Q3 2025 Independent Bank Corp Earnings Call

October 17, 2025

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Operator: Only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star then 2. Before proceeding, please note that during this call, we will be making forward-looking statements. Actual results may differ materially from these statements due to a number of factors, including those described in our earnings release and other SEC filings. We undertake no obligation to publicly update any such statements. In addition, some of our discussion today may include references to certain non-GAAP financial measures. Information about these non-GAAP measures, including reconciliation to GAAP measures, may be found in our earnings release and other SEC filings.

Operator: 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 a touch-tone phone. To withdraw your question, please press star then two. Before proceeding, please note that during this call, we will be making forward-looking statements. Actual results may differ materially from these statements due to a number of factors, including those described in our earnings release and other SEC filings.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on attached homestyle to withdraw your question. Please press Star then two.

Before proceeding. Please note that during this call we will be making forward looking statements actual results may differ materially from these statements due to a number of factors, including those described in our earnings release and other SEC filings.

We undertake no obligation to publicly update any such statements. In addition, some of our discussion today may include references to certain non-GAAP financial measures.

Operator: We undertake no obligation to publicly update any such statements. In addition, some of our discussion today may include references to certain non-GAAP financial measures. Information about these non-GAAP measures, including reconciliation to GAAP measures, may be found in our earnings release and other SEC filings. These SEC filings may be accessed via the Investor Relations section of our website. Finally, please note this event is being recorded. I would now like to turn the conference over to Jeff Tengel, CEO. Please go ahead.

Formation about these non-GAAP measures, including reconciliation to GAAP measures may be found in our earnings release and other SEC filings.

These SEC filings may be accessed via the Investor Relations section of our website.

Operator: These SEC filings may be accessed via the Investor Relations section of our website. Finally, please note this event is being recorded. I would now like to turn the conference over to Jeff Tengel, CEO. Please go ahead.

Finally, please note this event is being recorded.

I would now like to turn the conference over to Jeff Tangle CEO. Please go ahead.

Good morning, and thanks for joining us today the company. This morning by CFO and head of consumer lending Mark for zero.

Jeff Tengel: Good morning. Thanks for joining us today. I'm accompanied this morning by CFO and Head of Consumer Lending, Mark Ruggiero. We had a busy Q3. We closed on the Enterprise transaction on 1 July and completed the systems conversion this past weekend. We posted solid financial results and continue to make progress on several of our strategic initiatives. Results for the Q3 reflect continued NIM improvement, strong C&I loan growth, solid growth in low cost deposits, lower credit costs, and the beginning of the realization of cost savings from the Enterprise acquisition. Our PPNR return on average assets was 1.7% on an operating basis, our operating return on average tangible common equity improved 283 basis points to 13.2%. I wanted to focus most of my comments on the Enterprise integration and conversion.

We had a busy third quarter, we closed on the enterprise transaction on July one and completed the systems conversion this past weekend.

We posted solid financial results and continue to make progress on several of our strategic initiatives.

Results for the third quarter reflects continued NIM improvement strong C&I loan growth.

Solid growth in low cost deposits lower credit cost in the beginning of the realization of cost savings from the enterprise acquisition.

Our PPE at our return on average assets was 1.7% on an operating basis.

Our operating return on average tangible common equity and <unk>.

283 basis points to 13, 2%.

I wanted to focus most of my comments on the enterprise integration and conversion.

Before we get into some of the specifics I would like to highlight one important difference in this transaction.

Jeff Tengel: Before we get into some of the specifics, I would like to highlight one important difference in this transaction. The typical pattern in most of the acquisitions I've been involved is for the acquired CEO to get a big payday and ride off into the sunset. In the case of Enterprise, their former chairman and founder, George Duncan, remains actively involved. He is an advisor to our board, chairs the newly created Lowell Advisory Board, and continues to be an advocate for Rockland Trust in the community. There are several other senior executives from Enterprise who also continue to be a resource and advocate for us. The involvement and insights provided by George and his colleagues have been invaluable as we bring these two banks together. Simply put, they care. Regarding the integration, things went extremely well.

Jeff Tengel: Before we get into some of the specifics, I would like to highlight one important difference in this transaction. The typical pattern in most of the acquisitions I've been involved is for the acquired CEO to get a big payday and ride off into the sunset. In the case of Enterprise, their former Chairman and Founder, George Duncan, remains actively involved. He is an Advisor to our Board, Chairs the newly created Lowell Advisory Board, and continues to be an advocate for Rockland Trust in the community. There are several other senior executives from Enterprise who also continue to be a resource and advocate for us. The involvement and insights provided by George and his colleagues have been invaluable as we bring these two banks together. Simply put, they care. Regarding the integration, things went extremely well.

Typical pattern in most of the acquisitions I've been involved in for the acquired CEO to get a big payday and write off into the sunset.

In the case of enterprise there are former chairman and founder George Duncan remains actively involved he is an advisor to our board chair is a newly created role Advisory Board and continues to be an advocate for Rockland Trust in the community.

There are several other senior executives from enterprise, who also continue to be a resource and advocate for us.

The involvement and insights provided by Georgia and his colleagues have been invaluable as we bring these two banks together.

Simply put they care.

Regarding the integration things went extremely well we've had great collaboration between the teams post close and the lead up to the systems integration and conversion.

Jeff Tengel: We've had great collaboration between the teams post-close and the lead-up to the systems integration and conversion that took place this past weekend. While it's still early, we think the conversion went exceptionally well. Many colleagues across various business lines commented on how this transaction felt different than others they were involved in. The level of teamwork and appreciation for what each side brought to the table was a common theme across many I spoke with. For Rockland Trust colleagues, we have been open to acknowledge ways in which the Enterprise Bank did things differently and perhaps better. We have already adopted some practices and approaches from Enterprise. On the commercial banking side, we've retained almost 100% of client-facing personnel and have experienced negligible customer loss. Obviously, keeping the lenders has helped retain the customers.

Place this past weekend.

While it's still early we think the conversion went exceptionally well many colleagues across various business lines commented on how this transaction developed different than others. They were involved in.

The level of teamwork and appreciation for what each side brought to the table was a common theme across many I spoke with.

Our Rockland Trust colleagues, we've been open to acknowledge ways in which the enterprise bank did things differently, and perhaps better and we have already adopted some practices and approaches from enterprise.

On the commercial banking side, we've retained almost 100% of client facing personnel and have experienced negligible customer loss.

Obviously, keeping the lenders as health retaining the customers.

Enterprise lenders are fully embracing Rockland trust diverse lending product set as well as our treasury management and fee income offerings.

Jeff Tengel: The Enterprise lenders are fully embracing Rockland Trust's diverse lending product set, as well as their treasury management and fee income offerings. As evidence of this engagement, Enterprise bankers originations for the Q3 this year were 27% higher than the prior year period. This is a testament to my comment last quarter, where I highlighted our similar credit culture. As such, there has not been the typical transition period where the acquired bankers must figure out where the new bank's credit appetite is. A key initiative going forward will be to continue to cross-sell deeper into this Enterprise customer base. On the retail banking side, it's important to emphasize that no Enterprise branches were closed and all Enterprise branch employees were retained. There are many strategic and tactical methodologies that we have found to be beneficial and will be working to incorporate those at Rockland.

As evidence of this engagement enterprise bankers originations for the third quarter. This year were 27% higher.

In the prior year period.

This is a testament to my comment last quarter I highlighted our similar credit culture.

And so as such there has not been the typical transition period, where the acquired bankers both figure out where the new bank credit appetite is like.

Our key initiatives going forward will be to continue to cross sell deeper into this enterprise customer base.

On the retail banking side, it's important to emphasize that no enterprise branches were closed.

All enterprise branch employees were retained.

There are many strategic and tactical methodologies that we have found to be beneficial and will be working to incorporate those at Rockland.

These include incentive plans position responsibilities within our branch and de Novo branch openings.

Jeff Tengel: These include incentive plans, position responsibilities within a branch, and de novo branch openings. Excluding brokered funds, deposit retention at Enterprise has been better than expected. We are also eager to bring our broader consumer lending product set to this market, with early activity indicating the team is well-positioned to introduce both mortgage and home equity offerings to further support these strong communities. Within our investment management group, we've been able to retain all employees we had targeted. The caliber of talent, the strength of the client base, and the depth of relationships between colleagues and clients are outstanding. At both Rockland Trust and Enterprise at a client-centric focus and the cultural integration has been excellent. In summary, success is driven by having talented and engaged employees. It was great to note that over 90% of Enterprise employees who had a job offer extended accepted that offer.

Excluding brokered funds deposit retention at enterprise has been better than expected.

We are also eager to bring our broader consumer lending product set to this market with early activity, indicating the team is well positioned to introduce both mortgage and home equity offerings to further support these strong communities.

Within our investment management group, we've been able to retain all employees we had targeted.

Caliber of talent the strength of the client base and the depth of relationships between colleagues and clients are outstanding.

<unk> Rockland Trust in enterprise at a client centric focus.

The cultural integration has been excellent.

In summary successes driven by having talented and engaged employees. It was great to note that over 90% of enterprise employees, who had a job offer extended accepted that offer.

We can't be more excited about the merits of this transaction.

Jeff Tengel: We can't be more excited about the merits of this transaction. Shifting gears a bit to the general business conditions in the current environment, we can now add the government shutdown to the existing list of tariffs, government funding, inflation, and unemployment that weigh on clients' minds. Overall, the word I think our clients would use to characterize all this is uncertainty, yet our client base remains resilient. The recent AIM poll, which is the Associated Industries of Massachusetts, showed that their Massachusetts business confidence was in the high forties, right where it's been for the last five months. A score of 50 is considered negative. Of note, the poll was taken prior to the government shutdown. Turning to results at INDB, I would like to touch on just a few financial highlights before I turn it over to Mark.

Shifting gears to the general business conditions and the current environment. We can now add the government shutdown to the existing list of tariffs government funding and inflation and unemployment that weigh on clients' minds.

Overall, the word I think our clients would use to characterize all this as uncertainty.

Yet our client base remains resilient.

The recent ampoule, which is Soc associated industries of Massachusetts.

Sure.

Massachusetts business confidence was in the high Forty's.

Right, where it's been for the last five months.

Score of 50 is considered negative.

Of note the poll was taken prior to the government shutdown.

Turning to results of <unk> I would like to touch on just a few financial highlights before I turn it over to Mark.

First C&I loans grew organically at a 13% annualized rate. This represents continued strong performance in our legacy markets like Plymouth County, coupled with some of our newer initiatives maturing.

Jeff Tengel: First, C&I loans grew organically at a 13% annualized rate. This represents continued strong performance in our legacy markets like Plymouth County, coupled with some of our newer initiatives maturing. Second, commercial real estate loan balances declined organically at a 6.7% annualized rate due to normal amortization and the intentional reduction of transactional CRE business. We've talked in the past about getting our CRE concentration below 300%. As expected, the Enterprise acquisition resulted in our CRE concentration increasing. However, the quarter-end number landed at 295%, indicating we have quickly met our challenge to get our concentration below 300%. Despite this, there remains additional transactional CRE we wish to exit as quickly and as economically as possible while still serving our legacy client base.

Second commercial real estate loan balances declined organically at a six 7% annualized rate due to normal amortization and the intentional reduction of transactional <unk> business.

We've talked in the past about getting our pre concentration below 300%.

As expected the enterprise acquisition resulted in our pre concentration increasing however, the quarter end number landed at 295%.

Indicating we have quickly been our challenge to get our concentration below 300%.

Despite this there remains additional transactional Cree, we wish to exit as quickly and as economically as possible, while still serving our legacy client base.

In all we see a clear path for the bank to return to a rate of loan growth more commensurate with our solid deposit growth.

Jeff Tengel: In all, we see a clear path for the bank to return to a rate of loan growth more commensurate with our solid deposit growth. Third, we think generating organic demand deposit growth of 5% annualized in Q3, which has been a historical strength of ours. DDAs represent a healthy 28% of overall deposits, about where we were pre-pandemic. In Q3, the cost of deposits was 1.58%, highlighting the immense value of our deposit franchise. Lastly, our wealth management business continues to be a key value driver. We grew our AUA to $9.2 billion in Q3, inclusive of the $1.4 billion acquired from Enterprise. Now that we have the Enterprise conversion behind us, we will continue to prepare for our core conversion of the entire bank scheduled for May 2026.

Third we think generating organic demand deposit growth of 5% annualized in the third quarter, which has been a historical strength of ours.

DDA is represent a healthy 28% of overall deposits about where we were pre pandemic.

In the third quarter the cost of deposits was 158% highlighting the immense value of our deposit franchise.

Lastly, our wealth management business continues to be a key value driver, we grew our <unk> and <unk>.

$9 2 billion in the third quarter inclusive of the $1 4 billion acquired from enterprise.

Now that we have the enterprise conversion behind US we will continue to prepare for our core conversion of the entire bank scheduled for May of 'twenty six.

The move to a new platform within the <unk> ecosystem will improve our technology infrastructure.

Jeff Tengel: The move to a new platform within the FIS ecosystem will improve our technology infrastructure, enhance efficiencies and scalability, and support the future growth of the bank. We think Q3 results are an important stepping stone to improved growth and profitability for Rockland Trust. We expect to build off these solid results in the quarters ahead. We believe prudent expense and capital management, continued NIM improvement, the realization of the benefits of the Enterprise acquisition, and improved organic growth will unlock the inherent earning power of Rockland Trust. On that note, I'll turn it over to Mark.

Hence efficiencies and scalability and support the future growth of the bank.

We think third quarter results are an important stepping stone to improved growth and profitability for our Rockland Trust, we expect to build off these solid results in the quarters ahead.

We believe prudent expense and capital management continued NIM improvement the realization of the benefits of the enterprise acquisition and improved organic growth will unlock the inherent earnings power of Rockland Trust on that note I'll turn it over to Mark.

Thanks, Jeff as Jeff just hit on a lot of the key drivers for the quarter I will go into a bit more detail in a few areas focusing primarily on the enterprise acquisition some of the big moving pieces during the quarter and expected trends going forward to summarize the quarter results 2025 third quarter GAAP net income was.

Mark Ruggiero: Thanks, Jeff. As Jeff just hit on a lot of the key drivers for the quarter, I will go into a bit more detail in a few areas, focusing primarily on the Enterprise acquisition, some of the big moving pieces during the quarter, and expected trends going forward. To summarize the quarter results, 2025 Q3 GAAP net income was $34.3 million. Diluted EPS was $0.69, resulting in a 0.55% return on assets, a 3.82% return on average common equity, and a 5.84% return on average tangible common equity.

$34 3 million and diluted EPS was <unk> 69.

Resulting in a 0.55% return on assets of 382% return on average common equity and a 584% return on average tangible common equity.

Excluding $23 9 million of merger and acquisition expenses.

Mark Ruggiero: Excluding $23.9 million of merger and acquisition expenses and $34.5 million of day two CECL provision for non-PCD acquired loans and their related tax impacts, the adjusted operating net income for the quarter was $77.4 million or $1.55 diluted EPS, representing a 1.23% return on assets, an 8.63% return on average common equity, and a 13.2% return on average tangible common equity. I'll start with some of the key metrics that are heavily impacted by the Enterprise acquisition. First, in terms of a capital update, as a reminder, we originally estimated the Enterprise deal to result in 9.8% tangible book dilution.

And $34 5 million of day, two seasonal provision for non PC D acquired loans and their related tax impacts. The adjusted operating net income for the quarter was $77 4 million or $1 55 diluted EPS.

Representing a 123% return on assets and 863% return on average common equity and a 13, 2% return on average tangible common equity.

I'll start with some of the key metrics that are heavily impacted by the enterprise acquisition.

First in terms of our capital update as a reminder, we originally estimated the enterprise deal to result at nine 8% tangible book dilution and.

Including estimated M&A to be incurred in the fourth quarter, we peg actual tangible book dilution right around 7% as the loan interest and credit marks came in lower than originally modeled.

Mark Ruggiero: Including estimated M&A to be incurred in Q4, we peg actual tangible book dilution right around 7%, as the loan interest and credit marks came in lower than originally modeled. As such, we anticipate slightly lower earnings accretion than originally modeled as well. In addition, we repurchased $23.4 million of capital at an average price per share of $64.07 during the quarter. Despite the deal impact dilution and repurchase activity, our improved earnings profile and OCI movement resulted in a tangible book value per share decrease for the quarter of only $2.17 or 4.5%, while the tangible book value per share is up modestly over the year-ago metric. Regarding the net interest margin, the reported margin improved meaningfully to 3.62% for the quarter.

As such we anticipate slightly lower earnings accretion than originally modeled as well.

In addition, we repurchased $23 4 million of capital at an average price per share of $64 seven during the quarter.

Despite the deal impact dilution in repurchase activity, our improved earnings profile and OCI movement resulted in a tangible book value per share decreased for the quarter of only $2 17 or four 5%.

While the tangible book value per share is up modestly over the year ago metric.

Regarding the net interest margin the reported margin improved meaningfully to 362% for the quarter.

The 25 basis point increase from the prior quarter can be summarized by highlighting a few key components.

Mark Ruggiero: The 25 basis point increase from the prior quarter can be summarized by highlighting a few key components. First, both the Rockland Trust and Enterprise Bank balance sheet profiles are well-positioned to experience margin growth from loan and securities cash flow repricing, we saw that drive a good portion of the increase this quarter. In addition, though it has negligible impact on the actual net interest income results, the margin also improved slightly by the payoff of approximately $110 million of acquired debt from Enterprise. The margin also expanded approximately 5 basis points due to purchase discount accretion on the acquired securities book. Lastly, we saw approximately 8 basis points of expansion from purchase loan accretion. Regarding this last item, we recognize that the loan accretion results are less than suggested in our guidance last quarter. I would suggest this is purely a timing issue.

First both the Rockland Trust and enterprise Bank balance sheet profiles are well positioned to experience margin growth from loan and securities cash flow repricing and we saw that drive a good portion of the increase this quarter.

In addition, though it has negligible impact on the actual net interest income results. The margin also improved slightly by the payoff of approximately $110 million of acquired debt from enterprise.

The margin also expanded approximately five basis points due to purchase discount accretion on the acquired Securities book.

And lastly, we saw approximately eight basis points of expansion from purchase loan accretion.

Regarding this last item, we recognize that the loan accretion results are less and suggested in our guidance last quarter.

I would suggest this is purely a timing issue. The total accretable loan interest and credit Mark is approximately $160 million and we will expect the vast majority of that to come in over the next five to seven years. However, we remind everyone that the actual results can often be lumpy due to prepayments individual loan payoffs.

Mark Ruggiero: The total accretable loan interest in credit mark is approximately $160 million, we will expect the vast majority of that to come in over the next five to seven years. However, we remind everyone that the actual results can often be lumpy due to prepayments, individual loan payoffs, and repricing events. As long as longer-term rates remain intact, we are confident that our reported margin will reflect a sustainable level as those accretion numbers roll down. With the Federal Reserve cut occurring in mid-September, the quarterly results had very little impact from the Fed action. We continue to reiterate our guidance that the bank is positioned to see little impact on the net interest margin from the recent and any future Fed cuts.

And repricing events.

As long as longer term rates remain intact. We are confident that our reported margin will sustain will reflect a sustainable level as those accretion numbers roll down.

With the federal reserve occurring in mid September mid September quarterly results had very little impact from the fed action. We continue to reiterate our guidance that the bank is positioned to see little impact on the net interest margin from the recent and any future fed cuts.

Shifting gears to loan and deposit activity for the quarter. We are very pleased with the organic results for the quarter.

Mark Ruggiero: Shifting gears to loan and deposit activity for the quarter, we are very pleased with the organic results for the quarter. As Jeff just alluded to, you saw our strategic initiative to focus on relationship CRE and C&I lending on display as total C&I balances increased organically over 13% on an annualized basis for the quarter and are up over 7% through the first nine months of the year. In addition, we are still optimistic over CRE and construction activity moving forward, with the year-to-date declines driven primarily by runoff and workouts of more transactional balances. Specific to the Enterprise acquisition, our newly acquired teams are working off of the same playbook, prioritizing C&I and relationship CRE, and they have not missed a beat, remaining very active in the deal flow during the quarter.

As Jeff just alluded to you saw our strategic initiative to focus on relationship Cree in C&I lending on display as total C&I balances increased organically over 13% on an annualized basis for the quarter and are up over 7% through the first nine months of the year.

We are still optimistic over Cree and construction activity moving forward with the year to date declines driven primarily by runoff and workouts of more transactional balances.

Specific to the enterprise acquisition, our newly acquired teams are working off of the same playbook prioritizing C&I and relationship Cree and they have not missed a beat remaining very active in the deal flow during the quarter.

This focus resulted in a modest decline of approximately $45 million in total loan balances from the enterprise activity, which was nicely offset by growth in the legacy Rockland book.

Mark Ruggiero: This focus resulted in a modest decline of approximately $45 million in total loan balances from the Enterprise activity, which was nicely offset by growth in the legacy Rockland Trust book. Moving to the deposit side of the balance sheet, the story is equally positive. First, specific to the Enterprise-acquired balances, the Q3 results reflected a decline of approximately $80 million. However, only $30 million of that relates to relationship balances, while $50 million reflected the payoff of a maturing brokered CD. Similar to the loan activity, the legacy Rockland Trust deposit organic growth more than offset the Enterprise-related reductions, resulting in approximately 1% combined annualized growth for the quarter. Switching gears to asset quality, the quarterly results capture a few different moving pieces related to the allowance for loan loss and provision levels.

Moving to the deposit side of the balance sheet. The story is equally positive.

First specific to the enterprise acquired balances the third quarter results reflected a decline of approximately $80 million. However, only $30 million of that relates to relationship balances, while $50 million reflected the pay off of a maturing brokered CD and.

And similar to the loan activity the legacy Rockland deposit organic growth more than offset the enterprise related reductions resulted in approximately 1% combined annualized growth for the quarter.

Switching gears to asset quality.

Orderly results capture a few different moving pieces related to the allowance for loan loss and provision levels.

High level net charge off activity was only $1 $8 million for the quarter were four basis points on an annualized basis and overall asset quality metrics remained strong to.

Mark Ruggiero: High level net charge-off activity was only $1.8 million for the quarter, or 4 basis points on an annualized basis, and overall asset quality metrics remain strong. To provide a little more color on the reported results, the allowance for loan loss increased $45.7 million for the quarter, which includes $34.5 million of day two provision on non-PCD acquired loans, $9 million of carryover allowance on acquired PCD loans, and $4 million of core provision less charge-off activity. Total non-performing assets at 30 September are 0.35% of total assets and include approximately $25 million of acquired NPAs from Enterprise. Though new to nonperforming activity was up slightly from the prior quarter, no material loss exposures were identified in those recent downgrades.

To provide a little more color on the reported results the allowance for loan loss increased $45 $7 million for the quarter, which includes $34 5 million of day two provision on non PCB acquired loans.

$9 million of carryover allowance on acquired PCI loans, and $4 million of core provision less charge off activity.

Total nonperforming assets at September 30.

Three 5% of total assets and include approximately $25 million of acquired <unk> from enterprise.

And though no new to nonperforming activity was up slightly from the prior quarter no material loss exposures were identified in our most recent downgrades.

Rounding out the update on noninterest related items. We are pleased to report that both noninterest income and noninterest expense are right in line with expectations. Following in the enterprise merger.

Mark Ruggiero: Rounding out the update on non-interest related items, we are pleased to report that both non-interest income and non-interest expense are right in line with expectations following the Enterprise merger. On the fee income side, as Jeff just mentioned, it's worth re-highlighting that the merger brought over an additional $1.4 billion in assets under administration. With the current quarter activity, total AUA grew to $9.2 billion as of 30 September. On the expense side, I will highlight a few key items. First, we reaffirm our original guidance of achieving 30% cost saves on the acquired Enterprise expense base to be fully realized during Q1 2026. Merger-related expenses totaled $23.9 million for the quarter and were comprised primarily of severance-related costs and professional fees.

On the fee income side as Jeff just mentioned, it's worth three highlighting that the merger brought over an additional $1 4 billion in assets under administration and with the current quarter activity total <unk> grew to $9 2 billion as of September 30th.

On the expense side I will highlight a few key items.

First we reaffirm our original guidance of achieving 30% cost saves on the acquired enterprise expense base to be fully realized during the first quarter of 2026.

Merger related expenses totaled $23 9 million for the quarter and were comprised primarily of severance related costs and professional fees.

Amortization of intangible assets for the quarter was $7 3 million with $6 $1 million related to the newly acquired intangibles from the enterprise deal.

Mark Ruggiero: Amortization of intangible assets for the Q was $7.3 million, with $6.1 million related to the newly acquired intangibles from the Enterprise deal. As Jeff mentioned in his comments, we are working through implementation efforts for a core system upgrade in May 2026. We had little impact from this in the Q3 expenses, though we do anticipate approximately $5 million of one-time costs to be incurred over the next couple of quarters. Lastly, the reported tax rate for the Q stayed relatively consistent at 22.8%. I'll now just close out my comments with Q4 guidance only, as I will plan to give full year 2026 guidance with our Q4 results. In terms of both loan and deposit growth, we anticipate a low single-digit percentage increase off the September balances.

And as Jeff mentioned in his comments, we are working through implementation efforts for a core system upgrade in may of 'twenty six.

We had little impact from this in the third quarter expenses that we do we anticipate approximately $5 million of one time cost to be incurred over the next couple of quarters.

And lastly, the reported tax rate for the quarter stayed relatively consistent at 22, 8%.

I'll now disclose out my comments with fourth quarter guidance only as I will plan to give full year 2026 guidance with our fourth quarter results.

In terms of both loan and deposit growth, we anticipate a low single digit percentage increase off of September balances.

Regarding asset quality as I've been stating, we still do not see any pervasive issues across segments and as such provision will continue to be highly driven by developments of individual commercial credits.

Mark Ruggiero: Regarding asset quality, as I've been stating, we still do not see any pervasive issues across segments, and as such, provision will continue to be highly driven by developments of individual commercial credits. Regarding the net interest margin, we reaffirm and anticipate four to six basis points of expansion on an adjusted basis, which excludes loan accretion impact, which, as I noted before, can be volatile on a quarter-over-quarter basis. For non-interest income, we estimate flat to a low single-digit percentage increase off the Q3 results. For non-interest expense, we anticipate total core expenses, excluding merger-related costs and one-time conversion upgrade costs, to decrease by approximately $2 million. This decrease represents a portion of the remaining Enterprise cost saves expected to be realized, as some temporary salary costs will extend into the Q1.

Regarding the net interest margin.

We reaffirm and anticipate four to six basis points of expansion on an adjusted basis, which excludes bowen accretion impact, which as I noted before it can be volatile on a quarter to quarter basis.

For non interest income, we estimate flat to a low single digit percentage increase after third quarter results.

And for non interest expense, we anticipate total core expenses, excluding merger related costs and one time conversion upgrade costs to decrease by approximately $2 million.

This decrease represents a portion of the remaining enterprise cost saves is expected to be realized as some temporary salary costs will extend into the first quarter.

And as I, just alluded to earlier with the enterprise core conversion behind US we are ramping up efforts and preparation work for our upcoming cost system upgrade, which we estimate will result in approximately $3 million to $5 million of one time costs during the fourth quarter.

Mark Ruggiero: Now, as I just alluded to earlier, with the Enterprise core conversion behind us, we are ramping up efforts and preparation work for our upcoming core system upgrade, which we estimate will result in approximately $3 to 5 million of one-time costs during Q4. Lastly, the core tax rate for Q4 is expected to be in the 23% range, further impacted by any one-time adjustments associated with finalizing the 2024 tax returns. That concludes my comments. With that, we'll now open it up for questions.

And lastly, the core tax rate for the fourth quarter is expected to be in the 23% range.

Further impacted by any one time adjustments associated with finalizing the 2020 for tax returns.

And that concludes my comments and with that we'll now open it up for questions.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Operator: We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Steve Moss with Raymond James. Please go ahead.

We are using a speakerphone please pick up your handset before pressing the keys.

If at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then Kim at this time, we will pause momentarily to assemble our roster.

The first question comes from Steve Moss with Raymond James. Please go ahead.

Good morning, guys.

Thanks, Steve.

Steve Moss: Good morning, guys.

Nice quarter here and definitely.

Mark Ruggiero: Morning, Steve.

Jeff Tengel: Hi, Steve.

Steve Moss: Nice quarter here and, you know, definitely, a lot of moving pieces. Maybe just one thing to start here. I noticed in the deck you guys had said, you know, there was good C&I growth. Just wondering if you could quantify that number here as you're kind of hard with the merger noise? Also just talk about the loan pipeline.

Lot of moving pieces and maybe just one thing to start here I noticed in the deck you guys had said.

There was good C&I growth just wondering if you could quantify that number here is a kind of hard with the merger noise and then also just talk about the loan pipeline.

Yes, so the C&I growth has been as I said in my comments really a function of.

Jeff Tengel: Yeah, the C&I growth has been, as I said in my comments, really a function of we're really good at what we do, and we've been doing it a long time, but it's really been in the kind of the lower middle market. We've continued to make progress there. As I mentioned in some of our legacy markets like Plymouth County, we've changed the incentives of the bankers there too and sent more C&I than CRE. You know, with the balanced scorecard, C&I usually checks more of those boxes, like with deposits and treasury management and such. We think that's part of it.

We're really good at what we do what we've been doing it a long time, but it's really been in that kind of the lower middle market and so we've continued to make progress there.

As I mentioned in some of our legacy markets like Plymouth County.

We've changed the incentives of the bankers there to incent more C&I and CRE and.

And with a balanced scorecard.

I, usually checks more of those boxes like with deposits and Treasury management and such so sorry.

So we think thats part of it and then we had as I mentioned the last couple of quarters, we hired somebody.

Jeff Tengel: We had, as I mentioned, the last couple of Qs, we hired somebody to lead our effort in the middle market and in some of our specialty businesses and he's had an immediate impact. And the loans that his groups and that he are responsible for are all C&I, and they tend to be a little bit bigger than our, you know, some of the things we've done historically. That's really what's driving the, you know, the C&I growth that we've been seeing over the, you know, the last Q or 2. With regard to the pipelines, I'd say they're pretty healthy. I mean, we haven't seen a, you know, dramatic increase or decrease.

To lead our effort in the middle market and in some of our specialty businesses and he has had an immediate impact and the loans that that his groups in that ear responsible for our all CNI and they tend to be a little bit bigger than.

Then some of the things we've done historically.

And so that's really what's driving the.

The C&I growth that we've been seeing over the last quarter or two.

With regard to the pipelines I'd say, there, they're pretty healthy I mean, we haven't seen a dramatic <unk>.

Increase or decrease I think they've been somewhat stable with where they have been in the past.

Jeff Tengel: I think they've been somewhat stable with where they've been in the past. You know, obviously kind of with the caveat that, you know, as you clear out portions of your pipeline with closings, you know, you got to rebuild it a bit. We've been experiencing some of that quarter-to-quarter. Overall, I think they've been pretty healthy.

Obviously kind of with the caveat that as you clear out portions of your pipeline with closing.

To rebuild it so we've been experiencing some of that quarter to quarter, but but overall I think <unk> been pretty elevated.

Okay I appreciate that color and just curious where is loan pricing.

Steve Moss: Okay. Appreciate that color. Just curious, where is loan pricing for you guys these days?

Are you guys. These days.

Yes, I mean still on a spread basis, Steve we stay disciplined we're still looking to get above.

Mark Ruggiero: Yeah, I mean, still on a spread basis. Steve, you know, we stay disciplined. We're still looking to get above, you know, 200 basis points on a spread, especially on the C&I side. Given where rates are today, as you can expect that, you know, that tends to lead you to around 6%, you know, low sixes. You know, we're always looking at staying disciplined to get the appropriate spread over whatever term we're funding.

Above 200 basis points on a spread and especially on the C&I side.

Given where rates are today as you can expect that that tends to lead you to around 6%.

Low sixes. So we're always looking at staying disciplined to get the appropriate spread over whatever term, where where we're funding.

Okay. One other comment maybe on our CNI exposures since I know, it's a tough.

Steve Moss: Okay.

Jeff Tengel: Steve, one other comment maybe on our C&I exposure, since I know it's a topic that we'll probably get asked about later, is none of the growth that we're talking about in C&I is coming in the MDI space. We don't have any, you know, specialty businesses that are geared to that space or, you know, have much, you know, in the way. We have a, you know, a couple of one-off, you know, relationships with leasing companies where we provide a line to them. It's incredibly modest, and we don't have any of our initiatives pointed at that space. All of the C&I growth that we're talking about is all Eastern Massachusetts and it's all, you know, kind of middle market companies.

Topic that will probably get asked about later is none of the growth that we're talking about in C&I is coming in the <unk> space. So we don't have any.

Specialty businesses that are geared to that space.

Much in the way we have.

A couple of one off.

Our relationships with leasing companies, where we provide aligns with them, but but it's incredibly modest and we don't have any of our initiatives pointed at that space. So all of the C&I growth that we're talking about is all eastern Massachusetts, and it's all kind of middle market companies.

Right.

And then just kind of curious here in terms of.

Steve Moss: Right. Just kind of curious here in terms of, you know, the on the office side of things. You know, a stable quarter I guess is kind of how I would characterize it for office. Just kind of curious, you know, how are you guys thinking about, you know, resolution here? Are you guys feeling better in terms of office credit? You know, there's, you know, obviously a decent number of classified loans coming to maturity next year in particular. Just kind of curious if you have any updated thoughts as to what you're seeing and, you know, resolution on the criticizing classified.

You know the on the office side of things.

A stable quarter I guess.

It seems like I would characterize it for office just kind of curious.

How are you guys thinking about resolution here are you guys feeling better in terms of office credit.

Yeah.

There's obviously a few.

Decent number of classified loans coming to maturity next year in particular.

Just kind of curious if you have any updated thoughts as to what youre seeing in resolution on the criticized and classified.

Yes, so I'll start and then Mark you can you can.

Comment I would say in general I feel better today than I did six months ago.

Jeff Tengel: Yeah. I'll start, then Mark, you can comment. I would say in general, I feel better today than I did 6 months ago. Part of that is, we've resolved, you know, several of the larger problems we've had. Part of that is, you know, when I sit through, you know, a lot of the meetings where we're talking about these credits, I think, you know, the general feeling I walk away with is we still have work to do. We're not out of the woods yet.

And part of that is we've resolved several of the larger problems. We've had in part of that is when I when I sit through.

The meetings were talking about these credits I think.

The general feeling I walk away with is we still have work to do so we're not out of the woods, yet, but it feels like.

There is a good number of the.

Jeff Tengel: It feels like, you know, there's a good number of the work we're doing with these loans where we expect a positive resolution or a positive outcome, you know, in part because the sponsors working with us, you know, we're reaching middle grounds on this. You know, we're providing them time to get the asset they own, maybe in better shape, and they're providing us with, you know, money or a master lease or what have you. There's a bunch of different ways to get to that point. I would say net-net, I feel positive. That's not something I could put numbers to, but it's just a general feeling.

The work, we're doing with these loans.

We expect a positive resolution or a positive outcome.

Bar because the sponsors working with us are.

Reaching middle ground on this one we're providing them time to get.

Get the asset they own maybe in better shape and they are providing us with.

Money or a master lease or what have you. So there's a there's a bunch of different ways to get to that point, but I would say net net I feel positive that is not something I could put numbers to but its just a general feeling.

I don't have too much more to edge up outside of when you look at as you are indicating to you some of the.

Mark Ruggiero: Yeah. I don't have too much more to add, Jeff, outside of. You know, when you look at, as you were indicating too, some of the practical implications of what's coming due over the next couple of quarters, it's really concentrated in just a handful of loans. You know, to be honest, a couple of these are trending in the right direction, where, you know, there's potential for, you know, upgrades of risk ratings and good resolution. If there is, you know, a little bit of an uncertainty, you're certainly not seeing the loss exposures that we experienced earlier in the quarter. I think from that perspective, it feels like, you know, true losses and provision expectations feel much more contained.

The practical implications of what's coming due over the next couple of quarters, It's really concentrated in just a handful of loans and to be honest. A couple of these are trending in the right direction, where.

There is potential for <unk>.

<unk> of risk ratings and good resolution if there is a little bit of an uncertainty youre certainly not seeing the loss exposures that we experienced earlier in the quarter. So I think from that perspective.

Feels like true losses, and provision expectations feel much more contained.

Okay, that's great and maybe just one last one for me and I'll hop back in the queue, but.

Steve Moss: Okay. That's great. Maybe just one last one from me and I'll hop back in the queue. You know, you guys sound a bit more constructive on commercial real estate balances and, you know, definitely talking about, you know, a better C&I loan pipeline. I know, Jeff, you've been talking about more organic growth for a little while now. You know, historically, you guys have done low single digit type loan growth. You know, could we maybe see something a little better next year, given what kind of sounds like things are shaking out?

You guys sound a bit.

More constructive on commercial real estate balances.

And.

Definitely talk on about a better C&I loan pipeline and I know, Jeff you've been talking about more organic growth.

For a little while now.

Certainly you guys have done mid single digit type I am sorry, low single digit type loan growth.

Could we maybe see something a little better next year.

Given what kind of it sounds like things are shaking out.

We could if the trends continue here.

Jeff Tengel: Yeah, I think we could. If the trends continue here and, you know, and we get our Enterprise bankers, you know, continuing on the same path that they just demonstrated in Q1 that we've owned them, I feel like kind of if I were to bracket it kind of low to mid-single digits. I think previously we would've said low single digits. I don't think we're ready to put a stake in the ground and say, This is what we think the number's gonna be. But I, you know, I think we feel pretty good about it.

And we get our enterprise bankers continuing on the same path.

As demonstrated in the first quarter that we've owned them.

I feel I feel like kind of if I were to bracket it kind of low to mid single digits. So I think previously we would've said low single digits. So I don't think we're ready to put a stake in the ground and say this is what we think.

Number is going to be.

But.

But I think we feel pretty good about it.

Great I appreciate all the color here and I'll step back in the queue nice quarter.

Steve Moss: Great. I appreciate all the color here, and I'll step back in the queue. Nice quarter.

Thanks.

The next question comes from Mark Mark Fitzgibbon with Piper Sandler. Please go ahead.

Jeff Tengel: Thanks.

Mark Ruggiero: Thanks.

Operator: The next question comes from Mark Fitzgibbon with Piper Sandler. Please go ahead.

Hey, guys Happy Friday.

Hi.

Mark Fitzgibbon: Hey, guys. Happy Friday.

Mark first question I had for you is your guidance on the margin of 46 basis points of expansion in the fourth quarter does that assume one or two.

Jeff Tengel: Hi, Mark.

Mark Ruggiero: Hey, Mark.

Mark Fitzgibbon: Mark, first question I have for you is, your guidance on the margin of 4 to 6 basis points of expansion in Q4, does that assume 1 or 2 Fed rate cuts?

Fed rate cut.

Somewhat moved two fed cuts I guess I would say mark because.

Mark Ruggiero: somewhat moot to Fed cuts, I guess I would say, Mark. You know, as I mentioned in the call, like, I really feel good about our ability to neutralize any Fed cuts pretty quickly. I would suggest it's similar guidance regardless of the Fed action.

As I mentioned in the call I really feel good about our ability to neutralize any fed cuts pretty quickly. So I would suggest that's similar guidance regardless of the fed action.

And then secondly, now that you have.

Mark Fitzgibbon: Okay. Secondly, now that you've marked, you know, the securities portfolio of Enterprise, you know, any plans to kind of restructure that or shrink it?

The securities portfolio of enterprise any plans to kind of restructure that.

We're probably not at this point I mean.

Mark Ruggiero: Probably not at this point. I mean, not that it's about a reporting answer here, but, you know, I think we view that as now being market securities. Whether we sell those off and replace with new securities, I think you're in the same position. It's asset classes we're comfortable with. We're comfortable with the total book of the securities portfolio. You know, the all-in now yield on that book is certainly a lot better. I don't feel strongly there's any reason to restructure that at this point.

Not that it's about a reporting answer here, but I think we view that is now being market securities.

Whether we sell those off and replace with New Securities. I think you are in the same position. So it's asset classes, we're comfortable with.

We're comfortable with the total book of the Securities portfolio and the all in now yield on that book is certainly a lot better so.

I don't feel strongly there is any reason to restructure that at this point.

Okay.

And then I Wonder if you could give us any color on the $16 8 million of new non accruals.

Mark Fitzgibbon: Okay. I wonder if you could give us any color on the $16.8 million of new non-accruals. You know, is it concentrated in a couple loans? What type of loans? Anything you could share with us?

In particular is it concentrated in a couple of loans what type of loans.

Here with US sure, yes, it's actually.

Mark Ruggiero: Sure. Yeah. It's actually really only three loans greater than $1 million in that number. The largest being about a $4.5 million construction loan that came over with the Enterprise acquisition. That's you know, it's a fairly benign story there in terms of what we expect from, you know, probably, hopefully no loss. This was a construction loan that was under an agreement and had just been delayed and kind of pushed out. That P&S has since expired, but the interest is still there, and we're hopeful and feel pretty optimistic that, you know, there is a sale that will get paid out in full on that. That's a $4.7 million loan. That was the biggest of them.

Really only three loans greater than $1 million in that number.

<unk> being about a four and a half a million dollar construction loan that came over with with the enterprise acquisition.

That's.

A fairly benign story there in terms of.

But what we expect from.

Probably hopefully no loss.

This was a <unk>.

Construction loan that was under an agreement and had just been delayed and kind of pushed out that.

That PFS has since expired, but the interest is still there and we're <unk>.

Full and feel pretty optimistic that there is a sale that will get paid out in full on that so that's a $4 7 million all alone.

That was the biggest of them after that you dropped to a.

$1 6 million one one of those would be in a residential loan that appraisal as well in support of the outstanding balance and then it's just a handful of smaller stuff. So I know the number ticked up a bit from the prior quarter, but we really don't see any any loss exposure in that bucket at this point.

Mark Ruggiero: You know, after that, you drop to $1.6 million and $1.1 million, one of those being a residential loan. That appraisal is well in support of the outstanding balance, then it's just a handful of smaller stuff. You know, I know the number ticked up a bit from the prior quarter, you know, we really don't see any loss exposure in that bucket at this point.

Okay, and then I noticed you bought a little bit of stock back this quarter at an average price like 64 and change.

Mark Fitzgibbon: Okay. I noticed you bought a little bit of stock back this quarter at an average price of like $64 and change. How do you think about the tangible book value dilution from buying it up here at, call it, you know, $140 or $145 of tangible book value?

How do you think about the tangible book value dilution from buying it up here I'd call. It 140 to 145 of tangible book value.

I mean, it's always a valuation consideration.

Mark Ruggiero: Yeah. I mean, it's always a valuation consideration. You know, certainly, we're always a bank that's sensitive to tangible book dilution. At the same time, it really comes down to, do we feel the bank's appropriately valued and what's the right level to be buying at? You know, I think it's something we're going to continue to reassess at what ranges we'll tear up activity. I'd like to suggest we will continue to stay active, but we'll just revisit that over the next, you know, month or two and see, you know, what the right levels are to keep an eye on that.

Certainly we were.

We're always a bank that sensitive to tangible book dilution.

But at the same time, it really comes down to do we feel the bank's appropriately valued and what's the right level to be buying at.

So I.

I think it's.

It's something we're going to continue to reassess at what ranges will will tear off activity.

I'd like to suggest we will continue to stay active but we'll just revisit that.

Over the next next month or two and see.

What the right levels to keep buying it.

Okay.

And then lastly for you Jeff I was curious.

Mark Fitzgibbon: Okay. Lastly, for you, Jeff, I was curious, you know, given how friendly the regulatory environment seems to be for M&A these days, you know, what are your thoughts about doing another transaction? Would you look at all sort of further afield from what you have traditionally?

You know given how friendly the regulatory environment seems to be for M&A. These days.

What are your thoughts about doing another transaction and would you look at all sort of further afield from what you have traditionally.

Yes, so I guess I would.

Jeff Tengel: Yeah. I guess I would, you know, point back to the last couple of quarters, and our posture hasn't really changed, which is not really interested or focused on M&A at the moment. We're very focused on organic growth and getting our company, you know, positioned to continue to be a good earner and the integration and conversion of Enterprise. Just because the conversion, you know, is behind us, that doesn't mean our work is done. We still have a lot of work to do, making sure that continues to be a good story, the conversion I'm speaking of.

Point back to the last couple of quarters, and our posture Hasnt really changed switches.

Not really interested her focus on M&A at the moment, we're very.

<unk> focus on.

Organic growth and getting our company positioned to continue to be a good a good earner and the integration.

And the conversion of the enterprise and just because of the conversion is behind us.

That doesn't mean, our work is done so we still have a lot of work to do making sure that continues to be.

A good story the conversion I'm speaking of and then we still have a lot of integration activities going on in order to synergize.

Jeff Tengel: You know, we still have a lot of integration activities going on in order to synergize, you know, the Enterprise franchise with the rest of our franchise. Message hasn't really changed in my mind.

The enterprise franchise with the rest of our franchise so message hasn't really changed in my mind.

Thank you.

Thanks Mark.

Mark Fitzgibbon: Thank you.

Mark Ruggiero: Thanks, Mark.

The next question comes from Laurie Hunsicker with Seaport Research. Please go ahead.

Operator: The next question comes from Laurie Hunsicker with Seaport Research. Please go ahead.

Yeah, Hey, good morning.

Jeff I just wanted to start by asking a question that I think you're largely answered, but I just want to hear it because it's so great and EFI expose there is basically nothing.

Laurie Hunsicker: Yeah. Hey, good morning. Jeff, I just wanted to start, by asking a question that I think you largely answered, but I just wanna hear it because it's so great. MDI exposure is basically nothing.

I mean.

To the extent you want to call it a couple of local.

Jeff Tengel: It is. I mean, to the extent you wanna call a couple of local leasing companies where we have some exposure to, you know. Beyond that, it's really, it's negligible. It's not, hasn't ever been really a focus of ours, isn't today. We don't have any businesses geared towards that sector of the economy.

Leasing companies, where we have some exposure to.

But beyond that it's really it's negligible, it's not hasn't ever been really a focus of ours isn't today.

We don't have any businesses geared towards that sector of the economy.

Okay, Okay, and then often Angela just circling back to that.

Laurie Hunsicker: Right. Okay. Then office, just circling back to that. The $42.9 million of criticized that you've got maturing in Q4, I guess how much of that came from EBTC? It's marked, or how should we think about that piece? It's up from where you were last quarter, but obviously last quarter didn't include EBTC. Is there any color you can give us around that $42.9 criticized office maturing in Q4?

That's $42 9 million of criticized that you've got maturing in the fourth quarter I guess, how much of that came from EBT CE, mark or how should we think about that piece.

It's up from where you were last quarter, but obviously last quarter didn't include the BTC.

Is there any color you can give us around that 42 point on criticized opex maturing in fourth quarter.

Yes, you.

<unk> seen this now play out on a few loans I think over the last couple of quarters here. Laurie those were primarily the same two loans that we talked about is maturing last quarter. We entered into a couple of short term extensions as we were working through more permanent resolutions.

Mark Ruggiero: Yes. You've seen this now play out on a few loans, I think, over the last couple of quarters here, Laurie. Those were primarily the same two loans that we talked about as maturing last quarter. We entered into a couple of short-term extensions as we were working through more permanent resolutions. Happy to report on one of those loans, which is a $27 million relationship that was just recently approved for a new 2-year renewal, you know, with some, you know, some injected equity as well. The projected debt service coverage looks very strong. That property has morphed into a much better position and was just recently extended. The other remaining balance, there's really only two notes that make up that $42 million. The other one is likely to be sold.

I'm So happy to report on one of those loans, which is a $27 million relationship that was just recently approved for a new two year renewal.

With some some.

Injected equity as well the projected debt service coverage looks very strong so that property is.

Has morphed into a much better position and was just recently extended.

The other.

Remaining balance so there's really only two notes that make up that $42 million the other one.

Is likely to be sold were entertaining that right now the offer we see on the table falls, just a little bit short, but nothing of a material nature. So we're hopeful for a resolution there as well but.

Mark Ruggiero: We're entertaining that right now. The offer we see on the table, you know, falls just a little bit short, but nothing of a material nature. We're hopeful for a resolution there as well. You know, that one's just potentially a pending sale.

One is just potentially a pending sale.

And that $10 million that's it.

Laurie Hunsicker: Got you. That's $16 million?

About 16 million correct. There's another couple of million dollars related to that relationship that is not in that number that has exposure to the same bar, but the office exposure was only $16 million.

Mark Ruggiero: That's about $16 million, correct. There's another couple million dollars related to that relationship that is not in that number, that is exposure to the same borrower, but the office exposure is only $16 million.

Okay. Okay, and then it looks like your office Nonperformer is down to 20.

Laurie Hunsicker: Got you. That's it. Okay. It looks like your office nonperformers down to $22 million. That's great. That's just that Class A office, SNICK.

That's great.

Hum.

Class a office.

Right.

You may disconnect all background from farming model here in the next one or two quarters.

Mark Ruggiero: Correct.

Laurie Hunsicker: That maybe is gonna go back on performing status here in the next one or two quarters. Can you just help us think about that one? Any updated information?

Can you just help us.

Think about that one.

Global went from Olson.

So that one would not be return and they have essentially payment free period for quite some time now heading out into 2026 aware of even though it's technically performing under the Hood modification were of the opinion that we were not restore it back to accruing until we see cash flow resuming so that's going to stick around on N P.

Mark Ruggiero: No. That one would not be returning. They have a essentially payment-free period for quite some time now heading out into 2026. Even though it's technically performing under the modification, we're of the opinion that we would not restore it back to accruing until we see cash flow resuming. That's gonna stick around on NPA for a bit, unless there's a path to a full resolution through another channel. If it stays as is, it'll be on payment deferral for quite some time.

For a bit unless there's a path to a full resolution through another channel but.

If it stays.

As is it'll just it'll there'll be on payment deferral for quite some time.

Okay. Okay.

And that that $20 million, but it's still $22 million that is the one that's just one one loan.

Laurie Hunsicker: Gotcha. Okay. That still is $22 million. Is that right?

Mark Ruggiero: It is still $22 million, yep. That is the one. That's just one loan.

Okay, Great I appreciate all the details you gave on Opex okay.

Laurie Hunsicker: Okay, great. Appreciate all the details you give on office. Okay, maybe jumping over to margin. What was your spot margin?

Okay, So maybe jumping over.

The margin what what's your spot margin.

[noise] spot margin for September excluding.

Mark Ruggiero: Spot margin for September, excluding loan accretion, I think is the appropriate number to give you. That was 3.57.

Loan accretion I think is the appropriate number to give you that was $3 57.

Okay.

Good afternoon.

Our bond accretion back to maybe marks question earlier.

Laurie Hunsicker: Okay.

Mark Ruggiero: That includes the bond accretion. You know, back to maybe Mark's question earlier. I, you know, we view that as the core margin now or what we refer to as our adjusted margin. That is inclusive of the bond pickup we got with Enterprise. I will continue to isolate the loan accretion as that can be a bit lumpy.

We view that as the.

The core margin now or what we refer to as our adjusted margin. So that that is inclusive of the bond pick.

Pick up we got with enterprise, but I will continue to isolate the loan accretion is that can be a bit lumpy.

Okay, Okay, and then I do appreciate that loan.

Laurie Hunsicker: Perfect. Okay. I do appreciate that loan accretion income is lumpy. You know, initially obviously your guide was 18 basis points. You had less dilution to tangible book on the deal, which was amazing, but obviously less accretion. I mean, and I know it can jump around, but thinking about it, like, 8 basis points, give or take on margin. Is that the right way to be thinking about it?

And then come in lumpy.

Initially obviously your guide with 18 basis points, you had lots of pollution and handful Buck in Minneapolis with amazing, but obviously lots of accretion.

And I know it can jump around but thinking about it like eight basis points give or take.

On margin.

That's not the right way to be thinking about it.

It feel.

To be candid Laurie I think it would probably move up a bit from there I don't want to predict an exact number but.

Mark Ruggiero: To be candid, Laurie, I think it'd probably move up a bit from there. I don't want to predict an exact number, but you didn't see a lot of payoffs this quarter, which typically can accelerate some of the marks. I would expect that to move north a bit. I just don't want to pick a number. I think it's important to note, though, the 18 basis points, I think, that you were referring to was also inclusive of the securities accretion as well. That's 5 basis points of the 18. I think if you're isolating just the loan mark, that would have originally thought to be 13 basis points or so. You may see a quarter where it actually, you know, is in that range, or you may see a quarter like you saw here.

You didn't see a lot of pay offs this quarter, which typically can accelerate some of the marks so I would expect that.

To move North a bit I, just don't want to <unk>.

Pick a number I think it is important to note, though the 18 basis points I think that you were referring to was also inclusive of the securities accretion as well so that's.

Five basis points of the 18, so I think if you're isolating just alone mark that would've originally thought to be 13 basis points or so.

You may see a quarter, where it actually.

It's in that range or you may see a quarter like you saw here, so I think youre going to see.

Yes, I think you will see volatility between you know.

Mark Ruggiero: Yeah, I think you will see volatility between, you know, 10, 13 basis points on a given quarter, if that makes sense.

10, 13 basis points on a given quarter.

If that makes sense okay.

That's helpful. Okay, and then just jumping over to expenses.

Laurie Hunsicker: Okay. That's helpful. Okay.

Right.

Mark Ruggiero: Okay.

Laurie Hunsicker: Just jumping over to expenses. By my math, you got one-time charges left of $32 million. Is that right? Is there a better number?

You got one time charges was $32 million is that right or is there a better number.

The $61 million, we originally modeled we a lot of that actually went through enterprise I shouldn't say a lot, but about $22 million of that went through enterprise's books in the second quarter. They were change of controls that.

Mark Ruggiero: The $61 million we originally modeled, we, a lot of that actually went through Enterprise. I shouldn't say a lot, but about $22 million of that went through Enterprise's books in Q2. They were change of controls that was pushed through on their side prior to close because they were change of control contracts, and the accounting nature suggested it was their expense. $22 of it already went through Enterprise. We've incurred about $27 million or $29 million year to date, and based on the revised estimates. I'm probably looking around an $8 million to $10 million in Q4.

Was pushed through on their side.

To close because they were change of control contracts and the accounting nature suggested it was their expense.

So 22 of it already went through enterprise.

We've incurred about 27.

A 29 year to date and based on the revised estimates I'm, probably looking around an $8 million $8 million to $10 million in the fourth quarter.

Uh-huh finish it off.

Okay.

Laurie Hunsicker: Oh, that's great.

Mark Ruggiero: Finish it off.

Okay, Great and then if we if we think you know to your point.

Laurie Hunsicker: Okay. That finishes it. Okay, good. Then if we think, you know, to your point that, you know, core expenses here increased $2 million, ex merger, ex system upgrade. I mean, I guess if we sort of fast forward and said we would be looking to a clean quarterly run rate on expenses, how should we be thinking about that number?

Core expenses here.

In ex merger.

X system upgrade.

Again, if we sort of fast forward in pad, we would be looking to clean quarterly run rate on expenses.

How should we be thinking about that number.

Yeah, It's a good question.

Mark Ruggiero: Yeah. It's a good question. You know, I will reserve formal guidance for 2026 till next Q. I think if you just look at Q3, you know, round it to $137 million of what I would call core expenses, excluding M&A. We're pegging additional cost saves of about $2 million. That gets you to $135 million. You know, fully baked cost saves will probably get a little better than that. We're going to go through the budget process and strategic planning in the next couple of months. I wouldn't suggest there's meaningful increases by any means coming.

I will reserve formal guidance for 2026 till next quarter, but I think if you just look at the third quarter.

Rounded to $137 million of what I would call core expenses excluding M&A.

Will.

We're pegging additional cost saves of about $2 million that gets you to $1 35.

You're all fully baked cost saves will probably get a little better than that we're going to go through the budget process and strategic planning in the next couple of months I wouldn't suggest there's meaningful increases by any means coming but I don't want to pick up.

A new number yet for 2026, but I don't think you're going to see it move too far north from.

Mark Ruggiero: You know, I don't want to pick a new number yet for 2026, but I don't think you're going to see it move too far north from, you know, that math that I was just suggesting, which is, you know, about a 135 per quarter type number.

No that that math that I was just suggesting which as you know about a $1 35 per quarter type number.

That's super helpful. Thanks for taking my question.

Laurie Hunsicker: That's great. Super helpful. Thanks for taking my question.

Thanks, Larry.

Mark Ruggiero: No problem.

The next question comes from David Conrad with B K VW. Please go ahead.

David Konrad: Thanks, Laurie.

Operator: The next question comes from David Konrad with KBW. Please go ahead.

Hey, good morning.

I was hoping you can help me out a little bit with the securities portfolio. If I if I promise this will allow us time, but I'll ask it but.

David Konrad: Hey, good morning. I was hoping you could help me out a little bit with the securities portfolio if I promise this will be the last time that I'll ask it. I was wondering if you can kind of split out the kind of legacy with the Enterprise book. In other words, you went from 232 to 284. Just wondering what the yields are on the marked Enterprise side and then what kind of improvement from the 232 on the legacy side and kind of what's the new investment run rate you're getting there. I'm trying to kind of figure out where the cash flows are going and where the yield can improve, if that makes sense.

I was wondering if you can kind of split out the kind of legacy with the enterprise book in other words, you went from $2 32 to $2 84.

Wondering what the yields are on the enterprise side, and then what what kind of improvement from the June 32 on the legacy side and kind of what the new investment run rate Youre getting there. So I'm trying to kind of figure out where the cash flows are going and where the yield can improve if that makes sense.

It does.

I may not have all the pieces for you so I may need to follow up but.

Mark Ruggiero: It does. I may not have all the pieces for you, so I may need to follow up. You know, I would peg the yield on the acquired book in the low 4% range, and I can follow up with an exact number there. I believe the discount mark that you're seeing accrete in essentially brings that piece of the portfolio into the low 4s, which is consistent with what we're replacing runoff of our legacy securities at with new securities. And that's the lift you're seeing on the Rockland side. You know, the cash flows we're anticipating on our book, I guess on the combined book going forward, is about $700 million in 2026.

I waited pegged the.

Yield on the acquired book and the low 4% range and I can follow up with an exact number there, but I believe the discount.

Mark that youre, seeing and accrete and essentially brains that piece of the portfolio into the low fours, which is consistent with what we're replacing.

Run off of our legacy Securities at with New Securities and that's called <unk>.

Seeing on on the Rockman side.

So.

Cash flows were anticipating on our book I guess on the combined book going forward is about $700 million in 2026 I.

I guess technically a portion of that is already at market rate because if its enterprise related it's been marked up to the 4% range, but a good portion of that will be.

Mark Ruggiero: I guess technically a portion of that is already at market rate because if it's Enterprise related, it's been marked up to the 4% range. A good portion of that will be, on average, probably 1.5%, 2% coupons that are being replaced at 4% yields. That's, you know, that's a piece of that overall margin expansion that we've been talking about pretty consistently now for a few quarters. That 4 to 6 basis point range is because, you know, a basis point or two of that is because of the securities repricing that we're seeing.

On average probably 152% coupons that are being replaced at 4% yields and that's that's.

That's a piece of that.

Overall margin expansion that we've been talking about pretty consistently now for a few quarters at 4% to six basis point range is because.

A basis point or two of that is because of the securities repricing.

Got it.

Okay, perfect and then.

David Konrad: Yeah. Got it. Okay, perfect. Following up with the earlier comment, question from Steve, on loan yields. I think that was more directed towards C&I. Maybe the belly of the curve has come in a little bit, maybe more than I thought. On this, on the new CRE, is there a difference in kind of the new money yield you're looking at there?

Finally, with the earlier comment or question from Steve.

On loan yields I think there was more directed towards C&I maybe.

Maybe the belly of the curve has come in a little bit maybe more than I thought, but I missed the new.

New CRE.

Is there a difference in kind of a new money yield youre looking at are not.

Not much David.

Mark Ruggiero: Not much, David. You know, I think fixed rate 3 is probably penciling out somewhere around there. You know, I'm sure we're seeing some competition get below 6, given, like you, as you mentioned, the contraction at that part of the curve. I'm not suggesting we're not doing deals that might be slightly under 6, but it's gonna be right around probably 6%. We are seeing, you know, pretty modest pickup in swap activity. You know, I think that's back on the table for borrowers to be thinking about. That's a product we've always been very comfortable with. You saw a bit of an uptick in the Q3 fee income as it relates to swap fees. Again, swap pricing I wouldn't suggest is that far off.

Think fixed rate <unk> is probably pentangle penciling out somewhere around there.

Sure were seeing some competition get below six given like as you mentioned the contraction at that part of the curve.

I'm not suggesting we're not we're not doing deals that might be slightly under six but it's going to be right around probably 6%.

We are seeing pretty modest pickup in swap activity.

Yes, I think thats back on the table for borrowers to be thinking about.

That's a product we've always been very comfortable with so you saw a bit of an uptick in the third quarter fee income as it relates to swap fees.

So again swap pricing I wouldn't suggest is not far off it's just.

I think borrowers are thinking about that a bit more now as well.

Mark Ruggiero: It's just, you know, I think borrowers are thinking about that a bit more now as well.

Got it okay perfect. Thank you I appreciate it.

Okay. Thank you.

David Konrad: Got it. Okay. Perfect. Thank you. Appreciate it.

Mark Ruggiero: Okay, thank you.

Again. Thank you have a question. Please press Star then one.

Operator: Again, if you have a question, please press star then one. We do have a follow-up from Steve Moss with Raymond James. Please go ahead.

We do have a follow up from Steve Moss with Raymond James. Please go ahead.

Two follow ups from me guys in terms of the balance sheet you guys have a.

Steve Moss: 2 calls for me, guys. In terms of the balance sheet, you guys have a, you know, reasonably healthy cash position here, been running it for a little bit. Just kind of curious if there's any thoughts on deploying some of that into securities here and maybe, you know, shifting the mix given Fed rate cuts or just, you know, any thought process around that?

Reasonably healthy cash position here than.

<unk> been running it for a little bit just kind of curious if theres any thoughts on deploying some of that into securities here and maybe.

Shifting the mix given fed rate cuts or just.

Any thought process around that.

Yeah Yeah.

It's a good question I mean, I think as the balance sheet has grown.

Mark Ruggiero: Yeah. It's a good question. I mean, I think as the balance sheet has grown, there's certainly a slightly elevated cash position that we believe is appropriate, just from a liquidity management standpoint. I do think there's opportunity to put a little of that back into securities. You know, I think right now we're comfortable with the current level as we work through the acquisition. We get a bit more visibility into what loan growth expectations look like. I'm not feeling antsy to rush to put that cash to work. I really would like to see what the loan demand looks like. Obviously, how deposits play out post-acquisition. Sitting on a little bit of excess cash feels appropriate right now.

There's certainly a slightly elevated cash position that we believe is appropriate just from a liquidity management standpoint, but.

I do think there's opportunity to.

Put a little of that back into securities.

I think right now we're comfortable with the current level as we work through the acquisition, we get a bit more visibility into what loan growth expectations look like so I am not.

Not.

Feeling antsy to rush to put that cash to work I really would like to see what the what the loan demand looks like obviously, how deposits play out post acquisition, so sitting on a little bit of excess cash feels feels appropriate right now.

Okay.

Appreciate that and then on capital here you guys are almost at a 13% CET one ratio kind of curious how you're thinking about a longer term target.

Steve Moss: Okay. Appreciate that. On, on capital here, you guys are almost at a 13% CET1 ratio. Kind of curious, you know, how are you thinking about a longer-term target? You know, given good profitability and where credit is these days, you know, could you be a little bit maybe more aggressive on the buyback? You know, I heard your answer on TBV buyback, you know, seems like you have room here.

And.

Given given good profitability in and where credit is these days could you be a little bit maybe more aggressive on the buyback.

I heard your answer on TBB buying back but.

It seems like you have room here.

No.

It's a fair question, certainly I think optimal levels of CET for us in this environment.

Mark Ruggiero: No, it's a fair question. You know, certainly I think optimal levels of CET1 for us in this environment, you know, I would certainly be comfortable at 12% CET1, you know, 8.5% to 9% tangible capital. You're hitting the nail on the head. That suggests there's opportunity to continue to, you know, engage in buyback activity to work that down. You know, that would require a lot of buyback, I think, to be realistic there. You know, it's something that we understand and appreciate. Ideally, we would love to be able to take advantage of these great new markets that we're in with Enterprise and grow into that capital. Growth will need to be driven by good core funding.

I would certainly be comfortable at 12% CET one eight.

Eight 5% to 9% tangible capital and you're hitting the nail on the head that suggests there's opportunity too.

Continue to engage in buyback activity to work that down.

So that would require a lot of buyback I think to be realistic there. So.

So it's something that we understand and appreciate.

Ideally, we would love to be able to take advantage of these great new markets that we're in with enterprise and grow into that capital.

Growth will need to be driven by good core funding I think that's going to be.

A lot of what our mentality will be so if we if we can find better growth because we're getting good deposits and good funding.

Mark Ruggiero: I think that's gonna be, you know, a lot of what our mentality will be. If we, if we can find better growth because we're getting good deposits and good funding, I'd prefer to grow into that capital. If growth stays, you know, in that low to mid-single digit range, I think buyback is certainly a tool that we should be exploring more.

Referred to grow into that capital if growth stays.

And that low to mid single digit range.

Buyback is certainly a tool that we should be exploring more.

Alright, alright, that's everything for me thanks.

Steve Moss: Great. All right. That's everything for me. Thanks.

Thanks, Steve.

Do you.

Mark Ruggiero: Thanks, Steve. Thank you.

This concludes our question and answer session I would like to turn the conference back over to Jeff Tangle for any closing remarks.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Jeff Tengel for any closing remarks.

Thanks, We appreciate your interest in <unk> and everybody have a great day.

Jeff Tengel: Thanks. We appreciate your interest in INDB. Everybody have a great day. Thank you.

Thank you.

Yeah.

The conference.

<unk> has now concluded. Thank you for attending today's presentation you may now disconnect.

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

Q3 2025 Independent Bank Corp Earnings Call

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