Boston Private Financial Holdings, Inc.
Q1 2015 Earnings Call Transcript

Published: 15 Apr 2015

[Operator:]

Hello and welcome to the Boston Private Financial Holdings First Quarter 2015 Earnings Conference Call. [Operator Instructions] Please note this call is being recorded. Now I would like to turn the conference over to Clay Deutsch, CEO of Boston Private Financial Holdings. Mr. Deutsch, please go ahead.

[Clay Deutsch:]

Thank you. Good morning. This is Clay Deutsch, Chief Executive Officer of Boston Private Financial Holdings. Welcome to our first quarter 2015 earnings conference call. Joining me this morning are David Kaye, our Chief Financial Officer; Mark Thompson, CEO of Boston Private Bank and now President of Boston Private; and Steve Gaven, Vice President for Investor Relations. At this time I’ll ask Steve to read the Safe Harbor Provisions before we make additional remarks.

[Steve Gaven:]

Good morning. This call contains forward-looking statements regarding strategic objectives and expectations for future results of operations and financial prospects. They are based upon the current beliefs and expectations of Boston Private's management and are subject to certain risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. I refer you also to the Forward-Looking Statements contained in our earnings release which identified a number of factors that could cause material differences between actual and anticipated results or other expectations expressed. Additional factors that could cause Boston Private's results to differ materially from those described in the forward-looking statements can be found in the company's filings submitted to the SEC. All subsequent written and oral forward-looking statements attributable to Boston Private or any person acting on behalf are expressly qualified by these cautionary statements. Boston Private does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the forward-looking statements are made.

[Clay Deutsch:]

Thank you all for joining the call this morning. In the first quarter, our company generated net income of $18.8 million or $0.21 per share compared with $0.13 per share last quarter and $0.20 per share in the first quarter of 2014. Return on average tangible common equity was 16% for the quarter and return on stated common equity was 10.8%. Before we go more deeply into the financial results, I would like to give an update on the integration and build out of Boston Private Wealth. Since the October 2014 closing, we have made significant progress in combining both the back office and front office functions which now make up Boston Private Wealth. We remain on schedule to complete the integration by the end of the second quarter of 2015. When we announced this transaction we committed to achieving combination benefits of $3 million. Through the first quarter, we have realized about one-third of those expected benefits and we expect to fully realize these benefits by the fourth quarter of 2015. In February, we introduced the Boston Private Wealth brand to the marketplace. With more than 9 billion of assets under management, Boston Private Wealth ranks among the largest high net worth registered investment advisors in the country and is on a shortlist of companies that combine sophisticated investment management and wealth management capabilities with bespoke, trust and private banking services delivered in a boutique client centered setting. Our private bankers have been working closely with their counterparts at Boston Private Wealth to develop a seamless go-to-market strategy for the combined wealth management and private banking offering. Two weeks ago I had the opportunity to attend a two day sales strategy session with the top client leaders and client facing professionals from wealth management and private banking. I left that meeting believing that we have the talent and technical expertise to deliver on our goal of building the premier private clients business in our markets nationally. We remain confident that in the second half of 2015, our performance plan will be evident and we look forward to updating you on our progress as we move ahead in the year. At this point, I would like to turn it over to Dave and to Mark for more detail on our financial performance and then I'll return to discuss the wealth management affiliates and offer some closing comments. David?

[Dave Kaye:]

Thanks, Clay, and good morning, everyone. My comments will begin with Slide 3 of the earnings presentation and that can be found in the Investor Relations section of our website, bostonprivate.com. On Slide 3, we provided summary of our key performance metrics. In the first quarter 2015, return on average common equity was 10.8% as opposed to 7% in the fourth quarter of 2014 and 10.9% in the first quarter of 2014. The company's tier one common equity ratio was flat linked quarter and it does reflect the implementation of Basel III. On Slide 4 we'll walk through the consolidated income statement. Core fees and income increased 1% linked quarter and are up 27% year-over-year to 40 million. The year-over-year increase includes both organic growth as well as the revenue from the Banyan acquisition. Total operating expenses for the first quarter of 2015 was $63.4 million, and that's down 1% on a linked-quarter basis. Total operating expenses increased 15% year-over-year again that's primarily due to the Banyan acquisition. Pre-tax, pre-provision income increased 18% on a linked quarter basis and is up 8% year-over-year. The company recorded a provision credit of 2.5 million in the first quarter and that's primarily due to 3.9 million of net recoveries partially offset by some downgrades on the loans. On Slide 5, we show a detailed breakout of our consolidated operating expenses. Salaries and employee benefits increased 6% linked quarter and that's due to seasonal expenses of approximately 1.5 million related to 401-K and other taxes. Occupancy and equipment was up $500,000 linked quarter due to higher rent expense at our Wealth Advisors. Marketing and business development expense decreased 44% linked quarter to 1.3 million and reflects the timing of various marketing campaigns at Boston Private Bank and Boston Private Wealth. We expect the marketing and business development expense to be in the $2 million range per quarter for the remainder of 2015. Finally, other expenses fell 927,000 linked quarter as the fourth quarter of 2014 included about an $800,000 charge related to the prepayment of FHLB borrowings. Moving to Slide 6, the top chart shows the relationship between our net charge-offs or recoveries and our provision for loan loss. As you can see these measures are highly correlated. The chart on the bottom demonstrates the continued improvement in asset quality with criticized loans down 12% year-over-year. We continue to maintain strong reserves and the ALLL loans finishing at the quarter at about 1.46%. This concludes my prepared remarks in morning. And I'll now turn it over to Mark for a discussion on the Private Banking and Wealth Management and Trust segments. Mark?

[Mark Thompson:]

Thanks Dave and good morning all. My comments will begin on Slide 7, which shows the Private Banking segment excluding Wealth Management portion of our bank. In the first quarter net interest income increased 4% linked quarter to $47 million, excluding interest recovered on previous non-accrual loans at $1.7 million in the first quarter of 2015 and 300,000 last quarter. Net interest income increased 1% linked quarter. Total operating expenses were down 1% linked quarter and up 3% year-over-year. The private bank efficiency ratio improved to 55% in the first quarter of 2015 down from 59% last quarter and last year. We believe the improvement in our efficiency ratio demonstrates our ability to effectively manage expenses while at the same time funding our growth initiatives both in New England and on the West Coast. Slide 8, shows the past five quarters of average loan balances and deposit balances [by 8-K] [ph]. Total average loans increased 3% year-over-year led by C&I up 15% and residential up 5%. Average CRE loans are down 5% year-over-year due in part to the loan sales we executed in the second quarter of 2014 along with the pay down of problem loans. We are also pleased to see double-digit year-over-year and period growth in the C&I category across all three markets with New England up 12%, San Francisco Bay up 13% and the Southern California up 46%, albeit off a smaller base. Average total deposits increased 7% year-over-year to $5.4 billion. Money market and savings increased 13% and 10% respectively while CD's decreased 3%. Now Slide 9 shows end of period deposits by region. We continue to see strong year-over-year growth in both San Francisco Bay up 11% and Southern California up 15%. New England was down linked quarter due to seasonal out flows. Year-over-year deposits were down due in a large - due to a large client in flow related to a liquidity event at the end of 2014. On the right side of the slide, we show the progress we've made in remixing our client base since we integrated the West Coast banks with Boston Private Bank and Trust at the end of 2011. CD's has 8% of total deposits have fallen from 31% to 11% in San Francisco Bay and from 44% to 17% in Southern California. Now turning to Slide 10, net interest margin was 3% in the first quarter of 2015 up 17 basis points linked quarter and down 4 basis points year-over-year. Included in the current quarters net interest income is $1.7 million of interest on previous non-accrual loans, excluding the recaptured interest, net interest margin was 2.89%. Slide 11 contains financial information and for the wealth management and trust segment, which operates under the Boston Private Wealth brands. The first quarter of 2014 data represent the pre-acquisition bank wealth management business, while the fourth quarter of 2014 and the first quarter of 2015 shows the results for the newly combined Boston Private Wealth. Revenue increased 5% on a linked quarter basis to $14 million included in the first quarter of 2015 revenue is a $400,000 gain related to the fair value accounting for contingent payment liability. Excluding these gains, revenue increased 2% late quarter. Total operating expenses has decreased 4% linked quarter over to $12.3 million. The fourth quarter of 2014 included 800,000 of costs related to the Banyan acquisition. Now I will turn it back to Clay.

[Clay Deutsch:]

Thank you, Mark. Let's turn to Slide 12, total revenue for the investment management segment increased 2% year-over-year to $11.7 million. On a linked quarter basis revenue decreased 1% due to seasonally lower performance fees at Dalton, Greiner. These fees are recorded in the fourth quarter. First quarter 2015 segment EBITDA margin was 33%, slightly down from prior quarters, but still above our 30% EBITDA margin threshold. The segment overall reported net outflows of $273 million in the quarter reflecting ongoing pressure on active domestic equity strategies. Assets under management ended the first quarter at $10.7 billion down less than 0.5% quarter-over-quarter. Over the past six months, we’ve taken a number of steps to strengthen the performance of Anchor Capital Holdings our largest investment management firm and to reposition that firm for future growth. We've added debt to our investment professionals and our distribution teams. Investment results are quite strong and we’re increasing our visibility across our platforms. Moving to Slide 13, our wealth advisors reported an 11% year-over-year increase in revenue for the first quarter of 2015 to $12.7 million. Operating expenses increased 17% due to staff expansion and new office space. The segments first quarter EBITDA margin of 32% remains above our target of 30%. Assets under management ended the first quarter at $10 billion up from $9.9 billion at year end representing a quarter-to-quarter increase of 1.3%. More information on assets under management and net flows can be found on Slide 14. In the first quarter consolidated net flows were negative $388 million as previously mentioned $273 million of this were 70% of the net outflows were from the investment management segment. Boston Private Wealth experienced net outflows of $102 million in the current quarter approximately half of the outflows from Boston Private Wealth, our low fee assets under administration, this won't have a material impact on Boston Private Wealth revenue. That concludes our comments on first quarter 2015 performance. I'd like to briefly comment on executive appointments, which were approved at our Board meeting yesterday and released to the public last night. These changes were more directly aligned the Boston Private Executive team with executing the company's plan to become nationally recognized as a distinctive wealth management trust and private banking organization. Mark Thompson has been appointed President of the Company and will continue to serve as Chief Executive Officer of Boston Private Bank. As Company President, Mark will work even more closely with me in overseeing Boston Private Wealth and Boston Private Bank in an expanded set of wealth management trust and private banking capabilities under the Boston Private umbrella. These businesses are at the heart of our expansion strategy and our goal of becoming a nationally recognized company. In addition, Mark has been nominated for election to the company's Board of Directors. Following election at our 2015 annual shareholders meeting later today, he will join me as one of the two Boston Private Executive serving on the Company's Board. Mark joined our company in 1994 and has served as Chief Executive Officer of Boston Private Bank since 2003. Dave Kaye, has been appointed the Company’s Chief Administrative Officer, and will continue to serve as the Company's Chief Financial Officer and Treasurer. He will focus on continuing to enhance the quality, effectiveness and efficiency across all of our corporate functions. Dave has been our Chief Financial Officer since 2007. Corey Griffin will become Chief Executive Officer of the Boston Private Investment Management segment. Corey's focus will be aiding the development of Anchor Capital and Dalton Greiner. Corey has deep experience in the investment management business having previously served as Chief Executive Officer of the Boston Company Asset Management Business, he joined Boston Private in 2014 as Head of Corporate Development and Wealth Management Strategy. I’m personally very excited about these appointments. I look forward to working with this executive team and a deeper team of executives across the company to accelerate the development of our company. With that, I’d like to open the call and take your questions.

[Operator:]

[Operator Instructions] And the first question comes from Chris McGratty with KBW.

[Chris McGratty:]

Good morning. Dave question for you on the expense, if I look at the slide deck you said there is 1.5 million of seasonal expenses and then you said the marketing budget little bit low, but if you kind of net those out for the second quarter is kind of a 62.5, 63 a fair run rate again given your comments about cost saves from Banyan?

[Dave Kaye:]

Yes. That's probably in the range, Chris.

[Chris McGratty:]

Okay. Clay one for you kind of a broader high level question. Non-performers are 60 basis points, you obviously still getting some recovery there and you still got the earning benefit from Westfield over time but there was a bump up in the quarter. Can you talk about how you’re thinking longer term as you kind of see how kind of replacing these earnings; there’s by my calculation a decent headwind that you got to replace and I know you got some initiatives with Banyan but maybe speak to capital allocation kind of replacing your earnings over time?

[Clay Deutsch:]

Yes. You're right but I'd call it a gradual slope rather than going off a cliff with both the factors you described and I think what we’re trying to rotate into as the earnings expansion offsets are broadly our whole family of wealth management, trust and fee driven activities where we continue to believe there is substantial upside. Second I like the development I see in particular in our California markets and we think there is a lot of upside as we now enter into San Jose and Florida. So we've gone from essentially kind of a one market play in Boston to Boston LA, San Francisco, San Jose, Florida play with a lot of upside. I'm heartened by evidence I hope that we've stabilized NIM despite the difficulty of the yield environment and I like the evolution of the loan book in the rotation into C&I over CRE. So it's no one silver bullet Chris, but I think steadily advancing our franchise, it gives me a lot of confidence in our earnings strength.

[Chris McGratty:]

Okay. That’s helpful. And just one follow up, are there more - Clay you are spending time on your capital – use of capital to use, are you spending a lot of time prospecting for additional, are there other opportunities that you’re hopeful to announce maybe in this year?

[Clay Deutsch:]

Well as I've said previously Chris, we look at everything; I'm most interested in intelligent additions to our wealth businesses, I’ve said pretty publicly, bank on bank deals is not a priority for us but as you know part of our capital plan once we really get Boston and Private Wealth grounded and humming, part of our capital plan is subsequent additions to our wealth business that makes sense and we’re going to show a lot of price discipline but I like that. I like that as a destination for capital.

[Chris McGratty:]

All right. Thanks a lot.

[Clay Deutsch:]

Thanks, Chris.

[Operator:]

And the next question comes from Casey Haire of Jefferies.

[Casey Haire:]

Mark, my question for you on the loan growth funds, sounds like you, there was some had deals with some pay downs this quarter which kind of take you below that, that mid single digit guide range that you guys have been talking about and hitting. But just curious, how is the pipeline shaping up headed in the second quarter, can you get back to that mid single digit pace and if so, kind of what are the drivers by product and geography?

[Mark Thompson:]

Sure. We’re confident we'll continue at the pace you have seen over last say three to four quarters. In the first quarter, I think what we saw was a reduction in some of the non-strategic type client relationships, lot of that happened to be in the CRE book and in particular San Francisco Bank. So two things really the management team has been focusing on first improving the asset loan composition across all three of our markets so that they were developing much more strategically focused relationships, and it's really driven by the model. So not too much we’re out looking for specific loan types, we are looking for a specific client profiles and that's developing very nicely. If you take a look at the types of clients that we have seen initiate relationships over the past few quarters, privately held businesses, a lot of private partnerships, private equity vendor capital. We're really taking advantage of the innovation in the entrepreneurial activity taking place in San Francisco, Silicon Valley, Boston and also in LA. So we feel the model is working, we feel the demographics in our market support our growth strategy and growth metrics and objectives and I feel confident that's a pretty consistent track that we'll look forward to.

[Casey Haire:]

Okay, great. And then Dave, on the credit front obviously another more good news on credit recovery this quarter. I know it’s difficult, but just curious, of the non-accruals, the $32 million or so, how much - what percentage of them are paying as agreed and what’s your best guess in terms of how long we can see this benefits both in interest recoveries and in provision credits going forward.

[Dave Kaye:]

Well, in response to your first question of the $32 million of non-accruals, I’d say about half of those, little bit less than half of those are paying as agreed, so may be $15 million or so payments agreed. Those are obviously the biggest source that we would have for recoveries and interest recoveries, really difficult to say. We expect to get more recoveries this year and as I said in the past, the net recoveries are really going to influence the provision along with our growth in our loan book. So we had a little bit less growth, little bit less provision associated with the growth this quarter but, we’ll still see some more recoveries in the future.

[Casey Haire:]

Got it, thanks. And then Clay just wrapping up with you, on the - you mentioned substantial upside, on the fee opportunity, just curious because the industrial management continues to be a top story with outflows running around basically 10% for the last three quarters. I'm just curious does that presume, the upside that you see does that presume some stabilization and investment management or are you, is the momentum in wealth management and private banking enough to overcome weakness there.

[Clay Deutsch:]

Well first, I like the momentum in wealth management and private banking and I like the potential there, specifically asset management though. Let me pick up on your word stabilization, that’s a word we actually use quite a bit internally. We’re now about two to three quarters into a very significant set of transitions at Anchor Capital which of course 8.8 or so billion of our 10 plus billion in the investment management segments. So Anchors - as goes the Anchors so goes investment management to a large extent. We have undergone CIO succession. We've put in place an overhaul investment process. Anchor has a long track record of value disciplines as seven of their nine strategies are now pretty strong outperformed. We like what we see happening, but as you know transitions in investment management firm are always a sensitive period. In parallel, we've had a pretty significant remake of the marketing and sales leadership across the three primary channels, which feed clients to Anchor the institutional channel, the platform channel, and then direct client separately managed accounts at Anchor what we call the wealth management channel. So, we've done a very, significant set of organization transitions, new marketing and sales strategy, distribution strategy, and it's rolling out. I'm pleased with the progress and my hope is we'll get Anchor much closer to net neutral is kind of goal one. And goal two then is once neutral and stabilized to actually drive growth. We’re beginning to see net growth in a number of Anchor's distinct strategies, so I like where it's going and where I think it can go. So I think stabilization as you put it, it is the strategy that's the operative word.

[Casey Haire:]

Great. Thank you.

[Operator:]

Thank you. And the next question comes from Jennifer Demba with SunTrust Robinson Humphrey.

[Jennifer Demba:]

Hi Clay, I wonder if you could just elaborate a little bit on the credit downgrades you guys experienced during the first quarter and what you’re seeing overall all credit trends in the portfolio, give us some more detail there.

[Clay Deutsch:]

Well let me tell you kind of our stance, our house stance and then Dave can elaborate on any of the quantitative detail. But I would just say we've had a several quarter discussion internally as well as with our Board and our Risk Management committee. I’ll make a subjective point, I think we’re in the final third of the credit cycle, as I look at the marketplace. So, we actually have heightened vigilance around the caliber of our loan portfolio. I don't yet see any systemic degradation in our book. I see whacky behavior in the marketplace, but I don’t see degradation in our book. I hope our track record speaks for itself. We’ve had very strong and conservative credit disciplines since I’ve been here and I think the team that oversees our portfolio quality is extremely able team. But we're very tough minded about this. What you saw in the quarter was a re-rate of a small number of performing loans to quote special mentioned, which means there are perfectly fine performing as agreed loans, they're not criticized or classified but we’re watching. In some cases, it has to do with the underlying client industry segment. In some cases it has to do with something about market conditions that just has a sign of higher state of alert.

[Jennifer Demba:]

Okay. And I’m assuming there was no in terms of those downgrades just you also mentioned there was no consistency with regard to industry as it was still random?

[Clay Deutsch:]

When I defer to Mark and Dave, but as I said earlier, we don’t see a systemic pattern.

[Dave Kaye:]

Yes that’s right not really systemic pattern, I would say handful of relationships as Clay said both the move to that's mentioned and I think we have one relationship getting downgrade on the accruing sub standard so but not really a pattern.

[Jennifer Demba:]

Okay. Thank you for the color.

[Clay Deutsch:]

Thank you, Jen.

[Operator:]

And the next question comes from Alex Twerdahl with Sandler O'Neill.

[Alex Twerdahl:]

First Clay, I was wondering you talked a lot about how some of the other guys, how some of the senior managers roles have changed, we didn’t really mentioned your role. Are you taking a step back from things here to focus more on M&A or how is your role changing with these new appointments?

[Clay Deutsch:]

Well, I think my role Alex remains - I call it highly engaged with maybe even a sharper focus on business development. I’ve started my career here in a couple of chapters when I first got here we had a lot of work to do to restructure the company and I call that a fixed period, that ended a couple of years ago and then we moved from fixed to prove and what I mean by prove, we needed to prove that our company could perform. The Boston Private could perform beyond the geographic limits of Boston and I think we’ve done a very good job doing that. I’m really pleased with the rotation into wealth management and I’m really pleased the way we’ve exported private banking to markets beyond Boston. I’m really excited our next chapter. Now we’re moving into expansion having proven that we can perform beyond Boston, we’re moving into expansion. I’m going to be heavily engaged in market development of our wealth management trust and private banking businesses and the partnership with Mark there is extremely vital to managing that strategy across that family of businesses. And I’m going to be heavily engaged in business development and subsequent M&A. So I don't view my yielding of the President title to Mark as disengagement. I view it as a very tight coupling of myself and Mark to drive this next chapter in the company.

[Alex Twerdahl:]

Okay. That’s very helpful. And then Dave the remaining $2 million of cost saves from the Banyan that has not yet been realized, where are those coming from?

[Dave Kaye:]

A lot of those will come from systems integration which again has been mostly occurring in the second half of the year. We do have - we had some personnel departures in the first quarter, so they were partially realized in the first quarter but it will be fully realized going forward.

[Alex Twerdahl:]

Okay, great. And then final question it look like just a follow-up on the credit theme, it look like early stage delinquencies especially in New England ticked up, is that some of that can be attributable to the harsh winter up there or is there something else going on below the surface?

[Dave Kaye:]

Really if you look at the increase in the delinquencies about $18 million, $10 million of it was residential loans, anytime we have 31 day per month, we tend to see more 30 day pass dues, just you will get in that payment late, that was 10 of it. The other 8 were two loans one that is already paid off and the other one is just, I think it is in the process of sort of administrative repapering. And I think that may already be done. So nothing there, that we're worried about.

[Alex Twerdahl:]

Great. Thank you very much.

[Dave Kaye:]

Thank you.

[Operator:]

And the next question comes from Dave Rochester with Deutsche Bank.

[Dave Rochester:]

I just wanted to go back to the AUM net flow trends this quarter. I was just wondering how the net flows trended at Anchor versus Dalton Greiner and then if you could just talk about what steps you’re taking with Dalton Greiner if any to improve the flows there that will be great?

[Dave Kaye:]

Well both firms, each firm individually was net negative, so both firms contributed to the net negative. Dalton Greiner is about $2 billion of that segment, Dalton Greiner has good investment performance. It’s a good team, good leadership, solidly next generation with a lot of stability and continuity, I believe they're marketing and sales constrained and that’s not a shot at their capability. But as a small firm, they have a pretty limited marketing sales and distribution effort. Part of my hope with this move with Corey Griffin is to better enable Dalton Greiner to achieve wider marketplace presence and exposure. So this in my opinion is a very good firm but a firm that would benefit from expanded distribution reach.

[Dave Rochester:]

Great. Are there any plans to further build out that capability later this year?

[Dave Kaye:]

Yes Corey is going to be hard at work with the leadership teams at Anchor and Dalton Greiner. On the whole, the whole task fortifying our marketplace presence, our marketing distribution efforts, we're going to be looking at distribution partnerships, all manner of things that could better lever the investment strength of those firms.

[Dave Rochester:]

Great. And then a quick one for Dave, you guys had a decent pick up in liquidity yields this quarter, that helps to support them a bit. We're just wondering if you’re anticipating any additional pick up there in 2Q and what’s your general outlook is for the NIM at this point given the current rate environment?

[Dave Kaye:]

No, I don’t expect any additional pick up, I think the quarter-over-quarter improvement as you said, if you normalized for the interest recoveries it was really through the deployment of cash into higher yielding securities. I don’t anticipate that to continue, I think we were at a comfortable level there in the first quarter and just going forward we do, we'd like to see continued pressure particularly with the commercial loan yields and some of that is a very conscious decision that we’ve made to put on as you can see we have a increase in C&I but even in our CRE book we’re doing more and more variable and adjustable rate, products which are lower yielding initially but we’re trying to set ourselves up for the future.

[Dave Rochester:]

Any potential to pay down more higher cost borrowings, I know that benefited you guys all this quarter too.

[Dave Kaye:]

Yes. That was a definite benefit. I don’t see any opportunity in the near term on that front.

[Dave Rochester:]

Okay. And then just one last and you mentioned the personal departures and Banyan in the first quarter, whether any of these were meaningful that weren’t necessarily planned?

[Dave Kaye:]

It’s been a mixed day of voluntary and involuntary, nothing is that I would call though, a red light alarm we feel the organization is unfolding as planned and we think we have a strong team in place. We're watching client retention like a hawk. We think there is about a 3% loss rate associated with the departures. We set more positively about a 97% retention rate and I think the industry veterans in that space would tell you will the merger and an integration and a transition of this magnitude, that's a down good number. We’re watching it like the hawk.

[Dave Rochester:]

All right, great. Thanks guys.

[Operator:]

[Operator Instructions] And the next question comes from Christopher Marinac with FIG Partners.

[Christopher Marinac:]

Thanks. Good morning. Clay, can you refresh my memory on the percentage of earnings from the fiduciary business that you would like to see evolve. Recall kind of high 30s number, just talk about when Banyan was first amount. So I just want to refresh that may be talk about kind of where you see that evolving in the next several quarters and years.

[Clay Deutsch:]

Yes, Chris, I've never declared a hard fast rule. We do talk a lot though about revenue and earnings mix. And when we first started fixating on this wealth management evolution strategy, I think our wealth management fees as a percent of company revenue, it's kind of ancient history but I think when I got here in 2010, it was something like 30%, 34%, 35%. It's now, up around 45%. We've increased the earnings contribution of those businesses collectively by 51% since 2011. I think its about 32% of our - I’m looking at Dave for correction but I think its about 32% of our EPS right now and importantly those activities contribute 3.5 to 4 points of return on intangible common equity which makes all the difference between being very average and being superior top quartile in terms of return on equity. With all that said, I don’t have hard fast rules other than more, more. So I’d like to continue the progression on revenue mix, if 45 is good, 50 is better and 55 is better, so our strategy is clearly expansion of those businesses. I have talked about target growth rates, I would like to push the revenue development of those businesses to well into the double digits year-over-year, we've been penciling to about 10 or 11, 12 with the addition of Boston Private Wealth, long term this is not quarter-to-quarter guidance or anything like that but I’d like those businesses to get closer to 15%. Our target margin is minimum 30%. So you can triangulate the math but we would like to have revenue function to be clicking along between 10% and 15% and as close to 15% as we get, the happy we’d all be. And I would like margin expansion, I’d like for those margins to remain in 30% or above which if you look at our peers that's kind of an industry leading margin. So as you know, we are margin play rather than a topline growth play but I love the growth in margin expansion these businesses perform, so no hard fast rule but more.

[Christopher Marinac:]

Great Clay, that’s a helpful discussion. Thanks very much for that. Just a quick follow-up for Mark, is there any benefit of seasonality that could occur in the loan pipeline Q2, Q3?

[Mark Thompson:]

In the loan pipeline?

[Christopher Marinac:]

Yes.

[Mark Thompson:]

Yes. We would expect some but really on both sides of the balance sheet typically with tax payments and the profile of our clients they tend to have large checks send to Uncle Sam and at the same time they draw down lines of credit to pay some of that tax liability. The other aspect of the seasonality, a lot of our partnership accounts and businesses will accumulate pretty significant cash balances over the course of the year and typically would pay out to partners or the ownership of the firms towards the end of the first quarter, or early second quarter. So at the seasonality, will be pretty much as it has been over the past few years and that's all we would expect going forward.

[Christopher Marinac:]

Sounds great, Mark. Thanks again. I appreciate it.

[Operator:]

Thank you. And as there are no more questions, I'd like to turn the call back over to management for any closing comments.

[Clay Deutsch:]

Well I would just like to thank all of you for your continued interest in us. And thanks for listening to me on the Executive Appointment's. I’m really excited about how we are now positioned for the next chapter of our development. I think we have a strong team and I think we continue to build in continuity and strength. Some more to come quarter-to-quarter, but we like where we’re going. Thanks all have a good day.

[Operator:]

Thank you. The conference has now concluded. Thank you for attending today's presentation. We now disconnect.