Independent Bank Reverses Loan Decline and Restores Margin
Net interest income reached $220.7 million and the net interest margin recovered 4 basis points to 3.89% after a 5 bps squeeze in the second quarter.
Independent Bank Corp. (INDB), the Massachusetts holding company for Rockland Trust Company, reported third-quarter net income of $89.7 million, or $1.90 a share, up from $81.8 million, or $1.70 a share, in the second quarter.
The inflection was in net interest income. That line rose $9.7 million, or 4.6%, to $220.7 million as average interest-earning assets increased $514.0 million, with the extra deposits deployed into securities and interest-earning cash. The net interest margin expanded 4 basis points to 3.89% from 3.85%, reversing a 5 bps compression in the prior quarter. The adjusted margin, which strips purchase-accounting accretion and other non-core items, stayed at 3.76%.
Loan yields increased 11 bps to 5.80% on repricing and higher purchase-accounting accretion; the adjusted loan yield rose 6 bps. Securities yields rose 23 bps to 3.36% on higher-yielding purchases. The overall cost of funding increased 4 bps to 1.56%, and the total cost of deposits rose 6 bps to 1.42%.
Period-end loans increased $158.2 million, or 0.9%, to $18.6 billion, reversing a $31.2 million, or 0.2%, decline in the second quarter. Commercial and industrial loans grew $49.0 million, or 1.0% (4.1% annualized), despite $11.5 million of dealer-finance runoff after a $79.4 million, or 1.7% (6.8% annualized), increase in the prior quarter that included $36.8 million of that runoff. Commercial real estate and construction balances increased $30.8 million, or 0.3%, after a $176.4 million, or 1.8%, decline. Consumer real estate increased $80.2 million, or 1.9% (7.6% annualized), with home equity up $40.9 million (3.0%, 12.1% annualized) and residential mortgages up $39.3 million (1.4%, 5.4% annualized).
Period-end deposits increased $135.3 million, or 0.7%, to $20.5 billion, after a $294.6 million, or 1.5%, increase in the second quarter. Average deposits rose $633.8 million, or 3.2%. Core deposits increased $232.4 million, or 1.4%, and comprised 84.6% of total deposits versus 84.1% at June 30, 2026. Noninterest-bearing demand deposits were 28.1% of total deposits.
Noninterest income decreased $1.1 million, or 2.6%, to $41.3 million. Investment and advisory income fell $463,000, or 3.1%, on lower seasonal tax-preparation fees; mortgage banking income fell $243,000, or 20.7%; loan-level derivative income fell $518,000, or 39.3%. Service charges rose $555,000, or 5.9%. Noninterest expense decreased $1.9 million, or 1.3%, to $138.4 million. FDIC assessment fell $623,000, or 19.7%. Salaries and benefits rose $1.3 million, or 1.7%. Other noninterest expense fell $1.5 million, or 4.6%, and included $2.2 million of core-conversion costs versus $2.1 million in the prior quarter.
Return on average assets was 1.42% and return on average common equity was 10.13%, versus 1.34% and 9.24% in the prior quarter; return on average tangible common equity was 15.43%.
Nonperforming loans increased to $125.7 million, or 0.68% of loans, from $103.6 million, or 0.56%, driven primarily by one office real estate loan. Delinquencies as a percentage of loans rose 30 bps to 0.73%. The provision for credit losses was $6.5 million versus $6.3 million, driven by a specific reserve on the office loan that migrated to nonperforming status. Net charge-offs were $1.2 million, or 0.02% of average loans annualized, consistent with the prior quarter. The allowance for credit losses increased to $201.2 million, or 1.08% of loans, from $195.9 million, or 1.06%. Criticized and classified commercial loans were $550.9 million, or 3.9% of commercial loans, consistent with the prior quarter.
The company repurchased approximately 679,000 shares for $57.4 million in the third quarter, versus 964,000 shares for $75.0 million in the second quarter; remaining authorization was about $93 million under the $200 million plan. Common equity to assets fell 26 bps to 13.80%; tangible common equity to tangible assets fell 25 bps to 9.44%. Stockholders’ equity decreased $60.0 million, or 1.7%.