8-K
Independent Bank Corp (INDB)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15 (d) of
The Securities and Exchange Act of 1934
DATE OF REPORT:
October 19, 2023
(Date of Earliest Event Reported)
Massachusetts
(State or Other Jurisdiction of Incorporation)
| 1-9047 | 04-2870273 | ||||||
|---|---|---|---|---|---|---|---|
| (Commission File Number) | (I.R.S. Employer identification No.) | INDEPENDENT BANK CORP. | |||||
| --- | --- | --- | --- | --- | |||
| Office Address: | 2036 Washington Street, | Hanover, | Massachusetts | 02339 | |||
| Mailing Address: | 288 Union Street, | Rockland, | Massachusetts | 02370 | |||
| (Address of principal executive offices, including zip code) |
NOT APPLICABLE
(Former Address of Principal Executive Offices)
(781)-878-6100
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||
|---|---|---|---|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | Securities registered pursuant to Section 12(b) of the Act: | |||
| --- | --- | --- | |||
| Title of each Class | Trading Symbol | Name of each exchange on which registered | |||
| Common Stock, $.01 par value per share | INDB | NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act (17CFR 230.405)) or Rule 12b-2 of the Exchange Act (17CFR 240.12b-2).
| Emerging growth company | ☐ |
|---|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
| ITEM 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
|---|
On October 19, 2023, Independent Bank Corp. (the "Company") announced by press release its earnings for the quarter ended September 30, 2023. A copy of the press release is attached hereto as Exhibit 99.1.
The information in this Item 2.02 (including Exhibit 99.1) is being furnished pursuant to Item 2.02 and shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.
| ITEM 7.01 | REGULATION FD DISCLOSURE |
|---|
The Company is furnishing presentation materials to be discussed during its earnings conference call which are included as Exhibit 99.2 to this report pursuant to Item 7.01.
The information in this Item 7.01 (including Exhibit 99.2) shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.
| ITEM 8.01 | OTHER EVENTS |
|---|
On October 19, 2023 the Company also announced a stock buyback plan which authorizes repurchases by the Company of up to $100 million in common stock. Repurchases under the plan may be made from time to time on the open market and in privately negotiated transactions, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act. The extent to which the Company repurchases shares and the size and timing of these repurchases will depend on a variety of factors, including pricing, market and economic conditions, the Company’s capital position and amount of retained earnings and legal and contractual requirements. The repurchase plan is scheduled to expire October 18, 2024 and may be modified, suspended or discontinued without prior notice at any time. The Company had approximately 44.1 million shares of common stock outstanding as of September 30, 2023.
| ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
|---|
d. The following exhibits are included with this Report:
| Exhibit Index | |
|---|---|
| Exhibit # | Exhibit Description |
| 99.1 | Q3 2023 Earnings Press Release dated October 19, 2023 |
| 99.2 | Q3 2023 Earnings Presentation |
| 101 | The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document |
| 104 | Cover page interactive data file (formatted as inline XBRL and contained in Exhibit 101) |
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned and hereunto duly authorized.
| INDEPENDENT BANK CORP. | |||
|---|---|---|---|
| Date: | October 19, 2023 | By: | /s/Mark J. Ruggiero |
| MARK J. RUGGIERO | |||
| CHIEF FINANCIAL OFFICER |
Document
Exhibit 99.1
Shareholder Relations NEWS RELEASE
288 Union Street
Rockland, Ma. 02370
INDEPENDENT BANK CORP. REPORTS THIRD QUARTER NET INCOME OF $60.8 MILLION
Franchise strength drives performance in challenging environment
Rockland, Massachusetts (October 19, 2023) Independent Bank Corp. (Nasdaq Global Select Market: INDB), parent of Rockland Trust Company, today announced 2023 third quarter net income of $60.8 million, or $1.38 per diluted share, compared to 2023 second quarter net income of $62.6 million, or $1.42 per diluted share.
The Company generated a return on average assets and a return on average common equity of 1.25% and 8.35%, respectively, for the third quarter of 2023, as compared to 1.29% and 8.78%, respectively, for the prior quarter.
“I am proud of the Company’s fundamental commitment to its customers and communities, as another quarter of strong business activity and solid financial results underscores the inherent value of our relationship banking model.” said Jeffrey Tengel, the Chief Executive Officer of Independent Bank Corp. and Rockland Trust Company. “Our strong balance sheet and capital levels position us well for continuing to successfully navigate forward in a challenging environment.”
BALANCE SHEET
Total assets of $19.4 billion at September 30, 2023 remained relatively consistent with the prior quarter and decreased by $335.2 million, or 1.7%, as compared to the prior year period, driven primarily by lower cash and securities balances.
Total loans at September 30, 2023 of $14.2 billion increased by $84.3 million, or 0.6% (2.4% annualized), compared to the prior quarter. The increase was fueled primarily by consumer real estate, which increased $117.0 million, or 3.5% (14.0% annualized), for the quarter, driven primarily by adjustable-rate residential mortgages. Total commercial loans decreased slightly by $35.9 million, or 0.3% (1.3% annualized), compared to the prior quarter, reflecting construction to permanent commercial real estate transfers and solid closing activity offset by decreased line of credit utilization.
Deposit balances of $15.1 billion at September 30, 2023 decreased by $188.5 million, or 1.2%, from June 30, 2023, primarily attributable to seasonal declines in municipal deposits. Reflecting continued demand for higher rate products, time deposits continue to experience steady growth with the total cost of deposits for the quarter increasing 22 basis points to 1.07%. The volume of new account openings remains robust. Core deposits represented 80.5% of total deposits at September 30, 2023, compared to 82.6% at June 30, 2023.
Borrowings increased by $99.1 million, or 11.0%, during the third quarter of 2023, primarily a result of net changes in loans, deposits, and securities for the quarter.
The securities portfolio decreased by $49.1 million, or 1.6%, compared to June 30, 2023 driven primarily by paydowns, calls, and maturities, along with unrealized losses of $10.4 million in the available for sale portfolio during the third quarter. Total securities represented 15.4% of total assets at September 30, 2023, as compared to 15.6% at June 30, 2023.
Stockholders' equity at September 30, 2023 increased 1.1% when compared to June 30, 2023, driven primarily by strong earnings retention, partially offset by unrealized losses on the available for sale investment securities portfolio included in other comprehensive income. The Company's ratio of common equity to assets of 14.90% at September 30, 2023 represented an increase of 18 basis points, or 1.2%, from June 30, 2023 and an increase of 60 basis points, or 4.2%, from September 30, 2022. The Company's book value per share increased by $0.68, or 1.1%, to $65.37 at September 30, 2023 as compared to the prior quarter. The Company's tangible book value per share at September 30, 2023 rose by $0.72, or 1.7%, from the prior quarter to $42.60, and represented an increase of 7.7% from the year ago period. The Company's ratio of tangible common equity to tangible assets of 10.24% at September 30, 2023 represented an increase of 19 basis points from the prior quarter and an increase of 58 basis points from the year ago period. Please refer to Appendix A for a detailed reconciliation of Non-GAAP balance sheet metrics.
In consideration of the Company's strong current capital position, the Company is announcing a new stock repurchase plan, which authorizes repurchases by the Company of up to $100 million in common stock and is scheduled to expire on October 18, 2024.
NET INTEREST INCOME
Net interest income for the third quarter of 2023 decreased 1.7% to $149.9 million compared to $152.5 million for the prior quarter, as rising deposit costs slightly outpaced the benefit of repriced assets. Both the net interest margin and core margin (excluding purchase accounting and other non-core items) were 3.47% for the third quarter, representing reductions of 7 basis points and 5 basis points, respectively, as compared to the prior quarter. Please refer to Appendix C for additional details regarding the net interest margin and Non-GAAP reconciliation of core margin.
NONINTEREST INCOME
Noninterest income of $33.5 million for the third quarter of 2023 represented an increase of $2.8 million, or 9.1%, as compared to the prior quarter. Significant changes in noninterest income for the third quarter of 2023 compared to the prior quarter included the following:
•Deposit account and interchange and ATM fees increased by $758,000, or 7.6%, due primarily to increased overdraft and treasury management activity.
•Investment management income decreased by $102,000, or 1.0%, primarily driven by a reduction in seasonal tax preparation fees, which are primarily recognized during the second quarter, partially offset by increased insurance commissions. Total assets under administration declined by $183.2 million, or 2.9%, to $6.1 billion during the third quarter of 2023, driven primarily by market depreciation.
•The Company received proceeds on life insurance policies resulting in gains of $1.9 million for the third quarter, as compared to gains of $176,000 in the prior quarter.
•Loan level derivative income decreased by $433,000, or 34.0%, compared to the prior quarter due primarily to lower customer demand.
•Other noninterest income increased by $703,000, or 11.0%, due primarily to outsized loan fees and increased Federal Home Loan Bank dividend income, partially offset by unrealized gains on equity securities and interest on income tax refunds received in the prior quarter.
NONINTEREST EXPENSE
Noninterest expense of $97.8 million for the third quarter of 2023 represented an increase of $2.2 million, or 2.3%, as compared to the prior quarter. Significant changes in noninterest expense for the third quarter compared to the prior quarter included the following:
•Salaries and employee benefits increased by $822,000, or 1.5%, due primarily to increased commissions, timing on certain retirement benefits, and severance.
•Other noninterest expense increased by $1.5 million, or 6.4%, due primarily to increased consultant fees, unrealized losses on equity securities and card issuance costs.
The Company’s tax rate for the third quarter of 2023 decreased slightly to 24.12%, compared to 24.30% for the prior quarter.
ASSET QUALITY
The third quarter provision for credit losses was $5.5 million, as compared to $5.0 million in the prior quarter. Net charge-offs were $5.6 million for the third quarter of 2023, driven predominantly by a partial charge-off of a single commercial real estate credit which had previously been placed on nonaccrual and was largely reserved for during the second quarter. Nonperforming loans decreased by 14.3% to $39.2 million, or 0.28% of total loans at September 30, 2023, as compared to $45.7 million, or 0.32% of total loans at June 30, 2023. Delinquency as a percentage of total loans decreased eight basis points from the prior quarter to 0.22% at September 30, 2023.
The allowance for credit losses on total loans remained flat at $140.6 million, or 0.99% of total loans, at September 30, 2023 and June 30, 2023, respectively.
CONFERENCE CALL INFORMATION
Jeffrey Tengel, Chief Executive Officer, and Mark Ruggiero, Chief Financial Officer and Executive Vice President of Consumer Lending, will host a conference call to discuss third quarter earnings at 10:00 a.m. Eastern Time on Friday, October 20, 2023. Internet access to the call is available on the Company’s website at https://INDB.RocklandTrust.com or via telephonic access by dial-in at 1-888-336-7153 reference: INDB. A replay of the call will be available by calling 1-877-344-7529, Replay Conference Number: 7087586 and will be available through October 27, 2023. Additionally, a webcast replay will be available on the Company's website until October 20, 2024.
ABOUT INDEPENDENT BANK CORP.
Independent Bank Corp. (NASDAQ Global Select Market: INDB) is the holding company for Rockland Trust Company, a full-service commercial bank headquartered in Massachusetts. With retail branches in Eastern Massachusetts and Worcester County as well as commercial banking and investment management offices in Massachusetts and Rhode Island, Rockland Trust offers a wide range of banking, investment, and insurance services to individuals, families, and businesses. The Bank also offers a full suite of mobile, online, and telephone banking services. Rockland Trust was named to The Boston Globe's "Top Places to Work" 2022 list, an honor earned for the 14th consecutive year. Rockland Trust has a longstanding commitment to equity and inclusion. This commitment is underscored by initiatives such as Diversity and Inclusion leadership training, a colleague Allyship mentoring program, and numerous Employee Resource Groups focused on providing colleague support and education, reinforcing a culture of mutual respect and advancing professional development, and Rockland Trust's sponsorship of diverse community organizations through charitable giving and employee-based volunteerism. In addition, Rockland Trust is deeply committed to the communities it serves, as reflected in the overall "Outstanding" rating in
its most recent Community Reinvestment Act performance evaluation. Rockland Trust is an FDIC member and an Equal Housing Lender.
This press release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and business of the Company. These statements may be identified by such forward-looking terminology as “expect,” “achieve,” “plan,” “believe,” “future,” “positioned,” “continued,” “will,” “would,” “potential,” or similar statements or variations of such terms. Actual results may differ from those contemplated by these forward-looking statements.
Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to:
•further weakening in the United States economy in general and the regional and local economies within the New England region and the Company’s market area;
•the effects of inflationary pressures, labor market shortages and supply chain issues;
•the instability or volatility in financial markets and unfavorable general economic or business conditions, globally, nationally or regionally, whether caused by geopolitical concerns, including the Russia/Ukraine conflict, the conflict in Israel and surrounding areas and the possible expansion of such conflicts, recent disruptions in the banking industry, or other factors;
•unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, pandemics or other external events;
•adverse changes or volatility in the local real estate market;
•adverse changes in asset quality and any unanticipated credit deterioration in our loan portfolio including those related to one or more large commercial relationships;
•acquisitions may not produce results at levels or within time frames originally anticipated and may result in unforeseen integration issues or impairment of goodwill and/or other intangibles;
•additional regulatory oversight and related compliance costs;
•changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System;
•higher than expected tax expense, including as a result of failure to comply with general tax laws and changes in tax laws;
•changes in market interest rates for interest earning assets and/or interest bearing liabilities;
•increased competition in the Company’s market areas;
•adverse weather, changes in climate, natural disasters, and geopolitical concerns;
•the emergence of widespread health emergencies or pandemics, any further resurgences or variants of the "COVID-19 virus", actions taken by governmental authorities in response thereto, other public health crises or man-made events, and their impact on the Company's local economies or the Company's operations;
•a deterioration in the conditions of the securities markets;
•a deterioration of the credit rating for U.S. long-term sovereign debt or uncertainties surrounding the federal budget;
•inability to adapt to changes in information technology, including changes to industry accepted delivery models driven by a migration to the internet as a means of service delivery;
•electronic fraudulent activity within the financial services industry, especially in the commercial banking sector;
•adverse changes in consumer spending and savings habits;
•the effect of laws and regulations regarding the financial services industry;
•changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) generally applicable to the Company’s business, including any such changes in laws and regulations as a result of recent disruptions in the banking industry, and the associated costs of such changes;
•the Company's potential judgments, claims, damages, penalties, fines and reputational damage resulting from pending or future litigation and regulatory and government actions;
•changes in accounting policies, practices and standards, as may be adopted by the regulatory agencies as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters;
•cyber security attacks or intrusions that could adversely impact our businesses; and
•other unexpected material adverse changes in our operations or earnings.
The Company wishes to caution readers not to place undue reliance on any forward-looking statements as the Company’s business and its forward-looking statements involve substantial known and unknown risks and
uncertainties described in the Company’s Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q (“Risk Factors”). Except as required by law, the Company disclaims any intent or obligation to update publicly any such forward-looking statements, whether in response to new information, future events or otherwise. Any public statements or disclosures by the Company following this release which modify or impact any of the forward-looking statements contained in this release will be deemed to modify or supersede such statements in this release. In addition to the information set forth in this press release, you should carefully consider the Risk Factors.
This press release and the appendices attached to it contain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). This information may include operating net income and operating earnings per share ("EPS"), operating return on average assets, operating return on average common equity, operating return on average tangible common equity, core net interest margin ("core margin"), tangible book value per share and the tangible common equity ratio.
Operating net income, operating EPS, operating return on average assets and operating return on average common equity, exclude items that management believes are unrelated to the Company's core banking business such as merger and acquisition expenses, and other items, if applicable. Management uses operating net income and related ratios and operating EPS to measure the strength of the Company’s core banking business and to identify trends that may to some extent be obscured by such items. Management reviews its core margin to determine any items that may impact the net interest margin that may be one-time in nature or not reflective of its core operating environment, such as significant purchase accounting adjustments or other adjustments such as nonaccrual interest reversals/recoveries and prepayment penalties. Management believes that adjusting for these items to arrive at a core margin provides additional insight into the operating environment and how management decisions impact the net interest margin.
Management also supplements its evaluation of financial performance with analysis of tangible book value per share (which is computed by dividing stockholders' equity less goodwill and identifiable intangible assets, or "tangible common equity", by common shares outstanding), the tangible common equity ratio (which is computed by dividing tangible common equity by "tangible assets", defined as total assets less goodwill and other intangibles), and return on average tangible common equity (which is computed by dividing net income by average tangible common equity). The Company has included information on tangible book value per share, the tangible common equity ratio and return on average tangible common equity because management believes that investors may find it useful to have access to the same analytical tools used by management. As a result of merger and acquisition activity, the Company has recognized goodwill and other intangible assets in conjunction with business combination accounting principles. Excluding the impact of goodwill and other intangibles in measuring asset and capital values for the ratios provided, along with other bank standard capital ratios, provides a framework to compare the capital adequacy of the Company to other companies in the financial services industry.
These non-GAAP measures should not be viewed as a substitute for operating results and other financial measures determined in accordance with GAAP. An item which management excludes when computing these non-GAAP measures can be of substantial importance to the Company’s results for any particular quarter or year. The Company’s non-GAAP performance measures, including operating net income, operating EPS, operating return on average assets, operating return on average common equity, core margin, tangible book value per share and the tangible common equity ratio, are not necessarily comparable to non-GAAP performance measures which may be presented by other companies.
Contacts:
Jeffrey Tengel
President and Chief Executive Officer
(781) 982-6144
Mark J. Ruggiero
Chief Financial Officer and
Executive Vice President of Consumer Lending
(781) 982-6281
Category: Earnings Releases
| INDEPENDENT BANK CORP. FINANCIAL SUMMARY | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| (Unaudited, dollars in thousands) | % Change | % Change | ||||||||||||
| September 30<br>2023 | June 30<br>2023 | September 30<br>2022 | Sept 2023 vs. | Sept 2023 vs. | ||||||||||
| Jun 2023 | Sept 2022 | |||||||||||||
| Assets | ||||||||||||||
| Cash and due from banks | $ | 176,930 | $ | 181,810 | $ | 172,615 | (2.68) | % | 2.50 | % | ||||
| Interest-earning deposits with banks | 43,198 | 126,454 | 763,681 | (65.84) | % | (94.34) | % | |||||||
| Securities | ||||||||||||||
| Trading | 4,476 | 4,477 | 3,538 | (0.02) | % | 26.51 | % | |||||||
| Equities | 21,475 | 21,800 | 20,439 | (1.49) | % | 5.07 | % | |||||||
| Available for sale | 1,353,744 | 1,372,903 | 1,425,511 | (1.40) | % | (5.03) | % | |||||||
| Held to maturity | 1,594,279 | 1,623,892 | 1,697,635 | (1.82) | % | (6.09) | % | |||||||
| Total securities | 2,973,974 | 3,023,072 | 3,147,123 | (1.62) | % | (5.50) | % | |||||||
| Loans held for sale | 3,998 | 6,577 | 5,100 | (39.21) | % | (21.61) | % | |||||||
| Loans | ||||||||||||||
| Commercial and industrial | 1,653,003 | 1,723,219 | 1,548,349 | (4.07) | % | 6.76 | % | |||||||
| Commercial real estate | 7,896,230 | 7,812,796 | 7,677,917 | 1.07 | % | 2.84 | % | |||||||
| Commercial construction | 965,442 | 1,022,796 | 1,185,157 | (5.61) | % | (18.54) | % | |||||||
| Small business | 245,335 | 237,092 | 209,567 | 3.48 | % | 17.07 | % | |||||||
| Total commercial | 10,760,010 | 10,795,903 | 10,620,990 | (0.33) | % | 1.31 | % | |||||||
| Residential real estate | 2,338,102 | 2,221,284 | 1,959,254 | 5.26 | % | 19.34 | % | |||||||
| Home equity - first position | 529,938 | 546,240 | 578,405 | (2.98) | % | (8.38) | % | |||||||
| Home equity - subordinate positions | 565,617 | 549,158 | 508,765 | 3.00 | % | 11.17 | % | |||||||
| Total consumer real estate | 3,433,657 | 3,316,682 | 3,046,424 | 3.53 | % | 12.71 | % | |||||||
| Other consumer | 30,568 | 27,326 | 32,936 | 11.86 | % | (7.19) | % | |||||||
| Total loans | 14,224,235 | 14,139,911 | 13,700,350 | 0.60 | % | 3.82 | % | |||||||
| Less: allowance for credit losses | (140,569) | (140,647) | (147,313) | (0.06) | % | (4.58) | % | |||||||
| Net loans | 14,083,666 | 13,999,264 | 13,553,037 | 0.60 | % | 3.92 | % | |||||||
| Federal Home Loan Bank stock | 43,878 | 39,488 | 5,218 | 11.12 | % | 740.90 | % | |||||||
| Bank premises and equipment, net | 191,560 | 193,642 | 198,408 | (1.08) | % | (3.45) | % | |||||||
| Goodwill | 985,072 | 985,072 | 985,072 | — | % | — | % | |||||||
| Other intangible assets | 19,825 | 21,537 | 26,934 | (7.95) | % | (26.39) | % | |||||||
| Cash surrender value of life insurance policies | 295,670 | 296,687 | 293,126 | (0.34) | % | 0.87 | % | |||||||
| Other assets | 550,338 | 527,328 | 552,955 | 4.36 | % | (0.47) | % | |||||||
| Total assets | $ | 19,368,109 | $ | 19,400,931 | $ | 19,703,269 | (0.17) | % | (1.70) | % | ||||
| Liabilities and Stockholders' Equity | ||||||||||||||
| Deposits | ||||||||||||||
| Noninterest-bearing demand deposits | $ | 4,796,148 | $ | 4,861,092 | $ | 5,622,260 | (1.34) | % | (14.69) | % | ||||
| Savings and interest checking accounts | 5,398,322 | 5,525,223 | 6,094,493 | (2.30) | % | (11.42) | % | |||||||
| Money market | 2,852,293 | 3,065,520 | 3,443,622 | (6.96) | % | (17.17) | % | |||||||
| Time certificates of deposit | 2,012,763 | 1,796,216 | 1,178,619 | 12.06 | % | 70.77 | % | |||||||
| Total deposits | 15,059,526 | 15,248,051 | 16,338,994 | (1.24) | % | (7.83) | % | |||||||
| Borrowings | ||||||||||||||
| Federal Home Loan Bank borrowings | 887,548 | 788,479 | 643 | 12.56 | % | nm | ||||||||
| Junior subordinated debentures, net | 62,857 | 62,857 | 62,855 | — | % | — | % | |||||||
| Subordinated debentures, net | 49,957 | 49,933 | 49,862 | 0.05 | % | 0.19 | % | |||||||
| Total borrowings | 1,000,362 | 901,269 | 113,360 | 10.99 | % | 782.46 | % | |||||||
| Total deposits and borrowings | 16,059,888 | 16,149,320 | 16,452,354 | (0.55) | % | (2.39) | % | |||||||
| Other liabilities | 422,813 | 396,697 | 433,714 | 6.58 | % | (2.51) | % | |||||||
| Total liabilities | 16,482,701 | 16,546,017 | 16,886,068 | (0.38) | % | (2.39) | % | |||||||
| Stockholders' equity | ||||||||||||||
| Common stock | 440 | 440 | 454 | — | % | (3.08) | % | |||||||
| Additional paid in capital | 1,999,448 | 1,997,674 | 2,113,313 | 0.09 | % | (5.39) | % | |||||||
| Retained earnings | 1,046,266 | 1,009,735 | 882,503 | 3.62 | % | 18.56 | % | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| Accumulated other comprehensive loss, net of tax | (160,746) | (152,935) | (179,069) | 5.11 | % | (10.23) | % | |||||||
| Total stockholders' equity | 2,885,408 | 2,854,914 | 2,817,201 | 1.07 | % | 2.42 | % | |||||||
| Total liabilities and stockholders' equity | $ | 19,368,109 | $ | 19,400,931 | $ | 19,703,269 | (0.17) | % | (1.70) | % | ||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| (Unaudited, dollars in thousands, except per share data) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| % Change | % Change | |||||||||||||
| September 30<br>2023 | June 30<br>2023 | September 30<br>2022 | Sept 2023 vs. | Sept 2023 vs. | ||||||||||
| Jun 2023 | Sept 2022 | |||||||||||||
| Interest income | ||||||||||||||
| Interest on federal funds sold and short-term investments | $ | 905 | $ | 3,312 | $ | 6,519 | (72.68) | % | (86.12) | % | ||||
| Interest and dividends on securities | 14,818 | 15,583 | 13,244 | (4.91) | % | 11.88 | % | |||||||
| Interest and fees on loans | 187,145 | 179,759 | 150,157 | 4.11 | % | 24.63 | % | |||||||
| Interest on loans held for sale | 60 | 39 | 51 | 53.85 | % | 17.65 | % | |||||||
| Total interest income | 202,928 | 198,693 | 169,971 | 2.13 | % | 19.39 | % | |||||||
| Interest expense | ||||||||||||||
| Interest on deposits | 40,713 | 31,909 | 6,109 | 27.59 | % | 566.44 | % | |||||||
| Interest on borrowings | 12,335 | 14,238 | 1,261 | (13.37) | % | 878.19 | % | |||||||
| Total interest expense | 53,048 | 46,147 | 7,370 | 14.95 | % | 619.78 | % | |||||||
| Net interest income | 149,880 | 152,546 | 162,601 | (1.75) | % | (7.82) | % | |||||||
| Provision for credit losses | 5,500 | 5,000 | 3,000 | 10.00 | % | 83.33 | % | |||||||
| Net interest income after provision for credit losses | 144,380 | 147,546 | 159,601 | (2.15) | % | (9.54) | % | |||||||
| Noninterest income | ||||||||||||||
| Deposit account fees | 5,936 | 5,508 | 6,261 | 7.77 | % | (5.19) | % | |||||||
| Interchange and ATM fees | 4,808 | 4,478 | 4,331 | 7.37 | % | 11.01 | % | |||||||
| Investment management | 10,246 | 10,348 | 8,436 | (0.99) | % | 21.46 | % | |||||||
| Mortgage banking income | 739 | 670 | 585 | 10.30 | % | 26.32 | % | |||||||
| Increase in cash surrender value of life insurance policies | 1,983 | 1,940 | 1,883 | 2.22 | % | 5.31 | % | |||||||
| Gain on life insurance benefits | 1,924 | 176 | 477 | 993.18 | % | 303.35 | % | |||||||
| Loan level derivative income | 842 | 1,275 | 471 | (33.96) | % | 78.77 | % | |||||||
| Other noninterest income | 7,065 | 6,362 | 5,751 | 11.05 | % | 22.85 | % | |||||||
| Total noninterest income | 33,543 | 30,757 | 28,195 | 9.06 | % | 18.97 | % | |||||||
| Noninterest expenses | ||||||||||||||
| Salaries and employee benefits | 54,797 | 53,975 | 52,708 | 1.52 | % | 3.96 | % | |||||||
| Occupancy and equipment expenses | 12,321 | 12,385 | 12,316 | (0.52) | % | 0.04 | % | |||||||
| Data processing and facilities management | 2,404 | 2,530 | 2,259 | (4.98) | % | 6.42 | % | |||||||
| FDIC assessment | 2,727 | 2,674 | 1,677 | 1.98 | % | 62.61 | % | |||||||
| Other noninterest expenses | 25,533 | 23,991 | 23,768 | 6.43 | % | 7.43 | % | |||||||
| Total noninterest expenses | 97,782 | 95,555 | 92,728 | 2.33 | % | 5.45 | % | |||||||
| Income before income taxes | 80,141 | 82,748 | 95,068 | (3.15) | % | (15.70) | % | |||||||
| Provision for income taxes | 19,333 | 20,104 | 23,171 | (3.84) | % | (16.56) | % | |||||||
| Net Income | $ | 60,808 | $ | 62,644 | $ | 71,897 | (2.93) | % | (15.42) | % | ||||
| Weighted average common shares (basic) | 44,135,487 | 44,129,152 | 45,839,555 | |||||||||||
| Common share equivalents | 11,417 | 7,573 | 16,856 | |||||||||||
| Weighted average common shares (diluted) | 44,146,904 | 44,136,725 | 45,856,411 | |||||||||||
| Basic earnings per share | $ | 1.38 | $ | 1.42 | $ | 1.57 | (2.82) | % | (12.10) | % | ||||
| Diluted earnings per share | $ | 1.38 | $ | 1.42 | $ | 1.57 | (2.82) | % | (12.10) | % | ||||
| Performance ratios | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||
| Net interest margin (FTE) | 3.47 | % | 3.54 | % | 3.64 | % | ||||||||
| Return on average assets (calculated by dividing net income by average assets) | 1.25 | % | 1.29 | % | 1.43 | % | ||||||||
| Return on average common equity (calculated by dividing net income by average common equity) (GAAP) | 8.35 | % | 8.78 | % | 9.90 | % | ||||||||
| Return on average tangible common equity (Non-GAAP) (calculated by dividing net income by average tangible common equity) | 12.81 | % | 13.54 | % | 15.26 | % | ||||||||
| Noninterest income as a % of total revenue (calculated by dividing total noninterest income by net interest income plus total noninterest income) | 18.29 | % | 16.78 | % | 14.78 | % | ||||||||
| Efficiency ratio (calculated by dividing total noninterest expense by total revenue) | 53.31 | % | 52.13 | % | 48.60 | % | ||||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | |||||||
| (Unaudited, dollars in thousands, except per share data) | ||||||||||||||
| Nine Months Ended | ||||||||||||||
| % Change | ||||||||||||||
| September 30<br>2023 | September 30<br>2022 | Sept 2023 vs. | ||||||||||||
| Sept 2022 | ||||||||||||||
| Interest income | ||||||||||||||
| Interest on federal funds sold and short-term investments | $ | 4,882 | $ | 10,222 | (52.24) | % | ||||||||
| Interest and dividends on securities | 45,711 | 34,571 | 32.22 | % | ||||||||||
| Interest and fees on loans | 537,830 | 413,770 | 29.98 | % | ||||||||||
| Interest on loans held for sale | 133 | 150 | (11.33) | % | ||||||||||
| Total interest income | 588,556 | 458,713 | 28.31 | % | ||||||||||
| Interest expense | ||||||||||||||
| Interest on deposits | 95,297 | 10,327 | 822.79 | % | ||||||||||
| Interest on borrowings | 31,835 | 3,492 | 811.66 | % | ||||||||||
| Total interest expense | 127,132 | 13,819 | 819.98 | % | ||||||||||
| Net interest income | 461,424 | 444,894 | 3.72 | % | ||||||||||
| Provision for credit losses | 17,750 | 1,000 | 1,675.00 | % | ||||||||||
| Net interest income after provision for credit losses | 443,674 | 443,894 | (0.05) | % | ||||||||||
| Noninterest income | ||||||||||||||
| Deposit account fees | 17,360 | 17,582 | (1.26) | % | ||||||||||
| Interchange and ATM fees | 13,470 | 11,967 | 12.56 | % | ||||||||||
| Investment management | 30,373 | 26,438 | 14.88 | % | ||||||||||
| Mortgage banking income | 1,717 | 2,989 | (42.56) | % | ||||||||||
| Increase in cash surrender value of life insurance policies | 5,777 | 5,549 | 4.11 | % | ||||||||||
| Gain on life insurance benefits | 2,111 | 600 | 251.83 | % | ||||||||||
| Loan level derivative income | 2,525 | 1,511 | 67.11 | % | ||||||||||
| Other noninterest income | 19,209 | 15,729 | 22.12 | % | ||||||||||
| Total noninterest income | 92,542 | 82,365 | 12.36 | % | ||||||||||
| Noninterest expenses | ||||||||||||||
| Salaries and employee benefits | 165,747 | 150,957 | 9.80 | % | ||||||||||
| Occupancy and equipment expenses | 37,528 | 37,255 | 0.73 | % | ||||||||||
| Data processing and facilities management | 7,461 | 6,878 | 8.48 | % | ||||||||||
| FDIC assessment | 8,011 | 5,225 | 53.32 | % | ||||||||||
| Merger and acquisition expense | — | 7,100 | (100.00) | % | ||||||||||
| Other noninterest expenses | 73,251 | 71,375 | 2.63 | % | ||||||||||
| Total noninterest expenses | 291,998 | 278,790 | 4.74 | % | ||||||||||
| Income before income taxes | 244,218 | 247,469 | (1.31) | % | ||||||||||
| Provision for income taxes | 59,519 | 60,699 | (1.94) | % | ||||||||||
| Net Income | $ | 184,699 | $ | 186,770 | (1.11) | % | ||||||||
| Weighted average common shares (basic) | 44,419,731 | 46,618,209 | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| Common share equivalents | 12,851 | 17,221 | ||||||||||||
| Weighted average common shares (diluted) | 44,432,582 | 46,635,430 | ||||||||||||
| Basic earnings per share | $ | 4.16 | $ | 4.01 | 3.74 | % | ||||||||
| Diluted earnings per share | $ | 4.16 | $ | 4.00 | 4.00 | % | ||||||||
| Reconciliation of Net Income (GAAP) to Operating Net Income (Non-GAAP): | ||||||||||||||
| Net Income | $ | 184,699 | $ | 186,770 | ||||||||||
| Noninterest expense components | ||||||||||||||
| Add - merger and acquisition expenses | — | 7,100 | ||||||||||||
| Noncore increases to income before taxes | — | 7,100 | ||||||||||||
| Net tax benefit associated with noncore items (1) | — | (1,995) | ||||||||||||
| Noncore increases to net income | $ | — | $ | 5,105 | ||||||||||
| Operating net income (Non-GAAP) | $ | 184,699 | $ | 191,875 | (3.74) | % | ||||||||
| Diluted earnings per share, on an operating basis | $ | 4.16 | $ | 4.11 | 1.22 | % | ||||||||
| (1) The net tax benefit associated with noncore items is determined by assessing whether each noncore item is included or excluded from net taxable income and applying the Company's combined marginal tax rate to only those items included in net taxable income. | ||||||||||||||
| Performance ratios | ||||||||||||||
| Net interest margin (FTE) | 3.60 | % | 3.33 | % | ||||||||||
| Return on average assets (GAAP) (calculated by dividing net income by average assets) | 1.28 | % | 1.25 | % | ||||||||||
| Return on average assets on an operating basis (Non-GAAP) (calculated by dividing net operating net income by average assets) | 1.28 | % | 1.28 | % | ||||||||||
| Return on average common equity (GAAP) (calculated by dividing net income by average common equity) | 8.58 | % | 8.51 | % | ||||||||||
| Return on average common equity on an operating basis (Non-GAAP) (calculated by dividing net operating net income by average common equity) | 8.58 | % | 8.74 | % | ||||||||||
| Return on average tangible common equity (GAAP) (calculated by dividing net income by average tangible common equity) | 13.21 | % | 13.00 | % | ||||||||||
| Return on average tangible common equity on an operating basis (Non-GAAP) (calculated by dividing net operating net income by average tangible common equity) | 13.21 | % | 13.35 | % | ||||||||||
| Noninterest income as a % of total revenue (calculated by dividing total noninterest income by net interest income plus total noninterest income) | 16.71 | % | 15.62 | % | ||||||||||
| Noninterest income as a % of total revenue on an operating basis (Non-GAAP) (calculated by dividing total noninterest income on an operating basis by net interest income plus total noninterest income) | 16.71 | % | 15.62 | % | ||||||||||
| Efficiency ratio (GAAP) (calculated by dividing total noninterest expense by total revenue) | 52.71 | % | 52.88 | % | ||||||||||
| Efficiency ratio on an operating basis (Non-GAAP) (calculated by dividing total noninterest expense on an operating basis by total revenue) | 52.71 | % | 51.53 | % | ||||||||||
| ASSET QUALITY | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||
| (Unaudited, dollars in thousands) | Nonperforming Assets At | |||||||||||||
| September 30<br>2023 | June 30<br>2023 | September 30<br>2022 | ||||||||||||
| Nonperforming loans | ||||||||||||||
| Commercial & industrial loans | $ | 2,953 | $ | 3,235 | $ | 27,393 | ||||||||
| Commercial real estate loans | 23,867 | 29,910 | 15,982 | |||||||||||
| Small business loans | 372 | 348 | 50 | |||||||||||
| Residential real estate loans | 8,493 | 8,179 | 8,891 | |||||||||||
| Home equity | 3,411 | 3,944 | 3,485 | |||||||||||
| Other consumer | 75 | 86 | 216 | |||||||||||
| Total nonperforming loans | 39,171 | 45,702 | 56,017 | |||||||||||
| Other real estate owned | 110 | 110 | — | |||||||||||
| Total nonperforming assets | $ | 39,281 | $ | 45,812 | $ | 56,017 | ||||||||
| Nonperforming loans/gross loans | 0.28 | % | 0.32 | % | 0.41 | % | ||||||||
| Nonperforming assets/total assets | 0.20 | % | 0.24 | % | 0.28 | % | ||||||||
| Allowance for credit losses/nonperforming loans | 358.86 | % | 307.75 | % | 262.98 | % | ||||||||
| Allowance for credit losses/total loans | 0.99 | % | 0.99 | % | 1.08 | % | ||||||||
| Delinquent loans/total loans | 0.22 | % | 0.30 | % | 0.17 | % | ||||||||
| Nonperforming Assets Reconciliation for the Three Months Ended | ||||||||||||||
| September 30<br>2023 | June 30<br>2023 | September 30<br>2022 | ||||||||||||
| Nonperforming assets beginning balance | $ | 45,812 | $ | 56,235 | $ | 55,915 | ||||||||
| New to nonperforming | 3,455 | 18,018 | 30,650 | |||||||||||
| Loans charged-off | (6,018) | (23,767) | (741) | |||||||||||
| Loans paid-off | (2,915) | (3,984) | (29,450) | |||||||||||
| Loans restored to performing status | (1,428) | (680) | (366) | |||||||||||
| Other | 375 | (10) | 9 | |||||||||||
| Nonperforming assets ending balance | $ | 39,281 | $ | 45,812 | $ | 56,017 | ||||||||
| Net Charge-Offs (Recoveries) | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Three Months Ended | Nine Months Ended | |||||||||||||
| September 30<br>2023 | June 30<br>2023 | September 30<br>2022 | September 30<br>2023 | September 30<br>2022 | ||||||||||
| Net charge-offs (recoveries) | ||||||||||||||
| Commercial and industrial loans | $ | (111) | $ | 23,174 | $ | (2) | $ | 23,339 | $ | (44) | ||||
| Commercial real estate loans | 5,072 | — | (268) | 5,072 | (271) | |||||||||
| Small business loans | 77 | 51 | (88) | 125 | (88) | |||||||||
| Home equity | (12) | (10) | (65) | (38) | 17 | |||||||||
| Other consumer | 552 | 269 | 429 | 1,102 | 995 | |||||||||
| Total net charge-offs (recoveries) | $ | 5,578 | $ | 23,484 | $ | 6 | $ | 29,600 | $ | 609 | ||||
| Net charge-offs (recoveries) to average loans (annualized) | 0.16 | % | 0.67 | % | nm | 0.28 | % | 0.01 | % |
nm = not meaningful
| BALANCE SHEET AND CAPITAL RATIOS | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| September 30<br>2023 | June 30<br>2023 | September 30<br>2022 | |||||||
| Gross loans/total deposits | 94.45 | % | 92.73 | % | 83.85 | % | |||
| Common equity tier 1 capital ratio (1) | 14.42 | % | 14.06 | % | 13.98 | % | |||
| Tier 1 leverage capital ratio (1) | 11.12 | % | 10.85 | % | 10.51 | % | |||
| Common equity to assets ratio GAAP | 14.90 | % | 14.72 | % | 14.30 | % | |||
| Tangible common equity to tangible assets ratio (2) | 10.24 | % | 10.05 | % | 9.66 | % | |||
| Book value per share GAAP | $ | 65.37 | $ | 64.69 | $ | 61.73 | |||
| Tangible book value per share (2) | $ | 42.60 | $ | 41.88 | $ | 39.56 |
(1) Estimated number for September 30, 2023.
(2) See Appendix A for detailed reconciliation from GAAP to Non-GAAP ratios.
| INDEPENDENT BANK CORP. SUPPLEMENTAL FINANCIAL INFORMATION | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Unaudited, dollars in thousands) | Three Months Ended | |||||||||||||||||
| September 30, 2023 | June 30, 2023 | September 30, 2022 | ||||||||||||||||
| Interest | Interest | Interest | ||||||||||||||||
| Average | Earned/ | Yield/ | Average | Earned/ | Yield/ | Average | Earned/ | Yield/ | ||||||||||
| Balance | Paid (1) | Rate | Balance | Paid (1) | Rate | Balance | Paid (1) | Rate | ||||||||||
| Interest-earning assets | ||||||||||||||||||
| Interest-earning deposits with banks, federal funds sold, and short term investments | $ | 89,449 | $ | 905 | 4.01 | % | $ | 270,443 | $ | 3,312 | 4.91 | % | $ | 1,156,143 | $ | 6,519 | 2.24 | % |
| Securities | ||||||||||||||||||
| Securities - trading | 4,546 | — | — | % | 4,487 | — | — | % | 3,730 | — | — | % | ||||||
| Securities - taxable investments | 3,000,736 | 14,817 | 1.96 | % | 3,071,752 | 15,581 | 2.03 | % | 3,024,802 | 13,243 | 1.74 | % | ||||||
| Securities - nontaxable investments (1) | 188 | 1 | 2.11 | % | 191 | 2 | 4.20 | % | 196 | 1 | 2.02 | % | ||||||
| Total securities | $ | 3,005,470 | $ | 14,818 | 1.96 | % | $ | 3,076,430 | $ | 15,583 | 2.03 | % | $ | 3,028,728 | $ | 13,244 | 1.73 | % |
| Loans held for sale | 4,072 | 60 | 5.85 | % | 2,977 | 39 | 5.25 | % | 4,263 | 51 | 4.75 | % | ||||||
| Loans | ||||||||||||||||||
| Commercial and industrial (1) | 1,682,000 | 30,739 | 7.25 | % | 1,686,348 | 29,451 | 7.00 | % | 1,520,924 | 19,289 | 5.03 | % | ||||||
| Commercial real estate (1) | 7,823,525 | 94,861 | 4.81 | % | 7,803,702 | 91,813 | 4.72 | % | 7,760,470 | 85,284 | 4.36 | % | ||||||
| Commercial construction | 1,007,814 | 16,829 | 6.62 | % | 1,044,650 | 17,212 | 6.61 | % | 1,157,876 | 14,875 | 5.10 | % | ||||||
| Small business | 240,782 | 3,752 | 6.18 | % | 230,371 | 3,501 | 6.10 | % | 207,546 | 2,819 | 5.39 | % | ||||||
| Total commercial | 10,754,121 | 146,181 | 5.39 | % | 10,765,071 | 141,977 | 5.29 | % | 10,646,816 | 122,267 | 4.56 | % | ||||||
| Residential real estate | 2,276,882 | 23,197 | 4.04 | % | 2,153,563 | 20,943 | 3.90 | % | 1,909,066 | 16,533 | 3.44 | % | ||||||
| Home equity | 1,093,479 | 18,313 | 6.64 | % | 1,094,329 | 17,394 | 6.38 | % | 1,076,040 | 11,869 | 4.38 | % | ||||||
| Total consumer real estate | 3,370,361 | 41,510 | 4.89 | % | 3,247,892 | 38,337 | 4.73 | % | 2,985,106 | 28,402 | 3.77 | % | ||||||
| Other consumer | 30,775 | 608 | 7.84 | % | 28,863 | 566 | 7.87 | % | 31,883 | 523 | 6.51 | % | ||||||
| Total loans | $ | 14,155,257 | $ | 188,299 | 5.28 | % | $ | 14,041,826 | $ | 180,880 | 5.17 | % | $ | 13,663,805 | $ | 151,192 | 4.39 | % |
| Total interest-earning assets | $ | 17,254,248 | $ | 204,082 | 4.69 | % | $ | 17,391,676 | $ | 199,814 | 4.61 | % | $ | 17,852,939 | $ | 171,006 | 3.80 | % |
| Cash and due from banks | 184,003 | 178,707 | 192,003 | |||||||||||||||
| Federal Home Loan Bank stock | 38,252 | 44,619 | 5,745 | |||||||||||||||
| Other assets | 1,859,099 | 1,826,879 | 1,854,870 | |||||||||||||||
| Total assets | $ | 19,335,602 | $ | 19,441,881 | $ | 19,905,557 | ||||||||||||
| Interest-bearing liabilities | ||||||||||||||||||
| Deposits | ||||||||||||||||||
| Savings and interest checking accounts | $ | 5,393,209 | $ | 11,860 | 0.87 | % | $ | 5,512,995 | $ | 9,425 | 0.69 | % | $ | 6,224,690 | $ | 2,110 | 0.13 | % |
| Money market | 2,945,450 | 13,709 | 1.85 | % | 3,044,486 | 12,331 | 1.62 | % | 3,459,212 | 3,025 | 0.35 | % | ||||||
| Time deposits | 1,860,440 | 15,144 | 3.23 | % | 1,630,015 | 10,153 | 2.50 | % | 1,246,841 | 974 | 0.31 | % | ||||||
| Total interest-bearing deposits | $ | 10,199,099 | $ | 40,713 | 1.58 | % | $ | 10,187,496 | $ | 31,909 | 1.26 | % | $ | 10,930,743 | $ | 6,109 | 0.22 | % |
| Borrowings | ||||||||||||||||||
| Federal Home Loan Bank borrowings | 869,646 | 10,568 | 4.82 | % | 1,068,585 | 12,576 | 4.72 | % | 12,876 | 55 | 1.69 | % | ||||||
| Junior subordinated debentures | 62,857 | 1,150 | 7.26 | % | 62,856 | 1,044 | 6.66 | % | 62,854 | 589 | 3.72 | % | ||||||
| Subordinated debentures | 49,944 | 617 | 4.90 | % | 49,921 | 618 | 4.97 | % | 49,847 | 617 | 4.91 | % | ||||||
| Total borrowings | $ | 982,447 | $ | 12,335 | 4.98 | % | $ | 1,181,362 | $ | 14,238 | 4.83 | % | $ | 125,577 | $ | 1,261 | 3.98 | % |
| Total interest-bearing liabilities | $ | 11,181,546 | $ | 53,048 | 1.88 | % | $ | 11,368,858 | $ | 46,147 | 1.63 | % | $ | 11,056,320 | $ | 7,370 | 0.26 | % |
| Noninterest-bearing demand deposits | 4,883,009 | 4,873,767 | 5,641,742 | |||||||||||||||
| Other liabilities | 381,483 | 336,210 | 325,507 | |||||||||||||||
| Total liabilities | $ | 16,446,038 | $ | 16,578,835 | $ | 17,023,569 | ||||||||||||
| Stockholders' equity | 2,889,564 | 2,863,046 | 2,881,988 | |||||||||||||||
| Total liabilities and stockholders' equity | $ | 19,335,602 | $ | 19,441,881 | $ | 19,905,557 | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net interest income | $ | 151,034 | $ | 153,667 | $ | 163,636 | ||||||||||||
| Interest rate spread (2) | 2.81 | % | 2.98 | % | 3.54 | % | ||||||||||||
| Net interest margin (3) | 3.47 | % | 3.54 | % | 3.64 | % | ||||||||||||
| Supplemental Information | ||||||||||||||||||
| Total deposits, including demand deposits | $ | 15,082,108 | $ | 40,713 | $ | 15,061,263 | $ | 31,909 | $ | 16,572,485 | $ | 6,109 | ||||||
| Cost of total deposits | 1.07 | % | 0.85 | % | 0.15 | % | ||||||||||||
| Total funding liabilities, including demand deposits | $ | 16,064,555 | $ | 53,048 | $ | 16,242,625 | $ | 46,147 | $ | 16,698,062 | $ | 7,370 | ||||||
| Cost of total funding liabilities | 1.31 | % | 1.14 | % | 0.18 | % |
(1) The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $1.2 million, $1.1 million, and $1.0 million for the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively, determined by applying the Company's marginal tax rates in effect during each respective quarter.
(2) Interest rate spread represents the difference between weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(3) Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.
| Nine Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2023 | September 30, 2022 | |||||||||||
| Interest | Interest | |||||||||||
| Average | Earned/ | Yield/ | Average | Earned/ | Yield/ | |||||||
| Balance | Paid | Rate | Balance | Paid | Rate | |||||||
| Interest-earning assets | ||||||||||||
| Interest earning deposits with banks, federal funds sold, and short term investments | $ | 144,558 | $ | 4,882 | 4.52 | % | $ | 1,477,117 | $ | 10,222 | 0.93 | % |
| Securities | ||||||||||||
| Securities - trading | 4,377 | — | — | % | 3,775 | — | — | % | ||||
| Securities - taxable investments | 3,062,745 | 45,707 | 2.00 | % | 2,881,203 | 34,567 | 1.60 | % | ||||
| Securities - nontaxable investments (1) | 191 | 5 | 3.50 | % | 198 | 5 | 3.38 | % | ||||
| Total securities | $ | 3,067,313 | $ | 45,712 | 1.99 | % | $ | 2,885,176 | $ | 34,572 | 1.60 | % |
| Loans held for sale | 3,180 | 133 | 5.59 | % | 5,841 | 150 | 3.43 | % | ||||
| Loans | ||||||||||||
| Commercial and industrial (1) | 1,662,459 | 86,762 | 6.98 | % | 1,531,421 | 53,816 | 4.70 | % | ||||
| Commercial real estate (1) | 7,800,173 | 276,255 | 4.74 | % | 7,832,534 | 238,085 | 4.06 | % | ||||
| Commercial construction | 1,061,847 | 50,508 | 6.36 | % | 1,180,509 | 40,599 | 4.60 | % | ||||
| Small business | 231,299 | 10,472 | 6.05 | % | 202,151 | 7,891 | 5.22 | % | ||||
| Total commercial | 10,755,778 | 423,997 | 5.27 | % | 10,746,615 | 340,391 | 4.23 | % | ||||
| Residential real estate | 2,163,130 | 63,498 | 3.92 | % | 1,774,355 | 45,109 | 3.40 | % | ||||
| Home equity | 1,092,304 | 51,951 | 6.36 | % | 1,051,921 | 29,709 | 3.78 | % | ||||
| Total consumer real estate | 3,255,434 | 115,449 | 4.74 | % | 2,826,276 | 74,818 | 3.54 | % | ||||
| Other consumer | 30,885 | 1,751 | 7.58 | % | 31,092 | 1,519 | 6.53 | % | ||||
| Total loans | $ | 14,042,097 | $ | 541,197 | 5.15 | % | $ | 13,603,983 | $ | 416,728 | 4.10 | % |
| Total interest-earning assets | $ | 17,257,148 | $ | 591,924 | 4.59 | % | $ | 17,972,117 | $ | 461,672 | 3.43 | % |
| Cash and due from banks | 181,380 | 184,754 | ||||||||||
| Federal Home Loan Bank stock | 32,615 | 7,780 | ||||||||||
| Other assets | 1,843,564 | 1,853,818 | ||||||||||
| Total assets | $ | 19,314,707 | $ | 20,018,469 | ||||||||
| Interest-bearing liabilities | ||||||||||||
| Deposits | ||||||||||||
| Savings and interest checking accounts | $ | 5,545,951 | $ | 28,758 | 0.69 | % | $ | 6,224,317 | $ | 3,418 | 0.07 | % |
| Money market | 3,079,942 | 36,433 | 1.58 | % | 3,517,459 | 4,191 | 0.16 | % | ||||
| Time deposits | 1,596,889 | 30,106 | 2.52 | % | 1,355,861 | 2,718 | 0.27 | % | ||||
| Total interest-bearing deposits | $ | 10,222,782 | $ | 95,297 | 1.25 | % | $ | 11,097,637 | $ | 10,327 | 0.12 | % |
| Borrowings | ||||||||||||
| Federal Home Loan Bank borrowings | 747,640 | 26,788 | 4.79 | % | 21,361 | 311 | 1.95 | % | ||||
| Long-term borrowings | — | — | — | % | 2,988 | 31 | 1.39 | % | ||||
| Junior subordinated debentures | 62,856 | 3,195 | 6.80 | % | 62,854 | 1,298 | 2.76 | % | ||||
| Subordinated debentures | 49,921 | 1,852 | 4.96 | % | 49,824 | 1,852 | 4.97 | % | ||||
| Total borrowings | $ | 860,417 | $ | 31,835 | 4.95 | % | $ | 137,027 | $ | 3,492 | 3.41 | % |
| Total interest-bearing liabilities | $ | 11,083,199 | $ | 127,132 | 1.53 | % | $ | 11,234,664 | $ | 13,819 | 0.16 | % |
| Noninterest-bearing demand deposits | 4,990,869 | 5,544,476 | ||||||||||
| Other liabilities | 363,989 | 303,308 | ||||||||||
| Total liabilities | $ | 16,438,057 | $ | 17,082,448 | ||||||||
| Stockholders' equity | 2,876,650 | 2,936,021 | ||||||||||
| Total liabilities and stockholders' equity | $ | 19,314,707 | $ | 20,018,469 | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net interest income | $ | 464,792 | $ | 447,853 | ||||||||
| Interest rate spread (2) | 3.06 | % | 3.27 | % | ||||||||
| Net interest margin (3) | 3.60 | % | 3.33 | % | ||||||||
| Supplemental Information | ||||||||||||
| Total deposits, including demand deposits | $ | 15,213,651 | $ | 95,297 | $ | 16,642,113 | $ | 10,327 | ||||
| Cost of total deposits | 0.84 | % | 0.08 | % | ||||||||
| Total funding liabilities, including demand deposits | $ | 16,074,068 | $ | 127,132 | $ | 16,779,140 | $ | 13,819 | ||||
| Cost of total funding liabilities | 1.06 | % | 0.11 | % |
(1) The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $3.4 million and $3.0 million for the nine months ended September 30, 2023 and 2022, respectively.
(2) Interest rate spread represents the difference between weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(3) Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.
Certain amounts in prior year financial statements have been reclassified to conform to the current year's presentation.
APPENDIX A: NON-GAAP Reconciliation of Balance Sheet Metrics
(Unaudited, dollars in thousands, except per share data)
The following table summarizes the calculation of the Company's tangible common equity to tangible assets ratio and tangible book value per share, at the dates indicated:
| September 30<br>2023 | June 30<br>2023 | September 30<br>2022 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Tangible common equity | (Dollars in thousands, except per share data) | |||||||||
| Stockholders' equity (GAAP) | $ | 2,885,408 | $ | 2,854,914 | $ | 2,817,201 | (a) | |||
| Less: Goodwill and other intangibles | 1,004,897 | 1,006,609 | 1,012,006 | |||||||
| Tangible common equity (Non-GAAP) | $ | 1,880,511 | $ | 1,848,305 | $ | 1,805,195 | (b) | |||
| Tangible assets | ||||||||||
| Assets (GAAP) | $ | 19,368,109 | $ | 19,400,931 | $ | 19,703,269 | (c) | |||
| Less: Goodwill and other intangibles | 1,004,897 | 1,006,609 | 1,012,006 | |||||||
| Tangible assets (Non-GAAP) | $ | 18,363,212 | $ | 18,394,322 | $ | 18,691,263 | (d) | |||
| Common Shares | 44,141,973 | 44,130,901 | 45,634,626 | (e) | ||||||
| Common equity to assets ratio (GAAP) | 14.90 | % | 14.72 | % | 14.30 | % | (a/c) | |||
| Tangible common equity to tangible assets ratio (Non-GAAP) | 10.24 | % | 10.05 | % | 9.66 | % | (b/d) | |||
| Book value per share (GAAP) | $ | 65.37 | $ | 64.69 | $ | 61.73 | (a/e) | |||
| Tangible book value per share (Non-GAAP) | $ | 42.60 | $ | 41.88 | $ | 39.56 | (b/e) |
APPENDIX B: Non-GAAP Reconciliation of Earnings Metrics
(Unaudited, dollars in thousands)
The following table summarizes the impact of noncore items on the Company's calculation of noninterest income and noninterest expense, the impact of noncore items on noninterest income as a percentage of total revenue and the efficiency ratio, as well as the average tangible common equity used to calculate return on average tangible common equity and operating return on tangible common equity for the periods indicated:
| Three Months Ended | Nine Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30<br>2023 | June 30<br>2023 | September 30<br>2022 | September 30<br>2023 | September 30<br>2022 | ||||||||||||
| Net interest income (GAAP) | $ | 149,880 | $ | 152,546 | $ | 162,601 | $ | 461,424 | $ | 444,894 | (a) | |||||
| Noninterest income (GAAP) | $ | 33,543 | $ | 30,757 | $ | 28,195 | $ | 92,542 | $ | 82,365 | (b) | |||||
| Noninterest income on an operating basis (Non-GAAP) | $ | 33,543 | $ | 30,757 | $ | 28,195 | $ | 92,542 | $ | 82,365 | (c) | |||||
| Noninterest expense (GAAP) | $ | 97,782 | $ | 95,555 | $ | 92,728 | $ | 291,998 | $ | 278,790 | (d) | |||||
| Less: | ||||||||||||||||
| Merger and acquisition expense | — | — | — | — | 7,100 | |||||||||||
| Noninterest expense on an operating basis (Non-GAAP) | $ | 97,782 | $ | 95,555 | $ | 92,728 | $ | 291,998 | $ | 271,690 | (e) | |||||
| Total revenue (GAAP) | $ | 183,423 | $ | 183,303 | $ | 190,796 | $ | 553,966 | $ | 527,259 | (a+b) | |||||
| Total operating revenue (Non-GAAP) | $ | 183,423 | $ | 183,303 | $ | 190,796 | $ | 553,966 | $ | 527,259 | (a+c) | |||||
| Net income (GAAP) | $ | 60,808 | $ | 62,644 | $ | 71,897 | $ | 184,699 | $ | 186,770 | ||||||
| Operating net income (Non-GAAP) (See income statement for reconciliation of GAAP to Non-GAAP) | $ | 60,808 | $ | 62,644 | $ | 71,897 | $ | 184,699 | $ | 191,875 | ||||||
| Average common equity (GAAP) | $ | 2,889,564 | $ | 2,863,046 | $ | 2,881,988 | $ | 2,876,650 | $ | 2,936,021 | ||||||
| Less: Average goodwill and other intangibles | 1,005,778 | 1,007,500 | 1,013,169 | 1,007,526 | 1,015,040 | |||||||||||
| Tangible average tangible common equity (Non-GAAP) | $ | 1,883,786 | $ | 1,855,546 | $ | 1,868,819 | $ | 1,869,124 | $ | 1,920,981 | ||||||
| Ratios | ||||||||||||||||
| Noninterest income as a % of total revenue (GAAP) (calculated by dividing total noninterest income by total revenue) | 18.29 | % | 16.78 | % | 14.78 | % | 16.71 | % | 15.62 | % | (b/(a+b)) | |||||
| Noninterest income as a % of total revenue on an operating basis (Non-GAAP) (calculated by dividing total noninterest income on an operating basis by total revenue) | 18.29 | % | 16.78 | % | 14.78 | % | 16.71 | % | 15.62 | % | (c/(a+c)) | |||||
| Efficiency ratio (GAAP) (calculated by dividing total noninterest expense by total revenue) | 53.31 | % | 52.13 | % | 48.60 | % | 52.71 | % | 52.88 | % | (d/(a+b)) | |||||
| Efficiency ratio on an operating basis (Non-GAAP) (calculated by dividing total noninterest expense on an operating basis by total revenue) | 53.31 | % | 52.13 | % | 48.60 | % | 52.71 | % | 51.53 | % | (e/(a+c)) | |||||
| Return on average tangible common equity (Non-GAAP) (calculated by dividing annualized net income by average tangible common equity) | 12.81 | % | 13.54 | % | 15.26 | % | 13.21 | % | 13.00 | % | ||||||
| Return on average tangible common equity on an operating basis (Non-GAAP) (calculated by dividing annualized net operating net income by average tangible common equity) | 12.81 | % | 13.54 | % | 15.26 | % | 13.21 | % | 13.35 | % |
APPENDIX C: Net Interest Margin Analysis & Non-GAAP Reconciliation of Core Margin
| Three Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2023 | June 30, 2023 | |||||||||||
| Volume | Interest | Margin Impact | Volume | Interest | Margin Impact | |||||||
| (Dollars in thousands) | ||||||||||||
| Reported total interest earning assets | $ | 17,254,248 | $ | 151,034 | 3.47 | % | $ | 17,391,676 | $ | 153,667 | 3.54 | % |
| Acquisition fair value marks: | ||||||||||||
| Loan accretion | (330) | (862) | ||||||||||
| CD amortization | 11 | 11 | ||||||||||
| (319) | — | % | (851) | (0.02) | % | |||||||
| Nonaccrual interest, net | 67 | — | % | 231 | 0.01 | % | ||||||
| Other noncore adjustments | (5,448) | (77) | — | % | (6,362) | (287) | (0.01) | % | ||||
| Core margin (Non-GAAP) | $ | 17,248,800 | $ | 150,705 | 3.47 | % | $ | 17,385,314 | $ | 152,760 | 3.52 | % |
18
q32023erpresentation-fin
Exhibit 99.2 Independent Bank Corp. (INDB) (parent of Rockland Trust Company) Q3 2023 Earnings Presentation October 20, 2023
2 Company Overview Safe & Sound Customer Centric • Strong, liquid balance sheet • Significant capital buffer • Diversified, low-cost deposit base • Experienced commercial lender with conservative credit culture • Proven operator and acquiror • Full suite of retail and commercial banking product offerings • Relationship-oriented commercial lending with strong local market knowledge • Exceptional brand awareness and reputations Attractive Market • Top performing MA-based bank with scale and density • Supported by strong economic growth and vitality in key markets served • Depth of market offers opportunities for continued growth Strong, Resilient Franchise; Well Positioned for Growth High Performing • Consistent, strong profitability • Focused on maintaining good margins • Fee income contribution from scalable wealth franchise • Efficient cost structure focused on operating leverage • History of organic capital generation
$ 60.8M Net Income $ 1.38 Diluted EPS 1.25% ROAA 8.35% ROAE 12.81% ROATCE 3 Q3 2023 Financial Highlights • Disciplined loan growth • Seasonal deposit declines; stable product mix • Core NIM at 3.47%, down 5 basis points • Solid fee income growth • Nonperforming asset decrease; stable asset quality • Prudent expense management; 53% efficiency ratio • $0.72 tangible book value per share growth • Robust capital levels; $100 million share repurchase authorization Key Metrics Highlights
4 ($ in millions) Period Ended $ Increase % Increase Deposit Product Type 9/30/2023 6/30/2023 (Decrease) (Decrease) Noninterest-bearing demand deposits $ 4,796 $ 4,861 $ (65) (1.3) % Savings and interest checking deposits 5,398 5,525 (127) (2.3) % Money market deposits 2,852 3,066 (214) (7.0) % Time certificates of deposit 2,013 1,796 217 12.1 % $ 15,059 $ 15,248 $ (189) (1.2) % Average Deposit Balances $ 15,082 $ 15,061 21 0.1 % Deposit Balances $ in b ill io ns Average Balances and Cost of Deposits $16.2 $15.5 $15.1 $15.1 0.35% 0.59% 0.85% 1.07% Deposits Cost of deposits Q4 2022 Q1 2023 Q2 2023 Q3 2023 $0.0 $5.0 $10.0 $15.0 0.00% 0.50% 1.00% 1.50% • Municipal - $240M decrease; seasonality • Business - slight increase • Personal - slight decrease
5 Liquidity Additional Borrowing Capacity ($ in millions) Period Ended Off Balance Sheet Liquidity 9/30/2023 6/30/2023 Federal Home Loan Bank ("FHLB") $ 1,789 $ 1,811 Federal Reserve 3,074 2,993 Unpledged securites 1,188 1,156 Lines of credit 85 85 Total borrowing capacity $ 6,136 $ 6,045 Estimated uninsured $ 4,730 $ 4,894 Borrowing capacity / estimated uninsured 130% 124% Estimated uninsured less collateralized deposits $ 4,030 $ 4,111 Borrowing capacity / estimated uninsured less collateralized deposits 152% 147%
6 Securities Portfolio Available for Sale (AFS) Held to Maturity (HTM) Portfolio Composition at September 30, 2023 Book Value Fair Value Unrealized Gain/(Loss) Book Value Fair Value Unrealized Gain/(Loss) ($ in millions) U.S. government agency securities $ 231 $ 200 $ (31) $ 30 $ 28 $ (2) U.S. treasury securities 874 798 (76) 101 89 (12) Agency mortgage-backed securities 327 275 (52) 840 742 (98) Agency collateralized mortgage obligations 37 34 (4) 490 404 (86) Other 56 47 (9) 133 121 (12) Total securities $ 1,525 $ 1,354 $ (172) $ 1,594 $ 1,384 $ (210) Duration of portfolio 3.4 Years 5.1 Years Capital Impact $ % of Tangible Assets ($ in millions) Tangible capital (Non-GAAP) $ 1,881 10.24 % Less: HTM unrealized loss, net of tax (151) Tangible capital adjusted for HTM $ 1,730 9.53 % ($ in m ill io ns ) Projected Cash Flows $93 $363 $287 $618 Q4 2023 2024 2025 2026 $0 $200 $400 $600
7 Loan Balances ($ in millions) Period Ended $ Increase % Increase Loan Category 9/30/2023 6/30/2023 (Decrease) (Decrease) Commercial and industrial $ 1,653 $ 1,723 $ (70) (4.1) % Commercial real estate 7,896 7,813 83 1.1 % Commercial construction 965 1,023 (58) (5.7) % Small business 245 237 8 3.4 % Total commercial 10,759 10,797 (37) (0.3) % Residential real estate 2,338 2,221 117 5.3 % Home equity - first position 530 546 (16) (2.9) % Home equity - subordinate positions 566 550 16 2.9 % Total consumer real estate 3,434 3,317 117 3.5 % Other consumer 31 27 4 14.8 % Total loans $ 14,224 $ 14,141 $ 83 0.6 %
8 Loan Portfolios 95% CRE & Construction Portfolio $8.9 billion Residential - Related - 34.7% Strip Malls / Retail - 18.8%Mixed Office / Retail - 3.0% Office Buildings - 14.2% Industrial Warehouse - 12.0% Hotels/Motels - 8.1% Healthcare - 2.7% All Other - 6.5% C&I Portfolio $1.7 billion Retail Trade - 22.4% Real Estate/ Rental and Leasing - 15.1% Construction - 8.6% Wholesale Trade - 9.2% Administrative Support/Waste Mgmt/ Remediation Services - 7.1% Manufacturing - 5.5% Finance and Insurance - 6.0% Professional, Scientific, and Technical Services - 5.1% All Other (11 Sectors) - 21.0% Consumer Portfolio $3.5 billion Residential real estate - 67.5% Home equity - first position - 15.3% Home equity - subordinate positions - 16.3% Other consumer - 0.9% $8.9 $8.9 $8.8 $8.9 317% 316% 319% 321% CRE NOO CRE/Capital * Q4 2022 Q1 2023 Q2 2023 Q3 2023 $0.0 $2.5 $5.0 $7.5 $10.0 310% 320% 330% 340% 350% * Rockland Trust Bank only; Non-owner occupied commercial real estate divided by total capital. Ratio for Q3 2023 is an estimated number. ($Bil)
9 Focal Point: Non-Owner Occupied CRE Office (inclusive of construction) 95% CRE Office - Total Portfolio ($ in millions) September 30, 2023 June 30, 2023 CRE - Mixed use, primarily office* $ 269 $ 269 CRE - Office: owner occupied 200 201 CRE - Office: non-owner occupied 1,060 1,068 *CRE - Mixed use, primarily office category includes loans with revenues from office space greater than 50%. Focus Point: Non-owner Occupied CRE Office Asset Quality As of 9/30/2023 Criticized Classified Total Avg. Loan Size $ % $ % ($ in millions) Class A $ 491 $ 11.2 $ 74.8 7.1 % $ 39.2 3.7 % Class B/C 454 2.7 10.0 0.9 % 11.5 1.1 % Medical Office 115 4.1 — — % — — % $ 1,060 $ 4.4 $ 84.8 8.0 % $ 50.7 4.8 % **Includes $9 million paid in full subsequent to quarter end Key Portfolio Characteristics • 33% is set to mature or reprice in the next 2 years ◦ Current Wtd Avg Rate = 4.73% • "Barbell" portfolio ◦ Top 20 loans: Avg balance = $24.6M ◦ All others (223 loans): Avg balance = $2.5M Review of Top 20 Loans • $504.3 million, or 47.6% of portfolio ◦ $55.5M criticized ◦ $27.5M classified • $329.2 million in Class A Category • In general, ~80% occupancy • Loans are actively managed - direct communication with borrowers Geography • Primarily MA based • $84.9, or 8.0%, located in Boston Financial District or Back Bay • Remaining exposure is well diversified **
10 Nonperforming Loans ($ in millions) $54.9 $56.2 $45.7 $39.2 0.39% 0.40% 0.32% 0.28% NPLs ($Mil) NPL/Loan% Q4 2022 Q1 2023 Q2 2023 Q3 2023 0.30% 0.40% $0 $30 $60 Net Charge-offs/(Recoveries) ($ in millions) $0.4 $0.5 $23.5 $5.6 0.01% 0.02% 0.67% 0.16% Net Charge-offs (recoveries) Annualized Loss Rate Q4 2022 Q1 2023 Q2 2023 Q3 2023 $0 $10 $20 $30 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70% Asset Quality Allowance for Credit Loss & Delinquency Trends 1.09% 1.14% 0.99% 0.99% 0.30% 0.27% 0.30% 0.22% Allowance for Credit Losses/Total Loans Delinquent Loans/Total Loans Q4 2022 Q1 2023 Q2 2023 Q3 2023 0.00% 0.50% 1.00% 1.50% Charge-off and Provisioning Trends ($ in millions) $0.4 $0.5 $23.5 $5.6$5.5 $7.3 $5.0 $5.5 Net Charge-offs (recoveries) Provision for Credit Losses Q4 2022 Q1 2023 Q2 2023 Q3 2023 $0.0 $10.0 $20.0 $30.0
11 Net Interest Margin Analysis Net Interest Margin 3.85% 3.79% 3.54% 3.47% 3.82% 3.78% 3.52% 3.47% Reported NIM Core NIM Q4 2022 Q1 2023 Q2 2023 Q3 2023 3.40% 3.60% 3.80% 4.00% Loan Betas 27.9% 25.6% 34.1% 32.0% 41.1% 25.4% 25.4% 27.1% 27.8% 26.4% Quarter Cumulative Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 0% 20% 40% 60% Deposit Betas 6.7% 14.1% 27.8% 53.9% 81.9% 4.5% 8.4% 12.2% 16.4% 19.7% Quarter Cumulative Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 0% 50% 100% 12 Month Margin Outlook* Positives • Loan maturities/repricing - proceeds redeployed into higher rate environment • Securities maturities - proceeds redeployed into higher rate assets or borrowings paydowns • Fixed rate loan hedge maturities - loan yields revert back to higher floating rates Negatives • Time Deposit maturities - repricing into the higher rate environment *assumes current forward Treasury curve
12 Noninterest Income ($ in thousands) Three Months Ended Noninterest Income September 30 2023 June 30 2023 Deposit account fees $ 5,936 $ 5,508 Interchange and ATM fees 4,808 4,478 Investment management 10,246 10,348 Mortgage banking income 739 670 Increase in cash surrender value of life insurance policies 1,983 1,940 Gain on life insurance benefits 1,924 176 Loan level derivative income 842 1,275 Other noninterest income 7,065 6,362 Total noninterest income $ 33,543 $ 30,757 $ in m ill io ns Assets Under Administration $5,793 $6,145 $6,304 $6,120 Q4 2022 Q1 2023 Q2 2023 Q3 2023 $5,000 $6,000 Investment management: Focal Point $ in m illi on s Gross New Assets $469 $249 $125 $127 Q4 2022 Q1 2023 Q2 2023 Q3 2023 $0 $100 $200 $300 $400 $500
13 Noninterest Expense ($ in thousands) Three Months Ended Noninterest Expense September 30 2023 June 30 2023 Salaries and employee benefits $ 54,797 $ 53,975 Occupancy and equipment expenses 12,321 12,385 Data processing and facilities management 2,404 2,530 FDIC assessment 2,727 2,674 Other noninterest expenses 25,533 23,991 Total noninterest expenses $ 97,782 $ 95,555 Efficiency Ratio - GAAP Basis 47.28% 52.69% 52.13% 53.31% Q4 2022 Q1 2023 Q2 2023 Q3 2023 40.00% 50.00% 60.00% 70.00%
14 2023 Forward Guidance Loans • Overall loan balances expected to increase modestly in 2023 Q4 Deposits • Deposit balances expected to remain flat or decrease slightly due to seasonality Borrowings • Balances expected to fluctuate based on loan, deposit and securities cash flows Net Interest Margin • 2023 Q4 margin expected in the range of 3.35%-3.40%* Asset Quality • Stabilized; Office CRE expected to drive provision requirements Non-interest items • 2023 Q4: Noninterest income expected to decrease from outsized Q3 levels • 2023 Q4: Noninterest expense expected to be flat to low single digit increase from Q3 levels *Based on current forward Treasury curve
This presentation contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and business of the Company. These statements may be identified by such forward-looking terminology as “expect,” “achieve,” “plan,” “believe,” “outlook”, “projected”, “future,” “positioned,” “continued,” “will,” “would,” “potential,” “anticipated,” “guidance,” “targeted” or similar statements or variations of such terms. Actual results may differ from those contemplated by these forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to: further weakening in the United States economy in general and the regional and local economies within the New England region and the Company’s market area; the effects of inflationary pressures, labor market shortages and supply chain issues; the instability or volatility in financial markets and unfavorable general economic or business conditions, globally, nationally or regionally, whether caused by geopolitical concerns, including the Russia/Ukraine conflict, the conflict in Israel and surrounding areas and the possible expansion of such conflicts, recent disruptions in the banking industry, or other factors; unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, pandemics or other external events; adverse changes or volatility in the local real estate market; adverse changes in asset quality and any unanticipated credit deterioration in our loan portfolio including those related to one or more large commercial relationships; acquisitions may not produce results at levels or within time frames originally anticipated and may result in unforeseen integration issues or impairment of goodwill and/or other intangibles; additional regulatory oversight and related compliance costs; changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; higher than expected tax expense, including as a result of failure to comply with general tax laws and changes in tax laws; changes in market interest rates for interest earning assets and/or interest bearing liabilities; increased competition in the Company’s market areas; adverse weather, changes in climate, natural disasters, and geopolitical concerns; the emergence of widespread health emergencies or pandemics, any further resurgences or variants of the COVID-19 virus, actions taken by governmental authorities in response thereto, other public health crises or man-made events, and their impact on the Company's local economies or the Company's operations; a deterioration in the conditions of the securities markets; a deterioration of the credit rating for U.S. long-term sovereign debt, or uncertainties surrounding the federal budget; inability to adapt to changes in information technology, including changes to industry accepted delivery models driven by a migration to the internet as a means of service delivery; electronic fraudulent activity within the financial services industry, especially in the commercial banking sector; adverse changes in consumer spending and savings habits; the effect of laws and regulations regarding the financial services industry; changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) generally applicable to the Company’s business, including any such changes in laws and regulations as a result of recent disruption in the banking industry, and the associated costs of such changes; the Company's potential judgments, claims, damages, penalties, fines and reputational damage resulting from pending or future litigation and regulatory and government actions; changes in accounting policies, practices and standards, as may be adopted by the regulatory agencies as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters; cyber security attacks or intrusions that could adversely impact our businesses; and other unexpected material adverse changes in our operations or earnings. The Company wishes to caution readers not to place undue reliance on any forward-looking statements as the Company’s business and its forward-looking statements involve substantial known and unknown risks and uncertainties described in the Company’s Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q (“Risk Factors”). Except as required by law, the Company disclaims any intent or obligation to update publicly any such forward-looking statements, whether in response to new information, future events or otherwise. Any public statements or disclosures by the Company following this presentation which modify or impact any of the forward-looking statements contained in this presentation will be deemed to modify or supersede such statements in this presentation. In addition to the information set forth in this presentation, you should carefully consider the Risk Factors. 15 Forward Looking Statements
This presentation contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). This information may include operating net income and operating earnings per share ("EPS"), operating return on average assets, operating return on average common equity, operating return on average tangible common equity, core net interest margin ("core NIM" or "core margin"), tangible book value per share and the tangible common equity ratio. Operating net income, operating EPS, operating return on average assets and operating return on average common equity, exclude items that management believes are unrelated to the Company's core banking business such as merger and acquisition expenses, provision for credit losses on acquired loan portfolios, and other items, if applicable. Management uses operating net income and related ratios and operating EPS to measure the strength of the Company’s core banking business and to identify trends that may to some extent be obscured by such items. Management reviews its core margin to determine any items that may impact the net interest margin that may be one-time in nature or not reflective of its core operating environment, such as low-yielding loans originated through government programs in response to the pandemic, or significant purchase accounting adjustments, or other adjustments such as nonaccrual interest reversals/recoveries and prepayment penalties. Management believes that adjusting for these items to arrive at a core margin provides additional insight into the operating environment and how management decisions impact the net interest margin. Similarly, management reviews certain loan metrics such as growth rates and allowance as a percentage of total loans, adjusted to exclude loans that are not considered part of its core portfolio, which includes loans originated in association with government sponsored and guaranteed programs in response to the pandemic, to arrive at adjusted numbers more representative of the core growth of the portfolio and core reserve to loan ratio. Management also supplements its evaluation of financial performance with analysis of tangible book value per share (which is computed by dividing stockholders' equity less goodwill and identifiable intangible assets, or "tangible common equity", by common shares outstanding), the tangible common equity ratio (which is computed by dividing tangible common equity by "tangible assets", defined as total assets less goodwill and other intangibles), and return on average tangible common equity (which is computed by dividing net income by average tangible common equity). The Company has included information on tangible book value per share, the tangible common equity ratio and return on average tangible common equity because management believes that investors may find it useful to have access to the same analytical tools used by management. As a result of merger and acquisition activity, the Company has recognized goodwill and other intangible assets in conjunction with business combination accounting principles. Excluding the impact of goodwill and other intangibles in measuring asset and capital values for the ratios provided, along with other bank standard capital ratios, provides a framework to compare the capital adequacy of the Company to other companies in the financial services industry. These non-GAAP measures should not be viewed as a substitute for operating results and other financial measures determined in accordance with GAAP. An item which management deems to be noncore and excludes when computing these non-GAAP measures can be of substantial importance to the Company’s results for any particular quarter or year. The Company’s non-GAAP performance measures, including operating net income, operating EPS, operating return on average assets, operating return on average common equity, core margin, tangible book value per share and the tangible common equity ratio, are not necessarily comparable to non-GAAP performance measures which may be presented by other companies. 16 Non-GAAP Financial Measures