INDB - Earnings call transcript Q1 2019

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Operator

Good morning. And welcome to the Independent Bank Corp.

First Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Independent let with that condition, respect operations business proceeding, contain call results Before and statements forward-looking to of Instructions] me this mention may of [Operator Corp. Bank the financial be may Actual results different. that in annual earnings identified press Factors include and Form our cause to report actual differ may these XX-K release. on our results Bank Corp. Independent or statements, you otherwise. information, to update intent against disclaims and any new unduly cautions to any relying whether forward-looking statements future response upon events any forward-looking in publicly during Corp.’s Please will discuss that we note this we also certain call, as measures review non-GAAP performance. financial Independent Bank These non-GAAP GAAP and results. not considered with should replacements financial for measures should together be read be which the information regarding of GAAP Please website our a additional to contains refer most measures these and measures. obtain non-GAAP release, of reconciliations measures non-GAAP directly the to of Relations comparable to section our copy our press Investor earnings recorded. Also is event being please that note the to and to I over would conference like turn CEO. now the President Oddleifson, Chris ahead. Please go

Chris Oddleifson

Nantucket credit but loan this Hills development, and Rob stubborn higher shortly, per importantly, strong fundamentals, share, everyone, detail to continuity by financial will you, month. Mark Bill to Ruggiero, and our presence the growth, in earlier million has walk were Blue and continues extends XX% today. Smith, quality, results. and of closing both and returns. to us it an our Officer combined Mark Bill’s related another began the ago. above and contained and We merger pre-planned our along in major Scott Thank our once its This deposit plus a The the respectively. Andrea, and a along today nicely $XX Boston a Cozzone you highly our record Officer, asset share greater operating appointed reached make I, M&A Board, bring quarterly results reaching book $X.XX desirable or strengthens the Rob per year addition led organization. and help to value more good Chief Financial Blue Bancorp year’s many to course, above and income Greater success. am time which thank of accompanied has level billion healthy of this grow acquisition year and was XX% to record with Tangible Dave transforms a been $XX.X Parent and I Operating newly others a including welcome joining with Hills’ expenses performance, Powers We who by us margin, excluding prior our again spent for together markets. you Chief will considerable charges, with morning, CEO, and through quarter net say, striking suffice company

successful given We assimilating in are our in the confident acquired the years. integration, other track record upcoming banks over

of meaningfully size to goal performing eyes our high of communities the course, bank, our customers, not but to a local merger this be to become -- While increases in bank biggest of is the to continue and, high rather a continue colleagues, our shareholders. the bank,

them In benefit important costs, another organizational the that was to of Rob announced build we on capitalize more Operating the Officer Cozzone our our profitably the lead position and Chief elevation to the leadership also skills of accretion, of acquisition to to is earnings regulatory future. designed organization enables businesses. absorb it Beyond move and into in among Chief us -- especially is scale related. strong command closing, with to this incremental the conjunction

Chief internally investment Controller, leader. of served Mark in our are Financial who shoes also a to is promoted has we to story well Officer. of you but and confident as community He has Ruggiero, us his many to abilities. an fill, respected As Rob is communicator the can big highly attest, has excellent been

capable Ed and various move Risk expansion of to well, our including key Reglin were responsibilities and appoint as Seksay, Controller. Officer into promotions position. Chief to was the Gaffney very Counsel General the important promotion related Officer to other Deputy David Another Risk Chief Maureen There

the passion jobs. We at examples robust, from with able motivates other to basis. it their illustrate. promotions promote my an This program many that are develop much succession really There bank who and is to as we from I at and ongoing levels Rockland within have these noteworthy, a all Trust talent believe so were resonates brings colleagues of on within

number a with welcome and colleagues our within Driscoll business combined we mortgage Bob Neil Marttila market. residential including sets addition, into our leads Blue talented our skill who strong Hills’ of Nantucket who In company, key positions leads

While our the -- top near-term we still aren’t Blue priority, integration certainly is still. standing Hills

move made important We other of number initiatives. continue on a to forward and progress

continually As examples, of platform, we banking have mobile tellers account video and upgrade use our our unveiled online expanded opening capabilities. the

going the western by recent National a acquisition, opening new with Wealth is expansion and of our market encouraging and Management generation. well business As the well Banking office along of our Milford Commercial

Our and and are newer excellent $X also billion our into customer expanded administration. to start. branches under reached lastly, continues in our in management investment downtown a just inroads great And management make mark base assets off Boston to business and Newton the

recognition able success time company the as receive based customer by included new financial grow of and we product and third business our generation Best hasn’t that performance, range was integrate a innovation. to reputable the Rockland criteria While unnoticed, a New is of continue earnings front being missing entities as relationships, the Finance, two without England and on parties. day-to-day, the from beat in acquired the on execute to our gone all recently organically, strengths same Trust named Global Bank

ninth number ranked of banks was of overall Forbes thousands in and in among of addition, In survey recent banking all nationwide Massachusetts as a one tens customers.

strong sentiment work economies persists continue still uncertainty Steady basis unemployment growth. Amid annualized environment customer despite job capacity. nationally, Trade community this, and It weak in and the X.X% U.S. to national X.X% fourth X% and future our the global Massachusetts a the was received we low-to-mid a is state years, the near service, on continued over is income unemployment X.X% XXXX also negative rate Academy remained all time to creation recognitions have has excellence and the operating create GDP and and is X% growth. of State difficult for growth Over discussions numerous strong near the accolades in outreach. increasing versus concern rate that quarter, at salary driving full an market and in lows. ignore wage

ahead, potential The perform. industry. the of combined believe cycle like of gives our in and to grow what in larger we us the a company to to engagement. So competitive We confidence call our as ability we excited succeed about you highly and is in ours importance our corporate strength essential culture look now strongly are to added

we which in So cycle and with reward virtuous financial more can business, service which a ability us strong growth. my do our drives oriented customers, then relationship engaged in who invest in exemplary colleagues future turn to provide to performance

dividends. higher growth shareholders in ultimately which increased and valuations value, benefit of with book All

all dividend, Board Speaking shareholders which encouragement of thank increase healthy a recently Blue like to approved ones our Rob? pleased were well. the support which, former in and and XX% increase their our before. our shareholders year’s Hills that many of for other We welcome in was long-term years and last we on top as would XX%

Rob Cozzone

earnings Blue Thank the begin front. And you, additional the quarter, morning. I Chris. who welcoming competencies before echo to on for acquisition definitely comments organization. Chris’ discuss bring to Good I about will Hills’ added some I provide colleagues our color

in the preparation mentioned, legal some is but $X.X Hills occurred loans, added in remaining well deposits. in we all April securities and billion expected. $XXX $X.X went Xst lifting the systems for including on is as underway. Upon still that billion in billion assets, Chris of As $X.X and Blue closing conversion, There closing, heavy million

and sale will capital in also took our will balance balance a some base, sheet you million in total sheet margin a earnings of mitigating the including $XXX Blue while of This profile, million funding The notice, $XXX loans. difference negative As modest by residential and the the reported that than is securities $X.X is deleveraging result the planned close, less the before acquired on compression. shortly XX/XX/XX. place overall billion Hills but profitability, approximately enhance impact on have deleveraging will acquired

we as second remainder some deleveraging, may loan quarter, include of participations additional some and anticipate well the the further sales. as During which loan runoff, security planned

transaction, significant rates originally decline the final loan announcement the the market be anticipated, income associated marks interest less much than marks Hills will will Blue value accretion deposit fair term be whereas intended and September With -- much of higher. since in

book Blue the per slightly lower be At slightly intangible earnings to to the more associated per anticipated. than to deposit originally gone to the day, expected Hills accretive share of and will core the share addition, National value well. we transaction the Hills which and In Bank, accretive tangible than closed very be end the keep closing, originally eye nothing is amortization continue a of November. quite material. Blue last midst integration of close integration our but Milford preparation planned, In on That has for less

a rates Milford are to planned The branch our realized March are with helping acquisition Xst. gradual savings into National better retention acclimated closing Street is cost of quickly and anticipated, some Main our colleagues expansion new to our continuity than of the Our the remainder customer provide was on getting Worcester. Milford

begin increases me Net GAAP Let from first handing results share over XX% $XX.X commentary on reflect quarterly in earnings to results. of of and it and some per $X.XX income Mark. provide of prior XX%, XXXX the of respectively, to now quarter the diluted the quarter’s before million

period impact, value versus $XX.X tangible ratios earnings and Strong share. last to and acquisition and growth $X.XX, XX% to merger expenses the improved same profitability and respectively. in Excluding and earnings book tax drive per results income share continue increased net year million related plus per the

within with $X.XX other the estate growth basis flat growth lending Our challenging. in quarter was was decline structure quarter primarily Commercial home was per strong buoyed during value similar continued C&I $XX.XX. almost real to and was real in as from production. pricing be assets boost Loan increased quarter driven annualized during ongoing the the remained category on by asset-based residential prior book flat comprehensive the $X.XX as equity. X% average banking operating competitive a offset tangible the another to by quarter share to consumer X.X% and in and growth on corporate by also was first and income, a the Total on other return hand, an estate

first is As deposit case was due to growth the quarter seasonality, usually tempered.

in well driven customer some more market transfers million tax to exchange free also as However, yielding a $XX as accounts. was reduction XXXX demand impacting higher volatile in money the growth deposits category,

a by the offset demand result, market deposits increase to XX for with X.X% down a the As deposits quarter, was previous almost points were for cost line basis points. X basis guidance, In in X% of money the quarter balances. up

for company’s quarter, of a March anticipation company healthy credit also anticipated rate the increase deposit the X net interest drove to XXXX loan quarter and of position deployment in April Hills and prove merger. peaked repaid costs, during $XX margin basis cycle. as of bringing future be the loan credit quarter. lower late increase flattening essentially quarter Management $XXX of has of X.XX%, majority a the profile for the $XXX XX, million of points Blue protecting yield for halt, have increases million another expectations total As in $XX to come of funding $XXX comprised the an December of the proactively $XX liquidity curve from to with borrowing secured Despite downward the million against the responded transactions in various the quarter. hedge betas line the in movements, of line is a have the three-year up rates rate rate The full the hedges against prior first X particular, second deposit increased to million million the XXXX. betas, commitment. a may continued the quarter million reflected In The to to facility

-- advantage debt in will $XX now rate off will the a company market of conduction took it in over of and subordinated treatment its Mark. Tier subordinated this interest million fixed pay issued regulatory later capital million that addition, I conditions year, of hand lose X conjunction strong at of X.XX%. to of In planned $XX with debt the

Mark Ruggiero

you, Thank Rob.

quarter the up continue income -- the that excluding look of is year mentioned quarter, is As Chris increase the typical equity X.X% the over X.X%. in million as previous investment with of And first to reflect first open in Investment even million to the $XXX,XXX great compared Management a comments, dialog under prior when from decline we strong CFO, or but quarter securities of on seasonal the approximately I continue the in the business place and $X the Boston, gain $X the to assets when XXXX, importance decrease The $X.X fourth now XXXX approximately billion rounding on. the Vineyard. healthy total open of community as through and generate continues to total mark, to is enhanced the Group administration his Cod presence Cape the company Martha’s its non-interest

the generate first with and expected excluding reminder or from by costs and in over the was quarter expected XXXX of in workout for and M&A in remaining loan to the of quarter. $XX second large payroll taxes, consulting approximate problem of categories. pending expenses primarily were the $X million increases In to that down second Gap] quarter quarter. QX. has the relationship when will very expense addition, reductions across expense, the the of income the M&A with Blue most costs. the XXXX in costs the Hills successful non-anticipated Hills workout end acquisition removal Non-interest increased a should the continued to insurance After-tax first a of The related prior driven be medical quarter and non-interest merger snow realized restructuring the to associated commercial are quarter quarter, compared be costs in end savings expense of was cost and contained the loan Blue merger XXXX, well non-interest loans, incurred merger at total [Audio significant million charges prior expense X.X% including despite

the the million expected the significant Net the commercial of dropped was remained restructure in loan provision CECL strong. only loans The non-performing needed on aforementioned a preparation. basis of decrease or quarter. in also now Asset X% $X quarter. large for an at current an level company’s annualized the of organic loans primarily quality point quarter for quarter drove during loss X metrics on the for charge-offs remained and delinquency nearly relationship And The levels growth. update for basis credit

be attention X, and recovery to level assumptions Although, for particular, its is from to standard regulatory the time data the the basis. as I certainly guidance the color of an impact getting parts, We I around implementation. some is the initial a financial life-of-loan loan officials, Hills over track update moving project in in for the categories. In already the given key the developing balance an plan you of an company its now will estimate. many has setters, a guidance effective given Rob company its standard government year. successfully and the has the estimated validated anticipate here and is of for this on lot impact historical needed little an and January provide on XXXX process more the SEC agencies, sheet expectations translate acquisition, providing well. will and Blue for loss run insights CECL will and loss model on forecasts add later P&L needed scenarios organic But with growth a

pace with are acquired acquired annualized attrition C&I of in portfolio expected. some Hills with the to an Blue will be better next to -- grow We portfolio a on is The portfolio the discuss basis Blue particular range with Legacy Hills mid within legacy still on single-digit in a mid annualized on CD residential. to the single-digit a natural at in combined runoffs and in categories these expected, expected loan near-term grow expected basis. quarter position an deposits basis

all As also will income results. forward additional Almost mid-to-high a the the in expect anticipate second low-to-mid Hills increase a combined noted, rate the pieces lot legacy total at some going impact margin low-to-mid basis to moving the a for grow there net with the for Blue in acquisition. factoring in on that increased year and as no compared interest load increase in should to a expense expense are to the increases. be and of we the rate non-interest further to to settles, year single-digit QX delevering, X.X% an categories are expected When with prior experience we to dust full of non-interest and at continue quarter rate single-digit

around for bank. plus our As although for we saying, be inevitable. my the expected concludes endeavors deterioration to noted the summary, XX%. lastly, is to have comments. been as In continue no progress tax concerns Chris? is in credit a rate near-term, $XX we are the billion That look new forward eventual likely And year

Chris Oddleifson

you, Thank the questions. up open line for Mark. you, right. Thank let’s Andrea, All Rob. some

Operator

the & [Operator of Fitzgibbon Mark Instructions] Partners. O’Neill will Please first question And Sandler from ahead. go come

Mark Fitzgibbon

to Hey, say and congrats and Mark. first guys. morning me let Good Rob

Rob Cozzone

Thank you, Mark.

Mark Ruggiero

Mark. you, Thank

Mark Fitzgibbon

if something I out to I aggressive guys and deposits. anecdotally will respect sort could asking am new deposit of just growth of, just a the that be pricing. you by gotten Hills, forecasting strategies market are deposit this particularly some banks I low-to-mid of get wonder with new I you We Blue and locations or with regional year single-digit have start in sort else? function promotions some curious about your of bigger I the hear competitive think, -- deposit environment the

Rob Cozzone

Mark, competition, Yes, in as have actually increased. for expectations terms increases future subsided it’s of the partially rate

saw with out have of competitors aggressively pulled some we Some rates back. and market rates CD the there that money

offer as entrants, have market product. go-to-market into for checking a of obviously some We has some locations moving physical less We of and have cash view a couple with strategy there, the new heavy we which chase seen savings overall. a upfront been combined competitive

rate of concerning driven competition. the other is most competition as that So

with from just close are an of eye So keeping now impact that’s not on chase couple Right a locations we us. on having a that.

However, expect saw to the we price market. we money growth that rate higher do that in

continue Although into continue expect transition growth some We don’t expect up. go of as market our a that grow some funds not to result we promotional and deposit we of accelerated cost higher likely growth will core promotional offers withdraw. we at have we pace will the -- anticipate using Blue some their see funds cost just of and Hills to to were that CD deposits had to amongst higher money we which categories. and They acquisition deposits, because they attrition offers rate

So those attrite, franchises. the our that rate will overall combine balances when two growth we reduce actually you anticipate will so

Mark Fitzgibbon

Okay.

Mark Ruggiero

Right. has a I’d especially perspective. say competitive environment the a rate bit up eased little from

Mark Fitzgibbon

And Okay. share then that your and pipeline maybe could looks like? rate average you size of us the with on what commercial the

Mark Ruggiero

Sure, Mark.

the at with end approximately first experience the certainly last what the consistent been pipeline was quarters, commitments of mid X%s has booked new terms $XXX in and the it’s or rates rate in on For in pretty approved quarter which couple the of so. million healthy are of our

Mark Fitzgibbon

Okay. you the too how a And small then, future larger, are acquisitions in today? considered small sort would beginning would which gets as deal and of lastly, geography consider think to of the be Bank expanding in about you

Chris Oddleifson

-- of list here. that history. of are situational. sort is Mark, the the mean we what Part but The have really and have size, our very you ideal you ideal -- Chris market we if familiar doesn’t want. give ideally, opportunistic are and you with our I calculus

to mean focus had that there think right? highly that say, if leverage don’t we want it if markets, are we mean at that, to there that if priorities I in take million it’s thought we too in, adjacent a a would weren’t that’s so things we $XXX on situational. other be within market other I priorities, let’s something if comes look we and So other example. were I for more be or along small, our it’s If small. would

Ocean. terms like of really the -- mean, size, Southeast arc we Worcester and said, the historically and of do what market, have Northeast East sort In the market of I that we Atlantic just North

we -- there Providence that’s and were We Southern little more bit Island a probably didn’t consider be So would we that again opportunities if attractive it, are our like that. Should opportunities some going Hampshire, have sort New going within can Rhode focus through band. area. sort of through that outside they of

We a in guess, be that billion lot look I take will bank East that So, we we to of $XX concentration at would and focusing and will in comes a the thoughtful are think a -- we focused build like we opportunities. of Ideally, of billion terms geographical positives managing $XX take with a to position Worcester. bank.

Mark Fitzgibbon

Thank you.

Chris Oddleifson

Thanks, Mark.

Operator

Laurie from go Please Our Compass next comes Hunsicker Point. question of ahead.

Laurie Hunsicker

morning. Good Thanks. Hi.

Chris Oddleifson

Hi, Laurie.

Laurie Hunsicker

on how the the interest Just us accretion of the was much $XX.XX? income much can of how that wondered line, net you income, margin, tell

Mark Ruggiero

Sure.

was this For It was about lower. relatively quarter, $XXX,XXX. it only

Laurie Hunsicker

Wow! Okay.

So...

Mark Ruggiero

less total was accounting not purchase the and become not That’s yield. Total purchase the accretable accounting $XXX,XXX. total -- that’s about

Laurie Hunsicker

That was $XXX,XXX.

Okay.

last up from a So little bit quarter.

Okay.

from excluding core accretable your So am X.XX%? yield, to if I margin you looking at X.XX% the went

Mark Ruggiero

Yeah. right. all sound That

Laurie Hunsicker

Okay.

Okay. and your And hear heard make on did sheet, balance X.XX%-ish runoff right, then assuming obviously, just wanted in sure I continued would margin that then I correctly? range, to deleveraging to we a be I Hills you recent Blue expect the the

Mark Ruggiero

factor you is planned delevering anticipate that occurred underway, When delevering some is mid done, are the already that still that that all when strategies the margin. X.XX% and said Sure. and we where Yeah. has in

Laurie Hunsicker

going dollar is as Blue that Hills, points point Okay. going be forward around have a basis with like accretion are we on to looking going now you much income to And number then, higher number so do is look right accretion a basis on obviously, X there? margin margin or

Mark Ruggiero

originally to Hills. a accretion anticipated we lot Actually with Laurie was going income less than be Blue

Laurie Hunsicker

Sure.

Mark Ruggiero

So close. down points with between and XX treasury that is announcement five-year basis

anticipated. biggest finalized minimum. So on The deposits. term we is mark expect the be now interest The what mark not very mark liquidity close mark, credit fairly and to but loan mark yet, be we will to the we still loan expect,

pretty year, of so that range will to be in within through as offset the quickly. we away first of tend the maturities, to mark in million to expect margin CDs $X two-year and kind expense the that that goes an obviously the accrete be So interest that but annually quickly

Laurie Hunsicker

Okay. right. All

thinking income basis I back impact, of X go So accretion from just points basis for or added mean, you sort points X maybe together so… we about to if

Mark Ruggiero

pretty Yeah. close. That’s probably Yeah.

Laurie Hunsicker

Okay.

And you just closed the it. on balance just Great. then Okay. Thanks. sheet, obviously,

first your don’t market point So claim you on to move.

intangibles do March Blue what you a you closed had March were million. have as would you Your intangibles number? Hills $XXX Do of XXst have be XXst,

Mark Ruggiero

marks. approximately to Well, in we it $XXX in additional finalized. to be expect accounting to $XX we are are million goodwill still numbers another, But finalizing round million the call and but it, $XX intangibles, those yet be purchase million

Laurie Hunsicker

it. Got

Okay.

looks another charges, all putting like plus that shy forma million So pro $XX together, you have of $XX, it got tangible $XX.XXX or sitting one-time so just of is book something?

Chris Oddleifson

Yeah.

think... I

Mark Ruggiero

Yeah.

Chris Oddleifson

of that, because bit are …little we... you far, north not but

Laurie Hunsicker

Okay.

Chris Oddleifson

… ended the first so. quarter or at $XX.XX

Laurie Hunsicker

$XX.XX, right.

Chris Oddleifson

A bit yeah. that, lift little on top of a of

Laurie Hunsicker

Okay.

to substantially it’s So accretive expected. comments earlier your more than

Chris Oddleifson

Exactly.

Laurie Hunsicker

Okay.

then… And Okay.

Mark Ruggiero

be to All yet finalized, Laurie.

Laurie Hunsicker

sure, on as yeah, then bit what balance more delever. sheet quantify we quantify absolutely. just help further little you us to look are restructuring just mean, I runoff like the can And a models you our as trying no, could

loans the to total be securities, how on about $X that? should we Just put thinking were if just and you

Mark Ruggiero

you of, can Yes. Laurie. and tune Primarily occur will within the again, to think securities numbers round of

$XXX we to little We a million number anticipate a loan giving moment. participate credits. in And amount. deleverage. handful uncomfortable additional that planned. I at legacy securities the of any sales portfolio to Blue to we the commercial a then am $XXX on look don’t But a out portfolio, have additional will So million you amortize fair the Hills

Laurie Hunsicker

Okay.

amortization thinking should there? that lower. be a mentioned Do the you will Okay. that? about be we last How question, then expense you have Great. number And

Rob Cozzone

the... number, for which For

Laurie Hunsicker

we The yeah, about amortization should the line, expense, that and expense be number? how thinking non-interest

Rob Cozzone

Sure.

the preliminary at on CDI coming X%. about is in again, So, mark the

range. a year’s typically digit XX% our you if the around So be the quick the using math, million we the year. of CDIs -- about methodology, to amortization equates first mean, expected do amortize the $XX it’s I which sum to in

Laurie Hunsicker

Great.

now M&A wanted go historically, closed, you said have earlier And is and booking now? back quantified assume you Okay. deals to billion right it like you would certainly what $XX two safe question Chris, you $XX that’s I be on Super. potentially to you and obviously, Mark’s consistent billion of just have to out are to to

Chris Oddleifson

I you coming How predictable, not always and mean, mirror, every we always in sort the it’s are this aware of and sort you a half of a have year look the and works. and banks look what’s little down when the or funny sold, what management fairly are the moods really front at bought it’s if and on a are teams average. But rearview sort take -- business windshield -- take one we of are of no you going be. road, very idea Boards various and to

all is, And continue to the continue the secular say, I sell. Boards consolidation would anticipate their of and trend like the banking So hope say raise can and table I would when locally. we to nationally will I we be at hand

Laurie Hunsicker

Thank so Mark and Great. Okay. you much and Rob congratulations. Thanks.

Rob Cozzone

Thank you, Laurie.

Mark Ruggiero

Thanks.

Operator

ahead. question Our next go Jaffray. comes from Matthew Piper Please Breese of

Matthew Breese

morning, everybody. Good

Chris Oddleifson

Good morning, Matt.

Matthew Breese

the rate dynamic to using? hedges. are then, that start, And you hedges now the are you the to use you using, million are you that instruments what really wanted right. bit a about outlook, instruments focus to a little on Could you were of place. just what interest are we if NIM noted in the Maybe had I and $XXX in just talk

So do if post NIM would and cuts XQ cut, protection what you? to if or fed the they do how don’t afford the much hedges

Mark Ruggiero

Sure.

So nature looking pool an are are that there have of the where hedge entire variable on pool hedges, rate -- in loan interest we Matt, nature. hedges are to loan in the done of we the terms effective

last significantly the fixed little of over them can where in And give whereas protection the hedges were environments is. them these as recently put on, where some few where more they time done us those both as well hedges, they we floor imagine, quarters hedge closer against received bit money of to of of in the were the callers, at the actually combination a market you So obviously a as the dynamics downside. are given the

we those essentially go well. rates rate the to the on the process, in able market near-term, down nature benefit So on and even have will be rates the market are hedges because if environment come in upward the even will interest if of do earlier up as here that those we the of where from still get and the we callers hedges was

for a short-term callers the flexibility accommodate really to up lot potential or So some of added us down. movements either

Matthew Breese

what’s Okay. hedges? does and And with the behavior end of the like cut what where NIM of scenario by hedges if a kind in XQ, the go NIM that the just like of let’s look through year place the without -- by the would what XQ, fed the

Rob Cozzone

negative. be Well, I’d still say, would it

are still We asset sensitive.

of the loan XX% unadjusted I XX% As for to think LIBOR is to we about hedges. said portfolio have tied our past the in

So if you of it has tied downside. add $XXX a hedge protected that’s $X are so the to been with that call billion that LIBOR, of million loans to --

the side remainder the still down. we have LIBOR. costs rates side, as go because deposit compression and adjust and we that on only our in some will effect And to LIBOR margin them on movements can take the so the which time offset low, some we with rate tied deposit will to is with obviously, So adjustments minimal deposit are

a negative downward margin So to lower our certainly. Matt, have rate continue is for we the on layer a if it impact rates. But to tomorrow protection plan, would shift in get

Matthew Breese

Sure.

Okay.

sums as likely for just in guess, I place in to I in of the see XX deals charge-offs, maybe to years, Is come pretty do. actually a plus have years, eight historical you then we then more years go to not good it or on about regards And you possibility and reserve Okay. reserve It’s totality. higher? current in is to imagine CECL. number touching its think I’d CECL than the there that of are maybe a just CECL, nine

Chris Oddleifson

soon certainly and It’s XX the on we question access our a last losses to going much point tell it healthy about a historical balance lot loan longer to the is period reserve the actually in data into But years and books we back of books. that implement the into a move we have too a specifically. a at build have how But into sits or good the CECL, we to interesting as period it’s towards model. historical your look and factor this to today. and point, look we it very feel terms of very We on loss back be that can as level model right of now nine of data recovery dependent have

will the the of and loss much how number areas impact rate. will framework then, economic the the macroeconomic over wildcards obviously, forecasting loss really what So of be drive and future that that assumptions foreseeable for be historical will factors and level CECL will

be down about to of in don’t in a number as a pan yet, and your may in intended CECL seem not big out the we model have originally but nailed the that was thought as number instinct summary, So, industry.

Matthew Breese

a ever commentary their and Okay. The as reserves reducing strengthen odd. closer it ironic rule very fairly isn’t some to downturn about sizable we probably are have it’s to was we been result intended a are than of the a that institutions talking industry, that

Rob Cozzone

of reserves data But it move be right? from to to should loss the to able both in that really is be like nuance relieving an the incurred Intuitively loss, sound driven is models. expected you that an doesn’t

and end I we what have we progress finite of some like out, in closer my the year. the have plan certainly in to more with mentioned built we get So comments, as good to we numbers are

Matthew Breese

to a Okay. level dependent. there, to specifics, going we data that’s be more And follow-up but just maybe just get into don’t a mentioned high want from you

more roughly model, that that breakdown data it today, dependent you in versus make were quantitative if volatile qualitative years? to, the out So that more and is is a allowance percentage where for going provision going the to and what is to does drive the that

Rob Cozzone

of and you that over look very at certainly, economic aspect factors about little charge-offs And of things very drive book historical quantitative as analysis in looks qualitative model, loss have years. then that number drive mentioned, if the and factors qualitative think that that your you really loss have like we a had where history, net incurred at XX like our the charge-offs, we the bifurcated you it. history Well, trends the the Yeah. management last

default allowance lost you is the factors. historical bit of of the more gets data qualitative a model, There’s using So, against is most and attributable specific and then assumptions. of drive certainly buildout those to given the forecast our economic analysis you the variables. of to as model blended. of of default get And need come to data the But model, regression really loss but the multiplied it’s two a that allowance probability imagine, with portion to healthy our CECL points that by up can or kind bifurcation other

quantitative kind grey are frame if the translation gets two, more that we the how and bit in helps of thinking model, CECL the adding of of it. the So of and a qualitative,

Matthew Breese

thinking in that way you more the applied result about was model curious was provision? going I is too. if think dependent I just to That’s if data it more volatile once Yeah. a

Chris Oddleifson

Certainly Yeah. the...

Matthew Breese

therefore And reserve.

Chris Oddleifson

that generated may in foreseeable factors spike assumptions the the loss to the really that reserves Yeah. a in be leading model is of is environment make economic pro-cyclical into get where will future going worse. over scenario and the The the what downturn downturn then cycle, at it economic anticipation in concern losses, do factors point the that of a

too lead more certainly as still as all to major back and assumptions bit would cycles. concerns in soon estimates model. of it’s we that it’s again, come out it to think, a move layered through those I to get and But how kind going it are tell So to bit the building you economic volatility

Matthew Breese

Thank Understood. help. Well, appreciate the I you.

Chris Oddleifson

Thank Yeah. you.

Rob Cozzone

Matt. Thanks,

Operator

go from [Operator Instructions] question Collyn And next our of KBW. ahead. comes Gilbert Please

Collyn Gilbert

everyone. Thanks. Good morning,

Chris Oddleifson

Good morning, Collyn.

Rob Cozzone

Hi.

Collyn Gilbert

bit, into so a guys little digging just could you we another If by growth. of quarter loan C&I book great had the start

I kind part color little are outlook a a getting pipeline to subsided also and segments there, getting know CRE you talk of on of had that your is, of given from question what’s just each seeing side, a those Mark pipeline little of what sort the this the had within blended you could kind looking? there, of how bit is there bit are maybe two about the just growth you more pricing as a and bit of basis. you yield But that the If some then on driving

Mark Ruggiero

our some Rob noted will drivers of based in lending few we of growth C&I been color. then I add and getting really Sure. in I our more a is by key those think, corporate have and asset Chris quarters. well. the the the growth But, lot add the in might as the over comments, the bank really and last as And portfolio initiative buoyed want to

of in it’s And have key made benefit portfolios couple so in of the we hires of a terms starting last growth really in year and both production. and those to

Worcester market. our Worcester lending terms office we commercial that’s to very here the going Worcester In the into addition and continue talked kind off in think complementing opening acquisition about have and we pay that, the to penetrate to of market, recently that movement well of Milford

of growth. And portfolios we the the portion certainly, as on a to the that portfolios, a So comes deals perspective those see and larger growth in. real bit continues those we in little to good volatility, it what from two attributing the one or where of sometimes just result in in a some mentioned quarter-over-quarter more challenge. be a But, really -- seeing estate are most you are do commercial deals can front really

in metrics strategy for that kind look are competition our very And We you without a credit, I asset stay trade-off pricing slow quality we structuring. selective about us. in to want stay you our at think of in. in if there sacrificing that well. strong participate growth the see been being the continue good mean, of to terms kind I to deals as very that’s The continues term we disciplined of our and

remained So pricing discipline rate portfolio, looking not feel because in and really just comfortable of very that the that that we of at we our are that, chasing with. deals strong because

Collyn Gilbert

Mark, in there of credits as of and that just at due are are overall variances you just a book? seeing -- point look of get some you reset among lumpiness that book, sense CRE big those or terms that On Okay. you maturation to pricing of the schedule see kind is of to complexion and the any big the within mature the of like pricing what resets, any do trying looks

Chris Oddleifson

see Collyn terms create much in we Yeah. of the have horizon abnormal volatility anticipate that large Nothing in of pricing specific yields. deals that will that or in loan we the terms

Collyn Gilbert

Okay.

of some to they Okay. their do back happen that have ahead That’s given the helpful. you the guys Blue Hills, And what movement just for to what March quarter? month or the was of then it the was either of shifting did margin for maybe close,

Mark Ruggiero

quarter, they were the For X.XX%.

Collyn Gilbert

Okay.

Mark Ruggiero

we… that reporting internal their Given

Collyn Gilbert

Yeah.

Mark Ruggiero

That have obviously access to, non-public number. that we was a

Chris Oddleifson

they quarter. had delevering we Collyn before end the all of And closed the described at on happened of the quarter the actual Friday loans The end.

well, in in was during of of actually security happened X.XX% think So then sales March. that them the margin and as that March included not all benefit most happened I

Collyn Gilbert

Okay.

you you anticipating that sensitive promotional Blue as rate commented promotional are pricing. most dollar keep a maybe Hills’ -- their had indicated deposits what And characterize rate the would not -- same that some that Okay. are amount Do you you roughly you then going deposits all and of that just deposits? to of you -- of will have slug

Chris Oddleifson

the it’s The been years some they CD them offerings between had $XXX went rates promotional extended. now retired, have to as runoff kind they time of a component a medium-term over of X.XX% is and so. of that on. different or haven’t promotional slug largest take little less as CDs, of But couple kind million. next Well, those that money XX hard and They markets at that is had within time, think the will over priced than over a months I and

Collyn Gilbert

Okay.

and is where the Okay. of sort color maybe we how just of more the there. we Fed at for And bit be was move on we whatever asking I of broadly seeing what the little question think That’s the you great you there structured But about sense the detail goal are compression trajectory of minimize Is maturation broadly? see your know NIM bias? just relative trying then the helpful. upward XXXX, just cut the kind -- side if on of about why via and flat, you NIM to gave a rates if Matt’s I we we timeframe. the this environment the hedges hold look trending book, might an the into sort there more the NIM that mean, is it stay is as that’s I we meaningfully downward and CRE does to a in a kind assume get or to of But if of like not bias? and just goal

Rob Cozzone

Yeah.

excluding without relief organic go at to Hills, up costs an much to saw the But side. certainly basis what on Collyn asset to up Blue this So and pace than on expected have go we would quarter. slower continue we deposit a

increase basis seen cost of point highest any is quarter. are my we points nothing not the to we move basis away, going earlier expect and at comments rate now deposit quarterly backing increase in maybe and we regarding the on have a going an So points X deposits that That feds forward, saw for increase to that. after basis X next sentiment and was quarters this further organic the then that of costs to the wouldn’t see competition X basis couple

So, the compression in organic with that, we see would to flat slight margin.

to to mid-to-high that post even the Mark margin However, delevering quarter layering Hills sheet, as X.XX% the on the X.XX%. Blue versus we balance said, expect at the bring current

deposits also decline runoff at should we that. that think after QX be those so margin to that X.XX% mid-to-high could maintain deposit start and the to as on We higher able combined basis costs cost a

Collyn Gilbert

Okay.

course, prioritize of as willingness deals? kind East the of you helpful. world, ideal Okay. then you color sheet but us doing the That’s on prioritize preference, versus M&A ideal your color as next staying whatever fixer you of sort model it’s growing is would of to case world, slug $XX you Chris. and for appetite in in of the in prioritize the you like might billion question an sellers. last you the a bank thrift Within Thank recognizing very geographic -- I you kind how us expansion, be. billion some to do more type of the sort my geographic And kind upper right, had strategy acquisition business another taking of giving how mean like thrift But gave indicated for of have of that for or balance $XX you of would structure,

Chris Oddleifson

bank. high a a think, combine, I create high-performing high-performing Collyn, bank bank performing and

and And think I think an I I very we upper, performing sheet, be are of sort the of as we a wouldn’t dilution sort bank of fixer mean, we they worry we our think, or what currency. high if to about appreciated to were the would have acquisition of commercial our too of with dilute balance of by become, much. have sort much you guardians

difficult I position in put acquisitions. in terms of think a would then us future that

to be behave down that balance of of of think not thrift and would more we looks the fixer side. kind think how a that’s a any sheet highly acquisition that and on But be that had currency imagine situational. this bank So about about prefer upper like our the that’s maintaining we or metric currency time would it in like is bank sort in than well you to terms an of, I one that us our way metrics the have easier we so probably think would

Collyn Gilbert

Okay.

helpful. very will guys. I Thanks it there. That’s leave Okay.

Chris Oddleifson

Great.

Rob Cozzone

Thanks, Collyn.

Chris Oddleifson

Thanks. Yeah.

Operator

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

Chris Oddleifson

look and us everybody in you Thank you, joining Andrea. And to thank again three you Bye. today time. months with for talking we forward

Operator

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

disconnect. now may You

Independent Bank (INDB) 22 Apr 192019 Q1 Earnings call transcript