Results marked by higher revenues, increased credit provision, and deposit growth

Independent Bank Corp. (Nasdaq Global Select Market: INDB), parent of Rockland Trust Company, today announced 2024 third quarter net income of $42.9 million, or $1.01 per diluted share, compared to 2024 second quarter net income of $51.3 million, or $1.21 per diluted share. The decline in net income was largely attributable to an increase in the Company’s loan loss provision compared to the prior quarter, partially mitigated by higher revenue levels. The increased loan loss provision was primarily attributable to a reserve allocation associated with one commercial real estate loan, while total levels of criticized and classified loans remained stable.

The Company generated a return on average assets of 0.88% and a return on average common equity of 5.75% for the third quarter of 2024, as compared to 1.07% and 7.10%, respectively, for the prior quarter.

“Our employees continue to provide outstanding service to our clients, resulting in continued improvement over many core elements of the bank, as evidenced by strong tangible book value growth, margin expansion, and core deposit growth for the third quarter,” said Jeffrey Tengel, the Chief Executive Officer of Independent Bank Corp. and Rockland Trust Company. “In addition, we believe that we are well positioned to improve profitability with expectations of future Federal Reserve interest rate cuts.”

BALANCE SHEET

Total assets of $19.4 billion at September 30, 2024 remained essentially flat when compared to the prior quarter and increased $40.0 million, or 0.21% when compared to September 30, 2023 levels, with the change compared to the year ago period reflecting a healthy remix of assets from securities into loans.

Total loans at September 30, 2024 of $14.4 billion decreased slightly by $40.1 million, or 0.3% (1.1% annualized), compared to the prior quarter level. This decrease was driven primarily by continued restraint on commercial real estate and construction portfolio growth combined with lower levels of commercial and industrial line utilization despite strong origination volume. On the consumer side, the total loan portfolio grew $18.5 million, or 0.5% (2.0% annualized), from the prior quarter, reflecting increased home equity utilization. Small business lending remains a focal point with the portfolio having grown by 10.1% from a year ago.

Average deposits for the third quarter increased by $330.0 million, or 2.2% (8.74% annualized), as compared to the prior quarter average balances, while period end balances of $15.4 billion at September 30, 2024 increased by $31.4 million, or 0.2%, from June 30, 2024, reflecting strong growth in business checking balances offset by reductions in municipal deposits. Overall core deposits represented 81.7% of total deposits at September 30, 2024, as compared to 81.9% at June 30, 2024. Total noninterest bearing demand deposits grew by 2.3% versus the prior quarter and represent 29.3% of total deposits at September 30, 2024, compared to 28.7% at June 30, 2024. The total cost of deposits for the third quarter increased 9 basis points to 1.74% compared to the prior quarter.

In conjunction with deposit growth during the quarter, total period end borrowings declined by $30.0 million, or 4.3%, during the third quarter of 2024, while average borrowings decreased $334.2 million for the quarter, or 32.8%. As such, the overall cost of funding increased by only 1 basis point to 1.86% during the third quarter as increased deposit costs were mitigated by reductions in wholesale borrowing costs.

The securities portfolio balances remained flat at September 30, 2024 compared to June 30, 2024, as new purchases of $47.8 million and unrealized gains of $36.7 million in the available for sale portfolio were offset by maturities, calls and paydowns. Total securities represented 14.2% of total assets at both September 30, 2024 and June 30, 2024.

Stockholders’ equity at September 30, 2024 increased $57.9 million, or 2.0%, compared to June 30, 2024, driven by strong earnings retention as well as unrealized gains on the available for sale investment securities portfolio and interest rate derivative valuations included in other comprehensive income. The Company’s ratio of common equity to assets of 15.34% at September 30, 2024 represented an increase of 30 basis points from June 30, 2024 and an increase of 44 basis points from September 30, 2023. The Company’s book value per share increased by $1.34, or 1.9%, to $70.08 at September 30, 2024 as compared to the prior quarter. The Company’s tangible book value per share at September 30, 2024 rose by $1.38, or 3.1%, from the prior quarter to $46.57, and has grown by 9.3% from the year ago period. The Company’s ratio of tangible common equity to tangible assets of 10.75% at September 30, 2024 represented an increase of 33 basis points from the prior quarter and an increase of 51 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 third quarter of 2024 increased to $141.7 million as compared to $137.9 million for the prior quarter. The net interest margin of 3.29% increased 4 basis points when compared to the prior quarter, driven primarily by higher loan yields and securities cash flow deployment, combined with stable overall funding costs.

NONINTEREST INCOME

Noninterest income of $33.5 million for the third quarter of 2024 represented an increase of $1.2 million, or 3.8%, as compared to the prior quarter. Significant changes in noninterest income for the third quarter of 2024 compared to the prior quarter included the following:

• Deposit account fees increased by $447,000, or 7.1%, due primarily to increased overdraft and cash management activity.

• Interchange and ATM fees increased by $217,000, or 4.6%, driven by increased transaction volume during the third quarter of 2024.

• Total assets under administration rose by $290.6 million, or 4.2%, during the quarter to a record level of $7.2 billion at September 30, 2024. The related increase in management fee income was offset partially by a reduction in seasonal tax preparation fees and insurance commissions recognized during the second quarter, resulting in a slight increase in overall investment and advisory income for the third quarter.

• Mortgage banking income decreased by $348,000, or 26.4%, despite higher origination volumes, as a significant portion of the quarter end pipeline remained in an interest rate floating position, affecting the timing of the recognition of the associated expected gain.

• Loan level derivative income rose by $652,000, or 137.8%, reflecting increased customer demand in light of changes in the macroeconomic environment.

• Other noninterest income increased by $199,000, or 3.1%, driven primarily by increased gains on equity securities, partially offset by reduced loan fees and lower FHLB dividend income.

NONINTEREST EXPENSE

Noninterest expense of $100.4 million for the third quarter of 2024 represented an increase of 0.8%, or $829,000, as compared to the prior quarter. Significant changes in noninterest expense for the third quarter compared to the prior quarter included the following:

• Salaries and employee benefits increased by $2.9 million, or 5.15%, as compared to the prior quarter, fueled primarily by outsized interest rate-driven valuation fluctuations on the Company’s split-dollar bank-owned life insurance policies, which resulted in a $1.7 million increase in expense as compared to the prior quarter. Other increases were attributable to timing on retirement contributions and increased base salary costs.

• Occupancy and equipment expenses increased by $262,000, or 2.1%, due mainly to increases in utilities costs and equipment maintenance and repairs, partially offset by reduced cleaning expenses.

• Other noninterest expense decreased by $2.4 million, or 9.7%, due primarily to a one-time credit of $1.1 million on debit card expenses, as well as reduced director equity compensation and consultant fees, partially offset by increased software and subscriptions costs.

The Company’s tax rate for the third quarter of 2024 decreased slightly to 22.35%, compared to 22.69% for the prior quarter.

ASSET QUALITY

The third quarter provision for credit losses was $19.5 million as compared to $4.3 million for the second quarter of 2024, primarily attributable to a reserve allocation associated with one commercial real estate loan from a previously acquired bank that migrated to nonperforming status during the quarter. As such, nonperforming loans increased to $104.2 million at September 30, 2024, as compared to $57.5 million at June 30, 2024, representing 0.73% and 0.40% of total loans at each respective period. Net charge-offs increased to $6.7 million for the third quarter of 2024, as compared to $339,000 for the prior quarter, representing 0.18% and 0.01%, respectfully, of average loans annualized. Net charge-offs for the third quarter were primarily driven by the partial charge-off of one commercial and industrial loan which had been previously reserved for. Delinquencies as a percentage of total loans decreased 4 basis points from the prior quarter to 0.33% at September 30, 2024.

The allowance for credit losses on total loans increased to $163.7 million at September 30, 2024 compared to $150.9 million at June 30, 2024, and represented 1.14% and 1.05% of total loans, at September 30, 2024 and June 30, 2024, 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 third quarter earnings at 10:00 a.m. Eastern Time on Friday, October 18, 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: 8729400 and will be available through October 25, 2024. Additionally, a webcast replay will be available on the Company’s website until October 15, 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 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:

• adverse economic conditions in the regional and local economies within the New England region and the Company’s market area;
• events impacting the financial services industry, including high profile bank failures, and any resulting decreased confidence in banks among depositors, investors, and other counterparties, as well as competition for deposits, significant disruption, volatility and depressed valuations of equity and other securities of banks in the capital markets;
• the effects to the Company of an increasingly competitive labor market, including the possibility that the Company will have to devote significant resources to attract and retain qualified personnel;
• the instability or volatility in financial markets and unfavorable domestic or global general economic, political or business conditions, whether caused by geopolitical concerns, including the Russia/Ukraine conflict, the conflict in Israel and surrounding areas and the possible expansion of such conflicts, political and policy uncertainties with the approach of the U.S. presidential election, changes in U.S. and international trade policies, or other factors, and the potential impact of such factors 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 the Company’s local economies or the Company's business caused by adverse weather conditions and natural disasters, changes in climate, public health crises or other external events and any actions taken by governmental authorities in response to any such events;
• adverse changes or volatility in the local real estate market;
• changes in interest rates and any resulting impact on interest earning assets and/or interest bearing liabilities, the level of voluntary prepayments on loans and the receipt of payments on mortgage-backed securities, decreased loan demand or increased difficulty in the ability of borrowers to repay variable rate loans;
• 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;
• the effect of laws, regulations, new requirements or expectations, or additional regulatory oversight in the highly regulated financial services industry, including as a result of intensified regulatory scrutiny in the aftermath of regional bank failures and the resulting need to invest in technology to meet heightened regulatory expectations, increased costs of compliance or required adjustments to strategy;
• 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;
• 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;
• 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, including any inability to effectively implement new technology-driven products, such as artificial intelligence;
• 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 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 the Company and its customers’ reliance on information technology; cyber threats, attacks, intrusions, and fraud; and outages or other issues impacting the Company or its third party service providers 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;
• any 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 most recent 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.

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 September 30, 2024.

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