INDEPENDENT BANK CORP.
INDEPENDENT BANK CORP. REPORTS FOURTH QUARTER NET INCOME OF $1.7 MILLION
2021 Performance demonstrates underlying franchise strength
Rockland, Massachusetts (January 20, 2022) Independent Bank Corp. (Nasdaq Global Select Market: INDB), parent of Rockland Trust Company, today announced 2021 fourth quarter net income of $1.7 million, or $0.04 per diluted share, compared to net income of $40.0 million, or $1.21 per diluted share, reported for the third quarter of 2021. Financial results for the fourth quarter 2021 reflected pre-tax merger-related costs of $37.2 million associated with the acquisition of Meridian Bancorp, Inc. ("Meridian") and its subsidiary, East Boston Savings Bank, which closed during the fourth quarter of 2021. In addition, the current period provision for credit losses included $50.7 million that was attributable to the closing of the Meridian acquisition, offset by a credit reserve release of $15.0 million for the fourth quarter. Excluding merger-related costs and provision for credit losses associated with the acquisition, and their related tax effects, operating net income was $65.7 million, or $1.63 per diluted share, for the fourth quarter of 2021 compared to operating net income of $41.4 million, or $1.25 per diluted share for the third quarter of 2021. Please refer to "Reconciliation of Net Income (GAAP) to Operating Net Income (Non-GAAP)" below for a reconciliation of net income to operating net income.
"2021 was a pivotal year for Rockland Trust as we closed on our acquisition of East Boston Savings Bank, ending the year with over $20.4 billion in assets. We are proud of all we accomplished last year, both financially and strategically, despite the many challenges posed by the ongoing pandemic," said Christopher Oddleifson, the Chief Executive Officer of Independent Bank Corp. and Rockland Trust Company. "Our many achievements were made possible by the tireless dedication of my colleagues who performed above and beyond to achieve our strategic goals while ensuring we exceeded the expectations of our customers, supported our communities, and supported one another as colleagues. Each and every day our commitment to one another, our customers and our communities leads to a shared sense of purpose at the Bank Where Each Relationship Matters® and inspires us to find meaning in the work we do. I extend my sincere thanks to my colleagues, I am proud to serve alongside each of you. We enter 2022 committed to our singular focus on serving and bettering all of our relationships and capitalizing on the opportunities that lay before us."
MERIDIAN BANCORP, INC.
Effective November 12, 2021, the Company completed the acquisition of Meridian, which resulted in the net addition of twenty-seven branch locations in four counties of Massachusetts, including one mobile banking unit. The transaction included the acquisition of approximately $4.9 billion in loans, the assumption of $4.4 billion in deposits, and $576.1 million of borrowings, each at fair value. Total consideration of $1.3 billion consisted of 14,299,720 shares of the Company's common stock issued, as well as $11.2 million in cash paid for stock option cancellations and in lieu of fractional shares.
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The following table provides the purchase price allocation of net assets acquired for this transaction:
| Net Assets Acquired at Fair Value | ||
| (Dollars in thousands) | ||
| Assets | ||
| Cash | $ | 798,470 |
| Investments | 266 | |
| Loans (including loans held for sale) | 4,908,949 | |
| Allowance for credit losses on purchased credit deteriorated ("PCD") loans | (16,540) | |
| Bank premises and equipment | 66,825 | |
| Goodwill | 478,866 | |
| Core deposit and other intangibles | 10,300 | |
| Other assets | 125,543 | |
| Total assets acquired | $ | 6,372,679 |
| Liabilities | ||
| Deposits | $ | 4,440,432 |
| Borrowings | 576,088 | |
| Other liabilities | 46,432 | |
| Total liabilities assumed | $ | 5,062,952 |
| Purchase price | $ | 1,309,727 |
Immediately after the closing, the Company paid off the acquired borrowings of $576.1 million in full.
Please refer to Appendix A for details on acquired loans and deposits along with organic changes for the periods presented.
BALANCE SHEET
Total assets of $20.4 billion at December 31, 2021 increased by $5.9 billion, or 40.5%, from the prior quarter, and by $7.2 billion, or 54.7%, as compared to the year ago period inclusive of the 2021 fourth quarter acquisition of Meridian.
Total loans at December 31, 2021 rose by $4.8 billion, or 54.3%, when compared to the prior quarter which was the net result of the acquired Meridian loan portfolio, partially offset by organic decreases in total loan balances. On an organic basis, commercial loans decreased by $153.5 million compared to the prior quarter, primarily driven by a $207.9 million reduction in Paycheck Protection Program ("PPP") loan balances. Excluding PPP activity, the organic commercial portfolio increased by $54.3 million compared to the prior quarter, or 3.5% annualized, driven by strong commercial real estate closing activity partially offset by ongoing paydowns and payoffs. The consumer real estate portfolio increased by $27.7 million on an organic basis, driven by an increase of $42.9 million, or 3.5% (13.91% annualized), in the residential portfolio, reflecting increased jumbo mortgage originations retained in portfolio, while paydowns and continued low utilization rates led to a decrease in home equity loan balances of $15.2 million, or 1.5% (6.03% annualized), compared to the prior quarter. Inclusive of the Meridian acquisition, total loans increased by $4.2 billion, or 44.7%, when compared to the year ago period.
Deposit balances of $16.9 billion at December 31, 2021 increased by $4.7 billion, or 38.0%, from the prior quarter, reflecting both the addition of Meridian deposits and organic growth in demand deposit and interest savings and checking accounts. Despite the acquisition, the total cost of deposits for the quarter remained consistent at 0.05%. Core deposits comprised 84.5% of total deposits at December 31, 2021, a decline from 92.0% at September 30, 2021, which is reflective of Meridian's higher ratio of noncore-time deposits. Inclusive of the Meridian acquisition, total deposits increased by $5.9 billion, or 53.9%, when compared to the year ago period.
The securities portfolio increased by $346.1 million, or 14.9%, when compared to the prior quarter, reflecting the Company's ongoing strategy to deploy a portion of excess cash balances into investment securities.
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Total purchases for the quarter were $444.6 million, offset by paydowns, calls, and maturities, and total securities now represent 13.0% of total assets as of December 31, 2021.
Total borrowings decreased by $4.7 million, or 3.0% when compared to the prior quarter reflecting repayments of outstanding debt.
Stockholders' equity at December 31, 2021 rose to $3.0 billion, a 71.9% increase when compared to the prior quarter, due primarily to the stock issuance associated with the Meridian acquisition. Book value per share increased by $10.61, or 20.0%, to $63.75 during the fourth quarter as compared to the prior quarter. The Company's ratio of common equity to assets of 14.78% increased by 270 basis points from the prior quarter and by 189 basis points from the year ago period. The Company's tangible book value per share at December 31, 2021 rose by $5.01, or 13.5%, from the prior quarter to $42.25, reflective of the immediate accretive impact of the Meridian acquisition, and representing an increase of 18.7% from the year ago period. The Company's ratio of tangible common equity to tangible assets of 10.31% at December 31, 2021 represents an increase of 152 basis points from the prior quarter and an increase of 105 basis points from the year ago period. Please refer to Appendix B for a detailed reconciliation of Non-GAAP metrics.
In consideration of the Company's strong current capital position, the Company has put in place a stock buyback plan which authorizes repurchases of up to $140 million in common stock and will be in effect through January 18, 2023. The plan was previously approved by the Company's Board of Directors, pending the receipt of non-objection from the Federal Reserve, which was received on January 19, 2022.
NET INTEREST INCOME
Net interest income for the fourth quarter increased 36.0% to $122.5 million compared to $90.1 million for the prior quarter, due to increased average interest-earning assets as a result of the Meridian acquisition as well as an increase in PPP fee recognition of $5.3 million, as $7.5 million was recognized in the fourth quarter compared to $2.2 million for the prior quarter. These factors led to an increase in net interest margin of 27 basis points from the prior quarter to 3.05%. Please refer to Appendix D for additional details regarding the net interest margin.
NONINTEREST INCOME
Noninterest income of $29.2 million for the fourth quarter of 2021 was $2.7 million, or 10.3%, higher than the prior quarter. Significant changes in noninterest income for the fourth quarter compared to the prior quarter included the following:
•Deposit account fees increased by $743,000, or 17.3%, primarily driven by overdraft fees and increased volume attributable to the Meridian acquisition.
•Interchange and ATM fees increased by $317,000, or 9.2%, due primarily to increased volume from both the Meridian acquisition and seasonal spending.
•Investment management income decreased by $216,000, or 2.4% compared to prior quarter due primarily to decreased insurance commissions during the fourth quarter, along with the fact that market appreciation in assets under administration occurred late in the quarter. As of December 31, 2021, total assets under administration reached a record level of $5.7 billion.
•Mortgage banking income decreased by $815,000, or 28.8%, primarily reflecting a larger portion of new originations retained in the Company's portfolio versus being sold in the secondary market as compared to the prior quarter.
•The increase in cash surrender value of life insurance policies rose by $327,000, or 20.5% in the fourth quarter due primarily to policies obtained from the Meridian acquisition, along with annual dividends on policies received during the fourth quarter.
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•Loan level derivative income increased by $1.8 million, to $2.4 million, due primarily to increased customer demand.
•Other noninterest income increased by $571,000, or 12.6%, primarily attributable to increased rental income from equipment leases, capital gain distributions on equity securities, discounted purchases of Massachusetts historical tax credits and income from like-kind exchanges, offset by lower other investment income during the quarter and commercial loan late charges.
NONINTEREST EXPENSE
Noninterest expense of $117.1 million for the fourth quarter of 2021 was $44.7 million, or 61.7% higher than the prior quarter. Significant changes in noninterest expense for the fourth quarter compared to the prior quarter included the following:
•Salaries and employee benefits increased by $5.6 million, or 13.2%, primarily due to the increased workforce base following the Meridian acquisition as well as increases in incentive compensation and commissions, offset partially by decreased pension costs.
•Occupancy and equipment increased by $1.2 million, or 13.5%, primarily attributable to the expanded branch network, real estate and other fixed assets resulting from the Meridian acquisition.
•Data processing increased $202,000, or 12.1%, due primarily to timing of certain initiatives and system upgrades.
•FDIC assessment increased by $195,000, or 19.9%, primarily due to an increased assessment base resulting from the Meridian acquisition.
•Merger and acquisition costs increased to $37.2 million, compared to $1.9 million for the prior quarter and were attributable to the Meridian acquisition. The majority of these costs include change in control contracts, severance, branch closure and conversion costs, contract termination costs and other integration costs.
•Other noninterest expense increased by $2.3 million, or 13.7%, primarily due to increases in consultant fees, advertising, software maintenance, and amortization of Meridian-related core deposit and other intangible assets.
The Company generated a return on average assets and a return on average common equity of 0.04% and 0.28%, respectively, for the fourth quarter of 2021, as compared to 1.11% and 9.04%, respectively, for the prior quarter. On an operating basis, return on average assets and return on average common equity were 1.47% and 10.75%, respectively, for the fourth quarter of 2021 as compared to 1.15% and 9.35%, respectively for the prior quarter.
The Company recorded a tax benefit of $2.8 million for the fourth quarter, which included discrete positive true up adjustments of $975,000 associated with the 2020 tax return filing, as well as adjustments for merger related expenses associated with the closing of the Meridian acquisition.
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ASSET QUALITY
Asset quality metrics improved during the fourth quarter driven primarily by the sale of one large commercial and industrial loan relationship in October 2021, the aggregate balance of which totaled $15.6 million, and resulted in a recovery of $2.5 million. As a result, the Company recorded total net recoveries of $2.4 million, equating to (0.09)% of average loans on an annualized basis. Nonperforming loans, inclusive of approximately $4.5 million from the Meridian acquired portfolios, decreased by 39.3% to $27.8 million, or 0.20% of total loans at December 31, 2021, as compared to $45.8 million, or 0.52% of total loans, at September 30, 2021.
In addition, total loans subject to a payment deferral increased from the prior quarter to $383.1 million, or 2.8% of total loans at December 31, 2021, primarily due to the addition of $194.3 million in COVID-19 related modifications in the acquired Meridian portfolio. The majority of the loans subject to a payment deferral at December 31, 2021 were characterized as current loans. Delinquency as a percentage of total loans increased 13 basis points from the prior quarter, yet remained low at 0.34%. Please refer to Appendix E for additional details regarding loans whose terms have been modified as a result of the COVID-19 pandemic.
The Company recorded a provision for credit losses of $35.7 million during the fourth quarter of 2021, including the net impact of a $50.7 million provision to establish allowance for credit losses for the non-purchased credit deteriorated loans acquired from Meridian, offset by a $15.0 million release of credit reserves reflecting continued improvement in both expected asset quality metrics and overall macro-economic assumptions. The allowance for credit losses on total loans was $146.9 million at December 31, 2021, or 1.08% of total loans, as compared to $92.2 million at September 30, 2021, or 1.05% of total loans. The allowance for credit losses as a percentage of total loans, excluding PPP loans, was 1.10% and 1.09% at December 31, 2021 and September 30, 2021, respectively.
CONFERENCE CALL INFORMATION
Christopher Oddleifson, Chief Executive Officer, Robert Cozzone, Chief Operating Officer, Mark Ruggiero, Chief Financial Officer, and Gerard Nadeau, President and Chief Commercial Banking Officer will host a conference call to discuss fourth quarter earnings at 10:00 a.m. Eastern Time on Friday, January 21, 2022. Internet access to the call is available on the Company's website at www.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: 1508639 and will be available through January 28, 2022. Additionally, a webcast replay will be available until January 21, 2023.
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" 2021 list, an honor earned for the 13th consecutive year. In 2021, Rockland Trust was ranked the #1 Bank in Massachusetts according to Forbes World's Best Banks list for the second year in a row. 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 in eastern Massachusetts, including Greater Boston, North Shore, South Shore, Cape Cod and Islands, 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. To find out why Rockland Trust is the bank "Where Each Relationship Matters®," please visit RocklandTrust.com.
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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, including future weakening caused by the COVID-19 pandemic;
•the length and extent of economic contraction as a result of the COVID-19 pandemic and potential effects of inflationary pressures, labor market shortages and supply chain issues;
•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, including the acquisition of Meridian, 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 LIBOR;
•increased competition in the Company's market areas;
•adverse weather, changes in climate, natural disasters, the emergence of widespread health emergencies or pandemics, including the magnitude and duration of the COVID-19 pandemic, other public health crises or man-made events could negatively affect our local economies or disrupt our operations, which would have an adverse effect on our business or results of operations;
•a deterioration in the conditions of the securities markets;
•a deterioration of the credit rating for U.S. long-term sovereign debt;
•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;
•the Company's potential judgments, claims, damages, penalties, fines and reputational damage resulting from pending or future litigation and regulatory and government actions, including as a result of our participation in and execution of government programs related to the COVID-19 pandemic;
•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 including, but not limited to, changes to how the Company accounts for credit losses;
•cyber security attacks or intrusions that could adversely impact our businesses; and
•other unexpected material adverse changes in our operations or earnings.
Further, the foregoing factors may be exacerbated by the ultimate impact of the COVID-19 pandemic, which is unknown at this time. Statements about the COVID-19 pandemic and its potential impact on the Company's business, financial condition, liquidity and results of operations may constitute forward-looking statements and are subject to the risk that actual results may differ, possibly materially, from what is reflected in such statements due to factors and future developments that are uncertain, unpredictable and, in many cases, beyond the Company's control, including the scope, duration and extent of the pandemic and any further resurgences, the efficacy, availability and public acceptance of vaccines, boosters or other treatments, actions taken
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by governmental authorities in response to the pandemic and the direct and indirect impact of these actions and the pandemic generally on the Company's employees, customers, business and third-parties with which the Company conducts business.
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 contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP"). This information includes operating net income and operating earnings per share ("EPS"), operating return on average assets, operating return on average 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 out-sized cash balances, unique low-yielding loans originated through government programs in response to the pandemic, or significant purchase accounting adjustments. 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). The Company has included information on tangible book value per share and the tangible common equity ratio 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.
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Contacts:
Chris Oddleifson
President and Chief Executive Officer
(781) 982-6660
Mark J. Ruggiero
Chief Financial Officer and
Chief Accounting Officer
(781) 982-6281
Category: Earnings Releases
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| INDEPENDENT BANK CORP. FINANCIAL SUMMARY | ||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||
| (Unaudited, dollars in thousands) | % Change | % Change | ||||||||
|
December 31 2021 |
September 30 2021 |
December 31 2020 | Dec 2021 vs. | Dec 2021 vs. | ||||||
| Sept 2021 | Dec 2020 | |||||||||
| Assets | ||||||||||
| Cash and due from banks | $ | 141,581 | $ | 138,148 | $ | 169,460 | 2.49 | % | (16.45) | % |
| Interest-earning deposits with banks | 2,099,103 | 1,869,683 | 1,127,176 | 12.27 | % | 86.23 | % | |||
| Securities | ||||||||||
| Trading | 3,720 | 3,504 | 2,838 | 6.16 | % | 31.08 | % | |||
| Equities | 23,173 | 22,794 | 22,107 | 1.66 | % | 4.82 | % | |||
| Available for sale | 1,571,148 | 1,427,210 | 412,860 | 10.09 | % | 280.55 | % | |||
| Held to maturity | 1,066,818 | 865,249 | 724,512 | 23.30 | % | 47.25 | % | |||
| Total securities | 2,664,859 | 2,318,757 | 1,162,317 | 14.93 | % | 129.27 | % | |||
| Loans held for sale | 24,679 | 33,553 | 58,104 | (26.45) | % | (57.53) | % | |||
| Loans | ||||||||||
| Commercial and industrial | 1,563,279 | 1,640,709 | 2,103,152 | (4.72) | % | (25.67) | % | |||
| Commercial real estate | 7,992,344 | 4,221,259 | 4,173,927 | 89.34 | % | 91.48 | % | |||
| Commercial construction | 1,165,457 | 515,415 | 553,929 | 126.12 | % | 110.40 | % | |||
| Small business | 193,189 | 184,138 | 175,023 | 4.92 | % | 10.38 | % | |||
| Total commercial | 10,914,269 | 6,561,521 | 7,006,031 | 66.34 | % | 55.78 | % | |||
| Residential real estate | 1,604,686 | 1,222,849 | 1,296,183 | 31.23 | % | 23.80 | % | |||
| Home equity - first position | 589,550 | 592,564 | 633,142 | (0.51) | % | (6.89) | % | |||
| Home equity - subordinate positions | 450,061 | 407,904 | 435,648 | 10.34 | % | 3.31 | % | |||
| Total consumer real estate | 2,644,297 | 2,223,317 | 2,364,973 | 18.93 | % | 11.81 | % | |||
| Other consumer | 28,720 | 23,175 | 21,862 | 23.93 | % | 31.37 | % | |||
| Total loans | 13,587,286 | 8,808,013 | 9,392,866 | 54.26 | % | 44.66 | % | |||
| Less: allowance for credit losses | (146,922) | (92,246) | (113,392) | 59.27 | % | 29.57 | % | |||
| Net loans | 13,440,364 | 8,715,767 | 9,279,474 | 54.21 | % | 44.84 | % | |||
| Federal Home Loan Bank stock | 11,407 | 8,666 | 10,250 | 31.63 | % | 11.29 | % | |||
| Bank premises and equipment, net | 195,590 | 123,528 | 116,393 | 58.34 | % | 68.04 | % | |||
| Goodwill | 985,072 | 506,206 | 506,206 | 94.60 | % | 94.60 | % | |||
| Other intangible assets | 32,772 | 19,055 | 23,107 | 71.99 | % | 41.83 | % | |||
| Cash surrender value of life insurance policies | 289,304 | 244,573 | 200,525 | 18.29 | % | 44.27 | % | |||
| Other assets | 538,674 | 555,375 | 551,289 | (3.01) | % | (2.29) | % | |||
| Total assets | $ | 20,423,405 | $ | 14,533,311 | $ | 13,204,301 | 40.53 | % | 54.67 | % |
| Liabilities and Stockholders' Equity | ||||||||||
| Deposits | ||||||||||
| Noninterest-bearing demand deposits | $ | 5,479,503 | $ | 4,590,492 | $ | 3,762,306 | 19.37 | % | 45.64 | % |
| Savings and interest checking accounts | 6,350,016 | 4,484,208 | 4,047,332 | 41.61 | % | 56.89 | % | |||
| Money market | 3,556,375 | 2,399,878 | 2,232,903 | 48.19 | % | 59.27 | % | |||
| Time certificates of deposit | 1,531,150 | 785,562 | 950,629 | 94.91 | % | 61.07 | % | |||
| Total deposits | 16,917,044 | 12,260,140 | 10,993,170 | 37.98 | % | 53.89 | % | |||
| Borrowings | ||||||||||
| Federal Home Loan Bank borrowings | 25,667 | 25,675 | 35,740 | (0.03) | % | (28.18) | % | |||
| Long-term borrowings, net | 14,063 | 18,750 | 32,773 | (25.00) | % | (57.09) | % | |||
| Junior subordinated debentures, net | 62,853 | 62,853 | 62,851 | - | % | - | % | |||
| Subordinated debentures, net | 49,791 | 49,767 | 49,696 | 0.05 | % | 0.19 | % | |||
| Total borrowings | 152,374 | 157,045 | 181,060 | (2.97) | % | (15.84) | % | |||
| Total deposits and borrowings | 17,069,418 | 12,417,185 | 11,174,230 | 37.47 | % | 52.76 | % | |||
| Other liabilities | 335,538 | 360,172 | 327,386 | (6.84) | % | 2.49 | % | |||
| Total liabilities | 17,404,956 | 12,777,357 | 11,501,616 | 36.22 | % | 51.33 | % | |||
| Stockholders' equity | ||||||||||
| Common stock | 472 | 329 | 328 | 43.47 | % | 43.90 | % |
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| Additional paid in capital | 2,249,078 | 949,316 | 945,638 | 136.92 | % | 137.84 | % | |||
| Retained earnings | 766,716 | 787,742 | 716,024 | (2.67) | % | 7.08 | % | |||
| Accumulated other comprehensive income, net of tax | 2,183 | 18,567 | 40,695 | (88.24) | % | (94.64) | % | |||
| Total stockholders' equity | 3,018,449 | 1,755,954 | 1,702,685 | 71.90 | % | 77.28 | % | |||
| Total liabilities and stockholders' equity | $ | 20,423,405 | $ | 14,533,311 | $ | 13,204,301 | 40.53 | % | 54.67 | % |
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||
| (Unaudited, dollars in thousands, except per share data) | ||||||||||
| Three Months Ended | ||||||||||
| % Change | % Change | |||||||||
|
December 31 2021 |
September 30 2021 |
December 31 2020 | Dec 2021 vs. | Dec 2021 vs. | ||||||
| Sept 2021 | Dec 2020 | |||||||||
| Interest income | ||||||||||
| Interest on federal funds sold and short-term investments | $ | 840 | $ | 815 | $ | 301 | 3.07 | % | 179.07 | % |
| Interest and dividends on securities | 8,876 | 7,796 | 7,135 | 13.85 | % | 24.40 | % | |||
| Interest and fees on loans | 116,024 | 84,212 | 89,068 | 37.78 | % | 30.26 | % | |||
| Interest on loans held for sale | 181 | 193 | 301 | (6.22) | % | (39.87) | % | |||
| Total interest income | 125,921 | 93,016 | 96,805 | 35.38 | % | 30.08 | % | |||
| Interest expense | ||||||||||
| Interest on deposits | 1,966 | 1,633 | 3,982 | 20.39 | % | (50.63) | % | |||
| Interest on borrowings | 1,425 | 1,292 | 1,380 | 10.29 | % | 3.26 | % | |||
| Total interest expense | 3,391 | 2,925 | 5,362 | 15.93 | % | (36.76) | % | |||
| Net interest income | 122,530 | 90,091 | 91,443 | 36.01 | % | 34.00 | % | |||
| Provision for credit losses | 35,705 | (10,000) | - | (457.05) | % | 100.00% | ||||
| Net interest income after provision for credit losses | 86,825 | 100,091 | 91,443 | (13.25) | % | (5.05) | % | |||
| Noninterest income | ||||||||||
| Deposit account fees | 5,041 | 4,298 | 3,894 | 17.29 | % | 29.46 | % | |||
| Interchange and ATM fees | 3,758 | 3,441 | 2,680 | 9.21 | % | 40.22 | % | |||
| Investment management | 8,958 | 9,174 | 7,736 | (2.35) | % | 15.80 | % | |||
| Mortgage banking income | 2,010 | 2,825 | 5,378 | (28.85) | % | (62.63) | % | |||
| Increase in cash surrender value of life insurance policies | 1,923 | 1,596 | 1,460 | 20.49 | % | 31.71 | % | |||
| Gain on life insurance benefits | - | - | 352 | n/a | (100.00) | % | ||||
| Loan level derivative income | 2,382 | 586 | 1,140 | 306.48 | % | 108.95 | % | |||
| Other noninterest income | 5,108 | 4,537 | 4,828 | 12.59 | % | 5.80 | % | |||
| Total noninterest income | 29,180 | 26,457 | 27,468 | 10.29 | % | 6.23 | % | |||
| Noninterest expenses | ||||||||||
| Salaries and employee benefits | 47,827 | 42,235 | 39,433 | 13.24 | % | 21.29 | % | |||
| Occupancy and equipment expenses | 9,722 | 8,564 | 9,187 | 13.52 | % | 5.82 | % | |||
| Data processing and facilities management | 1,875 | 1,673 | 1,581 | 12.07 | % | 18.60 | % | |||
| FDIC assessment | 1,175 | 980 | 985 | 19.90 | % | 19.29 | % | |||
| Merger and acquisition expense | 37,166 | 1,943 | - | 1,812.82 | % | 100.00% | ||||
| Lease impairment | - | - | 4,163 | n/a | (100.00) | % | ||||
| Loss on sale of other equity investments | - | - | 1,033 | n/a | (100.00) | % | ||||
| Other noninterest expenses | 19,361 | 17,024 | 17,345 | 13.73 | % | 11.62 | % | |||
| Total noninterest expenses | 117,126 | 72,419 | 73,727 | 61.73 | % | 58.86 | % | |||
| Income (loss) before income taxes | (1,121) | 54,129 | 45,184 | (102.07) | % | (102.48) | % | |||
| Provision (benefit) for income taxes | (2,823) | 14,122 | 10,543 | (119.99) | % | (126.78) | % | |||
| Net Income | $ | 1,702 | $ | 40,007 | $ | 34,641 | (95.75) | % | (95.09) | % |
| Weighted average common shares (basic) | 40,354,728 | 33,043,716 | 32,964,090 | |||||||
| Common share equivalents | 20,438 | 15,554 | 26,348 | |||||||
| Weighted average common shares (diluted) | 40,375,166 | 33,059,270 | 32,990,438 | |||||||
| Basic earnings per share | $ | 0.04 | $ | 1.21 | $ | 1.05 | (96.69) | % | (96.19) | % |
10
| Diluted earnings per share | $ | 0.04 | $ | 1.21 | $ | 1.05 | (96.69) | % | (96.19) | % |
| Reconciliation of Net Income (GAAP) to Operating Net Income (Non-GAAP): | ||||||||||
| Net income | $ | 1,702 | $ | 40,007 | $ | 34,641 | ||||
| Provision for non-PCD acquired loans | 50,705 | - | - | |||||||
| Noninterest expense components | ||||||||||
| Add - merger and acquisition expenses | 37,166 | 1,943 | - | |||||||
| Noncore increases to income before taxes | 87,871 | 1,943 | - | |||||||
| Net tax benefit associated with noncore items (1) | (23,866) | (546) | - | |||||||
| Noncore increases to net income | 64,005 | 1,397 | - | |||||||
| Operating net income (Non-GAAP) | $ | 65,707 | $ | 41,404 | $ | 34,641 | 58.70 | % | 89.68 | % |
| Diluted earnings per share, on an operating basis | $ | 1.63 | $ | 1.25 | $ | 1.05 | 30.40 | % | 55.24 | % |
| (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) | 3.05 | % | 2.78 | % | 3.10 | % | ||||
| Return on average assets (GAAP) (calculated by dividing net income by average assets) | 0.04 | % | 1.11 | % | 1.04 | % | ||||
| Return on average assets on an operating basis (Non-GAAP) (calculated by dividing net operating net income by average assets) | 1.47 | % | 1.15 | % | 1.04 | % | ||||
| Return on average common equity (GAAP) (calculated by dividing net income by average common equity) | 0.28 | % | 9.04 | % | 8.10 | % | ||||
| Return on average common equity on an operating basis (Non-GAAP) (calculated by dividing net operating net income by average common equity) | 10.75 | % | 9.35 | % | 8.10 | % |
| CONSOLIDATED STATEMENTS OF INCOME | ||||||
| (Unaudited, dollars in thousands, except per share data) | ||||||
| Years Ended | ||||||
| % Change | ||||||
|
December 31 2021 |
December 31 2020 | Dec 2021 vs. | ||||
| Dec 2020 | ||||||
| Interest income | ||||||
| Interest on federal funds sold and short-term investments | $ | 2,494 | $ | 847 | 194.45 | % |
| Interest and dividends on securities | 30,493 | 30,168 | 1.08 | % | ||
| Interest and fees on loans | 381,433 | 369,836 | 3.14 | % | ||
| Interest on loans held for sale | 856 | 1,218 | (29.72) | % | ||
| Total interest income | 415,276 | 402,069 | 3.28 | % | ||
| Interest expense | ||||||
| Interest on deposits | 8,327 | 27,333 | (69.53) | % | ||
| Interest on borrowings | 5,390 | 7,008 | (23.09) | % | ||
| Total interest expense | 13,717 | 34,341 | (60.06) | % | ||
| Net interest income | 401,559 | 367,728 | 9.20 | % | ||
| Provision for credit losses | 18,205 | 52,500 | (65.32) | % | ||
| Net interest income after provision for credit losses | 383,354 | 315,228 | 21.61 | % | ||
| Noninterest income | ||||||
| Deposit account fees | 16,745 | 15,121 | 10.74 | % | ||
| Interchange and ATM fees | 12,987 | 15,834 | (17.98) | % | ||
| Investment management | 35,308 | 29,432 | 19.96 | % | ||
| Mortgage banking income | 13,280 | 18,948 | (29.91) | % | ||
| Increase in cash surrender value of life insurance policies | 6,431 | 5,362 | 19.94 | % | ||
| Gain on life insurance benefits | 258 | 1,044 | (75.29) | % | ||
| Loan level derivative income | 3,257 | 10,058 | (67.62) | % | ||
| Other noninterest income | 17,584 | 15,641 | 12.42 | % |
11
| Total noninterest income | 105,850 | 111,440 | (5.02) | % | ||
| Noninterest expenses | ||||||
| Salaries and employee benefits | 172,586 | 152,460 | 13.20 | % | ||
| Occupancy and equipment expenses | 36,265 | 37,050 | (2.12) | % | ||
| Data processing and facilities management | 6,899 | 6,265 | 10.12 | % | ||
| FDIC assessment | 3,980 | 2,522 | 57.81 | % | ||
| Lease impairment | - | 4,163 | (100.00) | % | ||
| Loss on sale of other equity investments | - | 1,033 | (100.00) | % | ||
| Loss on termination of derivatives | - | 684 | (100.00) | % | ||
| Merger and acquisition expense | 40,840 | - | 100.00% | |||
| Other noninterest expenses | 71,959 | 69,655 | 3.31 | % | ||
| Total noninterest expenses | 332,529 | 273,832 | 21.44 | % | ||
| Income before income taxes | 156,675 | 152,836 | 2.51 | % | ||
| Provision for income taxes | 35,683 | 31,669 | 12.67 | % | ||
| Net Income | $ | 120,992 | $ | 121,167 | (0.14) | % |
| Weighted average common shares (basic) | 34,872,034 | 33,259,643 | ||||
| Common share equivalents | 16,484 | 25,646 | ||||
| Weighted average common shares (diluted) | 34,888,518 | 33,285,289 | ||||
| Basic earnings per share | $ | 3.47 | $ | 3.64 | (4.67) | % |
| Diluted earnings per share | $ | 3.47 | $ | 3.64 | (4.67) | % |
| Reconciliation of Net Income (GAAP) to Operating Net Income (Non-GAAP): | ||||||
| Net Income | $ | 120,992 | $ | 121,167 | ||
| Provision for non-PCD acquired loans | 50,705 | - | ||||
| Noninterest expense components | ||||||
| Add - loss on termination of derivatives | - | 684 | ||||
| Add - merger and acquisition expenses | 40,840 | - | ||||
| Noncore increases to income before taxes | 91,545 | 684 | ||||
| Net tax benefit associated with noncore items (1) | (24,899) | (192) | ||||
| Noncore increases to net income | $ | 66,646 | $ | 492 | ||
| Operating net income (Non-GAAP) | $ | 187,638 | $ | 121,659 | 54.23 | % |
| Diluted earnings per share, on an operating basis | $ | 5.38 | $ | 3.66 | 46.99 | % |
| (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) | 3.02 | % | 3.29 | % | ||
| Return on average assets (GAAP) (calculated by dividing net income by average assets) | 0.81 | % | 0.96 | % | ||
| Return on average assets on an operating basis (Non-GAAP) (calculated by dividing net operating net income by average assets) | 1.26 | % | 0.97 | % | ||
| Return on average common equity (GAAP) (calculated by dividing net income by average common equity) | 6.34 | % | 7.13 | % | ||
| Return on average common equity on an operating basis (Non-GAAP) (calculated by dividing net operating net income by average common equity) | 9.83 | % | 7.16 | % |
12
| ASSET QUALITY | ||||||
| (Unaudited, dollars in thousands) | Nonperforming Assets At | |||||
|
December 31 2021 |
September 30 2021 |
December 31 2020 | ||||
| Nonperforming loans | ||||||
| Commercial & industrial loans | $ | 3,439 | $ | 19,275 | $ | 34,729 |
| Commercial real estate loans | 10,870 | 11,788 | 10,195 | |||
| Small business loans | 44 | 46 | 825 | |||
| Residential real estate loans | 9,182 | 10,872 | 15,528 | |||
| Home equity | 3,781 | 3,746 | 5,427 | |||
| Other consumer | 504 | 83 | 157 | |||
| Total nonperforming loans | 27,820 | 45,810 | 66,861 | |||
| Total nonperforming assets | $ | 27,820 | $ | 45,810 | $ | 66,861 |
| Nonperforming loans/gross loans | 0.20 | % | 0.52 | % | 0.71 | % |
| Nonperforming assets/total assets | 0.14 | % | 0.32 | % | 0.51 | % |
| Allowance for credit losses/nonperforming loans | 528.12 | % | 201.37 | % | 169.59 | % |
| Allowance for credit losses/total loans | 1.08 | % | 1.05 | % | 1.21 | % |
| Delinquent loans/total loans | 0.34 | % | 0.21 | % | 0.23 | % |
| Nonperforming Assets Reconciliation for the Three Months Ended | ||||||
|
December 31 2021 |
September 30 2021 |
December 31 2020 | ||||
| Nonperforming assets beginning balance | $ | 45,810 | $ | 47,818 | $ | 98,025 |
| New to nonperforming | 3,875 | 4,613 | 22,052 | |||
| Acquired loans | 4,463 | - | - | |||
| Loans charged-off | (445) | (332) | (2,698) | |||
| Loans paid-off /sold | (21,162) | (3,488) | (45,327) | |||
| Loans restored to performing status | (4,925) | (2,813) | (5,373) | |||
| Other | 204 | 12 | 182 | |||
| Nonperforming assets ending balance | $ | 27,820 | $ | 45,810 | $ | 66,861 |
13
| Net Charge-Offs (Recoveries) | ||||||||||
| Three Months Ended | Years Ended | |||||||||
|
December 31 2021 |
September 30 2021 |
December 31 2020 |
December 31 2021 |
December 31 2020 | ||||||
| Net charge-offs (recoveries) | ||||||||||
| Commercial and industrial loans | $ | (2,586) | $ | - | $ | 1,882 | $ | 788 | $ | 2,020 |
| Commercial real estate loans | - | - | - | (57) | 3,876 | |||||
| Small business loans | 2 | 33 | 161 | 121 | 347 | |||||
| Residential real estate loans | - | - | 105 | (1) | 103 | |||||
| Home equity | (142) | (49) | (36) | (180) | (68) | |||||
| Other consumer | 295 | 127 | 121 | 544 | 590 | |||||
| Total net (recoveries) charge-offs | $ | (2,431) | $ | 111 | $ | 2,233 | $ | 1,215 | $ | 6,868 |
| Net (recoveries) charge-offs to average loans (annualized) | (0.09) | % | 0.00 | % | 0.09 | % | 0.01 | % | 0.07 | % |
| Troubled Debt Restructurings At | ||||||
|
December 31 2021 |
September 30 2021 |
December 31 2020 | ||||
| Troubled debt restructurings on accrual status | $ | 14,635 | $ | 15,950 | $ | 16,983 |
| Troubled debt restructurings on nonaccrual status | 1,993 | 21,104 | 22,209 | |||
| Total troubled debt restructurings | $ | 16,628 | $ | 37,054 | $ | 39,192 |
| BALANCE SHEET AND CAPITAL RATIOS | ||||||
|
December 31 2021 |
September 30 2021 |
December 31 2020 | ||||
| Gross loans/total deposits | 80.32 | % | 71.84 | % | 85.44 | % |
| Common equity tier 1 capital ratio (1) | 14.22 | % | 13.53 | % | 12.67 | % |
| Tier 1 leverage capital ratio (1) | 12.38 | % | 9.36 | % | 9.56 | % |
| Common equity to assets ratio GAAP | 14.78 | % | 12.08 | % | 12.89 | % |
| Tangible common equity to tangible assets ratio (2) | 10.31 | % | 8.79 | % | 9.26 | % |
| Book value per share GAAP | $ | 63.75 | $ | 53.14 | $ | 51.65 |
| Tangible book value per share (2) | $ | 42.25 | $ | 37.24 | $ | 35.59 |
(1) Estimated number for December 31, 2021.
(2) See Appendix A for detailed reconciliation from GAAP to Non-GAAP ratios.
14
| INDEPENDENT BANK CORP. SUPPLEMENTAL FINANCIAL INFORMATION | ||||||||||||||||||
| (Unaudited, dollars in thousands) | Three Months Ended | |||||||||||||||||
| December 31, 2021 | September 30, 2021 | December 31, 2020 | ||||||||||||||||
| 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 | $ | 2,107,325 | $ | 840 | 0.16 | % | $ | 2,135,031 | $ | 815 | 0.15 | % | $ | 1,190,965 | $ | 301 | 0.10 | % |
| Securities | ||||||||||||||||||
| Securities - trading | 3,572 | - | - | % | 3,498 | - | - | % | 2,660 | - | - | % | ||||||
| Securities - taxable investments | 2,520,248 | 8,874 | 1.40 | % | 1,880,863 | 7,792 | 1.64 | % | 1,122,055 | 7,127 | 2.53 | % | ||||||
| Securities - nontaxable investments (1) | 216 | 3 | 5.51 | % | 468 | 5 | 4.24 | % | 1,041 | 10 | 3.82 | % | ||||||
| Total securities | $ | 2,524,036 | $ | 8,877 | 1.40 | % | $ | 1,884,829 | $ | 7,797 | 1.64 | % | $ | 1,125,756 | $ | 7,137 | 2.52 | % |
| Loans held for sale | 28,428 | 181 | 2.53 | % | 30,143 | 193 | 2.54 | % | 48,604 | 301 | 2.46 | % | ||||||
| Loans | ||||||||||||||||||
| Commercial and industrial (1) | 1,603,776 | 21,046 | 5.21 | % | 1,640,422 | 15,309 | 3.70 | % | 2,080,045 | 18,308 | 3.50 | % | ||||||
| Commercial real estate (1) | 6,207,248 | 62,531 | 4.00 | % | 4,232,575 | 41,469 | 3.89 | % | 4,130,945 | 41,213 | 3.97 | % | ||||||
| Commercial construction | 884,243 | 9,720 | 4.36 | % | 507,393 | 4,916 | 3.84 | % | 582,900 | 5,609 | 3.83 | % | ||||||
| Small business | 186,939 | 2,352 | 4.99 | % | 181,953 | 2,341 | 5.10 | % | 169,645 | 2,276 | 5.34 | % | ||||||
| Total commercial | 8,882,206 | 95,649 | 4.27 | % | 6,562,343 | 64,035 | 3.87 | % | 6,963,535 | 67,406 | 3.85 | % | ||||||
| Residential real estate | 1,415,488 | 11,830 | 3.32 | % | 1,231,606 | 10,955 | 3.53 | % | 1,322,016 | 12,020 | 3.62 | % | ||||||
| Home equity | 1,021,354 | 8,769 | 3.41 | % | 1,007,371 | 9,043 | 3.56 | % | 1,086,781 | 9,379 | 3.43 | % | ||||||
| Total consumer real estate | 2,436,842 | 20,599 | 3.35 | % | 2,238,977 | 19,998 | 3.54 | % | 2,408,797 | 21,399 | 3.53 | % | ||||||
| Other consumer | 25,378 | 427 | 6.68 | % | 25,929 | 398 | 6.09 | % | 23,860 | 468 | 7.80 | % | ||||||
| Total loans | $ | 11,344,426 | $ | 116,675 | 4.08 | % | $ | 8,827,249 | $ | 84,431 | 3.79 | % | $ | 9,396,192 | $ | 89,273 | 3.78 | % |
| Total interest-earning assets | $ | 16,004,215 | $ | 126,573 | 3.14 | % | $ | 12,877,252 | $ | 93,236 | 2.87 | % | $ | 11,761,517 | $ | 97,012 | 3.28 | % |
| Cash and due from banks | 168,907 | 144,556 | 136,602 | |||||||||||||||
| Federal Home Loan Bank stock | 12,557 | 8,904 | 10,475 | |||||||||||||||
| Other assets | 1,569,995 | 1,268,199 | 1,284,948 | |||||||||||||||
| Total assets | $ | 17,755,674 | $ | 14,298,911 | $ | 13,193,542 | ||||||||||||
| Interest-bearing liabilities | ||||||||||||||||||
| Deposits | ||||||||||||||||||
| Savings and interest checking accounts | $ | 5,471,560 | $ | 465 | 0.03 | % | $ | 4,426,106 | $ | 338 | 0.03 | % | $ | 3,975,140 | $ | 540 | 0.05 | % |
| Money market | 3,049,300 | 537 | 0.07 | % | 2,375,492 | 443 | 0.07 | % | 2,232,007 | 671 | 0.12 | % | ||||||
| Time deposits | 1,196,889 | 964 | 0.32 | % | 795,943 | 852 | 0.42 | % | 1,014,388 | 2,771 | 1.09 | % | ||||||
| Total interest-bearing deposits | $ | 9,717,749 | $ | 1,966 | 0.08 | % | $ | 7,597,541 | $ | 1,633 | 0.09 | % | $ | 7,221,535 | $ | 3,982 | 0.22 | % |
| Borrowings | ||||||||||||||||||
| Federal Home Loan Bank borrowings | 63,428 | 353 | 2.21 | % | 31,118 | 165 | 2.10 | % | 36,297 | 195 | 2.14 | % | ||||||
| Long-term borrowings | 14,063 | 49 | 1.38 | % | 18,742 | 77 | 1.63 | % | 32,765 | 131 | 1.59 | % | ||||||
| Junior subordinated debentures | 62,853 | 405 | 2.56 | % | 62,852 | 432 | 2.73 | % | 62,850 | 436 | 2.76 | % | ||||||
| Subordinated debentures | 49,776 | 618 | 4.93 | % | 49,753 | 617 | 4.92 | % | 49,683 | 618 | 4.95 | % | ||||||
| Total borrowings | $ | 190,120 | $ | 1,425 | 2.97 | % | $ | 162,465 | $ | 1,291 | 3.15 | % | $ | 181,595 | $ | 1,380 | 3.02 | % |
| Total interest-bearing liabilities | $ | 9,907,869 | $ | 3,391 | 0.14 | % | $ | 7,760,006 | $ | 2,924 | 0.15 | % | $ | 7,403,130 | $ | 5,362 | 0.29 | % |
| Noninterest-bearing demand deposits | 5,124,859 | 4,502,045 | 3,770,580 | |||||||||||||||
| Other liabilities | 298,557 | 280,754 | 318,981 | |||||||||||||||
| Total liabilities | $ | 15,331,285 | $ | 12,542,805 | $ | 11,492,691 | ||||||||||||
| Stockholders' equity | 2,424,389 | 1,756,106 | 1,700,851 |
15
| Total liabilities and stockholders' equity | $ | 17,755,674 | $ | 14,298,911 | $ | 13,193,542 | ||||||
| Net interest income | $ | 123,182 | $ | 90,312 | $ | 91,650 | ||||||
| Interest rate spread (2) | 3.00 | % | 2.72 | % | 2.99 | % | ||||||
| Net interest margin (3) | 3.05 | % | 2.78 | % | 3.10 | % | ||||||
| Supplemental Information | ||||||||||||
| Total deposits, including demand deposits | $ | 14,842,608 | $ | 1,966 | $ | 12,099,586 | $ | 1,633 | $ | 10,992,115 | $ | 3,982 |
| Cost of total deposits | 0.05 | % | 0.05 | % | 0.14 | % | ||||||
| Total funding liabilities, including demand deposits | $ | 15,032,728 | $ | 3,391 | $ | 12,262,051 | $ | 2,924 | $ | 11,173,710 | $ | 5,362 |
| Cost of total funding liabilities | 0.09 | % | 0.09 | % | 0.19 | % |
(1) The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $652,000, $220,000, and $207,000 for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020, 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.
16
| Years Ended | ||||||||||||
| December 31, 2021 | December 31, 2020 | |||||||||||
| 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 | $ | 1,864,346 | $ | 2,494 | 0.13 | % | $ | 748,419 | $ | 847 | 0.11 | % |
| Securities | ||||||||||||
| Securities - trading | 3,344 | - | - | % | 2,481 | - | - | % | ||||
| Securities - taxable investments | 1,795,199 | 30,477 | 1.70 | % | 1,164,439 | 30,133 | 2.59 | % | ||||
| Securities - nontaxable investments (1) | 469 | 20 | 4.26 | % | 1,142 | 44 | 3.85 | % | ||||
| Total securities | $ | 1,799,012 | $ | 30,497 | 1.70 | % | $ | 1,168,062 | $ | 30,177 | 2.58 | % |
| Loans held for sale | 34,056 | 856 | 2.51 | % | 44,521 | 1,218 | 2.74 | % | ||||
| Loans | ||||||||||||
| Commercial and industrial (1) | 1,823,914 | 79,752 | 4.37 | % | 1,858,951 | 70,335 | 3.78 | % | ||||
| Commercial real estate (1) | 4,702,346 | 185,908 | 3.95 | % | 4,070,462 | 171,013 | 4.20 | % | ||||
| Commercial construction | 616,037 | 24,696 | 4.01 | % | 561,431 | 22,950 | 4.09 | % | ||||
| Small business | 180,473 | 9,276 | 5.14 | % | 171,839 | 9,529 | 5.55 | % | ||||
| Total commercial | 7,322,770 | 299,632 | 4.09 | % | 6,662,683 | 273,827 | 4.11 | % | ||||
| Residential real estate | 1,286,470 | 46,279 | 3.60 | % | 1,435,655 | 53,876 | 3.75 | % | ||||
| Home equity | 1,025,809 | 35,160 | 3.43 | % | 1,116,005 | 40,996 | 3.67 | % | ||||
| Total consumer real estate | 2,312,279 | 81,439 | 3.52 | % | 2,551,660 | 94,872 | 3.72 | % | ||||
| Other consumer | 23,885 | 1,668 | 6.98 | % | 25,195 | 2,055 | 8.16 | % | ||||
| Total loans | $ | 9,658,934 | $ | 382,739 | 3.96 | % | $ | 9,239,538 | $ | 370,754 | 4.01 | % |
| Total interest-earning assets | $ | 13,356,348 | $ | 416,586 | 3.12 | % | $ | 11,200,540 | $ | 402,996 | 3.60 | % |
| Cash and due from banks | 152,723 | 125,896 | ||||||||||
| Federal Home Loan Bank stock | 10,283 | 15,843 | ||||||||||
| Other assets | 1,335,193 | 1,263,332 | ||||||||||
| Total assets | $ | 14,854,547 | $ | 12,605,611 | ||||||||
| Interest-bearing liabilities | ||||||||||||
| Deposits | ||||||||||||
| Savings and interest checking accounts | $ | 4,590,055 | $ | 1,610 | 0.04 | % | $ | 3,688,360 | $ | 4,413 | 0.12 | % |
| Money market | 2,516,871 | 1,930 | 0.08 | % | 2,041,853 | 6,166 | 0.30 | % | ||||
| Time deposits | 936,046 | 4,787 | 0.51 | % | 1,155,399 | 16,754 | 1.45 | % | ||||
| Total interest-bearing deposits | $ | 8,042,972 | $ | 8,327 | 0.10 | % | $ | 6,885,612 | $ | 27,333 | 0.40 | % |
| Borrowings | ||||||||||||
| Federal Home Loan Bank borrowings | 41,556 | 897 | 2.16 | % | 162,776 | 1,564 | 0.96 | % | ||||
| Long-term borrowings | 21,072 | 331 | 1.57 | % | 54,082 | 1,176 | 2.17 | % | ||||
| Junior subordinated debentures | 62,852 | 1,692 | 2.69 | % | 62,850 | 1,798 | 2.86 | % | ||||
| Subordinated debentures | 49,741 | 2,470 | 4.97 | % | 49,647 | 2,470 | 4.98 | % | ||||
| Total borrowings | $ | 175,221 | $ | 5,390 | 3.08 | % | $ | 329,355 | $ | 7,008 | 2.13 | % |
| Total interest-bearing liabilities | $ | 8,218,193 | $ | 13,717 | 0.17 | % | $ | 7,214,967 | $ | 34,341 | 0.48 | % |
| Noninterest-bearing demand deposits | 4,443,410 | 3,386,140 | ||||||||||
| Other liabilities | 284,679 | 304,957 | ||||||||||
| Total liabilities | $ | 12,946,282 | $ | 10,906,064 | ||||||||
| Stockholders' equity | 1,908,265 | 1,699,547 |
17
| Total liabilities and stockholders' equity | $ | 14,854,547 | $ | 12,605,611 | ||||
| Net interest income | $ | 402,869 | $ | 368,655 | ||||
| Interest rate spread (2) | 2.95 | % | 3.12 | % | ||||
| Net interest margin (3) | 3.02 | % | 3.29 | % | ||||
| Supplemental Information | ||||||||
| Total deposits, including demand deposits | $ | 12,486,382 | $ | 8,327 | $ | 10,271,752 | $ | 27,333 |
| Cost of total deposits | 0.07 | % | 0.27 | % | ||||
| Total funding liabilities, including demand deposits | $ | 12,661,603 | $ | 13,717 | $ | 10,601,107 | $ | 34,341 |
| Cost of total funding liabilities | 0.11 | % | 0.32 | % |
(1) The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $1.3 million and $927,000 for the years ended December 31, 2021 and 2020, 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: Organic Loan and Deposit Growth |
| (Unaudited, dollars in thousands) |
| Linked Quarter | ||||||||||
|
December 31 2021 |
September 30 2021 | Meridian Balances Acquired | Organic Growth/(Decline) | Organic Growth/(Decline)% | ||||||
| Loans | ||||||||||
| Commercial and industrial (1) | $ | 1,563,279 | $ | 1,640,709 | $ | 110,359 | $ | (187,789) | (11.45) | % |
| Commercial real estate | 7,992,344 | 4,221,259 | 3,702,407 | $ | 68,678 | 1.63 | % | |||
| Commercial construction | 1,165,457 | 515,415 | 691,978 | $ | (41,936) | (8.14) | % | |||
| Small business | 193,189 | 184,138 | 1,552 | $ | 7,499 | 4.07 | % | |||
| Total commercial | 10,914,269 | 6,561,521 | 4,506,296 | $ | (153,548) | (2.34) | % | |||
| Residential real estate | 1,604,686 | 1,222,849 | 338,959 | $ | 42,878 | 3.51 | % | |||
| Home equity | 1,039,611 | 1,000,468 | 54,355 | $ | (15,212) | (1.52) | % | |||
| Total consumer real estate | 2,644,297 | 2,223,317 | 393,314 | $ | 27,666 | 1.24 | % | |||
| Total other consumer | 28,720 | 23,175 | 9,339 | $ | (3,794) | (16.37) | % | |||
| Total loans | $ | 13,587,286 | $ | 8,808,013 | $ | 4,908,949 | $ | (129,676) | (1.47) | % |
| Deposits | ||||||||||
| Noninterest-bearing demand deposits | $ | 5,479,503 | $ | 4,590,492 | $ | 819,792 | $ | 69,219 | 1.51 | % |
| Savings and interest checking accounts | 6,350,016 | 4,484,208 | 1,647,600 | $ | 218,208 | 4.87 | % | |||
| Money market | 3,556,375 | 2,399,878 | 1,156,563 | $ | (66) | - | % | |||
| Time certificates of deposit | 1,531,150 | 785,562 | 816,477 | $ | (70,889) | (9.02) | % | |||
| Total deposits | $ | 16,917,044 | $ | 12,260,140 | $ | 4,440,432 | $ | 216,472 | 1.77 | % |
(1)Organic loan growth/(decline) within commercial and industrial in the table above includes a decrease in PPP loan balances of $207.9 million.
18
| Year-over-Year | ||||||||||
|
December 31 2021 |
December 31 2020 | Meridian Balances Acquired | Organic Growth/(Decline) | Organic Growth/(Decline)% | ||||||
| Loans | ||||||||||
| Commercial and industrial (1) | $ | 1,563,279 | $ | 2,103,152 | $ | 110,359 | $ | (650,232) | (30.92) | % |
| Commercial real estate | 7,992,344 | 4,173,927 | 3,702,407 | 116,010 | 2.78 | % | ||||
| Commercial construction | 1,165,457 | 553,929 | 691,978 | (80,450) | (14.52) | % | ||||
| Small business | 193,189 | 175,023 | 1,552 | 16,614 | 9.49 | % | ||||
| Total commercial | 10,914,269 | 7,006,031 | 4,506,296 | (598,058) | (8.54) | % | ||||
| Residential real estate | 1,604,686 | 1,296,183 | 338,959 | (30,456) | (2.35) | % | ||||
| Home equity | 1,039,611 | 1,068,790 | 54,355 | (83,534) | (7.82) | % | ||||
| Total consumer real estate | 2,644,297 | 2,364,973 | 393,314 | (113,990) | (4.82) | % | ||||
| Total other consumer | 28,720 | 21,862 | 9,339 | (2,481) | (11.35) | % | ||||
| Total loans | $ | 13,587,286 | $ | 9,392,866 | $ | 4,908,949 | $ | (714,529) | (7.61) | % |
| Deposits | ||||||||||
| Noninterest-bearing demand deposits | $ | 5,479,503 | $ | 3,762,306 | $ | 819,792 | $ | 897,405 | 23.85 | % |
| Savings and interest checking accounts | 6,350,016 | 4,047,332 | 1,647,600 | 655,084 | 16.19 | % | ||||
| Money market | 3,556,375 | 2,232,903 | 1,156,563 | 166,909 | 7.47 | % | ||||
| Time certificates of deposit | 1,531,150 | 950,629 | 816,477 | (235,956) | (24.82) | % | ||||
| Total deposits | $ | 16,917,044 | $ | 10,993,170 | $ | 4,440,432 | $ | 1,483,442 | 13.49 | % |
(1)Organic loan growth/(decline) within commercial and industrial in the table above includes a decrease in PPP loan balances of $616.2 million.
APPENDIX B: 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, tangible book value per share, and loan and allowance metrics, exclusive of PPP loan balances at the dates indicated:
|
December 31 2021 |
September 30 2021 |
December 31 2020 | |||||
| Tangible common equity | (Dollars in thousands, except per share data) | ||||||
| Stockholders' equity (GAAP) | $ | 3,018,449 | $ | 1,755,954 | $ | 1,702,685 | (a) |
| Less: Goodwill and other intangibles | 1,017,844 | 525,261 | 529,313 | ||||
| Tangible common equity | $ | 2,000,605 | $ | 1,230,693 | $ | 1,173,372 | (b) |
| Tangible assets | |||||||
| Assets (GAAP) | $ | 20,423,405 | $ | 14,533,311 | $ | 13,204,301 | (c) |
| Less: Goodwill and other intangibles | 1,017,844 | 525,261 | 529,313 | ||||
| Tangible assets | $ | 19,405,561 | $ | 14,008,050 | $ | 12,674,988 | (d) |
| Common Shares | 47,349,778 | 33,043,812 | 32,965,692 | (e) | |||
| Common equity to assets ratio (GAAP) | 14.78 | % | 12.08 | % | 12.89 | % | (a/c) |
| Tangible common equity to tangible assets ratio (Non-GAAP) | 10.31 | % | 8.79 | % | 9.26 | % | (b/d) |
| Book value per share (GAAP) | $ | 63.75 | $ | 53.14 | $ | 51.65 | (a/e) |
| Tangible book value per share (Non-GAAP) | $ | 42.25 | $ | 37.24 | $ | 35.59 | (b/e) |
| Total loans (GAAP) | $ | 13,587,286 | $ | 8,808,013 | $ | 9,392,866 | |
| Total loans, excluding PPP (Non-GAAP) | $ | 13,371,070 | $ | 8,424,442 | $ | 8,600,956 | |
| Allowance as a % of total loans (GAAP) | 1.08 | % | 1.05 | % | 1.21 | % | |
| Allowance as a % of total loans, excluding PPP (Non-GAAP) | 1.10 | % | 1.09 | % | 1.32 | % |
19
APPENDIX C: 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, as well as the impact of noncore items on noninterest income as a percentage of total revenue and the efficiency ratio for the periods indicated:
| Three Months Ended | Years Ended | ||||||||||
|
December 31 2021 |
September 30 2021 |
December 31 2020 |
December 31 2021 |
December 31 2020 | |||||||
| Net interest income (GAAP) | $ | 122,530 | $ | 90,091 | $ | 91,443 | $ | 401,559 | $ | 367,728 | (a) |
| Noninterest income (GAAP) | $ | 29,180 | $ | 26,457 | $ | 27,468 | $ | 105,850 | $ | 111,440 | (b) |
| Noninterest income on an operating basis (Non-GAAP) | $ | 29,180 | $ | 26,457 | $ | 27,468 | $ | 105,850 | $ | 111,440 | (c) |
| Noninterest expense (GAAP) | $ | 117,126 | $ | 72,419 | $ | 73,727 | $ | 332,529 | $ | 273,832 | (d) |
| Less: | |||||||||||
| Merger and acquisition expense | 37,166 | 1,943 | - | 40,840 | - | ||||||
| Loss on termination of derivatives | - | - | - | - | 684 | ||||||
| Noninterest expense on an operating basis (Non-GAAP) | $ | 79,960 | $ | 70,476 | $ | 73,727 | $ | 291,689 | $ | 273,148 | (e) |
| Total revenue (GAAP) | $ | 151,710 | $ | 116,548 | $ | 118,911 | $ | 507,409 | $ | 479,168 | (a+b) |
| Total operating revenue (Non-GAAP) | $ | 151,710 | $ | 116,548 | $ | 118,911 | $ | 507,409 | $ | 479,168 | (a+c) |
| Ratios | |||||||||||
| Noninterest income as a % of total revenue (GAAP based) | 19.23 | % | 22.70 | % | 23.10 | % | 20.86 | % | 23.26 | % | (b/(a+b)) |
| Noninterest income as a % of total revenue on an operating basis (Non-GAAP) | 19.23 | % | 22.70 | % | 23.10 | % | 20.86 | % | 23.26 | % | (c/(a+c)) |
| Efficiency ratio (GAAP based) | 77.20 | % | 62.14 | % | 62.00 | % | 65.53 | % | 57.15 | % | (d/(a+b)) |
| Efficiency ratio on an operating basis (Non-GAAP) | 52.71 | % | 60.47 | % | 62.00 | % | 57.49 | % | 57.00 | % | (e/(a+c)) |
20
APPENDIX D: Net Interest Margin Analysis & Non-GAAP Reconciliation of Core Margin
| Three Months Ended | ||||||||||||
| December 31, 2021 | September 30, 2021 | |||||||||||
| Volume | Interest | Margin Impact | Volume | Interest | Margin Impact | |||||||
| (Dollars in thousands) | ||||||||||||
| Reported total interest earning assets | $ | 16,004,215 | $ | 123,589 | 3.05 | % | $ | 12,877,252 | $ | 90,247 | 2.78 | % |
| Core adjustments: | ||||||||||||
| PPP volume @ 1% | (315,420) | (793) | (418,645) | (1,064) | ||||||||
| PPP fee amortization | (7,537) | (2,242) | ||||||||||
| Total PPP impact | (315,420) | (8,330) | (0.14) | % | (418,645) | (3,306) | (0.01) | % | ||||
| Acquisition related: | ||||||||||||
| Loan accretion | (1,534) | (1,927) | ||||||||||
| CD fair market accretion | (365) | - | ||||||||||
| (1,899) | (0.05) | % | (1,927) | (0.06) | % | |||||||
| Nonaccrual interest | 64 | - | % | 163 | - | % | ||||||
| Other noncore adjustments | (1,234) | (0.03) | % | (415) | (0.01) | % | ||||||
| Core margin (Non-GAAP) | $ | 15,688,795 | $ | 112,190 | 2.83 | % | $ | 12,458,607 | $ | 84,762 | 2.70 | % |
21
APPENDIX E: COVID-19 Related Modifications Details
| Deferrals by Modification Type | ||||||
| Deferral of Principal Only | Total Portfolio | % Deferral | ||||
| (Dollars in thousands) | ||||||
| Commercial and industrial | $ | 560 | $ | 1,563,279 | - | % |
| Commercial real estate (1) | 382,535 | 9,157,801 | 4.2 | % | ||
| Business banking | - | 193,189 | - | % | ||
| Residential real estate | - | 1,604,686 | - | % | ||
| Home equity | - | 1,039,611 | - | % | ||
| Consumer | - | 28,720 | - | % | ||
Total active deferrals as of December 31, 2021 (2)
| $ | 383,095 | $ | 13,587,286 | 2.8 | % |
(1) Balances include commercial construction deferrals.
(2) Total active deferrals are inclusive of Meridian acquired deferrals of $194.3 million.
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Independent Bank Corp. published this content on 20 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 January 2022 21:31:09 UTC.
