EX-99.1 2 exhibit991-indb06x30x2019e.htm Q2 2019 EARNINGS PRESS RELEASE Exhibit


Exhibit 99.1

indblogoa44.jpg
Shareholder Relations                 NEWS RELEASE
288 Union Street
Rockland, Ma. 02370

INDEPENDENT BANK CORP. REPORTS SECOND QUARTER NET INCOME OF $30.6 MILLION
Record quarterly operating results following successful Blue Hills Bancorp, Inc. acquisition

Rockland, Massachusetts (July 18, 2019) Independent Bank Corp. (Nasdaq Global Select Market: INDB), parent of Rockland Trust Company, today announced 2019 second quarter net income of $30.6 million, or $0.89 per diluted share, compared to net income of $35.2 million, or $1.25 per diluted share, reported in the first quarter of 2019. Excluding merger and acquisition expenses incurred in both quarters, operating net income was $48.8 million, or $1.42 per diluted share, during the second quarter of 2019 compared to $36.7 million, or $1.30 per diluted share, during the prior quarter.

"During the second quarter of 2019 Rockland Trust completed the acquisition of Blue Hills Bank, grew to over $11.6 billion in assets, added branches in Boston’s Hyde Park neighborhood and several other Boston area locations, and expanded our geographic reach to include Nantucket Island," said Christopher Oddleifson, the President and Chief Executive Officer of Independent Bank Corp. and Chief Executive Officer of Rockland Trust Company. "Also, after many months of careful planning, we completed the successful conversion of the customers and branches acquired from Blue Hills Bank over the first weekend in June. Our growth and success is directly attributable to the exceptional hard work of my deeply committed and talented colleagues, including those who joined us from Blue Hills."

BLUE HILLS BANCORP, INC.

Effective April 1, 2019, the Company completed the acquisition of Blue Hills Bancorp, Inc., parent of Blue Hills Bank (collectively "BHB"). The acquisition resulted in the net addition of eight branch locations in Suffolk, Norfolk and Nantucket counties of Massachusetts. The transaction included the acquisition of approximately $2.1 billion in loans, $196.9 million in securities, the assumption of $1.9 billion in deposits, and $124.8 million of borrowings, each at fair value. Total consideration of $661.3 million consisted of 6,166,010 shares of the Company's common stock issued, as well as $161.6 million in cash, inclusive of cash in lieu of fractional shares. The following table provides the purchase price allocation of net assets acquired for this transaction:


1


Net Assets Acquired at Fair Value
(Dollars in thousands)
Assets
 
Cash
$
56,331

Investments
196,937

Loans
2,073,714

Bank premises and equipment
24,253

Goodwill
248,457

Core deposit and other intangibles
19,870

Other assets
147,836

Total assets acquired
$
2,767,398

Liabilities
 
Deposits
$
1,930,436

Borrowings
124,817

Other liabilities
50,857

Total liabilities assumed
$
2,106,110

     Purchase price
$
661,288


For further details on the loans and deposits acquired, see the Organic Loan and Deposit Growth table provided near the end of the financial schedules accompanying this release.

BALANCE SHEET
    
Total assets of $11.6 billion at June 30, 2019 increased by $2.6 billion, or 29.0% from the prior quarter, and by $3.2 billion, or 38.5%, as compared to the year ago period, inclusive of the 2019 second quarter acquisition of BHB and the 2018 fourth quarter acquisition of MNB Bancorp ("MNB").

The $2.0 billion increase in the total loan portfolio in the second quarter was the net result of a variety of factors, including the addition of BHB loans acquired, a transfer of loans to held for sale, planned reductions in BHB loan segments, and growth in legacy portfolios. Strong organic growth in the commercial construction portfolio of 10.6% was offset by decreases in all other commercial loan categories, as anticipated payoffs, primarily within the acquired portfolios, outpaced strong new originations during the quarter. The decline in the residential real estate portfolio was largely attributable to the reclass of $86.0 million of loans to held for sale. Otherwise, all consumer portfolios were relatively flat during the quarter as new business was offset by runoff. Inclusive of the BHB and the MNB acquisitions, total loans increased by $2.5 billion, or 38.1%, when compared to the year ago period.

The $1.8 billion increase in total deposits in the second quarter of 2019 reflected the addition of BHB deposits, strong growth in demand deposit balances, and meaningful post-acquisition decreases as anticipated in higher rate deposit categories. This favorable remixing moderated the overall increase in the cost of deposits, which was up 10 basis points to 0.49% in the second quarter as compared to the prior quarter. Inclusive of the acquired BHB and MNB deposits, total deposits increased by $2.3 billion, or 32.7%, when compared to the year ago period.

The securities portfolio increased by $130.1 million, or 12.0%, compared to the prior quarter, reflecting the $196.9 million in securities included in the BHB acquisition and additional purchases during the quarter of $20.9 million, partially offset by paydowns on existing securities and the sale of approximately $47.3 million acquired BHB mortgage-backed securities, the proceeds of which were used to pay off wholesale funding.

The Company's total borrowings increased by $191.7 million, or 62.2%, compared to the prior quarter, reflecting the $124.8 million in borrowings included in the BHB acquisition as well as increases in the Federal Home Loan Bank overnight borrowings, partially offset by the paydown of the $50.0 million line of credit funding that was

2


obtained in the first quarter to supplement the financing of the BHB acquisition, as well as a $10.3 million redemption of trust preferred securities during the quarter.

Stockholders' equity at June 30, 2019 rose to $1.6 billion, an increase of 48.1% and 67.4% when compared to March 31, 2019, and June 30, 2018, respectively, due primarily to the stock issuance associated with the BHB and MNB acquisitions. In addition, other comprehensive income increased significantly in the quarter, growing by $14.1 million as a result of the increased values associated with the Company's interest rate derivatives and available for sale securities. Book value per share increased by $8.41, or 21.4%, during the second quarter. The Company's ratio of common equity to assets of 14.10% increased by 182 basis points from the prior quarter and by 244 basis points from the same period a year ago. The Company's tangible book value per share increased significantly by $2.36, or 8.0%, to $32.00 from the prior quarter and is now 19.5% higher than the year ago period. The Company's ratio of tangible common equity to tangible assets of 9.92% at June 30, 2019 is 36 basis points higher than the prior quarter and 86 basis points above the year ago period.

NET INTEREST INCOME
        
Net interest income for the second quarter increased 28.5% to $106.0 million compared to $82.5 million in the prior quarter due to increased average earning assets as a result of the BHB acquisition. The net interest margin of 4.09% for the second quarter of 2019 benefited from elevated loan accretion as a result of payoff activity on the acquired portfolios during the quarter, yet decreased from the prior quarter margin of 4.14% due to the absorption of the lower margin inherent to the BHB balance sheet base.

NONINTEREST INCOME

Noninterest income of $28.6 million in the second quarter of 2019 was $7.1 million, or 33.0%, higher than the prior quarter. Most categories of noninterest income were positively impacted by the BHB acquisition. Other factors that contributed to changes in noninterest income in the second quarter compared to the prior quarter included the following:

•
Deposit account and interchange and ATM fees increased by $2.0 million, or 21.9%, due primarily to the increased customer base from the BHB acquisition as well as seasonal increases in overdraft fees and debit card usage.

•
Investment management income increased by $405,000, or 6.0%, due primarily to the increase in assets under administration, along with seasonal tax preparation fees during the second quarter. Assets under administration at June 30, 2019 rose by 5.8% over the prior quarter to $4.2 billion.

•
Mortgage banking income grew by $2.6 million, or 323.1%, due to the combination of a significantly increased production channel following the BHB acquisition, a strong rate-driven increase in refinance demand, and typical seasonal increases in volume.

•
The increase in cash surrender value of life insurance policies increased by $324,000, or 33.3%, due to policies obtained from the BHB acquisition.

•
Loan level derivative income increased by $291,000, or 45.4%, as a result of increased customer demand in the quarter.

•
Other noninterest income increased $1.5 million, or 44.7%. Primary drivers of the increase include gains associated with the sale of a small business credit card portfolio, as well as increases in FHLB dividend income, equity method investment income, and foreign currency exchange fees. Partly offsetting these factors were decreases in gains on equity securities.


3


NONINTEREST EXPENSE

Noninterest expense of $93.0 million in the second quarter of 2019 was $36.7 million, or 65.2%, higher than the prior quarter. Most categories of noninterest expense were impacted by the BHB acquisition. Other factors that contributed to changes in noninterest expense in the second quarter compared to the prior quarter included the following:

•
Salaries and employee benefits expense increased by $5.7 million, or 17.3%, due primarily to the increased workforce base following the BHB acquisition, as well as increases in incentive programs and commissions, offset by decreases in payroll taxes.

•
Occupancy and equipment expense increased by $1.3 million, or 18.1%, mainly due to the acquired BHB branch network, which was partially offset by a decrease in snow removal costs.

•
Merger and acquisition costs increased to $24.7 million for the second quarter, which was primarily attributable to the BHB acquisition. The majority of these costs include severance, contract termination and integration costs. The prior quarter expense of $1.0 million included $719,000 attributable to the BHB acquisition and the remainder associated with the MNB acquisition.

•
Other noninterest expense increased by $5.2 million, or 39.3%, due to a $1.5 million loss on sale of securities, an increase in core deposit amortization expense of $715,000, and higher consultant fees, director fees, provision for unfunded commitments, and software maintenance fees.
 
The Company generated a return on average assets and a return on average common equity of 1.06% and 7.59%, respectively, in the second quarter of 2019, as compared to 1.62% and 13.10%, 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 12.09%, respectively, during the second quarter of 2019, as compared to 1.69% and 13.65%, respectively, for the prior quarter.

ASSET QUALITY

During the second quarter of 2019, the Company recorded total net charge-offs of $180,000, 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 second quarter of 2019, also consistent with the first quarter of 2019. Nonperforming loans increased to $45.3 million, at June 30, 2019 compared to prior quarter balances of $43.3 million, and now represent 0.51% of loans, inclusive of approximately $2.3 million from the BHB acquired portfolio. Total nonperforming assets increased at June 30, 2019 to $48.2 million when compared to $43.3 million in the prior period, which included $2.9 million in other real estate owned acquired from BHB. Despite these increases, total nonperforming assets at June 30, 2019 are relatively consistent with balances from the year ago period. At June 30, 2019, delinquency as a percentage of loans was 0.24%, representing a decrease of one basis point from the prior quarter.

The allowance for loan losses was $66.0 million at June 30, 2019, as compared to $65.1 million at March 31, 2019. The Company’s allowance for loan losses as a percentage of loans was 0.74% and 0.93% at June 30, 2019 and March 31, 2019, respectively. The decrease in this percentage is attributable to the treatment of loans acquired in connection with the BHB acquisition. These acquired loans are recorded at fair value, which include consideration for estimated credit losses, and without carryover of the respective portfolio's historical allowance for loan losses.


4


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 second quarter earnings at 10:00 a.m. Eastern Time on Friday, July 19, 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: 10132134 and will be available through August 2, 2019. Additionally, a webcast replay will be available until July 19, 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 over 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;
•
changes in market interest rates for interest earning assets and/or interest bearing liabilities and changes related to the phase-out of LIBOR;
•
increased competition in the Company’s market 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 and BHB acquisitions;

5


•
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 common 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 tools used by management.  As a result of merger and acquisition activity, the Company has recognized goodwill and other intangible assets in conjunction with business combination accounting principles.  Excluding the impact of goodwill and other intangibles in measuring asset and capital values for the ratios provided, along with other bank standard capital ratios, provides a framework to compare the capital adequacy of the Company to other companies in the financial services industry.

These non-GAAP measures should not be viewed as a substitute for operating results and other financial measures determined in accordance with GAAP. An item which management deems to be noncore and excludes when computing these non-GAAP measures can be of substantial importance to the Company’s results for any particular quarter or year. The Company’s non-GAAP performance measures, including operating 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

6


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






7



INDEPENDENT BANK CORP. FINANCIAL SUMMARY
 
 
 
 
 
 
CONSOLIDATED BALANCE SHEETS
 
 
 
 
(Unaudited, dollars in thousands)
 
 
 
 
 
 
% Change
 
% Change
 
June 30
2019
 
March 31
2019
 
June 30
2018
 
Jun 2019 vs.
 
Jun 2019 vs.
 
 
 
 
Mar 2019
 
Jun 2018
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
121,001

 
$
106,748

 
$
113,930

 
13.35
 %
 
6.21
 %
Interest-earning deposits with banks
73,013

 
185,526

 
209,176

 
(60.65
)%
 
(65.09
)%
Securities
 
 
 
 
 
 


 


Trading
1,939

 
1,837

 
1,598

 
5.55
 %
 
21.34
 %
Equities
20,807

 
20,357

 
20,133

 
2.21
 %
 
3.35
 %
Available for sale
393,148

 
437,689

 
442,929

 
(10.18
)%
 
(11.24
)%
Held to maturity
797,359

 
623,243

 
538,261

 
27.94
 %
 
48.14
 %
Total securities
1,213,253

 
1,083,126

 
1,002,921

 
12.01
 %
 
20.97
 %
Loans held for sale
123,557

 
5,586

 
9,614

 
2,111.90
 %
 
1,185.18
 %
Loans
 
 
 
 
 
 


 


Commercial and industrial
1,400,924

 
1,150,632

 
976,264

 
21.75
 %
 
43.50
 %
Commercial real estate
4,058,066

 
3,254,085

 
3,131,337

 
24.71
 %
 
29.60
 %
Commercial construction
491,598

 
373,517

 
364,225

 
31.61
 %
 
34.97
 %
Small business
173,927

 
166,410

 
147,137

 
4.52
 %
 
18.21
 %
Total commercial
6,124,515

 
4,944,644

 
4,618,963

 
23.86
 %
 
32.60
 %
Residential real estate
1,655,182

 
935,238

 
779,421

 
76.98
 %
 
112.36
 %
Home equity - first position
656,515

 
642,451

 
646,626

 
2.19
 %
 
1.53
 %
Home equity - subordinate positions
487,984

 
438,290

 
422,671

 
11.34
 %
 
15.45
 %
Total consumer real estate
2,799,681

 
2,015,979

 
1,848,718

 
38.87
 %
 
51.44
 %
Other consumer
26,591

 
16,249

 
11,590

 
63.65
 %
 
129.43
 %
Total loans
8,950,787

 
6,976,872

 
6,479,271

 
28.29
 %
 
38.14
 %
Less: allowance for loan losses
(65,960
)
 
(65,140
)
 
(62,557
)
 
1.26
 %
 
5.44
 %
Net loans
8,884,827

 
6,911,732

 
6,416,714

 
28.55
 %
 
38.46
 %
Federal Home Loan Bank stock
26,085

 
7,667

 
13,107

 
240.22
 %
 
99.02
 %
Bank premises and equipment, net
123,374

 
98,843

 
95,838

 
24.82
 %
 
28.73
 %
Goodwill
504,562

 
256,105

 
231,806

 
97.01
 %
 
117.67
 %
Other intangible assets
33,334

 
14,339

 
7,918

 
132.47
 %
 
320.99
 %
Cash surrender value of life insurance policies
197,292

 
161,521

 
153,574

 
22.15
 %
 
28.47
 %
Other real estate owned and other foreclosed assets
2,889

 
—

 
245

 
100.00%

 
1,079.18
 %
Other assets
300,012

 
166,264

 
126,159

 
80.44
 %
 
137.80
 %
Total assets
$
11,603,199

 
$
8,997,457

 
$
8,381,002

 
28.96
 %
 
38.45
 %
Liabilities and Stockholders' Equity
 
 
 
 
 
 

 

Deposits
 
 
 
 
 
 

 

Demand deposits
$
2,738,420

 
$
2,329,566

 
$
2,262,871

 
17.55
 %
 
21.02
 %
Savings and interest checking accounts
3,196,639

 
2,914,367

 
2,739,228

 
9.69
 %
 
16.70
 %
Money market
1,927,797

 
1,496,118

 
1,351,623

 
28.85
 %
 
42.63
 %
Time certificates of deposit
1,445,059

 
723,551

 
659,768

 
99.72
 %
 
119.03
 %
Total deposits
9,307,915

 
7,463,602

 
7,013,490

 
24.71
 %
 
32.71
 %
Borrowings
 
 
 
 
 
 

 

Federal Home Loan Bank borrowings
277,671

 
25,752

 
50,775

 
978.25
 %
 
446.87
 %
Customer repurchase agreements
—

 
—

 
142,235

 
n/a

 
(100.00
)%
Line of credit, net
—

 
49,993

 
—

 
(100.00
)%
 
n/a

Long-term borrowings, net
74,879

 
74,914

 
—

 
(0.05
)%
 
100.00%

Junior subordinated debentures, net
62,847

 
73,082

 
73,077

 
(14.00
)%
 
(14.00
)%
Subordinated debentures, net
84,305

 
84,299

 
34,705

 
0.01
 %
 
142.92
 %
Total borrowings
499,702

 
308,040

 
300,792

 
62.22
 %
 
66.13
 %

8


Total deposits and borrowings
9,807,617

 
7,771,642

 
7,314,282

 
26.20
 %
 
34.09
 %
Other liabilities
159,579

 
121,277

 
89,655

 
31.58
 %
 
77.99
 %
Total liabilities
9,967,196

 
7,892,919

 
7,403,937

 
26.28
 %
 
34.62
 %
Stockholders' equity
 
 
 
 
 
 

 

Common stock
342

 
280

 
274

 
22.14
 %
 
24.82
 %
Additional paid in capital
1,029,594

 
527,795

 
481,979

 
95.07
 %
 
113.62
 %
Retained earnings
585,111

 
569,582

 
504,926

 
2.73
 %
 
15.88
 %
Accumulated other comprehensive income (loss), net of tax
20,956

 
6,881

 
(10,114
)
 
204.55
 %
 
(307.20
)%
Total stockholders' equity
1,636,003

 
1,104,538

 
977,065


48.12
 %
 
67.44
 %
Total liabilities and stockholders' equity
$
11,603,199

 
$
8,997,457

 
$
8,381,002

 
28.96
 %
 
38.45
 %

CONSOLIDATED STATEMENTS OF INCOME
 
 
 
 
 
(Unaudited, dollars in thousands, except per share data)
 
 
 
 
 
 
Three Months Ended
 
 
 
 
 
 
 
 
 
 
 
% Change
 
% Change
 
June 30
2019
 
March 31
2019
 
June 30
2018
 
Jun 2019 vs.
 
Jun 2019 vs.
 
 
 
 
Mar 2019
 
Jun 2018
Interest income
 
 
 
 
 
 
 
 
 
Interest on federal funds sold and short-term investments
$
647

 
$
426

 
$
541

 
51.88
 %

19.59
 %
Interest and dividends on securities
8,534

 
7,478

 
6,514

 
14.12
 %
 
31.01
 %
Interest and fees on loans
112,923

 
83,608

 
72,082

 
35.06
 %
 
56.66
 %
Interest on loans held for sale
40

 
31

 
30

 
29.03
 %
 
33.33
 %
Total interest income
122,144

 
91,543

 
79,167

 
33.43
 %
 
54.29
 %
Interest expense
 
 
 
 
 
 


 


Interest on deposits
11,178

 
7,028

 
4,587

 
59.05
 %
 
143.69
 %
Interest on borrowings
4,947

 
1,990

 
1,412

 
148.59
 %
 
250.35
 %
Total interest expense
16,125

 
9,018

 
5,999

 
78.81
 %
 
168.79
 %
Net interest income
106,019

 
82,525

 
73,168

 
28.47
 %
 
44.90
 %
Provision for loan losses
1,000

 
1,000

 
2,000

 
—
 %
 
(50.00
)%
Net interest income after provision for loan losses
105,019

 
81,525

 
71,168

 
28.82
 %
 
47.56
 %
Noninterest income
 
 
 
 
 
 


 


Deposit account fees
5,080

 
4,406

 
4,551

 
15.30
 %
 
11.62
 %
Interchange and ATM fees
5,794

 
4,516

 
4,769

 
28.30
 %
 
21.49
 %
Investment management
7,153

 
6,748

 
6,822

 
6.00
 %
 
4.85
 %
Mortgage banking income
3,410

 
806

 
1,038

 
323.08
 %
 
228.52
 %
Increase in cash surrender value of life insurance policies
1,296

 
972

 
998

 
33.33
 %
 
29.86
 %
Loan level derivative income
932

 
641

 
708

 
45.40
 %
 
31.64
 %
Other noninterest income
4,983

 
3,444

 
3,001

 
44.69
 %
 
66.04
 %
Total noninterest income
28,648

 
21,533

 
21,887

 
33.04
 %
 
30.89
 %
Noninterest expenses
 
 
 
 
 
 


 


Salaries and employee benefits
38,852

 
33,117

 
30,288

 
17.32
 %
 
28.28
 %
Occupancy and equipment expenses
8,424

 
7,130

 
6,497

 
18.15
 %
 
29.66
 %
Data processing and facilities management
2,042

 
1,326

 
1,264

 
54.00
 %
 
61.55
 %
FDIC assessment
778

 
616

 
691

 
26.30
 %
 
12.59
 %
Merger and acquisition expense
24,696

 
1,032

 
434

 
2,293.02
 %
 
5,590.32
 %
Other noninterest expenses
18,240

 
13,090

 
13,514

 
39.34
 %
 
34.97
 %
Total noninterest expenses
93,032

 
56,311

 
52,688

 
65.21
 %
 
76.57
 %
Income before income taxes
40,635

 
46,747

 
40,367

 
(13.07
)%
 
0.66
 %
Provision for income taxes
10,007

 
11,522

 
9,249

 
(13.15
)%
 
8.20
 %
Net Income
$
30,628

 
$
35,225

 
$
31,118

 
(13.05
)%
 
(1.57
)%
 
 
 
 
 
 
 
 
 
 
Weighted average common shares (basic)
34,313,492

 
28,106,184

 
27,526,653

 
 
 
 

9


Common share equivalents
41,878

 
54,466

 
54,525

 
 
 
 
Weighted average common shares (diluted)
34,355,370

 
28,160,650

 
27,581,178

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.89

 
$
1.25

 
$
1.13

 
(28.80
)%
 
(21.24
)%
Diluted earnings per share
$
0.89

 
$
1.25

 
$
1.13

 
(28.80
)%
 
(21.24
)%
 
 
 
 
 
 
 
 
 
 
Reconciliation of Net Income (GAAP) to Operating Net Income (Non-GAAP):
 
 
 
 
 
 
Net income
$
30,628

 
$
35,225

 
$
31,118

 
 
 
 
Noninterest expense components
 
 
 
 
 
 
 
 
 
Add - merger and acquisition expenses
24,696

 
1,032

 
434

 
 
 
 
Noncore items, gross
24,696

 
1,032

 
434

 
 
 
 
Less - net tax benefit associated with noncore items (1)
(6,560
)
 
(198
)
 
(122
)
 
 
 
 
Add - adjustment for tax effect of previously incurred merger and acquisition expenses
—

 
650

 
—

 
 
 
 
Total tax impact
(6,560
)
 
452

 
(122
)
 
 
 
 
Noncore items, net of tax
18,136

 
1,484

 
312

 
 
 
 
Operating net income
$
48,764

 
$
36,709

 
$
31,430

 
32.84
 %
 
55.15
 %
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share, on an operating basis
$
1.42

 
$
1.30

 
$
1.14

 
9.23
 %
 
24.56
 %
(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)
4.09
%
 
4.14
%
 
3.89
%
 
 
 
 
Return on average assets GAAP (calculated by dividing net income by average assets)
1.06
%
 
1.62
%
 
1.52
%
 
 
 
 
Return on average assets on an operating basis (calculated by dividing net operating earnings by average assets)
1.69
%
 
1.69
%
 
1.53
%
 
 
 
 
Return on average common equity GAAP (calculated by dividing net income by average common equity)
7.59
%
 
13.10
%
 
12.85
%
 
 
 
 
Return on average common equity on an operating basis (calculated by dividing net operating earnings by average common equity)
12.09
%
 
13.65
%
 
12.98
%
 
 
 
 
CONSOLIDATED STATEMENTS OF INCOME
 
 
 
 
 
(Unaudited, dollars in thousands, except per share data)
 
 
 
 
 
 
Six Months Ended
 
 
 
 
 
 
 
 
% Change
 
 
June 30
2019
 
June 30
2018
 
Jun 2019 vs.
 
 
 
 
Jun 2018
 
 
 
 
 
 
 
Interest income
 
 
 
 
 
 
Interest on federal funds sold and short-term investments
 
$
1,073

 
$
852

 
25.94
 %
Interest and dividends on securities
 
16,012

 
12,749

 
25.59
 %
Interest and fees on loans
 
196,531

 
139,266

 
41.12
 %
Interest on loans held for sale
 
71

 
49

 
44.90
 %
Total interest income
 
213,687

 
152,916

 
39.74
 %
Interest expense
 
 
 
 
 


Interest on deposits
 
18,206

 
8,522

 
113.64
 %
Interest on borrowings
 
6,937

 
2,755

 
151.80
 %
Total interest expense
 
25,143

 
11,277

 
122.96
 %
Net interest income
 
188,544

 
141,639

 
33.12
 %
Provision for loan losses
 
2,000

 
2,500

 
(20.00
)%
Net interest income after provision for loan losses
 
186,544

 
139,139

 
34.07
 %
Noninterest income
 
 
 
 
 


Deposit account fees
 
9,486

 
8,982

 
5.61
 %
Interchange and ATM fees
 
10,310

 
8,942

 
15.30
 %

10


Investment management
 
13,901

 
12,964

 
7.23
 %
Mortgage banking income
 
4,216

 
1,908

 
120.96
 %
Increase in cash surrender value of life insurance policies
 
2,268

 
1,945

 
16.61
 %
Loan level derivative income
 
1,573

 
1,155

 
36.19
 %
Other noninterest income
 
8,427

 
5,854

 
43.95
 %
Total noninterest income
 
50,181

 
41,750

 
20.19
 %
Noninterest expenses
 
 
 
 
 


Salaries and employee benefits
 
71,969

 
61,388

 
17.24
 %
Occupancy and equipment expenses
 
15,554

 
13,905

 
11.86
 %
Data processing and facilities management
 
3,368

 
2,550

 
32.08
 %
FDIC assessment
 
1,394

 
1,489

 
(6.38
)%
Merger and acquisition expense
 
25,728

 
434

 
5,828.11
 %
Other noninterest expenses
 
31,330

 
26,373

 
18.80
 %
Total noninterest expenses
 
149,343

 
106,139

 
40.71
 %
Income before income taxes
 
87,382

 
74,750

 
16.90
 %
Provision for income taxes
 
21,529

 
16,077

 
33.91
 %
Net Income
 
$
65,853

 
$
58,673

 
12.24
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares (basic)
 
31,226,985

 
27,506,724

 


Common share equivalents
 
48,381

 
61,480

 
 
Weighted average common shares (diluted)
 
31,275,366

 
27,568,204

 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
2.11

 
$
2.13

 
(0.94
)%
Diluted earnings per share
 
$
2.11

 
$
2.13

 
(0.94
)%
 
 
 
 
 
 
 
Reconciliation of Net Income (GAAP) to Operating Net Income (Non-GAAP):
 
 
 
 
 


Net Income
 
$
65,853

 
$
58,673

 
 
Noninterest expense components
 
 
 
 
 


Add - merger and acquisition expenses
 
25,728

 
434

 


Noncore items, gross
 
25,728

 
434

 


Less - net tax benefit associated with noncore items (1)
 
(6,758
)
 
(122
)
 


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

 
—

 
 
Total tax impact
 
(6,108
)
 
(122
)
 
 
Noncore items, net of tax
 
$
19,620

 
$
312

 
 
Operating net income
 
$
85,473

 
$
58,985

 
44.91
 %
 
 
 
 
 
 
 
Diluted earnings per share, on an operating basis
 
$
2.73

 
$
2.14

 
27.57
 %
(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)
 
4.12
%
 
3.83
%
 


Return on average assets GAAP (calculated by dividing net income by average assets)
 
1.30
%
 
1.46
%
 


Return on average assets on an operating basis (calculated by dividing net operating earnings by average assets)
 
1.69
%
 
1.46
%
 


Return on average common equity GAAP (calculated by dividing net income by average common equity)
 
9.80
%
 
12.30
%
 


Return on average common equity on an operating basis (calculated by dividing net operating earnings by average common equity)
 
12.72
%
 
12.36
%
 



11


ASSET QUALITY
 
 
(Unaudited, dollars in thousands)
 
Nonperforming Assets At
 
 
June 30
2019
 
March 31
2019
 
June 30
2018
Nonperforming loans
 
 
 
 
 
 
Commercial & industrial loans
 
$
24,895

 
$
25,879

 
$
30,095

Commercial real estate loans
 
833

 
1,539

 
3,110

Small business loans
 
168

 
180

 
384

Residential real estate loans
 
11,762

 
8,517

 
7,612

Home equity
 
7,514

 
7,202

 
5,861

Other consumer
 
122

 
14

 
50

Total nonperforming loans
 
45,294

 
43,331

 
47,112

Other real estate owned
 
2,889

 
—

 
245

Total nonperforming assets
 
$
48,183

 
$
43,331

 
$
47,357

 
 
 
 
 
 
 
Nonperforming loans/gross loans
 
0.51
%
 
0.62
%
 
0.73
%
Nonperforming assets/total assets
 
0.42
%
 
0.48
%
 
0.57
%
Allowance for loan losses/nonperforming loans
 
145.63
%
 
150.33
%
 
132.78
%
Allowance for loan losses/total loans
 
0.74
%
 
0.93
%
 
0.97
%
Delinquent loans/total loans
 
0.24
%
 
0.25
%
 
0.89
%
 
 
 
 
 
 
 
 
 
Nonperforming Assets Reconciliation for the Three Months Ended
 
 
June 30
2019
 
March 31
2019
 
June 30
2018
 
 
 
 
 
 
 
Nonperforming assets beginning balance
 
$
43,331

 
$
45,418

 
$
48,071

New to nonperforming
 
4,801

 
1,857

 
3,642

Acquired loans
 
2,317

 
—

 
—

Loans charged-off
 
(472
)
 
(559
)
 
(568
)
Loans paid-off
 
(3,289
)
 
(3,171
)
 
(2,209
)
Loans restored to performing status
 
(1,266
)
 
(232
)
 
(1,490
)
Acquired other real estate owned
 
2,818

 
—

 
—

Other
 
(57
)
 
18

 
(89
)
Nonperforming assets ending balance
 
$
48,183

 
$
43,331

 
$
47,357



12


 
 
Net Charge-Offs (Recoveries)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30
2019
 
March 31
2019
 
June 30
2018
 
June 30
2019
 
June 30
2018
Net charge-offs (recoveries)
 
 
 
 
 
 
 
 
 
 
Commercial and industrial loans
 
$
—

 
$
(124
)
 
$
(55
)
 
$
(124
)
 
$
66

Commercial real estate loans
 
(13
)
 
(33
)
 
(18
)
 
(46
)
 
(38
)
Small business loans
 
29

 
118

 
92

 
147

 
107

Residential real estate loans
 
—

 
(1
)
 
108

 
(1
)
 
145

Home equity
 
53

 
47

 
72

 
100

 
117

Other consumer
 
111

 
146

 
106

 
257

 
189

Total net charge-offs
 
$
180

 
$
153

 
$
305

 
$
333

 
$
586

 
 
 
 
 
 
 
 
 
 
 
Net charge-offs to average loans (annualized)
 
0.01
%
 
0.01
%
 
0.02
%
 
0.01
%
 
0.02
%
 
 
Troubled Debt Restructurings At
 
 
June 30
2019
 
March 31
2019
 
June 30
2018
Troubled debt restructurings on accrual status
 
$
22,423

 
$
23,053

 
$
25,528

Troubled debt restructurings on nonaccrual status
 
27,841

 
28,908

 
4,095

Total troubled debt restructurings
 
$
50,264

 
$
51,961

 
$
29,623

 
 
 
 
 
 
 
BALANCE SHEET AND CAPITAL RATIOS
 
 
 
 
 
 
 
 
June 30
2019
 
March 31
2019
 
June 30
2018
Gross loans/total deposits
 
96.16
%
 
93.48
%
 
92.38
%
Common equity tier 1 capital ratio (1)
 
12.24
%
 
12.09
%
 
11.64
%
Tier one leverage capital ratio (1)
 
10.45
%
 
10.64
%
 
10.39
%
Common equity to assets ratio GAAP
 
14.10
%
 
12.28
%
 
11.66
%
Tangible common equity to tangible assets ratio (2)
 
9.92
%
 
9.56
%
 
9.06
%
Book value per share GAAP
 
$
47.67

 
$
39.26

 
$
35.49

Tangible book value per share (2)
 
$
32.00

 
$
29.64

 
$
26.78

(1) Estimated number for June 30, 2019.
(2) See Appendix A for detailed reconciliation from GAAP to Non-GAAP ratios.
    



















13



INDEPENDENT BANK CORP. SUPPLEMENTAL FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited, dollars in thousands)
 
Three Months Ended
 
 
June 30, 2019
 
March 31, 2019
 
June 30, 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
 
$
104,157

 
$
647

 
2.49
%
 
$
68,994

 
$
426

 
2.50
%
 
$
122,116

 
$
541

 
1.78
%
Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities - trading
 
1,894

 
—

 
—
%
 
1,616

 
—

 
—
%
 
1,599

 
—

 
—
%
Securities - taxable investments
 
1,240,509

 
8,521

 
2.76
%
 
1,084,747

 
7,465

 
2.79
%
 
993,222

 
6,498

 
2.62
%
Securities - nontaxable investments (1)
 
1,739

 
17

 
3.92
%
 
1,738

 
17

 
3.97
%
 
2,204

 
20

 
3.64
%
Total securities
 
$
1,244,142

 
$
8,538

 
2.75
%
 
$
1,088,101

 
$
7,482

 
2.79
%
 
$
997,025

 
$
6,518

 
2.62
%
Loans held for sale
 
15,710

 
40

 
1.02
%
 
3,445

 
31

 
3.65
%
 
4,719

 
30

 
2.55
%
Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial (1)
 
1,405,693

 
20,960

 
5.98
%
 
1,113,819

 
14,440

 
5.26
%
 
943,110

 
11,116

 
4.73
%
Commercial real estate (1)
 
4,091,335

 
50,860

 
4.99
%
 
3,240,346

 
39,230

 
4.91
%
 
3,092,771

 
35,175

 
4.56
%
Commercial construction
 
460,921

 
7,265

 
6.32
%
 
386,736

 
5,617

 
5.89
%
 
416,830

 
5,256

 
5.06
%
Small business
 
166,440

 
2,610

 
6.29
%
 
165,374

 
2,484

 
6.09
%
 
138,758

 
2,008

 
5.80
%
Total commercial
 
6,124,389

 
81,695

 
5.35
%
 
4,906,275

 
61,771

 
5.11
%
 
4,591,469

 
53,555

 
4.68
%
Residential real estate
 
1,746,723

 
17,475

 
4.01
%
 
926,945

 
9,547

 
4.18
%
 
769,441

 
7,661

 
3.99
%
Home equity
 
1,146,066

 
13,313

 
4.66
%
 
1,086,620

 
12,175

 
4.54
%
 
1,061,082

 
10,830

 
4.09
%
Total consumer real estate
 
2,892,789

 
30,788

 
4.27
%
 
2,013,565

 
21,722

 
4.38
%
 
1,830,523

 
18,491

 
4.05
%
Other consumer
 
29,413

 
683

 
9.31
%
 
16,087

 
313

 
7.89
%
 
10,295

 
211

 
8.22
%
Total loans
 
$
9,046,591

 
$
113,166

 
5.02
%
 
$
6,935,927

 
$
83,806

 
4.90
%
 
$
6,432,287

 
$
72,257

 
4.51
%
Total interest-earning assets
 
$
10,410,600

 
$
122,391

 
4.72
%
 
$
8,096,467

 
$
91,745

 
4.60
%
 
$
7,556,147

 
$
79,346

 
4.21
%
Cash and due from banks
 
125,507

 
 
 
 
 
105,194

 
 
 
 
 
100,952

 
 
 
 
Federal Home Loan Bank stock
 
22,161

 
 
 
 
 
11,697

 
 
 
 
 
13,399

 
 
 
 
Other assets
 
1,041,346

 
 
 
 
 
617,259

 
 
 
 
 
545,994

 
 
 
 
Total assets
 
$
11,599,614

 
 
 
 
 
$
8,830,617

 
 
 
 
 
$
8,216,492

 
 
 
 
Interest-bearing liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Savings and interest checking accounts
 
$
3,205,512

 
$
2,175

 
0.27
%
 
$
2,891,613

 
$
1,954

 
0.27
%
 
$
2,664,148

 
$
1,293

 
0.19
%
Money market
 
1,975,900

 
4,440

 
0.90
%
 
1,464,151

 
2,719

 
0.75
%
 
1,360,216

 
1,667

 
0.49
%
Time deposits
 
1,375,726

 
4,563

 
1.33
%
 
717,081

 
2,355

 
1.33
%
 
653,373

 
1,627

 
1.00
%
Total interest-bearing deposits
 
$
6,557,138

 
$
11,178

 
0.68
%
 
$
5,072,845

 
$
7,028

 
0.56
%
 
$
4,677,737

 
$
4,587

 
0.39
%
Borrowings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal Home Loan Bank borrowings
 
372,260

 
2,373

 
2.56
%
 
112,898

 
710

 
2.55
%
 
62,600

 
295

 
1.89
%
Customer repurchase agreements
 
—

 
—

 
—
%
 
—

 
—

 
—
%
 
143,259

 
64

 
0.18
%
Line of Credit
 
8,636

 
83

 
3.85
%
 
2,221

 
21

 
3.83
%
 
—

 
—

 
—
%
Long-term borrowings
 
74,932

 
745

 
3.99
%
 
3,331

 
32

 
3.90
%
 
—

 
—

 
—
%
Junior subordinated debentures
 
71,508

 
701

 
3.93
%
 
73,287

 
684

 
3.79
%
 
73,076

 
625

 
3.43
%
Subordinated debentures
 
84,294

 
1,045

 
4.97
%
 
44,678

 
543

 
4.93
%
 
34,699

 
428

 
4.95
%
Total borrowings
 
$
611,630

 
$
4,947

 
3.24
%
 
$
236,415

 
$
1,990

 
3.41
%
 
$
313,634

 
$
1,412

 
1.81
%
Total interest-bearing liabilities
 
$
7,168,768

 
$
16,125

 
0.90
%
 
$
5,309,260

 
$
9,018

 
0.69
%
 
$
4,991,371

 
$
5,999

 
0.48
%
Demand deposits
 
2,641,470

 
 
 
 
 
2,317,209

 
 
 
 
 
2,174,571

 
 
 
 
Other liabilities
 
171,703

 
 
 
 
 
113,688

 
 
 
 
 
79,266

 
 
 
 
Total liabilities
 
$
9,981,941

 
 
 
 
 
$
7,740,157

 
 
 
 
 
$
7,245,208

 
 
 
 
Stockholders' equity
 
1,617,673

 
 
 
 
 
1,090,460

 
 
 
 
 
971,284

 
 
 
 

14


Total liabilities and stockholders' equity
 
$
11,599,614

 
 
 
 
 
$
8,830,617

 
 
 
 
 
$
8,216,492

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
 
 
$
106,266

 
 
 
 
 
$
82,727

 
 
 
 
 
$
73,347

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate spread (2)
 
 
 
 
 
3.82
%
 
 
 
 
 
3.91
%
 
 
 
 
 
3.73
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin (3)
 
 
 
 
 
4.09
%
 
 
 
 
 
4.14
%
 
 
 
 
 
3.89
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total deposits, including demand deposits
 
$
9,198,608

 
$
11,178

 
 
 
$
7,390,054

 
$
7,028

 
 
 
$
6,852,308

 
$
4,587

 
 
Cost of total deposits
 
 
 
 
 
0.49
%
 
 
 
 
 
0.39
%
 
 
 
 
 
0.27
%
Total funding liabilities, including demand deposits
 
$
9,810,238

 
$
16,125

 
 
 
$
7,626,469

 
$
9,018

 
 
 
$
7,165,942

 
$
5,999

 
 
Cost of total funding liabilities
 
 
 
 
 
0.66
%
 
 
 
 
 
0.48
%
 
 
 
 
 
0.34
%

(1) The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $247,000, $202,000, and $179,000 for the three months ended June 30, 2019, March 31, 2019, and June 30, 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.

15



 
 
Six Months Ended
 
 
June 30, 2019
 
June 30, 2018
 
 
 
 
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
 
$
86,673

 
$
1,073

 
2.50
%
 
$
102,136

 
$
852

 
1.68
%
Securities
 
 
 
 
 
 
 
 
 
 
 
 
Securities - trading
 
1,756

 
—

 
—
%
 
1,517

 
—

 
—
%
Securities - taxable investments
 
1,163,058

 
15,986

 
2.77
%
 
980,293

 
12,717

 
2.62
%
Securities - nontaxable investments (1)
 
1,738

 
34

 
3.94
%
 
2,233

 
40

 
3.61
%
Total securities
 
$
1,166,552

 
$
16,020

 
2.77
%
 
$
984,043

 
$
12,757

 
2.61
%
Loans held for sale
 
9,611

 
71

 
1.49
%
 
3,741

 
49

 
2.64
%
Loans
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial (1)
 
1,260,562

 
35,400

 
5.66
%
 
911,399

 
20,731

 
4.59
%
Commercial real estate (1)
 
3,668,191

 
90,090

 
4.95
%
 
3,100,063

 
68,464

 
4.45
%
Commercial construction
 
424,034

 
12,882

 
6.13
%
 
407,328

 
9,927

 
4.91
%
Small business
 
165,910

 
5,094

 
6.19
%
 
135,460

 
3,870

 
5.76
%
Total commercial
 
5,518,697

 
143,466

 
5.24
%
 
4,554,250

 
102,992

 
4.56
%
Residential real estate
 
1,339,099

 
27,022

 
4.07
%
 
762,755

 
15,162

 
4.01
%
Home equity
 
1,116,507

 
25,488

 
4.60
%
 
1,056,080

 
21,035

 
4.02
%
Total consumer real estate
 
2,455,606

 
52,510

 
4.31
%
 
1,818,835

 
36,197

 
4.01
%
Other consumer
 
22,787

 
996

 
8.81
%
 
10,476

 
425

 
8.18
%
Total loans
 
$
7,997,090

 
$
196,972

 
4.97
%
 
$
6,383,561

 
$
139,614

 
4.41
%
Total interest-earning assets
 
$
9,259,926

 
$
214,136

 
4.66
%
 
$
7,473,481

 
$
153,272

 
4.14
%
Cash and due from banks
 
115,407

 
 
 
 
 
99,288

 
 
 
 
Federal Home Loan Bank stock
 
16,958

 
 
 
 
 
13,209

 
 
 
 
Other assets
 
830,474

 
 
 
 
 
545,756

 
 
 
 
Total assets
 
$
10,222,765

 
 
 
 
 
$
8,131,734

 
 
 
 
Interest-bearing liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Deposits
 
 
 
 
 
 
 
 
 
 
 
 
Savings and interest checking accounts
 
$
3,049,430

 
$
4,129

 
0.27
%
 
$
2,613,945

 
$
2,386

 
0.18
%
Money market
 
1,721,439

 
7,159

 
0.84
%
 
1,349,301

 
3,031

 
0.45
%
Time deposits
 
1,048,223

 
6,918

 
1.33
%
 
649,970

 
3,105

 
0.96
%
Total interest-bearing deposits
 
$
5,819,092

 
$
18,206

 
0.63
%
 
$
4,613,216

 
$
8,522

 
0.37
%
Borrowings
 
 
 
 
 
 
 
 
 
 
 
 
Federal Home Loan Bank borrowings
 
243,296

 
3,083

 
2.56
%
 
67,792

 
555

 
1.65
%
Customer repurchase agreements
 
—

 
—

 
—
%
 
149,479

 
130

 
0.18
%
Line of Credit
 
5,446

 
104

 
3.85
%
 
—

 
—

 
—
%
Long-term borrowings
 
39,329

 
777

 
3.98
%
 
—

 
—

 
—
%
Junior subordinated debentures
 
72,393

 
1,385

 
3.86
%
 
73,075

 
1,215

 
3.35
%
Subordinated debentures
 
64,595

 
1,588

 
4.96
%
 
34,693

 
855

 
4.97
%
Total borrowings
 
$
425,059

 
$
6,937

 
3.29
%
 
$
325,039

 
$
2,755

 
1.71
%
Total interest-bearing liabilities
 
$
6,244,151

 
$
25,143

 
0.81
%
 
$
4,938,255

 
$
11,277

 
0.46
%
Demand deposits
 
2,480,235

 
 
 
 
 
2,152,168

 
 
 
 

16


Other liabilities
 
142,856

 
 
 
 
 
79,196

 
 
 
 
Total liabilities
 
$
8,867,242

 
 
 
 
 
$
7,169,619

 
 
 
 
Stockholders' equity
 
1,355,523

 
 
 
 
 
962,115

 
 
 
 
Total liabilities and stockholders' equity
 
$
10,222,765

 
 
 
 
 
$
8,131,734

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
 
 
$
188,993

 
 
 
 
 
$
141,995

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate spread (2)
 
 
 
 
 
3.85
%
 
 
 
 
 
3.68
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin (3)
 
 
 
 
 
4.12
%
 
 
 
 
 
3.83
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental Information
 
 
 
 
 
 
 
 
 
 
 
 
Total deposits, including demand deposits
 
$
8,299,327

 
$
18,206

 
 
 
$
6,765,384

 
$
8,522

 
 
Cost of total deposits
 
 
 
 
 
0.44
%
 
 
 
 
 
0.25
%
Total funding liabilities, including demand deposits
 
$
8,724,386

 
$
25,143

 
 
 
$
7,090,423

 
$
11,277

 
 
Cost of total funding liabilities
 
 
 
 
 
0.58
%
 
 
 
 
 
0.32
%
(1) The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $449,000 and $356,000 for the six months ended June 30, 2019 and 2018, 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.

Organic Loan and Deposit Growth
 
 
 
 
 
 
 
 
 
 
(Unaudited, dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Linked quarter
 
 
June 30
2019
 
March 31
2019
 
BHB Balance Acquired
 
Reclass to LHFS (1)
 
Organic Growth/(Decline)
 
Organic Growth/(Decline)%
Loans
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
1,400,924

 
$
1,150,632

 
$
259,592

 
$
—

 
$
(9,300
)
 
(0.81
)%
Commercial real estate
 
4,058,066

 
3,254,085

 
838,018

 
—

 
(34,037
)
 
(1.05
)%
Commercial construction
 
491,598

 
373,517

 
78,609

 
—

 
39,472

 
10.57
 %
Small business
 
173,927

 
166,410

 
13,851

 
—

 
(6,334
)
 
(3.81
)%
Total commercial
 
6,124,515

 
4,944,644

 
1,190,070

 
—

 
(10,199
)
 
(0.21
)%
Residential real estate
 
1,655,182

 
935,238

 
807,154

 
85,986

 
(1,224
)
 
(0.13
)%
Home equity
 
1,144,499

 
1,080,741

 
64,299

 
—

 
(541
)
 
(0.05
)%
Total consumer real estate
 
2,799,681

 
2,015,979

 
871,453

 
85,986

 
(1,765
)
 
(0.09
)%
Total other consumer
 
26,591

 
16,249

 
12,191

 
—

 
(1,849
)
 
(11.38
)%
Total loans
 
$
8,950,787

 
$
6,976,872

 
$
2,073,714

 
$
85,986

 
$
(13,813
)
 
(0.20
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits
 
 
 
 
 
 
 
 
 
 
 
 
Demand deposits
 
$
2,738,420

 
$
2,329,566

 
$
301,276

 
$
—

 
$
107,578

 
4.62
 %
Savings and interest checking accounts
 
3,196,639

 
2,914,367

 
351,554

 
—

 
(69,282
)
 
(2.38
)%
Money market
 
1,927,797

 
1,496,118

 
543,842

 
—

 
(112,163
)
 
(7.50
)%
Time certificates of deposit
 
1,445,059

 
723,551

 
733,764

 
—

 
(12,256
)
 
(1.69
)%
Total deposits
 
$
9,307,915

 
$
7,463,602

 
$
1,930,436

 
$
—

 
$
(86,123
)
 
(1.15
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

17


 
 
Year-over-Year
 
 
June 30
2019
 
June 30
2018
 
MNB Balances Acquired
 
BHB Balances Acquired
 
Reclass to LHFS (1)
 
Organic Growth/(Decline)
 
Organic Growth/(Decline)%
Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
1,400,924

 
$
976,264

 
$
44,929

 
$
259,592

 
$
—

 
$
120,139

 
12.31
 %
Commercial real estate
 
4,058,066

 
3,131,337

 
112,922

 
838,018

 
—

 
(24,211
)
 
(0.77
)%
Commercial construction
 
491,598

 
364,225

 
16,497

 
78,609

 
—

 
32,267

 
8.86
 %
Small business
 
173,927

 
147,137

 
12,589

 
13,851

 
—

 
350

 
0.24
 %
Total commercial
 
6,124,515

 
4,618,963

 
186,937

 
1,190,070

 
—

 
128,545

 
2.78
 %
Residential real estate
 
1,655,182

 
779,421

 
95,705

 
807,154

 
85,986

 
58,888

 
7.56
 %
Home equity
 
1,144,499

 
1,069,297

 
7,692

 
64,299

 
—

 
3,211

 
0.30
 %
Total consumer real estate
 
2,799,681

 
1,848,718

 
103,397

 
871,453

 
85,986

 
62,099

 
3.36
 %
Total other consumer
 
26,591

 
11,590

 
3,164

 
12,191

 
—

 
(354
)
 
(3.05
)%
Total loans
 
$
8,950,787

 
$
6,479,271

 
$
293,498

 
$
2,073,714

 
$
85,986

 
$
190,290

 
2.94
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand deposits
 
$
2,738,420

 
$
2,262,871

 
$
77,786

 
$
301,276

 
$
—

 
$
96,487

 
4.26
 %
Savings and interest checking accounts
 
3,196,639

 
2,739,228

 
58,441

 
351,554

 
—

 
47,416

 
1.73
 %
Money market
 
1,927,797

 
1,351,623

 
73,645

 
543,842

 
—

 
(41,313
)
 
(3.06
)%
Time certificates of deposit
 
1,445,059

 
659,768

 
68,332

 
733,764

 
—

 
(16,805
)
 
(2.55
)%
Total deposits
 
$
9,307,915

 
$
7,013,490

 
$
278,204

 
$
1,930,436

 
$
—

 
$
85,785

 
1.22
 %

(1)
At June 30, 2019 the Company transferred $86.0 million of residential loans as held for sale, primarily comprised of acquired BHB loans. The table above adjusts for the amounts transferred to arrive at the organic growth/(decline) prior to the transfer.


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


18


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:
 
 
June 30
2019
 
March 31
2019
 
June 30
2018
 
Tangible common equity
 
 
 
 
 
 
 
Stockholders' equity (GAAP)
 
$
1,636,003

 
$
1,104,538

 
$
977,065

(a)
Less: Goodwill and other intangibles
 
537,896

 
270,444

 
239,724

 
Tangible common equity
 
$
1,098,107

 
$
834,094

 
$
737,341

(b)
Tangible assets
 
 
 
 
 
 
 
Assets (GAAP)
 
$
11,603,198

 
$
8,997,457

 
$
8,381,002

(c)
Less: Goodwill and other intangibles
 
537,896

 
270,444

 
239,724

 
Tangible assets
 
$
11,065,302

 
$
8,727,013

 
$
8,141,278

(d)
 
 
 
 
 
 
 
 
Common Shares
 
34,321,061

 
28,137,504

 
27,532,524

(e)
 
 
 
 
 
 
 
 
Common equity to assets ratio (GAAP)
 
14.10
%
 
12.28
%
 
11.66
%
(a/c)
Tangible common equity to tangible assets ratio (Non-GAAP)
 
9.92
%
 
9.56
%
 
9.06
%
(b/d)
Book value per share (GAAP)
 
$
47.67

 
$
39.26

 
$
35.49

(a/e)
Tangible book value per share (Non-GAAP)
 
$
32.00

 
$
29.64

 
$
26.78

(b/e)


19


APPENDIX B

(Unaudited, dollars in thousands)

The following table summarizes the impact of noncore items on the Company's calculation of noninterest income and noninterest expense, as well as the impact of noncore items on noninterest income as a percentage of total revenue and the efficiency ratio for the periods indicated:
 
Three Months Ended
 
Six Months Ended
 
 
June 30
2019
 
March 31
2019
 
June 30
2018
 
June 30, 2019
 
June 30, 2018
 
Net interest income (GAAP)
$
106,019

 
$
82,525

 
$
73,168

 
$
188,544

 
$
141,639

(a)
 
 
 
 
 
 
 
 
 
 
 
Noninterest income (GAAP)
$
28,648

 
$
21,533

 
$
21,887

 
$
50,181

 
$
41,750

(b)
Noninterest income on an operating basis (Non-GAAP)
$
28,648

 
$
21,533

 
$
21,887

 
$
50,181

 
$
41,750

(c)
 
 
 
 
 
 
 
 
 
 
 
Noninterest expense (GAAP)
$
93,032

 
$
56,311

 
$
52,688

 
$
149,343

 
$
106,139

(d)
Less:
 
 
 
 
 
 
 
 
 
 
Merger and acquisition expense
24,696

 
1,032

 
434

 
25,728

 
434

 
Noninterest expense on an operating basis (Non-GAAP)
$
68,336

 
$
55,279

 
$
52,254

 
$
123,615

 
$
105,705

(e)
 
 
 
 
 
 
 
 
 
 
 
Total revenue (GAAP)
$
134,667

 
$
104,058

 
$
95,055

 
$
238,725

 
$
183,389

(a+b)
Total operating revenue (Non-GAAP)
$
134,667

 
$
104,058

 
$
95,055

 
$
238,725

 
$
183,389

(a+c)
 
 
 
 
 
 
 
 
 
 
 
Ratios
 
 
 
 
 
 
 
 
 
 
Noninterest income as a % of total revenue (GAAP based)
21.27
%
 
20.69
%
 
23.03
%
 
21.02
%
 
22.77
%
(b/(a+b))
Noninterest income as a % of total revenue on an operating basis (Non-GAAP)
21.27
%
 
20.69
%
 
23.03
%
 
21.02
%
 
22.77
%
(c/(a+c))
Efficiency ratio (GAAP based)
69.08
%
 
54.12
%
 
55.43
%
 
62.56
%
 
57.88
%
(d/(a+b))
Efficiency ratio on an operating basis (Non-GAAP)
50.74
%
 
53.12
%
 
54.97
%
 
51.78
%
 
57.64
%
(e/(a+c))


20