Good morning. And welcome to the Independent Bank Corp. First Quarter 2012 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity for you to ask questions. (Operator Instructions) This call may contain forward-looking statements with respect to the -- to financial conditions, results of operations and business of Independent Bank Corp. Actual results may be different. Independent Bank Corp. cautions you against unduly relying upon any forward-looking statements and disclaims any intent to update publicly any forward-looking statements whether in response to new information, future events or otherwise. Please also note that today’s event is being recorded. I would now like to turn the conference over to Mr. Oddleifson, President and CEO. Please go ahead.

Good morning, everyone, and thank you for joining us today. With me as always is Denis Sheahan, our Chief Financial Officer, who’ll elaborate on our financial results and talk about our outlook following my comments. Well, we really get off to a terrific start in 2012 with an excellent first quarter. Our net income rose for the quarter to $12.2 million, which translates to $0.56 per share. This healthy increase -- this is a really healthy increase over $0.52 per share in the prior quarter and $0.53 per share a year ago. Once again solid fundamentals and organic growth really lead the way. Clearly, our marketing, sales and high quality customer relationships are paying big dividends for us, excuse me. Our value proposition continues to resonate with businesses and consumers alike, fueling strong customer growth. As you’ve seen in previous quarters, our commercial banking franchise is a major growth engine -- a major engine of growth for us and commercial loan growth continued at a high single-digit annualized rate. Specifically, the C&I portfolio has been a key driver as we continue to add high quality clients. We have diligently pursued this sector and built up our expertise and product sophistication over the past few years. On the real estate side, there has been a pick up in commercial construction activity in our market and we’re getting our fair share of attractive deals. Success in the commercial business reached further success, as we continue to advance our reputation as reliable, full service lender to small and midsized businesses. For example, our recent expansion efforts are beginning to gain traction, such as our expanded asset based lending effort, along with our new office in providence. These and other related moves are expected to help us sustain strong growth in a portfolio. Our…

Thank you, Chris, and good morning, everyone. As Chris stated, we kicked off the year in fine fashion. Independent Bank Corp. reported net income of $12.2 million and GAAP diluted per share of $0.56 in the first quarter of 2012, as compared to net income of $11.2 million and diluted earnings per share of $0.52 in the fourth quarter of last year. The prior quarter included the occurrence of prepayment penalties on borrowings equating to $0.02 per diluted share as we deployed some of our excess cash to pay down both higher cost borrowings. On the key topics in the quarter, the first quarter maintained our disciplined momentum and resulted in strong growth in loans, deposits and the investment management business. Asset quality remains solid and expense growth was well-contained. Key performance ratios were excellent in the first quarter with return on assets at 1%, return on equity at 10.31% and the net interest margin at 3.82%. The margin came in generally in target as we deployed excess cash into higher yielding loans and securities, the latter to bolster our collateral positions. Loans grew at 8% on an annualized basis with continued strong growth in both the commercial and home equity lending categories. The home equity portfolio grew 23% on an annualized basis, benefiting from demand for first position mortgage refinancing. As added disclosure, we’ve begun breaking out first position loans on the balance sheet accompanying the release. The quality of the home equity portfolio was strong with 58% of outstanding balances in first position and current average FICO and LTVs of 762% and 55%, respectively. The commercial loan portfolio grew nicely in both the commercial and industrial, and construction categories. C&I growth came from both our enhanced asset-based lending initiatives, as well as expansion of borrowing activity from existing…

Right. Thanks Denis. We’re ready for questions, operator.

(Operator Instructions) Our first question comes from Damon DelMonte from KBW. Please go ahead with your question.

Hi. Good morning, guys. How are you?

Good morning.

Good morning.

I guess, could you guys first start off by talking little bit about the home equity growth that you saw this quarter and I think in your comments you made reference to just some refinancing activities, but do you guys have some promotional activities going on to try to drive business with that?

We have an attractive product called an express mortgage product is essentially a refi product where we offer through our branches, 92% of them are first, 84% have originations in home equity who were actually the express mortgages and 85% of it was 725 plus. This is all supported by some direct mail -- targeted direct mail and advertising.

Okay. And how does the pipeline looks for that category since we head in the second quarter?

It’s strong, I mean, it’s not sort of, it’s consistent with the production you’re seeing in the growth in the portfolio. So we expect it to continue to grow.

Damon, this is Denis. Just to understand, these are typically smaller balance loans that borrowers that don’t need to go through the lengthy process with the traditional residential mortgage sold in the secondary market. They are seasoned loans, smaller balance typically and it’s very convenient process for them to go through with this express mortgage. I think that’s part of the attraction to the consumer.

Okay. Denis, you had mentioned a FICO like 762% and LTV of 55%. Is that on the new production you are putting out now or is that with the entire portfolio looks like?

I think that’s the entire portfolio. We can give you production as well, production here, I might have…

Production is pretty consistent.

…pretty consistent with that, if I don’t have it here, it’s pretty consistent, Damon. I can provide you that off-line, but it’s very consistent with this -- with what we’ve talked about for the portfolio.

Okay. Great. And then with regard to C&I lending, could you talk a little bit about the pipeline there?

Yeah. I can give you pipeline information overall. I don’t think I have it split out by C&I. But I can give you total commercial. Just bear with me for a second. I think I mentioned earlier, it’s third of the last -- it’s the third highest in the last 12 months, yeah. So the total approved but not closed pipeline is $211 million at March 31st.

Okay. Great. And I guess just quickly, we look on the liability side of the balance sheet. I think you have around $370 or so million of borrowings that are coming due during the course of the year? What’s your, I guess, what does it look like for the next couple of quarters as far as potential pickup and reducing the total cost of the borrowings?

Well, keep in mind Damon the vast, vast majority of those borrowings, while they might appear just that the borrowing themselves might be variable they are swap to fixed rate. So there is little that we have coming due on the borrowing side for the remainder of the year, so unless we were to prepay borrowings, you’re not going to see a whole lot of change there, you all agree with that and we don’t anticipate doing more prepayment at least at this point.

Okay. All right. That’s helpful. I’ll jump out now and come back in if I have a chance after. Thank you.

Yeah. Sure.

Our next question comes from Mark Fitzgibbon from Sandler O’Neill. Please go ahead with your question.

Good morning, guys. This is actually [Matt] filling in for Mark.

Hi, Matt.

Hi. Just a quick question here on capital. Clearly, strong organic capital generation in the quarter, were you guys surprised by the linked-quarter increase, are you still managing towards 71 in 2012?

Well, I, no, we weren’t surprised by the increase, Matt. I mean, it was certainly a good quarter, but as you know, we’ve been steadily growing capital, we’re very, very comfortable with our capital level. Our current projections have us being close to 720 by the end of the year on an unadjusted basis. And then when you adjust for the goodwill of deductible for tax purposes will be closer to 750 by the end of the year. So we’re feeling really good about our capital position.

Okay. Okay. And just, I think last quarter you also said that having capital at that level gave you flexibility? If in fact, loan growth in your market hits up and people start doing silly things and you slow down loan growth. How should we think about capital deployment at that point, where do you look, the dividend or how you thinking into that?

So we increased the dividend here, just we announced that there last quarter and we think that’s an appropriate dividend for us. We don’t have plans to increase the dividend further for the rest of this year. So in this scenario that like the ‘05, ‘06 timeframe when we pulled in the reigns on loan growth because we didn’t like some of the things we were seeing. If that -- if we have that situation again then we would likely look to repurchase shares. But that’s a -- there’s a lot of ifs in that. But certainly we are not comfortable with our capital position that we believe we have access capital now.

Perfect. That’s great. Thank you very much.

Thanks Matt.

Our next question comes from Mac Hodgson from SunTrust Robinson. Please go ahead with your question.

Hi. Good morning.

Good morning.

Good morning.

Just a couple questions, Denis, you mentioned some promotions drove, stronger debt revenue, could you give any clarity there?

Yeah. We had some promotions in the fourth quarter and I think into the first quarter on debt card related to rewards associated with debit cards, like fairly competitively there’s a lot happening at the companies above $10 billion in terms of debit card revenue or less than $10 billion. So we are going to try and do what we can to win over those customers from the larger institutions. And that’s why we have had very, very good consumer check-in growth. Our growth year-to-date is up 23% in new consumer transaction accounts versus a year ago. So more accounts with some promotional activity has driven that interchange revenue certainly somewhat higher.

So it’s likely not a one time type event, it’s just an ongoing effort of probably.

Must be, yeah, the Q1 was very strong some of it probably season with the shopping, et cetera. It may not be that big in Q2. But certainly, if you look at even versus a year ago, of that $2.1 million level we had in the fourth quarter that’s probably more $2.1, $2.2, probably more of the normal run rate still up significantly versus Q1 over year ago.

Okay. And on the credit guidance, just really I think not much of a revision there. Is it really based on your belief that first quarter asset quality was in credit costs, I guess were so good. It’s unlikely that you could keep them at this level, that’s why you’ve not adjusted it down materially?

That’s a fair statement Mac. We’d like to hear it develop a little bit further before we brought down the guidance. We are feeling pretty confident that Q2 is likely going to be a peak for us in terms of charge-offs. So that’s why we’re guiding you to, we don’t want folks to get too far out ahead of us here in terms of guidance, that’s why we’re guiding you to $3 million to $3.5 million for the second quarter. I guess, if you look at the different components of our asset quality metrics, very, very positive in terms of delinquency, early stage delinquency at 41 basis points, total delinquency down on a linked quarter basis. That’s very good. But on the other hand, non-performers have crept up a little bit. We think that will ultimately lead to some charge-offs here in the second quarter. So our realistic projection is $3 million to $3.5 million of charge-offs for Q2. But full year and then that will be the peak Q3 and Q4 likely less than that, but we certainly see Q2 as being the peak.

Okay. Great. Appreciate the color and just one final one on the loan growth comments. Denis and Chris, you mentioned competition heated up and you sound like you tempered even though not materially, I think your prior guidance was 7% loan growth for the year and now 6% to 7%, even though first quarter was pretty strong? Is it based on your belief that competition is peaking up, so you might have to pass on stuff or not win some deals you would have previously won. So you’re somewhat more cautious on growth?

Well, we feel good about Q2 loan growth and on the commercial side unlike you talked about home equity area, it will probably continue into Q2. We already are losing opportunities. We’re passing up opportunities today, but there’s enough demand out there, enough good new business generation by our lenders that we’re still able to show very good growth. But we absolutely are losing opportunities on underwriting terms and pricing. So, we don’t know where it’s going to go in the second half of the year but we’ve been through this before.

Got you. Okay. I appreciate your thoughts. Thanks.

(Operator Instructions) Our next question comes from David Darst from Guggenheim. Please go ahead with your question.

Hey. Good morning.

Good morning.

On the relative reserve and your outlook for charge-offs. Do you have any specific reserves that you recruit for anticipated charge-offs?

Sure. Yeah. Absolutely we do. We do like everyone else loan impairment review and if the reserves is required, we would establish that reserve. I don’t know if they are specifically at the end of March, but absolutely we do.

Okay. So to that result…

That will be in our 10-Q filing if anyway, David.

Okay. Would that result in your maybe provisioning being under the charge-off guidance for the second quarter?

No, no. We don’t, we don’t have plans -- we don’t have plans to do that this year. We think we’re adequately reserves. We don’t have plans to recapture reserves and provide less than charge-offs, I won’t say never but that’s not how we typically think.

Okay. And then, could you walk through some of the AUA growth in the wealth management business, give us ideas of how much of that was related to market appreciation, and how much was related to new business, and maybe some insight on what your new business pipeline and the wealth management business looks like?

The -- we don’t have this. I don’t have the split. This is Chris, splitting up between market and production. I will say that we have a pipeline consisting with our past growth in the area. But the large uptick this quarter was due to an existing cline that went from one sort of class of management to another. So somewhat of -- a portion of that was a reclassification. But I would say, overall, we have really cracked the code on getting really solid referrals from our branch network, bank bankers and our commercial bankers because of the capability we have in our investment management group, which is staffed by real investment management professionals from the name brand firms in New England and nationally.

I think it’s fair to say, Chris, we’re running bigger mandates now too in the employee benefits arena, which has been a really growing area for us. It’s not just individual high net worth anymore and that’s a very, very important component of the business for us. But we’ve had a couple of big mandates coming here this past quarter in the employee benefit arena. So that does helpful.

And David, your question is good one. I’ll try in future quarters to have the information available if you so wanted in terms of market appreciation and that sort of stuff. We just -- we haven’t typically broken it out that way.

Yeah. I mean, I think, it wouldn’t be necessary unless you had in other words event, but thank you. And then could you comment on your outlook for mortgage banking. I think previously you’d expected to see that decline over the course of the year, is anything changing?

Yeah. We think, actually, we’ve been pleasantly surprised with mortgage banking in the first quarter. We think it will continue into certainly at the beginning of the second quarter, but we’re assuming in the back half of the year it’s going to fall off pretty significantly. We hope we’re wrong on that but that’s our current thinking.

Okay. And then do you have a value of the accruing TDRs?

Yeah. Yeah. I do, and okay, here we go. The TDRs in total didn’t change a whole lot quarter-over-quarter. So total TDRs at March 31st $47.2 million, the non-accruing TDRs are 9.2, that’s pretty similar to the prior quarter.

Okay. Great. Thanks. Good Job.

Sure.

(Operator Instructions)

No more questions, [Jamie]?

Sir, at this time, I am showing no additional questions.

Thank you very much everybody for joining us. And we look forward to reporting second quarter earnings in three months. Thank you.

Thank you.

Good bye.

Ladies and gentlemen, today’s conference call has now concluded. We do thank you for attending today’s presentation. You may now disconnect your telephone lines.