Independent Bank (US:INDB)2021-07-23 19:48Financial Data and Key Metrics Changes - Operating net income for Q2 2021 was $38.8 million, or $1.17 per share, excluding M&A charges, reflecting a decrease of approximately 10% from the prior quarter [23] - GAAP net income was $37.6 million with diluted EPS of $1.14, representing a decrease of about 10% from the previous quarter [23] - Tangible book value per share rose by $0.82 to $36.78 as of June 30 [23] Business Line Data and Key Metrics Changes - Total loan balances decreased by $308 million, or 3.3%, primarily due to a reduction in PPP loan balances of $364 million [24] - Excluding PPP loans, total commercial loans increased by $66.2 million, or 4.3% on an annualized basis [24] - Total deposits increased by 3.4% or $393.4 million, with core deposits now reflecting 92% of total deposits [29] Market Data and Key Metrics Changes - The Massachusetts economy has seen back-to-back quarterly GDP growth ahead of the national average, with Q1 2021 GDP growth of 6.9% compared to 6.4% nationally [18] - Labor market conditions in Massachusetts continue to recover faster than the national average, led by strong growth in leisure and hospitality [19] Company Strategy and Development Direction - The company is focused on the integration planning for the acquisition of Meridian Bancorp and its flagship East Boston Savings Bank, which has approximately $6.5 billion in assets [12] - The company aims to achieve cost savings, healthy earnings accretion, and tangible book value accretion from the acquisition, with a fourth-quarter closing and conversion anticipated [15] - The company is also expanding its footprint in the Greater Worcester market with new branch openings [17] Management's Comments on Operating Environment and Future Outlook - Management noted that while the economic recoveries are fragile, there are encouraging signs of increased economic activity [11] - The company remains optimistic about the future, citing strong loan origination volumes and robust deposit generation [8] - Management expressed confidence in the long-term strategic value of attracting new core customers despite current excess liquidity challenges [29] Other Important Information - Credit quality remains strong, with nonperforming loans down by over 19% during the quarter [10] - The company has been active in the PPP loan program, originating nearly $1.2 billion in loans since its inception [11] - Non-interest income decreased by 1.1%, but wealth management results remained strong [33] Q&A Session Summary Question: Can you provide details on the deferral portfolio and occupancy rates? - Management indicated that occupancy levels for vacation hotels have rebounded strongly, with some exceeding 2019 levels, while business stay hotels are gradually improving [42] Question: What is the current utilization of C&I lines compared to pre-pandemic levels? - General C&I line utilization is down to about 34% from 46% in March 2020, and dealer floor plan utilization is down to 52% from 66% [44] Question: How is the company planning to grow its securities portfolio? - The company plans to modestly continue purchasing securities, with a focus on finding products that offer reasonable returns [59] Question: What is the outlook for deferred fees from PPP loans? - Approximately $1.5 million in deferred fees remain from the first tranche of PPP loans, with expectations for most forgiveness applications to occur in 2022 [64] Question: Can you comment on the recent increase in deferrals in small business services? - The increase in deferrals was anticipated as part of ongoing negotiations with borrowers, and the company is not surprised by the current levels [70] Question: What is the expected tax rate for the remainder of the year? - The tax rate for Q2 was around 24%, which is expected to remain consistent for the rest of the year [94]