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| 8-K - PIPER JAFFRAY SEPTEMBER 2017 NEW ENGLAND BANK SYMPOSIUM - INDEPENDENT BANK CORP | piperjaffrayseptember20178.htm |
Piper Jaffray
New England Bank Symposium
September 28, 2017
Robert Cozzone – Chief Financial Officer and Treasurer
Gerard Nadeau – President of Rockland Trust Company
(2)
Who We Are
• Main Sub: Rockland Trust
• Market: Eastern Massachusetts
• Loans: $6.3 B
• Deposits: $6.7 B
• $AUA: $3.2 B
• Market Cap: $2.0 B
• NASDAQ: INDB
(3)
Key Messages
• Lengthy track record of consistent, solid performance
• Robust loan and core deposit activity
• Growing fee revenue sources, esp. Investment Mgmt.
• Expanding footprint in growth markets
• Tangible book value steadily growing *
• Steadily improving operating efficiency
• Disciplined risk management culture
• Proven integrator of acquired banks
• Deep, experienced management team
* See appendix A for reconciliation
(4)
Expanding Company Footprint
Rank 2016
1 23.5% 39%
Rank 2016
5 4.9% 18%
Rank 2016
3 12.3% 14%
Rank 2016
6 7.9% 12%
Rank 2016
19 1.2% 10%
Rank 2016
17 0.3% 4%
Rank 2016
2 19.7% 2%
Rank 2016
31 0.3% 1%
Suffolk County
Bristol County
Worcester County
Dukes County (MV)
Middlesex County
Norfolk County
% of
INDB Dep.Share
Barnstable County (Cape Cod)
Market
Plymouth County
Source: SNL Financial; Deposit/Market Share data as of October 20, 2016.
*Pro forma for Island Bancorp, Inc. acquisition
*
(5)
Recent Accomplishments
• Four consecutive years of record earnings
• Finalized acquisition of New England Bancorp, Inc. of Cape Cod
and Island Bancorp, Inc. of Martha’s Vineyard
• Capitalizing on expansion moves in vibrant Greater Boston
market
• Growth initiatives – new commercial products, new and
revitalized branches, expanded digital offerings, lending staff
adds
• Strong household growth rate
• Consistently high rankings in third party surveys
(6)
$59.9
$71.7 $80.4
$43.4
2014 2015 2016 1H17
Operating Earnings ($ Mil.)**
Strong Fundamentals Driving Performance
+16% CAGR
Diluted EPS
$2.49 $2.50 $2.90 $1.52
• Robust customer activity
• Core deposits up to 91%
• Fee revenues rising
• Low funding costs
• Low credit loss rates
• TBV steadily growing*
• Solid returns
• Accretive Acquisitions
Diluted EPS
$2.50 $2.76 $3.04 $1.60
* See appendix A for reconciliation
* *See appendix B for reconciliation
$59.8 $65.0
$76.6
$41.3
2014 2015 2016 1H17
Net Income ($ Mil.)
+13% CAGR
(7)
Vibrant Commercial Lending Franchise
TOTAL LOANS
$6.3 B
AVG. YIELD: 4.08%
2Q 2017
Comm'l
71%
Resi Mtg
12%
Home Eq
17%
• Long-term CRE/ C&I lender
• Increased small business focus
• Strong name recognition in local markets
• Expanded market presence
• Experienced, knowledgeable lenders
• Growing in sophistication and capacity
• Commercial banker development program
• Disciplined underwriting
(8)
Commercial Diversification
Total Commercial Real Estate Portfolio
Balance $3.4B as of 6/30/17
Industrial/
Warehouse
8.8%
Office Buildings
10.8%
Commercial
Buildings
17.8%
Residential-
Related*
31.2%
All Other
18.3%
Strip Malls
3.8%
Hotels/Motels
9.3%
Total C&I Loan Portfolio
Balance $911M as of 6/30/17
*Includes 1-4 Family, Multifamily, Condos and Approved Land
$784M
$861M $843M
$902M $911M
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
2013 2014 2015 2016 6/30/2017
Mi
llio
ns
C&I
$2.5B
$2.6B
$3.0B
$3.3B $3.4B 317%
321%
299%
306%
312%
250%
260%
270%
280%
290%
300%
310%
320%
330%
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
2013 2014 2015 2016 6/30/2017
Bil
lio
ns
CRE NOO CRE/Capital**
** Non-Owner Occupied Real Estate divided by Total Capital
All Other 17.5%
Health Care and
Social
Assistance
5.2%
Finance and
Insurance 7.5%
Manufacturing
8.6%
Wholesale
Trade 11.2%
Construction
10.1%
Retail Trade
21.9%
Real Estat and
Rental and
Leasing 18.0%
(9)
Low Cost Deposit Base
Demand
Deposits
32%
Money Market
19%
Savings/Now
40%
CDs
9%
TOTAL DEPOSITS $6.5B
2Q 2017
• Sizable demand deposit
component
• Valuable source of liquidity
• Relationship-based
approach
• Expanded digital access
• Growing commercial base
$4.2B $4.6B
$5.3B
$5.8B $6.1B
84.9%
87.3%
88.6%
89.9% 90.5%
79.0%
81.0%
83.0%
85.0%
87.0%
89.0%
91.0%
93.0%
95.0%
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
2013 2014 2015 2016 6/30/2017
Bill
ion
s
Core Deposits Core to Total
0.23%
0.21%
0.20%
0.18% 0.18%
0.00%
0.05%
0.10%
0.15%
0.20%
0.25%
013 2014 2015 2016 6/30/2017
Cost of Deposits
(10)
6.1
13.5
21.8
11.6
2006 2011 2016 1H17
Revenues
($ Mil.)
816
1,651
2,919
3,196
2006 2011 2016 2Q17
AUAs
($ Mil.)
Investment Management :
Transformed Into High Growth Business
+292% +257%
• Successful business model
• Growing source of fee revenues
• Strong feeder business from Bank
• Expanding investment center locations
• Cross-sell opportunity in acquired bank markets
• Adding experienced professionals
(11)
Well-Positioned for Rising Rates:
Prudent Balance Sheet Management
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Year 0 Year 1 Year 2
%
In
cr
ease
o
n
N
et
In
te
re
st
In
co
m
e
Interest Rate Sensitivity
Down 100
Up 200
Up 400
Flat Up 200
(12)
$8.5
$0.8
$0.3
$3.7
2014 2015 2016 1H17
Net Chargeoffs
($ Mil.)
customer
fraud
Asset Quality: Well Managed
$27.5 $27.7
$57.4
$51.8
2014 2015 2016 2Q17
NPLs
($ Mil.)
NPL/Loan %
0.55% 0.50% 0.96% 0.83%
Peers 0.58%*
* Source: FFIEC Peer Group 2; $3-10 Billion in Assets, June 30, 2017
Incl. 90 days + overdue
Loss Rate
18bp 1bp 1bp 12bp
Peers 7bp*
(13)
Strong Capital Position (period end)
$19.18
$21.29
$23.45 $24.48
2014 2015 2016 2Q17
Tangible Book Value*
+28%
* See appendix A for reconciliation
$26.69
$29.40
$32.02 $33.34
2014 2015 2016 2Q17
Book Value Per Share
+25%
• Strong internal capital generation
• No storehousing of excess capital
• No external equity raising
• No dividend cuts
(14)
Attentive to Shareholder Returns
$0.96 $1.04
$1.16
$0.64
2014 2015 2016 1H17
Cash Dividends Declared Per Share
(15)
Sustaining Business Momentum
Business Line
• Expand Market Presence/Recruit Seasoned Lenders
• Grow Client Base
• Expand Specialty Products, e.g. ABL, Leasing
• Lender Development Programs
Commercial
• Continue to Drive Household Growth
• Expand Digital Offerings
• Optimize Branch Network
Retail Delivery
• Capitalize on Strong Market Demographics
• Continue Strong Branch/Commercial Referrals
• Expand COI Relationships
Investment Management
• Continue Aggressive H.E. Marketing
• Scalable Resi Mortgage Origination Platform
Consumer Lending
Focal Points
(16)
Expanded Presence in Vibrant Greater Boston
Long-Term Commercial Lender in Greater Boston
Central Bancorp
$357MM Deposits
10 Branches – Nov. 2012
Investment Management
and Commercial Lending
Center
October 2013
Peoples Federal
Bancshares
$432MM Deposits
8 Branches – Feb. 2015
(17)
Island Bancorp Acquisition
Edgartown National Bank
• Profitable, well-managed community bank
• Provides first retail presence on M.V.
• Excellent complement to growing Cape Cod presence
• Financially attractive
• $0.03 - $0.04 EPS accretion expected in 2018
• Neutral to TBV
• Modest, low-risk deal
• Asset size: ~$200 MM
• Transaction value: $29 MM
• Closed in May ‘17
INDB: A Proven Integrator
(18)
Building Franchise Value
Disciplined Acquisitions
Deal Value: $84.5MM
2% Core Dep. Premium*
Benjamin
Franklin Bancorp
Apr ‘09
$994mm Assets
$701mm Deposits
11 Branches
Deal Value: $52.0MM
8% Core Dep. Premium*
Central
Bancorp
Nov ‘12
$537mm Assets
$357mm Deposits
10 Branches
Deal Value: $40.3MM
8% Core Dep. Premium*
Mayflower
Bancorp
Nov’13
$243mm Assets
$219mm Deposits
8 Branches
$276 mm Assets
$176mm Deposits
Net 1 Branch
Deal Value: $41.7MM
12% Core Dep. Premium*
All Acquisitions Immediately Accretive
*Incl. CDs <$100k
Deal metrics based on closing price and actual acquired assets
New England Bancorp
Nov ‘16
Deal Value: $102.2 MM
17% Core Dep. Premium*
Slade’s Ferry
Bancorp
Mar ‘08
$630mm Assets
$411mm Deposits
9 Branches
Peoples Federal
Bancshares
Feb ’15
$640 mm Assets
$432mm Deposits
8 Branches
Deal Value: $141.8MM
10% Core Dep. Premium*
Island Bancorp
May ‘17
$194 mm Assets
$171mm Deposits
Net 4 Branches
Deal Value: $29MM
9% Core Dep. Premium*
(19)
Major Opportunities in Acquired Bank Markets:
Capitalizing on Rockland Trust Brand
Investment
Management
Commercial
Banking
Retail/
Consumer
• $3.2 billion AUA
• Wealth/Institutional
• Strong referral network
• Sophisticated products
• Expanded capacity
• In depth market knowledge
• Award winning customer service
• Electronic/mobile banking
• Competitive home equity products
Acquired Bank Customer Bases
(20)
Optimizing Retail Delivery Network
In the past twelve months we have:
• Utilized specialized analytics software/location model
• Shifted branch distribution
• Closed/consolidated 2
• Opened 1
• Relocated 1
• Redesigned 3
• Added 5 locations from acquisitions
• Added 3 off-site ATMs
• Introduced SecurLOCK feature that provides the customer with control
to manage the security of their debit card(turn off/on, alerts, etc.)
• Implemented Apple, Android and Samsung Pay
• Allowed for electronic scans of customer identification
• Enabled EMV compatible ATMs
• Converted all debit cards to EMV ready
(21)
INDB Investment Merits
• High quality franchise in attractive markets
• Strong organic business volumes
• Growing brand recognition
• Operating platform that can be leveraged further
• Capitalizing on in-market consolidation opportunities
• Diligent stewards of shareholder capital
• Grounded management team
• Positioned to grow, build, and acquire to drive long-term value
creation
(22)
Appendix A
The following table reconciles Book Value per share, which is a GAAP based measure to Tangible Book Value per share, which
is a non-GAAP based measure. It also reconciles the ratio of Equity to Assets, which is a GAAP based measure, to Tangible
Equity to Tangible Assets, a non-GAAP measure, for the dates indicated:
2014 2015 2016 2Q17
(Dollars in thousands, except share and per share data)
Tangible common equity
Stockholders' equity (GAAP) $ 640,527 $ 771,463 $ 864,690 $ 914,584 (a)
Less: Goodwill and other intangibles 180,306 212,909 231,374 243,005
Tangible common equity 460,221 558,554 633,316 671,579 (b)
Tangible assets
Assets (GAAP) 6,364,318 7,209,469 7,709,375 8,017,293 (c)
Less: Goodwill and other intangibles 180,306 212,909 231,374 243,005
Tangible assets 6,184,012 6,996,560 7,478,001 7,774,288 (d)
Common shares 23,998,738 26,236,352 27,005,813 27,431,171 (e)
Common equity to assets ratio (GAAP) 10.06% 10.70% 11.22% 11.41% (a/c)
Tangible common equity to tangible assets
ratio (Non-GAAP)
7.44% 7.98% 8.47% 8.64% (b/d)
Book Value per share (GAAP) $ 26.69 $ 29.40 $ 32.02 $ 33.34 (a/e)
Tangible book value per share (Non-GAAP) $ 19.18 $ 21.29 $ 23.45 $ 24.48 (b/e)
(23)
Appendix B
The following table reconciles net income and diluted EPS, which are GAAP measures, to operating earnings and
diluted EPS on an operating basis, which are Non-GAAP Measures as of the time periods indicated:
2014 2015 2016 1H 2017
(Dollars in thousands, except per share data)
Net income available to common
shareholders (GAAP) $ 59,845 $ 2.49 $ 64,960 $ 2.50 $ 76,648 $ 2.90 $ 41,288 $ 1.52
Non-GAAP adjustments
Noninterest income components
Gain on extinguishment of debt — — — — — — — —
Gain on life insurance benefits
(tax exempt) (1,964) (0.08) — — — — — —
Gain on sale of fixed income
securities (121) (0.01) (798) (0.03) — — — —
Noninterest expense components
Impairment on acquired facilities 524 0.02 109 — — — — —
Loss on extinguishment of debt — — 122 0.01 437 0.02 — —
Loss on sale of fixed income
securities 21 — 1,124 0.04 — — — —
Loss on termination of
derivatives 1,122 0.05 — — — — — —
Merger and acquisition expenses 1,339 0.06 10,501 0.40 5,455 0.20 3,393 0.12
Severance — — — — — — — —
Total impact of noncore items 921 0.04 11,058 0.42 5,892 0.22 3,393 0.12
Net tax benefit associated with
noncore items (866) (0.03) (4,285) (0.16) (2,163) (0.08) (1,241) (0.04)
Net operating earnings (Non-
GAAP) $ 59,900 $ 2.50 $ 71,733 $ 2.76 $ 80,377 $ 3.04 $ 43,440 $ 1.60
(24)
NASDAQ Ticker: INDB
www.rocklandtrust.com
Robert Cozzone – CFO & Treasurer
Shareholder Relations:
(781) 982-6737
Statements contained in this presentation that are not historical facts are “forward-looking
statements” that are subject to risks and uncertainties which could cause actual results to differ
materially from those currently anticipated due to a number of factors, which include, but are not
limited to, factors discussed in documents filed by the Company with the Securities and Exchange
Commission from time to time.