INDEPENDENT BANK CORP.

(INDB)
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Independent Bank : UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS - Form 8-K/A

01/26/2022 | 04:34pm EDT

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On November 12, 2021, Independent Bank Corp. ("Independent") completed acquisition of Meridian Bancorp, Inc. ("Meridian") pursuant to an Agreement and Plan of Merger, dated as of April 22, 2021, by and among Independent, Rockland Trust Company ("Rockland Trust"), Bradford Merger Sub Inc. ("Merger Sub"), Meridian and East Boston Savings Bank ("East Boston"). Pursuant to the Merger Agreement, upon the terms and subject to the conditions set forth in the Merger Agreement, among other things, (i) Merger Sub merged with and into Meridian, with Meridian continuing as the surviving entity (the "Merger"), (ii) immediately after the Merger, Meridian merged with and into Independent, with Independent continuing as the surviving entity (the "HoldCo Merger") and (iii) immediately following the HoldCo Merger, East Boston merged with and into Rockland Trust, with Rockland Trust continuing as the surviving entity (the "Bank Merger" and, together with the Merger and the HoldCo Merger, the "Transaction"). Each share of Meridian common stock outstanding was converted into the right to receive 0.275 shares of Independent's common stock. Total merger consideration payable to equityholders consisted of approximately 14,299,720 shares of Independent common stock and an aggregate of $12.1 million in cash, which included approximately $12.0 million in cash paid for stock option cancellations and $71,000 cash in lieu to fractional shares. The transaction is accounted for as an acquisition and accordingly, Meridian assets and liabilities are recorded by Independent at their fair market value as of November 12, 2021.

The following unaudited pro forma condensed combined financial information and notes present how the combined financial statements of Independent and Meridian may have appeared had the Merger been completed at the beginning of the periods presented. The unaudited pro forma condensed combined financial information reflects the impact of the Merger on the combined balance sheets and combined statements of income under the acquisition method of accounting with Independent as the acquirer. Under the acquisition method of accounting, Meridian assets and liabilities are recorded by Independent at their fair market value as of the date that the Merger is completed. The unaudited pro forma condensed combined balance sheet as of September 30, 2021 assumes the Merger was completed on that date. The unaudited condensed combined statement of income for the period ending December 31, 2020 assumes the Merger was completed on January 1, 2020 and the unaudited combined statement of income for the period ending September 30, 2021 assumes the Merger was completed on January 1, 2021.

The unaudited pro forma condensed combined financial information is derived from and should be read in conjunction with the historical consolidated financial statements and related notes of Independent, which are available on the Company's 2020 Annual Report on Form 10-K and the financial statements and related notes of Meridian, which are incorporated into this document by reference and included.

The unaudited pro forma condensed combined financial information is presented for illustrative and informative purposes only and is not necessarily indicative or representative of the financial position or results of operations presented as of the date or for the periods indicated, or the results of operations or financial position that may be achieved in the future. In addition, the unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies or revenue enhancements that Independent may achieve as a result of its acquisition of Meridian, the costs to integrate the operations of Independent and Meridian or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements.

Independent and Meridian

Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet

As of September 30, 2021

Unaudited
Independent Meridian Adjustments (1) (2) Pro Forma
(Dollars in thousands)

Cash and short term investments

$ 2,007,831 $ 1,052,553 $ (12,048 ) (3) $ 3,048,336

Securities

2,318,757 9,180 - 2,327,937

Loans, net of deferred fees and costs

8,808,013 4,911,100 674 (4) 13,719,787

Allowance for credit losses

(92,246 ) (60,849 ) (6,397 ) (5) (159,492 )

Bank premises and equipment

123,528 63,321 19,927 (6) 206,776

Goodwill

506,206 20,378 469,273 (7) 995,857

Identifiable intangible assets

19,055 1,341 12,099 (8) 32,495

Other assets

842,167 131,350 290 (9) 973,807

Total assets

$ 14,533,311 $ 6,128,374 $ 483,818 $ 21,145,503

Deposits

$ 12,260,140 $ 4,693,179 $ 1,517 (10) $ 16,954,836

Borrowings

157,045 560,625 15,463 (11) 733,133

Other liabilities

360,172 60,872 634 (12) 421,678

Stockholders' equity

1,755,954 813,698 466,204 (13) 3,035,856

Total liabilities and stockholders' equity

$ 14,533,311 $ 6,128,374 $ 483,818 $ 21,145,503

Common shares

33,043,812 52,711,409 (38,215,772 ) (14) 47,539,449

Independent and Meridian

Unaudited Pro Forma Condensed Combined Consolidated Income Statement

Nine Months Ended September 30, 2021

Independent Meridian Adjustments (1) (2) Unaudited
Pro Forma
(Dollars in Thousands, Except Per Share Data)

INTEREST INCOME

Interest on Fed Funds Sold and Short Term Investments

$ 1,654 $ 1,286 $ - $ 2,940

Interest and Dividends on Securities

21,617 437 - 22,054

Interest on Loans

266,084 164,044 101 (15) 430,229

Total Interest Income

289,355 165,767 101 455,223

INTEREST EXPENSE

Interest on Deposits

6,361 13,019 (1,559 ) (16) 17,821

Interest on Borrowed Funds

3,965 10,535 3,866 (17) 18,366

Total Interest Expense

10,326 23,554 2,307 36,187

Net Interest Income

279,029 142,213 (2,206 ) 419,036

Less-Provision (credit) for Loan Losses

(17,500 ) (4,270 ) 50,687 28,917

Net Interest Income after Provision for Loan Losses

296,529 146,483 (52,893 ) 390,119

NONINTEREST INCOME

Deposit account fees

11,704 7,214 - 18,918

Interchange and ATM Fees

9,229 - - 9,229

Investment Management

26,350 - - 26,350

Mortgage Banking Income

11,270 845 - 12,115

Increase in Cash Surrender Value of Life Insurance Policies

4,508 - - 4,508

Other Noninterest Income

13,609 2,985 - 16,594

Total Noninterest Income

76,670 11,044 - 87,714

NONINTEREST EXPENSE

Salaries and Employee Benefits

124,759 43,396 - 168,155

Occupancy and Equipment Expenses

26,543 11,775 383 (19) 38,701

Data Processing and Facilities Management

5,024 6,868 - 11,892

FDIC Assessment

2,805 1,264 - 4,069

Other Noninterest Expense

56,272 14,820 (1,342 ) (20) 69,750

Total Noninterest Expense

215,403 78,123 (959 ) 292,567

INCOME BEFORE INCOME TAXES

157,796 79,404 (51,934 ) 185,266

PROVISION FOR INCOME TAXES

38,506 20,202 (14,604 ) (21) 44,104

NET INCOME

$ 119,290 $ 59,202 $ (37,330 ) $ 141,162

BASIC EARNINGS PER SHARE

$ 3.61 $ 1.18 $ - $ 3.01

DILUTED EARNINGS PER SHARE

$ 3.61 $ 1.17 $ - $ 3.00

BASIC AVERAGE SHARES

33,024,386 50,362,807 (36,513,035 ) 46,874,158

DILUTED AVERAGE SHARES

33,042,624 50,792,228 (36,824,365 ) 47,010,487

Independent and Meridian

Unaudited Pro Forma Condensed Combined Consolidated Income Statement

Twelve Months Ended December 31, 2020

Independent Meridian Adjustments (1) (2) Unaudited
Pro Forma
(Dollars in Thousands, Except Per Share Data)

INTEREST INCOME

Interest on Fed Funds Sold and Short Term Investments

$ 847 $ 3,268 $ - $ 4,115

Interest and Dividends on Securities

30,168 846 - 31,014

Interest on Loans

371,054 247,999 135 (15) 619,188

Total Interest Income

402,069 252,113 135 654,317

INTEREST EXPENSE

Interest on Deposits

27,333 42,989 (1,579 ) (16) 68,743

Interest on Borrowed Funds

7,008 16,391 5,154 (17) 28,553

Total Interest Expense

34,341 59,380 3,575 97,296

Net Interest Income

367,728 192,733 (3,440 ) 557,021

Less-Provision (credit) for Loan Losses

52,500 26,456 50,687 (18) 129,643

Net Interest Income after Provision for Loan Losses

315,228 166,277 (54,127 ) 427,378

NONINTEREST INCOME

Deposit account fees

15,121 8,593 - 23,714

Interchange and ATM Fees

15,834 - - 15,834

Investment Management

29,432 - - 29,432

Mortgage Banking Income

18,948 1,961 - 20,909

Increase in Cash Surrender Value of Life Insurance Policies

5,362 - - 5,362

Other Noninterest Income

26,743 6,712 - 33,455

Total Noninterest Income

111,440 17,266 - 128,706

NONINTEREST EXPENSE

Salaries and Employee Benefits

152,460 57,902 - 210,362

Occupancy and Equipment Expenses

37,050 15,230 511 (19) 52,791

Data Processing and Facilities Management

6,265 8,671 - 14,936

FDIC Assessment

2,522 2,371 - 4,893

Other Noninterest Expense

75,535 12,371 (1,810 ) (20) 86,096

Total Noninterest Expense

273,832 96,545 (1,299 ) 369,078

INCOME BEFORE INCOME TAXES

152,836 86,998 (52,828 ) 187,006

PROVISION FOR INCOME TAXES

31,669 21,947 (14,855 ) (21) 38,761

NET INCOME

$ 121,167 $ 65,051 $ (37,973 ) $ 148,245

BASIC EARNINGS PER SHARE

$ 3.64 $ 1.29 $ - $ 3.15

DILUTED EARNINGS PER SHARE

$ 3.64 $ 1.29 $ - $ 3.14

BASIC AVERAGE SHARES

33,259,643 50,283,704 (36,455,685 ) 47,087,662

DILUTED AVERAGE SHARES

33,285,289 50,418,169 (36,553,173 ) 47,150,285

Notes to Pro Forma Combined Condensed Consolidated Financial Statements (Unaudited)

(1)

Estimated merger costs of $42.2 million (net of $13.4 million of taxes) are excluded from the pro forma financial statements. It is expected that these costs will be recognized over time. These cost estimates for both Independent and Meridian are forward-looking. The type and amount of actual costs incurred could vary materially from these estimates if future developments differ from the underlying assumptions used by management in determining the current estimate of these costs. The current estimates of the merger costs, primarily comprised of anticipated cash charges, are as follows:

Change in control contract and severance contracts $ 18,818
Vendor and system contracts Terminations 3,853
Facilities conversion and termination costs 10,497
Professional and legal fees 20,501
Other acquisition related expenses 1,898
Pre-tax merger costs 55,567
Taxes 13,365
Total merger costs $ 42,202
(2)

Estimated expenses of approximately $34.1 million associated with the termination and final allocation of Meridian's employee stock ownership plan ("ESOP") are excluded from the pro forma financial statements. The estimated expenses will be recognized, with an equal offsetting benefit to unearned compensation and additional paid in capital within equity.

(3)

Represents Cash paid for stock options.

(4)

Adjustment to reflect acquired loans at their estimated fair value, including current interest rates and liquidity, as well as the allowance for credit losses gross-up for estimate of lifetime credit losses for purchased credit-deteriorated ("PCD") loans and leases.

(5)

Adjustments to the allowance for credit losses include the following:

Reversal of historical Meridian's allowance for credit losses

$ 60,849

Increase in allowance for credit losses for gross-up of estimated lifetime credit losses for purchased credit-deteriorated ("PCD") loans and leases

$ (16,541 )

Provision for estimate of lifetime credit losses on non-PCD loans and leases

$ (50,705 )
$ (6,397 )
(6)

Adjustment to reflect bank premises and equipment values to their estimated fair value.

(7)

Adjustment to eliminate Meridian's stockholder's equity and the issuance of Independent common stock in the merger.

(8)

Adjustment to reflect approximately $10.3 million of core deposit intangibles at the preliminary estimated fair value and eliminate Meridian's intangible assets.

(9)

Adjustment to net deferred tax assets due to the business combination.

(10)

Adjustment to reflect the preliminary estimate of fair value on time deposits.

(11)

Calculated to reflect the fair value adjustment of borrowings at current market rates.

(12)

Adjustment to reflect fair value of the acquired split-dollar bank-owned-life insurance policy obligations.

(13)

Adjustments to stockholders' equity:

To eliminate Meridian's stockholders' equity

$ (813,698 )

To reflect issuance of Independent common stock in the merger

1,316,349

Adjustment to record provision for credit losses on non-PCD acquired loans and leases, net of tax

(36,447 )
$ 466,204
(14)

Adjustment to eliminate shares of Meridian common stock outstanding, and to record shares of Independent common stock outstanding using an exchange ratio of 0.275.

(15)

Adjustment reflects the yield adjustment for interest income on loans.

(16)

Adjustment reflects the yield adjustment for interest expense on deposits.

(17)

Adjustment reflects the yield adjustment for interest expense on borrowings.

(18)

Adjustment to record provision for credit losses on non-PCD acquired loans and leases.

(19)

Adjustment reflects the estimated net increase associated with the fair value adjustment for the acquired bank premises and equipment.

(20)

Adjustment reflects the net increase in amortization of other intangible assets for the acquired other intangible assets.

(21)

Adjustment represents income tax expense on the pro-forma adjustments at an estimated rate of 28.12%.

Disclaimer

Independent Bank Corp. published this content on 26 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 January 2022 21:33:09 UTC.


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Sales 2022 683 M - -
Net income 2022 237 M - -
Net Debt 2022 - - -
P/E ratio 2022 15,8x
Yield 2022 2,56%
Capitalization 3 706 M 3 706 M -
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Nbr of Employees 1 691
Free-Float 99,0%
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Christopher Oddleifson President, Chief Executive Officer & Director
Mark J. Ruggiero Chief Financial & Accounting Officer
Donna L. Abelli Chairman
Barry H. Jensen Chief Technology Officer
Robert D. Cozzone Chief Operating Officer & Executive Vice President