Independent Bank Corp (Mass) (NASDAQ:INDB) Q4 2019 Earnings Conference Call - Final Transcript
Jan 17, 2020 • 10:00 am ET
[Operator Instructions] The first question comes from Mark Fitzgibbon, Piper Sandler. Please go ahead.
I wanted to first -- could you just clarify a comment you made about the interchange fees? Is that $5 million to $5.5 million of lost interchange fees in the second half of the year, did you say that was including that or excluding that? I apologize I missed it.
The guidance includes that reduction, Mark.
Got you. Okay. And then secondly, can you help us think about the purchase accounting accretion? As we sort of go into the first quarter, does that movement touch lower?
It does, yeah. We've been experiencing over the last couple of quarters -- if you recall, the Q3 accretion income was about $3.9 million, Q4 was about $3.4 million. Our expectation on a normalized level included in the margin guidance I gave is about $2 million to $2.5 million a quarter. So we do anticipate that to come down, but again, always somewhat contingent on individual credits and what we may have from marks [Phonetic] on those. But on a whole basis, we do anticipate it to come down to a degree, yes.
Okay. And then how much more runoff do you think is likely from the Blue Hills portfolio? We're getting to the end of that?
Yeah, I'd say, big picture, when we closed on the deal and looked at the portfolio, there were a handful of credits that we certainly anticipated when they came up for renewal that we would not extend or that would just because of their transactional nature refinance out here in the near term.
So I would say the majority of that has exited through the fourth quarter. So we do anticipate that the level of pay-offs and pay-downs should subside. I wouldn't say it's all behind us by any means. But we certainly should see that come down compared to the levels we've been seeing.
Okay. And then lastly, I know that couple of credit things you had this quarter were idiosyncratic. But from a credit perspective, what are the kinds of things that you're worried about out there that you're maybe dialing back a little bit or avoiding?
Yeah. I'd say certainly when you look at the growth in our construction portfolio, I think that's a portfolio that inherently may seem to be more risky. But we feel very, very good about that portfolio and the opportunities we've been seeing. And I think in particular an interesting dynamic there is, we're really getting a lot of those construction deals that are looking to have a very local banker familiar with construction lending and underwriting. And as a result, we are seeing less competition for those types of deals such that they meet our underwriting standards, the pricing is very well, we have good spreads there. We typically see borrowers putting more equity into those deals.
And when those deals get to a permanent stage and are looking to get permanent refinancing, that's when