Independent Bank Corp (Massachusetts) (INDB) 2010 Q2 法說會逐字稿

Good morning and welcome to the Independent Bank Corp.'s second-quarter earnings conference call. All participants will be in a listen-only mode. (Operator Instructions).

Please note this event is being recorded. I would now like to turn the conference over to Chris Oddleifson. Please go ahead.

Good morning and thank you, Camille. And thank you, everyone, for joining us today. As always, I am accompanied by Denis Sheahan, our Chief Financial Officer, who will provide some color on our financial performance following my brief comments.

And I will begin with the customary cautionary statement. This call may contain forward-looking statements with respect to financial conditions, results of operations, and business at Independent Bank Corp. Actual results may be different. Independent Bank Corp. cautions you against unduly relying upon any forward-looking statements and disclaims any attempt to update publicly any forward-looking statements, whether in response to new information, future events or otherwise.

Okay. Well, we released our second-quarter results after the market closed yesterday and we continue to make healthy progress on many fronts in our core business activities. Net income in the second quarter totaled $8 million, which translates to earnings per share of $0.38.

Earnings were held back by higher charge-offs in the quarter. This is by no means indicative of any material weakening in our credit portfolio but more a matter of timing and our proactive stance. As you know, charge-offs can be lumpy throughout the year.

The big news is that nonperforming loans declined by a striking 43% in Q2 and delinquencies dropped nicely as well. Denis will take you through the details, but what I would like emphasize is that the 40 plus percent reduction in nonperformance is not a mere happenstance or luck. It really is a direct reflection on a hands-on approach of our season's workout group to identify and address problem loan issues early.

We subscribe to the first loss is often the best loss line of thinking when it comes to pushing for exits or resolution of troubled credits. As Denis will describe later, we have not altered our outlook for charge-offs and related provisioning for the full year.

The trends in our fundamentals remain very encouraging, especially in the light of the tough operating environment. On the long front, we continue to generate (inaudible) volumes in various priority portfolios. [D&I] growth was exceptional in Q2 with outstandings rose by an annualized 10%.

Our in-depth knowledge of local markets and calling efforts by our skilled relationship bankers are really bearing fruit. We recently added several high-quality corporate clients, opportunity that really germinated during the turmoil on the marketplace. These were big wins for us against our largest competitors.

Home equity continues to be a steady grower for us as customers respond well to our product offerings and our marketing campaigns.

On the commercial real estate front, the loan pipeline is strong. But outstandings were flat in Q2 as originations are being offset by ongoing payoffs, by borrowers selling property and by some trimming of exposure on our part in addition to the surge in some competition recently.

Core deposits, another bright spot for us, were up nearly 10% in Q2 led by strong growth in both muni deposits, an area of increased deficits for us in commercial deposits. Core deposits now stand at 78% of total deposits and provide a source of ample liquidity.

Turning to the macro environment, the economic picture still seems to be fairly muddled. There's a lot of mixed signals, but any help of a speedy (technical difficulty) recovery is certainly waning, as following the federal stimulus fund is putting even more pressure on state and local budgets. And the expiration of tax credits is putting a cramp in the housing recovery, although the historic low rates are fueling good residential originations.

Locally, [our] regions continues to fare a little better than they do in that the national picture. Massachusetts unemployment dropped to 9% in May. Profit sector jobs grew for the sixth consecutive month although at a slow rate. But business activity in general is still pretty sluggish and a general feeling of unease persists.

The other major and prior (technical difficulty) revolves around the to be written financial reform regulation, a process that will unfold over the next quarters in years. While the specifics are somewhat uncertain, we do know there will be a lot more regulation coming down the road and, with it, higher compliance expense.

On the news could be worse front, the legislative language on the use of derivatives and trust preferreds appears to be workable for us, something that was not initially thought. It looks okay right now, but the formation of the Consumer Financial Protection Agency, or actually I believe it is now called the Bureau of Consumer Financial Protection, is a big wild card.

Interestingly, they required option rules for overdraft charges. It looks like an opportunity for us as we, in the past, did not allow any overdrafts at point of sale over the ATM. While it's hard to ignore the external challenges, we certainly haven't let it distract us from pursuing intelligent growth and maintaining an active presence in the marketplace. We really have been focusing on opportunities rather than a whole slew of problems.

In keeping with that, we have got a number of exciting business initiatives underway within a high-priority investment management business, we recently launched -- [Flight] Block Capital Management. It is a wholly-owned sub dedicated to institutional investment management.

Along with that in Q2, we introduced our first two mutual funds, one mid-cap growth and one large-cap core. As many of you know, probably better than I, that the mid-cap growth asset class is a capacity constrained class and the fact that we have a good 10-year performance record, institutional consultants are showing some good interest.

We are adding proven commercial bankers in selected markets. We are aggressively building our community business. We have already won some nice mandates as demonstrated in our deposit growth this quarter. And the SBA recently named Rockland Trust its National 2010 Small First Mortgage Lender of the Year.

Over the past three years, we have made more SBA 504 loans than any other bank in Massachusetts. So, in short, we have been busy focusing on opportunities.

Looking ahead, we will continue to do just that. Seeking -- added new business from new and existing customers, promoting our brand, keeping strong capital in our reserves levels in our current environment. Being opportunistic, and on this latter point, we always get asked about the M&A scenario.

We continue to selectively look and usually do get a seat at the table as various opportunities pop up. Recent pricing has gotten a little rich for our taste. And we simply are not prepared to stray from our disciplined approach. And we can be content to continue to grow with what we already have.

Thank you. That concludes my comments. Now I'll turn it over to Denis.

Thank you, Chris, and good morning. Independent Bank Corp. reported net income of $8 million in diluted earnings per share of $0.38 in the second quarter of 2010 as compared to a net income of $9.2 million and diluted earnings per share of $0.44 in the first quarter of this year. There were a couple of non-operating items in the second quarter as details in the table in the earnings release.

This second quarter presented good results from aggressive loan workout activity and positive developments in C&I lending and core deposit growth. Asset quality trends improved significantly. While net charge-offs increased in the second quarter to $6.9 million or 81 basis points of loans annualized, year-to-date charge-offs of $8.6 million or 51 basis points annualized are in line with our expectations of $15 million to $19 million for the full year as discussed in January.

This was accompanied by a strong reduction in nonperforming asset levels from $49 million or 1.07% of total assets at the end of the first quarter to $32 million or 68 basis points at the end of Q2. We have added a nonperforming loan roll-forward table to the asset quality section of the earnings release for your information. In addition, delinquency trends were favorable with total loan delinquency falling to 1.32% of loans and early-stage delinquency at 30 days to 89 days was stable at 79 basis points of loans.

In terms of an outlook on asset quality, we feel very good about the second half of the year. While NPAs will likely increase from the very low level at the end of the second quarter, we believe the worst is behind us for 2010. We believe loan charge-offs will likely be lower than the Q2 level for the rest of the year and be within the $15 million to $19 million range I just mentioned. Likewise, the loan loss provision will also be consistent within the $18 million to $22 million range established in January.

Overall, loan growth was modest with solid growth in commercial and industrial, as Chris mentioned, up 10% in the quarter. Home equity up 3%. But this was mitigated by slow commercial real estate growth caused by increased competition and reductions in the portfolio through loan workout activity. We expect total loan growth to remain modest as it is now challenging to generate strong growth, given the renewed competition and our lack of desire to portfolio 30-year fixed-rate residential real estate loans.

Commercial lending has been vibrant. The total loan growth is 1% year-to-date, a trend likely to continue for the rest of the year.

Deposit growth in the quarter was strong, led by commercial banking in the municipal banking segment. Commercial and small business PDA growth was a standout at almost 10% in the quarter, as a consequence of the strong C&I lending and focused effort in our cash management and small-business deposit generation activities.

Growth in both commercial and municipal categories was very good and has led to a large short-term cash position that averaged $190 million and grew to $268 million by the end of the quarter. While we recognize this is not the optimal time to carry a lot of cash given the unattractive or investment alternatives, we are compelled to take advantage of the opportunity to expand our customer base and gather fuel for growth. We will work diligently to reduce this position to decreases and wholesale funding and near-term investment purchases, until we can more effectively invest the funds over the medium term and loan growth.

The impact of the larger cash position certainly constrained the net interest margin, which reduced from 4.08% to 3.96% on a linked quarter basis. The impact of the higher cash position was 14 basis points -- was a 14 basis point reduction [to] the second-quarter margin. The net interest margin may decline further in the third quarter and then begin to back up towards 4% as we appropriately invest the funding.

Non interest income excluding securities gains grew by 3% in the second quarter, driven by Wealth Management and service charge revenue, offset by lower mortgage banking revenue. Wealth Management revenue benefited from seasonal tax preparation fees and to state fees. Service charge revenue grew to the higher deposit level and seasonality.

As you are aware, we are in the process of implementing the changes brought about by the new Reg E requirements. Independent Bank Corp. historically did not allow customers to overdraw at point-of-sale or ATMs, which industry data shows accounted for some 50% of overdraft revenue at banks which allowed that activity.

While we may experience a reduction in revenue due to the opt in requirement of Reg E, we anticipate much of that will be offset by the opportunity for customers to take advantage of the new service at point-of-sale and ATMs. Our plan is to roll out the new service late third quarter and into the fourth quarter.

Non interest expense was elevated in the second quarter, largely in the other expense category due to timing and advertising and shareholder relations, a fair value adjustment on the derivative in addition to high loan workout cost. We expect non interest expense to trend down for the rest of the year to the $33.5 million to $34 million range per quarter.

Our tangible common equity ratio decreased to 6.49% at the end of the second quarter, due to the larger balance sheet heavily coming from low risk rate assets, namely the large cash position. In addition, tangible book value improved in the quarter to $14.14.

I will now provide some outlook in terms of earnings guidance. We provided an estimate performance in January for diluted earnings-per-share in the range of $1.75 to $1.85, excluding any securities impairment which has been negligible thus far in 2010. We remain comfortable with this range.

Before I turn the call back over to Chris, I wanted to highlight for you an important topic you should be interested in. And that is the pending adoption of fair value accounting. The FASB has made it clear that investors want fair value accounting and has issued a proposal for comment by the end of September.

I urge you to get involved and comment on this proposal, whether you are in favor or against it. There are very material changes to both the presentation and calculation of our financial statements on the very near horizon brought about by the proposed standard.

In an industry where stability is paramount, volatility is rapidly approaching, the cost, timeliness, and complexity of financial statements is skyrocketing. Many of our long-term owners have told me they are not in favor of the change. If so, you must get involved and send your thoughts as an investor to the FASB.

That concludes my comments. Chris.

Thank you, Denis. Camille, we are ready for questions.

(Operator Instructions). Mark Fitzgibbons (sic) from Sandler O'Neill.

Good morning. First, you referenced in your comments you were seeing very strong competition on the lending side. I am curious who is driving that? Is it the larger banks in your market?

It is primarily the smaller banks. I mean, they -- what -- everybody is finding a lot of cash on their balance sheet and they are looking for ways to deploy it.

So it is a small community banks you're saying?

Right.

Right. Okay and then secondly for you, Denis, should we assume the effective tax rate for the remainder of this year is somewhere in that sort of 24 to 25% range?

More like 23%.

23. Okay. And then last question I had for you, I was curious whether you guys looked at the Wainwright and LSB transactions and was also curious whether capital was a constraint for you all in looking at those transactions?

Yes. Of course, we can't comment whether we are at the table or not, but we can say that we do look at those transactions and evaluate them with respect to our ability. And the -- our comment would be that both those franchises got extraordinarily full up prices for their franchises.

Let me ask the question a different way. Your balance sheet is growing at a rapid clip and you have expressed a desire to continue to be acquisitive. Does it make sense to have a higher capital or a larger capital cushion than you currently have?

Yes, we have outlined four reasons we'd raise capital. One is larger growth. Two is deteriorating credit quality. Three is that regulators tell us to. And four is acquisition potential.

So if a acquisition we presented that was attractive and that we could come to terms and a cash component was required, a capital raise would probably be appropriate.

And said another way, means those transactions were both cash transactions. Clearly at our capital level we could not do anything like 100% cash transactions without raising capital.

Right. Thank you.

Damon DelMonte from KBW.

Good morning. Denis, could you just repeat what you said about the margin outlook in light of the excess liquidity that you had? Did you say the (technical difficulties) -- sorry about that. Did you say that the margin would trend down and then in the fourth quarter start to begin to go back up towards 4%?

That's right. We'll certainly -- we will come down modestly off of 396 into the low 390s, possibly touch high 380s, but by the fourth quarter will be well into the 390s again and hopefully next year we will get back towards 4%. You know it is going to take us a while to get this cash appropriately deployed.

Okay. Great. And then with respect to the deposit growth. How much of that was in municipals?

Deposits for the quarter grew a little over $200 million. Municipal was $100 million and commercial was about $80 million and the rest was in retail.

And then, with respect to the C&I growth, I believe about 10% just on a linked quarter basis. Could you give us some color as to the types of loans you are booking? I guess maybe by size or by type, [pending] location?

Locations are all within footprint. They are all in Massachusetts. Do you want to comment on the types?

The two big ones that come to mind are a brand name food and restaurant franchise that I don't want to describe too much. They are very, very well established. High, high quality credit. The other is, again, sort of well-known range of convenience stores in our area. Again, very, very attractive credit. Very high, high grade.

And what is the average size of these loans?

Those would be in the $10 million plus range.

Okay. Great. I think that's all that I have for now. Thank you very much.

Laurie Hunsicker from Stifel Nicolaus.

Good morning. Loved the detail, by the way, on the commercial migration. Can you just give us a little color as to the $11 million in non-performers that were paid off and the $2 million that were restored to accrual status? I am assuming that those were commercial real estate, but if you have any additional color on those?

Yes a lot of this is, as you might have imagined, real estate-related. So, for example we -- high-end real estate developer down in the Cape. That accounted for about $3 million of resolution. We had a couple of pieces of industrial property. That was about $2 million of resolution. One high-end home, about $1.5 million -- I think that. And then sort of an office complex about $1 million. Then we had a real estate development that had actually wrote off. That was $1.5 million of it. That sort of gives you a -- Denis, do you have anything?

No, I think you've covered it. I mean at the $11 million, I think you --.

Got a lot of it. Yes.

So, the biggest drop obviously this quarter came from your commercial real estate non-accruals that were down sharply. If you were to sort of ballpark where you're seeing resolution versus from where you originated to where its charge-off written down or whatever comes off, what would you estimate? Because I know your [LTV] originations generally is running 60 to 65 --

Right.

-- LTV and so I'm just curious, where are you. If you were to ballpark it since on the dollar, is it $0.80 on the dollar you are generally ending up with? (multiple speakers) 60. You know what I'm saying?

Yes, well, a lot of those I just talked about sort of were 100% on the $1.00 plus expenses, plus accrued -- plus accrued interest. So we have done very well. The charge-offs, of course, are where we don't do so well.

Right. So if you blended all that together, what would just a sort of ballpark estimate be?

What do you think, Denis?

Well, on something like -- where we had our charge-offs were -- was construction or construction-related. Of the $5 million, roughly, $5.3 million in total commercial charge-offs in the quarter, the top three represented over $3 million -- two of which were development, one was construction-related. You know, a crane that we took a substantial charge-off on. That charge-off was certainly 50% (multiple speakers) more range on the crane.

The development loans would also be higher than the traditional permanent mortgage. You know, we took substantial levels of charge-off on those two just to move them along, as Chris said, we believe that to get these nonperformers moved out at the appropriate activity. So, a substantial percentage charge-off associated with those as well.

Yes, you know, it's tough to sort of say the on average thing. Because these things are really lumpy. I mean, how often do you come across a crane? We had one crane in our portfolio, big crane and it went bad and we took it back.

We have this one development that, through a variety of circumstances, which I won't go in, sort of was really in trouble. And it would be very difficult for a whole variety of abutting, septic, ledge, etc., etc. issues. And just sort of a confluence of stuff that came crashing in this thing that we took another big hit. To sort of apply that on average across our sort of nonperforming loans, I think would be a little misleading.

Okay. Fair enough. And just one last question on that, on the numbers. The TDRs that you have that are commercial real estate-related that are not included in nonperformers, do you happen to have that number?

Yes.

Maybe while you are looking that up, Chris, just one last question for you going back to something that Mark Fitzgibbon asked. Would you raise capital pro actively in search of a deal or would you wait for a deal? I mean, you all just got increased shareholder authorization to go higher. So how do you see that?

I see -- well, that is a question we sort of debate and discuss around here all the time. And we don't really have a firm point of view on that right now.

Okay.

On the TDRs and TDRs were something not mentioned this yet. TDRs at March 31 were $20 million. At the end of June they were $22 million. Of that commercial real estate, a vast majority of these TDRs are accruing, by the way. Almost all of it is accruing at this point.

The commercial real estate component of that is $8.2 million. C&I is $2.4 million. The rest is in either the consumer or small business categories.

Okay. Great. Then, just along those same lines, so TDRs were actually included in nonperformers in March of the 19 were about 2, 2.3. Is that still roughly the same?

No, it's only $200,000.

$200,000. Okay. Perfect. Great. Thank you all very much.

(Operator Instructions). Matthew Kelley from Sterne Agee.

I was wondering if you might be able to just give us a sense of how much yield to compression and commercial real estate you've seen just over the last couple of months? Has that become more competitive? And what yields are in that category, relative to your 577, total portfolio yield?

If you went back to last year, you certainly were getting close to 300 basis point spread over an index, say, the swap curve or LIBOR. That has narrowed clearly. We are seeing it narrowing today in some cases, as Chris mentioned, competition on the smaller end is down into the mid- to lower 2s.

And what type of index should we be using to think about and all, to yield then, just so I'm clear?

It depends on whether it is a swapped instrument, which we have been doing a lot of to make sure that we are managing our interest-rate risks appropriately. Anything of size in the commercial real estate portfolio, we are trying to swap to variables. So that would be off the swap curve, whatever point in the swap curve.

The smaller credits could be off home loan bank which home loan bank and LIBOR are very similar. So the strike would be off that index.

Okay, so 100 basis points [around] over that timeframe. And any change in your view on the auto business? I know it's been coming down quarter after quarter and you've made a bit of a decision to clearly bring that down in terms of the overall size of the contribution of the portfolio. But what's happening there and just pricing profitability dynamics in that business? Any change?

We announced last -- nearly a year ago there we exited the business. So what you are seeing is just runoff of the sort of the -- (technical difficulties) portfolio. And we don't have any interest in reentering that business.

It is not a relationship business. It's price, price, price. And that is not where we compete. Being one of five banks on an auto dealer spring is not -- does not -- we don't see that we have a competitive advantage there.

Right. Okay and then this last question, your closing comments just on fair value accounting, would love to get your thoughts on what you think are the biggest points of concern as your data is presented to investors and analysts on calls like this, as it goes through, as currently outlined.

Is it just that you are not marking both deposits as well as assets, or what other missed representations or concerns you have?

Well, we could -- I could go on for hours, but I will just pick a couple of things. You know, from your perspective as an analyst, comparability across (inaudible) is going to be more difficult in our opinion. My fair value is probably very different from someone else's fair value.

The volatility in -- in metrics that you typically use for comparability between organizations like the net interest margin, ROA, etc., could see a lot of volatility with the new rules. And when you book alone, today, you essentially put it on a par.

Under the new rules you would not put it on a par. You would have to -- you would put it on, including a credit mark, and then calculate your yield based upon that reduced amount. I mean, so it is going to be a very different environment. The face of the financial statements are scheduled to change.

So there's going to be a big learning for everybody in how to deal with the new accounting.

Okay. Got it. More to come. Thank you.

Bernard Horn from Polaris Capital.

Good morning. Just two questions. One is relating to if you could give us some idea on the status of your commercial real estate portfolio? I guess you know there are lots of rents that are being reset as least as mature and they are, generally speaking, being reset at lower rates. And I am sure that you addressed this in your loan loss provisioning.

But maybe you could give us a sense for how much exposure you have and your customers have for the downward trend in rents and what effect that might have on your real estate portfolio. So that is my first question.

Let me -- first of all our markets rents are not Boston area market rents. They are very modest, to begin with. And we do track that every quarter and take a look at where they are and the marker rents have -- I'm looking at it right now. The average asking for Metro South had declined but it has declined from a peak of [$21] a square foot in the second quarter of '08 down to about $18 right now. That's in the address out.

You take a look at the MetroWest, actually the one I just quoted was for office. For Metro South industrial, actually the (inaudible) their rents are heading up and [MetroWest] office rents are similarly down. But industrial has been pretty constant.

So what we -- so we don't see sort of a huge volatility that you would see in a major metropolitan area. But more probably relevant to your question, what we have -- let me, before I get there for the punchline here. Let me just describe to you that our commercial real estate portfolio is fairly well-diversified across apartments, multi-families, commercial retail office, industrial warehouse, hotel, a small portion of hotel/motel. 1 to 4 family residential.

I believe if you go to a website and look at our investor presentation there (multiple speakers) you see this pie chart. So fairly well distributed all within our markets; thus we know sort of who we are lending to.

But maybe most relevant to your question is that, over the last several months, we have taken a really, really good look at our commercial portfolio and looked at commercial real estate portfolio and taken a look at the tenant structure, the role rates, the underlying cap rates at origination. The current cap rates, the appraisal values, and we have concluded that we are very, very comfortable with the integrity of that portfolio. And that does reflect, is reflected in our provisioning and charge-off estimates we talked about today.

That's excellent, excellent feedback. The second is a kind of the more esoteric question in the sense that the fed has gone from being your regulator in a sense or banking regulators to its most difficult competitor, basically taking over the entire mortgage market. And it seems like that is almost forcing banks like you indicated you didn't want to take on any fixed-rate product. You may not want to anyway, but at least that low risk product helps to moderate the risk of the other part of your loan portfolio and balance sheet.

I know you've been increasing the home equity portfolio, but it is almost been offset by paydowns on the residential real estate portfolio. So it seems like banks, generally, are getting more and more risky as they get more into commercial and construction and other things because they just can't compete on the -- do you have any comments on that? Or how you might keep the riskiness of the portfolio or the balance sheet from getting too out of control or weighted toward that part of the market?

Well, we've always had a significant commercial exposure. It's been our history. We are a commercial bank. It's how we think.

And I don't want to mislead, but I think we certainly do the residential real estate into our portfolio. We are just not enamored with long-term fixed rate. It's more about interest-rate risks than anything else.

But we do, we do portfolio shorter-term fixed-rate. If we can get 10-, 15-year paper we certainly would consider that.

But you know, your point is valid. The Fed is holding down mortgage rates. It does make it challenging in terms of finding an appropriate amount of portfolio product. We have an interest in it for some time and at least maintaining the size of our residential portfolio if not growing it. But we frankly have been unable to do it.

If you went back to a year ago, we had a $600 million residential portfolio. We are down almost $100 million since that point. So we do find it challenging.

Thanks very much. Really helpful.

David Darst from Guggenheim Securities.

Good morning. Chris, could you give us an update on your three-year strategy for the Wealth Management business and if you have any AUM goals that you would like to reach?

Yes. We have aspirational goals. I don't want to, I don't -- which I probably don't want to quote on the phone. Just, but I will say the Wealth Management, we are currently above the sort of the high watermark precrisis at about $1.325 [billion]. About a third of that is in our large-cap core strategy; a third of that is in our fixed income; and a third of that is in institutional mutual funds that are enabling our customers to have a diversified asset allocation.

Our capabilities include -- we have a very disciplined equity selection process. We are on the portfolio management side, we are led by and staffed by investment professionals from the investment management industry from some name brands -- we were (technical difficulties) from namebrand firms over the years.

The -- we also have capability of sort of a quantitative based at institutional mutual fund selection and composite portfolio construction. So, we have a very, very good process here.

Our primary channel right now is we have had extraordinary success in working with our branch network and our commercial lenders, and bringing clients to the bank over and into the Wealth Management business. I would say our first big -- I always like to say our first big sale was in 2000, late 2004 and that sale was to the branch network. Showing that in fact, we had a real value product.

Fast forward a number of years, we have many commercial lenders who themselves are invested in this business. Parents, my biggest sale is my mother's, all of her assets are in -- are being managed, her assets that she depends on to live are being managed by this group.

So we've really gotten a lot of momentum. We have gotten feedback from our peer groups that we've really sort of cracked the code in our ability to originate business through our primary banking channels.

When we think about sort of growing this business, we think there's a lot of potential on the institutional side. You may recall that we hired a team with a [tenure], the good tenure track -- an excellent tenure track record in the mid-cap growth category. That is capacity constraint.

We have had hired a third-party marketing firm that is doing a really good job. It's opening up doors that we couldn't have opened it up ourselves. And the initial feedback is that we -- there's a great deal of interest there.

I will also say that one of the things that is unique about our model is that we couple it, each high net worth individual not only gets a portfolio manager assigned to them, but they also get a relationship manager. I will say, first, most of our portfolio managers are BFAs and on the relationship managers we have CFPs. They are also traditionally trust fiduciary trained and certified.

So we have a value proposition and a marketplace that is actually quite unique. And we do win business when going up against some of the big brand names.

In terms of our aspirations, now I would like to see this business grow. When I think about growth, I think about billions over the next two years. But I don't want to put a specific number against it.

Great. It sounds like it's going to do well. Denis, are you implying that we -- you could actually see some deposit fee income growth in the second half of the year through the opt-in program?

That's too early for us to say that. I think I am certainly implying that there is the opportunity for it because we did not participate in, as I said earlier, overdraft either at point-of-sale or ATM.

We are now going to be able to offer our customers that opportunity. If they so choose, then one might argue that, yes, we could see an improvement in C revenue. But it is a little early to say for us. We are -- some others have been out there much more aggressively than us in getting the opt-in program on board.

For us, it is a later Q3 event. So we should hopefully begin to see the impact in Q4.

Great. Thank you.

(Operator Instructions).

Camille, it sounds like we're out of questions.

Yes, we are, sir.

Okay. Well, everybody thank you very much. Really appreciate your support and your interests and your good questions. I look forward to talking with you again at the end of our third quarter. Have a good weekend. Thank you. Thanks. Bye.

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