ROCKLAND, Mass. – Independent Bank Corp., the parent company for Rockland Trust Co., brought in a $121.2 million profit in 2020, the company reported on Thursday.
Annual earnings represented a 26.6% drop over the prior year, reflecting a more than eight-fold increase in its stockpiling of reserves for bad loans as well as a continued low-interest rate environment, the company stated. The company set aside $52.5 million in its 2020 provisions for credit losses, compared to $6 million in 2019.
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Earnings per diluted share dropped from $5.03 to $3.64 year over year.
Total revenue dipped 8.7% to $513.5 million, primarily driven by a 10.1% cut to interest on income, including a 10% drop in interest and fees on loans and a 61.6% cut to interest on federal funds sold and short-term investments.
Net interest income – the difference between interest earned on assets such as loans, mortgages and securities and interest paid out to customer deposits – decreased 6.5% to $367.7 million as a result of the low interest rate environment, despite decreases in interest expenses.
Also a reflection of low interest rates, net interest margin – the difference between interest income generated and the amount of interest paid out to lenders – dropped 75 basis points to 3.29%.
Noninterest income declined 3.3% to $111.4 million, despite a 140.6% spike in gains on life insurance benefits and a 65.43% increase in mortgage banking income. Income from deposit account fees, ATM and interchange fees and “other income” each declined by roughly 25%.
The $273.8 million in noninterest expenses represented a 3.7% cut year over year, though salaries and employee benefits increased by 2.2% to $152.5 million.
Year-end average assets stood at $12.6 billion, a 16% year-over-year increase fueled by a 9.4% growth in total loans and strong deposit growth, the company stated. Commercial real estate and commercial and industrial loans drove a majority of the $9.2 billion in loans in 2020.
Total deposits reached $10.3 billion, a 16.8% increase over the prior year which the bank attributed to increases in existing customer accounts as well as new accounts.
Fourth-quarter profit of $34.9 million marked a 27% decline from the fourth quarter of 2019. The bank did not allocate any additional funds for credit losses in the most recent quarter, versus a $4 million set aside in the same time frame a year ago. Fourth-quarter results also included $5.2 million in pre-tax costs due to pending closure of two branches – locations for which have not been disclosed – and sale of non-strategic investments tied to the 2019 acquisition of Blue Hills Bancorp., the company stated. In a call with investors on Friday, CEO and President Christopher Oddleifson sought to assure against the mass branch closures announced by other regional competitors, and branches will remain “key to our success” in the short-to-medium term.
Quarterly revenue decreased 15.5% over a year ago to $124.3 million amid a 14.9% cut to interest income as well as losses in deposit account fees, interchange and ATM fees and loan level derivative income, partially offset by a 100% spike in gains on life insurance benefits.
Despite stockpiling its reserve build for bad loans, the company recorded net charge-offs of $2.2 million, or 0.09% of average loans on an annualized basis, in the fourth quarter. Non-performing loans also decreased compared to the prior quarter to $66.9 million due to “successful resolution” of two large non-performing commercial loans and recovering $900,000 of previously deferred interest.
“Our core fundamentals served us well as we encountered the unprecedented turbulence and uncertainty brought on by the COVID-19 pandemic and our 2020 results reflect on the strength of our fundamentals. We are confident we are well positioned to continue to successfully navigate forward as we enter 2021,” Oddleifson said in a statement.
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
