Q4 2024 Independent Bank Corp Earnings Call
Good day and welcome to the Independent Bank Corp, fourth quarter 'twenty 'twenty four earnings call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question.
You May press Star then one on your Touchtone phone to withdraw your question. Please press Star then two.
Before proceeding. Please note that during this call we'll be making forward looking statements actual results may differ materially from these statements due to a number of factors, including those described in our earnings release and other SEC filings. We undertake no obligation to publicly update any such statements. In addition, some of our discussions today may <unk>.
References to certain non-GAAP financial measures information about these non-GAAP measures, including reconciliation to GAAP measures may be found in our earnings release and other SEC filings.
These SEC filings can be accessed via the Investor Relations section of our website matters relating to our pending acquisition of enterprise Bancorp will be addressing a registration statement on form S. Four to be filed by independent with the SEC that will include a proxy statement for a special meeting of enterprises shareholders to approve the proposed.
Action and that will also constitutes a prospectus for the independent common stock that will be issued as part of the proposed transaction.
Information regarding the persons who may under the Sec's rules be deemed to be participants in the solicitation of proxies from the enterprise shareholders in connection with the proposed transaction will be set forth in the registration statement. We urge you to read the registration statement when it becomes available because it will contain important information final.
Speaker Change: Please also note that this event is being recorded I would now like to turn the conference over to Jeff Tango CEO. Please go ahead.
Jeff Tango: Thank you.
Speaker Change: And thanks for joining us today I'm, accompanied this morning by CFO and head of consumer lending Mark Ruggiero.
Speaker Change: I'm pleased to report solid fourth quarter results driven by net interest margin improvement stable credit trends and double digit annualized growth in our C&I and small business loan segments.
Speaker Change: Importantly, our average deposits grew at an approximate 3% annualized rate.
Speaker Change: Our pre provision net revenue ROA was 148 on an operating basis and our tangible book value improved 1% for the third quarter and six 4% from the year ago quarter.
As always this performance reflects our team's continued commitment to developing and deepening customer relationships.
Speaker Change: Mark will elaborate on our financial results in a few minutes.
Speaker Change: As I reflect on 'twenty 'twenty four I believe we made solid progress on several of our key strategic priorities.
Speaker Change: First we made steady progress towards reducing our commercial real estate concentration.
Speaker Change: C&I and small business loans were up 4% and 12% respectively in 2024.
Speaker Change: Conversely, Cree in construction loan balances were essentially flat due to normal amortization and the intentional reduction of transactional Cree business.
Speaker Change: At year end, our creek concentration stood at 305 down 2% from the third quarter, we will continue to reduce transactional Cree business.
Speaker Change: And free up capacity to support our legacy commercial real estate relationships.
Speaker Change: And 'twenty 'twenty four we hired 10, new C&I bankers, reflecting the desirability of our platform and the award winning culture of Rockland Trust.
Speaker Change: C&I loan production of approximately 785 million was up 28% in 2024.
Speaker Change: Importantly, C&I loan production represented 50% of total commercial loan production in 2024 up from 40% in 2023.
Speaker Change: We also originated $81 million of business banking loans up 8% from 2023.
Speaker Change: And finally, we hired a seasoned banker to lead a newly established not for profit vertical within our commercial banking business.
Speaker Change: It should bolster both commercial loans and deposits.
Speaker Change: I would note that this quarter, we reclassified owner occupied Cree loans from the Cree bucket to the C&I bucket we.
Speaker Change: We believe this more accurately reflects the purpose and the risk of owner occupied loans and is consistent with industry standards and regulatory guidance.
Speaker Change: Prior periods have been restated to allow for ease of comparison.
Speaker Change: Second in December we entered into an agreement to acquire enterprise Bancorp.
Speaker Change: This transaction will add density to our existing markets, while expanding the Rockland trust franchise into northern mass and southern New Hampshire.
Speaker Change: As we mentioned in December our franchises fit together like two puzzle pieces.
Speaker Change: We have made in person visits to all 27 enterprise branches, all of which will remain open post close.
Speaker Change: And I've had numerous cross functional meetings with the enterprise team across all business units.
Speaker Change: Yeah.
Speaker Change: No surprise, we've been extremely pleased with the collective I'll cover these meetings, which have validated our assumption, namely that their business practices strong focus on the customer experience and engagement of their colleagues mirrors that of Rockland Trust.
Speaker Change: We're even more convinced about the strategic and financial merits of this deal.
Speaker Change: Third we finalized plans to upgrade our core F I S processing platform the.
Speaker Change: Move to our new platform within the F. I S ecosystem will improve our technology infrastructure enhance efficiency and support the future growth of the bank.
Speaker Change: <unk> planned to convert our systems in May of 2026.
Speaker Change: Fourth we prudently grew deposits, which has been a historical strength of ours.
Speaker Change: In the fourth quarter the cost of deposits was 1.65% highlighting the immense value of our deposit franchise.
Speaker Change: Mark will provide additional color on our deposits in a few minutes.
Speaker Change: Fifth our wealth management business continues to be a key value driver.
Speaker Change: We grew our <unk> by seven 6% in 'twenty 'twenty $4 billion to $7 billion inclusive of the December market pullback.
Speaker Change: This business works seamlessly with our retail and commercial colleagues to deliver a holistic experience that resonates with our clients.
Speaker Change: The breadth of these services provides one stop shopping for our clients that includes not only investment management, but financial planning a state planning tax prep insurance and business Advisory services.
Speaker Change: This full suite of products is a differentiating factor for our wealth business.
Speaker Change: Lastly, I would be remiss, if I did not mention our historical disciplined credit underwriting and portfolio management.
Rockland Trust solid loan underwriting has consistently resulted in low loan losses through various economic cycles.
Speaker Change: Net charge offs have averaged five basis points over the last 10 years.
Speaker Change: Well, we clearly have some already identified troubled office loans, we have been proactive in monitoring and addressing these credits many of which were originated by banks that we acquired.
Speaker Change: As we look into 2025, we remain optimistic about our abilities to navigate an uncertain interest rate environment.
Speaker Change: We will continue to focus on those actions, we have control over and look to capitalize on our historical strengths.
Speaker Change: There's no magic to our value proposition, we just do community banking really well and believe our current market position represents a high level of opportunity there.
Speaker Change: We remain focused on long term value creation.
Speaker Change: A top priority in 2025 will be closing the enterprise acquisition in integrating the two companies.
Speaker Change: There are a lot of synergies to be captured that are not in any of our estimates.
We will also continue to focus on loan portfolio diversification and prudent expense management, while we build a best in class organization.
Speaker Change: Underscoring every measure of success is a talented team of engaged passionate and highly talented colleagues focus on making a difference for the customers and communities we serve.
Speaker Change: That is why we are proud to be named a top place to work in Massachusetts by the Boston Globe for the 16th consecutive year.
Speaker Change: In summary, we are fully equipped to deliver the consistent results the market expects with a skilled and experienced management team ample capital attractive markets disciplined credit underwriting strong brand recognition operating scale.
Speaker Change: Rod consumer commercial and wealth customer base, and an energized and engaged workforce.
Speaker Change: In short I believe we are well positioned to realize the benefits of the enterprise acquisition and continue to take market share in the northeast.
Mark Ruggiero: On that note I'll turn it over to Mark.
Mark Ruggiero: Thanks, 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.
Mark Ruggiero: Starting on slide three of the deck 'twenty 'twenty four fourth quarter GAAP net income was 50 million and diluted EPS was $1 18, resulting in a one point or 2% return on assets of $6 six 4% return on average common equity and a 9.96% return on <unk>.
Mark Ruggiero: Average tangible common equity.
Mark Ruggiero: Excluding $1 $9 million of merger and acquisition expenses and their related tax benefit.
Mark Ruggiero: Adjusted operating net income for the quarter was 51 4 million, representing a 1.05% return on assets of $6 eight 2% return on average common equity and a 10.23% return on average tangible common equity.
Mark Ruggiero: The results are largely in line with expectations highlighted by modest margin expansion offset by some level of outsized expenses about I'll provide additional color on it a bit.
Mark Ruggiero: Tangible book value per share increased by 39 cents during the quarter, reflecting solid earnings retention offset by a negative 30 cent impact from other comprehensive unrealized losses and.
Mark Ruggiero: And as Jeff mentioned tangible book value per share increased $2.83 for the full calendar year. Despite the approximately $31 million a share buyback activity earlier in the year.
Mark Ruggiero: Turning to slide four the deposit story continues to be a positive one as average balances increased by $109 million or 0.7% for the quarter. While the period end balance decline of a $135 million reflects typical seasonal outflows within our business and municipal segments.
Mark Ruggiero: The overall mix of deposits remained stable with noninterest bearing DDA, comprising 28, 7% of total deposits at year end.
Mark Ruggiero: Fueling the positive deposit momentum core households experienced net growth for the quarter with total net growth of two 8% for the full year.
Mark Ruggiero: In addition, as we have highlighted over the last few quarters. This deposit stabilization provides a clear path for us to be able to reduce the cost of deposits in conjunction with our fourth quarter and any future federal reserve rate cuts.
Speaker Change: Moving to slide five I'll quickly note that these balances reflect the owner occupied commercial real estate re class that Jeff just alluded to earlier.
Speaker Change: Regarding activity for the quarter advances in the construction book and solid closings in C&I drove a healthy net increase in total commercial balances, while small business regained strong growth after a fairly muted prior quarter.
Speaker Change: The approved commercial pipeline sits at $259 million as of December 31st.
Speaker Change: On the consumer side, both residential mortgage and home equity balances were up nicely in the quarter as we continue to see consistent demand across the footprint in both products.
Speaker Change: Shifting gears to asset quality on slides six and seven I'll highlight some of the key developments for the quarter.
Speaker Change: In summary, total nonperforming loans remained relatively stable at $101 5 million or 0.70% of total loans as of year end.
Speaker Change: Notable developments on the largest nonperforming loans as detailed here on slide six are as follows.
Speaker Change: The 53 8 million dollar office loan remains in workout status with resolution expected from a short sale of the underlying collateral.
Speaker Change: There is a signed off for pending what the offer price serving as the basis for the increase in the in the specific reserve of $3 $9 million to a total of $26 3 million as.
Speaker Change: As the process is still in the early stages, we are anticipating resolution to occur in the second quarter of 2025.
Speaker Change: The second loan on the list and 11.7 million dollar office loan is also anticipated to be resolved via short sale of the property.
Speaker Change: This too has a pending offer with the office price serving as the basis for an increase in the in the specific reserve on that loan of $2.2 million during the quarter.
Speaker Change: We are hopeful for a 2025 first quarter resolution on this loan.
Speaker Change: And third the equipment rental C&I loan remain unchanged and balances as of December 31st but on a positive front a 6 million dollar partial pay down was received subsequent to year end as a result of collateral sale under the bankruptcy proceedings ultra.
Speaker Change: The ultimate resolution of the remaining $5 8 million in Outstandings will be determined by additional collateral sales.
Speaker Change: As noted on slide seven these loans along with the modest loan growth noted earlier drove the $7.5 million and provision for loan loss for the quarter, increasing the allowance as a percentage of loans to 1.17% as of year end.
Speaker Change: Jumping to slide nine and a deeper dive on office exposure, we highlight that the total criticized and classified office loans remained virtually unchanged from the prior quarter.
Speaker Change: We already touched upon the two largest nonperforming office loans, while one other notable update would be in regards to the $30 million syndicated loan that reached maturity in the fourth quarter.
Speaker Change: For this loan the borrower is receiving new tenant interest for some of the recently vacated space as well as renewing some existing leases, which will all be incorporated in a new appraisal expected to be finalized and presented to the bank group during the first quarter.
Speaker Change: With the potential modification <unk> ultimate resolution still unknown no impact on balances our specific reserve was warranted in the quarter.
Speaker Change: In terms of office loan maturities for calendar year 2025, the vast majority and number of units are pass rated and performing without any known issues with the status of the large first quarter nonperforming loan already discussed.
Speaker Change: Switching gears to slide 11, we highlight the net interest margin improved by four basis points in the fourth quarter to 3.33% and improved two basis points on a core basis, when excluding outsized benefit from interest recoveries on payoffs and purchase accounting accretion.
Speaker Change: The drivers of the fourth quarter margin performance should remain intact as we think about the environment going forward.
Speaker Change: Along those lines, we have added slide 12 to provide additional detail on the companys expectations regarding the overall interest rate risk profile to.
Speaker Change: To summarize the bank has approximately 21% of its loan portfolio net of hedge positions that are tied to the short end of the curve and would reprice consistent with any future fed reserve rate moves.
Speaker Change: Similarly, we estimate an approximate 20% deposit beta on our overall non time related deposits and an approximate 80% beta on time deposits the effective timing of which would be in line with the future maturities of that book.
Speaker Change: Lastly, we currently have low levels of cash and borrowings that are tied to the short end of the curve.
Speaker Change: From a fixed rate repricing perspective, we project that the cash flows on our securities and loan books will reprice into a longer term rate curve that will drive yield spread increases on those cash flows of approximately 250, and 125 basis points, respectively based on the current yield curve.
The estimated impact of these moving pieces is reflected here on this slide and serves as the basis for the margin guidance that I'll share with the rest of the full year 2025 guidance shortly.
Speaker Change: Moving to slide 13, noninterest income decreased in the fourth quarter, driven primarily by reduced loan level derivative swap income and reduced unrealized gains on equity securities.
Overall wealth management income stayed relatively consistent with the prior quarter as the market correction in December challenged revenue growth with overall assets under management ending the year at $7 billion.
Total expenses increased during the quarter, partially impacted by a couple of large nonrecurring items, including a $550000. One time expense for final resolution on a lease termination of an exited east Boston branch as well as 764000 of <unk>.
Speaker Change: Unrealized losses on equity Securities.
Speaker Change: And the aforementioned 1.9 million of merger and acquisition expenses.
Speaker Change: And lastly for the tax rate the tax rate for the quarter was approximately 25%.
Speaker Change: Down from prior quarters as a result of additional tax credit investments made during the quarter as well as the statutory release of a 1.2 million dollar uncertain tax position in conjunction with the 20th twenty-three tax return filing during the quarter.
Speaker Change: In closing out my comments I will turn to slide 17 for full year 2025 guidance.
Jeff Tango: As Jeff mentioned, we will keep you apprised of any new developments related to the closing of enterprise Bancorp as that process develops for.
Jeff Tango: For now we reaffirm the high level results as presented at announcement with the caveat being the uncertainty for fair value adjustment impact depending on the rate environment are closing.
The rest of the guidance I'll provide now relates to independent Bank Corp, as a standalone entity.
Jeff Tango: In terms of loan and deposit growth, we anticipate low to mid single digit percentage increases for the full year.
Jeff Tango: Regarding the net interest margin as I laid out earlier, we believe the repricing of fixed rate assets will drive approximately 12 to 15 basis points of margin expansion over the course of the year, meaning approximately three to four basis points of expansion each quarter.
Jeff Tango: Given the overall profile of the balance sheet any additional federal reserve cuts are expected to have a neutral to slightly modest benefit on the overall margin forecast for the year.
Jeff Tango: Regarding asset quality, we anticipate resolution of the larger nonperforming assets already discussed with minimal impact on provision levels as the expected loss on those loans has already been recognized.
Jeff Tango: As we have been saying through the entire year, we will still expect to see some more bumps along the way, but given our view of the portfolio today, we would expect provision levels to come down from 'twenty to 'twenty four results and be driven by loan growth and any negative credit migration, that's not already identified.
Jeff Tango: Regarding noninterest income, we expect a mid single digit percentage increase for full year 2025 versus 2024.
Jeff Tango: And for noninterest expense, we would suggest core expenses, excluding M&A to increase at a mid single digit pace as well.
Jeff Tango: We worked through integration with enterprise. We are also committed to moving forward with a significant core system upgrade which Jeff just mentioned earlier.
Jeff Tango: The upgrade will likely be effective in the first half of 2026 with no material impact on the future expense run rate.
Jeff Tango: However, we anticipate one time expenses in 2025, and the $3 million range related to non capitalized implementation costs, and we will highlight that spend separately throughout the year.
Lastly, the tax rate for the full year is expected to be around 23%.
Jeff Tango: With that we will now open it up for questions.
Jeff Tango: Okay.
Jeff Tango: We will now begin the question and answer session.
Jeff Tango: Ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.
Jeff Tango: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Jeff Tango: At this time, we will pause momentarily to assemble our roster.
Jeff Tango: <unk>.
Speaker Change: The first question comes from Steve Moss with Raymond James. Please go ahead.
Steve Moss: Hey, guys good morning.
Speaker Change: Steve why don't.
Speaker Change: Maybe just starting off with the loan growth outlook for 2025 here feels like a little bit of a step up with including mid single digits for the upcoming year.
Mark Ruggiero: Jeff I know you mentioned that being on the call highlighting a number of hires just kind of curious have you seen an improvement in loan demand here.
Mark Ruggiero: And the last couple of months or is this more just a.
Mark Ruggiero: The hires you highlighted.
Mark Ruggiero: In terms of expectations on balance I think it's more that the people that we've hired him you know that.
Mark Ruggiero: Customer sentiment, we got we get is still you know.
Cautiously optimistic, but I wouldn't characterize it as being.
Mark Ruggiero: We're seeing like any kind of robust economic activity. So I would I would characterize it more as some of the people that we're hiring in and taking share.
Mark Ruggiero: Okay, Great and then in terms of the the margin outlook here.
Mark Ruggiero: I guess that the details in the deck really helpful. But I just was curious with regard to.
Mark Ruggiero: The reference rates you guys put for loans and securities I'm, assuming you're referring to the treasury curve.
Mark Ruggiero: So are you thinking in terms of new loans coming on they come on around a 6% rate am I reading that correctly.
Mark Ruggiero: No fourth quarter, Steve we experienced probably mid sixes, certainly what that the tick up here in the last few weeks you know there's the potential that we see new volumes coming on around 7%, but we are seeing you know the the weighted average coupon of what's rolling off.
Mark Ruggiero: You know low to mid fives, and you know in any given quarter. So that that's sort of the basis for the.
Mark Ruggiero: The 125 basis point spread that we referenced in the material.
Mark Ruggiero: Okay, great appreciate that.
Doug: And then Doug.
Mark Ruggiero: Just one last one for me.
Mark Ruggiero: In terms of the the $49 million in past dues.
Mark Ruggiero: And office just curious is the one of those I'm assuming is the 30 million sub standard that you guys gave the update on <unk>.
Mark Ruggiero: Is there just.
Mark Ruggiero: Is there another loan within that past due bucket there.
Mark Ruggiero: Yes, there is.
Mark Ruggiero: That's right. The 30 million is the largest there's another <unk>.
Mark Ruggiero: 7 million dollar office loan that we actually highlighted earlier in 2024 that at one point was subject to it.
Mark Ruggiero: I would say all of that deal had fallen through we believe it is another opportunity for a note sale here that is pending.
Mark Ruggiero: And then there is also a I believe an $11 million.
Mark Ruggiero: Past due.
Mark Ruggiero: That is also in negotiations right now of a short sale.
Mark Ruggiero: And that's that's alone we took an additional $2 2 million dollar reserve during the quarter on.
Mark Ruggiero: So its primarily three loans that make up the majority of that most of which we've talked about that's right.
Mark Ruggiero: Okay, perfect well I really appreciate all the color and nice quarter. Thanks, guys. Thank you. Thank you.
Mark Ruggiero: The next question comes from Mark Fitzgibbon with Piper Sandler. Please go ahead.
Mark Fitzgibbon: Hey, guys Happy Friday.
Speaker Change: RFP Friday.
Speaker Change: Mark just to be clear that the uptick in delinquencies was the 11 million dollar past due is that correct.
Speaker Change: No. It's I know, there's a lot of moving pieces the uptick in delinquencies. This quarter is the as the syndicated downtown Boston loan for $30 million.
Speaker Change: So that reached maturity in the fourth quarter.
Speaker Change: And then obviously is now in early stage delinquency without modification at this point.
Speaker Change: Okay Fair enough and then just sort of at a high level. Another bank in your in New England did a call. This morning, and they said they see the inflection point in credit quality being sort of mid 2025, I'm curious if you guys would agree with that.
Speaker Change:
Speaker Change: Kind of hard to say.
Speaker Change: It does feel like it's getting a little bit better but.
Speaker Change: These things are each loan is so unique.
Speaker Change: So if we were talking if we were speaking broadly.
Speaker Change: I would say I wouldn't necessarily argue with that I'm not I'm not here to call the pivot point, but I wouldn't necessarily disagree per se, but it.
Speaker Change: It is because of these especially with some of the legacy East Boston savings as long as we have that are sizable.
Speaker Change: I feel a lot better answering that question if we get a number of these a note sales and short sales accomplished in the next quarter or two and are on the other side of that.
Speaker Change: Okay, and then I guess I was curious.
Speaker Change: So your thoughts around reclassifying owner occupied commercial real estate C&I I guess I'm I'm curious you know what if any benefit.
Speaker Change: So to get from that other than the optics of it.
Speaker Change: Well I mean as long as I've been doing this I've always thought of.
Speaker Change: Of owner occupied Cree as C&I, because your ultimate repayment is coming from typically a you know a company, that's making something or distributing something and.
Speaker Change: And it's a much different risk in a much different asset class than kind of investor commercial real estate and so just even internally in our reporting I think it helps Orient you to.
Speaker Change: What kind of risk, we're taking on the balance sheet and what the composition of that the balance sheet is.
Speaker Change: And then as it gets reflected externally.
Im assuming that the investment community is smart enough to know that when we break out.
Speaker Change: The difference between owner occupied and non owner occupied that they can they can do the math, but I guess, we're just doing it for them and some in some respects it but I do think it's the right way to profile. It. If you think about what goes into the pre concentration that the regulators measure owner occupied Cree is not included in that measure.
Speaker Change: So it's just trying to be consistent across the entire portfolio as to how you know how we view the risks.
Speaker Change: Okay, and then lastly on the wealth business I guess I was curious if you could share with us what client flows look like in the quarter versus the impact from market appreciation.
Mark: Sure Mark we saw about $20 million or so of net outflows for the quarter as you know new in the new originations have been strong but.
Mark: <unk> slowed down a little bit in the last couple of quarters market for the quarter, we still saw net market appreciation, but the flows have been fairly neutral the last couple of quarters.
Mark: Yeah.
Mark:
Mark: Thank you.
Mark: Welcome.
Mark: Yeah.
Mark: The next question comes from Laurie Hunsicker with F. C Corps research. Please go ahead.
Laurie Hunsicker: Hi, Thanks, good morning.
Speaker Change: I just wonder Mark if we could start with your spot margin here.
Speaker Change: Thanks sure. So December spot margin was 333 on a core basis.
Speaker Change: Okay.
Speaker Change: And then just going back to that 30 million.
Speaker Change: There are there are no specific reserve on that economic correct correct.
Speaker Change: Okay, and then the new appraisal com that's quite to her.
Speaker Change: Okay.
Speaker Change: Yes, that's our expectation.
Speaker Change: Okay, and then as of last quarter I had in my notes that was 77% occupied.
Speaker Change: Do you have an updated occupancy number on that right now.
Speaker Change: Yeah. So we think with the potential for a new tenant coming in to two vacates some of the the partially vacated space.
Speaker Change: A larger loss of a tenant that that would get back to around 80% in the near term.
Laurie Hunsicker: And the other thing to keep in mind here Laurie as some of the new tenants are still burning through a free rent period, which impacts some of the near term cash flows.
Speaker Change: Got it yeah, and along those lines I had the debt service.
Speaker Change: One al do you have an update on that or.
Speaker Change: I think if if you know again some of it is when you say that services that I O or are we talking about amortization.
Speaker Change: Obviously some of the things we're talking to the client about now.
Speaker Change: If its I O are at their current occupancy I think they are positive cash flow.
Speaker Change: Yeah.
Speaker Change: Got it okay got it.
We thank you for all the color on your Opex I just wanted to shift over a last question on expenses I'm, Mark and I. Appreciate the expense guide, but can you help us think about the mid single digit growth.
Speaker Change: What number you're specifically using them I'm looking at core.
Speaker Change: Non interest expense at about four.
Speaker Change: 4.7 million I don't know if that's a good number and then.
Speaker Change: Yeah. It is that the right number to use or is there a different number.
Speaker Change: The right number yep.
Speaker Change: And then the other other expense line, just looking linked corner I'm going from $22 5 million to $26 8 million.
Speaker Change: And then you had some things in their life insurance adjustment last quarter, and credit and debit processing et cetera.
Speaker Change: Can you just maybe high level and that's a thrill the dip.
Speaker Change: And those two buckets, just so that we have on an apples to apples on a on a car comparison there.
Speaker Change: Sure.
Speaker Change: Yeah, I know one of the items I noted in the prepared comments was with some of the noise, we get on the equity securities.
Speaker Change: So just to reiterate we look at that on a quarter to quarter basis. So if we see.
Speaker Change: Unrealized gains for the full quarter will report that as noninterest income for that quarter, if there's unrealized losses net for the quarter that'll flow through as a noninterest expense. So in the fourth quarter, we had net unrealized losses to the tune of about $800000. So that's.
Speaker Change: Yes, that's obviously a volatile number impacting the fourth quarter. We had some you know some outsized consulting related expenses in the fourth quarter. You know some projects that just timing wise had had trailed into the fourth quarter.
Speaker Change: So you know consulting that we typically have a yellow.
Speaker Change: Run rate in every given quarter that was up about seven or $800000 quarter over quarter.
Speaker Change: We did see a bit more check fraud losses in the fourth quarter.
Speaker Change: One instance in particular, you know like we've heard with other banks as well, there's some issue with treasury checks believe it or not that are getting put back to banks. So we conservatively took that loss now as we continue to research and negotiate to see if we get a recovery on that.
Speaker Change: So we had some outsized check losses in the fourth quarter as well.
Speaker Change: So and then how much.
Speaker Change: I'm the treasurer Chuck situation is about 350000, but we had some other check losses as well during the quarter of two or 300000 outsized.
Speaker Change: Okay.
Speaker Change: I think there was a big.
Speaker Change: Components Laurie off the top of my head.
Speaker Change: Okay, Great. That's helpful I'll leave it there. Thanks, so much okay. Thank you.
Speaker Change: Okay.
Speaker Change: Again, if you have a question. Please press Star then one.
Speaker Change: Our next question comes from Christopher O'connell with K B W. Please go ahead.
Christopher O'Connell: Hey, Good morning, Jeff Hi, Mark Hi, Chris.
Speaker Change: Just wanted to.
Speaker Change: See if you could provide any details on the core conversion set for next year and just how significant of an upgrade that is it for you guys or do you see as the.
Speaker Change: The largest benefits and does it allow you to expand into any kind of new verticals or anything like that.
Speaker Change: Yeah. So.
Speaker Change: The platform more on right now just to put it in context, where.
Speaker Change: We're the largest bang on it and the average size bank on the platform. We're on right now is <unk>.
Speaker Change: Rounded.
Speaker Change: One or $2 billion, so we've really outgrown it.
Speaker Change: The platform, we're migrating to would be very consistent with you know a.
Speaker Change: A number of our peers and some companies much larger than ours, you know 234 times as big as we are so it really it's one it's way more efficient and so it'll create some efficiencies to it'll enable us to have greater product capability.
Speaker Change: Because it's much easier to plug Apis into this platform and and it's just a.
Speaker Change: More.
Speaker Change: It's a platform that is more consistent with the size and complexity that we are can handle multibank loans, whereas the platform. We're on right now struggles to do that a bit so it's a meaningful.
Speaker Change: Full upgrade it's it's it's something that we.
Speaker Change: <unk> spent a lot of time looking at to make sure. It was something we thought we should do and ultimately we came to the conclusion that if we were going to continue to to.
Speaker Change: To grow and to service our customers the way that we.
Speaker Change: Want to in a way that they expect to be service, we really needed a platform that was it.
Speaker Change: Enable us to do that.
I would just add Chris a couple of specifics to you know areas that we're really good at where technology can only make us better Oh, I would suggest cash management and.
Speaker Change: Or why a function right now could could certainly use an upgrade and in this new platform provides meaningful efficiencies and treasury management capabilities.
Speaker Change: And then a second area, we we have a lot of activity through the branches. It's one of our strongest.
Speaker Change: Core differentiators, but right now that's a bit more.
Speaker Change: Annual in an inefficient in terms of getting some of the branch related activity and in communications to the back office functions.
Speaker Change: So this would streamline communication case management, a customer relationship type notes between the front lines in the back office, which for a bank like US you know is very valuable.
Speaker Change: Great appreciate the color.
Speaker Change:
And then is there.
Speaker Change: Are there any update I guess on the sub.
Speaker Change: Sub debt.
Speaker Change: Related to the deal.
Speaker Change: No specific update quite yet on that but we are still planning to look.
Speaker Change: Look to execute here when we believe we'll get we'll get best pricing and certainty of execution.
Speaker Change: As I noted at at announcement time, you know, we're not going to necessarily try and time the market perfectly here to wind it up right before we plan to close we'll be working with our partners too.
Speaker Change: You know like I say assess the market and and look to execute when we think the timing's right. So if that means it's.
Speaker Change: A couple of months before the close we're okay with that.
Speaker Change: Great and then as it relates to the deal you know we've seen a number of our competitors.
Speaker Change: Competitors.
Speaker Change: We recently announced deals coming in at a little bit of a faster pace than they have perhaps over the past.
Speaker Change: Two or three years.
So far I know it's early in the process have you seen any change in tone or in.
Speaker Change: Discussions are your relationship with the regulators so far.
Speaker Change: With this deal.
Speaker Change: Yeah, So far I would say no, but we had a really good relationship coming into it.
Speaker Change: Prior to making the announcement.
Speaker Change: We haven't we haven't heard anything that is giving us pause and nor have we heard anything from the regulators that would suggest it's going to be an.
Speaker Change: Expedited approval so we're.
Speaker Change: We're going to continue to play on the way, we always would and.
Speaker Change: We'll react to the the approval process as it unfolds.
Speaker Change: Great. Thank you.
Speaker Change: And then.
Speaker Change: On slide 12, I just wanted to clarify.
Speaker Change: <unk>.
Speaker Change: On a longer term fixed rate repricing from the loans and securities.
Speaker Change: The annualized margin impact of the 12 to 15 basis points.
Speaker Change: Is that a longer term is in.
Speaker Change: Maturing over the next year.
Two years or is it is that the entire backlog filled on since yeah.
Speaker Change: That's a good question, that's essentially a one year outlook, meaning.
Speaker Change: Call It a basis point a month up what we expect to reprice over the next year.
Speaker Change: So a point in time a year from now is where we'd see sort of a full 12 months to 15 basis points baked into the margin.
Speaker Change: Okay, Great that's helpful.
Speaker Change: And then you know based on you know.
Speaker Change: The rest of the details on that side.
Speaker Change: Kind of in.
Speaker Change: The short term.
Speaker Change: One to two basis points.
And what we've already seen.
Speaker Change: <unk> come through.
Speaker Change: 100 basis points of fed cuts and then.
Speaker Change: On the power side you have the.
Speaker Change: Good detail on kind of the time deposit maturities.
Speaker Change: Which are heavily weighted towards.
Speaker Change: <unk> 25, do you expect to see more of an outsized margin pick up.
In the first quarter or the first and second quarter.
Speaker Change: <unk>.
Speaker Change: Of the year.
Speaker Change: Yeah, certainly the CD repricing dynamic Youll I think would drive.
Speaker Change: What we're reflecting on this slide which is potentially a couple of basis points.
Speaker Change: Over the next quarter or two that you would not necessarily maybe get in the second half of the year, where you know maybe the CD repricing dynamic as not as beneficial.
Speaker Change: So I think the core deposit and loan movements will essentially offset each other.
Speaker Change: And as you're highlighting the CD repricing would give us that net lift of a few basis points in the first half of the year.
Speaker Change: And if there are no other cuts I think the short end of the curve impact.
You know essentially becomes a moot point and it's it's the longer term repricing that drives the margin expansion.
Speaker Change: Great.
Speaker Change: Thanks for taking my questions.
Speaker Change: Problem.
Speaker Change: Yeah.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Jeff Tangled for any closing remarks.
Jeff Tango: Thanks, and I appreciate everybody's interest in Rockland Trust and <unk> have a great day.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Yes.