Exhibit 99.1
Shareholder Relations NEWS RELEASE
288 Union Street,
Rockland, MA 02370
INDEPENDENT BANK CORP. REPORTS THIRD QUARTER NET INCOME OF $23.9 MILLION
Higher Revenues and Returns Drive Solid Earnings Growth
Rockland, Massachusetts (October 19, 2017) Independent Bank Corp. (Nasdaq Global Select Market: INDB), parent of Rockland Trust Company, today announced 2017 third quarter net income of $23.9 million, or $0.87 per diluted share, compared to $20.6 million, or $0.75 per diluted share, reported in the prior quarter. There were no adjustments to net income during the third quarter which the Company considers to be non-core, whereas the second quarter 2017 net income included merger and acquisition expenses, which the Company does consider 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. Third quarter 2017 results compared to the adjusted second quarter 2017 results reflect an increase in adjusted net income of $1.5 million, or 6.6%, and an increase in adjusted diluted earnings per share of $0.05, or 6.1%.
“Rockland Trust’s strong performance continued in the third quarter of 2017, a period in which we achieved a new quarterly earnings per share record,” said Christopher Oddleifson, the Chief Executive Officer and President of Independent Bank Corp. and Chief Executive Officer of Rockland Trust Company. "We are well positioned to take advantage of a rising interest rate environment, and the increases in both our net interest margin and earnings during this quarter demonstrate that we are harvesting the benefits of our loan and deposit pricing strategies. My colleagues are devoted to the customers and communities we serve, and those tireless efforts will help us to continue to execute our plans for future growth.”
BALANCE SHEET
Total assets of $8.1 billion at September 30, 2017 increased by $35.6 million, or 0.4%, from the prior quarter and by $550.9 million, or 7.3%, as compared to the year ago period, inclusive of the 2017 second quarter Island Bancorp, Inc. ("Island Bancorp") acquisition and 2016 fourth quarter New England Bancorp, Inc. ("NEB") acquisition.
Total loans grew modestly in the third quarter by $20.2 million, or 0.3%, from the prior quarter. Within the overall commercial portfolio, strong growth in commercial construction (increase of $54.5 million, or 16.0% ) was offset by a decline in commercial and industrial (decrease of $52.4 million, or 5.8% ), related to lower utilization rates reflective of weaker customer demand conditions. The combined consumer real estate loan portfolio increased during the third quarter by $15.6 million, or 0.9%. Exclusive of the recent acquisitions, total loans increased by $162.5 million, or 2.8%, when compared to the year ago period.
Deposit balances in the third quarter remained relatively consistent with the prior quarter. The Company continued to experience strong growth in demand deposits (increase of $65.3 million, or 3.1%) along with higher time deposit levels arising from the increase in short term rates. These increases were offset by seasonal declines in government banking accounts. Exclusive of the recent acquisitions, total deposits increased by $78.2 million, or 1.2%,
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when compared to the year ago period. The Company's core deposits as a percentage of total deposits remained over 90% at September 30, 2017. The total cost of deposits increased by two basis points in the third quarter to 0.20%.
The securities portfolio also remained relatively flat to the prior quarter and is up approximately $90.6 million from the year ago period. None of this increase was attributable to the recent acquisitions. Total securities of $909.2 million comprised 11.3% of total assets at September 30, 2017.
The Company's total borrowings of $340.7 million increased $20.3 million during the third quarter, mainly due to an increase in customer repurchase agreements. Also during the third quarter, a $25.0 million Federal Home Loan Bank ("FHLB") advance matured and was replaced with a new $25.0 million FHLB advance in conjunction with an interest-rate-swap agreement, effectively lowering the borrowing rate. As a result, the total cost of borrowings declined 17 basis points to 1.63% for the third quarter, versus 1.80% in the linked quarter.
Stockholders' equity at September 30, 2017 rose to $931.2 million, representing increases of 1.8% from June 30, 2017, due primarily to strong earnings retention. Stockholders' equity increased by 13.8% when compared to the year ago period, driven by the Island Bancorp and NEB acquisitions. Book value per share increased $0.60, or 1.8%, during the third quarter compared to the prior quarter, and the Company's ratio of common equity to assets of 11.56% increased by 15 basis points from the prior quarter and by 65 basis points from the same period a year ago. The Company's tangible book value per share rose by $0.64, or 2.6%, to $25.12 in the third quarter compared to the second quarter of 2017, reflecting an 8.8% increase from the year ago period. The Company's ratio of tangible common equity to tangible assets of 8.82% at September 30, 2017 represents increases of 18 basis points from the prior quarter and 49 basis points from the same period a year ago.
NET INTEREST INCOME
Net interest income for the third quarter increased 5.2% to $67.1 million compared to $63.8 million in the prior quarter, which was attributable to both higher levels of interest-earning assets and a higher net interest margin. The Company’s net interest margin increased by 5 basis points from the prior quarter to 3.65%, reflecting the Company's asset sensitive position. In the past year the net interest margin has risen by 25 basis points.
NONINTEREST INCOME
Noninterest income decreased $628,000, to $20.8 million in the third quarter. Significant changes in noninterest income in the third quarter compared to the prior quarter included the following:
| • | Deposit account fees and interchange and ATM fees increased by $100,000, or 1.1%, driven mainly by seasonal debit card usage. |
| • | Investment management income was consistent, reflecting a higher level of assets under administration, which grew 2.5% to $3.3 billion as of September 30, 2017, due to strong new business results as well as market appreciation, offset by a decrease in seasonal tax preparation fees. |
| • | Loan level derivative income decreased by $553,000, or 41.4%, as a result of reduced customer demand in the quarter. |
| • | Other noninterest income decreased by $182,000, or 6.3%, primarily due to a decrease in income from Community Reinvestment Act investments and a lower gain on sale of fixed assets. |
NONINTEREST EXPENSE
Noninterest expense of $51.3 million in the third quarter was $1.5 million, or 2.8%, lower than the prior quarter. Significant changes in noninterest expense in the third quarter compared to the prior quarter included the following:
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| • | Salaries and employee benefits expense increased by $635,000, or 2.2%, due primarily to an increased workforce, a portion of which relates to the inclusion of the acquired Island Bancorp personnel for the full third quarter, as well as additional seasonal help and new hires. |
| • | There were no merger and acquisition costs for the third quarter of 2017 as compared to $2.9 million in the prior quarter. The majority of the expenses in the prior quarter related to compensation and severance agreements, as well as contract termination costs associated with the closing of the Island Bancorp acquisition. |
| • | Other noninterest expense increased by $771,000, or 5.8%, driven primarily by higher loan work out costs associated with the bankruptcy of a large commercial customer previously placed on nonaccrual status and reserved for, partially offset by a decrease in consulting fees. |
The Company generated a return on average assets and a return on average common equity of 1.18% and 10.18%, respectively, in the third quarter, as compared to 1.06% and 9.15%, respectively, for the prior quarter. On an operating basis during the second quarter, the Company generated a return on average assets and return on average equity of 1.15% and 9.96%, respectively. There were no adjustments to net income during the third quarter which the Company considers to be non-core.
ASSET QUALITY
During the third quarter, the Company recorded total net recoveries of $231,000 compared to net charge-offs of $3.9 million in the prior quarter which were largely attributable to the aforementioned large commercial relationship which was specifically reserved for in the fourth quarter of 2016. As such, there was zero provision for loan losses for the third quarter of 2017 versus $1.1 million in the second quarter of 2017. Nonperforming loans decreased to $50.3 million, or 0.80% of loans, at September 30, 2017 from $51.8 million, or 0.83% of loans, at June 30, 2017. Total nonperforming assets decreased to $53.2 million at the end of the third quarter, as compared to $54.8 million at the end of the prior quarter. Delinquency as a percentage of loans was 0.82% as of September 30, 2017 and June 30, 2017.
The allowance for loan losses was $59.7 million at September 30, 2017, as compared to $59.5 million at June 30, 2017. The Company’s allowance for loan losses as a percentage of loans was 0.95% at both September 30, 2017 and June 30, 2017, respectively.
CONFERENCE CALL INFORMATION
Christopher Oddleifson, Chief Executive Officer and Robert Cozzone, Chief Financial Officer, will host a conference call to discuss third quarter earnings at 10:00 a.m. Eastern Time on Friday, October 20, 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: 10112786 and will be available through November 3, 2017. Additionally, a webcast replay will be available until October 20, 2018.
ABOUT INDEPENDENT BANK CORP.
Independent Bank Corp. has approximately $8.1 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
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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; |
| • | 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, 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 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 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.
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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
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| INDEPENDENT BANK CORP. FINANCIAL SUMMARY | |||||||||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||||||||
| (Unaudited, dollars in thousands) | % Change | % Change | |||||||||||||||
| September 30 2017 | June 30 2017 | September 30 2016 | Sept 2017 vs. | Sept 2017 vs. | |||||||||||||
| June 2017 | Sept 2016 | ||||||||||||||||
| Assets | |||||||||||||||||
| Cash and due from banks | $ | 100,404 | $ | 110,249 | $ | 92,185 | (8.93 | )% | 8.92 | % | |||||||
| Interest-earning deposits with banks | 158,861 | 126,073 | 265,618 | 26.01 | % | (40.19 | )% | ||||||||||
| Securities | |||||||||||||||||
| Securities - trading | 1,298 | 1,293 | 809 | 0.39 | % | 60.44 | % | ||||||||||
| Securities - available for sale | 429,125 | 415,943 | 387,008 | 3.17 | % | 10.88 | % | ||||||||||
| Securities - held to maturity | 478,798 | 498,392 | 430,763 | (3.93 | )% | 11.15 | % | ||||||||||
| Total securities | 909,221 | 915,628 | 818,580 | (0.70 | )% | 11.07 | % | ||||||||||
| Loans held for sale (at fair value) | 5,459 | 9,381 | 13,334 | (41.81 | )% | (59.06 | )% | ||||||||||
| Loans | |||||||||||||||||
| Commercial and industrial | 858,522 | 910,936 | 857,713 | (5.75 | )% | 0.09 | % | ||||||||||
| Commercial real estate | 3,087,160 | 3,083,020 | 2,787,660 | 0.13 | % | 10.74 | % | ||||||||||
| Commercial construction | 395,267 | 340,757 | 376,245 | 16.00 | % | 5.06 | % | ||||||||||
| Small business | 130,656 | 131,663 | 115,054 | (0.76 | )% | 13.56 | % | ||||||||||
| Total commercial | 4,471,605 | 4,466,376 | 4,136,672 | 0.12 | % | 8.10 | % | ||||||||||
| Residential real estate | 756,130 | 749,392 | 632,685 | 0.90 | % | 19.51 | % | ||||||||||
| Home equity - first position | 615,132 | 612,428 | 559,867 | 0.44 | % | 9.87 | % | ||||||||||
| Home equity - subordinate positions | 437,163 | 431,031 | 405,245 | 1.42 | % | 7.88 | % | ||||||||||
| Total consumer real estate | 1,808,425 | 1,792,851 | 1,597,797 | 0.87 | % | 13.18 | % | ||||||||||
| Other consumer | 9,872 | 10,469 | 11,664 | (5.70 | )% | (15.36 | )% | ||||||||||
| Total loans | 6,289,902 | 6,269,696 | 5,746,133 | 0.32 | % | 9.46 | % | ||||||||||
| Less: allowance for loan losses | (59,710 | ) | (59,479 | ) | (58,205 | ) | 0.39 | % | 2.59 | % | |||||||
| Net loans | 6,230,192 | 6,210,217 | 5,687,928 | 0.32 | % | 9.53 | % | ||||||||||
| Federal Home Loan Bank stock | 11,597 | 14,421 | 11,304 | (19.58 | )% | 2.59 | % | ||||||||||
| Bank premises and equipment, net | 94,906 | 92,664 | 76,429 | 2.42 | % | 24.18 | % | ||||||||||
| Goodwill | 231,806 | 231,806 | 201,083 | — | % | 15.28 | % | ||||||||||
| Other intangible assets | 10,299 | 11,199 | 9,751 | (8.04 | )% | 5.62 | % | ||||||||||
| Cash surrender value of life insurance policies | 150,352 | 149,319 | 137,723 | 0.69 | % | 9.17 | % | ||||||||||
| Other real estate owned and other foreclosed assets | 2,898 | 3,029 | 1,798 | (4.32 | )% | 61.18 | % | ||||||||||
| Other assets | 146,924 | 143,307 | 186,276 | 2.52 | % | (21.13 | )% | ||||||||||
| Total assets | $ | 8,052,919 | $ | 8,017,293 | $ | 7,502,009 | 0.44 | % | 7.34 | % | |||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||
| Deposits | |||||||||||||||||
| Demand deposits | $ | 2,183,760 | $ | 2,118,506 | $ | 2,024,235 | 3.08 | % | 7.88 | % | |||||||
| Savings and interest checking accounts | 2,568,620 | 2,676,389 | 2,417,195 | (4.03 | )% | 6.26 | % | ||||||||||
| Money market | 1,302,662 | 1,292,311 | 1,198,959 | 0.80 | % | 8.65 | % | ||||||||||
| Time certificates of deposit | 627,900 | 608,174 | 629,071 | 3.24 | % | (0.19 | )% | ||||||||||
| Total deposits | 6,682,942 | 6,695,380 | 6,269,460 | (0.19 | )% | 6.60 | % | ||||||||||
| Borrowings | |||||||||||||||||
| Federal Home Loan Bank borrowings | 53,272 | 53,279 | 50,826 | (0.01 | )% | 4.81 | % | ||||||||||
| Customer repurchase agreements | 179,670 | 159,371 | 140,914 | 12.74 | % | 27.50 | % | ||||||||||
| Junior subordinated debentures, net | 73,071 | 73,069 | 73,157 | — | % | (0.12 | )% | ||||||||||
| Subordinated debentures, net | 34,670 | 34,659 | 34,624 | 0.03 | % | 0.13 | % | ||||||||||
| Total borrowings | 340,683 | 320,378 | 299,521 | 6.34 | % | 13.74 | % | ||||||||||
| Total deposits and borrowings | 7,023,625 | 7,015,758 | 6,568,981 | 0.11 | % | 6.92 | % | ||||||||||
| Other liabilities | 98,070 | 86,951 | 114,786 | 12.79 | % | (14.56 | )% | ||||||||||
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| Total liabilities | 7,121,695 | 7,102,709 | 6,683,767 | 0.27 | % | 6.55 | % | ||||||||||
| Stockholders' equity | |||||||||||||||||
| Common stock | 273 | 272 | 261 | 0.37 | % | 4.60 | % | ||||||||||
| Additional paid in capital | 477,877 | 476,684 | 409,731 | 0.25 | % | 16.63 | % | ||||||||||
| Retained earnings | 452,658 | 437,587 | 404,750 | 3.44 | % | 11.84 | % | ||||||||||
| Accumulated other comprehensive income, net of tax | 416 | 41 | 3,500 | 914.63 | % | (88.11 | )% | ||||||||||
| Total stockholders' equity | 931,224 | 914,584 | 818,242 | 1.82 | % | 13.81 | % | ||||||||||
| Total liabilities and stockholders' equity | $ | 8,052,919 | $ | 8,017,293 | $ | 7,502,009 | 0.44 | % | 7.34 | % | |||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||
| (Unaudited, dollars in thousands, except per share data) | |||||||||||||||||
| Three Months Ended | |||||||||||||||||
| % Change | % Change | ||||||||||||||||
| September 30 2017 | June 30 2017 | September 30 2016 | Sept 2017 vs. | Sept 2017 vs. | |||||||||||||
| June 2017 | Sept 2016 | ||||||||||||||||
| Interest income | |||||||||||||||||
| Interest on federal funds sold and short-term investments | $ | 417 | $ | 190 | $ | 387 | 119.5 | % | 7.75 | % | |||||||
| Interest and dividends on securities | 5,661 | 5,635 | 5,062 | 0.46 | % | 11.83 | % | ||||||||||
| Interest and fees on loans | 65,667 | 62,287 | 56,778 | 5.43 | % | 15.66 | % | ||||||||||
| Interest on loans held for sale | 33 | 21 | 81 | 57.14 | % | (59.26 | )% | ||||||||||
| Total interest income | 71,778 | 68,133 | 62,308 | 5.35 | % | 15.20 | % | ||||||||||
| Interest expense | |||||||||||||||||
| Interest on deposits | 3,331 | 2,912 | 2,733 | 14.39 | % | 21.88 | % | ||||||||||
| Interest on borrowings | 1,374 | 1,466 | 1,907 | (6.28 | )% | (27.95 | )% | ||||||||||
| Total interest expense | 4,705 | 4,378 | 4,640 | 7.47 | % | 1.40 | % | ||||||||||
| Net interest income | 67,073 | 63,755 | 57,668 | 5.20 | % | 16.31 | % | ||||||||||
| Provision for loan losses | — | 1,050 | 950 | nm | nm | ||||||||||||
| Net interest income after provision for loan losses | 67,073 | 62,705 | 56,718 | 6.97 | % | 18.26 | % | ||||||||||
| Noninterest income | |||||||||||||||||
| Deposit account fees | 4,401 | 4,392 | 4,766 | 0.20 | % | (7.66 | )% | ||||||||||
| Interchange and ATM fees | 4,525 | 4,434 | 4,190 | 2.05 | % | 8.00 | % | ||||||||||
| Investment management | 5,967 | 5,995 | 5,446 | (0.47 | )% | 9.57 | % | ||||||||||
| Mortgage banking income | 1,338 | 1,314 | 1,963 | 1.83 | % | (31.84 | )% | ||||||||||
| Increase in cash surrender value of life insurance policies | 1,019 | 1,017 | 984 | 0.20 | % | 3.56 | % | ||||||||||
| Gain on sale of equity securities | 12 | 3 | — | 300.00 | % | nm | |||||||||||
| Loan level derivative income | 784 | 1,337 | 810 | (41.36 | )% | (3.21 | )% | ||||||||||
| Other noninterest income | 2,724 | 2,906 | 2,257 | (6.26 | )% | 20.69 | % | ||||||||||
| Total noninterest income | 20,770 | 21,398 | 20,416 | (2.93 | )% | 1.73 | % | ||||||||||
| Noninterest expenses | |||||||||||||||||
| Salaries and employee benefits | 29,289 | 28,654 | 27,395 | 2.22 | % | 6.91 | % | ||||||||||
| Occupancy and equipment expenses | 6,085 | 6,059 | 5,433 | 0.43 | % | 12.00 | % | ||||||||||
| Data processing and facilities management | 1,272 | 1,188 | 1,400 | 7.07 | % | (9.14 | )% | ||||||||||
| FDIC assessment | 673 | 778 | 725 | (13.50 | )% | (7.17 | )% | ||||||||||
| Merger and acquisition expense | — | 2,909 | 151 | nm | nm | ||||||||||||
| Loss on sale of equity securities | 1 | 2 | — | (50.00 | )% | nm | |||||||||||
| Other noninterest expenses | 13,990 | 13,219 | 11,753 | 5.83 | % | 19.03 | % | ||||||||||
| Total noninterest expenses | 51,310 | 52,809 | 46,857 | (2.84 | )% | 9.50 | % | ||||||||||
| Income before income taxes | 36,533 | 31,294 | 30,277 | 16.74 | % | 20.66 | % | ||||||||||
| Provision for income taxes | 12,681 | 10,731 | 9,793 | 18.17 | % | 29.49 | % | ||||||||||
| Net Income | $ | 23,852 | $ | 20,563 | $ | 20,484 | 15.99 | % | 16.44 | % | |||||||
| nm - the percentage is not meaningful | |||||||||||||||||
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| Weighted average common shares (basic) | 27,436,792 | 27,257,799 | 26,324,316 | ||||||||||||||
| Common share equivalents | 76,307 | 74,497 | 53,072 | ||||||||||||||
| Weighted average common shares (diluted) | 27,513,099 | 27,332,296 | 26,377,388 | ||||||||||||||
| Basic earnings per share | $ | 0.87 | $ | 0.75 | $ | 0.78 | 16.00 | % | 11.54 | % | |||||||
| Diluted earnings per share | $ | 0.87 | $ | 0.75 | $ | 0.78 | 16.00 | % | 11.54 | % | |||||||
| Reconciliation of Net Income (GAAP) to Operating Earnings (Non-GAAP): | |||||||||||||||||
| Net income | $ | 23,852 | $ | 20,563 | $ | 20,484 | |||||||||||
| Noninterest expense components | |||||||||||||||||
| Add - merger and acquisition expenses | — | 2,909 | 151 | ||||||||||||||
| Noncore items, gross | — | 2,909 | 151 | ||||||||||||||
| Less - net tax benefit associated with noncore items (1) | — | (1,088 | ) | (61 | ) | ||||||||||||
| Noncore items, net of tax | — | 1,821 | 90 | ||||||||||||||
| Net operating earnings | $ | 23,852 | $ | 22,384 | $ | 20,574 | 6.56 | % | 15.93 | % | |||||||
| Diluted earnings per share, on an operating basis | $ | 0.87 | $ | 0.82 | $ | 0.78 | 6.10 | % | 11.54 | % | |||||||
| (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) | 3.65 | % | 3.60 | % | 3.40 | % | |||||||||||
| Return on average assets GAAP (calculated by dividing net income by average assets) | 1.18 | % | 1.06 | % | 1.09 | % | |||||||||||
| Return on average assets on an operating basis (calculated by dividing net operating earnings by average assets) | 1.18 | % | 1.15 | % | 1.10 | % | |||||||||||
| Return on average common equity GAAP (calculated by dividing net income by average common equity) | 10.18 | % | 9.15 | % | 9.98 | % | |||||||||||
| Return on average common equity on an operating basis (calculated by dividing net operating earnings by average common equity) | 10.18 | % | 9.96 | % | 10.03 | % | |||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||
| (Unaudited, dollars in thousands, except per share data) | |||||||||||
| Nine Months Ended | |||||||||||
| % Change | |||||||||||
| September 30 2017 | September 30 2016 | Sept 2017 vs. | |||||||||
| Sept 2016 | |||||||||||
| Interest income | |||||||||||
| Interest on federal funds sold and short-term investments | $ | 814 | $ | 767 | 6.13 | % | |||||
| Interest and dividends on securities | 16,689 | 15,589 | 7.06 | % | |||||||
| Interest and fees on loans | 186,747 | 166,683 | 12.04 | % | |||||||
| Interest on loans held for sale | 68 | 170 | (60.00 | )% | |||||||
| Total interest income | 204,318 | 183,209 | 11.52 | % | |||||||
| Interest expense | |||||||||||
| Interest on deposits | 9,010 | 8,339 | 8.05 | % | |||||||
| Interest on borrowings | 4,280 | 5,778 | (25.93 | )% | |||||||
| Total interest expense | 13,290 | 14,117 | (5.86 | )% | |||||||
| Net interest income | 191,028 | 169,092 | 12.97 | % | |||||||
| Provision for loan losses | 1,650 | 2,075 | (20.48 | )% | |||||||
| Net interest income after provision for loan losses | 189,378 | 167,017 | 13.39 | % | |||||||
| Noninterest income | |||||||||||
| Deposit account fees | 13,337 | 13,979 | (4.59 | )% | |||||||
| Interchange and ATM fees | 12,881 | 12,050 | 6.90 | % | |||||||
| Investment management | 17,576 | 16,183 | 8.61 | % | |||||||
8
| Mortgage banking income | 3,609 | 4,458 | (19.04 | )% | |||||||
| Increase in cash surrender value of life insurance policies | 3,000 | 2,980 | 0.67 | % | |||||||
| Gain on sale of equity securities | 19 | 5 | 280.00 | % | |||||||
| Loan level derivative income | 2,727 | 4,627 | (41.06 | )% | |||||||
| Other noninterest income | 7,931 | 6,384 | 24.23 | % | |||||||
| Total noninterest income | 61,080 | 60,666 | 0.68 | % | |||||||
| Noninterest expenses | |||||||||||
| Salaries and employee benefits | 86,267 | 81,561 | 5.77 | % | |||||||
| Occupancy and equipment expenses | 18,302 | 16,927 | 8.12 | % | |||||||
| Data processing and facilities management | 3,732 | 3,831 | (2.58 | )% | |||||||
| FDIC assessment | 2,234 | 2,655 | (15.86 | )% | |||||||
| Merger and acquisition expense | 3,393 | 691 | 391.03 | % | |||||||
| Loss on extinguishment of debt | — | 437 | nm | ||||||||
| Loss on sale of equity securities | 6 | 32 | (81.25 | )% | |||||||
| Other noninterest expenses | 38,958 | 34,351 | 13.41 | % | |||||||
| Total noninterest expenses | 152,892 | 140,485 | �� | 8.83 | % | ||||||
| Income before income taxes | 97,566 | 87,198 | 11.89 | % | |||||||
| Provision for income taxes | 32,426 | 27,729 | 16.94 | % | |||||||
| Net Income | $ | 65,140 | $ | 59,469 | 9.54 | % | |||||
| nm - the percentage is not meaningful | |||||||||||
| Weighted average common shares (basic) | 27,242,902 | 26,301,340 | |||||||||
| Common share equivalents | 78,043 | 48,354 | |||||||||
| Weighted average common shares (diluted) | 27,320,945 | 26,349,694 | |||||||||
| Basic earnings per share | $ | 2.39 | $ | 2.26 | 5.75 | % | |||||
| Diluted earnings per share | $ | 2.38 | $ | 2.26 | 5.31 | % | |||||
| Reconciliation of Net Income (GAAP) to Operating Earnings (Non-GAAP): | |||||||||||
| Net Income | $ | 65,140 | $ | 59,469 | |||||||
| Noninterest expense components | |||||||||||
| Add - loss on extinguishment of debt | — | 437 | |||||||||
| Add - merger and acquisition expenses | 3,393 | 691 | |||||||||
| Noncore items, gross | 3,393 | 1,128 | |||||||||
| Less - net tax benefit associated with noncore items (1) | (1,241 | ) | (461 | ) | |||||||
| Noncore items, net of tax | 2,152 | 667 | |||||||||
| Net operating earnings | $ | 67,292 | $ | 60,136 | 11.90 | % | |||||
| Diluted earnings per share, on an operating basis | $ | 2.46 | $ | 2.28 | 7.89 | % | |||||
| (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) | 3.59 | % | 3.42 | % | |||||||
| Return on average assets GAAP (calculated by dividing net income by average assets) | 1.11 | % | 1.09 | % | |||||||
| Return on average assets on an operating basis (calculated by dividing net operating earnings by average assets) | 1.15 | % | 1.10 | % | |||||||
| Return on average common equity GAAP (calculated by dividing net income by average common equity) | 9.65 | % | 9.92 | % | |||||||
| Return on average common equity on an operating basis (calculated by dividing net operating earnings by average common equity) | 9.96 | % | 10.03 | % | |||||||
9
| ASSET QUALITY | ||||||||||||
| (Unaudited, dollars in thousands) | Nonperforming Assets At | |||||||||||
| September 30 2017 | June 30 2017 | September 30 2016 | ||||||||||
| Nonperforming loans | ||||||||||||
| Commercial & industrial loans | $ | 32,556 | $ | 33,630 | $ | 3,065 | ||||||
| Commercial real estate loans | 3,052 | 4,679 | 7,399 | |||||||||
| Small business loans | 403 | 453 | 288 | |||||||||
| Residential real estate loans | 8,297 | 7,683 | 7,684 | |||||||||
| Home equity | 5,903 | 5,240 | 6,311 | |||||||||
| Other consumer | 66 | 98 | 46 | |||||||||
| Total nonperforming loans | $ | 50,277 | $ | 51,783 | $ | 24,793 | ||||||
| Other real estate owned | 2,898 | 3,029 | 1,798 | |||||||||
| Total nonperforming assets | $ | 53,175 | $ | 54,812 | $ | 26,591 | ||||||
| Nonperforming loans/gross loans | 0.80 | % | 0.83 | % | 0.43 | % | ||||||
| Nonperforming assets/total assets | 0.66 | % | 0.68 | % | 0.35 | % | ||||||
| Allowance for loan losses/nonperforming loans | 118.76 | % | 114.86 | % | 234.76 | % | ||||||
| Allowance for loan losses/total loans | 0.95 | % | 0.95 | % | 1.01 | % | ||||||
| Delinquent loans/total loans | 0.82 | % | 0.82 | % | 0.44 | % | ||||||
| Nonperforming Assets Reconciliation for the Three Months Ended | ||||||||||||
| September 30 2017 | June 30 2017 | September 30 2016 | ||||||||||
| Nonperforming assets beginning balance | $ | 54,812 | $ | 58,456 | $ | 27,473 | ||||||
| New to nonperforming | 3,573 | 3,619 | 2,630 | |||||||||
| Loans charged-off | (817 | ) | (4,198 | ) | (1,143 | ) | ||||||
| Loans paid-off | (3,679 | ) | (1,124 | ) | (2,049 | ) | ||||||
| Loans transferred to other real estate owned/other assets | (107 | ) | — | — | ||||||||
| Loans restored to performing status | (557 | ) | (1,642 | ) | (288 | ) | ||||||
| New to other real estate owned | 107 | — | — | |||||||||
| Valuation write down | (238 | ) | (95 | ) | (5 | ) | ||||||
| Sale of other real estate owned | — | (279 | ) | (42 | ) | |||||||
| Other | 81 | 75 | 15 | |||||||||
| Nonperforming assets ending balance | $ | 53,175 | $ | 54,812 | $ | 26,591 | ||||||
10
| Net Charge-Offs (Recoveries) | ||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30 2017 | June 30 2017 | September 30 2016 | September 30 2017 | September 30 2016 | ||||||||||||||||
| Net charge-offs (recoveries) | ||||||||||||||||||||
| Commercial and industrial loans | $ | (280 | ) | $ | 3,578 | $ | (36 | ) | $ | 3,111 | $ | (819 | ) | |||||||
| Commercial real estate loans | (286 | ) | (26 | ) | 217 | (343 | ) | (170 | ) | |||||||||||
| Small business loans | 147 | 11 | 70 | 162 | 69 | |||||||||||||||
| Residential real estate loans | 28 | 114 | (130 | ) | 153 | (155 | ) | |||||||||||||
| Home equity | 16 | 96 | 130 | 50 | 414 | |||||||||||||||
| Other consumer | 144 | 116 | 221 | 373 | 356 | |||||||||||||||
| Total net charge-offs (recoveries) | $ | (231 | ) | $ | 3,889 | $ | 472 | $ | 3,506 | $ | (305 | ) | ||||||||
| Net charge-offs (recoveries) to average loans (annualized) | (0.01 | )% | 0.25 | % | 0.03 | % | 0.08 | % | (0.01 | )% | ||||||||||
| Troubled Debt Restructurings At | ||||||||||||
| September 30 2017 | June 30 2017 | September 30 2016 | ||||||||||
| Troubled debt restructurings on accrual status | $ | 26,731 | $ | — | $ | — | ||||||
| Troubled debt restructurings on nonaccrual status | 5,776 | — | — | |||||||||
| Total troubled debt restructurings | $ | 32,507 | $ | — | $ | — | ||||||
| BALANCE SHEET AND CAPITAL RATIOS | ||||||||||||
| September 30 2017 | June 30 2017 | September 30 2016 | ||||||||||
| Gross loans/total deposits | 94.12 | % | 93.64 | % | 91.65 | % | ||||||
| Common equity tier 1 capital ratio (1) | 11.12 | % | 10.95 | % | 10.78 | % | ||||||
| Tier one leverage capital ratio (1) | 10.03 | % | 10.07 | % | 9.59 | % | ||||||
| Common equity to assets ratio GAAP | 11.56 | % | 11.41 | % | 10.91 | % | ||||||
| Tangible common equity to tangible assets ratio (2) | 8.82 | % | 8.64 | % | 8.33 | % | ||||||
| Book value per share GAAP | $ | 33.94 | $ | 33.34 | $ | 31.09 | ||||||
| Tangible book value per share (2) | $ | 25.12 | $ | 24.48 | $ | 23.08 | ||||||
(1) Estimated number for September 30, 2017.
(2) See Appendix A for detailed reconciliation from GAAP to Non-GAAP ratios.
11
| INDEPENDENT BANK CORP. SUPPLEMENTAL FINANCIAL INFORMATION | |||||||||||||||||||||||||||||||||
| (Unaudited, dollars in thousands) | Three Months Ended | ||||||||||||||||||||||||||||||||
| September 30, 2017 | June 30, 2017 | September 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 | $ | 132,327 | $ | 417 | 1.25 | % | $ | 72,676 | $ | 190 | 1.05 | % | $ | 305,728 | $ | 387 | 0.50 | % | |||||||||||||||
| Securities | |||||||||||||||||||||||||||||||||
| Securities - trading | 1,299 | — | — | % | 1,292 | — | — | % | 805 | — | — | % | |||||||||||||||||||||
| Securities - taxable investments | 908,560 | 5,642 | 2.46 | % | 900,086 | 5,609 | 2.50 | % | 815,889 | 5,034 | 2.45 | % | |||||||||||||||||||||
| Securities - nontaxable investments (1) | 2,817 | 29 | 4.08 | % | 3,787 | 40 | 4.24 | % | 4,382 | 43 | 3.90 | % | |||||||||||||||||||||
| Total securities | 912,676 | 5,671 | 2.47 | % | 905,165 | 5,649 | 2.50 | % | 821,076 | 5,077 | 2.46 | % | |||||||||||||||||||||
| Loans held for sale | 5,766 | 33 | 2.27 | % | 3,733 | 21 | 2.26 | % | 11,652 | 81 | 2.77 | % | |||||||||||||||||||||
| Loans | |||||||||||||||||||||||||||||||||
| Commercial and industrial | 868,358 | 9,173 | 4.19 | % | 895,173 | 9,098 | 4.08 | % | 851,497 | 8,420 | 3.93 | % | |||||||||||||||||||||
| Commercial real estate (1) | 3,104,098 | 32,875 | 4.20 | % | 3,028,745 | 30,968 | 4.10 | % | 2,723,832 | 28,466 | 4.16 | % | |||||||||||||||||||||
| Commercial construction | 365,143 | 4,177 | 4.54 | % | 362,603 | 4,105 | 4.54 | % | 370,085 | 3,881 | 4.17 | % | |||||||||||||||||||||
| Small business | 130,275 | 1,828 | 5.57 | % | 129,100 | 1,776 | 5.52 | % | 111,932 | 1,502 | 5.34 | % | |||||||||||||||||||||
| Total commercial | 4,467,874 | 48,053 | 4.27 | % | 4,415,621 | 45,947 | 4.17 | % | 4,057,346 | 42,269 | 4.14 | % | |||||||||||||||||||||
| Residential real estate | 749,813 | 7,656 | 4.05 | % | 704,726 | 7,024 | 4.00 | % | 631,582 | 6,334 | 3.99 | % | |||||||||||||||||||||
| Home equity | 1,046,894 | 10,081 | 3.82 | % | 1,028,109 | 9,444 | 3.68 | % | 958,317 | 8,243 | 3.42 | % | |||||||||||||||||||||
| Total consumer real estate | 1,796,707 | 17,737 | 3.92 | % | 1,732,835 | 16,468 | 3.81 | % | 1,589,899 | 14,577 | 3.65 | % | |||||||||||||||||||||
| Other consumer | 10,619 | 241 | 9.00 | % | 10,541 | 240 | 9.13 | % | 13,026 | 291 | 8.89 | % | |||||||||||||||||||||
| Total loans | 6,275,200 | 66,031 | 4.17 | % | 6,158,997 | 62,655 | 4.08 | % | 5,660,271 | 57,137 | 4.02 | % | |||||||||||||||||||||
| Total interest-earning assets | $ | 7,325,969 | $ | 72,152 | 3.91 | % | $ | 7,140,571 | $ | 68,515 | 3.85 | % | $ | 6,798,727 | $ | 62,682 | 3.67 | % | |||||||||||||||
| Cash and due from banks | 100,228 | 97,129 | 94,547 | ||||||||||||||||||||||||||||||
| Federal Home Loan Bank stock | 12,734 | 13,700 | 11,304 | ||||||||||||||||||||||||||||||
| Other assets | 567,297 | 551,388 | 552,247 | ||||||||||||||||||||||||||||||
| Total assets | $ | 8,006,228 | $ | 7,802,788 | $ | 7,456,825 | |||||||||||||||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||||||||||||||||||
| Deposits | |||||||||||||||||||||||||||||||||
| Savings and interest checking accounts | $ | 2,562,557 | $ | 992 | 0.15 | % | $ | 2,568,020 | $ | 849 | 0.13 | % | $ | 2,408,498 | $ | 756 | 0.12 | % | |||||||||||||||
| Money market | 1,309,457 | 1,171 | 0.35 | % | 1,287,991 | 935 | 0.29 | % | 1,197,382 | 758 | 0.25 | % | |||||||||||||||||||||
| Time deposits | 611,080 | 1,168 | 0.76 | % | 609,787 | 1,128 | 0.74 | % | 635,635 | 1,219 | 0.76 | % | |||||||||||||||||||||
| Total interest-bearing deposits | 4,483,094 | 3,331 | 0.29 | % | 4,465,798 | 2,912 | 0.26 | % | 4,241,515 | 2,733 | 0.26 | % | |||||||||||||||||||||
| Borrowings | |||||||||||||||||||||||||||||||||
| Federal Home Loan Bank borrowings | 53,926 | 302 | 2.22 | % | 63,275 | 418 | 2.65 | % | 51,100 | 391 | 3.04 | % | |||||||||||||||||||||
| Customer repurchase agreements | 172,387 | 67 | 0.15 | % | 155,692 | 55 | 0.14 | % | 151,982 | 52 | 0.14 | % | |||||||||||||||||||||
| Junior subordinated debentures | 73,070 | 578 | 3.14 | % | 73,068 | 565 | 3.10 | % | 73,184 | 1,037 | 5.64 | % | |||||||||||||||||||||
| Subordinated debentures | 34,664 | 427 | 4.89 | % | 34,652 | 428 | 4.95 | % | 34,617 | 427 | 4.91 | % | |||||||||||||||||||||
| Total borrowings | 334,047 | 1,374 | 1.63 | % | 326,687 | 1,466 | 1.80 | % | 310,883 | 1,907 | 2.44 | % | |||||||||||||||||||||
| Total interest-bearing liabilities | $ | 4,817,141 | $ | 4,705 | 0.39 | % | $ | 4,792,485 | $ | 4,378 | 0.37 | % | $ | 4,552,398 | $ | 4,640 | 0.41 | % | |||||||||||||||
| Demand deposits | 2,174,600 | 2,026,770 | 1,976,177 | ||||||||||||||||||||||||||||||
| Other liabilities | 84,782 | 81,725 | 112,018 | ||||||||||||||||||||||||||||||
| Total liabilities | $ | 7,076,523 | $ | 6,900,980 | $ | 6,640,593 | |||||||||||||||||||||||||||
| Stockholders' equity | 929,705 | 901,808 | 816,232 | ||||||||||||||||||||||||||||||
12
| Total liabilities and stockholders' equity | $ | 8,006,228 | $ | 7,802,788 | $ | 7,456,825 | |||||||||||||||||||||||||||
| Net interest income | $ | 67,447 | $ | 64,137 | $ | 58,042 | |||||||||||||||||||||||||||
| Interest rate spread (2) | 3.52 | % | 3.48 | % | 3.26 | % | |||||||||||||||||||||||||||
| Net interest margin (3) | 3.65 | % | 3.60 | % | 3.40 | % | |||||||||||||||||||||||||||
| Supplemental Information | |||||||||||||||||||||||||||||||||
| Total deposits, including demand deposits | $ | 6,657,694 | $ | 3,331 | $ | 6,492,568 | $ | 2,912 | $ | 6,217,692 | $ | 2,733 | |||||||||||||||||||||
| Cost of total deposits | 0.20 | % | 0.18 | % | 0.17 | % | |||||||||||||||||||||||||||
| Total funding liabilities, including demand deposits | $ | 6,991,741 | $ | 4,705 | $ | 6,819,255 | $ | 4,378 | $ | 6,528,575 | $ | 4,640 | |||||||||||||||||||||
| Cost of total funding liabilities | 0.27 | % | 0.26 | % | 0.28 | % | |||||||||||||||||||||||||||
(1) The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $374,000, $382,000, and $374,000 for the three months ended September 30, 2017, June 30, 2017, and September 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.
13
| Nine Months Ended | ||||||||||||||||||||||
| September 30, 2017 | September 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 | $ | 103,437 | $ | 814 | 1.05 | % | $ | 202,397 | $ | 767 | 0.51 | % | ||||||||||
| Securities | ||||||||||||||||||||||
| Securities - trading | 1,198 | — | — | % | 667 | — | — | % | ||||||||||||||
| Securities - taxable investments | 894,809 | 16,618 | 2.48 | % | 824,449 | 15,500 | 2.51 | % | ||||||||||||||
| Securities - nontaxable investments (1) | 3,462 | 109 | 4.21 | % | 4,557 | 137 | 4.02 | % | ||||||||||||||
| Total securities | 899,469 | 16,727 | 2.49 | % | 829,673 | 15,637 | 2.52 | % | ||||||||||||||
| Loans held for sale | 4,086 | 68 | 2.23 | % | 8,005 | 170 | 2.84 | % | ||||||||||||||
| Loans | ||||||||||||||||||||||
| Commercial and industrial | 881,387 | 26,913 | 4.08 | % | 845,565 | 24,759 | 3.91 | % | ||||||||||||||
| Commercial real estate (1) | 3,054,336 | 94,057 | 4.12 | % | 2,703,300 | 83,082 | 4.11 | % | ||||||||||||||
| Commercial construction | 353,134 | 11,859 | 4.49 | % | 369,403 | 11,376 | 4.11 | % | ||||||||||||||
| Small business | 127,938 | 5,284 | 5.52 | % | 105,761 | 4,266 | 5.39 | % | ||||||||||||||
| Total commercial | 4,416,795 | 138,113 | 4.18 | % | 4,024,029 | 123,483 | 4.10 | % | ||||||||||||||
| Residential real estate | 699,793 | 20,779 | 3.97 | % | 631,343 | 18,939 | 4.01 | % | ||||||||||||||
| Home equity | 1,024,164 | 28,233 | 3.69 | % | 943,857 | 24,452 | 3.46 | % | ||||||||||||||
| Total consumer real estate | 1,723,957 | 49,012 | 3.80 | % | 1,575,200 | 43,391 | 3.68 | % | ||||||||||||||
| Other consumer | 10,828 | 722 | 8.91 | % | 13,743 | 924 | 8.98 | % | ||||||||||||||
| Total loans | 6,151,580 | 187,847 | 4.08 | % | 5,612,972 | 167,798 | 3.99 | % | ||||||||||||||
| Total interest-earning assets | $ | 7,158,572 | $ | 205,456 | 3.84 | % | $ | 6,653,047 | $ | 184,372 | 3.70 | % | ||||||||||
| Cash and due from banks | 97,457 | 90,527 | ||||||||||||||||||||
| Federal Home Loan Bank stock | 13,180 | 12,940 | ||||||||||||||||||||
| Other assets | 553,129 | 542,271 | ||||||||||||||||||||
| Total assets | $ | 7,822,338 | $ | 7,298,785 | ||||||||||||||||||
| Interest-bearing liabilities | ||||||||||||||||||||||
| Deposits | ||||||||||||||||||||||
| Savings and interest checking accounts | $ | 2,536,954 | $ | 2,604 | 0.14 | % | $ | 2,386,520 | $ | 2,416 | 0.14 | % | ||||||||||
| Money market | 1,285,492 | 2,963 | 0.31 | % | 1,157,731 | 2,171 | 0.25 | % | ||||||||||||||
| Time deposits | 618,518 | 3,443 | 0.74 | % | 651,044 | 3,752 | 0.77 | % | ||||||||||||||
| Total interest-bearing deposits | 4,440,964 | 9,010 | 0.27 | % | 4,195,295 | 8,339 | 0.27 | % | ||||||||||||||
| Borrowings | ||||||||||||||||||||||
| Federal Home Loan Bank borrowings | 61,206 | 1,123 | 2.45 | % | 63,869 | 1,275 | 2.67 | % | ||||||||||||||
| Customer repurchase agreements | 161,850 | 178 | 0.15 | % | 144,393 | 149 | 0.14 | % | ||||||||||||||
| Junior subordinated debentures | 73,074 | 1,697 | 3.10 | % | 73,233 | 3,072 | 5.60 | % | ||||||||||||||
| Subordinated debentures | 34,652 | 1,282 | 4.95 | % | 34,606 | 1,282 | 4.95 | % | ||||||||||||||
| Total borrowings | 330,782 | 4,280 | 1.73 | % | 316,101 | 5,778 | 2.44 | % | ||||||||||||||
| Total interest-bearing liabilities | $ | 4,771,746 | $ | 13,290 | 0.37 | % | $ | 4,511,396 | $ | 14,117 | 0.42 | % | ||||||||||
| Demand deposits | 2,063,668 | 1,878,558 | ||||||||||||||||||||
| Other liabilities | 84,063 | 107,983 | ||||||||||||||||||||
| Total liabilities | $ | 6,919,477 | $ | 6,497,937 | ||||||||||||||||||
| Stockholders' equity | 902,861 | 800,848 | ||||||||||||||||||||
14
| Total liabilities and stockholders' equity | $ | 7,822,338 | $ | 7,298,785 | ||||||||||||||||||
| Net interest income | $ | 192,166 | $ | 170,255 | ||||||||||||||||||
| Interest rate spread (2) | 3.47 | % | 3.28 | % | ||||||||||||||||||
| Net interest margin (3) | 3.59 | % | 3.42 | % | ||||||||||||||||||
| Supplemental Information | ||||||||||||||||||||||
| Total deposits, including demand deposits | $ | 6,504,632 | $ | 9,010 | $ | 6,073,853 | $ | 8,339 | ||||||||||||||
| Cost of total deposits | 0.19 | % | 0.18 | % | ||||||||||||||||||
| Total funding liabilities, including demand deposits | $ | 6,835,414 | $ | 13,290 | $ | 6,389,954 | $ | 14,117 | ||||||||||||||
| 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 $1.1 million and $1.2 million for the nine months ended September 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) | |||||||||||||||||||
| Year-over-Year | |||||||||||||||||||
| September 30 2017 | September 30 2016 | Balance Acquired (1) | Organic Growth/(Decline) | Organic Growth/(Decline) % | |||||||||||||||
| Loans | |||||||||||||||||||
| Commercial and industrial | $ | 858,522 | $ | 857,713 | $ | 40,038 | $ | (39,229 | ) | (4.57 | )% | ||||||||
| Commercial real estate | 3,087,160 | 2,787,660 | 192,526 | 106,974 | 3.84 | % | |||||||||||||
| Commercial construction | 395,267 | 376,245 | 4,739 | 14,283 | 3.80 | % | |||||||||||||
| Small business | 130,656 | 115,054 | 110 | 15,492 | 13.46 | % | |||||||||||||
| Total commercial | 4,471,605 | 4,136,672 | 237,413 | 97,520 | 2.36 | % | |||||||||||||
| Residential real estate | 756,130 | 632,685 | 118,120 | 5,325 | 0.84 | % | |||||||||||||
| Home equity | 1,052,295 | 965,112 | 25,360 | 61,823 | 6.41 | % | |||||||||||||
| Total consumer real estate | 1,808,425 | 1,597,797 | 143,480 | 67,148 | 4.20 | % | |||||||||||||
| Total other consumer | 9,872 | 11,664 | 389 | (2,181 | ) | (18.70 | )% | ||||||||||||
| Total loans | $ | 6,289,902 | $ | 5,746,133 | $ | 381,282 | $ | 162,487 | 2.83 | % | |||||||||
| Deposits | |||||||||||||||||||
| Demand deposits | $ | 2,183,760 | $ | 2,024,235 | $ | 66,488 | $ | 93,037 | 4.60 | % | |||||||||
| Savings and interest checking accounts | 2,568,620 | 2,417,195 | 79,246 | 72,179 | 2.99 | % | |||||||||||||
| Money market | 1,302,662 | 1,198,959 | 105,364 | (1,661 | ) | (0.14 | )% | ||||||||||||
| Time certificates of deposit | 627,900 | 629,071 | 84,168 | (85,339 | ) | (13.57 | )% | ||||||||||||
| Total deposits | $ | 6,682,942 | $ | 6,269,460 | $ | 335,266 | $ | 78,216 | 1.25 | % | |||||||||
| 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.
15
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:
| September 30 2017 | June 30 2017 | September 30 2016 | |||||||||||
| Tangible common equity | |||||||||||||
| Stockholders' equity (GAAP) | $ | 931,224 | $ | 914,584 | $ | 818,242 | (a) | ||||||
| Less: Goodwill and other intangibles | 242,105 | 243,005 | 210,834 | ||||||||||
| Tangible common equity | $ | 689,119 | $ | 671,579 | $ | 607,408 | (b) | ||||||
| Tangible assets | |||||||||||||
| Assets (GAAP) | $ | 8,052,919 | $ | 8,017,293 | $ | 7,502,009 | (c) | ||||||
| Less: Goodwill and other intangibles | 242,105 | 243,005 | 210,834 | ||||||||||
| Tangible assets | $ | 7,810,814 | $ | 7,774,288 | $ | 7,291,175 | (d) | ||||||
| Common Shares | 27,437,791 | 27,431,171 | 26,320,467 | (e) | |||||||||
| Common equity to assets ratio (GAAP) | 11.56 | % | 11.41 | % | 10.91 | % | (a/c) | ||||||
| Tangible common equity to tangible assets ratio (Non-GAAP) | 8.82 | % | 8.64 | % | 8.33 | % | (b/d) | ||||||
| Book value per share (GAAP) | $ | 33.94 | $ | 33.34 | $ | 31.09 | (a/e) | ||||||
| Tangible book value per share (Non-GAAP) | $ | 25.12 | $ | 24.48 | $ | 23.08 | (b/e) | ||||||
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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 | Nine Months Ended | |||||||||||||||||||
| September 30 2017 | June 30 2017 | September 30 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||||||
| Net interest income (GAAP) | $ | 67,073 | $ | 63,755 | $ | 57,668 | $ | 191,028 | $ | 169,092 | (a) | |||||||||
| Noninterest income (GAAP) | $ | 20,770 | $ | 21,398 | $ | 20,416 | $ | 61,080 | $ | 60,666 | (b) | |||||||||
| Noninterest income on an operating basis (Non-GAAP) | $ | 20,770 | $ | 21,398 | $ | 20,416 | $ | 61,080 | $ | 60,666 | (c) | |||||||||
| Noninterest expense (GAAP) | $ | 51,310 | $ | 52,809 | $ | 46,857 | $ | 152,892 | $ | 140,485 | (d) | |||||||||
| Less: | ||||||||||||||||||||
| Loss on extinguishment of debt | — | — | — | — | 437 | |||||||||||||||
| Merger and acquisition expense | — | 2,909 | 151 | 3,393 | 691 | |||||||||||||||
| Noninterest expense on an operating basis (Non-GAAP) | $ | 51,310 | $ | 49,900 | $ | 46,706 | $ | 149,499 | $ | 139,357 | (e) | |||||||||
| Total revenue (GAAP) | $ | 87,843 | $ | 85,153 | $ | 78,084 | $ | 252,108 | $ | 229,758 | (a+b) | |||||||||
| Total operating revenue (Non-GAAP) | $ | 87,843 | $ | 85,153 | $ | 78,084 | $ | 252,108 | $ | 229,758 | (a+c) | |||||||||
| Ratios | ||||||||||||||||||||
| Noninterest income as a % of total revenue (GAAP based) | 23.64 | % | 25.13 | % | 26.15 | % | 24.23 | % | 26.40 | % | (b/(a+b)) | |||||||||
| Noninterest income as a % of total revenue on an operating basis (Non-GAAP) | 23.64 | % | 25.13 | % | 26.15 | % | 24.23 | % | 26.40 | % | (c/(a+c)) | |||||||||
| Efficiency ratio (GAAP based) | 58.41 | % | 62.02 | % | 60.01 | % | 60.65 | % | 61.14 | % | (d/(a+b)) | |||||||||
| Efficiency ratio on an operating basis (Non-GAAP) | 58.41 | % | 58.60 | % | 59.82 | % | 59.30 | % | 60.65 | % | (e/(a+c)) | |||||||||
17