Chronicle Journal: Finance

Independent Bank Corp. Reports Second Quarter Net Income of $24.9 Million

Independent Bank Corp. (Nasdaq Global Select Market: INDB), parent of Rockland Trust Company, today announced 2020 second quarter net income of $24.9 million, or $0.76 per diluted share, compared to net income of $26.8 million, or $0.78 per diluted share, reported in the first quarter of 2020. Both quarters' results were negatively impacted by elevated provision for credit losses of $20.0 million and $25.0 million for the second and first quarters, respectively. Second quarter results also reflected a return to a higher, more normalized tax rate.

Assumptions regarding the impact of the Coronavirus ("COVID-19") pandemic continue to be the primary driver of the credit loss provision. Please refer to Appendix D for additional information regarding the Company's Current Expected Credit Losses assumptions and results.

Rockland Trust continues to monitor the COVID-19 pandemic impact on our colleagues, customers, and the communities we serve. The safety of our colleagues and customers continues to be of the utmost importance, while the Company simultaneously continues to serve customer needs. Please refer to Appendices E through G for information regarding loan exposures that potentially could be deemed as highly impacted, loan modifications processed and requested, and Paycheck Protection Program ("PPP") loan volume.

"We remain confident in the strength of our financial position as we continue to navigate through the current environment,” said Christopher Oddleifson, the Chief Executive Officer of Independent Bank Corp. and Rockland Trust Company. “Observing my colleagues over these past few months has once-again demonstrated to me what I already knew: the professionalism and dedication of my Rockland Trust colleagues is what truly sets Rockland Trust apart. I am pleased we were able to help over 5,600 borrowers obtain Paycheck Protection Program (PPP) loans, with a total principal amount of approximately $800 million. In addition I was gratified to observe the investments we made in recent years to build out a sophisticated suite of digital and online capabilities enabled our customers to seamlessly access banking services when branch activity was reduced. I am extremely proud to be a part of Rockland Trust, the bank Where Each Relationship Matters.”

BALANCE SHEET

Total assets of $13.0 billion at June 30, 2020 increased by $1.0 billion, or 8.7%, from the prior quarter, and increased by $1.4 billion, or 12.2%, as compared to the year ago period. Total asset growth in the second quarter is primarily attributable to the Company's participation in the Paycheck Protection Program ("PPP"), as both higher cash and loan balances were generated from the funded PPP loans.

Interest-earning cash of $974.1 million as of June 30, 2020 reflects an increase of $628.4 million when compared to the prior quarter, as PPP loan fundings and other deposit growth fueled the significant increase.

Total loans rose by $443.2 million, or 5.0%, (20.0% annualized) when compared to the prior quarter, as PPP loan balances of $793.0 million at June 30, 2020 contributed significantly to the increase. When excluding PPP activity, loans declined by $349.8 million, or 3.92%, for the quarter. The majority of this decline occurred in the commercial and industrial ("C&I") and residential portfolios, as C&I balances reflect significantly reduced line utilization across multiple products, while the residential decline continues to reflect the lower rate environment driving the majority of production to be sold into the secondary market.

Deposit balances of $10.7 billion at June 30, 2020 increased by $1.3 billion, or 13.8%, (55.6% annualized) from the prior quarter, as a combination of PPP loan fundings, government stimulus programs, and a customer focus on retaining liquidity have fueled significant growth during the quarter. As these PPP funds get utilized and immediate stimulus money is disbursed, some level of decline from this elevated deposit level is expected to occur. Regarding time deposits, maturities of brokered certificates of deposits led to a 14.0% decline in balances when compared to the prior quarter. Deposit rate reductions resulted in the total cost of deposits for the second quarter declining by 20 basis points to 0.28% as compared to the prior quarter.

The securities portfolio decreased by $61.9 million, or 5.0%, when compared to the prior quarter, reflecting $10.0 million of purchases offset by paydowns, called securities, and maturities.

Total borrowings decreased by $250.3 million, or 45.8%, compared to the prior quarter, as the aforementioned enhanced on-balance sheet liquidity position led to a $200.0 million prepayment on short-term borrowings held with the Federal Home Loan Bank ("FHLB"). The payoff resulted in a prepayment penalty of $389,000, which is included in other noninterest expense for the quarter. Additionally, during the quarter, $37.5 million of the parent company long-term line of credit was paid down.

Stockholders' equity at June 30, 2020 remained relatively consistent with March 31, 2020. During the second quarter, the Company repurchased the remaining 300,000 shares under its previously announced stock repurchase plan at an average price of $65.65. Despite the repurchase of 1.5 million shares that was executed over the first and second quarters of 2020, stockholders' equity increased by 2.2% when compared to the year ago period, reflecting strong earnings retention and an increase in accumulated other comprehensive income of $30.9 million, offsetting the $73.2 million impact of the stock repurchases. Book value per share increased by $0.25, or 0.5%, to $50.75 during the second quarter as compared to the linked quarter. The Company's ratio of common equity to assets of 12.84% decreased by 118 basis points from the prior quarter and decreased by 126 basis points from the same period a year ago. The Company's tangible book value per share at June 30, 2020 rose by $0.13, or 0.4%, from the prior quarter to $34.59, and is now 8.1% higher than the year ago period. The Company's ratio of tangible common equity to tangible assets of 9.12% at June 30, 2020 is 89 basis points below the prior quarter and 80 basis points below the year ago period, largely attributable to the increase in the Company's balance sheet and stock repurchase activity.

NET INTEREST INCOME

Net interest income for the second quarter decreased 3.4% to $91.1 million compared to $94.3 million in the prior quarter largely due to the negative impact of the lower interest rate environment along with the mix of interest earning assets. The 2020 second quarter net interest margin of 3.25% represents a reduction of 49 basis points from the prior quarter. The table below illustrates the factors that contributed to the decline in the net interest margin for the second quarter:

Net Interest margin as of March 31, 2020

3.74

%

Decreased loan yields

(0.43

)%

Excess liquidity (cash) levels

(0.19

)%

PPP loan activity at 1% interest rate

(0.12

)%

PPP loan fee amortization

0.08

%

Loan purchase accounting

0.03

%

Decreased cost of funds

0.16

%

Other

(0.02

)%

Net interest margin as of June 30, 2020

3.25

%

Please refer to Appendix C for additional details regarding the net interest margin, including a three-quarter trend of an adjusted core margin.

NONINTEREST INCOME

Noninterest income of $28.2 million in the second quarter of 2020 was $1.8 million, or 6.6%, higher than the prior quarter. Significant changes in noninterest income in the second quarter compared to the prior quarter included the following:

  • Deposit account fees decreased by $2.1 million, or 43.1%, driven by significant reductions in overdraft fees as customers benefited from the government stimulus payments.
  • Interchange and ATM fees increased by $318,000, or 6.5%, reflecting general increases in consumer spending.
  • Investment management income increased by $467,000, or 6.8%, primarily due to an increase in market valuation, along with seasonal tax preparation fees during the second quarter. Assets under administration at June 30, 2020 increased 10.1% to $4.4 billion.
  • Mortgage banking income grew by $4.1 million, as the stabilization of the secondary market combined with strong demand led to the significant increase for the quarter.
  • Although remaining at an elevated level, loan level derivative income decreased by $733,000, or 20.4%, when compared to the strong first quarter results.
  • Other noninterest income decreased by $314,000, or 8.6%, attributable to decreases in small business equity funds income and reduced interest on cash collateral balances, offset by unrealized gains on equity securities of $1.4 million for the quarter.

NONINTEREST EXPENSE

Noninterest expense of $66.6 million in the second quarter of 2020 was consistent with the prior quarter. Significant changes in noninterest expense in the second quarter compared to the prior quarter included the following:

  • Salaries and employee benefits expense remained relatively consistent, with minor netting changes in various components.
  • Data processing and facilities management decreased by $199,000, or 12.0% due to timing of certain initiatives and system upgrades.
  • FDIC assessment increased by $503,000, reflecting a second quarter partial benefit associated with the final allocation of credits, whereas such credits resulted in no related expense in the first quarter.
  • Other noninterest expense decreased by $413,000, or 2.2%, largely due to decreases in unrealized loss on equity securities of $1.8 million, along with decreases in loss on sale of disposition of fixed assets and advertising expenses. These decreases were offset by increases in director expenses related to the equity compensation granted during the quarter, additional reserve for unfunded commitments, pre-payment fees on borrowings, retail branch traffic control and other miscellaneous expenses.

The tax rate for the quarter was 23.80% vs. the prior quarter of 7.4%, as the prior quarter benefited from a $4.7 million discrete tax benefit associated with net operating loss carryback provisions included in the federal Coronavirus Aid, Relief and Economic Security Act ("CARES Act").

The Company generated a return on average assets and a return on average common equity of 0.79% and 5.97%, respectively, in the second quarter of 2020, as compared to 0.94% and 6.22%, respectively, for the prior quarter.

ASSET QUALITY

The allowance for credit losses on loans was $112.2 million at June 30, 2020, or 1.20% of total loans, as compared to $92.4 million at March 31, 2020, or 1.04% of total loans. As previously noted, the Company recorded a $20.0 million provision for credit losses during the second quarter of 2020, reflecting assumptions over future losses that contemplate the impact of the COVID-19 pandemic on various industries and customer segments, related requests for loan deferral accommodations, and government stimulus programs.

The granting of loan deferrals has not resulted in increased asset quality risk metrics, as nonperforming and delinquency amounts do not reflect loans that have been modified as a result of the COVID-19 pandemic. During the second quarter of 2020, the Company recorded total net charge-offs of $200,000, or 0.01% of average loans on an annualized basis. Nonperforming loans of $48.8 million at June 30, 2020 were a slight increase over the prior quarter level of $48.0 million, with nonperforming loans as a percentage of gross loans decreasing slightly to 0.52% compared to 0.54% at March 31, 2020. When compared to the year ago period, total nonperforming assets have increased by 1.3%. At June 30, 2020, delinquency as a percentage of loans was 0.24%, representing a decrease of nine basis points from the prior quarter. Please refer to appendix F for additional details regarding loans whose terms have been modified as a result of COVID-19.

CONFERENCE CALL INFORMATION

Christopher Oddleifson, Chief Executive Officer, Robert Cozzone, Chief Operating Officer, Mark Ruggiero, Chief Financial Officer, and Gerard Nadeau, President and Chief Commercial Banking Officer will host a conference call to discuss second quarter earnings at 10:00 a.m. Eastern Time on Friday, July 24, 2020. 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: 10145222 and will be available through August 7, 2020. Additionally, a webcast replay will be available until July 24, 2021.

ABOUT INDEPENDENT BANK CORP.

Independent Bank Corp. (NASDAQ Global Select Market: INDB) is the holding company for Rockland Trust Company, a full-service commercial bank headquartered in Massachusetts. Continually recognized for its impressive financial performance and its outstanding culture for employees and customers alike, the bank is dedicated to giving back to the communities it serves through programs such as financial literacy. Rockland Trust offers a wide range of banking, investment, and insurance services. The bank serves businesses and individuals through approximately 100 retail branches, commercial and residential lending centers, and investment management offices in Eastern Massachusetts, including Greater Boston, the South Shore, the Cape and Islands, as well as in Worcester County and Rhode Island. Rockland Trust also offers a full suite of mobile and online banking services. 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 us at 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:

  • further 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, including future weakening caused by the COVID-19 pandemic;
  • the length and extent of economic contraction as a result of the COVID-19 pandemic;
  • unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, pandemics or other external events;
  • 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;
  • additional regulatory oversight and additional costs associated with the Company's increase in assets to over $10 billion;
  • changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System;
  • higher than expected tax expense, resulting from failure to comply with general tax laws, changes in tax laws, or failure to comply with requirements of the federal New Markets Tax Credit program;
  • changes in market interest rates for interest earning assets and/or interest bearing liabilities and changes related to the phase-out of LIBOR;
  • increased competition in the Company’s market area;
  • adverse weather, changes in climate, natural disasters, the emergence of widespread health emergencies or pandemics, including the magnitude and duration of the COVID-19 pandemic, other public health crises or man-made events could negatively affect our local economies or disrupt our operations, which would have an adverse effect on our business or results of operations;
  • a deterioration in the conditions of the securities markets;
  • a deterioration of the credit rating for U.S. long-term sovereign debt;
  • inability to adapt to changes in information technology, including changes to industry accepted delivery models driven by a migration to the internet as a means of service delivery;
  • electronic fraudulent activity within the financial services industry, especially in the commercial banking sector;
  • adverse changes in consumer spending and savings habits;
  • the effect of laws and regulations regarding the financial services industry;
  • changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) generally applicable to the Company’s business;
  • the Company's potential judgments, claims, damages, penalties, fines and reputational damage resulting from pending or future litigation and regulatory and government actions, including as a result of our participation in and execution of government programs related to the COVID-19 pandemic;
  • 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 including, but not limited to , changes to how the Company accounts for credit losses;
  • cyber security attacks or intrusions that could adversely impact our businesses; and
  • other unexpected material adverse changes in our operations or earnings.

The Company wishes to caution readers not to place undue reliance on any forward-looking statements as the Company’s business and its forward-looking statements involve substantial known and unknown risks and uncertainties described in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q (“Risk Factors”). Except as required by law, the Company disclaims any intent or obligation to update publicly any such forward-looking statements, whether in response to new information, future events or otherwise. Any public statements or disclosures by the Company following this release which modify or impact any of the forward-looking statements contained in this release will be deemed to modify or supersede such statements in this release. In addition to the information set forth in this press release, you should carefully consider the Risk Factors.

This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). This information includes operating net income and operating earnings per share ("EPS"), operating return on average assets, operating return on average common equity, core net margin, tangible book value per share and the tangible common equity ratio.

Operating net income, operating EPS, operating return on average assets and operating return on average common equity exclude items that management believes are unrelated to its core banking business such as merger and acquisition expenses, and other items, if applicable. The Company’s management uses operating earnings and related ratios and operating EPS to measure the strength of the Company’s core banking business and to identify trends that may to some extent be obscured by such items. Management reviews its net interest margin to determine any items that may impact the net interest margin that may be one-time in nature or not reflective of its core operating environment, such as out-sized cash balances, unique low-yielding loans originated through government programs in response to the pandemic, or significant purchase accounting adjustments. Management believes that adjusting for these items to arrive at a core margin provides additional insight into the operating environment and how management decisions impact the net interest margin. Similarly, management reviews certain loan metrics such as growth rates and allowance as a percentage of total loans, adjusted to exclude loans that are not considered part of its core portfolio, which includes loans originated in association with government sponsored and guaranteed programs in response to the pandemic, to arrive at adjusted numbers more representative of the core growth of the portfolio and core reserve to loan ratio.

Management also supplements its evaluation of financial performance with analysis of tangible book value per share (which is computed by dividing stockholders' equity less goodwill and identifiable intangible assets, or "tangible common equity", by common shares outstanding), the tangible common equity ratio (which is computed by dividing tangible common equity by "tangible assets", defined as total assets less goodwill and other intangibles). The Company has included information on tangible book value per share and the tangible common equity ratio because management believes that investors may find it useful to have access to the same analytical tools used by management. As a result of merger and acquisition activity, the Company has recognized goodwill and other intangible assets in conjunction with business combination accounting principles. Excluding the impact of goodwill and other intangibles in measuring asset and capital values for the ratios provided, along with other bank standard capital ratios, provides a framework to compare the capital adequacy of the Company to other companies in the financial services industry.

These non-GAAP measures should not be viewed as a substitute for operating results and other financial measures determined in accordance with GAAP. An item which management deems to be noncore and excludes when computing these non-GAAP measures can be of substantial importance to the Company’s results for any particular quarter or year. The Company’s non-GAAP performance measures, including operating earnings, operating EPS, operating return on average assets, operating return on average equity, tangible book value per share and the tangible common equity ratio, are not necessarily comparable to non-GAAP performance measures which may be presented by other companies.

INDEPENDENT BANK CORP. FINANCIAL SUMMARY

CONSOLIDATED BALANCE SHEETS

(Unaudited, dollars in thousands)

% Change

% Change

June 30
2020

March 31
2020

June 30
2019

Jun 2020 vs.

Jun 2020 vs.

Mar 2020

Jun 2019

Assets

Cash and due from banks

$

131,615

$

125,638

$

121,001

4.76

%

8.77

%

Interest-earning deposits with banks

974,105

345,739

73,013

181.75

%

1,234.15

%

Securities

Trading

2,541

2,247

1,939

13.08

%

31.05

%

Equities

20,810

19,439

20,807

7.05

%

0.01

%

Available for sale

420,517

437,296

393,148

(3.84

)%

6.96

%

Held to maturity

731,026

777,798

797,359

(6.01

)%

(8.32

)%

Total securities

1,174,894

1,236,780

1,213,253

(5.00

)%

(3.16

)%

Loans held for sale

45,395

43,756

123,557

3.75

%

(63.26

)%

Loans

Commercial and industrial

2,004,645

1,448,224

1,400,924

38.42

%

43.09

%

Commercial real estate

4,071,047

4,061,347

4,058,066

0.24

%

0.32

%

Commercial construction

537,788

527,138

491,598

2.02

%

9.40

%

Small business

170,288

177,820

173,927

(4.24

)%

(2.09

)%

Total commercial

6,783,768

6,214,529

6,124,515

9.16

%

10.76

%

Residential real estate

1,431,129

1,528,416

1,655,182

(6.37

)%

(13.54

)%

Home equity - first position

650,922

656,994

656,515

(0.92

)%

(0.85

)%

Home equity - subordinate positions

469,601

489,276

487,984

(4.02

)%

(3.77

)%

Total consumer real estate

2,551,652

2,674,686

2,799,681

(4.60

)%

(8.86

)%

Other consumer

24,228

27,215

26,591

(10.98

)%

(8.89

)%

Total loans

9,359,648

8,916,430

8,950,787

4.97

%

4.57

%

Less: allowance for credit losses

(112,176

)

(92,376

)

(65,960

)

21.43

%

70.07

%

Net loans

9,247,472

8,824,054

8,884,827

4.80

%

4.08

%

Federal Home Loan Bank stock

15,090

23,274

26,085

(35.16

)%

(42.15

)%

Bank premises and equipment, net

122,172

121,873

123,374

0.25

%

(0.97

)%

Goodwill

506,206

506,206

504,562

%

0.33

%

Other intangible assets

25,996

27,466

33,334

(5.35

)%

(22.01

)%

Cash surrender value of life insurance policies

198,124

197,772

197,292

0.18

%

0.42

%

Other real estate owned

2,889

n/a

(100.00

)%

Other assets

581,431

527,682

300,012

10.19

%

93.80

%

Total assets

$

13,022,500

$

11,980,240

$

11,603,199

8.70

%

12.23

%

Liabilities and Stockholders' Equity

Deposits

Noninterest-bearing demand deposits

$

3,694,559

$

2,820,312

$

2,738,420

31.00

%

34.92

%

Savings and interest checking accounts

3,896,024

3,428,546

3,196,639

13.63

%

21.88

%

Money market

2,034,021

1,897,632

1,927,797

7.19

%

5.51

%

Time certificates of deposit

1,092,217

1,269,708

1,445,059

(13.98

)%

(24.42

)%

Total deposits

10,716,821

9,416,198

9,307,915

13.81

%

15.14

%

Borrowings

Federal Home Loan Bank borrowings

145,770

358,591

277,671

(59.35

)%

(47.50

)%

Long-term borrowings, net

37,433

74,920

74,879

(50.04

)%

(50.01

)%

Junior subordinated debentures, net

62,850

62,849

62,847

%

%

Subordinated debentures, net

49,648

49,625

84,305

0.05

%

(41.11

)%

Total borrowings

295,701

545,985

499,702

(45.84

)%

(40.82

)%

Total deposits and borrowings

11,012,522

9,962,183

9,807,617

10.54

%

12.29

%

Other liabilities

338,286

338,401

159,579

(0.03

)%

111.99

%

Total liabilities

11,350,808

10,300,584

9,967,196

10.20

%

13.88

%

Stockholders' equity

Common stock

328

331

342

(0.91

)%

(4.09

)%

Additional paid in capital

942,685

962,513

1,029,594

(2.06

)%

(8.44

)%

Retained earnings

676,834

667,084

585,111

1.46

%

15.68

%

Accumulated other comprehensive income, net of tax

51,845

49,728

20,956

4.26

%

147.40

%

Total stockholders' equity

1,671,692

1,679,656

1,636,003

(0.47

)%

2.18

%

Total liabilities and stockholders' equity

$

13,022,500

$

11,980,240

$

11,603,199

8.70

%

12.23

%

 
 

CONSOLIDATED STATEMENTS OF INCOME

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

Three Months Ended

% Change

% Change

June 30
2020

March 31
2020

June 30
2019

Jun 2020 vs.

Jun 2020 vs.

Mar 2020

Jun 2019

Interest income

Interest on federal funds sold and short-term investments

$

132

$

160

$

647

(17.50

)%

(79.60

)%

Interest and dividends on securities

7,840

7,966

8,534

(1.58

)%

(8.13

)%

Interest and fees on loans

91,634

99,022

112,923

(7.46

)%

(18.85

)%

Interest on loans held for sale

359

232

40

54.74

%

797.50

%

Total interest income

99,965

107,380

122,144

(6.91

)%

(18.16

)%

Interest expense

Interest on deposits

7,027

10,892

11,178

(35.48

)%

(37.14

)%

Interest on borrowings

1,840

2,184

4,947

(15.75

)%

(62.81

)%

Total interest expense

8,867

13,076

16,125

(32.19

)%

(45.01

)%

Net interest income

91,098

94,304

106,019

(3.40

)%

(14.07

)%

Provision for credit losses

20,000

25,000

1,000

(20.00

)%

1,900.00

%

Net interest income after provision for credit losses

71,098

69,304

105,019

2.59

%

(32.30

)%

Noninterest income

Deposit account fees

2,829

4,970

5,080

(43.08

)%

(44.31

)%

Interchange and ATM fees

5,214

4,896

5,794

6.50

%

(10.01

)%

Investment management

7,296

6,829

7,153

6.84

%

2.00

%

Mortgage banking income

5,005

861

3,410

481.30

%

46.77

%

Increase in cash surrender value of life insurance policies

1,312

1,276

1,296

2.82

%

1.23

%

Gain on life insurance benefits

335

357

(6.16

)%

100.00%

Loan level derivative income

2,864

3,597

932

(20.38

)%

207.30

%

Other noninterest income

3,335

3,649

4,983

(8.61

)%

(33.07

)%

Total noninterest income

28,190

26,435

28,648

6.64

%

(1.60

)%

Noninterest expenses

Salaries and employee benefits

37,269

37,349

38,852

(0.21

)%

(4.07

)%

Occupancy and equipment expenses

9,273

9,317

8,424

(0.47

)%

10.08

%

Data processing and facilities management

1,459

1,658

2,042

(12.00

)%

(28.55

)%

FDIC assessment

503

778

100.00%

(35.35

)%

Merger and acquisition expense

24,696

n/a

(100.00

)%

Other noninterest expenses

18,103

18,516

18,240

(2.23

)%

(0.75

)%

Total noninterest expenses

66,607

66,840

93,032

(0.35

)%

(28.40

)%

Income before income taxes

32,681

28,899

40,635

13.09

%

(19.57

)%

Provision for income taxes

7,779

2,148

10,007

262.15

%

(22.26

)%

Net Income

$

24,902

$

26,751

$

30,628

(6.91

)%

(18.70

)%

Weighted average common shares (basic)

32,944,761

34,184,431

34,313,492

Common share equivalents

28,098

36,827

41,878

Weighted average common shares (diluted)

32,972,859

34,221,258

34,355,370

Basic earnings per share

$

0.76

$

0.78

$

0.89

(2.56

)%

(14.61

)%

Diluted earnings per share

$

0.76

$

0.78

$

0.89

(2.56

)%

(14.61

)%

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

Net income

$

24,902

$

26,751

$

30,628

Noninterest expense components

Add - merger and acquisition expenses

24,696

Noncore increases to income before taxes

24,696

Net tax benefit associated with noncore items (1)

(6,560

)

Total tax impact

(6,560

)

Noncore increases to net income

18,136

Operating net income

$

24,902

$

26,751

$

48,764

(6.91

)%

(48.93

)%

Diluted earnings per share, on an operating basis

$

0.76

$

0.78

$

1.42

(2.56

)%

(46.48

)%

(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)

3.25

%

3.74

%

4.09

%

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

0.79

%

0.94

%

1.06

%

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

0.79

%

0.94

%

1.69

%

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

5.97

%

6.22

%

7.59

%

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

5.97

%

6.22

%

12.09

%

 
 

CONSOLIDATED STATEMENTS OF INCOME

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

Six Months Ended

% Change

June 30
2020

June 30
2019

Jun 2020 vs.

Jun 2019

Interest income

Interest on federal funds sold and short-term investments

$

292

$

1,073

(72.79

)%

Interest and dividends on securities

15,806

16,012

(1.29

)%

Interest and fees on loans

190,656

196,531

(2.99

)%

Interest on loans held for sale

591

71

732.39

%

Total interest income

207,345

213,687

(2.97

)%

Interest expense

Interest on deposits

17,919

18,206

(1.58

)%

Interest on borrowings

4,024

6,937

(41.99

)%

Total interest expense

21,943

25,143

(12.73

)%

Net interest income

185,402

188,544

(1.67

)%

Provision for loan losses

45,000

2,000

2,150.00

%

Net interest income after provision for loan losses

140,402

186,544

(24.74

)%

Noninterest income

Deposit account fees

7,799

9,486

(17.78

)%

Interchange and ATM fees

10,110

10,310

(1.94

)%

Investment management

14,125

13,901

1.61

%

Mortgage banking income

5,866

4,216

39.14

%

Increase in cash surrender value of life insurance policies

2,588

2,268

14.11

%

Gain on life insurance benefits

692

100.00%

Loan level derivative income

6,461

1,573

310.74

%

Other noninterest income

6,984

8,427

(17.12

)%

Total noninterest income

54,625

50,181

8.86

%

Noninterest expenses

Salaries and employee benefits

74,618

71,969

3.68

%

Occupancy and equipment expenses

18,590

15,554

19.52

%

Data processing and facilities management

3,117

3,368

(7.45

)%

FDIC assessment

503

1,394

(63.92

)%

Merger and acquisition expense

25,728

(100.00

)%

Other noninterest expenses

36,619

31,330

16.88

%

Total noninterest expenses

133,447

149,343

(10.64

)%

Income before income taxes

61,580

87,382

(29.53

)%

Provision for income taxes

9,927

21,529

(53.89

)%

Net Income

$

51,653

$

65,853

(21.56

)%

Weighted average common shares (basic)

33,564,596

31,226,985

Common share equivalents

31,991

48,381

Weighted average common shares (diluted)

33,596,587

31,275,366

Basic earnings per share

$

1.54

$

2.11

(27.01

)%

Diluted earnings per share

$

1.54

$

2.11

(27.01

)%

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

Net Income

$

51,653

$

65,853

Noninterest expense components

Add - merger and acquisition expenses

25,728

Noncore increases to income before taxes

25,728

Net tax benefit associated with noncore items (1)

(6,758

)

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

650

Total tax impact

(6,108

)

Noncore increases to net income

$

$

19,620

Operating net income

$

51,653

$

85,473

(39.57

)%

Diluted earnings per share, on an operating basis

$

1.54

$

2.73

(43.59

)%

(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)

3.48

%

4.12

%

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

0.86

%

1.30

%

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

0.86

%

1.69

%

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

6.10

%

9.80

%

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

6.10

%

12.72

%

 
 

ASSET QUALITY

(Unaudited, dollars in thousands)

Nonperforming Assets At

June 30
2020

March 31
2020

June 30
2019

Nonperforming loans

Commercial & industrial loans

$

20,736

$

21,435

$

24,895

Commercial real estate loans

6,313

4,949

833

Small business loans

619

450

168

Residential real estate loans

14,561

14,502

11,762

Home equity

6,437

6,571

7,514

Other consumer

148

133

122

Total nonperforming loans

48,814

48,040

45,294

Other real estate owned

2,889

Total nonperforming assets

$

48,814

$

48,040

$

48,183

Nonperforming loans/gross loans

0.52

%

0.54

%

0.51

%

Nonperforming assets/total assets

0.37

%

0.40

%

0.42

%

Allowance for credit losses/nonperforming loans

229.80

%

192.29

%

145.63

%

Allowance for credit losses/total loans

1.20

%

1.04

%

0.74

%

Delinquent loans/total loans

0.24

%

0.33

%

0.24

%

Nonperforming Assets Reconciliation for the Three Months Ended

June 30
2020

March 31
2020

June 30
2019

Nonperforming assets beginning balance

$

48,040

$

48,049

$

43,331

New to nonperforming

8,215

6,515

4,801

Acquired loans

2,317

Loans charged-off

(710

)

(734

)

(472

)

Loans paid-off

(2,210

)

(5,079

)

(3,289

)

Loans restored to performing status

(4,529

)

(561

)

(1,266

)

Acquired other real estate owned

2,818

Other

8

(150

)

(57

)

Nonperforming assets ending balance

$

48,814

$

48,040

$

48,183

 
 

Net Charge-Offs (Recoveries)

Three Months Ended

Six Months Ended

June 30
2020

March 31
2020

June 30
2019

June 30
2020

June 30
2019

Net charge-offs (recoveries)

Commercial and industrial loans

$

(4

)

$

(42

)

$

$

(46

)

$

(124

)

Commercial real estate loans

(13

)

(46

)

Small business loans

33

106

29

139

147

Residential real estate loans

(1

)

(1

)

(1

)

Home equity

(91

)

80

53

(11

)

100

Other consumer

262

241

111

503

257

Total net charge-offs

$

200

$

384

$

180

$

584

$

333

Net charge-offs to average loans (annualized)

0.01

%

0.02

%

0.01

%

0.01

%

0.01

%

 
 

Troubled Debt Restructurings At

June 30
2020

March 31
2020

June 30
2019

Troubled debt restructurings on accrual status

$

17,741

$

18,129

$

22,423

Troubled debt restructurings on nonaccrual status

24,098

23,842

27,841

Total troubled debt restructurings

$

41,839

$

41,971

$

50,264

BALANCE SHEET AND CAPITAL RATIOS

June 30
2020

March 31
2020

June 30
2019

Gross loans/total deposits

87.34

%

94.69

%

96.16

%

Common equity tier 1 capital ratio (1)

12.22

%

11.95

%

12.08

%

Tier 1 leverage capital ratio (1)

9.57

%

10.74

%

10.45

%

Common equity to assets ratio GAAP

12.84

%

14.02

%

14.10

%

Tangible common equity to tangible assets ratio (2)

9.12

%

10.01

%

9.92

%

Book value per share GAAP

$

50.75

$

50.50

$

47.67

Tangible book value per share (2)

$

34.59

$

34.46

$

32.00

(1) Estimated number for June 30, 2020.

(2) See Appendix A for detailed reconciliation from GAAP to Non-GAAP ratios.

 

INDEPENDENT BANK CORP. SUPPLEMENTAL FINANCIAL INFORMATION

(Unaudited, dollars in thousands)

Three Months Ended

June 30, 2020

March 31, 2020

June 30, 2019

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

$

724,634

$

132

0.07

%

$

72,552

$

160

0.89

%

$

104,157

$

647

2.49

%

Securities

Securities - trading

2,393

%

2,263

%

1,894

%

Securities - taxable investments

1,206,631

7,831

2.61

%

1,189,965

7,957

2.69

%

1,240,509

8,521

2.76

%

Securities - nontaxable investments (1)

1,145

11

3.86

%

1,237

12

3.90

%

1,739

17

3.92

%

Total securities

$

1,210,169

$

7,842

2.61

%

$

1,193,465

$

7,969

2.69

%

$

1,244,142

$

8,538

2.75

%

Loans held for sale

50,613

359

2.85

%

28,045

232

3.33

%

15,710

40

1.02

%

Loans

Commercial and industrial (1)

1,914,830

17,363

3.65

%

1,403,199

16,940

4.86

%

1,405,693

20,960

5.98

%

Commercial real estate (1)

4,051,342

42,371

4.21

%

4,012,125

45,851

4.60

%

4,091,335

50,860

4.99

%

Commercial construction

538,767

5,314

3.97

%

555,741

6,901

4.99

%

460,921

7,265

6.32

%

Small business

174,438

2,388

5.51

%

174,668

2,562

5.90

%

166,440

2,610

6.29

%

Total commercial

6,679,377

67,436

4.06

%

6,145,733

72,254

4.73

%

6,124,389

81,695

5.35

%

Residential real estate

1,474,495

13,801

3.76

%

1,560,839

14,619

3.77

%

1,746,723

17,475

4.01

%

Home equity

1,133,034

10,132

3.60

%

1,136,931

11,827

4.18

%

1,146,066

13,313

4.66

%

Total consumer real estate

2,607,529

23,933

3.69

%

2,697,770

26,446

3.94

%

2,892,789

30,788

4.27

%

Other consumer

24,971

500

8.05

%

27,843

572

8.26

%

29,413

683

9.31

%

Total loans

$

9,311,877

$

91,869

3.97

%

$

8,871,346

$

99,272

4.50

%

$

9,046,591

$

113,166

5.02

%

Total interest-earning assets

$

11,297,293

$

100,202

3.57

%

$

10,165,408

$

107,633

4.26

%

$

10,410,600

$

122,391

4.72

%

Cash and due from banks

119,692

122,707

125,507

Federal Home Loan Bank stock

23,175

14,699

22,161

Other assets

1,287,620

1,166,775

1,041,346

Total assets

$

12,727,780

$

11,469,589

$

11,599,614

Interest-bearing liabilities

Deposits

Savings and interest checking accounts

$

3,679,729

$

1,101

0.12

%

$

3,270,719

$

1,934

0.24

%

$

3,205,512

$

2,175

0.27

%

Money market

1,972,986

1,377

0.28

%

1,872,003

3,173

0.68

%

1,975,900

4,440

0.90

%

Time deposits

1,186,189

4,549

1.54

%

1,346,890

5,785

1.73

%

1,375,726

4,563

1.33

%

Total interest-bearing deposits

$

6,838,904

$

7,027

0.41

%

$

6,489,612

$

10,892

0.68

%

$

6,557,138

$

11,178

0.68

%

Borrowings

Federal Home Loan Bank borrowings

339,393

433

0.51

%

131,225

528

1.62

%

372,260

2,373

2.56

%

Line of Credit

%

%

8,636

83

3.85

%

Long-term borrowings

71,629

343

1.93

%

74,912

561

3.01

%

74,932

745

3.99

%

Junior subordinated debentures

62,849

446

2.85

%

62,849

478

3.06

%

71,508

701

3.93

%

Subordinated debentures

49,635

618

5.01

%

49,612

617

5.00

%

84,294

1,045

4.97

%

Total borrowings

$

523,506

$

1,840

1.41

%

$

318,598

$

2,184

2.76

%

$

611,630

$

4,947

3.24

%

Total interest-bearing liabilities

$

7,362,410

$

8,867

0.48

%

$

6,808,210

$

13,076

0.77

%

$

7,168,768

$

16,125

0.90

%

Noninterest-bearing demand deposits

3,371,262

2,680,718

2,641,470

Other liabilities

315,979

251,469

171,703

Total liabilities

$

11,049,651

$

9,740,397

$

9,981,941

Stockholders' equity

1,678,129

1,729,192

1,617,673

Total liabilities and stockholders' equity

$

12,727,780

$

11,469,589

$

11,599,614

Net interest income

$

91,335

$

94,557

$

106,266

Interest rate spread (2)

3.09

%

3.49

%

3.82

%

Net interest margin (3)

3.25

%

3.74

%

4.09

%

Supplemental Information

Total deposits, including demand deposits

$

10,210,166

$

7,027

$

9,170,330

$

10,892

$

9,198,608

$

11,178

Cost of total deposits

0.28

%

0.48

%

0.49

%

Total funding liabilities, including demand deposits

$

10,733,672

$

8,867

$

9,488,928

$

13,076

$

9,810,238

$

16,125

Cost of total funding liabilities

0.33

%

0.55

%

0.66

%

(1) The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $237,000, $253,000, and $247,000 for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019, respectively, determined by applying the Company's marginal tax rates in effect during each respective quarter.

(2) Interest rate spread represents the difference between weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(3) Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.

 
 

Six Months Ended

June 30, 2020

June 30, 2019

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

$

398,593

$

292

0.15

%

$

86,673

$

1,073

2.50

%

Securities

Securities - trading

2,328

%

1,756

%

Securities - taxable investments

1,198,298

15,788

2.65

%

1,163,058

15,986

2.77

%

Securities - nontaxable investments (1)

1,191

23

3.88

%

1,738

34

3.94

%

Total securities

$

1,201,817

$

15,811

2.65

%

$

1,166,552

$

16,020

2.77

%

Loans held for sale

39,329

591

3.02

%

9,611

71

1.49

%

Loans

Commercial and industrial (1)

1,659,014

34,303

4.16

%

1,260,562

35,400

5.66

%

Commercial real estate (1)

4,031,734

88,222

4.40

%

3,668,191

90,090

4.95

%

Commercial construction

547,254

12,215

4.49

%

424,034

12,882

6.13

%

Small business

174,553

4,950

5.70

%

165,910

5,094

6.19

%

Total commercial

6,412,555

139,690

4.38

%

5,518,697

143,466

5.24

%

Residential real estate

1,517,667

28,420

3.77

%

1,339,099

27,022

4.07

%

Home equity

1,134,983

21,959

3.89

%

1,116,507

25,488

4.60

%

Total consumer real estate

2,652,650

50,379

3.82

%

2,455,606

52,510

4.31

%

Other consumer

26,406

1,072

8.16

%

22,787

996

8.81

%

Total loans

$

9,091,611

$

191,141

4.23

%

$

7,997,090

$

196,972

4.97

%

Total interest-earning assets

$

10,731,350

$

207,835

3.89

%

$

9,259,926

$

214,136

4.66

%

Cash and due from banks

121,199

115,407

Federal Home Loan Bank stock

18,937

16,958

Other assets

1,227,199

830,474

Total assets

$

12,098,685

$

10,222,765

Interest-bearing liabilities

Deposits

Savings and interest checking accounts

$

3,475,223

$

3,035

0.18

%

$

3,049,430

$

4,129

0.27

%

Money market

1,922,495

4,550

0.48

%

1,721,439

7,159

0.84

%

Time deposits

1,266,540

10,334

1.64

%

1,048,223

6,918

1.33

%

Total interest-bearing deposits

$

6,664,258

$

17,919

0.54

%

$

5,819,092

$

18,206

0.63

%

Borrowings

Federal Home Loan Bank borrowings

235,309

961

0.82

%

243,296

3,083

2.56

%

Line of Credit

%

5,446

104

3.85

%

Long-term borrowings

73,271

904

2.48

%

39,329

777

3.98

%

Junior subordinated debentures

62,849

924

2.96

%

72,393

1,385

3.86

%

Subordinated debentures

49,623

1,235

5.00

%

64,595

1,588

4.96

%

Total borrowings

$

421,052

$

4,024

1.92

%

$

425,059

$

6,937

3.29

%

Total interest-bearing liabilities

$

7,085,310

$

21,943

0.62

%

$

6,244,151

$

25,143

0.81

%

Noninterest-bearing demand deposits

3,025,990

2,480,235

Other liabilities

283,724

142,856

Total liabilities

$

10,395,024

$

8,867,242

Stockholders' equity

1,703,661

1,355,523

Total liabilities and stockholders' equity

$

12,098,685

$

10,222,765

Net interest income

$

185,892

$

188,993

Interest rate spread (2)

3.27

%

3.85

%

Net interest margin (3)

3.48

%

4.12

%

Supplemental Information

Total deposits, including demand deposits

$

9,690,248

$

17,919

$

8,299,327

$

18,206

Cost of total deposits

0.37

%

0.44

%

Total funding liabilities, including demand deposits

$

10,111,300

$

21,943

$

8,724,386

$

25,143

Cost of total funding liabilities

0.44

%

0.58

%

(1) The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $490,000 and $449,000 for the six months ended June 30, 2020 and 2019, 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: NON-GAAP Reconciliation of Capital Metrics

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

The following table summarizes the calculation of the Company's tangible common equity ratio and tangible book value per share at the dates indicated:

June 30
2020

March 31
2020

June 30
2019

Tangible common equity

(Dollars in thousands, except per share data)

Stockholders' equity (GAAP)

$

1,671,692

$

1,679,656

$

1,636,003

(a)

Less: Goodwill and other intangibles

532,202

533,672

537,896

Tangible common equity

$

1,139,490

$

1,145,984

$

1,098,107

(b)

Tangible assets

Assets (GAAP)

$

13,022,500

$

11,980,240

$

11,603,199

(c)

Less: Goodwill and other intangibles

532,202

533,672

537,896

Tangible assets

$

12,490,298

$

11,446,568

$

11,065,303

(d)

Common Shares

32,942,110

33,260,005

34,321,061

(e)

Common equity to assets ratio (GAAP)

12.84

%

14.02

%

14.10

%

(a/c)

Tangible common equity to tangible assets ratio (Non-GAAP)

9.12

%

10.01

%

9.92

%

(b/d)

Book value per share (GAAP)

$

50.75

$

50.50

$

47.67

(a/e)

Tangible book value per share (Non-GAAP)

$

34.59

$

34.46

$

32.00

(b/e)

 

APPENDIX B: Non-GAAP Reconciliation of Earnings Metrics

(Unaudited, dollars in thousands)

The following table summarizes the impact of noncore items on the Company's calculation of noninterest income and noninterest expense, as well as the impact of noncore items on noninterest income as a percentage of total revenue and the efficiency ratio for the periods indicated:

Three Months Ended

Six Months Ended

June 30
2020

March 31
2020

June 30
2019

June 30
2020

June 30
2019

Net interest income (GAAP)

$

91,098

$

94,304

$

106,019

$

185,402

$

188,544

(a)

Noninterest income (GAAP)

$

28,190

$

26,435

$

28,648

$

54,625

$

50,181

(b)

Noninterest income on an operating basis (Non-GAAP)

$

28,190

$

26,435

$

28,648

$

54,625

$

50,181

(c)

Noninterest expense (GAAP)

$

66,607

$

66,840

$

93,032

$

133,447

$

149,343

(d)

Less:

Merger and acquisition expense

24,696

25,728

Noninterest expense on an operating basis (Non-GAAP)

$

66,607

$

66,840

$

68,336

$

133,447

$

123,615

(e)

Total revenue (GAAP)

$

119,288

$

120,739

$

134,667

$

240,027

$

238,725

(a+b)

Total operating revenue (Non-GAAP)

$

119,288

$

120,739

$

134,667

$

240,027

$

238,725

(a+c)

Ratios

Noninterest income as a % of total revenue (GAAP based)

23.63

%

21.89

%

21.27

%

22.76

%

21.02

%

(b/(a+b))

Noninterest income as a % of total revenue on an operating basis (Non-GAAP)

23.63

%

21.89

%

21.27

%

22.76

%

21.02

%

(c/(a+c))

Efficiency ratio (GAAP based)

55.84

%

55.36

%

69.08

%

55.60

%

62.56

%

(d/(a+b))

Efficiency ratio on an operating basis (Non-GAAP)

55.84

%

55.36

%

50.74

%

55.60

%

51.78

%

(e/(a+c))

 

APPENDIX C: Net Interest Margin Analysis & Non-GAAP Reconciliation of Core Margin

2020

2019

Q2

Q1

Q4

Volume

Interest

Margin
Impact

Volume

Interest

Margin
Impact

Volume

Interest

Margin
Impact

(Dollars in thousands)

Reported Total (GAAP)

$

11,297,293

$

91,335

3.25

%

$

10,165,408

$

94,557

3.74

%

$

10,197,973

$

100,249

3.90

%

Adjustments

PPP Volume @ 1%

(581,351

)

(1,474

)

0.12

%

%

%

PPP Fee amortization

(2,247

)

(0.08

)%

%

%

Cash Position (vs $100M)

(624,634

)

(106

)

0.19

%

27,448

62

(0.01

)%

827

1

%

Adjusted Margin

3.48

%

3.73

%

3.90

%

Acquired loan accretion

(1,660

)

(0.06

)%

(866

)

(0.03

)%

(3,422

)

(0.13

)%

CD fair value mark

(149

)

(0.01

)%

(210

)

(0.01

)%

(1,416

)

(0.06

)%

Core Margin (Non-GAAP)

3.41

%

3.69

%

3.71

%

Core Margin Compression

(0.28

)%

(0.02

)%

Cash

(0.01

)%

(0.01

)%

Securities

%

%

Loans

(0.43

)%

(0.07

)%

Deposits

0.15

%

0.05

%

Borrowings

0.01

%

0.01

%

(0.28

)%

(0.02

)%

APPENDIX D: Current Expected Credit Loss ("CECL")

The following table shows the allowance by category for the periods indicated:

June 30
2020

March 31
2020

January 1
2020

December 31
2019

CECL
Methodology

CECL
Methodology

CECL
Methodology

Incurred Loss
Methodology

(Dollars in thousands)

Commercial and industrial

$

25,662

$

21,649

$

15,659

$

17,594

Commercial real estate

36,956

29,498

20,224

32,935

Commercial construction

4,501

3,747

2,401

6,053

Small business

4,561

3,829

2,241

1,746

Residential real estate

15,046

14,847

13,691

3,440

Home equity

24,860

17,910

12,907

5,576

Other consumer

590

896

637

396

Total allowance for credit losses

$

112,176

$

92,376

$

67,760

$

67,740

Total Loans (GAAP)

$

9,359,648

$

8,916,430

$

8,873,639

$

8,873,639

Total Loans, excluding PPP (Non-GAAP)

$

8,566,665

$

8,916,430

$

8,873,639

$

8,873,639

Allowance as a % of total loans (GAAP)

1.20

%

1.04

%

0.76

%

0.76

%

Allowance as a % of total loans, excluding PPP (Non-GAAP)

1.31

%

1.04

%

0.76

%

0.76

%

APPENDIX E: Commercial Loan Portfolio Characteristics

Commercial Industries Highly Impacted by COVID-19 Pandemic

While Rockland Trust is unable to know with certainty the direct, indirect, and likely far-reaching impacts of the COVID-19 pandemic, we continue to monitor daily the loan balances and the loan exposures for commercial loan categories we have deemed to be highly impacted by the pandemic (i.e., Accommodations, Food Services, Retail Trade, Health Care & Social Assistance, Other Services (except Public Administration), Arts, Entertainments & Recreation, Transportation & Warehousing, as well as Educational Services). We do not have any material loan exposure to the Oil & Gas, Casino & Gambling, Aviation, or Cruise Line industries.

The table below provides total outstanding balances of commercial loans as of June 30, 2020 and March 31, 2020 within industries that are deemed to be highly impacted by the COVID-19 pandemic:

Highly Impacted COVID-19 Industries - Balances

June 30, 2020 (1)

March 31, 2020

(Dollars in thousands)

Accommodations

$

414,723

$

411,384

Food Services

164,467

155,415

Retail Trade

490,137

526,711

Health Care and Social Assistance

185,295

206,484

Other Services (except Public Administration)

153,009

160,159

Arts, Entertainment, and Recreation

96,640

88,202

Transportation and Warehousing

77,354

84,805

Educational Services

45,720

44,922

Total

$

1,627,345

$

1,678,082

(1) June 30, 2020 amounts exclude balances of processed PPP loans.

 

Highly Impacted COVID-19 Industries - Details

June 30, 2020

March 31, 2020

(Dollars in thousands)

Accommodations

Balance

$

414,723

$

411,384

Average borrower loan size

$

4,083

$

4,100

% secured by real estate

99.5

%

98.0

%

Weighted average loan to value

53.5

%

54.8

%

Other information:

– The accommodation portfolio consists of 71 properties representing a combination of flagged (61%) and non-flagged (39%) hotels, motels and inns.

– Approximately 90% of the balances outstanding are secured by properties located within New England states with the largest concentration in Massachusetts (60%).

Food Services

Balance

$

164,467

$

155,415

Average borrower loan size

$

430

$

388

% secured by real estate

59.8

%

61.3

%

Weighted average loan to value

49.9

%

46.7

%

Other information:

– The food services portfolio includes full-service restaurants (66%), limited service restaurants and fast food (32%), and other types of food service (caterers, bars, mobile food service 2%).

Retail Trade

Balance

$

490,137

$

526,711

Average borrower loan size

$

473

$

466

% secured by real estate

44.9

%

43.1

%

Weighted average loan to value

54.1

%

54.0

%

Other information:

– The retail trade portfolio consists broadly of food and beverage stores (40%), motor vehicle and parts dealers (26%), gasoline stations (14%), and all other retailers account for (20%).

– Collateral for these loans varies and may consist of real estate, motor vehicles inventories, other types of inventories and general business assets.

Health Care and Social Assistance

Balance

$

185,295

$

206,484

Average borrower loan size

$

641

$

652

% secured by real estate

73.8

%

69.7

%

Weighted average loan to value

46.3

%

46.9

%

Other information:

– The healthcare portfolio consists of nursing and residential care facilities (38%), ambulatory care (29%), social assistance (20%) and hospitals (13%).

Other Services (except Public Administration)

Balance

$

153,009

$

160,159

Average borrower loan size

$

261

$

272

% secured by real estate

49.1

%

49.1

%

Weighted average loan to value

47.4

%

46.5

%

Other information:

– The other services portfolio consists of various for-profit and not-for-profit services diversified across religious, civic and social service organizations (44%), repair and maintenance business (30%) and personal services, including car washes, beauty salons, laundry services, funeral homes, pet care and other types of services (26%).

Arts, Entertainment, and Recreation

Balance

$

96,640

$

88,202

Average borrower loan size

$

764

$

737

% secured by real estate

83.7

%

82.8

%

Weighted average loan to value

47.5

%

44.0

%

Other information:

– Amusement, gambling and recreational industries make up a majority of this category (95%) and include amusement/theme parks, bowling centers, fitness centers, golf courses, marinas, and other recreational industries. Other industries including museums, performing arts, and spectator sports account for the remaining outstanding balances (5%).

Transportation and Warehousing

Balance

$

77,354

$

84,805

Average borrower loan size

$

557

$

611

% secured by real estate

61.9

%

56.0

%

Weighted average loan to value

53.0

%

52.2

%

Other information:

– The transportation and warehousing portfolio consists of warehousing and storage (55%), transit, ground passenger transportation and truck transportation (36%) and other transportation related activities (9%).

Educational Services

Balance

$

45,720

$

44,922

Average borrower loan size

$

623

$

598

% secured by real estate

86.7

%

89.5

%

Weighted average loan to value

33.3

%

31.8

%

Other information:

– The educational services portfolio consists of elementary and secondary schools (46%), colleges and universities (38%) and other types of for profit and not-for-profit educational and training schools (16%).

Other Commercial Loan Portfolio Characteristics

Average total loan size varies across the commercial portfolio with commercial real estate loans having an average size of $1.1 million, commercial and industrial loans have an average loan size of $137,000 and small business loans, which are all under $5.0 million, have an average loan size of $31,000. Additional details below are provided regarding loan sizes of the commercial real estate and commercial and industrial portfolios as of June 30, 2020:

Commercial Real Estate (Including Construction)

<$5M

$5-10M

$10-20M

>$20M

Total

Dollar Amount (in '000s)

$

2,553,037

$

858,009

$

850,903

$

346,886

$

4,608,835

# of loans

4,072

121

61

14

4,268

Commercial and Industrial (Including PPP)

<$5M

$5-10M

$10-20M

>$20M

Total

Dollar Amount (in '000s)

$

1,481,196

$

251,557

$

228,032

$

43,860

$

2,004,645

# of loans

14,569

38

17

2

14,626

 

APPENDIX F: COVID-19 Related Modifications Details

Deferrals by Modification Type

Principal
and
Interest

Principal
Only

Interest
Only

Other

Total
Deferrals

Total
Portfolio

%
Deferral

(Dollars in thousands)

Commercial and industrial

$

55,936

$

33,502

$

11,089

$

24,127

$

124,654

$

2,004,645

6.2

%

Commercial real estate (1)

564,942

231,722

43,862

43,263

883,789

4,608,835

19.2

%

Business Banking

13,153

4,572

889

203

18,817

170,288

11.1

%

Residential real estate

112,330

2,514

2,837

117,681

1,431,129

8.2

%

Home equity

15,213

13,417

28,630

1,120,523

2.6

%

Consumer

350

350

24,228

1.4

%

Total active deferrals as of June 30, 2020

$

761,924

$

272,310

$

72,094

$

67,593

$

1,173,921

$

9,359,648

12.5

%

(1) Balances include commercial construction deferrals.

  • In general, monthly payment deferrals (exclusive of escrow payments for taxes and/or insurance) have been granted for periods of up to three months for customers paying interest payments on interest only loans and lines of credit, or for customers paying principal & interest payments on amortizing loans.
  • In general, monthly principal payment deferrals, where the customer continues to pay make interest payments while deferring the principal amounts due, have been granted for periods of up to four to six months for some commercial and business banking customers.
  • Of all initial deferral modification requests, approximately 77% of customers, representing 73% of the dollars requested, have been granted deferrals for up to three monthly payments, while 23% of customers, representing 27% of the dollars requested, have been granted deferrals for up to four to six monthly payments.
  • To date, all subsequent requests granted for extensions beyond the initial deferral period have been for up to an additional three monthly payments, which is up to a total of six monthly payments when combined with the initial deferral period.

Deferrals by Industry

June 30, 2020

(Dollars in thousands)

Highly Impacted Industries

Accommodation

$

255,833

Food Services

70,271

Retail Trade

49,579

Health Care and Social Assistance

44,724

Other Services (except Public Administration)

25,302

Arts, Entertainment, and Recreation

59,136

Transportation and Warehousing

32,358

Educational Services

2,226

Total Highly Impacted Industries

539,429

Other Industries

Real Estate and Leasing

425,339

Construction

17,292

All Other Industries

47,713

Total Other Industries

490,344

Consumer (residential, home equity and other)

144,148

Grand Total

$

1,173,921

 

APPENDIX G: Paycheck Protection Program (PPP) Loans

The table below summarizes Rockland Trust's PPP loan activity processed through June 30, 2020:

 

June 30, 2020

Units

$

(Dollars in thousands)

Processed

5,626

$

792,983

Average Loan Size

n/a

141

Estimated Fees

n/a

26,181

PPP Activity by Industry

Highly Impacted Industries

Accommodation

80

$

15,521

Food Services

469

65,467

Retail Trade

986

55,510

Health Care and Social Assistance

358

87,470

Other Services (except Public Administration)

505

32,389

Arts, Entertainment, and Recreation

134

8,650

Transportation and Warehousing

135

19,964

Educational Services

86

18,570

Total Highly Impacted Industries

2,753

$

303,541

Other Industries

Construction

896

$

199,272

Manufacturing

298

80,489

Professional, Scientific, and Technical Services

616

73,935

Administrative and Support and Waste Management and Remediation Services

313

45,552

Wholesale Trade

177

48,329

Real Estate and Leasing

265

19,309

All Other Industries

308

22,556

Total Other Industries

2,873

$

489,442

Total

5,626

$

792,983

Contacts:

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

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

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