SELECTED CONSOLIDATED FINANCIAL INFORMATION & OTHER
DATA
The selected consolidated financial information and
other data of the Company set forth below does not
purport to be complete and should be read in
conjunction with,and is qualified in its entirety by,
the more detailed information, including the Consolidated
Financial Statements and related notes, appearing elsewhere
herein.
As of or For the Year
Ended December 31, 1995 1994 1993 1992 1991
(In Thousands, Except Per Share Data)
FINANCIAL CONDITION DATA:
Securities held
to maturity $226,896 $256,785 $266,544 $194,635 $156,161
Securities available
for sale 32,628 4,250 -- -- --
Loans, net of
unearned discount 628,141 590,689 487,584 499,052 583,466
Reserve for possible
loan losses 12,088 13,719 15,485 15,971 16,165
Total assets 987,589 929,194 829,681 807,146 846,293
Total deposits 871,085 796,612 743,385 729,020 794,078
Stockholders equity 72,572 64,202 57,385 52,746 31,251
Nonperforming loans 5,271 7,864 16,982 28,802 44,162
Nonperforming assets 5,909 11,730 25,866 44,714 64,342
OPERATING DATA:
Interest income $73,031 $63,487 $57,450 $63,055 $80,805
Interest expense 29,143 22,029 22,920 29,127 49,851
Net interest income 43,888 41,458 34,530 33,928 30,954
Provision for possible
loan losses 1,000 801 5,075 11,014 22,993
Non-interest income 11,480 11,470 12,995 17,059 21,648
Non-interest expenses 39,252 42,481 37,331 39,583 45,779
Net income (loss) 10,387 8,113 4,636 175 (11,869)
PER SHARE DATA:
Net income (loss) $0.71 $0.56 $0.32 $0.03 $(2.28)
Cash dividends declared 0.18 0.08 -- -- --
Book value, end of period 5.00 4.45 3.98 3.66 6.00
OPERATING RATIOS:
Return on average assets 1.10% 0.94% 0.59% 0.02% (1.29%)
Return on average equity 15.28% 13.36% 8.48% 0.56% (29.42%)
Net interest margin 4.99% 5.18% 4.74% 4.74% 3.88%
ASSET QUALITY RATIOS:
Nonperforming loans
as a percent of gross
loans .83% 1.31% 3.45% 5.71% 7.45%
Nonperforming assets as
a percent of total
assets .60% 1.26% 3.12% 5.54% 7.60%
Reserve for possible
loan losses as a
percent of loans, net
of unearned discount 1.92% 2.32% 3.18% 3.20% 2.77%
Reserve for possible
loan losses as a
percent of
nonperforming loans 229.33% 174.45% 91.18% 55.45% 36.60%
CAPITAL RATIOS:
Tier 1 leverage
capital ratio 7.37% 6.92% 7.01% 6.71% 3.56%
Tier 1 risk-based
capital ratio 10.90% 10.29% 11.01% 9.99% 4.99%
Total risk-based
capital ratio 12.15% 11.70% 12.84% 11.83% 7.61%
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
The condensed financial review which follows presents
managements discussion and analysis of the
consolidated financial condition and operating results
of Independent Bank Corp. (the Company) and its
subsidiary, Rockland Trust Company (Rockland or the
Bank). It should be read in conjunction with the
Consolidated Financial Statements and related notes
thereto.
Summary of Financial Condition. As of December 31,
1995, the Company's assets of $987.6 million reflected
an increase of $58.4 million, or 6.3%, over 1994 year-
end assets. This growth was driven by an increase in
loans of $37.5 million, centered in commercial
mortgages and consumer loans. A relatively stable
interest rate environment and a slowly recovering
regional economy were the primary factors contributing
to this loan growth. Although the total balance of
securities was relatively unchanged from 1994 to 1995,
the composition of the security portfolio was
different. Securities available for sale increased by
$28.4 million during 1995 to $32.6 million. This
increase, and an offsetting decline in securities held
to maturity, reflects the one-time reclassification of
certain mortgage-backed securities in December 1995
pursuant to a special report on Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting For
Certain Investments in Debt and Equity Securities." An
increase in deposits of $74.5 million was used to fund
the noted loan growth and reduce the Bank's usage of
its borrowing lines. It should be noted that the 1995
year-end asset and liability balances are inflated by a
$17 million deposit made on the last day of the year
which was subsequently withdrawn on the first business
day in January, 1996.
The Company's total assets grew to $929.2 million as of
December 31, 1994, an increase of $99.5 million, or
12.0%, over 1993 year-end assets. Healthy loan growth
resulting from an active customer contact program,
strong relationships with auto dealers, and an increase
in adjustable rate real estate loans retained in the
portfolio was the primary factor behind this increase.
Higher deposits and increased utilization of borrowing
lines were used to fund this loan growth.
Loan Portfolio. On December 31, 1995, the Bank's loan
portfolio amounted to $628.1 million, an increase of
$37.5 million, or 6.3%, from year-end 1994. This
increase was primarily centered in commercial mortgages
and consumer loans. Commercial loan balances were
relatively unchanged over the year.
The reserve for possible loan losses is maintained by
the related provision for possible loan losses at a
level that management of the Bank considers adequate
based upon relevant circumstances. The reserve for
possible loan losses was $12.1 million at December 31,
1995. The ratio of the reserve for possible loan losses
to non-performing loans was 229.3% at December 31,
1995, substantially better coverage than the level of
174.5% recorded a year earlier.
Outstanding loans increased $103.1 million, or 21.1%,
during 1994. This significant growth was reflected across
all loan sectors with consumer loans and mortgage loans
evidencing the largest increase.
The Bank provides its customers with access to capital
by offering a broad range of credit services. The
Bank's commercial customers consist of small-to-medium-
sized businesses which utilize demand, time, and term
loans, as well as fundings guaranteed by the Small
Business Administration, to finance their businesses.
The Bank's retail customers can choose from a variety
of mortgage and consumer loan products. The recovering
economy in the Bank's market area provides attractive
lending opportunities for commercial, real estate, and
consumer loans.
The Bank has centralized its credit services functions
to provide the requisite control that is consistent
with the needs of the Bank's management structure and
to enhance service quality. In addition to providing
credit analysis, underwriting and loan documentation
services, the commercial loan services department
performs certain administrative functions on behalf of
the Bank. The retail loan services department provides
the Bank with residential real estate mortgage loan
underwriting, servicing, and secondary market operations,
as well as instalment loan servicing and other
administrative services. The centralization of retail loan
services further provides for compliance with applicable
consumer protection laws and regulations.
The Bank's loan committee consists of the BankOs
President, the Executive Vice President of the
Commercial Lending Division, the Senior Credit Policy
Officer, and the Commercial Loan Regional Managers. The
committee considers a variety of policy issues,
including underwriting and credit standards, and
reviews loan proposals which exceed the individual loan
officer's lending authority.
Asset Quality. The Bank's principal earning assets are
its loans. Although the Bank judges its borrowers to be
creditworthy, the risk of deterioration in borrowers'
abilities to repay their loans in accordance with their
existing loan agreements is inherent in any lending
function.Participating as a lender in the credit
markets requires a strict monitoring process to
minimize credit risk. This process requires substantial
analysis of the loan application, the customer's
capacity to repay according to the loan's contractual
terms, and an objective determination of the value of
the collateral.
Nonperforming assets are comprised of nonperforming
loans and Other Real Estate Owned (OREO). Nonperforming
loans consist of loans that are more than
90 days past due but still accruing interest and
nonaccrual loans. OREO includes properties held by the
Bank as a result of foreclosure or by acceptance of a
deed in lieu of foreclosure. As of December 31, 1995,
nonperforming assets totaled $5.9 million, a reduction
of $5.8 million, or 49.6%, from the prior year-end.
Nonperforming assets have declined to 0.60% of total
assets as compared to 1.26% at the end of the preceding
year. Management believes that the current level of
nonperforming assets has reached an inherent base
level, given the risks in the industry and in the
environment within which the Bank operates.
The following table sets forth information regarding
nonperforming loans and nonperforming assets on the
dates indicated.
Dec. Sept. June Mar. Dec. Dec.
31, 30, 30, 31, 31, 31,
1995 1995 1995 1995 1994 1993
(Dollars In Thousands)
Nonperforming Loans:
Loans past due 90
days or more but
still accruing $553 $556 $640 $816 $598 $1,042
Loans accounted
for on a
nonaccrual basis 4,718 5,188 4,844 5,946 7,266 15,940
Total nonperforming
loans 5,271 5,744 5,484 6,762 7,864 16,982
Other real estate
owned 638 1,206 1,831 3,38 1 3,866 8,884
Total nonperforming
assets $5,909 $6,950 $7,315 $10,143 $11,730 $25,866
Nonperforming loans
as a percent of
gross loans 0.83% 0.92% 0.88% 1.09% 1.31% 3.45%
Nonperforming assets
as a percent of
total assets 0.60% 0.72% 0.77% 1.08% 1.26% 3.12%
As permitted by banking regulations, consumer loans and
home equity loans past due 90 days or more continue to
accrue interest. In addition, certain commercial and
real estate loans that are more than 90 days past due
may be kept on an accruing status if the loan is well
secured and in the process of collection. As a general
rule, a commercial or real estate loan more than 90
days past due with respect to principal or interest is
classified as a nonaccrual loan. Income accruals are
suspended on all nonaccrual loans and all previously
accrued and uncollected interest is reversed against
current income. A loan remains on nonaccrual
status until it becomes current with respect to
principal and interest, or when the loan is liquidated,
or when the loan is determined to be uncollectible and
is charged-off against the reserve for possible loan
losses.
The following table sets forth the Bank's nonperforming
loans by loan category on the dates indicated.
December 31, 1995 1994
(In Thousands)
Loans past due 90 days or more
but still accruing:
Real Estate - Residential $333 $344
Consumer - Instalment 67 90
Consumer - Other 153 164
Total $553 $598
Loans accounted for on a
nonaccrual basis:
Commercial $1,350 $3,111
Real Estate - Commercial 1,208 2,085
Real Estate - Residential 2,017 1,929
Real Estate - Construction -- 53
Consumer - Instalment 143 88
Total 4,718 7,266
Total Nonperforming Loans $5,271 $7,864
In the course of resolving nonperforming loans, the
Bank may choose to restructure the contractual terms of
certain commercial and real estate loans. Terms may be
modified to fit the ability of the borrower to repay in
line with its current financial status. It is the
Bank's policy to maintain restructured loans on
nonaccrual status for approximately six months before
management considers its return to accrual status.
Real estate acquired by the Bank through foreclosure
proceedings or the acceptance of a deed in lieu of
foreclosure is classified as OREO. When property is
acquired, it is recorded at the lesser of the loanOs
remaining principal balance or the estimated fair value
of the property acquired, less estimated costs to sell.
Any loan balance in excess of the estimated fair value
on the date of transfer is charged to the reserve for
possible loan losses on that date. All costs incurred
thereafter in maintaining the property, as well as
subsequent declines in fair value, are charged to non-
interest expense.
The following table summarizes OREO activity during the
periods indicated.
Activity Amount
(In Thousands)
Balance, December 31, 1993 $8,884
Properties Acquired 4,200
Sales and Rental Proceeds (8,289)
OREO Write-Downs (929)
Balance, December 31, 1994 3,866
Properties Acquired 878
Sales and Rental Proceeds (3,953)
OREO Write-Downs (153)
Balance, December 31, 1995 $638
At December 31, 1995, two OREO properties with a book
value of $250,000 were under contracts for sale which
had not yet closed.
The following table sets forth the types of properties,
all of which are located in the BankOs market area,
which comprise the BankOs OREO as of December 31, 1995.
Type of Properties Amount
(In Thousands)
Residential Condominiums $236
Land and Subdivisions 49
Commercial/Office/Retail Properties 189
Single-family Properties 164
Total $638
In order to facilitate the disposition of OREO, the
Bank may finance the purchase of such properties at
market rates if the borrower qualifies under the BankOs
standard underwriting guidelines.
Securities Portfolio. The Bank's securities portfolio
consists of securities which management intends to hold
until maturity, securities available for sale, and
Federal Home Loan Bank (FHLB) stock. Securities which
management intends to hold until maturity consist of U.
S. Treasury and U. S. Government Agency obligations, as
well as mortgage-backed securities, including
collateralized mortgage obligations. Securities held to
maturity as of December 31, 1995 are carried at their
amortized cost of $226.9 million and exclude gross
unrealized gains of $2.1 million and gross unrealized
losses of $1.6 million. A year earlier, securities held
to maturity totaled $256.8 million, excluding gross
unrealized gains of $.8 million and gross unrealized
losses of $17.7 million. There were no sales of
securities held to maturity during 1995, 1994, or 1993.
Securities available for sale consist of certain
mortgage-backed securities, including collateralized
mortgage obligations. These securities are carried at
fair market value and unrealized gains and losses, net
of applicable income taxes, are recognized as a
separate component of stockholdersO equity. The fair
market value of securities available for sale at
December 31, 1995 totaled $32.6 million and net
unrealized losses totaled $60,000. A year earlier,
securities available for sale were $4.2 million with
net unrealized losses of $254,000. There were no sales
of securities available for sale during 1995 or 1994.
In the fourth quarter of 1995, the Bank transferred
$28.6 million of securities from held to maturity status
to available for sale under the provisions of SFAS No. 115.
The investment in the stock of the Federal Home Loan
Bank is related to the admission of Rockland as a
member of the Federal Home Loan Bank of Boston in July
1994. This investment was increased during 1995 to
maintain investment levels required by FHLB guidelines.
Deposits. Including two new branches opened in 1995,
the Bank's branch system consists of 32 locations, in
addition to the main office of its subsidiary. Each
full-service branch operates as a retail sales and
services outlet offering a complete line of deposits
and loans.
As of December 31, 1995, deposits of $871.1 million
were $74.5 million, or 9.3%, higher than the prior year-
end. An expanding customer base, extensive branch
network, and competitive market rates were responsible
for this increase. It should be noted that 1995 year-
end balances are inflated by a $17 million deposit made
on the last day of the year which was subsequently
withdrawn on the first business day in January, 1996.
Core deposits, consisting of demand, NOW, savings, and
money market accounts, decreased $6.3 million, or 1.1%.
Time deposits increased $80.7 million, or 33.6%,
primarily as a result of a first quarter promotion
featuring 15 month certificates.
Total deposits increased $53.2 million, or 7.2%, during
the year ended December 31, 1994. Core deposits
increased $25.6 million, or 4.8%, while time deposits
increased $27.6 million, or 13.0%. In addition, the
Bank purchased $21.6 million of savings and time
deposits of a failed savings and loan association from
the Resolution Trust Corporation in March 1994.
Borrowings. Short term borrowings, consisting of
federal funds purchased, assets sold under repurchase
agreements, and treasury tax and loan notes, amounted
to $8.1 million on December 31, 1995, a decrease of
$22.3 million from year-end 1994. On December 31, 1995,
the Bank did not have any borrowings under repurchase
agreement lines, as compared to $25.4 million at the
prior year-end. In addition to these short term
borrowings, the Bank had borrowings of $20.0 million
from the FHLB at year-end 1995, a reduction of $5.0
million from December 31, 1994. The initial maturities
of the current FHLB borrowings range from 12 to 18 months.
The $4.8 million of subordinated capital notes outstanding
at December 31, 1995 all mature in 1996.
Summary of Results of Operations. The Company's
results of operations are largely dependent on net
interest income, which is the difference between the
interest earned on loans and investments and interest
paid on deposits and borrowings. Net interest income is
affected by the interest rate spread, which is the
difference between the yields earned on loans and
investments and the rates of interest paid on deposits
and borrowings. The results of operations are also
affected by the level of income from loan, deposit, and
mortgage banking fees, operating expenses, the
provision for possible loan losses, the impact of
federal and state income taxes, and the relative levels
of interest rates and economic activity.
For the year ended December 31, 1995, the Company
recorded net income of $10.4 million, or $.71 per
share. These results are a 28.0% improvement over the
1994 net income of $8.1 million, or $.56 per share. The
improvement in the results of operations in 1995 is due
to higher net interest income and lower non-interest
expenses. Net interest income for 1995 of $43.9 million
was $2.4 million, or 5.9%, higher than 1994. The
decline in non-interest expenses is attributable to
lower legal fees and OREO-related expenses, and a
reduction in the FDIC insurance premium.
Non-interest income of $11.5 million for 1995 was
virtually the same as 1994, although the individual
components reflected a variety of changes. Trust and
Financial Services income increased $273,000 and
mortgage banking income was $197,000 higher than 1994.
Service charges on deposit accounts and other non-
interest income declined from 1994 levels.
Non-interest expenses for 1995 of $39.3 million were
$3.2 million, or 7.6%, lower than the preceding year.
Salaries and employee benefits increased slightly due
to merit increases, higher funding of a performance-
based incentive compensation plan, and additional
employee participation in the BankOs 401(k) plan which
requires a matching contribution. Occupancy expenses
for 1995 were substantially lower than 1994 due to the
write-downs of plant facilities in the previous year.
Equipment expenses were slightly higher in 1995, while
other non-interest expenses were significantly reduced
from 1994.
For the year ended December 31, 1994, the Company
recorded net income of $8.1 million, or $0.56 per
share. These results were a 75% improvement over 1993
net income of $4.6 million, or $0.32 per share. The
improved results in 1994 were due to higher net
interest income and lower provision for possible loan
losses. Net interest income for 1994 of $41.5 million
was $6.9 million, or 20.1%, higher than 1993 levels due
to increased interest income from loans. The 1994
provision for possible loan losses of $801,000 was $4.3
million, or 84.2%, less than the 1993 provision as a
result of the improved quality of the loan portfolio.
Non-interest income for 1994 was lower than that
recorded in 1993 due, in part, to lower data processing
fees resulting from the BankOs decision to close its
lockbox operations in April, 1993. The Bank also
experienced significantly lower gains from the sales of
mortgage loans in the secondary market due to a
management decision to retain more adjustable rate
residential mortgage loans in the loan portfolio and
rising interest rates which drove down secondary market
sales potential.
Non-interest expenses for 1994 were substantially
higher than the preceding year. The increase in
salaries and employee benefits was due to higher wages
resulting from an expansion of the employee ranks and
merit increases, as well as higher medical insurance
premiums and pension costs. In addition, the Bank
established a 401(k) plan and introduced a performance-
based incentive compensation plan in place of the
former profit sharing plan. Occupancy expenses for 1994
were substantially higher than 1993 due to the write-
downs of plant facilities related to actual and
anticipated facility consolidations and renovations.
Net Interest Income. The amount of net interest income
is affected by changes in interest rates and by the
volume, mix, and interest rate sensitivity of interest-
earning assets and interest-bearing liabilities.
On a fully tax-equivalent basis, net interest income
was $44.3 million in 1995, a 6.0% increase over 1994
net interest income of $41.8 million. The average
balance of interest-earning assets for 1995 was $887.6
million, an increase of $81.6 million, or 10.1%, over
the prior year. The average yield earned on interest-
earning assets in 1995 was 8.27%, up slightly from the
average yield of 7.91% in 1994. During 1995, the
average balance of interest-bearing liabilities
increased $58.5 million, or 8.9%, over 1994 average
balances. The average cost of these liabilities rose
from 3.37% in 1994 to 4.09% in 1995. These noted
changes in volumes, yields, and rates have combined to
produce the increase in net interest income.
The following table shows the Company's average
balances, net interest income, interest rate spread,
and net interest margin for each of the three years in
the period ended December 31, 1995. Non-taxable income
from loans and securities is presented on a fully tax-
equivalent basis whereby tax-exempt income is adjusted
upward by an amount equivalent to the prevailing
federal income taxes that would have been paid if the
income had been fully taxable. The assumed tax rate was
34% in these years.
1995 1994
INTEREST INTEREST
AVERAGE EARNED/ AVERAGE EARNED/ AVERAGE
BALANCE PAID YIELD BALANCE PAID YIELD
(Dollars In Thousands)
Interest-earning assets:
Federal funds sold
and assets
purchased under
resale agreements $16,666 $964 5.78% $7,841 $330 4.22%
Interest bearing
deposits 362 19 5.25% 563 21 3.73%
Taxable securities 251,588 15,900 6.32% 257,663 15,939 6.19%
Non-taxable
securities (1) 6,479 385 5.94% 5,890 293 4.97%
Loans, net of
unearned
discount (1) 612,481 56,138 9.17% 534,052 47,205 8.84%
Total interest
-earning assets $887,576 $73,406 8.27% $806,009 $63,788 7.91%
Cash and due from
banks 44,027 41,053
Other assets 14,367 17,637
Total Assets $945,970 $864,699
Interest-bearing
liabilities:
Savings and NOW
accounts $261,302 $5,760 2.20% $290,719 $6,562 2.26%
Money Market & Super
NOW accounts 110,431 3,030 2.74% 119,347 2,944 2.47%
Time deposits 292,206 17,252 5.90% 214,780 10,960 5.10%
Federal funds
purchased and assets
sold under repurchase
agreements 15,167 910 6.00% 14,417 603 4.18%
Treasury tax and loan
notes 3,828 181 4.73% 3,617 122 3.37%
Federal home loan bank
borrowings 24,384 1,531 6.28% 5,918 352 5.95%
Subordinated capital
notes 4,898 479 9.78% 4,965 486 9.77%
Total interest-bearing
liabilities $712,216 $29,143 4.09% $653,763 $22,029 3.37%
Demand deposits 153,142 141,533
Other liabilities 12,628 8,661
Total Liabilities 877,986 803,957
Stockholders' equity 67,984 60,742
Total Liabilities and
Stockholders' Equity $945,970 $864,699
Net Interest Income $44,263 $41,759
Interest Rate
Spread (2) 4.18% 4.54%
Net Interest Margin (2) 4.99% 5.18%
(1) The total amount of adjustment to present interest
income and yield on a fully tax-equivalent basis is
$375 and $301 in 1995 and 1994, respectively.
(2) Interest rate spread represents the difference
between the weighted average yield on interest-earning
assets and the weighted average cost of interest-
bearing liabilities. Net interest margin represents net
interest income as a percent of average interest-
earning assets.
1993
INTEREST
AVERAGE EARNED/ AVERAGE
BALANCE PAID YIELD
(Dollars in thousands)
Interest-earning assets:
Federal funbds sold and
assets purchased under
resale agreements $20,294 $674 3.32%
Interest-bearing deposits 773 21 2.72%
Taxable securities 212,260 13,443 6.33%
Non-taxable securities (1) 6,166 378 6.13%
Loans, net of unearned
discount (1) 494,288 43,349 8.77%
Total interest-earning
assets 733,781 57,865 7.89%
Cash and due from banks 42,059
Other assets 16,016
Total Assets 791,856
Interest bearing
liabilities:
Savings and NOW accounts $277,633 $7,218 2.60%
Money Market & Super NOW
accounts 104,723 2,754 2.63%
Time deposits 212,488 11,982 5.64%
Federal funds purchased and
assets sold under
repurchase agreements 1,384 46 3.32%
Treasury tax and loan notes 3,900 105 2.69%
Federal home loan bank
borrowings -- -- --
Subordinated capital notes 8,611 815 9.46%
Total interest-bearing
liabilities 608,739 22,920 3.77%
Demand deposits 121,057
Other liabilities 7,381
Total Liabilities 737,177
Stockholders' Equity 54,679
Total Liabilities and
Stockholders' Equity 791,856
Net interest income 34,945
Interest rate spread (2) 4.12%
Net interest margin (2) 4.74%
(1) The total amount of adjustment to present interest
income and yield on a flly tax-equivalent basis is
$415 in 1993.
(2) Interest rate spread represents the difference
between the weighted average yield on interest-earning
assets and the weighted average cost f interest-
bearing liabilities. Net interest margin represents net
interest income as a percent of average interest-
earning assets.
The following table presents certain information
regarding changes in interest income and interest
expense for the periods indicated. For each category of
interest-earning assets and interest-bearing
liabilities, information is provided with respect to
changes attributable to changes in rate and changes in
volume. Changes which are attributable to both volume
and rate have been consistently allocated to change due
to rate.
Year Ended December 31,
1995 Compared To 1994 1994 Compared To 1993
Change Change Change Change
Due To Due To Total Due To Due To Total
Rate Volume Change Rate Volume Change
(In Thousands)
Income on
interest-earning
assets:
Federal funds sold
and assets
purchased under
resale agreements $262 $372 $634 $69 ($413) ($344)
Interest bearing
deposits 6 (8) (2) 6 (6) --
Taxable securities 337 (376) (39) (378) 2,874 2,496
Non-taxable
securities (1) 63 29 92 (68) (17) (85)
Loans, net of unearned
discount (1) 2,000 6,933 8,933 369 3,487 3,856
Total $2,668 $6,950 $9,618 ($2) $5,925 $5,923
Expense of
interest-bearing
liabilities:
Savings and NOW
accounts ($137) ($665) ($802) ($996) $340 ($656)
Money Market and
Super NOW accounts 306 (220) 86 (195) 385 190
Time deposits 2,343 3,949 6,292 (1,151) 129 (1,022)
Federal funds
purchased and assets
sold under repurchase
agreements 276 31 307 124 433 557
Treasury tax and
loan notes 52 7 59 25 (8) 17
Federal home loan
bank borrowings 80 1,099 1,179 352 -- 352
Subordinated capital
notes -- (7) (7) 16 (345) (329)
Total $2,920 $4,194 $7,114 ($1,825) $934) ($891)
Change in net
interest income ($252) $2,756 $2,504 $1,823 $4,991 $6,814
(1) Interest earned on non-taxable securities and
loans is shown on a fully tax equivalent basis.
Total interest income amounted to $73.4 million in
1995, an increase of $9.6 million, or 15.1%, over 1994.
This was due primarily to a rise of $8.9 million, or
18.9%, in interest earned on loans, attributable to a
$78.4 million, or 14.7%, increase in the average
balance of loans outstanding, as well as a 33 basis
point increase in the average yield earned on loans.
Interest earned on federal funds sold and assets
purchased under resale agreements increased almost 300%
due to higher average balances and increased yields.
Total income from the securities portfolio was $53,000
higher than in 1994. A decline in the average balance
of securities was offset by a slight increase in the
yield earned on the portfolio.
Total interest expense for the year ended December 31,
1995 increased $7.1 million, or 32.3%, over 1994. The
increase was primarily due to a higher balance of
costlier time deposit accounts. During 1995, the
average balance of interest-bearing deposit accounts
increased $39.1 million, or 6.3%. During the same
period, the average cost of interest bearing deposits
rose 64 basis points.
Total interest income amounted to $63.8 million in
1994, an increase of $5.9 million, or 10.2%, from 1993.
This was due primarily to an increase of $3.9 million,
or 8.9%, in interest earned on loans which is
attributable to a $39.8 million, or 8.0%, increase in
the average balance of loans outstanding and a 7 basis
point rise in the average yield earned on these loans.
Interest income on taxable securities in 1994 was $2.5
million, or 18.6%, higher than 1993 due to higher
average balances. The average yield on these securities
reflected a decline of 14 basis points for the year.
Interest income on the remaining earning assets
reflected small declines from 1993 due principally to
lower average balances.
Total interest expense for the year ended December 31,
1994 decreased $890,000, or 3.9%, from 1993. Average
balances of interest-bearing liabilities increased from
$608.7 million in 1993 to $653.8 million for 1994, an
increase of 7.4%. All deposit categories reflected this
growth due to an expanded customer base and the
purchase of the deposits of three branches of a failed
savings and loan association. Average rates on deposits
declined 41 basis points as the Bank maintained rates
on transaction accounts and benefited from the
maturities of higher rate time deposits.
The average balance of borrowings amounted to $28.9
million in 1994, as compared to $13.9 million in 1993.
This increase reflected the more frequent utilization
of the repurchase agreement lines and the introduction
of the borrowing facility at the Federal Home Loan
Bank.
Provision for Possible Loan Losses. The reserve for
possible loan losses is increased by the provision for
possible loan losses and decreased by loan charge-offs,
net of recoveries. Management's periodic evaluation of
the adequacy of the reserve considers past loan loss
experience, known and inherent risks in the loan
portfolio, adverse situations which may affect the
borrowers' ability to repay, the estimated value of the
underlying collateral, if any, and current and
prospective economic conditions. A substantial portion
of the Bank's loans are secured by real estate in
Massachusetts. Accordingly, the ultimate collectibility
of a substantial portion of the BankOs loan portfolio
is susceptible to changes in property values.
For the year ended December 31, 1995, the provision for
possible loan losses amounted to $1.0 million, an
increase of $199,000 from the 1994 provision. This
increase is indicative of the 1995 loan origination
volumes. For the year ended December 31, 1995, net loan
charge-offs totaled $2.6 million, virtually the same as
the prior year. As of December 31, 1995, the reserve
for possible loan losses represented 1.92% of loans,
net of unearned discount, as compared to 2.32% at
December 31, 1994. Substantial improvement in the
coverage of nonperforming loans was noted as the
reserve for possible loan losses at December 31, 1995
represented 229.3% of nonperforming loans on that date,
as compared to coverage of 174.5% at the prior year-
end.
The provision for possible loan losses for the year
ended December 31, 1994 amounted to $801,000, a
decrease of $4.3 million from the 1993 provision. This
decline was indicative of the improving quality of the
BankOs loan portfolio as evidenced by the continuing
decline in the level of nonperforming loans. For the
year ended December 31, 1994, net loan charge-off
totaled $2.6 million, as compared to $5.6 million in
the prior year. As of December 31, 1994, the reserve
for possible loan losses represented 2.32% of loans,
net of unearned discount, as compared to 3.18% at
December 31, 1993. Significant improvement in the
coverage of nonperforming loans was noted as the
reserve for possible loan losses at December 31, 1994
represented 174.5% of nonperforming loans on that date
as compared to coverage of 91.2% at the prior year-end.
The provision for possible loan losses is based upon
management's evaluation of the level of the reserve for
possible loan losses required in relation to the
estimate of loss exposure in the loan portfolio. An
analysis of individual loans and the overall risk
characteristics and size of the different loan
portfolios is conducted on an ongoing basis. This
managerial evaluation is reviewed periodically by the
Company's independent public accountants as well as by
a third-party loan review consultant. As adjustments
are required, they are reported in the earnings of the
period in which they become known.
Management believes that the reserve for possible loan
losses is adequate. While management uses available
information to recognize losses on loans, future
additions to the reserve may be necessary based on
increases in nonperforming loans, changes in economic
conditions, or for other reasons. Various regulatory
agencies, as an integral part of their examination
process, periodically review the Company's reserve for
possible loan losses. The Company was most recently
examined by Federal Reserve regulators in the second
quarter of 1994 and the Bank was most recently examined
by FDIC banking regulators in the third quarter of
1995. No additional provision for possible loan losses
was required as a result of these examinations.
Non-Interest Income. The following table sets forth
information regarding non-interest income for the
periods shown.
Years Ended December 31, 1995 1994 1993
(In Thousands)
Service charges on
deposit accounts $5,648 $5,709 $6,121
Trust and financial
services income 2,424 2,151 2,214
Mortgage banking income 2,243 2,046 2,697
Other non-interest income 1,165 1,564 1,963
TOTAL $11,480 $11,470 $12,995
Non-interest income, which is generated by deposit
account service charges, fiduciary services, mortgage
banking activities, and miscellaneous other sources,
amounted to $11.5 million in 1995, virtually unchanged
from 1994.
Service charges on deposit accounts declined slightly
from $5.7 million in 1994 to $5.6 million in 1995. This
is attributed to an increase in the credit applied
against customer service charges based on U. S.
Treasury Bill rates which were slightly higher than
1994.
The Trust and Financial Services Division generated
record revenues of $2.4 million. These increased
revenues are primarily attributed to the first full
year of operating the trust satellite office located in
Attleboro and an increase in assets under
administration.
Mortgage banking income increased to $2.2 million in
1995, up from $2.0 million in 1994. The Company's
mortgage banking revenue consists primarily of
application fees and points, servicing income, and net
gains on the sale of loans originated for sale.
Residential mortgage loans are originated as necessary
to meet consumer demand. Sales of such loans in the
secondary market occur to lend balance to the CompanyOs
interest rate sensitivity. These sales generate gain or
loss at the time of sale, produce future servicing
income, and provide funds for additional lending and
other purposes. Typically, loans are sold with the Bank
retaining responsibility for collecting and remitting
loan payments, inspecting properties, making certain
insurance and tax payments on behalf of the borrowers,
and otherwise servicing the loans and receiving a fee
for performing these services.
Other non-interest income for 1995 declined $399,000
from 1994 primarily due to lower data processing fees
and miscellaneous other income.
For the year ended December 31, 1994, total non-
interest income decreased $1.5 million, or 11.7%, from
1993. Service charges on deposit accounts decreased
$412,000, or 6.7%, due to a sharp increase in the
credit applied against customer service charges based
on U. S. Treasury Bill rates which increased
substantially in 1994. Trust and financial services
income recorded a modest decrease of $63,000, or 2.8%,
from 1993 primarily attributable to a declining
securities market and a reduction in assets under
administration. Mortgage banking income declined
$651,000, or 24.1%, from 1993 as the Bank experienced a
lower level of mortgage originations and related fees
due to increases in mortgage rates. In addition, the
Bank recorded a $453,000 decline in gains realized from
the sale of mortgage loans in the secondary market. Other
non-interest income was $399,000 lower than 1993 due
primarily to lower data processing fees resulting from the
Bank's decision to close its lockbox operations in April, 1993.
Non-Interest Expense. The following table sets forth
information regarding non-interest expense for the
periods shown.
Years Ended December 31, 1995 1994 1993
(In Thousands)
Salaries and employee benefits $22,143 $20,802 $17,341
Occupancy expenses 3,458 4,726 2,950
Equipment expenses 2,335 2,005 2,027
Advertising 710 814 599
Legal fees - loan collection 681 1,610 2,195
Legal fees - other 381 320 139
FDIC assessment 1,070 1,863 2,009
OREO expenses 599 1,182 1,817
OREO write-downs 152 929 1,334
Other non-interest expenses 7,723 8,230 6,920
TOTAL $39,252 $42,481 $37,331
For the year ended December 31, 1995, non-interest
expenses totaled $39.3 million, a decrease of $3.2
million, or 7.6%, from 1994. Salaries and employee
benefits increased $1.3 million, or 6.4%, due to merit
increases, higher funding of the 401(k) and the
performance-based incentive compensation plans, and a
rise in medical insurance premiums and pension costs.
The decrease in occupancy expenses of $1.3 million, or
26.8%, is attributable to the substantial write-downs
of certain buildings in 1994 related to actual and
anticipated facility consolidations and renovations.
The 1995 total includes $265,000 of plant facility
write-downs related to impending branch consolidations.
Equipment expenses for 1995 were $330,000, or 16.5%,
higher than the prior year due to an increase in
equipment rental charges. The reduction in legal fees
related to loan collection efforts in 1995 of $929,000,
or 57.7%, is indicative of the declining portfolio of
troubled loans which require legal assistance to
resolve and recoveries of certain legal expenses. The
FDIC insurance premium was $793,000, or 42.6%, lower
than 1994 due to a reduced risk-based assessment and a
refund from the Bank Insurance Fund. The Bank currently
is assessed the lowest FDIC insurance premium rate as a
result of its strong financial condition. The
substantial decline in OREO-related expenses is
attributed to the low volume of foreclosed properties.
1995 other non-interest expenses decreased
approximately $507,000, or 6.2%, from 1994 despite the
recording of $439,000 of expenses related to the data
processing change.
Non-interest expenses totaled $42.5 million for the
year ended December 31, 1994, an increase of $5.2
million, or 13.8%, from 1993. Salaries and employee
benefits increased $3.5 million, or 20.0%, due to
higher wages resulting from an expansion of the
employee ranks and merit increases, the introduction of
a performance-based incentive compensation plan, the
establishment of a 401(k) Plan, and higher medical
insurance premiums and pension costs. The increase in
occupancy expenses of $1.8 million, or 60.2%, is
attributable to the write-downs of certain buildings
related to actual and anticipated facility
consolidations and renovations. The reduction in loan
collection legal fees of $585,000, or 26.7%, is
indicative of the shrinking portfolio of troubled loans
which require legal assistance to resolve. The increase
in other legal fees of $181,000, or 130.2%, is due to
legal fees incurred in connection with the acquisition
of deposits from the Resolution Trust Corporation and
managed trust assets from Pawtucket Trust Company. The
FDIC insurance premium was $146,000, or 7.3%, lower
than 1993 due to a reduced risk-based premium,
indicative of the BankOs improved financial strength.
The decline in OREO expenses of $635,000, or 34.9%, is
attributed to the reduction in the volume of foreclosed
properties. The decline in OREO write-downs of
$405,000, or 30.4%, is indicative of the reduced
holdings of foreclosed properties and a more stable
real estate market. Other non-interest expenses
increased approximately $1.3 million, or 18.9%. Of this
amount, $821,000 relates to the write-down of aged
computer software. In addition, education and training,
and telephone costs increased over 1993.
Income Taxes. For the years ended December 31, 1995,
1994, and 1993, the Company recorded combined federal
and state income tax provisions of $4,729,000,
$1,533,000, and $483,000, respectively. These
provisions reflect effective income tax rates of 31.3%,
15.9%, and 9.4% in 1995, 1994, and 1993, respectively,
which are less than the Company's combined statutory
tax rate of 42%. The lower effective income tax rates
are attributable to benefits recorded in these years in
compliance with SFAS No. 109. These benefits, which
amounted to $1.6 million, $2.6 million, and $1.7
million in 1995, 1994, and 1993, respectively, reduced
the valuation allowance which had been established
prior to 1993 due to the uncertainty of the
realizability of the Company's net deferred tax asset
at that time.
The tax effects of all income and expense transactions
are recognized by the Company in each yearOs
consolidated statements of income regardless of the
year in which the transactions are reported for income
tax purposes.
ASSET/LIABILITY MANAGEMENT
The Bank's asset/liability management process monitors
and manages, among other things, the interest rate
sensitivity of the balance sheet, the composition of
the securities portfolio, funding needs and sources,
and the liquidity position. All of these factors, as
well as projected asset growth, current and potential
pricing actions, competitive influences, national
monetary and fiscal policy, and the regional economic
environment are considered in the asset/liability
management process.
The Asset/Liability Management Committee, whose members
comprise the Bank's senior management, develops
procedures, consistent with policies established by the
Board of Directors, to monitor and coordinate the
Bank's interest rate sensitivity and the sources, uses,
and pricing of funds. Interest rate sensitivity refers
to the BankOs exposure to fluctuations in interest
rates and its effect on earnings. If assets and
liabilities do not reprice simultaneously and in equal
volume, the potential for interest rate exposure
exists. It is managementOs objective to maintain
stability in the growth of net interest income through
the maintenance of an appropriate mix of interest-
earning assets and interest-bearing liabilities and,
when necessary, within prudent limits, through the use of
off-balance sheet hedging instruments such as interest rate
swaps, floors, and caps. The Committee employs simulation
analyses in an attempt to quantify, evaluate and manage the
impact of changes in interest rates on the BankOs net
interest income. In addition, the Bank engages an independent
consultant to render advice with respect to asset/liability
management strategy.
The Bank implements a deposit pricing strategy in an
effort to maintain a balanced cost of funds. As an
alternative to retail deposits, management has
implemented funding strategies that include FHLB
advances and repurchase agreement lines. These non-
deposit funds are also viewed as a contingent source of
liquidity and, when profitable lending and investment
opportunities exist, access to such funds provides a
means to fund this asset growth.
At December 31, 1995, approximately 43.4% of total
assets consisted of assets which will reprice or mature
within one year. As of that date, the amount of the
cumulative hedged gap was a negative $120.9 million, or
12.2% of total assets.
From time to time the Bank has utilized interest rate
swaps, floors, and caps as hedging instruments against
stable or declining interest rates. An interest rate
swap is an agreement whereby one party agrees to pay a
floating rate of interest on a notional principal
amount in exchange for receiving a fixed rate of
interest on the same notional amount for a
predetermined period of time from a second party.
The assets relating to the notional principal amount
are not actually exchanged.
The Bank had entered into interest rate swap agreements
with a total notional value of $90 million at December
31, 1995. These swaps were arranged through two large
international financial institutions, have initial
maturities ranging from four to five years, and provide
for net settlement on a semiannual basis. The Bank
receives fixed rate payments and pays a variable rate
of interest tied to 3-month LIBOR. At December 31,
1995, the weighted average fixed payment rate was 5.88%
and the weighted average rate of the variable interest
payments was 5.84%. As a result of these interest rate
swaps, the Bank realized net interest expense of $.4
million for the year ended December 31, 1995 and net
interest income of $1.5 million and $2.9 million for
the years ended December 31, 1994 and 1993,
respectively.
Rockland also purchased two 2-year interest rate caps
with a total notional value of $70 million in May 1995.
The caps will pay the Bank the difference between LIBOR
and the cap level if LIBOR exceeds the cap level at any
of the quarterly reset dates. If LIBOR remains below
the cap level, no payment is made to the Bank.
The following table presents the expected maturities or
repricing opportunities of interest-earning assets and
interest-bearing liabilities at December 31, 1995 based
on the information and the assumptions set forth in the
notes below.
Amounts Maturing or Repricing
Within Over Three
Three To Twelve Over One
Months Months Year Total
(Dollars In Thousands)
Interest-earning
assets (1):
Federal funds sold and
assets purchased under
resale agreements $13,000 -- -- $13,000
Interest bearing deposits -- 296 -- 296
Securities 47,920 58,140 156,926 262,986
Loans - fixed rate (2) 24,141 55,093 241,811 321,045
Loans - floating rate (2) 190,597 39,250 71,978 301,825
Total interest-earning
assets 275,658 152,779 470,715 899,152
Interest-bearing
liabilities:
Savings and NOW
accounts (3) 61,935 -- 197,794 259,729
Money Market and Super
NOW accounts (3) 111,681 -- 11,978 123,659
Time certificates of
deposit over $100,000 10,273 14,194 5,619 30,086
Other time deposits 56,414 191,919 42,825 291,158
Borrowings 18,091 10,000 -- 28,091
Subordinated capital notes -- 4,843 -- 4,843
Total interest-bearing
liabilities 258,394 220,956 258,216 737,566
Net interest sensitivity
gap during the period 17,264 (68,177) 212,499 161,586
Cumulative gap 17,264 (50,913) 161,586 161,586
Effect of hedging
activities (90,000) 20,000 70,000 --
Cumulative hedged gap $(72,736) $(120,913) $161,586 $161,586
Interest-earning assets
as a percent of
interest-bearing
liabilities (cumulative) 106.68% 89.38% 121.91% 121.91%
Interest-earning assets
as a percent of total
assets (cumulative) 27.91% 43.38% 91.05% 91.05%
Ratio of unhedged gap to
total assets 1.75% (6.90)% 21.52% 16.36%
Ratio of cumulative unhedged
gap to total assets 1.75% (5.16)% 16.36% 16.36%
Ratio of hedged gap to total
assets (7.37)% (4.88)% 28.60% 16.36%
Ratio of cumulative hedged
gap to total assets (7.37)% (12.24)% 16.36% 16.36%
(1) Adjustable and floating-rate assets are included
in the period in which interest rates are next
scheduled to adjust rather than
in the period in which they are due, and fixed-rate
loans are included in the periods in which they are
scheduled to be repaid.
(2) Balances have been reduced for nonperforming loans
which amounted to $5.3 million at the same date.
(3) Although the BankOs regular savings accounts
generally are subject to immediate withdrawal,
management considers most ofthese accounts to be
core deposits having significantly longer effective
maturities based on the Bank's experience of retention
of such deposits in changing interest rate
environments.
LIQUIDITY
Liquidity, as it pertains to commercial banks, is the
ability to generate cash in the most economical way to
pay savings withdrawals and maturing certificates of
deposit and fund loan commitments. Liquidity is
provided by earning assets and both non-interest
bearing and interest bearing liabilities, principally
core deposits.
The Bank utilizes its extensive branch network to
access retail customers who provide a stable base of in-
market core deposits. These funds are principally comprised of
demand deposits, NOW and Super NOW accounts, savings
accounts, and money market accounts. Deposit levels are
greatly influenced by interest rates, economic
conditions, and competitive factors. The Bank has also
established four repurchase agreements lines with major
brokerage firms as potential sources of liquidity. At
December 31, 1995, there were no repurchase agreements
outstanding. The Bank is a member of the Federal Home
Loan Bank of Boston which provides another source of
funds for liquidity purposes. This affiliation provides
the Bank with access to approximately $300 million of
potential funding. On December 31, 1995, the Bank had
$20 million outstanding in FHLB borrowings, with
initial maturities of 12 to 18 months.
The Parent Company, as a separately incorporated bank holding
company, has no significant operations other than
serving as the sole stockholder of the Bank. On an
unconsolidated basis, the CompanyOs assets include its
investment in the Bank, $1.0 million of other
investments, and $1.5 million of goodwill. The Company
has no employees and no significant liabilities or
sources of income. Expenses incurred by the Company
relate to its reporting obligations under the
Securities Exchange Act of 1934, as amended, and
related expenses as a publicly traded company. The
Company is directly reimbursed by the Bank for
virtually all such expenses.
The Bank actively manages its liquidity position under
the direction of the Asset/Liability Management
Committee. Periodic review under prescribed policies
and procedures is intended to ensure that the Bank will
maintain adequate levels of available funds. At
December 31, 1995, the Bank's liquidity position was
well above policy guidelines.
CAPITAL RESOURCES
The Federal Reserve Board (FRB), the Federal Deposit
Insurance Corporation (FDIC), and other regulatory
agencies have established capital guidelines for banks
and bank holding companies. Risk-based capital
guidelines issued by the federal regulatory agencies
require banks to meet a minimum Tier 1 risk-based
capital ratio of 4.0% and a total risk-based capital
ratio of 8.0%. At December 31, 1995, the Company and
the Bank substantially exceeded the minimum
requirements for Tier 1 risk-based and total risk-based
capital.
An additional requirement of a minimum 3.0% Tier 1
leverage capital ratio is mandated. On December 31,
1995, the Tier 1 leverage capital ratio for the Company
and the Bank was 7.37% and 7.12%, respectively.
Capital ratios of the Company and the Bank are shown
below for the last two year-ends.
December 31, 1995 1994
The Company
Tier 1 leverage capital ratio 7.37% 6.92%
Tier 1 risk-based capital ratio 10.90% 10.29%
Total risk-based capital ratio 12.15% 11.70%
The Bank
Tier 1 leverage capital ratio 7.12% 6.62%
Tier 1 risk-based capital ratio 10.54% 9.86%
Total risk-based capital ratio 11.79% 11.27%
DIVIDENDS
The Company declared cash dividends of $.18 per share
in 1995, following the resumption of dividend payments
in the third quarter of 1994. The 1995 ratio of
dividends paid to earnings was 25.4%.
Payment of dividends by the Company on its common stock
is subject to various regulatory restrictions. The
Company is regulated by the Federal Reserve and, as
such, is subject to its regulations and guidelines with
respect to the payment of dividends. Since
substantially all of the funds available for the
payment of dividends are derived from the Bank, future
dividends will depend on the earnings of the Bank, its
financial condition, its need for funds, applicable
governmental policies and regulations, and other such
matters as the Board of Directors deems appropriate.
Management believes that the Bank will generate
adequate earnings to continue to pay dividends.
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and related notes
thereto presented elsewhere herein have been prepared
in accordance with generally accepted accounting
principles which require the measurement of financial
position and operating results in terms of historical
dollars without considering changes in the relative
purchasing power of money over time due to inflation.
The financial nature of the Company's consolidated
financial statements is more clearly affected by
changes in interest rates than by inflation. Interest
rates do not necessarily fluctuate in the same
direction or in the same magnitude as the prices of
goods and services. However, inflation does affect the
Company because, as prices increase, the money supply
grows and interest rates are affected by inflationary
expectations. The impact on the Company is a noted
increase in the size of loan requests with resulting
growth in total assets. In addition, operating expenses
may increase without a corresponding increase in
productivity. There is no precise method, however, to
measure the effects of inflation on the Company's
consolidated financial statements. Accordingly, any
examination or analysis of the financial statements
should take into consideration the possible effects of
inflation.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 1994
(Dollars In Thousands)
ASSETS
CASH AND DUE FROM BANKS $67,354 $48,555
FEDERAL FUNDS SOLD AND
ASSETS PURCHASED UNDER
RESALE AGREEMENTS 13,000 10,000
INTEREST BEARING DEPOSITS 296 502
SECURITIES HELD TO MATURITY
(Notes 1 and 3) 226,896 256,785
(market value $227,409
and $239,875)
SECURITIES AVAILABLE FOR SALE
(Notes 1 and 3) 32,628 4,250
FEDERAL HOME LOAN BANK STOCK
(Note 6) 3,462 3,100
LOANS, NET OF UNEARNED DISCOUNT
(Notes 1 and 4) 628,141 590,689
LESS: RESERVE FOR POSSIBLE
LOAN LOSSES (12,088) (13,719)
Net Loans 616,053 576,970
BANK PREMISES AND EQUIPMENT
(Notes 1 and 5) 8,903 7,088
OTHER REAL ESTATE OWNED (Note 1) 638 3,866
OTHER ASSETS (Notes 1 and 8) 18,359 18,078
TOTAL ASSETS $987,589 $929,194
LIABILITIES
DEPOSITS
Demand Deposits $166,453 $157,144
Savings and NOW Accounts 259,729 277,827
Money Market and Super NOW
Accounts 123,659 121,133
Time Certificates of Deposit
over $100,000 30,086 21,219
Other Time Deposits 291,158 219,289
Total Deposits 871,085 796,612
FEDERAL FUNDS PURCHASED AND
ASSETS SOLD UNDER REPURCHASE
AGREEMENTS (Notes 3 and 6) 4,060 26,585
TREASURY TAX AND LOAN NOTES
(Notes 3 and 6) 4,031 3,802
FEDERAL HOME LOAN BANK BORROWINGS
(Note 6) 20,000 25,000
OTHER LIABILITIES 10,998 8,028
SUBORDINATED CAPITAL NOTES
(Note 7) 4,843 4,965
TOTAL LIABILITIES 915,017 864,992
STOCKHOLDERS' EQUITY
(Notes 1 and 11)
Preferred Stock, $.01 par value.
Authorized:1,000,000 Shares
Outstanding: No Shares in 1995
or 1994 -- --
Common Stock, $.01 par value.
Authorized: 30,000,000 Shares
Outstanding: 14,507,925 Shares
in 1995 and 14,433,632 Shares
in 1994 145 144
Surplus 43,777 43,381
Retained Earnings 28,710 20,931
Unrealized Loss on Securities
Available For Sale, Net of Tax
(Note 3) (60) (254)
TOTAL STOCKHOLDERS' EQUITY 72,572 64,202
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $987,589 $929,194
The accompanying notes are an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 1994 1993
(Dollars In Thousands, Except Share and Per Share Data)
INTEREST INCOME
Interest on Loans
(Notes 1 and 4) $55,870 $46,981 $43,057
Interest and Dividends
on Securities (Note 3) 16,178 16,155 13,698
Interest on Federal
Funds Sold and Repurchase
Agreements 964 330 674
Interest on Interest Bearing
Deposits 19 21 21
Total Interest Income 73,031 63,487 57,450
INTEREST EXPENSE
Interest on Deposits 26,042 20,467 21,954
Interest on Borrowings
(Notes 1 and 6) 2,623 1,076 151
Interest on Subordinated
Capital Notes (Note 7) 478 486 815
Total Interest Expense 29,143 22,029 22,920
Net Interest Income 43,888 41,458 34,530
PROVISION FOR POSSIBLE LOAN
LOSSES (Notes 1 and 4) 1,000 801 5,075
Net Interest Income After
Provision For Possible
Loan Losses 42,888 40,657 29,455
NON-INTEREST INCOME
Service Charges on Deposit
Accounts 5,648 5,709 6,121
Trust and Financial
Services Income 2,424 2,151 2,214
Mortgage Banking Income 2,243 2,046 2,697
Other Non-Interest Income 1,165 1,564 1,963
Total Non-Interest Income 11,480 11,470 12,995
NON-INTEREST EXPENSES
Salaries and Employee
Benefits (Note 9) 22,143 20,802 17,341
Occupancy Expenses
(Notes 5 and 12) 3,458 4,726 2,950
Equipment Expenses 2,335 2,005 2,027
Other Non-Interest
Expenses (Note 10) 11,316 14,948 15,013
Total Non-Interest
Expenses 39,252 42,481 37,331
INCOME BEFORE INCOME TAXES 15,116 9,646 5,119
PROVISION FOR INCOME TAXES
(Notes 1 and 8) 4,729 1,533 483
NET INCOME $10,387 $8,113 $4,636
NET INCOME PER SHARE $0.71 $0.56 $0.32
Weighted average common and
common equivalent shares
outstanding
(Notes 1 and 11) 14,631,493 14,415,443 14,408,436
The accompanying notes are an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
UNREALIZED
LOSS ON
SECURITIES
COMMON RETAINED AVAILABLE
STOCK SURPLUS EARNINGS FOR SALE TOTAL
(In Thousands)
BALANCE,
DECEMBER 31, 1992 $144 $43,266 $9,336 $-- $52,746
Net Income 4,636 4,636
Proceeds From Exercise
of Stock Options
(Note 11) 3 3
BALANCE,
DECEMBER 31, 1993 144 43,269 13,972 -- 57,385
Cumulative Effect of
Adoption of SFAS No.
115, Net of Tax
(Notes 1 and 3) (44) (44)
Net Income 8,113 8,113
Cash Dividends Declared
($.08 per share) (1,154) (1,154)
Proceeds From Exercise
of Stock Options
(Note 11) 39 39
Common Stock Sold Under
Dividend Reinvestment
and Stock Purchase Plan
(Note 11) 73 73
Change in Unrealized
Loss on Securities
Available For Sale,
Net of Tax (Note 3) (210) (210)
BALANCE,
DECEMBER 31, 1994 144 43,381 20,931 (254) 64,202
Net Income 10,387 10,387
Cash Dividends Declared
($.18 per share) (2,608) (2,608)
Proceeds From Exercise
of Stock Options
(Note 11) 44 44
Common Stock Sold Under
Dividend Reinvestment
and Stock Purchase Plan
(Note 11) 1 352 353
Change in Unrealized
Loss on Securities
Available For Sale,
Net of Tax (Note 3) 194 194
BALANCE,
DECEMBER 31, 1995 $145 $43,777 $28,710 $(60) $72,572
The accompanying notes are an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES: (In Thousands)
Net Income $10,387 $8,113 $4,636
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH PROVIDED
FROM OPERATING ACTIVITIES:
Depreciation and amortization 3,214 5,406 3,292
Provision for possible loan losses 1,000 801 5,075
Prepaid income taxes 55 (2,013) (943)
Loans originated for resale (47,472) (30,148) (87,125)
Proceeds from mortgage loan sales 47,490 30,177 87,607
Gain on sale of mortgages (18) (29) (482)
Proceeds from sale of assets held
for sale -- -- 1,200
Other Real Estate Owned write-downs 153 929 1,334
Changes in assets and liabilities
Decrease in other assets 100 4,271 5,708
Increase in other liabilities 2,736 2,382 985
TOTAL ADJUSTMENTS 7,258 11,776 6,651
NET CASH PROVIDED FROM OPERATING
ACTIVITIES 17,645 19,889 21,287
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in Interest Bearing
Deposits 206 200 197
Proceeds from maturities of
Securities Held to Maturity 52,511 53,036 67,845
Proceeds from maturities of
Securities Available For Sale 485 797 --
Purchase of Securities Held to
Maturity (51,917) (49,565) (140,569)
Purchase of Federal Home Loan
Bank Stock (362) (3,100) --
Net increase in Loans (42,178) (113,720) (2,647)
Proceeds from sale of Other
Real Estate Owned 3,953 8,289 8,703
Investment in Bank Premises
and Equipment (3,536) (2,480) (909)
Premium Paid for Plymouth Fed
deposits and Pawtucket Trust
assets -- (1,923) --
NET CASH USED IN INVESTING
ACTIVITIES (40,838) (108,466) (67,380)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Acquired Deposits -- 21,574 --
Net increase (decrease) in
Time Deposits 80,736 21,618 (2,966)
Net increase (decrease) in
Other Deposits (6,263) 10,035 17,331
Net increase (decrease) in
Federal Funds Purchased
and Assets Sold Under
Repurchase Agreements (22,525) 14,657 3,898
Net increase (decrease) in
Federal Home Loan Bank
Borrowings (5,000) 25,000 --
Net increase (decrease) in
Treasury Tax & Loan Notes 229 (3,148) 2,114
Repayment of Capital Notes (122) -- (3,666)
Proceeds from stock issuance 397 112 3
Dividends paid (2,460) (576) --
NET CASH PROVIDED FROM FINANCING
ACTIVITIES 44,992 89,272 16,714
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 21,799 695 (29,379)
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR 58,555 57,860 87,239
CASH AND CASH EQUIVALENTS AT THE
END OF THE YEAR $80,354 $58,555 $57,860
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest $28,862 $21,398 $23,157
Income taxes 3,999 2,359 1,444
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
OREO Properties Acquired 878 4,200 7,233
Loans transferred from assets
held for sale -- -- (4,255)
Securities transferred to
Securities Available For Sale 28,619 -- --
DISCLOSURE OF ACCOUNTING POLICY:
For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due from
banks, and federal funds sold and assets purchased
under resale agreements. Generally, federal funds are
sold for up to two week periods.
The accompanying notes are an integral part of these
consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements
include the accounts of Independent Bank Corp. (the
Company) and its wholly-owned subsidiary, Rockland
Trust Company (Rockland or the Bank). All material
intercompany accounts and transactions have been
eliminated from these statements. Certain amounts in
prior year financial statements have been reclassified
to conform to the current yearOs presentation.
NATURE OF OPERATIONS
Independent Bank Corp. is a one-bank holding company
whose primary asset is its investment in Rockland Trust
Company. Rockland is a state-chartered commercial bank
which operates 33 banking offices in southeastern
Massachusetts. The Company's primary source of income
is from providing loans to individuals and small-to-
medium-sized businesses in its market area.
USES OF ESTIMATES IN THE PREPARATION OF FINANCIAL
STATEMENTS
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at
the date of the finan-cial statements and the reported
amounts of revenues and expenses during the reporting
periods. Actual results could vary from these
estimates.
SECURITIES
On January 1, 1994, the Bank adopted Statement of
Financial Accounting Standards (SFAS) No. 115,
OAccounting for Certain Investments in Debt and Equity
Securities." This statement addresses the accounting
and reporting for all investments in debt securities
and for investments in equity securities that have
readily determinable fair values.
When securities are purchased, they are classified as
securities held to maturity if it is managementOs
intent and ability to hold them until maturity. These
securities are carried at cost, adjusted for
amortization of premiums and accretion of discounts,
both computed by the effective yield method. If it is
management's intent at the time of purchase not to hold
the securities to maturity, these securities are
classified as securities available for sale and are
carried at market value with unrealized gains and
losses reported, net of the related tax effect, as a
separate component of stockholders' equity. When
securities are sold, the adjusted cost of the specific
security sold is used to compute gain or loss on the
sale. There were no sales of securities in 1995, 1994,
or 1993.
LOANS AND RESERVE FOR POSSIBLE LOAN LOSSES
Loans are stated at their principal balance
outstanding. Interest income for commercial, real
estate, and consumer loans is accrued based upon the
daily principal amount outstanding except for loans on
nonaccrual status. Interest income on instalment loans
is generally recorded based upon the level-yield
method. Interest accruals are generally suspended on
commercial or real estate loans more than 90 days past
due with respect to principal or interest. When a loan
is placed on nonaccrual status all previously accrued
and uncollected interest is reversed against current
income. Interest income on nonaccrual loans is
recognized on a cash basis when the ultimate
collectibility of principal is no longer considered
doubtful.
Loan fees in excess of certain direct origination costs
are deferred and amortized into interest income over
the expected term of the loan using the level-yield
method.
The reserve for possible loan losses is funded by
periodic charges against expense and is maintained at a
level that management considers adequate to provide for
potential loan losses based upon an evaluation of known
and inherent risks in the loan portfolio. The reserve
is based on estimates, and ultimate losses may vary
from current estimates. These estimates are reviewed
periodically and, as adjustments are required, are
reported in earnings in the period in which they become
known. When a loan, or any portion thereof,
is considered to be uncollectible, it is charged
against the reserve for possible loan losses.
Subsequent recoveries are credited to the reserve.
IMPAIRED LOANS AND TROUBLED DEBT RESTRUCTURINGS
The Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan," and SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan D
Income Recognition and Disclosures," as of January 1,
1995. SFAS No. 114 requires that certain impaired loans
be measured based on the present value of the expected
future cash flows discounted at the loan's original
effective interest rate or the collateral value.
When the measure of the impaired loan is less than the
recorded investment in the loan, the impairment is
recorded through a valuation allowance.
The Company had previously determined the adequacy of
the reserve for possible loan losses using methods
similar to those prescribed in SFAS No. 114. As a
result of adopting these statements, no additional
provision for possible loan losses was required as of
January 1, 1995.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed
using the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are
amortized over the shorter of the lease terms or the
estimated useful lives of the improvements.
OTHER REAL ESTATE OWNED
Other real estate owned (OREO) is comprised of real
estate acquired through foreclosure or acceptance of a
deed in lieu of foreclosure. OREO is carried at the
lower of the related loan's remaining principal balance
or the estimated fair value of the property acquired,
less estimated costs to sell. Any loan balance in
excess of the estimated fair value on the date of
transfer is charged to the reserve for possible loan
losses on that date. The carrying value of other real
estate owned is reviewed periodically. Subsequent
declines in value are charged to other non-interest
expense.
Upon the adoption of SFAS No. 114, loans classified as
in-substance foreclosures (ISF), totaling $1.6 million
as of December 31, 1994, were reclassified as loans
from OREO. All transactions involving ISF loans have
been reclassified in the accompanying consolidated
financial statements to conform with this new
pronouncement.
INTANGIBLE ASSETS
In connection with the acquisition of Middleborough
Trust Company in January 1986, the Company allocated
$2,951,000 of the purchase price to goodwill. This
amount is being amortized over a 20 year period using
the straight-line method. The balance at December 31,
1995 is $1,475,000.
In March 1994, Rockland purchased $21.6 million of
deposits from the Resolution Trust Corporation. In May
1994, Rockland purchased approximately $50 million of
trust assets from Pawtucket Trust Company. The Bank
allocated $1,923,000 of the purchase price of these
transactions to intangible assets, which is being
amortized over a 15 year period using the straight-line
method. The balance at December 31, 1995 is $1,692,000.
INCOME TAXES
The Company records income taxes using the liability
method of accounting for income taxes pursuant to SFAS
No. 109, "Accounting For Income Taxes," which it
adopted effective January 1, 1993. Under this method,
deferred taxes are determined based upon the difference
between the financial statement and the tax bases of
the assets and liabilities using the statutory tax
rates in effect in the years in which these differences
are expected to reverse.
TRUST AND FINANCIAL SERVICES
Assets held in a fiduciary or agency capacity for
customers are not included in the accompanying
consolidated balance sheets, as such assets are not
assets of the Company. Trust and Financial Services
income is recorded on the cash basis, the results of
which approximates the accrual basis of accounting for
such fees.
NET INCOME PER SHARE
Income per share amounts are based on the weighted
average number of common and common equivalent shares
outstanding each year.
OFF-BALANCE SHEET AGREEMENTS
From time to time the Bank has utilized interest rate
swap agreements, caps, or floors as hedging instruments
for asset and liability management purposes. As such,
these instruments are accounted for under the accrual
method. Income received from the fixed rate payments
and interest paid under variable rate obligations is
recorded net as interest income on loans. Gains or
losses on the sale of swap agreements are deferred and
amortized into interest income over the remainder of
the original term of the swap.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 1995, the FASB issued SFAS No. 122, "Accounting
for Mortgage Servicing Rights," which is to become
effective for fiscal years beginning after December 15,
1995. SFAS No. 122 requires that a bank recognize the
rights to service mortgage loans for others, regardless
of the manner in which the servicing rights are
acquired, as separate assets. In addition, capitalized
mortgage servicing rights are required to be assessed
for impairment based on the fair value of those rights.
SFAS No. 122 will be applied prospectively beginning
January 1, 1996, to transactions in which mortgage
loans are sold with servicing rights retained. The
Company expects that the adoption of SFAS No. 122 will
have a positive impact on income in 1996, the
significance of which will depend on the volume of
loans sold during the year.
(2) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures About Fair Value Of
Financial Instruments," requires disclosure of fair
value information about financial instruments for which
it is practicable to estimate that value, whether or
not recognized on the balance sheet. In cases where
quoted market values are not available, fair values are
based upon estimates using present value or other
valuation techniques. Those techniques are
significantly affected by the assumptions used,
including the discount rate and estimates of future
cash flows. In that regard, the derived fair value
estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be
realized in immediate settlement of the instrument.
The carrying amount reported on the balance sheet for
cash, federal funds sold and assets purchased under
resale agreements, and interest bearing deposits
approximates those assets' fair values. SFAS No. 107
excludes certain financial instruments and all
nonfinancial instruments from its disclosure
requirements. Accordingly, the aggregate fair value
amounts presented do not represent the underlying value
of the Company.
The following table reflects the book and fair values
of financial instruments, including on balance sheet
and off balance sheet instruments as of December 31,
1995 and 1994.
1995 1994
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
(In Thousands)
FINANCIAL ASSETS
Cash and Due From Banks $67,354 $67,354 $48,555 $48,555 (a)
Federal Funds Sold and
Assets Purchased Under
Resale Agreements 13,000 13,000 10,000 10,000 (a)
Interest Bearing Deposits 296 296 502 502 (a)
Securities Held To Maturity 226,896 227,409 256,785 239,875 (b)
Securities Available For
Sale 32,628 32,628 4,250 4,250 (b)
Federal Home Loan Bank
Stock 3,462 3,462 3,100 3,100 (c)
Net Loans 616,053 615,772 576,970 575,932 (d)
FINANCIAL LIABILITIES
Demand Deposits 166,453 166,453 157,144 157,144 (e)
Savings and Now Accounts 259,729 259,729 277,827 277,827 (e)
Money Market and Super
NOW Accounts 123,659 123,659 121,133 121,133 (e)
Time Deposits 321,244 319,886 240,508 239,158 (f)
Federal Funds Purchased
and Assets Sold Under
Repurchase Agreements 4,060 4,060 26,585 26,585 (a)
Treasury Tax and Loan
Notes 4,031 4,031 3,802 3,802 (a)
Federal Home Loan Bank
Borrowings 20,000 20,079 25,000 25,027 (f)
Subordinated Capital Notes 4,843 5,026 4,965 5,513 (f)
UNRECOGNIZED FINANCIAL INSTRUMENTS
Standby Letters of Credit 2,419 2,436 2,593 2,599 (g)
Commitments to Extend Credit 6,511 6,511 3,768 3,768 (a)
Interest Rate Swap Agreements 90,000 90,481 115,000 108,215 (b)
Interest Rate Caps 70,000 70,500 -- -- (b)
(a) Book value approximates fair value due to short
term nature of these instruments.
(b) Fair value was determined based on market prices
or dealer quotes.
(c) Federal Home Loan Bank stock is redeemable at cost
(d) The fair value of loans was estimated by
discounting anticipated future cash flows using current
rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining
maturities.
(e) Fair value is presented as equaling book value.
SFAS No. 107 requires that deposits which can be
withdrawn without penalty at any time be presented at
such amount without regard to the inherent value of
such deposits and the BankOs relationship with such
depositors.
(f) The fair value of these instruments is estimated
by discounting anticipated future cash payments using
rates currently available for instruments with similar
remaining maturities.
(g) The fair value of these instruments was estimated
using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of
the agreements and the present creditworthiness of
customers.
(3) SECURITIES
The amortized cost, gross unrealized gains and losses,
and fair market value of securities held to maturity at
December 31, 1995 and 1994 were as follows:
1995
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(In Thousands)
U.S. Treasury and U.S.
Government Agency Securities $73,484 $559 ($789) $73,254
Mortgage-Backed Securities 128,361 1,377 (749) 128,989
Collateralized Mortgage
Obligations 17,473 152 (54) 17,571
State, County, and Municipal
Securities 6,578 20 (3) 6,595
Other Securities 1,000 -- -- 1,000
Total $226,896 $2,108 ($1,595) $227,409
1994
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(In Thousands)
U. S. Treasury and U. S.
Goverment Agency Securities $70,904 $699 ($5,432) $66,171
Mortgage-Backed Securities 157,197 -- (11,229) 145,968
Collateralized Mortgage
Obligations 24,259 52 (990) 23,321
State, County, and Municipal
Securities 3,425 12 (22) 3,415
Other Securities 1,000 -- -- 1,000
Total $256,785 $763 ($17,673) $239,875
The amortized cost, gross unrealized gains and losses,
and fair market value of securities available for sale
at December 31, 1995 and 1994 were as follows:
1995
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(In Thousands)
Mortgage-Backed Securities $29,751 $38 ($113) $29,676
Collateralized Mortgage
Obligations 2,968 -- (16) 2,952
Total $32,719 $38 ($129) $32,628
1994
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(In Thousands)
Mortgage-Backed Securities $4,636 -- ($386) $4,250
Collateralized Mortgage
Obligations -- -- -- --
Total $4,636 -- ($386) $4,250
Securities totalling $28,619,000 were reclassified from
held to maturity to available for sale in December 1995
in accordance with the "FASB Special Report, A Guide to
the Implementation of Statement 115." On the date of
transfer, the net unrealized loss on these securities was
$31,312.
A schedule of the contractual maturities of securities
held to maturity and securities available for sale
at December 31, 1995 is presented below:
Held to maturity Available for sale
Fair Fair
Amortized Market Amortized Market
Cost Value Cost Value
(In Thousands) (In Thousands)
Due in one year or less $11,941 $11,973 $-- $--
Due from one year
to five years 68,007 67,388 25,650 25,620
Due from five to
ten years 60,404 60,405 7,069 7,008
Due after ten
years 86,544 87,643 -- --
Total $226,896 $227,409 $32,719 $32,628
The actual maturities of mortgage-backed securities and
collateralized mortgage obligations will differ from
the contractual maturities due to the ability of the
borrowers to prepay underlying mortgage obligations. On
December 31, 1995 and 1994, investment securities
carried at $33,253,000 and $67,525,000, respectively,
were pledged to secure public deposits, assets sold
under repurchase agreements, treasury tax and loan
notes, and for other purposes as required by law. At
year end 1995 and 1994, the Company had no investments
in obligations of individual states, counties, or
municipalities which exceeded 10% of stockholders'
equity.
(4) LOANS AND RESERVE FOR POSSIBLE LOAN LOSSES
The composition of loans, net of unearned discount, at
December 31, 1995 and 1994 is as follows:
1995 1994
(In Thousands)
Commercial $121,679 $122,944
Real Estate - Commercial 187,608 169,693
Real Estate - Residential 187,652 184,958
Real Estate - Construction 27,863 28,892
Consumer - Instalment 102,088 80,441
Consumer - Other 11,076 11,882
Gross Loans 637,966 598,810
Unearned Discount 9,825 8,121
Loans, Net of Unearned Discount $628,141 $590,689
In addition to the loans noted above, at December 31,
1995 and December 31, 1994, the Bank serviced
approximately $246,569,000 and $225,734,000, respectively,
of loans sold to investors in the secondary mortgage
market and other financial institutions. Of the loans
sold at December 31, 1995, $6,074,147 were sold with
recourse. All other loans sold at December 31, 1995 and
all loans sold at December 31, 1994 were sold without recourse.
At December 31, 1995, $3.6 million of residential
mortgages were held for sale.
At December 31, 1995 and 1994, the principal amount of
loans which were not accruing interest was
approximately $4,718,000 and $7,266,000, respectively.
Gross interest income that would have been recognized
for the years ended December 31, 1995, 1994, and 1993
if nonperforming loans at the respective dates had been
performing in accordance with their original terms
approximated $448,000, $1.1 million, and $2.1 million,
respectively. The actual amount of interest on these
loans that was collected during those periods and
included in interest income approximated $63,000,
$80,000, and $145,000, respectively.
As of December 31, 1995 the BankOs recorded investment
in impaired loans and the related valuation allowance
calculated under SFAS No. 114 is as follows.
Recorded Valuation
Investment Allowance
Impaired loans:
Valuation allowance required $3,401 $1,269
No valuation allowance required 1,321 --
Total $4,722 $1,269
The valuation allowance is included in the reserve for
possible loan losses on the balance sheet.
The average recorded investment in impaired loans
for the year ended December 31, 1995 was $3.7 million.
Interest payments received on impaired loans are
recorded as interest income unless collection of the
remaining recorded investment is doubtful at which time
payments received are recorded as reductions of
principal. The Bank recognized interest income on
impaired loans of $169,000 for the year ended December
31, 1995.
Restructured loans totaled $2,629,000 and $2,898,000 at
December 31, 1995 and 1994, respectively, of which
$644,000 and $1,071,000, respectively, are included in
nonaccruing loans above. Interest income of
approximately $262,000, $220,000, and $215,000 was
recognized on these loans in 1995, 1994, and 1993,
respectively. If these loans had been repaying in
accordance with original contractual terms,
approximately $37,000, $57,000, and $444,000 of
additional interest income would have been recognized
on these loans in the respective periods. At December
31, 1995, the Bank was not committed to lend any
additional funds to borrowers with loans whose terms
have been restructured.
The aggregate amount of loans in excess of $60,000
outstanding to directors, principal officers, and
principal security holders at December 31, 1995 and
1994 and for the years then ended is as follows
(in thousands).
Balance, January 1, 1994 $17,406
New loans 4,395
Loan repayments (3,743)
Balance, December 31, 1994 18,058
New loans 601
Loan repayments (7,086)
Balance, December 31, 1995 $11,573
All such loans were made in the ordinary course of
business on substantially the same terms, including
interest rate and collateral, as those prevailing at
the time for comparable transactions with other
persons, and do not involve more than the normal risk
of collectibility or present other unfavorable
features.
An analysis of the reserve for possible loan losses for
each of the three years in the period ended December
31, 1995 is as follows.
1995 1994 1993
(In Thousands)
Reserve, beginning of year $13,719 $15,485 $15,971
Loans charged-off (4,082) (4,293) (7,519)
Recoveries on loans
reviously charged-off 1,451 1,726 1,958
Net charge-offs (2,631) (2,567) (5,561)
Provision charged to expense 1,000 801 5,075
Reserve, end of year $12,088 $13,719 $15,485
(5) BANK PREMISES AND EQUIPMENT
Bank premises and equipment at December 31, 1995 and
1994 were as follows:
1995 1994
(In Thousands)
Cost:
Land $356 $356
Bank Premises 6,661 5,999
Leasehold Improvements 4,724 4,121
Equipment 14,741 12,500
Total Cost 26,482 22,976
Accumulated Depreciation (17,579) (15,888)
Net Bank Premises and Equipment $8,903 $7,088
Depreciation and amortization expense related to
bank premises and equipment reflected in the
consolidated statements of income was $1,721,000 in
1995, $3,193,000 in 1994, and $1,527,000 in 1993. The
1995 and 1994 expenses include $265,000 and $1,800,000,
respectively, of writedowns of the book values of
certain facilities related to actual and anticipated
facility consolidations and renovations.
(6) BORROWINGS
Short-term borrowings consist of federal funds
purchased, assets sold under repurchase agreements, and
treasury tax and loan notes. Information on the amounts
outstanding and interest rates of short term borrowings
for each of the three years in the period ended
December 31, 1995 is as follows:
1995 1994 1993
(Dollars In Thousands)
Balance outstanding at
end of year $8,091 $30,387 $18,878
Average daily balance
outstanding 18,995 18,034 5,284
Maximum balance outstanding
at any month end 63,988 30,387 20,062
Weighted average interest rate
for the year 5.74% 4.03% 2.86%
Weighted average interest rate
at end of year 4.36% 5.74% 2.74%
The Bank has established two federal funds lines
totaling $18 million. Borrowings under these lines are
classified as federal funds purchased. At December 31,
1995, the Bank had $4.1 million of federal funds
purchased. The Bank has also established four
repurchase agreement lines with major brokerage firms.
Amounts outstanding under these lines
are classified as assets sold under repurchase
agreements. At December 31, 1995 the Bank had no
outstanding balances under the repurchase agreement
lines, while at December 31, 1994, repurchase
agreements totaled $25.4 million.
Federal Home Loan Bank (FHLB) borrowings are
collateralized by a blanket pledge agreement on the
BankOs FHLB stock, certain qualified securities,
deposits at the Federal Home Loan Bank, and residential
mortgages held in the BankOs portfolio. The borrowing
capacity at the Federal Home Loan Bank is approximately
$300 million. A schedule of the maturity distribution
of FHLB advances with the weighted average interest
rates at December 31, 1995 and 1994 follows:
1995 1994
Weighted Weighted
Average Average
Amount Rate Amount Rate
(Dollars In Thousands)
Due in one year
or less $20,000 6.29% $15,000 5.76%
Due from one year
to two years -- -- 10,000 6.48%
$20,000 6.29% $25,000 6.05%
(7) SUBORDINATED CAPITAL NOTES
The following table summarizes the outstanding
subordinated capital notes at December 31, 1995 and
1994:
INTEREST YEAR OF
RATE MATURITY 1995 1994
(In Thousands)
9.50% 1995 $-- $122
9.50% 1996 2,102 2,102
10.00% 1996 2,732 2,732
14.00% 1996 9 9
TOTAL $4,843 $4,965
These subordinated notes do not contain provisions
enabling the Company to redeem them prior to their
scheduled maturities.
(8) INCOME TAXES
The provision for income taxes is comprised of the
following components:
YEARS ENDED DECEMBER 31, 1995 1994 1993
(In Thousands)
Current Provision
Federal $3,616 $2,760 $907
State 1,058 786 519
TOTAL CURRENT PROVISION 4,674 3,546 1,426
Deferred Provision (Benefit)
Federal 965 460 755
State 715 81 (36)
Change in Valuation Allowance (1,625) (2,554) (1,662)
TOTAL DEFERRED PROVISION
(BENEFIT) 55 (2,013) (943)
TOTAL PROVISION $4,729 $1,533 $483
The income tax provision shown in the consolidated
statements of income differs from the expected amount,
determined by applying the statutory federal tax rate
of 34% to income before income taxes. The following
summary reconciles the differences between these
amounts.
YEARS ENDED DECEMBER 31, 1995 1994 1993
(In Thousands)
Computed statutory federal
income tax provision $5,139 $3,279 $1,740
Nontaxable interest, net (257) (223) (240)
State taxes, net of federal
tax benefit 1,152 572 319
Change in valuation allowance (1,625) (2,554) (1,662)
Other, net 320 459 326
TOTAL PROVISION $4,729 $1,533 $483
The net deferred tax asset which is included in other
assets amounted to approximately $4,950,000,
$5,005,000, and $2,992,000 at December 31, 1995, 1994
and 1993, respectively. The tax-effected components of
the net deferred tax asset for each of the three years
in the period ended December 31, 1995 are as follows:
DECEMBER 31, 1995 1994 1993
(In Thousands)
Reserve for possible loan losses $4,231 $4,664 $5,265
Tax depreciation 546 415 (409)
Write-down of OREO 205 825 1,183
Mark to market adjustment (1,986) (1,477) (1,020)
Accrued expenses not deducted
for tax purposes 1,179 826 710
Deferred income 123 189 136
State taxes 1,063 1,552 1,606
Other, net (143) (96) (32)
TOTAL DEFERRED TAX ASSET 5,218 6,898 7,439
Valuation allowance (268) (1,893) (4,447)
NET DEFERRED TAX ASSET $4,950 $5,005 $2,992
The valuation allowance is provided when it is more
likely than not that some portion of the net deferred
tax asset will not be realized. As the Company's
earnings performance improved in 1994 and 1995, the
uncertainty surrounding the realizability of this asset
declined. At December 31, 1995, the valuation allowance
relates to certain state deferred tax assets that may
expire prior to realization.
(9) EMPLOYEE BENEFIT PLANS RETIREMENT PLAN
The Bank's noncontributory pension plan covers
substantially all employees of the Bank. The plan
provides pension benefits that are based upon the
employee's highest base annual salary during five
consecutive years of employment. The BankOs funding
policy is to contribute an amount within the range
permitted by applicable regulations on an annual basis.
Net pension cost for the Bank for each of the three
years in the period ended December 31, 1995 included the
following components:
1995 1994 1993
(In Thousands)
Service cost-benefits earned
during the period $750 $620 $502
Interest cost on projected
benefit obligation 938 821 773
Net amortization (deferral) 1,358 (1,053) 433
Actual loss (return) on assets (2,416) 36 (1,393)
Net pension cost $630 $424 $315
Assumptions used in the measurement
of net pension cost were:
Discount rate 7.75% 7.00% 7.00%
Rate of increase in
compensation levels 5.50% 5.50% 5.50%
Expected long-term rate
of return on assets 8.25% 8.25% 8.25%
The plan's assets are invested primarily in listed
stocks, bonds, and mutual funds. The following table
sets forth the the planOs funded status at December 31,
1995 and 1994:
1995 1994
(In Thousands)
Actuarial present value of
benefit obligations:
Accumulated benefit obligation,
including vested benefits of
$9,529 in 1995 and $8,961
in 1994 $9,863 $9,170
Projected benefit obligation $12,792 $12,317
Plan assets at fair value $14,524 $12,645
Plan assets in excess of
projected benefit obligation $1,732 $328
Unrecognized net gain (2,960) (886)
Unrecognized net asset at
transition (327) (368)
Accrued pension expense $(1,555) $(926)
OTHER EMPLOYEE BENEFIT PLANS
In 1994, the Bank implemented an incentive compensation
plan in which senior management, officers, and non-
officer employees are eligible to participate at
varying levels. The plan provides for awards based upon
the attainment of a combination of Bank, divisional,
and individual performance objectives. The expense for
this plan amounted to $979,000 and $954,000 in 1995 and
1994, respectively.
Also, in 1994, the Bank amended its Profit Sharing Plan
by converting it to an Employee Savings Plan that
qualifies as a deferred salary arrangement under
Section 401(k) of the Internal Revenue Code. Under the
Employee Savings Plan, participating employees may
defer a portion of their pre-tax earnings, not to
exceed Internal Revenue Service annual contribution
limits. The Bank matches 50% of each employeeOs
contributions up to 6% of the employeeOs earnings. In
1995 and 1994, the expense for this plan amounted to
$305,000 and $284,000, respectively. No expense was
recorded in 1993.
POSTEMPLOYMENT BENEFITS
Employees retiring from the Bank on or after attaining
age 65 and who have rendered at least 10 years of
continuous service to the Bank are entitled to
postretirement health care benefits. These benefits are
subject to deductibles, copayment provisions, and other
limitations. The Bank may amend or change these
benefits periodically.
Effective January 1, 1993, the Bank adopted SFAS No.
106, "Employers' Accounting For Postretirement Benefits
Other Than Pensions," which requires the recognition of
postretirement benefits over the service lives of the
employees rather than on a cash basis. Prior to 1993,
the costs of these benefits were expensed as paid. The
Bank elected to recognize its accumulated benefit
obligation of approximately $597,000 at January 1, 1993
prospectively on a straight-line basis over the average
life expectancy of current retirees, which is
anticipated to be less than 20 years. The
postretirement benefit expense recorded in 1995, 1994
and 1993 in accordance with this standard was
approximately $120,000, $100,000 and $94,000,
respectively. This includes the amortization of the
accumulated benefit obligation and service and interest
costs. The total cost of all postretirement benefits
charged to income was $192,000, $175,000, and $167,000,
in 1995, 1994, and 1993, respectively.
The Bank continues to evaluate ways in which it can
better manage these benefits and control the costs. Any
changes in the plan or revisions to assumptions that
affect the amount of expected future benefits may have
a significant effect on the amount of the reported
obligation and annual expense.
(10) OTHER NON-INTEREST EXPENSES
Included in other non-interest expenses for each of the
three years in the period ended December 31, 1995 were
the following:
1995 1994 1993
(In Thousands)
Advertising $710 $814 $599
Legal fees - loan collection 681 1,610 2,195
Legal fees - other 381 320 139
FDIC assessment 1,070 1,863 2,009
OREO expenses 599 1,182 1,817
OREO write-downs 153 929 1,334
Other non-interest expenses 7,722 8,230 6,920
TOTAL $11,316 $14,948 $15,013
(11) COMMON STOCK PURCHASE AND OPTION PLANS
The Company maintains a Dividend Reinvestment
and Stock Purchase Plan. Under the terms of the plan,
stockholders may elect to have cash dividends
reinvested in newly issued shares of common stock at a
5% discount from the market price on the date of the
dividend payment. Stockholders also have the option of
purchasing additional new shares, at the full market
price, up to the aggregate amount of dividends payable
to the stockholder during the calendar year.
The Company has granted stock options under its Amended
and Restated 1987 Incentive Stock Option Plan to
certain key employees of the Bank. The Company has
reserved 800,000 shares of common stock for issuance
under the plan. The option price is equal to the fair
market value of the stock on the date of grant and
currently ranges from $2.00 to $7.3125 per share.
Current options vest over a two year period and expire
between 1997 and 2005. Common shares under option are
shown below.
1995 1994 1993
Balance, January 1 410,950 320,333 246,750
Options granted 91,950 141,450 95,500
Options canceled -- (40,833) (21,083)
Options exercised (20,034) (10,000) (834)
Balance, December 31 482,866 410,950 320,333
(12) COMMITMENTS AND CONTINGENCIES FINANCIAL
INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank is a party to financial instruments with off-
balance sheet risk in the normal course of business to
meet the financing needs of its customers and to reduce
its own exposure to fluctuations in interest rates.
These financial instruments involve, to varying
degrees, elements of credit and interest rate risk in
excess of amounts recognized in the consolidated
balance sheets. The Bank uses the same credit policies
in making commitments and conditional obligations as it
does for on-balance sheet instruments.
Off-balance sheet financial instruments whose
contractual amounts present credit risk include the
following at December 31, 1995 and 1994:
1995 1994
(In Thousands)
Commitments to extend credit:
Fixed Rate $2,915 $1,466
Adjustable Rate 3,596 2,302
Unused portion of existing credit
lines 103,720 79,401
Unadvanced construction loans 7,704 8,839
Standby letters of credit 2,419 2,593
Interest rate swaps D notional value 90,000 115,000
Interest rate caps D notional value 70,000 --
The Bank's exposure to credit loss in the event of non-
performance by the other party for commitments to
extend credit and standby letters of credit is
represented by the contractual amounts of those
instruments. Commitments to extend credit are
agreements to lend to a customer as long as there is no
violation of any condition established in the contract.
The Bank evaluates each customer's creditworthiness on
an individual basis. The amount of collateral obtained
upon extension of the credit is based upon managementOs
credit evaluation of the customer. Collateral varies
but may include accounts receivable, inventory,
property, plant and equipment, and income-producing
commercial real estate. Commitments generally have
fixed expiration dates or other termination clauses and
may require payment of a fee. Since some of the
commitments may expire without being drawn upon, the
total commitment amounts do not necessarily represent
future cash requirements.
Standby letters of credit are conditional commitments
issued by the Bank to guarantee performance of a
customer to a third party. These guarantees are
primarily issued to support public and private
borrowing arrangements. The credit risk involved in
issuing letters of credit is essentially the same as
that involved in extending loans to customers. The
collateral supporting those commitments is essentially
the same as for other commitments. Most guarantees
extend for one year.
As a component of its asset/liability management
activities intended to manage interest rate exposure,
the Bank has entered into certain off-balance sheet
hedging transactions. Interest rate swap agreements
represent transactions which involve the exchange of
fixed and floating rate interest payment obligations
without the exchange of the underlying principal
amounts. The notional principal amount of interest
rate swaps outstanding were $90 million and $115
million at December 31, 1995 and 1994, respectively.
The weighted average fixed payment rates were 5.88% and
5.75% at December 31, 1995 and 1994, respectively,
while the weighted average rates of variable interest
payments, based on the 3-month London Interbank
Offering Rate (LIBOR), were 5.84% and 6.18% at December
31, 1995 and 1994, respectively. As a result of these
interest rate swaps, the Bank realized net interest
expense of $.4 million and net interest income of $1.5
million and $2.9 million for the years ended December
31, 1995, 1994, and 1993, respectively.
Entering into interest rate swap agreements involves
both the credit risk of dealing with counterparties and
their ability to meet the terms of the contracts and an
interest rate risk. While notional principal amounts
are generally used to express the volume of these
transactions, the amounts potentially subject to credit
risk are small due to the structure of the agreements.
The Bank is a direct party to these agreements which
provide for net settlement between the Bank and the
counterparty on a semiannual basis. Should the
counterparty fail to honor the agreement, the BankOs
credit exposure is limited to the net settlement
amount. At December 31, 1995 and 1994, the Bank had a
net payable of $57,000 and a net receivable of $77,000,
respectively, on the interest rate swaps.
Rockland also purchased two 2-year interest rate caps
with a total notional value of $70 million in May 1995.
Interest rate caps involve the credit risk of dealing
with counterparties and their ability to meet the terms
of the contract. The caps will pay the Bank the
difference between LIBOR and the cap level if LIBOR
exceeds the cap levels (7.00% and 6.50%)at any of the
quarterly reset dates. If LIBOR remains below the cap
level, no payment is made to the Bank. The transaction
fees for these instruments are being amortized over the
term of the agreements.
LEASE COMMITMENTS
The Bank leases equipment, office space and certain
branch locations under noncancelable operating leases.
The following is a schedule of minimum future lease
commitments under such leases as of December 31, 1995
(in thousands):
1996 $1,445
1997 1,379
1998 1,060
1999 857
2000 781
Thereafter 4,116
Total future minimum rentals $9,638
Rent expense incurred under operating leases was
approximately $2,047,000 in 1995, $1,526,000 in 1994,
and $1,438,000 in 1993. Renewal options ranging from 3
to 10 years exist for several of these leases.
OTHER CONTINGENCIES
At December 31, 1995 there were lawsuits pending which
arose in the ordinary course of business. Management
has reviewed these actions with legal counsel and has
taken into consideration the view of counsel as to the
outcome of the litigation. In the opinion of
management, final disposition of these lawsuits is not
expected to have a material adverse effect on the
Company's financial position or results of operations.
(13) SELECTED QUARTERLY FINANCIAL DATA
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
1995 1995 1995 1995
(Unaudited - Dollars in Thousands Except Share and Per Share Data)
INTEREST INCOME $17,467 $17,907 $18,502 $19,155
INTEREST EXPENSE 6,568 7,195 7,686 7,694
NET INTEREST INCOME 10,899 10,712 10,816 11,461
PROVISION FOR
POSSIBLE LOAN
LOSSES 250 250 250 250
NON-INTEREST INCOME 2,755 3,002 2,957 2,766
NON-INTEREST EXPENSES 9,915 9,635 9,658 10,044
PROVISION FOR INCOME
TAXES 1,099 1,207 1,192 1,231
NET INCOME $2,390 $2,622 $2,673 $2,702
NET INCOME PER SHARE $0.17 $0.18 $0.18 $0.18
AVERAGE SHARES
OUTSTANDING 14,449,892 14,631,050 14,658,788 14,699,643
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
1994 1994 1994 1994
(Unaudited - Dollars in thousands Except Share and Per Share Data)
INTEREST INCOME $14,820 $15,505 $15,979 $17,183
INTEREST EXPENSE 5,334 5,286 5,417 5,992
NET INTEREST INCOME 9,486 10,219 10,562 11,191
PROVISION FOR
POSSIBLE LOAN
LOSSES 298 159 150 194
NON-INTEREST INCOME 2,846 3,018 2,839 2,767
NON-INTEREST EXPENSE 9,608 10,377 12,054 10,442
PROVISION FOR INCOME
TAXES 712 788 (938) 971
NET INCOME $1,714 $1,913 $2,135 $2,351
NET INCOME PER SHARE $0.12 $0.13 $0.15 $0.16
AVERAGE SHARES
OUTSTANDING 14,409,078 14,409,078 14,411,578 14,429,765
(14) PARENT COMPANY FINANCIAL STATEMENTS
Condensed financial information relative to the
Company's balance sheets at December 31, 1995 and 1994,
and the related statements of income and cash flows for
the years ended December 31, 1995, 1994, and 1993 are
presented below.
BALANCE SHEETS
DECEMBER 31, 1995 1994
(In Thousands)
Assets:
Cash* $220 $96
Investments in subsidiary* 70,609 62,066
Other investments 1,000 1,000
Other assets 1,477 1,626
Total assets $73,306 $64,788
Liabilities and Stockholders' Equity:
Dividends Payable $725 $577
Subordinated capital notes 9 9
Total Liabilities 734 586
Stockholders' equity 72,572 64,202
Total liabilities and stockholders'
equity $73,306 $64,788
*Eliminated in consolidation.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 1994 1993
(In Thousands)
Income:
Dividend received from
subsidiary* $2,152 $514 $--
Interest income 39 28 21
Other income -- -- 1
Total income 2,191 542 22
Expenses:
Interest expense 1 1 1
Other expenses 152 149 151
Total expenses 153 150 152
Income (loss ) before income taxes and
equity in undistributed income
of subsidiary 2,038 392 (130)
Provision for income taxes -- -- (5)
Equity in undistributed income of
subsidiary 8,349 7,721 4,771
Net income $10,387 $8,113 $4,636
*Eliminated in consolidation.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 1994 1993
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $10,387 $8,113 $4,636
ADJUSTMENTS TO RECONCILE NET INCOME
TO CASH PROVIDED FROM OPERATING
ACTIVITIES:
Amortization 148 147 147
Decrease (increase) in other assets 1 (4) 2
Decrease in other liabilities -- -- (1)
Equity in income of subsidiary* (8,349) (7,721) (4,771)
TOTAL ADJUSTMENTS (8,200) (7,578) (4,623)
NET CASH PROVIDED FROM OPERATING
ACTIVITIES 2,187 535 13
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities -- -- (500)
NET CASH USED IN INVESTING
ACTIVITIES -- -- (500)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock options exercised 60 39 3
Proceeds from dividend reinvestment
and optional stock purchases 337 73 --
Dividends paid (2,460) (576) --
NET CASH PROVIDED FROM (USED IN)
FINANCING ACTIVITIES (2,063) (464) 3
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 124 71 (484)
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR* 96 25 509
CASH AND CASH EQUIVALENTS AT THE
END OF THE YEAR* $220 $96 $25
*Eliminated in consolidation.
To The Board of Directors of Independent Bank Corp.:
We have audited the consolidated balance sheets of
Independent Bank Corp. and its subsidiary as of
December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in
the period ended December 31, 1995. These consolidated
financial statements are the responsibility of the
Company's management. Our responsibility is to express
an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the
accounting principles used and significant estimates
made by management, as well as evaluating the overall
consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material
respects, the financial position of Independent Bank
Corp. and its subsidiary as of December 31, 1995 and
1994, and the results of their operations and their
cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally
accepted accounting principles.
As explained in Note 1 to the consolidated financial
statements, the Company changed its method of
accounting for investments by adopting Statement of
Financial Accounting Standards No. 115, "Accounting For
Certain Investments in Debt and Equity Securities,"
effective January 1, 1994.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 23, 1996
DIRECTORS OF INDEPENDENT BANK CORP.
Richard S. Anderson
President and Treasurer
Anderson-Cushing
Insurance Agency, Inc.
Donald K. Atkins
Retired, Former President
and Chief Executive Officer
Winthrop - Atkins Co., Inc.
W. Paul Clark
President and General Manager
Paul Clark, Inc.
Robert L. Cushing
Owner
Robert L. Cushing Insurance
Benjamin A. Gilmore, II
Owner and President
Gilmore Cranberry Co.
James T. Jones
Treasurer
Plumber's Supply Company
Lawrence M. Levinson
Partner
Burns & Levinson
Douglas H. Philipsen
President and Chief Executive Officer
Rockland Trust Company
Richard H. Sgarzi
President and Treasurer
Black Cat Cranberry Corp.
John F. Spence, Jr.
Chairman of the Board
Rockland Trust Company
Robert J. Spence
President
Albert Culver Co.
William J. Spence
President
Mass. Bay Lines, Inc.
Brian S. Tedeschi
President
Tedeschi Realty Corp.
Thomas J. Teuten
Executive Vice President
A. W. Perry, Inc.
OFFICERS OF INDEPENDENT BANK CORP.
John F. Spence, Jr.
Chairman of the Board
and Chief Executive Officer
Douglas H. Philipsen
President
Linda M. Campion
Clerk
Richard J. Seaman
Chief Financial Officer and
Treasurer
Tara M. Villanova
Assistant Clerk
DIRECTORS OF ROCKLAND TRUST COMPANY
Richard S. Anderson
President and Treasurer
Anderson-Cushing
Insurance Agency, Inc.
*John B. Arnold
President and Treasurer
H.H. Arnold Co., Inc.
Donald K. Atkins
Retired, Former President
and Chief Executive Officer
Winthrop-Atkins Co., Inc.
Theresa J. Bailey
Retired, Former Senior Vice President
and Clerk, Rockland Trust Company
W. Paul Clark
President and General Manager
Paul Clark, Inc.
*Robert L. Cushing
Owner
Robert L. Cushing Insurance
*H. Thomas Davis
Retired, Former Chairman
Clipper Abrasives, Inc.
Alfred L. Donovan
Consultant
*Ann M. Fitzgibbons
Volunteer
Benjamin A. Gilmore, II
Owner and President
Gilmore Cranberry Co.
*Donald A. Greenlaw
Retired, Former President
Rockland Trust Company
E. Winthrop Hall
Chairman and President
F.L. and J.C. Codman Company
James T. Jones
Treasurer
Plumber's Supply Company
*Lawrence M. Levinson
Partner
Burns & Levinson
Douglas H. Philipsen
President and Chief Executive Officer
Rockland Trust Company
Richard H. Sgarzi
President and Treasurer
Black Cat Cranberry Corp.
*Nathan Shulman
Retired, Former President
Best Chevrolet, Inc.
John F. Spence, Jr.
Chairman of the Board
Rockland Trust Company
Robert J. Spence
President
Albert Culver Co.
William J. Spence
President
Mass. Bay Lines, Inc.
*Richard A. Spencer
Retired, Former Chairman of
the Board, Hingham Mutual Fire Insurance Co.
John H. Spurr, Jr.
Senior Vice President and Treasurer
A.W. Perry, Inc.
Robert D. Sullivan
President
Sullivan Tire Company, Inc.
Brian S. Tedeschi
President
Tedeschi Realty Corp.
*Ralph D. Tedeschi
Consultant, Former Chairman,
Angelo's Supermarkets, Inc.
Thomas J. Teuten
Executive Vice President
A.W. Perry, Inc.
*Honorary Director
OFFICERS OF ROCKLAND TRUST COMPANY
John F. Spence, Jr.
Chairman of the Board
Douglas H. Philipsen
President and
Chief Executive Officer
Richard J. Seaman
Chief Financial Officer
and Treasurer
Richard F. Driscoll
Executive Vice President
Retail and Operations Division
S. Lee Miller
Executive Vice President
Trust and Financial Services Division
Ferdinand T. Kelley
Executive Vice President
Commercial Lending Division
Raymond G. Fuerschbach
Senior Vice President
Human Resources
Russell N. Viau
Vice President and
Chief Internal Auditor
Linda M. Campion
Clerk
Tara M. Villanova
Assistant Clerk
STOCKHOLDER INFORMATION
ANNUAL MEETING
The Annual Meeting of Stockholders will be held at 3:30
P. M. on Thursday, April 11, 1996
at the Sheraton Tara Hotel, Braintree, Massachusetts.
COMMON STOCK
The Common Stock of the Company is traded over the
counter through the NASDAQ
National Market System under the symbol of INDB.
PRICE RANGE OF COMMON STOCK
HIGH LOW DIVIDEND
1995
4th Quarter $7.50 $6.63 $0.05
3rd Quarter 7.63 6.63 0.05
2nd Quarter 7.50 6.25 0.04
1st Quarter 6.63 5.13 0.04
1994
4th Quarter $5.87 $4.87 $0.04
3rd Quarter 7.00 5.75 0.04
2nd Quarter 6.50 4.63 0.00
1st Quarter 5.88 4.38 0.00
STOCKHOLDER RELATIONS
Inquiries should be directed to:
Richard J. Seaman, Chief Financial Officer and Treasurer, or
Jeanne Govoni, Shareholder Relations
Independent Bank Corp.
288 Union Street
Rockland, MA 02370
(617) 878-6100
FORM 10-K
A copy of the Annual Report on Form 10-K filed with the
Securities and Exchange Commission for fiscal 1995 is
available without charge by writing to:
Jeanne Govoni, Shareholder Relations
Independent Bank Corp.
288 Union Street
Rockland, MA 02370
TRANSFER AGENT AND REGISTRAR
Transfer Agent and Registrar for the Company is:
Boston EquiServe
P. O. Box 8200
Boston, Ma. 02266-8200