Independent Bank Corp. Reports Fourth Quarter Net Income of $54.8 Million

Completes solid performance in 2023

Independent Bank Corp. (Nasdaq Global Select Market: INDB), parent of Rockland Trust Company, today announced 2023 fourth quarter net income of $54.8 million, or $1.26 per diluted share, a decrease of $6.0 million, or 9.9%, compared to the prior quarter. Full year net income was $239.5 million, or $5.42 on a diluted earnings per share basis, a decrease of $24.3 million, or 9.2%, as compared to the prior year. In 2023, full year operating net income was also $239.5 million, or $5.42 on a diluted earnings per share basis, as no adjustments were recognized. In 2022, full year operating net income was $268.9 million, or $5.80 on a diluted earnings per share basis, which excluded non-core adjustments associated with the Company's fourth quarter 2021 acquisition of Meridian Bancorp, Inc. ("Meridian") and its subsidiary, East Boston Savings Bank. 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 1.13% and 7.51%, respectively, for the fourth quarter of 2023, as compared to 1.25% and 8.35%, respectively, for the prior quarter. For the full year 2023, the Company generated a return on average assets and return on average common equity of 1.24% and 8.31%, respectively, as compared to 1.33% and 9.05%, respectively, for 2022, or 1.24% and 8.31%, respectively, on an operating basis for 2023, compared to 1.35% and 9.22%, respectively, on an operating basis for 2022.

“The dedication of my colleagues and their unrelenting focus on each relationship, day in and day out, paved the way for the solid financial results we achieved throughout this past year,” said Jeffrey Tengel, the Chief Executive Officer of Independent Bank Corp. and Rockland Trust Company. “I am confident that our core fundamentals position us well for continued success heading into 2024 and beyond.”

BALANCE SHEET

Total assets of $19.3 billion at December 31, 2023 remained relatively consistent with the prior quarter and increased by $53.2 million, or 0.3%, as compared to December 31, 2022.

Total loans at December 31, 2023 of $14.3 billion increased by $53.8 million, or 0.4% (1.5% annualized), compared to the prior quarter level. The increase was driven primarily by consumer real estate, which increased $88.7 million, or 2.6% (10.3% annualized) for the quarter, largely attributable to adjustable-rate residential mortgages retained on the balance sheet. Total commercial loans decreased by $37.0 million, or 0.3% (1.4% annualized), compared to the prior quarter, primarily reflecting disciplined new origination activity, offset by commercial and industrial payoffs and decreased line utilization. The small business portfolio continued its steady growth and has risen by 15.0% since December 31, 2022.

Deposit balances of $14.9 billion at December 31, 2023 decreased by $194.0 million, or 1.3%, from September 30, 2023, driven primarily by seasonal business cash flows. Though some level of product remixing persists, total noninterest bearing demand deposits comprised a healthy 30.7% of total deposits at December 31, 2023. Core deposits, inclusive of reciprocal money market deposits, represented 84.6% of total deposits at December 31, 2023 as compared to 86.0% at September 30, 2023. The total cost of deposits for the fourth quarter increased 24 basis points to 1.31% compared to the prior quarter, reflective of ongoing customer preference for higher yielding accounts.

In conjunction with the decline in deposit balances, the Company's Federal Home Loan Bank borrowings increased by $218.0 million, or 21.8%, during the fourth quarter of 2023 to serve as a funding source for stock buyback activity and net loan growth during the quarter.

The securities portfolio decreased by $43.1 million, or 1.4%, compared to September 30, 2023, driven primarily by paydowns, calls, and maturities which were partially offset by unrealized gains of $45.2 million in the available for sale portfolio. Total securities represented 15.1% of total assets at December 31, 2023, as compared to 15.4% at September 30, 2023.

During the fourth quarter of 2023, the Company executed on its previously announced $100 million stock repurchase plan, buying back 1.3 million shares of common stock for $69.0 million at an average price per share of $53.73. Stockholders' equity at December 31, 2023 remained generally consistent when compared to September 30, 2023, as the impact of the share repurchase program was offset by strong earnings retention and unrealized gains on the available for sale investment securities portfolio included in other comprehensive income. The Company's ratio of common equity to assets of 14.96% at December 31, 2023 represented an increase of 6 basis points, or 0.4%, from September 30, 2023 and was consistent with the level at December 31, 2022. The Company's book value per share increased by $2.16, or 3.3%, to $67.53 at December 31, 2023 as compared to the prior quarter. The Company's tangible book value per share at December 31, 2023 rose by $1.53, or 3.6%, from the prior quarter to $44.13, and represented an increase of 7.3% from the year ago period. The Company's ratio of tangible common equity to tangible assets of 10.31% at December 31, 2023 represented an increase of 7 basis points from the prior quarter and an increase 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 fourth quarter of 2023 decreased 3.2% to $145.1 million compared to $149.9 million for the prior quarter, as rising deposit costs continued to counter the benefit of repriced assets resulting in a reduction in net interest margin of 9 basis points to 3.38% for the quarter. The core margin (excluding purchase accounting and other non-core items) was 3.35% for the fourth quarter, representing a reduction of 12 basis points as compared to the prior quarter. Please refer to Appendix C for additional details regarding the net interest margin and Non-GAAP reconciliation of core margin.

NONINTEREST INCOME

Noninterest income of $32.1 million for the fourth quarter of 2023 represented a decrease of $1.5 million, or 4.4%, as compared to the prior quarter. Significant changes in noninterest income for the fourth quarter of 2023 compared to the prior quarter included the following:

• Investment management income decreased by $428,000, or 4.2%, primarily driven by lower insurance commissions. However, total assets under administration increased by $417.4 million, or 6.8%, to a record level of $6.5 billion at December 31, 2023, driving higher managed fee income quarter over quarter.

• The Company received proceeds on life insurance policies resulting in gains of $180,000 for the fourth quarter, as compared to gains of $1.9 million in the prior quarter.

• Other noninterest income increased by $738,000, or 10.4%, primarily due to unrealized gains on equity securities and discounted purchases of tax credits, as well as outsized loan fees recognized during the third quarter of 2023.

NONINTEREST EXPENSE

Noninterest expense of $100.7 million for the fourth quarter of 2023 represented an increase of $3.0 million, or 3.0%, 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 $1.6 million, or 2.9%, due primarily to timing of incentive compensation.

• Occupancy and equipment expenses increased by $733,000, or 5.9%, due primarily to one-time termination costs associated with two leased locations related to the 2021 Meridian acquisition.

• FDIC assessment increased $1.2 million, or 44.6%, from the prior quarter, and includes a one-time $1.1 million special assessment implemented by the FDIC to recover losses incurred by the Deposit Insurance Fund in 2023.

• Other noninterest expense decreased by $593,000, or 2.3%, due primarily to decreases in consultant fees, unrealized losses on equity securities, and card issuance costs, partially offset by increases in check fraud losses, software maintenance and legal costs.

The Company’s tax rate for the fourth quarter of 2023 decreased to 22.72%, compared to 24.12% for the prior quarter. The fourth quarter decline was due to the recognition of discrete items in the quarter associated with low income housing tax investments and the release of certain tax reserves in conjunction with the final 2022 tax return filing.

ASSET QUALITY

The fourth quarter provision for credit losses was consistent with the prior quarter at $5.5 million. Net charge-offs declined to $3.8 million for the fourth quarter of 2023 compared to $5.6 million in the prior quarter and were largely attributable to one partial charge-off of a commercial real estate loan and general overdraft loan charge-offs. Nonperforming loans increased to $54.4 million, or 0.38% of total loans at December 31, 2023, as compared to $39.2 million, or 0.28% of total loans at September 30, 2023, driven primarily by the migration of two commercial loans totaling $25.9 million, offset by paydowns during the quarter. Delinquency as a percentage of total loans increased 22 basis points from the prior quarter to 0.44% at December 31, 2023.

The allowance for credit losses on total loans increased slightly to $142.2 million at December 31, 2023 compared to $140.6 million at September 30, 2023, or 1.00% and 0.99% of total loans, at December 31, 2023 and September 30, 2023, respectively.

CONFERENCE CALL INFORMATION

Jeffrey Tengel, Chief Executive Officer, and Mark Ruggiero, Chief Financial Officer and Executive Vice President of Consumer Lending, will host a conference call to discuss fourth quarter earnings at 10:00 a.m. Eastern Time on Friday, January 19, 2024. 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: 9516407 and will be available through January 26, 2024. Additionally, a webcast replay will be available on the Company's website until January 19, 2025.

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. With retail branches in Eastern Massachusetts and Worcester County as well as commercial banking and investment management offices in Massachusetts and Rhode Island, Rockland Trust offers a wide range of banking, investment, and insurance services to individuals, families, and businesses. The Bank also offers a full suite of mobile, online, and telephone banking services. Rockland Trust was named to The Boston Globe's "Top Places to Work" 2023 list, an honor earned for the 15th consecutive year. 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 is an FDIC member and an Equal Housing Lender.

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;

• the effects to the Company or its customers 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, whether caused by geopolitical concerns, including the Russia/Ukraine conflict, the conflict in Israel and surrounding areas and the possible expansion of such conflicts, recent disruptions in the banking industry, or other factors, and the potential impact of unfavorable economic conditions on the Company and its customers, including the potential for decreases in deposits and loan demand, unanticipated loan delinquencies, loss of collateral and decreased service revenues;

• 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;

• rising interest rates and any resultant adverse changes in asset quality, increased credit risks, decreased loan demand, and/or refinancing challenges, which in turn could further lead to unanticipated credit deterioration in the Company's loan portfolio, including with respect 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, including as a result of 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;

• increased competition in the Company’s market areas, including competition that could impact deposit gathering, retention of deposits and the cost of deposits, increased competition due to the demand for innovative products and service offerings, and competition from non-depository institutions which may be subject to fewer regulatory constraints and lower cost structures;

• adverse weather, changes in climate, natural disasters, including the risk of floods and fire; the emergence of widespread health emergencies or pandemics, any further resurgences or variants of the "COVID-19 virus", 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 or uncertainties surrounding 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 or other 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, including the need to invest in technology to meet heightened regulatory expectations or introduction of new requirements or expectations resulting in increased costs of compliance or required adjustments to strategy;

• changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) generally applicable to the Company’s business, including any such changes in laws and regulations as a result of recent disruptions in the banking industry, and the associated costs of such changes;

• 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;

• operational risks related to cyber threats, attacks, intrusions, and fraud which could lead to interruptions or disruptions of the Company's operating systems, including systems that are customer facing, and adversely impact the Company's business; and

• other unexpected material adverse changes in the Company's 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 may include 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, 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 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

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(1) Estimated number for December 31, 2023.

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