Good morning and welcome to the Independent Bank Corp. Fourth Quarter 2015 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. [Operator Instructions] Please note this event is being recorded. 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 in response to new information, future events or otherwise. I would now like to turn the conference over to Chris Oddleifson. Please go ahead.

Good morning. Thank you. Good morning, everyone and thank you for joining us this morning. As usual, I'm accompanied by Rob Cozzone, our Chief Financial Officer. Once again we ended the year on a high note with our strongest performance of the year. Core earnings in the fourth quarter rose to $19.5 million or $0.74 per share. Rob will cover the quarter in more detail shortly. I'd like to focus my comments on the overall year just completed. 2015 proved to be another terrific year for us on many fronts. Yet again we produced record results of core operating earnings of $71.7 million or $2.76 per share for the full year. This constitutes EPS growth of over 10%. There's nothing quirky here. This is a continuation of sound fundamentals. Some highlights of our 2015 performance include solid operating revenue growth, ongoing organic loan growth, very strong core deposit generation, continued low funding costs, healthy fee income growth, steady growth in our investment management business, superb credit quality with lower nonperforming asset levels and minimal net credit losses and ever rising capital levels, we grew tangible book value per share by over 10% despite absorbing an acquisition earlier in the year and of course effective cost management. Looking beyond the numbers, Rockland Trust made considerable strides in a number of important areas during the year. We’ve assimilated the Peoples Federal Bancshares acquisition quickly and seamlessly, providing us with our first retail presence in Boston proper, and we are expanding our customer base nicely. In general, we’re really capitalizing all our recent moves to expanding greater Boston across the range of commercial, consumer investment management and small business sectors. New business generation continues at a solid rate where we rank in the top quartile of competitors in that measure. Our brand has…

Thank you Chris, good morning. I will now review the earnings for the fourth quarter and full-year in more detail. Following those comments, I will provide earnings guidance for 2016. Independent Bank Corp. reported net income of $19.5 million and GAAP diluted earnings per share of $0.74 in the fourth quarter of 2015. This compared to net income of $18.6 million and GAAP diluted earnings per share of $0.71 in the third quarter. There were no non-operating items in either quarter. As Chris stated, the full-year in 2015 operating diluted earnings per share improved by 10.4% and reached a record of $2.76. Performance ratios for the quarter were also strong. The return on average assets was 1.07% and return on average equity was 10.03%. In addition, our return on average tangible common equity approached 14% for the quarter. Strong earnings results continue to drive growth in tangible book value, which increased to $21.29 at December 31 and now sits almost 11% above where it was a year ago. In addition, tangible capital to tangible assets was a healthy 7.98% at December 31, 2015 over 50 basis points higher than a year ago. As expected, moderate loan growth continued in the final quarter of the year. Fourth quarter growth was driven by commercial construction and home equity lending. Although construction has historically tended to decline in the fourth quarter 2015 was an exception as strong new bookings an increase in existing line utilization and the reclass of some loans from CRE to construction contributed to strong growth in that category. Despite the recent growth the construction portfolio continues to be very well diversified across geographies and project types. No single city or town represents more than 10% of our construction exposure and no single project represents more than 5%. When markets…

Great. Thanks, Rob. So we're ready for questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Mark Fitzgibbon of Sandler O'Neill. Please go ahead.

Hey guys, good morning.

Good morning.

Hi Mark.

Rob, I wonder if you could help us think about these tax credits that you guys have been purchasing and how those might flow into the income statement in 2016. Will it be a fairly steady, you think, 31%, 32% tax rate over the course of the year?

Yes, it will be steady 31% to 32% unless we true up the tax rate obviously every quarter depending upon our expected performance for the full-year, but based upon budgeted expectations for the full-year pretax income and the mix of that income we will be accruing 31% to 32% evenly. The actual tax credits - the historical tax credit, those are just kind of periodic opportunities that we are able to take advantage of and are somewhat difficult to predict. They didn't contribute significantly to the full-year in 2015, but pricing on them fluctuates depending upon the project and the environment and the pricing had gotten pretty rich. We had the opportunity to execute on one in the fourth quarter that seemed reasonably priced to us, but those are somewhat unpredictable.

Okay. And then I heard your guidance about the margin for the full-year, but I thought earlier in your comments you mention that the margin would rebound a bit in the first quarter. Is that because of the cash deployment?

No, it’s - well partially due to cash deployment, but also because of the impact of the December rate increase will be felt in the first quarter. So if we just get this one increase and no further increases will get a boost in the first quarter relative to the fourth quarter and then as fixed assets continue to reprice at lower rates due to tenure being sub 2% now. We would expect the core net interest margin to gradually trend down throughout the rest of 2016 again unless we get further rate increases, but the total year we would expect to approximate what we realized in 2015.

Okay. And then changing gears a little bit, with the joint regulatory white paper that just came out on commercial real estate in December, and I noticed your commercial real estate growth slowed this quarter, is that related because you do have a decent concentration in commercial real estate, or was it just the market moved away?

Yes, not related at all and that guidance includes both CRE and construction and as you saw we had very strong growth in construction, so on a combined basis, both portfolios grew. We have consistently applied the previous [guidance reference] in that most recently issued statement throughout the credit crisis. So there is nothing new there for us, Mark and in fact our concentration in CRE relative to those measures particularly the 300% measure has gradually declined over time from what was a peak in probably the 2011, 2012 timeframe.

Okay. Thank you.

You are welcome.

The next question comes from Collyn Gilbert of KBW. Please go ahead.

Thanks. Good morning guys.

Hi Collyn.

Just talk a little bit about kind of your outlook in terms of growth. Rob, I know you said loans in that 3% to 5% range for the year. Is there some more color that you can add in terms of how you see that trending over the year? Do you anticipate growth to sort of slow in the back half of the year, or just talk a little bit kind of your outlook for what's going to fuel that growth?

Last year 2015 the first half of the year we were essentially flat almost exactly flat as a matter of fact. We were down in the first quarter slightly up in the second quarter. In the second half of the year, we grew just north of 2% which got us to the annual growth of 2.3% organically, excluding the Peoples acquisition. Last year's first quarter was as you probably recall was impacted significantly by the weather in both our consumer and commercial portfolios. So that certainly could happen again here in the first quarter of 2016, hopefully it doesn't. Our commercial pipeline ended the year at north of $200 million, which was nice growth versus the $160 million in change that ended the third quarter and so that bodes well for the first half of the year. It's little challenging to predict exactly when some of those closings might come through. So we don't expect to have Collyn any necessarily seasonality in the commercial book, but weather could impact that. The consumer books of business do get impacted by seasonality. So applications in the fourth quarter in both the residential book and the home equity book were lower not surprisingly because of the holidays and so you end up with lower closings in the first quarter and slightly lower growth. That then picks up into the second and third quarter and so that will contribute to additional growth we would expect it to contribute to additional growth in the latter quarters in the year.

Okay. Okay that's great. That's helpful. And then just in terms of deposit pricing, are you guys seeing any change in your markets among your competitors as it relates to deposit pricing with the Fed move in December?

Yes, I'm not sure I would necessarily link it to the Fed move I mean there is definitely some special offers out there by various banks. I think some of them are unique to strategies that those banks are currently deploying and not linked to a Fed increase. In terms of our customer base I can only think of one customer at least that gotten to me that has alluded to the Fed increase and their desire for higher rate on their deposit account. I'm not saying anything significant as of yet.

Okay. That’s helpful.

Our core deposit level is the highest it’s ever been at 88%.

Almost it’s around 88.6%.

88.6% that bodes well so far price sensitivity in a rising rate environment.

Yes. Okay, great. And then just finally, can you talk a little bit, Chris, just in terms of outlook for franchise expansion either through branch openings or M&A I mean if there are certain geographies or areas that you feel like you'd like to supplement with the franchise?

Sure, yes as you know historically we have not been sort of aggressive de novo, but sort of very carefully sort of picking our spots and we do have a new branch opening on May 1st in North Quincy, Quincy has been a terrific market for us you may recall about eight years ago we put our first branch in the city and it has done very, very well and so we are adding a second. We have a very comprehensive branch network optimization sort of process here, we’ve hired some talent that is bring a lot of new capabilities and there are number of - there are handful of branches that we are looking to relocate they will stay in the same geography. There are a handful of branches that were renovating and converting to a new modern format. So we are sort of optimizing on the margin if you will. In terms of acquisitions, yes, we continue to be very interested in that, if you take a look at the last 10 years that we have - that's been an opportunistic strategy that started out as an opportunistic strategy is turned into one that’s really pretty key to our growth over the last decade. And we expect that over time there is going to be the continued consolidation in the industry and we like to, if possible and appropriate and priced rate and there is good strategic compatibility, add some incremental most likely smaller franchises to our - within the current footprint or what our success has been to sort of expanding concentric circles where we really can be very good and focused on deploying our business model just beyond our borders. So we would like to and would anticipate over the next I mean can’t predict since there are so few franchises available, but would anticipate hopefully the trend will continue.

Okay. That’s great, that’s helpful. I’ll leave it there. Thanks guys.

Thanks Collyn.

[Operator Instructions] The next question comes from Matthew Kelley of Piper Jaffray. Please go ahead.

Yes, hi guys.

Hi, Matt. How are you?

Good. Just a question on your deposit service fees. So when you look at NSF and overdraft and maintenance fees, do you think we've kind of reached the bottom in the trajectory of some of those fees relative to deposit balances, or will there be more pressure going forward? And then where do you stand on your policies on NSF and overdraft versus some of your competitors?

We think we - I guess I’ll hit the latter question first here. We think we take a pretty conservative approach to our overdraft fees. We don't do any sort of kind of reordering of transactions and those sorts of things. But, at the same time we’re in the mix in terms of what we charge for an individual overdraft relative to competition and something that we monitor pretty carefully. We do seem to be in somewhat of a gradual decline in terms of overdraft fees due to changes in customer behavior attributed to the gradually improving economy and the lowering of the unemployment rate or just awareness in general. And so we have no reason really to expect that kind of gradual trend in overdraft fees to change and so we’re anticipating lower overdraft fees on averages we head into 2016. However, there are other opportunities for fees. Certainly debit interchange revenue has been a very strong contributor for us and we’re having a lot of success getting debit cards in the hands of our customers. When they open an account and getting those debit cards activated and active and we have a number of different marketing strategies to be successful there and so we expect that to continue to grow. And that is also consistent with growing the core deposit base in general, which we have been very successful at.

Got you. And then getting back to the discussion on just the interagency commentary on commercial real estate types of risks in the system. Could you comment on the status of the Boston development market, particularly the high end and maybe just give us an update on how you see the residential multi-family condo type of market today versus a year ago and where we are maybe in that type of cycle and how that impacts your willingness to lend in that market?

Yes, that’s a really interesting question. And there is a $35 million penthouse on top of Millennium Tower that's available if you're interested?

A little out of my league.

As you know, there's been a lot of high-end housing sort of being built in the Boston market and many of us sort of look at this sort of as consumers and ask sort of where is the market for that. And these are sort of I mean the Millennium Tower aside, which is really high end. There are number of sort of multifamily buildings that are sort of rents in the, for a two-bedroom in the $35 to $5,000 month range, which is really sort of out of reach for anybody even earning $100,000. So there’s been a little bit of concern about that. We do not lend into that market. Those projects are too big for us so that sort of that doesn’t influence us. We will lend on a smaller scale in the luxury market where developers have a very good reputation, who are well-capitalized and very low risk, and we've been very successful doing that. The GE announce that will bring a lot of jobs in here that will support sort of multifamily housing pricing maybe along the lines that I just talked about. Really what is - what is really interesting sort of question that you are asking without knowing it is sort of what is the situation with multifamily policy in the city of Boston and how does that impact our overall economic growth in the city. There is a lack of affordable housing. What I mean by affordable housing is not subsidized affordable housing. I am saying about affordable housing for the young professionals who want to come to Boston and work in the tech sector, work at the mid to entry-level jobs at GE, for example, and that is a policy question that the mayor is sort of taking on head-on sort of put a big goal out there to build sort of the housing that is affordable, [as I said]. Sharing in that housing partnership, we’ve commissioned some work to demonstrate if you do not have housing in the affordable range for these younger professionals, you will impact the Commonwealth growth rate. So this is a big interesting policy issue that’s getting a lot of attention by the mayor's office and by various business groups around the city. But I will say that in terms of worrying about will the buildup in the higher-end apartment’s sort of impact customer credit perspective I think we don’t have significant exposure there.

Gotcha. All right, thank you.

Thanks Matt.

There are no additional questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Chris Oddleifson for any closing remarks.

Great. Well, thank you, Kate and thank you everybody for joining us today and I look forward - we look forward to talking with you again in three months. Have a good day. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.