Strong Fundamentals Drive 8% Increase in Earnings Per Share

ROCKLAND, Mass.--(BUSINESS WIRE)-- Independent Bank Corp., (NASDAQ: INDB), parent of Rockland Trust Company, today announced net income of $12.2 million for the first quarter of 2012, or $0.56 on a diluted earnings per share basis. The results of the first quarter 2012 represent an increase of $0.04, or 7.7%, on a diluted earnings per share basis as compared to the fourth quarter of 2011. The Company’s organic customer growth continues to be strong, fueling deposit, loan and fee income growth.

Christopher Oddleifson, President and Chief Executive Officer of Independent Bank Corp. and Rockland Trust Company, stated: “Starting the year with a terrific quarter provides momentum for the rest of 2012. While the current interest rate environment remains challenging, we’re running on all cylinders right now to counter its impact - with customer growth driving strong business volumes and profitability.”

BALANCE SHEET

Total assets of $5.0 billion at March 31, 2012 are up $15.5 million from the prior quarter and $340.0 million, or 7.3%, as compared to the year ago period.

Total loans rose to $3.9 billion at March 31, 2012, an increase of 8.0% from the prior quarter, on an annualized basis, and continue to be led by robust volumes in the commercial loan and first position home equity loan portfolios. The Company has consistently generated steady loan growth, as customers continue to realize that Rockland Trust’s high level of service, industry expertise, and flexible lending solutions are an attractive alternative to national banks.

Deposits increased by 7.1%, on an annualized basis, to $3.9 billion at March 31, 2012, as compared to the prior quarter. Core deposits increased by $74.1 million to $3.3 billion during the quarter and grew to 83.9% of total deposits. The Company’s cost of total deposits continued its steady decline to 0.29%, down 2 basis points from the prior quarter, reflecting management’s emphasis on core deposits, as new core relationships replace single service certificates of deposits.

The securities portfolio of $563.0 million increased by $44.5 million during the quarter as a result of purchases made to increase securities available for collateral purposes.

Stockholders’ equity at March 31, 2012 increased by 2.1% to $478.9 million as compared to December 31, 2011. The Tier 1 leverage capital ratio at March 31, 2012 remained strong at 8.77%, maintaining the Company’s well-capitalized position.

NET INTEREST INCOME

Net interest income of $41.9 million remained consistent when compared to the prior quarter. The net interest margin in the first quarter of 2012 increased to 3.82%, as compared to 3.78% in the linked quarter, as excess liquidity was largely deployed into higher yielding loans and securities. The margin also benefited from the prepayment of higher cost wholesale borrowings in the prior quarter.

NONINTEREST INCOME

The Company recorded noninterest income of $13.9 million during the first quarter of 2012 which represents a $406,000, or 2.8%, decrease from the prior quarter. Significant changes in noninterest income included the following:

• Service charges on deposit accounts decreased by $365,000, or 8.6%, due to lower overdraft fees.
• Interchange and ATM fees increased by $316,000, or 15.4%, due to strong debit card income growth related to successful sales and marketing programs.
• Investment management revenue increased by $341,000, or 10.6%. Assets under administration in the investment management division were $2.0 billion at March 31, 2012, an increase of $328.3 million, or 19.9% as compared to the linked quarter.
• Mortgage banking income decreased by $230,000, or 14.7%, due to lower volumes of mortgage originations.
• Other noninterest income decreased by $373,000. This was largely due to reduced loan level interest rate swap activity in the quarter, resulting in a revenue decline of $524,000 partially offset by a gain on the purchase of Massachusetts historical tax credit certificates of $176,000.

NONINTEREST EXPENSE

The Company recorded noninterest expense of $37.4 million during the first quarter of 2012 which represents a $406,000, or 1.1% increase from the prior quarter. Significant changes in noninterest expense included the following:

• Salaries and employee benefits increased by $743,000, or 3.6%, due to increases in payroll taxes and stock compensation, partially offset by a decrease in incentive program accruals.
• Occupancy and equipment expense increased by $330,000, or 8.3%, due primarily to increases in winter-related costs of $115,000 and added equipment depreciation expense of $79,000, due to the installation of new image-enabled ATMs.
• Noninterest expense in the prior quarter was impacted by the prepayment of $28.0 million of borrowings, resulting in a prepayment penalty of $757,000, pre-tax. There were no prepayment penalties on borrowings in the first quarter of 2012.

The Company generated a return on average assets and a return on average common equity in the first quarter of 2012 of 1.00% and 10.31% respectively, as compared to 0.91% and 9.45% for the quarter ended December 31, 2011.

ASSET QUALITY

The Company continued to maintain a solid credit profile during the quarter. The provision for loan losses was $1.6 million for the first quarter compared to $3.8 million for the quarter ended December 31, 2011. The provision for loan loss exceeded net charge-offs in both periods. For the quarter, net charge-offs decreased to $1.5 million, or 0.16%, on an annualized basis of average loans compared to $2.8 million, or 0.30%, for the quarter ended December 31, 2011. Nonperforming loans increased to $31.6 million, or 0.82% of total loans at March 31, 2012, from $29.0 million, or 0.76% of total loans, at December 31, 2011. Nonperforming assets totaled $40.7 million at the end of the first quarter compared to $37.1 million in the linked quarter. Delinquency as a percentage of loans decreased to 0.92% at March 31, 2012 compared to 1.01% at December 31, 2011.

The allowance for loan losses was $48.3 million at March 31, 2012, slightly above the prior quarter levels. The Company’s allowance for loan losses was 1.25% and 1.27% as a percentage of total loans at March 31, 2012 and December 31, 2011, respectively.

Christopher Oddleifson and Denis K. Sheahan, Chief Financial Officer, of Independent Bank Corp. and Rockland Trust Company, will host a conference call to discuss first quarter earnings at 10:00 a.m. Eastern Time on Friday, April 13, 2012. Internet access to the call is available on the Company’s website at www.RocklandTrust.com or by telephonic access by dial-in at 1-877-317-6789 reference: INDB. A replay of the call will be available by calling 1-877-344-7529. Replay Pass code: 10012384. The webcast replay will be available until April 13, 2013.

Independent Bank Corp., which has Rockland Trust Company as a wholly-owned bank subsidiary, has approximately $5.0 billion in assets. Rockland Trust offers a wide range of commercial banking products and services, retail banking products and services, business and consumer loans, insurance products and services, and investment management services. To find out why Rockland Trust is the bank Where Each Relationship Matters^®, visit www.RocklandTrust.com.

This press release contains certain “forward-looking statements” with respect to the financial condition, results of operations and business of the Company.Actual results may differ from those contemplated by these statements.The Company wishes to caution readers not to place undue reliance on any forward-looking statements. The Company disclaims any intent or obligation to update publicly any such forward-looking statements, whether in response to new information, future events or otherwise.

This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Operating earnings, which is a non-GAAP financial measure, excludes gain or loss due to items that management does not believe are related to its core banking business, such as gains or losses on the sales of securities, merger and acquisition expenses, and other items.The Company’s management uses operating earnings to measure the strength of the Company’s core banking business and to identify trends that may to some extent be obscured by gains or losses which management deems not to be core to the Company’s operations.The Company has included information on operating earnings because management believes that investors may find it useful to have access to the same analytical tool used by management and may also find that it facilitates the comparison of the Company to other companies in the financial services industry.Non-GAAP operating earnings should not be viewed as a substitute for operating results determined in accordance with GAAP.An item which management deems to be non-core and excludes when computing non-GAAP operating earnings can be of substantial importance to the Company’s results for any particular quarter or year.The Company’s non-GAAP operating earnings are not necessarily comparable to non-GAAP performance measures which may be presented by other companies.