Independent Bank Q3 2023 Earnings Call Transcript

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Provided by Quartr
October 20, 2023

There are 7 speakers on the call.

Operator

And welcome to the Independent Bancorp Third Quarter 2023 Earnings Conference Call. All participants will be in listen only mode. 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.

Operator

In addition, some of our discussion today may include references to certain non GAAP financial measures. Information about these non GAAP measures, including reconciliations To GAAP measures may be found in our earnings release and other SEC filings. These SEC filings can be accessed via the Investor Relations section of our website. Finally, please also note that this event is being recorded. I would now like to turn the conference over to Jeff Tengel, CEO.

Operator

Please go ahead.

Speaker 1

Thanks, Anthony, and good morning and thanks for joining us today. I'm accompanied this morning by CFO and Head of Consumer Lending, Mark Ruggiero. Our Q3 performance was a solid one given the macro environment and included stable deposit flows, Modest margin pressure, benign credit, higher fee income and disciplined loan growth. Mark will take you through the details in a minute, but I thought I'd offer a few observations prior to. Needless to say, there are many near term challenges confronting the banking industry.

Speaker 1

I feel we've weathered them quite well thus far. We continue to focus on our distinct strength and expertise. It is operational resiliency that has served us well through the years during a variety of credit and economic cycles. Rockland Trust competes in the areas where we can bring unique value, resources and acumen. Our goal is to achieve top quartile performance while delivering a differentiated customer experience where each relationship matters.

Speaker 1

Equally important is knowing where we cannot offer a unique client experience and steering resources elsewhere. As we manage through this unprecedented rising rate environment and the lingering issues brought on by the pandemic, we also keep an eye towards the future. Trust me, there's no grandiose strategic vision being undertaken here. We're simply looking at the best way to capitalize on our inherent strengths in a rapidly changing competitive playing field, focusing on long term value creation. We remain committed to our time honored disciplined approach to building profitable relationships and executing our community banking model that has served Rockland Trust So well over its 100 plus years.

Speaker 1

In some respects, it's getting back to basics. Organic growth in the absence of M and A and focusing on being efficient and effective at $20,000,000,000 in assets. While M and A has been a significant value driver in the past and will again in the future, we are not sitting around waiting for the next deal. With that in mind, we do see near term growth opportunities to exploit our proven operating model in a variety of ways, including leveraging the Rockland Trust business model in our newer markets like the Northshore and Worcester, Continued investment in technology and data analytics to deliver actionable insights for our bankers Ongoing focus on organic loan and deposit growth in our legacy markets and opportunistically attracting high performing talent who can drive revenue. Although the M and A activity continues to be somewhat muted, we will continue to be disciplined on the M and A front when conditions improve, poised to take advantage of opportunities that fit our historical acquisition strategy and pricing parameters.

Speaker 1

To summarize, we have everything in place to deliver the results the market has been accustomed to over the years, including a talented and deep management team, Ample capital, highly attractive markets, good expense management, disciplined credit underwriting, strong brand recognition, Operating scale and an energized workforce. Before turning the call over to Mark, I'd like to note The $100,000,000 share repurchase program we just announced. In this environment, we obviously take our capital position very seriously. At the same time, we recognize that perceived industry concerns can cause our stock's valuation to reach levels that we feel warrant repurchasing stock. With that in mind, this share buyback program allows us the flexibility to create long term value over time.

Speaker 1

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

Speaker 2

Thanks, Jeff. I will now take us through the earnings presentation deck that was included in our 8 ks filing and is available on our website in today's investor portal. Starting on Slide 3 of the deck, 2023 Q3 GAAP net income was $60,800,000 and diluted EPS was 1.38 which reflected another quarter of solid overall business activity amidst a very challenging environment. As Jeff alluded to in his comments, we grew total loans in manner maintained a stable funding profile while growing household accounts generated strong fee income experienced Credit quality trends in line with expectations, maintain low efficiency ratios and authorized a new $100,000,000 share repurchase program. In summary, these results produced a strong 1.25 percent return on assets, an 8.4% return on average common equity and a 12.8% return on average tangible common equity.

Speaker 2

In addition, tangible book value grew per share grew $0.72 per share or 1.7 percent in the 3rd quarter and is up almost 8% from the prior year period. Continuing to focus on a number of topics that are certainly top of mind, Slide 4 summarizes our deposit activity for the quarter. Although total deposits declined by $189,000,000 or 1.2 percent to $15,100,000,000 for the quarter, Average deposits remained relatively flat quarter over quarter. Approximately 240,000,000 The period end decline is attributable to municipal deposits, which is typically impacted by seasonal declines in the 3rd quarter. In addition, the remixing of deposits was modest, with total non interest bearing deposits comprising 32% of total deposits at quarter end, representing no real change from the prior quarter.

Speaker 2

Reflecting a cumulative 20% deposit beta, The cost of deposits increased to a well contained 1.07% for the 3rd quarter, highlighting value of our overall deposit franchise. In addition, new account opening activity remains strong on both the consumer and business front, With an increase in total households for the quarter of 0.9% or 3.7% annualized. Though balance sheet growth is muted given the overall macroeconomic challenges, we firmly believe that this steady and consistent quarterly growth in households Throughout 2023 provides the impetus for our long term relationship banking model that has served us well for decades. Slide 5 provides updated information regarding uninsured deposit and overall liquidity information with no meaningful changes in overall risk Sure, quarter over quarter. Moving to Slide 6, we summarize key information related to our securities portfolio, including updated information regarding book and fair values on both the available for sale and held to maturity portfolios.

Speaker 2

As further support for the share buyback decision, we note that the tangible capital ratio remains at a strong 9.5% even when factoring in the HTM unrealized loss position net of tax. Turning to Slide 7, Total loans increased 0.6 percent or 2.4 percent annualized to $14,200,000,000 for the quarter. The increase was fueled primarily by adjustable rate residential loans, while total commercial loans experienced A slight decline within this challenging environment. Having said that, new commercial closing activity has been solid And we remain optimistic and open for business in our markets as we continue to see market disruption drive a steady flow of new relationship opportunities across both our commercial and small business segments. And while Slide 8 provides an overall snapshot of the makeup of the various loan portfolios, We will take a deeper dive into overall asset quality and in particular an update on non owner occupied commercial office exposure.

Speaker 2

So regarding office commercial real estate exposure, we recognize this remains an area of deep interest. As we have noted in many conversations over the last couple of quarters, the ultimate credit performance will likely play out over time. As such, our goal is to be transparent to the investor community around the insights we gain as we continue to monitor and manage the portfolio. Slides 9 and 10 provide various updates and risk viewpoints on a number of factors. To highlight a few, I'll start with the current status update, which is positive.

Speaker 2

The one non performing loan within the Office Cree portfolio from last quarter has been fully resolved, with a $5,000,000 charge off taken during the quarter and the remaining $9,000,000 paid in full subsequent to quarter end. As a reminder, this loan was largely reserved for last quarter. Total criticized and classified balances within the office portfolio are currently comprised of only 11 loans and are monitored closely by an experienced credit and workout team. In addition, we continue to closely monitor and provide insight on our top 20 office exposures, which make up approximately $504,000,000 in balances or 48% of the entire office portfolio. Within these top 20, we note 0 non performers, dollars 56,000,000 in a criticized status and $28,000,000 as classified, with every one of these loans recently reviewed for appropriate risk rating adjustments.

Speaker 2

The bigger credit picture across the broader loan portfolio As reflected in the graphs noted on Slide 10, while we certainly aren't immune from the inevitable bumps and bruises in our industry through this cycle, We remain vigilant and confident in our approach to managing credit risk, as evidenced by the decrease in total non performing assets and contained net charge off and provision expense results in the quarter. Turning to Slide 11. The continued pressure on cost of deposits outpaced asset yield repricing benefit, resulting in a 3.47% margin for the quarter, which reflects a 7 basis point drop from the prior quarter or only 5 basis points when excluding non core items. I'll include specific margin guidance here in a couple of minutes, but some key items regarding the margin that are worth noting are highlighted on this slide. In summary, we will experience margin benefit resulting from general asset repricing in the higher rate environment from both loans and securities, as well as the maturities of certain 1 month sulfur macro level hedges.

Speaker 2

Assuming a more stabilized rate environment in the first half of 2024. We would anticipate this benefit will outweigh the increases in overall deposit costs, which continue to be impacted by time deposit maturities. Moving to Slide 12, fee income was up nicely for quarter as overall deposit and ATM activity remained strong and wealth management income experienced increased insurance and retail commission income to help offset the drop from seasonal tax preparation fee recognized in the 2nd quarter. The quarter also reflected approximately 2 $700,000 of combined benefit from gains on bank owned life insurance and loan related fees. Turning to Slide 13.

Speaker 2

Total expenses increased $2,200,000 or 2.3 percent when compared to the prior quarter, reflecting increased commissions, retirement benefits and consulting expenses. Also included in the quarter was $750,000 of outsized expense related to one time severance costs and volatile unrealized losses on a trading securities portfolio. Lastly, as summarized on Slide 14, we provide an updated set of guidance focused primarily on Q4 expectations. We expect low single digit loan growth in the 4th quarter to be funded primarily from securities runoff. We anticipate flat to modest declines in total deposit balances, reflecting our typical Q4 seasonality impact.

Speaker 2

Using the current forward curve assumptions, we expect the margin to stabilize in the 3.35% to 3.40% range during the 4th quarter. Though ongoing uncertainty challenges, credit quality assumptions across all loan portfolios, we anticipate provision for loan loss will continue to be driven primarily by the near term performance of our investment commercial real estate portfolio. Regarding fee income, we anticipate Q4 results largely in line with Q3 when excluding the non recurring items I just referenced. And for non interest expense, we expect relatively flat to slightly increased levels as compared to Q3. That concludes my comments and we will now open it up for questions.

Operator

We will now begin the question and answer session. At this time, we will pause momentarily to assemble our roster. Our first question will come from Mark Fitzgibbon with Piper Sandler. You may now go ahead.

Speaker 3

Hey, guys. Good morning and happy Friday.

Speaker 2

Hi, Mark. Happy Friday, Mark.

Speaker 3

Mark, I was curious, what gives you so much confidence that deposit costs won't remain under pressure for a while, especially given that your Cost of deposits is low relative to your peers?

Speaker 2

Yes. We certainly expect The cost of deposits to continue to increase, Mark, I'd say the benefit is really on the asset side, where we believe we'll continue to see repricing benefit that will mitigate the majority of those costs continuing to rise. So I highlighted a couple of key items in my comments. But if you look out over the next 12 months, we have a number of levers that will drive outsized Asset yield benefit compared to what you've seen over the last couple of quarters. So in particular, not only loan and securities run off, But the hedges will continue to mature, and every one of those factors gives some meaningful lift to the margin.

Speaker 2

So I think it's really that dynamic we believe will start to outpace what we still expect to be continued increase on the deposit side such that the margin stabilizes No, heading into 2024.

Speaker 3

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

Speaker 1

Yes, Mark, it's Jeff. I'll take a shot at that. I don't think this is a kind of a strategic shift in our mindset. I think honestly, we just thought at the levels our stock is trading and with the amount of capital we had, It really was prudent for us to take advantage of a buyback in the environment we're in today. And I think importantly, even if you assumed we did the entire buyback today, we're still going to be very well capitalized and I feel like our currency will enable us to continue to pursue acquisitions down the road should they present themselves.

Speaker 1

So Not really much of a strategic change. I would characterize it more as very opportunistic. Okay.

Speaker 3

And then lastly on Office, I think in your slide you suggest that you have about a third of your office book maturing or repricing over the next 2 years. What are the I guess, I'm curious, what are those renewals look like? Do you reappraise all of those? And how much your value is coming down when you do that? And also, what are the loan to value and debt service coverage ratios look like on the new loans?

Speaker 2

Yes, it's a great question. And unfortunately, the answer is still largely it depends. I think what we're learning is each situation That's a little bit of a unique facts and circumstances. But in general, when you look at that population that's set to mature or reprice, It breaks down pretty consistently over the next 24 months. We have about $100,000,000 maturing.

Speaker 2

I guess a little bit more elevated in the next 3 months and then there's about $80,000,000 in 2024 $175,000,000 in 2025. What's interesting is when you look at even just in the very near term, the $100,000,000 coming due in Q4, $70,000,000 of that is comprised in just 3 relationships, 3 loans. So each one of those three loans, we have good ability into, in fact, one of those already renewed here in October. It's performing based upon reappraised valuations. Debt service is 1.2% and loan to value is 60%.

Speaker 2

So that's an example of one where we expect the maturities To be somewhat of a non event and we still see valuation and debt service at the hurdles we'd like them to be. But We're not suggesting that's going to be the case for every loan. There are a couple where maybe occupancy isn't as strong that we'll work through. But in general, it's a very manageable number. The population, as we look at it today, continues to have Essentially, the 60% to 65% LTV and debt service around 150%, 160%.

Speaker 2

How much stress we'll see as those Mature, it's a little bit of, like I said, kind of depending on each unique facts and circumstances. But when we look out the near term, We feel really good about the individual credits coming due.

Speaker 3

Thank you.

Operator

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

Speaker 4

Good morning, guys.

Speaker 1

Good morning.

Speaker 5

Mark, just on your comment with regard to the margin stabilizing, If you could remind us the amount of fixed rate hedges maturing in 2024?

Speaker 2

Yes, I have so the next 12 months is $300,000,000 of hedges that will mature with an average strike rate of about 2.8%. So those In the current rate environment, we'll just revert back to essentially a floating rate impact, which is well north 5% today. So you're talking about a 2 25 basis point increase on that $300,000,000 of notional.

Speaker 5

Okay, awesome. That's helpful. And then, Jeff, on M and A, it sounds like M and A discussions are not Active is kind of like how I'm thinking about it, maybe just for interpreting it. Just kind of curious, are you having discussions with anyone? Is there just Seller resistance at current pricing, any color you could share there?

Speaker 5

Yes.

Speaker 1

Well, I mean, honestly, just because I'm still relatively new, I'm trying to meet people for no other reason just to Continue to familiarize myself with the banking landscape here in Massachusetts. So that is ongoing. And in part those are very what I would characterize as very benign conversations. But I think in the current environment when you Some of the deal dynamics, it just makes it difficult to do, I think from either side, right? I mean, if you're the seller, you're thinking I can increase the value of the franchise, why would I sell now?

Speaker 1

And if you're a buyer, The marks that you would have to take become challenging in a tangible book value earn back type scenario. We're going to continue to have as many conversations as we can, so that when there is the opportunity, whereas Some of the banks that I'm meeting decide that they want to maybe Pursue a different alternative than continuing to stay independent that will be their first call. But that's So there's both of those things kind of going on at the same time, I guess, sort of a challenging environment that we're working Drew and again just myself getting out and meeting a number of the bank executives across our landscape.

Speaker 5

Okay. That's helpful. And then on the credit that was you had the $5,000,000 charge off, Was that resolution through a note sale or just kind of curious if you could give any color around that?

Speaker 2

Yes, that actually went to auction, believe it or not, Stephen, which we that was a lot of discussion here internally around the appropriate resolution for that credit. This isn't necessarily the optimal environment for an office loan to be sold at auction. We could have potentially looked for a different alternative route and held on to that and maybe look for A slightly better resolution, but at the end of the day, we felt it was appropriate and prudent to go to auction, get the resolution we did and just get that loan behind us. So it did go at a foreclosure sale.

Speaker 1

I would just add to that, just to put words to Mark's comments, we could have kicked the can down the road. That was an option for us. And we just made the decision that We didn't see the level of commitment on the part of the sponsor that we felt was going to be appropriate. And so Instead of kicking the can down the road, we decided to take our medicine now.

Speaker 5

Okay. That's helpful. And then in terms of just the maybe just going back to the margin here, With the dynamic of margin stabilizing here in the Q4, what are you guys assuming for a deposit beta, A cumulative cycle will be hold steady at a 5.25 percent, 5.50 percent Fed funds rate?

Speaker 2

Yes. I know we're at 20% Cumulatively today, when I look out into 2024, I'd say the biggest driver is going to be primarily The level of CDs maturing, and if you play out essentially the entire CD book, if you just assume that Matures at current rates, I think there's the potential for anywhere of 10 to 15 basis points impact on the margin. I haven't done the math on what that does to the beta in particular, but I'd suggest that it certainly goes a bit north from where we are today. So I think if I were to do the math in my head, it feels like it probably stays in that mid-20s range.

Operator

Okay,

Speaker 5

great. Thanks for all the color. Appreciate it.

Speaker 2

Thank you.

Operator

Our next question will come from Laurie Hunsicker with Compass Point. You may now go ahead.

Speaker 6

Yes. Hi, thanks. Good morning. Just going back to office here and I really, really appreciate all your details. So the $14,200,000 on pro form a that Sold.

Speaker 6

Was that Class A or Class B?

Speaker 2

That was a Class B.

Speaker 6

That was a Class B. Okay. And so it was if I'm doing the math right that was a $0.357 on the dollar haircut?

Speaker 2

Yes, compared to what we had it on the books at, I think that. Yes. Yes. Yes.

Speaker 6

That's right. Okay. Okay. And then, as far as the breakdown of your maturity, I mean, I think you guys were sort of put in the penalty box because you had so much That's mature and reprice over the next 2 years compared to your peers that we've already walked back from in June, it was 41%, now you're 33%. You've got this huge chunk that's coming in the Q4, this $100,000,000 that's 9% right there of your whole balance.

Speaker 6

And Mark, thank you for the update on the one loan, but could you help us think about the other two loans? How do we get comfortable that that $100,000,000 is going to renew? How should we be thinking about that?

Speaker 2

Sure. I mean, the biggest of those 3, just to give some facts to it, it's 85% occupied. It's currently at a 5% rate. So if we were to likely just renew And continue to price at the 5 year part of the curve, you'd suggest pricing may only result in a 1 175, 200 basis point increase in their rate. And when you look at debt service under that scenario, I think we Continue to feel very good about that.

Speaker 2

So that's another one where I think our expectation is that renewal at current rates Does not create undue risk or concern. And then the other is again pretty well occupied. There's a little bit of tenant rollover that they're looking for replacements on. But based on the cash flow And sort of what we'd expect the LTVs at reappraisal, we think there's a pretty good story there. They've been very communicative with us Through the process, we have really good direct relationships with most of these borrowers.

Speaker 2

So again, those three loans in the very Near term, I'd say all three of them we feel pretty good about.

Speaker 6

Okay. And then the one that you already renewed, how much of the 100 Does that comprise?

Speaker 2

That was about $18,000,000

Speaker 6

$18,000,000 Okay, great. Thanks for the And then just one more question on office. It looks like maybe you did a bit of a restatement and I realize you gave A whole lot more details than so many of the other banks, but I'm just trying to make sure that I'm comparing apples to apples here. So your pre mixed use that was primarily office Had it last quarter at $401,000,000 It looks like it's restated to $269,000,000 And just wanted to know What was the difference there?

Speaker 2

Yes. So hopefully, you can appreciate, Laurie, as we continue to mine the data And really do deeper dives into a lot of the portfolio. We thought it was appropriate to just continue to further clarify Last quarter was mixed use regardless of how much office was in that relationship. And what we want to do now is really start to highlight those loans that have primarily office exposure, so I. E.

Speaker 2

Greater than 50% of it It's office. So when you look through that same lens at the last quarter, that $400,000,000 gets reduced down to $269,000,000 and that's more of a focus now going forward.

Speaker 6

Perfect. Perfect. Okay. And then just one quick question on your owner occupied and I realize owner occupied is much lower risk. But Is there anything that's concerning you in the owner occupied book?

Speaker 6

Any sense that you're starting to see percolate from higher rates? How are you thinking about that?

Speaker 1

Yes, I don't think we've seen anything in the owner occupied that we're concerned about. I mean, Alton, there's certainly nothing compared to the office, the non owner occupied.

Speaker 6

Okay, great. I'll leave it there. Thanks for taking my questions.

Speaker 2

No problem.

Operator

Our next question will come from Chris O'Connell with KBW. You may now go ahead.

Speaker 4

Hey, good morning. Hey, Suki, being his dead horse here on the office side. But just wanted to see if you guys had any color specifically on what looked to be some migration or perhaps Just new loans moved into the Class A Classified category From

Speaker 1

criticize? I mean, obviously that's something that we're paying very, very close attention to And have our bankers all very focused on near term rate resets and maturities. And as Mark said a little while ago, every loan is unique. And so the story it's difficult to paint Paint that story with the same broad brush. So we're being very diligent and trying to be very thorough In our analysis, do I think we're going to have some continued ins and outs in that criticizing classified category?

Speaker 1

Yes. I mean, of course, we will. But as we sit here today, we've gone through all of that All of the loans that have that near term risk to it and feel very comfortable with our current classification.

Speaker 4

Okay, got it. And again, just And on the

Speaker 2

It's only a handful of loans too. Just And I don't think we gave the unit count, but that increase dollar wise is primarily 2 loans. Like 2 or 3. 2 loans.

Operator

Okay, great. Thanks.

Speaker 4

And can you just remind us on the 240,000,000 Of the seasonal muni outflows this quarter, when those should come back in and if you think that you'll Recapture the full amount of the seasonal outflows?

Speaker 2

Yes. It's a good question. Certainly, we expect to recapture a good portion of that. There is some money in the 3rd quarter Municipal related that was I'd say kind of coined as temporarily parked here that did outflow in the Q3 that we wouldn't expect and that was about $80,000,000 or so. But I do think the rest of that is consistent with where we saw municipal levels through most of the first half of twenty twenty three.

Speaker 2

So I would expect the majority of that to come back in at some point in the Q4. But Typically, we see a little bit of seasonality affecting our deposit balances in the Q4, primarily on the consumer side and Some of the holiday spending towards the tail end of the year, we may see a little bit of a dip on that front.

Speaker 4

Got it. And excluding the seasonal factors in Q4 that you're referring to, On the overall kind of non interest bearing deposit mix shift, I mean, it's kind of consistently declined in order of magnitude Over the course of 2023, do you think that there's still a little bit of mix shift left? Has it been slowing down over The quarter into the Q4, what's your view on how much might be kind of remaining over the next couple of quarters?

Speaker 2

Yes, certainly feels as if the shifting is slowing down. I think what we're seeing mostly drive the dynamic today is Just the continuing repricing into the higher rate environment. So those CDs that were promotionally priced 6, 7 months ago that is starting to mature, will obviously likely renew into now a higher promotional product. So I think It feels to me like the mix is starting to slow. I'm going to say it's 100% behind, but I don't think that's as big of an impact.

Speaker 2

But those Deposit relationships where rate is important, I think you'll continue to see those same customers likely getting additional exception pricing higher or on the CD book maturing into a higher rate CD. So I think the population of deposits that we've priced up will continue to be a bit pressured.

Speaker 4

Got it. That's helpful. And on the expense side, appreciate the guide into Q4 and I know it's Early for 2024. But I guess just in general, I mean, do you guys You started looking at 2024 in terms of expenses. I know there's opportunities to add hires here, But is there also some opportunities that you guys are exploring on the efficiency side or ways to kind Limited expense growth given the overall rate environment?

Speaker 2

Absolutely. Certainly, as we head into Our budgeting process for next year and strategic planning and thinking about some key initiatives that to your point, we want to obviously continue to invest in. There are areas in the bank where we're taking hard looks. And we recognize There needs to be a very focused short term view on expenses as well. So there will be less of an appetite to really look for any meaningful expense Tight to really look for any meaningful expense creep.

Speaker 2

We'll look at that very closely heading into 2024. And I do think there's very practical Areas where we can hold the line and or decrease.

Speaker 1

Yes, that was a bit of my comments about kind of getting back to basics and being more efficient and effective is Looking at some of the areas that Mark just spoke about, we've almost doubled in size in the last 3 years or And we're really taking a hard look at how we're organized and are we being as efficient and as effective as we can be and making sure that we're being really focused on that. I would also mention that to the extent that we do have some opportunistic hires that we think can drive revenue, We would expect that to be incremental revenue over and above what we would be normally planning on in any sort of Planning environment, whether it be 2024, beyond. So they'll bring revenue with

Speaker 4

Absolutely. Thanks. Appreciate you taking my questions.

Speaker 2

Thank you.

Operator

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

Speaker 1

Thanks, Anthony, and thank you all for your continued interest in Independent Bancorp, And we will look forward to talking to you at the end of the 4th quarter.

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Key Takeaways

  • Q3 financial performance: GAAP net income was $60.8 million with diluted EPS of $1.38, delivering a 1.25% return on assets, 8.4% return on average common equity and a 12.8% return on average tangible common equity, while tangible book value rose 1.7% sequentially (8% year-over-year).
  • Stable deposit franchise: Total deposits dipped 1.2% ($189 million) seasonally, but average deposits were flat quarter-over-quarter, non-interest bearing balances held at 32% and cost of deposits remained well-contained at 1.07% (≈20% cumulative beta).
  • Disciplined loan growth: Total loans grew 0.6% (2.4% annualized) to $14.2 billion, fueled by adjustable-rate residential loan originations, while commercial and small business lending remained cautious but open for new relationships.
  • Office CRE exposure under control: Approximately 33% of office loan balances repricing or maturing over the next two years ($269 million of primarily office-use loans), with top 20 exposures ($504 million) showing zero non-performers, average LTVs around 60–65% and debt-service coverage above underwriting thresholds.
  • $100 million share repurchase program: Launched to opportunistically add value amid depressed valuations; M&A remains a longer-term priority but the bank is prioritizing organic growth, technology investments and talent acquisition in the near term.
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Earnings Conference Call
Independent Bank Q3 2023
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