Independent Bank (INDB) 19 Apr 242024 Q1 Earnings call transcript

Good day, and welcome to the INDB Independent Bank First Quarter 2024 Earnings Conference Call. [Operator Instructions] 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 discussions today may include references to certain non-GAAP financial measures. measures, our to SEC earnings non-GAAP be measures filings. these in found release about including GAAP reconciliation may Information and other section These the be can of Relations SEC our accessed website. filings Investor via to that note Jeff being now over event Please turn also conference this the CEO. recorded. I is would like Tengel, to go Please ahead.

CFO thanks Consumer of Lending, Ruggiero. morning, Thanks, us I'm Head Nick. and Good accompanied and today. joining for this morning by Mark

and performance continues a in to demonstrate a of long-term resilience our franchise thoughts. environment Mark customer-focused will as quarter the a take the our proven difficult minutes few you share first a after is bank. model some to testament through Our operating in I details community

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quarter, that results tangible return remain take bank of was Though resulting was in the equity core that well, in most year XXXX March $XXX Though the average period-end total portal. when term. The on our first through X.XX% for the contained quarter, the demand XX.XX% X average comments overall the X.XX% return of forward. now some included quarter competitive driven versus for drove diluted the remains a by this of time deposits for but in in the expected this annualized reflection balances near core deposit earnings deck rebound momentum balances our quarter and in profile encouraged customer Starting reflected not increased prioritization on X. deposit central the compression for well reflects steady balances fourth Jeff in common rate in since the income compared and Municipal a Slide by to is X-K on the prior declined environment X% investor that degree positions growth to the result Slide common and $X.XX, is will momentum sacrificing and of that equity. million deck, balances to while challenging our positive we last seasonality, an deposit in growth average us that of I we consumer for up assets, $XX.X household margin position well our which moving increase component net in as doing the served discipline the while are GAAP as QX are the deposits any our fundamentals environment. filing so revenue Jeff. we inflows X.X% drove with weighed through of typical the growing on costs and overall confident well website net keeping million to over growth us deposit time our cost our us consistent quarter. increase new households presentation quarter, positive Thanks, a a scenario today's deposit of was and on the well continued in pricing the continued Though deposit in EPS demand. The on return prior so in or has first on rate his XXXX available alluded

$XX Total net other or as estate balance X. to as annualized in primarily commercial as of combined small growth by construction $XX.X remained X.X% business, portfolios Moving to quarter-over-quarter. Slide billion The flat modest well quarter million all and while was driven increased relatively end. real increase loans

New commercial in interest the market. heels sensitivity, to real to XXXX efforts successfully the across worth rate the in noting Also office have of was no estate. new salable a types activity our diversified we real of majority residential of our number shifted on with estate production neutralize activity nonowner-occupied property commercial our

other to minimal million update Pipelines offset Total and consistent across both key nonperforming lending C&I nonperforming definitely relationship balances. includes million all represent for we are Slide status, on and $XX.X asset represents an Notable assets. estate of real few, of owned, $X.X contain meets a that criteria. Using commercial quarter an To to portfolios a highlight real million, nonaccrual, the includes X.X% that relatively total remain of X.X% loan underwriting for an total market segue solid at number activity loan office assets estate quality. X and loans loans. details of which million that relationship $XX.X over asset accrual remained provide moved in restoration the to core $XX.X total credit as metrics. which quality a our provides by the of

charge-offs loan only quarter, the X the $X points net million in provision loss related minimis net the by the allowance $XXX,XXX charge-offs commercial ratio real and estate for to for in the increased total With of basis of quarter.

X. Slide to Moving

estate real conversations and of is with have recognize has portfolio additional the into helpful. been that investor We community owner-occupied insight we of number how our commercial had providing regarding that portfolio much a

process first The of terms office here group. I move portfolio, with or fourth the a $XX updated some segment we but echo note Slide to we overall quarter the in of the separate loss was exposures X. through renewed this of manner. our few potential credit levels. so migrated previously bumps had mature of provision of migration. comments working by to in is over in process that expect the We to mentioned one risk a in Jeff's loan among strong in the million assessments here, in more and the loans XXXX are office component. And in performance we in captured next a to maturity And exposure risk over either and that mature balances all the with monitoring And the terms renewed update pie owner-occupied methodical our see earlier being rating detailed set total encouraged quarter can the to that we nonowner-occupied and will negative no very loans nonaccrual loans as we levels now chart a continue of still road appropriately minimal quarters, QX

an includes additional X. terms our on Slide of update portfolio, on detail In multifamily which

impact, margin our quality bit, of to previous and one the paying and off million $X.X pristine continues the of competitive stubbornly in first curve reflecting new end notable continue asset gears longer asset We on to dynamics remains inverted metrics pricing nonperforming see net this a during Switching with quarter environment. pricing pressure quarter. the

where with noted to yields costs, As interest XX with will major deposit of prior Appreciating offset X interest drivers. Slide we that basis on than a on I loan guidance. reported out, expectation say increased increased that significant investor more by XX, margin is basis, some on there points compressed the level would in net in the bottom when line margin understanding anchor X.XX% and

and funding touch being believe growth airing the rates. impact the deposit higher cost those our need upon which offsetting wholesale We be I'll on points guidance levels secondly, and into stabilization and deposits at the both and margin dynamics move reprice in or updated first inflection of pace rate-sensitive reflected for The its shortly. total of will and/or higher the

color prior wealth Moving prior Noninterest mainly items, with line by from reflects all income Slide reduced tax investments credit lower quarter across fees compared driven consistent securities the the the our with quarter, valuations. in bit provide and business second. more here a noninterest decrease to in core results a equity items. XX to I'll benefit volatile and swap levels on

combined compared to first related that, And the challenges just focus containment reduction the X.X% quarter. expenses in environment. Before the $XXX,XXX to our occupancy increases upon this assessment a typical counter prior decreased and appropriate expense which reflects FDIC this touching on the despite with expenses, or total in company's in payroll when current quarter revenue

update not quarterly some to sacrificing included the to continue while of the believe key as a business effectively in we quick this activity, clarity an on on wealth XX We area circling our strategic initiatives. fee breakdown more Slide we income management And is that to income additional wealth results. investment the back can provide manage over

primarily Other record over of under slightly retail, is by X%. to with the reflected, As assets wealth quarter-over-quarter. quarter grew revenue up administration end other at nicely associated X% advisory fee $X.X income a components insurance related comprised services with billion down those and

slightly the to reiterate I'll the primarily already current new contributing us uncertainty impact my of money activity key lastly, cost level source versus force is We to This see hires banks. And XX% the track update turn XX.X% the in over from space advantage to of with an provide than business vesting consistent and real guided conditions. with Slide out record recent a to a want sales solid we equity to credit comparable a performance. the of an was guidance, forward-looking our competitive in comments, award this higher due of reflect we funding XX near-term believe many continue quarter. In closing on to which of for and rate other continues tax to discrete strong

reiterate of year we near single-digit in percentage In growth, with expectations modest terms and low flat growth deposit full term. to the increases our for guidance of XXXX loan relatively

Regarding the interest the make year. moving are results. Last predict a net improvement at in half still quarter, margin second potential play margin, pieces specific difficult the the it interest there to of for we net of number highlighted that

front. key conditions for earlier, noted resumed that we was growth. core funding One of were encouraging March the potential as And results the that on

the costs term, certainty pressure obvious lesser benefit the lastly, will assumptions quarters. a provide rate curve near Another maturities we key impact With prior to on Alternatively, its a dynamics. over degree limit see path over the lies yield Federal we XXXX, over payoffs to of the cuts inverted continue margin time. will Reserve and continue and less inversion positive component than the on in in from but also prolonged of pricing the the somewhat anticipate yield will note, deposit the benefit to asset to to loan in securities a hedge curve repricing. And continue

for second pieces, the the moving of in with the margin X.XX% we half second Given for anticipate modest to to these range, in all expectations X.XX% the remain quarter the year. improvement

regarding in As dynamic we guidance no have work that continue provision commercial it to relates asset asset real to with the being through quality our estate loss space. primary loan and and maturities diligently quality, to we'll office changes for

expense, increases XXXX. And rate Regarding noninterest XXXX as full XXXX. reaffirm QX we increase income, low similarly, open the for now versus we versus my QX percentage And will expect increases lastly, low the year in QX anticipate XXXX around we for to levels, as tax percentage for remainder for single-digit is low single-digit a versus comments, in of well it single-digit and and year full versus concludes questions. noninterest percentage the be year expected we up XX%. QX That

from with [Operator Mark first question The Instructions] Fitzgibbon Sandler. comes Piper

in This for Mark at moment. going is the [indiscernible] Greg

in a So the in modest assuming that? many half How I you just the you're NIM you expecting cuts the think improvement said second in are of year. rate

would year. be sort and that one market either two, We're in of Yes. later cuts, following of minimal expectation the or there the

an words, on expect have it other don't of XXXX. in too much to impact we So

would to in the to the XX% the And XX.X% rate be expect then year? of you remainder tax for the range Okay.

XX% dip No, to right the I around down year, XX%. back will do for rest the think it around of

credit, Okay. at summarize quarter Then of largest that could end? you the are your on balance nonperforming credits quickly part

Sure.

credits there's bucket. larger So commercial nonperformers, within really total within our nonperforming X

methodology. that deal that we a went larger quarter. loan credit is lead reserve are individual within a C&I and have it relationship participated prior nonaccrual, our actually first When talked we we allocations about the The a that's not evaluated in

believe million have is a $X determined adequately that's of We reserved. that resolution collateral the valuations loss to some still underlying the be we expect somewhere on our exposure but a there. But range loss have we given in we

nonperforming The looking tenant to tenant That commitment was and in that we the fourth to $XX loan quarter. asset where there to deal. comments. from improvements. That's in first participated new here mentioned less the That's occupancy an my I nonperforming loan second seeing the the that's the owner is are deal office a that's a of lead, million major There's XXXX. in matured that downsize not another we're fund its quarter

looks lastly, we which is that a short a included right to So it largest through million lead then XX% may XX% could now, loss was, third fact, provision. And loan also in about potential be an a and That's exposure, sale took quarter. resolution as our a to office nonperformer in in $X million the QX the charge-off about loan. $X.X the though prior

accounted already been So that well. has loss as for

the on major side are the X and So the those nonperforming. components commercial

are Awesome. And think reprice they on to then that expecting XX, maturities, those TD pivoting mature? to the I Slide when you

Yes.

would expectation imagine the for will less cuts, of up Fed reprice with mentioned, most into I high. I As that

have money out still promotional have some X%. there We at

majority expect high up Xs, assuming call rate, will that of on into X.XX%, would X.XX% our average So it range. highest the reprice I move to the that into

data And is expansion going? share then could you lastly, any Worcester on with us how the

Worcester expansion? Sorry.

Yes. yes.

Yes. break the feel you as We making. -- have initiative tell that we're can that don't a I about don't but progress specific good out we we typically

continue that to deposits again, to we're the We we've our mix. add loans feel I good are going to made growing comments, in model operating about bring and that progress good to to in earlier my bankers continue But to look market, said date. In the to for -- about talented that progress general, and the market. feel as

question next Our with Moss Raymond from Steve comes James.

the Maybe here. just margin starting with

-- are where cost at kind Just curious, out? rate of you are maybe about and where Just are thinking deposits your days? new funding adding at what you these peak they

into QX rate the honest. deposits to have not sensitive. I are I expect is I that think positive core would mean to that some grow heading in saw It and late March we Yes. Steve, depends, to momentum be

some modestly traction activity, priced see of or some our checking savings we're it's whether in our to accounts. So noninterest-bearing account starting

is think core stock to our products, time, deposits level do absolutely same commercial But whether to at demand we to some see in grow. which to X%, high product ICS I X%. or be there So continue that lower of our will will the CDs our a cost continue it's

that seeing really to operating X% is you're then again, that are So range. for looking rate accounts in household the be cost are of core continued good mix low that and those

in and pricing Just the loans new books what's these on loan days, then uptick And pipeline? Okay. in terms curious these are where coming the renewals days? the of

the through been imagine, first It's to a mid-part continue can somewhat you of curve quarter, stay depressed. as challenge Yes. the the

first a of commercial the been fixed has the certainly, in curve our lot off around anything priced quarter, Xs of short up So pricing the in was X%. mid-to-high probably end the

I think the there of bit. part X-year up to the you're X see the move starting positive to curve is that middle a

would see anything quarter in I continue here second start commercial X% X to in [indiscernible] to the in So rate range. expect fixed our the we and should pricing back be that

emphasize and And -- of also we credit I try floating. lines continue that to tend as a lot of C&I, think be that to or

And as so we'll get segment. continue the to benefit emphasize we from that that

of an just Steve. I'll impact. Not add, as big

a all seeing is line our equity in based. prime well side, bit which lately utilization an on are of as uptick home We

So we're seeing a little equity on well. home side bit of a lift the there as

of you guys balances construction And it the year-over-year. come call have down, in probably XX% terms just had

to Or in further that we curious, Just closer portfolio? runoff in construction? a are getting commercial you do see bottom

should a I line environment probably going it's because going interest very disciplined we're say, but think pencil with I construction be the and costs. obviously the the out made as ups I market has down, see a much of are disciplined don't for lot that it loans and or linear to to we more in rate still construction difficult we're the downs. runoff increase know of further some the to -- more

I from it see much if here. that anything, So And I bucket will increasing down. be don't think again,

color And office or was appreciate the quarter, What around I status loan? B in questions office -- of give Okay. the A, terms then open rate class portfolio, the you Class the can that of C? X that we that. of occupancy that. on Any property this

went nonperforming, believe, fingertips my Class I that one at The but B, here, a Steve. I have is don't

Okay.

second the was your of what part question? sorry, And

you The occupancy, any have if that chance? by

Yes.

somewhat situation with the half have of has major the looking there tenant downsize they and to and up rest we occupancy where about been that a that's challenged. So take of building the

expectation somewhere to of looking loss a term towards range, on pressure to with So which in there's XX% here the to be resolution why in XX% to some it's sale trending XX% that valuation this the XX% near is sort to the extent come or may of the some exposure.

Right.

terms million in the of the office Okay. was in fourth that And one then performing quarter. property, not other just the $X

be is here just thinking any there? going in the update that that I was Just was -- the resolved near resolution to term, curious, on

if to but direct was much for price. thought the would note now, expectation too. upon it would going about deal there right Yes. loss way We note deal. this sale is the that there the a was the expect were that And is one, is, Unfortunately, a potential as only again, took -- we a borrower But we happen. And be based charge-off that out that we that workout of club on talked last where on or with is pending -- that we may pretty hoping there's discounted there at plays quarter. in payoff negotiations the we a a this fell so, participant it through. sale an the this not We're line with sort

Our question from comes Laura Hunsicker Seaport Research. with next

million. stay your of But so new just -- back first the things multifamily it it Just office, Appreciate of the on going line was started my great. office that on notes, last came outside wanted -- started it I credit Steve's questioning just look quarter, had -- to and with $XX.X in obviously, and slide. the to

of That's an $X.X $X.X million. charge-offs, to million so down still had loan? $X.X million You

is. Yes. It

is that NPA. still in So

but may the on believe our Laura. expect... point, million this a could that's at right But note value where alluding paid that had based to pending understanding I the of $X actually it's that's I or still resolved that think through one was get now the go point resolution, at down about that different sale we just to with so, one

you okay. Do --

it's $X million? So you any reserve it, to don't specific against have other down

to Correct. down Charge $X million, right?

Down to X.

and then in And one same provision $XX your just did this -- you we look -- provision? that you I'm stage delinquency early the assuming last great. an the think remark at Okay, is for I what went this quarter, flagged aside quarter. your million, it's What's showing set the them?

Yes.

So on million about specific a we allocation took that $X.X loan.

no Great. us And Maybe looking color to just Okay. surprise quarter criticized think you and office. help But that? seeing Any went be then just can your linked we would linked you're in weakness. just about watching at help here, that, be that us here should about worried your helpful. about up thinking what about Certainly, $XXX criticized those we're think or million from quarter. $XX million how

Sure.

I to I and I think So sure you right. want make -- heard

your material in $XXX million went to from have million? that You $XX

last I But now quarter had number. $XXX $XX.X criticized to Maybe it million going million from million? wrong if... $XXX.X $XX quarter. that's million is and maybe this I last at million quarter, At mean the up $XX

biggest You're right. million which think that it, a material the I worth maturity. Actually, the that is new from think, you noting criticized. relationship one our to I some reflected downgraded see is But that that's there's in to going criticized, improvement $XX classified QX one, as of

relationship. larger District exposure. deal. downtown Boston It's So It's Financial true only our much that's really a syndicated a

debt the that a coverage dropped The over downgraded service is on X%. bit got little at occupancy XX%. had property good because pretty It

the of part review to that as FDIC X. actually SNC downgraded their the So

this suggesting we based LTV probably relationship, we some have from maturity, protection QX our with but exit lead insight we'd there. honest, if there's we out value we come plenty how be an still on adequate it's to conversations see up to of to plays And there's bank believe a perspective. We'll look the can. So as

We will, have XXs. they're the couple sign think, ready up to of I think, that I getting up occupancy a into push other that tenants, the

there's like loss any feel in content that. don't we at So all

Okay.

Okay. Very helpful.

Okay. And March was back margin. margin? to switching just your spot What then

X.XX%. was margin March

about a Laura, interesting if I the in pickup deposits. lot too, think that, on period-end we talked what's

So we the allocation even borrowings. March, higher range, in means of deposits most of the wholesale average were from XX.X% which had

deposit to a again, having boost that that level already month, into later So just growth heading of some provides in April. a core bit

So on well. the balances just put that want of X.XX% to the really reflective deposit is lower caveat as

it. And you us, on just million Got could debt? in it. the Got remind timing the actually guys in that? sub What quarter when redeem $XX the was

at was February, on we that rate. March prior was That redemption, million to early held that to to have $XXX but late a that, would if floating repriced

So fixed just debt borrowings a shifted you X%. really X.XX% at

So impact. won't have much it too

No.

Okay. last question for Perfect. then, Perfect. Jeff, And just you.

considering you where you us buyback. a substantially below just Obviously, Can down mentioned You help you're another bit repurchased. think that? about little more

we've got think think I here we'll we a as a opportunistic weigh be that to consistent that Yes, answer that we able with. pretty the would tool continue obviously to having be toolkit to

our capital. and valuation levels our mentioned of You

to be suggest would considering available. something that to we have want certainly think I

yet made a term. decision. we say in to I will near here haven't Obviously, something safe announced the continue think there, haven't we to talk So it's about we anything but it's

Our next question comes from Chris O'Connell KBW. with

the guys on up deploy have to forward. follow and you of you that levels the to opportunity wanted going robust kind just that capital kind here I have of

in yield enough the is point it's restructuring securities the just have still securities I capital big book yields, You XXXX? some and any a mean in under still potential is X%. at there for

I I it's just taking with personally, loss a now a on, strategy. improve the think material that sense. getting a of announced makes now the would Chris. bit optics earnings. of I've point It's analysis structure We've one there's that the some to more Yes. And little struggled done think even I bit we one on the to margin where slides. better But we're a now probably say where this think I

portfolio, the the book. level a of expected the in to where of around of If really you term. assets a will has much pay more That near we'd end securities look total And by year. to assets to historically that's book the operated at comfortable. get XX% in down off probably be XX.X% that securities XX% the what's We're on bank

off the completely that's get much allowing to table, profile we'd think that for to be And payoffs. think, normal balance better We accelerating isn't So that term there longer sheet a shortly. relatively I but to the even in. just level, get for like I

saying do it's to compelled assess I feel of that we'll think it that way long So would of I already heading. given trajectory continue where -- isn't opportunity, to but we the something

Got has at And been M&A all conversations in guys opportunities mentioned always. looking mean, still markets? in as it. there uptick your at I any you there

struggle think the make trying not environment. and I Not math to with really. work uncertainty the I same around continues mean everybody regulatory to is continuing appreciably, -- it the issues around

it. And back to Got just then here. office circling

that's For you total have against a reserve do number that portfolio, entire portfolio? applied office guys the

Yes. We pool to publicly we a the want still construction. perspective, formal to underlying do types to be that don't guide look qualitative our from and estate total But anything much to how commercial property disclose We have we allocating pool. total there. real is through allocation would

looking have on to So of allocation are reserve ratings say book. allocation I those overall we and do the stressing definitely some we would by points. as rest increased that valuations at analysis the I'd probably the suggests intuitively risk criticized though office it, say a support result publicly and classified that we call commercial that, book think, to the are of basis type disclosed, real around X.X% of with estate, X% XX analysis on I probably office not

bucket. containment criticized And actually conservative pretty terms risk we allocating classified see of we in and is allocation where that in loss the think the reserve

have helpful. XXXX maturities. criticized? portion the the detail And currently are appreciate XXXX maturities the what of I That's you Do Great. on

don't is Really, do criticized criticized a where one one And of loan notable in $XX XXXX. I that XXXX a the have that -- update the exposure a bar more something there that, near-term of XXXX. the couple biggest. an as over we large with That's million but next expectation loan only bit it's conversations we in the had we'll of provide of we've go maturities, that's quarters. the

pressure mentioned any outside looks multifamily And the time? one there the credit office on helpful. at areas I quarter? is this all else? any mean, there additional from of credit you slides Very that is improvement anything are other very solid. sort of detail you guys mean this seeing Any the I outsized that

I relatively our very not credit why with classified actually been last look little the which of of Yes, really and together. if because this criticized of it's stable, over and again, has with several levels is, environment past not bit you over couple in really. we level classified quarters, and assets at few just comfortable It's the assets is very feel out than mean, different it are not criticized years. years, consistent It's zoom but the a no where last different. we the remarkably

non-floating are that one, then rate do And XXXX? in reprice to loans have or Great. set of the amount mature last you

adjustable of In not so me, do you but -- it's -- non-floating, the not said -- XXXX, I front have, rate. in a right? we the obviously, significantly

fixed. are Yes,

it you get Yes. I I have me, that. but don't in can of front Chris,

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

your and Corp. thank continued Bank for great interest you in Independent Nick, Thanks, day. a Have

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

now disconnect. You may