Completes a strong performance in 2022
ROCKLAND, Mass.–(BUSINESS WIRE)–Independent Bank Corp. (Nasdaq Global Select Market: INDB), parent of Rockland Trust Company, today announced 2022 fourth quarter net income of $77.0 million, or $1.69 per diluted share, compared to 2022 third quarter net income of $71.9 million, or $1.57 per diluted share, driven primarily by continued net interest margin expansion combined with solid loan growth and higher fee income. Full year net income was $263.8 million, or $5.69 on a diluted earnings per share basis, an increase of $142.8 million, or 118.0%, as compared to the prior year. In addition, full year operating net income, which excluded non-core adjustments for both periods associated with the Company’s fourth quarter 2021 acquisition of Meridian Bancorp, Inc. (“Meridian”) and its subsidiary, East Boston Savings Bank, was $268.9 million, or $5.80 on a diluted earnings per share basis, compared to operating net income of $187.6 million, or $5.38 per share for 2021. Please refer to “Reconciliation of Net Income (GAAP) to Operating Net Income (Non-GAAP)” below for a reconciliation of net income to operating net income.
The Company generated a return on average assets and a return on average common equity of 1.56% and 10.70%, respectively, for the fourth quarter of 2022, as compared to 1.43% and 9.90%, respectively, for the prior quarter. For the full year 2022, the Company generated a return on average assets and return on average common equity of 1.33% and 9.05%, respectively, as compared to 0.81% and 6.34%, respectively, for 2021, or 1.35% and 9.22%, respectively, on an operating basis for 2022, compared to 1.26% and 9.83% on an operating basis for 2021.
“Due to the tireless efforts of my colleagues we were well positioned for rising interest rates, recognized the full year benefit of our most recent acquisition, and increased our loan portfolio,” said Christopher Oddleifson, the Chief Executive Officer of Independent Bank Corp. and Rockland Trust Company. “Rockland Trust enjoyed another banner year in 2022, capped off with our recent announcement of my successor. It has been an honor to serve as CEO for over twenty years and, as I pass the baton, I am confident that Rockland Trust will continue to thrive.”
Total assets of $19.3 billion at December 31, 2022 decreased by $409.1 million, or 2.1% from total assets at September 30, 2022 and decreased by $1.1 billion, or 5.5%, as compared to December 31, 2021, due primarily to declining cash balances.
Total loans at December 31, 2022 of $13.9 billion increased by $228.3 million, or 1.7% (6.6% annualized), compared to the prior quarter level. The commercial portfolio increased $147.9 million, or 1.4% (5.5% annualized) during the quarter, driven primarily by solid growth within the commercial and industrial category of 5.6% (22.2% annualized), while growth in the combined commercial real estate and construction portfolios reflected strong closing activity, along with transfers from construction into commercial real estate during the period. Residential real estate loan closings remained strong with the vast majority of originations retained on the balance sheet, resulting in 3.9% growth (15.4% annualized) for the quarter while home equity balances remained relatively flat.
Deposit balances of $15.9 billion at December 31, 2022 decreased by $460.0 million, or 2.8%, from September 30, 2022 due primarily to reductions in excess liquidity from both consumer and business segments, while continued competitive pricing pressures fueled a combination of additional deposit outflow and an increase in time deposits for the quarter. Core deposits remained consistent at 87.9% of total deposits at December 31, 2022, compared to 87.8% at September 30, 2022, while the total cost of deposits for the quarter increased 20 basis points to 0.35% in line with the higher rate environment.
The securities portfolio decreased by $17.8 million, or 0.6%, compared to September 30, 2022 as $40.1 million in purchases and unrealized gains of $12.8 million within the available for sale portfolio were offset by paydowns, calls, and maturities. Total securities represented 16.2% of total assets at December 31, 2022, as compared to 16.0% at September 30, 2022.
Stockholders’ equity at December 31, 2022 increased 2.5% when compared to the prior quarter, driven primarily by strong earnings retention and other comprehensive income of $16.0 million. As a result of this increase in stockholders’ equity, book value per share increased by $1.52, or 2.5%, to $63.25 during the fourth quarter as compared to the prior quarter. The Company’s ratio of common equity to assets of 15.0% at December 31, 2022 represented an increase of 66 basis points, or 4.62%, from the prior quarter and an increase of 1.2% from the year ago period. The Company’s tangible book value per share at December 31, 2022 rose by $1.56, or 3.9%, from the prior quarter to $41.12, and represented a decrease of 2.7% from the year ago period primarily reflecting the repurchase of 1.8 million shares of common stock during the year along with increased other comprehensive losses mostly attributable to unfavorable valuations within the Company’s available for sale securities portfolio compared to the prior year. The Company’s ratio of tangible common equity to tangible assets of 10.26% at December 31, 2022 represents an increase of 60 basis points from the prior quarter and a decrease of 5 basis points from the year ago period. Please refer to Appendix A for a detailed reconciliation of Non-GAAP balance sheet metrics.
NET INTEREST INCOME
Net interest income for the 2022 fourth quarter increased 3.5% to $168.4 million compared to $162.6 million for the prior quarter, primarily reflecting the positive impact of asset repricing in the rising interest rate environment as well as strong loan growth, partially offset by higher deposit costs. The reported net interest margin increased by 21 basis points from the prior quarter to 3.85%, and increased by 23 basis points to 3.82% on a core basis when excluding PPP fees, purchase accounting, and other non-core items. Please refer to Appendix C for additional details regarding the net interest margin.
Noninterest income of $32.3 million for the fourth quarter of 2022 was $4.1 million, or 14.6% higher as compared to the prior quarter. Significant changes in noninterest income for the 2022 fourth quarter compared to the prior quarter included the following:
Deposit account fees decreased by $473,000, or 7.6%, driven primarily by reduced overdraft activity during the fourth quarter.
Investment management income increased by $2.0 million, or 23.2%, primarily driven by an increase in assets under administration of $701.3 million, or 13.8%, to $5.8 billion at December 31, 2022, reflecting healthy new asset inflows and increased market valuations. The income for the quarter also benefited from a one-time incentive of $649,000.
The increase in cash surrender value of life insurance policies rose by $253,000, or 13.4% due primarily to annual dividends received during the fourth quarter. The Company also received proceeds on life insurance policies resulting in a gain of $691,000 for the fourth quarter, as compared to $477,000 in the prior quarter.
Loan level derivative income increased by $950,000, or 201.7%, due primarily to higher customer demand.
Other noninterest income increased by $1.3 million, or 22.8%, due primarily to a $894,000 gain on the sale of a closed branch facility that was consolidated in conjunction with the Meridian acquisition, changes in valuation of equity securities, as well as discounted purchases of Massachusetts historical tax credits.
Noninterest expense of $94.9 million for the fourth quarter of 2022 was $2.1 million, or 2.3%, higher as compared to the prior quarter. Significant changes in noninterest expense for the fourth quarter compared to the prior quarter included the following:
Salaries and employee benefits increased by $1.0 million, or 2.0%, primarily due to valuation changes in the Company’s life insurance obligations.
Occupancy and equipment increased by $270,000, or 2.2%, due mainly to increases in building maintenance and repairs, as well as seasonal increases in utility costs, partially offset by reduced office equipment costs.
Other noninterest expense increased by $596,000, or 2.5%, due primarily to increases in software maintenance, customer fraud reimbursement, and advertising costs, partially offset by reduced unrealized losses on equity securities.
The Company’s tax rate for the fourth quarter of 2022 decreased slightly to 23.18%, compared to 24.37% for the prior quarter. The fourth quarter decline was due to the recognition of discrete items in the quarter.
The fourth quarter provision for credit losses of $5.5 million primarily reflects an additional reserve allocation associated with further credit deterioration of a large commercial and industrial credit that migrated to nonperforming status during the third quarter of 2022. Nonperforming loans declined slightly during the quarter to $54.9 million, or 0.39% of total loans at December 31, 2022, as compared to $56.0 million, or 0.41% of total loans at September 30, 2022. Net charge-offs were minimal at $394,000 or 0.01% of average loans annualized for the fourth quarter of 2022. Delinquency as a percentage of total loans increased 13 basis points from the prior quarter to 0.30% at December 31, 2022.
The allowance for credit losses on total loans was $152.4 million, or 1.09% of total loans at December 31, 2022, as compared to $147.3 million, or 1.08% of total loans, at September 30, 2022.
CONFERENCE CALL INFORMATION
Christopher Oddleifson, Chief Executive Officer, Robert Cozzone, Chief Operating Officer, and Mark Ruggiero, Chief Financial Officer, will host a conference call to discuss fourth quarter earnings and other matters at 10:00 a.m. Eastern Time on Friday, January 20, 2023. Internet access to the call is available on the Company’s website at https://INDB.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: 6538963 and will be available through January 27, 2023. Additionally, a webcast replay will be available on the Company’s website until January 20, 2024.
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. Rockland Trust was named to The Boston Globe’s “Top Places to Work” 2022 list, an honor earned for the 14th consecutive year. *In 2022, Rockland Trust was ranked #1 in Customer Satisfaction with Retail Banking in New England. Rockland Trust has a longstanding commitment to equity and inclusion. This commitment is underscored by initiatives such as Diversity and Inclusion leadership training, a colleague Allyship mentoring program, and numerous Employee Resource Groups focused on providing colleague support and education, reinforcing a culture of mutual respect and advancing professional development, and Rockland Trust’s sponsorship of diverse community organizations through charitable giving and employee-based volunteerism. In addition, Rockland Trust is deeply committed to the communities it serves, as reflected in the overall “Outstanding” rating in its most recent Community Reinvestment Act performance evaluation. Rockland Trust offers a wide range of banking, investment, and insurance services. The Bank serves businesses and individuals through over 120 retail branches, commercial and residential lending centers, and investment management offices in eastern Massachusetts, including Greater Boston, South Shore, North Shore, Cape Cod and Islands, Worcester County, and Rhode Island. Rockland Trust also offers a full suite of mobile, online, and telephone 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 RocklandTrust.com.
*Rockland Trust received the highest score in a tie in the New England Region of the J.D. Power 2022 U.S. Retail Banking Satisfaction Study of customers’ satisfaction with their primary bank. Visit jdpower.com/awards for more details.
This press release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 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 any future weakening caused by the Coronavirus (“COVID-19”) pandemic and any uncertainty regarding the length and extent of economic contraction as a result of the pandemic;
the effects of inflationary pressures, labor market shortages and supply chain issues;
the instability or volatility in financial markets and unfavorable general economic or business conditions, globally, nationally or regionally, caused by geopolitical concerns, including as a result of the conflict between Russia and Ukraine;
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 and any 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 related compliance costs;
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 and changes in tax laws;
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 areas;
adverse weather, changes in climate, natural disasters, geopolitical concerns, including those arising from the conflict between Russia and Ukraine;
the emergence of widespread health emergencies or pandemics, any further resurgences or variants of the COVID-19 virus, the efficacy and availability of vaccines, boosters or other treatments, actions taken by governmental authorities in response thereto, other public health crises or man-made events, and their impact on the Company’s local economies or the Company’s operations;
a deterioration in the conditions of the securities markets;
a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, or uncertainties surrounding the debt ceiling and the federal budget;
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;
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 subsequent 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 and the appendices attached to it contain 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, operating return on average tangible common equity, core net interest margin (“core 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 the Company’s core banking business such as merger and acquisition expenses, provision for credit losses on acquired loan portfolios, and other items, if applicable. Management uses operating net income 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 core 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 low-yielding loans originated through government programs in response to the pandemic, or significant purchase accounting adjustments, or other adjustments such as nonaccrual interest reversals/recoveries and prepayment penalties. 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.
Management also supplements its evaluation of financial performance with analysis of tangible book value per share (which is computed by dividing stockholders’ equity less goodwill and identifiable intangible assets, or “tangible common equity”, by common shares outstanding), the tangible common equity ratio (which is computed by dividing tangible common equity by “tangible assets”, defined as total assets less goodwill and other intangibles), and return on average tangible common equity (which is computed by dividing net income by average tangible common equity). The Company has included information on tangible book value per share, the tangible common equity ratio and return on average tangible common equity 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 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 net income, operating EPS, operating return on average assets, operating return on average common equity, core margin, 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.
Category: Earnings Releases
INDEPENDENT BANK CORP. FINANCIAL SUMMARY
CONSOLIDATED BALANCE SHEETS
(Unaudited, dollars in thousands)
Dec 2022 vs.
Dec 2022 vs.
Cash and due from banks
Interest-earning deposits with banks
Available for sale
Held to maturity
Loans held for sale
Commercial and industrial
Commercial real estate
Residential real estate
Home equity – first position
Home equity – subordinate positions
Total consumer real estate
Less: allowance for credit losses
Federal Home Loan Bank stock
Bank premises and equipment, net
Other intangible assets
Cash surrender value of life insurance policies
Liabilities and Stockholders’ Equity
Noninterest-bearing demand deposits
Savings and interest checking accounts
Time certificates of deposit
Federal Home Loan Bank borrowings
Long-term borrowings, net
Junior subordinated debentures, net
Subordinated debentures, net
Total deposits and borrowings
Additional paid in capital
Accumulated other comprehensive income (loss), net of tax
Total stockholders’ equity
Total liabilities and stockholders’ equity
President and Chief Executive Officer
Mark J. Ruggiero
Chief Financial Officer and
Chief Accounting Officer