ROCKLAND, Mass.--(BUSINESS WIRE)-- Independent Bank Corp. (NASDAQ: INDB), parent of Rockland Trust Company, today announced 2015 second quarter net income of $17.5 million, or $0.67 per diluted share as compared to $9.5 million, or $0.38 per diluted share in the prior quarter. The increase in the Company’s earnings was largely attributable to merger and acquisition costs recognized during the first quarter of $6.3 million, net of tax, relating to the February 20, 2015 acquisition of Peoples Federal Bancshares, Inc. (“Peoples”). When excluding these expenses and other items that the Company considers to be non-core, net operating earnings for the second quarter were $17.9 million, or $0.68 per diluted share, versus $15.8 million, or $0.63 per diluted share in the prior quarter, representing an increase of 12.9% and 7.9%, respectively.

“Due to the teamwork and extraordinary efforts of my many colleagues, Rockland Trust has performed very well during the first half of 2015,” said Christopher Oddleifson, the President and Chief Executive Officer of Independent and Rockland Trust. “While loan growth remains challenging due to intense competition, our disciplined and focused approach has resulted in strong deposit growth and continued pristine asset quality. Rockland Trust is well positioned for sustained organic growth and ready to take advantage of market opportunities.”

BALANCE SHEET

Total assets of $7.2 billion at June 30, 2015 increased by $284.8 million, or 4.1%, from the prior quarter and by $847.6 million, or 13.4%, as compared to the year ago period, inclusive of the acquisition of Peoples.

The commercial loan portfolio rose by $58.0 million or 1.5% (6.1% annualized) over the prior quarter, led by growth in the commercial and industrial and small business sectors. This reflected a pick up in business activity during the second quarter and the Company’s strong market presence and origination efforts. The home equity portfolio grew as well due to sustained promotional campaigns. These increases were countered by a reduction in the residential mortgage portfolio due to higher refinancing volumes and attrition in the acquired Peoples portfolio. These factors resulted in net growth in total loans at June 30, 2015 of $41.7 million, or 0.8% (3.0% annualized) over the prior quarter. Compared to the prior year period, total loans increased by $549.3 million, or 11.2%, inclusive of the Peoples acquisition.

Total deposits at June 30, 2015 grew sharply by $299.8 million, or 5.3% over the prior quarter and by $672.4 million, or 12.7% over the prior year period, inclusive of the acquisition of Peoples. Core deposits continued their steady growth with a rise of $320.6 million, or 26.2% on an annualized basis over the prior quarter, and as of June 30, 2015 represent 87.7% of total deposits. The growth in total and core deposits for the quarter was due in part to large short-term deposits related to the Company’s tax section 1031 exchange business. The increase in these short-term deposits also contributed to the increase in the Company’s short-term investments at quarter end. Total cost of deposits decreased by one basis point during the quarter to 20 basis points, reflecting the Company’s continued emphasis on core deposit growth.

The securities portfolio increased from the prior quarter to $803.8 million at June 30, 2015. The increase of $21.6 million was due primarily to the purchase of Small Business Administration pooled securities and mortgage backed securities, offset by sales of mortgage backed securities and certain pooled trust preferred securities. The securities portfolio comprised 11.2% of total assets as of June 30, 2015.

Stockholders’ equity at June 30, 2015 rose to $743.3 million, an increase of 1.4% from March 31, 2015. Compared to the year ago period, stockholders’ equity has increased by $126.8 million, or 20.6%. The strong growth in capital led to an increase in the Company’s tangible book value per share, which increased by $0.40, or 2.0%, during the second quarter, to $20.22, which is 11.1% above the prior year level. The Company’s tangible common ratio of 7.58% represents a decrease of 15 basis points from the prior quarter, as strong deposit growth drove a corresponding increase in total assets.

NET INTEREST INCOME

Net interest income increased to $53.7 million for the second quarter as compared to $51.2 million in the linked quarter, driven primarily by higher earning asset levels and a full quarter of income from the loans acquired in the Peoples acquisition. During the second quarter, the Company’s net interest margin decreased by seven basis points from the prior quarter to 3.43%. The decrease was driven by the benefit received in the prior quarter from purchase accounting adjustments, ongoing pressure on asset yields, and increased liquid asset levels.

NONINTEREST INCOME

The Company recorded noninterest income of $20.3 million during the second quarter, which represents a $3.7 million, or 22.4%, increase from the linked quarter. Significant changes in noninterest income in the second quarter compared to the prior quarter included the following:

• Deposit account fees and interchange and ATM fees increased by $966,000, or 13.3%, mainly due to the resumption of normal activity after the prior quarter’s seasonal and weather-related reductions in customer activity.
• Investment management income increased by $421,000, or 8.2%, primarily driven by seasonal tax preparation fees and continued growth in assets under administration, which increased by 1.3% to $2.6 billion.
• Loan level derivative income increased $1.0 million due to increased volume based on customer demand.
• Income from the cash surrender value of life insurance policies increased $171,000, or 22.0%, due primarily to the additional policies acquired from Peoples.
• The Company recorded gains on sale of fixed income securities during the quarter of $798,000. There were no such gains in the prior quarter.
• Other noninterest income increased $217,000, or 11.7%, mainly due to increases in asset based lending fee income, foreign currency exchange fees and affordable housing tax credits.

NONINTEREST EXPENSE

The Company recorded noninterest expense of $48.6 million during the second quarter, a $6.3 million, or 11.5%, decrease from the prior quarter. Significant changes in noninterest expense in the second quarter compared to the prior quarter included the following:

• Salaries and employee benefits increased $1.0 million, or 4.1%, due primarily to the full quarter’s impact of the Peoples acquisition along with increases in performance-based incentive compensation. These increases were partially offset by decreases in payroll taxes.
• Occupancy and equipment expense decreased $722,000, or 11.3%, mainly due to high snow removal costs incurred in the first quarter, partially offset by increases stemming from the addition of Peoples facilities as well as an impairment charge of $109,000 relating to an acquired facility.
• The Company incurred $271,000 and $10.2 million in merger and acquisition costs during the second and first quarter of 2015, respectively, related to the Peoples acquisition.
• The Company incurred a loss of $1.1 million on the sale of pooled trust preferred and mortgage backed securities during the second quarter. There was no such loss during the prior quarter.
• Other noninterest expenses increased by $2.0 million, or 18.4%, driven primarily by increased advertising costs, other losses and charge-offs, mortgage operations expenses, debit card expenses, and shareholder relations. These increases were partially offset by a decrease of $420,000 in loan workout costs.

The Company generated a return on average assets and a return on average common equity of 1.00% and 9.43%, respectively, in the second quarter, as compared to 0.58% and 5.58%, respectively, for the prior quarter. On an operating basis, the return on average assets and the return on average common equity for the three months ended June 30, 2015 were 1.03% and 9.65%, respectively, as compared to 0.97% and 9.33%, respectively, for the prior quarter.

ASSET QUALITY

Asset quality metrics remained strong during the second quarter with total net charge-offs totaling $220,000, or 0.02% of average loans on an annualized basis, compared to 0.01% for the quarter ending March 31, 2015. The provision for loan losses was $700,000 for the second quarter as compared to a negative provision of $500,000 in the first quarter. Nonperforming loans decreased during the second quarter by $4.2 million to $26.2 million, and represent 0.48% of total loans at June 30, 2015, as compared to 0.56% of total loans at March 31, 2015. In total, nonperforming assets declined to $31.3 million at the end of the second quarter, from $40.3 million at the end of the prior quarter, reflecting the aforementioned reduction in nonperforming loans, as well as the sale of the Company’s nonaccruing pooled trust preferred securities and a reduction in other real estate owned. Delinquency as a percentage of loans was 0.49% at June 30, 2015, a decrease of four basis points from the prior quarter.

The allowance for loan losses was $55.0 million at June 30, 2015, as compared to $54.5 million at March 31, 2015. The Company’s allowance for loan losses as a percentage of loans was 1.01% at both June 30, 2015 and March 31, 2015, inclusive of the recently acquired Peoples portfolio.

CONFERENCE CALL INFORMATION

Christopher Oddleifson, Chief Executive Officer and Robert Cozzone, Chief Financial Officer will host a conference call to discuss second quarter earnings at 10:00 a.m. Eastern Time on Friday, July 17, 2015. Internet access to the call is available on the Company’s website at www.rocklandtrust.com or via telephonic access by dial-in at 1-888-336-7153 reference: INDB. A replay of the call will be available by calling 1-877-344-7529. Replay Conference Number: 10067941 and will available through July 31, 2015. Additionally, a webcast replay will be available until July 17, 2016.

ABOUT INDEPENDENT BANK CORP.

Independent Bank Corp. has approximately $7.2 billion in assets and is the holding company for Rockland Trust Company, a full-service commercial bank headquartered in Massachusetts. Rockland Trust offers a wide range of banking, investment, and insurance services to businesses and individuals through retail branches, commercial lending offices, investment management offices, and residential lending centers located in Eastern Massachusetts and Rhode Island, as well as through telephone banking, mobile banking, and the Internet. Rockland Trust, which was named to Sandler 2014 Sm-All Stars list of top performing small-cap banks and thrifts in the country, is an FDIC Member and an Equal Housing Lender. To find out why Rockland Trust is the bank “Where Each Relationship Matters^®,” please 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.These statements may be identified by such forward-looking terminology as “expect,” “achieve,” “plan,” “believe,” “future,” “positioned,” “continued,” “will,” “would,” “potential,” or similar statements or variations of such terms.Actual results may differ from those contemplated by these forward-looking statements.

Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to:

• a weakening in the United States economy in general and the regional and local economies within the New England region and the Company’s market area;
• adverse changes in the local real estate market;
• acquisitions may not produce results at levels or within time frames originally anticipated and may result in unforeseen integration issues or impairment of goodwill and/or other intangibles;
• changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System;
• higher than expected tax rates and any changes in and any failure by the Company to comply with tax laws generally and requirements of the federal New Markets Tax Credit program;
• unexpected changes in market interest rates for interest earning assets and/or interest bearing liabilities;
• adverse changes in asset quality including an unanticipated credit deterioration in our loan portfolio;
• unexpected increased competition in the Company’s market area;
• unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather or other external events;
• a deterioration in the conditions of the securities markets;
• our inability to adapt to changes in information technology;
• electronic fraudulent activity within the financial services industry, especially in the commercial banking sector;
• adverse changes in consumer spending and savings habits;
• the inability to realize expected revenue synergies from the Peoples Federal Bancshares merger in the amounts or in the timeframe anticipated;
• inability to retain customers and employees, including those of Peoples Federal Bancshares;
• the effect of new laws and regulations regarding the financial services industry including, but not limited to, the Dodd-Frank Wall Street Reform and Consumer Protection Act;
• changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) generally applicable to the Company’s business;
• changes in accounting policies, practices and standards, as may be adopted by the regulatory agencies as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters; and
• other unexpected material adverse changes in our operations or earnings.

The Company wishes to caution readers not to place undue reliance on any forward-looking statements as the Company’s business and its forward-looking statements involve substantial known and unknown risks and uncertainties included in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q (“Risk Factors”).Except as required by law, 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.Any public statements or disclosures by the Company following this release which modify or impact any of the forward-looking statements contained in this release will be deemed to modify or supersede such statements in this release.In addition to the information set forth in this press release, you should carefully consider the Risk Factors.

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”).This information includes operating earnings and operating EPS, return on average assets and return on average common equity calculated on an operating basis. The non-GAAP financial measures, including operating earnings and operating EPS, exclude gain or loss due to items that management believes are unrelated to its core banking business and will not have a material financial impact on operating results in future periods, such as gains or losses on the sales of securities, merger and acquisition expenses, and other items.The Company’s management uses operating earnings and operating EPS to measure the strength of the Company’s core banking business and to identify trends that may to some extent be obscured by such excluded gains or losses. The Company has included information on these non-GAAP measures 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.These non-GAAP measures 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 these non-GAAP measures can be of substantial importance to the Company’s results for any particular quarter or year. The Company’s non-GAAP performance measures, including operating earnings and operating EPS, are not necessarily comparable to non-GAAP performance measures which may be presented by other companies.