INDB - Earnings call transcript Q2 2019

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Operator

Good morning and welcome to the Independent Bank Corp.

Second Quarter 2019 Earnings Conference Call. Today all participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions [Operator Instructions].

Before proceeding, let me mention that this call may contain forward-looking statements with respect to the financial condition, results of operations and business of Independent Bank Corp. different. be may results Actual Factors that identified and differ these results earnings cause our annual actual in XX-K release. to report press include may on our Form

forward-looking against Independent cautions forward-looking events statements, to to unduly or statements response any and in information, relying update Bank publicly disclaims you upon new Corp. whether otherwise. intent any any future

be Bank Please considered GAAP measures measures as financial discuss certain note non-GAAP financial should and that during for results. non-GAAP review replacements this Corp.’s Independent be call, should with These we not will also together performance. we read

section Please additional our contains refer to information measures. Please regarding the most today’s the Investor our to release, measures to Relations of a our is which non-GAAP earnings directly non-GAAP press being that recorded. of copy note comparable and obtain measures event these of reconciliations website GAAP

like would proceed. CEO. the time, now over this and to At President Chris Please to turn Oddleifson, I conference

Chris Oddleifson

and you, us everyone, Thank and for am Officer. Operating our Chief Cozzone, Mark good I today Officer Ruggiero, joining Chief today. and by our Financial Rob morning, thank you accompanied

our up earnings and year’s performance $XX.X operation result. or record to quarterly share income with M&A quarter related We continued charges, yet excluding net per $X.XX million above rose momentum prior significantly another financial prior

up On year-to-date is basis operating prior XX% year. the over EPS

above and quarter year income, XX% just efficiency fundamentals in the remain operating X% and growth continued now assets value alone its fee returns core ago. a level trends, per and it’s under tangible solid improved book core Our benign grew generation, strong with and most organic last a about deposit share management, credit notably loan healthy

as Blue the we’re very suffice $XX billion quarter which in was of integration milestone to progress to in say a far. happy while thus take of things fold bring have cover the over categories key financial but Hills a some April course Mark you Rob assets. how with impact us it bolted and gone points The will Xst, bank second into will and through of details to the the with major

Hills have and Blue colleagues to are talented The joined in our our settled overall already nicely who success. contributing ranks

new three integration simulation. have very Blue that our very of providing during noteworthy Hills, continuity been a and helpful over engines came achieving very Hills members from and well. Blue Our on A we focused when running were the who successful a board smoother organic growth is were quarter

quarter, second management new we the volume. During had investment record

brand commercial stand origination, account our assets this a and employers business. recognition, and to loan scanning management our satisfaction is record as in having tad origination, Massachusetts place below well We highest serve Our and all new loan now record a among core residential had tells building under as work the just customer reputation $X.XX consumer to tough our continues our me record billion. All sales.

Our New on in footprint throughout activity Greater de with southward northern Rockland These encompass Cod a continues fashion attractive and now economic Boston. of strongest real Worcester to islands and reached to westward strength expansion England to Cape most by brand. We the markets Boston demographics. Trust in us contiguous suburbs the acquisitions, the the the along of novo opportunistic capitalize opportunity to providing both extend and

technology. critical remain maintain possessing balance markets. In we nimble investing areas all need tracker alone and continue preferred Rather, continue we size But, must as institutions bank scale company to to the performing sufficient while to relationships so, a goal. and some I've our is seek local in said significant intimate the do and size to as not ultimate to before, financial customers our in order our are especially becoming high biggest to sustain and

forward deep another our We Hills to move integration Blue talent allows the key considerable resources and initiatives. efforts to us devote pool

is them significant make strides the digital continue we among a Foremost in space. to

less some technology quite XX% online last in implementation allows the to customer our open year. or five online minutes of open accounts Our increased that period successful. account over The proven is of opening positive accounts

such Watch customer that access routine repetitive our Apple such continue to video address to from We've things cybersecurity we services enhance and tellers, up a also with our growing card for introduced We've risk. or to swap as strengthen capabilities experience. as robotics protect request against tasks, new change and the free use colleagues processing begun to handling goal

to forming becoming with list department and and a included the dashboard metrics, refining of larger keep efforts board the risk membership key and broaden in much prioritizing thresholds, internal and also intend improve of tandem the and enterprise to revising competitive customer to strengthening committee, a digital we remain independent that board experience. space expanding We've scope This are other appetite risk our management institution. areas effective intelligent, stakes by enhanced The pace, party fashion our reporting unrelenting reviews. committees, third cost the risk program in obtaining

state but real with economic May remain the the at weekend, global Massachusetts These of the of are the Fed they X.X% cut to All favorable annual signal appearing is we're say, and the working of at the on still X% contributes about unless of conditions economies Needles we're rates. are local and optimistic just on. despite growth this unemployment and clouds QX. to the future economy only about end an sitting trade of of basis things not few a that uncertainty, the GDP disputes, the end to weak here

ahead each relationship a important sets it all gain and looking business. are is same superior to are trust Rockland So constant the foundation and a work recognizes matters now hard colleagues that expression our bigger to known expression and customers call-to-action to where performance. preserves my breathing time improvement living, The at all path Trust of and well our bank, for is a on that need when future add culture we we us believe at as creating the sustainable needed

our to which and third deliver action and and the expectations, put a continual simply parties. on seemingly competitive an a continue basis. is led our service heart as advantages. a to dedication have this disciplined taken of reputable on have recognition Rockland It colleagues has to exceed unwavering idea remained in but My We exhibit focus is be complex to and to actions passion the

continue in to growth track We and of we sustain will take nothing our confident external ability that granted uncertainly a persist feel to performance. record competitive and challenge for expect and our

for me it That's Rob.

Rob Cozzone

Good morning. provide it before Chris. color additional Blue Hills on turn some you, Thank to Mark. I the front I'll over

I of we Rockland of on the the of say Following Hills acquisition converted over June and of systems efforts all can't teams enough and Blue on the Xth. Xst, both April conversion facilities combined all the closing weekend sides. the

XX,XXX transitioning and to Despite with learning the relationships. colleagues serve stress with care, customers strong continue households, new Rockland new all already our associated further their system approximately solidifying

and branches combination, dates we Nantucket Roxbury, As a closed island brand of mid-XXXXs. and on Norwood Westwood three overlapping to we in decided back maintain to the the that Nantucket, West the part of uniquely, Bank brand the

deposits, $X.X our Even the million acquisitions successful on of billion $XXX I $XXX ceased with to Blue of Hills securities we X.X talented added and million them by can't our acquisition, thank the have XX under a be enough. a of loans, working At billion belt, we and of never borrowings. colleagues integrations I amazed

$XX sale. more delevering we for be reclassified the which of been closing third and help have of sold additional been to to an anticipated afterwards. $XX million quarter, loans to sheet performed balance some discussed, had residential in have closing, the Since have previously with securities million identified As sold loans prior

don't In line we've run addition, for allow the accelerated well portfolio up with ours. of for segments Hills loan that off Blue

do certain security portfolios we sales, further not to to continue While loan down. will run loan anticipate or we allow

the out the leverage side, gate the operation offices and began commercial them Hills quarter. second fruitful producing has with on-boarded already On of Blue to our the Hills' closings business record proven mortgage loan Blue desire during

financial we the transaction. exceeded for our of north initial Tangible book Notably, was accretion X.X%. value have expectations

margin We much income quarter expectations have anticipated. well was partially XXX. extracted ahead the than than accounting, was net interest cost of accelerated for dilution saves more of to banking in less Mortgage due second purchase and XX% as

We know often the we Mark? to that colleagues we confident customers, to more Blue are Hills be assimilate Bank work that right footprint. done are former there is and fully but

Mark Ruggiero

and will with of prior XXXX, quarter now acquisition acquisition. detail. the diluted GAAP cover income quarter of and second the in associated decreases of $XX.X quarter’s in Hills $XX.X I more of results pretax, XX% Rob. primarily second million from $X.XX reflect driven expenses net and the you, earnings merger respectively Blue Thank the by the million per share XX% results,

QX. increases their $X.XX of compared Excluding diluted X% respectively, net million the and Company when to respectively merger tax XX% were and records for new and and related expenses income generating and $XX.X and these EPS impact, acquisition

sustained resulted performance operating assets. earnings strong This on in a return X.XX% average

$X.XX share direct $X.XX equity earnings of quarter. in at return increased the addition, XX.X% quarter, and the operating other value common on book strong tangible remarkable to for tangible remained In acquisition on lift operating per a an And comprehensive attributable strong income. result basis average impact a a the

Organic actions essentially the loan activity inclusive flat across categories. was all for of delevering the taken quarter

real Within the C&I the and strong as by on commercial level loans the in in offset loan a comments, acquired categories; estate offset commercial Rob volumes to run-off was however, was the quarter. portfolio, strong decreases Hills alluded certain Blue and his construction in of in both second loan commercial growth anticipated growth

production mortgage to quarter. be our a is million. both approved overall On and in continues across equity June XXth to the a the demand Prospectively, industry majority potential evidenced the side, commercial for lenders to flow the of secondary challenge $XXX provide approximately to of sold footprint our continues at of home market, remains pipeline movement opportunity expanded significant an loan flat consumer organic the the for leading

the in second category, elevated deposits time or liquidity run-offs the of quarter, X.X% the the for maturing Hills during strong annualized base. broker deposit with were the deposits On new demand organic slightly from quarter. replace Blue Company were growth the although rebound levels included the to needed and a experienced in deposit increased And deposit CDs acquired obtained within the the category XX.X% in side, deposits core

result our basis of noted, cost cost a absorption As the only Hills, cost. the deposits base Blue funding increase able quarter. and to from mitigate higher prior basis XX still the points impact overall XX relatively of balances deposit despite low we the negative a The reflecting of was the points a on in quarter for the to second movement were

increase when Company’s an of number consist reflected million of a borrowings. majority loan approximately $XXX including which overnight moving bank the The pieces quarter borrowings of profile in a federal home second borrowings,

Company was $XX.X approximately redeeming preferred first million million line that funding In the trust fully paid secured for higher acquisition the of debt. of credit quarter in callable and Hills the the addition, off $XX Blue cost

margin interest X.XX% $X.X second quarter net Amidst the for was than by acquired a of boosted pieces of and accretion lot the on higher loan of moving for quarter, expected came in the balances. approximately million

difficult potential to margin income absorption more prior to full of would a to quarter pay accretion decrease affect balancing. with of X%, around due be which a activity, Blue volatility Hills’ the associated off Although accretion reflects due to the lower income normalized predict from level quarter right the margin

And has Company as the as cuts, expectations into position with XX implications bringing to growing June of $XXX lower movements, rate additional potential million over the $XXX associated rate against rates the update of the downward of total quarter, XXXX. an has hedges an protecting during entered against million Federal Reserve

significant has already against pricing layering rates as cuts factored additional expected rate reminder, reduced throughout protection on a remains As the XXXX. market in challenging,

end would $XXX,XXX July, gears the in $X.X fourth the to result an $XX.X expect approximately XX we in in over approximately when income major The decrease of near approximately third million reflects decrease the first of to as an XX% non-interest $X.X points an of to quarter. quarter the basis million quarter, Currently, the quarter. Fed $XX,XXX for cut Shifting every $X.X quarter non-interest prior of income category in items. experienced a million to or the the increase million a from to increase and compared interest

combined income XXX% increasing strong and to in with preparation billion increase fees Some seasonality post for know have $X.X an capabilities driven have and the in natural the mortgage Enhanced an quarter, key administration to the from following. Management mortgage in seasonal results assets waves a Investment banking tax increase environment acquisition current quarter. due refinance rate under interest to over highlights include production resulted

income levels portfolio from lastly, small of customer increased equity card from with income income. increased income of as and core and accounts and other FHLB ATM fee higher a acquisition dividend credit households approximately in resulting well as health the includes non-interest interchange $XXX,XXX The generated of have method business the income, deposits, sale associated investments

$XX increase which or and represents this in Total the the quarter million non-interest related is of number quarter, expenses, costs. XX% termination a millions $XX.X includes included merger on $XX.X the prior severance of expensive of million majority for contract

related benefits increase as excluding conversion expense increased higher expense approximately transitionary $XX the the merger prior and increased acquisition of being million, well combined Xth. million some from June quarter, workforce for When including through space, salaries the as new date major with non-interest cost expenses the of incentive drivers $X.X

and Rob, Occupancy A expense. non-interest mentioned $X.X $X.X net million, is branch on million increased Blue the the in Hills by network enhanced equipment million sale realized previously primarily the was deleveraged reflecting acquisition. other approximately $XX loss included security expense of which from

directors intangible assets, for customarily expenses, in fees to that grants and of in commitments. drivers unfunded the acquisition, rewards second vested category consulting quarter, include the and in tied of Other product immediately amortization provision increase acquired the quarter increased increase

increases days Blue ratios of acquisition has to Rob the the XX.X% that for dollars a to quarter. the expected the and led covered the in absolute and Despite achievement successful noted, operating efficiency further Hills reduction cost

quality remained metrics Asset strong.

annualized at remained balances real $X.X Hills on quarter X non-performing loans point loans in assets non-performing are the loan an uptick the primarily attributable other in and basis and only approximately combined Blue obtained basis for charge-offs to Net of the acquisition. estate million of

the accommodate primarily balances. The provision quarter non-acquired growth was $X level in million of needed loan for to

factors. to the the fine will and preparation, economic loss update into to finalizing the need the of of model, runs to refined level assumptions quick top of the more loss loss scenarios historical second will initial outputs model year. the This tune process to assumptions expected Company's on its layer step For forecast lead on current CECL the loan generating half parallel then is over credit Company current the needed or which

a rest I'll guidance the for on update now year. the provide of

of Given the for With year. primarily on company's year. a the as to single-digit be acquisition, Company of competition the guidance run certain result focus a significant additional Hills half second growth flat overall composition will overall the liquidity the low acquired and on change in growth our with the continued Blue focused the to be is offs expected portfolios, rest loan the along pricing anticipated on of of

the year. single-digit Deposits range for are rest expected the in the to low grow of

in margin Assuming the normalized the rates assuming from anticipated accretion as high previously no is range changes X.X% fed, levels. loan guided to interest net to be

reminder, given for a can of loan the However, impact activity payoff quarter. provide upside potential any in

relatively as by the Non-interest expected deleveraged the is sales. remain an in QX remain mortgage on of combined from with income third being to gains nonrecurring fall, is offset realized until pending second decreases early results with residential demand to items in strong quarter the banking consistent anticipated anticipated quarter

QX a non-interest and QX gains wane compared mid at anticipated to non-recurring demand fourth income the anticipated single-digit no estimates. to in to and decrease when QX, With mortgage expected quarter, in percentage is

realized a Bancorp Hills to although Blue we and deterioration full and for expenses no operating low costs non-interest likely near-term, concerns at save compared in are noted single-digit transitionary to the expectations is quarterly to expected results, percentage, as been QX further have decrease saying, no QX, credit With inevitable. eventual is mid to be

Lastly, rest expected to XX%. the year remain of the tax rate the is around for

concludes Chris? my That comments.

Chris Oddleifson

much. very you Thank

are for We questions. ready

Operator

David from Davidson. Bishop session. proceed. We question [Operator Please first of will Today's question-and-answer comes now the Instructions] being DA

David Bishop

the pace in saw of are the what that’s given think non-interest seeing uptick side into that about of funding just demand your of deposit cost Hills, back question the place? you the Or And of you the of of strong A growth second deposit you, in the of in and side there some process was pressures, half? you costs, Blue the you’re year? maybe some terms plateaued thinking head how I on terms terms the for are we half market as curious what in remix just bearing? of the estimate sort the telegraph and was some on Side you think the the the had but of deposit in wholesale

Chris Oddleifson

looking concept of look upon hit you where you that’s the as a think certainly closely at. I can Dan, and mix that Sure, deposits essentially we’re at

at quarter results deposits in growth second demand The strong we X.X%. very had

Although, a outsized. that we the continue to third that would love see quarter into maybe growth bit

a on the deposits strain of mix So, certainly, the of could of bit little deposits. put cost

cuts think On the starting we The rate side, the over CD potential pressures on starting is positive are our competition subside. certainly competitors. in and seeing expectations pricing I the to is certainly resonate amongst come to pricing industry

check, pretty deposit be expect two basis primarily think maybe remain mix or So, all quarter to where but cost I I the we point the to should that increase comfortable in into deposits. of said, third solely due we feel would a able with being probably

David Bishop

a any you rates board? guess, all lowing of your third, CDs I of started the terms on Have legacy some and the savings across

Chris Oddleifson

not, David. have We

the We recognized have probably up. lagged as you way on

they certainly We’re on from not of a to But of actually do should and cut the use we as reduce fed our impetus ourselves we any deposits. to that positioning as rates reduced get so. rates have now,

David Bishop

And like that versus sounds loan the the that I’d pretty be curious just pretty legacy, just run-off legacy was to there sounds it And sort of of was about like the what sound quarter Blue residential legacy our some may pace what sort math some Bull origination planned by and of organic I'm originations. run-off caught like, growth? then have surprise, Hills curious a fronts, strong hear of Hills size attrition of talk the maybe on organic strong maybe the sectors, volume clearly were in on commercial

Chris Oddleifson

pipeline closings third into suggest in quarter. that really referenced commercial the that strong very have I the in momentum quarter we my Yes comments the and strong going we in add numbers prepared very, and

have our we to terms of So middle which upper base. is customer initiative continue good success opportunities, very corporate in market of banking sort in the

lending we’re to there’s that advantage starting As that space disruption in you a of. know, ABL see Worcester commercial market there, and take portfolios some really C&I we’ve can and opportunities think opened we and we office in the especially

that, So, we not due, that point portfolio continue feel they on. In should originations. we to loans to some anticipate Hills there going continue that particular, would we level from likely into will some acquired in strong was quarter become new look terms leverage that, of is And very third we or attrite. Blue offsetting to your see of to originations lending of, continue once the there do renew

So, portfolio that there element is still of an through. expected still run to

deals the relationships then And in that second did really that commercial of loans profile. combination off sense, the or where think pricing really non-relationship fit, our C&I real is just didn't other essentially just didn't pay into fit typical makes we quarter again what a estate

So a off as I nothing that expected. we be think of run it which be another closing strong will combination unusual, off said should that that going quarter still But was run offsetting, forward.

Mark Ruggiero

comments, on of of to force the we of the total million third as the given decrease the tune of at that the And originators that combining the volume. pipeline in closing we expect that June. record combination some a volumes expect refinance in rate Hills sales residential side, I increase and had driving Rockland, But about XX% in had Blue we the end we to XX% quarter, and to the quarter, XX my in have we now $XXX then David, about stated with obviously

head quite front. as to quarter, third we but be residential will we expect all the in fourth the that obviously into So, strong subside quarter

David Bishop

from holistic you $XX $XX bigger model about from a color. in good Chris get move size it, strong look getting and that you basis banking closing to Do sort Obviously, Got growing of are the relationship you more on and relationship as transactional Is have a holistic mark, bigger? terms of then, your a billion. we over guess, that's it massive from worry billion forward is at basis, do the bigger driven pretty just ROA. concern credits. I here, models away as guys sort you of And in

Chris Oddleifson

very, tendency bigger sort get the to to the have to diligent I for be and you numbers the about natural think you when to focused very of think of Yes, instead mitigate people.

think large is -- happens to staff of I And and And respected. -- people of very we culture don't to really work as that tendency. are are on valued absolutely that's we organizations have exactly who we day-to-day, are making that. have focused set business that sort naturally feel they the mitigates what in sort

a certainly how people include the to the in stuff numbers that lot And the be hard in the you on stuff focus to lot that ongoing people to side. have our spend acquisition yields of really time and everybody The on a work, really technical we strategy, on and thoughtful of entity.

that than we that a continued lot we So performance go high that is have start And thinking a orientation. rather lot of to before have our on that our to depends employee exists. have maintain is I confidence really ability about definitely relationship of to risk numbers serial understand that people. a I my runway colleagues as And of

Operator

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

Laurie Hunsicker

I just know X.X expense, that $XX.X I in other, loss other on it sales million, securities. that your million included wondered

fees, figure?? that You consulting there was higher non-core some in mentioned what that you tell us can else was other

Mark Ruggiero

Sure, Laurie.

bit of of stayed other a and up we lot has $XX a with significant that but sort certainly factors, the of recur in into consulting items non-core a of items, wouldn't for ticked strategic And expense CECL a a would the of there. there's delays the expected intended some XXXX that quarter. the this consulting we run terms first the through expense billion, bit had say third and not that crossing in was rate that I priorities So, of to have some was lot have of Certainly of initiatives preparing outsized, of quarter. is the sort number

that with the fees director in the awards in a equity not recur, all $X.X that expense is million. quarter second associated the quarter There will that's

occur within would million surely Directors in that we at can fees, the look on sale the security you $X when and again category quarter. there not think say I the the loss third So, that the

components that biggest So, I'd two are those category. within

Laurie Hunsicker

And continue to then elevated you've right, that crossed heard just fees XX? consulting run so you will as simply outsize the I just

Mark Ruggiero

And in there of be anticipated. we terms elevated Correct. terms of in won't what

think difference timing increase. suggested QX to QX, was a it there I a just there bigger that from was

Laurie Hunsicker

a Perfect. bit the specifically And of at year income give also you're makes into year, color Okay. and more just little on wise accretion the sort That about sense. half we also net income then line? dollar interest can this back you that next looking as think of

Mark Ruggiero

Sure.

suggested, comments payoffs, obviously would can on in second an quarter. target we good my loan it As be normalized a what run on bit volatile say terms individual of a be I'd in a of saw depending the rate but half

accretion alluded they're loan to what mentioned that the and of total million is would rate a gauge be. I of $X.X run half good normal So of

Laurie Hunsicker

sorry. last oh, you, then Chris, And ahead, for I'm question go

Chris Oddleifson

about. I that just going talking X% peg the That would threes right to Lauri, the been was say, we've that. be line margin with high to in

Laurie Hunsicker

right. Okay,

basis at of back we So, XX we're I will looking that that's to as X, jump the accretion XX, go forward? yes, which how X think we if end, guess, NIM income point was down

Mark Ruggiero

Exactly.

Laurie Hunsicker

avoiding one then that for you Chris, you've update your any Thanks. what's Hills, your be helpful? this you color us looking you England. would got closed Blue point could you in give what when currencies M&A have And New the even appetite at now of just strongest is Can

Chris Oddleifson

No, without it question complete Laurie. wouldn't be from a call this

you. thank So,

geographical regional and of franchise to think as called too little of been have examples and We very manage. they difficult really to field really franchise get have set out of strength strong banks worked I We've that's and our our a our would that seen been continuous and this focus of within far all to here bit continues and our tenth have tight is acquisition sort orientation like well. franchise. of sort is who gangly since sort a very Our a

we were the north perfect we'd from If and range is ocean, and where and the a love of is sort $XX conversation there conversations. is. of picture, of mean, comes franchise little south. a to both west Worcester we I real concentration bank Atlantic arcs activity sort if a to available, then have a is in is billion I that out I that paint that's economic would in there to have bit $XX includes of that That be to mean, billion a certainly

conversation, whether better is than and are have see wants I'd sense. love there bought to the that I engage know You is and something board make banks not any that to sold

disciplined whole we acquisitions point of make do sense but from as super strategic fiscally are strategic We so do things, responsible. don’t are that also We acquisitions. view

Operator

next [Operator of Matthew proceed. Jaffray. Our Piper Breese Please question comes Instructions] from

Matthew Breese

make have round everything to the sure up want Just NIM I discussion, of kind right.

in that So of quarter? couple face else core line all top else imply range. accurate? NIM equal your Is going X.XX the all this compression comments in cuts, highest basis points that that equal to no Does given just be fed could at the to is NIM point

Mark Ruggiero

bit so compression. the certainly put overall NIM to implications a extent think attribute the alluded potential little and could I of think are are to deposit that remixing to as would the I of the the Yes earlier deposit, there beyond little pressure side, I we a

X basis is good pretty estimate. to X a So, points

Matthew Breese

your that layer fed cut an you effect suggest is in I the X if And basis quarterly think comments NIM? additional cut basis pro the its perhaps pressure core points on maybe of

Mark Ruggiero

quarter, a X about be bps. more For it’d like full

I X.X So, million. a mentioned

Matthew Breese

understood okay. I

Mark Ruggiero

X basis to be it’s would through be about the half quarter. third points rate The going quarter essentially

Matthew Breese

is protection at thinking would have fed million What wasn’t provides? this Got $XXX it, that there And be quarter place, for a okay. just instance, point. from the what then you in cut? impact it If the hedges the about full the the

Mark Ruggiero

money we that million portfolio of is right that so million -what now, of $XXX portfolio, Sure, protection. already $XXX in are providing approximately call the

cut we million that. rate where would that million of any $X.X from protect today approximately are $XXX So,

of income a quarterly essentially interest on that's protection. $XXX,XXX So, basis, in terms XXX,

speaking additional rate that as $XXX couple had least cuts. The market to at we’re million of you of because not the can a pricing expect in is factored conditions, already

fixed those the maybe get or those XXX that until we not protection, on rate but cuts have So, three XXX provide the two rates we is in either or as to hedges range. even floor hedges the in

Matthew Breese

into Hills how thinking to can strong, seasonality us we expect model? holistically should update island seasonal just the be you be on the to about quarter that then And expect presences, Blue be with more you will The an factoring you franchise a just certainly And really basis? categories that how go-forward different. on give some impact the

Mark Ruggiero

extent in overall of impact deposit the the that Yes on deposit Matt, much book. not side an would an deposit you Company's fluctuate balances as the actually as to expect, might terms equation, don’t you see

the would our a produce mortgage winter loans does the again, ability of it's commercial commercial On islands then piece noticeable our side, also, lending somewhat be and certainly in entire on the our And production to moment. at small now. fall within the late side, That months. production on the slow

noticeably we're result a digit talking fact So you you're not of in as that seasonality. decreases single production that, percentage in

Matthew Breese

And yield. do just the one, get next the half me, point to final cadence of accretable trying over $X million $X.X the If model back going we in just but, months? At to know tough we ramp something XX down yields? next quarterly I we cut in to accretable sub it's to on get to the for million. that gauge quarter, it for what

Mark Ruggiero

essentially So created, you and is the mark activity. the down a based accounting the part pay books, fair just this, normal sort because is essentially, loan I value upon nuances credit that assumption included that bifurcated this And, of getting how guess rules of entire of mark. in large

portfolio. theory X% loans consistent or but would of duration mark over you a a payoffs So $XX number should about the create that on the full can Hills' volatility, that that credit Blue million, in credible of book be think

to sort see of loan a any earning in nuance the quarter that of of dip should create level in would So after a of sort time any a resolve you period expect quarter volatility. interest the but accretion, shouldn't significant chaos

Operator

question Collyn proceed. Please comes of from next KBW. The Gilbert

Collyn Gilbert

apologize. question. Thanks, for Matt good asking morning, kicked got his was when off a second just guys. I I

off? remind what I'm repeating just he BHBK not I'm intend again of what are balances run just the curious to the hope I So you runoff Can portfolio. the and you asked. on us of where But already

Mark Ruggiero

a of particular. in combination portfolios a it's few So,

of side, a came acquisition with There commercial And On that off in primarily C&I seeing construction into to pay time, we're the significant the naturally real isolated payoff standings that. been commercial that estate. was but good over seeing either and bulk C&I for what a it's been seeing will is portfolio move has activities, accretive the over in date to portfolio. the permanent or we've category and own associated increase

residential portfolio, going highly some much And of than we we'll natural to as have I well. run continue C&I off quarter what higher is the then book expected to given the had, this that as still been third that is And portfolio attrite. see the leveraged into think anticipated of

of book. quarter, on run was that, So the off around$XX in resi million the second there

Some of that full was due to payoffs.

Chris Oddleifson

Collyn, $X to the we acquired down about billion. we're million So X.X

Collyn Gilbert

Okay.

going one-off So to another $X.X what I was to of anticipation pull I the balances what, ask the is mean, that of you is billion?

Chris Oddleifson

of course, No, not.

Collyn Gilbert

No, yes.

Chris Oddleifson

with up that that that book with. a lending The I'd hundred couple call small doesn't million line of fraction the commercial we're comfortable categories within it

those over let time. we so, And trades

So, the less slow we looking similar from little than start as to $XXX quarter at mile into third we the head million for have to and second quarter, thereafter. now then

Collyn Gilbert

That's on the kind then, down? paid paying loans and just what between any in originations that the to of of origination versus seeing. dynamic the on And then, of What's helpful. on difference are? you are rate terms the some rates you're that And those seeing

Chris Oddleifson

say There I'd hasn't been sizable differential a them. between

we spreads of to to off continue that the that disciplined part over the are of very market those pricing. our is organic somewhat we're deal know, actively go but in you after. don't we coming As stay modest see in the Certainly, continuing are trade growth

volume getting price range. to in deals our continuing with of sort we're and see spreads So,

and rate a delta On much in certainly we runoffs and anticipated side, between of a what's don't expected that come pricing impact the Fed. bit on the has fixed originations, the of as But that. new in a result terms was significant see from obviously the of

Mark Ruggiero

with to now it Colin, close feels new our so book purchase stabilizing, And pretty us volatility yield like volume to is the the to is yields, if the you strip loan accounting. current

Collyn Gilbert

Okay.

that in just anticipating of and there how you guys originator third How seems obviously beyond great given mortgage you in that coming How you're see now. you XXXX on be contributing business fourth and you in way, And contribution helpful. longer-term? quarters? That's Okay. business about to longer-term broad the of XX guys kind do kind then lastly should that very banking, that that's and strong. Just you offer sites, infrastructure got of think kind then on in to and just bit beyond staff little we color a

Chris Oddleifson

Yes.

base the majority coming relationships. business our historically, by the and struggled making lenders that and to those a banking and volume local we favored as necessity because we it branch our emphasized our the successful with LOs that our supplement mortgage relationships between extent our Collyn, of recruiting largely not with CLIs. offering were and was and was customer to some existing from connection You The had purely in know, alike, LOs personnel but commercial

via those success then mortgage other other cross the able an that the recruiting the individuals, and is they're delivers bank had sell have to and very giving ability to us on bank the ability customers. services cross-sell, lots equation to Hills leverage experience. customer Blue of the infrastructure hopefully bring so has And good piece the infrastructure a the of customers hand new to those mortgage channel,

a In the mortgage past it’s difficult support LOs, internal operation. XX to with of an team

the Hills we mortgage as with well customer made XX mortgage Now great Blue delivers phasing experience efficiently LO that can but operation internal operation producing because phasing support an investments as LOs internal especially customer an technology. in good right a

basis. what will anticipate very a quarter and certainly, contributor enhance that this we will feeling customers But mortgage a good good it be and be don’t and next contributor both able to on bottom about be the offerings prospects. It done to will run our any a indication, to we So on quarter significant side. we’re rate the line have

Rob Cozzone

should get consistent our aspirations branch. that with I mortgage think business our are probably to we

Chris Oddleifson

right. That's

Rob Cozzone

national. go super And we regional have or don't to aspiration

Chris Oddleifson

that That’s exactly right. aspirations all. at No for

Operator

comes question Davidson. Please proceed. next from of D.A. Bishop The David

David Bishop

guys. morning good Yes

follow-up. I I That health think pricing. maybe quick the you've one discussion there’s and being mentioned loan about the Chris, Just on said, of structure the that’s segments the especially then regional any loan the CRE economy backs, there and guys brakes you're where are you on am and stepping where frothy putting too seeing pulling side getting aside? pricing just just but

Chris Oddleifson

I can answer that David.

the quarters to in several seeing we’re front. You’re seeing is CRE CRE competition on flat down CRE and decline over in the purely that portfolio the book the the that last due a to

credit evidence than to to both the prior continue being narrower as seeing we terms as pricing and anecdotal of come well see We’re in spreads quarter. continue

in good decline of obviously well capital space modest deals Where is CRE get to the book seeing we have the have to And been us side construction as healthy expect continue. able expertise in construction we with those the very on overall. So, the on terms we some smaller terms the opportunities the and and loan to allowed have we’re transactions, as those. pricing credit and

say we I would limits bumping finally up on also against side. hospitality just are internal

only So, allowing free there existing to some headroom. runs down really portfolio we’re customers new production well to that up

David Bishop

portfolio? the exact How

Chris Oddleifson

remember, fingertips. issues I but it on You David. be had I I that what ask me my XXX have think could I wrong. to don’t

David Bishop

offline. for guys. up Thanks colors follow can I the

Chris Oddleifson

Okay thank you.

Operator

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

Chris Oddleifson

you good and your stay heat months We’ll all three be for everybody appreciate cool. questions. careful We weekend this your interest. to you talk bye. Good wave, in with again Thank this

Operator

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

You may now disconnect.

Independent Bank (INDB) 19 Jul 192019 Q2 Earnings call transcript