Solid performance reflects strong business
fundamentals
Independent Bank Corp. (Nasdaq Global Select Market: INDB),
parent of Rockland Trust Company, today announced 2023 second
quarter net income of $62.6 million, or $1.42 per diluted share,
compared to 2023 first quarter net income of $61.2 million, or
$1.36 per diluted share. Second quarter results were driven by
healthy loan volumes, strong fee income, and disciplined expense
management.
The Company generated a return on average assets and a return on
average common equity of 1.29% and 8.78%, respectively, for the
second quarter of 2023, as compared to 1.30% and 8.63%,
respectively, for the prior quarter.
“Our solid performance reflects both the underlying strength of
our core franchise and our resilience to the current difficult
operating environment. Our sound business fundamentals, including
disciplined underwriting and comprehensive capital and liquidity
planning, continue to serve us well and position us to take
advantage of the right opportunities.” said Jeffrey Tengel, the
Chief Executive Officer of Independent Bank Corp. and Rockland
Trust Company. “Our focus will continue to center on capitalizing
on our diverse business model and maintaining a laser focus on
cultivating and expanding our valuable core relationships.”
BALANCE SHEET
Total assets of $19.4 billion at June 30, 2023 were virtually
unchanged from the prior quarter and decreased by $581.5 million,
or 2.9%, as compared to the prior year level, driven primarily by
lower cash balances and associated deposit levels.
Total loans at June 30, 2023 of $14.1 billion increased by
$192.0 million, or 1.4% (5.5% annualized), compared to the prior
quarter level. Solid closing activity along with reduced attrition
drove a modest 0.5% (2.0% annualized) increase in total commercial
balances, while small business loans also exhibited solid growth,
rising 5.0% over the prior quarter. In addition, the vast majority
of residential real estate originations were retained on the
balance sheet, resulting in growth in that portfolio of $125.6
million, or 6.0% for the quarter, while home equity balances
increased slightly by $4.6 million, or 0.4%, compared to the prior
quarter level.
Deposit balances of $15.2 billion at June 30, 2023 decreased
slightly by $24.1 million, or 0.2%, from March 31, 2023, reflecting
a stabilization of overall deposit balances as compared to the
prior quarter. As a result of the continued migration of balances
to higher rate time deposits, the total cost of deposits for the
quarter increased 26 basis points to 0.85%. Core deposits
represented 82.6% of total deposits at June 30, 2023, compared to
85.6% at March 31, 2023.
Borrowings decreased by $91.1 million, or 9.2%, during the
second quarter of 2023, primarily driven by a redeployment of the
balance sheet cash position. In addition, the Company entered into
an additional $100 million of pay-fixed borrowings hedges during
the quarter, bringing the total of such hedges to $400 million.
The securities portfolio decreased by $86.9 million, or 2.8%,
compared to March 31, 2023 driven primarily by paydowns, calls, and
maturities, along with unrealized losses of $15.0 million in the
available for sale portfolio during the second quarter. Total
securities represented 15.6% of total assets at June 30, 2023, as
compared to 16.0% at March 31, 2023.
Stockholders' equity at June 30, 2023 increased 0.8% when
compared to March 31, 2023, driven primarily by strong earnings
retention and 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 14.72% at June 30, 2023 represented an increase of 16
basis points, or 1.1%, from March 31, 2023 and an increase of 35
basis points, or 2.4%, from June 30, 2022. The Company's book value
per share increased by $0.52, or 0.8%, to $64.69 at June 30, 2023
as compared to the prior quarter. The Company's tangible book value
per share at June 30, 2023 rose by $0.57, or 1.4%, from the prior
quarter to $41.88, and represented an increase of 3.9% from the
year ago period, despite 1.6 million shares of common stock
repurchased during the first quarter of 2023. The Company's ratio
of tangible common equity to tangible assets of 10.05% at June 30,
2023 represented an increase of 16 basis points from the prior
quarter and an increase of 26 basis points from the year ago
period. Please refer to Appendix A for a detailed reconciliation
of Non-GAAP balance sheet metrics.
NET INTEREST INCOME
Net interest income for the second quarter of 2023 decreased
4.1% to $152.5 million compared to $159.0 million for the prior
quarter, reflecting a full quarter of increased wholesale
borrowings as well as higher deposit costs, resulting in a
reduction in net interest margin of 25 basis points to 3.54% for
the quarter. The core margin decreased 26 basis points to 3.52% for
the second quarter of 2023, when excluding purchase accounting and
other non-core items. 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 $30.8 million for the second quarter of
2023 represented an increase of $2.5 million, or 8.9%, as compared
to the prior quarter. Significant changes in noninterest income for
the second quarter of 2023 compared to the prior quarter included
the following:
- Deposit account fees decreased by $408,000, or 6.9%, due
primarily to reduced overdraft fees stemming from the Company's
policy changes, which went into effect in March 2023.
- Interchange and ATM fees increased by $294,000, or 7.0%, driven
by increased transaction volume during the second quarter of
2023.
- Investment management income increased by $569,000, or 5.8%,
due primarily to seasonal tax preparation fees, as well as
increased market valuations. Total assets under administration rose
by $158.6 million, or 2.6%, to a record level of $6.3 billion
during the second quarter of 2023.
- Mortgage banking income grew by $362,000 in comparison to the
prior quarter, primarily reflecting increased saleable volume.
- The Company received proceeds on life insurance policies
resulting in a gain of $176,000 for the second quarter, as compared
to a gain of $11,000 in the prior quarter.
- Loan level derivative income increased by $867,000 compared to
the prior quarter due primarily to higher customer demand.
- Other noninterest income increased by $580,000, or 10.0%, due
primarily to interest income recognized from income tax return
refunds received during the quarter and increased Federal Home Loan
Bank dividend income.
NONINTEREST EXPENSE
Noninterest expense of $95.6 million for the second quarter of
2023 represented a decrease of $3.1 million, or 3.1%, as compared
to the prior quarter. Significant changes in noninterest expense
for the second quarter compared to the prior quarter included the
following:
- Salaries and employee benefits decreased by $3.0 million, or
5.3%, due primarily to non-recurring CEO transition related
expenses incurred during the first quarter, as well as decreases in
payroll taxes and incentive compensation, partially offset by
increases in medical plan insurance.
- Occupancy and equipment decreased by $437,000, or 3.4%, due
mostly to seasonal decreases in snow removal and utilities
costs.
- Other noninterest expense increased by $264,000, or 1.1%, due
primarily to director equity compensation granted during the
quarter, advertising and sponsorships, partially offset by
decreases in legal fees.
The Company’s tax rate for the second quarter of 2023 decreased
slightly to 24.30%, compared to 24.69% for the prior quarter.
ASSET QUALITY
Net charge-offs were $23.5 million for the second quarter of
2023, driven primarily by the full charge-off of a large
nonperforming commercial and industrial credit which had previously
been fully reserved for. The second quarter provision for credit
losses declined to $5.0 million from $7.3 million in the prior
quarter and was driven primarily by the migration of a single
commercial real estate loan to non-accrual, as well as loan growth
during the quarter. As a result, nonperforming loans decreased to
$45.7 million, or 0.32% of total loans at June 30, 2023, as
compared to $56.2 million, or 0.40% of total loans at March 31,
2023. Delinquency as a percentage of total loans increased three
basis points from the prior quarter to 0.30% at June 30, 2023.
The allowance for credit losses on total loans decreased to
$140.6 million, or 0.99% of total loans, at June 30, 2023, as
compared to $159.1 million, or 1.14% of total loans, at March 31,
2023. The decline in the coverage ratio was driven primarily by the
aforementioned commercial and industrial loan charged-off during
the quarter.
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 second quarter
earnings at 10:00 a.m. Eastern Time on Friday, July 21, 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: 3932449 and will be available through
July 28, 2023. Additionally, a webcast replay will be available on
the Company's website until July 21, 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. 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 offers a
wide range of banking, investment, and insurance services. The Bank
serves businesses and individuals through over 120 retail branches,
commercial and residential lending centers, and investment
management offices located throughout Eastern Massachusetts as well
as in Worcester County and Rhode Island. Rockland Trust also offers
a full suite of mobile, online, and telephone banking services.
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 as a result of the conflict between Russia and Ukraine,
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, resulting from 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 and changes related to the
phase-out of the London Interbank Offered Rate ("LIBOR");
- increased competition in the Company’s market areas;
- adverse weather, changes in climate, natural disasters,
geopolitical concerns, including those arising from the conflict
between Russia and Ukraine;
- 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, 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.
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.
Category: Earnings Releases
INDEPENDENT BANK CORP. FINANCIAL
SUMMARY
CONSOLIDATED BALANCE SHEETS
(Unaudited, dollars in thousands)
% Change
% Change
June 30 2023
March 31 2023
June 30 2022
Jun 2023 vs.
Jun 2023 vs.
Mar 2023
Jun 2022
Assets
Cash and due from banks
$
181,810
$
179,923
$
202,802
1.05
%
(10.35
)%
Interest-earning deposits with banks
126,454
322,621
1,273,465
(60.80
)%
(90.07
)%
Securities
Trading
4,477
4,469
3,637
0.18
%
23.10
%
Equities
21,800
21,503
21,181
1.38
%
2.92
%
Available for sale
1,372,903
1,405,602
1,501,949
(2.33
)%
(8.59
)%
Held to maturity
1,623,892
1,678,376
1,408,189
(3.25
)%
15.32
%
Total securities
3,023,072
3,109,950
2,934,956
(2.79
)%
3.00
%
Loans held for sale
6,577
1,130
2,358
482.04
%
178.92
%
Loans
Commercial and industrial
1,723,219
1,649,882
1,541,046
4.44
%
11.82
%
Commercial real estate
7,812,796
7,820,094
7,791,757
(0.09
)%
0.27
%
Commercial construction
1,022,796
1,046,310
1,194,577
(2.25
)%
(14.38
)%
Small business
237,092
225,866
205,953
4.97
%
15.12
%
Total commercial
10,795,903
10,742,152
10,733,333
0.50
%
0.58
%
Residential real estate
2,221,284
2,095,644
1,844,057
6.00
%
20.46
%
Home equity - first position
546,240
556,534
587,314
(1.85
)%
(6.99
)%
Home equity - subordinate positions
549,158
534,221
478,196
2.80
%
14.84
%
Total consumer real estate
3,316,682
3,186,399
2,909,567
4.09
%
13.99
%
Other consumer
27,326
19,401
32,864
40.85
%
(16.85
)%
Total loans
14,139,911
13,947,952
13,675,764
1.38
%
3.39
%
Less: allowance for credit losses
(140,647
)
(159,131
)
(144,319
)
(11.62
)%
(2.54
)%
Net loans
13,999,264
13,788,821
13,531,445
1.53
%
3.46
%
Federal Home Loan Bank stock
39,488
40,303
6,249
(2.02
)%
531.91
%
Bank premises and equipment, net
193,642
195,921
202,221
(1.16
)%
(4.24
)%
Goodwill
985,072
985,072
985,072
—
%
—
%
Other intangible assets
21,537
23,253
28,845
(7.38
)%
(25.34
)%
Cash surrender value of life insurance
policies
296,687
295,268
292,807
0.48
%
1.33
%
Other assets
527,328
500,140
522,230
5.44
%
0.98
%
Total assets
$
19,400,931
$
19,442,402
$
19,982,450
(0.21
)%
(2.91
)%
Liabilities and Stockholders'
Equity
Deposits
Noninterest-bearing demand deposits
$
4,861,092
$
5,083,678
$
5,562,174
(4.38
)%
(12.60
)%
Savings and interest checking accounts
5,525,223
5,638,781
6,347,601
(2.01
)%
(12.96
)%
Money market
3,065,520
3,094,362
3,419,170
(0.93
)%
(10.34
)%
Time certificates of deposit
1,796,216
1,455,351
1,310,603
23.42
%
37.05
%
Total deposits
15,248,051
15,272,172
16,639,548
(0.16
)%
(8.36
)%
Borrowings
Federal Home Loan Bank borrowings
788,479
879,628
25,652
(10.36
)%
2,973.75
%
Junior subordinated debentures, net
62,857
62,856
62,854
—
%
—
%
Subordinated debentures, net
49,933
49,909
49,838
0.05
%
0.19
%
Total borrowings
901,269
992,393
138,344
(9.18
)%
551.47
%
Total deposits and borrowings
16,149,320
16,264,565
16,777,892
(0.71
)%
(3.75
)%
Other liabilities
396,697
346,928
333,373
14.35
%
18.99
%
Total liabilities
16,546,017
16,611,493
17,111,265
(0.39
)%
(3.30
)%
Stockholders' equity
Common stock
440
439
459
0.23
%
(4.14
)%
Additional paid in capital
1,997,674
1,995,077
2,146,333
0.13
%
(6.93
)%
Retained earnings
1,009,735
971,338
833,857
3.95
%
21.09
%
Accumulated other comprehensive loss, net
of tax
(152,935
)
(135,945
)
(109,464
)
12.50
%
39.71
%
Total stockholders' equity
2,854,914
2,830,909
2,871,185
0.85
%
(0.57
)%
Total liabilities and stockholders'
equity
$
19,400,931
$
19,442,402
$
19,982,450
(0.21
)%
(2.91
)%
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, dollars in thousands, except
per share data)
Three Months Ended
% Change
% Change
June 30 2023
March 31 2023
June 30 2022
Jun 2023 vs.
Jun 2023 vs.
Mar 2023
Jun 2022
Interest income
Interest on federal funds sold and
short-term investments
$
3,312
$
665
$
2,817
398.05
%
17.57
%
Interest and dividends on securities
15,583
15,310
11,283
1.78
%
38.11
%
Interest and fees on loans
179,759
170,926
133,988
5.17
%
34.16
%
Interest on loans held for sale
39
34
35
14.71
%
11.43
%
Total interest income
198,693
186,935
148,123
6.29
%
34.14
%
Interest expense
Interest on deposits
31,909
22,675
2,111
40.72
%
1,411.56
%
Interest on borrowings
14,238
5,262
1,151
170.58
%
1,137.01
%
Total interest expense
46,147
27,937
3,262
65.18
%
1,314.68
%
Net interest income
152,546
158,998
144,861
(4.06
)%
5.31
%
Provision for credit losses
5,000
7,250
—
(31.03
)%
100.00
%
Net interest income after provision for
credit losses
147,546
151,748
144,861
(2.77
)%
1.85
%
Noninterest income
Deposit account fees
5,508
5,916
5,828
(6.90
)%
(5.49
)%
Interchange and ATM fees
4,478
4,184
4,027
7.03
%
11.20
%
Investment management
10,348
9,779
9,329
5.82
%
10.92
%
Mortgage banking income
670
308
1,042
117.53
%
(35.70
)%
Increase in cash surrender value of life
insurance policies
1,940
1,854
1,871
4.64
%
3.69
%
Gain on life insurance benefits
176
11
123
1,500.00
%
43.09
%
Loan level derivative income
1,275
408
436
212.50
%
192.43
%
Other noninterest income
6,362
5,782
5,242
10.03
%
21.37
%
Total noninterest income
30,757
28,242
27,898
8.91
%
10.25
%
Noninterest expenses
Salaries and employee benefits
53,975
56,975
49,538
(5.27
)%
8.96
%
Occupancy and equipment expenses
12,385
12,822
11,637
(3.41
)%
6.43
%
Data processing and facilities
management
2,530
2,527
2,247
0.12
%
12.59
%
FDIC assessment
2,674
2,610
1,743
2.45
%
53.41
%
Other noninterest expenses
23,991
23,727
25,397
1.11
%
(5.54
)%
Total noninterest expenses
95,555
98,661
90,562
(3.15
)%
5.51
%
Income before income taxes
82,748
81,329
82,197
1.74
%
0.67
%
Provision for income taxes
20,104
20,082
20,421
0.11
%
(1.55
)%
Net Income
$
62,644
$
61,247
$
61,776
2.28
%
1.41
%
Weighted average common shares (basic)
44,129,152
45,004,100
46,665,101
Common share equivalents
7,573
19,564
14,096
Weighted average common shares
(diluted)
44,136,725
45,023,664
46,679,197
Basic earnings per share
$
1.42
$
1.36
$
1.32
4.41
%
7.58
%
Diluted earnings per share
$
1.42
$
1.36
$
1.32
4.41
%
7.58
%
Performance ratios
Net interest margin (FTE)
3.54
%
3.79
%
3.27
%
Return on average assets (calculated by
dividing net income by average assets)
1.29
%
1.30
%
1.24
%
Return on average common equity
(calculated by dividing net income by average common equity)
(GAAP)
8.78
%
8.63
%
8.49
%
Return on average tangible common equity
(Non-GAAP) (calculated by dividing net income by average tangible
common equity)
13.54
%
13.30
%
13.01
%
Noninterest income as a % of total revenue
(calculated by dividing total noninterest income by net interest
income plus total noninterest income)
16.78
%
15.08
%
16.15
%
Efficiency ratio (calculated by dividing
total noninterest expense by total revenue)
52.13
%
52.69
%
52.42
%
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, dollars in thousands, except
per share data)
Six Months Ended
% Change
June 30 2023
June 30 2022
Jun 2023 vs.
Jun 2022
Interest income
Interest on federal funds sold and
short-term investments
$
3,977
$
3,703
7.40
%
Interest and dividends on securities
30,893
21,327
44.85
%
Interest and fees on loans
350,685
263,613
33.03
%
Interest on loans held for sale
73
99
(26.26
)%
Total interest income
385,628
288,742
33.55
%
Interest expense
Interest on deposits
54,584
4,218
1,194.07
%
Interest on borrowings
19,500
2,231
774.05
%
Total interest expense
74,084
6,449
1,048.77
%
Net interest income
311,544
282,293
10.36
%
Provision for (release of) credit
losses
12,250
(2,000
)
(712.50
)%
Net interest income after provision for
credit losses
299,294
284,293
5.28
%
Noninterest income
Deposit account fees
11,424
11,321
0.91
%
Interchange and ATM fees
8,662
7,636
13.44
%
Investment management
20,127
18,002
11.80
%
Mortgage banking income
978
2,404
(59.32
)%
Increase in cash surrender value of life
insurance policies
3,794
3,666
3.49
%
Gain on life insurance benefits
187
123
52.03
%
Loan level derivative income
1,683
1,040
61.83
%
Other noninterest income
12,144
9,978
21.71
%
Total noninterest income
58,999
54,170
8.91
%
Noninterest expenses
Salaries and employee benefits
110,950
98,249
12.93
%
Occupancy and equipment expenses
25,207
24,939
1.07
%
Data processing and facilities
management
5,057
4,619
9.48
%
FDIC assessment
5,284
3,548
48.93
%
Merger and acquisition expense
—
7,100
(100.00
)%
Other noninterest expenses
47,718
47,607
0.23
%
Total noninterest expenses
194,216
186,062
4.38
%
Income before income taxes
164,077
152,401
7.66
%
Provision for income taxes
40,186
37,528
7.08
%
Net Income
$
123,891
$
114,873
7.85
%
Weighted average common shares (basic)
44,564,209
47,013,989
Common share equivalents
13,568
17,403
Weighted average common shares
(diluted)
44,577,777
47,031,392
Basic earnings per share
$
2.78
$
2.44
13.93
%
Diluted earnings per share
$
2.78
$
2.44
13.93
%
Reconciliation of Net Income (GAAP) to
Operating Net Income (Non-GAAP):
Net Income
$
123,891
$
114,873
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)
$
123,891
$
119,978
3.26
%
Diluted earnings per share, on an
operating basis
$
2.78
$
2.55
9.02
%
(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)
3.67
%
3.18
%
Return on average assets (GAAP)
(calculated by dividing net income by average assets)
1.29
%
1.15
%
Return on average assets on an operating
basis (Non-GAAP) (calculated by dividing net operating net income
by average assets)
1.29
%
1.21
%
Return on average common equity (GAAP)
(calculated by dividing net income by average common equity)
8.70
%
7.82
%
Return on average common equity on an
operating basis (Non-GAAP) (calculated by dividing net operating
net income by average common equity)
8.70
%
8.16
%
Return on average tangible common equity
(GAAP) (calculated by dividing net income by average tangible
common equity)
13.42
%
11.89
%
Return on average tangible common equity
on an operating basis (Non-GAAP) (calculated by dividing net
operating net income by average tangible common equity)
13.42
%
12.42
%
Noninterest income as a % of total revenue
(calculated by dividing total noninterest income by net interest
income plus total noninterest income)
15.92
%
16.10
%
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)
15.92
%
16.10
%
Efficiency ratio (GAAP) (calculated by
dividing total noninterest expense by total revenue)
52.41
%
55.30
%
Efficiency ratio on an operating basis
(Non-GAAP) (calculated by dividing total noninterest expense on an
operating basis by total revenue)
52.41
%
53.19
%
ASSET QUALITY
(Unaudited, dollars in thousands)
Nonperforming Assets
At
June 30 2023
March 31 2023
June 30 2022
Nonperforming loans
Commercial & industrial loans
$
3,235
$
26,343
$
3,518
Commercial real estate loans
29,910
18,038
40,074
Small business loans
348
242
31
Residential real estate loans
8,179
8,178
8,563
Home equity
3,944
3,305
3,514
Other consumer
86
129
215
Total nonperforming loans
45,702
56,235
55,915
Other real estate owned
110
—
—
Total nonperforming assets
$
45,812
$
56,235
$
55,915
Nonperforming loans/gross loans
0.32
%
0.40
%
0.41
%
Nonperforming assets/total assets
0.24
%
0.29
%
0.28
%
Allowance for credit losses/nonperforming
loans
307.75
%
282.98
%
258.10
%
Allowance for credit losses/total
loans
0.99
%
1.14
%
1.06
%
Delinquent loans/total loans
0.30
%
0.27
%
0.40
%
Nonperforming Assets
Reconciliation for the Three Months Ended
June 30 2023
March 31 2023
June 30 2022
Nonperforming assets beginning balance
$
56,235
$
54,881
$
56,618
New to nonperforming
18,018
5,416
2,822
Loans charged-off
(23,767
)
(815
)
(545
)
Loans paid-off
(3,984
)
(1,915
)
(2,239
)
Loans restored to performing status
(680
)
(1,352
)
(738
)
Other
(10
)
20
(3
)
Nonperforming assets ending balance
$
45,812
$
56,235
$
55,915
Net Charge-Offs
(Recoveries)
Three Months Ended
Six Months Ended
June 30 2023
March 31 2023
June 30 2022
June 30 2023
June 30 2022
Net charge-offs (recoveries)
Commercial and industrial loans
$
23,174
$
276
$
(29
)
$
23,450
$
(42
)
Commercial real estate loans
—
—
—
—
(3
)
Small business loans
51
(3
)
(22
)
48
—
Home equity
(10
)
(16
)
84
(26
)
82
Other consumer
269
281
166
550
566
Total net charge-offs (recoveries)
$
23,484
$
538
$
199
$
24,022
$
603
Net charge-offs (recoveries) to average
loans (annualized)
0.67
%
0.02
%
0.01
%
0.35
%
0.01
%
BALANCE SHEET AND CAPITAL RATIOS
June 30 2023
March 31 2023
June 30 2022
Gross loans/total deposits
92.73
%
91.33
%
82.19
%
Common equity tier 1 capital ratio (1)
14.07
%
13.83
%
13.90
%
Tier 1 leverage capital ratio (1)
10.85
%
10.78
%
10.42
%
Common equity to assets ratio GAAP
14.72
%
14.56
%
14.37
%
Tangible common equity to tangible assets
ratio (2)
10.05
%
9.89
%
9.79
%
Book value per share GAAP
$
64.69
$
64.17
$
62.32
Tangible book value per share (2)
$
41.88
$
41.31
$
40.31
(1) Estimated number for June 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
June 30, 2023
March 31, 2023
June 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
$
270,443
$
3,312
4.91
%
$
73,608
$
665
3.66
%
$
1,377,286
$
2,817
0.82
%
Securities
Securities - trading
4,487
—
—
%
4,095
—
—
%
3,863
—
—
%
Securities - taxable investments
3,071,752
15,581
2.03
%
3,117,024
15,309
1.99
%
2,889,245
11,281
1.57
%
Securities - nontaxable investments
(1)
191
2
4.20
%
193
2
4.20
%
197
3
6.11
%
Total securities
$
3,076,430
$
15,583
2.03
%
$
3,121,312
$
15,311
1.99
%
$
2,893,305
$
11,284
1.56
%
Loans held for sale
2,977
39
5.25
%
2,474
34
5.57
%
3,842
35
3.65
%
Loans
Commercial and industrial (1)
1,686,348
29,451
7.00
%
1,618,330
26,572
6.66
%
1,537,883
17,496
4.56
%
Commercial real estate (1)
7,803,702
91,813
4.72
%
7,773,007
89,581
4.67
%
7,827,442
76,771
3.93
%
Commercial construction
1,044,650
17,212
6.61
%
1,134,469
16,467
5.89
%
1,193,353
13,456
4.52
%
Small business
230,371
3,501
6.10
%
222,543
3,219
5.87
%
203,947
2,656
5.22
%
Total commercial
10,765,071
141,977
5.29
%
10,748,349
135,839
5.13
%
10,762,625
110,379
4.11
%
Residential real estate
2,153,563
20,943
3.90
%
2,056,524
19,358
3.82
%
1,761,986
14,879
3.39
%
Home equity
1,094,329
17,394
6.38
%
1,089,056
16,244
6.05
%
1,046,933
9,178
3.52
%
Total consumer real estate
3,247,892
38,337
4.73
%
3,145,580
35,602
4.59
%
2,808,919
24,057
3.44
%
Other consumer
28,863
566
7.87
%
32,767
577
7.14
%
31,554
507
6.44
%
Total loans
$
14,041,826
$
180,880
5.17
%
$
13,926,696
$
172,018
5.01
%
$
13,603,098
$
134,943
3.98
%
Total interest-earning assets
$
17,391,676
$
199,814
4.61
%
$
17,124,090
$
188,028
4.45
%
$
17,877,531
$
149,079
3.34
%
Cash and due from banks
178,707
181,402
190,501
Federal Home Loan Bank stock
44,619
14,714
6,249
Other assets
1,826,879
1,844,556
1,855,351
Total assets
$
19,441,881
$
19,164,762
$
19,929,632
Interest-bearing liabilities
Deposits
Savings and interest checking accounts
$
5,512,995
$
9,425
0.69
%
$
5,745,357
$
7,473
0.53
%
$
6,192,761
$
710
0.05
%
Money market
3,044,486
12,331
1.62
%
3,243,322
10,393
1.30
%
3,486,017
607
0.07
%
Time deposits
1,630,015
10,153
2.50
%
1,293,987
4,809
1.51
%
1,356,507
794
0.23
%
Total interest-bearing deposits
$
10,187,496
$
31,909
1.26
%
$
10,282,666
$
22,675
0.89
%
$
11,035,285
$
2,111
0.08
%
Borrowings
Federal Home Loan Bank borrowings
1,068,585
12,576
4.72
%
298,413
3,644
4.95
%
25,654
123
1.92
%
Junior subordinated debentures
62,856
1,044
6.66
%
62,856
1,001
6.46
%
62,854
410
2.62
%
Subordinated debentures
49,921
618
4.97
%
49,897
617
5.01
%
49,825
618
4.97
%
Total borrowings
$
1,181,362
$
14,238
4.83
%
$
411,166
$
5,262
5.19
%
$
138,333
$
1,151
3.34
%
Total interest-bearing liabilities
$
11,368,858
$
46,147
1.63
%
$
10,693,832
$
27,937
1.06
%
$
11,173,618
$
3,262
0.12
%
Noninterest-bearing demand deposits
4,873,767
5,219,531
5,546,041
Other liabilities
336,210
374,195
290,467
Total liabilities
$
16,578,835
$
16,287,558
$
17,010,126
Stockholders' equity
2,863,046
2,877,204
2,919,506
Total liabilities and stockholders'
equity
$
19,441,881
$
19,164,762
$
19,929,632
Net interest income
$
153,667
$
160,091
$
145,817
Interest rate spread (2)
2.98
%
3.39
%
3.22
%
Net interest margin (3)
3.54
%
3.79
%
3.27
%
Supplemental Information
Total deposits, including demand
deposits
$
15,061,263
$
31,909
$
15,502,197
$
22,675
$
16,581,326
$
2,111
Cost of total deposits
0.85
%
0.59
%
0.05
%
Total funding liabilities, including
demand deposits
$
16,242,625
$
46,147
$
15,913,363
$
27,937
$
16,719,659
$
3,262
Cost of total funding liabilities
1.14
%
0.71
%
0.08
%
(1) The total amount of adjustment to
present interest income and yield on a fully tax-equivalent basis
is $1.1 million, $1.1 million, and $956,000 for the three months
ended June 30, 2023, March 31, 2023, and June 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.
Six Months Ended
June 30, 2023
June 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
$
172,569
$
3,977
4.65
%
$
1,640,264
$
3,703
0.46
%
Securities
Securities - trading
4,292
—
—
%
3,798
—
—
%
Securities - taxable investments
3,094,263
30,890
2.01
%
2,808,213
21,324
1.53
%
Securities - nontaxable investments
(1)
192
4
4.20
%
199
4
4.05
%
Total securities
$
3,098,747
$
30,894
2.01
%
$
2,812,210
$
21,328
1.53
%
Loans held for sale
2,727
73
5.40
%
6,643
99
3.01
%
Loans
Commercial and industrial (1)
1,652,527
56,023
6.84
%
1,536,757
34,527
4.53
%
Commercial real estate (1)
7,788,304
181,394
4.70
%
7,869,164
152,800
3.92
%
Commercial construction
1,089,311
33,679
6.23
%
1,192,013
25,724
4.35
%
Small business
226,479
6,720
5.98
%
199,408
5,072
5.13
%
Total commercial
10,756,621
277,816
5.21
%
10,797,342
218,123
4.07
%
Residential real estate
2,105,311
40,301
3.86
%
1,705,883
28,576
3.38
%
Home equity
1,091,707
33,638
6.21
%
1,039,661
17,840
3.46
%
Total consumer real estate
3,197,018
73,939
4.66
%
2,745,544
46,416
3.41
%
Other consumer
30,940
1,143
7.45
%
30,690
996
6.54
%
Total loans
$
13,984,579
$
352,898
5.09
%
$
13,573,576
$
265,535
3.94
%
Total interest-earning assets
$
17,258,622
$
387,842
4.53
%
$
18,032,693
$
290,665
3.25
%
Cash and due from banks
180,047
181,069
Federal Home Loan Bank stock
29,749
8,814
Other assets
1,835,669
1,853,285
Total assets
$
19,304,087
$
20,075,861
Interest-bearing liabilities
Deposits
Savings and interest checking accounts
$
5,628,535
$
16,898
0.61
%
$
6,224,128
$
1,308
0.04
%
Money market
3,143,355
22,724
1.46
%
3,547,066
1,166
0.07
%
Time deposits
1,462,929
14,962
2.06
%
1,411,275
1,744
0.25
%
Total interest-bearing deposits
$
10,234,819
$
54,584
1.08
%
$
11,182,469
$
4,218
0.08
%
Borrowings
Federal Home Loan Bank borrowings
685,626
16,220
4.77
%
25,675
256
2.01
%
Long-term borrowings
—
—
—
%
4,506
31
1.39
%
Junior subordinated debentures
62,856
2,045
6.56
%
62,854
709
2.27
%
Subordinated debentures
49,909
1,235
4.99
%
49,813
1,235
5.00
%
Total borrowings
$
798,391
$
19,500
4.93
%
$
142,848
$
2,231
3.15
%
Total interest-bearing liabilities
$
11,033,210
$
74,084
1.35
%
$
11,325,317
$
6,449
0.11
%
Noninterest-bearing demand deposits
5,045,694
5,495,036
Other liabilities
355,097
292,023
Total liabilities
$
16,434,001
$
17,112,376
Stockholders' equity
2,870,086
2,963,485
Total liabilities and stockholders'
equity
$
19,304,087
$
20,075,861
Net interest income
$
313,758
$
284,216
Interest rate spread (2)
3.18
%
3.14
%
Net interest margin (3)
3.67
%
3.18
%
Supplemental Information
Total deposits, including demand
deposits
$
15,280,513
$
54,584
$
16,677,505
$
4,218
Cost of total deposits
0.72
%
0.05
%
Total funding liabilities, including
demand deposits
$
16,078,904
$
74,084
$
16,820,353
$
6,449
Cost of total funding liabilities
0.93
%
0.08
%
(1) The total amount of adjustment to
present interest income and yield on a fully tax-equivalent basis
is $2.2 million and $1.9 million for the six months ended June 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:
June 30 2023
March 31 2023
June 30 2022
Tangible common equity
(Dollars in thousands, except per
share data)
Stockholders' equity (GAAP)
$
2,854,914
$
2,830,909
$
2,871,185
(a)
Less: Goodwill and other intangibles
1,006,609
1,008,325
1,013,917
Tangible common equity (Non-GAAP)
$
1,848,305
$
1,822,584
$
1,857,268
(b)
Tangible assets
Assets (GAAP)
$
19,400,931
$
19,442,402
$
19,982,450
(c)
Less: Goodwill and other intangibles
1,006,609
1,008,325
1,013,917
Tangible assets (Non-GAAP)
$
18,394,322
$
18,434,077
$
18,968,533
(d)
Common Shares
44,130,901
44,114,827
46,069,761
(e)
Common equity to assets ratio (GAAP)
14.72
%
14.56
%
14.37
%
(a/c)
Tangible common equity to tangible assets
ratio (Non-GAAP)
10.05
%
9.89
%
9.79
%
(b/d)
Book value per share (GAAP)
$
64.69
$
64.17
$
62.32
(a/e)
Tangible book value per share
(Non-GAAP)
$
41.88
$
41.31
$
40.31
(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
Six Months Ended
June 30 2023
March 31 2023
June 30 2022
June 30 2023
June 30 2022
Net interest income (GAAP)
$
152,546
$
158,998
$
144,861
$
311,544
$
282,293
(a)
Noninterest income (GAAP)
$
30,757
$
28,242
$
27,898
$
58,999
$
54,170
(b)
Noninterest income on an operating basis
(Non-GAAP)
$
30,757
$
28,242
$
27,898
$
58,999
$
54,170
(c)
Noninterest expense (GAAP)
$
95,555
$
98,661
$
90,562
$
194,216
$
186,062
(d)
Less:
Merger and acquisition expense
—
—
—
—
7,100
Noninterest expense on an operating basis
(Non-GAAP)
$
95,555
$
98,661
$
90,562
$
194,216
$
178,962
(e)
Total revenue (GAAP)
$
183,303
$
187,240
$
172,759
$
370,543
$
336,463
(a+b)
Total operating revenue (Non-GAAP)
$
183,303
$
187,240
$
172,759
$
370,543
$
336,463
(a+c)
Net income (GAAP)
$
62,644
$
61,247
$
61,776
$
123,891
$
114,873
Operating net income (Non-GAAP) (See
income statement for reconciliation of GAAP to Non-GAAP)
$
62,644
$
61,247
$
61,776
$
123,891
$
119,978
Average common equity (GAAP)
$
2,863,046
$
2,877,204
$
2,919,506
$
2,870,086
$
2,963,485
Less: Average goodwill and other
intangibles
1,007,500
1,009,340
1,014,953
1,008,415
1,015,991
Tangible average tangible common equity
(Non-GAAP)
$
1,855,546
$
1,867,864
$
1,904,553
$
1,861,671
$
1,947,494
Ratios
Noninterest income as a % of total revenue
(GAAP) (calculated by dividing total noninterest income by total
revenue)
16.78
%
15.08
%
16.15
%
15.92
%
16.10
%
(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)
16.78
%
15.08
%
16.15
%
15.92
%
16.10
%
(c/(a+c))
Efficiency ratio (GAAP) (calculated
by dividing total noninterest expense by total revenue)
52.13
%
52.69
%
52.42
%
52.41
%
55.30
%
(d/(a+b))
Efficiency ratio on an operating basis
(Non-GAAP) (calculated by dividing total noninterest expense on an
operating basis by total revenue)
52.13
%
52.69
%
52.42
%
52.41
%
53.19
%
(e/(a+c))
Return on average tangible common equity
(Non-GAAP) (calculated by dividing annualized net income by average
tangible common equity)
13.54
%
13.30
%
13.01
%
13.42
%
11.89
%
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)
13.54
%
13.30
%
13.01
%
13.42
%
12.42
%
APPENDIX C: Net Interest Margin
Analysis & Non-GAAP Reconciliation of Core
Margin
Three Months Ended
June 30, 2023
March 31, 2023
Volume
Interest
Margin Impact
Volume
Interest
Margin Impact
(Dollars in thousands)
Reported total interest earning assets
$
17,391,676
$
153,667
3.54
%
$
17,124,090
$
160,091
3.79
%
Acquisition fair value marks:
Loan accretion
(862
)
(287
)
CD amortization
11
11
(851
)
(0.02
)%
(276
)
—
%
Nonaccrual interest, net
231
0.01
%
(12
)
—
%
Other noncore adjustments
(6,362
)
(287
)
(0.01
)%
(7,396
)
(361
)
(0.01
)%
Core margin (Non-GAAP)
$
17,385,314
$
152,760
3.52
%
$
17,116,694
$
159,442
3.78
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230719380950/en/
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 Jeffrey Tengel
Independent Bank (NASDAQ:INDB)
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