EX-99.1 2 exhibit991-indb03x31x2019e.htm Q1 2019 EARNINGS PRESS RELEASE Exhibit


Exhibit 99.1

indblogoa41.jpg
Shareholder Relations                 NEWS RELEASE
288 Union Street
Rockland, Ma. 02370

INDEPENDENT BANK CORP. REPORTS FIRST QUARTER NET INCOME OF $35.2 MILLION
Record Quarterly Earnings Led by Strong Fundamentals

Rockland, Massachusetts (April 18, 2019) Independent Bank Corp. (Nasdaq Global Select Market: INDB), parent of Rockland Trust Company, today announced 2019 first quarter net income of $35.2 million, or $1.25 per diluted share, compared to net income of $29.9 million, or $1.07 per diluted share, reported in the fourth quarter of 2018. Excluding merger and acquisition expenses incurred in both quarters, operating net income was $36.7 million, or $1.30 per diluted share during the first quarter of 2019 compared to $35.9 million, or $1.29 per diluted share during the prior quarter.

“Rockland Trust started 2019 with a strong first quarter, driven by loan growth and a rising net interest margin,” said Christopher Oddleifson, the Chief Executive Officer of Independent Bank Corp. and Rockland Trust Company. “We closed the Blue Hills Bank acquisition and welcomed many new colleagues to Rockland Trust on the first day of the second quarter, and are focused on completing the customer and branch conversion over the weekend of June 8, 2019. Rockland Trust is able to consistently succeed at both organic growth and the seamless integration of other banks due to the hard work of my deeply committed and extremely talented colleagues.”

BALANCE SHEET
    
Total assets of $9.0 billion at March 31, 2019 increased by $145.9 million, or 1.6% from the prior quarter, and by $907.0 million, or 11.2%, as compared to the year ago period, inclusive of the 2018 fourth quarter acquisition of MNB Bancorp, parent of the Milford National Bank and Trust Company ("MNB").

Total loans rose by $70.7 million, or 1.0% (4.2% annualized) over the prior quarter. This increase was led by strong growth of $57.0 million, or 21.1% on an annualized basis, in commercial and industrial loans, especially in corporate and asset-based lending, whereas commercial construction and commercial real estate balances remained relatively flat on a combined basis. Residential real estate also increased $11.9 million, or 5.2% on an annualized basis, driven primarily by jumbo loan production. Inclusive of the MNB acquisition, total loans increased by $614.8 million, or 9.7% when compared to the year ago period.

Total deposits experienced modest seasonal growth, increasing by $36.5 million, or 0.5% (2.0% annualized) from the prior quarter. Strong growth in money market deposits was offset by declines in demand deposit balances, which included outflows of funds into the Company's investment management group portfolio as well as a $39.0 million decrease attributable to its more volatile section 1031 tax-free exchange business. The total cost of deposits increased by five basis points in the first quarter to 0.39%. Inclusive of the acquired MNB deposits, total deposits increased by $712.1 million, or 10.6%, when compared to the year ago period. A portion of the increase from the year ago period is also attributable to the discontinuance and transition of $141.2 million in customer repurchase agreements, which were previously classified as borrowings.

The securities portfolio increased by $7.9 million, or 0.7%, compared to the prior quarter, due to the purchases of $30.5 million, offset by paydowns on existing securities.


1


The Company's total borrowings increased by a net $49.3 million, or 19.1%, compared to the prior quarter. The increase was attributable to funding needs for the cash portion of the April 1, 2019 Blue Hills Bancorp, Inc. ("BHB") acquisition, and included a $125.0 million credit facility comprised of a $50.0 million line of credit and a $75.0 million term loan.  In addition, during the first quarter, the Company issued $50.0 million of subordinated debt in anticipation of paying down existing subordinated debt that is scheduled to lose its regulatory capital treatment, along with other borrowings. Partially offsetting these increases was a decrease in Federal Home Loan Bank overnight borrowings of $122.1 million.

Stockholders' equity at March 31, 2019 rose to $1.1 billion, an increase of 2.9% from December 31, 2018, driven by continued strong earnings retention, as well as an increase in accumulated other comprehensive income. Stockholders' equity increased by 15.5% when compared to the year ago period, due primarily to the issuance of common stock associated with the MNB acquisition. Book value per share increased $1.03, or 2.7%, during the first quarter. The Company's ratio of common equity to assets of 12.28% increased by 15 basis points from the prior quarter and by 46 basis points from the same period a year ago. The Company's tangible book value per share rose by $1.07, or 3.7%, to $29.64 from the prior quarter and is now 13.9% higher than the year ago period, inclusive of the added goodwill from the MNB acquisition. The Company's ratio of tangible common equity to tangible assets of 9.56% at March 31, 2019 is 21 basis points higher than the prior quarter and 44 basis points above the year ago period.

NET INTEREST INCOME
        
Net interest income for the first quarter increased 2.8% to $82.5 million compared to $80.3 million in the prior quarter, due to solid average earning asset growth, including a full quarter of the MNB acquired assets, and a higher net interest margin. The net interest margin rose to 4.14%, compared to 4.05% in the prior quarter, as the Company continues to benefit from its asset sensitive position as rising yields on earning assets continued to outpace higher funding costs.

NONINTEREST INCOME

Noninterest income of $21.5 million in the first quarter of 2019 was $2.0 million, or 8.3%, lower than the prior quarter. Significant changes in noninterest income in the first quarter compared to the prior quarter included the following:

•
Deposit account and interchange and ATM fees decreased by $792,000, or 8.2%, due to seasonal decreases in overdraft fees and debit card usage.

•
Investment management income increased by $121,000, or 1.8%, due primarily to the increase in assets under administration, partially offset by reduced retail commissions. Assets under administration at March 31, 2019 rose by 10.4% over the prior quarter to $4.0 billion.

•
Mortgage banking income decreased by $135,000, or 14.3%, due to a seasonal decrease in volume.

•
Loan level derivative income decreased by $185,000, or 22.4%, as a result of decreased customer demand in the quarter.

•
Other noninterest income decreased $808,000, or 19.0%. The prior quarter included a gain of $1.1 million on the sale of a previously closed branch facility, with no such gains in the first quarter of 2019. There were also decreases in merchant processing income and capital gain distributions received on equity securities. Partly offsetting these factors were gains of $907,000 on equity securities in the first quarter of 2019 compared to none in the prior quarter.


2


NONINTEREST EXPENSE

Noninterest expense of $56.3 million in the first quarter of 2019 was $8.1 million, or 12.5%, lower than the prior quarter. Significant changes in noninterest expense in the first quarter compared to the prior quarter included the following:

•
Salaries and employee benefits expense increased by $1.3 million, or 4.0%, due primarily to seasonal increases in payroll taxes, medical plan insurance, and certain pension expenses, combined with the impact of a full quarter of expenses associated with the MNB acquisition. These were offset by decreases in incentive compensation and retirement expenses.

•
Occupancy and equipment expense increased by $247,000, or 3.6%, mainly due to an increase in snow removal expense, partially offset by a decrease in landscaping costs.

•
Merger and acquisition costs decreased to $1.0 million for the first quarter, which included $719,000 attributable to the BHB acquisition and the remainder associated with the MNB acquisition. The majority of these costs include legal, professional fees, and integration costs. The prior quarter expense of $8.0 million was primarily related to the MNB acquisition.

•
Other noninterest expense decreased by $2.7 million, or 17.0%, due to a $1.1 million loss on equity securities that took place in the fourth quarter of 2018, as well as decreases in loan workout costs, consultant fees and directors fees.
 
The Company generated a return on average assets and a return on average common equity of 1.62% and 13.10%, respectively, in the first quarter of 2019, as compared to 1.38% and 11.49%, respectively, for the prior quarter. On an operating basis, the Company generated a return on average assets and return on average equity of 1.69% and 13.65%, respectively, during the first quarter of 2019, as compared to 1.66% and 13.78%, respectively, for the prior quarter.

The Company’s effective tax rate increased to 24.6% for the first quarter as compared to 21.6% in the prior quarter which was primarily attributable to reduced New Markets Tax Credits benefits in 2019. Both quarters' tax rates were impacted by various discrete items such as the impact of excess tax benefits associated with stock compensation transactions and return to provision adjustments.
ASSET QUALITY

During the first quarter of 2019, the Company recorded total net charge-offs of $153,000, or 0.01% of average loans on an annualized basis, consistent with the prior quarter. The provision for loan losses was $1.0 million for the first quarter of 2019 compared to $1.2 million in the fourth quarter of 2018, both of which were primarily attributable to loan growth. Nonperforming loans declined to $43.3 million, or 0.62% of loans at March 31, 2019 compared to prior quarter balances of $45.4 million, or 0.66% of loans. There were no balances in the other real estate owned category as of both March 31, 2019 and December 31, 2018. Total nonperforming assets at March 31, 2019 declined 4.6% when compared to the prior period, and declined 9.9% as compared to the year ago period, which included other real estate owned of $358,000. At March 31, 2019, delinquency as a percentage of loans was 0.25%, representing a decrease of 42 basis points from the prior quarter, driven by the restructuring of loans associated with a large commercial loan customer.

The allowance for loan losses was $65.1 million at March 31, 2019, as compared to $64.3 million at December 31, 2018. The Company’s allowance for loan losses as a percentage of loans was 0.93% at both March 31, 2019 and December 31, 2018.


3


CONFERENCE CALL INFORMATION

Christopher Oddleifson, Chief Executive Officer, Robert Cozzone, Chief Operating Officer, and Mark Ruggiero, Chief Financial Officer, will host a conference call to discuss first quarter earnings at 10:00 a.m. Eastern Time on Monday, April 22, 2019. 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: 10129763 and will be available through May 6, 2019. Additionally, a webcast replay will be available until April 22, 2020.

ABOUT INDEPENDENT BANK CORP.
Independent Bank Corp. is the holding company for Rockland Trust Company, a full-service commercial bank headquartered in Massachusetts. Named in 2018 to The Boston Globe’s “Top Places to Work” list for the 10th consecutive year, Rockland Trust offers a wide range of banking, investment, and insurance services. The Bank serves businesses and individuals through approximately 100 retail branches, commercial and residential lending centers, and investment management offices in eastern Massachusetts, including Greater Boston, the South Shore, the Cape and Islands, as well as in Worcester County and Rhode Island. Rockland Trust also offers a full suite of mobile, online, and telephone banking services. The Company is an FDIC member and an Equal Housing Lender. To find out why Rockland Trust is the bank “Where Each Relationship Matters®”, please visit www.rocklandtrust.com.

This press release contains certain “forward-looking statements” 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:

•
a 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;
•
adverse changes or volatility in the local real estate market;
•
adverse changes in asset quality including an 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;
•
inability to raise capital on terms that are favorable;
•
additional regulatory oversight and additional costs associated with the Company's increase in assets to over $10 billion;
•
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, changes in tax laws, or failure to comply with requirements of the federal New Markets Tax Credit program;
•
unexpected changes in market interest rates for interest earning assets and/or interest bearing liabilities;
•
unexpected increased competition in the Company’s market area;
•
unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather or other external events;
•
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 inability to realize expected synergies from merger transactions in the amounts or in the timeframes anticipated;
•
inability to retain customers and employees, including those acquired in the MNB Bancorp and Blue Hills Bancorp, Inc. acquisitions;

4


•
the effect of laws and regulations regarding the financial services industry including, but not limited to, the Dodd-Frank Wall Street Reform and the Consumer Protection Act and regulatory uncertainty surrounding these laws and regulations;
•
changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) generally applicable to the Company’s business;
•
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 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 equity, 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 its core banking business such as merger and acquisition expenses, and other items, if applicable.  The Company’s management uses operating earnings 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 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 tool 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 earnings, operating EPS, operating return on average assets, operating return on average equity, tangible book value per share and the tangible common equity ratio are not necessarily comparable to non-GAAP performance measures which may be presented by other companies.

Contacts:

Chris Oddleifson
President and Chief Executive Officer
(781) 982-6660

5


                
Mark J. Ruggiero
Chief Financial Officer
(781) 982-6281






6



INDEPENDENT BANK CORP. FINANCIAL SUMMARY
 
 
 
 
 
 
CONSOLIDATED BALANCE SHEETS
 
 
 
 
(Unaudited, dollars in thousands)
 
 
 
 
 
 
% Change
 
% Change
 
March 31
2019
 
December 31
2018
 
March 31
2018
 
Mar 2019 vs.
 
Mar 2019 vs.
 
 
 
 
Dec 2018
 
Mar 2018
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
106,748

 
$
127,503

 
$
102,623

 
(16.28
)%
 
4.02
 %
Interest-earning deposits with banks
185,526

 
122,952

 
62,925

 
50.89
 %
 
194.84
 %
Securities
 
 
 
 
 
 


 


Trading
1,837

 
1,504

 
1,601

 
22.14
 %
 
14.74
 %
Equities
20,357

 
19,477

 
20,075

 
4.52
 %
 
1.40
 %
Available for sale
437,689

 
442,752

 
445,750

 
(1.14
)%
 
(1.81
)%
Held to maturity
623,243

 
611,490

 
528,861

 
1.92
 %
 
17.85
 %
Total securities
1,083,126

 
1,075,223

 
996,287

 
0.74
 %
 
8.72
 %
Loans held for sale (at fair value)
5,586

 
6,431

 
3,937

 
(13.14
)%
 
41.88
 %
Loans
 
 
 
 
 
 


 


Commercial and industrial
1,150,632

 
1,093,629

 
903,214

 
5.21
 %
 
27.39
 %
Commercial real estate
3,254,085

 
3,251,248

 
3,102,271

 
0.09
 %
 
4.89
 %
Commercial construction
373,517

 
365,165

 
400,934

 
2.29
 %
 
(6.84
)%
Small business
166,410

 
164,676

 
133,666

 
1.05
 %
 
24.50
 %
Total commercial
4,944,644

 
4,874,718

 
4,540,085

 
1.43
 %
 
8.91
 %
Residential real estate
935,238

 
923,294

 
761,331

 
1.29
 %
 
22.84
 %
Home equity - first position
642,451

 
654,083

 
617,164

 
(1.78
)%
 
4.10
 %
Home equity - subordinate positions
438,290

 
438,001

 
434,288

 
0.07
 %
 
0.92
 %
Total consumer real estate
2,015,979

 
2,015,378

 
1,812,783

 
0.03
 %
 
11.21
 %
Other consumer
16,249

 
16,098

 
9,188

 
0.94
 %
 
76.85
 %
Total loans
6,976,872

 
6,906,194

 
6,362,056

 
1.02
 %
 
9.66
 %
Less: allowance for loan losses
(65,140
)
 
(64,293
)
 
(60,862
)
 
1.32
 %
 
7.03
 %
Net loans
6,911,732

 
6,841,901

 
6,301,194

 
1.02
 %
 
9.69
 %
Federal Home Loan Bank stock
7,667

 
15,683

 
13,027

 
(51.11
)%
 
(41.15
)%
Bank premises and equipment, net
98,843

 
97,581

 
95,214

 
1.29
 %
 
3.81
 %
Goodwill
256,105

 
256,105

 
231,806

 
—
 %
 
10.48
 %
Other intangible assets
14,339

 
15,250

 
8,462

 
(5.97
)%
 
69.45
 %
Cash surrender value of life insurance policies
161,521

 
160,456

 
152,568

 
0.66
 %
 
5.87
 %
Other real estate owned and other foreclosed assets
—

 
—

 
358

 
n/a

 
(100.00
)%
Other assets
166,264

 
132,507

 
122,009

 
25.48
 %
 
36.27
 %
Total assets
$
8,997,457

 
$
8,851,592

 
$
8,090,410

 
1.65
 %
 
11.21
 %
Liabilities and Stockholders' Equity
 
 
 
 
 
 

 

Deposits
 
 
 
 
 
 

 

Demand deposits
$
2,329,566

 
$
2,450,907

 
$
2,167,361

 
(4.95
)%
 
7.48
 %
Savings and interest checking accounts
2,914,367

 
2,865,349

 
2,606,257

 
1.71
 %
 
11.82
 %
Money market
1,496,118

 
1,399,761

 
1,323,138

 
6.88
 %
 
13.07
 %
Time certificates of deposit
723,551

 
711,103

 
654,755

 
1.75
 %
 
10.51
 %
Total deposits
7,463,602

 
7,427,120

 
6,751,511

 
0.49
 %
 
10.55
 %
Borrowings
 
 
 
 
 
 

 

Federal Home Loan Bank borrowings
25,752

 
147,806

 
53,257

 
(82.58
)%
 
(51.65
)%
Customer repurchase agreements
—

 
—

 
137,914

 
n/a

 
(100.00
)%
Line of credit, net
49,993

 
—

 
—

 
100.00%

 
100.00%

Long-term borrowings, net
74,914

 
—

 
—

 
100.00%

 
100.00%

Junior subordinated debentures, net
73,082

 
76,173

 
73,075

 
(4.06
)%
 
0.01
 %
Subordinated debentures, net
84,299

 
34,728

 
34,693

 
142.74
 %
 
142.99
 %
Total borrowings
308,040

 
258,707

 
298,939

 
19.07
 %
 
3.04
 %

7


Total deposits and borrowings
7,771,642

 
7,685,827

 
7,050,450

 
1.12
 %
 
10.23
 %
Other liabilities
121,277

 
92,275

 
83,901

 
31.43
 %
 
44.55
 %
Total liabilities
7,892,919

 
7,778,102

 
7,134,351

 
1.48
 %
 
10.63
 %
Stockholders' equity
 
 
 
 
 
 

 

Common stock
280

 
279

 
273

 
0.36
 %
 
2.56
 %
Additional paid in capital
527,795

 
527,648

 
479,715

 
0.03
 %
 
10.02
 %
Retained earnings
569,582

 
546,736

 
484,266

 
4.18
 %
 
17.62
 %
Accumulated other comprehensive income (loss), net of tax
6,881

 
(1,173
)
 
(8,195
)
 
(686.62
)%
 
(183.97
)%
Total stockholders' equity
1,104,538

 
1,073,490

 
956,059


2.89
 %
 
15.53
 %
Total liabilities and stockholders' equity
$
8,997,457

 
$
8,851,592

 
$
8,090,410

 
1.65
 %
 
11.21
 %

CONSOLIDATED STATEMENTS OF INCOME
 
 
 
 
 
(Unaudited, dollars in thousands, except per share data)
 
 
 
 
 
 
Three Months Ended
 
 
 
 
 
 
 
 
 
 
 
% Change
 
% Change
 
March 31
2019
 
December 31
2018
 
March 31
2018
 
Mar 2019 vs.
 
Mar 2019 vs.
 
 
 
 
Dec 2018
 
Mar 2018
Interest income
 
 
 
 
 
 
 
 
 
Interest on federal funds sold and short-term investments
$
426

 
$
908

 
$
311

 
(53.08
)%

36.98
 %
Interest and dividends on securities
7,478

 
7,146

 
6,235

 
4.65
 %
 
19.94
 %
Interest and fees on loans
83,608

 
79,807

 
67,184

 
4.76
 %
 
24.45
 %
Interest on loans held for sale
31

 
49

 
19

 
(36.73
)%
 
63.16
 %
Total interest income
91,543

 
87,910

 
73,749

 
4.13
 %
 
24.13
 %
Interest expense
 
 
 
 
 
 


 


Interest on deposits
7,028

 
6,222

 
3,935

 
12.95
 %
 
78.60
 %
Interest on borrowings
1,990

 
1,396

 
1,343

 
42.55
 %
 
48.18
 %
Total interest expense
9,018

 
7,618

 
5,278

 
18.38
 %
 
70.86
 %
Net interest income
82,525

 
80,292

 
68,471

 
2.78
 %
 
20.53
 %
Provision for loan losses
1,000

 
1,200

 
500

 
(16.67
)%
 
100.00
 %
Net interest income after provision for loan losses
81,525

 
79,092

 
67,971

 
3.08
 %
 
19.94
 %
Noninterest income
 
 
 
 
 
 


 


Deposit account fees
4,406

 
4,687

 
4,431

 
(6.00
)%
 
(0.56
)%
Interchange and ATM fees
4,516

 
5,027

 
4,173

 
(10.17
)%
 
8.22
 %
Investment management
6,748

 
6,627

 
6,142

 
1.83
 %
 
9.87
 %
Mortgage banking income
806

 
941

 
870

 
(14.35
)%
 
(7.36
)%
Increase in cash surrender value of life insurance policies
972

 
1,131

 
947

 
(14.06
)%
 
2.64
 %
Loan level derivative income
641

 
826

 
447

 
(22.40
)%
 
43.40
 %
Other noninterest income
3,444

 
4,252

 
2,853

 
(19.00
)%
 
20.72
 %
Total noninterest income
21,533

 
23,491

 
19,863

 
(8.34
)%
 
8.41
 %
Noninterest expenses
 
 
 
 
 
 


 


Salaries and employee benefits
33,117

 
31,845

 
31,100

 
3.99
 %
 
6.49
 %
Occupancy and equipment expenses
7,130

 
6,883

 
7,408

 
3.59
 %
 
(3.75
)%
Data processing and facilities management
1,326

 
1,288

 
1,286

 
2.95
 %
 
3.11
 %
FDIC assessment
616

 
560

 
798

 
10.00
 %
 
(22.81
)%
Merger and acquisition expense
1,032

 
8,046

 
—

 
(87.17
)%
 
100.00%

Other noninterest expenses
13,090

 
15,769

 
12,859

 
(16.99
)%
 
1.80
 %
Total noninterest expenses
56,311

 
64,391

 
53,451

 
(12.55
)%
 
5.35
 %
Income before income taxes
46,747

 
38,192

 
34,383

 
22.40
 %
 
35.96
 %
Provision for income taxes
11,522

 
8,258

 
6,828

 
39.53
 %
 
68.75
 %
Net Income
$
35,225

 
$
29,934

 
$
27,555

 
17.68
 %
 
27.84
 %
 
 
 
 
 
 
 
 
 
 
Weighted average common shares (basic)
28,106,184

 
27,815,437

 
27,486,573

 
 
 
 

8


Common share equivalents
54,466

 
58,576

 
67,381

 
 
 
 
Weighted average common shares (diluted)
28,160,650

 
27,874,013

 
27,553,954

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
1.25

 
$
1.08

 
$
1.00

 
15.74
 %
 
25.00
 %
Diluted earnings per share
$
1.25

 
$
1.07

 
$
1.00

 
16.82
 %
 
25.00
 %
 
 
 
 
 
 
 
 
 
 
Reconciliation of Net Income (GAAP) to Operating Net Income (Non-GAAP):
 
 
 
 
 
 
Net income
$
35,225

 
$
29,934

 
$
27,555

 
 
 
 
Noninterest expense components
 
 
 
 
 
 
 
 
 
Add - merger and acquisition expenses
1,032

 
8,046

 
—

 
 
 
 
Noncore items, gross
1,032

 
8,046

 
—

 
 
 
 
Less - net tax benefit associated with noncore items (1)
(198
)
 
(2,089
)
 
—

 
 
 
 
Add - adjustment for tax effect of previously incurred merger and acquisition expenses
650

 
—

 
—

 
 
 
 
Total tax impact
452

 
(2,089
)
 
—

 
 
 
 
Noncore items, net of tax
1,484

 
5,957

 
—

 
 
 
 
Operating net income
$
36,709

 
$
35,891

 
$
27,555

 
2.28
 %
 
33.22
 %
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share, on an operating basis
$
1.30

 
$
1.29

 
$
1.00

 
0.78
 %
 
30.00
 %
(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)
4.14
%
 
4.05
%
 
3.77
%
 
 
 
 
Return on average assets GAAP (calculated by dividing net income by average assets)
1.62
%
 
1.38
%
 
1.39
%
 
 
 
 
Return on average assets on an operating basis (calculated by dividing net operating earnings by average assets)
1.69
%
 
1.66
%
 
1.39
%
 
 
 
 
Return on average common equity GAAP (calculated by dividing net income by average common equity)
13.10
%
 
11.49
%
 
11.73
%
 
 
 
 
Return on average common equity on an operating basis (calculated by dividing net operating earnings by average common equity)
13.65
%
 
13.78
%
 
11.73
%
 
 
 
 

9


ASSET QUALITY
 
 
(Unaudited, dollars in thousands)
 
Nonperforming Assets At
 
 
March 31
2019
 
December 31
2018
 
March 31
2018
Nonperforming loans
 
 
 
 
 
 
Commercial & industrial loans
 
$
25,879

 
$
26,310

 
$
30,751

Commercial real estate loans
 
1,539

 
3,326

 
2,997

Small business loans
 
180

 
235

 
412

Residential real estate loans
 
8,517

 
8,251

 
7,646

Home equity
 
7,202

 
7,278

 
5,858

Other consumer
 
14

 
18

 
49

Total nonperforming loans
 
43,331

 
45,418

 
47,713

Other real estate owned
 
—

 
—

 
358

Total nonperforming assets
 
$
43,331

 
$
45,418

 
$
48,071

 
 
 
 
 
 
 
Nonperforming loans/gross loans
 
0.62
%
 
0.66
%
 
0.75
%
Nonperforming assets/total assets
 
0.48
%
 
0.51
%
 
0.59
%
Allowance for loan losses/nonperforming loans
 
150.33
%
 
141.56
%
 
127.56
%
Allowance for loan losses/total loans
 
0.93
%
 
0.93
%
 
0.96
%
Delinquent loans/total loans
 
0.25
%
 
0.67
%
 
0.79
%
 
 
 
 
 
 
 
 
 
Nonperforming Assets Reconciliation for the Three Months Ended
 
 
March 31
2019
 
December 31
2018
 
March 31
2018
 
 
 
 
 
 
 
Nonperforming assets beginning balance
 
$
45,418

 
$
45,584

 
$
50,250

New to nonperforming
 
1,857

 
5,759

 
2,001

Loans charged-off
 
(559
)
 
(588
)
 
(594
)
Loans paid-off
 
(3,171
)
 
(4,453
)
 
(2,692
)
Loans restored to performing status
 
(232
)
 
(630
)
 
(690
)
Valuation write down
 
—

 
(120
)
 
—

Sale of other real estate owned
 
—

 
(70
)
 
(254
)
Other
 
18

 
(64
)
 
50

Nonperforming assets ending balance
 
$
43,331

 
$
45,418

 
$
48,071



10


 
 
Net Charge-Offs (Recoveries)
 
 
Three Months Ended
 
 
March 31
2019
 
December 31
2018
 
March 31
2018
Net charge-offs (recoveries)
 
 
 
 
 
 
Commercial and industrial loans
 
$
(124
)
 
$
(3
)
 
$
121

Commercial real estate loans
 
(33
)
 
(121
)
 
(20
)
Small business loans
 
118

 
118

 
15

Residential real estate loans
 
(1
)
 
—

 
37

Home equity
 
47

 
4

 
45

Other consumer
 
146

 
144

 
83

Total net charge-offs
 
$
153

 
$
142

 
$
281

 
 
 
 
 
 
 
Net charge-offs to average loans (annualized)
 
0.01
%
 
0.01
%
 
0.02
%
 
 
Troubled Debt Restructurings At
 
 
March 31
2019
 
December 31
2018
 
March 31
2018
Troubled debt restructurings on accrual status
 
$
23,053

 
$
23,849

 
$
25,617

Troubled debt restructurings on nonaccrual status
 
28,908

 
29,348

 
5,637

Total troubled debt restructurings
 
$
51,961

 
$
53,197

 
$
31,254

 
 
 
 
 
 
 
BALANCE SHEET AND CAPITAL RATIOS
 
 
 
 
 
 
 
 
March 31
2019
 
December 31
2018
 
March 31
2018
Gross loans/total deposits
 
93.48
%
 
92.99
%
 
94.23
%
Common equity tier 1 capital ratio (1)
 
12.12
%
 
11.92
%
 
11.47
%
Tier one leverage capital ratio (1)
 
10.64
%
 
10.69
%
 
10.32
%
Common equity to assets ratio GAAP
 
12.28
%
 
12.13
%
 
11.82
%
Tangible common equity to tangible assets ratio (2)
 
9.56
%
 
9.35
%
 
9.12
%
Book value per share GAAP
 
$
39.26

 
$
38.23

 
$
34.75

Tangible book value per share (2)
 
$
29.64

 
$
28.57

 
$
26.02

(1) Estimated number for March 31, 2019.
(2) See Appendix A for detailed reconciliation from GAAP to Non-GAAP ratios.
    



















11



INDEPENDENT BANK CORP. SUPPLEMENTAL FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited, dollars in thousands)
 
Three Months Ended
 
 
March 31, 2019
 
December 31, 2018
 
March 31, 2018
 
 
 
 
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
 
$
68,994

 
$
426

 
2.50
%
 
$
158,376

 
$
908

 
2.27
%
 
$
81,934

 
$
311

 
1.54
%
Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities - trading
 
1,616

 
—

 
—
%
 
1,554

 
—

 
—
%
 
1,433

 
—

 
—
%
Securities - taxable investments
 
1,084,747

 
7,465

 
2.79
%
 
1,031,969

 
7,132

 
2.74
%
 
967,221

 
6,219

 
2.61
%
Securities - nontaxable investments (1)
 
1,738

 
17

 
3.97
%
 
1,939

 
18

 
3.68
%
 
2,262

 
20

 
3.59
%
Total securities
 
$
1,088,101

 
$
7,482

 
2.79
%
 
$
1,035,462

 
$
7,150

 
2.74
%
 
$
970,916

 
$
6,239

 
2.61
%
Loans held for sale
 
3,445

 
31

 
3.65
%
 
5,708

 
49

 
3.41
%
 
2,753

 
19

 
2.80
%
Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial (1)
 
1,113,819

 
14,440

 
5.26
%
 
1,033,345

 
13,087

 
5.02
%
 
879,336

 
9,615

 
4.43
%
Commercial real estate (1)
 
3,240,346

 
39,230

 
4.91
%
 
3,168,962

 
38,533

 
4.82
%
 
3,107,437

 
33,289

 
4.34
%
Commercial construction
 
386,736

 
5,617

 
5.89
%
 
373,042

 
5,116

 
5.44
%
 
397,720

 
4,671

 
4.76
%
Small business
 
165,374

 
2,484

 
6.09
%
 
152,722

 
2,309

 
6.00
%
 
132,125

 
1,862

 
5.72
%
Total commercial
 
4,906,275

 
61,771

 
5.11
%
 
4,728,071

 
59,045

 
4.95
%
 
4,516,618

 
49,437

 
4.44
%
Residential real estate
 
926,945

 
9,547

 
4.18
%
 
860,234

 
8,647

 
3.99
%
 
755,996

 
7,501

 
4.02
%
Home equity
 
1,086,620

 
12,175

 
4.54
%
 
1,085,421

 
12,013

 
4.39
%
 
1,051,022

 
10,205

 
3.94
%
Total consumer real estate
 
2,013,565

 
21,722

 
4.38
%
 
1,945,655

 
20,660

 
4.21
%
 
1,807,018

 
17,706

 
3.97
%
Other consumer
 
16,087

 
313

 
7.89
%
 
14,415

 
283

 
7.79
%
 
10,659

 
214

 
8.14
%
Total loans
 
$
6,935,927

 
$
83,806

 
4.90
%
 
$
6,688,141

 
$
79,988

 
4.74
%
 
$
6,334,295

 
$
67,357

 
4.31
%
Total interest-earning assets
 
$
8,096,467

 
$
91,745

 
4.60
%
 
$
7,887,687

 
$
88,095

 
4.43
%
 
$
7,389,898

 
$
73,926

 
4.06
%
Cash and due from banks
 
105,194

 
 
 
 
 
110,643

 
 
 
 
 
97,605

 
 
 
 
Federal Home Loan Bank stock
 
11,697

 
 
 
 
 
13,274

 
 
 
 
 
13,016

 
 
 
 
Other assets
 
617,259

 
 
 
 
 
573,854

 
 
 
 
 
545,516

 
 
 
 
Total assets
 
$
8,830,617

 
 
 
 
 
$
8,585,458

 
 
 
 
 
$
8,046,035

 
 
 
 
Interest-bearing liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Savings and interest checking accounts
 
$
2,891,613

 
$
1,954

 
0.27
%
 
$
2,737,399

 
$
1,763

 
0.26
%
 
$
2,563,186

 
$
1,093

 
0.17
%
Money market
 
1,464,151

 
2,719

 
0.75
%
 
1,398,175

 
2,378

 
0.67
%
 
1,338,265

 
1,364

 
0.41
%
Time deposits
 
717,081

 
2,355

 
1.33
%
 
685,440

 
2,081

 
1.20
%
 
646,529

 
1,478

 
0.93
%
Total interest-bearing deposits
 
$
5,072,845

 
$
7,028

 
0.56
%
 
$
4,821,014

 
$
6,222

 
0.51
%
 
$
4,547,980

 
$
3,935

 
0.35
%
Borrowings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal Home Loan Bank borrowings
 
112,898

 
710

 
2.55
%
 
53,631

 
280

 
2.07
%
 
73,040

 
260

 
1.44
%
Customer repurchase agreements
 
—

 
—

 
—
%
 
72,668

 
43

 
0.23
%
 
155,768

 
66

 
0.17
%
Line of Credit
 
2,221

 
21

 
3.83
%
 
—

 
—

 
—
%
 
—

 
—

 
—
%
Long-term borrowings
 
3,331

 
32

 
3.90
%
 
—

 
—

 
—
%
 
—

 
—

 
—
%
Junior subordinated debentures
 
73,287

 
684

 
3.79
%
 
74,592

 
646

 
3.44
%
 
73,074

 
590

 
3.27
%
Subordinated debentures
 
44,678

 
543

 
4.93
%
 
34,723

 
427

 
4.88
%
 
34,687

 
427

 
4.99
%
Total borrowings
 
$
236,415

 
$
1,990

 
3.41
%
 
$
235,614

 
$
1,396

 
2.35
%
 
$
336,569

 
$
1,343

 
1.62
%
Total interest-bearing liabilities
 
$
5,309,260

 
$
9,018

 
0.69
%
 
$
5,056,628

 
$
7,618

 
0.60
%
 
$
4,884,549

 
$
5,278

 
0.44
%
Demand deposits
 
2,317,209

 
 
 
 
 
2,399,488

 
 
 
 
 
2,129,517

 
 
 
 
Other liabilities
 
113,688

 
 
 
 
 
95,670

 
 
 
 
 
79,125

 
 
 
 
Total liabilities
 
$
7,740,157

 
 
 
 
 
$
7,551,786

 
 
 
 
 
$
7,093,191

 
 
 
 

12


Stockholders' equity
 
1,090,460

 
 
 
 
 
1,033,673

 
 
 
 
 
952,844

 
 
 
 
Total liabilities and stockholders' equity
 
$
8,830,617

 
 
 
 
 
$
8,585,459

 
 
 
 
 
$
8,046,035

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
 
 
$
82,727

 
 
 
 
 
$
80,477

 
 
 
 
 
$
68,648

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate spread (2)
 
 
 
 
 
3.91
%
 
 
 
 
 
3.83
%
 
 
 
 
 
3.62
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin (3)
 
 
 
 
 
4.14
%
 
 
 
 
 
4.05
%
 
 
 
 
 
3.77
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total deposits, including demand deposits
 
$
7,390,054

 
$
7,028

 
 
 
$
7,220,502

 
$
6,222

 
 
 
$
6,677,497

 
$
3,935

 
 
Cost of total deposits
 
 
 
 
 
0.39
%
 
 
 
 
 
0.34
%
 
 
 
 
 
0.24
%
Total funding liabilities, including demand deposits
 
$
7,626,469

 
$
9,018

 
 
 
$
7,456,116

 
$
7,618

 
 
 
$
7,014,066

 
$
5,278

 
 
Cost of total funding liabilities
 
 
 
 
 
0.48
%
 
 
 
 
 
0.41
%
 
 
 
 
 
0.31
%

(1) The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $202,000, $185,000, and $177,000 for the three months ended March 31, 2019, December 31, 2018, and March 31, 2018, 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.

13


Organic Loan and Deposit Growth
 
 
 
 
 
 
 
 
 
 
(Unaudited, dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Year-over-Year
 
 
March 31
2019
 
March 31
2018
 
MNB Balances Acquired
 
Organic Growth/(Decline)
 
Organic Growth/(Decline) %
Loans
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
1,150,632

 
$
903,214

 
$
44,929

 
$
202,489

 
22.42
 %
Commercial real estate
 
3,254,085

 
3,102,271

 
112,922

 
38,892

 
1.25
 %
Commercial construction
 
373,517

 
400,934

 
16,497

 
(43,914
)
 
(10.95
)%
Small business
 
166,410

 
133,666

 
12,589

 
20,155

 
15.08
 %
Total commercial
 
4,944,644

 
4,540,085

 
186,937

 
217,622

 
4.79
 %
Residential real estate
 
935,238

 
761,331

 
95,705

 
78,202

 
10.27
 %
Home equity
 
1,080,741

 
1,051,452

 
7,692

 
21,597

 
2.05
 %
Total consumer real estate
 
2,015,979

 
1,812,783

 
103,397

 
99,799

 
5.51
 %
Total other consumer
 
16,249

 
9,188

 
3,164

 
3,897

 
42.41
 %
Total loans
 
$
6,976,872

 
$
6,362,056

 
$
293,498

 
$
321,318

 
5.05
 %
 
 
 
 
 
 
 
 
 
 
 
Deposits
 
 
 
 
 
 
 
 
 
 
Demand deposits
 
$
2,329,566

 
$
2,167,361

 
$
77,786

 
$
84,419

 
3.90
 %
Savings and interest checking accounts
 
2,914,367

 
2,606,257

 
58,441

 
249,669

 
9.58
 %
Money market
 
1,496,118

 
1,323,138

 
73,645

 
99,335

 
7.51
 %
Time certificates of deposit
 
723,551

 
654,755

 
68,332

 
464

 
0.07
 %
Total deposits
 
$
7,463,602

 
$
6,751,511

 
$
278,204

 
$
433,887

 
6.43
 %

Certain amounts in prior year financial statements have been reclassified to conform to the current year's presentation.


14


APPENDIX A

(Unaudited, dollars in thousands, except per share data)

The following table summarizes the calculation of the Company's tangible common equity ratio and tangible book value per share at the dates indicated:
 
 
March 31
2019
 
December 31
2018
 
March 31
2018
 
Tangible common equity
 
 
 
 
 
 
 
Stockholders' equity (GAAP)
 
$
1,104,538

 
$
1,073,490

 
$
956,059

(a)
Less: Goodwill and other intangibles
 
270,444

 
271,355

 
240,268

 
Tangible common equity
 
$
834,094

 
$
802,135

 
$
715,791

(b)
Tangible assets
 
 
 
 
 
 
 
Assets (GAAP)
 
$
8,997,457

 
$
8,851,592

 
$
8,090,410

(c)
Less: Goodwill and other intangibles
 
270,444

 
271,355

 
240,268

 
Tangible assets
 
$
8,727,013

 
$
8,580,237

 
$
7,850,142

(d)
 
 
 
 
 
 
 
 
Common Shares
 
28,137,504

 
28,080,408

 
27,512,328

(e)
 
 
 
 
 
 
 
 
Common equity to assets ratio (GAAP)
 
12.28
%
 
12.13
%
 
11.82
%
(a/c)
Tangible common equity to tangible assets ratio (Non-GAAP)
 
9.56
%
 
9.35
%
 
9.12
%
(b/d)
Book value per share (GAAP)
 
$
39.26

 
$
38.23

 
$
34.75

(a/e)
Tangible book value per share (Non-GAAP)
 
$
29.64

 
$
28.57

 
$
26.02

(b/e)


15


APPENDIX B

(Unaudited, dollars in thousands)

The following table summarizes the impact of noncore items on of 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
 
 
March 31
2019
 
December 31
2018
 
March 31
2018
 
Net interest income (GAAP)
$
82,525

 
$
80,292

 
$
68,471

(a)
 
 
 
 
 
 
 
Noninterest income (GAAP)
$
21,533

 
$
23,491

 
$
19,863

(b)
Noninterest income on an operating basis (Non-GAAP)
$
21,533

 
$
23,491

 
$
19,863

(c)
 
 
 
 
 
 
 
Noninterest expense (GAAP)
$
56,311

 
$
64,391

 
$
53,451

(d)
Less:
 
 
 
 
 
 
Merger and acquisition expense
1,032

 
8,046

 
—

 
Noninterest expense on an operating basis (Non-GAAP)
$
55,279

 
$
56,345

 
$
53,451

(e)
 
 
 
 
 
 
 
Total revenue (GAAP)
$
104,058

 
$
103,783

 
$
88,334

(a+b)
Total operating revenue (Non-GAAP)
$
104,058

 
$
103,783

 
$
88,334

(a+c)
 
 
 
 
 
 
 
Ratios
 
 
 
 
 
 
Noninterest income as a % of total revenue (GAAP based)
20.69
%
 
22.63
%
 
22.49
%
(b/(a+b))
Noninterest income as a % of total revenue on an operating basis (Non-GAAP)
20.69
%
 
22.63
%
 
22.49
%
(c/(a+c))
Efficiency ratio (GAAP based)
54.12
%
 
62.04
%
 
60.51
%
(d/(a+b))
Efficiency ratio on an operating basis (Non-GAAP)
53.12
%
 
54.29
%
 
60.51
%
(e/(a+c))


16