Regulatory Matters

9 Months Ended

Sep. 30, 2024

Capital guidelines adopted by federal and state regulatory agencies and restrictions imposed by law limit the amount of cash dividends our Bank can pay to us. Under these guidelines, the amount of dividends that may be paid in any calendar year is limited to the Bank’s current year net profits, combined with the retained net profits of the preceding two years. Further, the Bank cannot pay a dividend at any time that it has negative undivided profits. As of September 30, 2024, the Bank had positive undivided profits of $209.0 million. It is not our intent to have dividends paid in amounts that would reduce the capital of our Bank to levels below those which we consider prudent or that would not be in accordance with guidelines of regulatory authorities.

We are also subject to various regulatory capital requirements. The prompt corrective action regulations establish quantitative measures to ensure capital adequacy and require minimum amounts and ratios of total, Tier 1, and common equity Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets. Failure to meet minimum capital requirements can result in certain mandatory, and possibly discretionary, actions by regulators that could have a material effect on our interim condensed consolidated financial statements. In addition, capital adequacy rules include a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets that applies to all supervised financial institutions. To avoid limits on capital distributions and certain discretionary bonus payments we must meet the minimum ratio for adequately capitalized institutions plus the buffer. Under capital adequacy guidelines, we must meet specific capital requirements that involve quantitative measures as well as qualitative judgments by the regulators. The most recent regulatory filings as of September 30, 2024 and December 31, 2023, categorized our Bank as well capitalized and exceeding the minimum ratio for adequately capitalized institutions plus the capital conservation buffer. Management is not aware of any conditions or events that would have changed the most recent Federal Deposit Insurance Corporation (“FDIC”) categorization.

Our actual capital amounts and ratios follow (1):


	Actual				Minimum for Adequately Capitalized Institutions				Minimum for Well-Capitalized Institutions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
September 30, 2024
Total capital to risk-weighted assets
Consolidated	$	606,783	14.25	%	$	340,539	8.00	%	NA		NA
Independent Bank	552,577		13.00		340,134		8.00		$	425,167	10.00	%

Tier 1 capital to risk-weighted assets
Consolidated	$	513,461	12.06	%	$	255,404	6.00	%	NA		NA
Independent Bank	499,317		11.74		255,100		6.00		$	340,134	8.00	%

Common equity tier 1 capital to risk-weighted assets
Consolidated	$	474,906	11.16	%	$	191,553	4.50	%	NA		NA
Independent Bank	499,317		11.74		191,325		4.50		$	276,359	6.50	%

Tier 1 capital to average assets
Consolidated	$	513,461	9.62	%	$	213,392	4.00	%	NA		NA
Independent Bank	499,317		9.36		213,370		4.00		$	266,712	5.00	%

December 31, 2023
Total capital to risk-weighted assets
Consolidated	$	573,972	13.71	%	$	335,014	8.00	%	NA		NA
Independent Bank	521,374		12.46		334,673		8.00		$	418,341	10.00	%

Tier 1 capital to risk-weighted assets
Consolidated	$	481,569	11.50	%	$	251,260	6.00	%	NA		NA
Independent Bank	469,023		11.21		251,005		6.00		$	334,673	8.00	%

Common equity tier 1 capital to risk-weighted assets
Consolidated	$	443,065	10.58	%	$	188,445	4.50	%	NA		NA
Independent Bank	469,023		11.21		188,254		4.50		$	271,922	6.50	%

Tier 1 capital to average assets
Consolidated	$	481,569	9.03	%	$	213,227	4.00	%	NA		NA
Independent Bank	469,023		8.80		213,180		4.00		$	266,475	5.00	%

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(1)			These ratios do not reflect a capital conservation buffer of 2.50% at September 30, 2024 and December 31, 2023.

NA - Not applicable

The components of our regulatory capital are as follows:


	Consolidated				Independent Bank
	September 30, 2024		December 31, 2023		September 30, 2024		December 31, 2023
	(In thousands)
Total shareholders' equity	$	452,369	$	404,449	$	476,780	$	430,407
Add (deduct)
Accumulated other comprehensive (income) loss for regulatory purposes	52,454		66,344		52,454		66,344
Goodwill and other intangibles	(29,917)		(30,304)		(29,917)		(30,304)
CECL (1)	—		2,576		—		2,576
Common equity tier 1 capital	474,906		443,065		499,317		469,023
Qualifying trust preferred securities	38,555		38,504		—		—
Tier 1 capital	513,461		481,569		499,317		469,023
Subordinated debt	40,000		40,000		—		—
Allowance for credit losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets	53,322		52,403		53,260		52,351
Total risk-based capital	$	606,783	$	573,972	$	552,577	$	521,374


(1)			We elected the three year CECL transition method for regulatory purposes.

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

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