Independent Bank Corp. Reports Second Quarter Net Income of $12.8 Million
Independent Bank Corp. Reports Second Quarter Net Income of $12.8 Million
Strong Commercial Loan and Core Deposit Growth Drive Results
ROCKLAND, Mass.--(BUSINESS WIRE)-- Independent Bank Corp., (NAS: INDB) , parent of Rockland Trust Company, today announced net income for the second quarter of 2013 was $12.8 million, or $0.56 on a diluted earnings per share basis. The results of the second quarter of 2013 represent an increase of $0.02, or 3.7%, on a diluted earnings per share basis as compared to the first quarter of 2013. These quarters contained various items such as merger and acquisition expenses and severance expense, which the Company considers to be non-core in nature. When excluding these items, net operating earnings for the second quarter were $13.2 million, or $0.58 on a diluted earnings per share basis which were comparable to the prior quarter's net operating results.
Christopher Oddleifson, President and Chief Executive Officer of Independent Bank Corp. and Rockland Trust Company, stated: "The dedicated efforts of my colleagues and our top-notch product set ensures a high-quality banking experience that customers appreciate, resulting in the growth of the Rockland Trust franchise and strong earnings for the quarter. Continued household growth fueled an increase in core deposits, and our commercial lending group had another excellent quarter."
Total assets of $5.9 billion at June 30, 2013 have increased by $131.5 million from the prior quarter and increased by $728.0 million, or 14.2%, as compared to the year ago period, inclusive of the acquisition of Central Bancorp, Inc. ("Central") in November 2012.
Total loans of $4.5 billion at June 30, 2013, have increased by $42.6 million when compared to the prior quarter and have increased by $549.3 million, or 13.8%, when compared to June 30, 2012. The commercial loan portfolio continued its strong growth, rising by $86.7 million, or 11.2% on an annualized basis, during the quarter. Both the commercial and industrial and commercial real estate sectors generated healthy growth during the quarter. Offsetting the growth in the commercial portfolio, the residential portfolio decreased by $41.9 million, or 30.2% on an annualized basis, due to continued high prepayment activity combined with management's decision to not retain long term fixed rate mortgages on the balance sheet.
Deposit growth was strong, increasing by $125.1 million, or 11.0% on an annualized basis, to $4.7 billion at June 30, 2013. Deposit growth occurred within core deposits, which grew to 84.6% of total deposits as compared to 82.9% last quarter, partially offset by a reduction in time deposits. Total cost of deposits declined slightly to 0.23% for the quarter, reflecting the Company's continued emphasis on lower cost funding sources.
The securities portfolio of $529.1 million, decreased by $15.7 million during the quarter and represents 9.0% of total assets at June 30, 2013 as compared to 9.5% of total assets at March 31, 2013.
Stockholders' equity at June 30, 2013 rose to $543.6 million, an increase of 1.1% for the quarter. As compared to the year ago period, stockholders' equity has increased by $60.0 million, or 12.4%. The Tier 1 common ratio at June 30, 2013 increased to an estimated 9.06%, as compared to 8.96% in the prior quarter. The Company's tangible common ratio was 6.72%, representing a slight decrease from the prior quarter's level of 6.76% as a result of the Company's balance sheet growth combined with the impact of modest securities portfolio price depreciation due to the significant change in rates.
NET INTEREST INCOME
Net interest income was $45.6 million for the second quarter of 2013, a $753,000 increase from the linked quarter due primarily to loan growth. The Company's net interest margin decreased, modestly by one basis point, to 3.57%, for the second quarter of 2013. Purchase accounting adjustments resulted in a two basis point increase in the net interest margin when compared to the prior quarter.
The Company recorded noninterest income of $16.7 million during the second quarter of 2013 which represents a $968,000, or 6.2%, increase from the prior quarter. Significant changes in noninterest income included the following:
- Interchange and ATM fees increased by $433,000, or 18.6%, mainly due to seasonal increases in debit card usage.
- Investment management income increased by $473,000, or 12.2%, driven primarily by seasonal tax preparation fees. Assets under administration remained consistent at $2.3 billion at June 30, 2013, as compared to the linked quarter and were 12.8% above prior year levels.
- Income from loan level derivatives associated with the Company's commercial customers increased by $284,000 due to increased loan activity during the second quarter.
- Mortgage banking income decreased by $612,000, or 26.8%, primarily due to a decrease in refinancing activity due to rising rates.
The Company recorded noninterest expense of $42.2 million during the second quarter of 2013 which represents a $756,000, or 1.8%, decrease from the prior quarter. Significant changes in noninterest expense included the following:
- Merger and acquisition expenses associated with the Central Bancorp., Inc. and Mayflower Bancorp., Inc. acquisitions were $754,000 for the second quarter, representing a decrease of $591,000 from the linked quarter. As previously announced the Company has reached a definitive agreement to acquire Mayflower Bancorp, Inc. which is expected to close in the fourth quarter of 2013.
- Salaries and employee benefits decreased by $1.1 million, or 4.9%, largely as a result of a decline in salary, payroll taxes, overtime, and increased deferred loan origination salary costs, offset by increased incentive program expenses.
- Occupancy and equipment expense decreased $330,000, or 6.3%, as a result of higher snow removal costs in the first quarter of 2013.
- Other noninterest expenses increased by $1.2 million, or 10.0%, mainly due to an increase in advertising expense of $307,000 due to new marketing campaigns, mortgage operation costs of $371,000 due to the Company's transition to an outsourced provider, and loan work-out costs of $264,000.
The Company generated a return on average assets and a return on average common equity in the second quarter of 2013 of 0.89% and 9.40%, respectively, as compared to 0.88% and 9.25% for the quarter ended March 31, 2013. On an operating basis, the return on average assets and the return on average common equity were 0.93% and 9.74%, respectively, in the second quarter, as compared to 0.96% and 10.04% in the first quarter.
The provision for loan losses was $3.1 million for the second quarter compared to $1.3 million for the quarter ended March 31, 2013. The provision for loan losses exceeded net charge-offs in both periods as the Company continues to prudently add to loan loss reserves in line with recent loan growth trends. For the quarter, net charge-offs increased to $2.0 million, or 0.18%, on an annualized basis of average loans as compared to $1.2 million, or 0.11%, in the prior quarter. Nonperforming loans increased by $3.4 million to $36.5 million, or 0.81%, of total loans at June 30, 2013, from $33.1 million, or 0.74% of total loans at March 31, 2013, primarily due to higher nonaccrual home equity loans. Nonperforming assets increased to $48.1 million at the end of the second quarter compared to $46.8 million in the linked quarter. Delinquency as a percentage of loans decreased to 1.03% at June 30, 2013 compared to 1.05% at March 31, 2013.
The allowance for loan losses was $53.0 million at June 30, 2013, an increase of $1.1 million from the prior quarter levels. The Company's allowance for loan losses was 1.17% and 1.15% as a percentage of total loans at June 30, 2013 and December 31, 2012, 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 second quarter earnings at 10:00 a.m. Eastern Time on Friday, July 12, 2013. Internet access to the call is available on the Company's website at www.RocklandTrust.com or via telephonic access by dial-in at 1-888-317-6016 reference: INDB. A replay of the call will be available by calling 1-877-344-7529. Replay Pass code: 10030410. The webcast replay will be available until July 12, 2014.
Rockland Trust is a full-service commercial bank headquartered in Massachusetts with $5.9 billion in assets. The sole bank subsidiary of Independent Bank Corp. (NAS: INDB) , Rockland Trust provides a wide range of consumer, business, investment, and insurance products and services. Named a Boston Globe "Best Place to Work" for four consecutive years and one of America's "Best Banks" by Forbes for three consecutive years, Rockland Trust's network consists of 75 retail branches, 10 commercial lending offices, four investment management, and three residential lending centers throughout Eastern Massachusetts and Rhode Island. To find out why Rockland Trust is the bank "Where Each Relationship Matters®", please visit www.RocklandTrust.com. Member FDIC. Equal Housing Lender.
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 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 to measure the strength of the Company's core banking business and to identify trends that may to some extent be obscured by such gains or losses. 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.
INDEPENDENT BANK CORP. FINANCIAL SUMMARY
|% Change||% Change|
|CONSOLIDATED BALANCE SHEETS||June 30,||March 31,||June 30,||Jun 2013 vs.||Jun 2013 vs.|
|(Unaudited Dollars in thousands)||2013||2013||2012||Mar 2013||Jun 2012|
|Cash and due from banks||$||139,672||$||70,434||$||65,826||98.30||%||112.18||%|
|Interest earning deposits with banks||197,266||129,406||121,029||52.44||%||62.99||%|
|Fed funds sold||-||-||1,524||0.00||%||-100.00||%|
|Securities available for sale||303,855||335,693||338,331||-9.48||%||-10.19||%|
|Securities held to maturity||225,278||209,090||188,450||7.74||%||19.54||%|
|Loans held for sale||32,497||36,790||22,310||-11.67||%||45.66||%|
|Commercial and industrial||742,343||702,486||625,695||5.67||%||18.64||%|
|Commercial real estate||2,150,833||2,123,778||1,912,563||1.27||%||12.46||%|
|Residential real estate||509,185||547,649||389,053||-7.02||%||30.88||%|
|Home equity - 1st position||481,542||481,935||466,136||-0.08||%||3.31||%|
|Home equity - 2nd position||310,908||310,695||310,717||0.07||%||0.06||%|
|Total consumer real estate||1,306,001||1,348,043||1,180,866||-3.12||%||10.60||%|
|Less - allowance for loan losses||(52,976||)||(51,906||)||(48,403||)||2.06||%||9.45||%|
|Federal Home Loan Bank stock||38,674||38,674||33,564||0.00||%||15.22||%|
|Bank premises and equipment||56,344||55,160||49,384||2.15||%||14.09||%|
|Goodwill and core deposit intangible||161,089||161,616||139,924||-0.33||%||15.13||%|
|Liabilities and Stockholders' Equity|
|Savings and interest checking accounts||1,798,495||1,711,477||1,560,523||5.08||%||15.25||%|
|Time certificates of deposit||709,971||768,266||639,535||-7.59||%||11.01||%|
|Federal Home Loan Bank and other borrowings||261,456||267,091||189,522||-2.11||%||37.96||%|
|Wholesale repurchase agreements||50,000||50,000||50,000||0.00||%||0.00||%|
|Customer repurchase agreements||141,826||129,618||144,838||9.42||%||-2.08||%|
|Junior subordinated debentures||74,018||74,073||61,857||-0.07||%||19.66||%|
|Total deposits and borrowings||5,233,763||5,102,192||4,554,350||2.58||%||14.92||%|
|Additional paid in capital||272,165||270,927||236,279||0.46||%||15.19||%|
|Accumulated other comprehensive loss, net of tax||(7,397||)||(4,469||)||(4,330||)||65.52||%||70.83||%|
|Total stockholders' equity||543,605||537,575||483,592||1.12||%||12.41||
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