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What changed in INDEPENDENT BANK CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of INDEPENDENT BANK CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+339 added−342 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in INDEPENDENT BANK CORP's 2023 10-K

339 paragraphs added · 342 removed · 250 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

54 edited+19 added−8 removed72 unchanged
Biggest changeAs of December 31, 2022, approximately 64% of the Company's workforce was comprised of women and approximately 21% was comprised of professionals of color. Rockland Trust works to ensure colleagues have an opportunity to be heard, valued and engaged. Rockland Trust offers three Employee Resource Groups ("ERGs"): Inclusion Network, Women of Action, and Pride Alliance.
Biggest changeRockland Trust works to ensure colleagues have an opportunity to be heard, valued and engaged. Rockland Trust offers four Employee Resource Groups ("ERGs"): Inclusion Network, EmpowHer Alliance, Pride Alliance, and The Money Circle. These voluntary, employee-led groups join together to provide opportunities for colleagues to get involved in making the Company's workforce and communities more inclusive and equitable.
Construction loans within this category also present a degree of risk may be affected by a variety of factors, such as adverse changes in interest rates and the borrower’s ability to control costs and adhere to time schedules. Development of commercial real estate projects also may be subject to numerous land use and environmental issues.
Construction loans within this category present a degree of risk and may be affected by a variety of factors, such as adverse changes in interest rates and the borrower’s ability to control costs and adhere to time schedules. Development of commercial real estate projects also may be subject to numerous land use and environmental issues.
Additionally, other commercial term loans are typically secured by owner occupied commercial real estate and/or machinery and equipment. To limit the risk within this portfolio, the loans are made across a diverse set of industry groups.
Additionally, other commercial term loans are typically secured by machinery and equipment, and/or owner occupied commercial real estate. To limit the risk within this portfolio, the loans are made across a diverse set of industry groups.
Rockland Trust’s 124 branch locations feature expanded use of video-tellers, and are supplemented by internet and mobile banking services as well as automated teller machine ("ATM") cards and debit cards which may be used to conduct various banking transactions at ATMs maintained at each of the Bank’s full-service offices and 28 additional remote ATM locations.
Rockland Trust’s 123 branch locations feature expanded use of video-tellers, and are supplemented by internet and mobile banking services as well as automated teller machine ("ATM") cards and debit cards which may be used to conduct various banking transactions at ATMs maintained at each of the Bank’s full-service offices and 28 additional remote ATM locations.
The Bank believes this portfolio is well diversified with loans secured by a variety of property types, such as owner-occupied and nonowner-occupied commercial, retail, office, industrial, warehouse, industrial development bonds and other special purpose properties, such as hotels, motels, nursing homes, restaurants, churches, and recreational facilities.
The Bank believes this portfolio is well diversified with loans secured by a variety of property types, such as owner-occupied and nonowner-occupied commercial real estate, retail, office, industrial, warehouse, industrial development bonds and other special purpose properties, such as hotels, motels, nursing homes, restaurants, churches, and recreational facilities.
Additionally, if any bank holding company exceeds the $15 billion threshold as a result of an acquisition, subsequent to December 31, 2016, then these hybrid capital instruments are phased out of Tier 1 capital and generally included within Tier 2 capital, prospectively.
Additionally, if any bank holding company exceeds the $15 billion threshold as a result of an acquisition, subsequent to 15 Table of Contents December 31, 2016, then these hybrid capital instruments are phased out of Tier 1 capital and generally included within Tier 2 capital, prospectively.
See Note 19, "Regulatory Matters" within the Notes to the Consolidated Financial Statements included in Item 8 of this Report for more information. FDIC Deposit Insurance The Bank's deposit accounts are insured to the maximum extent permitted by law by the Deposit Insurance Fund, which is administered by the FDIC.
See Note 18, "Regulatory Matters" within the Notes to the Consolidated Financial Statements included in Item 8 of this Report for more information. FDIC Deposit Insurance The Bank's deposit accounts are insured to the maximum extent permitted by law by the Deposit Insurance Fund, which is administered by the FDIC.
The Patriot Act contains sweeping anti-money laundering and financial transparency laws and imposes various regulations, including standards for verifying client identification at account opening, and rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering. Office of Foreign Assets Control Regulation ("OFAC") The U.S.
The Patriot Act contains sweeping anti-money laundering and financial transparency laws and imposes various regulations, including standards for verifying client identification at account opening, and rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering. 13 Table of Contents Office of Foreign Assets Control Regulation ("OFAC") The U.S.
Rockland Trust also now offers person-to-person payment capabilities, allowing for simple and secure funds transfers between most banks and credit unions. 10 Table of Contents Regulation The following discussion sets forth certain material elements of the regulatory framework applicable to bank holding companies and their subsidiaries and provides certain specific information relevant to the Company.
Rockland Trust also offers person-to-person payment capabilities, allowing for simple and secure funds transfers between most banks and credit unions. 11 Table of Contents Regulation The following discussion sets forth certain material elements of the regulatory framework applicable to bank holding companies and their subsidiaries and provides certain specific information relevant to the Company.
The following table summarizes the minimum capital levels under the Rules: Bank Holding Company Total Risk-Based Ratio Tier 1 Risk-Based Ratio Common Equity Tier 1 Capital Tier 1 Leverage Capital Ratio Total Risk-Based Ratio Tier 1 Risk-Based Ratio Common Equity Tier 1 Capital Tier 1 Leverage Capital Ratio Category Well capitalized > 10% and > 8% and > 6.5% > 5% n/a n/a > 6.5% n/a Adequately capitalized > 8% and > 6% and > 4.5% > 4% > 8% and > 6% and > 4.5% > 4% Undercapitalized or or or or n/a Significantly undercapitalized or or n/a n/a n/a n/a The Company is currently in compliance with the above-described regulatory capital requirements.
The following table summarizes the minimum capital levels under the Rules: 12 Table of Contents Bank Holding Company Total Risk-Based Ratio Tier 1 Risk-Based Ratio Common Equity Tier 1 Capital Tier 1 Leverage Capital Ratio Total Risk-Based Ratio Tier 1 Risk-Based Ratio Common Equity Tier 1 Capital Tier 1 Leverage Capital Ratio Category Well capitalized > 10% and > 8% and > 6.5% > 5% n/a n/a > 6.5% n/a Adequately capitalized > 8% and > 6% and > 4.5% > 4% > 8% and > 6% and > 4.5% > 4% Undercapitalized or or or or n/a Significantly undercapitalized or or n/a n/a n/a n/a The Company is currently in compliance with the above-described regulatory capital requirements.
Revolving lines of credit, including asset-based lines, are typically collateralized by accounts receivable, inventory, or both, as well as other business assets. Commercial revolving lines of credit and asset based lines generally are reviewed on an annual basis and usually require either a borrowing base formula or varying levels of substantial repayment of principal during the course of a year.
Lines of credit, including asset-based lines, are typically collateralized by accounts receivable, inventory, or both, as well as other business assets. Commercial lines of credit and asset based lines generally are reviewed on an annual basis and usually require either a borrowing base formula or reflect varying levels of repayment of principal during the course of a year.
Rockland Trust has been named one of the Boston Globe’s Top Places to Work for 14 years running and has continued to be the top rated Bank in its size category since 2015.
Rockland Trust has been named one of the Boston Globe’s Top Places to Work for 15 years running and has continued to be the top rated bank in its size category since 2015.
(The Company has included its web address and the SEC website address only as inactive textual references and does not intend them to be active links to the Company's website or the SEC website.) 17 Table of Contents
(The Company has included its web address and the SEC website address only as inactive textual references and does not intend them to be active links to the Company's website or the SEC website.) 18 Table of Contents
The Dodd-Frank Act also permanently increased the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor. • requires publicly traded companies to give stockholders a nonbinding vote on executive compensation and so-called "golden parachute" payments.
The Dodd-Frank Act also permanently increased the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor. 14 Table of Contents • requires publicly traded companies to give stockholders a nonbinding vote on executive compensation and so-called "golden parachute" payments.
While it will continue to be examined for compliance with consumer protection regulations by both the FDIC and the Massachusetts Division of Banks ("DOB"), it will now also be similarly monitored and assessed by the CFPB. 13 Table of Contents • debit card and interchange fees must be reasonable and proportional to the issuer’s cost for processing the transaction.
While it will continue to be examined for compliance with consumer protection regulations by both the FDIC and the Massachusetts Division of Banks ("DOB"), it will now also be similarly monitored and assessed by the CFPB. • debit card and interchange fees must be reasonable and proportional to the issuer’s cost for processing the transaction.
It is the Bank’s practice to obtain personal guarantees from the principals of the borrower on commercial real estate loans and to obtain financial statements at least annually from all commercial and multi-family borrowers.
It is the Bank’s practice to obtain personal guarantees from the principals of the borrower on commercial real estate loans and to obtain financial statements at least annually from all commercial real estate borrowers.
Regulation W Transactions between a bank and its "affiliates" are quantitatively and qualitatively restricted under the Federal Reserve Act. The Federal Deposit Insurance Act applies Sections 23A and 23B to insured nonmember banks in the same manner and to the same extent as if they were members of the Federal Reserve System.
Regulation W Transactions between a bank and its "affiliates" are quantitatively and qualitatively restricted under the Federal Reserve Act. The FDI Act applies Sections 23A and 23B to insured nonmember banks in the same manner and to the same extent as if they were members of the Federal Reserve System.
At December 31, 2022, the Company had total assets of $19.3 billion, total deposits of $15.9 billion, and stockholders’ equity of $2.9 billion. Subsidiaries At December 31, 2022, Independent Bank Corp.’s consolidated subsidiaries included the Company’s banking subsidiary, Rockland Trust, which is the Company’s only reportable operating segment.
At December 31, 2023, the Company had total assets of $19.3 billion, total deposits of $14.9 billion, and stockholders’ equity of $2.9 billion. Subsidiaries At December 31, 2023, Independent Bank Corp.’s consolidated subsidiaries included the Company’s banking subsidiary, Rockland Trust, which is the Company’s only reportable operating segment.
The Bank offers secured and unsecured commercial loans for business purposes. Commercial loans may be structured as term loans or as revolving/nonrevolving lines of credit, and include overdraft protection, letters of credit, and automatic clearinghouse ("ACH") exposure. Secured loans may be collateralized by either owner or nonowner-occupied commercial mortgages or other assets.
The Bank offers secured and unsecured commercial loans for business purposes. Commercial loans may be structured as term loans or as revolving/nonrevolving lines of credit, and include overdraft protection and letters of credit. Secured loans may be collateralized by either owner or nonowner-occupied commercial mortgages or other assets.
In 2004, the Company formed a Diversity and Inclusion Council, which is comprised of Executive and Senior Leaders from all business units, with a purpose to develop strategic priorities through collaboration with the ERGs and business units to execute these priorities.
Established in 2004, the Company continues to support the Diversity and Inclusion Council, which is comprised of Executive and Senior Leaders from all business units, with a purpose to develop strategic priorities through collaboration with the ERGs and business units to execute these priorities.
In accordance with federal and state banking law, the Bank is permitted, with certain exceptions, to make loans and commitments to any one borrower, including related entities, in the aggregate amount of not more than 20% of the Bank’s stockholders’ equity, or $569.7 million at December 31, 2022, which is the Bank’s legal lending limit.
In accordance with federal and state banking law, the Bank is permitted, with certain exceptions, to make loans and commitments to any one borrower, including related entities, in the aggregate amount of not more than 20% of the Bank’s stockholders’ equity, or $584.2 million at December 31, 2023, which is the Bank’s legal lending limit.
The applicable regulatory authorities consider compliance with this law in connection with applications for, among other things, approval of new branches, branch relocations, the engagement in certain additional financial activities under the GLBA, and acquisitions of banks and bank holding companies.
The applicable regulatory authorities consider compliance with this law in connection with applications for, among other things, approval of new branches, branch relocations, the engagement in certain additional financial activities under the Gramm-Leach-Bliley Act, and acquisitions of banks and bank holding companies.
In addition to the Globe's ranking, Rockland Trust has been recognized as a "Best Place to Work" for LGBTQ Equality, scoring 100% on the Human Rights Campaign’s Corporate Equality Index since 2016. Demographic s As of December 31, 2022, Rockland Trust employed 1,739 total colleagues, 719 of whom are officers of the Bank.
In addition to the Boston Globe's ranking, Rockland Trust has been recognized as a "Best Place to Work" for LGBTQ Equality, scoring 100% on the Human Rights Campaign’s Corporate Equality Index since 2016. Demographic s As of December 31, 2023, Rockland Trust employed 1,787 total colleagues, 772 of whom are officers of the Bank.
The following pie chart shows the diversification of the commercial and industrial portfolio as of December 31, 2022: 8 Table of Contents Select Statistics Regarding the Commercial and Industrial Portfolio (Dollars in thousands) Average loan size (excluding floor plan tranches) $ 410 Largest individual commercial and industrial loan outstanding $ 37,650 Commercial and industrial nonperforming loans/commercial and industrial loans 1.63 % Consumer Loans The Bank’s consumer portfolio consists of real estate loans comprised of residential mortgages and home equity loans and lines, all secured by one-to-four family residential properties, as well as other consumer loans.
The following pie chart shows the diversification of the commercial and industrial portfolio as of December 31, 2023: 8 Table of Contents Select Statistics Regarding the Commercial and Industrial Portfolio (Dollars in thousands) Average loan size (excluding floor plan tranches) $ 399 Largest individual commercial and industrial loan outstanding $ 36,820 Commercial and industrial nonperforming loans/commercial and industrial loans 1.28 % Consumer Loans The Bank’s consumer portfolio consists of real estate loans comprised of residential mortgages and home equity loans and lines, all secured by one-to-four family residential properties, as well as other consumer loans.
Notwithstanding the foregoing, the Bank has established a more restrictive limit of $190.0 million as of December 31, 2022, which may only be exceeded with the approval of the Board of Directors. There were no borrowers whose total indebtedness in aggregate exceeded the Bank’s self-imposed restrictive limit.
Notwithstanding the foregoing, the Bank has established a more restrictive limit, which may only be exceeded with the approval of the Board of Directors (the "Board"). There were no borrowers whose total indebtedness in aggregate exceeded the Bank’s self-imposed restrictive limit.
Rockland Trust also partners with diverse organizations to support diverse recruitment efforts and provide professional development opportunities for professionals of color. For example, each year Rockland Trust invites colleagues to participate in The Partnership, a third-party organization that offers leadership development programs for racially and ethnically diverse professionals throughout New England. In 2022, seven colleagues participated in The Partnership.
Rockland Trust also partners with diverse organizations to support diverse recruitment efforts and provide professional development opportunities for professionals from various backgrounds. For example, each year Rockland Trust invites colleagues to participate in The Partnership, a third-party organization that offers leadership development programs for diverse professionals throughout New England.
Consequently, unintentional actions by the Bank could have a material adverse impact on our lending and results of operations if the actions are found to be discriminatory by our regulators. 14 Table of Contents The Bank is subject to federal consumer protection statutes and regulations promulgated under those laws, including, but not limited to the following: • Truth-In-Lending Act and Regulation Z, governing disclosures of credit terms to consumer borrowers; • Home Mortgage Disclosure Act and Regulation C, requiring financial institutions to provide certain information about home mortgage and refinanced loans; • Equal Credit Opportunity Act and Regulation B, prohibiting discrimination on the basis of race, sex, or other prohibited factors in extending credit; • Fair Credit Reporting Act and Regulation V, governing the provision of consumer information to credit reporting agencies and the use of consumer information; and • Fair Debt Collection Practices Act, governing the manner in which consumer debts may be collected by collection agencies.
The Bank is subject to federal consumer protection statutes and regulations promulgated under those laws, including, but not limited to the following: • Truth-In-Lending Act and Regulation Z, governing disclosures of credit terms to consumer borrowers; • Home Mortgage Disclosure Act and Regulation C, requiring financial institutions to provide certain information about home mortgage and refinanced loans; • Equal Credit Opportunity Act and Regulation B, prohibiting discrimination on the basis of race, sex, or other prohibited factors in extending credit; • Fair Credit Reporting Act and Regulation V, governing the provision of consumer information to credit reporting agencies and the use of consumer information; and • Fair Debt Collection Practices Act, governing the manner in which consumer debts may be collected by collection agencies.
Market Area and Competition The Bank contends with considerable competition both in generating loans and attracting deposits. The Bank’s competition for generating loans is primarily from other commercial banks, savings banks, credit unions, mortgage banking companies, finance companies, online lenders or online banks, and other institutional lenders.
These statutory trusts are not included in the Company's consolidated financial statements. Market Area and Competition The Bank contends with considerable competition both in generating loans and attracting deposits. The Bank’s competition for generating loans is primarily from other commercial banks, savings banks, credit unions, mortgage banking companies, finance companies, online lenders or online banks, and other institutional lenders.
Colleagues are also offered a full suite of learning and development programs designed to support professional growth and career advancement. Formal colleague development programs include the Rising Stars Development Program (for entry-level colleague career advancement), Commercial Lender Development Program, and the Management Development Program. Colleagues are also invited to participate in the Company's Online Learning Platform and in-house training opportunities.
Colleagues are also offered a full suite of learning and development programs designed to support professional growth and career advancement. Formal colleague development programs include the Rising Stars Development Program (for entry-level colleague career advancement), the Commercial Lender Development Program, and the Branch Management Development Program.
Colleagues are encouraged to recognize each other's excellent internal and external customer service through a peer recognition, “You Make a Difference” award, and managers are also provided the opportunity to recognize colleagues privately, through “Kudos”.
Colleagues are encouraged to recognize each other's excellent internal and external customer service through a peer recognition, “You Make a Difference” award, of which 3,512 awards were earned in 2023. Managers are also provided the opportunity to recognize colleagues privately, through “Kudos” awards.
Loan Portfolio The following table shows the balance of the gross average loan portfolio by category, the percentage of the gross average loan portfolio, and the percentage of total interest income that the loans generated, by category, for the fiscal years indicated: Average Balance for the Year Ended % of Total Loans % of Total Interest Income Generated for the Years Ended December 31, December 31, 2022 2022 2021 2020 (Dollars in thousands) Commercial $ 10,742,651 78.6 % 72.9 % 71.8 % 67.9 % Consumer real estate 2,892,721 21.2 % 16.7 % 19.6 % 23.6 % Other consumer 31,986 0.2 % 0.3 % 0.4 % 0.5 % Total $ 13,667,358 100.0 % 89.9 % 91.8 % 92.0 % Commercial Loans Commercial loans consist of commercial real estate loans, commercial construction loans, commercial and industrial loans, and small business loans (which generally consist of loans to businesses with commercial credit needs of less than or equal to $750,000).
Loan Portfolio The following table shows the balance of the gross average loan portfolio by category, the percentage of the gross average loan portfolio, and the percentage of total interest income that the loans generated, by category, for the fiscal years indicated: Average Balance for the Year Ended % of Total Loans % of Total Interest Income Generated for the Years Ended December 31, December 31, 2023 2023 2022 2021 (Dollars in thousands) Commercial $ 10,741,394 76.3 % 71.5 % 72.9 % 71.8 % Consumer real estate 3,311,517 23.5 % 20.0 % 16.7 % 19.6 % Other consumer 31,202 0.2 % 0.3 % 0.3 % 0.4 % Total $ 14,084,113 100.0 % 91.8 % 89.9 % 91.8 % Commercial Loans Commercial loans consist of commercial real estate loans, commercial construction loans, commercial and industrial loans, and small business loans (which generally consist of loans to businesses with commercial credit needs of less than or equal to $750,000).
Although the Bank judges its borrowers' creditworthiness, the risk of deterioration in borrowers’ abilities to repay their loans in accordance with their existing loan agreements is inherent in any lending function. Loans are approved based upon a hierarchy of authority, predicated upon the size of the loan.
Although the Bank analyzes the creditworthiness of its borrowers, the risk of deterioration in the ability of borrowers to repay their loans in accordance with their existing loan agreements is inherent in any lending function. Loans are approved based upon a hierarchy of authority, predicated upon the size of the loan, quality of collateral and perceived level of risk.
Rockland Trust had the following wholly-owned corporate subsidiaries: • Six Massachusetts security corporations, namely Rockland Borrowing Collateral Securities Corp., Rockland Deposit Collateral Securities Corp., Taunton Avenue Securities Corp., Goddard Ave Securities Corp., MFLR Securities Corporation, and BH Security Corporation; • RTC LIHTC Investments LLC and Rockland MHEF Fund LLC, established to invest primarily in Massachusetts-based low-income housing tax credit projects; • Rockland Trust Phoenix LLC, formed for the purpose of holding, maintaining, and disposing of certain foreclosed properties; • Bright Rock Capital Management LLC, which was established to act as a registered investment advisor under the Investment Advisors Act of 1940; and • Compass Exchange Advisors LLC, which provides like-kind exchange services pursuant to section 1031 of the Internal Revenue Code.
Security Corporation; • RTC LIHTC Investments LLC and Rockland MHEF Fund LLC, established to invest primarily in Massachusetts-based low-income housing tax credit projects; • Rockland Trust Phoenix LLC, formed for the purpose of holding, maintaining, and disposing of certain foreclosed properties; • Bright Rock Capital Management LLC, which was established to act as a registered investment advisor under the Investment Advisors Act of 1940; and • Compass Exchange Advisors LLC, which was established to provide like-kind exchange services pursuant to section 1031 of the Internal Revenue Code.
The Bank’s largest relationship as of December 31, 2022 consisted of 10 loans with an aggregate exposure of $171.0 million.
The Bank’s largest relationship as of December 31, 2023 consisted of 11 loans with an aggregate exposure of $171.8 million.
The consumer real estate loan portfolio at December 31, 2022 was as follows: Sources of Funds The Bank's primary sources of funds are derived from deposits and to a lesser extent, borrowings as well as the amortization, prepayment, and maturities of loans and securities.
The consumer real estate loan portfolio at December 31, 2023 was as follows: Select Statistics Regarding the Consumer Portfolio (Dollars in thousands) Average loan size $ 111 Largest individual consumer loan outstanding $ 5,043 Consumer nonperforming loans/consumer loans 0.31 % Sources of Funds The Bank's primary sources of funds are derived from deposits and to a lesser extent, borrowings as well as the amortization, prepayment, and maturities of loans and securities.
The Bank’s market area is generally comprised of Eastern Massachusetts, as well as Worcester County and Rhode Island. 6 Table of Contents Lending Activities The Bank’s gross loan portfolio (loans before allowance for credit losses) amounted to $13.9 billion on December 31, 2022, or 72.2% of total assets. The Bank’s borrowers consist of small-to-upper middle market sized businesses and consumers.
The Bank’s primary footprint for branch presence and deposit gathering is generally comprised of Eastern Massachusetts and Worcester County. Lending Activities The Bank’s gross loan portfolio (loans before allowance for credit losses) amounted to $14.3 billion on December 31, 2023, or 73.8% of total assets. The Bank’s borrowers primarily consist of small-to-upper middle market sized businesses and consumers.
The ATM cards and debit cards also allow customers access to a variety of national and international ATM networks. The Bank's mobile banking services give customers the ability to use a variety of mobile devices to check balances, track account activity, pay bills, search transactions, and set up alerts for text or e-mail messages for changes in their account.
The Bank's mobile banking services give customers the ability to use a variety of mobile devices to check balances, track account activity, pay bills, search transactions, and set up alerts for text or e-mail messages for changes in their account. 10 Table of Contents Customers can also transfer funds between Rockland Trust accounts, deposit checks into their account, and identify the nearest branch or ATM directly from their mobile device.
Competitive factors considered in attracting and retaining deposits include deposit and investment products and their respective rates of return, brand awareness, liquidity, and risk, among other factors, such as convenient branch locations and hours of operation, personalized customer service, online and mobile access to accounts and automated teller machines.
Competitive factors considered in attracting and retaining deposits include deposit and investment products and their respective rates of return, brand awareness, liquidity, and risk, among other factors, such as convenient branch locations and hours of operation, personalized customer service, online and mobile access to accounts and automated teller machines. 6 Table of Contents The Bank’s market area is attractive and entry into the market area by financial institutions previously not competing there has occurred and may continue to occur, which could impact the Bank’s growth or profitability.
In addition, the Company is currently the sponsor of Independent Capital Trust V, a Delaware statutory trust, Central Bancorp Capital Trust I, a Delaware statutory trust, and Central Bancorp Statutory Trust II, a Connecticut statutory trust, each of which was formed to issue trust preferred securities. These statutory trusts are not included in the Company's consolidated financial statements.
The like-kind exchange services provided in connection with this entity ceased during 2023. In addition, the Company is currently the sponsor of Independent Capital Trust V, a Delaware statutory trust, Central Bancorp Capital Trust I, a Delaware statutory trust, and Central Bancorp Statutory Trust II, a Connecticut statutory trust, each of which was formed to issue trust preferred securities.
The Federal Reserve has also issued Regulation W, which codifies prior regulations under Sections 23A and 23B of the Federal Reserve Act and 12 Table of Contents interpretative guidance with respect to affiliate transactions.
The Federal Reserve has also issued Regulation W, which codifies prior regulations under Sections 23A and 23B of the Federal Reserve Act and interpretative guidance with respect to affiliate transactions. Regulation W incorporates the exemption from the affiliate transaction rules, but expands the exemption to cover the purchase of any type of loan or extension of credit from an affiliate.
Many of the Company's training and development programs are built on Gestalt-based leadership principles, developed by the Gestalt International Study Center. Rockland Trust also offers Tuition Reimbursement through Cambridge College Global and other colleges and universities. In addition, the Company also offers a robust summer internship program, typically hiring 10-15 summer interns across the Bank each year.
Colleagues are also invited to participate in the Company's Online Learning Platform and in-house training opportunities. Many of the Company's training and development programs are built on Gestalt-based leadership principles, developed by the Gestalt International Study Center. Rockland Trust also offers Tuition Reimbursement through Cambridge College Global and other colleges and universities.
The following pie chart shows the diversification of the commercial real estate portfolio as of December 31, 2022: Select Statistics Regarding the Commercial Real Estate Portfolio (Dollars in thousands) Average loan size $ 1,602 Largest individual commercial real estate mortgage outstanding $ 63,118 Commercial real estate nonperforming loans/commercial real estate loans 0.18 % Owner occupied commercial real estate loans/commercial real estate loans 11.7 % Commercial and industrial loans consist of both term loans and revolving lines of credit.
Select Statistics Regarding the Commercial Real Estate Portfolio (Dollars in thousands) Average loan size $ 1,618 Largest individual commercial real estate mortgage outstanding $ 61,826 Commercial real estate nonperforming loans/commercial real estate loans 0.26 % Commercial and industrial loans consist of both term loans and revolving or non-revolving lines of credit.
Colleagues are provided with competitive compensation, a comprehensive benefits package and an environment that supports a healthy work-life balance. Benefits include Medical, Dental and Vision Insurance, Long-Term Disability Insurance, Life Insurance, 401(k) Voluntary Savings Plan, Additional Defined Contribution Retirement Savings Plan, Paid Time Off, Illness/Personal Time, Paid Parental Leave, Childcare Assistance, Wellness Program RockFit, AFLAC, Pet Insurance, and more.
Additionally, according to a recent internal survey, 83% of colleagues would recommend working at Rockland Trust. Benefits include medical, dental and vision insurance, long-term disability insurance, life insurance, a 401(k) voluntary savings plan, an additional defined contribution retirement savings plan, paid time off, illness/personal time, paid parental leave, childcare assistance, wellness program RockFit, supplemental insurance, pet insurance, and more.
The Rules provided for a number of complex deductions from and adjustments to CET1 and its various capital components. 11 Table of Contents Pursuant to Section 38 of the Federal Deposit Insurance Act, Federal banking agencies are required to take “prompt corrective action” if an insured depository institution fails to meet certain capital adequacy standards.
The Company and the Bank maintain all capital ratios above the required capital conservation buffer of 2.5%. Pursuant to Section 38 of the Federal Deposit Insurance Act, federal banking agencies are required to take “prompt corrective action” if an insured depository institution fails to meet certain capital adequacy standards.
Regulation W incorporates the exemption from the affiliate transaction rules, but expands the exemption to cover the purchase of any type of loan or extension of credit from an affiliate. Affiliates of a bank include, among other entities, the bank’s holding company and companies that are under common control with the bank.
Affiliates of a bank include, among other entities, the bank’s holding company and companies that are under common control with the bank. The Company is considered to be an affiliate of the Bank.
These voluntary, employee-led groups join together to provide opportunities for colleagues to get involved in making the Company's workforce and communities more inclusive and equitable. In addition to the efforts described above, there are many other ways the Company promotes diversity and inclusion among its workforce.
In addition to the efforts described above, there are many other ways the Company promotes diversity and inclusion among its workforce.
Commercial 7 Table of Contents real estate also includes loans secured by certain residential-related property types including multi-family apartment buildings, residential development tracts and condominiums.
The portfolio also includes loans secured by certain residential-related property types including multi-family apartment buildings, residential development tracts and condominiums. Although terms vary, commercial real estate loans typically are underwritten with maturities up to ten years. These loans generally have amortization periods of 20 to 30 years.
Rockland Trust has an inclusive workforce that enables the 16 Table of Contents Company to better perform for its customers and the diverse communities in which it operates. There has been an established diversity and inclusion program for over 17 years, which continues to grow and evolve.
There has been an established diversity and inclusion program at the Company for over 18 years, which continues to grow and evolve.
(collectively, the "Foundations") donated over $1.9 million to 318 nonprofit organizations throughout the Company’s footprint. In total, the Bank and these affiliated Foundations gave over $3.2 million to 761 local nonprofit and community organizations. Commitment to Diversity, Equity and Inclusion At Rockland Trust, management believes each relationship matters, and that statement goes far beyond the Company's customers.
In addition, Rockland Trust employees volunteered over 17,500 service hours in our communities in 2023. Commitment to Diversity, Equity and Inclusion At Rockland Trust, management believes each relationship matters, and that statement goes far beyond the Company's customers.
The Company's largest business units, in terms of total headcount, include Retail, Commercial, and Operations employing 43.5%, 16.3% and 7.3% of colleagues, respectively. Other business units include Audit, Executive, Executive Administration, Finance, Human Resources, Investment Management Group, Information Technology, Marketing, Mortgage, and Risk.
As depicted in the graph below, the workforce is comprised of colleagues of the following generations: The Company's largest business units, in terms of total headcount, include Retail, Commercial, and Operations employing 43.3%, 16.8% and 8.1% of colleagues, respectively.
The FDIC and the Massachusetts Division of Banks have assigned the Bank a CRA rating of "Outstanding"as of the latest examination.
The FDIC and the Massachusetts Division of Banks have assigned the Bank a CRA rating of "Outstanding" as of the latest examination. Anti-Money Laundering Act of 2020 The Anti-Money Laundering Act of 2020, enacted on January 1, 2021 as part of the National Defense Authorization Act, does not directly impose new requirements on banks, but requires the U.S.
In order to celebrate the academic achievements of colleagues, an annual recognition luncheon is hosted by the Company's Chief Executive Officer when they receive a degree or certification. The Company recognizes colleagues that find ways to make work easier and more efficient with our "Transforming Organizational Process" award.
In order to celebrate the academic achievements of colleagues, an 17 Table of Contents annual celebration is hosted by the Company's Chief Executive Officer when they receive a degree or certification. Colleagues are also recognized for extraordinary efforts through annual “Shining Star” awards and other awards at the annual all employee meeting.
The Bank’s commercial real estate portfolio, inclusive of commercial construction, is the Bank’s largest loan type concentration. Although terms vary, commercial real estate loans typically are underwritten with maturities up to ten years. These loans generally have amortization periods of 20 to 25 years.
The Bank’s commercial real estate portfolio, inclusive of commercial construction, is the Bank’s largest loan type concentration.
Rockland Trust’s average full time equivalent was 1,666, as of December 31, 2022. 15 Table of Contents As depicted in the graph below, the workforce is comprised of colleagues of the following generations: Colleague Engagement Rockland Trust is committed to a culture of inclusion, respect, teamwork, and employee engagement.
Other business units include Audit, Corporate Services, Executive, Executive Administration, Finance, Human Resources, Investment Management Group, Information Technology, Loan Operations, Marketing, Mortgage, and Risk. Rockland Trust’s average full time equivalent was 1,721, as of December 31, 2023. Colleague Engagement Rockland Trust is committed to a culture of inclusion, respect, teamwork, and employee engagement.
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The Bank’s market area is attractive and entry into the market by financial institutions previously not competing in the market area may continue to occur which could impact the Bank’s growth or profitability.
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Rockland Trust had the following wholly-owned corporate subsidiaries: • Six Massachusetts security corporations, namely Rockland Borrowing Collateral Securities Corp., Rockland Deposit Collateral Securities Corp., Taunton Avenue Securities Corp., Goddard Ave Securities Corp., MFLR Securities Corporation, and B.H.
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Commercial real estate lending entails additional risks as compared to residential real estate lending as these loans typically involve larger loan balances to single borrowers or groups of related borrowers.
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The 7 Table of Contents current environment has created additional considerations over office exposure as the development of hybrid work environments may reduce demand for large office spaces and as a result potentially reduce the valuation of collateral to loans within this property type. Amongst other actions, management is actively monitoring upcoming maturities within this subset of loans.
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Customers can also transfer funds between Rockland Trust accounts, deposit checks into their account, and identify the nearest branch or ATM directly from their mobile device.
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The following pie chart shows the diversification of the commercial real estate portfolio as of December 31, 2023: (1) Included in the total commercial real estate portfolio balance is $1.3 billion, or 15.1%, of owner occupied commercial real estate loans.
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The Company and the Bank maintain all capital ratios above the required capital conservation buffer of 2.5%.
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The ATM cards and debit cards also allow customers access to a variety of national and international ATM networks.
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The Company is considered to be an affiliate of the Bank.
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Additionally, on November 16, 2023, the FDIC Board of Directors approved a final rule to implement a special assessment to recover the loss to the Deposit Insurance Fund ("DIF") associated with protecting uninsured depositors following the closures of three prominent financial institutions in 2023.
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Colleagues are also recognized for extraordinary efforts through annual “Shining Star” awards and other awards at the annual all employee meeting. Community Outreach In 2022, the affiliated charitable foundations of Rockland Trust, including Rockland Trust Charitable Foundation Inc., Rockland Trust – Blue Hills Charitable Foundation, and Rockland Trust-East Boston Savings Bank Charitable Foundation Inc.
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The Federal Deposit Insurance Act ("FDI Act") requires the FDIC to take this action in connection with the systemic risk determination announced on March 12, 2023. The charge is determined by applying the assessment rate to the Bank's assessment base, which is defined as the estimated uninsured deposits exceeding $5 billion at December 31, 2022.
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Since 2008, more than 30 professionals of color have taken part in this offering and many have received promotions into higher responsibility roles. The Company launched a specialized development program, Strategies and Tactics for Emerging Professionals, in April 2021 to address the factors that can help advance the careers of professionals of color.
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The Company expensed $1.1 million in 2023 as an estimated special assessment, which is expected to be paid over eight quarters beginning in the first quarter of 2024.
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Since the conclusion of the first cohort, 63% of participants have been promoted, many more than once, and one participant has been promoted to an officer-level role. Future cohorts will be launched and the Company looks forward to the continued success and development of participants in this program.
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Treasury to issue National Anti-Money Laundering and Countering the Financing of Terrorism Priorities, and conduct studies and issue regulations that may, over the next few years, significantly alter some of the due diligence, recordkeeping and reporting requirements that the Bank Secrecy Act and Patriot Act impose on banks.
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The Anti-Money Laundering Act of 2020 also contains provisions that promote increased information-sharing and use of technology and increases penalties for violations of the Bank Secrecy Act and includes whistleblower incentives, both of which could increase the prospect of regulatory enforcement.
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Consequently, unintentional actions by the Bank could have a material adverse impact on our lending and results of operations if the actions are found to be discriminatory by our regulators.
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Approximately 63% of the Company's workforce was comprised of women and approximately 21% was 16 Table of Contents comprised of professionals of color. Of the Company's officers, 44% are women and 13% are professionals of color.
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Rockland Trust's senior leadership is made up of 19% of women and 8% professionals of color, while our executive leadership team is 46% women and 8% professionals of color.
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Colleagues are provided with competitive compensation, a comprehensive benefits package and an environment that supports a healthy work-life balance. Through utilizing effective listening and feedback tools to monitor colleague sentiments around the work experience, the Company is nationally recognized for being a top work place in areas such as employee appreciation, professional development, compensation and benefits, and work-life flexibility.
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Community Outreach In 2023, the affiliated charitable foundation of Rockland Trust, Rockland Trust Charitable Foundation Inc., donated over $2.4 million to 340 nonprofit organizations throughout the Company’s footprint. In total, the Bank and our affiliated Foundations contributed over $4.2 million to 944 local nonprofit and community organizations.
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Rockland Trust has an inclusive workforce that enables the Company to better perform for its customers and the diverse communities in which it operates. The Company is committed to respecting all colleagues as individuals and to be courteous and considerate to each colleague.
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All Rockland Trust new hires are assigned a Diversity and Inclusion unconscious bias training which promotes a dialogue around creating a more inclusive culture by discussing how micro inequities and unconscious bias play a role in colleague relationships and how we lead.
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In 2023, Rockland Trust hosted Dignified Banking for the second year, a training program for trainers, human resource leaders, branch managers and other retail staff, which focuses on how we can appropriately develop products and services that better serve the Company's diverse customer base.
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Also in 2023, the Company piloted a new training called "Inclusive Leadership", which teaches managers and leaders new ways to engage, involve, respect, and value the diverse perspectives and contributions of all team members.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeLegislation and regulation governing the privacy and protection of personal information of individuals (including customers, employees, suppliers and other third parties) have been evolving, expanding and increasing in complexity in recent years, and although the Company makes and will continue to make reasonable efforts to comply with all applicable laws and regulations, there can be no assurance that the Company will not be subject to regulatory action or monetary penalties in the event of an incident. 25 Table of Contents For example, the Company is subject to the Gramm-Leach-Bliley Act which, among other things: (i) imposes certain limitations on the ability to share nonpublic personal information about customers with nonaffiliated third parties; (ii) requires that the Company provide certain disclosures to customers about its information collection, sharing and security practices and afford customers the right to “opt out” of any information sharing by us with nonaffiliated third parties (with certain exceptions); and (iii) requires that the Company develop, implement and maintain a written comprehensive information security program containing appropriate safeguards based on its size and complexity, the nature and scope of its activities, and the sensitivity of customer information processed by the Company, as well as plans for responding to data security breaches.
Biggest changeFor example, the Company is subject to the Gramm-Leach-Bliley Act which, among other things: (i) imposes certain limitations on the ability to share nonpublic personal information about customers with nonaffiliated third parties; (ii) requires that the Company provide certain disclosures to customers about its information collection, sharing and security practices and afford customers the right to “opt out” of any information sharing by us with nonaffiliated third parties (with certain exceptions); and (iii) requires that the Company develop, implement and maintain a written comprehensive information security program containing appropriate safeguards based on its size and complexity, the nature and scope of its activities, and the sensitivity of customer information processed by the Company, as well as plans for responding to data security breaches.
Material additions to the allowance would materially decrease the Company’s net income and would have an adverse effect on the Company's results of operations or financial condition. A significant amount of the Company’s loans are concentrated in the Bank’s geographic footprint and adverse conditions in this geographic footprint could negatively impact its results of operations.
Material additions to the allowance would materially decrease the Company’s net income and could have an adverse effect on the Company's results of operations or financial condition. A significant amount of the Company’s loans are concentrated in the Bank’s geographic footprint and adverse conditions in this geographic footprint could negatively impact its results of operations.
Any financial liability or reputational damage could have a material adverse effect on the Company’s business, financial condition and results of operations. Changes in U.S. trade policies and other global political factors beyond the Company’s control, including the imposition of tariffs, retaliatory tariffs, or other sanctions, may adversely impact the Company's business, financial condition and results of operations.
Any material financial liability or reputational damage could have a material adverse effect on the Company’s business, financial condition and results of operations. Changes in U.S. trade policies and other global political factors beyond the Company’s control, including the imposition of tariffs, retaliatory tariffs, or other sanctions, may adversely impact the Company's business, financial condition and results of operations.
The policies and procedures the Company has adopted for the purposes detecting and preventing the use of its banking network for money laundering and related activities may not completely eliminate instances in which the Company may be used by customers to engage in money laundering and other illegal or improper activities.
The policies and procedures the Company has adopted for the purposes of detecting and preventing the use of its banking network for money laundering and related activities may not completely eliminate instances in which the Company may be used by customers to engage in money laundering and other illegal or improper activities.
Commercial and industrial loans may expose the Company to additional risks since their underwriting is typically based on the borrower's ability to make repayments from the cash flow of its business and are secured by non-real estate collateral that may depreciate over time.
Commercial and industrial loans may expose the Company to additional risks since their underwriting is typically based on the borrower's ability to make repayments from the cash flow of its business and they are secured by non-real estate collateral that may depreciate over time.
From time to time as part of the Company’s normal course of business, customers, bankruptcy trustees, former customers, contractual counterparties, third parties and former employees make claims and take legal action against the Company based on its actions or inactions.
From time to time as part of the Company’s normal course of business, customers, bankruptcy trustees, former customers, contractual counterparties, third parties and former employees make claims and take legal action against the Company based on its alleged actions or inactions.
Risks Related to Information Security and Technology The need to mitigate against and react to cyber-security risks, and electronic fraud risks require significant resources, and system failure, a cyber-security attack or electronic fraud could subject the Company to increased operating costs as well as litigation and other liabilities.
Risks Related to Information Security and Technology The need to mitigate against and react to cyber-security risks, and electronic fraud risks require significant resources, and any system failure, a cyber-security attack or electronic fraud could subject the Company to increased operating costs as well as litigation and other liabilities.
The Company's liquidity arises from its ability to liquidate assets or obtain adequate funding in a timely basis, at a reasonable cost and within acceptable risk tolerances. Liquidity is required to fund various obligations, including credit commitments to borrowers, mortgage and other loan originations, withdrawals by depositors, repayment of borrowings, dividends to shareholders, operating expenses and capital expenditures.
The Company's liquidity arises from its ability to liquidate assets or obtain adequate funding on a timely basis, at a reasonable cost and within acceptable risk tolerances. Liquidity is required to fund various obligations, including credit commitments to borrowers, mortgage and other loan originations, withdrawals by depositors, repayment of borrowings, dividends to shareholders, operating expenses and capital expenditures.
Many financial institutions and service providers to financial institutions have reported significant breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, denial-of-service, or sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks and other means.
Many financial institutions and service providers to financial institutions have reported significant breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, deny service, or sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks and other means.
The Company’s market area includes coastal regions that are susceptible to adverse weather conditions and natural disasters including, but not to limited to, hurricanes, blizzards and nor'easters and related flooding and wind damage. The nature and level of such natural disasters cannot be predicted and may be exacerbated by global climate change.
The Company’s market area includes coastal regions that are susceptible to adverse weather conditions and natural disasters including, but not to limited to, rain storms, hurricanes, blizzards and nor'easters and related flooding and wind damage. The nature and level of such natural disasters cannot be predicted and may be exacerbated by global climate change.
Subsequent periodic valuations of securities, taking into consideration then prevailing factors, may result in changes to valuations. Significant negative changes to valuations could result in the recognition of an allowance for credit losses within the Company’s securities portfolio, which could have an adverse effect on the Company’s results of operations or financial conditions.
Subsequent periodic valuations of securities, taking into consideration then prevailing factors, may result in changes to valuations. Significant negative changes to valuations could result in the recognition of an allowance for credit losses within the Company’s securities portfolio, which could have an adverse effect on the Company’s results of operations or financial condition.
Tariffs, retaliatory tariffs or other trade restrictions on products and materials that customers import or export, or a trade war or other related governmental actions related to tariffs, international trade agreements or policies or other trade restrictions have the potential to negatively impact the Company's and/or the Bank's customers' costs, demand for the Bank's customers' products, and/or the U.S. economy or certain sectors thereof and, thus, could adversely impact the Company's business, financial condition and results of operations.
Tariffs, retaliatory tariffs or other trade restrictions on products and materials that customers import or export, or a trade war or other 21 Table of Contents related governmental actions related to tariffs, international trade agreements or policies or other trade restrictions have the potential to negatively impact the Company's and/or the Bank's customers' costs, demand for the Bank's customers' products, and/or the U.S. economy or certain sectors thereof and, thus, could adversely impact the Company's business, financial condition and results of operations.
The risk of electronic fraudulent activity within the financial services industry, especially in the commercial banking sector, due to cyber-attacks (crime committed through or involving the internet, such as phishing, hacking, denial of service attacks, stealing information, unauthorized intrusions into internal systems or the systems of the Company's third-party vendors) could adversely impact the Company’s operations or damage its reputation.
The risk of electronic fraudulent activity within the financial services industry, especially in the commercial banking sector, due to cyber-attacks (crime committed through or involving the internet, such as phishing, hacking, denial of service attacks, stealing information, unauthorized intrusions into internal systems or the systems of the Company's third-party vendors) continues to increase and could adversely impact the Company’s operations or damage its reputation.
The real estate collateral securing the Company's loans provides an alternate source of repayment in the event of default by the borrower. Should real estate values deteriorate during the time the credit is extended, the Company is potentially exposed to greater losses.
The real estate collateral securing the Company's loans provides an alternate source of repayment in the event of default by the borrower. Should real estate values deteriorate or further deteriorate during the time the credit is extended, the Company is potentially exposed to greater losses.
Additionally, as a result of COVID-19 and the related shift toward remote banking, customers have become more reliant on, and their expectations have increased with respect to, new technology-driven products and services.
Additionally, as a result of the Coronavirus ("COVID-19") pandemic and the related shift toward remote banking, customers have become more reliant on, and their expectations have increased with respect to, new technology-driven products and services.
These competitive pressures from the Company’s peers could cause the Company to modify its program and practices in ways that 20 Table of Contents may negatively impact the profitability of the Company’s business activities and expose it to increased business and compliance costs, which, in turn could have an adverse effect on the Company’s financial condition and results of operations.
These competitive pressures from the Company’s peers could cause the Company to modify its program and practices in ways that may negatively impact the profitability of the Company’s business activities and expose it to increased business and compliance costs, which, in turn could have an adverse effect on the Company’s financial condition and results of operations.
Conversely, in a period of rising interest rates such as the current interest rate environment, the interest income earned on the Company’s assets may not increase as rapidly as the interest that the Company pays on its liabilities. Additionally, increases in interest rates may decrease loan demand or make it more difficult for borrowers to repay variable rate loans.
Conversely, in a period of rising interest rates, the interest income earned on the Company’s assets may not increase as rapidly as the interest that the Company pays on its liabilities. Additionally, increases in interest rates may decrease loan demand or make it more difficult for borrowers to repay variable rate loans.
If the information available to the Company at the time of assessment indicates there is a greater than 50% chance that the Company will not realize the deferred tax asset benefit, the Company is required to establish a valuation allowance for the 23 Table of Contents deferred tax asset and reduce its future deferred tax assets to the amount the Company believes could be realized.
If the information available to the Company at the time of assessment indicates there is a greater than 50% chance that the Company will not realize the deferred tax asset benefit, the Company is required to establish a valuation allowance for the deferred tax asset and reduce its future deferred tax assets to the amount the Company believes could be realized.
This may result in a delay or unrealized benefit, or in some cases, increased costs or other unforeseen risks to the Company’s business. Risks Related to Financial and Accounting Matters The Company’s securities portfolio performance in difficult market conditions could have adverse effects on the Company’s results of operations.
This may result in a delay or unrealized benefit, or in some cases, increased costs or other unforeseen risks to the Company’s business. 22 Table of Contents Risks Related to Financial and Accounting Matters The Company’s securities portfolio performance in difficult market conditions could have adverse effects on the Company’s results of operations.
Furthermore, the Company may not be able to ensure that all of its customers, suppliers, counterparties and other third parties have appropriate controls in place to protect the confidentiality of information exchanged with them, particularly where such information is transmitted by electronic means.
Furthermore, the Company may not be able to ensure that all of its 25 Table of Contents customers, suppliers, counterparties and other third parties have appropriate controls in place to protect the confidentiality of information exchanged with them, particularly where such information is transmitted by electronic means.
If such claims and legal actions are not resolved in a manner favorable to the Company, they may result in financial liability and/or adversely affect the market perception of the Company and its products and services. This may also impact customer demand 21 Table of Contents for the Company’s products and services.
If such claims and legal actions are not resolved in a manner favorable to the Company, they may result in financial liability and/or adversely affect the market perception of the Company and its products and services. This may also impact customer demand for the Company’s products and services.
Additionally, the occurrence of these events could harm the Company's operations thorough interference with communications, including the interruption or loss of its computer systems which could prevent the gathering of deposits, originating loans and processing and controlling business flow, as well as through the destruction of facilities and operational, financial and management information systems, and could cause us to incur significant costs to repair any resulting damage to the Company's property or business relationships.
Additionally, the occurrence of these events could harm the Company's operations thorough interference with communications, including the interruption or loss of its computer systems which could prevent the gathering of deposits, originating loans and processing and controlling business flow, as well as through the destruction of facilities and operational, financial and management information systems, and could cause us to incur significant costs to repair any resulting damage to the Company's property or business relationships. 28 Table of Contents ITEM 1B.
If hazardous or toxic substances are found, the Company may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require the Company to incur substantial expenses and may materially reduce the affected property’s value or limit the Company’s ability to use or sell the affected property.
If hazardous or toxic substances are found, the Company may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require the Company to incur substantial expenses and may materially 26 Table of Contents reduce the affected property’s value or limit the Company’s ability to use or sell the affected property.
The Company makes various assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of borrowers, the value of the real estate and other assets serving as collateral for the repayment of loans, and the enforce ability of its loan documents.
The Company makes various assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of borrowers, the value of the real estate and other assets serving as collateral for the repayment of loans, and the enforceability of its loan documents.
The Company identified the accounting policies regarding the allowance for credit losses, security valuations and allowance for credit losses, business combinations, and income taxes to be critical because these policies require management to make difficult, subjective and complex judgments, estimates and assumptions about matters that are inherently uncertain.
The Company identified the accounting policies regarding the allowance for credit losses, 23 Table of Contents security valuations and allowance for credit losses, business combinations, and income taxes to be critical because these policies require management to make difficult, subjective and complex judgments, estimates and assumptions about matters that are inherently uncertain.
Regulatory inquiries, actual or alleged incidents of employee misconduct and rumors, among other things, can substantially damage the Company’s reputation, even if the inquiries, allegations, or rumors are baseless or satisfactorily addressed.
Regulatory inquiries, actual or alleged incidents of employee misconduct and rumors, among other things, can substantially damage the Company’s reputation, even if the 27 Table of Contents inquiries, allegations, or rumors are baseless or satisfactorily addressed.
There can be no assurance that the precautions the Company takes to seek to manage cyber risk related to third-party service providers will be effective or prevent a cyber-attack that could expose the Company to significant operational costs and damages or reputational harm.
There can be no assurance that the precautions the Company takes to seek to manage cyber risk related to third-party service providers will be effective or 24 Table of Contents prevent a cyber-attack that could expose the Company to significant operational costs and damages or reputational harm.
Substantially all of the loans the Company originates are secured by properties located in, or are made to businesses that operate in, Massachusetts and, to a 19 Table of Contents lesser extent, Rhode Island.
Substantially all of the loans the Company originates are secured by properties located in, or are made to businesses that operate in, Massachusetts and, to a lesser extent, Rhode Island.
In determining the amount of the allowance for credit losses, the Company, in addition to assessing the collectability of its loan portfolio, relies on experience and evaluation of economic conditions.
In determining the amount of the 19 Table of Contents allowance for credit losses, the Company, in addition to assessing the collectability of its loan portfolio, relies on experience and evaluation of economic conditions.
Financial services industries continually experience rapid technological change with frequent introductions of new technology-driven products and services. An effective use of technology can increase efficiency, enable financial institutions to better serve customers, and reduce costs.
Financial services industries continually experience rapid technological change with frequent introductions of new technology-driven products and services, such as artificial intelligence. An effective use of technology can increase efficiency, enable financial institutions to better serve customers, and reduce costs.
Risks Related to Changes in Interest Rates Changes in interest rates and other factors could adversely impact the Company’s financial condition and results of operations.
ITEM 1A. RISK FACTORS Risks Related to Changes in Interest Rates Changes in interest rates and other factors could adversely impact the Company’s financial condition and results of operations.
Tax law changes may or may not be retroactive to previous periods and could negatively affect the current and future financial performance of the Company. Changes in enacted tax rates are recognized when promulgated and therefore could have a material impact on the Company's results.
Tax law changes may or may not be retroactive to previous periods and could negatively affect the current and future financial performance of the Company. Changes in enacted tax rates are recognized when promulgated and therefore could have a material impact on the Company's results. Claims and litigation could result in losses and damage to the Company’s reputation.
Economic growth may continue to slow down and the national or global economy may experience additional downturns, including recessionary periods.
Economic growth may slow down and the national or global economy may experience downturns, including recessionary periods.
The nature and level of such natural disasters, public health crises, such as pandemics or epidemics, or man-made events, including political events such as war, civil unrest or terrorist attacks, and other catastrophic events cannot be predicted.
The nature and level of such natural disasters, public health crises, such as the COVID-19 pandemic and any resurgences thereof or other pandemics or epidemics, or man-made events, including political events such as war, civil unrest or terrorist attacks, and other catastrophic events cannot be predicted.
Such events can disrupt operations, result in damage to 28 Table of Contents properties and negatively affect the local economies in the markets where the Company operates.
Such events can disrupt operations, result in damage to properties and negatively affect the local economies in the markets where the Company operates.
In addition, to the extent changes in the global political environment, including the Russia-Ukraine conflict, have had and may continue to have a negative impact on the Company or on the markets in which the Company operates, business, results of operations and financial condition could be materially and adversely impacted in the future.
In addition, to the extent changes in the global political environment, including the Russia-Ukraine conflict, the conflict in Israel and surrounding areas and the possible expansion of such conflicts, have had and may continue to have a negative impact on the Company or on the markets in which the Company operates, the Company's business, results of operations and financial condition could be materially and adversely impacted in the future.
If this occurs, the Company’s earnings could be adversely affected. The Company's emphasis on originating commercial loans may increase lending risks. At December 31, 2022, 77.3% of the Company's loan portfolio consisted of commercial loans. The Company's commercial loan portfolio includes commercial and industrial loans, commercial real estate loans, commercial constructions, and small business banking loans.
If this occurs, the Company’s earnings could be adversely affected. The Company's emphasis on originating commercial loans may increase lending risks. At December 31, 2023, 75.1% of the Company's loan portfolio consisted of commercial loans. The Company's commercial loan portfolio includes commercial and industrial loans, commercial real estate loans, commercial construction loans, and small business banking loans.
Changes in economic conditions that are out of the control of the borrower and lender could impact the value of the future cash flow and value of the involved property that serves as loan collateral.
Changes in economic conditions that are out of the control of the borrower and lender could impact the value of the future cash flow and value of the underlying loan collateral.
Risks Related to the Company's Strategic Activities Part of the Company’s business strategy is growth through acquisitions, and the failure to execute effectively on acquisitions could have an impact on the Company's earnings and results of operations. While focusing on organic growth, the Company's strategy also includes, in part, growth through acquisitions.
Risks Related to the Company's Strategic Activities Part of the Company’s growth has been through acquisitions, and the inability to continue to execute on future acquisitions could have an impact on the Company's results of operations. While focusing on organic growth, the Company's strategy also includes, in part, growth through acquisitions.
Although the Company maintains an insurance policy that it believes provides sufficient coverage at a manageable expense for an institution of the Company’s size and scope with similar technological systems, there can be no assurance that this policy will afford coverage for all possible losses or would be adequate to cover all financial losses, damages, penalties, including lost revenues, should the Company experience any system failure or cyber-attack in one or more Company or third-party systems.
Although the Company maintains an insurance policy covering these sorts of cyber risks, there can be no assurance that this policy will afford coverage for all possible losses or would be adequate to cover all financial losses, damages, and penalties, including lost revenues, should the Company experience any system failure or cyber-attack in one or more Company or third-party systems.
Although to date the Company has not experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that we will not suffer losses in the future. 24 Table of Contents The Company expects risk exposure to cyber-attacks will remain elevated or increase in the future due to, among other things, the increasing size and prominence of the Company in the financial services industry, its expansion of Internet and mobile banking tools and products based on customer needs, and its increasing use of operational software hosted on the Internet as more and more software solutions used in the Company’s operations migrate from solutions hosted within the Company’s firewalls to internet-hosted solutions at third-party locations.
The Company expects risk exposure to cyber-attacks will remain elevated or increase in the future due to, among other things, the increasing size and prominence of the Company in the financial services industry, its expansion of Internet and mobile banking tools and products based on customer needs, and its increasing use of operational software hosted on the Internet as more and more software solutions used in the Company’s operations migrate from solutions hosted within the Company’s firewalls to internet-hosted solutions at third-party locations.
The Company may incur losses or expenses if security interests granted to the Bank are not enforceable. Risks Related to Legal, Regulatory and Policy Matters The Company operates in a highly regulated environment and may be adversely impacted by changes in industry practices, laws, regulations, and accounting standards.
Risks Related to Legal, Regulatory and Policy Matters The Company operates in a highly regulated environment and may be adversely impacted by changes in industry practices, laws, regulations, and accounting standards.
Additionally, some commercial borrowers may have more than one outstanding loan with the Company and, as a result, an adverse development with respect to a commercial credit relationship may expose the Company to greater risk of loss as compared to an adverse development associated with a consumer loan borrower.
Additionally, some commercial borrowers may have more than one outstanding loan with the Company and, as a result, an adverse development with respect to a commercial credit relationship may expose the Company to greater risk of loss as compared to an adverse development associated with a consumer loan borrower. 20 Table of Contents The Company may experience losses and expenses if security interests granted for loans are not enforceable.
Such trends could ultimately result in a shrinkage of the commercial real estate market to the extent that there is a reduced need for office and retail space as a result of changed operating preferences, which could materially impact the Company’s results of operations and financial condition and possibly the Company’s long-term business strategy because commercial real estate loans are the Company’s largest loan category.
Such trends could ultimately result in a shrinkage of the commercial real estate market, which could materially impact the Company’s results of operations and financial condition and possibly the Company’s long-term business strategy because commercial real estate loans are currently the Company’s largest loan category.
New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure, which would result in increased compliance requirements and costs.
New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure, which would result in increased compliance requirements and costs. Any of the foregoing could have an adverse impact on our business, financial condition or results of operations.
The Company may execute strategic initiatives or make other strategic investments in businesses, products, technologies or platforms to enhance or grow its business. These strategic initiatives and investments may introduce new costs or liabilities which could impact the Company’s ability to grow or maintain acceptable performance.
These strategic initiatives and investments may introduce new costs or liabilities which could impact the Company’s ability to grow or maintain acceptable performance. The Company may be unable to integrate systems, personnel or technologies from its strategic investments and initiatives.
The planning and integration of a strategic investment or initiative may shift employee time and other resources which could impair the Company’s ability to focus on our core business.
Strategic investments and initiatives may also present unforeseen legal, regulatory or other challenges that the Company may not be able to manage effectively. The planning and integration of a strategic investment or initiative may shift employee time and other resources which could impair the Company’s ability to focus on its core business.
Any of the foregoing could have an adverse impact on our business, financial condition or results of operations. 27 Table of Contents Risks Related to the Company's Business and Industry Generally The Company’s business depends on maintaining the trust and confidence of customers and other market participants, and the Company's reputation is critical to its business.
Risks Related to the Company's Business and Industry Generally The Company’s business depends on maintaining the trust and confidence of customers and other market participants, and the Company's reputation is critical to its business.
Factors that could detrimentally impact the Company’s access to liquidity sources include a decrease in the level of business activity as a result of a downturn in the markets in which the Company's loans are concentrated or an adverse regulatory action against the Company. 26 Table of Contents The Company’s ability to borrow could also be impaired by factors that are not specific to the Company, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry generally.
Factors that could detrimentally impact the Company’s access to liquidity sources include a decrease in the level of business activity as a result of a downturn in the markets in which the Company's loans are concentrated or an adverse regulatory action against the Company.
Any possible acquisition may be subject to regulatory approval, and there can be no assurance that the Company will be able to obtain any such approval in a timely manner or at all. 22 Table of Contents The Company may not realize the value of strategic investments and strategic initiatives that it pursues and such investments and initiatives could divert resources or introduce unforeseen risks to the Company’s business.
Any possible acquisition may be subject to regulatory approval, and there can be no assurance that the Company will be able to obtain any such approval in a timely manner or at all.
These stakeholders often have differing priorities and expectations regarding ESG issues. The consideration of ESG factors in making investment and voting decisions is relatively new. Accordingly, the frameworks and methods for assessing ESG policies are not fully developed, vary considerably among the investment community, and will likely continue to evolve over time.
Accordingly, the frameworks and methods for assessing ESG policies are not fully developed, vary considerably among the investment community, and will likely continue to evolve over time.
Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property's value at completion of construction as compared to estimated costs.
Commercial construction loans are generally considered to involve a higher degree of credit risk than long-term financing on owner-occupied residential real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property's value at completion of construction as compared to estimated costs.
Commercial real estate loans also typically involve larger loan balances to single borrowers or groups of related borrowers compared to residential mortgage loans. Commercial construction loans are generally considered to involve a higher degree of credit risk than long-term financing on owner-occupied residential real estate.
Commercial real estate loans also typically involve larger loan balances to single borrowers or groups of related borrowers compared to residential mortgage loans.
Information security risks have increased because of the proliferation of new technologies and the increased sophistication and activities of perpetrators of cyber-attacks.
Information security risks have increased because of the proliferation of new technologies, including artificial intelligence, and the increased number as well as sophistication and level of activity of perpetrators of cyber-attacks, which include nation-state actors.
The Company may experience losses and expenses if security interests granted for loans are not enforceable. When the Bank makes loans, it sometimes obtains liens, such as real estate mortgages or other asset pledges, to provide the Bank with a security interest in collateral.
When the Bank makes loans, it sometimes obtains liens, such as real estate mortgages or other asset pledges, to provide the Bank with one or more security interests in collateral. If there is a loan default the Bank may seek to foreclose upon collateral and enforce the security interests to obtain repayment and eliminate or mitigate the Company's loss.
If there is a loan default the Bank may seek to foreclose upon collateral and enforce the security interests to obtain repayment and eliminate or mitigate the Company's loss. Drafting errors, recording errors, other defects or imperfections in the security interests granted to the Bank and/or changes in law may render liens granted to the Bank unenforceable.
Drafting errors, recording errors, other defects or imperfections in the security interests granted to the Bank and/or changes in law may render liens granted to the Bank unenforceable. The Company may incur losses or expenses if security interests granted to the Bank are not enforceable.
Congress, or the Massachusetts legislature could have a material adverse effect on the Company’s business, financial condition, results of operations, and cash flows.
Congress, or the Massachusetts legislature could have a material adverse effect on the Company’s business, financial condition, results of operations, and cash flows. In the wake of several bank failures in 2023, the Massachusetts Commissioner of Banks, FDIC, Federal Reserve and certain other regulators have intensified regulatory scrutiny and heightened expectations with respect to banking institutions.
The Company frequently experiences attempted cyber-security attacks against its systems, and expects such attacks will continue, and may intensify, in the future.
While the Company has seen attempts to gain access against its systems, and expects such attacks will continue, and may intensify, in the future. Although to date the Company has not experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that we will not suffer losses in the future.
Removed
RISK FACTORS Risks Related to the COVID-19 Pandemic and Resulting Economic Conditions The economic effects of the COVID-19 pandemic continue to adversely affect the Company and its customers, counterparties, employees, and third-party service providers, and the full extent of the adverse impacts on the Company's business, financial position, results of operations, and prospects are unknown and could be significant.
Added
Risks Related to Recent Events Impacting the Financial Services Industry During 2023, events impacting the financial services industry, including several high profile bank failures, resulted in 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.
Removed
The COVID-19 pandemic has resulted in widespread volatility and deterioration in business, economic, and market conditions and household incomes, including in the Commonwealth of Massachusetts where the Company conducts nearly all of its business, and has led to disruptions in global supply chains, inflationary pressures, increased unemployment levels and a slowdown in economic activity.
Added
These events occurred during a period of rapidly rising interest rates which, among other things, has resulted in increased unrealized losses on certain investment securities and increased competition for bank deposits and may increase the risk of a potential recession.
Removed
The extent of the impact of the COVID-19 pandemic and resulting economic deterioration on the Company's capital and liquidity, and on its business, results of operations, financial position and prospects generally will depend on a number of evolving factors, including: The effect on the Company's customers, counterparties, employees, and third-party service providers.
Added
These events have, had, and could continue to have, an adverse impact on the market price and volatility of the Company’s common stock.
Removed
COVID-19 and its associated consequences and uncertainties, including recent inflationary pressures, the labor market shortage, unemployment rates and supply chain disruptions, are affecting individuals, households, and businesses differently and unevenly. Many have changed their behavior in response to these pressures and have limited their discretionary spending.
Added
These events also have resulted in, and could continue to result in, increased regulatory scrutiny and expectations, and could further lead to potentially adverse changes to laws or regulations applicable to the Company, which could have a material impact on the Company’s business and result in increased costs necessary to comply with any such changes.
Removed
As a result, the Company's credit, operational, and other risks have generally increased and, for the foreseeable future, may remain elevated or increase further. The effect on economies and markets.
Added
Additionally, the cost of resolving recent bank failures may prompt the FDIC to increase its premiums above the current levels or result in additional special assessments. Any of the above factors could have a material adverse effect on the Company’s financial condition and results of operations.
Removed
National, regional, and local economies (including the local economies in the markets areas which the Company serves) and markets have suffered disruptions due to inflationary pressures, supply chain disruptions and market volatility, and these disruptions could be long lasting.
Added
Factors such as increased prevalence of remote work arrangements and consumer preference for online shopping have led and could continue to lead to a decreased demand for office and retail space, which could impact the value of the future cash flow and value of the involved property that serves as loan collateral.
Removed
Governmental actions are meaningfully influencing the interest-rate environment and financial-market activity, which could adversely affect the Company's results of operations and financial condition. The duration, extent, and severity of the economic effects of the pandemic and the pace of recovery. There remains substantial uncertainty surrounding the pace of economic recovery and the return of business and consumer confidence.
Added
Such intensified scrutiny and heightened expectations may lead to increased costs of compliance as well an increased risk of formal or informal regulatory actions.
Removed
Measures taken in 2020 and 2021 to partially mitigate the adverse effects of their containment measures, including the Coronavirus, Aid, Relief and Economic Security Act ("CARES Act"), the American Rescue Plan Act, also referred to as the COVID-19 Stimulus Package, and Federal Reserve actions to reduce the target range for the federal funds rate, and to purchase Treasury securities and agency mortgage-backed securities, have been eliminated or reduced.
Added
The Company may not realize the value of strategic investments and strategic initiatives that it pursues and such investments and initiatives could divert resources or introduce unforeseen risks to the Company’s business. The Company may execute strategic initiatives or make other strategic investments in businesses, products, technologies or platforms to enhance or grow its business.
Removed
In 2022, in an effort to arrest inflation, the Federal Reserve began raising interest rates, ceased U.S. Treasury securities purchases and began to reduce its holdings of these securities, and these actions may continue in 2023. Additional factors relate to the Company's high concentration of commercial real estate loans.
Added
Legislation and regulation governing the privacy and protection of personal information of individuals (including customers, employees, suppliers and other third parties) have been evolving, expanding and increasing in complexity in recent years, and although the Company makes and will continue to make reasonable efforts to comply with all applicable laws and regulations, there can be no assurance that the Company will not be subject to regulatory action or monetary penalties in the event of an incident.
Removed
The payment on these loans that are secured by income producing properties are typically dependent on the successful operation of the related real estate property and may subject the Company to risks from adverse conditions in the real estate market or the general economy, including decreases in collateral values associated with existing loans and the ability to liquidate the real estate collateral securing commercial real estate loans, or the acceleration in macroeconomic trends such as increased remote work arrangements and online shopping.
Added
The Company’s ability to borrow could also be impaired by factors that are not specific to the Company, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry generally.
Removed
The Company is unable to estimate the near-term and ultimate effects of the economic impacts of the COVID-19 pandemic on the Company's business and operations at this time.
Added
These stakeholders often have differing priorities and expectations regarding ESG issues. The consideration of ESG factors in making investment and voting decisions is relatively new. Certain stakeholders have commenced, or threatened to commence, lawsuits opposing various ESG measures.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES At December 31, 2022, the Bank conducted its business from its main office located at 288 Union Street, Rockland, Massachusetts, 122 retail branches and one mobile branch located within Eastern Massachusetts as well as in Worcester County and Rhode Island.
Biggest changeITEM 2. PROPERTIES At December 31, 2023, the Bank conducted its business from its main retail branch located at 288 Union Street, Rockland, Massachusetts, 121 retail branches and one mobile branch located within Eastern Massachusetts as well as in Worcester County. In addition to its main office, the Bank leased 73 of its branches and owned the remaining 49 branches.
For additional information regarding the Bank’s premises and equipment and lease obligations, see Notes 5, "Bank Premises and Equipment" and 17 "Leases ," respectively, within the Notes to Consolidated Financial Statements included in Item 8 of this Report.
For additional information regarding the Bank’s premises and equipment and lease obligations, see Notes 4, "Bank Premises and Equipment" and 16 "Leases ," respectively, within the Notes to Consolidated Financial Statements included in Item 8 of this Report.
In addition to its main office, the Bank leased 73 of its branches and owned the remaining 50 branches. In addition to these branch locations, the Bank had 28 remote ATM locations, all of which are leased. The Bank’s executive administration offices are located in Hanover, Massachusetts while the remaining administrative and operations locations are housed in several different campuses.
In addition to these branch locations, the Bank had 28 remote ATM locations, all of which are leased. The Bank’s executive administration offices are located in Hanover, Massachusetts while the remaining administrative and operations locations are housed in several different campuses.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS At December 31, 2022, Rockland Trust was involved in pending lawsuits that arose in the ordinary course of business. Management has reviewed these pending lawsuits with legal counsel and has taken into consideration the view of counsel as to their outcome.
Biggest changeITEM 3. LEGAL PROCEEDINGS At December 31, 2023, Rockland Trust was involved in pending lawsuits that arose in the ordinary course of business. Management has reviewed these pending lawsuits with legal counsel and has taken into consideration the view of counsel as to their outcome.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeInformation used in the graph and table was obtained from a third party provider, a source believed to be reliable, but the Company is not responsible for any errors or omissions in such information. 30 Table of Contents The following chart depicts the total return performance of the Company: (b.) Not applicable 31 Table of Contents (c.) The following table sets forth information regarding the Company’s repurchases of its common stock during the three months ended December 31, 2022: Issuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Program Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plan or Program October 1 to October 31, 2022 — $ — — $ 120,000,000 November 1 to November 30, 2022 — — — $ 120,000,000 December 1 to December 31, 2022 — — — $ 120,000,000 Total — $ — — $ 120,000,000 On October 20, 2022, the Company announced the commencement of a new share repurchase program which authorizes repurchases by the Company of up to $120 million in common stock.
Biggest changeThe following chart depicts the total return performance of the Company: (b.) Not applicable 31 Table of Contents (c.) The following table sets forth information regarding the Company’s repurchases of its common stock during the three months ended December 31, 2023: Issuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Program Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plan or Program (1) October 1 to October 31, 2023 257,500 $ 47.37 257,500 $ 87,802,432 November 1 to November 30, 2023 874,900 54.61 874,900 $ 40,020,259 December 1 to December 31, 2023 151,000 59.47 151,000 $ 31,041,000 Total 1,283,400 $ 53.73 1,283,400 (1) The remaining shares available for repurchase at December 31, 2023 were repurchased during the first quarter of 2024.
The lines in the graph and the numbers in the table below represent yearly index levels derived from compounded daily returns that include reinvestment or retention of all dividends. If the yearly interval, based on the last day of a fiscal year, was not a trading day, the preceding trading day was used.
The lines in the graph and the numbers in the table below represent yearly index levels derived from compounded daily returns that include reinvestment or retention of all dividends. If the yearly interval, based on the last day of a fiscal year, was not a trading 30 Table of Contents day, the preceding trading day was used.
The extent to which the Company repurchases shares and the size and timing of these repurchases will depend on a variety of factors, including pricing, market and economic conditions, the Company’s capital position and amount of retained earnings and legal and contractual requirements.
The extent to which the Company repurchases shares and the size and timing of these repurchases will depend on a variety of factors, including price, market and economic conditions, the Company's capital position and amount of retained earnings and legal and contractual requirements.
The index value for all of the series was set to 100.00 on December 31, 2017 (which assumes that $100.00 was invested in each of the series on December 31, 2017).
The index value for all of the series was set to 100.00 on December 31, 2018 (which assumes that $100.00 was invested in each of the series on December 31, 2018).
ITEM 5. MARKET FOR INDEPENDENT BANK CORP.'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES (a.) Independent Bank Corp.’s common stock trades on the NASDAQ Global Select Market under the symbol INDB. The Company declared aggregate cash dividends of $2.08 and $1.92 per share in 2022 and in 2021, respectively.
ITEM 5. MARKET FOR INDEPENDENT BANK CORP.'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES (a.) Independent Bank Corp.’s common stock trades on the NASDAQ Global Select Market under the symbol INDB. The Company declared aggregate cash dividends of $2.20 and $2.08 per share in 2023 and in 2022, respectively.
Comparative Stock Performance Graph The stock performance graph below and associated table compare the cumulative total shareholder return of the Company’s common stock from December 31, 2017 to December 31, 2022 to the cumulative total return of the NASDAQ Composite Index (U.S. Companies) and the KBW NASDAQ Bank Index.
Comparative Stock Performance Graph The stock performance graph below and associated table compare the cumulative total shareholder return of the Company’s common stock from December 31, 2018 to December 31, 2023 to the cumulative total return of the NASDAQ Composite Index (U.S. Companies), the KBW NASDAQ Bank Index, and the KBW NASDAQ Regional Banking Index.
The ratio of dividends paid to earnings in 2022 and 2021 was 35.53% and 51.85%, respectively. Payment of dividends by the Company on its common stock is subject to various regulatory restrictions and guidelines.
The ratio of dividends paid to earnings in 2023 and 2022 was 40.92% and 35.53%, respectively. Payment of dividends by the Company on its common stock is subject to various regulatory restrictions and guidelines.
The number of record-holders may not reflect the number of persons or entities holding stock in 29 Table of Contents nominee name through banks, brokerage firms, and other nominees. The closing price of the Company’s common stock on December 30, 2022, the last trading day of the year, wa s $84.43.
The number of record-holders may not reflect the number of persons or entities holding stock in nominee name through banks, brokerage firms, and other nominees. The closing price of the Company’s common stock on December 29, 2023, the last trading day of the year, wa s $65.81.
Repurchases under the new program may be made from time to time on the open market and in privately negotiated transactions, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act.
Repurchases under the plan were made from time to time on the open market and in privately negotiated transactions, including through the use of trading plans intended to quality under Rule 10b5-1 under the Exchange Act.
Management believes that the Bank will continue to generate adequate earnings to continue to pay comparable common dividends on a quarterly basis. As of February 24, 2023, there were 45,064,851 shares of common stock outstanding which were held by approximately 4,196 holders of record.
Management believes that the Bank will continue to generate adequate earnings to continue to pay comparable common dividends on a quarterly basis. As of February 26, 2024, there were 42,445,920 shares of common stock outstanding which were held by approximately 4,013 holders of record.
The stock price performance shown on the stock performance graph and associated table below is not necessarily indicative of future price performance.
The stock price performance shown on the stock performance graph and associated table below is not necessarily indicative of future price performance. Information used in the graph and table was obtained from a third party provider, a source believed to be reliable, but the Company is not responsible for any errors or omissions in such information.
Removed
The repurchase program is scheduled to expire October 19, 2023 and may be modified, suspended or discontinued without prior notice at any time. ITEM 6. [RESERVED]
Added
Accordingly, the share repurchase plan was terminated. On October 19, 2023, the Company announced a stock buyback plan which authorizes repurchases by the Company of up to $100 million in common stock.
Added
During the fourth quarter of 2023, the Company repurchased 1.3 million shares of common stock for $69 million under this plan and the remaining repurchases under this plan were completed during the first quarter of 2024. There are no other active repurchase plans at this time. ITEM 6. [RESERVED]

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations 31 Table 1 - Selected Financial Data 39 Table 2 - Securities Portfolio Composition 40 Table 3 - Securities Portfolio, Amounts Maturing 41 Table 4 - Aggregate Book Value and Market Value of Select Securities 41 Table 5 - Closed Residential Real Estate Loans 42 Table 6 - Residential Mortgage Loan Sales 42 Table 7 - Mortgage Servicing Asset 43 Table 8 - Loan Portfolio Composition 43 Table 9 - Scheduled Contractual Loan Amortization 44 Table 10 - Nonperforming Assets 46 Table 11 - Activity in Nonperforming Assets 46 Table 12 - Troubled Debt Restructurings 47 Table 13 - Activity in Troubled Debt Restructurings 47 Table 14 - Interest Income - Nonaccrual Loans and Troubled Debt Restructurings 47 Table 15 - Summary Net Charge-Offs to Average Loans Outstanding 49 Table 16 - Summary of Allocation of Allowance for Credit Losses 50 Table 17 - Maturities of Uninsured Time Deposits 51 Table 18 - Summary of Results of Operations 52 Table 19 - Average Balance, Interest Earned/Paid & Average Yields 53 Table 20 - Volume Rate Analysis 55 Table 21 - Noninterest Income 56 Table 22 - Noninterest Expense 57 Table 23 - Tax Provision and Applicable Tax Rates 58 Table 24 - Sources of Liquidity 60 Table 25 - Interest Rate Sensitivity 61 Item 7A.
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations 31 Table 1 - Selected Financial Data 41 Table 2 - Securities Portfolio Composition 42 Table 3 - Securities Portfolio, Weighted Average Yields 43 Table 4 - Aggregate Book Value and Market Value of Select Securities 43 Table 5 - Closed Residential Real Estate Loans 44 Table 6 - Residential Mortgage Loan Sales 44 Table 7 - Mortgage Servicing Asset 45 Table 8 - Loan Portfolio Composition 45 Table 9 - Scheduled Contractual Loan Amortization 46 Table 10 - Nonperforming Assets 48 Table 11 - Activity in Nonperforming Assets 48 Table 12 - Summary Net Charge-Offs to Average Loans Outstanding 50 Table 13 - Summary of Allocation of Allowance for Credit Losses 51 Table 14 - Maturities of Uninsured Time Deposits 53 Table 15 - Assets Under Administration 53 Table 16 - Summary of Results of Operation 54 Table 17 - Average Balance, Interest Earned/Paid & Average Yields 55 Table 18 - Volume Rate Analysis 57 Table 19 - Noninterest Income 58 Table 2 0 - Noninterest Expense 59 Table 2 1 - Tax Provision and Applicable Tax Rates 60 Table 22 - Sources of Liquidity 62 Table 23 - Interest Rate Sensitivity 63 Item 7A.
Quantitative and Qualitative Disclosures About Market Risk 64 Item 8. Financial Statements and Supplementary Data 65 1 Table of Contents INDEPENDENT BANK CORP.
Quantitative and Qualitative Disclosures About Market Risk 67 Item 8. Financial Statements and Supplementary Data 68 Report of Independent Registered Public Accounting Firm 68 1 Table of Contents INDEPENDENT BANK CORP.
Report of Independent Registered Public Accounting Firm 65 Consolidated Balance Sheets 67 Consolidated Statements of Income 68 Consolidated Statements of Comprehensive Income 69 Consolidated Statements of Stockholders' Equity 70 Consolidated Statements of Cash Flows 71 Note 1 - Summary of Significant Accounting Policies 73 Note 2 - Acquisitions 83 Note 3 - Securities 85 Note 4 - Loans, Allowance for Credit Losses and Credit Quality 90 Note 5 - Bank Premises and Equipment 100 Note 6 - Goodwill and Other Intangible Assets 100 Note 7 - Deposits 102 Note 8 - Borrowings 102 Note 9 - Stock Based Compensation 104 Note 1 0 - Derivatives and Hedging Activities 107 Note 1 1 - Income Taxes 114 Note 1 2 - Low Income Housing Project Investments 117 Note 1 3 - Employee Benefit Plans 117 Note 1 4 - Fair Value Measurements 122 Note 1 5 - Revenue Recognition 129 Note 1 6 - Other Comprehensive Income (Loss) 132 Note 1 7 - Leases 134 Note 1 8 - Commitments and Contingencies 135 Note 19 - Regulatory Matters 135 Note 2 0 - Parent Company Financial Statements 137 Note 2 1 - Transactions with Related Parties 140
Consolidated Balance Sheets 71 Consolidated Statements of Income 72 Consolidated Statements of Comprehensive Income 73 Consolidated Statements of Stockholders' Equity 74 Consolidated Statements of Cash Flows 75 Note 1 - Summary of Significant Accounting Policies 77 Note 2 - Securities 87 Note 3 - Loans, Allowance for Credit Losses and Credit Quality 92 Note 4 - Bank Premises and Equipment 102 Note 5 - Goodwill and Other Intangible Assets 102 Note 6 - Deposits 104 Note 7 - Borrowings 104 Note 8 - Stock Based Compensation 106 Note 9 - Derivatives and Hedging Activities 109 Note 10 - Income Taxes 116 Note 11 - Low Income Housing Project Investments 119 Note 12 - Employee Benefit Plans 119 Note 13 - Fair Value Measurements 124 Note 14 - Revenue Recognition 131 Note 15 - Other Comprehensive Income (Loss) 134 Note 1 6 - Leases 136 Note 1 7 - Commitments and Contingencies 137 Note 1 8 - Regulatory Matters 137 Note 19 - Parent Company Financial Statements 139 Note 20 - Transactions with Related Parties 142

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOther noninterest income increased during the year, primarily due to increases in equipment rental income, gain on the sale of a closed branch facility which was consolidated in conjunction with the Meridian acquisition, discounted purchases of Massachusetts historical tax credits, and foreign currency exchange fees, offset partially by decreases in income from other investments, and income from like-kind exchanges. 57 Table of Contents Noninterest Expense The following table sets forth information regarding noninterest expense for the periods shown: Table 22 - Noninterest Expense Years Ended December 31 Change 2022 2021 Amount % (Dollars in thousands) Salaries and employee benefits $ 204,711 $ 172,586 $ 32,125 18.6 % Occupancy and equipment 49,841 36,265 13,576 37.4 % Data processing and facilities management 9,320 6,899 2,421 35.1 % FDIC assessment 6,951 3,980 2,971 74.6 % Consulting 9,617 8,271 1,346 16.3 % Amortization of intangible assets 7,655 5,715 1,940 33.9 % Debit card expense 7,670 5,144 2,526 49.1 % Merger & acquisitions 7,100 40,840 (33,740) (82.6) % Software maintenance 10,961 8,149 2,812 34.5 % Other noninterest expense 59,836 44,680 15,156 33.9 % Total $ 373,662 $ 332,529 $ 41,133 12.4 % The primary reasons for significant variances in the noninterest expense categories shown in the preceding tables are noted below: The increase in salaries and employee benefits in comparison to the prior year was primarily attributable to the Company's increased workforce base following the Meridian acquisition.
Biggest changeNoninterest Income The following table sets forth information regarding noninterest income for the periods shown: Table 19 - Noninterest Income Years Ended December 31 Change 2023 2022 Amount % (Dollars in thousands) Deposit account fees $ 23,486 $ 23,370 $ 116 0.5 % Interchange and ATM fees 18,108 16,249 1,859 11.4 % Investment management 40,191 36,832 3,359 9.1 % Mortgage banking income 2,326 3,515 (1,189) (33.8) % Increase in cash surrender value of life insurance policies 7,868 7,685 183 2.4 % Gain on life insurance benefits 2,291 1,291 1,000 77.5 % Loan level derivative income 3,327 2,932 395 13.5 % Other noninterest income 27,012 22,793 4,219 18.5 % Total $ 124,609 $ 114,667 $ 9,942 8.7 % The primary reasons for significant variances in the noninterest income categories shown in the preceding table are noted below: • Interchange and ATM fees increased year over year due primarily to higher debit card service charges driven by increased transaction volume. • Investment management revenue increased due in part to growth in overall assets under administration, which increased from $5.8 billion at December 31, 2022 to $6.5 billion at December 31, 2023, reflecting healthy new asset inflows and increased market valuations, as well as due to higher retail and insurance commission income recognized during 2023. • Mortgage banking income decreased in comparison to the prior year, primarily attributable to overall reduced saleable volumes as a result of the rising interest rate environment in 2023. • Gain on life insurance benefits was higher in 2023 due to elevated proceeds on life insurance policies received in comparison to the prior year. • The changes in loan level derivative income primarily reflect customer demand during the respective periods. • Other noninterest income increased during the year, primarily due to increases in FHLB dividend income, unrealized gains on equity securities, outsized loan fees, and discounted purchases of Massachusetts historical tax credits, partially offset by decreases in gains on sales of fixed assets, equity capital gain distributions, and income from like-kind exchanges. 59 Table of Contents Noninterest Expense The following table sets forth information regarding noninterest expense for the periods shown: Table 20 - Noninterest Expense Years Ended December 31 Change 2023 2022 Amount % (Dollars in thousands) Salaries and employee benefits $ 222,135 $ 204,711 $ 17,424 8.5 % Occupancy and equipment 50,582 49,841 741 1.5 % Data processing and facilities management 9,884 9,320 564 6.1 % Software maintenance 13,115 10,961 2,154 19.7 % FDIC assessment 11,953 6,951 5,002 72.0 % Debit card expense 9,003 7,670 1,333 17.4 % Consulting 8,954 9,617 (663) (6.9) % Amortization of intangible assets 6,878 7,655 (777) (10.2) % Merger & acquisitions — 7,100 (7,100) (100.0) % Other noninterest expense 60,242 59,836 406 0.7 % Total $ 392,746 $ 373,662 $ 19,084 5.1 % The primary reasons for significant variances in the noninterest expense categories shown in the preceding tables are noted below: • The increase in salaries and employee benefits in comparison to the prior year was primarily attributable to non-recurring CEO transition expenses incurred during the first quarter of 2023, as well as increases in general salaries, equity compensation, severance and medical plan insurance, partially offset by decreases in incentive programs and payroll taxes. • Occupancy and equipment expense increased year-over-year, primarily driven by costs associated with the Company's leased real estate, including one-time lease exit costs associated with two leased locations related to the 2021 Meridian acquisition, as well as increased utilities costs, partially offset by reduced snow removal costs as compared to the prior year. • Data processing and facilities management expenses increased primarily due to the timing of certain initiatives and general increases associated with higher transaction volumes. • Software maintenance increased primarily due to the Company's continued investment in its technology infrastructure. • FDIC assessment expense increased in comparison to the prior year due an increased assessment base as well as an estimated $1.1 million special assessment based on rules implemented by the FDIC to recover losses incurred by the Deposit Insurance Fund in 2023. • Consulting expense decreased year-over-year due primarily to the timing of strategic initiatives. • The Company incurred merger and acquisition costs related to the Meridian acquisition of $7.1 million during the first quarter of 2022, primarily related to lease terminations associated with exited branch locations, along with additional integration costs and professional fees.
See Note 8, "Borrowings" within the Notes to Consolidated Financial Statements included in Item 8 of this Report for more information regarding borrowings. Liquidity and Capital Resources The Company proactively manages its liquidity and cash flow requirements with the intent to maintain stable, cost-effective funding and to promote the strength of its overall balance sheet.
See Note 7, "Borrowings" within the Notes to Consolidated Financial Statements included in Item 8 of this Report for more information regarding borrowings. Liquidity and Capital Resources The Company proactively manages its liquidity and cash flow requirements with the intent to maintain stable, cost-effective funding and to promote the strength of its overall balance sheet.
All other securities are classified as securities available-for-sale and are carried at fair market value. The fair values of securities are based on either quoted market price or third party pricing services. In general, the third-party pricing services employ various methodologies, including but not limited to, broker quotes and proprietary models.
All other securities are classified as securities available-for-sale and are carried at fair market value. The fair values of securities is based on either quoted market price or third party pricing services. In general, the third-party pricing services employ various methodologies, including but not limited to, broker quotes and proprietary models.
The following chart depicts the Company's efficiency ratio on a GAAP basis (calculated by dividing noninterest expense by the sum of noninterest income and net interest income), as well as the Company's efficiency ratio on a non-GAAP operating basis, (calculated by dividing noninterest expense, excluding certain noncore items, by the sum of noninterest income, excluding certain noncore items, and net interest income) over the past five years: *See "Non-GAAP Measures" below for a reconciliation to GAAP financial measures. 35 Table of Contents Capital The Company's approach with respect to revenue and expense is designed to promote long-term earnings growth, which in turn contributes to capital growth.
The following chart depicts the Company's efficiency ratio on a GAAP basis (calculated by dividing noninterest expense by the sum of noninterest income and net interest income), as well as the Company's efficiency ratio on a non-GAAP operating basis, (calculated by dividing noninterest expense, excluding certain noncore items, by the sum of noninterest income, excluding certain noncore items, and net interest income) over the past five years: *See "Non-GAAP Measures" below for a reconciliation to GAAP financial measures. 37 Table of Contents Capital The Company's approach with respect to revenue and expense is designed to promote long-term earnings growth, which in turn contributes to capital growth.
Borrowings The Company's borrowings typically consist of both short-term and long-term borrowings and provide the Bank with one of its primary sources of funding. Maintaining available borrowing capacity provides the Bank with a contingent source of liquidity.
Borrowings The Company's borrowings consist of both short-term and long-term borrowings and provide the Bank with one of its primary sources of funding. Maintaining available borrowing capacity provides the Bank with a contingent source of liquidity.
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, facilitates comparison of the capital adequacy of the Company to other companies in the financial services industry. 36 Table of Contents These non-GAAP measures should not be viewed as a substitute for financial results determined in accordance with GAAP.
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, facilitates comparison of the capital adequacy of the Company to other companies in the financial services industry. 38 Table of Contents These non-GAAP measures should not be viewed as a substitute for financial results determined in accordance with GAAP.
For further discussion regarding the credit risk and the credit quality of the Company’s loan portfolio, see Note 4, “Loans, Allowance for Credit Losses and Credit Quality” within the Notes to Consolidated Financial Statements included in Item 8 of this Report . Liquidity Risk Liquidity risk is the risk arising from the Company being unable to meet obligations when due.
For further discussion regarding the credit risk and the credit quality of the Company’s loan portfolio, see Note 3, “Loans, Allowance for Credit Losses and Credit Quality” within the Notes to Consolidated Financial Statements included in Item 8 of this Report . Liquidity Risk Liquidity risk is the risk arising from the Company being unable to meet obligations when due.
See Note 10," Derivatives and Hedging Activities " within Notes to Consolidated Financial Statements included in Item 8 of this Report for additional information regarding the Company’s derivative financial instruments. Movements in foreign currency rates or commodity prices do not directly or materially affect the Company's earnings.
See Note 9," Derivatives and Hedging Activities " within Notes to Consolidated Financial Statements included in Item 8 of this Report for additional information regarding the Company’s derivative financial instruments. Movements in foreign currency rates or commodity prices do not directly or materially affect the Company's earnings.
In addition, management takes a disciplined approach to credit underwriting, seeking to avoid undue credit risk and credit losses. 33 Table of Contents Funding and the Net Interest Margin The Company's overall sources of funding reflect strong business and retail deposit growth with a management emphasis on core deposit growth to fund loans.
In addition, management takes a disciplined approach to credit underwriting, seeking to avoid undue credit risk and credit losses. 34 Table of Contents Funding and the Net Interest Margin The Company's overall sources of funding reflect strong business and retail deposit growth with a management emphasis on core deposit growth to fund loans.
Movements in equity prices may have a modest impact on earnings by affecting the volume of activity or the amount of fees from investment-related business lines. See Note 3 , "Securities " within the Notes to Consolidated Financial Statements included in Item 8 of this Report.
Movements in equity prices may have a modest impact on earnings by affecting the volume of activity or the amount of fees from investment-related business lines. See Note 2 , "Securities " within the Notes to Consolidated Financial Statements included in Item 8 of this Report.
(4) Net interest margin represents net interest income as a percentage of average interest-earning assets. 55 Table of Contents The following table presents certain information on a fully-tax equivalent basis regarding changes in the Company’s interest income and interest expense for the periods indicated.
(4) Net interest margin represents net interest income as a percentage of average interest-earning assets. 57 Table of Contents The following table presents certain information on a fully-tax equivalent basis regarding changes in the Company’s interest income and interest expense for the periods indicated.
The third line of defense is independent assurance performed by the Chief Internal Auditor, who reports to the Audit Committee of the Company's Board of Directors, and by the Company's internal audit department. 59 Table of Contents The Board of Directors, with the assistance of its Risk Committee, oversees management’s enterprise risk management practices.
The third line of defense is independent assurance performed by the Chief Internal Auditor, who reports to the Audit Committee of the Company's Board of Directors, and by the Company's internal audit department. 61 Table of Contents The Board of Directors, with the assistance of its Risk Committee, oversees management’s enterprise risk management practices.
For reconciliation to GAAP measurement, see Item 7 " Management's Discussion and Analysis of Financial Condition and Results of Operations - Executive Level Overview - Non-GAAP Measures ". 40 Table of Contents Financial Position Securities Portfolio The Company's securities portfolio primarily consists of U.S.
For reconciliation to GAAP measurement, see Item 7 " Management's Discussion and Analysis of Financial Condition and Results of Operations - Executive Level Overview - Non-GAAP Measures ". 42 Table of Contents Financial Position Securities Portfolio The Company's securities portfolio primarily consists of U.S.
For additional information regarding the Bank’s allowance for credit losses, see Note 1, "Summary of Significant Accounting Policies" and Note 4, "Loans, Allowance for Credit Losses and Credit Quality " within the Notes to the Consolidated Financial Statements included in Item 8 of this Report.
For additional information regarding the Bank’s allowance for credit losses, see Note 1, "Summary of Significant Accounting Policies" and Note 3, "Loans, Allowance for Credit Losses and Credit Quality " within the Notes to the Consolidated Financial Statements included in Item 8 of this Report.
See Note 4, "Loans, Allowance for Credit Losses and Credit Quality " within the Notes to Consolidated Financial Statements included in Item 8 of this Report, for further details surrounding the primary drivers of the provision for credit losses during the period.
See Note 3, "Loans, Allowance for Credit Losses and Credit Quality " within the Notes to Consolidated Financial Statements included in Item 8 of this Report, for further details surrounding the primary drivers of the provision for credit losses during the period.
The nine major risk types identified by the Company and addressed in the Risk Appetite Statement are strategic and emerging risk, culture risk, credit risk, liquidity risk, interest rate risk, operational risk, reputation risk, compliance risk, and technology risk, each of which is discussed below.
The nine major risk categories identified by the Company and addressed in the Risk Appetite Statement are strategic and emerging risk, culture risk, credit risk, liquidity risk, interest rate risk, operational risk, reputation risk, compliance risk, and technology risk, each of which is discussed below.
Any subsequent actions taken to resolve the delinquency will depend upon the nature of the loan and 45 Table of Contents the length of time that the loan has been delinquent. The borrower’s needs are considered as much as reasonably possible without jeopardizing the Bank’s position. A late charge is usually assessed on loans upon expiration of the grace period.
Any subsequent actions taken to resolve the delinquency will depend upon the nature of the loan and the length of time that the loan has been delinquent. The borrower’s needs are considered as much as reasonably possible without jeopardizing the Bank’s position. A late charge is usually assessed on loans upon expiration of the grace period.
For additional discussion of the Company’s methodology of assessing the appropriateness of the allowance for credit losses, see Note 4, "Loans, Allowance for Credit Losses and Credit Quality " within the Notes to Consolidated Financial Statements included in Item 8 of this Report.
For additional discussion of the Company’s methodology of assessing the appropriateness of the allowance for credit losses, see Note 3, "Loans, Allowance for Credit Losses and Credit Quality " within the Notes to Consolidated Financial Statements included in Item 8 of this Report.
However, inflation does affect the Company because, as prices increase, the money supply grows and interest rates are affected by inflationary expectations. The impact on the Company is a noted increase in the size of loan 63 Table of Contents requests with resulting growth in total assets. In addition, operating expenses may increase without a corresponding increase in productivity.
However, inflation does affect the Company because, as prices increase, the money supply grows and interest rates are affected by inflationary expectations. The impact on the Company is a noted increase in the size of loan requests with resulting growth in total assets. In addition, operating expenses may increase without a corresponding increase in productivity.
Management does not typically adjust the prices received from third-party pricing services. Depending upon the type of security, management employs various techniques to analyze the pricing it receives from third-parties, such as reviewing model inputs, reviewing comparable trades, analyzing changes in market yields and, in certain instances, reviewing the underlying collateral of the security.
Management does not typically adjust the prices received from third-party pricing services. Depending upon the type of security, management employs various techniques to analyze the pricing it receives from third-parties, such as reviewing model inputs, reviewing 67 Table of Contents comparable trades, analyzing changes in market yields and, in certain instances, reviewing the underlying collateral of the security.
Management seeks to mitigate reputational risk through actions that include a structured process of customer complaint resolution and ongoing reputational monitoring. Compliance Risk Compliance risk is the risk arising from violations of laws or regulations, non-conformance with prescribed practices, internal bank policies and procedures, or ethical standards. Compliance risk includes consumer compliance risk, legal risk, and regulatory compliance risk.
Management seeks to mitigate reputational risk through actions that include a structured process of customer complaint resolution and ongoing reputational monitoring. Regulatory and Compliance Risk Regulatory and Compliance risk is the risk arising from violations of laws or regulations, non-conformance with prescribed practices, internal bank policies and procedures, or ethical standards.
It is the Company's objective to maintain stability in the growth of net interest income through the maintenance of an appropriate mix of interest-earning assets and interest-bearing liabilities and, when necessary within limits management deems prudent, with off-balance sheet hedging instruments such as interest rate swaps, floors, and caps.
It is the Company's objective to maintain stability in the growth of net interest income through the maintenance of an appropriate mix of interest-earning assets and interest-bearing liabilities and, when necessary within limits management deems prudent, with hedging instruments such as interest rate swaps, floors, and caps.
The most material assumptions relate to the prepayment of mortgage assets (including mortgage loans and mortgage-backed securities) and the life and sensitivity of non-maturity deposits ( e.g. , demand deposit, negotiable order of withdrawal, savings, and money market accounts). In the case of prepayment of mortgage assets, assumptions are derived from published median prepayment estimates for comparable mortgage loans.
The most material assumptions relate to the prepayment of mortgage assets (including mortgage loans and mortgage-backed securities) and the life and sensitivity of non-maturity deposits ( e.g. , demand deposit, savings, and money market accounts). In the case of prepayment of mortgage assets, assumptions are derived from published median prepayment estimates for comparable mortgage loans.
Refer to the accompanying notes to consolidated financial statements in this report for further information and the expected timing of the applicable payments as of December 31, 2022.
Refer to the accompanying notes to consolidated financial statements in this report for further information and the expected timing of the applicable payments as of December 31, 2023.
At December 31, 2022, the Company and the Bank exceeded the minimum requirements for Common Equity Tier 1 capital, Tier 1 capital, total capital, and Tier 1 leverage capital, inclusive of the capital conservation buffer.
At December 31, 2023, the Company and the Bank exceeded the minimum requirements for Common Equity Tier 1 capital, Tier 1 capital, total capital, and Tier 1 leverage capital, inclusive of the capital conservation buffer.
Also refer to Table 24 - Sources of Liquidity within Item 7 of this report for further details surrounding the Company's current and unused liquidity resources.
Also refer to Table 22 - Sources of Liquidity within Item 7 of this report for further details surrounding the Company's current and unused liquidity resources.
Given the Company's benign loss history, the analyses performed have not resulted in a material change to the quantitative allowance but has informed management's determination of qualitative adjustments and act as corroborating evidence as to the appropriateness of the allowance as a whole.
Given the Company's benign loss history, the analyses 66 Table of Contents performed have not resulted in a material change to the quantitative allowance but has informed management's determination of qualitative adjustments and act as corroborating evidence as to the appropriateness of the allowance as a whole.
Taxes are discussed in more detail in Note 11, "Income Taxes" within the Notes to the Consolidated Financial Statements included in Item 8 of this Report.
Taxes are discussed in more detail in Note 10, "Income Taxes" within the Notes to the Consolidated Financial Statements included in Item 8 of this Report.
For the loans that will be individually assessed, the Company uses either a discounted cash flow (“DCF”) approach or a fair value of collateral approach. The latter approach is used for loans deemed to be collateral dependent or when foreclosure is probable.
For the loans that will be individually assessed, the Company uses either a discounted cash flow (“DCF”) approach 49 Table of Contents or a fair value of collateral approach. The latter approach is used for loans deemed to be collateral dependent or when foreclosure is probable.
For further details surrounding the Company’s liquidity risks and related strategy, see “Risk Management 52 Table of Contents – Liquidity Risk” section below within Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations within this Report.
For further details surrounding the Company’s liquidity risks and related strategy, see “Risk Management – Liquidity Risk” section below within Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations within this Report.
For the remainder of the sold loans for which the Company retains the servicing, a mortgage servicing asset is recognized. Additionally, as part of its asset/liability management strategy, the Bank may opt to retain certain adjustable rate and fixed rate residential real estate loan originations for its portfolio.
For the remainder of the sold loans for which the Company retains the servicing, a mortgage servicing asset is recognized. Additionally, as part of its asset/liability management strategy, the Bank may opt to retain certain residential real estate loan originations for its portfolio.
Management seeks to mitigate compliance risk through compliance training and regulatory change management processes. Technology Risk Technology risk is the risk of losses or other impacts arising from the failure of technology systems to function in accordance with expectations and business requirements. Technology risk includes information technology risk, information security risk, and cyber security.
Compliance risk includes consumer compliance risk, legal risk, and regulatory compliance risk. Management seeks to mitigate compliance risk through compliance training and regulatory change management processes. Technology and Cyber Risk Technology and Cyber risk is the risk of losses or other impacts arising from the failure of technology systems to function in accordance with expectations and business requirements.
Previously 64 Table of Contents recorded tax assets and liabilities need to be adjusted when the expected date of the future event is revised based upon current information.
Previously recorded tax assets and liabilities need to be adjusted when the expected date of the future event is revised based upon current information.
Cash Surrender Value of Life Insurance Policies The Bank holds life insurance policies for the purpose of offsetting its future obligations to its employees under its retirement and benefits plans. The cash surrender value of life insurance policies was $293.3 million and $289.3 million at December 31, 2022 and December 31, 2021, respectively.
Cash Surrender Value of Life Insurance Policies The Bank holds life insurance policies for the purpose of offsetting its future obligations to its employees under its retirement and benefits plans. The cash surrender value of life insurance policies was $297.4 million and $293.3 million at December 31, 2023 and December 31, 2022, respectively.
See footnotes to Table 19 above for the related adjustments. 56 Table of Contents Provision For Credit Losses The provision for credit losses represents the charge to expense that is required to maintain an adequate level of allowance for credit losses.
See footnotes to Table 17 above for the related adjustments. 58 Table of Contents Provision For Credit Losses The provision for credit losses represents the charge to expense that is required to maintain an adequate level of allowance for credit losses.
Results of Operations Table 18 - Summary of Results of Operations Years Ended December 31 2022 2021 (Dollars in thousands, except per share data) Net income $ 263,813 $ 120,992 Diluted earnings per share $ 5.69 $ 3.47 Return on average assets 1.33 % 0.81 % Return on average equity 9.05 % 6.34 % Stockholders' equity as % of assets 14.96 % 14.78 % Net interest margin 3.46 % 3.02 % 53 Table of Contents Net Interest Income The amount of net interest income is affected by changes in interest rates and by the volume, mix, and interest rate sensitivity of interest-earning assets and interest-bearing liabilities.
Results of Operations Table 16 - Summary of Results of Operations Years Ended December 31 2023 2022 2021 (Dollars in thousands, except per share data) Net income $ 239,502 $ 263,813 $ 120,992 Diluted earnings per share $ 5.42 $ 5.69 $ 3.47 Return on average assets 1.24 % 1.33 % 0.81 % Return on average equity 8.31 % 9.05 % 6.34 % Stockholders' equity as % of assets 14.96 % 14.96 % 14.78 % Net interest margin 3.54 % 3.46 % 3.02 % Net Interest Income The amount of net interest income is affected by changes in interest rates and by the volume, mix, and interest rate sensitivity of interest-earning assets and interest-bearing liabilities.
The Company's qualitative assessment is structured based upon nine environmental factors impacting the expected risk of loss within the loan portfolio. Loans that do not share similar risk characteristics with any pools of assets are subject to individual assessment and are removed from the collectively assessed pools to avoid double counting.
The Company's qualitative assessment is structured based upon nine environmental factors impacting the expected risk of loss within the loan portfolio, with an additional factor designed to capture model imprecision. Loans that do not share similar risk characteristics with any pools of assets are subject to individual assessment and are removed from the collectively assessed pools to avoid double counting.
As of December 31, 2022 and December 31, 2021, included in the assets under administration amounts above, there were $390.1 million and $447.4 million, respectively, relating to the Company's registered investment advisor. The administration of trust and fiduciary accounts is monitored by the Trust Committee of the Bank’s Board of Directors.
As of December 31, 2023 and December 31, 2022, included in the assets under administration amounts above, there were $449.8 million and $390.1 million, respectively, relating to the Company's registered investment advisor. The administration of trust and fiduciary accounts is monitored by the Trust Committee of the Bank’s Board of Directors.
The following table sets forth information regarding the Company’s tax provision and applicable tax rates for the periods indicated: Table 23 - Tax Provision and Applicable Tax Rates Years Ended December 31 2022 2021 2020 (Dollars in thousands) Combined federal and state income tax provisions $ 83,941 $ 35,683 $ 31,669 Effective income tax rates 24.14 % 22.78 % 20.72 % Blended Statutory tax rate 27.85 % 27.92 % 27.92 % The Company’s effective tax rate for 2022 is higher as compared to the year ago period primarily due to higher pre-tax net income, as well as the impact of discrete items, such as provision to return adjustments, changes in uncertain tax positions, and excess benefits from equity compensation, which are subject to fluctuation year over year.
The following table sets forth information regarding the Company’s tax provision and applicable tax rates for the periods indicated: Table 21 - Tax Provision and Applicable Tax Rates Years Ended December 31 2023 2022 2021 (Dollars in thousands) Combined federal and state income tax provisions $ 75,632 $ 83,941 $ 35,683 Effective income tax rates 24.00 % 24.14 % 22.78 % Blended Statutory tax rate 27.91 % 27.85 % 27.92 % The Company’s effective tax rate for 2023 is lower as compared to the year ago period primarily due to lower pre-tax net income, as well as the impact of discrete items, such as provision to return adjustments, changes in uncertain tax positions, and excess benefits from equity compensation, which are subject to fluctuation year over year.
For additional information related to the Company's income taxes see Note 11, "Income Taxes" and Note 12, "Low Income Housing Project Investments" within the Notes to the Consolidated Financial Statements included in Item 8 of this Report. Dividends The Company declared quarterly cash dividends totaling $2.08 per common share in 2022 and $1.92 per common share in 2021.
For additional information related to the Company's income taxes see Note 10, "Income Taxes" and Note 11, "Low Income Housing Project Investments" within the Notes to the Consolidated Financial Statements included in Item 8 of this Report. Dividends The Company declared quarterly cash dividends totaling $2.20 per common share in 2023 and $2.08 per common share in 2022.
The Company’s allowance for credit losses, as a percentage of total loans, was 1.09%, 1.08% and 1.21% at December 31, 2022, 2021 and 2020, respectively.
The Company’s allowance for credit losses, as a percentage of total loans, was 1.00%, 1.09% and 1.08% at December 31, 2023, 2022 and 2021, respectively.
The Company recorded tax exempt income from life insurance policies in the amounts of $7.7 million, $6.4 million, and $5.4 million for the years ended December 31, 2022, 2021 and 2020, respectively. The Company also recorded gains on life insurance benefits of $1.3 million, $258,000, and $1.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.
The Company recorded tax exempt income from life insurance policies in the amounts of $7.9 million, $7.7 million, and $6.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. The Company also recorded gains on life insurance benefits of $2.3 million, $1.3 million, and $258,000 for the years ended December 31, 2023, 2022 and 2021, respectively.
Interest rate changes, as well as fluctuations in the level and duration of assets and liabilities, affect net interest income, the Company’s primary source of revenue. Interest rate risk arises directly from the Company’s core banking activities.
Interest rate risk is the sensitivity of income to changes in interest rates. Interest rate changes, as well as fluctuations in the level and duration of assets and liabilities, affect net interest income, which is the Company’s primary source of revenue. Interest rate risk arises directly from the Company’s core banking activities.
There were no events or changes that indicated impairment of other intangible assets. For additional information regarding the goodwill and other intangible assets, see Note 6, "Goodwill and Other Intangible Assets " within the Notes to Consolidated Financial Statements included in Item 8 hereof.
There were no other events or changes during the fourth quarter of 2023 that indicated impairment of goodwill and other intangible assets. For additional information regarding the goodwill and other intangible assets, see Note 5, "Goodwill and Other Intangible Assets " within the Notes to Consolidated Financial Statements included in Item 8 hereof.
The following table summarizes the Company's interest-earning assets as of December 31st for each year presented: Management strives to be disciplined about loan pricing and considers interest rate sensitivity when generating loan assets.
The following table summarizes the Company's average interest-earning assets for each year presented: Management strives to be disciplined about loan pricing and considers interest rate sensitivity when generating loan assets.
These include payments related to (i) borrowings (Note 8 - Borrowings ), (ii) lease obligations ( Note 17 - Leases), (iii) time deposits with stated maturity dates ( Note 7 - Deposits ), (iv) commitments to extend credit ( Note 18 - Commitments and Contingencies ), (v) derivative positions ( Note 10 - Derivatives and Hedging Activities), and (vi) unfunded commitments on low income housing project investments ( Note 12 - Low Income Housing Project Investments).
These include payments related to (i) borrowings (Note 7 - Borrowings ), (ii) lease obligations ( Note 16 - Leases), (iii) time deposits with stated maturity dates ( Note 6 - Deposits ), (iv) commitments to extend credit ( Note 17 - Commitments and Contingencies ), (v) derivative positions ( Note 9 - Derivatives and Hedging Activities), and (vi) unfunded commitments on low income housing project investments ( Note 11 - Low Income Housing Project Investments).
A loan remains on nonaccrual status until it becomes current with respect to principal and interest (and in certain instances remains current for up to six months), the loan is liquidated, or when the loan is determined to be uncollectible and is charged-off against the allowance for credit losses.
A loan remains on nonaccrual status until it becomes current with respect to principal and interest and remains current for a minimum period of six months, the loan is liquidated, or when the loan is determined to be uncollectible and is charged-off against the allowance for credit losses.
At December 31, 2022 and 2021, the Company had no securities categorized as level 3 within the fair value hierarchy. 41 Table of Contents The following table sets forth the weighted average yield for each range of contractual maturities of the Bank’s held to maturity securities portfolio at December 31, 2022.
At December 31, 2023 and 2022, the Company had no securities categorized as level 3 within the fair value hierarchy. 43 Table of Contents The following table sets forth the weighted average yield for each range of contractual maturities of the Bank’s available for sale and held to maturity securities portfolios at December 31, 2023.
The following table summarizes the impact of noncore items on net income and reconciles non-GAAP net operating earnings to net income available to common shareholders for the periods indicated: Years Ended December 31 Net Income Diluted Earnings Per Share 2022 2021 2022 2021 (Dollars in thousands, except per share data) Net income available to common shareholders (GAAP) $ 263,813 $ 120,992 $ 5.69 $ 3.47 Non-GAAP adjustments Provision for non-PCD acquired loans — 50,705 — 1.45 Noninterest expense components Add: merger and acquisition expenses 7,100 40,840 0.15 1.17 Noncore increases to income before taxes 7,100 91,545 0.15 2.62 Net tax benefit associated with noncore items (1) (1,995) (24,899) (0.04) (0.71) Noncore increases to net income $ 5,105 $ 66,646 $ 0.11 $ 1.91 Net operating earnings (Non-GAAP) $ 268,918 $ 187,638 $ 5.80 $ 5.38 (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 only to those items included in net taxable income. 37 Table of Contents The following table summarizes the impact of noncore items with respect to the Company's total revenue, noninterest income as a percentage of total revenue, and the efficiency ratio for the periods indicated: Years Ended December 31 2022 2021 2020 2019 2018 (Dollars in thousands) Net interest income $ 613,249 $ 401,559 $ 367,728 $ 393,135 $ 298,165 (a) Noninterest income (GAAP) $ 114,667 $ 105,850 $ 111,440 $ 115,294 $ 88,505 (b) Less: Gain on sale of loans — — — 951 — Noninterest income on an operating basis (non-GAAP) $ 114,667 $ 105,850 $ 111,440 $ 114,343 $ 88,505 (c) Noninterest expense (GAAP) $ 373,662 $ 332,529 $ 273,832 $ 284,321 $ 225,969 (d) Less: Loss on termination of derivatives — — 684 — — Merger and acquisition expenses 7,100 40,840 — 26,433 11,168 Noninterest expense on an operating basis (non-GAAP) $ 366,562 $ 291,689 $ 273,148 $ 257,888 $ 214,801 (e) Total revenue (GAAP) $ 727,916 $ 507,409 $ 479,168 $ 508,429 $ 386,670 (a+b) Total operating revenue (non-GAAP) $ 727,916 $ 507,409 $ 479,168 $ 507,478 $ 386,670 (a+c) Ratios Noninterest income as a % of revenue 15.75 % 20.86 % 23.26 % 22.68 % 22.89 % (b/(a+b)) Noninterest income as a % of revenue on an operating basis (non-GAAP) 15.75 % 20.86 % 23.26 % 22.53 % 22.89 % (c/(a+c)) Efficiency ratio (GAAP) 51.33 % 65.53 % 57.15 % 55.92 % 58.44 % (d/(a+b)) Efficiency ratio on an operating basis (non-GAAP) 50.36 % 57.49 % 57.00 % 50.82 % 55.55 % (e/(a+c)) 38 Table of Contents The following table summarizes the calculation of the Company's tangible common equity ratio and tangible book value per share for the periods indicated: Years Ended December 31 2022 2021 2020 2019 2018 (Dollars in thousands, except per share data) Tangible common equity Stockholders’ equity $ 2,886,701 $ 3,018,449 $ 1,702,685 $ 1,708,143 $ 1,073,490 (a) Less: Goodwill and other intangibles 1,010,140 1,017,844 529,313 535,492 271,355 Tangible common equity (Non-GAAP) 1,876,561 2,000,605 1,173,372 1,172,651 802,135 (b) Tangible assets Assets (GAAP) 19,294,174 20,423,405 13,204,301 11,395,165 8,851,592 (c) Less: Goodwill and other intangibles 1,010,140 1,017,844 529,313 535,492 271,355 Tangible assets (Non-GAAP) $ 18,284,034 $ 19,405,561 $ 12,674,988 $ 10,859,673 $ 8,580,237 (d) Common shares 45,641,238 47,349,778 32,965,692 34,377,388 28,080,408 (e) Common equity to assets ratio (GAAP) 14.96 % 14.78 % 12.89 % 14.99 % 12.13 % (a/c) Tangible common equity to tangible assets ratio (Non-GAAP) 10.26 % 10.31 % 9.26 % 10.80 % 9.35 % (b/d) Book value per share (GAAP) $ 63.25 $ 63.75 $ 51.65 $ 49.69 $ 38.23 (a/e) Tangible book value per share (Non-GAAP) $ 41.12 $ 42.25 $ 35.59 $ 34.11 $ 28.57 (b/e) 39 Table of Contents SELECTED FINANCIAL DATA The selected consolidated financial and other data of the Company set forth below does not purport to be complete and should be read in conjunction with, and is qualified in its entirety by, the more detailed information, including the Consolidated Financial Statements and related notes, appearing elsewhere herein.
The following table summarizes the impact of noncore items on net income and reconciles non-GAAP net operating earnings to net income available to common shareholders for the periods indicated: Years Ended December 31 Net Income Diluted Earnings Per Share 2023 2022 2023 2022 (Dollars in thousands, except per share data) Net income available to common shareholders (GAAP) $ 239,502 $ 263,813 $ 5.42 $ 5.69 Non-GAAP adjustments Noninterest expense components Add: merger and acquisition expenses — 7,100 — 0.15 Noncore increases to income before taxes — 7,100 — 0.15 Net tax benefit associated with noncore items (1) — (1,995) — (0.04) Noncore increases to net income $ — $ 5,105 $ — $ 0.11 Net operating earnings (Non-GAAP) $ 239,502 $ 268,918 $ 5.42 $ 5.80 (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 only to those items included in net taxable income. 39 Table of Contents The following table summarizes the impact of noncore items with respect to the Company's total revenue, noninterest income as a percentage of total revenue, and the efficiency ratio for the periods indicated: Years Ended December 31 2023 2022 2021 2020 2019 (Dollars in thousands) Net interest income $ 606,521 $ 613,249 $ 401,559 $ 367,728 $ 393,135 (a) Noninterest income (GAAP) $ 124,609 $ 114,667 $ 105,850 $ 111,440 $ 115,294 (b) Less: Gain on sale of loans — — — — 951 Noninterest income on an operating basis (non-GAAP) $ 124,609 $ 114,667 $ 105,850 $ 111,440 $ 114,343 (c) Noninterest expense (GAAP) $ 392,746 $ 373,662 $ 332,529 $ 273,832 $ 284,321 (d) Less: Loss on termination of derivatives — — — 684 — Merger and acquisition expenses — 7,100 40,840 — 26,433 Noninterest expense on an operating basis (non-GAAP) $ 392,746 $ 366,562 $ 291,689 $ 273,148 $ 257,888 (e) Total revenue (GAAP) $ 731,130 $ 727,916 $ 507,409 $ 479,168 $ 508,429 (a+b) Total operating revenue (non-GAAP) $ 731,130 $ 727,916 $ 507,409 $ 479,168 $ 507,478 (a+c) Ratios Noninterest income as a % of total revenue (GAAP) (calculated by dividing total noninterest income by total revenue) 17.04 % 15.75 % 20.86 % 23.26 % 22.68 % (b/(a+b)) Noninterest income as a % of total revenue on an operating basis (Non-GAAP) (calculated by dividing total noninterest income on an operating basis by total revenue) 17.04 % 15.75 % 20.86 % 23.26 % 22.53 % (c/(a+c)) Efficiency ratio (GAAP) (calculated by dividing total noninterest expense by total revenue) 53.72 % 51.33 % 65.53 % 57.15 % 55.92 % (d/(a+b)) Efficiency ratio on an operating basis (Non-GAAP) (calculated by dividing total noninterest expense on an operating basis by total revenue) 53.72 % 50.36 % 57.49 % 57.00 % 50.82 % (e/(a+c)) 40 Table of Contents The following table summarizes the calculation of the Company's tangible common equity ratio and tangible book value per share for the periods indicated: Years Ended December 31 2023 2022 2021 2020 2019 (Dollars in thousands, except per share data) Tangible common equity Stockholders’ equity $ 2,895,251 $ 2,886,701 $ 3,018,449 $ 1,702,685 $ 1,708,143 (a) Less: Goodwill and other intangibles 1,003,262 1,010,140 1,017,844 529,313 535,492 Tangible common equity (Non-GAAP) 1,891,989 1,876,561 2,000,605 1,173,372 1,172,651 (b) Tangible assets Assets (GAAP) 19,347,373 19,294,174 20,423,405 13,204,301 11,395,165 (c) Less: Goodwill and other intangibles 1,003,262 1,010,140 1,017,844 529,313 535,492 Tangible assets (Non-GAAP) $ 18,344,111 $ 18,284,034 $ 19,405,561 $ 12,674,988 $ 10,859,673 (d) Common shares 42,873,187 45,641,238 47,349,778 32,965,692 34,377,388 (e) Common equity to assets ratio (GAAP) 14.96 % 14.96 % 14.78 % 12.89 % 14.99 % (a/c) Tangible common equity to tangible assets ratio (Non-GAAP) 10.31 % 10.26 % 10.31 % 9.26 % 10.80 % (b/d) Book value per share (GAAP) $ 67.53 $ 63.25 $ 63.75 $ 51.65 $ 49.69 (a/e) Tangible book value per share (Non-GAAP) $ 44.13 $ 41.12 $ 42.25 $ 35.59 $ 34.11 (b/e) 41 Table of Contents SELECTED FINANCIAL DATA The selected consolidated financial and other data of the Company set forth below does not purport to be complete and should be read in conjunction with, and is qualified in its entirety by, the more detailed information, including the Consolidated Financial Statements and related notes, appearing elsewhere herein.
Table 1 - Selected Financial Data As of or for the Years Ended December 31 2022 2021 2020 2019 2018 (Dollars in thousands, except per share data) Financial condition data Securities $ 3,129,281 $ 2,664,859 $ 1,162,317 $ 1,190,670 $ 1,075,223 Loans 13,928,675 13,587,286 9,392,866 8,873,639 6,906,194 Allowance for credit losses (152,419) (146,922) (113,392) (67,740) (64,293) Goodwill and other intangibles 1,010,140 1,017,844 529,313 535,492 271,355 Total assets 19,294,174 20,423,405 13,204,301 11,395,165 8,851,592 Deposits 15,879,007 16,917,044 10,993,170 9,147,367 7,427,120 Borrowings 113,377 152,374 181,060 303,103 258,707 Stockholders’ equity 2,886,701 3,018,449 1,702,685 1,708,143 1,073,490 Nonperforming loans 54,881 27,820 66,861 48,049 45,418 Nonperforming assets 54,881 27,820 66,861 48,049 45,418 Operating data Interest income $ 642,840 $ 415,276 $ 402,069 $ 447,014 $ 323,701 Interest expense 29,591 13,717 34,341 53,879 25,536 Net interest income 613,249 401,559 367,728 393,135 298,165 Provision for credit losses 6,500 18,205 52,500 6,000 4,775 Noninterest income 114,667 105,850 111,440 115,294 88,505 Noninterest expenses 373,662 332,529 273,832 284,321 225,969 Net income 263,813 120,992 121,167 165,175 121,622 Per share data Net income — basic $ 5.69 $ 3.47 $ 3.64 $ 5.03 $ 4.41 Net income — diluted 5.69 3.47 3.64 5.03 4.40 Cash dividends declared 2.08 1.92 1.84 1.76 1.52 Book value 63.25 63.75 51.65 49.69 38.23 Tangible book value (1) 41.12 42.25 35.59 34.11 28.57 Performance ratios Return on average assets 1.33 % 0.81 % 0.96 % 1.52 % 1.46 % Return on average common equity 9.05 % 6.34 % 7.13 % 10.85 % 12.31 % Net interest margin (on a fully tax equivalent basis) 3.46 % 3.02 % 3.29 % 4.04 % 3.91 % Dividend payout ratio 35.53 % 51.85 % 50.21 % 32.25 % 33.03 % Asset quality ratios Nonperforming loans as a percent of gross loans 0.39 % 0.20 % 0.71 % 0.54 % 0.66 % Nonperforming assets as a percent of total assets 0.28 % 0.14 % 0.51 % 0.42 % 0.51 % Allowance for credit losses as a percent of total loans 1.09 % 1.08 % 1.21 % 0.76 % 0.93 % Allowance for credit losses as a percent of nonperforming loans 277.73 % 528.12 % 169.59 % 140.98 % 141.56 % Capital ratios Equity to assets 14.96 % 14.78 % 12.89 % 14.99 % 12.13 % Tangible equity to tangible assets (1) 10.26 % 10.31 % 9.26 % 10.80 % 9.35 % Tier 1 leverage capital ratio 10.99 % 12.03 % 9.56 % 11.28 % 10.69 % Common equity tier 1 capital ratio 14.33 % 14.30 % 12.67 % 12.86 % 11.92 % Tier 1 risk-based capital ratio 14.33 % 14.30 % 13.34 % 13.53 % 12.99 % Total risk-based capital ratio 16.11 % 16.04 % 15.13 % 14.83 % 14.45 % (1) Represents a non-GAAP measurement.
Table 1 - Selected Financial Data As of or for the Years Ended December 31 2023 2022 2021 2020 2019 (Dollars in thousands, except per share data) Financial condition data Securities $ 2,930,860 $ 3,129,281 $ 2,664,859 $ 1,162,317 $ 1,190,670 Loans 14,278,070 13,928,675 13,587,286 9,392,866 8,873,639 Allowance for credit losses (142,222) (152,419) (146,922) (113,392) (67,740) Goodwill and other intangibles 1,003,262 1,010,140 1,017,844 529,313 535,492 Total assets 19,347,373 19,294,174 20,423,405 13,204,301 11,395,165 Deposits 14,865,547 15,879,007 16,917,044 10,993,170 9,147,367 Borrowings 1,218,379 113,377 152,374 181,060 303,103 Stockholders’ equity 2,895,251 2,886,701 3,018,449 1,702,685 1,708,143 Nonperforming loans 54,383 54,881 27,820 66,861 48,049 Nonperforming assets 54,493 54,881 27,820 66,861 48,049 Operating data Interest income $ 795,726 $ 642,840 $ 415,276 $ 402,069 $ 447,014 Interest expense 189,205 29,591 13,717 34,341 53,879 Net interest income 606,521 613,249 401,559 367,728 393,135 Provision for credit losses 23,250 6,500 18,205 52,500 6,000 Noninterest income 124,609 114,667 105,850 111,440 115,294 Noninterest expenses 392,746 373,662 332,529 273,832 284,321 Net income 239,502 263,813 120,992 121,167 165,175 Per share data Net income — basic $ 5.42 $ 5.69 $ 3.47 $ 3.64 $ 5.03 Net income — diluted 5.42 5.69 3.47 3.64 5.03 Cash dividends declared 2.20 2.08 1.92 1.84 1.76 Book value 67.53 63.25 63.75 51.65 49.69 Tangible book value (1) 44.13 41.12 42.25 35.59 34.11 Performance ratios Return on average assets 1.24 % 1.33 % 0.81 % 0.96 % 1.52 % Return on average common equity 8.31 % 9.05 % 6.34 % 7.13 % 10.85 % Net interest margin (on a fully tax equivalent basis) 3.54 % 3.46 % 3.02 % 3.29 % 4.04 % Dividend payout ratio 40.92 % 35.53 % 51.85 % 50.21 % 32.25 % Asset quality ratios Nonperforming loans as a percent of gross loans 0.38 % 0.39 % 0.20 % 0.71 % 0.54 % Nonperforming assets as a percent of total assets 0.28 % 0.28 % 0.14 % 0.51 % 0.42 % Allowance for credit losses as a percent of total loans 1.00 % 1.09 % 1.08 % 1.21 % 0.76 % Allowance for credit losses as a percent of nonperforming loans 261.52 % 277.73 % 528.12 % 169.59 % 140.98 % Capital ratios Equity to assets 14.96 % 14.96 % 14.78 % 12.89 % 14.99 % Tangible equity to tangible assets (1) 10.31 % 10.26 % 10.31 % 9.26 % 10.80 % Tier 1 leverage capital ratio 10.96 % 10.99 % 12.03 % 9.56 % 11.28 % Common equity tier 1 capital ratio 14.19 % 14.33 % 14.30 % 12.67 % 12.86 % Tier 1 risk-based capital ratio 14.19 % 14.33 % 14.30 % 13.34 % 13.53 % Total risk-based capital ratio 15.91 % 16.11 % 16.04 % 15.13 % 14.83 % (1) Represents a non-GAAP measurement.
There are items that impact the Company's results that management believes are unrelated to its core banking business such as gains or losses on the sales of securities, merger and acquisition expenses, provision for credit losses on acquired portfolios, loss on extinguishment of debt, impairment, and other items, such as one-time adjustments as a result of changes in laws and regulations.
There are items that impact the Company's results that management believes are unrelated to its core banking business such as gains or losses on the sales of securities, merger and acquisition expenses, provision for credit losses on acquired portfolios, loss on extinguishment of debt, impairment and other items.
For a full list of corporate entities see Item 1 "Business — General." All material intercompany balances and transactions have been eliminated in consolidation. When necessary, certain amounts in prior year financial statements have been reclassified to conform to the current year’s presentation. The following should be read in conjunction with the Consolidated Financial Statements and related notes.
For a full list of corporate entities see Item 1 "Business — General." All material intercompany balances and transactions have been eliminated in consolidation. When necessary, certain amounts in prior year financial statements have been reclassified to conform to the current year’s presentation.
Troubled Debt Restructurings In the course of resolving problem loans, the Company may choose to restructure the contractual terms of certain loans. The Company attempts to work out an alternative payment schedule with the borrower in order to avoid or cure a default.
Loan Modifications In the course of resolving problem loans, the Company may choose to modify the contractual terms of certain loans. The Company attempts to work out an alternative payment schedule with the borrower in order to avoid or cure a default.
Total assets under administration as of December 31, 2022 were $5.8 billion, including $603.7 million of investment solutions designed by Rockland Trust that are administered and executed through its agreement with LPL Financial ("LPL"), compared to $5.7 billion and $372.2 million, respectively, at December 31, 2021.
Total 54 Table of Contents assets under administration as of December 31, 2023 were $6.5 billion, including $622.9 million of investment solutions designed by Rockland Trust that are administered and executed through its agreement with LPL Financial ("LPL"), compared to $5.8 billion and $603.7 million, respectively, at December 31, 2022.
The principal balance of loans serviced by the Bank on behalf of investors was $327.5 million at December 31, 2022 and $382.6 million at December 31, 2021. 43 Table of Contents The following table shows the adjusted cost of the servicing rights associated with these loans and the changes for the periods indicated: Table 7 - Mortgage Servicing Asset 2022 2021 (Dollars in thousands) Beginning balance $ 2,627 $ 2,365 Additions 8 95 Acquired portfolio — 493 Amortization (649) (1,011) Change in valuation allowance 961 685 Ending balance $ 2,947 $ 2,627 See Note 10, "Derivatives and Hedging Activities," within the Notes to Consolidated Financial Statements included in Item 8 of this Report for more information on mortgage activity and mortgage related derivatives.
The principal balance of loans serviced by the Bank on behalf of investors was $298.8 million at December 31, 2023 and $327.5 million at December 31, 2022. 45 Table of Contents The following table shows the adjusted cost of the servicing rights associated with these loans and the changes for the periods indicated: Table 7 - Mortgage Servicing Asset 2023 2022 (Dollars in thousands) Beginning balance $ 2,947 $ 2,627 Additions 5 8 Amortization (485) (649) Change in valuation allowance 174 961 Ending balance $ 2,641 $ 2,947 See Note 9, "Derivatives and Hedging Activities," within the Notes to Consolidated Financial Statements included in Item 8 of this Report for more information on mortgage activity and mortgage related derivatives.
The Company recognized a net tax benefit of approximately $3.4 million for 2022 and anticipates additional net tax benefits of $26.2 million over the remaining life of the investments from the combination of tax credits and operating losses.
The Company recognized a net tax benefit of approximately $3.7 million for 2023 and anticipates additional net tax benefits of $30.3 million over the remaining life of the investments from the combination of tax credits and operating losses.
The investments are accounted for using the proportional amortization method and will be amortized over various periods through 2039, which represents the period that the tax credits and other tax benefits will be utilized. The total committed investment in these partnerships at December 31, 2022 was $197.1 million, of which $139.2 million has been funded.
The investments are accounted for using the proportional amortization method and will be amortized over various periods through 2040, which represents the period that the tax credits and other tax benefits will be utilized. The total committed investment in these partnerships at December 31, 2023 was $229.0 million, of which $170.3 million has been funded.
(2) Loans with a carrying value of $1.7 billion and $1.8 billion at December 31, 2022 and 2021, respectively, have been pledged to the Federal Reserve Bank of Boston resulting in this additional unused borrowing capacity. (3) The additional borrowing capacity has not been assessed for these categories.
(2) Loans with a carrying value of $4.6 billion and $1.7 billion at December 31, 2023 and 2022, respectively, were pledged to the Federal Reserve Bank of Boston. (3) The additional borrowing capacity has not been assessed for these categories.
Goodwill and Other Intangible Assets Goodwill and Other Intangible Assets were $1.0 billion at both December 31, 2022 and December 31, 2021, respectively. 51 Table of Contents The Company typically performs its annual goodwill impairment testing during the third quarter of the year, unless certain indicators suggest earlier testing to be warranted.
Goodwill and Other Intangible Assets Goodwill and Other Intangible Assets were $1.0 billion at both December 31, 2023 and December 31, 2022. The Company typically performs its annual goodwill impairment testing during the third quarter of the year, unless certain indicators suggest earlier testing to be warranted, using a combined qualitative and quantitative approach.
The following chart shows the sources of funding and the percentage of core deposits to total deposits as of December 31st for the trailing five years: The following table shows the net interest margin and cost of deposits trends for the trailing five year period: 34 Table of Contents Noninterest Income Noninterest income is primarily comprised of deposit account fees, interchange and ATM fees, investment management fees and mortgage banking income.
The following table shows the net interest margin and cost of deposits trends for the trailing five year period: 36 Table of Contents Noninterest Income Noninterest income is primarily comprised of deposit account fees, interchange and ATM fees, investment management fees and mortgage banking income.
Executive Level Overview Management evaluates the Company's operating results and financial condition using measures that include net income, earnings per share, return on assets and equity, return on tangible common equity, net interest margin, tangible book value per share, asset quality indicators, and many others.
The following should be read in conjunction with the Consolidated Financial Statements and related notes. 32 Table of Contents Executive Level Overview Management evaluates the Company's operating results and financial condition using measures that include net income, earnings per share, return on assets and equity, return on tangible common equity, net interest margin, tangible book value per share, asset quality indicators, and many others.
The results of those scenarios are summarized in the following table: Table 25 - Interest Rate Sensitivity Years Ended December 31 2022 2021 Year 1 Year 1 Parallel rate shocks (basis points) -300 (10.0)% n/a -200 (5.7)% n/a -100 (2.5)% (4.5)% +100 1.5% 5.4% +200 2.4% 11.4% +300 4.0% 17.8% +400 5.5% 23.9% Gradual rate shifts (basis points) -200 over 12 months (2.3)% n/a -100 over 12 months (1.1)% (1.6)% +200 over 12 months 1.4% 5.4% +400 over 24 months 1.4% 5.4% Alternative scenarios Steep down 200 basis points scenario (0.5)% n/a The results depicted in the table above are dependent on material assumptions.
The results of those scenarios are summarized in the following table: Table 23 - Interest Rate Sensitivity Years Ended December 31 2023 2022 Year 1 Year 1 Parallel rate shocks (basis points) -300 (1.7)% (10.0)% -200 (0.9)% (5.7)% -100 (0.3)% (2.5)% +100 (0.3)% 1.5% +200 0.8% 2.4% +300 (1.0)% 4.0% Gradual rate shifts (basis points) -200 over 12 months (0.1)% (2.3)% -100 over 12 months 0.0% (1.1)% +200 over 12 months (0.3)% 1.4% +400 over 24 months n/a 1.4% Alternative scenarios Steep down 200 basis points scenario 1.2% (0.5)% 64 Table of Contents The results depicted in the table above are dependent on material assumptions, such as prepayment rates, decay rates, pricing decisions on loans and deposits, and other factors, which management believes are reasonable.
Each of these loan categories possess unique risk characteristics that are considered when determining the appropriate level of allowance for each segment. The total allowance is available to absorb losses from any segment of the loan portfolio.
Each of these loan categories possess unique risk characteristics that are considered when determining the appropriate level of allowance for each segment.
The risk of prepayment tends to increase when interest rates fall. Since future prepayment behavior of loan customers is uncertain, interest rate sensitivity of loans cannot be determined with precision and actual behavior may differ from assumptions to a significant degree. Based upon the net interest income simulation models, the Company anticipates that assets will re-price faster than liabilities.
The risk of prepayment tends to increase when interest rates fall. Since future prepayment behavior of loan customers is uncertain, interest rate sensitivity of loans cannot be determined with precision and actual behavior may differ from assumptions to a significant degree.
The 2022 and 2021 ratio of dividends paid to earnings was 35.53% and 51.85%, respectively.
The 2023 and 2022 ratio of dividends paid to earnings was 40.92% and 35.53%, respectively.
For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to (1) changes in rate (change in rate multiplied by prior year volume), (2) changes in volume (change in volume multiplied by prior year rate) and (3) changes in volume/rate (change in rate multiplied by change in volume) which is allocated to the change due to rate column: Table 20 - Volume Rate Analysis Years Ended December 31 2022 Compared To 2021 2021 Compared To 2020 2020 Compared To 2019 Change Due to Rate Change Due to Volume Total Change Change Due to Rate Change Due to Volume Total Change Change Due to Rate Change Due to Volume Total Change (Dollars in thousands) Income on interest-earning assets Interest-earning deposits, federal funds sold and short term investments $ 12,750 $ (859) $ 11,891 $ 384 $ 1,263 $ 1,647 $ (16,177) $ 14,817 $ (1,360) Securities Taxable securities 300 19,577 19,877 (15,979) 16,323 344 (1,926) (346) (2,272) Nontaxable securities (1) (1) (12) (13) 2 (26) (24) (1) (21) (22) Total securities 19,864 320 (2,294) Loans held for sale 52 (736) (684) (76) (286) (362) 247 80 327 Loans Commercial and industrial 9,787 (12,465) (2,678) 10,743 (1,326) 9,417 (34,030) 30,157 (3,873) Commercial real estate 17,925 122,760 140,685 (11,652) 26,547 14,895 (28,243) 11,354 (16,889) Commercial construction 10,043 23,065 33,108 (486) 2,232 1,746 (9,014) 4,701 (4,313) Small business 350 1,260 1,610 (732) 479 (253) (900) 149 (751) Total commercial 172,725 25,805 (25,826) Residential real estate (2,442) 19,606 17,164 (1,999) (5,598) (7,597) (3,571) (1,928) (5,499) Home equity 7,674 1,214 8,888 (2,523) (3,313) (5,836) (9,650) (518) (10,168) Total consumer real estate 26,052 (13,433) (15,667) Total other consumer (120) 566 446 (280) (107) (387) (85) (76) (161) Loans (1) 199,223 11,985 (41,654) Total $ 230,294 $ 13,590 $ (44,981) Expense of interest-bearing liabilities Deposits Savings and interest checking accounts $ 6,179 $ 550 $ 6,729 $ (3,882) $ 1,079 $ (2,803) $ (5,473) $ 1,520 $ (3,953) Money market 9,007 746 9,753 (5,670) 1,434 (4,236) (10,838) 1,869 (8,969) Time certificates of deposits (2,072) 1,915 (157) (8,786) (3,181) (11,967) 415 (1,346) (931) Total interest-bearing deposits 16,325 (19,006) (13,853) Borrowings Federal Home Loan Bank borrowings (35) (549) (584) 498 (1,165) (667) (2,479) (395) (2,874) Line of credit — (104) (104) Long-term borrowings (4) (296) (300) (127) (718) (845) (782) (115) (897) Junior subordinated debentures 433 — 433 (106) — (106) (423) (167) (590) Subordinated debt (5) 5 — (5) 5 — (144) (1,076) (1,220) Total borrowings (451) (1,618) (5,685) Total $ 15,874 $ (20,624) $ (19,538) Change in net interest income $ 214,420 $ 34,214 $ (25,443) (1) The table above reflects income determined on a fully tax equivalent basis.
For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to (1) changes in rate (change in rate multiplied by prior year volume), (2) changes in volume (change in volume multiplied by prior year rate) and (3) changes in volume/rate (change in rate multiplied by change in volume) which is allocated to the change due to rate column: Table 18 - Volume Rate Analysis Years Ended December 31 2023 Compared To 2022 2022 Compared To 2021 2021 Compared To 2020 Change Due to Rate Change Due to Volume Total Change Change Due to Rate Change Due to Volume Total Change Change Due to Rate Change Due to Volume Total Change (Dollars in thousands) Income on interest-earning assets Interest-earning deposits, federal funds sold and short term investments $ 3,788 $ (12,987) $ (9,199) $ 12,750 $ (859) $ 11,891 $ 384 $ 1,263 $ 1,647 Securities Taxable securities 8,626 1,356 9,982 300 19,577 19,877 (15,979) 16,323 344 Nontaxable securities (1) — — — (1) (12) (13) 2 (26) (24) Total securities 9,982 19,864 320 Loans held for sale 72 (54) 18 52 (736) (684) (76) (286) (362) Loans Commercial and industrial 33,264 5,414 38,678 9,787 (12,465) (2,678) 10,743 (1,326) 9,417 Commercial real estate 48,652 1,341 49,993 17,925 122,760 140,685 (11,652) 26,547 14,895 Commercial construction 16,958 (8,322) 8,636 10,043 23,065 33,108 (486) 2,232 1,746 Small business 1,942 1,600 3,542 350 1,260 1,610 (732) 479 (253) Total commercial 100,849 172,725 25,805 Residential real estate 11,379 13,388 24,767 (2,442) 19,606 17,164 (1,999) (5,598) (7,597) Home equity 25,309 1,341 26,650 7,674 1,214 8,888 (2,523) (3,313) (5,836) Total consumer real estate 51,417 26,052 (13,433) Total other consumer 356 (52) 304 (120) 566 446 (280) (107) (387) Loans (1) 152,570 199,223 11,985 Total $ 153,371 $ 230,294 $ 13,590 Expense of interest-bearing liabilities Deposits Savings and interest checking accounts $ 35,640 $ (906) $ 34,734 $ 6,179 $ 550 $ 6,729 $ (3,882) $ 1,079 $ (2,803) Money market 41,513 (1,566) 39,947 9,007 746 9,753 (5,670) 1,434 (4,236) Time certificates of deposits 43,957 1,463 45,420 (2,072) 1,915 (157) (8,786) (3,181) (11,967) Total interest-bearing deposits 120,101 16,325 (19,006) Borrowings Federal Home Loan Bank borrowings 22,455 14,856 37,311 (35) (549) (584) 498 (1,165) (667) Line of credit — Long-term borrowings — (31) (31) (4) (296) (300) (127) (718) (845) Junior subordinated debentures 2,234 — 2,234 433 — 433 (106) — (106) Subordinated debt (5) 5 — (5) 5 — (5) 5 — Total borrowings 39,514 (451) (1,618) Total $ 159,615 $ 15,874 $ (20,624) Change in net interest income $ (6,244) $ 214,420 $ 34,214 (1) The table above reflects income determined on a fully tax equivalent basis.
Table 19 - Average Balance, Interest Earned/Paid & Average Yields Years Ended December 31 2022 2021 2020 Average Balance Interest Earned/ Paid Average Yield Average Balance Interest Earned/ Paid Average Yield Average Balance Interest Earned/ Paid Average Yield (Dollars in thousands) Interest-earning assets Interest-earning deposits with banks, federal funds sold, and short term investments $ 1,222,434 $ 14,385 1.18 % $ 1,864,346 $ 2,494 0.13 % $ 748,419 $ 847 0.11 % Securities Securities - trading 3,764 — — % 3,344 — — % 2,481 — — % Securities - taxable investments 2,948,358 50,354 1.71 % 1,795,199 30,477 1.70 % 1,164,439 30,133 2.59 % Securities - nontaxable investments (1) 196 7 3.57 % 469 20 4.26 % 1,142 44 3.85 % Total securities 2,952,318 50,361 1.71 % 1,799,012 30,497 1.70 % 1,168,062 30,177 2.58 % Loans held for sale 4,774 172 3.60 % 34,056 856 2.51 % 44,521 1,218 2.74 % Loans (2) Commercial and industrial 1,538,848 77,074 5.01 % 1,823,914 79,752 4.37 % 1,858,951 70,335 3.78 % Commercial real estate (1) 7,807,427 326,593 4.18 % 4,702,346 185,908 3.95 % 4,070,462 171,013 4.20 % Commercial construction 1,191,394 57,804 4.85 % 616,037 24,696 4.01 % 561,431 22,950 4.09 % Small business 204,982 10,886 5.31 % 180,473 9,276 5.14 % 171,839 9,529 5.55 % Total commercial 10,742,651 472,357 4.40 % 7,322,770 299,632 4.09 % 6,662,683 273,827 4.11 % Residential real estate 1,831,493 63,443 3.46 % 1,286,470 46,279 3.60 % 1,435,655 53,876 3.75 % Home equity 1,061,228 44,048 4.15 % 1,025,809 35,160 3.43 % 1,116,005 40,996 3.67 % Total consumer real estate 2,892,721 107,491 3.72 % 2,312,279 81,439 3.52 % 2,551,660 94,872 3.72 % Other consumer 31,986 2,114 6.61 % 23,885 1,668 6.98 % 25,195 2,055 8.16 % Total loans 13,667,358 581,962 4.26 % 9,658,934 382,739 3.96 % 9,239,538 370,754 4.01 % Total Interest-Earning Assets 17,846,884 646,880 3.62 % 13,356,348 416,586 3.12 % 11,200,540 402,996 3.60 % Cash and Due from Banks 184,812 152,723 125,896 Federal Home Loan Bank Stock 7,134 10,283 15,843 Other Assets 1,858,210 1,335,193 1,263,332 Total Assets $ 19,897,040 $ 14,854,547 $ 12,605,611 Interest-bearing liabilities Deposits Savings and interest checking accounts $ 6,159,289 $ 8,339 0.14 % $ 4,590,055 $ 1,610 0.04 % $ 3,688,360 $ 4,413 0.12 % 54 Table of Contents Money market 3,489,981 11,683 0.33 % 2,516,871 1,930 0.08 % 2,041,853 6,166 0.30 % Time certificates of deposits 1,310,442 4,630 0.35 % 936,046 4,787 0.51 % 1,155,399 16,754 1.45 % Total interest bearing deposits 10,959,712 24,652 0.22 % 8,042,972 8,327 0.10 % 6,885,612 27,333 0.40 % Borrowings Federal Home Loan Bank borrowings 16,138 313 1.94 % 41,556 897 2.16 % 162,776 1,564 0.96 % Long-term borrowings 2,235 31 1.39 % 21,072 331 1.57 % 54,082 1,176 2.17 % Junior subordinated debentures 62,854 2,125 3.38 % 62,852 1,692 2.69 % 62,850 1,798 2.86 % Subordinated debt 49,837 2,470 4.96 % 49,741 2,470 4.97 % 49,647 2,470 4.98 % Total borrowings 131,064 4,939 3.77 % 175,221 5,390 3.08 % 329,355 7,008 2.13 % Total interest-bearing liabilities 11,090,776 29,591 0.27 % 8,218,193 13,717 0.17 % 7,214,967 34,341 0.48 % Noninterest-bearing demand deposits 5,559,997 4,443,410 3,386,140 Other liabilities 330,371 284,679 304,957 Total liabilities 16,981,144 12,946,282 10,906,064 Stockholders’ equity 2,915,896 1,908,265 1,699,547 Total liabilities and stockholders’ equity $ 19,897,040 $ 14,854,547 $ 12,605,611 Net interest income (1) $ 617,289 $ 402,869 $ 368,655 Interest rate spread (3) 3.35 % 2.95 % 3.12 % Net interest margin (4) 3.46 % 3.02 % 3.29 % Supplemental Information Total deposits, including demand deposits $ 16,519,709 $ 24,652 $ 12,486,382 $ 8,327 $ 10,271,752 $ 27,333 Cost of total deposits 0.15 % 0.07 % 0.27 % Total funding liabilities, including demand deposits $ 16,650,773 $ 29,591 $ 12,661,603 $ 13,717 $ 10,601,107 $ 34,341 Cost of total funding liabilities 0.18 % 0.11 % 0.32 % (1) The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $4.0 million, $1.3 million, and $927,000 for 2022, 2021 and 2020, respectively.
Table 17 - Average Balance, Interest Earned/Paid & Average Yields Years Ended December 31 2023 2022 2021 Average Balance Interest Earned/ Paid Average Yield Average Balance Interest Earned/ Paid Average Yield Average Balance Interest Earned/ Paid Average Yield (Dollars in thousands) Interest-earning assets Interest-earning deposits with banks, federal funds sold, and short term investments $ 118,806 $ 5,186 4.37 % $ 1,222,434 $ 14,385 1.18 % $ 1,864,346 $ 2,494 0.13 % Securities Securities - trading 4,411 — — % 3,764 — — % 3,344 — — % Securities - taxable investments 3,027,769 60,336 1.99 % 2,948,358 50,354 1.71 % 1,795,199 30,477 1.70 % Securities - nontaxable investments (1) 190 7 3.68 % 196 7 3.57 % 469 20 4.26 % Total securities 3,032,370 60,343 1.99 % 2,952,318 50,361 1.71 % 1,799,012 30,497 1.70 % Loans held for sale 3,289 190 5.78 % 4,774 172 3.60 % 34,056 856 2.51 % Loans (2) Commercial and industrial 1,646,939 115,752 7.03 % 1,538,848 77,074 5.01 % 1,823,914 79,752 4.37 % Commercial real estate (1) 7,839,476 376,586 4.80 % 7,807,427 326,593 4.18 % 4,702,346 185,908 3.95 % Commercial construction 1,019,871 66,440 6.51 % 1,191,394 57,804 4.85 % 616,037 24,696 4.01 % Small business 235,108 14,428 6.14 % 204,982 10,886 5.31 % 180,473 9,276 5.14 % Total commercial 10,741,394 573,206 5.34 % 10,742,651 472,357 4.40 % 7,322,770 299,632 4.09 % Residential real estate 2,217,971 88,210 3.98 % 1,831,493 63,443 3.46 % 1,286,470 46,279 3.60 % Home equity 1,093,546 70,698 6.47 % 1,061,228 44,048 4.15 % 1,025,809 35,160 3.43 % Total consumer real estate 3,311,517 158,908 4.80 % 2,892,721 107,491 3.72 % 2,312,279 81,439 3.52 % Other consumer 31,202 2,418 7.75 % 31,986 2,114 6.61 % 23,885 1,668 6.98 % Total loans 14,084,113 734,532 5.22 % 13,667,358 581,962 4.26 % 9,658,934 382,739 3.96 % Total Interest-Earning Assets 17,238,578 800,251 4.64 % 17,846,884 646,880 3.62 % 13,356,348 416,586 3.12 % Cash and Due from Banks 180,553 184,812 152,723 Federal Home Loan Bank Stock 33,734 7,134 10,283 Other Assets 1,853,585 1,858,210 1,335,193 Total Assets $ 19,306,450 $ 19,897,040 $ 14,854,547 Interest-bearing liabilities Deposits Savings and interest checking accounts $ 5,489,923 $ 43,073 0.78 % $ 6,159,289 $ 8,339 0.14 % $ 4,590,055 $ 1,610 0.04 % Money market 3,022,322 51,630 1.71 % 3,489,981 11,683 0.33 % 2,516,871 1,930 0.08 % Time certificates of deposits 1,724,625 50,050 2.90 % 1,310,442 4,630 0.35 % 936,046 4,787 0.51 % Total interest bearing deposits 10,236,870 144,753 1.41 % 10,959,712 24,652 0.22 % 8,042,972 8,327 0.10 % Borrowings Federal Home Loan Bank borrowings 782,121 37,624 4.81 % 16,138 313 1.94 % 41,556 897 2.16 % Long-term borrowings — — — % 2,235 31 1.39 % 21,072 331 1.57 % 56 Table of Contents Junior subordinated debentures 62,857 4,359 6.93 % 62,854 2,125 3.38 % 62,852 1,692 2.69 % Subordinated debt 49,933 2,470 4.95 % 49,837 2,470 4.96 % 49,741 2,470 4.97 % Total borrowings 894,911 44,453 4.97 % 131,064 4,939 3.77 % 175,221 5,390 3.08 % Total interest-bearing liabilities 11,131,781 189,206 1.70 % 11,090,776 29,591 0.27 % 8,218,193 13,717 0.17 % Noninterest-bearing demand deposits 4,918,787 5,559,997 4,443,410 Other liabilities 374,585 330,371 284,679 Total liabilities 16,425,153 16,981,144 12,946,282 Stockholders’ equity 2,881,297 2,915,896 1,908,265 Total liabilities and stockholders’ equity $ 19,306,450 $ 19,897,040 $ 14,854,547 Net interest income (1) $ 611,045 $ 617,289 $ 402,869 Interest rate spread (3) 2.94 % 3.35 % 2.95 % Net interest margin (4) 3.54 % 3.46 % 3.02 % Supplemental Information Total deposits, including demand deposits $ 15,155,657 $ 144,753 $ 16,519,709 $ 24,652 $ 12,486,382 $ 8,327 Cost of total deposits 0.96 % 0.15 % 0.07 % Total funding liabilities, including demand deposits $ 16,050,568 $ 189,206 $ 16,650,773 $ 29,591 $ 12,661,603 $ 13,717 Cost of total funding liabilities 1.18 % 0.18 % 0.11 % (1) The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $4.5 million, $4.0 million, and $1.3 million for 2023, 2022 and 2021, respectively.
The allocation of the allowance for credit losses is made to each loan category using the analytical techniques and estimation methods described in this Report.
For purposes of the allowance for credit losses, management segregates the portfolio based upon loans sharing similar risk characteristics. The allocation of the allowance for credit losses is made to each loan category using the analytical techniques and estimation methods described in this Report.
When available information confirms that specific loans or portions thereof are uncollectible, these amounts are promptly charged-off against the allowance for credit losses and any recoveries of such previously charged-off amounts are credited to the allowance.
Possible sources of repayment include the potential for future cash flows, the value of the Bank’s collateral, and the strength of co-makers or guarantors. When available information confirms that specific loans or portions thereof are uncollectible, these amounts are promptly charged-off against the allowance for credit losses and any recoveries of such previously charged-off amounts are credited to the allowance.
Additionally, the allowance for credit losses is qualitatively adjusted on a quarterly basis in order to ensure coverage for relationships that are deemed to be more at risk within certain industries, specific collateral types, or other specific characteristics that may be highly impacted by the current economic environment. 49 Table of Contents The following table summarizes the ratio of net charge-offs to average loans outstanding within each major loan category for the periods presented: Table 15 - Summary Net Charge-Offs to Average Loans Outstanding Net Charge-Offs (Recoveries) Average Amount Outstanding Ratio of Annualized Net Charge-Offs/(Recoveries) to Average Loans (Dollars in thousands) December 31, 2022 Commercial and industrial $ (49) $ 1,538,848 — % Commercial real estate (271) 7,807,427 — % Commercial construction — 1,191,394 — % Small business 47 204,982 0.02 % Residential real estate — 1,831,493 — % Home equity 1 1,061,228 — % Other consumer 1,275 31,986 3.99 % Total $ 1,003 $ 13,667,358 0.01 % December 31, 2021 Commercial and industrial $ 788 $ 1,823,914 0.04 % Commercial real estate (57) 4,702,346 — % Commercial construction — 616,037 — % Small business 121 180,473 0.07 % Residential real estate (1) 1,286,470 — % Home equity (180) 1,025,809 (0.02) % Other consumer 544 23,885 2.28 % Total $ 1,215 $ 9,658,934 0.01 % December 31, 2020 Commercial and industrial $ 2,020 $ 1,858,951 0.11 % Commercial real estate 3,876 4,070,462 0.10 % Commercial construction — 561,431 — % Small business 347 171,839 0.20 % Residential real estate 103 1,435,655 0.01 % Home equity (68) 1,116,005 (0.01) % Other consumer 590 25,195 2.34 % Total $ 6,868 $ 9,239,538 0.07 % 50 Table of Contents For purposes of the allowance for credit losses, management segregates the loan portfolio into the portfolio segments detailed in the table below.
Additionally, the allowance for credit losses is qualitatively adjusted on a quarterly basis in order to ensure coverage for relationships that are deemed to be more at risk within certain industries, specific collateral types, or other specific characteristics that may be highly impacted by the current economic environment. 50 Table of Contents The following table summarizes the ratio of net charge-offs to average loans outstanding within each major loan category for the periods presented: Table 12 - Summary Net Charge-Offs to Average Loans Outstanding Net Charge-Offs (Recoveries) Average Amount Outstanding Ratio of Net Charge-Offs/(Recoveries) to Average Loans (Dollars in thousands) December 31, 2023 Commercial and industrial $ 23,419 $ 1,646,939 1.42 % Commercial real estate 7,855 7,839,476 0.10 % Commercial construction — 1,019,871 — % Small business 392 235,108 0.17 % Residential real estate — 2,217,971 — % Home equity (15) 1,093,546 — % Other consumer (1) 1,796 31,202 5.76 % Total $ 33,447 $ 14,084,113 0.24 % December 31, 2022 Commercial and industrial $ (49) $ 1,538,848 — % Commercial real estate (271) 7,807,427 — % Commercial construction — 1,191,394 — % Small business 47 204,982 0.02 % Residential real estate — 1,831,493 — % Home equity 1 1,061,228 — % Other consumer (1) 1,275 31,986 3.99 % Total $ 1,003 $ 13,667,358 0.01 % December 31, 2021 Commercial and industrial $ 788 $ 1,823,914 0.04 % Commercial real estate (57) 4,702,346 — % Commercial construction — 616,037 — % Small business 121 180,473 0.07 % Residential real estate (1) 1,286,470 — % Home equity (180) 1,025,809 (0.02) % Other consumer (1) 544 23,885 2.28 % Total $ 1,215 $ 9,658,934 0.01 % (1) Other consumer portfolio is inclusive of deposit account overdrafts recorded as loan balances and the associated net charge-offs.
Managed accounts are those for which the Bank is responsible for administration and investment management and/or investment advice, while nonmanaged accounts are those for which the Bank acts solely as a custodian or directed trustee. The Bank receives fees dependent upon the level and type of service(s) provided.
Accounts maintained by the Investment Management Group consist of managed and nonmanaged accounts. Managed accounts are those for which the Bank is responsible for administration and investment management and/or investment advice, while nonmanaged accounts are those for which the Bank acts solely as a custodian or directed trustee.
In addition to its core deposits, the Company also participates in the IntraFi Network, allowing the Bank to provide easy access to multi-million dollar Federal Deposit Insurance Corporation ("FDIC") deposit insurance protection on certificate of deposit and money market investments for consumers, businesses and public entities.
The FDIC offers insurance coverage on deposits up to the federally insured limit of $250,000. The Company participates in the IntraFi Network, allowing it to provide easy access to multi-million dollar FDIC deposit insurance protection on certificate of deposit and money market investments for consumers, businesses and public entities.
For example, a prime one-to-four family residential loan may provide 75 cents of borrowing capacity for 60 Table of Contents every $1.00 pledged, whereas a pledged commercial loan may increase borrowing capacity in a lower amount. The Company’s lending decisions, therefore, can also affect its liquidity position.
For example, a prime one-to-four family residential loan may provide 75 cents of borrowing capacity for every $1.00 pledged, whereas a pledged commercial loan may increase borrowing capacity in a lower amount.
The following table sets forth the fair value of available for sale securities and the amortized cost of held to maturity securities along with the percentage distribution: Table 2 - Securities Portfolio Composition December 31 2022 2021 Amount Percent Amount Percent (Dollars in thousands) Fair value of securities available for sale U.S. government agency securities $ 202,300 14.5 % $ 215,482 13.7 % U.S. treasury securities 791,341 56.5 % 861,448 54.8 % Agency mortgage-backed securities 313,688 22.4 % 363,933 23.2 % Agency collateralized mortgage obligations 38,843 2.8 % 79,677 5.1 % State, county and municipal securities 191 — % 203 — % Single issuer trust preferred securities issued by banks — — % 491 — % Pooled trust preferred securities issued by banks and insurers 1,034 0.1 % 1,000 0.1 % Small business administration pooled securities 51,757 3.7 % 48,914 3.1 % Total fair value of securities available for sale 1,399,154 100.0 % 1,571,148 100.0 % Amortized cost of securities held to maturity U.S. government agency securities 31,258 1.8 % 32,987 3.1 % U.S. treasury securities 100,634 5.9 % 102,560 9.6 % Agency mortgage-backed securities 898,927 52.8 % 493,012 46.2 % Agency collateralized mortgage obligations 535,971 31.4 % 415,736 39.0 % Single issuer trust preferred securities issued by banks 1,500 0.1 % 1,500 0.1 % Small business administration pooled securities 136,830 8.0 % 21,023 2.0 % Total amortized cost of securities held to maturity 1,705,120 100.0 % 1,066,818 100.0 % Total $ 3,104,274 $ 2,637,966 The Company’s available for sale securities are carried at fair value and are categorized within the fair value hierarchy based on the observability of model inputs.
The following table sets forth the fair value of available for sale securities and the amortized cost of held to maturity securities along with the percentage distribution: Table 2 - Securities Portfolio Composition December 31 2023 2022 Amount Percent Amount Percent (Dollars in thousands) Fair value of securities available for sale U.S. government agency securities $ 207,138 15.5 % $ 202,300 14.5 % U.S. treasury securities 769,102 57.6 % 791,341 56.5 % Agency mortgage-backed securities 277,047 20.8 % 313,688 22.4 % Agency collateralized mortgage obligations 33,189 2.5 % 38,843 2.8 % State, county and municipal securities 190 — % 191 — % Pooled trust preferred securities issued by banks and insurers 1,018 0.1 % 1,034 0.1 % Small business administration pooled securities 46,572 3.5 % 51,757 3.7 % Total fair value of securities available for sale 1,334,256 100.0 % 1,399,154 100.0 % Amortized cost of securities held to maturity U.S. government agency securities 29,521 1.9 % 31,258 1.8 % U.S. treasury securities 100,712 6.4 % 100,634 5.9 % Agency mortgage-backed securities 829,431 52.9 % 898,927 52.8 % Agency collateralized mortgage obligations 477,517 30.4 % 535,971 31.4 % Single issuer trust preferred securities issued by banks 1,500 0.1 % 1,500 0.1 % Small business administration pooled securities 130,426 8.3 % 136,830 8.0 % Total amortized cost of securities held to maturity 1,569,107 100.0 % 1,705,120 100.0 % Total $ 2,903,363 $ 3,104,274 The Company’s available for sale securities are carried at fair value and are categorized within the fair value hierarchy based on the observability of model inputs.
Loans having no schedule of repayments or no stated maturity are reported as being due in greater than five years.
(2) Loans having no schedule of repayments or no stated maturity are reported as being due in the 5-15 years category above.
The retail investments and insurance group generated gross fee revenues of $4.1 million, $3.7 million, and $2.3 million for the years ended December 31, 2022, 2021, and 2020, respectively.
The retail investments and insurance revenues were $5.6 million, $4.1 million, and $3.7 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Other noninterest expenses increased year-over year due primarily to increased advertising costs, customer fraud reimbursements, unrealized losses on equity securities, internet banking costs, insurance, telecommunications, and postage costs. 58 Table of Contents Income Taxes The tax effect of all income and expense transactions is recognized by the Company in each year’s consolidated statements of income, regardless of the year in which the transactions are reported for income tax purposes.
No such costs were incurred during 2023. • Other noninterest expenses increased year-over year due primarily to increased interest paid on cash collateral accounts, loan workout costs, sponsorships, and internet banking costs, partially offset by decreases in unrealized losses on equity securities, telecommunications costs, and mortgage operations expense. 60 Table of Contents Income Taxes The tax effect of all income and expense transactions is recognized by the Company in each year’s consolidated statements of income, regardless of the year in which the transactions are reported for income tax purposes.
These metrics are used by management to make key decisions regarding the Company's balance sheet, liquidity, interest rate sensitivity, and capital resources and assist with identifying opportunities for improving the Company's financial position or operating results. The Company maintains an asset-sensitive profile and, accordingly, has benefited from recent interest rate increases.
These metrics are used by management to make key decisions regarding the Company's balance sheet, liquidity, interest rate sensitivity, and capital resources and assist with identifying opportunities for improving the Company's financial position or operating results. The Company focuses on organic growth, but will also consider growth through acquisition.
Total securities increased by $464.4 million, or 17.4%, at December 31, 2022 as compared to December 31, 2021, reflecting $927.4 million of purchases, partially offset by unrealized losses of $155.0 million related to the available for sale portfolio, as well as paydowns, calls and maturities.
Total securities decreased by $198.4 million, or 6.3%, at December 31, 2023 as compared to December 31, 2022, primarily reflecting the impact of paydowns, calls, and maturities, partially offset by unrealized gains of $42.0 million related to the available for sale portfolio.
Excluding these merger and acquisition-related costs, operating net income was $268.9 million, or $5.80 on a diluted per share 32 Table of Contents basis, for the year ended December 31, 2022, as compared to $187.6 million, or $5.38 on a diluted per share basis for the year ended December 31, 2021, representing increases of 43.3% and 7.8%, respectively.
Excluding these merger and acquisition-related costs, operating net income was $268.9 million, or $5.80 on a diluted per share basis for the year ended December 31, 2022, representing decreases of 10.9% and 6.6%, respectively. See "Non-GAAP Measures" below for a reconciliation of non-GAAP measures.

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