ROCKLAND, Mass.--(BUSINESS WIRE)-- Independent Bank Corp. (NASDAQ: INDB), parent of Rockland Trust Company, today announced 2016 first quarter net income of $18.6 million, or $0.71 per diluted share, as compared to $19.5 million, or $0.74 per diluted share, in the prior quarter. The first quarter net income contained items which the Company considers non-core, such as merger and acquisition expenses and loss on the extinguishment of debt. There were no such items for the prior quarter. On an operating basis, net income for the first quarter was $19.1 million, or $0.72 on a diluted earnings per share basis.

“Rockland Trust Company is off to a strong start in 2016,” said Christopher Oddleifson, the President and Chief Executive Officer of Independent Bank Corp. and Rockland Trust. “During the first quarter we continued to grow loans despite a difficult competitive environment, generated strong growth in capital, and were pleased to announce the New England Bancorp acquisition, which we anticipate will be accretive to 2017 earnings."

BALANCE SHEET

Total assets of $7.2 billion at March 31, 2016 decreased by $20.2 million, or 0.3%, from the prior quarter and increased by $278.8 million, or 4.0%, as compared to the year ago period.

The commercial loan portfolio increased by $42.1 million, or 1.1% (4.3% annualized), over the prior quarter, led by growth in the commercial real estate and business banking sectors, as origination volumes remained solid across the Company's footprint. During the quarter various construction projects reached completion and were reclassified to the real estate category. The home equity portfolio also continued to rise due to sustained marketing efforts, with an increase of 0.8% (3.3% annualized) over the prior quarter. These factors combined to generate growth in total loans at March 31, 2016 of $41.5 million, or 0.7% (3.0% annualized), compared to the balance at December 31, 2015. Compared to the prior year period, total loans increased by $196.1 million, or 3.6%.

Total deposit levels remained relatively consistent with the prior quarter, reflecting good core deposit growth offset by ongoing decreases in higher-cost time deposits. Core deposits rose by $32.2 million, or 2.4% on an annualized basis, from the prior quarter, driven mainly by growth in savings and money market balances. Total cost of deposits decreased to 19 basis points during the first quarter, further reflecting the Company’s success in growing its core deposit customer base. Core deposits represent 89.0% of total deposits at March 31, 2016. Compared to the prior year period, total deposits increased by $324.5 million, or 5.7%.

The securities portfolio decreased by $8.5 million from the prior quarter to $836.6 million at March 31, 2016 and comprise 11.6% of total assets of the Company as of then.

During the first quarter, the Company deployed some of its excess liquidity to further reduce its Federal Home Loan Bank borrowings by approximately $49.0 million.

Stockholders' equity at March 31, 2016 rose to $788.1 million, an increase of 2.2% from December 31, 2015 and 7.5% from the year ago period. The strong growth in capital led to a $0.61 increase, or 2.9%, in the Company’s tangible book value per share during the first quarter compared to the fourth quarter of 2015. The March 31, 2016 tangible book value per share of $21.90 represents a 10.5% increase above the prior year amount. In addition, the Company’s ratio of common equity to tangible assets of 8.25% represents an increase of 27 basis points from the prior quarter and 52 basis points from the same period a year ago.

NET INTEREST INCOME

Net interest income for the first quarter was $54.9 million, remaining consistent with the prior quarter. During the first quarter, the Company’s net interest margin increased by five basis points from the prior quarter to 3.39%, reflecting higher loan yields attributable to the increase in rates by the Federal Reserve Bank in December, 2015. This was partially mitigated by the four basis point impact of lower purchase accounting benefits in the first quarter.

NONINTEREST INCOME

The Company recorded noninterest income of $19.2 million during the first quarter, which represents a $669,000, or 3.4%, decrease from the linked quarter. Significant changes in noninterest income in the first quarter compared to the prior quarter included the following:

• Deposit account fees and interchange and ATM fees decreased by $411,000, or 4.8%, mainly due to seasonal decreases in overdraft fees and debit card usage.
• Investment management income decreased by $117,000, or 2.3%, reflecting the weak market conditions that prevailed during the first quarter. Assets under administration increased by 2.8% to $2.7 billion as of March 31, 2016.
• Mortgage banking income decreased by $199,000, or 15.0%, due primarily to lighter volume.
• Loan level derivative income increased by $709,000, or 70.0%, due to strong customer demand in the quarter caused by the uncertain rate environment.
• Other noninterest income decreased $657,000, or 23.9%, mainly due to decreases in Federal Home Loan Bank dividend income and capital gain distributions on equity securities, as well as fewer purchases of Massachusetts historical tax credits.

NONINTEREST EXPENSE

The Company recorded noninterest expense of $46.5 million during the first quarter, consistent with the prior quarter. Significant changes in noninterest expense in the first quarter compared to the prior quarter included the following:

• Salaries and employee benefits increased by $412,000, or 1.5%, due primarily to increases in payroll taxes, medical insurance, and stock compensation, partially offset by decreases in salaries and incentives.
• Occupancy and equipment expenses increased by $316,000, or 5.7%, mainly due to higher snow removal and utility costs.
• Merger and acquisition costs of $334,000 related to the pending acquisition of New England Bancorp, Inc., which is expected to close in the fourth quarter of 2016.
• The Company recognized a $437,000 loss in conjunction with its payoff of approximately $49.0 million in Federal Home Loan Bank borrowings. There was no such expense in the fourth quarter of 2015.
• Other noninterest expenses decreased by $1.5 million, or 12.6%, driven primarily by lower consultant fees, decreased provision for unfunded commitments and reduced loan workout costs, partly offset by increases in advertising.

The Company generated a return on average assets and a return on average common equity of 1.04% and 9.52%, respectively, in the first quarter, as compared to 1.07% and 10.03%, respectively, for the prior quarter.

ASSET QUALITY

Asset quality metrics remained strong during the first quarter with total net recoveries of $82,000, compared to net recoveries of $120,000 in the prior quarter. The provision for loan losses was $525,000 for the first quarter as compared to $500,000 in the fourth quarter of 2015. Nonperforming loans decreased during the first quarter by $2.2 million to $25.5 million, and represent 0.46% of total loans at March 31, 2016, as compared to 0.50% at December 31, 2015. Total nonperforming assets decreased to $27.2 million at the end of the first quarter, from $29.8 million at the end of the prior quarter. Delinquency as a percentage of loans was 0.54% at March 31, 2016, a decrease of two basis points from the prior quarter.

The allowance for loan losses was $56.4 million at March 31, 2016, as compared to $55.8 million at December 31, 2015. The Company’s allowance for loan losses as a percentage of loans was 1.01% at both March 31, 2016 and December 31, 2015, respectively.

CONFERENCE CALL INFORMATION

Christopher Oddleifson, Chief Executive Officer and Robert Cozzone, Chief Financial Officer will host a conference call to discuss first quarter earnings at 10:00 a.m. Eastern Time on Friday, April 22, 2016. 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: 10083023 and will available through May 6, 2016. Additionally, a webcast replay will be available until April 22, 2017.

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 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;
• adverse changes in asset quality including an unanticipated credit deterioration in our loan portfolio;
• 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 expense, resulting from failure to comply with general tax laws, changes in tax laws, or failure to comply with requirements of the federal New Markets Tax Credit program;
• unexpected changes in market interest rates for interest earning assets and/or interest bearing liabilities;
• 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;
• a deterioration of the credit rating for U.S. long-term sovereign debt;
• 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 merger transactions in the amounts or in the timeframe anticipated;
• inability to retain customers and employees, including those of previous mergers;
• the effect of 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;
• cyber security attacks or intrusions that could adversely impact our businesses; 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 described 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 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, loss on extinguishment of debt, 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. Management also supplements its evaluation of financial performance with analysis of tangible book value per share which is computed by dividing stockholders' equity less goodwill and identifiable intangible assets by common shares outstanding.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, operating EPS, and tangible book value per share are not necessarily comparable to non-GAAP performance measures which may be presented by other companies.

(1) The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $389,000, $376,000, and $372,000 for the three months ended March 31, 2016, December 31, 2015, and March 31, 2015, respectively.
(2) Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(3) Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.

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Independent Bank Corp.
Chris Oddleifson, 781-982-6660
President and Chief Executive Officer
or
Robert Cozzone, 781-982-6723
Chief Financial Officer and Treasurer

Source: Independent Bank Corp.