Record Operating Earnings Per Share in 2015 of $2.76

ROCKLAND, Mass.--(BUSINESS WIRE)-- Independent Bank Corp. (NASDAQ: INDB), parent of Rockland Trust Company, today announced 2015 fourth quarter net income of $19.5 million, or $0.74 per diluted share, as compared to $18.6 million, or $0.71 per diluted share in the prior quarter. Net income for the full year was $65.0 million, or $2.50 on a diluted earnings per share basis, as compared to $59.8 million, or $2.49 on a diluted earnings per share basis in the prior year. The full year net income contained items which the Company considers non-core, such as merger and acquisition expenses and gains and losses on the sale of fixed income securities. There were no such items in the second half of the year. On an operating basis, the full year income was $71.7 million, or $2.76 on a diluted earnings per share basis, an increase of $11.8 million, and $0.26 over the prior year, respectively.

“Rockland Trust achieved record-setting operating earnings in 2015,” said Christopher Oddleifson, the President and Chief Executive Officer of Independent Bank Corp. and Rockland Trust. “Our core deposit growth was very strong and our loan growth steady, due to my engaged colleagues delivering consistent value to our customers. We enter 2016 with good momentum and a clear, disciplined focus upon the priorities of our customers.”

BALANCE SHEET

Total assets of $7.2 billion at December 31, 2015 increased by $74.5 million, or 1.0%, from the prior quarter and by $845.1 million, or 13.3%, as compared to the year ago period, inclusive of the acquisition of Peoples Federal Bancshares, Inc. ("Peoples").

The commercial loan portfolio increased by $44.0 million, or 1.1% (4.4% annualized), over the prior quarter, led by growth in the commercial construction and business banking sectors, as origination volumes remained solid across the Company's footprint. The home equity portfolio also continued to experience robust growth due to active customer outreach, with an increase of 2.2% (8.7% annualized) over the prior quarter. These factors contributed to growth in total loans at December 31, 2015 of $49.6 million, or 0.9% (3.6% annualized), compared to the balance at September 30, 2015. Compared to the prior year period, total loans increased by $577.0 million, or 11.6%, inclusive of the Peoples acquisition.

Total deposits increased by $75.8 million, or 1.3%, from the prior quarter, driven by strong core deposit growth, especially in the demand and savings categories. Core deposits rose by $111.3 million, or 8.5% on an annualized basis, from the prior quarter, and represent 88.6% of total deposits at December 31, 2015. Compared to the prior year period, total deposits increased $780.2 million, or 15.0%, inclusive of the Peoples acquisition. Total cost of deposits remained low at 20 basis points during the fourth quarter, reflecting the Company’s success in growing its core deposit customer base.

The securities portfolio increased by $30.7 million from the prior quarter to $845.1 million at December 31, 2015, due primarily to the purchase of $68.3 million of additional securities, offset by principal paydowns during the quarter. The securities portfolio comprised 11.7% of total assets as of December 31, 2015.

Stockholders’ equity at December 31, 2015 rose to $771.5 million, an increase of 1.6% from September 30, 2015. Compared to the year ago period, stockholders’ equity has increased by $130.9 million, or 20.4%, fueled primarily by the Peoples acquisition and record earnings results. The strong growth in capital led to a $0.48 increase, or 2.3%, in the Company’s tangible book value per share during the fourth quarter compared to the third quarter of 2015. The December 31, 2015 tangible book value per share of $21.29 represents an 11.0% increase above the prior year level. In addition, the Company’s ratio of common equity to tangible assets of 7.98% represents an increase of 10 basis points from the prior quarter and of 54 basis points from the prior year.

NET INTEREST INCOME

Net interest income for the fourth quarter was $54.9 million, remaining relatively consistent with the prior quarter as the effect of higher earning asset levels and a lower net interest margin basically offset each other. During the fourth quarter, the Company’s net interest margin decreased by five basis points from the prior quarter to 3.34%. The decline is attributable to increased liquid asset levels along with a reduction in loan and investment yields which continue to be impacted by the prolonged low rate environment. Investment yields were also primarily lower in the fourth quarter of 2015 due to a security prepayment benefit realized in the third quarter.

NONINTEREST INCOME

The Company recorded noninterest income of $19.8 million during the fourth quarter, which represents a $577,000, or 3.0%, increase from the linked quarter. Significant changes in noninterest income in the fourth quarter compared to the prior quarter included the following:

• Deposit account fees and interchange and ATM fees decreased by $98,000, or 1.1%.
• Investment management income increased by $139,000, or 2.8%, primarily driven by an increase in assets under administration of 5.1% to $2.7 billion.
• Mortgage banking income decreased by $149,000, or 10.1%, caused primarily by lighter volume typically associated with the holiday months.
• Other noninterest income increased $590,000, or 27.4%, mainly due to discounted purchases of Massachusetts historical tax credits, capital gain distributions on equity securities, and increases in other various fees.

NONINTEREST EXPENSE

The Company recorded noninterest expense of $46.5 million during the third quarter, a $545,000, or 1.2%, decrease from the prior quarter. Significant changes in noninterest expense in the fourth quarter compared to the prior quarter included the following:

• Salaries and employee benefits increased slightly by $92,000, or 0.3%, due primarily to increases in salaries and retirement plan benefits, offset by decreases in commissions and stock compensation.
• Other noninterest expenses decreased by $818,000, or 6.4%, driven primarily by lower advertising costs and decreases in loan workout costs, partly offset by increases in consultant fees and provision for unfunded commitments.

The Company generated a return on average assets and a return on average common equity of 1.07% and 10.03%, respectively, in the fourth quarter, as compared to 1.03% and 9.75%, respectively, for the prior quarter.

ASSET QUALITY

Asset quality metrics remained strong during the fourth quarter with total net recoveries of $120,000, compared to net charge-offs of $590,000 or 0.04% of average loans on an annualized basis for the third quarter. The provision for loan losses was $500,000 for the fourth quarter as compared to $800,000 in the third quarter. Nonperforming loans decreased during the fourth quarter by $1.9 million to $27.7 million, and represent 0.50% of total loans at December 31, 2015, as compared to 0.54% at September 30, 2015. Total nonperforming assets decreased to $29.8 million at the end of the fourth quarter, from $32.1 million at the end of the prior quarter. Delinquency as a percentage of loans was 0.56% at December 31, 2015, an increase of thirteen basis points from the prior quarter.

The allowance for loan losses was $55.8 million at December 31, 2015, as compared to $55.2 million at September 30, 2015. The Company’s allowance for loan losses as a percentage of loans was 1.01% and 1.00% at December 31, 2015 and September 30, 2015, respectively.

CONFERENCE CALL INFORMATION

Christopher Oddleifson, Chief Executive Officer and Robert Cozzone, Chief Financial Officer will host a conference call to discuss fourth quarter earnings at 10:00 a.m. Eastern Time on Friday, January 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: 10077735 and will available through February 5, 2016. Additionally, a webcast replay will be available until January 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;
• 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 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. 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.