Jeffrey Tengel; President, Chief Executive Officer, Director; Independent Bank Corp (Massachusetts)
Mark Ruggiero; Chief Financial Officer and Executive Vice President - Consumer Lending of Rockland Trust; Independent Bank Corp (Massachusetts)
Steve Moss; Analyst; Raymond James Financial, Inc.
Chris O'connell; Analyst; Keefe, Bruyette & Woods, Inc.
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. Information about these non-GAAP measures, including reconciliation to GAAP measures may be found in our earnings release and other SEC filing. These SEC filings can be accessed via the Investor Relations section of our website. Please also note that this event is being recorded. I would now like to turn the conference over to Jeff Tangoe, CEO. Please go ahead.
Thanks, Nick. Good morning and thanks for joining us today. I'm accompanied this morning by CFO and the Head of Consumer Lending, Mark Ruggiero. Our first quarter performance continued to demonstrate the resilience of our franchise in a difficult environment and as a testament to our long term proven operating model as a customer focused community bank. Mark will take you through the details in a few minutes after I share some thoughts. While the current higher for longer interest rate sentiment clearly creates a challenging environment, not only for Rockland Trust for the entire industry.
We continue to definitely navigate this uncertain environment. We are laser-focused on a number of key strategic priorities, all centered around protecting short-term earnings while positioning the bank for earnings growth when the overall environment improves. One of those priorities is actively managing our commercial real estate office portfolio while working to create a more diversified loan portfolio. We know we have a CRI concentration, but it's important to keep in mind that we've been here before throughout the last decade, we have made a number of acquisitions that in some cases created temporary CRI concentrations. Each time we actively manage this segment while growing other parts of our business to bring us back in balance, we fully expect to do the same.
Now this historical context is important to note, we have the muscle memory and experienced staff to execute the same game plan at the same time we continue to emphasize deposit gathering and deposit pricing discipline, our uptick in deposits at quarter end. As a result of this renewed emphasis, we believe our customer service is best in class and resonates with our commercial and retail customer base. It is this personal touch, coupled with investments in technology that creates a winning customer experience. It is why Rockland Trust recently ranked number two in New England in J.D. Power's 2024 US Retail Banking Satisfaction Study.
One of the several factors measured in the survey, our highest scores were in the categories of trust and people a direct reflection of the meaningful relationships our colleagues have built with those we serve. Our employees continue to be the driving force behind our success. We said last quarter that we didn't expect this year to be easy and it hasn't been, but we will continue to focus on those actions. We have control over and look to capitalize on our historical strengths. There's no magic to our value proposition. We do Community Banking really well and believe our current market position presents a high level of opportunity. We remain focused on long-term value creation.
Another way we will create long-term value is through disciplined organic growth. We will do that by deepening relationships across all of our business lines. We have a differentiated business model where all of our lines of business work seamlessly across the enterprise. It may sound simple, but it's been years in the making for our retail branch colleagues work hand-in-hand with our commercial and mortgage bankers. Our wealth management business, IMG receives a majority of its new business leads from our commercial and retail colleagues.
We are developing and enhancing measures and metrics to further drive this collaboration, gaining buy-in and successfully executing this model has earned us a competitive advantage. It is this operating model we are bringing to our new markets, Worcester and the North Shore where we are starting to gain traction. We are also continuing to build out our commercial banking platform with an emphasis on C&I. We've made a number of strategic hires and expect more to come. We are very active in acquiring talent and new talent acquisition and retention is a top priority.
Our business model culture and stability resonates with prospective employees, no different than it does with prospective customers. Our commercial loan pipelines at quarter end were higher than a year ago and higher than that in the last quarter, I mentioned earlier that we are laser focused on our commercial real estate office exposure. We are confident that our decades of demonstrated credit and portfolio management skills will help mitigate any inherent risks because each office loan has unique characteristics like lease roll maturity, geography, ownership, tenant makeup, it's difficult to paint the entire portfolio with one brush. That's why we have action plans tailored to each individual loan and relationship and review and discuss every large loan monthly. It is because of these unique characteristics that we believe the credit story will take time to fully play out.
Although with each quarter that passes, we believe you'll see the signs of our credit acumen and under underwriting discipline mitigating this risk as we focus on these priorities, we continue to actively assess M&A opportunities. While M&A activity remains somewhat muted, we will be disciplined and poised to take advantage of opportunities that fit our historical acquisition strategy and pricing parameters when conditions improve. It's been a proven value driver in the past, and we expect it to be one in the future. Additionally, given our level of excess capital we routinely discuss and evaluate the economics of another stock buyback.
Finally, I would be remiss if I didn't give a shout out to our fantastic colleagues for their dedication and commitment to our customers, colleagues and communities continued to amaze me. You can't win in banking without the best people and our J.D. Power recognition. Our Greenwich awards are the myriad of other awards and recognition to illustrate that our people are simply the best to summarize.
We have everything in place to deliver the results. The market has been accustomed to over the years, including a talented and deep management team, ample capital, highly attractive markets, good expense management, disciplined credit underwriting, strong brand recognition, operating scale, a deep consumer and commercial customer base and an energized and engaged workforce. In short, I believe we are well positioned to not only navigate through the current challenging environment, but to take market share and continue to be an acquirer of choice in the Northeast.
And on that note, I'll turn it over to Mark.
Mark Ruggiero
Thanks, Jeff. I will now take us through the earnings presentation deck that was included in our 8-K filing and is available on our website in today's investor portal. Starting on slide 3 of the deck, 2024 first quarter GAAP net income was $47.8 million and diluted EPS was $1.12, resulting in a 1% return on assets, a 6.63% return on average common equity and a 10.15% return on average tangible common equity. Though expected the margin compression wave to some degree on overall results this quarter, we remain confident that the positive momentum in our core fundamentals position, the bank well for net revenue growth in the near term. The central component of that positive momentum is reflected on slide 4. So average deposits declined in Q1 versus the prior quarter, which reflects our typical seasonality.
We are encouraged by our consistent growth in new households over the last year and the rebound in balances in March with period end balances up $178 million or 4.8% annualized when compared to the prior quarter. Municipal customer inflows drove most of the increase, while total consumer balances increased as well, driven by steady core household growth and continued time deposit demand.
The deposit environment remains competitive, but the result of growing deposit balances for the first time since the fourth quarter of 2021 as a reflection of the deposit prioritization that Jeff alluded to in his comments, and we are doing so while not sacrificing our pricing discipline that has served us so well through this challenging environment. Though, the continued demand for rate drove an increase in the cost of deposits to 1.48% for the quarter, our overall deposit profile positions us well for keeping deposit costs well contained in any rate scenario moving forward.
Moving to slide 5, total loans increased $53 million or 1.5% annualized to $14.3 billion as of quarter end. The modest balance increase was driven primarily by net growth in combined commercial real estate and construction as well as small business. While all other portfolios remained relatively flat quarter over quarter. New commercial real estate activity was diversified across a number of property types with no new activity in non-owner occupied office commercial real estate.
Also worth noting on the heels of our efforts in 2023 to neutralize our interest rate sensitivity, we have successfully shifted the majority of our residential production to the salable market. Pipelines across all loan portfolios remain solid and we are definitely in the market for core relationship lending that meets our credit underwriting criteria. Using that as a segue to provide an update on asset quality.
Slide 6 provides details over a number of key asset quality metrics. To highlight a few, total nonperforming loans remained relatively consistent at $56.9 million and represent 0.4% of total loans. Total nonperforming assets of $57.1 million, which includes minimal other real estate owned, represents 0.3% of total assets. Notable activity for the quarter includes an $11.6 million office loan that moved to nonaccrual, offset by the restoration of an $8.2 million relationship to accrual status, which contain both commercial real estate and C&I balances. With de minimis net charge-offs related to commercial real estate and only $274,000 of net charge-offs in total for the quarter, the provision of $5 million increased the allowance for loan loss ratio by 3 basis points in the quarter.
Moving to slide 7, we have had a number of conversations with the investor community regarding our commercial real estate portfolio, and we recognize that providing additional insight into how much of that portfolio is owner-occupied has been helpful. And so we updated the pie chart here to know total owner-occupied balances as a separate component. And in terms of a more detailed update over the occupied office portfolio, we can move now to slide 8.
We had $41 million of loans in this segment mature in the first quarter, with all loans either renewed or in the process of being renewed with no negative risk migration. The one previously mentioned loan that migrated to nonaccrual was a 2023 fourth quarter maturity and potential loss exposure is appropriately captured in our Q1 provision levels. And in terms of the minimal levels of office loans set to mature over the next few quarters, we are encouraged by the strong credit performance and risk rating assessments among that group.
I echo Jeff's earlier comments that we still expect to see some bumps in the road here, but we will continue our process of monitoring and working through the overall exposures in a very methodical manner. In terms of an update on our multifamily portfolio, which includes additional detail on slide 9, we continue to see pristine asset quality metrics with our one notable previous quarter nonperforming asset of $2.7 million paying off during the first quarter.
Switching gears a bit, reflecting on pricing and net margin impact, the longer end of the curve remains stubbornly inverted and continues to pressure new pricing dynamics in this competitive environment. As noted on slide 10, with some level of increased loan yields more than offset by increased deposit costs the net interest margin compressed 15 basis points to 3.23% on a reported basis in line with prior guidance.
Appreciating that there is significant investor interest on understanding where and when the margin will bottom out, I would say we anchor that expectation in two major drivers, the first being the stabilization and or growth of total deposit levels, and its offsetting impact on the need for higher cost wholesale funding. And secondly, the pace at which our rate sensitive deposits move or reprice into higher rates. We believe both of those dynamics are nearing inflection points and will be reflected in the updated margin guidance I'll touch upon shortly.
Moving to slide 11 and non-interest items. Non-interest income reflects consistent levels with the prior quarter across all core line items, with the decrease compared to the prior quarter, driven mainly by lower swap fees and reduced benefit from volatile tax credit investments in equity securities valuation.
I'll provide a bit more color on our wealth business results here in a second. Before that, just touching upon total expenses, which decreased $860,000 or 0.9% when compared to the prior quarter, despite our typical payroll and occupancy related increases in the first quarter. And this reflects a reduction in FDIC assessment expenses, combined with the company's focus on appropriate expense containment to counter the revenue challenges in this current environment. We continue to believe this is an area that we can manage effectively while not sacrificing investment in key strategic initiatives.
Circling back to the fee income, as a quick update on our wealth management activity, we included some additional breakdown in the wealth business income on slide 12 to provide more clarity of the quarterly results. As reflected assets under administration grew nicely by 4% to a record $6.8 billion at quarter end, with the associated fee revenue up over 3%. Other wealth related income is comprised primarily of retail, insurance, and other advisory services, with those components down slightly quarter over quarter.
We continue to see solid activity of new money in this space with recent hires contributing to an already strong sales force with a track record of consistent performance. This is a key business for us and we believe a real source of competitive advantage versus many other comparable banks. And lastly, the tax rate of 23.6% was slightly higher than the guided 23% due primarily to the discrete impact from equity award vesting in the current quarter.
In closing out my comments, I'll turn to slide 14 to provide an update on our forward-looking guidance, which we want to reiterate continues to reflect the level of uncertainty over near-term credit and funding cost conditions. In terms of loan and deposit growth, we reiterate our full year 2024 guidance of low single digit percentage increases with expectations for relatively flat to modest growth in the near term. Regarding the net interest margin, there's still a number of moving pieces at play that make it difficult to predict specific results.
Last quarter, we highlighted the potential for net interest margin improvement in the second half of the year. One of the key conditions for that potential was resumed core funding growth and as we noted earlier, the March results were encouraging on that front. And other obvious key component lies in the assumptions over the yield curve and its impact on pricing dynamics. With less certainty over the path of rate cuts from the Federal Reserve in 2024, a prolonged inverted yield curve will continue to pressure deposit costs in the near term, but on a positive note to a lesser degree than prior quarters.
Alternatively, we anticipate the inversion will also continue to somewhat limit the benefit of asset repricing. And lastly, we will continue to see securities payoffs and loan hedge maturities provide benefit to the margin over time. Given all these moving pieces, we anticipate the margin for the second quarter to remain in the three [$320 million to $325 million] range, with expectations for modest improvement in the second half of the year.
As it relates to asset quality, we have no changes to our guidance regarding asset quality and provision for loan loss. With losses commercial real estate being the primary dynamic, and we'll continue to diligently work through maturities in that space.
Regarding noninterest income, we expect low single digit percentage increases in Q2 versus Q1 levels, and we reaffirm a low single digit percentage increase for full year 2024 versus 2023. And similarly, for non-interest expense, we anticipate low single digit percentage increases in Q2 versus Q1 as well as full year 2024 versus 2023. And lastly, the tax rate for the remainder of the year is expected to be around 23%. That concludes my comments, and we will now open it up for questions.
Operator
We will now begin the question-and-answer session. (Operator Instructions)
Mark Fitzgibbon, Piper Sandler.
Greg Zingone
Hey, good morning. This is Greg Zingone filling in for Mark at the moment.
Jeffrey Tengel
Hi, Greg.
Greg Zingone
Hey. So I think you just said you expect modest improvement in the NIM in the second half of the year. How many rate cuts are you assuming that?
Mark Ruggiero
Yes, we're sort of following the of the bucket expectations there of minimal cuts on either one or two and that would be later in the year. So in other words, we don't expect it to have too much of an impact on 2024.
Greg Zingone
Okay. And then would you expect the tax rate to be in the 23.5% to 24% range for the remainder of the year?
Mark Ruggiero
So I do think it'll double dip back down to around 23% for the rest of the year. Right around 23%.
Right around 23% on that on credit, could you quickly summarize the largest credits that are part of your nonperforming balance at quarter end?
Sure. So within total nonperformers, which does really three larger commercial credits within our nonperforming bucket, the first is a C&I relationship on the larger our participated deal that we are not the lead and we actually talked about that credit in a prior quarter when it went non accrual. We have reserve allocations within our individual evaluated loan methodology. We expect somewhere in a 4 million loss range given some of the valuations we have on the underlying collateral there, but that's still still of a resolution that is to be determined, but we believe we have our loss exposure adequately reserved.
And the second nonperforming asset is new to nonperforming here in the first quarter. That's the 11 million. Our loan that I mentioned in my comments, that's another deal where we are not the lead to participate a deal that was an office loan that matured in the fourth quarter of 2023. And there's the major tenant there that's looking to downsize its occupancy, and we're seeing less commitment from the owner to fund tenant improvements. So right now, it looks as though a potential resolution could be through a short sale, and that may lead to about a 20% to 25% loss exposure, which was in fact, included also in our Q1 provision.
And then lastly, the third largest nonperformer is about an CAD8 million office loan. That's the loan we took a $2.5 million charge off in a prior quarter. So that loss has already been accounted for as well. So those are the three major components on the commercial side and the nonperformance.
Awesome. Thank you. And then pivoting to the CD maturities, I think on slide 10, where are you expecting those to reprice at when they mature?
Yes. Because I mentioned with less expectation for Fed cuts, I would imagine most of that will reprice up into the high 40s. We have still have some promotional money out there at 5%. So assuming the majority of that will move into our highest rate, I would expect on average that to reprice up into the high fours, call it four 84 85 range.
And then lastly, could you share with us any data on how the Western extension has gone western expansion side?
Yes, on it, yes, yes, we don't have we don't break that out typically on a specific initiative, but I can tell you that we feel good about the progress we're making. We are growing loans and deposits in that market and in general, feel good about about the progress that we've made and we're going to continue to. So as I said earlier in my comments, bring our operating model to that market, continue to look for talented bankers to add to the mix. But again, feel good about the progress to date.
Awesome.
Thanks so much.
Operator
Thank you. Our next question comes from Steve Moss with Raymond James. Please go ahead.
Steve Moss
Good morning.
I want to stay high side.
Maybe just starting with the margin here. Just curious what where are you at what rate are you adding new deposits these days? Just kind of thinking about your funding cost certain maybe from a pickup?
Yes.
I know it depends, Steve, to be honest. I mean, I think the positive that we saw in late March and I would expect to have some momentum heading into Q2 is to grow core deposits that are not rate sensitive. So we're starting to see some traction in our checking account activity, whether it's noninterest-bearing or some of our modestly priced savings accounts. So I do think there's a level to which are core lower cost deposits start to grow. But at the same time, we will absolutely continue to see demand and some of our commercial products, whether it's RICICS. product or CD.s that will continue to be high fours, 5%. So it you're really seeing that mix of good core household operating accounts that are low cost and then those that are looking for rate again, it's continue to be in the 5% range.
Okay.
And then in terms of loan pricing these days with the uptick in the pipeline just curious your where where are new loans and renewals coming on the books these days?
Yes. It's been a challenge through the first quarter. As you can imagine that the mid-part of the curve continue to stay somewhat depressed. So in the first quarter, a lot of our fixed commercial pricing has been probably the mid to high sixes. Certainly anything priced off the short end of the curve was up around 8%. I think the positive there is that you're starting to see the middle three to seven year part of the curve move up a bit. So I would expect we should start to see our fixed rate commercial pricing back in the sevens here in the second quarter and anything tied to prime or so for continuing to be in that 8% range.
And I also think as we continue to train and emphasize C&I, a lot of that in our lines of credit it tend to be on floating.
And so we'll get the benefit from that as we continue to emphasize that, that segment and we're not as big of an impact, I'll just add Seabrook, but we are seeing a bit of an uptick lately in home equity utilization as well on online side, which is all prime based. So we're seeing a little bit of a lift there on the home equity side as well.
Okay.
And in terms of just the construction balances, you guys had have come down probably call it, 20% year over year. Just curious on are we getting closer to a bottom in commercial construction or do you do see further runoff in that portfolio?
I think we're going to probably see further runoff with some ups and downs. I don't know that it's going to be a linear line down, but some were obviously much more disciplined or I should say we still are very disciplined as the market has made it more difficult for the a lot of the construction loans to pencil out because of the interest rate environment and the increase in construction costs. So so I don't I don't see that that third bucket increasing much from here. And again, if anything, I think it will be done.
Okay.
Appreciate that. And then in terms of the the office portfolio, you'll have two questions on that one, what was the class of the office?
Probably it went up $0.1 this quarter, Class A. B or C, just any color you can give around the rate of occupancy there that loan one that went nonperforming, I believe is a Class B, but I don't have that at my fingertips here, Steve.
Okay. In that time, what was the second part of your question?
The occupancy, if you have a fighting chance yet, so that that's where we have the situation with the major tenant looking to downsize and they take about up about half of that building and the rest of the occupancy there has been somewhat challenged. So looking to be trending towards somewhere in the 50% to 60% range, which is why there is expectation that this deal may come to a sale or some sort of resolution here in the near term of what some some pressure on the valuation to the extent of 20% to 25% loss exposure.
Right.
Okay.
And then just in terms of the other office property, the $8 million or one that was nonperforming in Q4. Just curious is that that I was thinking was going to be resolved here in the near near term just any update on the resolution there?
Yes, we were hoping so two and four, there was a pending note sale on that as we talked about it last quarter. Unfortunately, that deal fell through. But right now, there's an expectation or negotiations that we may. Again, this is a now this is our club deal. We're not the only participant on this one but that there's potential for a direct worked out with the borrower at a discounted sort of pay off price. And if that plays out the way it is, we would expect that the loss there would be pretty much in line with the charge-off we took based upon where we thought the note sale was going to happen.
Okay, great. Appreciate all the color of a step back.
Thank you.
Operator
Our next question comes from Laurie Hunsicker with Seaport Research. Please go ahead.
Laurie Hunsicker
You may have more than or just wanted to stay with us the line of questioning on the office and obviously outside of office things look, great. Appreciate you're at your new multifamily slide. But just just going back to and the so the first credit that came on last quarter was it started and I have in my notes, it started at 11.3 million at 2.8 million of charge-offs down to 8.5 million, that was still an $8.5 million loan.
It is yes, that is still end. And B, I think it's actually paid down to about 8 million or so, Laurie, but that's the one I was just alluding to that had the pending class note sale at one point. I now may go through what they are a different resolution, but we still believe that's the right value based on our understanding of where that could get resolved heading off.
And then you are at this point, if I may you.
Okay. So you don't have any other specific reserve against it?
It's down to 8 million direct.
Okay.
Yes.
And then you're charged down to right down to eight.
Okay, great. And then your the EUR11 million and I think you flagged this is showing an early-stage delinquency last quarter. I'm assuming it was the same one that just went on what did you set aside in provision this quarter?
We look at your provision what was marked for?
Yes.
So we took about a CAD2.5 million specific allocation on that loan I can create and in and just looking here at your criticized, your linked quarter criticized and office, maybe just help us think about that. That went from 55 million up to 115 million linked quarter and certainly no surprise we're seeing weakness. But just can you help us think about those and what we should be watching or worried about here? How you're thinking about that? Any any color would be helpful.
Sure.
So the items I want to make sure I heard you right, you have in your material it went from 85 to one 15 total money going from 55 million last quarter, criticized 55 million up to 115 million this quarter.
Okay, 55.3 million less quarter and now at 114.9 million.
Okay. Maybe that's the wrong number, but I mean maybe Arnon underwrite some of that actually some actually some of it, I think, is improvement going from classified to criticize. But the biggest one, I think that's worth noting there's one new relationship that downgraded to criticized, which is the 30 million that you see reflected in, um, in our materials as a Q4 maturity. So that's a syndicated deal. That's a much larger relationship. It's really our only true downtown Boston Financial District exposure. The occupancy on that property is pretty good at 85% and they got downgraded because the debt service coverage had dropped a little bit over 1%. So the FDIC. as part of their snick review, actually downgraded that to the seven. And so we have some insight based on our conversations with the lead bank suggesting there's still inadequate value from an LTV perspective. We'll see how this plays out as we come up to a Q4 maturity, but we believe there's plenty of protection there and is probably a relationship, to be honest, we'd look to exit if we can have a couple of other tenants.
I think that are out there getting ready to sign up that'll I think, push the occupancy up into the 90s going. So we don't we don't feel like there's any loss content at all on that.
Okay.
Okay.
Fair enough.
Okay.
And then just switching switching back to margin was what was your March spot margin?
March margin was three 21.
I think what's interesting on that, too, Laurie, if we talked a lot about the pickup in period end deposits. So even from us, most of March, the average deposits were in the 14 eight range, which means we had a higher allocation of wholesale borrowings. So again, are just later in that month, having some core deposit growth already provides a bit of a boost to that level heading into April. And so I just want to put that caveat on three 21 is really reflective of the lower deposit balances as well.
Got it. Got it.
And just remind us when wins in the quarter, Mark, did you guys actually redeem the 50 million in sub-debt? What was the timing on that?
That was late February, early March, so but that was out for 75 prior to redemption. If we held onto that, that would have repriced to a floating rate. And so you really just shifted a four, 75 fixed debt to borrowings at 5%. So it won't have too much impact, yes.
Okay. Perfect. Perfect. And then just last question for you. You mentioned considering another buyback. Obviously you're if you're down substantially below where you just repurchase, can you help us think a little bit more about that?
Yes, that's yes, we've got a pretty consistent answer here that I think we'll obviously continue to weigh that as a tool that we think we would be able to you have in the toolkit to be opportunistic with you mentioned valuation and levels of capital. I think you'll certainly suggested something we would want to be considering to have available. So we haven't made a decision. Obviously, we haven't announced anything yet there, but I think it's safe to say it's something we will continue to talk about here in the near term.
Great.
Thanks for taking my questions.
Operator
Thank you again, if you have a question, please press star then one. Our next question comes from Chris O'Connell with KBW. Please go ahead.
Chris O'connell
Good morning. Just wanted to follow up on the kind of robust capital levels that you guys have here and you have the opportunity to kind of deploy that going forward. If you have enough capital in the securities yields, it's still a big book and the yield still just under 2% I mean, is there any potential for securities restructuring at some point in 2024?
Yes, that's a strategy. We've done some analysis on for us, and I think it's one that.
Yes. Personally, I've struggled a little bit with on just the the optics of taking the loss now to improve the earnings. I would say I think there's better margin now and where that structure probably makes a bit more sense. But we're getting to a point now where I think we even have this material on one of the slides, if you look at what's expected to pay off on the securities portfolio in the near term, our data book will get down to probably 13.5% of total assets by the end of the year. And that's really a level where we'd be much more comfortable on where we are a bank that historically has operated around 12% to 13% of assets in the securities book. So we are accelerating to get to that level, I think isn't completely off the table, but even just allowing for normal payoffs, we get there relatively shortly. And I think that's a much better balance sheet profile for the longer term that we'd like to be in. So long way of saying we'll continue to assess that opportunity. But it isn't something that I would think we feel compelled to do given the trajectory of where it's already heading.
Got it. And you guys mentioned, you know, still looking at M&A opportunities as always. I mean, has there been any uptick in conversations there at all in your markets?
I'm not really I mean not appreciably. As you know, it continues. I think everybody is continuing to struggle with the same issues around trying to make the math work and uncertainty around the regulatory environment.
And then just circling back to office here for the total office portfolio, do you guys have a reserve number that's applied against that entire portfolio?
Yes, we don't disclose anything publicly there. We still have our formal pool allocation is total commercial real estate and construction. But we do look through to the underlying property types to guide how much from a qualitative perspective, we would want to be allocating to that that total pool. So I guess I would say we definitely have increased reserve allocation as a result of the office book.
Yes, I'd say we do some some analysis to support the overall allocation by looking at risk ratings and stressing valuations on those that are criticized and classified in that type of analysis probably suggests that I think, yes. So not publicly disclosed we probably intuitively are around 2.5% to 3% on the office book with the rest of commercial real estate at, call it 75 basis points. And we think that reserve allocation was actually pretty conservative in terms of allocating loss containment where we see the risk in the criticized and classified bucket.
Great.
That's helpful. And I appreciate the detail on the 2024 maturities, do you have what portion of the 2025 maturities are currently criticized?
I do have the 2025 maturities. There's one large criticized loan. That's a 50 million exposure in 2025. That's the biggest, really the only notable and criticized loan in 2025. And that one where we've had conversations with the bar that, yes, we don't have a near-term expectation of that, but it's something we'll provide a bit more of an update as we go over the next couple of quarters.
Really helpful. And is there anything else? I mean, you mentioned the multi-family improvement from the one credit this quarter and any additional detail in the slides that are all very solid I mean, is there any other areas outside of office you guys are seeing any any sort of outsized credit pressure at this time?
Yes, not really. I mean, if you zoom out a little bit and look at our levels of criticized and classified assets together. It's actually very stable, not just over the last couple of quarters, but it's very consistent with the last few years, which is again why we feel relatively comfortable with where we are in the credit environment because that the level of criticized and classified assets is not it's remarkably different. It's really no different than it has been over the past several years.
Great.
And then last one, do you have the amount of non floating rate loans that are is set to reprice or mature in 2024 and 2024.
I do not in front of me, but it's not a significantly. We have obviously the risk you said the non floating rate, so adjustable rate are fixed?
Yes, I don't have it in front of me, Chris, but I can get you. I can get you that.
Okay.
That's all I had. Thank you.
Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Jeff Tangoe for any closing remarks.
Thanks, Nick. And thank you for your continued interest in Independent Bank Corp. Have a great day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
