Independent Bank Corp. (NASDAQ:INDB)

Q1 2017 Results Conference Call

April 21, 2017 12:00 AM ET

Executives

Christopher Oddleifson – President and CEO

Robert Cozzone – CFO and Treasurer

Gerry Nadeau – Head of Commercial Banking

Analysts

Collyn Gilbert – KBW

Laurie Hunsicker – Compass Point

Matthew Breese – Piper Jaffray

Operator

Good morning and welcome to the Independent Bank Corp. First Quarter 2017 Earnings Call Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]

This call may contain forward-looking statements with respect to the financial condition, results of operations and business of Independent Bank Corp. Actual results may be different. Factors that may cause actual results to differ include those identified in our Annual Report on Form 10-K and our earnings press release.

Independent Bank Corp. cautions you against unduly relying upon any forward-looking statements and disclaims any intent to update publicly any forward-looking statements, whether to response new information, future events or otherwise. Please note this event is being recorded.

I would now like to turn the conference over to Christopher Oddleifson, CEO. Please go ahead.

Christopher Oddleifson

Thank you and good morning everyone and thank you for joining us today. As always, I am companied by Rob Cozzone, our Chief Financial Officer. I am also delighted to be joined by Gerry Nadeau, our longtime Head of Commercial Banking and newly appointed President of Rockland Trust. More on that a bit later.

We carried our momentum into the New Year with another strong financial performance inclusive of M&A expenses. EPS on a GAAP basis came in at $0.76 per share in the first quarter excluding these costs. Net income rose to $21.1 million or $0.78 per share, nicely above both prior quarter and prior year results. Rob will cover the quarter in more detail and Gerry will provide some added color following my comments.

This show business momentum was sustained on many points during the quarter. The commercial loan portfolio continued its steady ascent as we continue to help new and existing relationships. Our small business initiative has been a nice story for us with loan balances up 22% in a past year albeit on a smaller balance.

On the consumer side, we saw healthy growth in both our home equity and residential portfolios. Core deposits are now grown over 90% of total deposits. Our investment management business continues to prosper, a recent milestone with assets under administration crossing a $3 billion mark.

Credit quality remains in good shape as evidenced by a lower non-performance and net credit recoveries in the first quarter. Our approach to intelligent expense, management has a resulted in a solid operating efficiencies ratio in a low 60s, and of course ever-rising capital levels, tangible book value per share has grown by over 9% in the past year. So well round of performance driven by strong fundamentals.

Now, I’d like to turn to some of other positive developments in our company. While integration planning for our Island Bancorp acquisition, or Martha’s Vineyard is going very smoothly. We have retained an attractive lenders who know Martha’s very well and are proudly hitting the ground running.

Needless to say, we are excited about our prospect there and we still expect the transaction will close this quarter. We also just had our first four quarter of Bank of Cape Cod under the Rockland Trust umbrella and always gone as planned. Both that acquisitions are expected to be accretive to earnings and considerably deepen our pricings in attractive Cape Cod market.

Internally, we have recently made moves to strengthen our management ranks and capitalize on existing talent. I fully subscribed to the belief that a company is only is as its people, a big part of its having the right people in the right jobs. So, in that vein, we made very few appointments. My collogue here Gerry Nadeau has been serving us well for 30 years and he has been instrumental to the tremendous success we’ve achieved through his management of the commercial banking franchise which he’ll continue to lead.

As President of Rockland Trust, he will work closely with me and others to sustain our disciplined growth path. Gerry has also joined to our Board of Directors. Pam Frey very recently joined us to Head of our Consumer and Business Banking Group. Pam has many years of proven success in consumer banking arena with our leadership positions in several banking organizations. She is busy getting to up to speed. We’ll look forward to working with her. We expanded duties of two talented Rockland executives, Jen Marino and Deb Smith to lead, enhance and expand our customer experience in digital banking activities.

Given the rapid changes in technologies and customer preferences, these are critical assignments. And we’ve promoted our another talented manager, Maria Harris, as our new Head of Human Resources effective May 1st following the retirement of Ray Fuerschbach, who has served us well over many, many years. We are also trilled to announce the appointment of Michael Hogan to our Board of Directors. He brings much wide experience in commercial business, real estate and public policy to our Board, and we welcome the additive sites and over a site he will provide.

Turning to the macro environment, national and economic picture does seem to gradually improve but of course there is lot of uncertainty that persists for corporate America and the banking industry in particular in light of the ongoing political wrangling in Washington. The timing and optimal path key issues such as tax reform, healthcare, interest rate trade and infrastructure spending will present varying scenarios for our customer in our bank.

We’re encouraged though by the growing consensus to provide some regulatory relief to smaller banks from the sweeping set of measures imposed in the wake of the financial crisis. Notwithstanding that, we remain vigilant in our compliance and risk management efforts. Locally, the Massachusetts economy continues to perform well, the most available state gross domestic product, the growth reached 3.8% in Q3, up from 1.7% in Q2 is difficult to approve upon the 3.4% unemployment rate in the state, which a full 1.1 percentage point below the national average.

Looking ahead, we’re steadfast and are focused on creating strong and enduring relationship with the customers. We will continue to invest in our brand and strive to continue deliver exceptional customer service that is consistently guided high marks from third-party surveys. We have an operating platform that can surely deleverage further and we’re in a lap of the evolving highly competitive industry with the ever-increasing rate of technological innovation presents opportunities as well as risk.

So, we will stick to our long haul strategy of disciplined growth as works so well for us. Our confidence in our approach and outlook is readily evidenced by the 10% increase in our dividend recently approved by the Board and we have a long tracker that of healthy dividend increases it that it reflective of our desire to reward our loyal shareholders with a healthy return.

So with that, I’ll turn it over to Rob.

Robert Cozzone

Thank you, Chris, and good morning. As Chris said, I’ll now provide some more details on our first quarter results. Independent Bank Corp reported net income of 12.7 million and GAAP diluted earnings per share of $0.76 in the first quarter of 2017. This compared to net income of 18.6 million and GAAP diluted earnings per share of $0.71 in the same quarter last year. Both quarters included merger charges and the prior year’s first quarter included a loss on extinguishment of debt. When excluding those charges which management consider as non-core, operating diluted earnings per share was $0.78 in the first quarter of 2017, an increase of 8.3% when compared to the same period a year ago and above last quarter’s $0.76 per share.

Healthy earnings results led to a return on average assets of 1.12% on an operating basis and continue to drive growth and tangible book value per share, which is increased by an average of more than $0.50 per quarter over the last three years, despite the added goodwill from several acquisitions. Continued growth in capital and earnings supported the recent decision to increase the quarterly dividends by 10%. Although, loan growth tends to be muted in the first quarter, 2017 is off to a good start.

Total loans were up over 4% annualized as a seasonal decline in new loan production was offset by a rate driven reduction in pay downs and pay offs. Total annualized commercial growth of 3.3% was [booed] by a $52 million increase in the combined CRE and construction portfolios. Competition remains tough, but we are holding our own on this space.

Gerry, will now provide some additional color on our commercial business and current market dynamics. Gerry?

Gerry Nadeau

Good morning. Now, it’s interest as we have started the year with a great deal of uncertainty, both from a political and interest rate environment, we were facing potential interest rate increases beyond what we had seen in over a decade, but we are very pleased to what we are seeing recently in increases in our pipeline and deal activity. Our actual growth performance in the first quarter was nearly equal to last year’s just up by little less than 3%. So, we really feel still comfortable this is going to work out for us.

Looking at what activity we have, first maybe in Boston which we can ask quite a bit. Our Boston activity is really centered on developers, local developers, who seek to reposition smaller office buildings and retail properties that have been under invested in over the years, and they feel they can add value. The opportunity for them is to come and buy at a reasonable price, add basic improvements, greater base of tenancy, longer lease term and often time resell. Another part of our business in Boston is really the small construction builders where they’re looking to build condominiums or single family homes in the outline suburbs of the city anywhere from 5 to 20 unit condominium projects.

We are not involved in the office towers of the very large pilot buildings, in fact the average size of our construction loan and balance is just a bit less than a 1.3 million and that includes larger projects for ourselves. On average, we really focus on the smaller end of the market. As we think about reaching at also our business in fact our construction loan business over 50% of it is for residential development, single family homes and condominium spread throughout entire footprint. We are fortunate to be a long time bag in parts of the state with the most undeveloped land-wise especially in Southeastern Massachusetts.

The other activity we saw in the first quarter to the fact, the majority of the remainder that was associated with the grocery, a small retail plaza anchored by publically traded grocer who signed a long-term lease. Only 15% of our construction loan activity in the first quarter was in fact in Boston by the suburbs to it. Other things that we actually wanted to — we’re very pleased about in the first quarter was hiring activities. We’re able to bring on Board four very seasoned commercial bankers in the first quarter. We have accepted offer that fit to start in May when we combine that with our success in our commercial banker training program and we’re developing highly skilled talented bankers to join their other colleagues, giving us a competitive advantage over other banks in our footprint.

I guess another thing that we’re pretty pleased about learning in the first quarter was banker and tradesman with a local real estate publication named us the number one commercial real estate lender in Massachusetts based on dollars. That is something we’re really proud of is again as I mentioned a moment ago the average loan size we have is relatively small plus to achieve that we really had to work very hard making it awful lot of loans. Another accolade we received was S&L, part of S&P recognized us as the number one real estate lender — commercial real estate lender in Massachusetts in Rhode Island measured in units. And again, that’s evidenced to the average, small average loan size we have. So, again something I think continues to protect us in a long term both from a growth and as well from a safety and soundness.

Now, perhaps the only other item I can mention is growth in business banking. This is banking and the small end of our commercial business is very important to us. These often times are the future largest customers we have they’re able to grow with us over the year. One thing interesting on that that portfolio grew by nearly 3% in the first quarter and a 21% on a year-over-year basis. That’s growth levels we haven’t seen in the long-time and in the first quarter with perhaps most positive is the two segments of that the two loan types that grew the most were SBA loans and term loans, which is typically used by smaller business owners to by new trucks and other equipment to help them growth their business. So, we think that’s really positioning us way and us well for the rest of this year.

Robert Cozzone

Thank you, Gerry. I’ll now translation to our consumer portfolios. Trends in our consumer real estate portfolios were quite favorable in the first quarter of 2017. Strong number one production contributed to a 6% annualized increase in our mortgage portfolio, despite a seasonal and partially rate driven decline in the overall mortgage production. In addition, home equity outstanding exceeded a $1 billion for the first time during the quarter and the home equity pipeline reached to multi-quarter high at March 31. Notably, the strongest growth over 13% annualized occurred within the first lien category. With the spring season upon us growth in the combined consumer real estate portfolios should begin to accelerate.

Total deposits were up a little less than 1% for the quarter as strong new core account volumes were partially offset by a continued decline in higher cost term deposits. The more expensive term deposit category now only comprises 9.5% of total deposits. Total core deposits continue to rise despite the typical seasonal decline in demand deposits and a 1 basis point increase in the total cost of deposits during the quarter resulted from lower average demand deposit balances and not increased pricing on interest bearing deposits.

A 15 basis points increase in the net interest margin versus the fourth quarter reflected the deployment of liquidity, higher loan relates as a result of increases in market rates and a reduction in the interest expense on junior subordinated debentures. The 25 basis points increase in the fed funds rate in March, provided little benefit to the first quarter, which had further enhanced the core net interest margin in future quarters. As of 331, more than 45% of the Company’s loan book was indexed to either LIBOR or Prime.

Asset quality continues to be excellent with another quarter of net recoveries and a 5% reduction in non-performing assets. Loan loss provision of 600,000 was primarily needed to support loan growth. The large commercial credit we reserved for last quarter continues to be managed closely by our workout team and we concluded that no change to this specific reserve was needed as of March 31st. In addition, a charge off was not deemed appropriate given no further deterioration and the borrowers condition. As we have said previously, we believe the credit metrics will eventually migrate towards long term averages, but the strength of a local economy may continue to extend that transition.

Non-interest income decreased 13% versus a very strong fourth quarter. There was seasonal decline in deposit related fees and mortgage banking income with the growth in jumbos also mitigated secondary market sales. This was accompanied by a significant decline in loan level derivative income which just proven to be quite variable on a quarterly basis. As Chris mentioned, assets and administration and our wealth management business exceeded $3 billion for the first time, a very nice milestone for a scale business. We expect most fee income categories to experience a rebound in the second quarter. Excluding merger charges, non-interest expense increased 3% versus the fourth quarter.

Typical, first quarter increases in payroll taxes, advertising and snow removal combined with a full quarter of New England Bancorp drove the increase. The core efficiency ratio is expected to decline from the 61% recorded in the first quarter for the remainder of the year. The effective tax rate in the first quarter was 30.3% as opposed to full year guidance of 34% as it benefitted from the adoption of an accounting standard, which made changes to various accounting requirements related to stock-based compensation. The biggest impact to the Company of this standard relates to the recognition of the excess tax benefit associated with certain stock compensation transactions.

During the first quarter approximately 920,000 of benefit was recognized as a discrete item within the Company’s effective tax rate. Prior to 2017, the benefit was recognized as an adjustment to additional paid in capital. The go forward tax rate should revert to approximately 34% as discussed last quarter due to the exploration of some new markets tax credits and higher earnings levels. Now with the New England Bancorp acquisition is fully integrated, we turn our efforts to Edgartown. We anticipate final regulatory approval for the Edgartown transaction in the very near future and a legal closing soon after.

Financial expectations for Edgartown remain intact and we are confident that the very capable team will hit the ground running. The transaction is expected to add approximately 160 million in loans and deposits and second quarter merger charges are anticipated to be approximately $2 million after tax. As discussed in January, the variety of potential assumptions about the pace of interest rate changes and tax rate changes in the path of regulatory burden convinced us to discontinue our practice of providing specific EPS guidance. However, we will continue to be open with respect to the general direction of our business and we will provide as much specificity as is prudent. In that vein, we provide the following general guidance.

We expect organic loan and deposit growth to continue at the mid single digit base. With the March rate increase, the full year core net interest margin is now expected to increase more than the original 7 to 10 basis points guidance provided. We now anticipate 10 to 15 basis points of net interest margin expansion versus full year 2016. Year-over-year fee income is expected to increase at a low-to mid-single digit base. Now, this expense expanse will be closely managed and the core efficiency ratio should gradually decline finishing the year of the low 60%. And as previously stated, the tax rate for the reminder of the year is expected to approximately 34%.

That concludes my comments. Chris?

Christopher Oddleifson

Okay, great. We are ready for some questions. Anita, we’re ready for some question.

Question-and-Answer Session

Operator

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Collyn Gilbert with KBW. Please go ahead.

Collyn Gilbert

Just to talk a little bit about Gerry your comments on the hiring activity and to some of the momentum that you’re seeing on the lending side. Can you just kind of put that in prospective for us? You indicated you’ve hired four bankers in the first quarter of this year. How that hiring behavior had been different than a year ago or even two years ago? Just trying to sort of gauge where you guys are in sort of the development of this momentum.

Gerry Nadeau

I would probably say I can’t remember a quarter in the past where we’ve ever hired four season bankers. So, that helps and a fit that’s accepted in office. So, I don’t — quite know, I mean it’s easy for me to take credit, but I don’t think that’s quite right, but I think there is certainly some forces happening the marketplace that having us to be viewed as a desirable employer.

Collyn Gilbert

Does this change your kind of longer tern view on where the growth of the Company can go or within kind of the commercial loan growth bucket? I know again it sounds like there is a lot of things that are moving right and I’m just curious about changes sort of where you see yourself in the market and your ability to take share and kind of the growth trajectory from here? I mean that’s more for Chris.

Christopher Oddleifson

I guess from my prospective, I think our benefit is that we know the markets we’re in. We live here. We all work here. We have day-to-day contact with customers. So that many of our competitors are seeking very large opportunities leaving further ground for us on the small, medium sized opportunities that often times is ignored by some of them. So, by having experienced talented people on the street, we were able to create more opportunities for ourselves to meet for our expected growth rates up, which may be plus then when some of our competitors do.

Gerry Nadeau

Collyn, if you are set of getting how we sort of embarking on a strategy that we hear in that some banks around the country where we do left out and so you — we really accelerate the commercial long growth. I wouldn’t sort of put that characterize sort of what we are doing in that vein. I’d say now where we expect sort of the steady-eddie as a mid-digit growth with solid commercial earning team that knows the markets really well and that produces great credit quality.

Collyn Gilbert

Okay, that’s helpful. And then Rob just a couple of questions for you, one on your fee comment, you had indicated that most lines would be higher in second quarter and I appreciate the guidance you gave kind of sort of full year, but just trying to understand maybe where you wouldn’t see a rebound coming in the second quarter?

Rob Cozzone

Probably the whole line item is the other income line item where we may not see a rebound, seasonable increases in deposit fees and to change in ATM fees, seasonal increase in mortgage banking income obviously, investment management income will increase both because of the increase in our assets under administration, but also because of tax proceeds in the second quarter. And then in a loan level derivatives income, we hope that this was kind of an annual loan for us here in the first quarter and we start to see a rebound. We do know that some transactions that likely would have closed in the first quarter in terms of swap transactions, actually closed in the fourth quarter as some borrowers panicked a little bit as rates begin to rise.

Collyn Gilbert

Okay.

Rob Cozzone

So, essentially all core willing items are anticipated to increase as we head into the second quarter.

Collyn Gilbert

Okay, okay that’s helpful. And then just your comments of the NIM, the benefit that you will see there. How do you see that breaking down between on the — the asset side versus the funding side? And maybe how that ties into where you think future deposit pricing pressure could come?

Rob Cozzone

Well, what we have said in the past just in terms of deposit price we maybe cover that first is that, we assume in our modeling a total deposit beta including demand deposits of about 25%. If you — which sounds well, but obviously we have a large component of our deposit base in demand deposits, 32%, 33%. And so if you strip out the demand deposit component, it gets close to the high 30s to 40% deposit beta, which we believe is reasonable based upon the work that we have done.

We have not seen that deposit beta to take hold through these most recent couple of increases. We are seeing some anecdotal evidence of pricing pressure and couple of specific categories, but as you saw our cost of interest bearing deposits was flat at 26 basis points quarter-over-quarter. I would expect that deposit cost for our interest bearing category might increase just a little bit as we head into the second and third quarters, but the total cost of deposits will probably remain stable because demand deposits will increase.

On the asset side, I would expect a little bit more of a list in the second quarter than what we saw in the first quarter in terms of total earning asset yields because the increase was muted in the first quarter, first of all because securities yields decreased relative to the fourth quarter because of a prepayment fee we received in the fourth quarter and then a couple of other new launched items within in loan yields slightly diluted the benefit of the rate increase.

Collyn Gilbert

Okay. Okay, that’s very helpful. And then just a final question for Chris, maybe just give us a thought or two on M&A, I mean you guys obviously — it’s a core part of the strategy. You’ve done a great job selling in with some of these smaller deals. What do you seeing out there now? And has anything changed among kind of the market of potential sellers in your view?

Christopher Oddleifson

I think we said the — we’re seeing the growth in our strategy, which is really and very obsessed about how we prove and enhance our existing business. And we have a lot of efforts and strategies underway to how do we grow organically. On the acquisition side, we’re always ready to talk to management team, so while there are fewer banks available being bought simply because many have them. I mean there are mutuals that are converting and there is a stream of sort of eligible banks although the calculation is small.

So, any of them raise their hand, we’d love to talk to them. So I think I would say this one more point that the, all banks need to — it’s a good environment for banking right now. And as a result with the market up, there is a probably not a lot of pressure for people to want to sell now and jump on to may be a better currency or better operating platform. But that’s always a shift, I say it one day and something changes, so now I would hope that we would over the next several years be able to make an acquisition or two at the pace we’ve been making in the past. It’s been — they been very helpful to sort of building scale and we like to continue.

Operator

[Operator Instructions] Our next question comes from Laurie Hunsicker with Compass Point. Please go ahead.

Laurie Hunsicker

Just a follow-up on that M&A question, I wonder as you talk about building scale in your approach M&A and certainly you mentioned, a straight and eligible conversion. Can you talk about how big you would potentially go in terms of a deal? And I guess, Chris and Gerry that’s you. And the Rob, can you just refresh us on where you are as far as the $10 billion threshold spent? And what else you would potentially need to incur? Thanks.

Christopher Oddleifson

Okay, that’s a — you’ve tagged a lot in those questions. So, let me see, if we can un-tag a little bit. In terms of how they could have go, I think our rule would be that any solid franchise that is with that in our adjacent to our market, that is interested in a — I’m talking about M&A, we would like to have the conversation. Now have been said that, one of our successes and one of our really core successes in our M&A strategy is our ability to really bring on franchises in a very seamless, solid momentum generating way. And our biggest acquisition to-date was Ben Franklin at a 1 billion and that’s when we’re much smaller. And that went very, very well. I expect that we could do something that substantially bigger than that.

If we got, if you’re talking about sort of on the low order of merger equals, of equal sizes that was referring a loss of reflection about how you maintain the franchise value on both firms and how one plus one is equal to three in that situation. So I think we would have to sort of be even more thoughtful than we have in the passive how our merger was coming together. With respect to sort of the timing and size and how you get over $10 million, we say we would love to sort of orchestrated toward 9.5 for six months and that we lead to 12 and just jump right on through, but of course, you can’t choose how sort of acquisition, potential acquisitions come to the table. So, we’ll just have to play that as it comes.

Robert Cozzone

In terms of the cost part of that equation, Laurie, as I’ve said in the past, we’ve gradually made a number of investments and obviously areas like BSA and AML, and general compliance adds higher a director of enterprise risk management, a director of capital planning. We have purchased some data sources to help with our DFAST modeling and are building internal capabilities. We are adding to our portfolio risk management staff. So, we probably have a couple million dollars already built into our run rate, but we probably have another couple million dollar to go before we are finished.

Laurie Hunsicker

Okay, and then just in terms of that 2 million additional spent. When in your mind does that start? Does that start next year?

Robert Cozzone

Well, as I said it’s been ongoing. We are preparing and we want to be ready well beforehand, if we can. I mean obviously if we found an acquisition tomorrow then we would have less time to prepare, but our plan is to be well prepared beforehand. So, most of the cost associated with crossing the $10 million threshold should be embedded in our run rate prior to crossing with the exception of Durbin obviously, which we have talked about is a meaningful impact for us because the amount of interchange revenue we generate from our core checking base.

Laurie Hunsicker

Okay. And just remind me the Durbin impact is about 5 million, is that right?

Robert Cozzone

No, it’s closer to the 6 million to 7 million.

Laurie Hunsicker

6 million to 7 million, okay thanks. And then Chris, just going back to your comments in terms of obviously you were a lot small when you did Ben Franklin at a 1 billion, and if we were to do an extrapolation and again just talking about your comments, potentially 9.5 to 12. You would potentially be comfortable doing a $3 billion to $4 billion bank?

Christopher Oddleifson

Well, theoretically, yes.

Laurie Hunsicker

What’s the math for it?

Christopher Oddleifson

That goes in detail right and that’s a hypothetical question, I think it’s — when we approach every sort of bank we acquire, we take a very sort of fresh eye customize look about, sort of what they key opportunities issues development or where we’re at, we need to track this going. But conceptually, yes, I mean I think that we would be very engaged, we would be delighted to engage in a conversation like that and I think we have the platform, the capability, the capacity to do it with very well.

Unidentified Analyst

And the currency. Your point is correct.

Christopher Oddleifson

Yes.

Operator

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

Matthew Breese

Just to continue the M&A dialog, I have noted the adjacent markets and does that mean you would consider Rhode Island, New Hampshire, Western Massachusetts as the adjacent markets? And then and I note, if you had to kind of wink those options in terms of desirability, how would it go?

Christopher Oddleifson

Yes, so what we’ve said in the past is that if you think about a semester call that sort of stood the start in Western sort of then embarks East that captures Rhode Island and captures Southern New Hampshire and up to maybe Southern Maine. That sort of work the bulk of the economic activity is in New England. And so we really believe we could create overtime and we don’t have any specific plans such as sort of at you said, different plans out and visions sort of what you could become, $15 billion or $20 billion bank within that arc. And in terms of jumping to Western Massy activity out there isn’t as robust. So, we’re probably in terms of priority that would a second priority, more priority.

Robert Cozzone

And you know math that we already have a lending center and an investment management center in Providence, Rhode Island that has been very successful. Branching into Rhode Island is a little bit different equation, but we’ve been very pleased with our lending and investment management results in Rhode Island today.

Matthew Breese

And then some de novo prospective, if the opportunities are whacking. Could we see you push north and headed to Portsmouth and Portland from just an organic standpoint?

Christopher Oddleifson

That certainly is going to allow us possibility. I’d say it’s probably a lower priority than really flushing out of Boson centric markets.

Robert Cozzone

And we would go directly there, you would see us make progress in between our, the northern parts of our footprint and New Hampshire and Maine before we actually made a jump to that level, if we were to consider that.

Christopher Oddleifson

A lot of these are hypothetical questions, right. I mean it’s a — how — what opportunities would rise and so on, really to drive a large part how we think about this.

Matthew Breese

Right, but if we talk about thinking about $15 billion or $20 billion bank and how you get there at least become important questions.

Christopher Oddleifson

We call absolutely and then thank you for asking them.

Matthew Breese

And let me be switching gears to another big part of your business which is wealth management. Are there opportunities there on that front to acquire, the pricing can be different, the earned back can be longer? And how do you think about that in terms of your discipline around acquiring different kind of businesses?

Christopher Oddleifson

I will say that it is extremely more difficult to acquire a wealth management operation with the confidence that to perform over the long term. We have over the last decade probably desk reviewed a couple hundred, sometimes with the help of some folks who know a lot of the M&A space in that industry. We probably talk to 20 or 30 and we’ve acquired one. And that is in large part because the size of the entity we typically could acquire are very entrepreneurial, very dependent and typically our interest in selling, working for few years and then moving on and starting something off. So, we have to be — we have approach the M&A and invest management where the great deal of eyes wide open.

The one acquisition we did make in this space was where the two principals [0:39:12.0] both clearly have time and age and then two secondary principals were clearly — would adapt to our culture and invest and adopt our approach with enthusiasm. We would like to be accounting role and [Indiscernible] talked about more of the accounting roles of acquire — when you do an earn-out structure or I will [Indiscernible] your point you when you’re buying in a space, so that’s certainly the consideration. But have been said all that which is kind of negative — little bit more negative, I would say that that now if we find a right opportunity, look, we like to do because there are literally hundreds of investment managers in that arc that I was talking about that could potentially be part of the franchise, but it’s much more difficult to two.

Operator

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

Christopher Oddleifson

Well, thank you everybody and we look forward to talking with you again at the end of the second quarter. Have a good next few months. Thank you.

Operator

This conference call is now concluded. Thank you for attending today’s presentation. You may now disconnect.

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