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Hello, everyone. Thank you for joining us and welcome to the Independent Bank Corp. Second Quarter 2026 Earnings Call. Joining me on today's call is Jeff Tengel, CEO, and Mark Ruggiero, CFO. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star1 again. 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-GAP measures, including reconciliation to GAAP measures may be found in our earnings release and other SEC filings. These SEC filINGS can be accessed via the investor relations section of our website. Finally, please note that this event is being recorded. I would now like to turn the conference over to Jeff Tangle, CEO. Please go ahead. Thank you. Good morning and thanks for joining us today. I'm accompanied this morning by CFO and Head of Consumer Lending, Mark Ruggiero. Before we discuss our quarterly results, I wanted to share an update on my health. We released an 8K in February disclosing that I have been diagnosed with non-Hodgkin's lymphoma. I'm happy to report that I've finished my treatments and learned last Friday that I am cancer-free and in remission. So on that good note, I'd like to turn to our quarterly result. activity was slow early in the second quarter momentum accelerated as the quarter progressed resulting in solid deposit growth strong cni loan growth continued improvement in the adjusted nim aggressive buyback activity and excellent results in our wealth management business these positives were offset by a smaller average balance sheet and lower loan accretion income our deposit franchise continued to differentiate itself producing over 300 million dollars of non-time deposits representing seven percent annualized growth while maintaining a stable cost of deposits of 136. these results were achieved in an environment of heightened competition and expectations that the fed will keep rates higher for longer on the lending front we experienced robust growth in the cni and home equity portfolios offset by heavy loan payoffs within the Cree book. With respect to CNI, excluding the impact of the $37 million decrease in our dealer floor plan business, which we have now largely exited, our CNI loans rose by $116 million, a healthy 10% on an annualized basis. This growth was broad-based across all of our market segments. Investment Cree and construction loans conversely declined $176 million during the quarter, primarily reflecting elevated payoffs due to a variety of factors, including asset sales, refinancing done away from us, and construction loans maturing and going to the permanent market. We like the CRE asset class and will continue to support our clients in this space the way we always have. This is evidenced by the $203 million in new relationship-based CRE loans we funded in the quarter, up 11% from the first quarter, and the $300 million of new CREE commitments we added. Our CREE concentration now stands at 278. On June 30, our approved commercial loan pipeline totaled $510 million, up from $313 million on March 31. This strong loan pipeline, together with continued strong origination activity and an expected normalization of payoff activity positions us well to return to positive commercial loan growth. The second quarter also saw continued improvement in the adjusted NIM, which rose by four basis points, right in line with our guidance. This reflects pricing discipline across both our loan and deposit portfolios. Mark will elaborate on our NIM during his comments. As Mark will also further expand on, we maintained a proactive posture returning excess capital to shareholders with expected further improvement in our profitability and moderate balance sheet growth capital management will remain a key priority for the balance of the year our wealth management business continues to be a key fee income driver for us second quarter results benefited from strength in our traditional asset management business as well as inroads we have made in the enterprise footprint i would also highlight momentum in our business advisory services segment where we assist business owners to prepare for and manage the sale of their companies which has shown early signs of being a real positive catalyst for potential aum inflows with respect to asset quality while we continue to see movement in and out of our non-performing loans and criticize and classified loan buckets the levels are consistent with our historical credit performance our net charge-offs were just two basis points for the second quarter and have averaged just nine basis points over the last five quarters our loan loss provision represented 14 basis points of average loans in the second quarter and has averaged 13 basis points over the last five quarters excluding the day one impact of the enterprise acquisition Excluding M&A charges and non-recurring core system conversion costs, expenses were flat versus the first quarter. Mark will provide a detailed breakdown of the moving parts within our expenses. We remain vigilant regarding our expense levels. As we have stated in the past, given the investments we have made in people and technology over the past few years, we believe we have the scale to continue to grow without significant additions to our expense base. There is a significant amount of work underway as we prepare to transition our core operating platform from Horizon to IBS, both part of the FIS ecosystem. The conversion is scheduled to take place in October of this year. The IBS platform positions us to improve client service, enhance operating efficiencies, accelerate the introduction of new products, and support future growth. I'd like to take a moment to talk about AI. This is obviously a topic on investors' minds. In the first quarter, we established an Office of Digital Innovation. We've stood up a governance framework around our AI activities to ensure we stay within the guardrails of our moderate risk profile and that any actions are consistent with our award-winning culture. This governance framework includes a steering committee that will serve as a clearinghouse for AI use cases. This will allow us to make AI investments in those areas that have a meaningful payback and avoid the proverbial boiling ocean. I expect us to start with some relatively easy use cases as we build muscle memory. Over time, this should enable us to gain confidence in our ability to execute and take on bigger, more impactful applications. Our strategy remains straightforward. Organic growth through new and existing relationships, maintain disciplined underwriting, generate positive operating leverage and deploy our strong capital position to create long-term shareholder value. I want to thank all Rockland Trust employees for their tremendous efforts on a daily basis. Every measure of our success is a direct result of their commitment. On that note, I'll turn it over to Mark. Thanks, Jeff. And to summarize the quarter results, 2026 second quarter net income was $81.8 million and diluted EPS was $1.70, resulting in a 1.34% return on assets, a 9.24% return on average common equity, and a 14.05% return on average tangible common equity. The second quarter results were a great reflection of the bank's ability to drive strong core profitability and return capital to shareholders, despite the highly competitive environment keeping loan growth relatively flat. Touching first on the capital management aspect, during the quarter we completed the previous year's buyback authorization and in May announced a new $200 million share repurchase plan. During the second quarter, we repurchased $75 million in capital, bringing our capital ratios down slightly, with the CET1 ratio at June 30th now at 12.8% and the tangible capital ratio at 9.7 percent going forward we will continue to leverage the buyback plan as our primary means of returning excess capital to our shareholders in terms of the core profitability improvement the main drivers continue to be core net interest margin expansion coupled with prudent sherry purchases regarding the margin though reported loan yields were down eight basis points in the second quarter, core loan yields increased three basis points when adjusted for the exclusion of volatile purchase accounting accretion and other non-core items. And although commercial real estate loan growth has been a challenge, we are originating a significant volume of new loans to offset the paydowns and amortization in this portfolio, and that continues to fuel the cash flow and repricing benefit dynamic in our loan yields. Similar characteristics in the securities portfolio drove an increase of five basis points for the quarter with increased amortization and maturities expected in the second half of the year and lastly as jeff noted we are extremely pleased with our ability to hold the line on cost of deposits keeping that flat at 1.36 percent with these all primary drivers the core net interest margin increased four basis points for the quarterback i mentioned the challenges in the commercial real estate and construction books but on a positive note as jeff mentioned the second quarter approved commercial pipeline grew nicely to 510 million a 63 increase from the prior quarter and reflects a healthy mix of both commercial real estate and cni on the cni side the ability to enhance our combined offerings to both the smaller and mid-market cni space was highlighted this quarter as cni balances increased 10% on an annualized basis when excluding balance runoff from the exited dealer floor plan business. In addition, consumer home equity balances increased $35 million or 11% on a annualized base, while residential mortgage activity reflected a nice balance between increased portfolio balances and mortgage banking gain on sale results. On the deposit side, there's no secret in our industry when it comes to how competitive the environment is we believe the second quarter results are a testament to the amazing deposit franchise that continues to differentiate rockland trust not only did we grow period end balances at a 5.9 percent annualized rate we did so while maintaining a flat cost of deposits average balances however were down for much of a quarter which created a temporary drag on our cash position and overall average earning assets but we are encouraged by the rebound of balances late in the quarter in our consistent quarterly trends of attracting new core deposit relationships to the bank as a result of the strong core deposit growth we paid down 100 million of maturing fhlb borrowings while increasing our working capital line of credit by only 25 million i'll now switch gears to asset quality, and I'll highlight the following notable items for the second quarter. Total non-performing assets increased modestly to 103.8 million, or 56 basis points of total assets. The changes reflect some normal ins and outs on the commercial loan side, and a net $4.7 million increase in residential loans. Regarding the latter, though we are seeing some increased volatility in delinquencies and non-performers, in almost all workout cases to date, there is sufficient equity in the homes and net charge-offs remain extremely low in this portfolio. Along those lines, net charge -offs for the quarter were only 911,000 or two basis points annualized, with total year-to-date charge-off now at only six basis points on an annualized basis. The second quarter provision of $6.3 million and increase in the allowance for loan loss to 1.06% of loans was primarily driven by modest specific reserves on a couple of commercial loans. And lastly, total criticized and classified loans decreased versus the prior quarter as we remained hypervigilant on effective early identification and development of workout strategies on problem loans. Moving to non-interest items, fee income of $42.4 million was up over 5% from the prior quarter. The wealth management business continues to lead the way with AUA at $9.5 billion as of June 30th, driving higher wealth management fees combined with elevated tax preparation fees of $537,000 during the quarter. In addition to wealth, we saw solid fee income growth from our deposit and treasury management services, as well as increased swap volume. On the expense side, the quarter-over-quarter results reflect a few moving pieces that I'll highlight. Specific to quarter-of-quarter trends, the second quarter has zero merger-related expenses versus $3 million recognized in the first quarter. Secondly, we incurred approximately $2.1 million of expenses related to the ongoing in preparation of our core conversion project versus $1.1 million of similar expenses in the first quarter. The majority of these are consulting-related, included in the other non-interest category in our earnings release. After excluding these two items, our remaining core expenses were relatively flat versus the prior quarter, as reductions in incentive expense, payroll taxes, and snow removal offset by annual merit increases, annual director equity compensation grants, and some other miscellaneous increases. And lastly, as expected, the tax rate stayed relatively consistent at 23.4%. With that, I'll now finish up by revisiting our 2026 full-year guidance. First, we reaffirm our two primary profitability targets for the fourth quarter of 2026 the first is return on average assets of 1.4 percent and the second is return on average tangible capital of 15 percent regarding loan growth given the pay down activity experienced in the second quarter we update our cree and construction full year estimates to now be flat to low single digit percentage decrease for cni growth with minimal headwinds from the the exited floor plan business, we would expect to land on the high end of the mid single digit percentage range of the guidance. And for total consumer, we now assume a full year increase in the low single digit percentage range. Our full year deposit growth guidance remains unchanged and similarly with the core margin increase as expected for the quarter, we reaffirm our 2026 fourth quarter margin will be in the range of 3.9% to 3.95%, though likely on the low end of that range. I would also point out this range includes a 10 basis point impact assumption from purchase accounting accretion. Our fee income and tax guidance also remains unchanged. And lastly, on the expense side, we anticipate core expenses, which exclude the system's conversion expenses, to be in the $553 to $557 million range, plus the one-time systems conversion expenses to land in the $5 to $6 million total range for the year. And that concludes my comments, and with that, we'll open it up for questions. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star one again. ask that you pick up your handset when asking a question to allow for optimum sound quality and if you are muted locally please remember to unmute your device please stand by while we compile the q a roster your first question comes from the line of justin crowley from piper stanler your line is open please go ahead hey good morning guys um first of all jeff on uh the health update congratulations that's that's really excellent news and thrilled to hear i think we all are um thank you but uh i wanted to uh start out on loan growth and maybe just dig into um that commercial real estate bucket uh where the guide was tweaked a bit lower um you know i was wondering if you can give a sense of you know what else may have gone into that beyond i know you mentioned the payoff activity um but just maybe some details on the evolution of the market uncertainty and competition from where we were 90 days ago when we talked through this yeah i mean especially in commercial real estate it feels like the market has continued to get more aggressive as the year has has um has unfolded um you know part of that is evidenced by you know we talked about the elevated pay downs in the second quarter we had two loans uh in the second quarter that accounted for 120 million dollars of those pay downs um so and what both of those loans are refinanced away from us uh and one of them was refinanced uh really on terms and conditions that we were very uncomfortable with um and so that's some of the headwinds that we have when we're trying to to um to grow the commercial loan book um having said that as Mark pointed out and I did as well in my comments we still originated a healthy amount of commercial real estate in the quarter and and feel like we can continue to do that in the back half of the year and really would expect pay downs to revert back to their more historical levels which is why we think in the second half of a year we could see flat to modestly up commercial real state balances uh it won't offset the the first half of the year uh headwinds but we we think that uh is a good signal uh for us in terms of growing the balance sheet okay and then i guess kind of like you know within commercial real estate and you know i know it's still early days here but what have you been hearing from borrowers in the wake of the decision we got just on massachusetts front control um you know I guess any read on how that could impact the commercial real estate market and just the overall level of activity in the state i think it's a little too early to um to say that we've seen a you know a a big increase in the demand for multi-family construction um we have seen some outset sales that i think um maybe wouldn't have occurred had had that news not not come out but um we do expect that um there will be more activity as as we move through the second half of the year in in that in the multi-family construction space and and of course the it also impacts the permanent market as well to the extent that there are sponsors looking to um sell their multi-friendly business then the cap rates have likely uh come in a bit uh because of the the run control um ruling so uh too early to tell but we but i do think as we move through the balance of the year that we'll see an increase in activity okay got it that's helpful um and maybe just one last one on credit um as you guys pointed out you know overall looks like some stabilization you know if not some improvement in a lot of areas and i know there's some moving parts but i guess just in the not performing bucket um you know with the growth inflows picking up a bit over the last quarter um you know curious if you could talk through some of what you saw there and then uh just some color on on the payoffs that kind of helped keep a lid on that net increase uh for the period yeah i mean the story on the non-performing asset side on the commercial is is fairly benign uh i'd say the biggest movers was the actually resolution and pay down of one office non- performer that we were talking about last quarter that was about an 11 million dollar loan that had been charged down to that came off the npa list and and we had one new one go on at about 14 million dollars um and and you know outside of that there was very little movement within the commercial bucket i did mention in my prepared comments what you're seeing really is the primary driver the increase is a bit of an uptick on the resi side but you know it's interesting as you as as you go through each case, you're seeing a dynamic where the consumer will often suggest that the mortgage payment is one that they're willing to delay while still spending in other areas. So believe it or not, we have a lot of what we would call chronic non-performers where they make periodic payments throughout, but it's not at a consistent pace where you can establish putting them back on on accruing status so in all cases you know there's plenty of equity in the homes um we don't see really any emerging loss dynamics in that segment you're just seeing a little bit of payment um you know or you know payment issues where delays are ticking up a bit in terms of delinquencies and npas one of the companies yeah sorry just one other comment i'd make on our non-performing bucket is is the largest non- performer uh which we've talked about the multiple quarters um continues to improve and uh and we think there's a chance um that it could return to performing status by year end uh so we're encouraged by the the progress there in fact it already started to make interest payments in july so it was an 18-month no payment period that effectively started last January of last year so that 18 months has come due and they are starting to make the interest payment and one other comment on the control that about Justin and just to be clear the organization that was putting that forward they can come back in two years so the that's the I'm not sure what the legalese is around that but they'll have the ability in two years to reintroduce that as a ballot measure okay but that's helpful um i guess just on that one large non-performer that you called out do you have you know how much what is the balance of that um right now i'm not sure if you have it handy the largest one that's been on non-performing yeah correct yeah that's a 22 million dollar large syndicated loan we had taken a a fairly sizable charge off on that down to that balance so it's staying on the books now at about 22 okay perfect i will leave it there thank you so much guys thank you your next question comes from the line of david conrad from kvw please go ahead hey good morning and i'd also like to say jeff congrats on your help it's great news Thank you, David. You bet. Mark, some questions for you. I mean, I think the quarter really isn't about the NIM, but it's about the balance sheet. And because of the volatility in deposits, I'm looking, you know, cash balances around $730 million EOP last quarter, $530 average, and now we're up to $1 billion EOP in cash with kind of flat security. So kind of when we think about, you know, the guidance in the back half of the year, I guess my key question is, you know, how quickly, what do you think cash and securities, that mix shift, what will that end up, do you think, by the end of the years? How quickly can you kind of remix that? Yeah, no, it's a great question, and we're already remixing that into securities right now. I mean, ideally, we'd like to see that obviously get redeployed into loan growth, but we absolutely, will be more aggressive in putting more of that cash balance into the securities bucket. So ideally, I would say targeting earning cash in the $400 million to $500 million range over the second half. We'll monitor the pipeline and see how much of that we get comfortable should get redeployed into loan growth. But I would expect you'll certainly put more of that back into higher yielding securities and then and then you also have what about a half a billion or so rolling off in the second half like sub two percent right that's another that's right benefit yeah yeah so what i guess yeah sorry no no you're fine it's interesting in the second quarter, you only saw about 70 million of runoff in the securities portfolio. 45 million of it happened literally on the last day of the quarter. We had a treasury security mature at 87 basis points. So, you know, the five basis point lift you're seeing in the securities book for the second quarter. I'm very, very comfortable suggesting that's a low point in terms of a quarterly increase to you know the 200 million in the third quarter 200 million in the fourth quarter give or take at two percent coupon you know that should create more like a 15 basis point lift each quarter um all other things being equal and i would think we can go even more north of that if we're putting more purchases into the book as well got it and what uh what yields are you looking at now with the improved yield church yeah we're i mean we're still looking mostly at deep discounted mbs that give us sort of down rate protection but as the rain environment and expectations are starting to shift more we're more comfortable taking on a little bit more duration so call it high fours five percent on new purchases perfect thank you appreciate it you're welcome your next question comes from the line of steve moss from raymond james please go ahead good morning guys jeff just to echo what's already been said congratulations on your health here you know great news there um thank you definitely glad to hear it um in terms of just the you know going back to the loan uh pipeline here just kind of curious on the you know is as the mix shifted more cni in the pipeline on that 510 million number or is it kind of similar to what you guys disclosed in there in terms of what was originated for 2q and just one other thing to throw in there just curious on where you've seen loan pricing these days yeah the mix is i would say is shifted to cni slightly um in the pipe line part of that is we had a number of of um approved loans that honestly we thought were going to close in the second quarter and they didn't they slipped into the third quarter so um that's one of the reasons why i think the cni pipeline um is a little bit uh higher as a percentage of the overall than it maybe it was in the in the first quarter uh but i think we're we expect to see good originations in in both asset classes cni and korea as we move through the second half of the year um i'll add on and the good news is as more of that pipeline has shifted to cni it's primarily more floating rate so we've seen new originations on the commercial space move up into the mid six percent range in the pipeline i have the data it's about 50 50 cree cni today i can't recall off the top of my head last quarter if it was materially different than that but to just point it probably it probably continues to tick a bit more up cni versus Cree from a mixed standpoint. Okay, great. Appreciate that color there. And then in terms of capital deployment, you guys bought back 2% of shares outstanding here. Just kind of curious how – and capital ratio has barely moved. Just kind of curious as to how you guys are thinking about the payout ratio here going forward on a combined basis. Do we think about it as 100% of quarterly earnings or Or maybe a bit more than that, just given where your capital ratios are at the moment? Yeah, I'd say 100% is the minimum, Steve. And I think ability to do more, I talked about this in the past, but a lot of that I would like to fund via earnings in a bank holding company structure, dividend funding up from the bank to the holding company allows us to execute buybacks in a much more economic efficient way. I'm not against barring to execute more buyback than that, but that's the calculus we'll go through each quarter to see how aggressive we want to get in terms of returning over 100% of profits. But it's an appropriate question to ask. Obviously, the growth has been challenged, so we are definitely committed to executing the buyback in an aggressive manner. Okay. Appreciate that. And then, you know, on expenses here, just kind of curious, obviously you've got the conversion coming up in October, you know, but it kind of seems like your underlying core expense run rate would be fairly stable, call it $138, $139-ish. You know, as we kind of look at going forward, I know you guys have been looking to hire people and add more talent. How do you think about the, you now, your investments and maybe your expense growth rate a little further out here? Yeah, I mean, I think, as Jeff said in his comment, you know, the mentality here is sort of a hold the line type mentality, meaning we can't take our foot off the pedal in terms of thinking about AI and technology investments. And that's part of what you're seeing even in the last couple of quarters is increased IT spend and talent in those areas to help develop some of the technologies that we know we'll need to deploy throughout the bank internally. So it's looking for opportunities to find areas to reduce or get smarter on and other spend across the bank. so you know i think it's it's still supporting the infrastructure that we think we need to to be a bank that continues to grow in this space but we need to find you know the offsets to to make sure the expenses are held in check okay great appreciate all the call there i'll step back in here thanks guys okay thank you your next question comes from the line of lori hunsicker from seaport research partners please go ahead yeah hi thanks good morning jeff messenger yes congratulations i'm so so happy to hear that news um thank you just wanted to wanted to maybe start over um with margin and deposit just want to make sure i'm thinking about this right so as i as i look link quarter you guys actually had a jump in your money market um you know i mean the line held flat on an average basis that i'm i'm talking about the rate right so the rate went from 206 to two pounds so directionally a little different than what we're seeing is it just so competitive you're paying up or was that a special or how do we think about that yes it is um we have a a money market special that we introduced into the market you know i'd say halfway through the second quarter in that that is a 4% sort of short-term money market rate. So it's not surprising, Laurie, we're seeing some of the new money come in on that special. So it has been pretty equally balanced between, you know, DDA low-cost deposits and higher-rate promo money. But, you Know, I'll be fully candid. You know, we would expect the cost of deposits to tick up a bit in the second half. I'm still comfortable with the fourth quarter guidance range that we gave with the margin in the 390, 395 range. But our spot cost of deposits in June was at 1.38%. So I think you'll see a little bit of pressure on the cost of deposit in the second half. Okay, that's helpful. And then what was your spot margin? So our spot margin for June stayed at 376, which is what the full quarter was, despite that cost-to-deposit increase I just mentioned. So, we're still seeing the asset side repriced to offset that. Great. Okay. So 376, and that's obviously excluding the accretion. Exactly. That's a core number, correct. Okay. Okay, great. And then just going back over to office. So you're down to, you've got the two office non-performers obviously the 22 million which you've talked about for some time and i just want to make sure i heard that potentially um goes current in the fourth quarter uh by year end potentially okay okay and then the 18 million office that remains that's the life sciences loan um and classified i think in our performance no the 18 million is the um that's a uh loan that had moved into non-performing uh last quarter we had taken a reserve on it we're in the process of brokering that for sale based on some updated bovs that's one of the two properties we actually put a bit more reserve on so we're hoping to get that resolved in the second half of the year that's a 17.4 million dollar balance but that has a full reserve on based on our updated bovs okay but that one is that one the life sciences That's the one where you had a large tenant, or am I – is that a – Single tenant. This is a single tenant. It's not the labs that has been built up and now has new tenants in it. This is another life science single tenant facility. Gotcha, gotcha. Okay, and then next quarter, I'm just looking at page 10, and I love all of your details here, and this certainly was unchanged from last quarter, But the $20 million that's criticized that matures in the third quarter, is there anything that we should be thinking about there? Or how are you looking at that? So the third-quarter criticized levels is primarily two loans. Give me one sec here. Let me just make sure I'm getting you the right data here. Yes. Give me one second here, Laurie. Yeah, so the classified. So we have basically the classified is the loan we just talked about. Within the other criticized is $26.8 million. It's two loans, one's $17 million, the other is $10. We're working through on both of those for resolution. We think one of them would likely either refinance out as that becomes reach and maturity, and the other, I believe, is likely on track to see sort of a short-term extension. So both of those right now, based on the data we have, we don't see any imminent loss exposure on them, but we are looking for either short- term extension or hopefully refinance out on both. Okay. Okay. Yeah. So that's, okay. So it's the 27 and the 17 where we're talking about, and sorry, the one that comes up in the third quarter, the 19.9 million criticized that's maturing in the 3rd quarter. The 3rd quarter is also two loans. Yeah, so sorry. 3rd quarter is off of two loans, one of them is 14 million, the other is about five. I'd say the 14 million dollar loan we're also working with the broker to sell that property um based on data now we we do expect full payment um so we hope to get out of that here in the second half the five million dollar loan um you know that that one's a little bit uh of a different situation it's it's anchored by one primary tenant who um you knows is indicating they may be leaving the space so So if that ends up happening, we would expect that that will have maybe a modest impact on the valuation. So right now, there's no loss reserve on that. And then, Jeff, you've now held, I think, for at least a quarter, maybe two quarters, that we're seventh inning on office, which is still a long seventh inning. We're close to the eighth. How are you thinking about it? uh i yes it still feels like we're in like kind of a this long seventh inning um i i am encouraged though by the amount of of um work that we're doing um that i think is going to over the next couple of quarters uh hopefully bring down the the office loans in our criticized and classified We have an awful lot of energy around moving as many of those out as we can. So hopefully we can get into the eighth and ninth inning before too long. But we still have a lot of work to do, but we're doing the work. And I think we'll have some positive outcomes over the second half of the year. Okay. Okay. Great. And then just income statement, just two questions here. interest income, it looks like, you know, outsized, outsize bully, bully death benefits and sort of outsized loan level derivative. I mean, if, if we're looking at, at your projected numbers of increase, do you exclude that bully death benefit? Or maybe a better way to ask this, you know, if you're thinking sort of about a core number 41 and a half, 41.6 million would be a closer number is the quarterly run rate um yeah i mean i think you'll you'll lose a little bit of tax prep fees in the third quarter obviously off of the second quarter numbers but i think a lot of the other major components whether it's deposit related fees interchange atm those all should be you know pretty consistent and continuing to increase modestly so i think i would expect to see us you know pretty consistent with q2 results all in if okay and then on the Foley side it's pretty modest right so I think you know I think even with or without that you should stay in that you know 42 million dollar plus range okay okay and the last question for me on your expenses so the core systems upgrade was a million and then you mentioned another million that was that was non-recurrent in the quarter I guess just what was that and then if we look at the core systems upgrade relative it looks like you you sort of upticked your spend a little bit there we're going to have maybe a four million dollar charge in the third quarter thing into that or so gonna take some of that in the fourth quarter because it's it's an October event how should we think about that yeah so just to be clear we had 1.1 million of core charges in the first quarter that increased to 2.1 million in the second quarter so we're at 3.2 million all in already year to date um so the one million dollar references the increase quarter over quarter but both quarter had had meaningful charges in there um in terms of the remaining so call it three million you know two to three million dollars i would expect most of it to be in the third quarter Sorry, because the conversion date is in October. You may see some added consulting expense in the fourth quarter to help with, you know, whether it's call center or other sort of customer-facing work that we would expect post-conversion, but I would imagine the bulk of that will be in the third quarter. Okay, great. Thanks for taking my question. Thank you. Your next question comes from the line of Matthew Breeze from Stevens Incorporated. hold on please good morning everybody uh jeff i'd be remiss if i i too didn't congratulate you on that it's a health news feels a little out of tune hopscotch to nim and lone goat dynamics but very glad you hear the news everything else i suppose is secondary um mark you touched on a little bit uh deposit competition um i guess i'm curious you'd mentioned the spot rate i think is $138. Should we expect that kind of cadence, maybe one or two biffs of deposit costs increases through the end of the year? And then as we think about, because you're also growing DDAs, as we thinking about kind of the all-in new money rate for deposits, what is that relative to where you're at? Yeah. Yeah. I think your first question is spot on there, Matt. I would expect, you know i mean we're already talking about two basis points in terms of that spot rate number i gave but you know I'd like to see us you know counter that a bit and kind of keep that in check through the third quarter and and probably even a little bit more pressure heading into the fourth quarter so when I look out into the margin guidance and reaffirming the 390 to 395 range I'm comfortable suggesting that with an expectation you could see cost of deposits you know, tick up towards 1.40%. I think there's still enough asset repricing benefit and, you know with some growth, hopefully on the commercial side, you know I think you land in the low end of that range, even with some of that cost of deposit pressure. And the reason we're seeing that pressure, you hit on it in the second part of your question, you we're seeing basically almost a 50-50 kind of DDA plus promo money driving those new deposit results. So that's going to create sort of an all-in weighted average cost on new deposits, call it around 2%. So as the deposit environment, our deposit situation has stabilized significantly through June, I think it's prudent for us to revisit sort of the promo strategy and make sure we're finding the right sort of marketing and and um you know i guess new sales efforts to to keep that new cost of deposit in check um so you know I don't want to promise anything quite yet out of the gate but we recognize you know the more that comes in on that promo money the more pressure that puts on cost of deposits so with with the you know, the modest growth and the the nice lift we got through June I think it gives us the opportunity to get you know a bit more tactical on that front in the the second half. Great. Okay. And then just a follow-up, Mark, on the NIM. When you model it out, how much longer might we see the fixed asset repricing benefits flow through to the NM? When do you think it starts to peter out? And I'm particularly focused on 2028 as low yields kind of spiked in 2023. And just my gut is that we start to see some of those benefits from 23 roll loss in 28. And I'm curious if that kind of aligns with what you're seeing. It does. It does. I think there's certainly additional repricing benefit both on the securities and the loans through 2027. And, I would suggest early 28 is when you start to see, you know, most of that really low coupon not impacting as much. Okay. Jeff, one for you, you know, kind of marrying two ideas together and considering your background and the continued disruption in Connecticut with Webster being sold. Is there an opportunity for you all to kind of expand the geography, start to hire or de novo in Connecticut, considering how many folks you're close to there? I would also throw in hiring indoor M&A, but I think I know what the M&E answer is to be yeah um so the m a answer would be the same as it's been in past quarters um and i think the novo uh branching would probably um be a ways off but having said that we're uh having active dialogue with with um some of the people that that are in connecticut that that i know um and honestly um you know we've done this in the past um our head of commercial banking jim rizzo I don't know, Mark, how many years ago this was that we established, you know, effectively an LPO in Providence and experienced a lot of success there. And so we're having conversations as we speak about thinking about doing the same thing in Connecticut, which, again, which we have confidence we can do because we've done it before. But it's all about the people. We wouldn't do it if we couldn't get the right people on the ground that we felt confident could build a business. Would that be a like a Hartford play or more Northern Connecticut? Could be Hartford. It could be, you know, New Haven, Fairfield County. At this point, we've been open minded about it as we've been having discussions with various people. Our preference would probably be Hartfords just because it's closer, but not exclusively. Okay. And then last one for me, wealth management, a good quarter. Nice to see AUM pick up as well. But as I measure kind of fees to AUM, that ratio has started to creep up in recent quarters. It's now at 63 basic points versus 59 just a few quarters ago. Anything to that? What's going on behind the scenes to drive a higher level of profitability there? And do you expect it to continues. Yeah, I'm not sure, Matt, if you're using from an income perspective, if you have just what I would call managed money or if some of our other ancillary businesses might be in that revenue number you're using. But we've seen our fee ratios stay relatively flat, to be honest, over the last couple of quarters. So I wouldn't suggest where we're seeing any dynamic that is driving an increase in fee ratios. I think it just might be other services that we've put into the wealth business that are also giving us some nice lift on the revenue side. I can help maybe break that down. Yeah, I'll follow up with you there. Okay. I'll leave it there. Thank you very much for taking my question. Yeah. The 14.9, just so you know, that's an all-in number. If you look at the slide deck we include in the earnings deck, we we try and break out what is you know really tied to the to the aua versus what's um either tax prep we have estate planning we have a business advisory fee services all that is in that 14.9 number helpful thank you okay a reminder if you would like to ask a question to please press star 1 to raise your hand your next question comes from the line of jared shaw from barclays please go ahead thanks good morning and uh congratulations jeff as well that's great news thank you um yeah so i think you know a lot has been addressed i guess just on the loan side um you know what's what's giving you confidence that that the pace of prepayments on the cre side is going to to slow down in the second half is that uh you know just more of a willingness on your part to to engage or you just you know we're looking at sort of the pipeline of of what's uh what's coming down i think it's both of those things and then i would add one a third which was i mentioned in my comments a little bit earlier we had two rather large loans and and one of them wasn't one loan it was a it was two or three different loans but to one sponsor but um the two I'll call it the two relationships, totaled $120 million of paydowns. Incredibly lumpy, a bit unusual in terms of our normal paydown activity. So it would be a combination of those three things, Jared. We don't expect that kind of lumpiness of size in the second half, and we think we're We're going to get good originations as we move through the second half of the year, and we're going continue to defend our existing clients when they're refinancing and be as aggressive as we think is appropriate without doing something stupid. A combination of those factors is what gives us confidence. have very few 50 million dollar exposures in the book at all so to have two of them pay off is pretty unusual yeah okay so i guess you know if we if we just sort of look at at the expectations for the second half of the year and some of those trends i mean you know when we look at 27 is that the type of thing where we could be mid to high single digit uh loan growth overall i would think mid single digits overall if we can get some traction in uh in cree i feel very confident we'll we'll continue to to generate the kind of loan growth that we've had on the cni uh side and we're just talking commercial here not consumer but um but i think we could get back to the the mid single digit okay and then um what's the what's the new loan yields going on right now on the commercial, on the C&I and the CRE side for you? Yeah, on commercial side, C&Is mid to high sixes, CRE probably low sixes. So all in, it was trending around 6.5% for the second quarter. So it's up nicely quarter over quarter. On the consumer side, home equity is you know typically prime minus 50 give or take on average um and then on the mortgage side you know we're still only putting into portfolio both five or seven one arm product we have we have not opened up 30 year fixed to the to the balance sheet um so you know that's pricing we're staying fairly competitive on and kind of the high fives call it six percent range Okay. All right. Thanks. And then on the DDA side, good trends on growth there. Is that just getting a bigger wallet share from existing customers? Or maybe you could break down what's sort of new to the bank versus existing customers doing a little bit more? Yeah, it is both, Jarrett. We see a lot of seasonality in the second quarter, And this is probably the biggest drop in rebound that I've seen here since I've been at the bank. You know, I think to give that perspective, we got probably as low as like nineteen point six billion during the quarter. So significant rebound. A lot of that is existing relationships and just kind of, you know, we have a lot of activity on the Cape and the islands. That's more seasonal tax time period. always creates some some drops and then rebounds so a lot of it was rebounding on existing relationships on the new money um you know we're still very much on the consumer side um you know community bank driven with you know a free checking product that doesn't bring in a lot of big single deposit relationships but it brings in a a lot units and it adds up in dollars over time so that continues to be a big driver of new money and on the business side it's word of mouth treasury management you know some of the cni activity that we're doing that that's going to lead to you know better full wallet deposit relationships on the commercial side muni is always a bit volatile we had a you know a big uptick on municipal in june as well but you know that's that's an area that we have a good team on and is sourcing some new wins as well Okay. All right. Good. Thanks. And then just finally, I know it's a relatively small part of the overall number, but good growth in the interchange and ATM fees. Is that anything to call out there? Is that the impact of enterprise, or is that just sort of seasonality? I think a little bit of seasonability. I wouldn't say there's anything unique to call out there. But yeah, it's the focus on operating accounts that continues to put that debit card in their hand and drive interchange so that's you know it's nice to see that lift play out great thanks a lot thank you at this time there are no further questions i will now pass the call back to jeff tangle for closing remarks thank you we appreciate everybody's interest in independent bank corp have a great rest of the day This concludes today's call. Thank you all for attending. You may now disconnect.