Independent Bank Corp. Announces 2004 Results

Business Wire, Jan 13, 2005

ROCKLAND, Mass. -- Independent Bank Corp., (NASDAQ: INDB), parent of Rockland Trust Company, today announced that net income for the quarter ended December 31, 2004 was $9.2 million and that diluted earnings per share for the quarter were $0.59, an increase of $1.9 million or $0.10 per diluted earnings per share, compared to net income of $7.3 million and diluted earnings per share of $0.49 for the quarter ended December 31, 2003. For the twelve months ended December 31, 2004, net income was $30.8 million and diluted earnings per share were $2.03, an increase of $4.3 million or $0.24 per diluted earnings per share, compared to net income of $26.4 million and diluted earnings per share of $1.79 for the same period in 2003. The Company experienced robust loan and core deposit growth of $335.2 million, or 21.2%, and $279.2 million, or 21.0%, respectively during 2004. Organic loan and deposit growth during 2004, excluding the acquisition of Falmouth Bancorp. Inc ("Falmouth"), was $237.5 million and $140.2 million, respectively.

As previously announced, Independent Bank Corp. acquired Falmouth Bancorp, Inc. ("Falmouth") on July 16, 2004. That acquisition attributed to many of the balance sheet variances discussed below.

Comparing the fourth quarter of 2004 to the same period last year, net interest income increased $2.7 million, or 11.4%, while net interest income for the twelve months ended December 31, 2004 increased $2.0 million, or 2.1%, from the twelve months ended December 31, 2003. The net interest margin for the three and twelve month periods ended December 31, 2004 was 3.96% and 3.95%, respectively, as compared to 4.26% and 4.40%, for the comparable periods last year.

The Company's adoption of a new accounting standard on March 31, 2004 caused certain expenses to be reclassified to interest expense prospectively and contribute, on an annualized basis, approximately 19 basis points to the compression of the net interest margin when compared to reported net interest margin calculations prior to the second quarter of 2004 (See note below pertaining to FIN46R). The remainder of the net interest margin compression is a consequence of the prolonged low interest rate environment, coupled with what the Company believes to be the prudent management of its balance sheet in anticipation of rising interest rates. The impact of the low interest rate margin has been mitigated, to some extent, by the Company's continued ability to generate loan growth. During the fourth quarter of 2004, the net interest margin stabilized and expanded by 8 basis points from the 3.88% reported in the third quarter of 2004.

Non-interest income increased by $1.7 million, or 27.6%, and by $561,000, or 2.0%, during the three and twelve months ended December 31, 2004, respectively, as compared to the same periods in the prior year. The majority of the increase is attributable to the sale of a bank branch in North Eastham, MA during the fourth quarter of 2004 that resulted in a pre-tax gain of approximately $1.8 million.

Service charges on deposit accounts increased by $268,000, or 9.1%, and by $936,000, or 8.2%, for the three and twelve months ended December 31, 2004, respectively, as compared to the same periods in 2003, reflecting strong organic growth in core deposits. Investment management services income increased by $83,000, or 7.8%, and by $343,000 or 7.9%, for the three and twelve months ended December 31, 2004, respectively, compared to the same periods last year due to growth in managed assets. Mortgage banking income decreased by $236,000, or (33.8)%, and $1.7 million, or (37.9)%, for the three and twelve months ended December 31, 2004 as compared to the three and twelve months ended December 31, 2003, respectively, due to the decline in refinancing activity that was at its peak in 2003. The balance of the mortgage servicing asset is $3.3 million and loans serviced amounted to $392.0 million as of December 31, 2004. Other non-interest income increased $89,000, or 11.5%, for the three months ended December 31, 2004, and by $345,000, or 11.1%, for the twelve months ended December 31, 2004, as compared to the same period in 2003, primarily due to increases in commercial loan prepayment fees.

No security gains were recognized in the fourth quarter of 2004 as compared to $302,000 in the same period of 2003. Net security gains were $1.5 million for the twelve months ending December 31, 2004 as compared to $2.6 million for the same period in 2003, a decrease of $1.2 million, or 44.5%. Net security gains of $2.0 million were recorded in the second quarter of 2003 on the sale of $20 million of investment securities as part of a strategy to improve the Company's overall interest rate risk position and increase the net interest margin. That strategy included prepaying $31.5 million of fixed high rate borrowings and an associated $1.9 million prepayment penalty.

Non-interest expense increased by $3.2 million, or 18.2%, and $3.9 million, or 5.2%, for the three and twelve months ended December 31, 2004, respectively, as compared to the same periods in the prior year. Salaries and employee benefits increased by $2.5 million, or 24.2%, and $3.4 million, or 8.2%, for the three and twelve months ended December 31, 2004, respectively, as compared to the same periods in the prior year partially reflecting additions to staff to support continued growth as well as increased pension expense. Incentive based compensation and profit sharing increased by $1.2 million in the fourth quarter ending 2004 as compared to the same period in 2003, contributing significantly to the fourth quarter variance. On a full year basis, the incentive compensation expense decreased by $578,000, or 19.0%, when comparing 2004 to 2003. Occupancy and equipment related expense increased by $318,000, or 16.0%, for the three months ended December 31, 2004, and by $202,000, or 2.3% for the twelve months ended December 31, 2004, compared to the same periods in the prior year. The increase in expense is associated with infrastructure improvements made throughout the year.