Exhibit 99.1
Shareholder Relations NEWS RELEASE
288 Union Street,
Rockland, MA 02370
INDEPENDENT BANK CORP. REPORTS SECOND QUARTER NET INCOME OF $20.6 MILLION
Strong Fundamentals Drive Solid Earnings Growth
Rockland, Massachusetts (July 20, 2017) Independent Bank Corp. (Nasdaq Global Select Market: INDB), parent of Rockland Trust Company, today announced 2017 second quarter net income of $20.6 million, or $0.75 per diluted share, compared to $20.7 million, or $0.76 per diluted share, reported in the prior quarter. The first and second quarter 2017 net income included merger and acquisition expenses, which the Company considers to be non-core. Excluding these items and their related tax impact, adjusted net income for the second quarter of 2017 was $22.4 million, or $0.82 per diluted share, versus an adjusted $21.1 million, or $0.78 per diluted share in the prior quarter.
"During the second quarter of 2017 Rockland Trust grew to over $8.0 billion in assets, expanded our geographic reach to include Martha's Vineyard, and was recognized by J.D. Power as having the highest ranking for customer satisfaction with retail banking in New England," said Christopher Oddleifson, the Chief Executive Officer and President of Independent Bank Corp. and Chief Executive Officer of Rockland Trust Company. "Through our disciplined approach to organic growth and acquisitions in the past year we have grown total loans and net interest income by over ten percent (10%) and core deposits by over nine percent (9%), all while managing expenses in an efficient manner to achieve economies of scale. Rockland Trust is focused on being the best bank for business in Boston, eastern Massachusetts, and Rhode Island. Our steady progress is directly attributable to the superior customer service provided by my colleagues."
ISLAND BANCORP, INC. ACQUISITION
On May 12, 2017, the Company completed the acquisition of Island Bancorp, Inc., the parent company of The Edgartown National Bank ("Island Bancorp"). This resulted in the addition of four locations on Martha's Vineyard, Massachusetts. The transaction included the acquisition of $155.6 million in loans and the assumption of $159.6 million in deposits, each at fair value. Total consideration of $28.3 million consisted of 369,286 shares of Independent Bank Corp. common stock issued to Island Bancorp shareholders, as well as $4.8 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:
| Net Assets Acquired at Fair Value | |||
| (Dollars in thousands) | |||
| Assets | |||
| Cash | $ | 11,137 | |
| Loans | 155,551 | ||
| Bank premises and equipment | 5,828 | ||
| Goodwill | 10,280 | ||
| Core deposit and other intangibles | 2,964 | ||
| Other assets | 4,629 | ||
| Total assets acquired | $ | 190,389 | |
| Liabilities | |||
| Deposits | $ | 159,580 | |
| Borrowings | 2,475 | ||
| Other liabilities | 18 | ||
| Total liabilities assumed | $ | 162,073 | |
| Purchase price | $ | 28,316 | |
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 $8.0 billion at June 30, 2017 increased by $279.2 million, or 3.6%, from the prior quarter and by $598.4 million, or 8.1%, as compared to the year ago period, inclusive of the 2017 second quarter Island Bancorp acquisition and 2016 fourth quarter New England Bancorp ("NEB") acquisition.
Exclusive of the acquisitions, total loans grew in the second quarter by $49.8 million, or 3.3% on an annualized basis, and increased by $214.2 million, or 3.8%, when compared to the year ago period. The second quarter organic increase was driven by loan growth in both the total commercial and consumer real estate portfolios. The total commercial portfolio reflected strong double-digit annualized growth in each of the commercial and industrial (11.5% annualized) and small business (16.6% annualized) portfolios, partly offset by a decline in construction related balances (17.5% annualized). Additionally, continued strong marketing efforts and increased demand for jumbo products drove strong home equity and residential mortgage closings. As a result, the home equity portfolio increased organically by $15.8 million, or 6.3% on an annualized basis and the residential mortgage portfolio increased organically by $7.9 million, or 4.9% on an annualized basis, in the second quarter. Prepayment activity continued to slow across most portfolios in light of the rising rate environment.
Exclusive of the acquisitions, deposits increased in the second quarter by $65.1 million, or 4.0%, on an annualized basis, and increased by $162.2 million, or 2.6%, when compared to the year ago period. The Company's deposit growth continues to be fueled by core deposits, which grew organically by $65.3 million in the second quarter. Inclusive of the acquired balances, core deposits have now risen to 90.5% of total deposits at June 30, 2017, and the total cost of deposits remained consistent with the prior quarter at 0.18%.
The securities portfolio increased by $10.4 million from the prior quarter and is up approximately $86.3 million from the year ago period, due in part to the Company's deployment of excess liquidity during the current rising rate environment. None of the increase was attributable to the recently closed acquisitions. Total securities of $915.6 million comprised 11.4% of total assets of the Company at June 30, 2017.
The Company's total borrowings of $320.4 million increased $16.1 million during the second quarter, mainly due to an increase in customer repurchase agreements. The total cost of borrowings of 1.80% for the second quarter
was consistent with the prior quarter and reflects a significant decline from the 2.47% cost of borrowings for the second quarter of 2016.
Stockholders' equity at June 30, 2017 rose to $914.6 million, an increase of 4.2% from March 31, 2017, and an increase of 13.8% when compared to the year ago period, due primarily to the second quarter 2017 Island Bancorp acquisition and the fourth quarter 2016 NEB acquisition, as well as strong earnings retention. Book value per share increased $0.90, or 2.8%, during the second quarter compared to the prior quarter, and the Company's ratio of common equity to assets of 11.41% increased 7 basis points from the prior quarter and by 57 basis points from the same period a year ago. The Company's tangible book value per share rose by $0.56, or 2.3%, in the second quarter compared to the first quarter of 2017 and is now 8.7% above its year ago level offset in part by the increased goodwill recognized with the Island Bancorp and NEB acquisitions. The Company's ratio of tangible common equity to tangible assets of 8.64% at June 30, 2017 represents an increase of 2 basis points from the prior quarter and an increase of 42 basis points from the same period a year ago.
NET INTEREST INCOME
Net interest income for the second quarter was $63.8 million, representing a $3.6 million, or 5.9%, increase over the prior quarter, which was mainly attributable to higher levels of interest-earning assets, inclusive of the Island Bancorp acquisition, combined with a higher net interest margin. The Company’s net interest margin increased by 9 basis points from the prior quarter to 3.60%, reflecting the Company's asset sensitive position.
NONINTEREST INCOME
Noninterest income totaled $21.4 million in the second quarter, which represents a $2.5 million, or 13.1%, increase from the prior quarter. Significant changes in noninterest income in the second quarter compared to the prior quarter included the following:
| • | Deposit account fees and interchange and ATM fees increased by $360,000, or 4.3%, driven mainly by seasonal debit card usage, partly offset by decreases in overdraft fees. |
| • | Investment management income increased by $381,000, or 6.8%, reflecting a higher level of assets under administration, which grew 5.1% to $3.2 billion as of June 30, 2017, due to strong new business results as well as market appreciation, along with seasonal tax preparation fees during the second quarter. |
| • | Mortgage banking income increased by $357,000, or 37.3%, driven largely by an increase in sold loan volume. |
| • | Loan level derivative income more than doubled with an increase of $731,000, or 120.6%, representing a strong rebound from a very low customer demand in the prior quarter. |
| • | Other noninterest income increased by $605,000, or 26.3%, mainly due to an increase of $336,000 in rental income related to an equipment leasing initiative entered into during the prior quarter. Other increases in this category relate to gains on sale of fixed assets, income from like-kind exchange services pursuant to section 1031 of the Internal Revenue Code and income from Community Reinvestment Act investments, which were partially offset by a decrease in gain on sale of loans. |
NONINTEREST EXPENSE
The Company recorded noninterest expense of $52.8 million during the second quarter, which represents a $4.0 million, or 8.3%, increase from the prior quarter. Significant changes in noninterest expense in the second quarter compared to the prior quarter included the following:
| • | Salaries and employee benefits expense increased by $330,000, or 1.2%, due primarily to increases in incentive compensation and retirement plan expenses, along with the inclusion of Island Bancorp personnel for |
approximately half of the second quarter. The increase was partially offset by decreases in commissions, payroll taxes and medical plan insurance.
| • | Occupancy and equipment expenses decreased by $99,000, or 1.6%, mainly due to seasonal decreases in snow removal costs and utility costs, partially offset by increased expenses due to the Island Bancorp acquistion and an increase in depreciation on newly acquired lease equipment where the Company is the lessor. |
| • | Merger and acquisition costs amounted to $2.9 million for the second quarter as compared to $484,000 in the prior quarter. The majority of the expenses related to compensation and severance agreements, as well as contract termination costs associated with the second quarter closing of the Island Bancorp acquisition. |
| • | Other noninterest expense increased by $1.5 million, or 12.5%, driven primarily by increases in consultant fees, loan work out costs, and recruitment expense. |
The Company generated a return on average assets and a return on average common equity of 1.06% and 9.15%, respectively, in the second quarter, as compared to 1.10% and 9.59%, respectively, for the prior quarter. On an operating basis, the Company generated a return on average assets and return on average common equity of 1.15% and 9.96%, respectively, in the second quarter, as compared to 1.12% and 9.74%, respectively, for the prior quarter.
ASSET QUALITY
During the second quarter, the Company recorded total net charge-offs of $3.9 million, or 0.25% of average loans on an annualized basis, compared to net recoveries of $152,000 in the prior quarter. The increase in net charge-offs was primarily attributable to one large commercial relationship which was specifically reserved for in the fourth quarter of 2016, when it was placed on nonaccrual. The provision for loan losses increased to $1.1 million for the second quarter of 2017 versus $600,000 in the first quarter of 2017, due mainly to loan growth during the quarter. Nonperforming loans decreased to $51.8 million, or 0.83% of loans, at June 30, 2017 from $55.1 million, or 0.91% of loans, at March 31, 2017. Total nonperforming assets decreased to $54.8 million at the end of the second quarter, as compared to $58.5 million at the end of the prior quarter. Delinquency as a percentage of loans increased to 0.82% at June 30, 2017 compared to 0.58% at March 31, 2017, primarily attributable to certain loans associated with the above-mentioned large commercial relationship.
The allowance for loan losses was $59.5 million at June 30, 2017, as compared to $62.3 million at March 31, 2017. The Company’s allowance for loan losses as a percentage of loans was 0.95% and 1.03% at June 30, 2017 and March 31, 2017, respectively. The decreases are attributable to the above-described charge-off recorded for a previously recognized specific reserve, combined with the impact of loans acquired in connection with the Island Bancorp acquisition. These acquired loans are recorded at fair value, including a reduction for estimated credit losses, and without carryover of the respective portfolio's historical allowance for loan losses.
CONFERENCE CALL INFORMATION
Christopher Oddleifson, Chief Executive Officer and Robert Cozzone, Chief Financial Officer, will host a conference call to discuss second quarter earnings at 10:00 a.m. Eastern Time on Friday, July 21, 2017. 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: 10110349 and will be available through August 4, 2017. Additionally, a webcast replay will be available until July 21, 2018.
ABOUT INDEPENDENT BANK CORP.
Independent Bank Corp. has approximately $8.0 billion in assets and is the holding company for Rockland Trust Company, a full-service commercial bank headquartered in Massachusetts. Rockland Trust offers a wide range of banking, investment, and insurance services to businesses and individuals through retail branches, commercial lending offices, investment management offices, and residential lending centers located in Eastern Massachusetts and Rhode Island, as well as through telephone banking, mobile banking, and the Internet. Rockland Trust is an FDIC Member and an Equal Housing Lender. To find out why Rockland Trust is the bank “Where Each Relationship Matters ®”, please visit 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 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; |
| • | 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; |
| • | our inability to adapt to changes in information technology; |
| • | 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 revenue synergies from merger transactions in the amounts or in the timeframe anticipated; |
| • | inability to retain customers and employees, including those acquired in previous acquisitions; |
| • | 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; |
| • | 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 earnings and operating EPS, tangible book value per share and the tangible common equity ratio, and return on average assets and return on average equity on an operating basis.
Operating earnings and operating EPS exclude items that management believes are unrelated to its core banking business such as losses on extinguishment of debt, merger and acquisition expenses, and other items. The Company’s management uses operating earnings 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 excluded gains or losses.
Management also supplements its evaluation of financial performance with analysis of tangible book value per share (which is computed by dividing stockholders' equity less goodwill and identifiable intangible assets, or "tangible common equity", by common shares outstanding), the tangible common equity ratio (which is computed by dividing tangible common equity by tangible assets, defined as total assets less goodwill and other intangibles)and with analysis of return on average assets and return on average common equity on an operating basis. The Company has included information on tangible book value per share, the tangible common equity ratio, and return on average assets and return on average common equity on an operating basis 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 non-core 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, tangible book value per share, the tangible common equity ratio, and return on average assets and return on average equity on an operating basis 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
Robert Cozzone
Chief Financial Officer and Treasurer
(781) 982-6723
| INDEPENDENT BANK CORP. FINANCIAL SUMMARY | |||||||||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||||||||
| (Unaudited dollars in thousands) | % Change | % Change | |||||||||||||||
| June 30 2017 | March 31 2017 | June 30 2016 | Jun 2017 vs. | Jun 2017 vs. | |||||||||||||
| Mar 2017 | Jun 2016 | ||||||||||||||||
| Assets | |||||||||||||||||
| Cash and due from banks | $ | 110,249 | $ | 94,662 | $ | 102,397 | 16.47 | % | 7.67 | % | |||||||
| Interest-earning deposits with banks | 126,073 | 125,411 | 229,740 | 0.53 | % | (45.12 | )% | ||||||||||
| Securities | |||||||||||||||||
| Securities - trading | 1,293 | 1,289 | 799 | 0.31 | % | 61.83 | % | ||||||||||
| Securities - available for sale | 415,943 | 401,837 | 389,824 | 3.51 | % | 6.70 | % | ||||||||||
| Securities - held to maturity | 498,392 | 502,123 | 438,656 | (0.74 | )% | 13.62 | % | ||||||||||
| Total securities | 915,628 | 905,249 | 829,279 | 1.15 | % | 10.41 | % | ||||||||||
| Loans held for sale (at fair value) | 9,381 | 3,398 | 12,927 | 176.07 | % | (27.43 | )% | ||||||||||
| Loans | |||||||||||||||||
| Commercial and industrial | 910,936 | 881,329 | 875,164 | 3.36 | % | 4.09 | % | ||||||||||
| Commercial real estate | 3,083,020 | 3,027,305 | 2,727,143 | 1.84 | % | 13.05 | % | ||||||||||
| Commercial construction | 340,757 | 356,173 | 367,559 | (4.33 | )% | (7.29 | )% | ||||||||||
| Small business | 131,663 | 126,374 | 111,035 | 4.19 | % | 18.58 | % | ||||||||||
| Total commercial | 4,466,376 | 4,391,181 | 4,080,901 | 1.71 | % | 9.45 | % | ||||||||||
| Residential real estate | 749,392 | 653,999 | 628,348 | 14.59 | % | 19.26 | % | ||||||||||
| Home equity - first position | 612,428 | 595,828 | 554,624 | 2.79 | % | 10.42 | % | ||||||||||
| Home equity - subordinate positions | 431,031 | 412,943 | 393,952 | 4.38 | % | 9.41 | % | ||||||||||
| Total consumer real estate | 1,792,851 | 1,662,770 | 1,576,924 | 7.82 | % | 13.69 | % | ||||||||||
| Other consumer | 10,469 | 10,415 | 16,428 | 0.52 | % | (36.27 | )% | ||||||||||
| Total loans | 6,269,696 | 6,064,366 | 5,674,253 | 3.39 | % | 10.49 | % | ||||||||||
| Less: allowance for loan losses | (59,479 | ) | (62,318 | ) | (57,727 | ) | (4.56 | )% | 3.03 | % | |||||||
| Net loans | 6,210,217 | 6,002,048 | 5,616,526 | 3.47 | % | 10.57 | % | ||||||||||
| Federal Home Loan Bank stock | 14,421 | 11,497 | 11,304 | 25.43 | % | 27.57 | % | ||||||||||
| Bank premises and equipment, net | 92,664 | 82,027 | 76,173 | 12.97 | % | 21.65 | % | ||||||||||
| Goodwill | 231,806 | 221,526 | 201,083 | 4.64 | % | 15.28 | % | ||||||||||
| Other intangible assets | 11,199 | 9,087 | 10,443 | 23.24 | % | 7.24 | % | ||||||||||
| Cash surrender value of life insurance policies | 149,319 | 145,560 | 136,724 | 2.58 | % | 9.21 | % | ||||||||||
| Other real estate owned and other foreclosed assets | 3,029 | 3,404 | 1,845 | (11.02 | )% | 64.17 | % | ||||||||||
| Other assets | 143,307 | 134,245 | 190,425 | 6.75 | % | (24.74 | )% | ||||||||||
| Total assets | $ | 8,017,293 | $ | 7,738,114 | $ | 7,418,866 | 3.61 | % | 8.07 | % | |||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||
| Deposits | |||||||||||||||||
| Demand deposits | $ | 2,118,506 | $ | 2,043,359 | $ | 1,908,986 | 3.68 | % | 10.98 | % | |||||||
| Savings and interest checking accounts | 2,676,389 | 2,542,667 | 2,469,162 | 5.26 | % | 8.39 | % | ||||||||||
| Money market | 1,292,311 | 1,268,796 | 1,175,669 | 1.85 | % | 9.92 | % | ||||||||||
| Time certificates of deposit | 608,174 | 615,852 | 644,075 | (1.25 | )% | (5.57 | )% | ||||||||||
| Total deposits | 6,695,380 | 6,470,674 | 6,197,892 | 3.47 | % | 8.03 | % | ||||||||||
| Borrowings | |||||||||||||||||
| Federal Home Loan Bank borrowings | 53,279 | 50,811 | 50,833 | 4.86 | % | 4.81 | % | ||||||||||
| Customer repurchase agreements and other short-term borrowings | 159,371 | 145,772 | 139,716 | 9.33 | % | 14.07 | % | ||||||||||
| Junior subordinated debentures, net | 73,069 | 73,067 | 73,207 | — | % | (0.19 | )% | ||||||||||
| Subordinated debentures, net | 34,659 | 34,647 | 34,612 | 0.03 | % | 0.14 | % | ||||||||||
| Total borrowings | 320,378 | 304,297 | 298,368 | 5.28 | % | 7.38 | % | ||||||||||
| Total deposits and borrowings | 7,015,758 | 6,774,971 | 6,496,260 | 3.55 | % | 8.00 | % | ||||||||||
| Other liabilities | 86,951 | 85,663 | 118,709 | 1.50 | % | (26.75 | )% | ||||||||||
| Total liabilities | 7,102,709 | 6,860,634 | 6,614,969 | 3.53 | % | 7.37 | % | ||||||||||
| Stockholders' equity | |||||||||||||||||
| Common stock | 272 | 269 | 261 | 1.12 | % | 4.21 | % | ||||||||||
| Additional paid in capital | 476,684 | 452,048 | 408,155 | 5.45 | % | 16.79 | % | ||||||||||
| Retained earnings | 437,587 | 425,802 | 391,898 | 2.77 | % | 11.66 | % | ||||||||||
| Accumulated other comprehensive income (loss), net of tax | 41 | (639 | ) | 3,583 | (106.42 | )% | (98.86 | )% | |||||||||
| Total stockholders' equity | 914,584 | 877,480 | 803,897 | 4.23 | % | 13.77 | % | ||||||||||
| Total liabilities and stockholders' equity | $ | 8,017,293 | $ | 7,738,114 | $ | 7,418,866 | 3.61 | % | 8.07 | % | |||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||
| (Unaudited dollars in thousands, except per share data) | |||||||||||||||||
| Three Months Ended | |||||||||||||||||
| % Change | % Change | ||||||||||||||||
| June 30 2017 | March 31 2017 | June 30 2016 | Jun 2017 vs. | Jun 2017 vs. | |||||||||||||
| Mar 2017 | Jun 2016 | ||||||||||||||||
| Interest income | |||||||||||||||||
| Interest on federal funds sold and short-term investments | $ | 190 | $ | 207 | $ | 169 | (8.2 | )% | 12.43 | % | |||||||
| Interest and dividends on securities | 5,635 | 5,393 | 5,298 | 4.49 | % | 6.36 | % | ||||||||||
| Interest and fees on loans | 62,287 | 58,793 | 55,636 | 5.94 | % | 11.95 | % | ||||||||||
| Interest on loans held for sale | 21 | 14 | 57 | 50.00 | % | (63.16 | )% | ||||||||||
| Total interest income | 68,133 | 64,407 | 61,160 | 5.79 | % | 11.40 | % | ||||||||||
| Interest expense | |||||||||||||||||
| Interest on deposits | 2,912 | 2,767 | 2,738 | 5.24 | % | 6.36 | % | ||||||||||
| Interest on borrowings | 1,466 | 1,440 | 1,889 | 1.81 | % | (22.39 | )% | ||||||||||
| Total interest expense | 4,378 | 4,207 | 4,627 | 4.06 | % | (5.38 | )% | ||||||||||
| Net interest income | 63,755 | 60,200 | 56,533 | 5.91 | % | 12.77 | % | ||||||||||
| Provision for loan losses | 1,050 | 600 | 600 | 75.00 | % | 75.00 | % | ||||||||||
| Net interest income after provision for loan losses | 62,705 | 59,600 | 55,933 | 5.21 | % | 12.11 | % | ||||||||||
| Noninterest income | |||||||||||||||||
| Deposit account fees | 4,392 | 4,544 | 4,618 | (3.35 | )% | (4.89 | )% | ||||||||||
| Interchange and ATM fees | 4,434 | 3,922 | 4,136 | 13.05 | % | 7.21 | % | ||||||||||
| Investment management | 5,995 | 5,614 | 5,734 | 6.79 | % | 4.55 | % | ||||||||||
| Mortgage banking income | 1,314 | 957 | 1,363 | 37.30 | % | (3.60 | )% | ||||||||||
| Increase in cash surrender value of life insurance policies | 1,017 | 964 | 982 | 5.50 | % | 3.56 | % | ||||||||||
| Gain on sale of equity securities | 3 | 4 | 5 | (25.00 | )% | (40.00 | )% | ||||||||||
| Loan level derivative income | 1,337 | 606 | 2,095 | 120.63 | % | (36.18 | )% | ||||||||||
| Other noninterest income | 2,906 | 2,301 | 2,162 | 26.29 | % | 34.41 | % | ||||||||||
| Total noninterest income | 21,398 | 18,912 | 21,095 | 13.15 | % | 1.44 | % | ||||||||||
| Noninterest expenses | |||||||||||||||||
| Salaries and employee benefits | 28,654 | 28,324 | 26,977 | 1.17 | % | 6.22 | % | ||||||||||
| Occupancy and equipment expenses | 6,059 | 6,158 | 5,667 | (1.61 | )% | 6.92 | % | ||||||||||
| Data processing and facilities management | 1,188 | 1,272 | 1,225 | (6.60 | )% | (3.02 | )% | ||||||||||
| FDIC assessment | 778 | 783 | 920 | (0.64 | )% | (15.43 | )% | ||||||||||
| Merger and acquisition expense | 2,909 | 484 | 206 | 501.03 | % | 1,312.14 | % | ||||||||||
| Loss on sale of equity securities | 2 | 3 | 3 | (33.33 | )% | (33.33 | )% | ||||||||||
| Other noninterest expenses | 13,219 | 11,749 | 12,148 | 12.51 | % | 8.82 | % | ||||||||||
| Total noninterest expenses | 52,809 | 48,773 | 47,146 | 8.28 | % | 12.01 | % | ||||||||||
| Income before income taxes | 31,294 | 29,739 | 29,882 | 5.23 | % | 4.73 | % | ||||||||||
| Provision for income taxes | 10,731 | 9,014 | 9,508 | 19.05 | % | 12.86 | % | ||||||||||
| Net Income | $ | 20,563 | $ | 20,725 | $ | 20,374 | (0.78 | )% | 0.93 | % | |||||||
| Weighted average common shares (basic) | 27,257,799 | 27,029,640 | 26,304,129 | ||||||||||||||
| Common share equivalents | 74,497 | 81,283 | 47,885 | ||||||||||||||
| Weighted average common shares (diluted) | 27,332,296 | 27,110,923 | 26,352,014 | ||||||||||||||
| Basic earnings per share | $ | 0.75 | $ | 0.77 | $ | 0.77 | (2.60 | )% | (2.60 | )% | |||||||
| Diluted earnings per share | $ | 0.75 | $ | 0.76 | $ | 0.77 | (1.32 | )% | (2.60 | )% | |||||||
| Reconciliation of Net Income (GAAP) to Operating Earnings (Non-GAAP): | |||||||||||||||||
| Net income | $ | 20,563 | $ | 20,725 | $ | 20,374 | |||||||||||
| Noninterest expense components | |||||||||||||||||
| Add - merger and acquisition expenses | 2,909 | 484 | 206 | ||||||||||||||
| Noncore items, gross | 2,909 | 484 | 206 | ||||||||||||||
| Less - net tax benefit associated with noncore items (1) | (1,088 | ) | (153 | ) | (84 | ) | |||||||||||
| Noncore items, net of tax | 1,821 | 331 | 122 | ||||||||||||||
| Net operating earnings | $ | 22,384 | $ | 21,056 | $ | 20,496 | 6.31 | % | 9.21 | % | |||||||
| Diluted earnings per share, on an operating basis | $ | 0.82 | $ | 0.78 | $ | 0.78 | 5.13 | % | 5.13 | % | |||||||
| (1) The net tax benefit associated with noncore items is determined by assessing whether each noncore item is included or excluded from net taxable income and applying the Company's combined marginal tax rate to only those items included in net taxable income. | |||||||||||||||||
| Performance ratios | |||||||||||||||||
| Net interest margin (FTE) | 3.60 | % | 3.51 | % | 3.47 | % | |||||||||||
| Return on average assets GAAP (calculated by dividing net income by average assets) | 1.06 | % | 1.10 | % | 1.13 | % | |||||||||||
| Return on average assets on an operating basis (calculated by dividing net operating earnings by average assets) | 1.15 | % | 1.12 | % | 1.14 | % | |||||||||||
| Return on average common equity GAAP (calculated by dividing net income by average common equity) | 9.15 | % | 9.59 | % | 10.24 | % | |||||||||||
| Return on average common equity on an operating basis (calculated by dividing net operating earnings by average common equity) | 9.96 | % | 9.74 | % | 10.31 | % | |||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||
| (Unaudited dollars in thousands, except per share data) | |||||||||||
| Six Months Ended | |||||||||||
| % Change | |||||||||||
| June 30 2017 | June 30 2016 | Jun 2017 vs. | |||||||||
| Jun 2016 | |||||||||||
| Interest income | |||||||||||
| Interest on federal funds sold and short-term investments | $ | 397 | $ | 380 | 4.47 | % | |||||
| Interest and dividends on securities | 11,028 | 10,527 | 4.76 | % | |||||||
| Interest and fees on loans | 121,080 | 109,905 | 10.17 | % | |||||||
| Interest on loans held for sale | 35 | 89 | (60.67 | )% | |||||||
| Total interest income | 132,540 | 120,901 | 9.63 | % | |||||||
| Interest expense | |||||||||||
| Interest on deposits | 5,679 | 5,606 | 1.30 | % | |||||||
| Interest on borrowings | 2,906 | 3,871 | (24.93 | )% | |||||||
| Total interest expense | 8,585 | 9,477 | (9.41 | )% | |||||||
| Net interest income | 123,955 | 111,424 | 11.25 | % | |||||||
| Provision for loan losses | 1,650 | 1,125 | 46.67 | % | |||||||
| Net interest income after provision for loan losses | 122,305 | 110,299 | 10.88 | % | |||||||
| Noninterest income | |||||||||||
| Deposit account fees | 8,936 | 9,213 | (3.01 | )% | |||||||
| Interchange and ATM fees | 8,356 | 7,860 | 6.31 | % | |||||||
| Investment management | 11,609 | 10,737 | 8.12 | % | |||||||
| Mortgage banking income | 2,271 | 2,495 | (8.98 | )% | |||||||
| Increase in cash surrender value of life insurance policies | 1,981 | 1,996 | (0.75 | )% | |||||||
| Gain on sale of equity securities | 7 | 5 | 40.00 | % | |||||||
| Loan level derivative income | 1,943 | 3,817 | (49.10 | )% | |||||||
| Other noninterest income | 5,207 | 4,127 | 26.17 | % | |||||||
| Total noninterest income | 40,310 | 40,250 | 0.15 | % | |||||||
| Noninterest expenses | |||||||||||
| Salaries and employee benefits | 56,978 | 54,166 | 5.19 | % | |||||||
| Occupancy and equipment expenses | 12,217 | 11,494 | 6.29 | % | |||||||
| Data processing and facilities management | 2,460 | 2,431 | 1.19 | % | |||||||
| FDIC assessment | 1,561 | 1,930 | (19.12 | )% | |||||||
| Merger and acquisition expense | 3,393 | 540 | 528.33 | % | |||||||
| Loss on extinguishment of debt | — | 437 | (100.00 | )% | |||||||
| Loss on sale of equity securities | 5 | 32 | (84.38 | )% | |||||||
| Other noninterest expenses | 24,968 | 22,598 | 10.49 | % | |||||||
| Total noninterest expenses | 101,582 | 93,628 | 8.50 | % | |||||||
| Income before income taxes | 61,033 | 56,921 | 7.22 | % | |||||||
| Provision for income taxes | 19,745 | 17,936 | 10.09 | % | |||||||
| Net Income | $ | 41,288 | $ | 38,985 | 5.91 | % | |||||
| Weighted average common shares (basic) | 27,144,350 | 26,289,726 | |||||||||
| Common share equivalents | 78,757 | 45,679 | |||||||||
| Weighted average common shares (diluted) | 27,223,107 | 26,335,405 | |||||||||
| Basic earnings per share | $ | 1.52 | $ | 1.48 | 2.70 | % | |||||
| Diluted earnings per share | $ | 1.52 | $ | 1.48 | 2.70 | % | |||||
| Reconciliation of Net Income (GAAP) to Operating Earnings (Non-GAAP): | |||||||||||
| Net Income | $ | 41,288 | $ | 38,985 | |||||||
| Noninterest expense components | |||||||||||
| Add - loss on extinguishment of debt | — | 437 | |||||||||
| Add - merger and acquisition expenses | 3,393 | 540 | |||||||||
| Noncore items, gross | 3,393 | 977 | |||||||||
| Less - net tax benefit associated with noncore items (1) | (1,241 | ) | (400 | ) | |||||||
| Noncore items, net of tax | 2,152 | 577 | |||||||||
| Net operating earnings | $ | 43,440 | $ | 39,562 | 9.80 | % | |||||
| Diluted earnings per share, on an operating basis | $ | 1.60 | $ | 1.50 | 6.67 | % | |||||
| (1) The net tax benefit associated with noncore items is determined by assessing whether each noncore item is included or excluded from net taxable income and applying the Company's combined marginal tax rate to only those items included in net taxable income. | |||||||||||
| Performance ratios | |||||||||||
| Net interest margin (FTE) | 3.56 | % | 3.43 | % | |||||||
| Return on average assets GAAP (calculated by dividing net income by average assets) | 1.08 | % | 1.09 | % | |||||||
| Return on average assets on an operating basis (calculated by dividing net operating earnings by average assets) | 1.13 | % | 1.10 | % | |||||||
| Return on average common equity GAAP (calculated by dividing net income by average common equity) | 9.36 | % | 9.89 | % | |||||||
| Return on average common equity on an operating basis (calculated by dividing net operating earnings by average common equity) | 9.85 | % | 10.03 | % | |||||||
| ASSET QUALITY | ||||||||||||
| (Unaudited dollars in thousands) | Nonperforming Assets At | |||||||||||
| June 30 2017 | March 31 2017 | June 30 2016 | ||||||||||
| Nonperforming loans | ||||||||||||
| Commercial & industrial loans | $ | 33,630 | $ | 36,877 | $ | 3,177 | ||||||
| Commercial real estate loans | 4,679 | 4,792 | 8,220 | |||||||||
| Small business loans | 453 | 207 | 349 | |||||||||
| Residential real estate loans | 7,683 | 7,139 | 7,116 | |||||||||
| Home equity | 5,240 | 5,987 | 6,684 | |||||||||
| Other consumer | 98 | 50 | 82 | |||||||||
| Total nonperforming loans | $ | 51,783 | $ | 55,052 | $ | 25,628 | ||||||
| Other real estate owned | 3,029 | 3,404 | 1,845 | |||||||||
| Total nonperforming assets | $ | 54,812 | $ | 58,456 | $ | 27,473 | ||||||
| Nonperforming loans/gross loans | 0.83 | % | 0.91 | % | 0.45 | % | ||||||
| Nonperforming assets/total assets | 0.68 | % | 0.76 | % | 0.37 | % | ||||||
| Allowance for loan losses/nonperforming loans | 114.86 | % | 113.20 | % | 225.25 | % | ||||||
| Gross loans/total deposits | 93.64 | % | 93.72 | % | 91.55 | % | ||||||
| Allowance for loan losses/total loans | 0.95 | % | 1.03 | % | 1.02 | % | ||||||
| Delinquent loans/total loans | 0.82 | % | 0.58 | % | 0.47 | % | ||||||
| Nonperforming Assets Reconciliation for the Three Months Ended | ||||||||||||
| June 30 2017 | March 31 2017 | June 30 2016 | ||||||||||
| Nonperforming assets beginning balance | $ | 58,456 | $ | 61,580 | $ | 27,219 | ||||||
| New to nonperforming | 3,619 | 3,948 | 3,943 | |||||||||
| Loans charged-off | (4,198 | ) | (508 | ) | (576 | ) | ||||||
| Loans paid-off | (1,124 | ) | (4,745 | ) | (1,955 | ) | ||||||
| Loans transferred to other real estate owned/other assets | — | (457 | ) | (291 | ) | |||||||
| Loans restored to performing status | (1,642 | ) | (629 | ) | (1,058 | ) | ||||||
| New to other real estate owned | — | 457 | 291 | |||||||||
| Valuation write down | (95 | ) | — | (153 | ) | |||||||
| Sale of other real estate owned | (279 | ) | (1,226 | ) | (45 | ) | ||||||
| Net capital improvements to other real estate owned | — | — | 31 | |||||||||
| Other | 75 | 36 | 67 | |||||||||
| Nonperforming assets ending balance | $ | 54,812 | $ | 58,456 | $ | 27,473 | ||||||
| Net Charge-Offs (Recoveries) | ||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30 2017 | March 31 2017 | June 30 2016 | June 30 2017 | June 30 2016 | ||||||||||||||||
| Net charge-offs (recoveries) | ||||||||||||||||||||
| Commercial and industrial loans | $ | 3,578 | $ | (187 | ) | $ | (647 | ) | $ | 3,391 | $ | (783 | ) | |||||||
| Commercial real estate loans | (26 | ) | (31 | ) | (198 | ) | (57 | ) | (387 | ) | ||||||||||
| Small business loans | 11 | 4 | (43 | ) | 15 | (1 | ) | |||||||||||||
| Residential real estate loans | 114 | 11 | (43 | ) | 125 | (24 | ) | |||||||||||||
| Home equity | 96 | (62 | ) | 164 | 34 | 284 | ||||||||||||||
| Other consumer | 116 | 113 | 72 | 229 | 134 | |||||||||||||||
| Total net charge-offs (recoveries) | $ | 3,889 | $ | (152 | ) | $ | (695 | ) | $ | 3,737 | $ | (777 | ) | |||||||
| Net charge-offs (recoveries) to average loans (annualized) | 0.25 | % | (0.01 | )% | (0.05 | )% | 0.12 | % | (0.03 | )% | ||||||||||
| Troubled Debt Restructurings At | ||||||||||||
| June 30 2017 | March 31 2017 | June 30 2016 | ||||||||||
| Troubled debt restructurings on accrual status | $ | 26,908 | $ | 25,575 | $ | 28,319 | ||||||
| Troubled debt restructurings on nonaccrual status | 5,728 | 5,439 | 5,121 | |||||||||
| Total troubled debt restructurings | $ | 32,636 | $ | 31,014 | $ | 33,440 | ||||||
| CAPITAL ADEQUACY | ||||||||||||
| June 30 2017 | March 31 2017 | June 30 2016 | ||||||||||
| Common equity tier 1 capital ratio (1) | 10.93 | % | 10.89 | % | 10.64 | % | ||||||
| Tier one leverage capital ratio (1) | 10.07 | % | 9.92 | % | 9.66 | % | ||||||
| Common equity to assets ratio GAAP | 11.41 | % | 11.34 | % | 10.84 | % | ||||||
| Tangible common equity to tangible assets ratio (2) | 8.64 | % | 8.62 | % | 8.22 | % | ||||||
| Book value per share GAAP | $ | 33.34 | $ | 32.44 | $ | 30.55 | ||||||
| Tangible book value per share (2) | $ | 24.48 | $ | 23.92 | $ | 22.52 | ||||||
(1) Estimated number for June 30, 2017.
(2) See Appendix A for detailed reconciliation from GAAP to Non-GAAP ratios.
| INDEPENDENT BANK CORP. SUPPLEMENTAL FINANCIAL INFORMATION | |||||||||||||||||||||||||||||||||
| (Unaudited - dollars in thousands) | Three Months Ended | ||||||||||||||||||||||||||||||||
| June 30, 2017 | March 31, 2017 | June 30, 2016 | |||||||||||||||||||||||||||||||
| 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 | $ | 72,676 | $ | 190 | 1.05 | % | $ | 105,007 | $ | 207 | 0.80 | % | $ | 135,766 | $ | 169 | 0.50 | % | |||||||||||||||
| Securities | |||||||||||||||||||||||||||||||||
| Securities - trading | 1,292 | — | — | % | 999 | — | — | % | 775 | — | — | % | |||||||||||||||||||||
| Securities - taxable investments | 900,086 | 5,609 | 2.50 | % | 875,417 | 5,367 | 2.49 | % | 826,382 | 5,269 | 2.56 | % | |||||||||||||||||||||
| Securities - nontaxable investments (1) | 3,787 | 40 | 4.24 | % | 3,793 | 40 | 4.28 | % | 4,397 | 44 | 4.02 | % | |||||||||||||||||||||
| Total securities | 905,165 | 5,649 | 2.50 | % | 880,209 | 5,407 | 2.49 | % | 831,554 | 5,313 | 2.57 | % | |||||||||||||||||||||
| Loans held for sale | 3,733 | 21 | 2.26 | % | 2,725 | 14 | 2.08 | % | 8,077 | 57 | 2.84 | % | |||||||||||||||||||||
| Loans | |||||||||||||||||||||||||||||||||
| Commercial and industrial | 895,173 | 9,098 | 4.08 | % | 880,765 | 8,642 | 3.98 | % | 853,783 | 8,367 | 3.94 | % | |||||||||||||||||||||
| Commercial real estate (1) | 3,028,745 | 30,968 | 4.10 | % | 3,029,344 | 30,215 | 4.05 | % | 2,726,249 | 27,847 | 4.11 | % | |||||||||||||||||||||
| Commercial construction | 362,603 | 4,105 | 4.54 | % | 331,285 | 3,577 | 4.38 | % | 358,256 | 3,676 | 4.13 | % | |||||||||||||||||||||
| Small business | 129,100 | 1,776 | 5.52 | % | 124,374 | 1,680 | 5.48 | % | 106,272 | 1,432 | 5.42 | % | |||||||||||||||||||||
| Total commercial | 4,415,621 | 45,947 | 4.17 | % | 4,365,768 | 44,114 | 4.10 | % | 4,044,560 | 41,322 | 4.11 | % | |||||||||||||||||||||
| Residential real estate | 704,726 | 7,024 | 4.00 | % | 643,672 | 6,099 | 3.84 | % | 628,855 | 6,224 | 3.98 | % | |||||||||||||||||||||
| Home equity | 1,028,109 | 9,444 | 3.68 | % | 996,940 | 8,708 | 3.54 | % | 942,515 | 8,178 | 3.49 | % | |||||||||||||||||||||
| Total consumer real estate | 1,732,835 | 16,468 | 3.81 | % | 1,640,612 | 14,807 | 3.66 | % | 1,571,370 | 14,402 | 3.69 | % | |||||||||||||||||||||
| Other consumer | 10,541 | 240 | 9.13 | % | 11,333 | 241 | 8.62 | % | 13,815 | 297 | 8.65 | % | |||||||||||||||||||||
| Total loans | 6,158,997 | 62,655 | 4.08 | % | 6,017,713 | 59,162 | 3.99 | % | 5,629,745 | 56,021 | 4.00 | % | |||||||||||||||||||||
| Total interest-earning assets | $ | 7,140,571 | $ | 68,515 | 3.85 | % | $ | 7,005,654 | $ | 64,790 | 3.75 | % | $ | 6,605,142 | $ | 61,560 | 3.75 | % | |||||||||||||||
| Cash and due from banks | 97,129 | 94,955 | 91,198 | ||||||||||||||||||||||||||||||
| Federal Home Loan Bank stock | 13,700 | 13,108 | 13,935 | ||||||||||||||||||||||||||||||
| Other assets | 551,388 | 540,411 | 539,511 | ||||||||||||||||||||||||||||||
| Total assets | $ | 7,802,788 | $ | 7,654,128 | $ | 7,249,786 | |||||||||||||||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||||||||||||||||||
| Deposits | |||||||||||||||||||||||||||||||||
| Savings and interest checking accounts | $ | 2,568,020 | $ | 849 | 0.13 | % | $ | 2,479,373 | $ | 763 | 0.12 | % | $ | 2,395,837 | $ | 777 | 0.13 | % | |||||||||||||||
| Money market | 1,287,991 | 935 | 0.29 | % | 1,258,466 | 857 | 0.28 | % | 1,146,928 | 712 | 0.25 | % | |||||||||||||||||||||
| Time deposits | 609,787 | 1,128 | 0.74 | % | 634,947 | 1,147 | 0.73 | % | 647,274 | 1,249 | 0.78 | % | |||||||||||||||||||||
| Total interest-bearing deposits | 4,465,798 | 2,912 | 0.26 | % | 4,372,786 | 2,767 | 0.26 | % | 4,190,039 | 2,738 | 0.26 | % | |||||||||||||||||||||
| Borrowings | |||||||||||||||||||||||||||||||||
| Federal Home Loan Bank borrowings | 63,275 | 418 | 2.65 | % | 66,556 | 403 | 2.46 | % | 59,657 | 394 | 2.66 | % | |||||||||||||||||||||
| Customer repurchase agreements and other short-term borrowings | 155,692 | 55 | 0.14 | % | 157,305 | 56 | 0.14 | % | 140,252 | 48 | 0.14 | % | |||||||||||||||||||||
| Junior subordinated debentures | 73,068 | 565 | 3.10 | % | 73,085 | 554 | 3.07 | % | 73,231 | 1,019 | 5.60 | % | |||||||||||||||||||||
| Subordinated debentures | 34,652 | 428 | 4.95 | % | 34,641 | 427 | 5.00 | % | 34,607 | 428 | 4.97 | % | |||||||||||||||||||||
| Total borrowings | 326,687 | 1,466 | 1.80 | % | 331,587 | 1,440 | 1.76 | % | 307,747 | 1,889 | 2.47 | % | |||||||||||||||||||||
| Total interest-bearing liabilities | $ | 4,792,485 | $ | 4,378 | 0.37 | % | $ | 4,704,373 | $ | 4,207 | 0.36 | % | $ | 4,497,786 | $ | 4,627 | 0.41 | % | |||||||||||||||
| Demand deposits | 2,026,770 | 1,987,579 | 1,846,550 | ||||||||||||||||||||||||||||||
| Other liabilities | 81,725 | 85,691 | 105,607 | ||||||||||||||||||||||||||||||
| Total liabilities | $ | 6,900,980 | $ | 6,777,643 | $ | 6,449,943 | |||||||||||||||||||||||||||
| Stockholders' equity | 901,808 | 876,485 | 799,843 | ||||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 7,802,788 | $ | 7,654,128 | $ | 7,249,786 | |||||||||||||||||||||||||||
| Net interest income | $ | 64,137 | $ | 60,583 | $ | 56,933 | |||||||||||||||||||||||||||
| Interest rate spread (2) | 3.48 | % | 3.39 | % | 3.34 | % | |||||||||||||||||||||||||||
| Net interest margin (3) | 3.60 | % | 3.51 | % | 3.47 | % | |||||||||||||||||||||||||||
| Supplemental Information | |||||||||||||||||||||||||||||||||
| Total deposits, including demand deposits | $ | 6,492,568 | $ | 2,912 | $ | 6,360,365 | $ | 2,767 | $ | 6,036,589 | $ | 2,738 | |||||||||||||||||||||
| Cost of total deposits | 0.18 | % | 0.18 | % | 0.18 | % | |||||||||||||||||||||||||||
| Total funding liabilities, including demand deposits | $ | 6,819,255 | $ | 4,378 | $ | 6,691,952 | $ | 4,207 | $ | 6,344,336 | $ | 4,627 | |||||||||||||||||||||
| Cost of total funding liabilities | 0.26 | % | 0.25 | % | 0.29 | % | |||||||||||||||||||||||||||
(1) The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $382,000, $383,000, and $400,000 for the three months ended June 30, 2017, March 31, 2017, and June 30, 2016, 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.
| Six Months Ended | ||||||||||||||||||||||
| June 30, 2017 | June 30, 2016 | |||||||||||||||||||||
| 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 | $ | 88,752 | $ | 397 | 0.90 | % | $ | 150,165 | $ | 380 | 0.51 | % | ||||||||||
| Securities | ||||||||||||||||||||||
| Securities - trading | 1,146 | — | — | % | 597 | — | — | % | ||||||||||||||
| Securities - taxable investments | 887,820 | 10,976 | 2.49 | % | 828,776 | 10,466 | 2.54 | % | ||||||||||||||
| Securities - nontaxable investments (1) | 3,790 | 80 | 4.26 | % | 4,646 | 93 | 4.03 | % | ||||||||||||||
| Total securities | 892,756 | 11,056 | 2.50 | % | 834,019 | 10,559 | 2.55 | % | ||||||||||||||
| Loans held for sale | 3,232 | 35 | 2.18 | % | 6,161 | 89 | 2.91 | % | ||||||||||||||
| Loans | ||||||||||||||||||||||
| Commercial and industrial | 888,009 | 17,740 | 4.03 | % | 842,566 | 16,339 | 3.90 | % | ||||||||||||||
| Commercial real estate (1) | 3,029,043 | 61,182 | 4.07 | % | 2,692,921 | 54,617 | 4.08 | % | ||||||||||||||
| Commercial construction | 347,031 | 7,682 | 4.46 | % | 369,058 | 7,495 | 4.08 | % | ||||||||||||||
| Small business | 126,750 | 3,456 | 5.50 | % | 102,642 | 2,764 | 5.42 | % | ||||||||||||||
| Total commercial | 4,390,833 | 90,060 | 4.14 | % | 4,007,187 | 81,215 | 4.08 | % | ||||||||||||||
| Residential real estate | 674,368 | 13,123 | 3.92 | % | 631,222 | 12,605 | 4.02 | % | ||||||||||||||
| Home equity | 1,012,610 | 18,152 | 3.61 | % | 936,547 | 16,209 | 3.48 | % | ||||||||||||||
| Total consumer real estate | 1,686,978 | 31,275 | 3.74 | % | 1,567,769 | 28,814 | 3.70 | % | ||||||||||||||
| Other consumer | 10,934 | 481 | 8.87 | % | 14,105 | 633 | 9.02 | % | ||||||||||||||
| Total loans | 6,088,745 | 121,816 | 4.03 | % | 5,589,061 | 110,662 | 3.98 | % | ||||||||||||||
| Total interest-earning assets | $ | 7,073,485 | $ | 133,304 | 3.80 | % | $ | 6,579,406 | $ | 121,690 | 3.72 | % | ||||||||||
| Cash and due from banks | 96,048 | 88,495 | ||||||||||||||||||||
| Federal Home Loan Bank stock | 13,406 | 13,767 | ||||||||||||||||||||
| Other assets | 545,929 | 537,229 | ||||||||||||||||||||
| Total assets | $ | 7,728,868 | $ | 7,218,897 | ||||||||||||||||||
| Interest-bearing liabilities | ||||||||||||||||||||||
| Deposits | ||||||||||||||||||||||
| Savings and interest checking accounts | $ | 2,523,941 | $ | 1,612 | 0.13 | % | $ | 2,375,409 | $ | 1,660 | 0.14 | % | ||||||||||
| Money market | 1,273,310 | 1,792 | 0.28 | % | 1,137,687 | 1,413 | 0.25 | % | ||||||||||||||
| Time deposits | 622,298 | 2,275 | 0.74 | % | 658,834 | 2,533 | 0.77 | % | ||||||||||||||
| Total interest-bearing deposits | 4,419,549 | 5,679 | 0.26 | % | 4,171,930 | 5,606 | 0.27 | % | ||||||||||||||
| Borrowings | ||||||||||||||||||||||
| Federal Home Loan Bank borrowings | 64,905 | 821 | 2.55 | % | 70,325 | 884 | 2.53 | % | ||||||||||||||
| Customer repurchase agreements and other short-term borrowings | 156,494 | 111 | 0.14 | % | 140,557 | 97 | 0.14 | % | ||||||||||||||
| Junior subordinated debentures | 73,077 | 1,119 | 3.09 | % | 73,257 | 2,035 | 5.59 | % | ||||||||||||||
| Subordinated debentures | 34,647 | 855 | 4.98 | % | 34,600 | 855 | 4.97 | % | ||||||||||||||
| Total borrowings | 329,123 | 2,906 | 1.78 | % | 318,739 | 3,871 | 2.44 | % | ||||||||||||||
| Total interest-bearing liabilities | $ | 4,748,672 | $ | 8,585 | 0.36 | % | $ | 4,490,669 | $ | 9,477 | 0.42 | % | ||||||||||
| Demand deposits | 2,007,282 | 1,829,212 | ||||||||||||||||||||
| Other liabilities | 83,697 | 105,944 | ||||||||||||||||||||
| Total liabilities | $ | 6,839,651 | $ | 6,425,825 | ||||||||||||||||||
| Stockholders' equity | 889,217 | 793,072 | ||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 7,728,868 | $ | 7,218,897 | ||||||||||||||||||
| Net interest income | $ | 124,719 | $ | 112,213 | ||||||||||||||||||
| Interest rate spread (2) | 3.44 | % | 3.30 | % | ||||||||||||||||||
| Net interest margin (3) | 3.56 | % | 3.43 | % | ||||||||||||||||||
| Supplemental Information | ||||||||||||||||||||||
| Total deposits, including demand deposits | $ | 6,426,831 | $ | 5,679 | $ | 6,001,142 | $ | 5,606 | ||||||||||||||
| Cost of total deposits | 0.18 | % | 0.19 | % | ||||||||||||||||||
| Total funding liabilities, including demand deposits | $ | 6,755,954 | $ | 8,585 | $ | 6,319,881 | $ | 9,477 | ||||||||||||||
| Cost of total funding liabilities | 0.26 | % | 0.30 | % | ||||||||||||||||||
(1) The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $764,000 and $789,000 for the six months ended June 30, 2017 and 2016, 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 2017 | March 31 2017 | Balance Acquired | Organic Growth/(Loss) | Organic Growth/(Loss) % | |||||||||||||||
| Loans | |||||||||||||||||||
| Commercial and industrial | $ | 910,936 | $ | 881,329 | $ | 4,271 | $ | 25,336 | 2.87 | % | |||||||||
| Commercial real estate | 3,083,020 | 3,027,305 | 44,510 | 11,205 | 0.37 | % | |||||||||||||
| Commercial construction | 340,757 | 356,173 | 106 | (15,522 | ) | (4.36 | )% | ||||||||||||
| Small business | 131,663 | 126,374 | 57 | 5,232 | 4.14 | % | |||||||||||||
| Total commercial | 4,466,376 | 4,391,181 | 48,944 | 26,251 | 0.60 | % | |||||||||||||
| Residential real estate | 749,392 | 653,999 | 87,450 | 7,943 | 1.21 | % | |||||||||||||
| Home equity | 1,043,459 | 1,008,771 | 18,921 | 15,767 | 1.56 | % | |||||||||||||
| Total consumer real estate | 1,792,851 | 1,662,770 | 106,371 | 23,710 | 1.43 | % | |||||||||||||
| Total other consumer | 10,469 | 10,415 | 236 | (182 | ) | (1.75 | )% | ||||||||||||
| Total loans | $ | 6,269,696 | $ | 6,064,366 | $ | 155,551 | $ | 49,779 | 0.82 | % | |||||||||
| Deposits | |||||||||||||||||||
| Demand deposits | $ | 2,118,506 | $ | 2,043,359 | $ | 33,599 | $ | 41,548 | 2.03 | % | |||||||||
| Savings and interest checking accounts | 2,676,389 | 2,542,667 | 47,095 | 86,627 | 3.41 | % | |||||||||||||
| Money market | 1,292,311 | 1,268,796 | 63,915 | (40,400 | ) | (3.18 | )% | ||||||||||||
| Time certificates of deposit | 608,174 | 615,852 | 14,971 | (22,649 | ) | (3.68 | )% | ||||||||||||
| Total deposits | $ | 6,695,380 | $ | 6,470,674 | $ | 159,580 | $ | 65,126 | 1.01 | % | |||||||||
| Year-over-Year | |||||||||||||||||||
| June 30 2017 | June 30 2016 | Balance Acquired (1) | Organic Growth/(Loss) | Organic Growth/(Loss) % | |||||||||||||||
| Loans | |||||||||||||||||||
| Commercial and industrial | $ | 910,936 | $ | 875,164 | $ | 40,038 | $ | (4,266 | ) | (0.49 | )% | ||||||||
| Commercial real estate | 3,083,020 | 2,727,143 | 192,526 | 163,351 | 5.99 | % | |||||||||||||
| Commercial construction | 340,757 | 367,559 | 4,739 | (31,541 | ) | (8.58 | )% | ||||||||||||
| Small business | 131,663 | 111,035 | 110 | 20,518 | 18.48 | % | |||||||||||||
| Total commercial | 4,466,376 | 4,080,901 | 237,413 | 148,062 | 3.63 | % | |||||||||||||
| Residential real estate | 749,392 | 628,348 | 118,120 | 2,924 | 0.47 | % | |||||||||||||
| Home equity | 1,043,459 | 948,576 | 25,360 | 69,523 | 7.33 | % | |||||||||||||
| Total consumer real estate | 1,792,851 | 1,576,924 | 143,480 | 72,447 | 4.59 | % | |||||||||||||
| Total other consumer | 10,469 | 16,428 | 389 | (6,348 | ) | (38.64 | )% | ||||||||||||
| Total loans | $ | 6,269,696 | $ | 5,674,253 | $ | 381,282 | $ | 214,161 | 3.77 | % | |||||||||
| Deposits | |||||||||||||||||||
| Demand deposits | $ | 2,118,506 | $ | 1,908,986 | $ | 66,488 | $ | 143,032 | 7.49 | % | |||||||||
| Savings and interest checking accounts | 2,676,389 | 2,469,162 | 79,246 | 127,981 | 5.18 | % | |||||||||||||
| Money market | 1,292,311 | 1,175,669 | 105,364 | 11,278 | 0.96 | % | |||||||||||||
| Time certificates of deposit | 608,174 | 644,075 | 84,168 | (120,069 | ) | (18.64 | )% | ||||||||||||
| Total deposits | $ | 6,695,380 | $ | 6,197,892 | $ | 335,266 | $ | 162,222 | 2.62 | % | |||||||||
| 1. | Balances are reflective of both the Island Bancorp acquisition that took place in the second quarter of 2017 and the NEB acquisition that took place in the fourth quarter of 2016. |
Certain amounts in prior year financial statements have been reclassified to conform to the current year's presentation.
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 for the periods indicated:
| June 30 2017 | March 31 2017 | June 30 2016 | |||||||||||
| Tangible common equity | |||||||||||||
| Stockholders' equity (GAAP) | $ | 914,584 | $ | 877,480 | $ | 803,897 | (a) | ||||||
| Less: Goodwill and other intangibles | 243,005 | 230,613 | 211,526 | ||||||||||
| Tangible common equity | 671,579 | 646,867 | 592,371 | (b) | |||||||||
| Tangible assets | |||||||||||||
| Assets (GAAP) | 8,017,293 | 7,738,114 | 7,418,866 | (c) | |||||||||
| Less: Goodwill and other intangibles | 243,005 | 230,613 | 211,526 | ||||||||||
| Tangible assets | $ | 7,774,288 | $ | 7,507,501 | $ | 7,207,340 | (d) | ||||||
| Common Shares | 27,431,171 | 27,046,768 | 26,309,887 | (e) | |||||||||
| Common equity to assets ratio (GAAP) | 11.41 | % | 11.34 | % | 10.84 | % | (a/c) | ||||||
| Tangible common equity to tangible assets ratio (Non-GAAP) | 8.64 | % | 8.62 | % | 8.22 | % | (b/d) | ||||||
| Book value per share (GAAP) | $ | 33.34 | $ | 32.44 | $ | 30.55 | (a/e) | ||||||
| Tangible book value per share (Non-GAAP) | $ | 24.48 | $ | 23.92 | $ | 22.52 | (b/e) | ||||||
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 | Six Months Ended | |||||||||||||||||||
| June 30 2017 | March 31 2017 | June 30 2016 | June 30, 2017 | June 30, 2016 | ||||||||||||||||
| Net interest income (GAAP) | $ | 63,755 | $ | 60,200 | $ | 56,533 | $ | 123,955 | $ | 111,424 | (a) | |||||||||
| Noninterest income (GAAP) | $ | 21,398 | $ | 18,912 | $ | 21,095 | $ | 40,310 | $ | 40,250 | (b) | |||||||||
| Noninterest income on an operating basis (Non-GAAP) | $ | 21,398 | $ | 18,912 | $ | 21,095 | $ | 40,310 | $ | 40,250 | (c) | |||||||||
| Noninterest expense (GAAP) | $ | 52,809 | $ | 48,773 | $ | 47,146 | $ | 101,582 | $ | 93,628 | (d) | |||||||||
| Less: | ||||||||||||||||||||
| Loss on extinguishment of debt | — | — | — | — | 437 | |||||||||||||||
| Merger and acquisition expense | 2,909 | 484 | 206 | 3,393 | 540 | |||||||||||||||
| Noninterest expense on an operating basis (Non-GAAP) | $ | 49,900 | $ | 48,289 | $ | 46,940 | $ | 98,189 | $ | 92,651 | (e) | |||||||||
| Total revenue (GAAP) | $ | 85,153 | $ | 79,112 | $ | 77,628 | $ | 164,265 | $ | 151,674 | (a+b) | |||||||||
| Total operating revenue (Non-GAAP) | $ | 85,153 | $ | 79,112 | $ | 77,628 | $ | 164,265 | $ | 151,674 | (a+c) | |||||||||
| Ratios | ||||||||||||||||||||
| Noninterest income as a % of total revenue (GAAP based) | 25.13 | % | 23.91 | % | 27.17 | % | 24.54 | % | 26.54 | % | (b/(a+b)) | |||||||||
| Noninterest income as a % of total revenue on an operating basis (Non-GAAP) | 25.13 | % | 23.91 | % | 27.17 | % | 24.54 | % | 26.54 | % | (c/(a+c)) | |||||||||
| Efficiency ratio (GAAP based) | 62.02 | % | 61.65 | % | 60.73 | % | 61.84 | % | 61.73 | % | (d/(a+b)) | |||||||||
| Efficiency ratio on an operating basis (Non-GAAP) | 58.60 | % | 61.04 | % | 60.47 | % | 59.77 | % | 61.09 | % | (e/(a+c)) | |||||||||