President and CEO Christopher Oddleifson is feeling pretty good after Independent Bank Corp.’s recent quarterly results.
The holding company for Rockland Trust posted net income totaling $20.4 million in the second quarter, representing an increase of 16.7 percent over the year-ago period, as it grew its small business and home equity portfolios and worked toward its pending acquisition of New England Bancorp.
Total assets increased 3.1 percent, or $223.5 million, year-over-year to $7.4 billion. Total loans increased 4.4 percent over that period to $5.7 billion. The bank’s total commercial loans increased 5.4 percent to $4.1 billion. Its small business portfolio in particular totaled $111 million, a 21.5 percent increase over the second quarter in 2015.
“For years it hovered around $80 million,” Oddleifson said of the bank’s small business portfolio. “This growth we’ve seen really is a recent phenomenon over the last year or so. It’s really started to move up. And while it’s small relative to the whole balance sheet, it’s still very noteworthy for a few reasons.”
He said the combination of low unemployment rate in the Boston Metro area with low interest rates has prompted many small business owners to expand at the margins. A similar principle is at work with home equity loans, he said. First position home equity loans increased 5.4 percent and subordinate position home equity loans increased 8.1 percent year-over-year.
Oddleifson credited a sophisticated direct mail marketing program as partially driving that increase, coupled with the low interest rate environment and Rockland Trust’s acquisitions over recent years.
Total deposits increased 3.8 percent year-over-year to $6.2 billion.
Net interest income, before setting aside provisions for loan losses, totaled $56.5 million, representing an increase of 5.2 percent over the year-ago period. Noninterest income totaled $21.1 million in the second quarter, a 4.1 percent increase from the second quarter last year.
Noninterest expenses totaled $47.1 million during the second quarter, representing a 1.4 percent increase from the prior quarter and a 3.1 percent decrease from the year-ago quarter. The $664,000 increase from the first quarter included $206,000 in merger and acquisition expenses related to the company’s pending purchase of New England Bancorp. That deal cost Independent Bank Corp. $334,000 in the first quarter of this year.
That deal is expected to boost Rockland Trust up to about $7.6 billion in assets. Oddleifson said that Rockland Trust has been preparing for the Dodd-Frank Act Stress Tests it will face once it crosses $10 billion in assets. He told Banker & Tradesman that has included a new capital planning manager, additions to the bank’s compliance and internal audit departments, and seeking advice and counsel from regulators and fellow bankers alike.
“It’s very important that when we cross into 10 billion territory, nothing really feels different because we’ve completely prepared. We’re operating like a $10 billion bank way before we get to $10 billion,” he said.
The Rockland Trust parent posted net recoveries of $695,000 in the second quarter, compared with $82,000 in the prior quarter. The company increased its provision for loan losses to $600,000 from $525,000 in the first quarter, largely to keep pace with growth in its loan portfolio.
Nonperforming loans remained flat at $25.6 million and represented 0.45 percent of total loans at June 30, compared with 0.46 percent of loans at March 31. Total nonperforming assets crept up to $27.5 million from $27.2 million in the first quarter. Delinquency as a percentage of loans fell seven basis points from the first quarter to 0.47 percent of loans at June 30.
The allowance for loan losses totaled $57.7 million at June 30, compared with $56.4 million at March 31. The company’s allowance for loan losses as a percentage of loans was 1.02 percent and 1.01 percent at June 30 and March 31, respectively.
Asked about Independent Bank Corp.’s next deal, Oddleifson noted that the company has made a number of acquisitions in recent years, usually preferring to buy franchises in or adjacent to its existing footprint.
He also added a refrain he’s repeated over many conference calls with investors, “Banks are sold, not bought. It’d be great if I could look at all the stock based banks and say, ‘OK, I’ll take that one, that one and that one.’ Unfortunately, it doesn’t go like that, but we really are sticking to our discipline of moving out in concentric semi-circles.”