Good day. Welcome to the Independent Bank Corp second quarter 2021 earnings conference call. All participants will be in a listen- only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. Before proceeding, let me mention that this call may contain forward- looking statements with respect to the financial condition, results of operation, and business of Independent Bank Corp. Actual results may be different. Factors that may cause actual results to differ include those identified in our annual report on Form 10-K and our earnings press release. Independent Bank Corp. cautions you against unduly relying upon any forward- looking statements and disclaims any intent to update publicly any forward- looking statements, whether in response to new information, future events, or otherwise. With respect to the Meridian East Boston Savings Bank transaction, please note that Independent filed a Form S-4 registration statement with the SEC that includes a Proxy Statement/prospectus regarding the merger. You are urged to read the Proxy Statement/prospectus and other documents relating to the merger because they contain important information about the merger. In addition, Independent and Meridian and other directors and officers may be deemed to be participating in a solicitation of proxies in favor of the prospective merger. Finally, please note that during this live call, we will also discuss certain non-GAAP financial measures as we review Independent Bank Corp.'s performance. These non-GAAP financial measures should not be considered replacements for and should be read together with non-GAAP results. Please refer to the investor relations section of our website to obtain a copy of our earnings press release, which contains reconciliations of these non-GAAP measures to the most direct comparable GAAP measures and additional information regarding our non-GAAP measures. I would now like to turn the conference over to Chris Oddleifson, President and CEO. Please go ahead. Morning everybody t hank you Betsy. Thank you, everybody, for joining us today. With me, as usual, is Mark Ruggiero, our Chief Financial Officer. We're also joined by Rob Cozzone, our Chief Operating Officer, and Gerry Nadeau, President of Rockland Trust and our Chief Commercial Banking Officer. Our strong fundamentals were once again on display as evidenced by our solid second quarter performance. Excluding M&A charges, operating net income for the quarter came in at $38.8 million, or $1.17 per share. Mark will be taking you through the quarter shortly, but highlights include excluding PPP loans, our commercial portfolio grew at a healthy 4% annualized rate for the quarter that was marked by strong loan closings. In general, while total loan growth remains constrained, we remain encouraged by our robust origination volumes across both the commercial and retail areas. Total loan origination of approximately $1.6 billion for the first half of this year grew by over 24% from the same period last year. Deposit generation remains very robust, with core deposits reaching 92% of total deposits. Our marketing efforts and growing brand recognition resulted in record new account openings, along with ongoing growth in the number of households we serve. Investment management continues as a major source of strength with rising fee revenues and assets under administration continuing to reach record levels. Credit quality remains pristine with non-performing loans down by over 19% during the quarter, along with minimal levels of charge- offs and lower delinquencies. Expense levels remain well contained given our disciplined management of costs and selective investments. Tangible book value per share continued its upward ascent. All in all, a well-rounded performance. While we and all other financial institutions are still dealing with the lingering effects of the pandemic, along with the unprecedented levels of excess liquidity, we are witnessing some encouraging signs of increased economic activity. Economic recoveries are fragile by nature, but we remain hopeful of continued progress. We also continue to be active participants in the PPP loan program. Since its inception last year, we originated just about 10,000 loans totaling nearly $1.2 billion. At the same time, we've been hard at work aiding the 6,000+ Round 1 borrowers to obtain forgiveness of their loans. This program required a lot of effort, but it provided needed working capital to worthy businesses. As the program winds down, we really take great pride in how we answered the call in the communities we served. Beyond all that, our top priority, of course, centers on the integration planning for our recently announced acquisition of Meridian Bancorp and its flagship East Boston Savings Bank, a well- run community bank with approximately $6.5 billion in assets centered in Boston proper and neighboring towns. We couldn't be more excited about assimilating this company to ours, and we're already making excellent progress in the three months since the announcements. Initial focus has been heavily on key people retention, which is proving quite successful, especially in the customer facing ranks in both the commercial and consumer areas. Gerry and Rob are heavily involved with their East Boston counterparts in mapping out new business opportunities in the acquired customer base. Branch consolidation decisioning and planning is very far along. Shareholder approval meetings are scheduled for early next month, and all regulatory applications have been filed. I would especially like to thank Meridian CEO, Dick Gavegnano, and his senior team for their focused and very capable efforts to ensure a smooth integration of our two companies. Dick's intimate knowledge of the local marketplace is invaluable, and I look forward to continuing to work closely with him in his consultant role with us over the next few years. We remain confident in achieving our original expectations for cost savings, healthy earnings accretion, and tangible book value accretion. We anticipate a fourth quarter closing and conversion. Despite this high priority effort, we're not sitting still in moving our franchise forward. Our proven integration record across multiple acquisitions over many years gives us confidence to pursue other growth initiatives at the same time. For example, we're implementing our mobile Your Banking technology, which allows customers to chat and share documents securely with their own dedicated banker anytime, anywhere, from their own phone, tablet, or computer. We're working to further extend our sales force application within our commercial and investment management businesses, along with a rollout to our retail network that will continue to boost our marketing and new business generation efforts. We continue to expand in the greater Worcester market with the recent opening of our Shrewsbury branch. We'll have a third Worcester city branch opening next quarter with another plan for a neighboring town early next year. We also continue to attract senior lenders with in-depth knowledge of the local markets. We're very encouraged by our progress in this attractive market. Of course, continuing to build out our broad-based enterprise and technology risk management functions to accompany our growing size as a company. Taking a look at the economy, despite a recent shift in sentiment in the equity markets due to increased uncertainty, economic data remains encouraging, and the economy continues to prove its resiliency. Nationally, as I'm sure all of you know, GDP continues to climb, with consumer spending providing a strong tailwind. Retail sales growth exceeded expectations in June. That provides for support for continued growth. Inflation remains in focus. Chairman Powell has reaffirmed his stance that it will be transitory, and the Fed will continue to support the economic recovery. Lastly, labor market conditions. The labor market continues its steady recovery with 850,000 new jobs in June. More locally, the Massachusetts economy has seen back-to-back quarterly GDP growth ahead of the nation with Q1 2021 GDP growth of 6.9%, compared to 6.4% nationally. In addition, while Massachusetts was hit harder by the pandemic, the labor market in Massachusetts continues to recover faster than the nation, led by strong growth in leisure and hospitality, as well as some other services. Now, in summary, I'd say that there is a lot going on at our company these days, and we believe we are persevering very well through the near-term challenges posed by the current environment. More importantly, we continue to build on our strengths to ensure long-term success and sustained financial performance. We continue to rank high in various surveys by reputable third parties across a wide range of measures. Most recently, we came in first in our home state and third nationally in Forbes rankings of the world's best bank. The Bank Director publication ranked us second overall for long-term performance and total shareholder return. Opportunistic acquisitions such as Meridian Bancorp certainly contribute to our long-term goals. Organic growth remains a focal point. We like how we're positioned without taking anything for granted in this highly competitive space. We believe the winning formula lies with a relentless focus on our customers and service, a clear understanding of our competitive advantages, and investing heavily in our Rockland Trust colleagues. Speaking of my colleagues, I want to acknowledge their incredibly tireless efforts to meet our challenges and opportunities while continuing to provide really top-rate service to our customers. They have really fully embraced our role as an essential business to provide much needed comfort and support to our customers and local communities in these very stressful times. I thank each and every one of them for their dedication and enthusiasm. With that, I'll turn it over to Mark. Thank you, Chris. Second quarter GAAP net income of $37.6 million in diluted EPS of $1.14 represent a decrease of approximately 10% from prior quarter results, due primarily to reduced PPP fee recognition in Mortgage Banking Income, as well as current quarter East Boston Savings Bank merger-related expenses. Excluding merger and acquisition expenses, operating net income, and diluted EPS were $38.8 million and $1.17, respectively, for the second quarter. On a GAAP basis, the results reflect a 1.08% return on assets and an 8.70% return on average common equity, while the operating results, excluding M&A, were 1.12% and 8.98%, respectively. In addition, tangible book value per share rose another $0.82 to $36.78 as of June 30th, 2021. I will now summarize some of the major drivers behind the quarterly results. Changes in loan levels continue to be skewed by PPP loan activity. Total loan balances decreased by $308 million or 3.3% for the quarter, caused primarily by a reduction in PPP loan balances of $364 million. Excluding PPP loans, total commercial loans increased $66.2 million or 4.3% on an annualized basis, with total closed commitments of $452 million for the quarter, essentially doubling its volume from Q1. In addition, the approved commercial loan pipeline as of June 30th, 2021 sits at approximately $346 million, which should bode well for healthy closing activity in the second half of the year. As discussed in prior quarters, the majority of commercial opportunities lie in various residential developments, including both single and multi-family, as well as both for- sale and rental properties, while additional opportunities are diversified across retail, industrial, and warehouse classes. In addition to new volume associated with those asset classes, second quarter balance changes also reflect an increased level of construction loans reaching project stabilization in either transferring into commercial real estate or refinancing out. We also experienced solid growth in our small business portfolio as the customer goodwill earned from the successful PPP campaign has paved the way for increased volume. On the consumer loan side, a similar story of strong closing volumes was experienced in both the home equity and residential books, with the residential portfolio also benefiting from the retention of approximately 45% of the production into the balance sheet portfolio for the second quarter, as compared to only 23% in the first quarter. Despite the consequent lowering of mortgage banking interest income, the increase in retained residential loans did help maintain balances quarter-over-quarter, while adding modestly to net interest income. Strong closing activity in home equity continues to be offset by accelerated paydown and payoff activity, resulting in a 1% decrease in that portfolio. As Chris noted our success in the PPP program, a deeper dive into the related financials is as follows. As of June 30th, 2021, there are approximately $112 million of outstandings and $1.5 million of deferred fees remaining to be recognized from the original 2020 round, the majority of which should be recognized in the second half of the year. Regarding the new 2021 round, we closed that program having secured approximately 3,700 loans totaling approximately $370 million. This volume generated $18.2 million in total fees, with $16.9 million remaining to be amortized into interest income over the five-year repayment schedule or accelerated into income upon full forgiveness. Total deposits increased by 3.4% or $393.4 million, reflecting not only additional stimulus money received in April, as Chris cited, very robust new account opening activity. Core households are up 2.6% over the first half of the year, with core deposits now reflecting 92% of total deposits. The combination of strong core deposit levels and the runoff of higher cost time deposits led to a second quarter overall cost of deposits of only 7 basis points, down another 3 basis points from the prior quarter. While the success of attracting new core accounts does not alleviate the current excess liquidity challenges, we continue to feel strongly about the long-term strategic value of attracting new core customers, we believe the current environment remains ripe for doing so. As such, there are no plans to hit the pause button on efforts to attract and retain core customers, as evidenced by, as Chris mentioned, our continued Worcester branch expansion and ongoing improvement in our digital experience. Though general expectations for an improving economy could lead to some level of increased customer spending in the second half of the year, the impact of the excess liquidity from both our consumer and business segments on overall deposit and cash levels remains challenging to confidently predict. The primary outlet for some of the excess liquidity continues to be the securities portfolio, with second quarter purchases of $340 million and overall balance increases of $251 million or 17.6%. With our overall asset-sensitive profile of the balance sheet, we have been more comfortable investing further out on the curve for these security purchases, with an average expected duration on second quarter and first quarter purchases of 5.4 years and 6.7 years respectively. Shifting gears to the quarterly earnings, net interest income of $93.4 million decreased by $2.2 million or 2.3% compared to the prior quarter, with a reported margin of 2.99%, reflecting a 26 basis points decrease. As I previously noted, the decrease in dollars was primarily driven by a reduction of PPP fees, as $7.2 million was recognized in the current quarter versus $9.5 million in the prior quarter. While the decrease in margin is primarily attributable to the elevated levels of cash and securities, where average balances rose by over $800 million on a combined basis in the quarter. The loan yield compression was able to be offset with further deposit rate decreases during the second quarter. With absolute funding costs at very low levels, further asset yield reductions from asset repricing will be a challenge to mitigate going forward. Regarding asset quality, notable metrics for the quarter include the following. Non-performing loans decreased $11.4 million, or 19.2%, driven primarily by an $8.4 million commercial loan payoff during the quarter. Total delinquencies dropped to 0.11% of the portfolio. Net charge-offs for the quarter were only $192,000, representing nearly 1 basis point of loss on an annualized basis. Total loan deferrals were $233.8 million at June 30th, 2021 which is relatively consistent with the prior quarter as expected. This equates to 2.6% of the total portfolio and continues to be concentrated in the accommodation industry. As such, the negative $5 million in provision for bad debts is reflective of improving overall economic forecasts, very strong asset quality metrics, and modest new overall loan growth in the quarter. The current level of loan loss reserves equates to a healthy 221% of non-performing loans. Non-interest income decreased $279,000, or 1.1%, which included strong wealth management results, further enhanced by seasonal tax preparation fees, notable increases in deposit account fees, interchange and ATM income, and $1.1 million of gains from small business equity investments. Offsetting these increases, the $3 million decrease in mortgage banking reflects gain on sale margin compression, combined with the aforementioned strategic decision to hold a larger portion of new originations in the company's portfolio versus selling into the secondary market. On the expense side, total reported expenses increased 5.2% from the prior quarter. When excluding the $1.7 million in merger-related expenses, the remaining increase of $1.9 million is almost entirely comprised of increased incentive compensation, with other offsetting increases and decreases in various categories. Lastly, the tax rate of 24.9% for the second quarter is in line with expectations and is up from the prior quarter, which, as a reminder, benefited from $1.4 million of discrete benefits associated with loans and housing tax credit investments and equity compensation. In summary, highlighting various aspects of those second quarter results as a framework for near-term guidance. The healthy pipelines across all loan products should serve for low single-digit annualized commercial loan growth moving forward, excluding PPP impact. While the mortgage retain- versus sell decision and low home equity utilization rates will continue to challenge net growth in the consumer books. Any future deposit growth will likely be more muted, which in turn will affect the level of excess cash continuing to be deployed into securities. Though the deployment of cash into securities will provide some level of incremental interest income, a reduction in net interest income is expected as accelerated PPP fee income for Q3 is anticipated to be approximately $5.5 million lower than Q2 results, with any notable acceleration of the 2021 round not expected to benefit the margin until 2022. Assuming an anticipated trend of improving general economic factors and no major surprises from overall asset quality, provision for loan loss will likely continue to track at levels below net charge-offs, resulting in further reductions in the overall allowance. With various moving pieces, core non-interest income, excluding the second quarter $1.1 million investment gain that is non-recurring, and non-interest expense, excluding merger costs, should remain relatively consistent with Q2 results, along with a consistent tax rate for the remainder of the year. That concludes my comments, and we'll now open it up to questions. The first question comes from Mark Fitzgibbon with Piper Sandler. Please go ahead. Good morning, everyone. This is Nick Cucharale filling in for Mark. Hope you've been well. Hi, Nick. Nick. Yeah, thank you. I wanted to start with the deferral portfolio. As you alluded to, looks like nearly three-quarters of the remaining modifications were in the accommodation book. Can you give some color on those loans? Has occupancy rebounded significantly? Sure. Maybe, Gerry, do you mind giving some color there? Sure. It's really two subsets in that group, and that is those that are sort of destination or vacation stay hotels have actually come back very, very strong. Majority of them are either in vacation locales such as New Hampshire and Cape Cod. They're experiencing occupancy levels, in some cases, even in excess of 2019. The business stay hotels are, for the most part, flagged suburban to Boston or suburban in Rhode Island, focused on business travelers. They have been slowly improving their occupancy rates and ADR. Anecdotally, we are hearing from them that from what has been as low as in some cases is 10%, now running up closer to 50% on average, with many of them reporting nearly 100% on weekends. It is gradual, steady improvement on that subset. Of those $176 million in accommodation deferrals, do you have a breakout of what% is destination versus business? In that group, about 2/3 is business. As our total hotel portfolio is split about 50/50. In that subset, 2/3 business travel, 1/3 vacation. That's very helpful. Can you share with us where C&I line utilization was at June 30th, relative to last quarter and then pre-pandemic levels? Sure. I have that here, Nick. We look at within C&I, we break out dealer floor plan and then other general C&I lines. I have March 2020 data, which was right at the onset of the pandemic, but reflective of probably more healthier levels. general line of credit utilization was around 46%, and dealer floor plan utilization was about 66% back in March of 2020. At the end of the second quarter, general C&I line utilization is down to about 34%, and dealer floor plan is down to 52%. Certainly, those continue to give some headwinds into extracting outstanding balances on the balance sheet. That's great. Thank you for having that handy. Lastly, just thank you for clarifying that the commercial loan pipeline. It sounds like you're optimistic for the second half, given your guidance. Could you help us think about where you're finding opportunities in a competitive lending environment? Mark, would you like me to answer that? Sure. I'll chime in if needed, Gerry. Sure. As Mark indicated in his comments, we're seeing it mostly on the residential side, whether it be apartments or single- family or condominiums for- sale, I would say have been the most significant driver. Secondarily have been clients either expanding their buildings for their own personal use, being their business, or expanding buildings for further rental tenants. Mostly these are on the industrial or mixed- use, if you will, side. That's probably been the primary drivers mostly on the CRE side. That's great. Thank you for taking my questions. Nick, I thought it'd be important to note, just back on your deferral question, one other aspect of that, as a reminder, we shared this in prior quarters, but recollection, a lot of those modifications under the CARES Act were able to extend out into 2022. Many of those accommodation-based deferrals will continue to stay on deferral through the remainder of 2021. Those levels of deferral balances that we've been reporting would not be expected to run off in any meaningful manner through the rest of the year. Then they'll sort of layer in based on different segments and different maturity dates of those deferral programs. Those will be deferrals well into 2022. That's great. Thank you for clarifying. Yep. The next question comes from Dave Bishop with Seaport. Please go ahead. Yeah. Good morning, gentlemen. Morning, Dave. Good morning, Dave. You had mentioned, in terms of the outlook for excess liquidity, probably continuing to redeploy to the extent that loan growth opportunities are available into the securities portfolio, and I guess that's up to probably about 11% of average assets or so. Do you have a sense how large that could get as a% of assets? Just curious how you're thinking in terms of building that in light of, Chris Oddleifson, I guess your remarks with the Fed seeming to be staying on the sidelines for some time and the yield curves staying so flat. Just curious what the appetite is to grow that portfolio. Yeah, David, you know our story well. We typically do not have an overly large securities portfolio as a percentage of those assets. In fact, the percentage we have right now is pretty much where we've historically operated at. I think this dynamic and the environment we're in, with the level of excess cash, it just warrants sort of an expectation and the correct decision to at least deploy some of that excess cash and probably build a higher securities portfolio than we typically operate with. I will add, the one challenge here is just even finding security product that has a reasonable return and a reasonable spread. During the second quarter, leading up to the second quarter and through partway of the second quarter, we were primarily investing in agency bullets going a little bit longer out on the curve because we have the asset sensitive profile to do so. We all know just the low rate environment. In fact, what we're seeing in terms of spreads on a lot of those products, it's becoming more and more of a challenge to be convinced that those are the right deployment of the excess cash. We actually moved towards purchasing some treasuries as of late because to be quite honest It's the best bang for our buck at this point. It's a constant sort of analysis of where to deploy that liquidity if there's even convincing product out there with a reasonable spread and reasonable return for the risk. Sort of a long way of saying we'll modestly continue, I think the clip we did in the second quarter of $300 million-$350 million of purchases, assuming all things being equal, that's probably where our comfort level would be. Did you have the weighted average yield on the security purchases this quarter by any chance? Yeah. On the second quarter it was a little over 1, so about 1.1% on those purchases. Obviously the Treasuries that I just mentioned will be lower than that. We're looking at sort of the five-six year part of the curve on those purchases. You're talking maybe 70 basis points, but all in weighted average for Q2 purchases was 1.1%. Got it. Chris, I think you noted another strong quarter from the investment management, wealth management group. Probably one of the stronger quarters we've seen on a year-over-year basis. Just curious how much of that is sort of market rebound related versus new assets and generation of new relationships. I don't have that breakdown in front of me. I will say our origination is strong. Mark, do you have that specific breakdown? I do, yep. We had net inflows of about-- well, actually, we did experience a little bit of runoff in the second quarter. It was essentially a wash in terms of new money and outflows for the second quarter. Most of the appreciation came in market value appreciation. We did add a little over $100 million or $125 million of new money. That's down a little bit from the first quarter where we were just shy of $200 million. Still very good results and very optimistic opportunities in talking with the wealth management folks. I think they're excited to be able to actually go out and start meeting with clients again. I think there's been a lot of pent-up demand for those customers to have those face-to-face meetings and get with their advisers again. We're feeling very good about continuing to find opportunities there, and the market's been cooperating as well. Dave, I will add that we have grown this business over 10X over the last 15 years. One of the major drivers is our expanding footprint franchise. 80% of our business comes from our commercial bankers and our retail bankers referrals. The more commercial lenders and retail branches we have, the more referrals we get. That's been the trend of all our acquisitions. With the Meridian Bancorp acquisition, we expect that to bode well too for the growth into this business. Got it. Just one final question. Mark, you mentioned, I missed the number, but in terms of deferred fees outstanding from the first tranche of PPP loans. Could you go over that again? Yeah. The first tranche is down to about $1.5 million, Dave, as of June 30. Got it. Then 18.2 or I'm sorry, 16.9. 0.9. Yeah. I think that will just be subject to normal amortization through most of 2021. A five-year sort of amortization period on the 16.9. The one caveat there is there will be a time period here in the 4th quarter for the most part where borrowers will hit the end of the time period, the 24-week period of utilizing the funds. Then there's a 10-month window essentially where they have sort of a payment deferral, and that's sort of the window when, at least for the first round we experienced, we'll start to see some level of applications coming in for forgiveness. It's tough to pinpoint exactly when customers will start going through that forgiveness process. If we leverage what we learned through the first round, my best guesstimate would be the majority of that will not happen until 2022. There is the potential for some accelerated forgiveness later in the year. I just think you'll see the majority of it in the next calendar year. Got it. Thanks. Sure. The next question comes from Laurie Hunsicker with Compass Point. Please go ahead. Yeah. Hi, good morning. Good morning, Laurie. Just wondered if we could go back to deferrals for a minute and your credit trends look great. Just wondered if you could comment a little bit on this other small business services where we just saw the sharp uptick in deferrals. I'm talking about the line, it looks like it's real estate and leasing. They're small transportation warehouse, but your deferrals by one quarter from 24 up to $43 million. Just any color you can give us around that or how we should be thinking about that? Yeah. Without the specific borrowers, Laurie, I'd say this was a similar issue with the first quarter. There was a time period through as of when we reported year-end 2020 deferral numbers, and then as it played out over the first couple of quarters. We were in talks and negotiations with a number of borrowers that were looking to enter into a deferral program. Just the timing of when some of those negotiations got executed, that's what created the increases we've seen over the first couple of quarters. I'm not sure if you recall, but when we announced at year-end, we talked about somewhere around $70 million of potential deferrals that were still somewhat in flux that could come back on. Nothing has surprised us there. All of these increases over the first couple of quarters were all part of that group that we were talking to. In fact, it's probably at a number now where we anticipated we would be, once sort of all the dust settled. The one increase this quarter was just another example of a borrower that had not, in theory, signed the paperwork and just got around to it in the second quarter. Got it. Okay, thanks. Then also just wondered, and thank you for your clarification on the remaining PPP fees. If you could also help us think about what accretion income is going to look like in 2022, with EBSB, and then also just any thoughts you can give us around pro forma margin, excluding the PPP. In other words, as we think about what your core margin looks like for 2022, factoring in EBSB, factoring in the restructure, any comments would be super helpful. Sure. I'll take a stab at it. As you noted in your question, there are a lot of moving pieces in that equation. I'll try and break it down for you as best I can. I think as a starting point, looking at our results over the last two quarters, I think of it as, let's take out PPP altogether as sort of the baseline starting point. I think if you do that, you're looking at our standalone entity at a margin of about 280-285 basis points. That's with what has been a pretty consistent purchase accounting accretion number. You've seen in the last two quarters, it's running about $1.6 million-$1.7 million a quarter. That could tick down $200,000, if I had to guess, over the next two quarters, but I don't think it'll be a meaningful change. Upon the East Boston acquisition, the reminder, our initial assumptions that are still subject to obviously a lot of moving pieces between now and close, but at the time we announced, and what we're reiterating still, is that we would have a 60/40 non-PCD, PCD split, and that would equate to about a $65 million-$68 million non-PCD mark. That would get accreted into income. If we assume that's a five-year average life, that would equate to about $13 million a year in accretion income. Offsetting that, we anticipate there'll be a premium loan interest and liquidity mark essentially in the same amount. The amortization of that premium will be about $13 million-$14 million. That'll wash with the non-PCD benefit. The good news is there should be sort of a washing effect in terms of the noise in the margin on that side. There'll be a one-year benefit on the fair value mark of the CDs or the time deposits, and I think that'll accrete in about a $5 million benefit. Really that starting point core margin, 280-285, doesn't change a whole lot when you layer in the impact of the acquisition because a lot of that is sort of netting out to very little noise. I think you're going to see that getting to about a 290-295 margin, we'll call it. Lastly, we talked about the balance sheet restructure and the opportunities to essentially allow for a level of runoff on the commercial real estate book, then likely deploying some of that excess cash into paying off their wholesale funding and also allowing for a level of deposit runoff. We take that and modeled in essentially a $2 billion reduction in the balance sheet. On the asset side, that's comprised of $1 billion free in cash and $600 million or $700 million in loans. On the funding side, it's $600 million in FHLB borrowings and the rest coming out of deposits. That spread on the $2 billion is only about 50 basis points. Even though we'll lose absolute dollars in net interest income, the quality of earnings improves significantly. You're looking at a smaller balance sheet. We pegged that margin post full restructure of that $2 billion to get back up to about 320 or so. I'll pause there, Laurie. I know there's a lot of moving pieces there, but hopefully that answered your questions. Yeah, that sure did. Thank you for all the details. I really appreciate it. That is great. Hopefully, we're fast enough. Chris, just a question for you. Obviously, we're going to see EBSB close here hopefully by the end of the year. How are you thinking about forward M&A at this point? Laurie, pretty much the same way. I mean, we've had a long track record of an acquisition sort of coming across the horizon every year and a half, two years, and it's been a really great growth strategy for us. I think we've executed quite well, and it's been important to us. I would hope that once we close and convert and digest that, as the past is prologue, and another opportunity emerges, and we would love to take advantage of it. Okay. Just remind us again, I know that one of us asks you usually every quarter almost, but just your target asset size in terms of how small you would go, how large you would go. Yes. Banks are sold, not bought. I'd love to sort of tell you exactly. I think probably it'd have to move the needle a little bit, and if it was too small, it didn't move the needle, there would have to be another good reason like some capability you were buying or so on. You may recall the first acquisition back in 2003 was $175 million. I think that was the size of Falmouth Co-operative Bank. I think that would be too small. It'd have to move the needle a little, noticeably. Certainly not as much as East Boston Savings Bank on Meridian Bancorp. That's pretty extraordinary. That was good metrics, but I don't want to set a number, but it'd have to be something noticeable. Great. Thanks for taking my question. Thanks, Laurie. As a reminder, if you have a question, please press star then one to be joined into the queue. The next question is from Kelly Motta with KBW. Please go ahead. Hi. Thanks for the question. Good morning. Hi, Kelly. Hey. At this point, most of my questions have been asked and answered. I did want to dig in a little bit on expenses. Specifically, your occupancy and equipment line came down a lot, which you in the release said was mostly snow removal and reduced cleaning costs. Just wondering, I think you, in the past, have talked about potentially reducing some office expenses. Just wondering if you're still working on that as you look to integrate and close the Meridian deal, and if there was anything else kind of at play to drive that decrease. Certainly, in terms of occupancy and equipment, post Meridian, we've talked about sort of our cost save assumptions, and I think that will play out as we've anticipated, and we've made a lot of great progress, and are on track to, we believe, achieving those cost saves. Certainly the absolute dollars will increase with the expansion of the branch locations and the office space we're taking on there. As a standalone Rockland Trust entity, we think we've been pretty careful about where to spend money, especially on technology and equipment. We need to continue to invest in our capabilities. We need to continue to invest in our infrastructure. That requires a constant care and feeding of the environment, and that isn't where we think it makes sense to shortchange the investment. A couple of tangible items I'd point to. I actually don't have exact numbers in front of me. Just a reminder, we did make the decision to close the Seaport and the Medford branches last year. We pulled a lot of that expense forward. There was still some level of incremental sort of run rate expense. We actually just completely closed those branches and exited those branches in the Q2. There should be some modest benefit in terms of fully exiting those two branches. In terms of other line items, I think we've extracted probably as much as we can. We're always looking at that and looking for efficiency gains where it makes sense. Great. Earlier in the call, Chris, I believe you spoke about getting new lenders and lock-up agreements in place. Just wondering how that initiative is going, if it's mostly completed at this point. If you could just go over whether that's for Meridian specifically or how you're doing with recruitment from other banks as well. Thank you. Great. Well, I'll let Gerry comment more extensively. I will say that this is one of the stories that will never end, I think, in our business. We will be constantly looking for lenders through acquisition, through hires, through internal development, through promotion. Gerry, you can expand on that. Sure. Thanks, Chris. Hi, Kelly. Yeah, I think in the context Chris was speaking about earlier, it was about Worcester. We're very fortunate to have been able to bring over a couple folks from TD when we opened in Worcester last year. That's been really giving us some nice growth. Even though we are joining together with East Boston, we're continuing to find opportunities to add incrementally to our team in a couple of our different groups. I think we have a couple that we're pretty close to right now. I think that's something we always want to be opportunistic about. There's great value to finding relationship managers that have been in the market for a long time and have generally been able to bring relationships over to us. Great. Thanks, Gerry. Maybe one last one, probably for Mark. Just for the tax rate, it looks like it bumped up a bit. Just wondering if there's any kind of discrete items there or how to think about the tax rate for the rest of the year. Thanks. Yeah. That level for Q2 of high 24s, 25% is right in line, and we should expect to see that for the rest of the year. The first quarter was the anomaly because of some one-time benefits on low-income housing tax credits, where we get updated information and have to revalue the tax benefit. Then equity compensation typically creates some noise in the first quarter because of when the awards vest, that triggers a one-time impact through the tax rate. The first quarter is noisy, and then the rest of the year should fall out into that high 24% range. Great. Thank you. That's all for me. Thank you, Kelly. Have a good weekend. This concludes our question and answer session. I would like to turn the conference back over to Chris Oddleifson for any closing remarks. Great. Thank you, Betsy, and thank you, everybody, for joining us today. We look forward to talking to you in three months to update you on our third quarter. Have a good weekend. Goodbye. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.