INDB - Earnings call 3 2023 | Independent Bank Corp.

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Operator

Good morning, and welcome to the Independent Bank Corporation Third Quarter 2023 Earnings 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 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. be the can of Relations filings website. our SEC accessed Investor in section These

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

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

Jeffrey Tengel

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

will details credit, and deposit flows, minute Mark observations modest Our third thus confronting solid you a loan stable was take income well one we've given disciplined a many say, but in feel offer pressure, I quite included benign challenges a prior higher the there quarter far. thought few performance the the near-term fee to I them and macro I'd banking industry. environment through too. margin Needless weathered are growth.

to focus through us served It's credit and distinct that strengths economic a of our well resiliency operational on variety and cycles. this We expertise. has the during years continue

value, can competes in Trust Rockland unique the acumen. where we bring resources areas and

Our knowing goal each important elsewhere. and achieve Equally resources delivering while offer matters. relationship experience performance is differentiated steering quartile customer we unique a client where cannot a experience is where top to

rising inherent on on on As future. also simply capitalize competitive playing at this and a through being here. unprecedented focusing issues vision there's to undertaken no brought field me, in the long-term value way our environment We're Trust looking we an rapidly lingering eye by manage the creation. we pandemic, the best the rate keep strength towards changing grandiose strategic

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

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

operating a markets Worcester, mind, Trust technology growth With analytics our to and of our focus model including in that opportunistically legacy Shore ways, on like for and do ongoing bankers, opportunities actionable in newer growth see in loan in Rockland North the deliver insights near-term continued proven variety and organic our and the our we business revenue. model exploit to in who drive talent attracting data investment deposit markets, can high-performing leveraging

be opportunities to on strategy front somewhat the be we Although that will everything of disciplined parameters. M&A muted, credit place continue disciplined market To deep to to our and been take management, the the the advantage attractive historical fit M&A have poised summarize, management improve, years conditions accustomed markets, continues to pricing brand underwriting, an acquisition activity we a workforce. when recognition operating highly good deliver strong has the scale and expense including team, results talented capital, over ample energized to in and

turn create cause reach us to stock. At repurchasing over seriously. concerns long-term to share environment, this very we Before I'll buyback feel call the can same our million over that in on it With take to program I'd stocks In that levels time. And that turning flexibility this Mark, valuation we note, that program mind, warrant allows to we value $XXX over perceived repurchase share Mark. time, recognize obviously capital the our like note just industry we the the to announced. position

Mark Ruggiero

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

was reflected a challenging million, EPS activity $XX.X of Starting was environment. amidst GAAP on Slide very third XXXX which diluted X $X.XX business solid deck, quarter the quarter income another of overall and net

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

strong on XX.X% results return assets, average In an return produced and X.XX% tangible a return equity X.X% a common on on equity. common summary, these average

addition, per grew period. X.X% third In the $X.XX or almost and in per grew share tangible the prior book value year quarter from up is share X%

a activity of top Continuing are summarizes for number deposit the to certainly focus that quarter. our slide X on of mind, topics

to typically X.X% average declines is $XXX Although total the Approximately remained deposits municipal deposits seasonal quarter, flat deposits, in attributable of million by third to the million $XXX the quarter-over-quarter. impacted declined relatively $XX.X decline by for is which or billion period-end quarter.

of franchise. In deposits for no deposits modest a total prior representing quarter, value differentiating XX% the the deposit the at addition, beta, real deposits of from X.XX% the well-contained change quarter our XX% was deposits deposit total end, of increased Reflecting with cost comprising third noninterest-bearing remixing to quarter. the of overall a highlighting cumulative

for overall consumer account given in on X.X% Though sheet business model XXXX, front households has consistent relationship an that the new households the throughout long-term we is decades. believe macroeconomic growth provides of annualized. challenges, that addition, firmly total impetus quarter growth activity for and muted banking quarterly the and this us in served the our steady remained well strong X.X% for opening both In increase balance or with

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

to and information the book updated X. values regarding to both fair securities Moving on including to information maturity sale Slide related for and key portfolios. We available held summarize portfolio our

support at loss unrealized X.X% further that factoring HTM of share when capital the As the in net tax. buyback remains strong position decision, note we even for the tangible a ratio

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

the an snapshot take the update exposure. of portfolios, various dive provides overall commercial of makeup will while Slide asset on into an we particular, overall nonowner-occupied X in a deeper office And and quality, loan

we remains estate office So of an real regarding recognize deep area exposure, this commercial interest.

As we have noted last ultimate the couple many in play performance the conversations likely quarters, over of will over time. credit out

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

full positive. CRE updates loan been taken To with which to $X start resolved and and X from one various during factors. has and Slides risk quarter a provide the portfolio The few, nonperforming on highlight million I'll status number update, is of Office XX a with viewpoints the last $X quarter within a end. paid in the fully remaining quarter million subsequent the charge-off current

Total within closely As reserved loan classified for last are quarter. office a team. workout by XX credit criticized balances and and an only was largely currently portfolio are the of and experienced monitored comprised this reminder, loans

the In portfolio. in office XX% and up on balances provide to closely office monitor addition, million XX we continue of or insight exposures $XXX make our entire approximately which top

loans million $XX Within and a appropriate these is these risk recently nonperformers, status adjustments. in one reviewed top X of million we classified for rating $XX XX, with every note criticized

the The noted graphs bigger reflected the loan on picture across Slide credit broader is in XX. portfolio

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

to Turning XX. Slide

excluding resulting As only a of I'll include in the guidance some anticipated, worth highlighted pressure specific this couple benefit X a quarter, basis items of X.XX% are here from in X deposits but or the quarter prior cost key repricing margin a margin basis the for margin the on points continued noting asset slide. that yield minutes, items. which when point regarding are reflects noncore drop on outpaced

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

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

drop was million tax offset to The quarter. the ATM preparation in up deposit from and income the combined nicely of on management recognized income bank-owned activity second $X.X gains the wealth fee and experienced approximately Fee income to help fees. for seasonal and also quarter loan-related remains from reflected increased life Slide commission retail insurance as overall strong, XX. Moving and insurance benefit quarter

to onetime portfolio. expenses the losses $XXX,XXX expenses. Total or XX. costs $X.X the commissions, on volatile Also was and Slide retirement to increased trading quarter, in increased securities to expense prior compared of outsized related when X.X% a quarter million benefits consulting and reflecting included unrealized severance Turning

Lastly, QX expectations. updated on on provide we set guidance Slide primarily as summarized XX, an focused of

growth expect modest quarter We seasonality flat reflecting We impact. loan securities declines anticipate deposit low to in typical the runoff. to be total our funded single-digit QX primarily in fourth balances, from

all provision forward quarter. be X.XX% the loan challenges, anticipate the the expect our across driven we fourth for range stabilize current assumptions, credit the to to estate curve performance by near-term commercial portfolios, assumptions X.XX% investment we to Using of continue loss portfolio. the margin will real quality loan in Though during uncertainty primarily ongoing

And when for excluding line the anticipate expense, noninterest we as QX flat QX. we slightly expect fee referenced. nonrecurring with items to income, Regarding increased in just to compared results levels relatively I QX largely

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

Operator

first Fitzgibbon Mark Sandler. Instructions] Our question from will with [Operator come Piper

Mark Fitzgibbon

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

Mark Ruggiero

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

months, yield outsized what over But you So items the drive levers key in you've XX of that benefit seen we to a over the have look compared I of couple out highlighted will quarters. next my of asset comments. couple if number last a

loan mature. in but every And continue lift one give meaningful So margin. particular, to securities some runoff, and the will to of hedges factors only those not the

I outpace expect be heading deposit into continued to So still will to stabilizes what believe, it's margin XXXX. the on start increase that side that such we think really we the dynamic,

Mark Fitzgibbon

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

Jeffrey Tengel

think our Jeff. Mark, a shot of kind a I'll shift take Yes, it's mindset. I a this that. don't strategic is in at

to we themselves. acquisitions feel they the if think at importantly, we stock to down us I think we honestly, in you entire continue just present and was take to really environment enable the like with of did buyback capitalized should is trading in very the be currency for road us today, pursue our and today. had, we're even amount to I advantage a buyback it of going the assumed prudent will capital thought our we're well the And still levels

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

Mark Fitzgibbon

office. Okay. on And then lastly,

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

Mark Ruggiero

Yes, depends. it's largely unfortunately, And a it question. answer great -- is still the

it learning breaks I you that's and But months. mature that look is over bit to when circumstances. situation population has unique a down think at next XX or pretty what each the general, consistently of set facts in we're reprice, a little

$XXX just I million little XXXX. elevated and $XXX $XXX about even months a interesting maturing, in you million QX, look is loans. X due is the very next the $XX million there's guess, more about XXXX that in in in million in coming when comprised $XX X and What's term, have near at the then We relationships, bit of in million X just

we So X have in each loans, fact, X those already of one good into, visibility those renewed of in October. here

is is reappraised performing It's and XX%. based X.X loan-to-value ] upon debt valuations, service [

maturities today, of, said, kind we we out $XXX we'll those when at them each debt case the XX% stress that to little going million. where that's as through. it about manageable we're for So somewhat credits on of be we XX% we and the and be million, But like debt like example LTV that's at at I of feel the see couple The hurdles loan. and good general, service There maybe depending the to continues essentially are facts really we'd unique suggesting where we'll coming of a to a be. one strong to as non-event still the an we isn't But expect a very look and not term, $XXX work individual the see bit population, in due. service every mature around much it's look as to number. is near occupancy circumstances. How a But valuation have

Operator

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

Stephen Moss

your comment to margins the with on stabilizing. just regard Mark,

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

Mark Ruggiero

Yes, the of $XXX XX about I months have X.X%. is strike of average will -- with hedges million rate an next mature so that

in of floating a today. well impact, essentially rate environment, is the X% north revert current those we So back to just rate which

XXX about $XXX point a on that So million notional. you're increase basis talking of

Stephen Moss

I'm helpful. That's just like And not active like as it of on Okay. M&A thinking Awesome. are for then how M&A, Jeff, kind interpreting. maybe it, about sounds discussions

you discussions are there? having Just just share at you kind Any pricing? current anyone? of Is resistance it seller curious, any with color could

Jeffrey Tengel

to people for other trying no I'm to Yes. new, Massachusetts. to landscape continue familiarize banking still the I'm mean, relatively honestly, with myself reason just here just meet in Well, because I

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

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

Stephen Moss

around then note any was color And million that a had give curious that. you $X if on credit you through the resolution the Was sale? -- just kind of that Or could charge-off.

Mark Ruggiero

it actually here around lot This the which loan appropriate not, -- credit. resolution internally sold we a or at an of necessarily went to for environment for office That Stephen, that auction. discussion to there auction, was be optimal the isn't believe

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

go sale. foreclosure So at it did a

Jeffrey Tengel

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

now. down And we so decided medicine instead can of to the road, kicking the take our

Stephen Moss

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

for are guys you funds With margin X.XX%, at stabilizing we quarter, steady a what of -- X.XX% the hold beta in the a rate? deposit cumulative assuming fed fourth dynamic cycle here

Mark Ruggiero

for biggest XX% if primarily Yes. assume to north there's we you XX today. you points from look matures at that margin. going I is entire are I'd math the maturing. haven't of I cumulatively essentially And say in the particular, CD done what potential if play I rates, a today. just beta XX impact think it out does the we're that basis the suggest current bit goes anywhere into XXXX, to I'd but the on on out of to driver No, certainly at where that the level book, CDs the be When

it do stays math probably if think range. head, my mid-XXs like to in were the I So it that feels in I

Operator

will question Laura from next Point. come Compass Hunsicker Our with

Laura Hunsicker

to back all appreciate really here, details. and office going Just your really, I

million $XX.X on the B. Class that's So Class was that A or a performer sold,

Mark Ruggiero

a Class That was B.

Laura Hunsicker

a was Class That B.

Okay.

was And a dollar haircut. the math if was the I'm -- doing on so it right, that XX.X cents

Mark Ruggiero

Yes, books compared to added we at, what I think that's the yes. on

Laura Hunsicker

And I sort then guys back and penalty set far because over mature in the we've were much in it of X XX%. think compared as so mean, was backs already you to that from I peers breakdown put your your reprice had of next maturity, as the the walked June, to years you

Now you're XX%.

you got How think about of How that's million, for balance. update quarter, X% loan, this to there thinking but the could You've the the we that, do about the that's get you we be $XXX going $XXX your is other in that renew? huge X on comfortable that? help loans? us right And chunk million should X coming fourth whole Mark, this thank

Mark Ruggiero

a at X% Sure. I XX% some rate. It's X, to to facts of the those give just currently biggest occupied. it's mean it,

a increase rate. renew basis at very maybe suggest X-year service XXX, if in and point I XXX curve, continue the to we in their only pricing of about And part debt that. that the likely you'd price So feel you just at good look we when continue result think under to scenario, to were

another rates I think risk concern. So does at expectation or one where our that's that is not create current renewal undue

well rollover there. the what reappraisal, they're then very LTVs that There's a with is, but communicative looking process. other of story there's pretty little at tenant the pretty a flow again, expect think we'd the sort replacements good occupied. been And on bit of and cash through They've the we for on us based

of these relationships have most really with We good borrowers. direct

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

Laura Hunsicker

then $XXX already you much that Okay. the one how that does renewed, And of the comprise? million

Mark Ruggiero

was million. $XX That about

Laura Hunsicker

million. $XX

And Great. I'm Okay. apples-to-apples then and looks you gave I'm maybe just that did X I make realize a to a other comparing banks, of just of office. details in It but question you on whole lot more more many the restatement, sure so here. trying a like bit

it's So office at your million. use had $XXX just to restated premixed there? that was last it it know $XXX million, like what was the quarter I looks wanted difference to primarily

Mark Ruggiero

Yes.

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

it i.e., office. XX% So, greater is than of

forward. focus lens now going $XXX gets to more and $XXX look reduced of the million the when that quarter, at through down million, that same So last you that's

Laura Hunsicker

book? concerning the just lower anything starting trends Any percolate to from is on that's realize your that? And much owner X Or quick owner about but occupied, you is rates? there are and you're owner-occupied then question risk, how in that see you higher I thinking occupied

Jeffrey Tengel

anything often, office, that I certainly don't we're occupied the concerned nothing owner the to in about. compared the And seen there's nonowner-occupied. think Yes. we've

Operator

Our from next will KBW. come Chris with O'Connell question

Christopher O'Connell

be perhaps you Class new what horse Good migration loans a classified on if just color criticized? side. or into some any from the A moved morning. Hate guys on to office just But keep being the look to wanted specifically had category to see

Jeffrey Tengel

resets our said have obviously, and attention on we're mean, that all a ago, to And little unique. and is very something every Mark while very, very close bankers as that's focused I maturities. loan near-term paying rate

the And the same is broad paint story so story difficult with brush. to the

to diligent very thorough in trying being we're analysis. and be very So our

will. in it to I So through criticized course, sit of that But here I ins all feel some we current to outs that we've the and continued as with Yes. think going -- classification. very we're loans have have today, near-term all mean, comfortable category. of classified and that our of gone that we and risk

Christopher O'Connell

it. Okay. Got

Mark Ruggiero

loans, unit is dollar-wise And count, I just the gave think again, like don't handful and but too, of primarily there's only a X that loans. we increase

Christopher O'Connell

of you'll amount Okay. when and kind that And us the of $XXX just Great. back the muni outflows think seasonal this million seasonal quarter, of should remind in recapture can come the outflows. if you those you full

Mark Ruggiero

Yes, we that about the that do through third XXXX. so. the wouldn't is consistent I kind we quarter did was levels it's expect in But the here good pocked to we a of question. expect Certainly, portion $XX money is million temporarily some or that related I'd and municipal of that coined ] There saw first of of recapture where of was, as good outflow most a that. with the half think municipal quarter, say, that third rest [ in

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

Christopher O'Connell

kind on of slowing kind into What's overall mix bit shift I how course it kind been noninterest-bearing the Do Got factors left? remaining that of on couple be in a declined XXXX. the still that quarter little there's might fourth and order mean, shift, Has the of excluding magnitude it. quarters? of think over deposit the view consistently of of of seasonal it's And referring the next your over in you over to, mix QX of much down quarter? course the you're the

Mark Ruggiero

if Yes. slowing is It certainly the shifting feels as down.

is I the mostly just think continuing environment. today drive rate the what the into dynamic repricing we're higher seeing

those that into promotionally X higher now likely were that ago, will a starting to CDs obviously promotional months So mature is X, renew priced product.

to slow. starting an So to like I'm where say don't the But as to me I is is going big mix it's behind, those I important. rate feels relationships impact. it XXX% that's but think of deposit think

continue customers I see likely additional getting exception into think you'll maturing those book higher pricing same to a or CD. on CD the rate higher

So I we've be of the deposits that bit population priced up pressured. continue a to think will

Christopher O'Connell

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

Mark Ruggiero

needs Certainly, we and obviously where to there recognize view in. our There focused well. and to bank head on as point, Absolutely. areas we're continue we we in expenses thinking strategic key about initiatives very year and as budgeting to next be want a looks to are short-term hard for planning process into invest taking that your the some

look And we and/or there's heading very to think expense decrease. line the XXXX. at appetite creep. really We'll any hold can So do I meaningful practical into less closely of very be areas for an look where there that will

Jeffrey Tengel

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

revenue them. bring with So they'll

Operator

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

Jeffrey Tengel

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

Operator

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

disconnect. now may You

Independent Bank (INDB) 20 Oct 232023 Q3 Earnings call transcript