Independent Bank Corp. Reports First Quarter Net Income of $20.7 Million

Independent Bank Corp. (Nasdaq Global Select Market: INDB), parent of
Rockland Trust Company, today announced 2017 first quarter net income of
$20.7 million, or $0.76 per diluted share, compared to $17.2 million, or
$0.64 per diluted share, reported in the prior quarter. The first
quarter and prior quarter net income include merger and acquisition
expenses, which the Company considers to be noncore. When excluding
these items and their related tax impact, net income for the first
quarter was $21.1 million, or $0.78 on an adjusted diluted earnings per
share basis, versus $20.2 million, or $0.76 per diluted share in the
prior quarter.

“During the first quarter of 2017 Rockland Trust continued to steadily
grow loans and deposits,” said Christopher Oddleifson, the President and
Chief Executive Officer of Independent Bank Corp. and the Chief
Executive Officer of Rockland Trust. “Our wealth management business
also continued its steady progress, as the Rockland Trust Investment
Management Group achieved a new record level of $3.0 billion of assets
under administration at quarter end. We are preparing for the
anticipated acquisition of The Edgartown National Bank in the near
future, and look forward to welcoming new customers and colleagues on
Martha’s Vineyard to Rockland Trust prior to the summer. 2017 is off to
a very good start.”

BALANCE SHEET

Total assets of $7.7 billion at March 31, 2017 increased by $28.7
million, or 0.4%, from the prior quarter and by $548.8 million, or 7.6%,
as compared to the year ago period.

Total loans grew in the first quarter by $64.8 million, or 4.4% on an
annualized basis, and increased by $475.1 million, or 8.5%, when
compared to the year ago period. The current quarter increase was driven
by solid loan growth in both the total commercial and consumer real
estate portfolios. The increase versus the year ago period reflects both
organic growth and the inclusion of New England Bancorp (“NEB”), the
parent company of The Bank of Cape Cod, which was acquired in the fourth
quarter of 2016. Reflecting the healthy local economy, the combined
commercial real estate and construction portfolios rose by 6.4%
annualized in the current quarter along with 12.1% annualized growth in
the small business category. Continued strong marketing efforts and
increased demand for jumbo products drove strong home equity and
residential closings. As a result, the home equity portfolio increased
by $20.6 million, or 8.5% on an annualized basis, during the first
quarter, and the residential mortgage portfolio increased by $9.6
million, or 6.0% on an annualized basis, in the first quarter.
Prepayment activity also slowed across most portfolios in the first
quarter.

Total deposits increased in the first quarter by $58.4 million, or 3.7%,
on an annualized basis, and increased by $475.4 million, or 7.9%, when
compared to the year ago period. In addition to the impact of the NEB
acquisition during the fourth quarter of 2016, the Company’s deposit
growth continues to be fueled organically with core deposits, which
increased by $87.8 million in the first quarter and represented 90.4% of
total deposits at March 31, 2017. The total cost of deposits increased
modestly by 1 basis point to 0.18% for the quarter.

The securities portfolio increased by $53.7 million from the prior
quarter due to $83.6 million in purchases of agency mortgage-backed
securities, partially offset by paydowns on existing securities. The
higher yield curve during the first quarter was viewed as an opportunity
to profitably deploy some excess liquidity. Total securities of $905.2
million comprised 11.7% of total assets of the Company at March 31, 2017.

The Company’s total borrowings remained relatively consistent versus
year end levels, with the exception of a seasonal decline in customer
repurchase agreement balances. However, the cost of borrowings notably
declined during the quarter as a result of the Company replacing a $50
million maturing interest rate swap on certain junior subordinated
debentures with a new, lower fixed-rate swap, as well as the repricing
of $5.9 million of other junior subordinated debentures at a lower
variable rate during March. Both of these factors helped contribute to
an overall reduction of approximately $436,000 in interest expense from
borrowings in the first quarter when compared to the prior quarter.

Stockholders’ equity at March 31, 2017 rose to $877.5 million, an
increase of 1.5% from December 31, 2016, due primarily to continued
strong earnings retention, and increased by 11.3% when compared to the
year ago period inclusive of the fourth quarter 2016 NEB acquisition.
Book value per share increased $0.42, or 1.3%, during the first quarter
compared to the prior quarter, and the Company’s ratio of common equity
to assets of 11.34% increased 12 basis points from the prior quarter end
and 38 basis points from the same period a year ago. The Company’s
tangible book value per share rose by $0.47, or 2.0%, in the first
quarter compared to the fourth quarter. The Company’s ratio of tangible
common equity to tangible assets of 8.62% at March 31, 2017 represents
an increase of 15 basis points from the prior quarter. The latter
measure also increased 37 basis points from the same period a year ago
despite the increased goodwill recognized with the NEB acquisition.

NET INTEREST INCOME

Net interest income for the first quarter was $60.2 million,
representing a $1.4 million, or 2.5%, increase over the prior quarter
which was mainly attributable to higher levels of interest-earning
assets combined with a much higher net interest margin. The Company’s
net interest margin increased by 15 basis points from the prior quarter
to 3.51%, driven primarily by increased market rates on short-term
indexed assets, lower borrowing costs, and the reinvestment of excess
liquidity.

NONINTEREST INCOME

Noninterest income totaled $18.9 million in the first quarter, which
represents a $2.9 million, or 13.1%, decrease from the prior quarter.
Significant changes in noninterest income in the first quarter compared
to the prior quarter included the following:

  • Deposit account fees and interchange and ATM fees decreased by
    $367,000, or 4.2%, driven mainly by seasonality.
  • Investment management income remained consistent with the prior
    quarter, reflecting higher revenues from the management of assets
    under administration, which grew 4.2% to $3.0 billion as of March 31,
    2017, offset by a decline in retail commissions.
  • Mortgage banking income decreased by $1.2 million, or 55.5%, driven
    largely by a decrease in sold loan volume, combined with an impairment
    recovery in the prior quarter on the Company’s mortgage servicing
    asset.
  • The decrease in cash surrender value of life insurance policies of
    $145,000, or 13.1%, was due to annual dividend income that was
    received during the fourth quarter.
  • Loan level derivative income decreased by $922,000, or 60.3%, due to
    less customer demand in the first quarter compared to the linked
    quarter.
  • Other noninterest income decreased $215,000, or 8.5%, mainly due to a
    decrease in certain loan fees, capital gain distributions received on
    equity securities, and checkbook fees, partially offset by a gain on
    sale of loans.

NONINTEREST EXPENSE

The Company recorded noninterest expense of $48.8 million during the
first quarter, which represents a $2.9 million, or 5.6%, decrease from
the prior quarter. Significant changes in noninterest expense in the
first quarter compared to the prior quarter included the following:

  • Salaries and employee benefits expense increased by $1.2 million, or
    4.6%, due primarily to seasonal increases in payroll taxes and medical
    insurance along with the inclusion of NEB personnel for a full
    quarter. This was offset partially by decreases in incentive
    compensation and certain retirement plan expenses.
  • Occupancy and equipment expenses increased by $218,000, or 3.7%,
    mainly due to increased snow removal costs, partially offset by a
    decrease in depreciation which was accelerated in the fourth quarter
    due to a branch closing.
  • Data processing and facilities management expense increased by
    $128,000, or 11.2%, due primarily to timing of transactional credits
    and statement rendering costs.
  • Merger and acquisition costs amounted to $484,000 for the first
    quarter as compared to $4.8 million in the prior quarter. The first
    quarter expense primarily relates to the pending acquisition of Island
    Bancorp, Inc., which is expected to close in the second quarter of
    2017. The majority of the prior quarter expenses related to
    compensation and severance agreements, as well as legal and consulting
    fees associated with the fourth quarter closing of the NEB acquisition.
  • Other noninterest expense decreased by $240,000, or 2.0%, driven
    primarily by decreases in consultant fees, mortgage operations
    expense, and lower loan work out costs, partially offset by increases
    in advertising, postage, internet banking, legal, software
    maintenance, and higher provisions for unfunded commitments.

The Company generated a return on average assets and a return on average
common equity of 1.10% and 9.59%, respectively, in the first quarter, as
compared to 0.89% and 8.07%, respectively, for the prior quarter. On an
operating basis, the Company generated a return on average assets and
return on average common equity of 1.12% and 9.74%, respectively, in the
first quarter, as compared to 1.05% and 9.51%, respectively, for the
prior quarter.

The Company’s tax rate for the first quarter was 30.3% as compared to
30.9% in the prior quarter. This quarter’s tax rate was impacted by new
accounting guidance that went into effect in 2017. This guidance
requires that the excess tax benefit associated with stock compensation
transactions be recorded through earnings as a discrete item within the
Company’s effective tax rate during the period of the transaction, as
opposed to prior year treatment which required recognition of the excess
tax benefit through additional paid in capital. The Company’s effective
tax rate without these discrete items, which totaled approximately
$920,000, would have been 33.4%, reflecting the Company’s reduced levels
of new market tax credits as compared to the prior year. While a
majority of tax events related to stock compensation occur within the
first quarter, these events will continue to impact the tax rate in
future quarters, as applicable.

ASSET QUALITY

During the first quarter, the Company recorded total net recoveries of
$152,000, or 0.01% of average loans on an annualized basis, compared to
net charge-offs of $639,000 in the prior quarter. The provision for loan
losses decreased to $600,000 for the first quarter of 2017 versus $4.0
million in the fourth quarter of 2016, primarily due to a $3.6 million
specific loan loss reserve for one large commercial relationship which
was placed on nonaccrual status in the fourth quarter of 2016 and
remains in workout status. Nonperforming loans decreased to $55.1
million, or 0.91% of loans, at March 31, 2017 from $57.4 million, or
0.96% of loans, at December 31, 2016. Total nonperforming assets
decreased to $58.5 million at the end of the first quarter, as compared
to $61.6 million at the end of the prior quarter. Delinquency as a
percentage of loans increased to 0.58% at March 31, 2017 compared to
0.33% at December 31, 2016, representing the movement of the
aforementioned large commercial relationship from current to delinquent
status.

The allowance for loan losses was $62.3 million at March 31, 2017, as
compared to $61.6 million at December 31, 2016. The Company’s allowance
for loan losses as a percentage of loans was 1.03% at both March 31,
2017 and December 31, 2016, respectively.

CONFERENCE CALL INFORMATION

Christopher Oddleifson, Chief Executive Officer and Robert Cozzone,
Chief Financial Officer will host a conference call to discuss first
quarter earnings at 10:00 a.m. Eastern Time on Friday, April 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: 10104817 and will be available through May 5, 2017.
Additionally, a webcast replay will be available until April 21, 2018.

ABOUT INDEPENDENT BANK CORP.

Independent Bank Corp. has approximately $7.7 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;
  • failure to consummate or delay in consummating the acquisition of
    Island Bancorp, Inc., which is subject to certain standard conditions,
    including receipt of required regulatory approvals;
  • 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 of
    previous mergers;
  • the effect of laws and regulations regarding the financial services
    industry including, but not limited to, the Dodd-Frank Wall Street
    Reform and 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 gains or
losses on the sales of securities, loss 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), 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.

           

INDEPENDENT BANK CORP. FINANCIAL SUMMARY

CONSOLIDATED BALANCE SHEETS
(Unaudited dollars in thousands)         % Change % Change
March 31
2017
December 31
2016
March 31
2016

Mar 2017 vs.
Dec 2016

Mar 2017 vs.
Mar 2016

Assets

Cash and due from banks $ 94,662 $ 97,196 $ 83,345 (2.61 )% 13.58 %
Interest-earning deposits with banks 125,411 191,899 113,387 (34.65 )% 10.60 %
Securities
Securities – trading 1,289 804 763 60.32 % 68.94 %
Securities – available for sale 401,837 363,644 378,227 10.50 % 6.24 %
Securities – held to maturity 502,123   487,076   457,641   3.09 % 9.72 %
Total securities 905,249 851,524 836,631 6.31 % 8.20 %
Loans held for sale (at fair value) 3,398 6,139 7,588 (44.65 )% (55.22 )%
Loans
Commercial and industrial 881,329 902,053 835,336 (2.30 )% 5.51 %
Commercial real estate 3,027,305 3,010,798 2,711,857 0.55 % 11.63 %
Commercial construction 356,173 320,391 357,867 11.17 % (0.47 )%
Small business 126,374   122,726   103,323   2.97 % 22.31 %
Total commercial 4,391,181   4,355,968   4,008,383   0.81 % 9.55 %
Residential real estate 653,999 644,426 631,888 1.49 % 3.50 %
Home equity – first position 595,828 577,006 547,056 3.26 % 8.92 %
Home equity – subordinate positions 412,943   411,141   388,255   0.44 % 6.36 %
Total consumer real estate 1,662,770   1,632,573   1,567,199   1.85 % 6.10 %
Other consumer 10,415   11,064   13,649   (5.87 )% (23.69 )%
Total loans 6,064,366   5,999,605   5,589,231   1.08 % 8.50 %
Less: allowance for loan losses (62,318 ) (61,566 ) (56,432 ) 1.22 % 10.43 %
Net loans 6,002,048   5,938,039   5,532,799   1.08 % 8.48 %
Federal Home Loan Bank stock 11,497 11,497 11,807 % (2.63 )%
Bank premises and equipment, net 82,027 78,480 76,692 4.52 % 6.96 %
Goodwill 221,526 221,526 201,083 % 10.17 %
Other intangible assets 9,087 9,848 11,135 (7.73 )% (18.39 )%
Cash surrender value of life insurance policies 145,560 144,503 135,734 0.73 % 7.24 %
Other real estate owned and other foreclosed assets 3,404 4,173 1,720 (18.43 )% 97.91 %
Other assets 134,245   154,551   177,347   (13.14 )% (24.30 )%
Total assets $ 7,738,114   $ 7,709,375   $ 7,189,268   0.37 % 7.63 %

Liabilities and Stockholders’ Equity

Deposits
Demand deposits $ 2,043,359 $ 2,057,086 $ 1,840,186 (0.67 )% 11.04 %
Savings and interest checking accounts 2,542,667 2,469,237 2,374,264 2.97 % 7.09 %
Money market 1,268,796 1,236,778 1,123,600 2.59 % 12.92 %
Time certificates of deposit 615,852   649,152   657,197   (5.13 )% (6.29 )%
Total deposits 6,470,674   6,412,253   5,995,247   0.91 % 7.93 %
Borrowings
Federal Home Loan Bank borrowings 50,811 50,819 50,840 (0.02 )% (0.06 )%
Customer repurchase agreements and other short-term borrowings 145,772 176,913 134,568 (17.60 )% 8.33 %
Junior subordinated debentures, net 73,067 73,107 73,257 (0.05 )% (0.26 )%
Subordinated debentures, net 34,647   34,635   34,600   0.03 % 0.14 %
Total borrowings 304,297   335,474   293,265   (9.29 )% 3.76 %
Total deposits and borrowings 6,774,971   6,747,727   6,288,512   0.40 % 7.74 %
Other liabilities 85,663   96,958   112,609   (11.65 )% (23.93 )%
Total liabilities 6,860,634   6,844,685   6,401,121   0.23 % 7.18 %
Stockholders’ equity
Common stock 269 268 261 0.37 % 3.07 %
Additional paid in capital 452,048 451,664 406,921 0.09 % 11.09 %
Retained earnings 425,802 414,095 379,153 2.83 % 12.30 %
Accumulated other comprehensive income (loss), net of tax (639 ) (1,337 ) 1,812   (52.21 )% (135.26 )%
Total stockholders’ equity 877,480   864,690   788,147   1.48 % 11.33 %
Total liabilities and stockholders’ equity $ 7,738,114   $ 7,709,375   $ 7,189,268   0.37 % 7.63 %
           
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited dollars in thousands, except per share data)
Three Months Ended
        % Change % Change
March 31
2017
December 31
2016
March 31
2016
Mar 2017 vs. Mar 2017 vs.
Dec 2016 Mar 2016
Interest income
Interest on federal funds sold and short-term investments $ 207 $ 423 $ 211 (51.1 )% (1.90 )%
Interest and dividends on securities 5,393 5,379 5,229 0.26 % 3.14 %
Interest and fees on loans 58,793 57,561 54,269 2.14 % 8.34 %
Interest on loans held for sale 14   65   32   (78.46 )% (56.25 )%
Total interest income 64,407 63,428 59,741 1.54 % 7.81 %
Interest expense
Interest on deposits 2,767 2,801 2,868 (1.21 )% (3.52 )%
Interest on borrowings 1,440   1,875   1,982   (23.20 )% (27.35 )%
Total interest expense 4,207   4,676   4,850   (10.03 )% (13.26 )%
Net interest income 60,200 58,752 54,891 2.46 % 9.67 %
Provision for loan losses 600   4,000   525   (85.00 )% 14.29 %
Net interest income after provision for loan losses 59,600 54,752 54,366 8.85 % 9.63 %
Noninterest income
Deposit account fees 4,544 4,673 4,595 (2.76 )% (1.11 )%
Interchange and ATM fees 3,922 4,160 3,724 (5.72 )% 5.32 %
Investment management 5,614 5,626 5,003 (0.21 )% 12.21 %
Mortgage banking income 957 2,149 1,132 (55.47 )% (15.46 )%
Increase in cash surrender value of life insurance policies 964 1,109 1,014 (13.07 )% (4.93 )%
Gain on sale of equity securities 4 1 300.00 %

100.00

%

Loan level derivative income 606 1,528 1,722 (60.34 )% (64.81 )%
Other noninterest income 2,301   2,516   1,965   (8.55 )% 17.10 %
Total noninterest income 18,912 21,762 19,155 (13.10 )% (1.27 )%
Noninterest expenses
Salaries and employee benefits 28,324 27,075 27,189 4.61 % 4.17 %
Occupancy and equipment expenses 6,158 5,940 5,827 3.67 % 5.68 %
Data processing and facilities management 1,272 1,144 1,206 11.19 % 5.47 %
FDIC assessment 783 725 1,010 8.00 % (22.48 )%
Merger and acquisition expense 484 4,764 334 (89.84 )% 44.91 %
Loss on extinguishment of debt 437 n/a (100.00 )%
Loss on sale of equity securities 3 29

100.00

%

(89.66 )%
Other noninterest expenses 11,749   11,989   10,450   (2.00 )% 12.43 %
Total noninterest expenses 48,773 51,637 46,482 (5.55 )% 4.93 %
Income before income taxes 29,739 24,877 27,039 19.54 % 9.99 %
Provision for income taxes 9,014   7,698   8,428   17.10 % 6.95 %
Net Income $ 20,725   $ 17,179   $ 18,611   20.64 % 11.36 %
 
Weighted average common shares (basic) 27,029,640 26,710,029 26,275,323
Common share equivalents

81,283

  60,022   43,409  
Weighted average common shares (diluted)

27,110,923

  26,770,051   26,318,732  
 
Basic earnings per share $ 0.77 $ 0.64 $ 0.71 20.31 % 8.45 %
Diluted earnings per share $ 0.76 $ 0.64 $ 0.71 18.75 % 7.04 %
 

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

Net income $ 20,725 $ 17,179 $ 18,611
Noninterest expense components
Add – loss on extinguishment of debt 437
Add – merger and acquisition expenses 484   4,764   334  
Noncore items, gross 484 4,764 771
Less – net tax benefit associated with noncore items (1) (153 ) (1,702 ) (315 )
Noncore items, net of tax 331   3,062   456  
Net operating earnings $ 21,056   $ 20,241   $ 19,067   4.03 % 10.43 %
 
Diluted earnings per share, on an operating basis $ 0.78 $ 0.76 $ 0.72 2.63 % 8.33 %
(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) 3.51 % 3.36 % 3.39 %
Return on average assets GAAP (calculated by dividing net income by
average assets)
1.10 % 0.89 % 1.04 %
Return on average assets on an operating basis (calculated by
dividing net operating earnings by average assets)
1.12 % 1.05 % 1.07 %
Return on average common equity GAAP (calculated by dividing net
income by average common equity)
9.59 % 8.07 % 9.52 %
Return on average common equity on an operating basis (calculated by
dividing net operating earnings by average common equity)
9.74 % 9.51 % 9.75 %
   

ASSET QUALITY

(Unaudited dollars in thousands) Nonperforming Assets At
March 31
2017
    December 31
2016
    March 31
2016
Nonperforming loans
Commercial & industrial loans $ 36,877 $ 37,455 $ 3,195
Commercial real estate loans 4,792 6,266 8,027
Small business loans 207 302 189
Residential real estate loans 7,139 7,782 7,510
Home equity 5,987 5,553 6,508
Other consumer 50   49   70  
Total nonperforming loans $ 55,052   $ 57,407   $ 25,499  
Other real estate owned 3,404   4,173   1,720  
Total nonperforming assets $ 58,456   $ 61,580   $ 27,219  
 
Nonperforming loans/gross loans 0.91 % 0.96 % 0.46 %
Nonperforming assets/total assets 0.76 % 0.80 % 0.38 %
Allowance for loan losses/nonperforming loans 113.20 % 107.24 % 221.31 %
Gross loans/total deposits 93.72 % 93.56 % 93.23 %
Allowance for loan losses/total loans 1.03 % 1.03 % 1.01 %
Delinquent loans/total loans 0.58 % 0.33 % 0.54 %
 
Nonperforming Assets Reconciliation for the Three Months Ended
March 31
2017
December 31
2016
March 31
2016
 
Nonperforming assets beginning balance $ 61,580 $ 26,591 $ 29,849
New to nonperforming 3,948 37,639 3,159
Loans charged-off (508 ) (1,216 ) (537 )
Loans paid-off (4,745 ) (1,934 ) (3,694 )
Loans transferred to other real estate owned/other assets (457 ) (945 ) (86 )
Loans restored to performing status (629 ) (997 ) (1,104 )
New to other real estate owned 457 945 86
Acquired other real estate owned 2,100
Valuation write down (48 )
Sale of other real estate owned (1,226 ) (681 ) (638 )
Net capital improvements to other real estate owned 59 113
Other 36   67   71  
Nonperforming assets ending balance $ 58,456   $ 61,580   $ 27,219  
   
Net Charge-Offs (Recoveries)
Three Months Ended
March 31
2017
    December 31
2016
    March 31
2016
Net charge-offs (recoveries)
Commercial and industrial loans $ (187 ) $ 553 $ (136 )
Commercial real estate loans (31 ) 20 (189 )
Small business loans 4 (36 ) 42
Residential real estate loans 11 (116 ) 19
Home equity (62 ) 47 120
Other consumer 113   171   62  
Total net charge-offs (recoveries) $ (152 ) $ 639   $ (82 )
 
Net charge-offs (recoveries) to average loans (annualized) (0.01 )% 0.04 % (0.01 )%
   
Troubled Debt Restructurings At
March 31
2017
    December 31
2016
    March 31
2016
Troubled debt restructurings on accrual status $ 25,575 $ 27,093 $ 32,182
Troubled debt restructurings on nonaccrual status 5,439   5,199   4,368  
Total troubled debt restructurings $ 31,014   $ 32,292   $ 36,550  
 
CAPITAL ADEQUACY
March 31
2017
December 31
2016
March 31
2016
Common equity tier 1 capital ratio (1) 10.88 % 10.82 % 10.64 %
Tier one leverage capital ratio (1) 9.92 % 9.76 % 9.53 %
Common equity to assets ratio GAAP 11.34 % 11.22 % 10.96 %
Tangible common equity to tangible assets ratio (2) 8.62 % 8.47 % 8.25 %
Book value per share GAAP $ 32.44 $ 32.02 $ 29.97
Tangible book value per share (2) $ 23.92 $ 23.45 $ 21.90

(1) Estimated number for March 31, 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
March 31, 2017 December 31, 2016 March 31, 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
$ 105,007 $ 207 0.80 % $ 307,677 $ 423 0.55 % $ 164,563 $ 211 0.52 %
Securities
Securities – trading 999 % 801 % 420 %
Securities – taxable investments 875,417 5,367 2.49 % 831,141 5,351 2.56 % 831,170 5,197 2.51 %
Securities – nontaxable investments (1) 3,793   40   4.28 % 4,274   43   4.00 % 4,894   49   4.03 %
Total securities 880,209 5,407 2.49 % 836,216 5,394 2.57 % 836,484 5,246 2.52 %
Loans held for sale 2,725 14 2.08 % 12,812 65 2.02 % 4,246 32 3.03 %
Loans
Commercial and industrial 880,765 8,642 3.98 % 856,983 8,447 3.92 % 831,349 7,972 3.86 %
Commercial real estate (1) 3,029,344 30,215 4.05 % 2,882,468 28,895 3.99 % 2,659,591 26,770 4.05 %
Commercial construction 331,285 3,577 4.38 % 354,235 3,718 4.18 % 379,860 3,819 4.04 %
Small business 124,374   1,680   5.48 % 117,131   1,609   5.46 % 99,012   1,332   5.41 %
Total commercial 4,365,768 44,114 4.10 % 4,210,817 42,669 4.03 % 3,969,812 39,893 4.04 %
Residential real estate 643,672 6,099 3.84 % 639,180 6,548 4.08 % 633,590 6,381 4.05 %
Home equity 996,940   8,708   3.54 % 979,179   8,437   3.43 % 930,579   8,031   3.47 %
Total consumer real estate 1,640,612 14,807 3.66 % 1,618,359 14,985 3.68 % 1,564,169 14,412 3.71 %
Other consumer 11,333   241   8.62 % 12,370   261   8.39 % 14,396   336   9.39 %
Total loans 6,017,713   59,162   3.99 % 5,841,546   57,915   3.94 % 5,548,377   54,641   3.96 %
Total interest-earning assets $ 7,005,654   $ 64,790   3.75 % $ 6,998,251   $ 63,797   3.63 % $ 6,553,670   $ 60,130   3.69 %
Cash and due from banks 94,955 92,836 85,792
Federal Home Loan Bank stock 13,108 12,507 13,599
Other assets 540,411   552,796   534,946  
Total assets $ 7,654,128   $ 7,656,390   $ 7,188,007  
Interest-bearing liabilities
Deposits
Savings and interest checking accounts $ 2,479,373 $ 763 0.12 % $ 2,436,751 $ 757 0.12 % $ 2,354,982 $ 883 0.15 %
Money market 1,258,466 857 0.28 % 1,239,411 825 0.26 % 1,128,446 701 0.25 %
Time deposits 634,947   1,147   0.73 % 645,611   1,219   0.75 % 670,393   1,284   0.77 %
Total interest-bearing deposits 4,372,786 2,767 0.26 % 4,321,773 2,801 0.26 % 4,153,821 2,868 0.28 %
Borrowings
Federal Home Loan Bank borrowings 66,556 403 2.46 % 54,038 379 2.79 % 80,991 490 2.43 %
Customer repurchase agreements and other short-term borrowings 157,305 56 0.14 % 162,885 59 0.14 % 140,863 49 0.14 %
Junior subordinated debentures 73,085 554 3.07 % 73,132 1,011 5.50 % 73,283 1,016 5.58 %
Subordinated debentures 34,641   427   5.00 % 34,629   427   4.91 % 34,594   427   4.96 %
Total borrowings 331,587   1,440   1.76 % 324,684   1,876   2.30 % 329,731   1,982   2.42 %
Total interest-bearing liabilities $ 4,704,373   $ 4,207   0.36 % $ 4,646,457   $ 4,677   0.40 % $ 4,483,552   $ 4,850   0.44 %
Demand deposits 1,987,579 2,060,028 1,811,873
Other liabilities 85,691   103,144   106,281  
Total liabilities $ 6,777,643   $ 6,809,629   $ 6,401,706  
Stockholders’ equity

876,485

846,761 786,301
Total liabilities and stockholders’ equity $ 7,654,128   $ 7,656,390   $ 7,188,007  
 
Net interest income $ 60,583   $ 59,120   $ 55,280  
 
Interest rate spread (2) 3.39 % 3.23 % 3.25 %
 
Net interest margin (3) 3.51 % 3.36 % 3.39 %
 

Supplemental Information

Total deposits, including demand deposits $ 6,360,365 $ 2,767 $ 6,381,801 $ 2,801 $ 5,965,694 $ 2,868
Cost of total deposits 0.18 % 0.17 % 0.19 %
Total funding liabilities, including demand deposits $ 6,691,952 $ 4,207 $ 6,706,485 $ 4,677 $ 6,295,425 $ 4,850
Cost of total funding liabilities 0.25 % 0.28 % 0.31 %

(1) The total amount of adjustment to present interest income and yield
on a fully tax-equivalent basis is $383,000, $369,000, and $389,000 for
the three months ended March 31, 2017, December 31, 2016, and March 31,
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.

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:

           
March 31
2017
December 31
2016
March 31
2016
Tangible common equity
Stockholders’ equity (GAAP) $ 877,480 $ 864,690 $ 788,147 (a)
Less: Goodwill and other intangibles 230,613   231,374   212,218  
Tangible common equity 646,867   633,316   575,929   (b)
Tangible assets
Assets (GAAP) 7,738,114 7,709,375 7,189,268 (c)
Less: Goodwill and other intangibles 230,613   231,374   212,218  
Tangible assets $ 7,507,501   $ 7,478,001   $ 6,977,050   (d)
     
Common Shares 27,046,768   27,005,813   26,293,565   (e)
 
Common equity to assets ratio (GAAP) 11.34 % 11.22 % 10.96 % (a/c)
Tangible common equity to tangible assets ratio (Non-GAAP) 8.62 % 8.47 % 8.25 % (b/d)
Book value per share (GAAP) $ 32.44 $ 32.02 $ 29.97 (a/e)
Tangible book value per share (Non-GAAP) $ 23.92 $ 23.45 $ 21.90 (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
March 31
2017
    December 31
2016
    March 31
2016
Net interest income (GAAP) $ 60,200 $ 58,752 $ 54,891 (a)
 
Noninterest income (GAAP) $ 18,912 $ 21,762 $ 19,155 (b)
Noninterest income on an operating basis (Non-GAAP) $ 18,912 $ 21,762 $ 19,155 (c)
 
Noninterest expense (GAAP) $ 48,773 $ 51,637 $ 46,482 (d)
Less:
Loss on extinguishment of debt 437
Merger and acquisition expense 484   4,764   334  
Noninterest expense on an operating basis (Non-GAAP) $ 48,289 $ 46,873 $ 45,711 (e)
 
Total revenue (GAAP) $ 79,112 $ 80,514 $ 74,046 (a+b)
Total operating revenue (Non-GAAP) $ 79,112 $ 80,514 $ 74,046 (a+c)
 
Ratios
Noninterest income as a % of total revenue (GAAP based) 23.91 % 27.03 % 25.87 % (b/(a+b))
Noninterest income as a % of total revenue on an operating basis
(Non-GAAP)
23.91 % 27.03 % 25.87 % (c/(a+c))
Efficiency ratio (GAAP based) 61.65 % 64.13 % 62.77 % (d/(a+b))
Efficiency ratio on an operating basis (Non-GAAP) 61.04 % 58.22 % 61.73 % (e/(a+c))
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