OREANDA-NEWS. Fitch Ratings has affirmed the Long-term and Short-term Issuer Default Ratings (IDRs) of Independent Bank Corp's (INDB) and its subsidiary, Rockland Trust Company, at 'BBB' and 'F2', respectively. The Rating Outlook is Stable. A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

IDRs, VRs, AND SENIOR DEBT

The ratings affirmation and Outlook reflect the company's stable asset quality and steady operating performance. In Fitch's view, INDB will continue to deliver consistent financial measures such as lower-than-peers' net charge-offs as well as stable, reasonable returns while continuing to build capital. Although Fitch believes the company's balance sheet liquidity is weaker than peers, an offset is the company's sizeable mix of non-interest-bearing deposits, which is above its peer group average. The Stable Outlook also incorporates the view that INDB has made progress towards building capital.

INDB's 'BBB' rating is supported by its consistent performance evidenced by low level of credit losses and relatively stable earnings through various credit downturns. For second quarter 2015 ( 2Q15), nonperforming assets (NPAs) improved to 1.24%, which is lower than Fitch's community bank peer averages at 1.39%. Net charge-offs (NCOs) to average loans also remain very low at only 2bps for 2Q15, which is well below its normalized range. Fitch also notes that during the credit downturn, INDB's NCOs peaked in 2010 at 50bps, much lower than its peers despite the significant concentration in commercial real estate (CRE).

INDB's earnings performance metrics continue to exhibit strength and stability, buoyed by relatively solid spread income and low credit costs. Although net interest margin (NIM) has recently trended down reflecting the prolonged low interest rate environment, net interest income remains healthy. Further, INDB's performance relative to Fitch's community bank peer group tends to be more consistent with less volatility in earnings despite its loan concentrations.

Ratings are constrained by risk concentrations in CRE and lower levels of tangible common equity. Capital remains tighter than similarly rated peers with tangible common equity (TCE) at 7.58% at 2Q15 compared to the peer median of 8.30%. Fitch notes that INDB's CRE relative to capital is also high at over 300% of total risk based capital. While Fitch views INDB's capital levels as adequate given its limited loss history and stable earnings profile, Fitch's current ratings incorporate the expectation that INDB will continue to build its TCE position to roughly 8% by year-end 2015, which is the company's long-term target.

Fitch considers INDB's liquidity profile to be somewhat weaker relative to community banking peers. INDB's loan-to-deposit ratio of 92.2% at 2Q14 is higher than the peer average of 79%. Additionally, total liquid assets are limited relative to peers with INDB's securities totaling only 11% of total assets. However, Fitch notes INDB's funding sources help support current ratings. The company has a sizeable amount of non-interest-bearing deposits, accounting for 31% of total deposits at 2Q15, which is also better than most of its peer group. INDB's primary funding source is its core deposit base, which composes 88% of the total deposits.

LONG- AND SHORT-TERM DEPOSIT RATINGS

The uninsured deposit ratings of Independent Bank Corp are rated one notch higher than INDB's IDR and senior unsecured debt because U.S. uninsured deposits benefit from depositor preference. U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default.

HOLDING COMPANY

INDB's IDR and VR are equalized with those of its operating bank, Rockland Trust Co., reflecting its role as the bank holding company, which is mandated in the U.S. to act as a source of strength for its bank subsidiaries. Ratings are also equalized reflecting the very close correlation between holding company and subsidiary default probabilities.

SUPPORT RATING AND SUPPORT RATING FLOOR

INDB has a Support Rating of '5' and Support Rating Floor of 'NF'. In Fitch's view, INDB is not systemically important and therefore, the probability of support is unlikely. IDRs and VRs do not incorporate any support.

RATING SENSITIVITIES

VR, IDRs, AND SENIOR DEBT

The current ratings are at the high end of their range, and the likelihood for a positive rating action is limited. In Fitch's view, the company's relatively low levels of tangible common equity and high concentration of CRE are rating constraints.

Ratings could come under pressure if INDB's capital position were to be negatively impacted by a reversal in credit quality performance or more aggressive capital management that would suggest a long-term operating strategy with lower levels of capital. Additionally, should the company pursue an acquisition that results in materially lower pro-forma capital levels, negative rating action could follow.

LONG- AND SHORT-TERM DEPOSIT RATINGS

The long- and short-term deposit ratings are sensitive to any change to INDB's long- and short-term IDR.

HOLDING COMPANY

Should INDB's holding company begin to exhibit signs of weakness, demonstrate trouble accessing the capital markets, or have inadequate cash flow coverage to meet near-term obligations, there is the potential that Fitch could notch the holding company IDR and VR from the ratings of the operating companies.

SUPPORT RATING AND SUPPORT RATING FLOOR

INDB's Support Rating and Support Rating Floor are sensitive to Fitch's assumption as to capacity to procure extraordinary support in case of need.

Fitch has affirmed the following ratings:

Independent Bank Corp.
--Long-Term IDR at 'BBB'; Stable Outlook
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Support Rating at '5';
--Support Rating Floor at 'NF'.

Rockland Trust Company
--Long-Term IDR at 'BBB'; Stable Outlook
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Support Rating at '5';
--Support Rating Floor at 'NF';
--Long-Term deposits at 'BBB+';
--Short-Term deposits at 'F2'.