Q3 2023 Independent Bank Corp Earnings Call

Speaker 1: Good morning and welcome to the Independent Bancorp Third Quarter 2023 earnings conference call.

Good morning, and welcome to the Independent Bank Corp, third quarter 2023 earnings Conference call.

All participants will be in listen only mode.

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Speaker 1: Before proceeding, please note that during this call, we will be making forward-looking statements.

Before proceeding. Please note that during this call we will be making forward looking statements.

Speaker 1: Actual results may differ materially from these statements due to a number of factors including those described in our earnings release and other SEC filings.

Actual results may differ materially from those from these statements due to a number of factors, including those described in our earnings release and other SEC filings, we undertake no obligation to publicly update any such statements.

Speaker 1: We undertake no obligation to probably update any such statement.

Speaker 1: In addition, some of our discussion today may include references to certain non-GAAP financial measures. Information about these non-GAAP measures, including reconciliation to GAAP measures, may be filed in our Earnings Release and Other 65-

Some of our discussion today may include references to certain non-GAAP financial measures.

And about these non-GAAP measures, including reconciliation.

She got measures maybe found in our earnings release and other SEC filings.

Speaker 1: These SEC files can be accessed via the investor relations section of our website.

Our SEC filings can be accessed.

The Investor Relations section of our website.

Finally, please also note that this event is being recorded.

Speaker 1: I would now like to turn the call to Jeff Tingle, CEO . Please go ahead.

I'd now like to turn the call over to Jeff Campbell CEO . Please go ahead.

Speaker 2: Thanks, Anthony, and good morning and thanks for joining us today. I'm accompanied this morning by CFO and head of consumer lending, Mark Ruggiero.

Thanks, Anthony and good morning, and thanks for joining us today I'm accompanied this morning by CFO and head of consumer lending Mark Ruggiero.

Speaker 2: Our third quarter performance was a solid one given the macro environment and included stable deposit flows, modest margin pressure, benign credit, higher fee income, and disappeared.

Our third quarter performance was a solid one and given the macro environment and included stable deposit flows modest margin pressure benign credit.

Higher fee income and disciplined loan growth.

Speaker 2: Mark will take you through the details in a minute, but I thought I'd offer a few observations prior to...

Mark will take you through the details in a minute, but I thought I'd offer a few observations prior to.

Speaker 2: Needless to say, there are many near-term challenges confronting the banking industry. I feel we've weathered them quite well thus far. We continue to focus on our distinct strengths and expertise. It's this operational resiliency that has served us well through the years during a variety of credit and economic cycles.

Needless to say there are many near term challenges confronting the banking industry.

I feel we've weathered them quite well, thus far we continue to focus on our distinct strengths and expertise.

This operational resiliency that has served us well through the years during a variety of credit and economic cycles.

Speaker 2: Rockland Trust competes in the areas where we can bring unique value, resources, and acumen. Our goal is to achieve top quartile performance while delivering a differentiated customer experience where each relationship matters.

Rockland Trust competes in the areas, where we can bring unique value resources and acumen and our goal is to achieve top quartile performance, while delivering a differentiated customer experience where each relationship matters equally.

Speaker 2: Equally important is knowing where we cannot offer a unique client experience and steering resources elsewhere.

Equally important is knowing where we cannot offer a unique client experience in steering our resources elsewhere.

Speaker 2: As we manage through this unprecedented rising rate environment and the lingering issues brought on by the pandemic, we also keep an eye towards the future.

As we manage through this unprecedented rising rate environment and the lingering issues brought on by the pandemic. We also keep an eye towards the future.

Speaker 2: Trust me, there's no grandiose strategic vision being undertaken here. We're simply looking at the best way to capitalize on our inherent strengths in a rapidly changing competitive playing field, focusing on long-term value creation.

Trust me, there's no grandiose strategic vision being undertaken here, we're simply looking at the best way to capitalize on our inherent strengths in a rapidly changing competitive playing field focusing on the long term value creation.

Speaker 2: We remain committed to our time-honored, disciplined approach to building profitable relationships and executing our community banking model that has served Rockman Trust so well over its 100 plus years.

We remain committed to our time on our disciplined approach to building profitable relationships and.

Executing our community banking model that has served Rockland trust, so well over its 100 plus years.

Speaker 2: In some respects, it's getting back to basics, organic growth in the absence of M&A and focusing on being efficient and effective at 20 billion-

And in some respects, it's getting back to basics organic growth and the absence of M&A and focusing on being efficient and effective.

At $20 billion in assets.

Speaker 2: Well, M&A has been a significant value driver in the past and will again in the future. We are not sitting around waiting for the next deal.

Well M&A has been a significant value driver in the past and will again in the future. We are not sitting around waiting for the next deal.

Speaker 2: With that in mind, we do see near-term growth opportunities to exploit our proven operating model in a variety of ways, including leveraging the Rockman Trust business model in our newer markets like the North Shore and Worcester.

With that in mind, we do see near term growth opportunities to exploit our proven operating model in a variety of ways, including leveraging the Rockland Trust business model in our newer markets like the north shore and Worcester.

Speaker 2: continued investment in technology and data analytics to deliver actionable insights for our bankers.

Continued investment in technology and data analytics to deliver actionable insights for our bankers.

Speaker 2: ongoing focus on organic loan and deposit growth in our legacy markets, and opportunistically attracting high-performing talent who can drive revenue.

Ongoing focus on organic loan and deposit growth in our legacy markets.

And opportunistically, attracting high performing talent, who can drive revenue.

Speaker 2: Although the MNA activity continues to be somewhat muted, we will continue to be disciplined on the MNA front when conditions improve, points to take advantage of opportunities that fit our historical acquisition strategy and pricing parameters.

Although the M&A activity continues to be somewhat muted, we will continue to be disciplined on the M&A front when conditions improve poised to take advantage of opportunities that fit our historical acquisition strategy and pricing parameters.

Speaker 2: To summarize, we have everything in place to deliver the results. The market has been accustomed to over the years, including a talented and

To summarize we have everything in place to deliver the results the market has been accustomed to over the years.

Including a talented and deep management team.

Speaker 2: ample capital, highly attractive markets, good expense management, disciplined credit underwriting, strong brand recognition, operating scale, and an energized workforce.

Ample capital highly attractive markets good expense management disciplined credit underwriting strong brand recognition operating scale and an energized workforce.

Speaker 2: Before turning the call over to Mark, I'd like to note the $100 million share repurchase program we just announced.

Before turning the call over to Mark I'd like to note.

The $100 million share repurchase program, we just announced.

Speaker 2: In this environment, we obviously take our capital position very seriously. At the same time, we recognize that perceived industry concerns can cause our stocks valuation to reach levels that we feel weren't repurchasing stocks.

In this environment, we obviously take our capital position very seriously at the same time, we recognize that perceived industry concerns can cause our stock's valuation to reach levels that we feel warrant repurchasing stock.

Speaker 2: With that in mind, this share buyback program allows us the flexibility to create long-term value over time. And on that note,

With that in mind this share buyback program allows us the flexibility to create long term value overtime.

And on that note I'll turn it over to Mark.

Speaker 3: Thanks, Jeff. I will now take us through the earnings presentation deck that was included in our 8K filing and is available on our website in today's investor portal.

Jeff 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.

Speaker 3: Starting on slide three of the deck, 2023, third quarter, gap net income was $60.8 million and diluted EPS was $1.38, which reflected another quarter of solid overall business activity amidst a very challenging environment.

Starting on slide three of the deck 2023 third quarter GAAP net income was $60 8 million and diluted EPS was $1 38, which reflected another quarter of solid overall business activity amidst a very challenging environment.

Speaker 3: As Jeff alluded to in his comments, we grew total loans in a disciplined manner, maintained a stable funding profile while growing household accounts, generated strong fee income, experienced credit quality trends in line with expectations, maintained low efficiency ratios, and authorized a new 100 million share repurchase program.

As Jeff alluded to in his comments, we grew total loans in a disciplined manner maintained a stable funding profile, while growing household accounts generated strong fee income experienced credit quality trends in line with expectations maintained lower efficiency ratios and authorized a new 100 million share repurchase program.

Speaker 3: In summary, these results produced a strong 1.25% return on assets, an 8.4% return on average common equity, and a 12.8% return on average tangible common.

In summary, these results produced a strong 1.25% return on assets and eight 4% return on average common equity and a 12, 8% return on average tangible common equity and.

Speaker 3: In addition, tangible book value grew per share, grew 72 cents per share, or 1.7% in the third quarter, and is up almost 8% from the prior year period.

In addition, tangible book value grew per share grew 72 cents per share or one 7% in the third quarter and is up almost 8% from the prior year period.

Speaker 3: We continue to focus on a number of topics that are certainly top of mind. Slide 4 summarizes our deposit activity for the quarter. Although total deposits declined by 189 million or 1.2% to 15.1 billion for the quarter, average deposits remained relatively flat quarter over quarter.

Continuing to focus on a number of topics that are certainly top of mind.

Slide four summarizes our deposit activity for the quarter.

Although total deposits declined by $189 million or one 2% to 15.1 billion for the quarter.

Average deposits remained relatively flat quarter over quarter.

Speaker 3: approximately 240 million of the period end decline is attributable to municipal deposits, which is typically impacted by seasonal declines in the third quarter.

Approximately $240 million of the period end decline is attributable to municipal deposits, which is typically impacted by seasonal declines in the third quarter and.

Speaker 3: In addition, the remixing of deposits was modest, with total non-intersparing deposits comprising 32% of total deposits at quarter end, representing no real change from the prior quarter.

In addition, the Remixing of deposits was modest with total noninterest bearing deposits comprising 32% of total deposits at quarter end, representing no real change from the prior quarter.

Speaker 3: Reflecting a cumulative 20% deposit beta, the cost of deposits increased to a well-contained 1.07% for the third quarter, highlighting the differentiating value of our overall deposit franchise.

Reflecting a cumulative 20% deposit beta the cost of deposits increased to a well contained 1.17% for the third quarter, highlighting the differentiating value of our overall deposit franchise.

Speaker 3: In addition, new account opening activity remains strong on both the consumer and business front, with an increase in total households for the quarter of 0.9 percent or 3.7 percent annualized.

In addition, new account opening activity remains strong on both the consumer and business front with an increase in total households for the quarter of a 0.9% or three 7% annualized so balance sheet growth is muted given the overall macroeconomic challenges we firmly believe that this steady and consistent.

Speaker 3: Though balance sheet growth is muted, given the overall macroeconomic challenges, we firmly believe that this steady and consistent quarterly growth in households throughout 2023 provides the impetus for our long-term relationship banking model that has served us well for decades.

Quarterly growth in households throughout 2023 provides the impetus for a long term relationship banking model that has served us well for decades.

Speaker 3: Slide 5 provides updated information regarding uninsured deposit and overall liquidity information with no meaningful changes in overall risk posture, quarter, over quarter.

Slide five provides updated information regarding uninsured deposit and overall liquidity information with no meaningful changes in overall risk posture quarter over quarter.

Speaker 3: Moving to slide six, we summarize key information related to our securities portfolio, including updated information regarding book and fair values on both the available for sale and health to maturity portfolio.

Moving to slide six we summarize key information related to our securities portfolio, including updated information regarding book in fair values on both the available for sale and held to maturity portfolios.

Speaker 3: It's further support for the share by back decision. We note that the tangible capital ratio remains at a strong 9.5% even when factoring in the HTM unrealized lost position net of test.

As further support for the share buyback decision. We note that the tangible capital ratio remains at a strong nine 5%, even when factoring in the H T M unrealized loss position net of tax.

Speaker 3: Turn into slide seven. Total loans increased 0.6% or 2.4% annualized to 14.2 billion for the quarter.

Turning to slide seven total loans increased 0.6% or 2.4% annualized to $14 2 billion for the quarter.

Speaker 3: The increase was fueled primarily by adjustable rate residential loans, while total commercial loans experienced the slight decline within this challenge in environment.

The increase was fueled primarily by adjustable rate residential loans, while total commercial loans experienced a slight decline within this challenging environment, having said that new commercial closing activity has been solid and we remain optimistic and open for business in our markets as we continue to see market disruption drive us.

Speaker 3: Having said that, new commercial closing activity has been solid, and we remain optimistic and open for business in our markets. As we continue to see market disruption, drive a steady flow of new relationship opportunities across both our commercial and small business sector.

Steady flow of new relationship opportunities across both our commercial and small business segments.

Speaker 3: And while slide 8 provides an overall snapshot of the makeup of the various loan portfolios, we will take a deeper dive into overall asset quality and in particular an update on non-own or occupied commercial office exposed.

And while slide eight provides an overall snapshot of the makeup of the various loan portfolios, we will take a deeper dive into the overall asset quality and in particular, an update on our non owner occupied commercial office exposure.

Speaker 3: So regarding office commercial real estate exposure, we recognize this remains in the area of deep pinch.

So regarding office commercial real estate exposure, we recognize this remains an area of deep interest as we have noted in many conversations over the last couple of quarters. The ultimate credit performance will likely play out over time as.

Speaker 3: As we have noted in many conversations over the last couple of quarters, the ultimate credit performance will likely play out over time. As such, our goal is to be transparent to the investor community around the insights we gain as we continue to monitor and manage the portfolio.

As such our goal is to be transparent to the investor community around the insights we gain as we continue to monitor and manage the portfolio.

Speaker 3: slides 9 and 10 provide various updates and risk viewpoints on a number of facts.

<unk> nine and 10 provide various updates and risk viewpoints on a number of factors to highlight a few I'll start with a current status update which is positive.

Speaker 3: To highlight a few, I'll start with the current status update which is pause.

Speaker 3: The one non-performing loan within the office pre-portfolio from last quarter has been fully resolved. With a $5 million charge off taken during the quarter, and the remaining $9 million paid in full subsequent to quarter rent.

One nonperforming loan within the office cream portfolio from last quarter has been fully resolved with a 5 million dollar charge offs taken during the quarter and the remaining 9 million paid in full subsequent to quarter end.

Speaker 3: As a reminder, this loan was largely reserved for last quarter.

As a reminder, this loan was largely reserved for last quarter.

Speaker 3: Total criticized and classified balances within the office portfolio are currently comprised of only 11 loans and are monitored closely by an experienced credit and work out.

Total criticized and classified balances within the office portfolio are currently comprised of only 11 loans and are monitored closely by an experienced credit and workout team.

Speaker 3: In addition, we continue to closely monitor and provide insight on our top 20 office exposures, which make up approximately 504 million imbalances, or 48% of the entire office portfolio.

In addition, we continue to closely monitor and provide insight on our top 20 office exposures.

Each make up approximately 504 million in balances or 48% of the entire office portfolio.

Speaker 3: Within these top 20, we note zero non-performers, 56 million in a criticized status, and 28 million as classified, with every one of these loans recently reviewed for appropriate risk grading adjustments.

Within these top 20, we note zero non performers 56 million and a criticized status and $28 million is classified with every one of these loans recently reviewed for appropriate risk rating adjustments.

Speaker 3: The bigger credit picture across the Brot alone portfolio is reflected in the graphs noted on slide 10. While we certainly aren't immune from the inevitable bumps and bruises in our industry through this cycle, we remain vigilant and confident in our approach to managing credit risk. As evidenced by the decrease in total non-performing assets.

The bigger credit picture across the broader loan portfolio as reflected in the graphs noted on slide 10, what.

While we certainly aren't immune from the inevitable bumps and bruises in our industry through this cycle, we remain vigilant and confident in our approach to managing credit risk as evidenced by the decrease in total nonperforming assets and contained net charge off and provision expense results in the quarter.

Speaker 3: Net charge-rooifrom provision expense results in the quarter.

Speaker 3: Turn into slide 11. As anticipated, the continued pressure on cost of deposits outpaced asset yield repricing benefit. Resulting in a 3.47% margin for the quarter, which reflects a seven basis point drop from the prior quarter. are only five basis points when excluding non-coride.

Turning to slide 11 as anticipated the continued pressure on cost of deposits outpaced asset yield repricing benefit, resulting in a 3.47% margin for the quarter, which reflects a seven basis point drop from the prior quarter or only five basis points when excluding noncore items.

Speaker 3: I'll include specific margin guidance here in a couple minutes, but some key items regarding the margin that are worth noting a highlighted on this slide.

I'll include specific margin guidance here in a couple of minutes, but some key items remark regarding the margin that are worth noting are highlighted on this slide.

Speaker 3: In summary, we will experience margin benefit resulting from general asset repricing in the higher rate environment from both loans and security.

In summary, we will experience margin benefit, resulting from general asset repricing and the higher rate environment from both loans and securities as well as the maturities of certain one month sulfur macro level hedges.

Speaker 3: as well as the maturities of certain one month, sulfur macro level hedge.

Speaker 3: Assuming a more stabilized rate environment in the first half of 2024, we would anticipate this benefit will outweigh the increases in overall deposit costs, which will continue to be impacted by time deposit maturity.

Assuming a more stabilized rate environment in the first half of 'twenty 'twenty four we would anticipate this benefit will outweigh the increases in overall deposit costs, which will continue to be impacted by time deposit maturities.

Speaker 3: Moving to slide 12, fee income was up nicely for the quarter, as overall deposit and ATM activity remained strong, and wealth management income experienced increased insurance and retail commission income to help offset the drop from seasonal tax preparation fee, recognizing the second quarter.

Moving to slide 12 fee income was up nicely for the quarter as overall deposit and a T. M activity remains strong and wealth management income experienced increased insurance and retail commission income to help offset the drop from seasonal tax preparation fee recognized in the second quarter.

Speaker 3: The court are also reflected approximately 2.7 million of combined benefit from gains on bank-owned life insurance and loan-related.

Quarter also reflected approximately 2.7 million of combined benefit from gains on bank owned life insurance and loan related fees.

Speaker 3: Turn into slide 13. Total expenses increase 2.2 million or 2.3% when compared to the prior quarter. Reflecting increased commissions, retirement benefits, and consulting expense.

Turning to slide 13, total expenses increased $2 2 million or two 3% when compared to the prior quarter, reflecting increased commissions retirement benefits and consulting expenses.

Speaker 3: Also included in the quarter was 750,000 of outsized expense related to one time seven costs and volatile unrealized losses on a trading securities portfolio.

Also included in the quarter was 750000 of outsized expense related to one time severance costs and volatile unrealized losses on trading securities portfolio.

Speaker 3: Lastly, as summarized on slide 14, we provide an updated set of guidance focused primarily on Q4 expectation.

Lastly, as summarized on slide 14, we provide an updated set of guidance focused primarily on Q4 expectations.

Speaker 3: We expect low single-digit loan growth in the fourth quarter to be funded primarily from securities runoff.

We expect low single digit loan growth in the fourth quarter to be funded primarily from securities run off we.

Speaker 3: We anticipate flat to modest declines in total deposit balances, reflecting our typical Q4 seasonality impact.

We anticipate we anticipate flat to modest declines in total deposit balances, reflecting our typical Q4 seasonality impact.

Speaker 3: Using the current forward curve assumptions, we expect the margin to stabilize in the 335 to 340 range during the fourth quarter.

Using the current forward curve assumptions, we expect the margin to stabilize in the 335 to $3 40 range during the fourth quarter.

Speaker 3: So ongoing uncertainty challenges, credit quality assumption to cross all loan portfolios. We anticipate provision for loan loss will continue to be driven primarily by the near-term performance of our investment commercial real estate portfolio.

So ongoing uncertainty challenges credit quality assumptions across all loan portfolios, we anticipate provision for loan loss will continue to be driven primarily by the near term performance of our investment commercial real estate portfolio.

Speaker 3: Regarding fee income, we anticipate Q4 results largely in line with Q3 when excluding the non-recurring items I just referenced.

Regarding fee income, we anticipate Q4 results largely in line with Q3, when excluding the nonrecurring items I just referenced and.

Speaker 1: And for non-interest expense, we expect relatively flat, slightly increased levels as compared to Q3. That concludes my comments, and we will now open it up for questions. We will now begin the question and intercession. To ask a question, you may press start and one, you touch the phone. I step into some questions and intercession.

And for noninterest expense, we expect relatively flat to slightly increase levels as compared to Q3.

That concludes my comments and we will now open it up for questions.

Yeah.

Yeah.

We will now begin the question and answer session.

So that's a question you May press Star then one you touched on the phone.

Using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Speaker 1: Our first question will go from Mark Fitzgibbon with Piper Sandler. You may now go ahead.

Our first question will come from Mark Fitzgibbon with Piper Sandler.

You May now go ahead.

Speaker 4: Hey, guys, good morning and happy Friday. Hi, Mark. Happy Friday, Mark.

Hey, guys, good morning, and happy Friday.

Hi, Mark every Friday.

Speaker 4: Mark, I was curious, what gives you so much confidence that deposit costs won't remain under pressure for a while, especially given that your cost deposits is low relative to your peer.

Mark I was curious what gives you so much confidence that deposit costs won't remain under pressure for a while is especially given the your your.

Cost of deposits is low relative to your peers.

Speaker 3: Yeah, we certainly expect the cost of the deposit to continue to increase. Mark, I'd say the benefit is really on the asset side, where we believe we'll continue to see repricing benefit that'll mitigate the majority of those costs continuing to rise.

Yeah, we certainly we certainly expect the cost of deposits to continue to increase Mark I'd say the benefit is really on the asset side, where we believe we'll continue to see repricing benefit that'll mitigate the majority of those costs continuing to rise.

Speaker 3: So you know, I highlighted a couple key items in my comments, but if you look out over the next 12 months

So you know I I highlighted a couple of key items in my comments, but if you look out over the next 12 months.

Speaker 3: You know, we have a number of levers that will drive, you know, out size.

We have a number of levers that'll drive outsized.

Speaker 3: Asset yield benefit compared to what you've seen over the last couple quarters. So in particular Not only loan and securities run off, but the hedges will continue to mature

Asset yield benefit compared to what you've seen over the last couple of quarters. So in particular, not only loan and securities run off but the hedges will continue to mature.

Speaker 3: And every one of those factors gives some meaningful lift to the margin. So I think it's really that dynamic we believe will start to outpace what we still expect to be continued increase on the deposit side such that the margin stabilizes, you know, heading into 20.

And every one of those factors give some meaningful lift to the margin. So I think it's really that dynamic. We believe we will start to outpace what we still expect to be continued increase on the deposit side such that the margin stabilizes you know heading into 2024.

Speaker 4: And then on the buyback program, historically, you guys have

Okay, and then on the buyback program. Historically, you guys have sort of just used it opportunistically if the price got really cheap, but but it seemed like in the past you were more focused on using excess capital to support acquisitions with with it harder to do M&A right. Now is this kind of a strategic shift than you'd think.

Speaker 4: Sort of just used it opportunistically if the price got really cheap.

Speaker 4: But it seemed like in the past, you were more focused on using excess capital to support acquisitions with it harder to do M&A right now. Is this kind of a strategic shift in your thinking with respect to buybacks? Should we expect more of a kind of a pedal to the metal approach than maybe that opportunistic sort of a little less often with the buybacks that we saw in the past?

King with respect to buybacks or should we expect more of a kind of a pedal to the metal approach. Then then maybe that that opportunistic sort of you know a little less often with the buybacks that we saw in the past.

Speaker 2: Yeah, Mark, I'll take a shot at that. I don't think this is a kind of a strategic shift in our mindset. I think honestly, we just thought at the levels our stock is trading and with the amount of capital we had, it really was prudent for us to take advantage of a buyback in the environment we're in today. And I think importantly, even if you assumed we did the entire buyback today.

Yeah, Mark this is Jeff I'll take a shot at that I don't think this is a kind of a strategic shift in our mindset I think honestly, we just thought at the levels of our stock is trading and with the amount of capital. We had it really it was prudent for us to to take advantage of a buyback in the environment. We're in today.

And I think importantly, you know even if you assumed we did you know the entire buyback today.

Speaker 2: We're still going to be very well capitalized and

We're still going to be very well capitalized and feel.

Speaker 2: I feel like our currency will enable us to continue to pursue acquisitions down the road should they present themselves. So not really much of a strategic change, I would characterize it more as very opportunists.

Like our currency will will enable us to continue to pursue acquisitions down the road should they present themselves. So not really much of a strategic change more I would characterize it more as very opportunistic.

Speaker 4: And then lastly, on office, I think in your slide, you suggest that you have about a third of your office book maturing or repricing over the next two years. Well, I guess I'm curious, what do those renewals look like? Do you re-appraise all of those? And how much your value is coming down when you do that? And also, what do the loan of value and debt service coverage ratios look like on the new loans? of

Okay.

And then lastly on an office I think in your slide you suggest that you have about a third of your office book maturing and repricing over the next two years what is the I guess I'm curious what do those renewals look like you know do you reappraise all of those and you know how.

How much your values coming down when you do that and and also what are the loan to value and debt service coverage ratios look like on the on the new loans.

Yeah, It's a great question and and.

Speaker 3: Unfortunately, the answer is still largely, it depends. I think what we're learning is each situation has a little bit of a unique facts and circumstances, but in general, when you look at that,

Unfortunately, the answer is still largely it depends I think what we're learning is each situation.

There's a little bit of a unique facts and circumstances, but you know in general when you look at that.

Speaker 3: population that's set to mature or reprise. It breaks down pretty consistently over the next 24 months.

Population, that's set to mature or reprice, it breaks down pretty consistently over the next 24 months, we have about 100 million maturing you know I guess, a little bit more elevated in the next three months and then there's about $80 million in 2024 and $175 million in 2025, what's interesting.

Speaker 3: We have about 100 million, maturing, you know, I guess a little bit more elevated in the next three months, and then there's about 80 million in 2024, and 175 million in 2025. What's interesting is when you look at, even just in the very near term, 100 million come and do in Q4. 70 million of that is comprised in just three relationships, three loans.

And as when you look at even just in the very near term the 100 million coming due in Q4 $70 million of that is comprised in just three relationships three loans. So each one of those three loans, we have good visibility into in fact, one of those already renewed here in October its.

Speaker 3: So each one of those three loans, we have good visibility into, in fact, one of those already renewed here in October . It's performing based upon re-aprayed valuations. Death service is 1.2 and loaned to value is 60%.

Performing based upon reappraise valuations that services 1.2 and loan to value of 60%. So that's an example of one where we expect the majorities to to be somewhat of a non event and we still see valuation and debt service at the hurdles, we'd liked them to be but.

Speaker 3: So that's an example of one where we expect the majorities to be somewhat of a non-event. And we still see evaluation and debt service at the hurdles we'd like them to be.

Speaker 3: But we're not suggesting that's going to be the case for every loan. There are a couple where maybe occupancy isn't as strong that will work through. But in general, it's a very manageable number. The population, as we look at it today, continues to have.

Young we were not suggesting that's going to be the case for every loan you know there are a couple of where maybe occupancy isn't does strong that will work through but in general it's a very manageable number.

You know the population as we look at it today continues to have essentially the 60% to 65% LTV and debt service around 150 160.

Speaker 3: essentially the 60 to 65% LTV and debt service around 150, 160. You know, how much stress we'll see is those mature. It's a little bit of like I said kind of depending on each unique facts and circumstances, but when we look out the near term We feel really good about the individual credits come and do

How much stress, we'll see as those mature.

<unk> is a little bit of like I said kind of depending on each unique facts and circumstances, but when we look out the near term.

We feel really good about the individual credits coming due.

Thank you.

Yep.

Yeah.

Speaker 1: Our next question will come from Steve Moss with Raymond James. You may now go ahead.

Our next question will come from Steve Moss with Raymond James.

You May now go ahead.

Good morning, guys.

Good morning.

Speaker 5: Just on your comment with regard to the margins stabilizing, if you could remind us the amount of fixed rate hedges maturing in 2024.

Mark just on your on your comment with regard to the margin stabilizing.

If you could remind us the amount of fixed rate hedges are maturing in 2024.

Speaker 3: Yeah, I have, so the next 12 months is 300 million.

Yeah I have so the next 12 months is $300 million.

Speaker 3: Steve of Hege's Dottel mature with an average strike rate of about 2.8%.

Steve of hedges that will mature with an average strike rate of about two 8%.

Speaker 3: So those in the current rate environment, we just revert back to essentially a floating rate.

So those in the current rate environment, where just revert back to essentially a floating rate <unk>.

Speaker 3: Impact, which is well more than 5% today. So you're talking about a 225 basis point increase on that 300 million of notes.

Impact, which is well north of 5% today, so you're talking about a 225 basis point increase on that $300 million of notional.

Speaker 5: Okay, awesome, that's helpful. And then Jeff on M&A, it sounds like M&A discussions are not active, is kind of like how I'm thinking about it. Maybe just interpreting it, just kind of curious. You know, are you having any discussions with anyone? You know, is there just seller resistance, resistance at current pricing? Any color you could share there.

Okay Awesome, that's helpful and then.

Then.

Jeff on M&A it sounds like M&A discussions are not active as kind of like how I'm thinking about is maybe just her.

Just kind of curious.

You know are you, having any discussions with anyone.

Seller resistant resistance at current pricing any color you could share there.

Speaker 2: Yeah, well, I mean, honestly, just because I'm still relatively new, I'm trying to meet people if, you know, for no other reason, just to continue to familiarize myself with the banking landscape here in Massachusetts. So that is ongoing. And in part, those are very, what I would characterize is very benign conversations.

Yeah, well I mean honestly, just because I'm still relatively new I'm trying to.

Unknown Attendee: Good morning and welcome to the Independent Bank Corp. 3rd quarter, 23rd earnings coffee call. All participants will be in this in only mode. If you need assistance, please signal conference specials by pressing the star P, followed by zero. After today's orientation, though, we'd opportunity to ask questions. To ask a question, you request star then when you're touched on phone. To withdraw your question, please press star then two.

Meet people if you know if for no. Other reason just to continue to familiarize myself with the the banking landscape here in Massachusetts, So that that is ongoing and.

And part of those are very what I would characterize as very benign conversations.

Speaker 2: But I think in the current environment, when you pencil out some of the deal dynamics, it just makes it difficult to do, I think for me, they're side, right? I mean, if you're a seller, you're thinking I can increase the value of the franchise. Why would I sell now and if you're a buyer?

But I think in the current environment when you pencil out some of the.

Unknown Attendee: Before proceeding, please note that during this call, we will be making four looking statements. Actual results may differ materially from these statements. We do a number of factors including those described in our earnings release and other SEC filings. We undertake no obligation to publicly update any such statements. In addition, some of our discussions today may include references to certain non-GAF financial measures. Information about these non-GAF measures, including reconciliation to get measures, may be filed in our earnings release and other SEC filings. These SEC filings can be accessed via the investor relations section of our website.

Some of the deal dynamics it it just makes it difficult to do.

I think from either side right I mean, if you're a seller you're thinking I can increase the value of the franchise why would I sell now and if you're a buyer.

Speaker 2: you know, the marks that you would have to take, you know, become challenging in a, you know, a tangible book value air and back type scenario. So we're, you know, we're going to continue to have as many conversations as we can so that when there is the opportunity to worse some of the banks that I'm meeting decide that they want to maybe...

The marks that you would have to take you know become challenging in AR.

Tangible book value earn back type scenarios. So we're you know we're going to continue to have as many conversations as we can so that when a when there is the opportunity to do worse some of the banks that that I'm meeting decide that.

They they wanted maybe.

Unknown Attendee: Finally, please also note that this event is being recorded.

Speaker 2: pursue a different alternative than continuing to stay independent that will be their first call. But that's, you know, so there's both of those things kind of going on at the same time, I guess, sort of the challenging environment that we're working through. And again, just myself getting out and meeting a number of the bank executives across our plans.

Pursue a different alternative than continuing to stay independent.

Unknown Attendee: I would now like to take the call for the Jeff Tangle CEO. Please go ahead. Thanks, Anthony.

It will be their first call, but that's.

So there's both of those things kind of going on at the same time, I guess sort of the challenging environment that we're working through and and again, just myself getting out and meeting a number of the bank executives across our landscape.

Jeffrey Tengel: Good morning and thanks for joining us today. I'm accompanied this morning by CFO and head of Consumer Lending Mark Regiro. Our third quarter performance was a solid one given the macro environment and included stable deposit flows. Modest margin pressure, benign credit, higher fee income, and discipline loan growth.

Speaker 5: Okay, that's helpful. And then on the credit that was, you had the $5 million charge off, was that resolution through a note sale or you're just kinda curious to be giving a call around that?

Okay. That's helpful. And then on the credit that was you had the $5 million charge offs. It was that resolution through a note sale or you know just kind of curious if you can give any color around that.

Jeffrey Tengel: Mark will take you through the details in a minute, but I'd thought I'd offer a few observations prior to. Needless to say, there are many near-term challenges confronting the banking industry. I feel we've weathered them quite well thus far. We continue to focus on our distinct strengths and expertise. It's this operational resiliency that has served us well through the years during a variety of credit and economic cycles. Rockman Trust competes in areas where we can bring unique value resources and acumen. Our goal is to achieve top core-top performance while delivering a differentiated customer experience where each relationship matters.

Speaker 3: Yeah, that actually went to auction, believe it or not, even which...

Yeah that actually went to auction believe it or not Stephen which.

Speaker 3: You know, there was a lot of discussion here internally around the appropriate resolution for that credit. You know, this isn't necessarily the optimal environment for an office loan.

You know we that was a lot of discussion here internally around you know the appropriate resolution for that credit this isn't necessarily the the optimal environment for an office alone.

Speaker 3: to be sold at auction. So, you know, we could have potentially looked for a different alternative route and held on to that and maybe look for a slightly better resolution. But, you know, at the end of the day, we felt it was appropriate and prudent to go to auction, get the resolution we did and just get that loan behind us.

To be sold at auction. So you know we could have potentially looked for a different alternative route and held on to that and maybe look for a slightly better resolution, but you know at the end of the day, we felt that was appropriate and prudent to go to auction get the the resolution, we did and just get that loan behind us.

Jeffrey Tengel: Equally important is knowing where we cannot offer a unique client experience and steering resources elsewhere. As we managed through this unprecedented rising rate environment and the lingering issues brought on by the pandemic, we also keep an eye towards the future. Trust me, there's no grandiose strategic vision being undertaken here. We're simply looking at the best way to capitalize on our inherent strengths and a rapidly changing competitive playing field, focusing on long-term value creation.

Speaker 2: So, you know, it did go out of foreclosure, so. I would just add to that, you know, just to put words to, you know, Mark's comments, we could have kicked the can down the road. That was that that was an option for us. And we just made the decision that we didn't see the level of commitment on the part of the sponsor that we thought was going to be appropriate. And so instead of kicking the can down the road, we decided to take our medicine now.

So it did it did go out at a foreclosure sale I would just add to that just to put words to you know.

<unk> comments, we could've kick the can down the road that was that that was an option for us.

And we just made the decision that.

We didn't see the level of commitment on the part of the sponsor that we felt.

Was gonna be appropriate and so instead of kicking the can down the road, we decided to take our medicine now.

Jeffrey Tengel: We remain committed to our time-honored disciplined approach to building profitable relationships and executing our community banking model that has served Rockman Trust so well over its 100-plus years. In some respects, it's getting back to basics, organic growth in the absence of M&A and focusing on being efficient and effective.

Okay.

Speaker 5: That's helpful. And then in terms of just the, maybe just going back to the margin here.

That's helpful and then in terms of just the maybe just going back to the margin here.

Speaker 5: with, you know, with the dynamics of margin and state-wise in here in the fourth quarter, what are you guys assuming for a deposit data, a cumulative cycle, we hold steady at a 5.25 and a quarter, 550,alg eine Cheng'll, and TFAAK,

With you.

With the dynamics of the margin stabilizing here in the fourth quarter. What are you guys assuming for a deposit beta.

Accumulative cycle will hold steady at a five and a quarter 550, if that sounds right.

Jeffrey Tengel: At $20 billion in assets. Well, M&A has been a significant value driver in the past and will again in the future. We are not sitting around waiting for the next deal, with that in mind, we do see near-term growth opportunities to exploit our proven operating model in a variety of ways, including leveraging the Rockman Trust business model in our newer markets like the North Shore and Worcester, continued investment in technology and data analytics to deliver actionable insights for our bankers, ongoing focus on organic loan and deposit growth in our legacy markets, and opportunistically attracting high-performing talent who can drive revenue. Although the MNA activity continues to be somewhat muted, we will continue to be disciplined on the MNA front when conditions improve, points to take advantage of opportunities that fit our historical acquisition strategy and pricing parameters.

Speaker 3: Yeah, I know we're at 20% cumulatively today. When I look out into 2024, I'd say the biggest driver is going to be primarily the level of CDs maturing and if you play out.

Yeah, I know, we're at 20% cumulatively today, you know when I look out into 2024, I'd say the biggest driver is going to be primarily that the level of Cds maturing and you know if you play out.

Speaker 3: Essentially the entire CD block if you just assume that mature at current rate.

Essentially the entire C. D book, if you just assume that matures at current rates.

Speaker 3: I think this is the potential for anywhere of 10 to 15 basis points impact on the march.

I think there's the potential for anywhere of a 10 to 15 basis points impact on the margin.

Speaker 3: I haven't done the math on what that does to the beta in particular, but I'd suggest that it certainly goes a bit north from where we are today. Though I think, you know, if I were to do the math in my head, it feels like it probably stays in that mid-20s range. becomes normal one of your

I haven't done the math on what that does to the beta in particular, but I'd suggest that it's certainly goes a bit north from where we are today, though I think you know if I were to do the math in my head it it feels like it probably stays in that mid twenties range.

Okay.

Great. Thanks for all the color I appreciate it.

Thank you.

Speaker 1: Our next question will come from Laurie Humpzicker with Compass Point.

Jeffrey Tengel: To summarize, we have everything in place to deliver the results the market has been accustomed to over the years, including a talent in deep management team, ample capital, highly attractive markets, good expense management, discipline credit underwriting, strong brand recognition, operating scale, and an energized workforce.

Our next question will come from Laurie Hunsicker with Compass point.

You May now go ahead.

Speaker 6: Hi, thanks. Good morning. Just going back to office here, and I really, really appreciate all your details. So the 14.2 million on performer that sold, was that a class A or class B?

Yeah, Hi, Thanks, Good morning, I'm, just going back to the office here and I really really appreciate all your detail so that the $14 2 million nonperformer that snow.

Was that a class a or class b.

That was a class B L.

Speaker 6: That was a class B. Okay. And so it was a, if I'm doing the math right, that was a 35.7 cents on the dollar haircut. That was a sizes'?? Autogram No. easiest 1.5 $. shortened detal najlep ad

Jeffrey Tengel: Before turning the call over to Mark, I'd like to note the $100 million share repurchase program we just announced. In this environment, we obviously take our capital position very seriously.

It wasn't a class b and.

And so it was it if I'm doing the math right that was the 35.7 cents on the dollar haircut.

Yeah.

Yeah compared to what we had it on the books at.

Jeffrey Tengel: At the same time, we recognize that perceived industry concerns can cause our stocks' valuation to reach levels that we feel warrant repurchasing stock. With that in mind, this share-by-back program allows us the flexibility to create long-term value over time.

Yeah, Yes, yeah, okay. Okay. Okay.

Speaker 6: Okay, okay, okay, and then as far as the breakdown of your maturity, I mean, I think you guys were sort of put in the penalty box because you had so much set to mature and reprise over the next two years compared to your peers that, you know, we've already walked back from in June . It was 41% now you're 33% you've got this huge chunk that's coming in the fourth quarter, the $100 million that's 9% right there of your whole balance.

And then it as far as the breakdown there.

Your maturity I mean, I think you guys were starting to put in the penalty box because you had so much that mature and reprice.

Mark Ruggiero: And on that note, I'll turn it over to Mark. Thanks, Jeff. I will now take us through the earnings presentation deck that was included in our 8K filing and is available on our website in today's investor portal.

Over the next two years compared to your peers that you know we've already walked back from in June It was 41% now you're at 33%.

Got this huge chunk, that's coming in the fourth quarter and $100 million, that's 9% right now of your whole balance.

Mark Ruggiero: Starting on slide three of the deck, 2023, third quarter gap net income was 60.8 million and diluted EPS was $1.38, which reflected another quarter of solid overall business activity amidst a very challenging environment. As Jeff alluded to in his comments, we grew total loans in a discipline manner, maintained a stable funding profile while growing household accounts, generated strong fee income, experienced credit quality trends in line with expectations, maintained low efficiency ratios and authorized a new 100 million share repurchase program.

Speaker 6: And Mark, thank you for the update on the one loan, but could you help us think about the other two loans?

And Mark Thank you for the update on the one mom, but could you help us think about the other two loans.

Speaker 6: How do we get comfortable that that $100 million is?

How do we get comfortable that that 100 million is is.

Speaker 3: It's gonna renew. How should we be thinking about that? Sure. I mean, the biggest of those three is to give some facts to it. It's 85% occupied.

It's been a real name I had how should we be thinking about that sure I mean, the biggest of those three just to give some some facts to it it's it's 85% occupied.

Speaker 3: It's currently at a 5% rate. So if we were to likely just renew and continue to price at the five year part of the curve.

It's currently at a 5% rate. So if we were to likely just renew and continue to price at the five year part of the curve.

Speaker 3: You'd suggest pricing may be only, you know, resolved in a 175, 200 basis point increase in their rate.

You'd suggest pricing maybe only result in a 175 to 200 basis point increase in their rate.

Mark Ruggiero: In summary, these results produced a strong 1.25% return on assets, an 8.4% return on average common equity, and a 12.8% return on average tangible common equity. In addition, tangible book value grew per share, grew 72 cents per share, or 1.7% in the third quarter, and is up almost 8% from the prior year period.

Speaker 3: And when you look at debt service under that scenario, I think we continue to feel very good about that. So that's another one where I think our expectation is that renewal at current rate.

And when you when you look at debt service under that scenario I think we continue to feel very good about that so so that's another one where you know I think our expectation is that renewal at current rates.

Speaker 3: does not create undue risk or concern. And then the other is, again, you know, pretty well occupied. This is a little bit of tenant rollover that they're looking for replacements on.

<unk> does not create undue risk or concern and then the other is again, you know pretty well occupied.

Mark Ruggiero: Continuing to focus on a number of topics that are certainly top of mind, slide four summarizes our deposit activity for the quarter. Although total deposits declined by 189 million or 1.2% to 15.1 billion for the quarter, average deposits remained relatively flat quarter over quarter. Approximately 240 million of the period end decline is attributable to municipal deposits, which is typically impacted by seasonal declines in the third quarter. In addition, the remixing of deposits was modest, with total non-interest bearing deposits comprising 32% of total deposits at quarter end, representing no real change from the prior quarter.

A little bit of tenant rollover that theyre looking for a replacement is on but you know based on the cash flow.

Speaker 3: but based on the cash flow.

Speaker 3: and sort of what we'd expect. The LTV is at re-appraisal. You know, we think there's a pretty good story there. They've been very communicative with us through the process. We have, you know, really good direct relationships with most.

And sort of what we'd expect the ltvs at reappraisal you know, we we think there's a pretty good story there they've been very communicative with us through the process. We have you know really good direct relationships with most of these borrowers. So again those three loans in the very near.

Speaker 3: bars so again those three loans in the very near

Speaker 3: near term I'd say all three of them we feel pretty good

Near term I would say all all three of them, we feel pretty good about.

Speaker 6: Okay, and then the one that you are ready to renew, how much of the 100 million does that comprise? That was about

Okay, and then the one that you already renewed how much of the $100 million does that comprise.

Oh that was about $18 million.

Mark Ruggiero: Reflecting a cumulative 20% deposit beta, the cost of deposits increased to a well-contained 1.07% for the third quarter, highlighting the differentiating value of our overall deposit franchise. In addition, new account opening activity remains strong on both the consumer and business run with an increase in total households for the quarter of 0.9% or 3.7% annualized. Though balance sheet growth is muted, given the overall macroeconomic challenges, we firmly believe that this steady and consistent quarterly growth in households throughout 2023 provides the impetus for our long-term relationship banking model that has served us well.

Speaker 6: Thanks for the color on that. And I just want one more question on office. It looks like maybe you did a bit of a wrist statement and I realized you gave a whole lot more details in so many of the other banks but I'm just trying to make sure that I'm comparing Apple Stapples here. So your cream-ixed youth that was primarily office.

Okay, great. Thanks for the color on that and then just one one more question on off that.

It looks like maybe you did a bit of a restatement and I realize you gave a whole lot more detail and so many of the other bank that I'm, just trying to make sure that I'm comparing apples to apples here.

Are you a cream excuse it was primarily office.

Speaker 6: had it last quarter, 401 million, it looks like it's resated to 269 and just wanted to know.

Had it last quarter and $401 million looks like its restated.

Benign and just wanted to know.

Speaker 3: What was the difference there? Yeah, so it's hopefully you can appreciate Lari as we continue to combine the data and...

What was the difference there yeah. So.

Hopefully you can appreciate Laurie as we continue to mine the data in and really do deeper dives into a lot of the portfolio. We thought it was appropriate to just continue to further clarify last quarter was mixed use regardless of how much office was in that relationship and what we want to do.

Speaker 3: and really do deeper dives into a lot of the portfolio. We thought it was appropriate to just continue to further clarify. Last quarter was mixed use regardless of how much office was in that relationship.

Mark Ruggiero: Slide 5 provides updated information regarding uninsured deposit and overall liquidity information with no meaningful changes in overall risk posture quarter over quarter. Moving to slide 6, we summarize key information related to our securities portfolio, including updated information regarding book and fair values on both the available for sale and health maturity portfolios. As further support for the share buyback decision, we note that the tangible capital ratio remains at a strong 9.5% even when factoring in the HTM unrealized lost position net of tax.

Speaker 3: And what we want to do now is really stock to highlight those loans that have primarily office exposure. So IE greater than 50% of it is office. So when you look through that same lens at the last quarter, that 400 million gets reduced down to 269. And that's more of a focus now going.

Now, it's really stopped to highlight those loans that have primarily office exposure. So I E greater than 50% of it is office. So when you look through that same lens at the last quarter that 400 million gets reduced down to $2 69, and that's more of a focus now going forward.

Speaker 6: One quick question on your owner occupied and I realize owner occupied is much lower risk. Is there anything that's concerning you in the owner occupied book? Any?

Perfect perfect. Okay, and then just one one quick question on your own or occupied didn't have realized owner occupied is it's much lower rent, but is there anything that's concerning you in the owner occupied Buck any.

Speaker 6: friends that you're starting to see percolate from higher rates. How are you thinking about that?

And so you're starting to percolate from higher rates and how you're thinking about that.

Mark Ruggiero: Turning to slide 7, total loans increased 0.6% or 2.4% annualized to 14.2 billion for the quarter. The increase was fueled primarily by adjustable rate residential loans, while total commercial loans experienced the slight decline within this challenge in environment. Having said that, new commercial closing activity has been solid and we remain optimistic and open for business in our markets as we continue to see market disruption, drive a steady flow of new relationship opportunities across both our commercial and small business segments.

Speaker 2: Yeah, I don't think we've seen anything in the owner occupied that we're concerned about.

Yeah, I don't think we've seen any anything.

Anything in the owner occupied that where we're concerned about.

Speaker 7: I mean, Alton does certainly nothing compared to the office, the non-owner expense. Okay, great. I'll leave it there. Thanks for taking my question. No problem. I'll come.

And I'll tell you that certainly nothing compared to the.

Office, the non owner occupied.

Okay, Great I'll leave it there thanks for taking my question.

No problem.

Again, if you have a question. Please press Star then one on.

Our next question will come from Chris O'connell with <unk>.

You May now go ahead.

Hey, good morning.

Mark Ruggiero: And while slide 8 provides an overall snapshot of the makeup of the various loan portfolios, we will take a deeper dive into overall asset quality and in particular an update on non-owner occupied commercial office exposure. So regarding office commercial real estate exposure, we recognize this remains in the area of deep interest. As we have noted in many conversations over the last couple of quarters, the ultimate credit performance will likely play out over time. As such, our goal is to be transparent to the investor community around the insights we gain as we continue to monitor and manage the portfolio.

Speaker 5: It's a keep being a dead horse here on the office side. But just wanted to see if you guys had any color specifically on, we'll look to be some migration or perhaps, you know, just new loans moved into the, you know, class A, you know, classified category from, from criticized.

Hey, Hey, Keith.

Dead horse on the office side.

But just wanted to see if you guys had any color specifically on what looked to be some migration or perhaps just new loans are moved into the you know class a.

The classified category from criticized.

Speaker 2: I mean, obviously that's something that we're paying very, very close attention to and have our bankers all very focused on near-term rate resets and maturities.

I mean.

Obviously, that's something that we're paying very very close attention to and and have.

Our bankers all very focused on near term you know rate resets and maturities.

Mark Ruggiero: Slide 9 and 10 provide various updates and risk viewpoints on a number of factors. To highlight a few, I'll start with the current status update which is positive. The one non-performing loan within the office pre-portfolio from last quarter has been fully resolved. With a $5 million charge off taken during the quarter and the remaining $9 million paid and full subsequent to quarter end. As a reminder, this loan was largely reserved for last quarter.

Speaker 2: And Mark said a little while ago, every loan is unique. And so the story is difficult to paint the story with the same broad brush so we're...

And as Mark said, a little while ago. Every you know every loan is unique and so the story.

To paint paint that story with the same broad brush so were.

Speaker 2: We're being very diligent and trying to be very thorough in...

Were being very diligent in trying to be very thorough in our analysis do I think we're going to have some continued you know ins and outs in our criticized and classified category, Yes, I mean of course, we will.

Speaker 2: in our analysis. Do I think we're going to have some continued, you know, ins and outs in that criticizing class by category? Yes, I mean, of course we will. But as we've hit here today, we've gone through all of that, all of the loans that have that near term risk to it and feel very comfortable with our current classification.

Mark Ruggiero: Total Criticize and Classified Balances Within the Office Portfolio are currently comprised of only 11 loans and are monitored closely by an experienced credit and workout team. In addition, we continue to closely monitor and provide insight on our top 20 office exposures, which make up approximately 504 million in balances, or 48% of the entire office portfolio. Within these top 20, we note zero non-performers, 56 million in a criticized status, and 28 million as classified, with every one of these loans recently reviewed for appropriate risk-grading adjustments.

But as we sit here today, we've got we've gone through all of you know all of that all of the ones that that have that near term risk to it and feel very comfortable with our current classification.

Okay got it.

Speaker 3: And again, on the, I'm just, of loans to just, I don't think we gave the unit count, but, you know, that increased all the wise is primarily, like two or two loans.

And again.

Only a handful of loans to just and I don't think we gave the unit count, but you know that increased dollar wise is primarily like two or three months.

Speaker 8: Okay, great, thanks. And can you just remind us, I mean, 240 million of the seasonal community outflows this quarter, you know, when those should come back in, and if you think that you'll recapture, you know, the full amount of the seasonal outflows.

Okay, great. Thanks.

And can you just.

Remind us oh $240 million of the seasonal muni outflows this quarter.

Mark Ruggiero: The bigger credit picture across the broad alone portfolio is reflected in the graphs noted on slide 10, while we certainly aren't immune from the inevitable bumps and bruises in our industry through this cycle. We remain vigilant and confident in our approach to managing credit risk, as evidenced by the decrease in total non-performing assets in contained net draw drop in provision expense results in the quarter.

When those should come back in.

And if you think that.

But you'll recapture.

For the full amount of the seasonal outflows.

Speaker 3: Yeah, that's a good question. Certainly, we expect to recapture a good portion of that. There is some money in the third quarter municipal related that was.

Yeah, it's it's a it's a.

A good question certainly we expect to recapture a good portion of that that there is some money in the third quarter municipal related that was I'd say.

Mark Ruggiero: Turn into slide 11, as anticipated, the continued pressure on cost of deposits outpaced asset yield repricing benefit, resulting in a 3.47% margin for the quarter, which reflects a seven basis point drop from the prior quarter, or only five basis points when excluding non-core items. I'll include specific margin guidance here in a couple minutes, but some key items regarding the margin that are worth noting a highlight on this slide. In summary, we will experience margin benefit resulting from general asset repricing in the higher rate environment from both loans and securities, as well as the majorities of certain one month, so far macro level hedges. Assuming a more stabilized rate environment in the first half of 2024, we would anticipate this benefit will outweigh the increases in overall deposit costs, which will continue to be impacted by time-deposit majorities.

Speaker 3: kind of coined this temporarily parked here that did outflow in the third quarter that we wouldn't expect and that was about 80 million or so. But I do think the rest of that, you know, is...

Kind of coined as temporarily parked here that did outflow in the third quarter that we wouldn't expect and that was about $80 million or so but I do think the rest of that you know as is consistent with where we saw municipal levels through most of the first half of 2023. So I would expect the majority of that to.

Speaker 3: consistent with where we saw municipal levels through most of the first half of 2023, so I would expect the majority of that to come back in at some point in the fourth quarter. But typically we see a little bit of these analogy affecting our deposit balances in the fourth quarter, primarily on the consumer side.

Come back in at some point in the fourth quarter.

But you know typically we see a little bit of seasonality effect in our deposit balances in the fourth quarter, primarily on the consumer side and.

Speaker 3: some of the holiday spending towards the tail end of the year. We may see a little bit of a dip on that.

Some of the holiday.

Spending towards the towards the tail end of the year, we may see a little bit of a dip on that front.

Speaker 8: And in excluding, you know, the seasonal factors in Q4 that you're referring to,

Got it and I am excluding the seasonal factors in Q4.

You're referring to.

Speaker 8: On the overall kind of non-interests bearing deposit makeshift, I mean, it's kind of consistently declined in order of magnitude over the course of 2023. Do you think that there's still a little bit of makeshift left? It has been swelling down over the course of the quarter and into the fourth quarter. What's your view on how much might be remaining over the next couple of quarters?

On the overall kind of noninterest bearing deposits. It makes it I mean, it's you know kind of consistently.

The decline in order of magnitude over the course of 2023 do you think that there's still a little bit of mix shift left it has it been slowing down over the course of the quarter and into the fourth quarter.

Mark Ruggiero: Moving to slide 12, fee income was up nicely for the quarter, as overall deposit and ATM activity remains strong, and wealth management income experienced increased insurance and retail commission income to help offset the drop from seasonal tax preparation fee, recognizing the second quarter. The quarter also reflected approximately 2.7 million of combined benefit from gains on bank-owned life insurance and loan-related fees.

What what's your view on how much might be kind of remaining over the next couple of quarters.

Speaker 3: Yeah, it certainly feels as if the shifting is slowing down. I think what we're seeing mostly drive the dynamic today is

Yeah. It certainly feels as if that the shifting is slowing down and I think what we're seeing mostly drive the dynamic today is just the continuing repricing into the higher rate environment. So those.

Speaker 3: just the continuing repricing into the higher rate environment. So those...

Mark Ruggiero: Turning to slide 13, total expenses increased 2.2 million or 2.3 percent when compared to the prior quarter, reflecting increased commissions, retirement benefits, and consulting expenses. Also included in the quarter was 750,000 of outsized expense related to one time seven's costs and volatile unrealized losses on a trading securities portfolio.

Speaker 3: CDs that were promotionally priced six, seven months ago that are starting to mature will obviously

C D's that were promotional priced six seven months ago that are starting to mature we'll obviously.

Speaker 3: likely renew into now a higher promotional product. So I think it feels to me like the mix is starting to slow. I'm going to say it's 100% behind, but I don't think that's as big of an impact. But you know, those deposit relationships where

Likely renew into now a higher promotional products. So I think it feels to me like the mix is starting to slow I wouldn't say, it's 100% behind but I don't think that's as big of an impact, but you know those deposit relationships where.

Mark Ruggiero: Lastly, as summarized on slide 14, we provide an updated set of guidance focused primarily on Q4 expectations. We expect low single-digit loan growth in the fourth quarter to be funded primarily from securities runoff. We anticipate flat to modest declines and total deposit balances, reflecting our typical Q4 seasonality impact. Using the current forward curve assumptions, we expect the margin to stabilize in the 335 to 340 range during the fourth quarter. Though ongoing uncertainty challenges, credit quality assumptions across all loan portfolios, we anticipate provision for loan loss will continue to be driven primarily by the near term performance of our investment commercial real estate portfolio. Regarding fee income, we anticipate Q4 results largely in line with Q3 when excluding the non-recurring items I just referenced. And for non-interest expense, we expect relatively flat to slightly increase levels as compared to Q3.

Speaker 3: rate is important. You know, I think you'll continue to see those same customers.

Right is important.

You'll continue to see those same customers.

Speaker 3: likely getting additional exception pricing higher or on the CD book, maturing into a higher rate CD. So I think the population of deposits that we've priced up will continue to be a bit pressured. TRACUR The

Likely getting additional exception pricing higher or on the CD book maturing into a high rate C. D. So I think the population of deposits that we've probably stop will continue to be a bit pressured.

Got it.

That's helpful.

Speaker 8: And not only expense, I appreciate the guide and the Q4. And I know it's early for 2024. But I guess just in general, I mean, do you guys...

And and not me.

<unk> expense I appreciate the guide into Q4 and I know it's early.

For 2024.

But I guess just in general I mean do you guys have you started looking at 2024 in terms of expenses, you know I know theres opportunities to add higher here.

Speaker 8: We started looking at 2024 in terms of expenses. You know, I know there's opportunities, you know, to add higher here. But is there also, you know, some opportunities that you guys are, you know, exploring on the efficiency side or ways to kind of, you know, limit expense growth, giving the overall rate environment?

But is there also some opportunities that you guys are exploring on the efficiency side.

Or ways to kind of limit expense growth given the overall rate environment.

Speaker 3: Absolutely. Certainly as we head into our budgeting process for next year and strategic planning and thinking about some key initiatives that to your point we want to obviously continue to invest in. There are areas in the bank where we're taking hard looks. Yeah.

Absolutely, but certainly as we head into our budgeting process for next year in strategic planning and thinking about some key initiatives that to your point, we want to obviously continue to invest in there are areas in the bank were where were taking hard looks and you know we recognize that it needs to.

Unknown Attendee: That concludes my comments, and we will now open it up for questions. We will now begin the question and intercession.

Speaker 3: know, we recognize there needs to be a very focused short-term view on expenses as well. So there will be...

Unknown Attendee: To ask a question, you may press star that one you touched on phone. If you're using a speaker phone, please take up your hands up before pressing the keys. To withdraw your question, please press star then two.

A very focused short term view on expenses as well.

So there will be a less of an appetite to really look for any meaningful expense creep. You know, we'll we'll look at that very closely heading into 2024 and I do think theres very practical areas, where we can hold the line and or a decrease yes.

Speaker 3: Less of an appetite to really look for any meaningful expense creep. You know, we'll look at that very closely heading into 2024 and I do think there's very practical areas.

Unknown Attendee: At this time, we'll pause momentarily to summon our roster.

Mark Fitzgibbon: Our first question will come from Mark Fitzgibbon with Piper Sandler. You may now go ahead.

Speaker 2: Yeah, that was a bit of my comments about kind of getting back to basics and being more efficient and effective is looking at some of the areas that Mark just spoke about. We, you know, we've almost doubled in size.

That was a bit of all of my comments about kind of getting back to basics and being more efficient and effective as looking at some of the areas that Mark just spoke about we you know we've almost doubled in size.

Mark Ruggiero: Take out it's good morning and happy Friday. Hi, Mark. Happy Friday, Mark. Mark, I was curious, what gives you so much confidence that deposit costs won't remain under pressure for a while, especially given that your cost deposits is low relative to your peers? Yeah, we certainly expect the cost deposit to continue to increase smart. Mark, I'd say the benefit is really on the asset side, what we believe will continue to see repricing benefit that'll mitigate the majority of those costs continuing to rise.

Speaker 2: You know, in the last three years or so, and we're really taking a hard look at...

You know in the last three years or so and.

We're really taking a hard look at it you know how we're.

Speaker 2: that, you know, how we're organized and are we being as efficient and as effective as we can be and making sure that we're being really focused on that. I would also mention that to the extent that we do have some opportunistic hires that we think can drive revenue. We would expect that to be, you know, incremental revenue over and above, you know, what we would be normally planning on in any sort of planning environment, whether it be 2024.

Organized and are we being as efficient and as effective as we can be.

And making sure that we're being really focused on that I would also mention that to the extent that we do.

Have some opportunistic hires that we think can drive revenue, we would expect that to be incremental revenue over and above what we would be normally planning on in any sort of planning environment, whether it be 'twenty 'twenty four beyond so so so they'll bring revenue with with them.

Mark Ruggiero: I highlighted a couple key items in my comments, but if you look out over the next 12 months, we have a number of levers that will drive outsized asset yield benefit compared to what you've seen over the last couple quarters. So in particular, not only loan and securities run off, but the hedges will continue to mature. And every one of those factors gives some meaningful lift to the margin. So I think it's really that dynamic we believe will start to outpace what we still expect to be continued increase on the deposit side such that the margin stabilizes, you know, heading into 2024.

Speaker 2: So they'll bring revenue with

Speaker 8: Absolutely. Thanks. Appreciate the questions.

Absolutely. Thanks.

I appreciate you taking my questions.

Thank you.

Speaker 1: This concludes our question and answer session. I would like to turn the cobspec over to Jeff Tangle for an equation.

This concludes our question and answer session.

I'd like to turn the conference back over to Jeff Campbell for any closing remarks.

Speaker 2: Thanks Anthony and thank you all for your continued interest in independent bank court and we will look forward to talking to you at the end of the fourth quarter.

Thanks, Anthony and thank you all for your continued interest in independent Bank Corp, and we will look forward to talking to at the end of the fourth quarter.

Jeffrey Tengel: Okay. And then on the buyback program, historically, you guys have sort of just used it opportunistically if the price got really cheap. But, but it seemed like in the past, you were more focused on using excess capital to support acquisitions with, with it harder to do M&A right now, is this kind of a strategic shift in your thinking with respect to buybacks? Or should we expect more of a kind of a pedal to the metal approach than then maybe that that opportunistic sort of, you know, a little less often with the buybacks that we saw in the past?

Speaker 1: The conflict is not concluded. Thank you for attending today's presentation. You may not disconnect.

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

Jeffrey Tengel: Yeah, Mark is chef. I'll take a shot at that. I don't think this is a kind of a strategic shift in our mindset. I think, honestly, we just thought at the levels our stock is trading and with the amount of capital we had, it really was prudent for us to take advantage of a buyback in the environment we're in today. And I think importantly, you know, even if you assumed we did, you know, the entire buyback today, we're still going to be very well capitalized.

Jeffrey Tengel: And I feel like our currency will enable us to continue to pursue acquisitions down the road should they present themselves. So, not really much of a strategic change, but I would characterize it more as very opportunistic.

Unknown Attendee: Sticks.

Mark Ruggiero: Okay. And then lastly, on on office, I think in your slide, you suggest that you have about a third of your office book, maturing or repricing over the next two years. What I guess I'm curious, what do those renewals look like, you know, do you re appraise all of those? And, you know, how much your values coming down when you do that? And also, what are the loan of value and debt service coverage ratios look like on the on the new loans?

Mark Ruggiero: Yeah, it's a great question. And unfortunately, the answer is still largely, it depends. I think what we're learning is each situation has a little bit of a unique facts and circumstances, but, you know, in general, when you look at that population that's set to mature or reprise, it breaks down pretty consistently over the next 24 months. We have about a hundred million, maturing, you know, I guess a little bit more elevated in the next three months, and then there's about 80 million in 2024 and 175 million in 2025.

Mark Ruggiero: What's interesting is when you look at even just in the very near term, the 100 million come and do in Q4, 70 million of that is comprised in just three relationships, three loans. So each one of those three loans, we have good visibility into, in fact, one of those already renewed here in October. It's performing based upon re-offraised valuations, debt service is 1.2 and loan to value is 60%. So that's an example of one where we expect the matured to be somewhat of a non-event.

Mark Ruggiero: And we still see valuation and debt service at the hurdles we'd like them to be. But, you know, we were not suggesting that's going to be the case for every loan. You know, there are a couple where maybe occupancy isn't as strong that will work through. But in general, it's a very manageable number. You know, the population as we look at it today continues to have essentially the 60 to 65% LTV and debt service around 150, 160.

Mark Ruggiero: You know, how much stress we'll see is those mature is a little bit of, like I said, kind of depending on each unique facts and circumstances. But when we look at out the near term, we feel really good about the individual credits come and do.

Unknown Attendee: Thank you.

Steve Moss: Our next question will come from Steve Moss with Raymond James. You may now go ahead. Good morning, guys. Good morning. Mark, just on your comment with regard to the margins stabilizing. If you could remind us the amount of fixed rate hedges maturing in 2024. Yeah, I have. So the next 12 months is 300 million. Steve of hedges, that'll mature with an average strike rate of about 2.8%. So those in the current rate environment, we just revert back to essentially a floating rate impact, which is well more of 5% today. So you're talking about a 225 basis point increase on that 300 million of notes. International.

Jeffrey Tengel: Okay, awesome, that's helpful. And then Jeff on M&A, it sounds like M&A discussions are not active is kind of like how I'm thinking about it, maybe just interpreting it, just kind of curious, you know, are you having any discussions with anyone, you know, is there just a seller resistance, resistance at current pricing? Any color you could share there? Yeah, well, I mean, honestly, just because I'm still relatively new, I'm trying to meet people, if you know, for no other reason, just to continue to familiarize myself with the banking landscape here in Massachusetts.

Jeffrey Tengel: So that is ongoing. And in part, those are very, what I would characterize as very benign conversations. But I think in the current environment, when you pencil out some of the deal dynamics, it just makes it difficult to do, I think from either side, right? I mean, if you're a seller, you're thinking I can increase the value of the franchise, why would I sell now? And if you're a buyer, you know, the marks that you would have to take, you know, become challenging in a, you know, tangible book value, air and back type scenarios.

Jeffrey Tengel: So we're, you know, we're going to continue to have as many conversations as we can so that when there is the opportunity to worse some of the banks that I'm meeting decide that they want to maybe pursue a different alternative than continuing to stay independent, that will be their first call. But that's, you know, so there's both of those things kind of going on at the same time, I guess, sort of the challenging environment that we're working through. And, and again, just myself getting out and meeting a number of the bank executives across our landscape.

Jeffrey Tengel: Okay, that's helpful. And then on the credit that was, you had the $5 million charge off, you know, was that resolution through a note sale or, you know, just kind of curious to give a call around that. Yeah, that actually went to auction, believe it or not, Steven, which, you know, we, there was a lot of discussion here internally around, you know, the appropriate resolution for that credit. You know, this isn't necessarily the optimal environment for an office loan to be sold at auction.

Jeffrey Tengel: So, you know, we could have potentially looked for a different alternative route and held on to that and maybe look for a slightly better resolution. But, you know, at the end of the day, we felt it was appropriate and prudent to go to auction, get the resolution we did and just get that loan behind us. So, you know, it did go out of foreclosure sale. I would just add to that, you know, just to put words to, you know, Mark's comments, we could have kicked the can down the road.

Jeffrey Tengel: That was, that was an option for us and we just made the decision that we didn't see the level of commitment on the part of the sponsor that we felt was going to be appropriate. And so, instead of kicking the can down the road, we decided to take our medicine now.

Mark Ruggiero: Okay, that's helpful. And then in terms of just the, let me just go back to the margin here, with the dynamics of margin and scaleizing here in the fourth quarter. What are you guys assuming for a deposit data, a cumulative cycle will be hold state at a five and a quarter, five, 50 pet funds rate? Yeah, I know we're at 20% cumulatively today. You know, when I look out into 2024, I'd say the biggest driver is going to be primarily the level of CDs, maturing.

Mark Ruggiero: And you know, if you play out essentially the entire CD book, if you just assume that maturers at current rates, I think this is the potential for anywhere of 10 to 15 basis points impact on the margin. I haven't done the math on what that does to the beta in particular, but I'd suggest that it certainly goes a bit north from where we are today. Though I think, you know, if I were to do the math in my head, it feels like it probably stays in that mid-20s range. Great. Thanks for all the color.

Unknown Attendee: Appreciate it. Thank you.

Laura Hunsicker: Our next question will come from Laurie Hunsicker with Compass Point. You may not go ahead. Hi, thanks. Good morning. Just going back to office here and I really, really appreciate all your details. So the 14.2 million on performer that sold. Was that a class A or class B? That was a class B. Okay. And so it was a, if I'm doing the math right, that was a $35.7 cents on the dollar haircut.

Laura Hunsicker: Yeah, compared to what we had on the books at, I think. Yeah. That's right. Okay. And then as far as the breakdown of your maturity, I mean, I think you guys were sort of put in the penalty box because you had so much set to mature and reprise over the next two years compared to your peers that, you know, we've already walked back from in June. It was 41%. Now you're 33%.

Laura Hunsicker: You've got this huge chunk that's coming in the fourth quarter, the $100 million. That's 9% right there of your whole balance. And Mark, thank you for the update on the one loan, but could you help us think about the other two loans? How do we get comfortable that that $100 million is going to renew? How should we be thinking about that? Sure. I mean, the biggest of those three, just to give some facts to it, it's 85% occupied.

Laura Hunsicker: It's currently at a 5% rate. So if we were to likely just renew and continue to price at the five year part of the curve, you'd suggest pricing maybe only, you know, result in 175, 200 basis point increase in their rate. And when you look at debt service under that scenario, I think we continue to feel very good about that. So that's another one where, you know, I think our expectation is that renewal at current rates does not create undue risk or concern.

Laura Hunsicker: And then the other is, again, you know, pretty well occupied. This a little bit of tenant roll over that they're looking for replacements on. But, you know, based on the cash flow and sort of what we'd expect the LTVs at re-appraisal, you know, we think there's a pretty good story there. They've been very communicative with us through the process. We have, you know, really good direct relationships of these borrowers. So again, those three loans in the very near term, I'd say all three of them, we feel pretty good about it.

Laura Hunsicker: Okay. And then the one that you already renewed, how much of the 100 million does that comprise? That was about 18 million. 18 million. Okay. Great. Thanks for the color on that. And I just want one more question on office. It looks like maybe you did a bit of a restatement, and I realized you gave a whole lot more details than so many of the other banks, but I'm just trying to make sure that I'm comparing apples to apples here.

Laura Hunsicker: So your your cream excuse that was primarily office had at last quarter 401 million looks like it's restated to 269 and just wanted to know what was the difference there. Yeah. So it's hopefully you can appreciate Larry as we continue to to mine the data and really do deeper dive into a lot of the portfolio. We thought it was appropriate to just continue to further clarify last quarter was mixed use regardless of how much office was in that relationship.

Laura Hunsicker: And what we want to do now is really stock to highlight those loans that have primarily office exposure. So IE greater than 50% of it is office. So when you look through that same lens at the last quarter that 400 million gets reduced down to 269 and that's more of a focus now going forward. Perfect. Okay. And then just one one quick question on your owner occupied and I realized owner occupied is as much lower risk.

Laura Hunsicker: But is there anything that's concerning you in the owner occupied book any friends that you're starting to see percolate from higher rates. How are you thinking about that? Yeah, I don't think we've seen anything in the owner occupied that we're concerned about. I mean, often does certainly nothing compared to the you know the office. The nonowner expires. Okay. Great. I'll leave it there. Thanks for taking my question. Problem. Again, if you have a question, please put stars and one.

Chris O'Connor: Our next question will come from Chris O'Connor with KBW. You may not go ahead. Hey, good morning.

Mark Ruggiero: Hey, hey, hey, hey, hey to keep you know being is that a horse here on the office side. But just wanted to see if you guys had any color specifically on will look to be some migration or perhaps you know just new loans moved into the you know class a. You know classified category from criticize. I mean, obviously that's something that we're paying very, very close attention to and and have our bankers all very focused on near term.

Mark Ruggiero: You know, rate resets and in maturities and Mark said a little while ago every you know every loan is unique and so the story is difficult to paint the story with the same broad brush. So we're we're being very diligent in trying to be very thorough in in our analysis. Do I think we're going to have some continued you know ins and outs and that criticizing class by category. Yes. I mean, of course we will.

Mark Ruggiero: But as we've hit here today we've gone through all of you know all of that all of the loans that that have that near term risk to it and feel very comfortable with our current classification. Okay, got it. And again, on the handful of loans too, just, I don't think we gave the unit count, but you know, that increased all the wise is primarily like two loans. Okay, great, thanks. And can you just, you know, remind us and the 240 million of the seasonal community outflows this quarter, you know, when, when those should come back in.

Mark Ruggiero: And if you think that, that you'll recapture, you know, the full, the full amount of the seasonal outflows. Yeah, that's a good question. Certainly, we expected to recapture a good portion of that. There is some money in the third quarter municipal related that was, I'd say kind of coined this temporarily parked here that did outflow in the third quarter that we wouldn't expect and that was about 80 million or so. But I, I do think the rest of that, you know, is, is consistent with where we saw municipal levels through most of the first half of, of 2023.

Mark Ruggiero: So I would expect the majority of that to, to come back in at some point in the fourth quarter. But, you know, typically we see a little bit of, um, seasonality affecting our deposit balances in the fourth quarter primarily on the consumer side and some of the holiday, um, spending towards towards the tail end of the year. We may see a little bit of a dip on that front. Got it. And in excluding, you know, the, the seasonal factors in Q4 that you're referring to, um, on the overall kind of non-interest bearing deposit, make sure that, I mean, it's, you know, kind of consistently, uh, you know, declined in order of magnitude, uh, over the course of 2023.

Mark Ruggiero: Do you, do you think that there's still a little bit of mixture left? It has been swelling down over the course of the quarter into the fourth quarter. Um, what, what's your, you know, view on, on how much might be kind of remaining, uh, over the next couple of quarters? Yeah, certainly feels as if the shifting is slowing down. I think what we're seeing mostly drive the dynamic today is just the, the continuing repricing into the higher rate environment.

Mark Ruggiero: So those CDs that were promotionally priced six, seven months ago that are starting to mature will obviously likely renew into now a higher promotional product. So I think it feels to me like the, the mix is starting to slow. I'm going to say it's 100% behind, but I don't think that's as big of an impact. But, you know, those deposit relationships where rate is important, you know, I think you'll continue to see those same customers, um, likely getting additional exception pricing higher or on the CD book, maturing into a higher rate CD.

Mark Ruggiero: So I think the population of deposits that we've priced up will continue to be a bit pressured. Got it. Um, that's helpful. And, uh, and, and on the expense, I, you know, appreciate the guide and the Q4. And I know it's, you know, early, uh, you know, for 2024. Um, but I, I guess just in general, um, I mean, do you guys, we started looking at 2024 in terms of expenses, you know, some opportunities that you guys are, you know, exploring on the efficiency side, uh, or ways to kind of, you know, limit expense growth, giving the overall rate environment.

Mark Ruggiero: Absolutely. Um, but certainly as we head into our budgeting process for next year and strategic planning and thinking about some key initiatives that to your point, we want to obviously continue to invest in. Um, there are areas in the bank where, where we're taking hard looks, um, and, you know, we, we recognize there needs to be a very focused, short-term view on expenses as well. Um, so there will be, you know, uh, less of an appetite to really look for any meaningful expense creep.

Mark Ruggiero: Um, you know, we'll, we'll look at that very closely heading into 2024. And I, and I do think there's very practical areas where we can hold the line and, or, Decrease. Yeah, that was a bit of my comments about kind of getting back to basics and being more efficient and effective is looking at some of the areas that Mark just spoke about. We, you know, we almost doubled in size, you know, in the last three years or so.

Mark Ruggiero: And we're really taking a hard look at, you know, how we're organized and are we being as efficient and as effective as we can be and making sure that that we're being really focused on that. I would also mention that to the extent that we do have some opportunistic hires that we think can drive revenue. We would expect that to be, you know, incremental revenue over and above, you know, what we would be normally planning on in any sort of planning environment, whether it be 2024 beyond. So, so, so I'll bring revenue with, with them. Absolutely. Thanks. Appreciate the question. Thank you.

Unknown Attendee: This concludes our question and answer session.

Jeffrey Tengel: I would like to turn the cops back over to Jeff Tangle for an equal to remarks. Thanks, Anthony. And thank you all for your continued interest in independent bank court. And we will look forward to talking to you at the end of the fourth quarter. The conflict is not concluded.

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