Investors Bancorp, Inc.
Q3 2018 Earnings Call Transcript
Published:
- Operator:
- Good morning, and welcome to the Investors Bancorp Third Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask question. [Operator Instructions] We'll begin this morning's call with the company's standard forward-looking statement disclosure. On this call, representatives of Investors Bancorp Inc may make some forward-looking statements with respect to its financial position, results of operations and business. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond Investors Bancorp's control and are difficult to predict and which can cause actual results to materially differ from those expressed or forecast in these forward-looking statements. In last night's press release, the company included its safe harbor disclosure and refers you to that statement. That document is incorporated into this presentation. For a more complete discussion of the certain risks and uncertainties affecting Investors Bancorp, please see the section entitled Risk Factors, Management Discussion and Analysis of Financial Conditions and Results of Operations set forth in Investors Bancorp's filings with the SEC. Please note that today’s event is being recorded. And now, I'd like to turn the call over to Kevin Cummings, Chairman and CEO of Investors Bancorp.
- Kevin Cummings:
- Thank you, Andrea, and good morning. Welcome to the 2018 third quarter Investors Bancorp earnings call. The company and the bank reported net income of $54.2 million or $0.19 per diluted share for the three months ended September 30 versus $45.8 million or $0.16 per share for the quarter ended September 30th last year. This is compared to the $57.1 million or $0.20 per share for the three months ended linked quarter June 30, 2018. For the nine months ended September 30, net income totaled $169.2 million or $0.59 per diluted share compared to $131.5 million or $0.45 per diluted share for the nine months ended September 30th last year. This represents a 29% increase in earnings year-to-date and a 31% increase in EPS year-to-date. The increase in net income for the nine months is attributable to the benefit of the new tax law, improved expense management and growth in earning assets, offset by 11 basis point decline in the net interest margin. The net interest margin compression is a headwind and will continue as we project additional rate increases over the next 12 months. We continue to stay focused on our strategic plan and continue to position the bank to manage rising interest rates. In this past August, the bank entered into a $1 billion interest rate swap to receive valuable rate payments in exchange for paying fixed rate to a counterparty. This transaction in the current quarter, in the previous quarter, third quarter had a negative 2 basis point impact on the quarter's margin but will protect the bank going forward against future anticipated rate increases. We will continue to diversify our balance sheet and leverage our excess capital through organic growth, buybacks and dividends. During the quarter, we purchased 6.9 million shares for approximately $88 million. And year-to-date, we have purchased over 190 million in share buybacks. Post second step, starting in 2015, we have purchased almost 82 million shares at a total cost of 900 – almost $1 billion with an average price of approximately $12.17. At our board meeting this week, we approved the company's fourth share repurchase program, which authorizes the repurchase of an additional 10% of the outstanding shares or approximately 29 million shares. And that will commence upon the completion of our third repurchase plan announced in April 2016. During the quarter, we declared an $0.11 dividend, which is a 22% increase from the $0.09 dividend paid in the second quarter of 2018. Since our second step in 2014, we have raised our dividend from $0.04 to $0.11 and have leveraged our capital through organic growth, dividends and stock buybacks. Our tangible capital ratio now stands at $11.55, down from almost 20% in the second quarter of 2014. During the quarter, our loan portfolio grew $192 million, and for the year is up $885 million. Our total loan originations though year-to-date, including the acquisition of the equipment leasing portfolio in February and our correspondent residential lending program in 2018, was approximately $3.5 billion in new loan originations versus $3.26 billion in 2017. The company has been impacted by a large volume of paydowns, which are almost $500 million higher in 2018 versus last year. Our pipeline is strong at quarter-end at almost $2.2 billion, and we anticipate $300 million to $400 million in loan growth in the fourth quarter to finish 2018 in the range of $1.2 billion to $1.3 billion in loan growth for the year. Our asset quality remains strong as net charge-offs totaled $2 million for the current quarter versus a provision of $2 million. During the quarter, our nonperforming assets decreased to 49 basis points from 60 basis points at June 30. Total nonaccrual loans in the commercial book totaled $38 million versus $65 million in the previous quarter, which reflected a payoff in full of a C&I loan for $10 million and a return to performing status of a $14 million relationship in the multi-family book. In the 30-day commercial delinquencies, which totaled $32.7 million, approximately $22 million is currently – is current as of today and the remaining amounts are primarily related to matured loans, which are in the process of being underwritten. In the 60-day bucket, we have one multi-family relationship consisting of nine loans for $33.5 million, which are being managed by our special assets groups and are expected to be refinanced in another financial institution in the fourth quarter or early next year. Overall, our allowance for loan losses as a percentage of nonaccrual loans is 221% at quarter-end, which is an increase from our coverage ratio of 171% at June 30. The allowance for loan losses as a percent of total loans is 1.1% versus 1.11% at June 30, 2018. These ratios, along with our excess capital, put us in a strong position to weather any uncertainty as we move through this current economic cycle. On the deposit front, we had growth of $480 million for the quarter, which had a positive impact on our loan-to-deposit ratio at quarter-end. This growth came at a price as it was focused on our CD growth of $395 million with a good part of that money coming from our money market accounts, which declined $185 million for the quarter. Our total cost of deposits increased 23 basis points for the quarter. And overall, our interest-bearing liabilities increased 19 basis points to 1.565 and is the driving force of our margin compression of 11 basis points for the quarter. As mentioned earlier, we have entered into a $1 billion notational interest rate swap that reduces a portion of our exposure to rising rates. But we need to continue to enhance and change our business to drive core low cost deposits into the bank. We are up there in the process of hiring deposit gathering teams. These teams will be focused bankers who will be incentivized to drive core deposits into the bank. We are investing in building our technology platform to better compete with both large national and regional competitors. The competition is fierce especially in the Northeast, Mid-Atlantic region, and we need to raise our game to meet the changing competitive landscape. As mentioned last quarter, we hired five C&I lenders and added two more, who have been onboarded and are starting to contribute to our production in the fourth quarter. We need to continue these – to drive these business relationships into the bank in order to diversify our revenue stream and improve our margin. On the risk management front, we completed our current year's BSA exam and remain cautiously optimistic that the investments and efforts expended will result in a positive outcome for the bank. As we move forward though, we are looking at ways to improve the process in both the first and second lines and have focused teams whose goal is to streamline the account opening process for both consumer and business customers while meeting all regulatory requirements. Our technology enhancements are helping in this process and a multi-disciplined team looks to enhance our efficiency and improve the customer experience. These are our ongoing projects throughout the bank to help manage our course line and improve the customer experience. Now I'd like to turn it over to Sean Burke, our CFO, who will give some commentary on our operating results for the quarter.
- Sean Burke:
- Thanks, Kevin. Just a couple of additional comments here. Net interest margin, as you mentioned, contracted 11 basis points quarter over quarter, while core net interest margin declined 7 basis points. The decline in prepayment penalties in our interest rate swap transaction each contributed two basis points to margin compression. Net loans grew $192 million during the quarter or approximately 4% on an annualized basis. Deposits increased $480 million compared to the prior quarter or 11% on an annualized basis. Our provision was $2 million for the quarter compared to $4 million in the prior quarter with the decrease driven in part by lower net charge-offs and improving asset quality ratios. Net non-interest expenses totaled $101.8 million, down slightly from the second quarter. The decrease was primarily driven by compensation and advertising spending. Our effective tax rate was 26.2% for the quarter, which increased slightly compared to the prior quarter due to the New Jersey tax reform enacted in July of 2018. Our asset quality and capital ratios remained strong. At September 30, our nonperforming asset ratio stood at 0.49%, an improvement from 0.60% in the previous quarter. We were aggressive with respect to our buybacks having repurchased 6.9 million shares, totaling $88 million during the quarter. Now I'd like to turn it over to you Kevin.
- Kevin Cummings:
- Good, thanks, Sean. As we conclude the following remarks for the earnings call, I want to emphasize our strategy, which has served us well over the past 13 years as a public company. From our initial IPO in October 2005 to the second step in 2014, the bank weathered some difficult times during the 2008/2009 financial crisis. The current yield curve provides a challenging operating environment for us, but we will continue to leverage our excess capital in a prudent manner through stock buybacks, dividends, organic growth and M&A. With the stock at its current price, we see positive economics in our buybacks, we increased our dividend by 22% this quarter and our annual loan growth is focused on business lending, which enhances our yields and allows us to gather lower cost deposits. Our brand and marketing activities are much stronger today than during our first step journey. During the quarter, we entered into a marketing agreement with the New York Giants to be their consumer and business banking partner. Although they are having a difficult season, they are a great organization, have a great history and tradition and have a strong community-focused leadership. This partnership, along with our ongoing partnership with the New Jersey Devils, improves our profile in the region and gives us two partners who are like-minded in the way we approach our customers, employees and the communities we serve. We are making these investments to create long-term value for our shareholders. During the first step, it took us eight years to leverage our capital and reach double-digit ROE. The last two years have been difficult with respect to the investment in the BSA process, but we are working our way through it and are focused on the customer experience and driving shareholder value. Capital management and organic growth are the keys, but we will continue to evaluate potential M&A opportunities like the equipment leasing transaction completed in February of this year and other bank transactions, where the math works for all our shareholders. We continue to be a force in the community through our activities and the commitment of our employees. With our capital and credit quality, we are one of the strongest regional mid-cap banks in the country. We have the capital to manage and become stronger through the interest – through this interest rate cycle. Our risk management investments give us the confidence to grow, and we are a much stronger bank today than we were three years ago. We appreciate your support of our shareholders and the hard work of all our dedicated employees. We thank you for your time and we would like to have a strong finish to the fourth quarter and 2018 in general. Now, I would like to open it up to questions.
- Operator:
- We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Dave Rochester of Deutsche Bank. Please go ahead.
- Dave Rochester:
- Hey, good morning guys.
- Kevin Cummings:
- Good morning, Dave.
- Sean Burke:
- Good morning, Dave.
- Dave Rochester:
- On the margin, you guys mentioned you're expecting more rate hikes going forward, was just wondering how many you're modeling for at this point through the next year. And then following the addition of the swap, what are you guys expecting would be the impacts of future rate hikes on the NIM?
- Sean Burke:
- So we're incorporating one additional hike for this year, Dave. We haven't given any guidance yet, but our preliminary view is incorporating two rate hikes into the 2019 forecast, probably one in March and one in September.
- Dave Rochester:
- Okay. And for the next rate hike, what are you guys thinking just with the swap now in place in terms of what that impact could be on the margin?
- Sean Burke:
- Well, the swap dragged us down approximately 2 basis points, so the rate increase that we got in September, actually less than the magnitude of that negative hit. And so with one more rate increase actually, if we get one more rate increase in December, that swap will be sort of right even. And so any rate increases subsequent to December would be additional windfall to the bank.
- Dave Rochester:
- Okay, and so are you thinking beyond that December hike, you maybe thinking only maybe low single-digit-type pressure from each subsequent hike?
- Sean Burke:
- Dave, right now, I don’t think we’re really going to try to get into 2019. But I will tell you that the velocity of rate increases that we're expecting will be less. And as you mentioned, we're trying to position the bank to weather those rate increases better than we have in 2018. And so suffice it to say, I think we'll be in better position in 2019 relative to 2018.
- Dave Rochester:
- And so I guess with that swap in place and maybe it doesn't help as much with this quarter, but how are you thinking about the NIM trend in 4Q? And then are there any other plans to add more swaps to help out 2019?
- Sean Burke:
- In terms of the margin guidance, the margin guidance that we've been providing for the year has been the 2.75% area for full year 2018. We're on target for that. Maybe we might be one basis point off of that if you incorporate the negative cost of the swap right now into that, which implies somewhere in the area of 5 basis points to 9 basis points of compression in Q4, Dave.
- Dave Rochester:
- Okay. And on the expenses, it looks like you guys are coming in decently below that 4.15 guide for the year. Can you just talk about the level you're expecting for 4Q and then how you think maybe that trajectory plays out next year, if you've got any kind of preliminary comments on that?
- Sean Burke:
- We’re looking at the 102 to 103 range for expenses next year, and that's $102 million to $103 million and looking into 2019 again, we really haven't established our budgets and forecasts at this point. We're not in a position to share those. But suffice it to say, we've talked about the ramp-up and the building of our risk and infrastructure. And that being complete and the fact that we're not building branches in a rapid manner like we had historically, so we believe that our expense growth rate is going to be in the lower single digits.
- Dave Rochester:
- Great. Maybe just one last one if I could – what's that?
- Domenick Cama:
- Dave, I just wanted to add that if we hit our forecast expense for the fourth quarter, we'll probably be about $5 million off of what our guidance was for the year.
- Dave Rochester:
- Yep, sounds good. Just one last one, if I could, on capital, you guys have been very aggressive with the buyback this quarter. That looked great. And it sounds like you're signaling more of the same with the new plan you just announced. I was just curious, how you think about the CRE concentration at this point, where it is in this quarter. And do you feel that you can take that a bit higher just with the improved regulatory backdrop at this point?
- Domenick Cama:
- Yeah, I yes to all of those things, Dave. I think that regulatory backdrop has increased. I think our growth in commercial real estate has slowed somewhat. And so we're feeling pretty good about our concentration ratios going into 2019. So we're going to – we continue to believe there's a lot of value in the stock at this point, so we're going to continue to buy it back certainly at these levels.
- Dave Rochester:
- And as the CRE concentration ratio, where is that today, the concentration level?
- Domenick Cama:
- It is at 4.37%.
- Dave Rochester:
- All right, great. Thanks, guys.
- Operator:
- Our next question comes from Austin Lincoln of Stephens Inc. Please go ahead.
- Austin Lincoln:
- Hey, guys. Good morning.
- Kevin Cummings:
- Hi, good morning, Austin.
- Sean Burke:
- Good morning, Austin.
- Austin Lincoln:
- Maybe just on the BSA/AML agreement, could you maybe update us on just kind of where you are in that? I know the formal exam occurred a month or two ago. And maybe just where are we now in terms of exiting that? And any expectations in terms of loose time frame?
- Domenick Cama:
- Austin, we – as you pointed out, we have been through the formal exam. We have not received at this point any negative comments. However, it is, as we understand it, in the regional office for consideration. So at this point, we really have no new news in terms of whether the order will be lifted or not. At this point, we're just waiting for notification from the New York regional office of the FDIC.
- Austin Lincoln:
- Understood, and then maybe just back on expenses. I know you don't want to talk about kind of 2019 yet, but any updated thoughts on reevaluating the branch network? And anything that you're looking at to maybe trim some of the underperformers or downsize branches? Or anything that you're kind of working on right now would be helpful to know on the branch side of things.
- Domenick Cama:
- Yeah, Austin, as Sean pointed out, we're in the process – we're actually in the budget process right now. But certainly, given the success that we had with the closure or the merging of the six offices in 2018, we are looking at some additional locations to be merged into other branches in 2019. We haven't finalized that yet, but that's certainly in the planning stages. The – one other comment that I'll add about 2019, I know there's always a lot of talk about once the BSA order is lifted, will that help to reduce expenses? And I think we've been clear that it won't because most of the expenses were baked into the 2017 budget. Nonetheless, we see 2019 as a period where we want to continue to invest in our digital platforms and our technology and, as Kevin mentioned, our deposit gathering efforts. So again no guidance on 2019, but certainly I thought I could give you some thoughts on how we are thinking about 2019 and the things that we need to continue to do to position the bank for future growth.
- Austin Lincoln:
- Understood that.
- Kevin Cummings:
- I think it's going to be a little bit of a shell game. We'll look for cost saves in other areas of the bank, certain areas where we've built up. And maybe through efficiencies, we can look for some cost saves and then move in and make some additional investments on the revenue producer side and then drive the – so we might have some cost saves, but then we're going to be making more investments in technology and people to drive revenue into the organization.
- Austin Lincoln:
- Understood, thanks for taking my questions.
- Operator:
- Our next question comes from Matthew Breese of Piper Jaffray. Please go ahead.
- Matthew Breese:
- Good morning.
- Kevin Cummings:
- Good morning, Matt.
- Sean Burke:
- Good morning, Matt.
- Matthew Breese:
- I appreciate your comments on the margin. I was just looking to pull it apart a little bit more and gain a bit better understanding of what's going on. So I was hoping for some commentary on the state of the commercial real estate and multi-family market and whether or not conditions have changed. Are you starting to see any spread expansion on incremental loans? Have things become more rational? Or they still rather irrational with tight spreads?
- Domenick Cama:
- Matt, I would say first that we think they still remain somewhat irrational. However, given where rates have gone, given where the five and ten year rates have gone, we have seen some uplift in the weighted average coupons that we're booking loan at. I think we also mentioned this on the last quarter, and we continue to see it through this quarter, and that is we've lost a few deals to lenders. In the past, it's been agencies and life companies. But over the past quarter, we've lost some deals on proceeds, meaning that when we priced out a deal and underwrote it to our guidelines, we couldn't come close to what the borrower was getting from other institutions in the region. And so we have seen acceleration in payoffs. It's not totally a bad thing because our C&I portfolio continues to grow. I mean, even when I look at the C&I portfolio year-to-date without the acquisition of the leasing portfolio, it's still growing at an annualized pace of about 20%. And so we feel pretty good about that. These spreads are pretty tight on multi-family certainly, and we'll continue to manage that. But not having oversized growth in those asset classes, given this rate environment, may not be the worst thing for us going into 2019.
- Matthew Breese:
- So as you think about pricing on multi-family, one, could you just give us a sense for that, the five and ten year rate what you’re offering and whether or not the rates you're offering place you in a position to gain market share or you're basically at the market for pricing?
- Domenick Cama:
- We believe that we are at the market. Our five year multi-family rate is 4.5%. And I know there was some talk this week about other lenders being here in our market who are somewhere between 4.5% and 4.78%. And we went through this in pretty good detail with our CRE group, our commercial real estate group, yesterday in fact. And they have cited a number of deals that are below 4.5%. So when we think about where we are from a rate perspective, we think we are right at the market and we're at a point where we'll probably be able to maintain our volumes of where they are. We're not trying to grow them aggressively at this point. And so I hope that answers your question.
- Matthew Breese:
- No, that's great color. And maybe just talking about the other side of the balance sheet. The increase in interest-bearing deposits, the cost was pretty sizable this quarter. And so I wanted to get a sense for your current offerings, your current price of deposits. How does that stack up versus what's on the balance sheet? And should we expect the increase in the cost of funds to be as sizable in the next quarter and the quarter after that? Or are we basically caught up?
- Domenick Cama:
- Yeah, I wouldn’t say that we will caught up, Matt. In terms of our offerings, we have three primary high rate products. One is a money market at 1.75%. Another is a seven-month CD at 2% and another is a 12 or 13-month CD at 2.55%. We think we're right at the market, although I've got a letter from a customer this morning that a local bank here is offering 2.75% for 12-month CDs. So we think that the pace of increase in the cost to deposits is going to slow because we had such a surge happening in the second and third quarter. But that will depend on the rate of future increases from the Fed. It's interesting. We started to track some of the pressure on the cost side on deposits. And what we found was that banks were actually starting to increase their offerings prior to the Fed move in an attempt to try to get ahead of it. So we think that the pace of increases will continue. But we think it will be at a slower pace going into the fourth quarter of 2018 and the first quarter of 2019.
- Matthew Breese:
- Okay, understood. My last one is just – I know it’s uncertain as to when you could see some regulatory relief. But once you do, what does it allow you to do? Or what are just – what are the top three priorities post informal agreement?
- Domenick Cama:
- I think it’s steady as she goes, Matt, to be honest with you. The truth is we've peeked at a few books over the last few months, and we've looked at what potential M&A could be for us here. And truthfully, and I think I said this on the last call, that given where our valuation is, we think – and given what some of the pricing expectations are, and that is pre the selloff that's happened over the last few weeks, we think we're better off buying our own stock at this point. We have a lot and I have a lot more confidence in what we're doing than what I'm seeing from some of these other banks, smaller in nature around the region.
- Matthew Breese:
- Okay, I am sorry, let me throw in just one more. I think last quarter you had noted that the change in the New Jersey state tax laws would impact you perhaps by as much as 50 basis points for next year. Any change to that? Or is 26.5% still a good outlook?
- Sean Burke:
- Yeah, I think at this point, we're still in the same range. And if there's any change then, obviously we'll communicate that. But I think it's consistent with where we were last quarter.
- Matthew Breese:
- Great, that’s all I had. Thanks for taking my questions.
- Sean Burke:
- Thank you, Matt.
- Operator:
- Our net question comes from Laurie Hunsicker of Compass Point. Please go ahead.
- Laurie Hunsicker:
- Yeah, hi. Thanks, good morning. Just to stay, I guess, with where Matt was going and share comments on your own stock is more attractive at current levels. What is the price that you would look at and say, hey, we could use our stock as currency? How do you think about that?
- Kevin Cummings:
- [Indiscernible]
- Laurie Hunsicker:
- I realize you haven't come out of BSA/AML completely yet. But in other words, as you're looking and thinking about acquisitions versus buybacks, how do you think about that?
- Domenick Cama:
- I think, Laurie, it always goes back to dilution and earn back. And so it's difficult for me to sit here and say what value – what valuation could we have that would allow us to use it as currency because it would depend. It would depend on who the potential target is, what kind of a transaction is. And then ultimately, by executing on the transaction at that particular valuation, what would the earn back be on a deal. So I think it's safer to say that at these levels, we think our stock is a very good investment for the company, and we're going to continue to do that going forward.
- Laurie Hunsicker:
- Okay, and then just again remind us, I haven't asked you about this in a little while. What is the maximum that you would do in terms of a tangible book dilution deal? Or are you not thinking about it that way? Has your thinking changed in that it's not just an earn back focus? Have you also thought about tangible book dilution? And what's your approach on that?
- Domenick Cama:
- Yeah, I think no change, Laurie. We're still looking at it purely on an earn back perspective. But as you point out, really at this point, we don't really give it much thought because we don't see much activity out there. And not to mention that we're still under the BSA order.
- Laurie Hunsicker:
- Got it, okay, great. And then on deposit s, Sean, just a quick question. Can you remind us how much you have in public money and how much of maybe the public money is time?
- Sean Burke:
- About $4 billion, I believe, Laurie, as of the end of September. And there's not much time in there, Laurie. Most of it is – most of them are operating accounts. And so that actually makes those accounts pretty sticky. And they are a bit more rate-sensitive. But again, most of them are operating checking accounts.
- Domenick Cama:
- Less than $100 million, Laurie, in CDs.
- Laurie Hunsicker:
- Okay, and then what approximately is the rate that you're paying out on those public checking accounts, just approximate?
- Domenick Cama:
- Yes, the weighted average cost of the government portfolio is about 1.60%.
- Laurie Hunsicker:
- Okay, that’s helpful. Okay, and then just any general comment in terms of your loan-to-deposit ratio came down this quarter? Any general comment in terms of where you're targeting that or how you're thinking about that?
- Domenick Cama:
- No, I mean, we have always tried to stay around or not to exceed 125% as the loan-to-deposit ratio. We're down to 120%. And I think that's a function of the growth in the deposit book, albeit in the CDs versus lower loan growth for the quarter.
- Laurie Hunsicker:
- Okay, great. And then just two more questions. Obviously, your credit looks great, improved this quarter. But your provision is only matching charge-offs, we're not seeing anything in that for growth. When should we start seeing the growth component of that plan? Or how should we be thinking about that?
- Sean Burke:
- I think, Laurie, you're right to think about growth. You should be putting something away. But on the other end of that, you have asset quality trends that are improving. So those two offset one another. So I think to your point, if we had asset quality metrics that were perhaps deteriorating or equal to where they were in the prior quarter, but yes, you might expect some provision for some of the growth. But as you mentioned, as we're trying to point out, that some of the asset quality metrics actually improved quarter-over-quarter.
- Laurie Hunsicker:
- Okay, all right. And then last one for me, on your occupancy expense upticked a little bit this quarter. And so obviously, you had the branch rationalization, it came down. Was there anything nonrecurring? Or is this a good run rate?
- Sean Burke:
- I think this is a pretty good run rate, Laurie. I think that we have confidence and more visibility certainly relative to a year ago at this time as we were in the throes of resolving BSA. So there's a lot more confidence that we have in terms of providing projections and forecasts.
- Laurie Hunsicker:
- Okay, great. Thank you for taking my questions.
- Sean Burke:
- Thank you, Laurie.
- Operator:
- Our next question comes from Chris O'Connell of KBW. Please go ahead.
- Chris O'Connell:
- Good morning, guys.
- Kevin Cummings:
- Good morning.
- Sean Burke:
- Hi, Chris.
- Chris O'Connell:
- I just want to circle back on the growth outlook. I am just getting a little bit more in C&I, maybe the multi-family or CRE. Without the equipment leasing purchase kind of being in the numbers for next year and with kind of a slowdown we've seen in the back half of 2018, how do you guys feel about just the overall loan growth outlook going forward maybe after 4Q?
- Domenick Cama:
- Well, we're still working through those numbers, Chris, for 2000 – did you ask about 2019?
- Chris O'Connell:
- Yes.
- Domenick Cama:
- So we’re still working through those numbers. I think Kevin mentioned earlier that we see that – we believe that C&I will continue to be – will play a major role in the growth for 2019. He talked about hiring five new lenders in the C&I front and two new lenders in the leasing portfolio. So again, we haven't worked through the numbers, but we think the mix will be weighted more heavily towards C&I in 2019 versus what it was in 2018.
- Sean Burke:
- The only thing I would add to that Domenick is the pipeline does remain in a robust position. And I think Kevin alluded to the fact that we're expecting loan growth to pick up in the fourth quarter relative to the third quarter.
- Chris O'Connell:
- Understood. And you’re seeing pick up in demand for the fourth quarter mostly in C&I?
- Sean Burke:
- Yes.
- Chris O'Connell:
- Got it. And is there a point where the deposit pricing, if you see betas come up high enough, where that's going to drive a slowdown in your loan growth projections? Or is there a point where you bring down the securities book more to make room there in order to kind of abate on the deposit pricing pressure?
- Domenick Cama:
- It could although I would say that we have plenty of other liquidity sources that we could choose to use if our C&I growth continues to be strong. And when I look at the yields that we've been putting C&I loans on in this quarter, they're starting to get close to 5%. So to the extent that we can continue to book loans in that type of a rate environment, we'll look for ways to continue to fund it to be – hopefully to be accretive to the NIM.
- Chris O'Connell:
- Great, thank you.
- Kevin Cummings:
- Thanks, Chris.
- Operator:
- This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.
- Kevin Cummings:
- Okay, thank you, Andrea. I would like to thank you all for participating today. Again, we're looking forward, we're optimistic regarding the fourth quarter, our growth projections. And I think we appreciate your support and interest in our company. Have a great weekend, and thanks for participating.
- Operator:
- The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Other Investors Bancorp, Inc. earnings call transcripts:
- Q1 (2021) ISBC earnings call transcript
- Q4 (2020) ISBC earnings call transcript
- Q2 (2020) ISBC earnings call transcript
- Q1 (2020) ISBC earnings call transcript
- Q4 (2019) ISBC earnings call transcript
- Q3 (2019) ISBC earnings call transcript
- Q2 (2019) ISBC earnings call transcript
- Q1 (2019) ISBC earnings call transcript
- Q4 (2018) ISBC earnings call transcript
- Q2 (2018) ISBC earnings call transcript