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Investors Bancorp Inc  (NASDAQ:ISBC)
Q4 2018 Earnings Conference Call
Jan. 31, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Investors Bancorp Fourth 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 questions. (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 Investor Bancorp's control, 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's Discussion and Analysis of Financial Conditions and Results of Operations set forth in Investors Bancorp's filings with the SEC. Please note, this 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 -- Chairman & Chief Executive Officer

Thank you. And good morning and welcome to the 2018 fourth quarter Investors Bancorp earnings call. The Company last night reported in its earnings release quarterly net income of $33.3 million or $0.12 per diluted share. And as previously announced last month, the 2018 fourth quarter results include a $32.8 million loss on the sale and restructuring of the debt securities available-for-sale and a $2.8 million in expenses related to the closure of four branches, three in New Jersey and one in New York.

Adjusting for these items, core net income for the quarter was $61.1 million or $0.22 per diluted share compared to net income of $54.2 million or $0.19 per share for the three months ended September 30, 2018. And this compares to adjusted net income of $48.2 million or $0.17 per diluted share for the three months ended December 31st last year. The 2017 results reflect adjustments for the tax law change and severance and branch closure costs announced in 2017.

Year-over-year we saw a 27% increase in core net income and a 29% increase in EPS for the quarter ended December 31st. For the year ended December 31, 2018, net income totaled $202.6 million or $0.72 per diluted share. Core net income totaled $229.3 million after adjusting for the securities sales and the branch closures. And this totals $0.81 per share for 2018. These results represent a 28% increase in net income versus adjusted net income in 2017 and $0.62 per diluted share in 2017. So it was a good quarter and a good finish to 2018.

During the quarter, we announced termination of our informal agreement relating to the BSA compliance program, and I'm pleased with our continued progress in this area. The investments in our people and technology and risk management over the last three years will provide a strong foundation as we continue to grow.

During the quarter we saw a strong loan growth of $652 million in total loans which represents a 3.1% increase. For the year total loans grew just over $1.5 billion with close to 50% of this growth coming from our C&I portfolio, which grew from $1.6 billion to $2.4 billion during 2018. We will continue to diversify our balance sheet and leverage our excess capital through organic growth, buybacks, and dividends.

We announced a cash dividend of $0.11 per share to be paid next month, and we continue to repurchase our shares in the open market. During the quarter, we repurchased $5.9 million shares for $67.2 million for an average price of $11.39. This activity follows our third quarter repurchases of $6.9 million shares. Our return on tangible equity for the quarter was 8.34% as adjusted versus 6.28% in '17 and 7.29% for the quarter ended September 30.

During the quarter we experienced sound non-interest expense control as total non-interest expenses, excluding the branch closure, were at $99.4 million versus $101.8 million for the quarter ended September 30th and $103.6 million for the quarter ended December 31st last year. We have a little bit of a difficult operating environment with respect to interest rates and the flat yield curve, but we continue to manage our growth prudently, and we'll continue to make investments in both people and technology as we continue to grow and evolve into a full-service commercial bank.

Our balance sheet is strong and our credit quality continues to perform well. At this point in the economic cycle, we believe we are well-positioned for anything that might happen with respect to the potential slowdown in economic activity as we move it through 2019 and into 2020.

With respect to credit quality, we had net recoveries of $1.5 million for the quarter ended December 31st versus net charge-offs of $2 million in September and $3.6 million in the quarter ended last year. For the year we incurred charge-offs of $7.2 million in 2018 and $13.7 million in '17. For the last five years we've experienced net charge-offs of approximately $50 million to average about $10 million per year.

Overall our allowance for loan losses increased by $4.8 million to $235.8 million at year end. This reflects the loan growth experienced in the fourth quarter. Our non-accrual loans increased from $104 million to almost $125 million, as we saw one multifamily relationship consisting of nine loans moving to non-accrual status. These loans totaled approximately $31.2 million and have an overall loan-to-value at year end of approximately 75% on current appraisals received in September and October. We're closely monitoring this situation as the properties showed strong cash flows based on financials received from the borrower and it appears that income is being diverted to other projects. We are in the process of putting our rent receiver in place and legal actions have commenced. We're anticipating having that rent receiver in place by the end of the month, end of February.

In the CRE portfolio, $12.4 million is currently in non-accrual status with approximately $9.8 million of that group current on payment terms as of today. And in our business portfolio, there are $19.4 million in non-accrual loans of which $13.9 million is current on payment terms as of January 31st. Overall we think our credit quality remains strong and we have made significant investments in the business lines and in our risk management groups to enhance our processes as we continue to grow. We believe these investments will allow us to continue to diversify our portfolio in a safe and sound manner.

With respect to risk management, our Chief Risk Officer, Philippa Girling, has recently decided to leave the Bank and will retire in March. Paul Kalamaras has moved into that position from the Chief Retail Officer position and brings over 30 years of banking and credit experience to the position. We thank Philippa for her efforts and wish her good health and good luck in her retirement.

We are looking forward to improving and enhancing our processes in this risk management area to improve both the internal and external customer experience and become more efficient in this process. These past two years have seen an all hands on deck approach to the issues we faced with respect to ERM and BSA, but now we have the opportunity to get stronger and more efficient in these processes.

On the deposit front, deposits grew $182 million for the quarter and $222 million for the year. With Paul Kalamaras moving over to risk management, Bill Brown was promoted to Executive Vice President and Chief Retailer Officer to manage and lead our retail team. Bill along with our Chief Marketing Officer, Dorian Hansen, and Mark Taylor (ph), our Head of Digital Strategy, are addressing the issues that we face in both the marketing and the technology front with respect to deposit gathering activities.

This is the single most important priority of this management team and the entire bank, and the same effort that went into solving our BSA and risk management issues over the past two years are being directed to expanded activities to enhance our products and improve the customer experience. We need our retail and business teams to focus on the customer and not internally to focus on the customer and drive business into the Bank. The competition in the northeast is fierce and we need to manage our sales teams more effectively for better results. We have just recently hired a Senior Business Development Officer to head the team focused on driving business core deposits into the bank. This individual has a wealth of experience and will be in charge with expanding the team from its current team of 13 professionals to 40 over the course of 2018.

In addition, we have hired a new Chief Information Officer to continue to improve our technology and digital platform to allow our teams to compete more effectively. We need to continue to change and get stronger to compete and win new business into the bank.

Now I'd like to turn the call over to Sean Burke, our CFO, who will give you some color and commentary on our net interest margin and operating results for the quarter.

P. Sean Burke -- Executive Vice President & Chief Financial Officer

Thank you, Kevin. I'll be brief. Net interest margin was 2.69% consistent with the prior quarter. Yield on interest earning assets increased 10 basis points to 4.04%, while the cost of interest bearing liabilities increased 13 basis points to 1.69%. Non-interest income, excluding the impact of the securities loss, totaled $12.1 million, an increase of $1.8 million from the prior quarter.

Non-interest expenses totaled $102.2 million. Excluding branch closure cost, however, non-interest expenses were $99.4 million, down $2.4 million from the third quarter. The decrease was primarily driven by lower incentive compensation, employee benefits, and FDIC expense, offset by a $1.3 million charitable contribution.

Our effective tax rate was 22.1% for the quarter, which decreased compared to the prior quarter. We benefited from a $1 million tax credit resulting from the $1.3 million charitable contribution to the state of New Jersey's Neighborhood Revitalization Tax Credit Program. Our asset quality and capital ratios remained strong. At December 31st, our non-performing asset ratio stood at 55 basis points, a slight increase from 49 basis points in the third quarter.

Finally, I'd like to share some high-level guidance for 2019. We are targeting loan and deposit growth in the 6% to 7% area, a net interest margin in the 2.60% area for full year 2019, non-interest income in the $45 million range, and expenses in the $420 million range, implying 3% to 4% expense growth from 2018. We expect our effective tax rate to be in the 27% area.

Now I'd like to turn it back over to Kevin for concluding remarks.

Kevin Cummings -- Chairman & Chief Executive Officer

We had our recent State of the Bank meeting in December, and there was great chemistry and good momentum in the room. The 2018 fourth quarter was our strongest quarter in the history with respect to net income and our second best quarter with respect to pre-tax earnings.

We continue to be a force in the community through the activities and commitment of our employees. We are making a difference to improve the quality of life of our customers in the communities that we serve, but we're not satisfied with our stock price or the results and we need to continue to drive results for our shareholders. We appreciate the hard work and the dedication of our employees and look forward to a strong 2019.

Now I'd like to open the call for questions.

Questions and Answers:

Operator

We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from Dave Rochester of Deutsche Bank. Please go ahead.

David Patrick Rochester -- Deutsche Bank AG -- Analyst

Hey. Good morning, guys.

P. Sean Burke -- Executive Vice President & Chief Financial Officer

Morning.

Kevin Cummings -- Chairman & Chief Executive Officer

Morning, Dave.

David Patrick Rochester -- Deutsche Bank AG -- Analyst

A quick one on the NIM. It looked like securities yields increased a bit more than expected and you called out in the release some interest income from the pay down of trust preferred securities. So I was just wondering what that dollar amount was for the quarter.

P. Sean Burke -- Executive Vice President & Chief Financial Officer

For the quarter it was $2.8 million, Dave, but I would note that activity while it's a bit lumpy, we do see that come in and we have seen it come in in other quarters but it's hard to predict. And then just a step further, the securities portfolio restructuring that we performed, it was done in December, and so there's a little bit of pick up from the securities trade that we did there, but we're really going to see the full impact of that in Q1, and so not to say that they offset one another, but they do to a large degree.

David Patrick Rochester -- Deutsche Bank AG -- Analyst

Yes, yes. Exactly. I was just curious -- I appreciate the NIM guide for the year. What are you guys thinking in terms of prepayment penalty income within that and then what are your underlying rate assumptions for hikes and then just the shape of the curve?

Kevin Cummings -- Chairman & Chief Executive Officer

The prepayment assumption is consistent with 2018. We're usually pretty conservative with respect to how we forecast that number because it does move and it is pretty volatile. So it's no change from 2018 in terms of total prepayments. And could you repeat the second part of the question?

David Patrick Rochester -- Deutsche Bank AG -- Analyst

Yeah, sure. Just in terms of just your rate hike assumptions and then the shape of the overall curve in terms of 10-year, five-year.

Kevin Cummings -- Chairman & Chief Executive Officer

We are -- the guidance that was given was based on recent curve expectations, and the guidance is also building in anywhere from zero to two interest rate hikes. So our budget called for two rate hikes, although today it's looking more like zero, but somewhere in that ballpark. And our guidance is going to be the same regardless if we get zero or two.

David Patrick Rochester -- Deutsche Bank AG -- Analyst

So you're not looking for much in the way of upside in terms of medium-term interest rates within that guide. You're kind of projecting the current curve forward through 2019?

Kevin Cummings -- Chairman & Chief Executive Officer

Yeah, we get -- we do benefit toward the end of '19 or the second half 2019, but we do have CDs and borrowings that will reprice and that will continue regardless whether we get rate increases or not. And in the first part of the year, we're going to feel the impact of the last rate increase. So we are expecting some deterioration in margin in the first quarter, but then it should be pretty stable for us throughout the year.

David Patrick Rochester -- Deutsche Bank AG -- Analyst

Got it. Perfect.

Domenick A. Cama -- President & Chief Operating Officer

Dave, this is Domenick. If you look at the spread between twos and tens (ph) despite the activity over the last few days, it's still kind of bouncing around that 18 to 19 basis point range. I mean it's better than 13 basis points that we saw in December, but for the most part it's about the same with where it's been.

David Patrick Rochester -- Deutsche Bank AG -- Analyst

Yeah. Sounds good. And just one quick one on capital if I could. You had some nice buyback activity this quarter. How are you thinking about that going forward with your new loan growth guidance?

Kevin Cummings -- Chairman & Chief Executive Officer

We will continue to take advantage of the market, Dave. I mean with the stock trading at 115% of book value, it still seems like a very good investment for us to continue to be active in the buyback market.

David Patrick Rochester -- Deutsche Bank AG -- Analyst

Yeah. All right. Great. Thanks, guys.

Operator

Our next question comes from Mark Fitzgibbon of Sandler O'Neill & Partners. Please go ahead.

Mark Fitzgibbon -- Sandler O'Neill & Partners, L.P. -- Analyst

Hey, guys. Good morning.

P. Sean Burke -- Executive Vice President & Chief Financial Officer

Hey, Mark.

Kevin Cummings -- Chairman & Chief Executive Officer

Hey, Mark.

Mark Fitzgibbon -- Sandler O'Neill & Partners, L.P. -- Analyst

I wondered if you could share with us the size of your loan pipeline today and maybe what the blended yield on that looks like.

P. Sean Burke -- Executive Vice President & Chief Financial Officer

The pipeline, Mark, is about $1.2 billion between CRE and C&I, and the weighted average yields on it is somewhere in the 4.50%-ish range.

Mark Fitzgibbon -- Sandler O'Neill & Partners, L.P. -- Analyst

Okay. And then secondly, Sean, I missed -- I'm sorry if I missed it, but did you give guidance on the effective tax rate for this year?

P. Sean Burke -- Executive Vice President & Chief Financial Officer

We did. We guided to 27% area, Mark.

Mark Fitzgibbon -- Sandler O'Neill & Partners, L.P. -- Analyst

27%, OK. And then on expenses, I would have thought perhaps with the lifting of the BSA/AML order there might have been an opportunity to take some professional fees and such down, and so the expense growth might have been a little bit slower. Is that not the case?

Kevin Cummings -- Chairman & Chief Executive Officer

Mark, as far as the -- while we cleared the BSA issue, we think that we need to invest in technology, and we're using that 4% or so in growth in non-interest expenses to invest in our technology infrastructure.

Mark Fitzgibbon -- Sandler O'Neill & Partners, L.P. -- Analyst

Okay. And then that New Jersey Neighborhood Revitalization Tax Credit Program, is that a tax credit investment or is that a charitable donation where you got to benefit and it's kind of behind now?

Kevin Cummings -- Chairman & Chief Executive Officer

The charitable contribution is that you receive a tax credit when you make the donation. So the tax credit is $1 million tax credit.

Mark Fitzgibbon -- Sandler O'Neill & Partners, L.P. -- Analyst

Okay. So there's nothing residual going forward on that?

Kevin Cummings -- Chairman & Chief Executive Officer

No.

P. Sean Burke -- Executive Vice President & Chief Financial Officer

No, that was a one-time ...

Kevin Cummings -- Chairman & Chief Executive Officer

Basically, Mark, it's like you're making a net $300,000 donation and getting a benefit of $1.3 million.

Mark Fitzgibbon -- Sandler O'Neill & Partners, L.P. -- Analyst

Got you. Thank you.

Operator

Our next question comes from Matthew Keating of Barclays. Please go ahead.

Matthew Keating -- Barclays PLC -- Analyst

Great, thank you. I'm just curious that the guidance calls for deposit growth in 2019 to broadly track loan growth. And so what are the real drivers? And I know you called out in prepared remarks expectations for some hiring in sort of the business banking area which will help drive deposit growth. But what else is there that's likely to drive deposits at a faster rate than what we saw in 2018? Thanks.

P. Sean Burke -- Executive Vice President & Chief Financial Officer

Two aspects, one is the non-interest-bearing deposit line item is expected to grow by about 40% of the overall budget and that we expect will come as a result of the hiring of the new relationship management teams; and second is about 25% of the budgeted growth is expected to come from our online banking platform which we have recently reinstituted across 48 states. And so it's not-interest bearing about 40% and the online bank about 25%.

Matthew Keating -- Barclays PLC -- Analyst

Great. Thank you. And then as it relates to the deployment of the Bank's excess capital and you talked about organic growth, buybacks, and dividends, noticeably absent was acquisitions. And so maybe you could just comment on the Bank's appetite for M&A? I guess given the currency or the stock currency right now, is that something that's not in the cards? Thanks.

P. Sean Burke -- Executive Vice President & Chief Financial Officer

Well, it certainly makes it difficult to try to do a transaction, Matt, if our currency is trading -- our stock is trading at about 115% of tangible book. So again it's difficult to use it and we put that on a backburner at this point. I mean while we'll always look at a potential transaction, we're most concerned with the level of dilution that may occur if we would enter into a transaction. So right now we see that buybacks are a pretty good deal for us.

Matthew Keating -- Barclays PLC -- Analyst

Understood. And then just my final question. Obviously you used the word sense of urgency this year to improve performance. Just hopefully you can kind of like apply that relative to the Wall Street Journal article that came out in November that the Bank might be considering exploring a sale. And so maybe I guess the question would really be how much of a sense of urgency is the Bank focused on delivering vis-a-vis looking at other strategic alternatives. Thanks.

P. Sean Burke -- Executive Vice President & Chief Financial Officer

Well, first I'll say that we're not going to comment specifically on the article that came out I guess back in November. But just in terms of the sense of urgency Kevin made that comment, it really comes down to the fact that given the regulatory concerns and the building of the risk management infrastructure and the focus on BSA, management's attention was diverted toward ensuring that we can correct those issues to allow for us to continue to grow. And so, as Kevin said, most of those items are behind us. The regulatory issues are behind us, and there's a real focus on driving non-interest bearing deposits.

The other aspect of this is the fact that we've had nine interest rate hikes over the last, say, three years and that has put a sense of urgency on ensuring that we can continue to grow our non-interest bearing deposits to help protect our margin in the different interest rate environments.

So I guess the sense of urgency comes from the fact that here in the northeast a lot of banks are starved by deposits, specifically non-interest bearing deposits, and we want to make sure that we're working as hard as we can to continue to drive those into the Company, into the Bank.

Kevin Cummings -- Chairman & Chief Executive Officer

Yeah, I think when you look at our -- I mentioned earlier our growth in deposits prior to this year has averaged over $1.6 billion and we need -- the competition was less intense, and we need to raise our game and improve the processes, our products, and our technology, and to get off the excuse management wagon and produce results.

Matthew Keating -- Barclays PLC -- Analyst

Thank you.

Operator

Our next question comes from Laurie Hunsicker of Compass Point. Please go ahead.

Laurie Havener Hunsicker -- Compass Point Research & Trading, LLC -- Analyst

Yeah, hi. Good morning.

Kevin Cummings -- Chairman & Chief Executive Officer

Good morning.

Laurie Havener Hunsicker -- Compass Point Research & Trading, LLC -- Analyst

I'm just wondering if we could go back to loan growth. Your loan growth was so strong this quarter and obviously you've been adding some C&I folks. Was all of that organic?

Kevin Cummings -- Chairman & Chief Executive Officer

Yes.

Laurie Havener Hunsicker -- Compass Point Research & Trading, LLC -- Analyst

Okay. And so when we think about next year, the 12% run rate where we were for this quarter versus your 6% to 7% guide, can you help us think about why that slowdown?

P. Sean Burke -- Executive Vice President & Chief Financial Officer

Well, fourth quarter is historically a strong quarter, not only here at Investors but for most of the industry. I've seen that in a number of earnings releases over the last few days. And first quarter is generally a little lighter. So we think that having a 6.5% growth range for loans is a good place to be.

Laurie Havener Hunsicker -- Compass Point Research & Trading, LLC -- Analyst

Okay. And then onto expenses, I just wanted to come back to that. So we really saw nice clarity obviously if we take your $102 million. Less the branch closures, you're down to $99.5 million. Less the charitable contribution, you're down to $98 million, and then you've got obviously cost saves you're picking up from the branch closures puts you at a quarterly run rate of about, call it, $97 million, $97.5 million, something like that. But your guide of $420 million is suggesting $105 million quarterly, so that's a big delta. Can you help us think about the differential there?

Domenick A. Cama -- President & Chief Operating Officer

Well, I think, as Sean pointed out earlier, the fourth quarter expense was impacted by several items, actually several true-up items, if you will. And so we don't see that $97 million as being the run rate for 2019. And in addition what I think I said in response to someone else's question is that we see 2019 being a year in which we continue to invest in our technology infrastructure. So we've built that into our run rate for 2019.

Kevin Cummings -- Chairman & Chief Executive Officer

I'll just build off of that, Laurie, so just to go back to your comment around the sub-$100 million run rate per quarter. Typically, it's normal for us to see a 3% increase sort of across the board with respect to services, compensation and raises for staff. And so that's a natural spot, and so building off of that to get you to the $420 million that we're talking about that is the investment Domenick is alluding to in terms of technology and really building out our digital capabilities and building -- or our relationship making (ph) teams to drive in deposits.

Laurie Havener Hunsicker -- Compass Point Research & Trading, LLC -- Analyst

Okay, great. And then just last question. Just wondered, I appreciate your sensitivity around dilution as you approach M&A. Can you talk a little bit about how you would consider an MOE given that we obviously just saw very favorable market reaction to the Chemical-TCF MOE? Where your thoughts lie on that? Thank you.

Domenick A. Cama -- President & Chief Operating Officer

Yeah. We think that was a good transaction; obviously the market did. And certainly anything -- we've always been steadfast in our comments about that in that we would do whatever we think -- whatever is best for our shareholders, so whether it's an acquisition, whether it's an MOE, whether it's us acquiring someone, we always want to make sure that whatever we do, it's in the best interest of shareholders. So, yeah, I mean we thought it was a good transaction.

Laurie Havener Hunsicker -- Compass Point Research & Trading, LLC -- Analyst

Great, thank you.

Operator

Our next question comes from Brody Preston of Piper Jaffray. Please go ahead.

Brody Preston -- Piper Jaffray Companies -- Analyst

Good morning, everyone. How are you?

P. Sean Burke -- Executive Vice President & Chief Financial Officer

Morning.

Kevin Cummings -- Chairman & Chief Executive Officer

Morning.

Brody Preston -- Piper Jaffray Companies -- Analyst

I guess I just wanted to focus back on deposits. The deposit growth quarter-over-quarter on a period-end basis sort of lagged loan growth, but I guess when I peel back the onion and I sort of compare the average balance sheet to the period end -- or 3Q period end balances, it looks like you guys did a pretty good job growing checking accounts, both interest bearing and non-interest bearing. And I wanted to get a sense for what drove that this quarter?

Domenick A. Cama -- President & Chief Operating Officer

Well, it's the continued growth of our C&I business. The C&I business has the propensity to add more non-interest bearing checking accounts to the Bank. Some of our municipal deposits grow in the area of checking accounts, but I would say primarily it comes from our focus on trying to drive those types of accounts into the Company, specifically as it relates -- as it comes from the C&I balances.

Brody Preston -- Piper Jaffray Companies -- Analyst

Okay. And I guess moving forward, outside of focusing on new hires and building out that team, which will obviously drive increases in the checking accounts, is there anything different that you're doing to help yourself sort of stand out from the crowd and drive incremental deposit growth in the checking accounts?

Kevin Cummings -- Chairman & Chief Executive Officer

Well, we are continuing to enhance our cash management products and our account analysis products. That's the area where we see that investment in technology is going to allow us to stand out from some of our competitors. Of course, there are all types of competitors that we're dealing with. We're dealing with the big multinational banks and the regional banks. The nationals have invested a lot of money in their cash management and account analysis products, and we're trying to catch up to them.

So I don't know specifically that there's anything that we can do other than just continuing to provide good quality service and giving customers the technology that they want in this environment.

Domenick A. Cama -- President & Chief Operating Officer

I think it really gets down to blocking and tackling, Brody. We've instituted a new Salesforce or what they call CRM system, and holding our retail leaders, our branch managers, district managers, and people more accountable. I use the term -- I mean we're at the position now of micromanage -- I hate to say it, but we have to manage it differently and hold people more accountable and get better results. So in a way the tone is -- and in a positive way is we're going to micromanage the process and drive better results into the organization and hold people more accountable.

Brody Preston -- Piper Jaffray Companies -- Analyst

Okay. I guess so in that vein, have you sort of switched up compensation and incentive-based compensation to more heavily be weighted on deposit growth?

Kevin Cummings -- Chairman & Chief Executive Officer

Yes. And that's been the tone here in every meeting. Sometimes our loan officers are calling loan committee meetings, deposit meetings.

Brody Preston -- Piper Jaffray Companies -- Analyst

All right. And I guess along those same lines, I understand you close the four branches this quarter. Are there any plans to open new branches to help drive deposit growth or potentially close more in 2019?

Kevin Cummings -- Chairman & Chief Executive Officer

We're looking at potentially three more sites. We haven't officially -- we haven't signed any leases yet, but we're looking at newer markets in New York where we're doing a significant amount of loan business where we don't have any presence there. But it's still too early to tell.

Brody Preston -- Piper Jaffray Companies -- Analyst

Okay. And then I guess I just wanted to touch back on loan growth. Outside of the C&I you did have some nice loan growth in the traditional multifamily bucket, and I wanted to know what you guys saw there that helped propel that versus earlier in the year? Were there any purchases within that bucket or I guess what drove that?

Domenick A. Cama -- President & Chief Operating Officer

That was organic business that's been in the pipeline. There's nothing unique about that business. And as I said, obviously multifamily takes up a bit of the -- a piece of the pipeline, and customers have a tendency to want to close those loans before year-end. So nothing unique about that.

Brody Preston -- Piper Jaffray Companies -- Analyst

Okay. And I guess what is -- what's the average yield on the new multi-family loans that are rolling on the books?

Domenick A. Cama -- President & Chief Operating Officer

Somewhere around the 4.40-ish range.

Brody Preston -- Piper Jaffray Companies -- Analyst

Okay.

Kevin Cummings -- Chairman & Chief Executive Officer

What we funded -- the loans that we funded at least in the month of December I know came in around 4.59% in that area I think is what we funded for December.

Brody Preston -- Piper Jaffray Companies -- Analyst

All right, and then the last one for me is with more of an emphasis on growing the checking balances and sort of the core deposits and hiring new people and incentivizing your lenders to do that, could we see less of an emphasis on CDs moving forward potentially with those balances shrinking or potentially with you guys taking some specials or higher yielding CDs off the table?

Kevin Cummings -- Chairman & Chief Executive Officer

Yeah, we hope so. So we know that the market has stabilized somewhat. It's not as hot or intense as it was in the second quarter of 2018. And we're hoping that the level of shifting from low cost balances to CDs is going to slow.

Brody Preston -- Piper Jaffray Companies -- Analyst

All right, great. Thank you very much, guys. I appreciate it.

Kevin Cummings -- Chairman & Chief Executive Officer

Sure.

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 -- Chairman & Chief Executive Officer

Okay. Thank you very much. We're pretty optimistic and feel pretty good about our operating results for 2018. It was a good quarter. We have strong momentum going into '19. Just a little cool and cold in New Jersey today, so I want to wish everyone a good Super Bowl. Enjoy the game, and thank you today for participating on the call, and we look forward to catching up with you all soon. Thank you and enjoy the weekend.

Operator

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

Duration: 39 minutes

Call participants:

Kevin Cummings -- Chairman & Chief Executive Officer

P. Sean Burke -- Executive Vice President & Chief Financial Officer

David Patrick Rochester -- Deutsche Bank AG -- Analyst

Domenick A. Cama -- President & Chief Operating Officer

Mark Fitzgibbon -- Sandler O'Neill & Partners, L.P. -- Analyst

Matthew Keating -- Barclays PLC -- Analyst

Laurie Havener Hunsicker -- Compass Point Research & Trading, LLC -- Analyst

Brody Preston -- Piper Jaffray Companies -- Analyst

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