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Section 1: DEFM14A (DEFM14A)

DEFM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☑                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under §240.14a-12

Blue Hills Bancorp, Inc.

(Name of registrant as specified in its charter)

 

(Name of person(s) filing proxy statement, if other than the registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
  (1)  

Title of each class of securities to which the transaction applies:

 

     

  (2)  

Aggregate number of securities to which the transaction applies:

 

     

  (3)  

Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

  (4)  

Proposed maximum aggregate value of the transaction:

 

     

  (5)  

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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LOGO

   LOGO

Dear Blue Hills Bancorp, Inc. Stockholders and Independent Bank Corp. Shareholders:

We are pleased to report that the Boards of Directors of Blue Hills Bancorp, Inc. (“BHB”) and Independent Bank Corp. (“Independent”) have approved an Agreement and Plan of Merger, which is referred to as the merger agreement. Under the merger agreement, BHB will merge with and into Independent, with Independent as the surviving company in the merger. Independent and BHB cannot complete the merger transaction without the approval of both Independent shareholders and BHB stockholders.

BHB will be holding a special meeting of its common stockholders to vote on certain matters in connection with the merger and Independent will be holding a special meeting of its common shareholders to vote on certain matters in connection with the merger. Holders of shares of BHB common stock will vote at a special meeting of BHB stockholders to be held on January 16, 2019 to approve the merger agreement and to vote on a related proposal. Holders of shares of Independent common stock will vote at a special meeting of Independent common shareholders to be held on January 25, 2019 to approve the merger agreement, including the issuance of up to 6,835,690 shares of Independent common stock in connection with the merger, which is necessary to allow the merger to close, and to vote on a related proposal. The 6,835,690 shares of Independent common stock represent the maximum number of shares that would be issuable in the transaction, based on the estimated maximum number of shares of BHB common stock outstanding immediately prior to the merger, assuming that all outstanding stock options granted by BHB on the date hereof are exercised and all outstanding shares of restricted stock on the date hereof vest in accordance with their terms.

If the proposed merger is completed, BHB’s stockholders will receive in exchange for each share of BHB common stock, (i) $5.25 in cash and (ii) 0.2308 of a share of Independent common stock in accordance with the terms and conditions of the merger agreement. Independent’s and BHB’s common stock are each listed on the Nasdaq Global Select Market under the trading symbols “INDB” and “BHBK,” respectively. The closing sales prices of Independent common stock and BHB common stock on December 6, 2018, the last practicable trading day prior to the mailing of this document, were $74.72 and $22.68, respectively. The equivalent value of the consideration to be paid in the merger for each share of BHB, calculated by (i) adding $5.25 to (ii) the product obtained by multiplying the closing sales price of Independent common stock of $74.72 on December 6, 2018 by the 0.2308 exchange ratio, would be $22.50. The market prices for both Independent common stock and BHB common stock will fluctuate prior to the merger, and the market price for Independent common stock will fluctuate subsequent to the merger. We urge you to obtain current market quotations for both Independent common stock and BHB common stock.

If the market price of Independent common stock falls substantially, both in absolute terms (that is, a volume weighted average trading price below $77.07) and by comparison to a market capitalization-weighted index of the stock of banking companies that comprise the Nasdaq Bank Stock Index, BHB may terminate the merger agreement. However, if BHB seeks to exercise that termination right, Independent may negate the termination by increasing the exchange ratio from 0.2308 of a share to a formula amount determined in accordance with the merger agreement, as described in this joint proxy statement/prospectus.

We generally expect the merger to be tax-free solely with respect to the Independent common stock that BHB common stockholders receive.

Assuming the exchange ratio is 0.2308 of a share, if the merger is completed and all outstanding stock options granted by BHB on the date hereof are exercised and all outstanding shares of restricted stock on the date hereof vest in accordance with their terms prior to the closing of the merger, BHB common stockholders will own approximately 6.8 million shares, or approximately 20%, of Independent’s outstanding common stock. Independent expects substantially fewer shares of Independent common stock will be issued in the merger because not all outstanding stock options granted by BHB will be exercised before the closing of the merger. If no stock options are exercised, BHB stockholders would own approximately 18% of Independent’s common stock upon completion of the merger.

Independent and BHB cannot complete the proposed merger unless, among other conditions, BHB’s stockholders approve the merger agreement and the merger at the BHB special meeting and Independent’s


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shareholders approve the merger agreement and the merger at the Independent special meeting. This letter is accompanied by BHB’s proxy statement, which BHB is providing to BHB stockholders to solicit their proxy to vote for approval of the merger agreement and the merger at the BHB special meeting, and by Independent’s proxy statement, which Independent is providing to Independent shareholders to solicit their proxy to vote for approval of the merger agreement and the merger at the Independent special meeting. The accompanying document is also being delivered to BHB’s stockholders as Independent’s prospectus for its offering of Independent common stock to BHB’s stockholders in the merger.

BHB’s board of directors has unanimously recommended that you vote “FOR” approval of the merger agreement and the transactions contemplated by the merger agreement, including the merger, at the BHB special meeting and “FOR” approval of the authorization of the board of directors of BHB to adjourn the BHB special meeting if necessary to permit further solicitation of proxies on the proposal to approve the agreement and plan of merger and to vote on other matters properly before the BHB special meeting.

Independent’s board of directors has unanimously recommended that you vote “FOR” approval of the merger agreement and the transactions contemplated by the merger agreement, including the merger and the issuance of up to 6,835,690 shares of Independent common stock in connection with the merger, at the Independent special meeting, which is necessary to allow the merger to close, and “FOR” approval of the authorization of the board of directors of Independent to adjourn the Independent special meeting if necessary to permit further solicitation of proxies on the proposals to approve the agreement and plan of merger and to vote on other matters properly before the Independent special meeting.

This joint proxy statement/prospectus provides you with detailed information about the proposed merger. It also contains or references information about Independent and BHB and related matters. You are encouraged to read this document carefully. In particular, you should read the “Risk Factors” section beginning on page 19 for a discussion of the risks you should consider in evaluating the proposed merger and how it will affect you.

Your vote is very important. Approval of the BHB merger agreement proposal will require the affirmative vote of the holders of a majority of the shares of BHB common stock outstanding and entitled to vote. Approval of the Independent merger agreement proposal will require the affirmative vote of the holders of at least two-thirds of the shares of Independent common stock outstanding and entitled to vote. Whether or not you plan to attend the BHB special meeting or Independent special meeting, as applicable, please take the time to vote by completing and mailing the enclosed proxy card. If BHB stockholders and Independent shareholders do not vote in person or by proxy, it will have the same effect as a vote against the proposal to approve the merger at the BHB special meeting or the Independent special meeting, as applicable.

 

Sincerely,    Sincerely,
LOGO    LOGO
William M. Parent    Christopher Oddleifson
President and Chief Executive Officer    President and Chief Executive Officer
Blue Hills Bancorp, Inc.    Independent Bank Corp.

Neither the Securities and Exchange Commission nor any state securities regulator has approved or disapproved the proposed merger, including the issuance of Independent common stock to be issued in connection with the merger, or the other transactions described in this joint proxy statement/prospectus, or determined if this joint proxy statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The shares of Independent common stock are not savings accounts, deposits or other obligations of any bank or savings association and are not insured by the Federal Deposit Insurance Corporation or by any other federal or state governmental agency.

This joint proxy statement/prospectus is dated December 11, 2018 and is first being mailed or otherwise delivered to stockholders of BHB and shareholders of Independent on or about December 13, 2018.


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BLUE HILLS BANCORP, INC.

500 River Ridge Drive

Norwood, Massachusetts 02062

(617) 360-6520

Notice of Special Meeting of Stockholders

to be held January 16, 2019

To the Stockholders of Blue Hills Bancorp, Inc.:

A special meeting of stockholders of Blue Hills Bancorp, Inc. (“BHB”) will be held at 10:00 a.m., local time, on January 16, 2019 at the Operations Center of Blue Hills Bank, 500 River Ridge Drive, Norwood, Massachusetts 02062. Any adjournment or postponement of the special meeting will be held at the same location.

The purpose of the special meeting is to:

 

  1.

Approve the Agreement and Plan of Merger, dated as of September 20, 2018 (the “merger agreement”), by and among Independent Bank Corp. (“Independent”), Rockland Trust Company, BHB and Blue Hills Bank, and to approve the transactions contemplated by the merger agreement, including the merger of BHB with and into Independent (the “merger”); and

 

  2.

Authorize the board of directors of BHB to adjourn or postpone the special meeting, if necessary, to permit further solicitation of proxies in favor of the BHB merger agreement proposal or to vote on other matters properly before the special meeting.

You may vote at the special meeting if you were a stockholder of record at the close of business on December 4, 2018.

The BHB board of directors unanimously recommends that you vote “FOR” approval of the merger agreement and the transactions contemplated by the merger agreement, including the merger, and “FOR” approval of the authorization of the board of directors of BHB to adjourn or postpone the special meeting, if necessary, to permit further solicitation of proxies in favor of the BHB merger agreement proposal or to vote on other matters properly before the special meeting.

Under the provisions of the Maryland General Corporation Law, as amended, the holders of BHB common stock are not entitled to dissenters’ rights of appraisal in connection with the merger.

Your vote is very important. Your vote is important regardless of how many shares you own. Whether you plan to attend the BHB special meeting or not, please promptly vote your shares. Voting procedures are described in the accompanying joint proxy statement/prospectus and on the proxy card for the BHB special meeting.

 

By Order of the Board of Directors,
LOGO
Lauren B. Messmore
Corporate Secretary

IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE VOTING YOUR SHARES, PLEASE CONTACT OUR PROXY SOLICITOR, GEORGESON LLC, AT (888) 607-9252.


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INDEPENDENT BANK CORP.

288 Union Street

Rockland, Massachusetts 02370

(781) 878-6100

Notice of Special Meeting of Shareholders

to be held January 25, 2019

To the Shareholders of Independent Bank Corp.:

A special meeting of shareholders of Independent Bank Corp. (“Independent”) will be held at 10:00 a.m., local time, on January 25, 2019 at the Doubletree by Hilton Boston, 929 Hingham Street, Rockland, Massachusetts 02370. Any adjournment or postponement of the special meeting will be held at the same location.

The purpose of the special meeting is to:

 

  1.

Approve the Agreement and Plan of Merger, dated as of September 20, 2018 (the “merger agreement”), by and among Independent, Rockland Trust Company, Blue Hills Bancorp, Inc. (“BHB”) and Blue Hills Bank, and to approve the transactions contemplated by the merger agreement, including the merger of BHB with and into Independent (the “merger”) and the issuance of up to 6,835,690 shares of Independent common stock in connection with the merger; and

 

  2.

Authorize the board of directors of Independent to adjourn or postpone the special meeting, if necessary, to permit further solicitation of proxies in favor of the Independent merger agreement proposal or to vote on other matters properly before the special meeting.

You may vote at the special meeting if you were a shareholder of record at the close of business on December 4, 2018.

The Independent board of directors unanimously recommends that you vote “FOR” approval of the merger agreement and the transactions contemplated by the merger agreement, including the merger and the issuance of up to 6,835,690 shares of Independent common stock in connection with the merger, and “FOR” approval of the authorization of the board of directors of Independent to adjourn or postpone the special meeting, if necessary, to permit further solicitation of proxies in favor of the Independent merger agreement proposal or to vote on other matters properly before the special meeting.

Under the provisions of the Massachusetts Business Corporation Act, as amended, the holders of Independent common stock are not entitled to dissenters’ rights of appraisal in connection with the merger.

Your vote is very important. Your vote is important regardless of how many shares you own. Whether you plan to attend the Independent special meeting or not, please promptly vote your shares. Voting procedures are described in the accompanying joint proxy statement/prospectus and on the proxy card for the Independent special meeting.

 

By Order of the Board of Directors,
LOGO
Edward H. Seksay
General Counsel and Corporate Secretary

IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE VOTING YOUR SHARES, PLEASE CONTACT OUR PROXY SOLICITOR, GEORGESON LLC, AT (866) 296-5716.


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REFERENCE TO ADDITIONAL INFORMATION

This joint proxy statement/prospectus incorporates important business and financial information about BHB and Independent from other documents that are not included in, or delivered with, this joint proxy statement/prospectus. This information is available to you without charge upon your written or oral request. We have listed the documents containing this information on page 124 of this joint proxy statement/prospectus. You can obtain copies of these documents incorporated by reference in this document through the Securities and Exchange Commission’s website at http://www.sec.gov or by requesting them in writing or by telephone from BHB or Independent at the following addresses:

For business and financial information about BHB, please contact:

Blue Hills Bancorp, Inc.

500 River Ridge Drive

Norwood, Massachusetts 02062

Attention: Lauren B. Messmore, Corporate Secretary

(617) 361-6900

For business and financial information about Independent, please contact:

Independent Bank Corp.

288 Union Street

Rockland, Massachusetts 02370

Attention: Edward H. Seksay, General Counsel

(781) 982-6158

If BHB stockholders would like to request documents, they must do so no later than January 9, 2019 in order to receive them before BHB’s special meeting. If Independent shareholders would like to request documents, they must do so no later than January 17, 2019 in order to receive them before Independent’s special meeting. Neither BHB stockholders nor Independent shareholders will be charged for any of these documents that they request.

For additional information regarding where you can find information about Independent and BHB, please see the section entitled “Where You Can Find More Information” beginning on page 122 of this joint proxy statement/prospectus. The information contained in this joint proxy statement/prospectus with respect to Independent and its subsidiaries was provided by Independent and the information contained in this joint proxy statement/prospectus with respect to BHB and its subsidiaries was provided by BHB.

For information on submitting your proxy, please refer to the instructions on the enclosed proxy card for the BHB special meeting or on the enclosed proxy card for the Independent special meeting, as applicable.


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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS ABOUT THE MERGER, THE BLUE HILLS BANCORP, INC. SPECIAL MEETING AND THE INDEPENDENT BANK CORP. SPECIAL MEETING

     1  

SUMMARY

     10  

RISK FACTORS

     19  

Risks Related to the Merger

     19  

Risks Related to Independent’s Business

     23  

FORWARD-LOOKING STATEMENTS

     25  

SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION

     27  

Comparative Per Share Market Price Information

     27  

Comparative Stock Prices and Dividends

     28  

Independent Selected Historical Financial and Operating Data

     30  

BHB Selected Historical Consolidated Financial Data

     31  

PRO FORMA FINANCIAL DATA

     32  

Unaudited Comparative Per Share Data

     37  

THE SPECIAL MEETING OF BHB STOCKHOLDERS

     39  

Date, Time and Place of the BHB Special Meeting

     39  

Purpose of the BHB Special Meeting

     39  

Recommendation of BHB’s Board of Directors

     39  

Record Date; Shares Entitled to Vote

     39  

Quorum; Vote Required

     39  

BHB Voting Agreements

     40  

Voting of Proxies

     40  

How to Revoke Your Proxy

     40  

Voting in Person

     41  

Proxy Solicitation

     41  

Dissenters’ Rights of Appraisal

     41  

Stock Certificates

     41  

PROPOSAL NO. 1 APPROVAL OF THE AGREEMENT AND PLAN OF MERGER

     42  

PROPOSAL NO. 2 APPROVAL TO ADJOURN OR POSTPONE THE BHB SPECIAL MEETING, IF NECESSARY, TO PERMIT FURTHER SOLICITATION OF PROXIES

     43  

THE SPECIAL MEETING OF INDEPENDENT SHAREHOLDERS

     44  

Date, Time and Place of the Independent Special Meeting

     44  

Purpose of the Independent Special Meeting

     44  

Recommendation of Independent’s Board of Directors

     44  

Record Date; Shares Entitled to Vote

     44  

Quorum; Vote Required

     44  

Voting of Proxies

     45  

 

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     Page  

How to Revoke Your Proxy

     45  

Voting in Person

     45  

Proxy Solicitation

     46  

PROPOSAL NO. 1 APPROVAL OF THE AGREEMENT AND PLAN OF MERGER

     47  

PROPOSAL NO. 2 APPROVAL TO ADJOURN OR POSTPONE THE INDEPENDENT SPECIAL MEETING, IF NECESSARY, TO PERMIT FURTHER SOLICITATION OF PROXIES

     48  

THE MERGER

     49  

General

     49  

Background of the Merger

     49  

Recommendation of BHB’s Board of Directors

     53  

BHB’s Reasons for the Merger

     53  

Opinion of BHB’s Financial Advisor

     55  

Recommendation of Independent’s Board of Directors

     67  

Independent’s Reasons for the Merger

     67  

Opinion of Independent’s Financial Advisor

     68  

Regulatory Approvals Required to Complete the Merger

     79  

Interests of BHB’s Executive Officers and Directors in the Merger

     81  

THE MERGER AGREEMENT

     87  

The Merger

     87  

Effective Time and Completion of the Merger

     87  

Consideration to Be Received in the Merger

     87  

Exchange of BHB Stock Certificates for Merger Consideration

     87  

Representations and Warranties

     88  

Conduct of Business Pending the Merger

     90  

Stockholder Meetings

     94  

No Solicitation of Alternative Transactions

     94  

Employee Benefits Matters

     96  

Conditions to Complete the Merger

     97  

Termination of the Merger Agreement

     98  

Termination Fee

     99  

Waiver or Amendment of the Merger Agreement

     101  

Fees and Expenses

     101  

Restrictions on Resales by Affiliates

     101  

VOTING AGREEMENTS

     102  

ACCOUNTING TREATMENT

     103  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

     104  

Tax Consequences of the Merger Generally

     105  

Reporting Requirements

     106  

Withholding Requirements

     107  

 

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     Page  

THE COMPANIES

     108  

INDEPENDENT

     108  

BHB

     108  

DESCRIPTION OF INDEPENDENT’S CAPITAL STOCK

     109  

Common Stock

     109  

Preferred Stock

     109  

Other Provisions

     110  

Transfer Agent

     110  

COMPARISON OF RIGHTS OF SHAREHOLDERS OF INDEPENDENT AND STOCKHOLDERS OF BHB

     111  

Capitalization

     111  

Preemptive Rights

     111  

Limitations on Voting Rights

     112  

Dividends and Other Stock Rights

     112  

Right to Call Special Meetings of Stockholders of BHB and of Shareholders of Independent

     113  

Notice of Stockholder Meetings

     113  

Board of Directors – Number and Term of Office

     113  

Board of Director Nominations

     115  

Removal and Resignation of Directors

     116  

Amendment of Bylaws

     117  

Amendment of Articles of Incorporation and Articles of Organization

     117  

Limitation of Liability and Indemnification

     118  

Approval of Business Combinations

     120  

LEGAL MATTERS

     121  

EXPERTS

     121  

ANNUAL MEETING SHAREHOLDER AND STOCKHOLDER PROPOSALS

     122  

WHERE YOU CAN FIND MORE INFORMATION

     122  

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     124  

ANNEX A – AGREEMENT AND PLAN OF MERGER

     A-1  

ANNEX B – OPINION OF KEEFE, BRUYETTE & WOODS, INC.

     B-1  

ANNEX C – OPINION OF SANDLER O’NEILL & PARTNERS, L.P.

     C-1  

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER, THE BLUE HILLS BANCORP, INC. SPECIAL MEETING AND THE INDEPENDENT BANK CORP. SPECIAL MEETING

Questions and Answers About the Merger

 

Q.

Why am I receiving this document?

 

A.

Independent Bank Corp. (“Independent”) and Blue Hills Bancorp, Inc. (“BHB”) have agreed to the acquisition of BHB by Independent under the terms of a merger agreement that is described in this document, a copy of which is attached as Annex A. In order to complete the merger, both BHB’s stockholders and Independent’s shareholders must approve the merger agreement and the merger. BHB will hold a special meeting of its stockholders and Independent will hold a special meeting of its shareholders to obtain this approval. This document contains important information about the merger, the shares of Independent common stock to be issued in connection with the merger, the merger agreement, and other related matters, and you should read it carefully. The enclosed voting materials for the BHB special meeting allow you to vote your shares of BHB common stock without attending the BHB special meeting, and the enclosed voting materials for the Independent special meeting allow you to vote your shares of Independent common stock without attending the Independent special meeting.

 

Q.

What will BHB’s stockholders receive in the merger?

 

A.

BHB’s stockholders will be entitled to receive in the merger (i) $5.25 in cash and (ii) 0.2308 of a share of Independent common stock for each share of BHB common stock they own.

Independent’s common stock is listed on the Nasdaq Global Select Market under the trading symbol “INDB.” Independent will not issue fractional shares of its common stock in the merger, but will instead pay cash for any fractional shares at a price determined by the volume weighted average closing price of Independent common stock on the Nasdaq Global Select Market for the five trading days ending on the fifth trading day immediately preceding the closing date of the merger, which is referred to herein as the Closing VWAP.

 

Q.

What will Independent’s shareholders receive in the merger?

 

A.

Independent shareholders will not be entitled to receive any merger consideration and will continue to hold the shares of Independent common stock that they held immediately prior to the completion of the merger. Following the merger, shares of Independent common stock will continue to be listed on the Nasdaq Global Select Market under the trading symbol “INDB.”

 

Q.

What will happen to BHB and Blue Hills Bank as a result of the merger?

 

A.

If the merger is completed, BHB will merge with and into Independent and Independent will be the surviving entity. Immediately following the merger, Blue Hills Bank (“Blue Hills”), the wholly owned subsidiary of BHB, will merge with and into Rockland Trust Company (“Rockland Trust”), the wholly owned subsidiary of Independent, and Rockland Trust will be the surviving entity.

 

Q.

How will the merger affect BHB equity awards?

 

A.

The BHB equity awards will be affected as follows:

Stock Options: Each stock option granted by BHB will become fully vested immediately prior to the effective time of the merger. BHB stock options will be cancelled upon consummation of the merger, and each option holder will receive a cash payment upon cancellation of the BHB stock option equal to the product of (i) the number of shares of BHB common stock provided for by such stock option and (ii) the excess, if any, of $26.25 over the exercise price of such stock option. Any BHB stock option with an exercise price in excess of $26.25 will be cancelled as of the effective time of the merger without payment.

 

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Restricted Stock: Each restricted share of BHB common stock will become fully vested immediately prior to the effective time of the merger. All restricted shares of BHB common stock will be treated as outstanding shares of BHB common stock for all purposes under the merger agreement, and each holder will have the right to receive the merger consideration.

 

Q.

How will the merger affect the BHB ESOP?

 

A.

The Blue Hills Bank Employee Stock Ownership Plan (which we refer to as the BHB ESOP) will be terminated as of or as soon as practicable following the effective time of the merger. As a result of the merger, BHB shares held in each participant account will be exchanged for the merger consideration. In 2014, the BHB ESOP was funded through a 30-year loan to purchase BHB stock, which is allocated as the loan is repaid. The unallocated shares are held in a separate unallocated stock fund. Following the repayment of the BHB ESOP loan from the merger consideration, the remaining merger consideration in the unallocated stock fund will be allocated on a pro rata basis to all participants with an account balance under the BHB ESOP based on the size of each participant’s account balance on the termination date. The amount allocated to each participant will be determined based on the value of the merger consideration at closing. Pursuant to the terms of the BHB ESOP, all participants with an account balance in the BHB ESOP at the termination date will become fully vested in their account upon consummation of the merger. If you are a participant in the BHB ESOP, you will receive separate instructions about how to receive the merger consideration and your share of the unallocated stock fund.

 

Q.

Are BHB’s stockholders or Independent’s shareholders entitled to dissenters’ rights?

 

A.

No. Under the provisions of the Maryland General Corporation Law, as amended, BHB stockholders are not entitled to dissenters’ rights in the merger. Under the provisions of the Massachusetts Business Corporation Act, Chapter 156D, Section 13, Independent shareholders are not entitled to dissenters’ rights in the merger.

 

Q.

Are there any risks that BHB stockholders or Independent shareholders should consider in deciding whether to vote for approval of the merger?

 

A.

Yes. You should read and carefully consider the risk factors set forth in the section in this document titled “Risk Factors” beginning on page 19.

 

Q.

Should BHB’s stockholders send in their stock certificates now?

 

A.

No. BHB’s stockholders should not send in any stock certificates now. If the merger is consummated, Independent will send BHB’s stockholders written instructions on how to exchange their stock certificates for the merger consideration.

 

Q.

What are the material U.S. federal income tax consequences of the merger to U.S. holders of BHB common stock?

 

A.

The merger is intended to qualify, and the obligations of the parties to complete the merger are conditioned upon the receipt of a legal opinion from their respective counsel to the effect that the merger will qualify, as a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended, which is referred to in this joint proxy statement/prospectus as the Code. BHB’s stockholders should not recognize gain or loss with respect to the Independent common stock that they receive in the merger, except with respect to any cash they receive in lieu of receiving a fractional share of Independent common stock, and will generally recognize gain (but not loss) with respect to the cash portion of the merger consideration that they receive. See “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 104. This tax treatment may not apply to all BHB stockholders. Determining the actual tax consequences of the merger to BHB stockholders can be complicated and will depend on the particular circumstances of each BHB stockholder. BHB stockholders should consult their own tax advisor for a full understanding of the merger’s tax consequences that are particular to each stockholder.

 

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Q.

What are the interests of BHB’s executive officers and directors in the merger, if any?

 

A.

Some of the directors and executive officers of BHB have financial interests in the merger that are different from, or in addition to, the interests of BHB’s other stockholders generally. These interests include rights of executive officers under their existing employment agreements and change in control agreements; rights under employment agreements with Independent executed in connection with the merger agreement; rights under BHB’s equity-based benefit programs and awards, including the acceleration of vesting of stock options and restricted stock; rights under the BHB ESOP; and rights to continued indemnification and insurance coverage by Independent after the merger for acts and omissions occurring before the merger. In addition, as of the effective time of the merger, Independent will elect, from among those directors serving on BHB’s board of directors as of the date of the merger agreement, three individuals to become directors of Independent and Rockland Trust. The boards of directors of BHB and Independent were aware of these interests and considered them, among other matters, in approving the merger agreement and related transactions.

 

Q.

When will the merger be completed?

 

A.

The merger will be completed when all of the conditions to completion contained in the merger agreement are satisfied or waived, including obtaining required regulatory approvals and/or waivers and the expiration of any statutory waiting periods and the approval of the merger agreement and the merger by both BHB’s stockholders and Independent’s shareholders. We currently expect to complete the merger in the first half of 2019. However, because fulfillment of some of the conditions to completion of the merger, such as receiving required regulatory approvals and/or waivers, are not entirely within our control, we cannot predict the actual timing.

 

Q.

Where can I find more information about the companies?

 

A.

You can find more information about Independent and BHB from the various sources described under the section of this document titled “Where You Can Find More Information” beginning on page 122.

Questions and Answers About the Special Meeting of BHB Stockholders

 

Q.

When and where will BHB’s stockholders meet?

 

A.

BHB will hold its special meeting of stockholders on January 16, 2019 at 10:00 a.m., local time, at the Operations Center of Blue Hills Bank located at 500 River Ridge Drive, Norwood, Massachusetts 02062.

 

Q.

What matters are BHB’s stockholders being asked to approve at the BHB special meeting pursuant to this joint proxy statement/prospectus?

 

A.

BHB’s stockholders are being asked to approve the merger agreement and the transactions contemplated by the merger agreement, including the merger. We refer to this proposal as the BHB merger agreement proposal.

BHB’s stockholders are also being asked to authorize the board of directors of BHB to adjourn or postpone the BHB special meeting if necessary to permit further solicitation of proxies in favor of the BHB merger agreement proposal or to vote on other matters properly before the BHB special meeting. We refer to this proposal as the BHB adjournment proposal.

 

Q.

What does BHB’s board of directors recommend with respect to the two proposals?

 

A.

BHB’s board of directors has unanimously approved the merger agreement and determined that the merger agreement and the merger are fair to, and advisable to, BHB and its stockholders and unanimously recommends that BHB’s stockholders vote “FOR” the BHB merger agreement proposal.

BHB’s board of directors also unanimously recommends that BHB’s stockholders vote “FOR” the BHB adjournment proposal.

 

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Q.

Who is eligible to vote at the BHB special meeting of stockholders?

 

A.

Only holders of record of BHB common stock at the close of business on December 4, 2018, which is the record date for the BHB special meeting of stockholders, are entitled to vote at the BHB special meeting.

 

Q.

How many votes must be represented in person or by proxy at the BHB special meeting to have a quorum?

 

A.

The holders of a majority of the shares of BHB common stock outstanding and entitled to vote at the BHB special meeting of stockholders, present in person or represented by proxy, will constitute a quorum at the BHB special meeting.

 

Q.

What vote by BHB’s stockholders is required to approve the BHB special meeting proposals?

 

A.

Approval of the BHB merger agreement proposal will require the affirmative vote of the holders of a majority of the shares of BHB common stock outstanding and entitled to vote. Abstentions and broker non-votes will have the same effect as shares voted against the BHB merger agreement proposal.

Approval of the BHB adjournment proposal will require the affirmative vote of a majority of the shares voted on the BHB adjournment proposal. Abstentions and broker non-votes will not affect whether the BHB adjournment proposal is approved.

 

Q.

Are any BHB stockholders already committed to vote in favor of any of the BHB special meeting proposals?

 

A.

Under voting agreements with Independent, each of BHB’s directors and executive officers who individually or jointly owns shares of BHB common stock, acting solely in his or her capacity as a stockholder, has agreed to vote all of his or her BHB common stock in favor of the BHB merger agreement proposal. As of the record date for the BHB special meeting of stockholders, the BHB stockholders who are parties to the voting agreements with Independent collectively owned (with sole or shared voting power) approximately 4.32% of the BHB common stock outstanding and entitled to vote at the BHB special meeting.

 

Q.

How may BHB’s stockholders vote their shares for the BHB special meeting proposals presented in this joint proxy statement/prospectus?

 

A.

Shares Held of Record: If you are a stockholder of record of BHB common stock as of the BHB record date, you may submit your proxy before the BHB special meeting in one of the following ways:

 

   

by signing the enclosed proxy card and mailing it in the enclosed, prepaid and addressed envelope;

 

   

by calling toll-free 1-800-652-VOTE (8683) and following the instructions; or

 

   

by accessing the web page at www.investorvote.com/BHBK and following the on-screen instructions.

Proxies submitted by mail must be received by the close of business on January 15, 2019. Proxies submitted by telephone or through the Internet must be received by 8:00 a.m., Eastern Time, on January 16, 2019.

Shares Held in Brokerage Accounts: If you hold your shares of BHB common stock in street name (that is, you hold your shares of BHB common stock through a broker, bank or other holder of record), your bank, broker or other holder of record will forward proxy materials and voting instructions that you must follow in order to vote your shares of BHB common stock. You may receive more than one proxy card if your shares of BHB common stock are registered in different names or are held in more than one account. A broker, bank or other holder of record will not be able to vote your shares at the BHB special meeting without first receiving instructions from you on how to vote.

Shares Held in the BHB 401(k) Plan: If you are a participant in the Blue Hills Bancorp, Inc. Stock Fund of the Blue Hills Bank 401(k) Retirement Plan (which we refer to as the BHB 401(k) Plan) and indirectly hold shares of BHB common stock through the BHB 401(k) Plan, you may vote any shares of BHB common

 

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stock held in your BHB 401(k) Plan account as of the BHB record date ONLY by following the separate voting instructions provided by the BHB 401(k) Plan trustee. Your 401(k) vote authorization form must be received by 11:59 p.m., Eastern Time, on January 9, 2019. The telephonic and internet voting cutoff for providing your 401(k) vote authorization is 11:59 p.m., Eastern Time, on January 9, 2019. Blue Hills, as the BHB 401(k) Plan administrator, has instructed the BHB 401(k) Plan trustee to vote any shares in the BHB 401(k) Plan trustee for which participants have not issued timely voting instructions in the same proportion as the votes received on shares that participants have provided voting instructions.

Shares Held in the BHB ESOP Plan: If you are a participant in the BHB ESOP and indirectly hold shares of BHB common stock through the BHB ESOP, you may vote any shares of BHB common stock held in your BHB ESOP account as of the BHB record date ONLY by following the separate voting instructions provided by the BHB ESOP trustee. Your ESOP vote authorization form must be received by 11:59 p.m., Eastern Time, on January 9, 2019. The telephonic and internet voting cutoff for providing your ESOP vote authorization is 11:59 p.m., Eastern Time, on January 9, 2019. Under the terms of the BHB ESOP, the BHB ESOP trustee votes all shares held by the BHB ESOP, but each BHB ESOP participant may direct the trustee how to vote the shares of BHB common stock allocated to his or her account. The BHB ESOP trustee will vote all unallocated shares of BHB common stock held by the BHB ESOP and allocated shares for which no voting instructions are received in the same proportion as shares for which it has received timely voting instructions, so long as such vote is solely in the interests of participants and beneficiaries and in accordance with the requirements of the Employee Retirement Income Security Act of 1974, as amended.

 

Q.

Will BHB’s stockholders be able to vote their shares in person at the BHB special meeting?

 

A.

Yes. Submitting a proxy will not affect the right of any BHB stockholder to vote in person at the BHB special meeting of stockholders. If a BHB stockholder holds shares in “street name”, the BHB stockholder must request a proxy from his, her or its broker, bank or other holder of record in order to vote those shares in person at the BHB special meeting. Participants in the BHB 401(k) Plan or the BHB ESOP will not be able to vote their applicable shares by proxy or by ballot at the BHB special meeting.

 

Q.

May a BHB stockholder change its vote after submitting a proxy?

 

A.

Yes. A BHB stockholder may change a vote at any time before the BHB stockholder’s proxy is voted at the BHB special meeting. A proxy may be revoked by executing and timely submitting a later-dated proxy card, or by attending the BHB special meeting and voting in person.

A BHB stockholder executing a BHB proxy card may also revoke the proxy at any time before it is voted by giving written notice revoking the proxy to BHB’s Corporate Secretary, by timely filing another BHB proxy card bearing a later date or by attending the BHB special meeting and voting in person. Attending the BHB special meeting will not automatically revoke a BHB stockholder’s prior submission of a proxy (by Internet, telephone or in writing). All written notices of revocation or other communications with respect to revocation of proxies should be addressed to:

Blue Hills Bancorp, Inc.

500 River Ridge Drive

Norwood, Massachusetts 02062

(617) 360-6520

Attention: Lauren B. Messmore, Corporate Secretary

Participants in the BHB 401(k) Plan may revoke their instructions to the BHB 401(k) Plan trustee with respect to voting of the shares of BHB common stock held in their BHB 401(k) Plan account by submitting to the BHB 401(k) Plan trustee a signed instruction card bearing a later date, provided that such new instruction card must be received by the BHB 401(k) Plan trustee on or prior to the last date for submission of such instructions with respect to the BHB special meeting designated in the separate voting instructions provided by the BHB 401(k) Plan trustee.

 

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Participants in the BHB ESOP may revoke their instructions to the BHB ESOP trustee with respect to voting of the shares of BHB common stock held in their BHB ESOP account by submitting to the BHB ESOP trustee a signed instruction card bearing a later date, provided that such new instruction card must be received by the BHB ESOP trustee on or prior to the last date for submission of such instructions with respect to the BHB special meeting designated in the separate voting instructions provided by the BHB ESOP trustee.

 

Q.

What should BHB stockholders do if they receive more than one set of voting materials?

 

A.

BHB stockholders may receive more than one set of voting materials, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold shares of BHB common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold these shares. If you are a holder of record of BHB common stock and your shares are registered in more than one name, you will receive more than one proxy card. In addition, if you are a holder of both BHB common stock and Independent common stock, you will receive one or more separate proxy cards or voting instruction cards for each company. Please complete, sign, date and return each proxy card that you receive or otherwise follow the voting instructions set forth in this joint proxy statement/prospectus to ensure that you vote every share of BHB common stock and/or Independent common stock that you own.

 

Q.

What do BHB’s stockholders need to do now?

 

A.

After carefully reading and considering the information contained in this joint proxy statement/prospectus, BHB’s stockholders are requested to complete and return their respective proxies as soon as possible.

The BHB proxy card will instruct the persons named on the BHB proxy card to vote the BHB stockholder’s shares of BHB common stock at the BHB special meeting as the stockholder directs. If a BHB stockholder signs, dates and sends in a BHB proxy card and does not indicate how the stockholder wishes to vote, the proxy will be voted “FOR” both of the BHB special meeting proposals.

 

Q.

If I am a BHB stockholder, who can help answer my questions?

 

A.

If you have any questions about the merger or the BHB special meeting, or if you need additional copies of this joint proxy statement/prospectus or the enclosed BHB proxy card, you should contact BHB’s proxy solicitor at the following address or phone number:

Georgeson LLC

1290 Avenue of the Americas, 9th Floor

New York, New York 10104

(888) 607-9252

Questions and Answers About the Special Meeting of Independent Shareholders

 

Q.

When and where will Independent’s shareholders meet?

 

A.

Independent will hold its special meeting of shareholders on January 25, 2019 at 10:00 a.m., local time, at the Doubletree by Hilton Boston located at 929 Hingham Street, Rockland, Massachusetts 02370.

 

Q.

What matters are Independent’s shareholders being asked to approve at the Independent special meeting pursuant to this joint proxy statement/prospectus?

 

A.

Independent’s shareholders are being asked to approve the merger agreement and the transactions contemplated by the merger agreement, including the merger and the issuance of up to 6,835,690 shares of Independent common stock to be issued in connection with the merger. We refer to this proposal as the Independent merger agreement proposal.

Independent’s shareholders are also being asked to authorize the board of directors of Independent to adjourn or postpone the Independent special meeting, if necessary, to permit further solicitation of proxies

 

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in favor of the Independent merger agreement proposal or to vote on other matters properly before the Independent special meeting. We refer to this proposal as the Independent adjournment proposal.

 

Q.

What does Independent’s board of directors recommend with respect to the two proposals?

 

A.

Independent’s board of directors has unanimously approved the merger agreement and determined that the merger agreement and the merger are in the best interest of, and advisable to, Independent and its shareholders and unanimously recommends that Independent’s shareholders vote “FOR” the Independent merger agreement proposal.

Independent’s board of directors also recommends that Independent’s shareholders vote “FOR” the Independent adjournment proposal.

 

Q.

Who is eligible to vote at the Independent special meeting of shareholders?

 

A.

Only holders of record of Independent common stock at the close of business on December 4, 2018, which is the record date for the Independent special meeting of shareholders, are entitled to vote at the Independent special meeting.

 

Q.

How many votes must be represented in person or by proxy at the Independent special meeting to have a quorum?

 

A.

The holders of a majority of the shares of Independent common stock outstanding and entitled to vote at the Independent special meeting of shareholders, present in person or represented by proxy, will constitute a quorum at the Independent special meeting.

 

Q.

What vote by Independent’s shareholders is required to approve the Independent special meeting proposals?

 

A.

Approval of the Independent merger agreement proposal will require the affirmative vote of the holders of at least two-thirds of the shares of Independent common stock outstanding and entitled to vote. Abstentions and broker non-votes will have the same effect as shares voted against the Independent merger agreement proposal.

Approval of the Independent adjournment proposal will require the affirmative vote of a majority of the shares voted on the Independent adjournment proposal. Abstentions and broker non-votes will not affect whether the Independent adjournment proposal is approved.

 

Q.

Are any Independent shareholders already committed to vote in favor of any of the Independent special meeting proposals?

 

A.

No, none of Independent’s shareholders have committed to vote any their shares of Independent common stock in favor of any of the Independent special meeting proposals.

 

Q.

How may Independent’s shareholders vote their shares for the Independent special meeting proposals presented in this joint proxy statement/prospectus?

 

A.

Shares Held of Record: If you are a shareholder of record of Independent common stock as of the Independent record date, you may submit your proxy before the Independent special meeting in one of the following ways:

 

   

by signing the enclosed proxy card and mailing it in the enclosed, prepaid and addressed envelope;

 

   

by calling the toll-free number on your proxy card and following the instructions; or

 

   

by accessing the web page at the internet address shown on your proxy card and following the on-screen instructions.

Proxies submitted by mail must be received by the close of business on January 24, 2019. Proxies submitted by telephone or through the Internet must be received by 8:00 a.m., Eastern Time, on January 25, 2019.

 

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Shares Held in Brokerage Accounts: If you hold your shares of Independent common stock in street name (that is, you hold your shares of Independent common stock through a broker, bank or other holder of record), your bank, broker or other holder of record will forward proxy materials and voting instructions that you must follow in order to vote your shares of Independent common stock. You may receive more than one proxy card if your shares of Independent common stock are registered in different names or are held in more than one account. A broker, bank or other holder of record will not be able to vote your shares at the Independent special meeting without first receiving instructions from you on how to vote.

Shares Held in the Independent 401(k) Plan: If you are a participant in the Rockland Trust Company Employee Savings, Profit Sharing and Stock Ownership Plan (which we refer to as the Independent 401(k) Plan) and indirectly hold shares of Independent common stock through the Independent 401(k) Plan, you may vote any shares of Independent common stock held in your Independent 401(k) Plan account as of the Independent record date only by following the separate voting instructions provided by the Independent 401(k) Plan administrator.

 

Q.

Will Independent’s shareholders be able to vote their shares in person at the Independent special meeting?

 

A.

Yes. Submitting a proxy will not affect the right of any Independent shareholder to vote in person at the Independent special meeting of shareholders. If an Independent shareholder holds shares in “street name,” the Independent shareholder must request a proxy from his, her or its broker, bank or other holder of record in order to vote those shares in person at the Independent special meeting. Participants in the Independent 401(k) Plan will not be able to vote their applicable shares by proxy or by ballot at the Independent special meeting.

 

Q.

May an Independent shareholder change its vote after submitting a proxy?

 

A.

Yes. An Independent shareholder may change a vote at any time before the Independent shareholder’s proxy is voted at the Independent special meeting. A proxy may be revoked by executing a later-dated proxy card or by attending the Independent special meeting and voting in person.

An Independent shareholder executing an Independent proxy card may also revoke the proxy at any time before it is voted by giving written notice revoking the proxy to Independent’s General Counsel and Corporate Secretary, by subsequently filing another Independent proxy card bearing a later date or by attending the Independent special meeting and voting in person. Attending the Independent special meeting will not automatically revoke an Independent shareholder’s prior submission of a proxy (by Internet, telephone or in writing). All written notices of revocation or other communications with respect to revocation of proxies should be addressed to:

Independent Bank Corp.

288 Union Street

Rockland, Massachusetts 02370

(781) 878-6100

Attention: Edward H. Seksay, General Counsel and Corporate Secretary

Participants in the Independent 401(k) Plan may revoke their instructions to the Independent 401(k) Plan administrator with respect to voting of the shares of Independent common stock held in their Independent 401(k) Plan account by submitting to the Independent 401(k) Plan administrator a signed instruction card bearing a later date, provided that such new instruction card must be received by the Independent 401(k) Plan administrator on or prior to the last date for submission of such instructions with respect to the Independent special meeting designated in the separate voting instructions provided by the Independent 401(k) Plan administrator.

 

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Q.

What should Independent shareholders do if they receive more than one set of voting materials?

 

A.

Independent shareholders may receive more than one set of voting materials, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold shares of Independent common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold these shares. If you are a holder of record of Independent common stock and your shares are registered in more than one name, you will receive more than one proxy card. In addition, if you are a holder of both BHB common stock and Independent common stock, you will receive one or more separate proxy cards or voting instruction cards for each company. Please complete, sign, date and return each proxy card that you receive or otherwise follow the voting instructions set forth in this joint proxy statement/prospectus to ensure that you vote every share of BHB common stock and/or Independent common stock that you own.

 

Q.

What do Independent shareholders need to do now?

 

A.

After carefully reading and considering the information contained in this joint proxy statement/prospectus, Independent’s shareholders are requested to complete and return their respective proxies as soon as possible.

The Independent proxy card will instruct the persons named on the Independent proxy card to vote the Independent shareholder’s shares of Independent common stock at the Independent special meeting as the shareholder directs. If an Independent shareholder signs, dates and sends in an Independent proxy card and does not indicate how the shareholder wishes to vote, the proxy will be voted “FOR” both of the Independent special meeting proposals.

 

Q.

If I am an Independent shareholder, who can help answer my questions?

 

A.

If you have any questions about the merger or the Independent special meeting, or if you need additional copies of this joint proxy statement/prospectus or the enclosed Independent proxy card, you should contact Independent’s proxy solicitor at the following address or phone number:

Georgeson LLC

1290 Avenue of the Americas, 9th Floor

New York, New York 10104

(888) 296-5716

 

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SUMMARY

This summary highlights selected information from this document and may not contain all of the information that is important to you. You should carefully read this entire document and all other documents to which this document refers to fully understand the merger and the related transactions. See “Where You Can Find More Information” beginning on page 122 of this document. Most items in this summary include a page reference directing you to a more complete description of those items.

Unless the context otherwise requires, throughout this document, “Independent” refers to Independent Bank Corp., “BHB” refers to Blue Hills Bancorp, Inc., “Rockland Trust” refers to Rockland Trust Company, and “Blue Hills” refers to Blue Hills Bank; and “we,” “us” and “our” refers to Independent and BHB. Also, we refer to the merger between Independent and BHB as the “merger,” and the Agreement and Plan of Merger, dated as of September 20, 2018, by and among Independent, Rockland Trust, BHB, and Blue Hills as the “merger agreement.”

The Companies (see page 108)

Independent

Independent is a Massachusetts chartered bank holding company headquartered in Rockland, Massachusetts that was incorporated under Massachusetts law in 1985. Independent is the sole shareholder of Rockland Trust, a Massachusetts trust company chartered in 1907. Through its subsidiary, Rockland Trust, Independent offers a full range of banking services through a network of approximately 100 retail branches, commercial and residential lending centers, and investment management offices in eastern Massachusetts, including Greater Boston, the South Shore, Cape Cod and Martha’s Vineyard, and Providence, Rhode Island. Rockland Trust provides investment management and trust services to individuals, institutions, small businesses, and charitable institutions throughout eastern Massachusetts and Rhode Island.

At September 30, 2018, Independent had total consolidated assets of approximately $8.4 billion, net loans of approximately $6.5 billion, total deposits of approximately $7.0 billion, and total shareholders’ equity of approximately $998.3 million.

Independent Bank Corp.

288 Union Street

Rockland, Massachusetts 02370

(781) 878-6100

BHB

BHB is a Maryland corporation headquartered in Norwood, Massachusetts that owns 100% of the common stock of Blue Hills and Blue Hills Funding Corporation. BHB was incorporated in February 2014 to become the holding company of Blue Hills in connection with the mutual-to-stock conversion of Hyde Park Bancorp, MHC, Blue Hills’ former holding company. Through its subsidiary, Blue Hills, which is a Massachusetts-chartered savings bank organized in 1871 and headquartered in Hyde Park, Massachusetts, BHB provides financial services to individuals, families, small to mid-size businesses and government and non-profit organizations online and through eleven full-service branch offices located in Boston, Dedham, Hyde Park, Milton, Nantucket, Norwood, West Roxbury, and Westwood, Massachusetts. The three branches in Nantucket were acquired in January 2014 and operate under the name Nantucket Bank, a division of Blue Hills. Blue Hills also operates loan production offices in Boston, Concord, Dorchester, Franklin, Hingham, Lowell, Marblehead, Plymouth, Watertown, and Winchester, Massachusetts.



 

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At September 30, 2018, BHB had total consolidated assets of approximately $2.8 billion, net loans of approximately $2.3 billion, total deposits of approximately $2.2 billion, and total stockholders’ equity of approximately $403.1 million.

Blue Hills Bancorp, Inc.

500 River Ridge Drive

Norwood, Massachusetts 02062

(617) 360-6520

The Merger and the Merger Agreement (see pages 49 and 87)

The terms and conditions of the merger are contained in the merger agreement, which is attached as Annex A to this joint proxy statement/prospectus. Please carefully read the merger agreement, as it is the legal document that governs the merger. Under the terms of the merger agreement, BHB will merge with and into Independent and Independent will survive the merger.

What Holders of BHB Common Stock Will Receive in the Merger (see page 87)

Upon completion of the merger, each share of BHB common stock will be converted into the right to receive (i) $5.25 in cash and (ii) 0.2308 of a share of Independent common stock.

What Holders of BHB Stock Options and Restricted Stock Will Receive in the Merger

All outstanding unvested BHB stock options and restricted shares of BHB common stock will become fully vested immediately prior to the effective time of the merger. BHB stock options will be cancelled upon consummation of the merger, and each option holder will receive a cash payment upon cancellation of the BHB stock option equal to the product of (i) the number of shares of BHB common stock provided for by such stock option and (ii) the excess, if any, of $26.25 over the exercise price of such stock option. Any BHB stock option with an exercise price in excess of $26.25 will be cancelled as of the effective time of the merger without payment. All restricted shares of BHB common stock will be treated as outstanding shares of BHB common stock for all purposes under the merger agreement, including for purposes of the holders’ right to receive the merger consideration.

BHB’s Reasons for the Merger (see page 53)

In determining whether to approve the merger agreement, BHB’s board of directors evaluated the merger and the merger agreement in consultation with certain of its senior management and with BHB’s legal and financial advisors. In arriving at its determination, BHB’s board of directors also considered the factors described under “The Merger – BHB’s Reasons for the Merger.”

Opinion of BHB’s Financial Advisor (see pages 55 and B-1)

In connection with the merger, BHB’s financial advisor, Keefe, Bruyette & Woods, Inc., which is referred to in this document as KBW, delivered a written opinion, dated September 19, 2018, to the BHB board of directors as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of BHB common stock of the merger consideration in the merger. The full text of the opinion, which describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion, is attached as Annex B to this joint proxy statement/prospectus. The opinion was for the information of, and was directed to, the BHB board of directors (in its capacity as such) in connection with its consideration of the financial terms of the merger. The opinion did not address



 

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the underlying business decision of BHB to engage in the merger or enter into the merger agreement or constitute a recommendation to the BHB board of directors in connection with the merger, and it does not constitute a recommendation to any holder of BHB common stock or any shareholder of any other entity as to how to vote in connection with the merger or any other matter.

Interests of BHB’s Executive Officers and Directors in the Merger (see page 81)

Some of the directors and executive officers of BHB have financial interests in the merger that are different from, or in addition to, the interests of BHB’s other stockholders generally. These interests include rights of executive officers under their existing employment agreements and change in control agreements; rights under employment agreements with Independent executed in connection with the merger agreement; rights under BHB’s equity-based benefit programs and awards, including the acceleration of vesting of stock options and restricted stock; and rights to continued indemnification and insurance coverage by Independent after the merger for acts and omissions occurring before the merger.

In addition, as of the effective time of the merger, Independent will elect, from among those directors serving on BHB’s board of directors as of the date of the merger agreement, three individuals to become directors of Independent and Rockland Trust.

The boards of directors of BHB and Independent were aware of these interests and considered them, among other matters, in approving the merger agreement and related transactions.

Special Meeting of BHB’s Stockholders; Required Vote (see page 39)

BHB will hold a special meeting of stockholders at the Operations Center of Blue Hills Bank, located at 500 River Ridge Drive, Norwood, Massachusetts 02062 on January 16, 2019 at 10:00 a.m., local time. BHB’s stockholders will be asked to:

 

   

approve the merger agreement and the transactions it contemplates, including the merger; and

 

   

authorize the board of directors of BHB to adjourn or postpone the BHB special meeting, if necessary, to permit further solicitation of proxies in favor of the BHB merger agreement proposal or to vote on other matters properly before the BHB special meeting.

BHB’s stockholders can vote at the BHB special meeting if they owned BHB common stock at the close of business on December 4, 2018. On that date, there were 26,859,344 shares of BHB common stock entitled to vote, approximately 4.32% of which were beneficially owned and entitled to be voted by BHB directors and executive officers. BHB’s stockholders can cast one vote for each share of BHB common stock they owned on that date. In order to approve the merger agreement and the transactions it contemplates, the holders of at least a majority of the shares of BHB common stock outstanding and entitled to vote must vote in favor of the proposal. Approval of the BHB adjournment proposal will require the affirmative vote of a majority of the shares voted on the BHB adjournment proposal. Abstentions and broker non-votes will not affect whether the BHB adjournment proposal is approved.

Recommendation of BHB’s Board of Directors (see pages 39 and 53)

BHB’s board of directors has unanimously determined that the merger agreement and the merger are fair to, and advisable to, BHB and its stockholders and, accordingly, unanimously recommends that BHB stockholders vote “FOR” the proposal to approve the merger agreement and the transactions it contemplates and “FOR” the proposal to approve the authorization of the board of directors of BHB to adjourn or postpone the BHB special meeting, if necessary, to permit further solicitation of proxies in favor of the BHB merger agreement proposal or to vote on other matters properly before the BHB special meeting.



 

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BHB’s Directors and Executive Officers Have Agreed to Vote in Favor of the Merger Agreement (see page 102)

On the record date of December 4, 2018, the BHB’s directors and executive officers beneficially owned an aggregate of 1,161,312 shares of BHB common stock. This equals approximately 4.32% of the shares of BHB common stock outstanding and entitled to be voted at the BHB special meeting. Each of these directors and executive officers has agreed with Independent to vote his or her shares of BHB common stock in favor of the merger agreement and the transactions it contemplates.

Non-Solicitation (see page 94)

BHB has agreed that it will not solicit or encourage any inquiries or proposals regarding any acquisition proposals by third parties. BHB may respond to unsolicited proposals in certain circumstances if required by BHB’s board of directors’ fiduciary duties. BHB must promptly notify Independent if it receives any acquisition proposals.

Independent’s Reasons for the Merger and Issuance of Shares of Independent Common Stock (see page 67)

In determining whether to approve the merger agreement, including the issuance of up to 6,835,690 shares of Independent common stock in connection with the merger, Independent’s board of directors consulted with certain of its senior management and with its legal and financial advisors. In arriving at its determination, Independent’s board of directors also considered the factors described under “The Merger – Independent’s Reasons for the Merger.”

Fairness Opinion Rendered to the Independent Board of Directors (see pages 68 and C-1)

Sandler O’Neill & Partners, L.P., which we refer to as Sandler, has provided an opinion to Independent’s board of directors, dated September 20, 2018, to the effect that, as of that date and based upon and subject to the factors and assumptions set forth in the opinion, the merger consideration pursuant to the merger agreement was fair, from a financial point of view, to Independent. The full text of Sandler’s opinion is attached to this joint proxy statement/prospectus as Annex C, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken by Sandler in connection with its opinion. Independent shareholders should read the opinion carefully in its entirety.

Sandler’s opinion speaks only as of the date of the opinion. Sandler’s opinion was addressed to Independent’s board of directors in connection with its consideration of the merger agreement and the merger and does not constitute a recommendation to any Independent shareholder as to how that Independent shareholder should vote on the merger agreement. In addition, Sandler’s opinion was directed only to the fairness, from a financial point of view, of the merger consideration and does not address the underlying business decision of Independent to engage in the merger, the form or structure of the merger, any other transactions contemplated by the merger agreement, the relative merits of the merger as compared to any other alternative transactions or business strategies that might exist for Independent, or the effect of any other transactions in which Independent might engage. Pursuant to an engagement letter between Independent and Sandler, Independent has paid a fee to Sandler for rendering its opinion. For a description of the opinion that Independent received from its financial advisor, see “The Merger – Opinion of Independent’s Financial Advisor,” beginning on page 68.



 

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Special Meeting of Independent’s Shareholders; Required Vote (see page 44)

Independent will hold a special meeting of shareholders at the Doubletree by Hilton, Boston, located at 929 Hingham Street, Rockland, Massachusetts 02370 on January 25, 2019 at 10:00 a.m., local time. Independent’s shareholders will be asked to:

 

   

approve the merger agreement and the transactions it contemplates, including the merger and the issuance of up to 6,835,690 shares of Independent common stock to be issued in connection with the merger; and

 

   

authorize the board of directors of Independent to adjourn or postpone the Independent special meeting, if necessary, to permit further solicitation of proxies in favor of the Independent merger agreement proposal or to vote on other matters properly before the Independent special meeting.

Independent shareholders can vote at the Independent special meeting if they owned Independent common stock at the close of business on December 4, 2018. On that date, there were 28,080,444 shares of Independent common stock entitled to vote, approximately 2.10% of which were beneficially owned and entitled to be voted by Independent directors and executive officers. Independent shareholders can cast one vote for each share of Independent common stock they owned on that date. In order to approve the merger agreement and the transactions it contemplates, the holders of at least two-thirds of the shares of Independent common stock outstanding and entitled to vote must vote in favor of the proposal. The vote required to approve the merger agreement and the transactions it contemplates will also satisfy the Nasdaq shareholder approval requirement for the issuance of up to 6,835,690 shares of Independent common stock in connection with the merger. Approval of the Independent adjournment proposal will require the affirmative vote of a majority of the shares voted on the Independent adjournment proposal. Abstentions and broker non-votes will not affect whether the Independent adjournment proposal is approved.

Recommendation of Independent’s Board of Directors (see pages 44 and 67)

Independent’s board of directors has unanimously determined that the merger agreement and the merger are advisable to Independent and its shareholders and, accordingly, unanimously recommends that Independent’s shareholders vote “FOR” the proposal to approve the merger agreement and the transactions it contemplates and “FOR” the proposal to approve the authorization of the board of directors of Independent to adjourn or postpone the Independent special meeting, if necessary, to permit further solicitation of proxies in favor of the Independent merger agreement proposal or to vote on other matters properly before the Independent special meeting.

Conditions to Complete the Merger (see page 97)

Each of Independent’s and BHB’s obligations to complete the merger is subject to the satisfaction or waiver to the extent legally permitted of a number of mutual conditions, including:

 

   

the approval of the merger agreement and the transactions it contemplates, including the merger, by BHB’s stockholders at the BHB special meeting and by Independent’s shareholders at the Independent special meeting, each as described in this joint proxy statement/prospectus;

 

   

the receipt of all regulatory approvals, waivers, and consents (none of which shall contain a burdensome condition, as defined in the merger agreement), and the expiration of all statutory waiting periods required to complete the merger;

 

   

the effectiveness of the registration statement with respect to the Independent common stock to be issued in the merger under the Securities Act of 1933, as amended (which we refer to as the Securities Act), and the absence of any stop order or proceedings initiated or threatened by the Securities and Exchange Commission for that purpose;



 

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the listing of the shares of Independent common stock issuable pursuant to the merger on the Nasdaq Global Select Market, subject to official notice of issuance; and

 

   

the absence of any statute, regulation, rule, decree, injunction or other order in effect by any court or other governmental entity that prohibits completion of the transactions contemplated by the merger agreement.

Each of Independent’s and BHB’s obligations to complete the merger is also separately subject to the satisfaction or waiver (except for the condition set forth in the first bullet below, which may not be waived in any circumstance) of a number of conditions, including:

 

   

the receipt by the party of a legal opinion from its counsel with respect to certain U.S. federal income tax consequences of the merger; and

 

   

the other party’s representations and warranties in the merger agreement being true and correct, in all material respects, and the performance by the other party in all material respects of its covenants and other obligations under the merger agreement.

BHB’s obligation to complete the merger is also subject to the condition that Independent and Rockland Trust increase the size of their respective board of directors by three directors and elect three current directors of BHB to the boards of directors of Independent and Rockland Trust.

Independent’s obligation to complete the merger is further subject to the conditions that the number of outstanding shares of BHB common stock not exceed 26,899,594, except to the extent increased as a result of the exercise of BHB stock options previously disclosed to Independent; and that no burdensome condition exists with respect to regulatory approvals required for consummation of the merger and the bank merger.

Termination of the Merger Agreement (see page 98)

Independent and BHB may mutually agree at any time to terminate the merger agreement without completing the merger, even if BHB stockholders have approved the merger. Also, either Independent or BHB can terminate the merger agreement in various circumstances, including the following:

 

   

if any regulatory approval and/or waiver necessary for consummation of the transactions contemplated by the merger agreement is not obtained;

 

   

if the merger is not completed by July 31, 2019;

 

   

if the other party breaches the merger agreement in a way that would entitle the party seeking to terminate the merger agreement not to consummate the merger, subject to the right of the breaching party to cure the breach within 30 days following written notice (unless it is not possible due to the nature of the breach for the breaching party to cure the breach); or

 

   

if either BHB stockholders or Independent shareholders do not approve the merger agreement and the transactions it contemplates.

Additionally, Independent may terminate the merger agreement at any time prior to the BHB stockholder meeting if:

 

   

BHB has materially breached its “non-solicitation” obligations described under “The Merger Agreement – No Solicitation of Alternative Transactions” beginning on page 94;

 

   

BHB’s board of directors fails to recommend in this joint proxy statement/prospectus the approval of the merger agreement or changes its initial recommendation to approve the merger agreement;



 

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BHB’s board of directors recommends, proposes or publicly announces its intention to recommend or propose, to engage in an “Acquisition Transaction” with any party other than Independent or a subsidiary of Independent;

 

   

BHB fails to publicly recommend against a tender or exchange offer for 20% or more of the BHB common stock; or

 

   

BHB breaches its obligation to call, give notice of, convene and hold a meeting of stockholders for the purpose of approving the merger agreement and the transactions it contemplates.

Additionally, BHB may terminate the merger agreement:

 

   

if it enters into a “Superior Proposal” as described under “The Merger Agreement – No Solicitation of Alternative Transactions,” so long as it pays a termination fee of $26,200,000 to Independent; or

 

   

pursuant to a “walk away” right that is subject to a “top up” option, if (a) the ten-day volume weighted average closing price (which we refer to as the VWAP) of Independent’s common stock as of a measurement date prior to closing is less than $77.07, which would be more than 15% below the ten-day VWAP of Independent’s common stock for the trading period ended September 19, 2018 ($90.67) the decrease in the ten day VWAP of Independent’s common stock for the trading period ending on September 19, 2018 compared to the ten day VWAP of Independent common stock ending on the measurement date is more than 15% greater than the decrease in the ten day average price of the Nasdaq Bank Stock Index during the same time periods, (c) BHB elects to terminate the agreement by a majority vote of BHB’s directors, and (d) following notice to Independent by BHB of the exercise of its “walk away” right, Independent does not exercise its option under the merger agreement to increase the exchange ratio to a number that would compensate BHB stockholders for the extent of the decrease in Independent’s common stock price below the lowest price per share at which the “walk away” right would not have been triggered. If Independent exercises its “top up” option, then no termination will occur.

Termination Fee (see page 99)

BHB has agreed to pay a termination fee of $26,200,000 to Independent and/or reimburse Independent for certain expenses up to $750,000 if the merger agreement is terminated under any of the circumstances described in “The Merger Agreement – Termination Fee” beginning on page 99.

Regulatory Approvals Required for the Merger (see page 79)

Completion of the transactions contemplated by the merger agreement is subject to regulatory approvals and/or waivers from the Federal Reserve Board, the Federal Deposit Insurance Corporation (which we refer to in this joint proxy statement/prospectus as the FDIC), and the Massachusetts Division of Banks. Independent and BHB have filed or will file all of the required applications and notices with regulatory authorities. Although we do not know of any reason why we would not be able to obtain the necessary regulatory approvals in a timely manner, we cannot be certain when or if we will receive them.

Material U.S. Federal Income Tax Consequences of the Merger (see page 104)

The merger is intended to qualify, and the obligations of the parties to complete the merger are conditioned upon the receipt of a legal opinion from their respective counsel to the effect that the merger will qualify, as a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended, which is referred to in this joint proxy statement/prospectus as the Code. BHB’s stockholders should not recognize gain or loss with respect to the Independent common stock that they receive in the merger, except with respect to any cash they receive in lieu of receiving a fractional share of Independent common stock, and will generally recognize gain (but not loss) with respect to the cash portion of the merger consideration they receive.



 

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This tax treatment may not apply to all of BHB’s stockholders. Determining the actual tax consequences of the merger to BHB stockholders can be complicated and will depend upon their particular circumstances. BHB’s stockholders should consult their own tax advisor for a full understanding of the merger’s tax consequences that are particular to each BHB stockholder.

To review the tax consequences of the merger to BHB’s stockholders in greater detail, please see the section “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 104.

Rights of Independent Shareholders Differ from Those of BHB Stockholders (see page 111)

When the merger is completed, BHB stockholders will receive Independent common stock as approximately 80% of the consideration in the merger and become Independent shareholders. The rights of Independent shareholders differ from the rights of BHB stockholders in important ways. Many of these differences relate to provisions in Independent’s articles of organization and bylaws that differ from those of BHB. See “Comparison of Rights of Shareholders of Independent and Stockholders of BHB” beginning on page 111 for a summary of the material differences between the respective rights of BHB and Independent stockholders.

Dividend Policy of Independent; Dividends from BHB (see page 112)

The holders of Independent common stock receive dividends as and when declared by Independent’s board of directors. Independent declared cash dividends of $0.38 per share of common stock in the first, second and third quarters of 2018, cash dividends of $0.32 per share of common stock for each quarter of 2017, and $0.29 per share of common stock for each quarter of 2016. After completion of the merger, the timing and amount of the payment of dividends will be at the discretion of Independent’s board of directors and will be determined after consideration of various factors, including level of earnings, cash requirements and financial condition.

Prior to completion of the merger, BHB’s stockholders will continue to receive any regular quarterly dividends declared and paid by BHB, at a rate not to exceed $0.20 per share of BHB common stock.

Dissenters’ Rights of Appraisal

Dissenters’ rights are statutory rights that, if applicable under law, enable stockholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares in cash as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction. Dissenters’ rights are not available in all circumstances, and exceptions to these rights are provided under the Maryland General Corporation Law, as amended (which is referred to in this document as the MGCL), and the Massachusetts Business Corporation Act, as amended (which is referred to in this document as the MBCA). Under the provisions of the MGCL and the MCBA, neither BHB stockholders nor Independent shareholders are entitled to dissenters’ rights in the merger.

Comparative Per Share Market Price Information of Independent Common Stock and BHB Common Stock (see page 27)

Independent common stock and BHB common stock each trades on the Nasdaq Global Select Market under the symbols “INDB” and “BHBK,” respectively. The following presents the closing sale prices of Independent common stock and BHB common stock on September 20, 2018, the last trading day before we announced the merger agreement, and December 6, 2018, the last practicable trading day prior to mailing this document. The table also sets forth the equivalent value of the consideration to be paid in the merger per share of BHB common stock on those dates, calculated by adding $5.25 to the product obtained by multiplying the closing price of



 

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Independent common stock on those dates by an exchange ratio of 0.2308, which represents the fraction of a share of Independent common stock that BHB’s stockholders will receive in the merger for each share of BHB common stock.

 

Date

   Independent
Closing Price
     BHB
Closing Price
     Exchange
Ratio
     Cash
Consideration
     Equivalent Per
Share Value
 

Sept. 20, 2018

   $ 89.95      $ 23.55        0.2308      $ 5.25      $ 26.01  

Dec. 6, 2018

   $ 74.72      $ 22.68        0.2308      $ 5.25      $ 22.50  

The market prices of both Independent common stock and BHB common stock will fluctuate prior to the merger. You should obtain current stock price quotations for Independent common stock and BHB common stock.



 

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RISK FACTORS

In addition to the other information included in this proxy statement/prospectus, including the matters addressed under “Forward-Looking Statements,” BHB’s stockholders and Independent’s shareholders should carefully consider the following risks before deciding whether to vote for approval of the merger agreement. In addition, stockholders of BHB should read and consider the risks associated with the business of Independent because these risks will relate to the combined company. Certain of these risks with respect to the business of Independent can be found in Independent’s annual report on Form 10-K for the fiscal year ended December 31, 2017, and quarterly reports on Form 10-Q for each of the quarters ended March 31, 2018, June 30, 2018 and September 30, 2018, which reports are incorporated by reference into this joint proxy statement/prospectus. You should also consider the other information in this joint proxy statement/prospectus and the other documents incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference” beginning on page 122.

Risks Related to the Merger

Absent an exercise by BHB of its “walk away” right and a subsequent “top up” election by Independent, the exchange ratio used to determine the stock portion of the consideration in the merger will be 0.2308 and will not change due to changes in the market value of Independent common stock before the completion of the merger, regardless of how significant such changes might be.

Upon completion of the merger, each share of BHB common stock will be converted into the right to receive (i) $5.25 in cash and (2) 0.2308 of a share of Independent common stock. The exchange ratio used to determine the stock portion of the merger consideration will not increase based on fluctuations in the market price of Independent common stock regardless of how far the price of Independent common stock falls, except in the event Independent’s stock drops below certain levels and BHB exercises its “walk away” right and Independent subsequently exercises its right to “top up” the stock consideration to void the “walk away” right. The market value of Independent common stock has varied since Independent and BHB entered into the merger agreement and will continue to vary in the future due to changes in the business, operations or prospects of Independent, market assessments of the merger, regulatory considerations, market and economic considerations, and other factors both within and beyond the control of Independent. Therefore, at the time of the BHB special meeting, BHB’s stockholders will not know or be able to calculate the market value of the Independent common stock they will receive upon completion of the merger. For example, based on the range of closing prices of Independent common stock during the period from September 20, 2018, the last trading day before public announcement of the merger, through December 6, 2018, the last practicable date before the date of this document, the exchange ratio for the stock portion of the merger consideration plus the cash portion of the merger consideration represented a market value ranging from a low of $22.32 to a high of $26.01 for each share of BHB common stock exchanged for the merger consideration.

Because the market price of Independent common stock will fluctuate, BHB stockholders cannot be sure of the trading price of the stock portion of the merger consideration they will receive and the price of Independent common stock might decrease after the merger.

Upon completion of the merger, each share of BHB common stock will be converted into the right to receive merger consideration consisting of (i) $5.25 in cash and (2) 0.2308 of a share of Independent common stock. BHB does not have the right under the merger agreement to increase the exchange ratio in the merger agreement in the event of any decline in the stock price of Independent prior to the merger. There also will be a period of time between the date when BHB stockholders vote on the merger agreement and the date when the merger is completed. The market price of Independent common stock may vary between the date of this joint proxy statement/prospectus, the date of the BHB special meeting, and the date of completion of the merger. For example, during the twelve-month period ending on December 6, 2018 (the last practicable date before the date of this document), the closing price of Independent common stock varied from a low of $68.60 to a high of

 

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$92.40 and ended that period at $74.72. The market value of Independent common stock fluctuates based upon general market economic conditions, Independent’s business and prospects and other factors. Many of these factors are beyond the control of Independent and are not necessarily related to a change in the financial performance or condition of Independent. As the market price for shares of Independent will fluctuate, based on numerous factors, the value of the shares of Independent common stock that a BHB stockholder will receive in the merger will correspondingly fluctuate. It is impossible to know the market price of Independent common stock after completion of the merger. Accordingly, the price of Independent common stock on the date of the BHB special meeting may not be indicative of the price of Independent common stock immediately prior to completion of the merger and the price of Independent common stock after the merger is completed. Independent’s common stock is listed on the Nasdaq Global Select Market under the symbol “INDB.” We urge BHB stockholders to obtain current market quotations for Independent common stock on a regular basis.

Independent intends to incur debt to fund cash payments required in connection with the merger.

Independent will be required to pay cash consideration in connection with the closing of the merger of up to approximately $171.7 million, not including transaction costs and expenses incurred by Independent in connection with the merger. Although the merger agreement does not include a financing contingency, Independent does not currently believe that it will have sufficient cash at closing at the holding company level to pay the cash portion of the merger consideration and other transaction costs and expenses required to complete the merger. Accordingly, Independent intends to issue debt in order to raise cash to complete the merger. If Independent is unable to issue debt on attractive terms or at all, Rockland Trust may have to pay a special dividend to Independent to supply Independent with the cash needed to complete the merger. However, any special dividend is subject to regulatory approval and the cash reserves and regulatory capital of Rockland Trust may be materially adversely affected by the special cash dividend. Independent has not entered into any definitive agreement for debt financing, and its ability to obtain debt financing is subject to various factors, including market conditions, Independent’s operating performance and financial condition and third party credit ratings. Independent cannot assure you that it will be able to secure debt financing in a sufficient amount, on acceptable terms, in a timely manner or at all, and Independent further cannot assure you that in the event it is unable to secure debt financing, Rockland Trust will receive regulatory approval to pay a special dividend to Independent.

The fairness opinions rendered to the boards of directors of BHB and Independent by the parties’ respective financial advisors prior to the signing of the merger agreement do not reflect changes in events or circumstances occurring after the respective dates of the opinions.

The opinions of KBW, financial advisor to BHB, and of Sandler, financial advisor to Independent, were delivered on and dated September 19, 2018 and September 20, 2018, respectively. Neither opinion reflects changes that may occur or may have occurred after the date on which it was delivered, including changes to the operations and prospects of BHB or Independent, changes in general market and economic conditions or other changes. Any of these changes may alter the relative value of BHB or Independent or the prices of shares of BHB common stock or Independent common stock by the time the merger is completed. The opinions do not speak as of the date the merger will be completed or as of any date other than the dates of the respective opinions, and neither BHB nor Independent expects to request updated fairness opinions from their respective financial advisors. For a description of the opinion of BHB’s financial advisor, please see “The Merger – Opinion of BHB’s Financial Advisor.” For a description of the opinion of Independent’s financial advisor, please see “The Merger – Opinion of Independent’s Financial Advisor.”

BHB will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on BHB and, consequently, on Independent. These uncertainties may impair BHB’s ability to attract, retain and motivate key personnel until the merger is consummated, and could cause customers and others that deal with BHB to

 

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seek to change existing business relationships with BHB. Retention of certain employees may be challenging during the pendency of the merger, as certain employees may experience uncertainty about their future roles with Independent. If key employees depart because of issues relating to the uncertainty or difficulty of integration or a desire not to remain with Independent, Independent’s business following the merger could be harmed. In addition, the merger agreement restricts BHB from taking certain actions without the consent of Independent until the merger occurs. These restrictions may prevent BHB from pursuing attractive business opportunities that may arise prior to the completion of the merger. Please see the section entitled “The Merger Agreement – Conduct of Business Pending the Merger” of this joint proxy statement/prospectus for a description of the restrictive covenants to which BHB is subject.

Independent may fail to realize all of the anticipated benefits of the merger, particularly if the integration of Independent’s and BHB’s businesses is more difficult than expected.

The success of the merger will depend, in part, on our ability to successfully combine the businesses of Independent and BHB. Independent may fail to realize some or all of the anticipated benefits of the transaction if the integration process takes longer or is more costly than expected. Furthermore, any number of unanticipated adverse occurrences for either the business of BHB or Independent may cause us to fail to realize some or all of the expected benefits. The integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the merger. Each of these issues might adversely affect Independent, BHB or both during the transition period, resulting in adverse effects on Independent following the merger. As a result, revenues may be lower than expected or costs may be higher than expected and the overall benefits of the merger may not be as great as anticipated.

Some of the directors and executive officers of BHB may have interests and arrangements that may have influenced their decisions to support and recommend that you approve the merger.

The interests of some of the directors and executive officers of BHB may be different from those of BHB stockholders, and certain directors and executive officers of BHB may be participants in arrangements that are different from, or are in addition to, those of BHB stockholders, including agreements in settlement of obligations to such officers under pre-existing employment and change in control agreements, employment agreements with Rockland Trust, and provisions in the merger agreement relating to indemnification of directors and officers and insurance for directors and officers of BHB for events occurring before the merger. These interests are described in more detail in the section of this joint proxy statement/prospectus entitled “The Merger – Interests of BHB’s Executive Officers and Directors in the Merger” beginning on page 81.

The merger agreement limits BHB’s ability to pursue alternatives to the merger.

The merger agreement contains provisions that limit BHB’s ability to solicit, initiate, encourage or take any actions to facilitate competing third-party proposals to acquire all or substantially all of BHB. These provisions, which include a $26,200,000 termination fee and/or the reimbursement of up to $750,000 in Independent’s expenses, payable under certain circumstances, might discourage a potential competing acquiror that might have an interest in acquiring all or substantially all of BHB from considering or proposing that acquisition even if it were prepared to pay consideration with a higher per share market price than that proposed in the merger, or might result in a potential competing acquiror proposing to pay a lower per share price to acquire BHB than it might otherwise have proposed to pay.

Regulatory approvals may not be received, may take longer to receive than expected or may impose burdensome conditions that are not presently anticipated.

Before the merger may be completed, certain approvals or consents must be obtained from the various bank regulatory and other authorities of the United States and the Commonwealth of Massachusetts. These

 

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governmental entities, including the Federal Reserve Board, the FDIC and the Massachusetts Division of Banks, may impose conditions on the completion of the merger or require changes to the terms of the merger. While Independent and BHB do not currently expect that any such conditions or changes would be imposed, there can be no assurance that they will not be, and such conditions or changes could have the effect of delaying completion of the merger or imposing additional costs on or limiting the revenues of Independent following the merger, any of which might have a material adverse effect on Independent following the merger. Independent is not obligated to complete the merger if the regulatory approvals received in connection with the completion of the merger include any conditions or restrictions that would constitute a “Burdensome Condition” as defined in the merger agreement.

There can be no assurance as to whether the regulatory approvals will be received or the timing of the approvals. For more information, see the section entitled “The Merger – Regulatory Approvals Required to Complete the Merger” of this joint proxy statement/prospectus beginning on page 79.

If the merger is not consummated by July 31, 2019, either Independent or BHB may choose not to proceed with the merger.

Either Independent or BHB may terminate the merger agreement if the merger has not been completed by July 31, 2019, unless the failure of the merger to be completed has resulted from the failure of the party seeking to terminate the merger agreement to perform its obligations.

The shares of Independent common stock to be received by BHB stockholders as a result of the merger will have different rights from the shares of BHB common stock.

The rights associated with BHB common stock are different from the rights associated with Independent common stock. See the section of this joint proxy statement/prospectus entitled “Comparison of Rights of Shareholders of Independent and Stockholders of BHB” beginning on page 111 for a discussion of the different rights associated with Independent common stock.

Stockholders of BHB will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

As a result of the merger, the percentage ownership of every BHB stockholder in the combined company will be smaller than the BHB stockholder’s percentage ownership of BHB prior to the merger. Independent estimates that upon completion of the merger, current BHB stockholders will own approximately 18% of the outstanding shares of Independent common stock, and current Independent shareholders will own approximately 82% of the outstanding shares of Independent common stock.

Failure to complete the merger could negatively impact the future business and financial results of BHB.

If the merger is not completed, the ongoing business of BHB may be adversely affected and BHB will be subject to several risks, including the following:

 

   

BHB may be required, under certain circumstances, to pay Independent a termination fee of $26,200,000 and/or the reimbursement of up to $750,000 in Independent’s expenses under the merger agreement;

 

   

BHB will be required to pay certain costs relating to the merger, whether or not the merger is completed, such as legal, accounting, financial advisor and printing fees;

 

   

under the merger agreement, BHB is subject to certain restrictions on the conduct of its business prior to completion of the merger, which may adversely affect its ability to execute certain of its business strategies; and

 

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matters relating to the merger may require substantial commitments of time and resources by BHB’s management, which could otherwise have been devoted to other opportunities that may have been beneficial to BHB as an independent company.

In addition, if the merger is not completed, BHB may experience negative reactions from its customers and employees. BHB also could be subject to litigation related to any failure to complete the merger or to enforcement proceedings commenced against BHB to perform its obligations under the merger agreement. If the merger is not completed, BHB cannot assure its stockholders that the risks described above will not materialize and will not materially affect the business and financial results of BHB.

BHB stockholders will not have dissenters’ rights in the merger.

Dissenters’ rights are statutory rights that, if applicable under law, enable stockholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction. Under the Maryland General Corporation Law, a stockholder may not dissent from a merger as to shares that are listed on a national securities exchange at the record date fixed to determine the stockholders entitled to receive notice of the meeting of stockholders to vote upon the agreement of merger or consolidation.

Because BHB common stock is listed on the Nasdaq Global Select Market, a national securities exchange, and is expected to continue to be so listed on the record date, and because the merger otherwise satisfies the foregoing requirements of the Maryland General Corporation Law, holders of BHB common stock will not be entitled to dissenters’ rights in the merger with respect to their shares of BHB common stock.

Independent will be able to issue additional shares of its common stock in the future, which may adversely affect the market price of Independent common stock and dilute the holdings of existing shareholders.

In the future, Independent may issue additional shares of Independent common stock in connection with another acquisition, to increase its capital resources or if Independent’s or Rockland Trust’s capital ratios fall below or near the Basel III regulatory required minimums. Additional common stock offerings may dilute the holdings of Independent’s existing shareholders or reduce the market price of Independent common stock, or both. Independent may also issue shares of Independent preferred stock, which may be viewed as having adverse effects upon the holders of common stock.

Risks Related to Independent’s Business

Independent and Rockland Trust will have over $10 billion in total consolidated assets as a result of the merger, which will lead to increased regulation.

Upon consummation of the merger, and as of September 30, 2018 on a pro forma basis giving effect to the merger, Independent and Rockland Trust will each have approximately $11.5 billion in total consolidated assets. Accordingly, Independent and Rockland Trust will become subject to certain regulations that apply only to depository institution holding companies or depository institutions with total consolidated assets of $10 billion or more.

Debit card interchange fee restrictions set forth in Section 1075 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is known as the Durbin Amendment, as implemented by regulations of the Federal Reserve Board, cap the maximum debit interchange fee that a debit card issuer may receive per transaction at the sum of $0.21 plus five basis points. A debit card issuer that adopts certain fraud prevention procedures may charge an additional $0.01 per transaction. Debit card issuers with total consolidated assets of less than $10 billion, which currently includes Rockland Trust and Blue Hills, are exempt from these interchange

 

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fee restrictions. The exemption for small issuers ceases to apply as of July 1st of the year following the calendar year in which the debit card issuer has total consolidated assets of $10 billion or more at calendar year-end. As a result, if the bank merger is consummated in 2019, Rockland Trust will become subject to the interchange restrictions of the Durbin Amendment beginning July 1, 2020.

In addition, an insured depository institution with total assets of $10 billion or more is subject to supervision, examination, and enforcement with respect to consumer protection laws by the Consumer Financial Protection Bureau, which we refer to as the CFPB. Under its current policies, the CFPB will assert jurisdiction in the first quarter after the call reports of merging insured depository institutions, on a combined basis, show total consolidated assets of $10 billion or more for four consecutive quarters, including quarters ended prior to the merger. As a result, Independent expects Rockland Trust to become subject to CFPB supervision, examination and enforcement at the beginning of the quarter following consummation of the bank merger.

There are other regulatory requirements that apply to insured depository institution holding companies and insured depository institutions with total consolidated assets of $10 billion or more. These include, but are not limited to, (i) the establishment by publicly traded depository institution holding companies with $10 billion or more in assets of a risk committee responsible for oversight of enterprise-wide risk management practices that are commensurate with the entity’s structure, risk profile, complexity, activities and size and (ii) an institution with total consolidated assets of $10 billion or more no longer being entitled to benefit from the FDIC’s offset of the effect of the increase in the statutory minimum Deposit Insurance Fund reserve ratio to 1.35% from the former statutory minimum of 1.15% that is required for institutions with assets of less than $10 billion by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

In addition, Congress and/or regulatory agencies may impose new requirements or surcharges on these institutions in the future. The Economic Growth, Regulatory Reform, and Consumer Protection Act, which was enacted on May 24, 2018, includes provisions that, as they are implemented, relieve banking organizations with total consolidated assets of less than $10 billion (and that satisfy certain other conditions) from risk-based capital requirements, restrictions on proprietary trading and investment and sponsorship in hedge funds and private equity funds known as the Volcker Rule, and certain other regulatory requirements. Once Independent and Rockland Trust have total consolidated assets of $10 billion or more, Independent and Rockland Trust will no longer qualify for any of the foregoing relief.

There can be no assurance that the benefits of the merger will outweigh the regulatory costs resulting from Independent and Rockland Trust having total consolidated assets of $10 billion or more.

You should read and consider other risk factors specific to Independent’s business that will also affect the combined company after the merger is consummated. These risks are described in the sections entitled “Risk Factors” in Independent’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and in other documents incorporated by reference into this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 122 of this joint proxy statement/prospectus for the location of information incorporated by reference into this joint proxy statement/prospectus.

 

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FORWARD-LOOKING STATEMENTS

This document contains or incorporates by reference forward-looking statements regarding the financial condition, results of operations, earnings outlook, and business prospects of Independent, BHB and the potential combined company and may include statements for the period following the completion of the merger. You can find many of these statements by looking for forward-looking terminology such as “should,” “expect,” “believe,” “view,” “opportunity,” “allow,” “continues,” “reflects,” “typically,” “usually,” “anticipate,” or similar statements or variations of such terms.

The forward-looking statements involve certain assumptions, risks, and uncertainties. In particular, the ability of either Independent or BHB to predict results or actual effects of its plans and strategies, or those of the combined company, is inherently uncertain. Accordingly, actual results may differ materially from those expressed in, or implied by, the forward-looking statements. You are therefore cautioned not to place undue reliance on these statements, which speak only as of the date of this document or the date of any document incorporated by reference in this document. Some of the factors that may cause actual results or earnings to differ materially from those contemplated by the forward-looking statements include, but are not limited to, those discussed elsewhere in this joint proxy statement/prospectus under “Risk Factors”, as well as the following:

 

   

those risks and uncertainties Independent discusses or identifies in its public filings with the Securities and Exchange Commission (which is referred to in this document as the SEC);

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement;

 

   

the risk that BHB’s stockholders may not adopt the merger agreement;

 

   

the risk that Independent’s shareholders may not adopt the merger agreement, including the issuance of up to 6,835,690 shares of Independent common stock in connection with the merger;

 

   

the risk that the necessary regulatory approvals may not be obtained, may be delayed, or may be obtained subject to conditions that are not anticipated;

 

   

the risk that Independent is required to issue debt on terms that are less than attractive in order to raise cash to complete the merger;

 

   

delays in closing the merger or other risks that any of the closing conditions to the merger may not be satisfied in a timely manner or at all;

 

   

the diversion of management’s time from existing business operations due to time spent related to the merger or integration efforts;

 

   

the risk that the businesses of Independent and BHB will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected;

 

   

expected revenue and other synergies and cost savings from the merger may not be fully realized or realized within the expected time frame;

 

   

revenues following the merger may be lower than expected;

 

   

expenses related to the merger and costs following the merger may be higher than expected;

 

   

competitive pressure among financial services companies may increase significantly;

 

   

general economic or business conditions, either nationally, regionally, or in the markets in which Independent and BHB do business, may be affected by unexpected material adverse changes or be less favorable than expected;

 

   

changes in the interest rate environment may reduce interest margins and impact funding sources;

 

   

changes in both companies’ businesses during the period between now and the completion of the merger may have adverse impacts on the combined company;

 

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changes in market rates and prices may adversely impact the value of financial products and assets;

 

   

deterioration in the credit markets may adversely impact either company or its business;

 

   

legislation or regulatory environments, requirements or changes, including changes in accounting methods, may adversely affect businesses in which either company is engaged;

 

   

potential litigation in connection with the merger and litigation liabilities, including costs, expenses, settlements and judgments, that may adversely affect either company or its businesses; and

 

   

deposit attrition, operating costs, customer loss and business disruption following the merger, including difficulties in maintaining relationships with employees, may be greater than expected.

All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this joint proxy statement/prospectus and attributable to Independent or BHB or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable law or regulation, Independent and BHB undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this joint proxy statements/prospectus or to reflect the occurrence of unanticipated events.

 

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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION

Comparative Per Share Market Price Information

Independent common stock and BHB common stock each trades on the Nasdaq Global Select Market under the symbols “INDB” and “BHBK,” respectively. The following presents the closing sale prices of Independent common stock and BHB common stock on September 20, 2018, the last trading day before we announced the merger agreement, and December 6, 2018, the last practicable trading day prior to mailing this document. The table also sets forth the equivalent value of the consideration to be paid in the merger per share of BHB common stock on those dates, calculated by adding $5.25 to the product obtained by multiplying the closing price of Independent common stock on those dates by an exchange ratio of 0.2308, which represents the fraction of a share of Independent common stock that BHB’s stockholders will receive in the merger for each share of BHB common stock.

 

Date

   Independent
Closing Price
     BHB
Closing Price
     Exchange
Ratio
     Cash
Consideration
     Equivalent Per Share Value  

Sept. 20, 2018

   $ 89.95      $ 23.55        0.2308      $ 5.25      $ 26.01  

Dec. 6, 2018

   $ 74.72      $ 22.68        0.2308      $ 5.25      $ 22.50  

The above table shows only historical comparisons. These comparisons may not provide meaningful information to BHB stockholders in determining whether to approve the merger agreement. The market prices of both Independent common stock and BHB common stock will fluctuate prior to the merger. BHB stockholders are urged to obtain current stock price quotations for Independent common stock and BHB common stock and to review carefully the other information contained in this joint proxy statement/prospectus or incorporated by reference into this joint proxy statement/prospectus in considering whether to approve the merger agreement. See the section entitled “Where You Can Find More Information” beginning on page 122 of this joint proxy statement/prospectus.

 

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Comparative Stock Prices and Dividends

The following table sets forth, for the periods indicated, the high and low closing prices per share of Independent common stock as reported by the Nasdaq Global Select Market and the high and low closing prices per share of BHB common stock as reported by the Nasdaq Global Select Market. The table also provides information as to dividends declared per share of Independent common stock and BHB common stock. As of November 1, 2018, there were 27,551,581 shares of Independent common stock issued and outstanding and approximately 2,441 shareholders of record and 26,857,884 shares of BHB common stock issued and outstanding and approximately 730 stockholders of record.

 

     Independent  
     Closing Price      Dividend per
Share
 
     High      Low  

2016

                    

Quarter Ended March 31,

   $ 47.66      $ 41.35      $ 0.29  

Quarter Ended June 30,

     49.81        42.60        0.29  

Quarter ended September 30,

     54.09        44.26        0.29  

Quarter Ended December 31,

     70.95        52.21        0.29  

2017

                    

Quarter Ended March 31,

   $ 71.45      $ 60.35      $ 0.32  

Quarter Ended June 30,

     67.35        60.45        0.32  

Quarter Ended September 30,

     74.65        66.15        0.32  

Quarter Ended December 31,

     76.15        67.90        0.32  

2018

                    

Quarter Ended March 31,

   $ 75.55      $ 68.60      $ 0.38  

Quarter Ended June 30,

     82.90        70.10        0.38  

Quarter Ended September 30,

     92.40        78.50        0.38  

Quarter Ending December 31, (through December 4)

     84.39        73.96        TBD  

 

     BHB  
     Closing Price      Dividend per
Share
 
     High      Low  

2016

                    

Quarter Ended March 31,

   $ 14.94      $ 13.32      $ 0.02  

Quarter Ended June 30,

     14.90        13.42        0.03  

Quarter ended September 30,

     15.02        13.89        0.03  

Quarter Ended December 31,

     18.90        14.54        0.03  

2017

                    

Quarter Ended March 31,

   $ 19.50      $ 16.60      $ 0.05  

Quarter Ended June 30,

     19.10        17.40        0.25 (1)  

Quarter Ended September 30,

     19.60        17.75        0.15  

Quarter Ended December 31,

     22.00        19.35        0.15  

2018

                    

Quarter Ended March 31,

   $ 21.25      $ 18.80      $ 0.45 (2)  

Quarter Ended June 30,

     22.60        20.20        0.15  

Quarter Ended September 30,

     25.25        21.70        0.20  

Quarter Ending December 31, (through December 4)

     24.49        22.08        0.20  

 

(1) 

Includes a $0.05 regular quarterly cash dividend and a $0.20 special cash dividend

(2) 

Includes a $0.15 regular quarterly cash dividend and a $0.30 special cash dividend

After completion of the merger, the timing and amount of the payment of dividends, if any, will be at the discretion of Independent’s board of directors and will be determined after consideration of various factors, including level of earnings, cash requirements and financial condition.

BHB expects to continue to declare regular quarterly cash dividends on BHB common stock until the merger is completed, subject to the terms and conditions of the merger agreement, which prohibits BHB from declaring or paying any cash dividends other than regular quarterly cash dividends of no more than $0.20 per share of BHB common stock during the time period between the signing of the merger agreement and the closing

 

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of the merger. Accordingly, special dividends consistent with 2018 and 2017 may not be paid by BHB without the prior consent of Independent and are not expected to be paid. Holders of BHB common stock will stop receiving cash dividends with respect to shares of BHB common stock upon completion of the merger, when the separate corporate existence of BHB will cease.

 

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Independent Selected Historical Financial and Operating Data

The following table provides summary historical consolidated financial condition data for Independent as of the end of each of the fiscal years in the five-year period ended December 31, 2017, and operating and per share data and operating ratios for each of the corresponding fiscal years and as of the end of each of the nine months ended September 30, 2018 and September 30, 2017, and for the corresponding fiscal periods. The annual historical consolidated financial condition, operating and per share data and operating ratios have been derived in part from Independent’s audited financial statements and related notes incorporated by reference into this document. The historical consolidated financial condition, operating and per share data, and operating ratios as of the end of each of the nine months ended September 30, 2018 and September 30, 2017 and for the corresponding fiscal periods have been derived from Independent’s unaudited financial statements and related notes incorporated by reference into this document and are not necessarily indicative of the results that may be expected for the full year. The following information is only a summary and you should read it in conjunction with Independent’s financial statements and related notes incorporated by reference into this document.

 

    At or for the Nine Months
Ended September 30,
    At or for the Year Ended December 31,

 

 
    2018
(unaudited)
    2017
(unaudited)
    2017     2016     2015     2014     2013  
    (Dollars in Thousands, Except Per Share Data)  

FINANCIAL CONDITION DATA:

 

Securities

  $ 1,011,577     $ 909,221     $ 946,510     $ 851,524     $ 845,112     $ 724,007     $ 707,514  

Loans

    6,527,402       6,289,902       6,355,553       5,999,605       5,547,721       4,970,733       4,718,307  

Allowance for loan losses

    (63,235     (59,710     (60,643     (61,566     (55,825     (55,100     (53,239

Goodwill and core deposit intangibles

    239,185       242,105       241,147       231,374       212,909       180,306       182,642  

Total assets

    8,375,497       8,052,919       8,082,029       7,709,375       7,209,469       6,364,318       6,098,869  

Total deposits

    6,976,239       6,682,942       6,729,253       6,412,253       5,990,703       5,210,466       4,986,418  

Total borrowings

    299,738       340,683       323,698       335,474       343,933       406,061       448,123  

Stockholders’ equity

    998,305       931,224       943,809       864,690       771,463       640,527       591,540  

Nonperforming loans

    45,394       50,277       49,638       57,407       27,690       27,512       34,659  

Nonperforming assets

    45,584       53,175       50,250       61,580       29,849       38,894       43,833  

Shares outstanding

    27,540,843       27,437,791       27,450,190       27,005,813       26,236,352       23,998,738       23,805,984  

OPERATING DATA:

             

Interest income

  $ 235,791     $ 204,318     $ 277,194     $ 246,637     $ 235,545     $ 216,459     $ 205,914  

Interest expense

    17,918       13,290       18,334       18,793       20,617       20,417       23,336  

Net interest income

    217,873       191,028       258,860       227,844       214,928       196,042       182,578  

Provision (benefit) for loan losses

    3,575       1,650       2,950       6,075       1,500       10,403       10,200  

Noninterest income

    65,014       61,080       82,994       82,428       75,888       69,943       68,009  

Noninterest expenses

    161,578       152,892       204,359       192,122       197,138       171,838       173,649  

Net income

    91,688       65,140       87,204       76,648       64,960       59,845       50,254  

PER SHARE DATA:

             

Net income-basic

  $ 3.33     $ 2.39     $ 3.19     $ 2.90     $ 2.51     $ 2.50     $ 2.18  

Net income-diluted

    3.32       2.38       3.19       2.90       2.50       2.49       2.18  

Cash dividends declared

    1.14       0.96       1.28       1.16       1.04       0.96       0.88  

Book value

    36.25       33.94       34.38       32.02       29.40       26.69       24.85  

OPERATING RATIOS:

             

Return on average assets

    1.49     1.11     1.11     1.04     0.93     0.95     0.87

Return on average common equity

    12.60     9.65     9.55     9.43     8.79     9.66     9.09

Net interest margin (on a fully tax equivalent basis)

    3.87     3.59     3.60     3.40     3.42     3.45     3.51

Equity to assets

    11.92     11.56     11.68     11.22     10.70     10.06     9.70

Dividend payout ratio

    32.39     38.79     39.04     38.76     40.29     37.50     30.09

ASSET QUALITY RATIOS:

             

Nonperforming loans as a percent of gross loans

    0.70     0.80     0.78     0.96     0.50     0.55     0.73

Nonperforming assets as a percent of total assets

    0.54     0.66     0.62     0.80     0.41     0.61     0.72

Allowance for loan losses as a percent of total loans

    0.97     0.95     0.95     1.03     1.01     1.11     1.13

Allowance for loan losses as a percent of nonperforming loans

    139.30     118.76     122.17     107.24     201.61     200.28     153.61

CAPITAL RATIOS:

             

Tier 1 leverage capital ratio

    10.49     10.03     10.04     9.77     9.33     8.84     8.64

Common equity Tier 1 capital ratio

    11.98     11.13     11.20     10.82     10.44     N/A       N/A  

Tier 1 risk-based capital ratio

    13.07     12.24     12.31     11.99     11.71     10.88     10.78

Total risk-based capital ratio

    14.58     13.75     13.82     13.60     13.36     13.15     12.58

 

 

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BHB Selected Historical Consolidated Financial Data

The following table provides summary historical consolidated financial condition data for BHB as of the end of each of the fiscal years in the five-year period ended December 31, 2017, and operating and per share data and operating ratios for each of the corresponding fiscal years and as of the end of each of the nine months ended September 30, 2018 and September 30, 2017, and for the corresponding fiscal periods. The annual historical consolidated financial condition, operating and per share data and operating ratios have been derived in part from BHB’s audited financial statements and related notes incorporated by reference into this document. The historical consolidated financial condition, operating and per share data and operating ratios as of the end of each of the nine months ended September 30, 2018 and September 30, 2017, and for the corresponding fiscal periods, have been derived from BHB’s unaudited financial statements and related notes incorporated by reference into this document and are not necessarily indicative of the results that may be expected for the full year. The following information is only a summary and you should read it in conjunction with BHB’s financial statements and related notes incorporated by reference into this document.

 

    At or for the Nine Months
Ended September 30,
    At or for the Year Ended December 31,
(audited)
 
    2018
(unaudited)
    2017
(unaudited)
    2017     2016     2015     2014     2013  
    (Dollars in Thousands, Except Per Share Data)  

FINANCIAL CONDITION DATA:

 

Securities

  $ 311,205     $ 312,776     $ 313,436     $ 405,863     $ 431,831     $ 416,447     $ 442,056  

Loans (Net)

    2,286,796       2,067,287       2,186,147       1,912,871       1,523,275       1,132,914       764,582  

Allowance for loan losses(1)

    (19,920     (20,248     20,877       18,750       17,102       12,973       9,671  

Goodwill and core deposit intangibles

    9,335       9,892       9,717       10,560       11,785       13,392        

Total assets

    2,782,554       2,545,416       2,668,520       2,469,692       2,114,343       1,728,148       1,314,287  

Total deposits

    2,166,007       1,985,553       2,039,869       1,808,687       1,433,849       1,212,716       915,223  

Total borrowings

    178,000       130,000       205,000       251,000       260,000       75,000       215,000  

Stockholders’ equity

    403,076       399,034       397,806       386,907       398,829       411,606       171,534  

Nonperforming loans

    11,784       11,338       11,523       8,983       10,744       4,481       1,742  

Nonperforming assets

    15,433       11,540       11,523       8,983       10,744       4,481       1,742  

Shares outstanding (Common)

    26,899,594       26,869,088       26,827,660       26,759,953       28,492,732       28,446,813        

OPERATING DATA:

             

Interest income

  $ 75,706     $ 61,900     $ 84,775     $ 69,538     $ 58,301     $ 49,275     $ 33,092  

Interest expense

    18,901       12,657       17,738       12,576       8,744       6,898       7,971  

Net interest income

    56,805       49,243       67,037       56,962       49,557       42,377       25,121  

Provision (credit) for loan losses

    (541     1,417       2,098       4,885       4,090       3,381       4,094  

Noninterest income

    11,385       14,152       17,082       12,127       8,679       9,607       13,011  

Noninterest expenses

    43,085       40,121       54,306       51,746       44,082       49,408       31,659  

Net income (loss)

    18,829       15,196       16,489       8,653       7,227       (183     2,663  

Preferred stock dividend

    N/A       N/A       N/A       N/A       N/A       N/A       N/A  

Net income (loss) available to common shareholders

    18,829       15,196       16,489       8,653       7,227       (183     2,663  

PER SHARE DATA:

             

Net income-basic

  $ 0.78     $ 0.63     $ 0.69     $ 0.35     $ 0.28     $ N/A     $ N/A  

Net income-diluted

    0.75       0.62       0.67       0.35       0.28       N/A       N/A  

Cash dividends declared

    0.80       0.45       0.60       0.11       0.04              

Book value

    14.98       14.85       14.83       14.46       14.00       14.46    

OPERATING RATIOS:

             

Return on average assets

    0.94     0.81     0.65     0.39     0.39     (0.01 )%      0.22

Return on average common equity

    6.28     5.11     4.14     2.20     1.76     (0.07 )%      1.52

Net interest margin (on a fully tax equivalent basis)

    2.95     2.75     2.77     2.68     2.83     2.81     2.24

Equity to assets

    14.93     15.88     15.75     17.53     22.20     17.41     14.68

Dividend payout ratio

    106.67     72.58     89.55     31.43     14.29     N/A       N/A  

ASSET QUALITY RATIOS:

             

Nonperforming loans as a percent of gross loans

    0.51     0.54     0.52     0.47     0.70     0.39     0.23

Nonperforming assets as a percent of total assets

    0.55     0.45     0.43     0.36     0.51     0.26     0.13

Allowance for loan losses as a percent of total loans

    0.86     0.97     0.95     0.97     1.11     1.13     1.25

Allowance for loan losses as a percent of nonperforming loans

    169     179     181     209     159     290     555

CAPITAL RATIOS:

             

Tier 1 leverage capital ratio

    14.43     15.50     14.90     16.00     19.60     23.30     13.20

Common equity Tier 1 capital ratio

    17.38     19.60     18.70     19.50     23.80     N/A       N/A  

Tier 1 risk-based capital ratio

    17.38     19.60     18.70     19.50     23.80     31.50     18.50

Total risk-based capital ratio

    18.26     20.60     19.70     20.50     24.80     32.60     19.80

 

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PRO FORMA FINANCIAL DATA

The following unaudited pro forma condensed combined financial information is based on the historical financial statements of Independent and BHB and has been prepared to illustrate the financial effect of the merger of BHB with and into Independent. The following unaudited pro forma condensed combined financial information combines the historical consolidated financial position and results of operations of Independent and its subsidiaries and BHB and its subsidiaries, as an acquisition by Independent of BHB using the acquisition method of accounting and giving effect to the related pro forma adjustments described in the accompanying notes. Under the acquisition method of accounting, the assets and liabilities of BHB will be recorded by Independent at their respective fair values as of the date the merger is completed.

The unaudited pro forma condensed combined balance sheet gives effect to the transaction as if the transaction had occurred on September 30, 2018. The unaudited pro forma condensed combined income statements for the nine months ended September 30, 2018 and the year ended December 31, 2017 give effect to the transaction as if the transaction had become effective at January 1, 2017.

These unaudited pro forma condensed combined financial statements reflect the merger of BHB with and into Independent based upon estimated preliminary acquisition accounting adjustments. Actual adjustments will be made as of the effective date of the merger and, therefore, may differ from those reflected in the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial statements included in this joint proxy statement/prospectus are presented for informational purposes only and do not necessarily reflect the financial results of the combined company had the companies actually been combined at the beginning of each period presented. The adjustments included in these unaudited pro forma condensed financial statements are preliminary and may be revised. This information also does not reflect the benefits of the expected cost savings and expense efficiencies, opportunities to earn additional revenue, potential impacts of current market conditions on revenues or asset dispositions, among other factors, and includes various preliminary estimates and may not necessarily be indicative of the financial position or results of operations that would have occurred if the merger had been consummated on the date or at the beginning of the period indicated or which may be attained in the future. The unaudited pro forma combined condensed consolidated financial information has been derived from and should be read in conjunction with the historical consolidated financial statements and the related notes of Independent, which have been separately filed by Independent with the SEC and are incorporated by reference in this joint proxy statement/prospectus, and BHB, which have been separately filed by BHB with the SEC and are incorporated by reference in this joint proxy statement/prospectus.

 

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INDEPENDENT BANK CORP.

CONSOLIDATED PRO FORMA STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(in thousands)

 

     September 30, 2018  
     Independent
Historical
     BHB
Historical
     Adjustments(1)(2)     Pro Forma  

Assets

          

Cash and short-term investments

   $ 250,847      $ 47,749      $ 21,116 (3)     $ 319,712  

Securities

     1,011,577        311,205        (10,800 )(4)      1,311,982  

Net loans

     6,464,167        2,286,796        (29,857 )(5)      8,721,106  

Bank premises and equipment

     95,941        19,882        (974 )(6)      114,849  

Goodwill

     231,806        9,160        278,145 (7)       519,111  

Identifiable intangible assets

     7,379        175        32,707 (8)       40,261  

Other assets

     313,780        107,587        13,982 (9)       435,349  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total Assets

   $ 8,375,497      $ 2,782,554      $ 304,319     $ 11,462,370  
  

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities

          

Total Deposits

   $ 6,976,239      $ 2,166,007      $ 2,936 (10)     $ 9,145,182  

Borrowings

     299,738        178,000        171,111 (11)       648,849  

Other liabilities

     101,215        35,471          136,686  

Shareholders’ Equity

     998,305        403,076        130,272 (12)       1,531,653  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total Liabilities and Shareholders’ Equity

   $  8,375,497      $ 2,782,554      $ 304,319     $ 11,462,370  
  

 

 

    

 

 

    

 

 

   

 

 

 

 

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INDEPENDENT BANK CORP.

CONSOLIDATED PRO FORMA STATEMENTS OF INCOME (Unaudited)

(in thousands, except for share data)

 

     Nine Months Ended September 30, 2018  
     Independent
Historical
     BHB
Historical
    Adjustments(1)(2)     Pro Forma  

Interest Income

         

Interest on loans

   $ 214,596      $ 69,345     $ 3,919 (13)     $ 287,860  

Interest and dividends on securities

     19,427        6,129       1,620 (14)       27,176  

Other interest income

     1,768        232             2,000  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total interest income

     235,791        75,706       5,539       317,036  
  

 

 

    

 

 

   

 

 

   

 

 

 

Interest Expense

         

Interest on deposits

     13,773        16,384       (1,101 )(15)      29,056  

Interest on borrowings

     4,145        2,517       3,245 (16)       9,907  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total interest expense

     17,918        18,901       2,144       38,963  
  

 

 

    

 

 

   

 

 

   

 

 

 

Net Interest Income

     217,873        56,805       3,396       278,074  

Less provision (credit) for loan losses

     3,575        (541           3,034  
  

 

 

    

 

 

   

 

 

   

 

 

 

Net Interest Income After Provision (Credit) for loan Losses

     214,298        57,346       3,396       275,040  
  

 

 

    

 

 

   

 

 

   

 

 

 

Non-Interest Income

         

Deposit account fees

     13,640        1,250             14,890  

Interchange and ATM fees

     13,889        1,316             15,205  

Investment management

     19,528                    19,528  

Mortgage banking income

     3,130        2,747             5,877  

Increase in cash surrender value of life insurance policies

     2,929        811             3,740  

Other

     11,898        5,261             17,159  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total non-interest income

     65,014        11,385             76,399  
  

 

 

    

 

 

   

 

 

   

 

 

 

Non-Interest Expense

         

Salary and employee benefits expense

     92,483        25,520             118,003  

Net occupancy and equipment expense

     20,215        6,204       (146 )(17)      26,273  

Data processing and facilities management expense

     3,837        3,160             6,997  

FDIC insurance assessment

     2,214        684             2,898  

Other

     42,829        7,517       4,484 (18)       54,830  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total non-interest expense

     161,578        43,085       4,337       209,000  
  

 

 

    

 

 

   

 

 

   

 

 

 

Income Before Income Taxes

     117,734        25,646       (942     142,438  

Income tax expense

     26,046        6,817       (265 )(19)      32,598  
  

 

 

    

 

 

   

 

 

   

 

 

 

Net Income

   $ 91,688      $ 18,829     $ (677)     $ 109,840  
  

 

 

    

 

 

   

 

 

   

 

 

 

Earnings Per Common Share:

         

Basic

   $ 3.33      $ 0.78           $ 3.26  

Diluted

   $ 3.32      $ 0.75           $ 3.25  

Weighted Average Number of Common Shares Outstanding:

         

Basic

     27,517,210        24,220,055       (18,011,629     33,725,636  

Diluted

     27,579,806        25,021,158       (18,812,732     33,788,232  

 

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INDEPENDENT BANK CORP.

CONSOLIDATED PRO FORMA STATEMENTS OF INCOME (Unaudited)

(in thousands, except for share data)

 

     Year Ended December 31, 2017  
     Independent
Historical
     BHB
Historical
     Adjustments(1)(2)     Pro Forma  

Interest Income

          

Interest on loans

   $ 253,223      $ 76,701      $ 5,225 (13)     $ 335,149  

Interest and dividends on investment securities

     22,553        7,843        2,160 (14)       32,556  

Other interest income

     1,418        231              1,649  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total interest income

     277,194        84,775        7,385       369,354  
  

 

 

    

 

 

    

 

 

   

 

 

 

Interest Expense

          

Interest on deposits

     12,702        15,215        (1,468 )(15)      26,449  

Interest on borrowings

     5,632        2,523        4,326 (16)       12,481  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total interest expense

     18,334        17,738        2,858       38,930  
  

 

 

    

 

 

    

 

 

   

 

 

 

Net Interest Income

     258,860        67,037        4,527       330,424  

Less provision (credit) for loan losses

     2,950        2,098              5,048  
  

 

 

    

 

 

    

 

 

   

 

 

 

Net Interest Income After Provision (Credit) for loan Losses

     255,910        64,939        4,527       325,376  
  

 

 

    

 

 

    

 

 

   

 

 

 

Non-Interest Income

          

Deposit account fees

     17,822        1,418              19,240  

Interchange and ATM fees

     17,291        1,609              18,900  

Investment management

     23,802                     23,802  

Mortgage banking income

     4,960        3,657              8,617  

Increase in cash surrender value of life insurance policies

     4,127        1,063              5,190  

Other

     14,992        9,335              24,327  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total non-interest income

     82,994        17,082              100,076  
  

 

 

    

 

 

    

 

 

   

 

 

 

Non-Interest Expense

          

Salary and employee benefits expense

     116,600        31,278              147,878  

Net occupancy and equipment expense

     24,693        8,393        (195 )(17)      32,891  

Data processing and facilities management expense

     4,988        4,149              9,137  

FDIC insurance assessment

     3,068        881              3,949  

Other

     55,010        9,605        5,978 (18)       70,593  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total non-interest expense

     204,359        54,306        5,783       264,448  
  

 

 

    

 

 

    

 

 

   

 

 

 

Income Before Income Taxes

     134,545        27,715        (1,256     161,004  

Income tax expense

     47,341        11,226        (353 )(19)      58,214  
  

 

 

    

 

 

    

 

 

   

 

 

 

Net Income

   $ 87,204      $ 16,489      $ (903   $ 102,790  
  

 

 

    

 

 

    

 

 

   

 

 

 

Earnings Per Common Share:

          

Basic

   $ 3.19      $ 0.69            $ 3.07  

Diluted

   $ 3.19      $ 0.67            $ 3.06  

Weighted Average Number of Common Shares Outstanding:

          

Basic

     27,294,028        23,985,822        (17,777,396     33,502,454  

Diluted

     27,372,104        24,482,414        (18,273,988     33,580,530  

 

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

 

1.

Estimated merger costs of $28.4 million (net of $7.6 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 BHB 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 and severance payments

   $ 13,007  

Vendor and system contracts terminations

     6,447  

Facilities terminations

     4,485  

Professional and legal fees

     8,263  

Other acquisition related expenses

     3,805  
  

 

 

 

Pre-tax merger costs

     36,007  

Taxes

     7,572  
  

 

 

 

Total merger costs

   $ 28,435  
  

 

 

 

 

2.

Estimated expenses associated with the termination and final allocation of the Blue Hills Bank Employee Stock Ownership Plan, which is referred to in this document as the BHB ESOP, are excluded from the pro forma financial statements as the amounts are expected to result in no change to capital. Expenses of approximately $26.1 million (based on the stock price of $82.60 on September 30, 2018) will be recognized with an equal offsetting benefit to unearned compensation and additional paid in capital within retained earnings.

3.

Includes cash estimated to be received from termination of the BHB ESOP and additional borrowings, net of cash paid.

4.

Adjustment to reflect the estimated fair value of acquired investment securities.

5.

Adjustment to reflect acquired loans at their estimated fair value.

6.

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

7.

Adjustment to reflect approximately $278.1 million of preliminary estimated goodwill from this business transactions and to eliminate BHB’s goodwill.

8.

Adjustment to reflect approximately $32.8 million of core deposit intangibles at the preliminary estimated fair value and to eliminate BHB’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 ($889,000) and to adjust for additional borrowings expected to be used to fund the transactions ($172 million).

12.

Adjustment primarily reflects the elimination of BHB’s stockholders’ equity and the issuance of Independent common stock in the merger.

13.

Adjustment reflects the yield adjustment for interest income on loans.

14.

Adjustment reflects the yield adjustment for interest income on investment securities.

15.

Adjustment reflects the yield adjustment for interest income on deposits.

16.

Adjustment reflects the yield adjustment for interest income on borrowings.

17.

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

18.

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

19.

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

 

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Table of Contents

Unaudited Comparative Per Share Data

The table that follows presents, for both Independent and BHB, historical information with respect to earnings, dividends and book value on a per share basis. The table also presents preliminary pro forma information for both companies on a per share basis.

The preliminary pro forma information as of and for the year ended December 31, 2017 assumes that the merger became effective on January 1, 2017 and assumes total merger consideration of approximately $603.8 million, consisting of approximately $171.3 million in cash and 6,191,824 shares of Independent common stock to be paid or issued to holders of BHB common stock upon completion of the merger. The number of shares of Independent common stock was calculated based on 26,827,660 shares of BHB common stock outstanding on December 31, 2017.

The preliminary pro forma information as of and for the nine months ended September 30, 2018 assumes that the merger became effective on January 1, 2018 and assumes total merger consideration of approximately $684.5 million, consisting of approximately $171.7 million in cash and 6,208,427 shares of Independent common stock to be paid or issued to holders of BHB common stock upon completion of the merger. The number of shares of Independent common stock was calculated based on 26,899,594 shares of BHB common stock outstanding on September 30, 2018.

The preliminary pro forma equivalent per share information shown for BHB in the following table was obtained by multiplying the pro forma per share amounts shown for Independent by the exchange ratio of 0.2308. The actual number of shares to be issued by Independent in the merger will also depend on the number of shares of BHB common stock outstanding immediately prior to the effective date of the merger.

The preliminary pro forma financial information includes estimated adjustments to record BHB’s assets and liabilities at their respective fair values based on Independent’s management’s best estimate using the information available at this time. The preliminary pro forma adjustments may be revised as additional information becomes available and as additional analyses are performed. The final allocation of the purchase price will be determined after the merger is completed and after the completion of a final analysis to determine the fair values of BHB’s tangible and identifiable intangible assets and liabilities as of the closing date. The final purchase price adjustments may differ materially from the preliminary pro forma adjustments. Increases or decreases in the fair value of certain balance sheet amounts and other items of BHB as compared to the information presented in this document may change the amount of the purchase price allocated to goodwill and other assets and liabilities and may impact the statement of income due to adjustments in yield and/or amortization of adjusted assets and liabilities.

It is anticipated that the merger will provide Independent with financial benefits, such as possible expense efficiencies and revenue enhancements, among other factors, although no assurances can be given that these benefits will actually be achieved. The impact of these benefits has not been reflected in the preliminary pro forma financial information. As required, the preliminary pro forma financial information includes adjustments that give effect to events that are directly attributable to the merger and factually supportable. As a result, any planned adjustments affecting the balance sheet, income statement, or shares of common stock outstanding subsequent to the assumed completion date of the merger have not been included.

The preliminary pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the financial results of the combined companies had the merger actually been completed as of or at the beginning of each period presented nor does it indicate future results for any interim or full-year period.

The information in the following table is derived from and should be read in conjunction with the historical consolidated financial statements and the notes thereto for Independent contained in this proxy statement/prospectus or incorporated into this document by reference.

 

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Summary Financial Information

 

     At or for the
Year Ended
December 31,
2017
     At or for the Nine
Months Ended
September 30,
2018
 

Book value per share:

     

Independent historical

   $ 34.38      $ 36.25  

BHB historical

     14.83        14.98  

Pro forma combined

     41.52        45.38  

BHB pro forma equivalent

     11.98        13.09  

Tangible book value per share:

     

Independent historical

   $ 25.60      $ 27.56  

BHB historical

     14.47        14.64  

Pro forma combined

     27.07        28.81  

BHB pro forma equivalent

     7.81        8.31  

Cash dividends declared per share:

     

Independent historical

   $ 1.28      $ 1.14  

BHB historical

     0.60        0.80  

Pro forma combined

     1.28        1.14  

BHB pro forma equivalent

     0.37        0.33  

Basic net income per share:

     

Independent historical

   $ 3.19      $ 3.33  

BHB historical

     0.69        0.78  

Pro forma combined

     3.07        3.26  

BHB pro forma equivalent

     0.89        0.94  

Diluted net income per share:

     

Independent historical

   $ 3.19      $ 3.32  

BHB historical

     0.67        0.75  

Pro forma combined

     3.06        3.25  

BHB pro forma equivalent

     0.88        0.94  

 

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THE SPECIAL MEETING OF BHB STOCKHOLDERS

This joint proxy statement/prospectus is being provided to holders of BHB common stock as BHB’s proxy statement in connection with the solicitation of proxies by and on behalf of its board of directors to be voted at the special meeting of BHB stockholders to be held on January 16, 2019, and at any adjournment or postponement of the BHB special meeting. This joint proxy statement/prospectus is also being provided to BHB stockholders as Independent’s prospectus in connection with the offer and sale by Independent of its shares of common stock as a result of the proposed merger.

Date, Time and Place of the BHB Special Meeting

 

           The special meeting is scheduled to be held as follows:
  Date:   January 16, 2019
  Time:   10:00 a.m., Local Time
  Place:  

Operations Center of Blue Hills Bank

500 River Ridge Drive

Norwood, Massachusetts 02062

Purpose of the BHB Special Meeting

At the BHB special meeting, BHB stockholders will be asked to:

 

   

approve the merger agreement and the transactions it contemplates, including the merger; and

 

   

authorize the board of directors of BHB to adjourn or postpone the BHB special meeting, if necessary, to permit further solicitation of proxies in favor of the BHB merger agreement proposal or to vote on other matters properly before the special meeting.

Recommendation of BHB’s Board of Directors

BHB’s board of directors unanimously recommends a vote “FOR” approval and adoption of the merger agreement and “FOR” approval of the proposal to authorize the board of directors of BHB to adjourn or postpone the BHB special meeting, if necessary, to permit further solicitation of proxies in favor of the BHB merger agreement proposal or to vote on other matters properly before the BHB special meeting.

Record Date; Shares Entitled to Vote

BHB stockholders are entitled to vote if the records of BHB show that they held shares of BHB common stock as of the close of business on December 4, 2018. Beneficial owners of shares held in the name of a broker, bank or other nominee (“street name”) should instruct their record holder how to vote their shares. As of the close of business on the record date, 26,859,344 shares of BHB common stock were outstanding. Each share of BHB common stock has one vote on each matter presented to BHB stockholders. If you are a beneficial owner of shares of BHB common stock held in “street name” and you want to vote your shares in person at the BHB special meeting, you will have to get a written proxy in your name from the broker, bank or other nominee who holds your shares.

Quorum; Vote Required

BHB will have a quorum and will be able to conduct the business of the BHB special meeting only if a majority of the shares of BHB common stock outstanding and entitled to vote is represented in person or by proxy at the BHB special meeting. If you return a valid proxy card or attend the BHB meeting in person, your shares will be counted for determining whether there is a quorum, even if you abstain from voting. Broker non-votes also will be counted for determining the existence of a quorum. A broker non-vote occurs when a broker, bank or other nominee holding shares of BHB common stock for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner.

 

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Approval of the BHB merger agreement proposal will require the affirmative vote of at least a majority of the shares of BHB common stock outstanding and entitled to vote at the BHB special meeting. Failure to return a properly executed proxy card or to vote in person will have the same effect as a vote against the proposal. Broker non-votes and abstentions from voting will have the same effect as voting against the proposal.

The affirmative vote of a majority of the shares voted on the BHB adjournment proposal is required to approve the BHB adjournment proposal. Broker non-votes and abstentions from voting will have no effect on the proposal.

BHB Voting Agreements

As of the record date of December 4, 2018, the directors and executive officers of BHB beneficially owned an aggregate of 1,161,312 shares of BHB common stock. This equals approximately 4.32% of the shares of BHB common stock outstanding and entitled to be voted at the BHB special meeting. All of BHB’s directors and executive officers entered into voting agreements with Independent pursuant to which they agreed to vote these shares of BHB common stock in favor of the BHB merger agreement proposal. As of the same date, neither Independent nor any its subsidiaries, directors or executive officers owned any shares of BHB common stock. For more information about the BHB voting agreements, see “Voting Agreements” beginning on page 102.

Voting of Proxies

BHB stockholders may vote in person at the BHB special meeting or by proxy. To ensure your representation at the BHB special meeting, BHB recommends that you vote by proxy even if you plan to attend the BHB special meeting. You can always change your vote at the BHB special meeting.

BHB stockholders whose shares are held in “street name” by their broker, bank or other nominee must follow the instructions provided by their broker, bank, or other nominee to vote their shares. Your broker or bank may allow you to deliver your voting instructions via the telephone or the Internet. If your shares are held in “street name” and you wish to vote in person at the special meeting, you will have to obtain a “legal proxy” from your record holder entitling you to vote at the BHB special meeting.

Voting instructions are included on your BHB proxy form. If you properly complete and timely submit your BHB proxy, your shares will be voted as you have directed. If you are the record holder of your shares of BHB common stock and submit your BHB proxy without specifying a voting instruction, your shares of BHB common stock will be voted “FOR” the BHB merger agreement proposal and “FOR” the BHB adjournment proposal. If you return an incomplete instruction card to your broker, bank or other nominee, that nominee will not vote your shares with respect to any matter.

How to Revoke Your Proxy

BHB stockholders may revoke their proxy at any time before it is voted by:

 

   

filing with the Corporate Secretary of BHB a duly executed revocation of proxy;

 

   

submitting a new executed proxy with a later date; or

 

   

voting in person at the BHB special meeting.

Attendance at the BHB special meeting will not, in and of itself, constitute a revocation of a proxy. All written notices of revocation and other communications with respect to the revocation of proxies should be addressed to:

Blue Hills Bancorp, Inc.

500 River Ridge Drive

Norwood, Massachusetts 02062

Attention: Lauren B. Messmore, Corporate Secretary

 

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Voting in Person

If you plan to attend the BHB special meeting and wish to vote in person, you will be given a ballot at the BHB special meeting. Please note, however, that if your shares are held of record by a broker, bank, or other nominee and you wish to vote at the BHB special meeting, you must bring additional documentation from the broker, bank, or other nominee in order to vote your shares. Whether or not you plan to attend the BHB special meeting, BHB requests that you complete, sign, date, and return the enclosed proxy card as soon as possible in the enclosed postage-paid envelope. This will not prevent you from voting in person at the BHB special meeting but will assure that your vote is counted if you are unable to attend.

Proxy Solicitation

BHB is soliciting your proxy. BHB will pay for this proxy solicitation. In addition to soliciting proxies by mail, Georgeson LLC, a proxy solicitation firm, will assist BHB in soliciting proxies for the BHB special meeting. BHB will pay approximately $6,000 for these services. Additionally, directors, officers, and employees of BHB and Blue Hills may solicit proxies personally and by telephone. None of these persons will receive additional or special compensation for soliciting proxies. BHB will, upon request, reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions.

Dissenters’ Rights of Appraisal

Under the Maryland General Corporation Law, as amended, the holders of BHB common stock are not entitled to dissenters’ rights of appraisal in connection with the merger.

Stock Certificates

You should not send in any certificates representing BHB common stock at this time. If the merger is consummated, you will receive separate instructions for the exchange of your certificates representing BHB common stock. For more information regarding these instructions, please see the section in this document titled “The Merger Agreement – Exchange of BHB Stock Certificates for Merger Consideration” beginning on page 87 of this document.

 

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PROPOSAL NO. 1

APPROVAL OF THE AGREEMENT AND PLAN OF MERGER

At the BHB special meeting, stockholders will consider and vote on the BHB merger agreement proposal. Details about the merger, including each party’s reasons for the merger, the effect of approval of the agreement and plan of merger and the timing of effectiveness of the merger, are discussed in the section entitled “The Merger” beginning on page 49 of this joint proxy statement/prospectus.

Approval of the BHB merger agreement proposal requires the affirmative vote of the holders of at least a majority of the shares of BHB common stock outstanding and entitled to vote at the BHB special meeting. Abstentions and broker non-votes will have the same effect as shares voted against the BHB merger agreement proposal.

BHB’s board of directors unanimously recommends that BHB stockholders vote “FOR” approval and adoption of the merger agreement, including the merger.

 

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PROPOSAL NO. 2

APPROVAL TO ADJOURN OR POSTPONE THE BHB SPECIAL MEETING, IF NECESSARY,

TO PERMIT FURTHER SOLICITATION OF PROXIES

BHB is submitting a proposal for consideration at the BHB special meeting to authorize the named proxies to authorize the board of directors of BHB to adjourn or postpone the special meeting, if necessary, to permit further solicitation of proxies in favor of the BHB merger agreement proposal or to vote on other matters properly before the BHB special meeting. Even though a quorum may be present at the BHB special meeting, it is possible that BHB may not have received sufficient votes to approve the BHB merger agreement proposal by the time of the meeting. In that event, the board of directors of BHB would need to adjourn the BHB special meeting in order to solicit additional proxies. This proposal relates only to authorization of the board of directors of BHB to adjourn or postpone the special meeting, if necessary, to permit further solicitation of proxies in favor of the BHB merger agreement proposal or to vote on other matters properly before the BHB special meeting. If the BHB special meeting is adjourned to a date not more than 120 days after the original record date of December 4, 2018, then BHB is not required to give notice of the time and place of the adjourned meeting, provided that the new time and place is announced at the special meeting before adjournment, unless the board of directors of BHB fixes a new record date for the BHB special meeting.

Approval of the BHB adjournment proposal requires the presence of a quorum and the affirmative vote of a majority of the shares voted on the proposal. Abstentions and broker non-votes will have no effect on the outcome of voting on this proposal.

BHB’s board of directors unanimously recommends that BHB stockholders vote “FOR” authorization of the board of directors of BHB to adjourn or postpone the BHB special meeting, if necessary, to permit further solicitation of proxies in favor of the BHB merger agreement proposal or to vote on other matters properly before the BHB special meeting.

 

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THE SPECIAL MEETING OF INDEPENDENT SHAREHOLDERS

This joint proxy statement/prospectus is being provided to holders of Independent common stock as Independent’s proxy statement in connection with the solicitation of proxies by and on behalf of its board of directors to be voted at the special meeting of Independent shareholders to be held on January 25, 2019, and at any adjournment or postponement of the Independent special meeting.

Date, Time and Place of the Independent Special Meeting

The special meeting is scheduled to be held as follows:

Date: January 25, 2019

Time: 10:00 a.m., Local Time

Place: Doubletree by Hilton Boston

           292 Hingham Street

           Rockland, Massachusetts 02370

Purpose of the Independent Special Meeting

At the Independent special meeting, Independent shareholders will be asked to:

 

   

approve the merger agreement and the transactions it contemplates, including the merger and the issuance of up to 6,835,690 shares of Independent common stock in connection with the merger; and

 

   

authorize the board of directors of Independent to adjourn or postpone the Independent special meeting, if necessary, to permit further solicitation of proxies in favor of the Independent merger agreement proposal or to vote on other matters properly before the Independent special meeting.

Recommendation of Independent’s Board of Directors

Independent’s board of directors unanimously recommends a vote “FOR” approval and adoption of the merger agreement and “FOR” approval of the proposal to authorize the board of directors of Independent to adjourn or postpone the Independent special meeting, if necessary, to permit further solicitation of proxies in favor of the Independent merger agreement proposal or to vote on other matters properly before the Independent special meeting.

Record Date; Shares Entitled to Vote

Independent shareholders are entitled to vote if the records of Independent show that they held shares of Independent common stock as of the close of business on December 4, 2018. Beneficial owners of shares held in the name of a broker, bank or other nominee (“street name”) should instruct their record holder how to vote their shares. As of the close of business on the record date, 28,080,444 shares of Independent common stock were outstanding. Each share of Independent common stock has one vote on each matter presented to Independent shareholders. If you are a beneficial owner of shares of Independent common stock held in “street name” and you want to vote your shares in person at the Independent special meeting, you will have to get a written proxy in your name from the broker, bank or other nominee who holds your shares.

Quorum; Vote Required

Independent will have a quorum and will be able to conduct the business of the Independent special meeting only if a majority of the shares of Independent common stock outstanding and entitled to vote is represented in person or by proxy at the Independent special meeting. If you return a valid proxy card or attend the Independent meeting in person, your shares will be counted for determining whether there is a quorum, even if you abstain from voting. Broker non-votes also will be counted for determining the existence of a quorum. A broker non-vote occurs when a broker, bank or other nominee holding shares of Independent common stock for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner.

 

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Approval of the Independent merger agreement proposal will require the affirmative vote of at least two-thirds of the shares of Independent common stock outstanding and entitled to vote at the Independent special meeting. The vote required to approve the merger agreement and the transactions it contemplates will also satisfy the Nasdaq shareholder approval requirement for the issuance of up to 6,835,690 shares of Independent common stock in connection with the merger. Failure to return a properly executed proxy card or to vote in person will have the same effect as a vote against the proposal. Broker non-votes and abstentions from voting will have the same effect as voting against the proposal.

The affirmative vote of a majority of the shares voted on the Independent adjournment proposal is required to approve the Independent adjournment proposal. Broker non-votes and abstentions from voting will have no effect on the proposal.

Voting of Proxies

Independent shareholders may vote in person at the Independent special meeting or by proxy. To ensure your representation at the Independent special meeting, Independent recommends that you vote by proxy even if you plan to attend the Independent special meeting. You can always change your vote at the Independent special meeting.

Independent shareholders whose shares are held in “street name” by their broker, bank or other nominee must follow the instructions provided by their broker, bank or other nominee to vote their shares. Your broker or bank may allow you to deliver your voting instructions via the telephone or the Internet. If your shares are held in “street name” and you wish to vote in person at the special meeting, you will have to obtain a “legal proxy” from your record holder entitling you to vote at the Independent special meeting.

Voting instructions are included on your Independent proxy form. If you properly complete and timely submit your Independent proxy, your shares will be voted as you have directed. If you are the record holder of your shares of Independent common stock and submit your Independent proxy without specifying a voting instruction, your shares of Independent common stock will be voted “FOR” the Independent merger agreement proposal and “FOR” the Independent adjournment proposal. If you return an incomplete instruction card to your broker, bank or other nominee, that nominee will not vote your shares with respect to any matter.

How to Revoke Your Proxy

Independent shareholders may revoke their proxy at any time before it is voted by:

 

   

filing with the Corporate Secretary of Independent a duly executed revocation of proxy;

 

   

submitting a new executed proxy with a later date; or

 

   

voting in person at the Independent special meeting.

Attendance at the Independent special meeting will not, in and of itself, constitute a revocation of a proxy. All written notices of revocation and other communications with respect to the revocation of proxies should be addressed to:

Independent Bank Corp.

288 Union Street

Rockland, Massachusetts 02370

Attention: Edward H. Seksay, General Counsel and Corporate Secretary

Voting in Person

If you plan to attend the Independent special meeting and wish to vote in person, you will be given a ballot at the Independent special meeting. Please note, however, that if your shares are held of record by a broker, bank

 

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or other nominee and you wish to vote at the Independent special meeting, you must bring additional documentation from the broker, bank or other nominee in order to vote your shares. Whether or not you plan to attend the Independent special meeting, Independent requests that you complete, sign, date and return the enclosed proxy card as soon as possible in the enclosed postage-paid envelope. This will not prevent you from voting in person at the Independent special meeting but will assure that your vote is counted if you are unable to attend.

Proxy Solicitation

Independent is soliciting your proxy. Independent will pay for this proxy solicitation. In addition to soliciting proxies by mail, Georgeson LLC, a proxy solicitation firm, will assist Independent in soliciting proxies for the Independent special meeting. Independent will pay approximately $8,000 for these services. Additionally, directors, officers and employees of Independent and Rockland Trust may solicit proxies personally and by telephone. None of these persons will receive additional or special compensation for soliciting proxies. Independent will, upon request, reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions.

 

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PROPOSAL NO. 1

APPROVAL OF THE AGREEMENT AND PLAN OF MERGER

At the Independent special meeting, shareholders will consider and vote on the Independent merger agreement proposal. Details about the merger, including each party’s reasons for the merger, the effect of approval of the merger agreement and the timing of effectiveness of the merger, are discussed in the section entitled “The Merger” beginning on page 49 of this document.

Approval of the Independent merger agreement proposal requires the affirmative vote of the holders of at least two-thirds of the shares of Independent common stock outstanding and entitled to vote at the Independent special meeting. The vote required to approve the merger agreement and the transactions it contemplates will also satisfy the Nasdaq shareholder approval requirement for the issuance of up to 6,835,690 shares of Independent common stock in connection with the merger. Abstentions and broker non-votes will have the same effect as shares voted against the Independent merger agreement proposal.

Independent’s board of directors unanimously recommends that Independent shareholders vote “FOR” approval of the merger agreement and the transactions it contemplates, including the merger and the issuance of up to 6,835,690 shares of Independent common stock in connection with the merger.

 

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PROPOSAL NO. 2

APPROVAL TO ADJOURN OR POSTPONE THE INDEPENDENT SPECIAL MEETING, IF NECESSARY, TO PERMIT FURTHER SOLICITATION OF PROXIES

Independent is submitting a proposal for consideration at the Independent special meeting to authorize the named proxies to authorize the board of directors of Independent to adjourn or postpone the special meeting, if necessary, to permit further solicitation of proxies in favor of the Independent merger agreement proposal or to vote on other matters properly before the Independent special meeting. Even though a quorum may be present at the Independent special meeting, it is possible that Independent may not have received sufficient votes to approve the Independent merger agreement proposal by the time of the meeting. In that event, the board of directors of Independent would need to adjourn the Independent special meeting in order to solicit additional proxies. This proposal relates only to authorization of the board of directors of Independent to adjourn or postpone the special meeting, if necessary, to permit further solicitation of proxies in favor of the Independent merger agreement proposal or to vote on other matters properly before the Independent special meeting. If the Independent special meeting is adjourned for less than 30 days, Independent is not required to give notice of the time and place of the adjourned meeting if the new time and place is announced at the special meeting before adjournment, unless the board of directors of Independent fixes a new record date for the Independent special meeting.

Approval of the Independent adjournment proposal requires the presence of a quorum and the affirmative vote of a majority of the shares voted on the proposal. Abstentions and broker non-votes will have no effect on the outcome of voting on this proposal.

Independent’s board of directors unanimously recommends that Independent shareholders vote “FOR” authorization of the board of directors of Independent to adjourn or postpone the Independent special meeting, if necessary, to permit further solicitation of proxies in favor of the Independent merger agreement proposal or to vote on other matters properly before the Independent special meeting.

 

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THE MERGER

The discussion in this joint proxy statement/prospectus of the merger and the principal terms of the merger agreement are subject to, and are qualified in their entirety by reference to, the merger agreement, a copy of which is attached to this joint proxy statement/prospectus as Annex A and is incorporated into this joint proxy statement/prospectus by reference.

General

Each of the Independent board of directors and the BHB board of directors has approved the merger agreement. The merger agreement provides for the merger of BHB with and into Independent, with Independent continuing as the surviving corporation. Immediately following the completion of the merger, Blue Hills, a wholly owned bank subsidiary of BHB, will merge with and into Independent’s wholly owned bank subsidiary, Rockland Trust, with Rockland Trust as the surviving entity in the bank merger.

The merger is structured as a 80% stock and 20% cash transaction. At the effective time of the merger, each share of BHB common stock outstanding immediately prior to the effective time will, by virtue of the merger and without any action on the part of the stockholder, be converted into the right to receive (i) $5.25 in cash and (ii) 0.2308 of a share of Independent common stock. The exchange ratio may be adjusted to reflect the effect of any stock split, split-up, reverse stock split, stock dividend, reorganization, recapitalization, reclassification, or other similar change with respect to the common stock of Independent or BHB that occurs before the merger. No fractional shares of Independent common stock will be issued in connection with the merger, and holders of BHB common stock will be entitled to receive cash in lieu of fractional shares of Independent common stock.

Based on the number of shares of BHB common stock outstanding on November 1, 2018, and assuming that all outstanding stock options of BHB as of November 1, 2018 are exercised and all outstanding shares of restricted stock vest in accordance with their terms prior to the closing of the merger, 6,835,690 is the maximum number of shares of Independent common stock that could be issued to BHB’s stockholders in connection with the merger, which would represent approximately 20% of the outstanding Independent common stock. Independent expects substantially fewer shares of Independent common stock will be issued in the merger because not all outstanding stock options granted by BHB will be exercised before the closing of the merger. If no stock options are exercised, BHB stockholders would own approximately 18% of Independent’s common stock upon completion of the merger.

Background of the Merger

BHB’s predecessor mutual holding company converted from a mutual holding company structure in July 2014, which resulted in BHB becoming the publicly traded holding company for Blue Hills. Over the course of the following years, BHB managed its capital through strong organic growth, stock repurchases and recurring and special dividends. Since the conversion, BHB also has, from time to time, been presented with and reviewed opportunities to acquire or bid upon other financial institutions or their assets but was either not able to execute upon those potential transactions or determined that they would not have been favorable to BHB and its stockholders.

Over the past few years, the BHB board of directors has had numerous discussions with its management, industry analysts, and consultants regarding the future of the community banking industry, the appropriate size and scale of BHB and the profitability targets that it should be attempting to achieve. These discussions have included the topics of competition, disintermediation risk, product requirements, technology investments, and prospective valuation risks in the future.

Additionally, since 2014, William M. Parent, Chief Executive Officer and President of BHB, has had numerous conversations with the chief executive officers, and in some cases board members, of various regional financial institutions that expressed possible interest in merging with or acquiring BHB. In each conversation, discussions centered on obtaining an understanding of strategic and operational value of a combination, cultural

 

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alignment of the organizations and roles of employees, management and the board of directors. Conversations were shared with the BHB board of directors to build awareness and an understanding of the relative differences among the institutions.

In 2016, BHB entered into negotiations to acquire an out-of-market financial institution. These negotiations involved multiple meetings and due diligence review and planning sessions. In May 2017, the negotiations were terminated by the parties because they were unable to agree on pricing and other terms of a transaction.

At BHB’s October 2017 annual strategic planning session, discussions centered around strategic options for BHB, including remaining independent or pursuing a strategic merger of equals or a sale of BHB. At this strategic planning session, the BHB board of directors also discussed the future financial projections and operations of BHB and anticipated industry and market conditions. As a result of the deliberations at this planning session, the BHB board of directors approved a course of action whereby BHB would begin to explore a strategic merger of equals that would enable BHB to better execute its operating strategies, optimize its scale and leverage its resources to more effectively compete for future acquisitions and other growth opportunities in its marketplace. The BHB board of directors determined that, if a favorable merger of equals were not available, it would assess other strategic measures, including remaining independent or pursuing a sale transaction.

In October 2017, Mr. Parent met with the chief executive officer of Company A and discussed a strategic merger transaction. Mr. Parent reported the discussion at the November 2017 board of directors meeting as a preliminary concept and discussed the strategic value of a possible combination with Company A. The board of directors directed Mr. Parent to continue to develop the possible benefits of a transaction with Company A. Mr. Parent had a follow-up meeting with the chief executive officer of Company A in December 2017 at which time the operational and strategic benefits of a possible strategic combination were discussed in greater detail.

On January 1, 2018, Mr. Parent received a message from Christopher Oddleifson, Chief Executive Officer of Independent about his interest in meeting. Mr. Parent and Mr. Oddleifson had previously met socially and individually to discuss industry matters and each company’s strategic vision.

On January 5, 2018, Mr. Parent and Mr. Oddleifson met to discuss the strategic visions of their respective institutions and the operations of each institution. Mr. Oddleifson expressed Independent’s interest in further investigating a strategic combination if desired by BHB. Mr. Oddleifson proposed a follow-up meeting with himself, Robert Cozzone, Chief Financial Officer and Executive Vice President of Consumer & Business Banking, of Independent and Gerard Nadeau, President and Chief Commercial Banking Officer of Independent, to further discuss the virtues of a combination.

Throughout January 2018, BHB continued to evaluate the prospects of a strategic merger with Company A. At the January 2018 board of directors meeting, the financial and strategic implications of such a combination were discussed and the board of directors determined to engage a financial advisor, KBW, and a legal advisor, Luse Gorman, PC, to assist and advise BHB with respect to overall strategic planning matters.

KBW and Luse Gorman discussed strategic planning matters with the BHB board of directors at a February 21, 2018 meeting. Matters discussed included the community bank merger market, relevant financial metrics and pricing, and the fiduciary duties of the BHB board of directors, as well as potential financial implications of a possible strategic combination with Company A to BHB’s stockholders.

On February 21, 2018, Mr. Parent met with Messrs. Oddleifson, Cozzone and Nadeau to provide an overview of each company’s operating capabilities, exchange integration ideas and discuss advantages and disadvantages regarding a potential combination transaction.

In March 2018, due to concerns regarding the viability and magnitude of the potential benefits of a transaction with Company A, discussions with Company A were terminated by the parties.

 

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At the April 18, 2018 meeting of the BHB board of directors, KBW reviewed and discussed with the BHB board of directors the community banking industry, observed merger market metrics and pricing, BHB’s recent and projected financial performance, its recent stock performance, its tactical position in the market, and a review of possible merger partners, including their apparent financial ability and capacity to offer merger consideration in a transaction with BHB and the attributes of possible partners, as well as their stock performance and recent pricing trends. At that meeting, the BHB board of directors determined that BHB should pursue a strategic combination with a larger institution that would be better able to utilize and leverage the resources of BHB based on several factors, including BHB’s competitive limitations in its market area, the future risks and rewards in remaining independent, the ability to improve earnings, and an assessment of BHB’s acquisition and growth opportunities in the near term. The board of directors directed management, with KBW’s assistance, to prepare BHB for a possible strategic transaction and develop a targeted solicitation process whereby the possible partners that were identified as the most favorable partners during the discussions, which included Independent, would be contacted to assess their interest in a possible transaction with BHB and gauge their specific level of interest and possible pricing. BHB determined that KBW would approach only those institutions that had been identified as a favorable strategic fit for BHB, that had successfully completed acquisitions, and that had other favorable operating attributes and stable currencies.

During the months of May and June 2018, KBW contacted Companies B and C to inquire as to their interest in a merger transaction with BHB. Company B, after initially expressing some interest in a dialogue, decided it was not interested in such a transaction and did not offer any price or range of pricing. Company C expressed some interest in a merger transaction with BHB, but was not interested in a transaction above a $23-$24 per share level.

On May 24, 2018, Mr. Parent and Mr. Oddleifson met to discuss Independent’s continued interest in a strategic transaction with BHB, the synergies and benefits that could be achieved through a combination. During that meeting, Mr. Oddleifson discussed a targeted price range of $24 – $25 per share, whereas Mr. Parent discussed a targeted price range of $25 – $26 per share. Mr. Oddleifson expressed interest in pursuing a transaction, but stated the need for a few days to confirm the targeted price range discussed by Mr. Parent at their meeting.

On May 29, 2018, Mr. Oddleifson contacted Mr. Parent to state that the targeted price range of $25-$26 per share could be achievable, but would be subject to further due diligence. Both parties discussed a timeline for further discussions in August of 2018, following the public release of second quarter earnings results.

On August 1, 2018, a mutual Non-Disclosure Agreement was signed and non-public information requested by Independent was provided in order for Independent to provide a firm offer price to BHB to consider.

On August 10, 2018, KBW received a proposal from Independent for an aggregate merger consideration based on an exchange ratio of 0.295x – 0.300x with up to 20% of the merger consideration being paid in cash.

On August 13, 2018, the BHB board of directors held a special meeting to consider the proposal from Independent. KBW updated the BHB board regarding the merger market and other information that was reviewed at the April 2018 BHB board of directors meeting. In addition, KBW discussed the financial aspects of the proposal from Independent in comparison to recent transactions and in comparison to the potential future performance of BHB as expected by BHB’s management on a stand-alone basis. After reviewing the information and consulting with KBW, BHB’s board of directors instructed KBW and Mr. Parent to propose a counter offer of $27.00 in cash per share for 20% of BHB common stock and 0.308 of a share of Independent common stock for each share of the remaining 80% of BHB common stock. This counter offer would have resulted in consideration of $5.40 in cash and 0.2464 of a share of Independent common stock for each share of BHB common stock.

On August 16, 2018, Independent’s board of directors held a regular meeting at which a potential transaction with BHB was one of the topics discussed and the Independent board of directors authorized management to continue negotiating the transaction.

 

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On August 17, 2018, Independent accepted the counter offer, subject to a full due diligence investigation, and the parties entered into an Exclusivity Agreement ending September 21, 2018.

From August 21, 2018 through September 11, 2018, members of each organization’s executive management teams, along with their advisors, met several times and negotiated the terms of the merger agreement and ancillary agreements. Each organization also conducted its due diligence review of the other during this period.

On September 5, 2018, a special meeting of BHB’s board of directors was held to discuss due diligence progress and a projected timeline for the transaction. At this meeting, the BHB board of directors was also advised that Independent had indicated that it may lower its offer.

On September 10, 2018, Independent contacted KBW to present a revised offer of $5.25 in cash and 0.2308 shares of Independent common stock for each share of BHB common stock. Independent revised its offer based on conclusions reached during its due diligence investigation about assumptions in its financial model regarding fair value marks, expenses, and growth.

On September 11, 2018, a special meeting of BHB’s board of directors was held to review Independent’s revised offer and other strategic directions or options available to BHB. KBW provided updated merger market information and compared the original offer, the revised offer and the median of recent transactions in terms of tangible book value, core tangible book value and core deposit premium. KBW also updated the board of directors on the other previously identified merger partners, including their recent performance, the performance of their stock prices and their apparent financial ability and capacity to engage in a merger transaction with BHB at the pricing levels similar to Independent’s revised offer. After extensive discussions regarding the strategic options available to BHB, the other identified possible partners and the benefits of a combination transaction with Independent, the BHB board of directors unanimously voted to accept the revised offer from Independent and instructed management to complete any remaining due diligence and, with the assistance of BHB’s advisors, negotiate a final merger agreement.

On September 19, 2018 the Independent board of directors held a special meeting to consider the proposed transaction with BHB. At that meeting, Sandler reviewed the financial aspects of the proposed merger and Independent’s management reviewed the business terms and financial expectations for the proposed merger and presented a detailed risk assessment of the proposed merger. The Independent board of directors also reviewed the findings of the due diligence investigation and the terms of the merger, the final merger agreement, and the ancillary agreements.

On September 19, 2018, the BHB board of directors met to discuss the proposed merger and review the final merger agreement. At that meeting, representatives from Luse Gorman and BHB management summarized the results of BHB’s due diligence investigation of Independent and outlined its fiduciary duties under relevant law. KBW also reviewed the financial aspects of the proposed merger and rendered to the BHB board of directors an opinion to the effect that, as of September 19, 2018, and subject to the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by KBW, as set forth in its opinion, the merger consideration in the proposed merger was fair, from a financial point of view, to the holders of BHB common stock. At this meeting, the BHB board of directors reviewed the terms of the final merger agreement and ancillary agreements and unanimously voted to approve the merger and to adopt the final merger agreement.

On September 20, 2018, Independent’s board of directors held a regular meeting at which it was reported that the BHB board of directors had approved the proposed transaction. At that meeting, Sandler delivered its opinion to the effect that, as of September 20, 2018 and subject to certain limitations, assumptions, and qualifications, as set forth in the opinion, the merger consideration was fair to Independent, from a financial point of view. After a further discussion of the findings of the due diligence investigation and the terms of the merger, the final merger agreement, and the ancillary agreements, the Independent board of directors unanimously voted to approve the proposed merger and to authorize the merger agreement and the transactions it contemplated.

 

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Thereafter, the parties executed and delivered the merger agreement and ancillary documents. A joint press release announcing the approval, adoption, and execution of the merger agreement was then issued on September 20, 2018 and Independent and BHB each filed a Form 8-K with the SEC.

Recommendation of BHB’s Board of Directors

BHB’s board of directors has unanimously approved the merger agreement and unanimously recommends that BHB stockholders vote “FOR” the approval of the BHB merger agreement proposal.

BHB’s Reasons for the Merger

The boards of directors of BHB and Blue Hills unanimously determined that the merger agreement and the merger are advisable and in the best interests of BHB and its stockholders and Blue Hills. Accordingly, the boards of directors of BHB and Blue Hills adopted and approved the merger agreement, and the BHB board of directors is unanimously recommending that BHB’s stockholders vote “FOR” the BHB merger agreement proposal.

In determining to unanimously adopt and approve the merger agreement and the merger, the boards of directors of BHB and Blue Hills evaluated the merger and the merger agreement in consultation with certain of BHB’s senior management and with BHB’s financial advisor and legal counsel, drew on the directors’ knowledge of the business, operations, properties, assets, financial condition, operating results, and prospects of Blue Hills, and also considered the following factors in favor of the decision to enter into the merger agreement:

 

   

the BHB board of directors’ and senior management’s knowledge of BHB’ business, operations, properties, assets, financial condition, operating results and prospects, and its and their understanding of Independent’s business, operations, properties, assets, financial condition, operating results, historical market prices and prospects, including information obtained through due diligence;

 

   

the fact that the consideration that BHB stockholders will receive in the proposed merger is largely in the form of Independent common stock and the potential for BHB stockholders, who will own approximately 18-20% of the combined company, to participate in the future earnings and growth of the combined company;

 

   

the expected pro forma financial impact of the transaction, taking into account anticipated cost savings and other factors, on both BHB stockholders and Independent shareholders, especially the fact that the transaction would be immediately accretive to the combined company;

 

   

the expectation of the BHB board of directors that the combined company will have a strong capital position upon completion of the transaction;

 

   

the understanding of the BHB board of directors of the current and prospective environment in which BHB operates, including national and local economic conditions, the interest rate environment, increasing operating costs resulting from regulatory initiatives, compliance mandates and investments in technology, the competitive environment for financial institutions generally and the likely effect of these factors on BHB with and without the proposed transaction;

 

   

the strong stock price performance of Independent’s common stock compared to its peers and the industry as a whole, and the potential for stock appreciation in the combined company for BHB stockholders;

 

   

Independent’s successful track record in executing mergers and the likelihood of receipt of regulatory approvals and completion of the merger in a timely manner;

 

   

the fact that the exchange ratio is fixed, which the BHB board of directors believes is consistent with market practice for transactions of this type and with the strategic purpose of the transaction; provided, that BHB may terminate the merger agreement in the event that the trading price of Independent’s

 

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common stock drops by more than 15% both on an absolute basis and in relation to an index of bank stocks, and this 15% trigger for termination on price decrease is consistent with, or better than, market practice for transactions of this type;

 

   

the financial presentation and the opinion, dated September 19, 2018, of KBW to the BHB board of directors as to the fairness, from a financial point of view, and as of the date of such opinion, to the holders of BHB common stock of the merger consideration in the proposed merger, as more fully described below under “Opinion of BHB’s Financial Advisor;”

 

   

the efforts made to negotiate a merger agreement favorable to BHB and its stockholders and the terms and conditions of the merger agreement;

 

   

the ability of BHB, under the terms of the merger agreement, to negotiate with third parties concerning certain unsolicited competing acquisition proposals, if BHB were to receive such a proposal prior to the approval of the merger agreement by BHB’s stockholders, and to terminate the merger agreement upon the payment to Independent of a termination fee of $26.2 million;

 

   

the effects of the merger on BHB’s employees, including the prospects for continued employment and the severance and other benefits agreed to be provided by Independent;

 

   

the impact of the merger on depositors, customers and communities served by BHB and the expectation that the combined entity will continue to provide quality service to the communities and customers currently served by BHB; and

 

   

the fact that three BHB directors will become directors of Independent upon the closing of the merger.

BHB’s board of directors also weighed the factors described above against certain factors and potential risks associated with entering into the merger agreement, including, among others, the following:

 

   

the fact that the integration of BHB and Independent may be complex and time consuming and may require substantial resources and effort;

 

   

the risk that, if the combined bank is not successfully integrated, the anticipated strategic and other benefits of the merger may not be realized fully, realized at all or may take longer to realize than expected;

 

   

the fact that the exchange ratio is fixed, and BHB cannot terminate the merger agreement in the event that the trading price of Independent’s common stock drops, unless it drops by more than 15% both on an absolute basis and in relation to an index of bank stocks;

 

   

the potential for diversion of management and employee attention and for increased employee attrition during the period prior to the completion of the merger, and the potential effect of the merger on BHB’s customers and business relationships;

 

   

the restrictions on the conduct of BHB’s business prior to the completion of the merger, requiring BHB to conduct its business only in the ordinary course, subject to specific limitations, which could delay or prevent BHB from undertaking business opportunities that may arise pending completion of the merger and could negatively impact BHB’s customers and business relationships;

 

   

the fact that the merger agreement contains certain restrictions on the ability of BHB to solicit proposals for alternative transactions or engage in discussions regarding such proposals, including the requirement for BHB to pay Independent a termination fee of $26.2 million in certain circumstances;

 

   

the transaction costs to be incurred by BHB in connection with the merger; and

 

   

the various other applicable risks associated with BHB, Independent and the merger, including the risks described in “Risk Factors,” beginning on page 19 of this joint proxy statement/prospectus.

During its consideration of the merger agreement, the BHB board of directors also considered that certain BHB officers and directors may have financial interests in the merger that are different from, or are in addition

 

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to, the interests of BHB stockholders. See “The Merger – Interests of BHB’s Executive Officers and Directors in the Merger,” beginning on page 81.

The discussion of the information and factors considered by the BHB board of directors is not exhaustive, but includes all material factors considered by the BHB board of directors. Based on the factors described above, the BHB board of directors determined that the merger with Independent would be advisable and in the best interests of BHB stockholders and approved the merger agreement and related transactions it contemplates. In view of the wide variety and complexity of factors considered by the BHB board of directors in connection with its evaluation of the merger, the BHB board of directors did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision and did not undertake to make any specific determination as to whether any particular factor, or any aspect of any factor, was favorable or unfavorable to the ultimate determination of the BHB board of directors. Rather, the BHB board of directors made its recommendation based on the totality of information presented to, and the investigation conducted by, it. In considering the factors discussed above, individual directors may have given different weights to different individual factors.

Opinion of BHB’s Financial Advisor

BHB engaged Keefe, Bruyette & Woods, Inc., which is referred to in this document as KBW, to render financial advisory and investment banking services to BHB, including an opinion to the BHB board of directors as to the fairness, from a financial point of view, to the holders of BHB common stock of the merger consideration to be received by such stockholders in the proposed merger of BHB with and into Independent. BHB selected KBW because KBW is a nationally recognized investment banking firm with substantial experience in transactions similar to the merger. As part of its investment banking business, KBW is continually engaged in the valuation of financial services businesses and their securities in connection with mergers and acquisitions.

As part of its engagement, representatives of KBW attended the meeting of the BHB board of directors held on September 19, 2018, at which the BHB board of directors evaluated the proposed merger. At this meeting, KBW reviewed the financial aspects of the proposed merger and rendered to the BHB board of directors an opinion to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW, as set forth in its opinion, the merger consideration in the proposed merger was fair, from a financial point of view, to the holders of BHB common stock. The BHB board of directors approved the merger agreement at this meeting.

The description of the opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached as Annex B to this document and is incorporated herein by reference, and describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion.

KBW’s opinion speaks only as of the date of the opinion. The opinion was for the information of, and was directed to, the BHB board of directors (in its capacity as such) in connection with its consideration of the financial terms of the merger. The opinion addressed only the fairness, from a financial point of view, of the merger consideration in the merger to the holders of BHB common stock. It did not address the underlying business decision of BHB to engage in the merger or enter into the merger agreement or constitute a recommendation to the BHB board of directors in connection with the merger, and it does not constitute a recommendation to any holder of BHB common stock or any stockholder of any other entity as to how to vote in connection with the merger or any other matter, nor does it constitute a recommendation regarding whether or not any such stockholder should enter into a voting, stockholders’ or affiliates’ agreement with respect to the merger or exercise any dissenters’ or appraisal rights that may be available to such stockholder.

 

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KBW’s opinion was reviewed and approved by KBW’s Fairness Opinion Committee in conformity with its policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.

In connection with the opinion, KBW reviewed, analyzed and relied upon material bearing upon the financial and operating condition of BHB and Independent and bearing upon the merger, including, among other things:

 

   

a draft of the merger agreement dated September 15, 2018 (the most recent draft then made available to KBW);

 

   

the audited financial statements and the Annual Reports on Form 10-K of BHB for the three fiscal year ended December 31, 2017;

 

   

the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q of BHB for the fiscal quarters ended March 31, 2018 and June 30, 2018;

 

   

the audited financial statements and Annual Reports on Form 10-K of Independent for the three fiscal year ended December 31, 2017;

 

   

the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q of Independent for the fiscal quarters ended March 31, 2018 and June 30, 2018;

 

   

certain regulatory filings of BHB and Independent and their respective subsidiaries, including the quarterly reports on Form FR Y-9C and the call reports filed with respect to each quarter during the three-year period ended December 31, 2017, as well as the quarters ended March 31, 2018 and June 30, 2018;

 

   

certain other interim reports and other communications of BHB and Independent to their respective stockholders; and

 

   

other financial information concerning the businesses and operations of BHB and Independent that was furnished to KBW by BHB and Independent or which KBW was otherwise directed to use for purposes of KBW’s analyses.

KBW’s consideration of financial information and other factors that it deemed appropriate under the circumstances or relevant to its analyses included, among others, the following:

 

   

the historical and current financial position and results of operations of BHB and Independent;

 

   

the assets and liabilities of BHB and Independent;

 

   

the nature and terms of certain other merger transactions and business combinations in the banking industry;

 

   

a comparison of certain financial and stock market information for BHB and Independent with similar information for certain other companies, the securities of which were publicly traded;

 

   

publicly available consensus “street estimates” of BHB, as well as assumed BHB long-term growth rates provided to KBW by BHB management, all of which information KBW discussed with BHB management and used and relied upon, at the direction of such management and with the consent of the BHB board of directors;

 

   

publicly available consensus “street estimates” of Independent (which estimates reflected the estimated pro forma impact of Independent’s publicly announced and pending merger of MNB Bancorp with and into Independent (which is referred to in this document as the MNB merger), as well as assumed Independent long-term growth rates provided to KBW by Independent management, all of which information Independent management discussed with KBW and KBW used and relied upon based on such discussions, at the direction of BHB management and with the consent of the BHB board of directors;

 

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projected balance sheet and capital data of Independent, giving effect to Independent’s estimates and assumptions regarding the pro forma impact of the MNB merger, which was prepared by Independent management, provided to and discussed with KBW by such management and used and relied upon by KBW based on such discussions, at the direction of BHB management and with the consent of the BHB board of directors; and

 

   

estimates regarding certain pro forma financial effects of the proposed merger on Independent (including, without limitation, the cost savings and related expenses expected to result or be derived from the merger) that Independent management prepared, provided to and discussed with KBW, and KBW used and relied upon based on such discussions, at the direction of BHB management and with the consent of the BHB board of directors.

KBW also performed such other studies and analyses as it considered appropriate and took into account its assessment of general economic, market and financial conditions and its experience in other transactions, as well as its experience in securities valuation and knowledge of the banking industry generally. KBW also participated in discussions with the management of BHB and the management of Independent regarding the past and current business operations, regulatory relations, financial condition and future prospects of their respective companies and such other matters as KBW deemed relevant to its inquiry. In addition, KBW considered the results of the efforts undertaken, with KBW’s assistance, by or on behalf of and at the direction of BHB, to solicit indications of interest from third parties regarding a potential transaction with BHB.

In conducting its review and arriving at its opinion, KBW relied upon and assumed the accuracy and completeness of all of the financial and other information that was provided to it or that was publicly available and did not independently verify the accuracy or completeness of any such information or assume any responsibility or liability for such verification, accuracy or completeness. KBW relied upon the management of BHB as to the reasonableness and achievability of the publicly available consensus “street estimates” of BHB and the assumed BHB long-term growth rates referred to above (and the assumptions and bases thereof), and KBW assumed that all such information was reasonably prepared and represented or, in the case of the BHB “street estimates” referred to above, that such estimates were consistent with the best currently available estimates and judgments of BHB management and that the forecasts, projections and estimates reflected in such information would be realized in the amounts and in the time periods estimated. With the consent of BHB, KBW further relied upon Independent management as to the reasonableness and achievability of the publicly available consensus “street estimates” of Independent, the assumed Independent long-term growth rates, the projected balance sheet and capital data of Independent, and the estimates regarding certain pro forma financial effects of the merger on Independent (including, without limitation, the cost savings and related expenses expected to result or be derived from the merger), all as referred to above (and the assumptions and bases for all such information), and KBW assumed that all such information was reasonably prepared and represented or, in the case of the Independent “street estimates” referred to above, that such estimates were consistent with the best currently available estimates and judgments of Independent management and that the forecasts, projections and estimates reflected in such information will be realized in the amounts and in the time periods estimated. KBW expressed no view or opinion as to the MNB merger (or any terms, aspects or implications thereof) and assumed, with the consent of BHB, that the MNB merger would be consummated in the fourth quarter of 2018, as described to KBW by Independent management.

It is understood that the portion of the foregoing financial information of BHB and Independent that was provided to KBW was not prepared with the expectation of public disclosure, that all of the foregoing financial information, including the publicly available consensus “street estimates” of BHB and Independent, was based on numerous variables and assumptions that are inherently uncertain, including, without limitation, factors related to general economic and competitive conditions, and that, accordingly, actual results could vary significantly from those set forth in such information. KBW assumed, based on discussions with the respective managements of BHB and Independent and with the consent of the BHB board of directors, that all such information provided a reasonable basis upon which KBW could form its opinion and KBW expressed no view

 

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as to any such information or the assumptions or bases therefor. KBW relied on all such information without independent verification or analysis and did not in any respect assume any responsibility or liability for the accuracy or completeness thereof.

KBW also assumed that there were no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of either BHB or Independent since the date of the last financial statements of each such entity that were made available to KBW. KBW is not an expert in the independent verification of the adequacy of allowances for loan and lease losses and KBW assumed, without independent verification and with BHB’s consent, that the aggregate allowances for loan and lease losses for BHB and Independent are adequate to cover such losses. In rendering its opinion, KBW did not make or obtain any evaluations or appraisals or physical inspection of the property, assets or liabilities (contingent or otherwise) of BHB or Independent, the collateral securing any of such assets or liabilities, or the collectability of any such assets, nor did KBW examine any individual loan or credit files, nor did it evaluate the solvency, financial capability or fair value of BHB or Independent under any state or federal laws, including those relating to bankruptcy, insolvency or other matters. Estimates of values of companies and assets do not purport to be appraisals or necessarily reflect the prices at which companies or assets may actually be sold. Because such estimates are inherently subject to uncertainty, KBW assumed no responsibility or liability for their accuracy.

KBW assumed, in all respects material to its analyses, that:

 

   

the merger and any related transaction (including the merger of Blue Hills with and into Rockland Trust) would be completed substantially in accordance with the terms set forth in the merger agreement (the final terms of which KBW assumed would not differ in any respect material to KBW’s analyses from the draft reviewed and referred to above) with no adjustments to the merger consideration and with no other consideration or payments in respect of BHB common stock;

 

   

the representations and warranties of each party in the merger agreement and in all related documents and instruments referred to in the merger agreement were true and correct;

 

   

each party to the merger agreement and all related documents would perform all of the covenants and agreements required to be performed by such party under such documents;

 

   

there were no factors that would delay any necessary regulatory or governmental approval for the merger or any related transactions (including the bank merger), or subject such approvals to any adverse conditions;

 

   

all conditions to complete the merger and any related transaction would be satisfied without any waivers or modifications to the merger agreement or any of the related documents; and

 

   

in the course of obtaining the necessary regulatory, contractual or other consents or approvals for the merger and any related transaction (including the bank merger), no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, would be imposed that would have a material adverse effect on the future results of operations or financial condition of BHB, Independent or the pro forma entity, or on the contemplated benefits of the merger, including, without limitation, the cost savings and related expenses expected to result or be derived from the merger.

KBW assumed that the merger would be consummated in a manner that complies with the applicable provisions of the Securities Act, the Exchange Act, and all other applicable federal and state statutes, rules and regulations. KBW was further advised by representatives of BHB that BHB relied upon advice from its advisors (other than KBW) or other appropriate sources as to all legal, financial reporting, tax, accounting and regulatory matters with respect to BHB, Independent, the merger, any related transaction (including the bank merger) and the merger agreement. KBW did not provide advice with respect to any such matters.

KBW’s opinion addressed only the fairness, from a financial point of view, as of the date of the opinion, to the holders of BHB common stock, of the merger consideration to be received by the holders of BHB common

 

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stock. KBW expressed no view or opinion as to any other terms or aspects of the merger or any term or aspect of any related transaction (including the bank merger and the termination of BHB’s employee stock ownership plan prior to the consummation of the merger), including, without limitation, the form or structure of the merger (including the form of the merger consideration or the allocation thereof between cash and stock) or any such related transaction, any consequences of the merger or any related transaction to BHB, its stockholders, creditors or otherwise, or any terms, aspects, merits or implications of any employment, consulting, voting, support, stockholder or other agreements, arrangements or understandings contemplated or entered into in connection with the merger or otherwise. KBW’s opinion was necessarily based upon conditions as they existed and could be evaluated on the date of such opinion and the information made available to KBW through such date. Developments subsequent to the date of KBW’s opinion may have affected, and may affect, the conclusion reached in KBW’s opinion and KBW did not and does not have an obligation to update, revise or reaffirm its opinion. KBW’s opinion did not address, and KBW expressed no view or opinion with respect to:

 

   

the underlying business decision of BHB to engage in the merger or enter into the merger agreement;

 

   

the relative merits of the merger as compared to any alternative transactions or strategies that are, have been or may be available to or considered by BHB or the BHB board of directors;

 

   

the fairness of the amount or nature of any compensation to any of BHB’s officers, directors or employees, or any class of such persons, relative to the compensation to the holders of BHB common stock;

 

   

the effect of the merger or any related transaction on, or the fairness of the consideration to be received by, holders of any class of securities of BHB (other than the holders of BHB common stock, solely with respect to the merger consideration, as described in KBW’s opinion and not relative to the consideration to be received by holders of any other class of securities) or holders of any class of securities of Independent or any other party to any transaction contemplated by the merger agreement;

 

   

any adjustment (as provided in the merger agreement) to the merger consideration assumed for purposes of KBW’s opinion;

 

   

whether Independent has sufficient cash, available lines of credit or other sources of funds to enable it to pay the aggregate cash consideration to the holders of BHB common stock at the closing of the merger;

 

   

the actual value of Independent common stock to be issued in the merger;

 

   

the prices, trading range or volume at which BHB common stock or Independent common stock would trade following the public announcement of the merger or the prices, trading range or volume at which Independent common stock would trade following the consummation of the merger;

 

   

any advice or opinions provided by any other advisor to any of the parties to the merger or any other transaction contemplated by the merger agreement; or

 

   

any legal, regulatory, accounting, tax or similar matters relating to BHB, Independent, their respective stockholders, or relating to, arising out of or as a consequence of the merger or any related transaction (including the bank merger), including whether or not the merger would qualify as a tax-free reorganization for United States federal income tax purposes.

In performing its analyses, KBW made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of KBW, BHB and Independent. Any estimates contained in the analyses performed by KBW are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by these analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. In addition, KBW’s opinion was among several factors taken into consideration by the BHB board of directors in making its determination to approve the merger

 

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agreement and the merger. Consequently, the analyses described below should not be viewed as determinative of the decision of the BHB board of directors with respect to the fairness of the merger consideration. The type and amount of consideration payable in the merger were determined through negotiation between BHB and Independent and the decision of BHB to enter into the merger agreement was solely that of the BHB board of directors.

The following is a summary of the material financial analyses presented by KBW to the BHB board of directors in connection with its opinion. The following is not a complete description of the financial analyses underlying the opinion or the presentation made by KBW to the BHB board of directors, but rather summarizes the material analyses performed by KBW and presented to the BHB board of directors in connection with KBW’s opinion. The financial analyses summarized below includes information presented in tabular format. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex analytic process involving various determinations as to appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, KBW did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, KBW believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion.

For purposes of the financial analyses described below, KBW utilized an implied transaction value for the merger of $25.92 per share of BHB common stock, or $727.7 million in the aggregate (inclusive of the implied value of in-the-money BHB options), consisting of the sum of (i) the implied value of the stock consideration of 0.2308 shares of Independent common stock based on the closing price of Independent common stock on September 18, 2018, and (ii) the cash consideration of $5.25. In addition to the financial analyses described below, KBW reviewed with the BHB board of directors for informational purposes, among other things, an implied transaction multiple for the proposed merger (based on the implied transaction value for the merger of $25.92 per share of BHB common stock) of 24.7x BHB’s estimated 2018 earnings per share (“EPS”), using the publicly available 2018 EPS consensus “street estimate” for BHB.

BHB Selected Companies Analysis. Using publicly available information, KBW compared the financial performance, financial condition and market performance of BHB to 14 selected publicly traded banks and thrifts which were headquartered in the Northeast United States (defined as Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont) and which had total assets between $1.0 billion and $5.0 billion. Merger targets were excluded from the selected companies.

The selected companies were as follows:

 

Bankwell Financial Group, Inc.

Bar Harbor Bankshares

BSB Bancorp, Inc.

Cambridge Bancorp

Camden National Corporation

Century Bancorp, Inc.

Enterprise Bancorp, Inc.

  

First Bancorp, Inc.

Hingham Institution for Savings

Northeast Bancorp

Salisbury Bancorp, Inc.

SI Financial Group, Inc.

Washington Trust Bancorp, Inc.

Western New England Bancorp, Inc.

To perform this analysis, KBW used profitability and other financial information for the last 12 months (“LTM”) or the most recent completed fiscal quarter (“MRQ”) available or as of the end of such periods and market price information as of September 18, 2018. KBW also used 2018 and 2019 EPS estimates taken from

 

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consensus “street estimates” for BHB and the six selected companies for which consensus “street estimates” were available. Certain financial data prepared by KBW, and as referenced in the tables presented below, may not correspond to the data presented in BHB’s historical financial statements, or the data prepared by Sandler presented under the section “The Merger — Opinion of Independent’s Financial Advisor,” as a result of the different periods, assumptions and methods used by KBW to compute the financial data presented.

KBW’s analysis showed the following concerning the financial performance of BHB and the selected companies:

 

           Selected Companies  
     BHB     Bottom
Quartile
    Median     Average     Top
Quartile
 

MRQ Core Return on Average Assets(1)

     0.94     0.88     1.05     1.11     1.24

MRQ Core Return on Average Equity(1)

     6.20     10.52     12.67     12.31     13.23

MRQ Net Interest Margin

     2.98     2.91     3.08     3.19     3.30

MRQ Fee Income / Revenue Ratio (2)

     14.3     12.2     17.1     17.7     23.5

MRQ Efficiency Ratio

     60.9     65.3     58.2     57.5     53.8

 

(1)

Core income excluded extraordinary items, gain/loss on sale of securities, nonrecurring revenue/expenses, and amortization of intangibles as calculated by S&P Global Market Intelligence.

(2)

Excluded gains/losses on sale of securities.

KBW’s analysis also showed the following concerning the financial condition of BHB and the selected companies:

 

           Selected Companies  
     BHB     Bottom
Quartile
    Median     Average     Top
Quartile
 

Tangible Common Equity / Tangible Assets

     14.31     7.51     7.90     8.30     8.88

Total Capital Ratio

     18.78     12.65     13.56     13.91     14.82

Loans / Deposits

     107.1     87.6     100.7     98.5     106.9

Loan Loss Reserve / Gross Loans

     0.89     0.69     0.83     0.90     1.10

Nonperforming Assets / Loans and OREO

     0.63     1.59     0.96     1.12     0.37

Net Charge-Offs / Average Loans

     0.03     0.04     0.01     0.02     0.00

In addition, KBW’s analysis showed the following concerning the market performance of BHB and, to the extent publicly available, the selected companies:

 

           Selected Companies  
     BHB     Bottom
Quartile
    Median     Average     Top
Quartile
 

One-Year Stock Price Change

     20.0     (6.0 %)      1.6     2.4     6.9

Year-To-Date Stock Price Change

     13.4     (6.3 %)      0.7     0.3     5.8

Stock Price / Book Value per Share

     1.53     1.32     1.55     1.61     1.69

Stock Price / Tangible Book Value per Share

     1.57     1.42     1.68     1.78     2.14

Stock Price / LTM Adjusted EPS(1)

     27.1     13.3     14.5     14.9     16.3

Stock Price / 2018 EPS Estimate

     21.7     13.1     13.7     14.1     14.3

Stock Price / 2019 EPS Estimate

     19.8     13.0     13.2     13.9     13.4

Dividend Yield

     3.5     0.9     1.7     1.8     2.7

LTM Dividend Payout

     95.1     12.6     28.8     27.7     39.2

 

(1)

Reflected EPS for the 12 months ended June 30, 2018 as adjusted, per S&P Global Market Intelligence, to exclude one-time charges in the fourth quarter of 2017 related to the revaluation of deferred tax assets or liabilities due to the Tax Cuts and Jobs Act of 2017.

 

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No company used as a comparison in the above selected companies analysis is identical to BHB. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Independent Selected Companies Analysis. Using publicly available information, KBW compared the financial performance, financial condition and market performance of Independent to nine selected publicly traded banks and thrifts which were headquartered in the Northeast United States and which had total assets between $3.0 billion and $15.0 billion. Merger targets were excluded from the selected companies.

The selected companies were as follows:

 

Bar Harbor Bankshares

Berkshire Hills Bancorp, Inc.

Boston Private Financial Holdings, Inc.

Brookline Bancorp, Inc.

Camden National Corporation

  

Century Bancorp, Inc.

Meridian Bancorp, Inc.

United Financial Bancorp, Inc.

Washington Trust Bancorp, Inc.

To perform this analysis, KBW used profitability and other financial information for the most recent completed fiscal quarter available or as of the end of such period and market price information as of September 18, 2018. KBW also used 2018 and 2019 EPS estimates taken from consensus “street estimates” for Independent and the seven selected companies for which consensus “street estimates” were available. Certain financial data prepared by KBW, and as referenced in the tables presented below, may not correspond to the data presented in Independent’s historical financial statements, or the data prepared by Sandler presented under the section “The Merger — Opinion of Independent’s Financial Advisor,” as a result of the different periods, assumptions and methods used by KBW to compute the financial data presented.

KBW’s analysis showed the following concerning the financial performance of Independent and the selected companies:

 

           Selected Companies  
     Independent     Bottom
Quartile
    Median     Average     Top
Quartile
 

MRQ Core Return on Average Assets(1)

     1.53     0.89     1.04     1.03     1.21

MRQ Core Return on Average Equity(1)

     12.94     9.11     10.15     10.43     12.18

MRQ Net Interest Margin

     3.88     2.91     3.05     3.04     3.12

MRQ Fee Income / Revenue Ratio(2)

     23.0     13.9     23.6     20.3     24.4

MRQ Efficiency Ratio

     54.9     59.0     57.9     58.7     53.6

 

(1)

Core income excluded extraordinary items, gain/loss on sale of securities, nonrecurring revenue/expenses, and amortization of intangibles as calculated by S&P Global Market Intelligence.

(2)

Excluded gain/losses on sale of securities.

KBW’s analysis showed the following concerning the financial condition of Independent and the selected companies:

 

           Selected Companies  
     Independent     Bottom
Quartile
    Median     Average     Top
Quartile
 

Tangible Common Equity / Tangible Assets(1)

     8.74     7.44     7.59     8.11     8.22

Total Capital Ratio

     13.74 %(1)      12.84     13.19     13.46     13.92

Loans / Deposits

     92.8 %(1)      98.5     102.2     100.0     105.1

Loan Loss Reserve / Gross Loans

     0.96     0.74     0.88     0.87     0.96

Nonperforming Assets / Loans and OREO

     1.11     0.70     0.59     0.59     0.39

Net Charge-Offs / Average Loans

     0.02     0.08     0.04     0.06     0.00

 

(1)

Data for Independent was pro forma for the MNB merger.

 

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In addition, KBW’s analysis showed the following concerning the market performance of Independent and, to the extent publicly available, the selected companies:

 

           Selected Companies  
     Independent     Bottom
Quartile
    Median     Average     Top
Quartile
 

One-Year Stock Price Change

     25.8     (0.2 %)      3.3     5.0     6.9

Year-To-Date Stock Price Change

     28.2     (8.7 %)      3.3     0.6     7.5

Stock Price / Book Value per Share(1)

     2.47     1.30     1.43     1.54     1.62

Stock Price / Tangible Book Value per Share(1)

     3.39     1.50     1.82     1.90     2.08

Stock Price / 2018 EPS Estimate

     20.0     14.0     15.7     15.3     16.4

Stock Price / 2019 EPS Estimate

     17.0     13.0     13.7     13.6     14.0

Dividend Yield

     1.7     2.1     2.8     2.3     2.8

2018 Dividend Payout

     34.0     34.5     37.7     38.3     41.0

 

(1)

Data for Independent was pro forma for the MNB merger.

No company used as a comparison in the above selected companies analysis is identical to Independent. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Selected Transactions Analysis. KBW reviewed publicly available information related to 16 selected U.S. whole bank transactions announced since January 1, 2018 with announced transaction values between $200 million and $2 billion. Terminated transactions were excluded from the selected transactions.

The selected transactions were as follows:

 

Acquiror

  

Acquired Company

PacWest Bancorp

First Busey Corporation

WSFS Financial Corporation

Old National Bancorp

People’s United Financial, Inc.

BOK Financial Corporation

Independent Bank Group, Inc.

Cadence Bancorporation

Allegiance Bancshares, Inc.

CenterState Bank Corporation

WesBanco, Inc.

Renasant Corporation

CVB Financial Corp.

Pacific Premier Bancorp, Inc.

Ameris Bancorp

Meta Financial Group, Inc.

  

El Dorado Savings Bank, F.S.B.

Banc Ed Corp.

Beneficial Bancorp, Inc.

Klein Financial, Inc.

First Connecticut Bancorp, Inc.

CoBiz Financial Inc.

Guaranty Bancorp

State Bank Financial Corporation

Post Oak Bancshares, Inc.

Charter Financial Corporation

Farmers Capital Bank Corporation

Brand Group Holdings, Inc.

Community Bank

Grandpoint Capital, Inc.

Hamilton State Bancshares, Inc.

Crestmark Bancorp Inc.

For each selected transaction, KBW derived the following implied transaction statistics, in each case based on the transaction consideration value paid for the acquired company and using financial data based on the acquired company’s then latest publicly available financial statements prior to the announcement of the respective transaction and, to the extent then publicly available, EPS consensus “street estimates” for the first full calendar year following the announcement of the respective transaction:

 

   

Price per common share to tangible book value per share of the acquired company (in the case of selected transactions involving a private acquired company, this transaction statistic was calculated as total transaction consideration divided by total tangible common equity);

 

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Price per common share to core tangible book value per share of the acquired company (purchase price and tangible book value were reduced by value of excess capital based on a normalized tangible common equity to tangible asset ratio of 8.00%);

 

   

Tangible equity premium to core deposits (total deposits less time deposits greater than $100,000) of the acquired company, referred to as core deposit premium;

 

   

Price per common share to LTM EPS of the acquired company (in the case of selected transactions involving a private acquired company, this transaction statistic was calculated as total transaction consideration divided by LTM earnings); and

 

   

Price per common share to next year estimated EPS of the acquired company in the seven selected transactions in which consensus “street estimates” for the acquired company were then available.

KBW also reviewed the price per common share paid for the acquired company for the 10 selected transactions involving publicly traded acquired companies as a premium to the closing price of the acquired company one day prior to the announcement of the acquisition (expressed as a percentage and referred to as the one day market premium). The resulting transaction multiples and premiums for the selected transactions were compared with the corresponding transaction multiples and premiums for the proposed merger based on the implied transaction value for the merger of $25.92 per outstanding share of BHB common stock and using historical financial information for BHB as of or for the period ended June 30, 2018, the publicly available 2019 EPS consensus “street estimate” of BHB and the closing price of BHB common stock on September 18, 2018.

The results of the analysis are set forth in the following table (excluding the impact of the LTM EPS multiple for one of the selected transactions, which multiple was considered to be not meaningful because it was greater than 35.0x):

 

           Selected Transactions  
     Independent /
        BHB        
    Bottom
Quartile
    Median     Average     Top
Quartile
 

Price / Tangible Book Value

     1.78     1.95     2.18     2.34     2.48

Price / Core Tangible Book Value(1)

     2.40     2.39     2.51     2.64     2.84

Core Deposit Premium

     19.3     14.4     16.6     17.4     20.7

Price / LTM EPS(2)

     30.8x / 31.2 x(3)      19.7     22.0     21.8     24.0

Price / Forward EPS

     22.5     15.6     17.0     18.6     17.2

One-Day Market Premium

     13.7     4.2     10.5     13.1     20.3

 

(1)

Purchase price and tangible book value were reduced by value of excess capital based on a normalized tangible common equity to tangible asset ratio of 8.00%.

(2)

LTM EPS was adjusted, per S&P Global Market Intelligence, to exclude one-time tax expenses in the fourth quarter of 2017 related to the revaluation of deferred tax assets or liabilities due to the Tax Cuts and Jobs Act of 2017 where applicable.

(3)

31.2x based on LTM core net income which excluded extraordinary items, gain/loss on sale of securities, nonrecurring revenue/expenses, and amortization of intangibles as calculated by S&P Global Market Intelligence; 2017Q4 earnings adjusted for one-time charge in 2017 tax provision related to the Tax Cuts and Jobs Act per BHB’s public disclosure.

No company or transaction used as a comparison in the above selected transaction analysis is identical to BHB or the proposed merger. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Relative Contribution Analysis. KBW analyzed the relative standalone contribution of Independent and BHB to various pro forma balance sheet and income statement items and the combined market capitalization of

 

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the combined entity. This analysis did not include purchase accounting adjustments. To perform this analysis, KBW used (i) balance sheet and income statement data for Independent (pro forma for the MNB merger in the case of balance sheet data) and BHB as of or for the period ended June 30, 2018, (ii) publicly available 2018, 2019 and 2020 consensus “street estimates” of Independent and BHB, and (iii) market price data as of September 18, 2018. KBW also used, for informational purposes, an assumed Independent long-term earnings growth rate for 2020 provided by Independent management, as well as 2019 and 2020 net income estimates for BHB provided by Independent management. The results of KBW’s analysis are set forth in the following table, which also compares the results of KBW’s analysis with the implied pro forma ownership percentages of Independent and BHB stockholders in the combined company based on the 0.2308x exchange ratio provided for in the merger agreement and also hypothetically assuming 100% stock consideration in the proposed merger for illustrative purposes:

 

     Independent
as a % of
Total
    BHB as a
% of
Total
 

Ownership

    

At 0.2308x Merger Exchange Ratio

     82     18

Assuming 100% stock consideration

     78     22

Balance Sheet

    

Assets

     76     24

Gross Loans Held for Investment

     75     25

Deposits

     78     22

Tangible Common Equity

     65     35

Income Statement

    

LTM Core Net Income(1)

     84     16

2018 Estimated Net Income

     82     18

2019 Estimated Net Income

     83     17

2020 Estimated Net Income

     83     17

Income Statement Per Independent Management(2)

    

2019 Estimated Net Income

     84     16

2020 Estimated Net Income

     85     15

Market Capitalization

     80     20

 

(1)

LTM core net income, per S&P Global Market Intelligence, excluded extraordinary items, gain/loss on sale of securities, nonrecurring revenue/expense, amortization of intangibles, and revaluation of deferred tax asset in the fourth quarter of 2017 due to Tax Cuts and Jobs Act.

(2)

For information purposes only. Based on the 2019 publicly available consensus “street estimate” of Independent, an assumed Independent long-term net income growth rate for 2020 per Independent management, and 2019 and 2020 net income estimates for BHB per Independent management.

Financial Impact Analysis. KBW performed a pro forma financial impact analysis that combined projected income statement and balance sheet information of Independent and BHB. Using (i) closing balance sheet estimates as of June 30, 2019 for Independent taken from publicly available consensus “street estimates” and closing balance sheet estimates as of June 30, 2019 for BHB provided by Independent management, (ii) publicly available 2018 and 2019 EPS consensus “street estimates” of Independent and an assumed long-term EPS growth rate for Independent provided by Independent management, (iii) the publicly available 2018 EPS consensus “street estimate” of BHB and 2019 and 2020 net income estimates for BHB provided by Independent management, and (iv) pro forma assumptions (including, without limitation, the cost savings and related expenses expected to result from the merger and certain accounting adjustments and restructuring charges assumed with respect thereto) provided by Independent management, KBW analyzed the potential financial impact of the merger on certain projected financial results of Independent. This analysis indicated the merger could be accretive to Independent’s estimated 2019 EPS and estimated 2020 EPS and could be approximately neutral to Independent’s estimated tangible book value per share as of June 30, 2019. Furthermore, the analysis

 

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indicated that, pro forma for the merger, each of Independent’s tangible common equity to tangible assets ratio, Tier I Leverage Ratio, Common Equity Tier 1 Ratio, Tier I Capital Ratio and Total Risk-based Capital Ratio as of June 30, 2019 could be lower. For all of the above analysis, the actual results achieved by Independent following the merger may vary from the projected results, and the variations may be material.

BHB Discounted Cash Flow Analysis. KBW performed a discounted cash flow analysis of BHB to estimate a range for the implied equity value of BHB. In this analysis, KBW used publicly available consensus “street estimates” of BHB and assumed long-term growth rates for BHB provided by BHB management, and assumed discount rates ranging from 10.0% to 13.0%. The range of values was derived by adding (i) the present value of the estimated excess cash flows that BHB could generate over the period from June 30, 2019 through December 31, 2023 as a stand-alone company, and (ii) the present value of BHB’s implied terminal value at the end of such period. KBW assumed that BHB would maintain a tangible common equity to tangible asset ratio of 8.00% and would retain sufficient earnings to maintain these levels. In calculating the terminal value of BHB, KBW applied a range of 13.0x to 17.0x estimated 2024 net income. This discounted cash flow analysis resulted in a range of implied values per share of BHB common stock of $20.18 per share to $25.82 per share.

The discounted cash flow analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions that must be made, including asset and earnings growth rates, terminal values, dividend payout rates and discount rates. The foregoing discounted cash flow analyses did not purport to be indicative of the actual values or expected values of BHB.

Independent Discounted Cash Flow Analysis. KBW performed a discounted cash flow analysis of Independent to estimate a range for the implied equity value of Independent. In this analysis, KBW used the publicly available 2019 net income consensus “street estimate” of Independent and assumed long-term growth rates for Independent provided by Independent management, and assumed discount rates ranging from 10.0% to 13.0%. The range of values was derived by adding (i) the present value of the estimated excess cash flows that Independent could generate over the period from June 30, 2019 through December 31, 2023 as a stand-alone company, and (ii) the present value of Independent’s implied terminal value at the end of such period. KBW assumed that Independent would maintain a tangible common equity to tangible asset ratio of 8.00% and would retain sufficient earnings to maintain these levels. In calculating the terminal value of Independent, KBW applied a range of 13.0x to 17.0x estimated 2024 net income. This discounted cash flow analysis resulted in a range of implied values per share of Independent common stock of $74.56 per share to $101.85 per share.

The discounted cash flow analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions that must be made, including asset and earnings growth rates, terminal values, dividend payout rates, and discount rates. The foregoing discounted cash flow analyses did not purport to be indicative of the actual values or expected values of Independent or the pro forma combined company.

Miscellaneous. KBW acted as financial advisor to BHB and not as an advisor to or agent of any other person. As part of its investment banking business, KBW is continually engaged in the valuation of bank and bank holding company securities in connection with acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for various other purposes. As specialists in the securities of banking companies, KBW has experience in, and knowledge of, the valuation of banking enterprises. In the ordinary course of its and their broker-dealer businesses, and further to certain existing sales and trading relationships with each of BHB and Independent, KBW and its affiliates may from time to time purchase securities from, and sell securities to, BHB and Independent. In addition, as a market maker in securities, KBW and its affiliates may from time to time have a long or short position in, and buy or sell, debt or equity securities of BHB or Independent for its and their own accounts and for the accounts of its and their respective customers and clients.

Pursuant to the KBW engagement agreement, BHB agreed to pay KBW a cash fee equal to 0.95% of the aggregate merger consideration, $1,000,000 of which became payable upon the rendering of KBW’s opinion and

 

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the balance of which is contingent upon the consummation of the merger. BHB also agreed to reimburse KBW for reasonable out-of-pocket expenses and disbursements incurred in connection with its retention and to indemnify KBW against certain liabilities relating to or arising out of KBW’s engagement or KBW’s role in connection therewith. Other than in connection with this present engagement, during the two years preceding the date of its opinion, KBW did not provide investment banking and financial advisory services to BHB. During the two years preceding the date of its opinion, KBW provided investment banking and financial advisory services to Independent. KBW provided certain financial advisory services to Independent in connection with the MNB merger. In connection with the MNB merger, Independent paid KBW a cash fee of $145,000. KBW may in the future provide investment banking and financial advisory services to BHB or Independent and receive compensation for such services.

Recommendation of Independent’s Board of Directors

Independent’s board of directors has unanimously approved the merger agreement and unanimously recommends that Independent’s shareholders vote “FOR” the approval of the Independent merger agreement proposal.

Independent’s Reasons for the Merger

Independent’s board of directors determined that the merger agreement and the merger are advisable to Independent and Rockland Trust. Accordingly, Independent’s board of directors adopted and approved the merger agreement.

The Independent board of directors unanimously approved the merger agreement and the merger because it determined that the merger is a natural expansion and strengthening of its Norfolk, Suffolk and Nantucket County, Massachusetts franchises that should increase long-term shareholder value because Blue Hills is, like Rockland Trust, a bank that is deeply committed to its customers, employees, and the communities that it serves. The merger should provide Rockland Trust with access to new and potential customers in Norfolk County, Suffolk County and Nantucket County, Massachusetts and provide Independent with deposit market share in Nantucket, Massachusetts, where Rockland Trust does not currently have a physical presence, and other towns in the surrounding area. The transaction is financially attractive to Independent and its shareholders because it allows Independent to add the loan and deposit base of Blue Hills to that of Independent while simultaneously providing Independent with the opportunity to maintain and deepen relationships with customers of Blue Hills by offering Independent’s deeper set of products. The Independent board of directors believes that the combined company should have the potential to realize a stronger competitive position and improved long-term operating and financial results, including revenue and earning enhancements. In addition, Independent’s financial advisor, Sandler O’Neill & Partners, L.P., reviewed in detail with the board of directors the financial aspects of the proposed merger and delivered its opinion, to the effect that, as of September 20, 2018 and subject to the limitations, assumptions, and qualifications set forth therein, the merger consideration was fair to Independent, from a financial point of view.

After taking into account these and other factors, the Independent board of directors determined that the merger agreement and the merger were advisable to Independent and Rockland Trust and that Independent should enter into the merger agreement and complete the merger. Independent’s board of directors evaluated the factors described above, including asking questions of Independent’s management and Independent’s legal and financial advisors, and reached the unanimous decision that the merger was advisable to Independent and Rockland Trust. This discussion of the factors considered by Independent’s board of directors is not exhaustive, but includes all material factors considered by the board. Independent’s board of directors considered these factors as a whole, and overall considered them to be favorable to, and to support, its determination. Independent’s board of directors did not consider it practical to, nor did it attempt to, quantify, rank or otherwise assign relative weights to the specific factors that it considered in reaching its decision. In considering the factors described above, individual members of Independent’s board of directors may have given different weights to

 

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different factors. Independent’s board of directors considered these factors as a whole, and overall considered them to be favorable to, and to support, its determination. This explanation of the reasoning of the Independent board of directors is forward-looking in nature ad should be read in light of the factors discussed under “Forward-Looking Statements” beginning on page 25.

Opinion of Independent’s Financial Advisor

Independent retained Sandler to act as financial advisor to Independent’s board of directors in connection with Independent’s consideration of a possible business combination. Sandler is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

Sandler acted as financial advisor in connection with the proposed transaction. At the September 20, 2018 meeting at which Independent’s board of directors considered and discussed the terms of the merger agreement and the merger, Sandler delivered to Independent’s board of directors its oral and written opinion, to the effect that, as of such date, the merger consideration provided for in the merger agreement was fair to Independent, from a financial point of view. The full text of Sandler’s opinion is attached as Annex C to this joint proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. Independent shareholders are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

Sandler’s opinion speaks only as of the date of the opinion. The opinion was directed to Independent’s board of directors in connection with its consideration of the merger agreement and the merger and does not constitute a recommendation to any shareholder of Independent as to how any such shareholder should vote at any meeting of shareholders called to consider and vote upon the approval of the merger agreement, the merger and the issuance of up to 6,835,690 shares of Independent common stock in connection with the merger. Sandler’s opinion was directed only to the fairness, from a financial point of view, of the merger consideration to Independent and does not address the underlying business decision of Independent to engage in the merger, the form or structure of the merger or any other transactions contemplated in the merger agreement, the relative merits of the merger as compared to any other alternative transactions or business strategies that might exist for Independent or the effect of any other transaction in which Independent might engage. Sandler did not express any opinion as to the fairness of the amount or nature of the compensation to be received in the merger by any officer, director or employee of Independent or BHB, or any class of such persons, if any, relative to the compensation to be received in the merger by any other shareholder. Sandler’s opinion was approved by its fairness opinion committee.

In connection with its opinion, Sandler reviewed and considered, among other things:

 

   

an execution version of the merger agreement, dated as of September 20, 2018;

 

   

certain publicly available financial statements and other historical financial information of Independent and Rockland Trust, a wholly-owned subsidiary of Independent, that Sandler deemed relevant;

 

   

certain publicly available financial statements and other historical financial information of BHB and Blue Hills Bank, a wholly-owned subsidiary of BHB, that Sandler deemed relevant;

 

   

publicly available consensus median analyst GAAP earnings per share and dividends per share estimates for Independent for the years ending December 31, 2018 and December 31, 2019, as well as an estimated long-term earnings per share growth rate and estimated dividends per share for the years thereafter, as provided by the senior management of Independent;

 

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publicly available consensus median analyst GAAP earnings per share estimates for BHB for the year ending December 31, 2018 and for the quarters ending March 31, 2019 and June 30, 2019, as well as estimated long-term net income and balance sheet growth rates and dividends per share for the quarters ending September 30, 2019 and December 31, 2019 and for the years thereafter, as provided by the senior management of Independent;

 

   

the pro forma financial impact of the Merger on Independent based on certain assumptions relating to transaction expenses, purchase accounting adjustments and cost savings, as provided by the senior management of Independent;

 

   

the publicly reported historical price and trading activity for Independent common stock and BHB common stock, including a comparison of certain stock trading information for Independent common stock and BHB common stock and certain stock indices, as well as similar publicly available information for certain other companies, the securities of which are publicly traded;

 

   

a comparison of certain financial information for Independent and BHB with similar institutions for which information is publicly available;

 

   

the financial terms of certain recent business combinations in the bank and thrift industry (on a regional and nationwide basis), to the extent publicly available;

 

   

the current market environment generally and the banking environment in particular; and

 

   

such other information, financial studies, analyses and investigations and financial, economic and market criteria as Sandler considered relevant.

Sandler also discussed with certain members of the senior management of Independent the business, financial condition, results of operations and prospects of Independent and held similar discussions with BHB’s representatives regarding the business, financial condition, results of operations and prospects of BHB.

In performing their review, Sandler relied upon the accuracy and completeness of all of the financial and other information that was available to Sandler from public sources, that was provided to Sandler by Independent or its representatives, or that was otherwise reviewed by Sandler and Sandler assumed such accuracy and completeness for purposes of rendering its opinion without any independent verification or investigation. Sandler further relied on the assurances of the senior management of Independent that they were not aware of any facts or circumstances that would have made any of such information inaccurate or misleading in any material respect. Sandler was not asked to undertake, and did not undertake, an independent verification of any of such information and did not assume any responsibility or liability for the accuracy or completeness thereof. Sandler did not make an independent evaluation or perform an appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Independent or BHB or any of their respective subsidiaries. Sandler rendered no opinion or evaluation on the collectability of any assets or the future performance of any loans of Independent or BHB or any of their respective subsidiaries. Sandler did not make an independent evaluation of the adequacy of the allowance for loan losses of Independent or BHB, or the combined entity after the merger, and Sandler did not review any individual credit files relating to Independent or BHB or any of their respective subsidiaries. Sandler assumed, with Independent’s consent, that the respective allowances for loan losses for both Independent and BHB were adequate to cover such losses and would be adequate on a pro forma basis for the combined entity.

In preparing its analyses, Sandler used publicly available consensus median analyst GAAP earnings per share and dividends per share estimates for Independent for the years ending December 31, 2018 and December 31, 2019, as well as an estimated long-term earnings per share growth rate and estimated dividends per share for the years thereafter, as provided by the senior management of Independent. In addition, Sandler used publicly available consensus median analyst GAAP earnings per share estimates for BHB for the year ending December 31, 2018 and for the quarters ending March 31, 2019 and June 30, 2019, as well as estimated long-term net income and balance sheet growth rates and dividends per share for the quarters ending September 30,

 

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2019 and December 31, 2019 and for the years thereafter, as provided by the senior management of Independent. Sandler also received and used in its pro forma analyses certain assumptions relating to transaction expenses, purchase accounting adjustments and cost savings, as provided by the senior management of Independent. With respect to the foregoing information, the senior management of Independent confirmed to Sandler that such information reflected (or, in the case of the publicly available consensus median analyst estimates referred to above, were consistent with) the best currently available estimates of senior management as to the future financial performance of Independent and BHB, respectively, and Sandler assumed that the financial results reflected in such information would be achieved. Sandler expressed no opinion as to such estimates or judgements, or the assumptions on which they were based. Sandler also assumed that there had been no material change in Independent’s or BHB’s assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements made available to Sandler. Sandler assumed in all respects material to Sandler’s analyses that Independent and BHB would remain as going concerns for all periods relevant to their analyses.

Sandler also assumed, with Independent’s consent, that (i) each of the parties to the merger agreement would comply in all material respects with all material terms and conditions of the merger agreement and all related agreements required to effect the merger, that all of the representations and warranties contained in such agreements were true and correct in all material respects, that each of the parties to such agreements would perform in all material respects all of the covenants and other obligations required to be performed by such party under such agreements and that the conditions precedent in such agreements were not and would not be waived, (ii) in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect that would be material to Sandler’s analysis of Independent, BHB, the merger or any related transactions, and (iii) the merger and any related transactions would be consummated in accordance with the terms of the merger agreement without any waiver, modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements. Finally, with Independent’s consent, Sandler relied upon the advice that Independent received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the merger and the other transactions contemplated by the merger agreement. Sandler expressed no opinion as to any such matters.

Sandler’s opinion was necessarily based on financial, regulatory, economic, market and other conditions as in effect on, and the information made available to Sandler as of, the date thereof. Events occurring after the date thereof could materially affect Sandler’s opinion. Sandler has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date thereof.

In rendering its opinion, Sandler performed a variety of financial analyses. The summary below is not a complete description of the analyses underlying Sandler’s opinion or the presentation made by Sandler to Independent’s board of directors, but is a summary of all material analyses performed and presented by Sandler. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Sandler believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Sandler’s comparative analyses described below is identical to Independent or BHB and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or merger transaction values, as the case may be, of Independent and BHB and the companies to which they are being compared. In arriving at its opinion, Sandler did not attribute

 

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any particular weight to any analysis or factor that it considered. Rather, Sandler made qualitative judgments as to the significance and relevance of each analysis and factor. Sandler did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion, rather, Sandler made its determination as to the fairness of the merger consideration on the basis of its experience and professional judgment after considering the results of all its analyses taken as a whole.

In performing its analyses, Sandler also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which are beyond the control of Independent, BHB and Sandler. The analyses performed by Sandler are not necessarily indicative of actual values or future results, both of which may be significantly more or less favorable than suggested by such analyses. Sandler prepared its analyses solely for purposes of rendering its opinion and provided such analyses to Independent’s board of directors at its September 20, 2018 meeting. Estimates on the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Sandler’s analyses do not necessarily reflect the value of Independent common shares or the prices at which Independent common shares or BHB shares may be sold at any time. The analyses of Sandler and its opinion were among a number of factors taken into consideration by Independent’s board of directors in making its determination to approve the merger agreement and should not be viewed as determinative of the merger agreement or the decision of Independent’s board of directors or management with respect to the fairness of the merger. The type and amount of consideration payable in the merger were determined through negotiation between Independent and BHB.

Summary of Merger Consideration and Implied Transaction Metrics. Sandler reviewed the financial terms of the proposed merger. As more fully described in the merger agreement, at the effective time, each share of BHB common stock issued and outstanding prior to the effective time will be converted into the right to receive (i) $5.25 in cash, and (ii) 0.2308 of a share of common stock of Independent. Based on the closing price of Independent common stock on September 18, 2018 of $89.55 per share, Sandler calculated an implied transaction price per share of $25.92 and an aggregate implied transaction value of approximately $728 million, assuming 26,901,347 BHB common shares outstanding and 2,760,700 stock options outstanding with a weighted average strike price of $15.21, as of August 1, 2018. Based upon publicly available historical financial information for BHB and publicly available median analyst earnings per share estimates for BHB for the year ending December 31, 2018, Sandler calculated the following implied transaction metrics:

 

Transaction Price / BHB LTM Earnings Per Share

     35.0

Transaction Price / BHB YTD Annualized Earnings Per Share

     24.9

Transaction Price / BHB 2018E Earnings Per Share(1)

     25.7

Transaction Price / BHB June 30, 2018 Book Value Per Share

     174

Transaction Price / BHB June 30, 2018 Tangible Book Value Per Share

     178

Tangible Book Premium / Core Deposits(2)

     19.3

Premium to BHB Closing Price(3)

     13.7

 

1)

Price/forward earnings multiple based on core analyst consensus median estimates per FactSet

2)

Core deposits defined as total deposits less certificates of deposit greater than $100,000

3)

Based on closing price of BHB common stock on September 18, 2018 of $22.80

BHB Stock Trading History. Sandler reviewed the historical stock price performance of BHB common stock for the one- and three-year periods ended September 18, 2018. Sandler then compared the relationship between the stock price performance of BHB’s shares to movements in the BHB Regional Peer Group (as described below) as well as certain stock indices.

 

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BHB One-Year Stock Price Performance

 

     September 18, 2017     September 18, 2018  

BHB

     100     120.0

BHB Regional Peer Group

     100     95.8

NASDAQ Bank Index

     100     113.0

S&P 500 Index

     100     116.0

BHB Three-Year Stock Price Performance

 

     September 18, 2015     September 18, 2018  

BHB

     100     157.1

BHB Regional Peer Group

     100     129.1

NASDAQ Bank Index

     100     153.4

S&P 500 Index

     100     148.3

BHB Comparable Company Analyses. Sandler used publicly available information to compare selected financial information for BHB with a group of financial institutions selected by Sandler (the “BHB Regional Peer Group”). The BHB Regional Peer Group consisted of 14 publicly traded banks and thrifts headquartered in the Northeast and Mid-Atlantic regions of the United States with total assets between $1 billion and $10 billion and Tangible Common Equity / Tangible Assets greater than 10.0%, excluding announced merger targets and Northeast Bancorp and Marlin Business Services Corp due to their different business structures. The BHB Regional Peer Group consisted of the following companies:

 

Bank of Princeton    Meridian Bancorp, Inc.
Citizens & Northern Corporation    Metropolitan Bank Holding Corp.
Eagle Bancorp, Inc.    Oritani Financial Corp.
First Bank.    Parke Bancorp, Inc.
Kearny Financial Corp    PCSB Financial Corporation
Northfield Bancorp, Inc.    Prudential Bancorp, Inc.
Malvern Bancorp, Inc.    Western New England Bancorp, Inc.

The analysis compared financial information for BHB as of or for the period ended June 30, 2018 with the corresponding publicly available data for the BHB Regional Peer Group as of or for the period ended June 30, 2018, with pricing data as of September 18, 2018. The table below sets forth the data for BHB and the median, mean, high and low data for the BHB Regional Peer Group.

 

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BHB Comparable Company Analysis

 

     BHB     BHB
Regional
Peer

Group
Median
    BHB
Regional
Peer

Group
Mean
    BHB
Regional
Peer

Group
High
    BHB
Regional
Peer

Group
Low
 

Total Assets ($MM)

   $ 2,741     $ 1,783     $ 2,966     $ 7,880     $ 1,029  

Loans / Deposits (%)

     107.1     106.8     103.6     122.5     78.4

Non-performing Assets / Total Assets (%)(1)

     0.51     0.64     0.83     2.30     0.15

Tangible Common Equity / Tangible Assets (%)

     14.31     12.22     12.95     19.07     10.25

Leverage Ratio (%)

     14.87     13.43     13.55     19.54     10.21

Total Risk-Based Capital Ratio (%)

     18.78     16.72     18.66     30.81     12.96

CRE / Total Risk-Based Capital Ratio (%)(2)

     184.1     306.2     304.6     558.7     81.2

YTD Return on Average Assets (%)

     0.99     1.03     1.08     2.00     0.37

YTD Return on Average Equity (%)

     6.58     7.79     8.23     16.93     1.81

YTD Net Interest Margin (%)

     2.94     3.13     3.25     4.16     2.50

YTD Efficiency Ratio (%)

     61.4     56.0     54.2     72.8     30.7

Price / Tangible Book Value (%)

     157     143     147     197     118

Price / YTD Annualized Earnings Per Share (x)

     21.9     16.3     16.7     28.1     8.3

Price / 2018E Earnings Per Share (x)(3)

     22.6     16.4     18.5     37.6     12.0

Current Dividend Yield (%)

     3.5     1.1     1.6     6.3     0.0

Market Value ($MM)

   $ 553     $ 334     $ 555     $ 1,806     $ 158  

 

1)

Non-performing assets defined as nonaccrual loans and leases, renegotiated loans and leases and foreclosed or repossessed assets; Regulatory holding company financial data used for PCSB Financial Corporation.

2)

Bank level financial data used for Prudential Bancorp, Inc.

3)

Price / forward earnings multiples based on analyst consensus median estimates from FactSet

BHB Net Present Value Analyses. Sandler performed an analysis that estimated the net present value per share of BHB common stock assuming BHB performed in accordance with publicly available consensus median analyst GAAP earnings per share estimates for BHB for the year ending December 31, 2018 and for the quarters ending March 31, 2019 and June 30, 2019, as well as estimated long-term net income and balance sheet growth rates and dividends per share for BHB for September 30, 2019 and December 31, 2019 and for the years thereafter, as provided by the senior management of Independent. To approximate the terminal value of a share of BHB common stock at December 31, 2022, Sandler applied price to 2022 earnings per share multiples ranging from 15.0x to 20.0x and price to December 31, 2022 tangible book value per share multiples ranging from 140% to 190%. The terminal values were then discounted to present values using different discount rates ranging from 8.0% to 12.0% which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of BHB common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of BHB common stock of $13.18 to $19.36 when applying multiples of earnings per share and $17.14 to $25.98 when applying multiples of tangible book value per share. Sandler also performed a similar analysis that estimated the net present value per share of BHB common stock using the same criteria described above and including the impact of the estimated after-tax cost savings as a result of the merger, as provided by the senior management of Independent. As illustrated in the following tables, the analysis including estimated after-tax cost savings indicated an imputed range of values per share of BHB common stock of $21.42 to $32.30 when applying multiples of earnings per share and $18.83 to $28.68 when applying multiples of tangible book value per share.

 

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Earnings Per Share Multiples

 

Discount Rate

   15.0x      16.0x      17.0x      18.0x      19.0x      20.0x  

8.0%

   $ 15.30      $ 16.11      $ 16.92      $ 17.74      $ 18.55      $ 19.36  

9.0%

   $ 14.73      $ 15.51      $ 16.29      $ 17.07      $ 17.85      $ 18.63  

10.0%

   $ 14.19      $ 14.94      $ 15.69      $ 16.43      $ 17.18      $ 17.93  

11.0%

   $ 13.68      $ 14.39      $ 15.11      $ 15.83      $ 16.55      $ 17.26  

12.0%

   $ 13.18      $ 13.87      $ 14.56      $ 15.25      $ 15.94      $ 16.63  

Earnings Per Share Multiples with Estimated After-Tax Cost Savings

 

Discount Rate

   15.0x      16.0x      17.0x      18.0x      19.0x      20.0x  

8.0%

   $ 25.00      $ 26.46      $ 27.92      $ 29.38      $ 30.84      $ 32.30  

9.0%

   $ 24.04      $ 25.44      $ 26.84      $ 28.24      $ 29.64      $ 31.04  

10.0%

   $ 23.13      $ 24.47      $ 25.81      $ 27.16      $ 28.50      $ 29.84  

11.0%

   $ 22.25      $ 23.54      $ 24.83      $ 26.12      $ 27.41      $ 28.70  

12.0%

   $ 21.42      $ 22.66      $ 23.90      $ 25.14      $ 26.38      $ 27.62  

Tangible Book Value Per Share Multiples

 

Discount Rate

   140%      150%      160%      170%      180%      190%  

8.0%

   $ 19.96      $ 21.17      $ 22.37      $ 23.57      $ 24.78      $ 25.98  

9.0%

   $ 19.21      $ 20.36      $ 21.51      $ 22.67      $ 23.82      $ 24.98  

10.0%

   $ 18.48      $ 19.59      $ 20.70      $ 21.81      $ 22.92      $ 24.02  

11.0%

   $ 17.80      $ 18.86      $ 19.92      $ 20.99      $ 22.05      $ 23.12  

12.0%

   $ 17.14      $ 18.16      $ 19.19      $ 20.21      $ 21.23      $ 22.25  

Tangible Book Value Per Share Multiples with Estimated After-Tax Cost Savings

 

Discount Rate

   140%      150%      160%      170%      180%      190%  

8.0%

   $ 21.95      $ 23.30      $ 24.64      $ 25.99      $ 27.33      $ 28.68  

9.0%

   $ 21.11      $ 22.41      $ 23.70      $ 24.99      $ 26.28      $ 27.57  

10.0%

   $ 20.32      $ 21.56      $ 22.79      $ 24.03      $ 25.27      $ 26.51  

11.0%

   $ 19.56      $ 20.75      $ 21.94      $ 23.12      $ 24.31      $ 25.50  

12.0%

   $ 18.83      $ 19.98      $ 21.12      $ 22.26      $ 23.40      $ 24.54  

Sandler also considered and discussed with the Independent board of directors how these analyses would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler performed similar analyses assuming BHB’ net income varied from 10% above projections to 10% below projections. These analyses resulted in the following range of per share values for BHB common stock, applying the price to 2022 earnings per share multiples range of 15.0x to 20.0x referred to above and a discount rate of 10.84%.

Earnings Per Share Multiples

 

Annual

Estimated

Variance

  15.0x     16.0x     17.0x     18.0x     19.0x     20.0x  

(10.0%)

  $ 12.67     $ 13.32     $ 13.97     $ 14.62     $ 15.27     $ 15.92  

(5.0%)

  $ 13.21     $ 13.90     $ 14.59     $ 15.27     $ 15.96     $ 16.65  

0.0%

  $ 13.76     $ 14.48     $ 15.20     $ 15.92     $ 16.65     $ 17.37  

5.0%

  $ 14.30     $ 15.06     $ 15.82     $ 16.57     $ 17.33     $ 18.09  

10.0%

  $ 14.84     $ 15.64     $ 16.43     $ 17.22     $ 18.02     $ 18.81  

 

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Table of Contents

Earnings Per Share Multiples with Estimated After-Tax Cost Savings

 

Annual

Estimated

Variance

  15.0x     16.0x     17.0x     18.0x     19.0x     20.0x  

(10.0%)

  $ 20.44     $ 21.61     $ 22.78     $ 23.95     $ 25.12     $ 26.28  

(5.0%)

  $ 21.42     $ 22.65     $ 23.88     $ 25.12     $ 26.35     $ 27.58  

0.0%

  $ 22.39     $ 23.69     $ 24.99     $ 26.28     $ 27.58     $ 28.88  

5.0%

  $ 23.36     $ 24.73     $ 26.09     $ 27.45     $ 28.82     $ 30.18  

10.0%

  $ 24.34     $ 25.77     $ 27.19     $ 28.62     $ 30.05     $ 31.48  

Analysis of Selected Merger Transactions. Sandler reviewed a regional group of bank and thrift merger and acquisition transactions consisting of transactions announced between January 1, 2016 and September 18, 2018 with announced deal values, involving targets headquartered in the Northeast and Mid-Atlantic regions of the United States with assets at announcement greater than $1.5 billion, and excluding deals where a private equity buyer was involved (the “Regional Precedent Transactions”). Sandler also reviewed a national group of bank and thrift merger and acquisition transactions consisting of transactions announced between November 8, 2016 and September 18, 2018 with announced deal values, involving targets with assets at announcement greater than $2 billion and Tangible Common Equity / Tangible Assets greater than 9.50%, and excluding deals where a private equity buyer was involved (the “Nationwide Precedent Transactions”).

The Regional Precedent Transactions group was composed of the following ten transactions:

 

Acquiror

  

Target

WSFS Financial Corp.    Beneficial Bancorp Inc.
People’s United Financial Inc.    First Connecticut Bancorp, Inc.
Kearny Financial Corp.    Clifton Bancorp Inc.
OceanFirst Financial Corp.    Sun Bancorp Inc.
Berkshire Hills Bancorp Inc.    Commerce Bancshares Corp.
Sterling Bancorp    Astoria Financial Corp.
Community Bank System Inc.    Merchants Bancshares Inc.
People’s United Financial Inc.    Suffolk Bancorp
Bar Harbor Bankshares    Lake Sunapee Bank Group
OceanFirst Financial Corp.    Cape Bancorp Inc.

Using the latest publicly available information prior to the announcement of the relevant transaction, Sandler reviewed the following transaction metrics: transaction price to last twelve months’ earnings, transaction price to estimated earnings per share, transaction price to tangible book value, core deposit premium and one-day market premium. Sandler compared the indicated transaction multiples for the merger to the high, low, mean and median multiples of the Regional Precedent Transactions group.

 

    Independent /
BHB
    Regional
Precedent

Transactions
Median
    Regional
Precedent

Transactions
Mean
    Regional
Precedent

Transactions
High
    Regional
Precedent

Transactions
Low
 

Transaction Price / LTM Earnings

    35.0x/24.9x (1)       21.4     23.8     53.0     7.8

Transaction Price / Estimated EPS

    25.7     28.2     34.7     63.2     18.7

Transaction Price / Tangible Book Value

    178     167     166     196     138

Core Deposit Premium(2)

    19.3     11.3     10.7     19.0     3.0

One-Day Market Premium

    13.7     20.3     20.8     42.8     1.3

 

1)

Represents BHB’s YTD annualized EPS

2)

Core deposits defined as total deposits less time deposits greater than $100,000

 

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Table of Contents

The Nationwide Precedent Transactions group was composed of the following thirteen transactions:

 

Acquiror

  

Target

PacWest Bancorp    El Dorado SB FSB
WSFS Financial Corp.    Beneficial Bancorp Inc.
Synovus Financial Corp.    FCB Financial Holdings Inc.
Cadence Bancorp.    State Bank Financial Corp.
Banco de Credito e Inversiones    TotalBank
Associated Banc-Corp    Bank Mutual Corp.
OceanFirst Financial Corp.    Sun Bancorp Inc.
Union Bankshares Corporation    Xenith Bankshares Inc.
First Horizon National Corp.    Capital Bank Financial Corp.
Home BancShares Inc.    Stonegate Bank
Sterling Bancorp    Astoria Financial Corp.
Simmons First National Corp.    Southwest Bancorp Inc.
Independent Bank Group Inc.    Carlile Bancshares Inc.

Using the latest publicly available information prior to the announcement of the relevant transaction, Sandler reviewed the following transaction metrics: transaction price to last twelve months’ earnings, transaction price to estimated earnings per share, transaction price to tangible book value, core deposit premium and one-day market premium. Sandler compared the indicated transaction multiples for the merger to the high, low, mean and median multiples of the Nationwide Precedent Transactions group.

 

     Independent /
BHB
    Nationwide
Precedent

Transactions
Median
    Nationwide
Precedent

Transactions
Mean
    Nationwide
Precedent

Transactions
High
    Nationwide
Precedent

Transactions
Low
 

Transaction Price / LTM Earnings

     35.0x 24.9 x(1)      26.2     26.3     53.0     7.8

Transaction Price / Estimated EPS

     25.7     27.4     29.8     63.2     15.7

Transaction Price / Tangible Book Value

     178     203     197     248     156

Core Deposit Premium(2)

     19.3     15.4     15.8     24.2     9.9

One-Day Market Premium

     13.7     8.4     9.5     25.0     (2.9 %) 

 

1)

Represents BHB’s YTD annualized EPS

2)

Core deposits defined as total deposits less time deposits greater than $100,000

Independent Stock Trading History. Sandler reviewed the historical stock price performance of Independent common stock for the one- and three-year periods ended September 18, 2018. Sandler then compared the relationship between the stock price performance of Independent’s shares to movements in the Independent Regional Peer Group (as described below) as well as certain stock indices.

Independent One-Year Stock Price Performance

 

     September 18,
2017
    September 18,
2018
 

Independent

     100     125.8

Independent Regional Peer Group

     100     107.1

NASDAQ Bank Index

     100     113.0

S&P 500 Index

     100     116.0

 

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Table of Contents

Independent Three-Year Stock Price Performance

 

     September 18,
2015
    September 18,
2018
 

Independent

     100     200.7

Independent Regional Peer Group

     100     148.6

NASDAQ Bank Index

     100     153.4

S&P 500 Index

     100     148.3

Independent Comparable Company Analyses. Sandler used publicly available information to compare selected financial information for Independent with a group of financial institutions selected by Sandler (the “Independent Regional Peer Group”). The Independent Regional Peer Group consisted of publicly traded banks and thrifts headquartered in the Northeast and Mid-Atlantic regions of the United States with total assets between $7 billion and $12 billion, excluding announced merger targets. The Independent Regional Peer Group consisted of the following companies.

 

Berkshire Hills Bancorp, Inc.    Northwest Bancshares, Inc.
Boston Private Financial Holdings, Inc.    OceanFirst Financial Corp.
Brookline Bancorp, Inc.    Provident Financial Services, Inc.
Community Bank System, Inc.    S&T Bancorp, Inc.
Customers Bancorp, Inc.    Sandy Spring Bancorp, Inc.
Eagle Bancorp, Inc.    United Financial Bancorp, Inc.
First Commonwealth Financial Corp.    WSFS Financial Corporation
NBT Bancorp Inc.   

The analysis compared publicly available financial information for Independent as of or for the period ended June 30, 2018 with the corresponding publicly available data for the Independent Regional Peer Group as of or for the period ended June 30, 2018, with pricing data as of September 18, 2018. The table below sets forth the data for Independent and the median, mean, high and low data for the Independent Regional Peer Group.

Independent Comparable Company Analysis

 

    Independent     Independent
Regional
Peer

Group
Median
    Independent
Regional
Peer

Group
Mean
    Independent
Regional
Peer

Group
High
    Independent
Regional
Peer

Group
Low
 

Total Assets ($MM)

  $ 8,381     $ 8,153     $ 8,749     $ 11,902     $ 7,097  

Loans / Deposits (%)

    92.4     99.2     99.8     118.7     73.3

Non-performing Assets / Total Assets (%)(1)

    0.87     0.59     0.54     0.89     0.26

Tangible Common Equity / Tangible Assets (%)

    9.06     8.58     8.75     11.80     6.33

Leverage Ratio (%)

    10.39     9.80     9.90     11.97     8.46

Total Risk-Based Capital Ratio (%)

    14.24     13.04     13.85     18.29     12.19

CRE / Total Risk-Based Capital Ratio (%)

    287.1     264.5     267.1     439.9     82.3

YTD Return on Average Assets (%)

    1.46     1.16     1.20     1.91 %&n