Independent Bank Corp. Reports Second Quarter Net Income of $62.6 Million

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	%

 

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