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Rockland Trust revealed two commercial loans loans worth $26 million that were not generating payments for the bank as of the fourth quarter of 2023, and a class A office loan worth $11 million that had gone into early-stage delinquency after the start of 2024.

The first two were one business loan for equipment and a large facility made to a company that declared bankruptcy but still operating, and a second office loan, Rockland Trust CEO Jeffrey Tengel and CFO Mark Ruggiero said during the bank’s fourth-quarter earnings call Friday. That office loan had matured in the fourth quarter.

Tengel and Ruggerio said both assets were being sold, while they are working with the class A office borrower that’s in early-stage delinquency.

The three loans pushed Rockland’s total volume of nonperforming loans to $54.4 million, or 0.38 percent of total loans, compared to $39.2 million, or 0.28 percent of total loans at the end of the third quarter.

Rockland Trust has a total of $125 million in maturing loans in 2024 with 30 percent to 40 percent of that expected to be due in the first quarter, including the non-performing equipment loan and the delinquent $11 million office loan.

“Some of those [maturing loans], we’ve already started the process of renewing, and we think we’ll resolve [with the borrowers] and [give] three-year extension as it has good debt service [coverage ratio] and LTV,” Ruggiero said.

The executives said they are not worried about the loans impacting the bank’s asset quality.

“Each loan has unique characteristics,” Tengel said. “In terms of extending, each one is different. We feel pretty good in managing because we’re on top of that. We don’t think we’ll see a bunch of new non-performers on the $125 million of maturing loans.”

Softness in the office sector, in particular, and recession fears in general have raised concerns about banks’ balance sheets, but so far Massachusetts stock bank earnings calls have turned up relatively few criticized loans.

Fourth-Quarter Income Down, Deposits Up

The bank saw reduced profitability in both the fourth quarter and full year 2023 as rising deposit costs continue to drag incomes, amid customers preferring high-yielding accounts and the bank increasing borrowing from the Federal Home Loan Bank.

Rockland Trust saw its fourth-quarter net income decrease by 9.9 percent or $6 million to $54.8 million compared to the $60.8 million the prior quarter. Full-year net income was $239.5 million, which was down 9.2 percent or $24.3 million from the $263.8 million profits recorded in 2022.

“The dedication of my colleagues and their unrelenting focus on each relationship, day in and day out, paved the way for the solid financial results we achieved throughout this past year,” Rockland Trust CEO Jeffrey Tengel said in a statement. “I am confident that our core fundamentals position us well for continued success heading into 2024 and beyond.”

Quarterly net interest income declined by 3.2 percent to $145.1 million from $149.9 million as

Total loans ended at $14.3 billion, which was up 0.4 percent or $53.8 million from the previous quarter mainly due to adjustable rate mortgages for residential lending retained on the balance sheet and steady growth of small business lending despite declines in commercial loans.

Deposit balances decreased by 1.3 percent or $194 million to $14.9 billion from a quarter ago due to seasonal business cash outflows. Cost of deposits increased 24 basis points in the fourth quarter to 1.31 percent as customers prefer higher-yielding accounts.

In line with this, borrowings from the Federal Home Loan Bank increased by 21.8 percent or $218 million to fund loan growth and its stock $100-million buyback activity in the fourth quarter.