango will benefit from a deep and accomplished executive management team, including a Rob and Mark who are here on this call with me.
And I'm deeply indebted to all my fellow executives together, we've been focused disciplined and unwaveringly committed to nurturing a culture of the bank.
Produce consistent.
Solid results over a long period of time, I will truly less leading the bank with them.
I'm also grateful to our board of directors for giving me this opportunity in 2003 after their unflagging supported me over the last two decades through good times and occasional difficulties.
And finally I wish to thank you the investment and analyst community for your support.
He has maintained an open and honest dialogue I have learned a lot from you and I. Thank you for your interest and insights.
I'll now turn it over to Mark.
Thank you, Chris certainly a tough act to follow but I will now take us through the earnings presentation deck that was included in our 8-K filing and is available on our website and today's investor portal.
Jumping to slide four of that deck to summarize results 2022 fourth quarter GAAP net income was a company record 77 million and diluted EPS was $1 69, reflecting seven 2% and seven 6% increases respectively from prior quarter results and.
In the fourth quarter results produced a 1.56% return on assets of 10.70% return on average common equity and a 16 point, 57% return on tangible common equity.
All up significantly over prior quarter results.
Regarding tangible equity the tangible book value per share increased an impressive $1 56 to $41 in 12 cents as of December 31st reflecting strong earnings and stabilize the other comprehensive income.
There were no share repurchases during the fourth quarter as.
As we move our way through the deck, we will hit on additional D. We were hit on any additional details behind the quarterly performance key drivers noted here on the slide.
Turning now to slide five we provide a high level summary of our loan portfolios for the quarter.
And as noted here reported balances for the quarter increased one 7% or six 6% on an annualized basis.
As anticipated with the rising rate environment payoff and refinance activity decreased when compared to prior quarters, which along with the strong closing activity, Chris noted fueled solid commercial loan growth across both C&I and commercial real estate.
Residential balances also increased nicely, but at a slower pace than prior quarters.
Slide six provides some additional details around the loan activity for the quarter.
As I just alluded to new commercial commitments for the quarter was strong at $636 million up over 20% from the prior quarter.
Naturally drove a decrease in the approved pipeline from $383 million last quarter to 317 million at year end. However, the current balance should still bode well for good closing activity heading into 2023.
And as noted on this slide you can see the majority of activity is in the asset classes and industries, we've been referencing for most of the year.
On the right side of the slide consumer portfolio closings were down compared to the prior quarter as expected with the vast majority of Q4 residential volume once again placed into the portfolio driving the solid balance sheet growth.
Moving now to slide seven the combination of inflationary pressures impacting customer liquidity and competitive pricing led to a 2.8% decrease in overall deposit balances.
New account opening activity remains strong, but it's no secret we are in a different deposit environment than we were just a few quarters ago.
As such we remain focused on core relationships and operating accounts, while addressing pricing pressures where needed.
As noted on this slide the majority of outflow occurred in our business savings and money market balances with consumer balances experience and some that flow as well.
While the C. D products that served as a compelling alternative to retain some level of higher rate sensitive customers.
As expected. These dynamics resulted in an increase in the cost of deposits to a still low 35 basis points for the quarter up from the prior quarter level of 15 basis points rich.
Reflecting the inherent value of our deposit franchise.
Just on the effective date of the federal reserve rate hikes, but total deposit beta for the quarter was 14% with a cumulative beta on all deposits at only eight 4% or 13% when isolated to only interest bearing deposits. However, we do not deny the pricing pressure has increased and.
We will touch upon deposit cost outlook and our forward guidance.
Slide eight reflects our customary snapshot of the reported margin as well as a break down a volatile or nonrecurring items to reconcile back to our core net interest margin.
The 21 basis point increase in margin and 23 basis point increase on a core basis is right in line with previous quarter guidance and a reflection of the asset sensitivity position and noted in the bottom right of the slide.
With absolute levels of cash significantly reduced our overall asset sensitivity has also been reduced with the balance sheet well positioned to manage interest rate risk heading into 2023.
Moving on to asset quality slide nine provides some key metrics worth highlighting.
Addressing the key notable development referenced in the earnings release first the C&I credit, making up the majority of that categories nonperforming balances in both Q3, and Q4 is still and work out.
Though still very fluid a specific reserve allocation of $14 million has been built over the last two quarters and is reflected in the provision levels already recorded with actual charge off amount in the 2023 timing still being assessed.
Not surprisingly then now delinquent status of this loan is the main driver of the fourth quarter increase in the overall delinquency rate.
Side from that one loan no. Other pervasive credit concerns are noted with nonperforming assets staying relatively consistent at $54 9 million and negligible charge offs of only 394000 for the quarter or one basis point annualized.
Shifting gears to noninterest items Slide 10 provides details on our strong net interest income results for the quarter, a few of which I will highlight.
Decreases in deposit account interchange and ATM fees reflect typical seasonality.
Regarding investment management income the significant increase in revenue reflects continued very strong new money inflows as Chris noted.
Solid market performance strong retail commission income and a one time nonrecurring earned incentive of 650000.
So a portion of the growth is tied to a meaningful increase in customer demand for shorter term cash strategies.
The increase of assets under administration from one from $5 1 billion last quarter to $5 8 billion at year end is a testament to investment performance as well as the inflows generated from the relationship synergies developed over many years between wealth and bank colleagues.
Loan level derivative income increased nicely as customers have become more comfortable with expectations over the pace of future rate changes.
And lastly, other noninterest income includes a $900000 gain on the sale of a previously closed branch building.
Turning to the next slide total operating expenses of $94 9 million reflect a two 3% increase from the prior quarter, while the quarter contained some specific notable variations to the prior quarter results such as changes in the fair value of split dollar insurance obligations and increased technology spend.
The overall increases in line with expectations.
Lastly, the tax rate for the quarter dropped to 23, 2% as the fourth quarter typically reflect some level of discrete adjustments related to the filing of the corporate tax returns.
We'll now shift gears to slide 12, and cover 2023 forward guidance, which will obviously remain fluid throughout the year.
But the level of overall economic uncertainty still at play we expect overall loan growth in the low single digit percentage range and what the payoff activity in commercial real estate decreasing from 'twenty to 'twenty two levels, we should see more balanced growth across both the commercial and consumer books.
His departure as deposit pressures continue we anticipate additional decreases in balances in the first quarter of 2023 in the low single digit percentage range.
So we will remain focused on customer acquisition efforts insight into deposit balance volatility for the rest of the year is difficult to predict at this time and we will certainly provide quarterly updates on deposit balance expectations throughout the year.
Given the current balance sheet profile at year end, we anticipate securities will attrite modestly over the course of the year, while cash and or some level of wholesale borrowings will be a function of actual loan and deposit activity throughout the year.
Regarding net interest income we currently expect our loan yield betas to stay in the range of 20% to 25%, reflecting the overall composition of portfolio is tied to short term rates combined with the one point for a 5 million dollar current macro hedge portfolio.
Deposit betas are expected to continue to increase from prior quarters with the cumulative total deposit beta to reach approximately 15% through the cycle.
In terms of shorter term guidance, assuming an early February 2023 federal reserve rate increase of 25 basis points. We expect the net interest margin to expand in the first quarter by three to five basis points with a reminder, that fewer days during the first quarter will drive lower net interest income results on a relative basis.
Regarding asset quality and provision levels, we think it's prudent to keep our guidance anchored more in the near term than our full year outlook.
As the previously mentioned large C&I loss estimate has already been provided for future provision levels will continue to be driven by loan growth any future migration of asset quality metrics or changes in the overall economic outlook.
Regarding noninterest income despite an anticipated late Q1 change.
And our overdraft program anticipated to reduce 20 twenty-three fees by approximately $3 5 million total fee income is anticipated to grow by a low single digit percentage compared to 2022 totals.
Key drivers of the growth are expected and deposit account interchange and ATM given the focus growth on core operating accounts.
<unk> gross momentum in wealth management, they'll likely not to the degree you experienced in Q4 and a continued demand over a loan level derivative product driving fee income similar to the levels noted in Q4.
Given the reduction in mortgage refinance opportunities and decreased pipelines mortgage banking income will continue to be challenged for much of 2023 rigs.
Regarding more immediate guidance given the increased level of nonrecurring fee income noted in the fourth quarter and reduced level of days in Q1.
Q1 fee income is expected to be down a high single digit percentage when compared to Q4 levels.
Regarding noninterest expenses inflationary pressures increased investment and continuously improving the customer experience and some one time items associated with the recently announced CEO transition are expected to drive increases in total expenses in the mid to high single digit range for the full year.
As compared to 2022 operating levels, which exclude M&A in terms of more immediate guidance.
Q1, 'twenty two 'twenty three expenses are expected to increase at a low to mid single digit percentage over 'twenty 'twenty to Q4 levels.
And lastly, the tax rate is expected to be in the 24% to 25% range for the full year.
That concludes my comments and we will now open it up to questions.
Yeah.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time we.
We'll pause momentarily to assemble our roster.
My first question comes from Mark Fitzgibbon with Sandler O'neill. Please go ahead with your question.
Hey, guys. Good morning, good morning.
I just wanted to start by saying, Chris Congratulations on your retirement, you've you've done an absolutely amazing job at the helm congrats.
Thank you very much part it's been a pleasure to know you for these 20 years.
First question I had for you you referenced in your early comments about the investment management business. You had about 470 million of net flows this quarter did that come from existing clients or did you bring in some new teams that really drove that.
Yeah, a little bit of both Mark we are we had a couple of hires in 2022, one of which really was was very successful in.
Tapping into his connections and networking.
And brought in about $80 million of gross money during the year. I also mentioned, we rarely found a good opportunity given the rate environment too.
To to work with both existing customers and some new customers, who are looking for more shorter term treasury security cash strategies and that that equated to about $240 million of new money in the year. So that's a little bit of a different.
Product set from our typical wealth management business, but I think a good reflection of really leveraging the retail bank and and being creative to look for opportunities given the interest rate environment. So those are really the two drivers, but the team still find really good opportunity in our typical larger wealth products.
We talk a lot about the long standing relationships.
The relationships that our wealth advisors and commercial lenders have created over the many years and you're really seeing that on display lately.
And then just Mark one thing that I want to add to this is that the code that we cracked a number of years ago is the oh completely eliminated any reluctance reluctance from the vast majority of our commercial lenders and the branches to working with wealth and providing referrals to wealth.
Stumbling block that exist.
Exist in many other financial institutions.
Okay, and then what was that $650000 onetime incentive and the wealth business.
Yeah, just didn't and we we actually switch to a couple of our wealth products to a different platform and the third party, we're using for the new platform incentivized us to to make that switch so theres a one time.
Fee associated with the transfer of that money from a platform perspective, something that was also a win win for a set of our customers.
Customer service and access and so on.
Okay, and then I know credit is not really an issue, but a couple of quick credit credit questions. If I could.
That one C&I loan that you've already provided for a I think you said you had a $14 million reserve against it do you think that's sufficient to be able to cover the charge that youre expecting to take and when will you do you anticipate taking that that charge. Yeah. At this point, we feel that's sufficient you know as I noted in my comments.
There's a lot of moving pieces to it. So obviously actual loss is still somewhat undetermined at this point, which is why we have not taken the charge off and have taken a specific allocation, but theres really additional work being done the company did file bankruptcy and theirs.
Liquidation expected of the company, which will drive a collection on receivables that's our primary collateral. So it's truly just a function of how well those receivables holdup in terms of of what sort of repayment will get through the process. We expect that timing Unfortunately to linger a bit Oh. This is a law.
Large syndicated deal many banks involved so I wouldn't anticipate a charge offs well I wouldn't expect full resolution in the first quarter, whether we'll be in a position to take a charge offs, there's still to be determined.
Okay, and then lastly can you remind us how large your Boston office book is and maybe what the average ltvs and debt service coverage ratios look like on that.
Sure I have the dollar amount in terms of true downtown Boston office exposure is about $240 million and balances a little bit higher in exposure.
It's important to note and included in there is about $50 million of owner occupied.
So it's a it's a portfolio we feel really good about and this is quite small in regards to the total office portfolio of about 1.5 billion.
But some other exposures in and neighboring cities like Brightened, Jamaica plain, that's probably another $80 million to $100 million in total balances, but yeah. We feel we feel good about the exposure.
Have all the LTV and debt service metrics in front of me, but I do know that those have been fairing, well and we're not seeing anything from a pervasive control by any means.
A pervasive concern at this point.
Thank you.
Sure. Thanks Mark.
Our next question comes from Steve Moss with Raymond James. Please go ahead with your question.
Hi, good morning.
I want to say.
And Chris Congratulations again on your retirement here.
<unk>.
Maybe just start off on the margin and NII outlook, just curious who you know.
Where is loan pricing these days.
And then if we think about the fed moving to.
Stay around 5% on on fed funds and holding there for the rest of the year. How are you guys thinking about that margin trajectory.
Sure. So you know.
First element of your question, Steve in terms of new volume.
Certainly from a fixed rate perspective, we continue to see the lift of the increase in rates. So for the fourth quarter keep in mind, there's a bit of a lag in terms of when loans are committed to versus when they hit the book So focused primarily on new outstandings for the quarter, we saw fit.
Fixed rate pricing on the commercial side, certainly move north to the to the high five 6% range.
For mortgage it was more in the mid 5% range in terms of what got booked in the quarter and similarly home equity slightly north of that so.
Obviously, a reflection of the rising rate environment, we've seen good churn over in terms of the yields on new new volumes getting booked.
In terms of longer term margin guidance, we talked about the three to five basis point.
Increase expected here in the first quarter that would be a function of expectations around the fed raising 25 basis points in their next meeting which is late January early February .
If they do another 25 as you indicated to get to that 5% fed funds target I think you'll find that the continued pressure on the deposit.
Pricing will will certainly mitigate really any meaningful increases of asset repricing going forward. So I think you'll see the margin.
Our expectations would be that would kind of get stabilized around that high $383 90 range. If that forward curve plays out as you indicated.
Okay, and maybe just on the deposit pricing side.
Im assuming that you know.
You probably think of if we're holding here.
And deposit pricing continues over the course of the year.
Kind of where do you think do you think like highest ratings for margin is sustainable for the second half of 'twenty, three or something below that.
Yeah, I think if we can you know given the that the value of our deposit franchise and I think are a proven ability to.
To manage those cost efficiently that is the goal is that we'd be able to maintain our margin in that high 383, 80 range, despite continuing to to price up deposits where needed.
Okay.
That's helpful. And then you know curious here with the 50 O change kind of you know.
What is your internal thought process on M&A activity going forward here and any color you can give around the discussion level in the market. These days.
So while we are.
Very much still interested in M&A opportunities and I am CEO for other what the 10 days. So if I get a call I will certainly respond to that and one of the first orders of business with Jeff will be sort of outline the handset of our incredible paas.
<unk> history here our success why we've been successful.
No.
And.
I have a high degree of confidence that he's gonna be receptive as well.
In terms of what's going on in the market more marketplace.
It's one of these things as you know.
You have your list you have a list you have all the candidates and every once in a while somebody raises their hand and says okay. I want to talk and it's given the number of banks that are have dwindled I sort of more of a random event. These days and any sort of continuous flow, but I, but I will make the.
They very bold prediction that overtime they will continue.
Yeah.
Alright, Thank you very much.
Our next question comes from Laurie Hunsicker with Compass.
Compass point. Please go ahead with your question.
Yeah, Hi, Thanks, good morning, good morning.
Hoping we could start over with credit can you just remind us that let's.
The C&I loan that the non performers what what is the actual net number now that of that 14 million reserve and then within your loan loss provisioning. This quarter did you take anything in other words, the five and half million did you take anything specific to that loan.
Yeah. So.
It's about a $23 million outstanding balance so our.
Exposure on the books you could say is about 9 million given the specific reserve we've allocated.
That that primarily was the driver of the $5 5 million provision Laurie is that one credit we allocated money.
Through our pooled approach in the third quarter are specific to that loan. So the $5 5 million provision recorded in the fourth quarter was to get the total allocation up to the $14 million I referenced.
Got it okay.
Yes, just to make sure that that I'm hearing that right Mark so the five and a half million that you provided this quarter that was entirely related to that the C&I loans.
The most part I mean, we have a couple of other elements, but that's the main driver correct.
Got it got it Okay and then on your guidance I guess I just wanted to make sure that.
And I'm thinking about this the right way or your full year money.
<unk> 23, non interest expense guidance expected to be mid to high single digits relative to 'twenty 'twenty tail.
Are you stripping out the $7 1 million of merger charges from your 22 base are you including that in that number.
Hi, I'm stripping that out so we're looking at it on a on an operating basis in terms of expense.
Perfect and then and then same thing with the 2023 or you're stripping out.
C E O, Turkey expenses or how do we think about that so that those are embedded in that in that guidance as well you know, there's certainly one time in nature or there's some transition expenses associated with that that'll be onetime in nature, but we are including that in the expense guidance we've provided.
Right, Okay, Great and then last question.
And I think this for a while but I don't Wanna get soaked up Chris I'm really going to Miss you and your whole team has obviously amazing the appreciate how clear and transparent you've been with us over the years.
Yeah, I, just I think you're amazing and congratulations Chris we're going to Miss you, but I guess the big question that I'm just trying to understand you are involved in absolutely everything you've said on so many board you are the largest insider older.
In terms of stock.
You know when you're younger than than some of the board members and the street.
Look we love deal.
Why not stay on the board can you help us think about that a little bit and I realize I'm, putting you on the spot you know my last question is you on this earnings call, but I'm.
Just really wanted to understand that you are so well loved that showed up in your price premium for so many years and I just wanted to understand why you're not staying involved.
Yeah.
Laurie now.
You and I go way back I think.
You're one of the very first analysts, saying that back in 2003 I went to many of your gatherings with and at which had that many other fellow Ceos and you helped me get established in and understand what the market is all about and for that I'm very very appreciative.
And I'm also extraordinary really complemented with your question.
I know you've you've seen a lot are you see a lot of banks and.
To they May have asked this question makes me feel very gratified that we've done a good job over the years.
So but to answer your question specifically.
I'm, taking a page out of my predecessors playbook. He he was a great CEO too he saved the bank on the he this bank, but we would not be having this conversation today, if it wasn't for Doug Phillips and he recapitalize the bank. He brought an amazing set of talent in here any really set in place.
The momentum in the bones or upon which this management team has built.
Built the bank over the last 20 years.
And one of the things I really appreciated about Doug.
Is that he.
Was there for me.
Any tiny I needed some clarification or question he was more than happy but in terms of setting a set of ever set of.
New energy our direction.
And instead of amping up in FHL, the emphasis that I brought to the table now whether it was in the.
Wealth management space, how to think about amping up the retail space home equity some of the technology stuff. He he he stayed out of my way and he and he was not in the boardroom where.
Directories quite frankly, I think given his reputation would be looking at him every time, I said, something and just sort of saying Oh, well, Doug what do you think about this and I think I need to do that do that same thing for Jeff and I will be.
Available.
Technical I mean literally available for them for the rest of the year, but after that.
I do have relationships and whether its I can the and I still well, despite not being a contractor and payroll will be representing Rockland trust in the marketplace with my community activities. You know the association of Chris Isaacson of Rockland Trust is still going to be there.
And last lastly, Laurie you know from a personal perspective, I want more time to do some other things.
65 will be 65, I figure I have another.
20 years of active Neste, my wife, and I are planning side of the.
And in the center of ranking the fish.
But you know there are other things that are visiting.
Machu Picchu, which requires some heavy tons athleticism.
They will do early on so I'm looking forward to that aspect to Laurie, but thank you very much.
Thank you Chris didn't have fun in Paris, and its been lovely working with you congratulations thank you.
Our next question comes from Chris O'connell with K B W. Please go ahead.
Good morning.
Congratulations Chris on your retirement and I'm incredibly successful and consistent track record here over the past 20 years.
Well thank you.
So wanted to just start off on.
On capital levels.
You know remain robust and increase this quarter.
No share repurchases it seems like during the quarter, but you're still gonna operation authorization outstanding here, how are you guys thinking about.
The utilization of the share repurchases going forward given that the balance sheet growth.
Appears to be more muted in 2023.
Yeah, Great question and you know.
I think we always answer this question pretty consistently and that is the share repurchase plan is in place to be opportunistic.
We're very comfortable with our capital levels. This gives us a lever we can pull in the event. The economics in the you know the situation at hand makes sense too. So we always think about share repurchase activity as being the right decision for a value for our shareholders, we only execute our prices.
We feel represent a fair price and given our historical track record and would give us a tangible book earn back period that we are comfortable with in terms of that immediate dilution of buying back. So we typically don't talk to what that exact number is but that is constantly.
And the analysis that we performed throughout the year is to gauge what is the right level that we're comfortable with them and it's there in place if the stock price does.
Come under some pressure and we think it's appropriate to buy back at levels. So we're we're we're happy it's there. It's it gives us plenty of flexibility moving forward.
Got it.
I mean this the share price is relatively similar to where you guys are doing repurchases in <unk> and <unk>.
Have there been any repurchase activity.
So far.
In the new year.
We haven't disclosed that.
Chris yet so we'll we'll certainly provide quarterly updates on that.
Okay got it.
And switching over to loan growth.
The pipeline is it seems like you know, although down a little bit quarter over quarter seem to be relatively strong or similar levels.
To where they were in the past quarter.
And you're talking about.
Repaired comments, a little bit about.
Less CRE payoffs.
Coming up through 2023.
So putting that together can you talk a little bit about you know the first quarter.
How you see the.
Cadence of loan growth progressing throughout the year.
Yeah, I think our expectation is.
Yeah. It does.
So much uncertainty in the environment you know, we really are looking at it.
Only three to six months all out of time and I think you referenced to the approved pipeline here at yearend is it's down a bit from where we were in the fourth quarter, but but not material.
And you saw the results in the fourth quarter with the.
The growth we experienced across most of our commercial book. So we think it's.
Well you know, we're very positive about the opportunity certainly the rate environment is helping in terms of seeing some reduced level of payoffs. There are some credits out there that.
We think it may still exit and maybe in the process of being refinanced but for the most part that activity has subsided pretty meaningfully so I think even with.
A more cautious approach to new deals given the uncertainty in the environment.
We're getting from the reduced payoffs, we think translates to some level of a modest growth as we noted in our guidance.
Okay.
Got it.
As far as cash levels I know it would be bouncing around depending on deposit flows but is there a minimum level of kind of overall cash that you guys want to retain on balance sheet over the long term.
Oh, no I mean, we look at liquidity balances, there's a there's a whole chris and comfortable with.
Absolute levels of liquidity, whether that's cash or other short term investments. So there isn't a specific cash number that we're targeting you know just a reminder, we are zero wholesale borrowings on the balance sheet. Today. So we have plenty of access.
Two to off balance sheet liquidity, we have different avenues, we could go down when and if that need arises. So we're comfortable bar.
Borrowing overnight, we're comfortable extending into longer term borrowings if pressure on cash subsides. So what do you think we're very well positioned to just.
Take that and as it comes over the first three to six months certainly monitoring.
Our deposit outflow will be a big driver as to any decisions we make on.
Any long term financing, but at this point I think it's still very fluid that you'll you'll likely see at least in the first quarter some level of cash.
Cash <unk> overnight borrowings if that situation arises.
Understood.
Appreciate the time, thanks for taking my questions.
This concludes our question and answer session I would like to turn the conference back over to the fifth.
Oddly ipsen for any closing remarks. Please go ahead.
Yeah. Thank you very much for everybody for joining us today and.
Now for 20 years, I said, they'll see I'll see you and talk to you in three months.
Not the case, it's been a real pleasure being on these calls all these years and thank you for your interest and support.
Wish you very well goodbye.
Yeah.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.