Exhibit 13
A Management Perspective
INDEPENDENT BANK CORP. HAD A BANNER YEAR IN 2001. The Company's 2001 financial
performance was outstanding, with net income increasing by 45% and diluted
earnings per share increasing 44%. For a variety of reasons, including our own
strong performance as well as favorable investor opinion of the industry segment
to which Independent Bank Corp. belongs, there was a dramatic increase in the
value of the Company's common stock during the year. On December 31, 2001, the
Company's stock closed at $21.49 per share, a 72% increase from the $12.50 per
share closing price on December 29, 2000 (that year's last trading day). The
Company's strong performance in 2001 can be attributed to the following factors:
o The continuing, seamless integration of the sixteen branches
(acquired from FleetBoston Financial in August 2000)
solidified our expansion on to Cape Cod and deepened our
already strong presence in Brockton;
o Significant growth in our core deposits contributed to our
lower cost of funds;
o We managed our sources of funds in such a manner as to
decrease our over-all cost of funds somewhat faster than the
market-driven yield on our earning assets;
o Our loan portfolio grew in spite of a slowing economy;
o Prudent management of our loan portfolio (coupled with
conservative underwriting of new loans) helped the Company
maintain asset quality and avoid serious non-performing loan
problems, a condition which plagued many other institutions;
o The structure of the Company's balance sheet was
well-positioned to take advantage of the Federal Reserve
Board's eleven interest rate cuts during 2001; and
o The high degree of personalized service, which is consistently
delivered by the employees of Rockland Trust Company (the
Company's sole banking subsidiary), strengthened relationships
with existing customers while simultaneously attracting new
customers.
Now I'd like to touch upon the highlights of our success in 2001 and what I
anticipate to be some of the opportunities and challenges that lay ahead:
SUPERLATIVE OPERATING PERFORMANCE
Excluding after-tax securities gains of $0.9 million, net operating earnings
were $21.1 million and diluted earnings per share on an operating basis were
$1.46 in 2001. Compared to the prior year (which also excludes one-time special
charges mostly related
to the acquisition), the year-over-year growth in net operating earnings and
diluted earnings per share amounts to +21.2% and +19.7%, respectively.
Total assets increased by $249.2 million (+12.8%) from year-end 2000 to a total
of $2.2 billion as of December 31, 2001. The loan portfolio increased by $114.2
million (+9.6%) to $1.3 billion and the investment portfolio increased by $119.2
million (+19.9%) to $719.1 million. The Company's net interest margin also
increased to 4.84% for the year ended December 31, 2001 from 4.60% the previous
year.
Cape Cod: A Year of Success and Great Opportunity Ahead
It has been almost eighteen months since our acquisition of sixteen former
FleetBoston Financial branches (including four branches in a simultaneous
transaction through Sovereign Bank) as well as associated deposits and loans.
Fourteen of the acquired branches were on Cape Cod.
While that acquisition is by now old news, the process of taking full advantage
of our entry to Cape Cod continues to this day and will be one of our key areas
of focus in the future. At December 31, 2001, the acquired deposits in the
branches on the Cape totaled $294.2 million, an 11.5% increase over December 31,
2000. We believe that Cape Cod has significant potential for additional growth
in part because the deposit balances in the acquired branches experienced a high
rate of decay while under Fleet's management, falling by $108 million between
June 1995 and June 2000.
Also, the permanent and seasonal residents of Cape Cod provide an exceptional
opportunity for our investment management services. The small business community
on the Cape represents another potential source of customers for the Bank's
suite of commercial services.
STRONG CUSTOMER RELATIONSHIPS AND CORE DEPOSIT GROWTH:
THE FOUNDATIONS OF OUR SUCCESS
The strength of our customer relationships derives from the dedicated, well
trained staff that is prudently empowered to make decisions. As a result of this
"high touch" approach towards banking, we benefit from tremendous loyalty and
support in the communities where we do business.
To reach new customers, we successfully launched several aggressive
marketing campaigns that contributed to our core deposit growth of 16.5% in
2001. As a result of our success in terms of increased core deposits, time
deposits were intentionally managed downward by $54.7 million (-9.2%) to $540.4
million at year-end. Overall, total deposits increased by $92.4 million (+6.2%)
from year-end 2000.
Sustained Loan Growth without Compromising Asset Quality
The Company experienced strong loan growth during 2001, particularly in the
residential and commercial real estate mortgage categories. While the Company
sells the majority of its residential real estate loan production, some
adjustable rate and 15-year "jumbo" fixed residential mortgages were added to
the Company's loan portfolio. However, there were
a number of payoffs in the seasoned commercial real estate loan portfolio that
had been acquired in 2000 from BankBoston. While the credit quality of that
portfolio has been excellent, the out-of-market locations of many of those
borrowers made refinancing their loans difficult in a declining rate
environment. This factor served to dampen overall commercial real estate loan
growth. Credit quality remains a high priority. We have continued to apply
strong underwriting standards and conservative lending practices. As a
consequence, during 2001 we had historically low levels of delinquency and
non-performing loans. The Company's ongoing attention to asset quality and
diligent credit management is made evident by the decrease in non-performing
assets which totaled $3.0 million at December 31, 2001, $1.4 million (31.7%),
lower than the $4.4 million reported a year earlier. In this uncertain
environment, we intend to continue to repeat our historical emphasis on credit
quality and will proceed with care to ensure that we do not deviate from our
customary credit discipline. However, we will not be forever immune from the
serious deterioration of the national economy and, therefore, decided to
substantially increase the provision for loan loss, to $4.6 million in 2001, up
$2.4 million from the prior year.
THE ROCKLAND TRUST INVESTMENT MANAGEMENT GROUP:
SIGNIFICANT PROGRESS DESPITE UNCERTAIN MARKET CONDITIONS
The Rockland Trust Investment Management Group, formerly known as our Asset
Management & Trust Services Division, continued to make progress in 2001 despite
the most challenging market environment in 27 years. While many major
"stand-alone" investment firms experienced negative revenue growth in 2001 of
15% or worse, our fee revenue declined only 2% due to competitive investment
performance and an aggressive new business effort. We added $87 million in new
assets under management in 2001, a 14.5% increase over the prior year, and our
account retention rate increased for the third year in a row.
Most importantly, our outstanding long-term track record of superior investment
performance was maintained in 2001. Over the last five years, the combined
equity portfolios managed by our Investment Management Group have grown at a
compound annual rate of 12.5%, a level which exceeds the Standard & Poor's 500
benchmark that has returned 10.7% annually over the same time period.
THE ENIGMA OF OUR ECONOMY, IN A WORLD FOREVER CHANGED
The Federal Reserve Board cut the Federal Funds and Discount rates eleven times
in 2001; seven times before the tragic events of September 11th and four times
afterward. It was clear at the beginning of 2001 that the country was headed
toward a recession, if indeed it was not already in one. There is no doubt that
the deteriorating situation was significantly amplified by the events of that
terrible day.
A little over one year ago, we as a nation were celebrating the fact that we had
enjoyed the longest period of sustained economic growth since World War II.
Today, we are suddenly experiencing the lowest short-term interest rate
environment since 1961, over 40 years ago! There is not a single leader, in
government or business, that has any experience in governing or managing in this
rate environment, to say nothing about the
additional uncertainties posed by trained terrorists awaiting opportunities to
magnify the events of September 11th.
One thing, however, remains certain. At some point, there will be an
economic recovery. Our country has managed to overcome adversity for over 200
years. Each crisis has seemed worse than the one before; yet the citizens of
this nation have prospered like no other.
Economic recovery will undoubtedly be accompanied by higher interest rates, at
least, higher short term rates. It is unclear when this transition will occur
but, when it does, the financial services industry will be challenged to
maintain earnings. Those institutions that are successful in doing so will have
figured out how to keep revenue growing in the face of increasing funding costs.
Obviously, in today's low interest rate environment, everyone wants to borrow
long term.
This Company has long had in place a sophisticated asset and liability
management process that has served us well to date. I expect that this process
will serve us well in the future. No institution, however, is immune from the
impact of a changing interest rate environment.
SOUTHEASTERN MASSACHUSETTS AND CAPE COD
Rockland Trust has enjoyed steady growth by taking advantage of being in some of
the fastest growing and stable Massachusetts communities.
U.S. Census Bureau Information
(Cape Cod)
Plymouth Barnstable
Massachusetts County County
Population, percent change, 1990 to 2000 5.5% 8.6% 19.1%
Homeownership rate, 2000 61.7% 75.6% 77.8%
Median household money income,
1997 model-based estimate $43,015 $49,165 $40,791
The largest population center in Plymouth County, the City of Brockton,
continues to undergo a transformation that is truly remarkable.
I have said many times that financial institutions are mirrors of their local
economies. Although Rockland Trust is by no means immune to national trends, we
continue to believe that Southeastern Massachusetts and Cape Cod should fare
better in this economic downturn and in the coming recovery. Southeastern
Massachusetts features small and mid-size firms in a diverse mix of industries
that is not heavily weighted toward any single industry. Therefore, our region
is insulated from being confronted with huge layoffs like those that have been
all too common in other regions of the U.S.
The Kingston/Plymouth and Middleborough lines of the renovated former Old Colony
Railroad resumed operations in late 1997, opening our region to commuters from,
as well
as to, Boston. Businesses and prospective residents will continue to take
advantage of the open space in Southeastern Massachusetts and relocate out of
the crowded and expensive metropolitan Boston area. The Scituate Branch of the
former Old Colony Railroad is finally due to begin construction in 2003 and
start operating in 2005. Once again, this will facilitate the expansion of a
sizable portion of our market.
STAYING UP-TO-DATE: IMPROVING OUR FACILITIES
During the second quarter of 2001, our Pembroke Branch was relocated from a
tired, nondescript building to a nearby location. We incorporated a historic
building, which had been a community landmark, into the design of our new
facility.
During the third quarter of 2001, Rockland Trust announced that it had signed a
lease for construction of a building at 100 Belmont Street in downtown Brockton
that will accommodate a bank branch, a commercial lending center, a residential
mortgage origination office and an investment management office.
At the same time an old, oversized, high-maintenance building acquired from
FleetBoston Financial was sold to a new owner and it will now become part of the
revitalization of downtown Brockton. Rockland Trust, furthermore, will continue
to maintain a small branch in that building, located directly across from
Brockton City Hall.
In the fourth quarter of 2001, our North Plymouth Branch was relocated from a
dated structure to a newly constructed building about one mile north of the
original location, close to the Plymouth/Kingston line.
GIVING BACK TO THE COMMUNITIES WE SERVE
Throughout its long history in Southeastern Massachusetts, Rockland Trust has
strived to understand and address the needs of its customers. Over the years, we
have not lost sight of our founding principle of making a positive difference in
the communities we serve.
In 2001, my colleagues pledged more than $100,000 to the Old Colony United Way
as well as the United Way of Cape Cod and the Islands, an increase of 21% over a
year ago.
When terrorism struck our nation, my colleagues once again felt the need to
help; they initiated a branch-wide fundraising effort for the Red Cross 9/11
Relief Fund. Throughout our 51 locations, employees and customers contributed
nearly $40,000.
One of our enduring initiatives, The Rockland Trust Company Charitable
Foundation, continues to invest in our common future through a scholarship
program serving students in every community where we operate a branch. We are
proud to expand this program into the towns where we have recently added
branches.
STRATEGY FOR GROWTH
Over a year ago, we established a three-year strategic plan for 2001-2003 and
are now engaged in the process of updating the plan that will now include 2004.
We will continue to be opportunistic and take advantage of unforeseen events
that coincide with our
established strategy. At the same time, we intend to maintain the controlled
risk profile that has served us well for ten years. Our ultimate goal remains
the same; to meet the financial expectations of our shareholders while offering
the best banking and financial services to the communities we serve. Our
industry clearly continues to evolve, and we have proven that our organization
can effectively adapt to these changing market conditions.
Douglas H. Philipsen
Chairman of the Board, President,
And Chief Executive Officer
Directors and Officers
Directors of Independent Bank Corp. and Rockland Trust Company
Richard S. Anderson
President and Treasurer
Anderson-Cushing Insurance Agency, Inc.
W. Paul Clark
President and General Manager
Paul Clark, Inc.
Robert L. Cushing*
President
Hannah B.G. Shaw Home for the Aged, Inc.
Alfred L. Donovan
Independent Consultant
Benjamin A. Gilmore, II
Owner and President
Gilmore Cranberry Co., Inc.
E. Winthrop Hall
Chairman and President
F. L. & J. C. Codman Company
Kevin J. Jones
Treasurer
Plumbers' Supply Company
Lawrence M. Levinson*
Partner
Burns and Levinson LLP
Douglas H. Philipsen
Chairman of the Board, President and
Chief Executive Officer
Richard H. Sgarzi
President and Treasurer
Black Cat Cranberry Corp.
William J. Spence
President
Massachusetts Bay Lines, Inc.
John H. Spurr, Jr.
Executive Vice President and Treasurer
A. W. Perry, Inc.
Robert D. Sullivan
President
Sullivan Tire Co., Inc.
Brian S. Tedeschi
Chairman
Tedeschi Realty Corp.
Thomas J. Teuten
President
A. W. Perry, Inc.
o IBC Director Only
Honorary Directors of
Rockland Trust Company
John B. Arnold
Retired, Former 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
Robert L. Cushing
President
Hannah B.G. Shaw Home for the Aged, Inc.
Ann M. Fitzgibbons
Volunteer
Donald A. Greenlaw
Retired, Former President
Rockland Trust Company
Lawrence M. Levinson
Partner
Burns and Levinson LLP
Nathan Shulman
Retired, Former President
Best Chevrolet, Inc.
John F. Spence, Jr.
Retired, Former Chairman
of the Board
Rockland Trust Company
Robert J. Spence
President
Albert Culver Company
Officers of Independent
Bank Corp.
Douglas H. Philipsen
Chairman of the Board, President and
Chief Executive Officer
Denis K. Sheahan
Chief Financial Officer and Treasurer
Edward H. Seksay
General Counsel
Edward F. Jankowski
Chief Internal Auditor
Linda M. Campion
Clerk
Tara M. Villanova
Assistant Clerk
Officers of Rockland Trust
Company
Douglas H. Philipsen
Chairman of the Board, President and
Chief Executive Officer
Denis K. Sheahan
Chief Financial Officer and Treasurer
Richard F. Driscoll
Executive Vice President
Retail and Operations
Ferdinand T. Kelley
Executive Vice President
Commercial Lending and Investment Management
Edward H. Seksay
General Counsel
Raymond G. Fuerschbach
Senior Vice President
Human Resources
Edward F. Jankowski
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, 2002 at Plimoth Plantation, Plymouth, Massachusetts.
Common Stock
Independent Bank Corp. common stock trades on the Nasdaq Stock Market under the
symbol INDB.
Stockholders Relations
Inquiries should be directed to:
Denis K. Sheahan, Chief Financial Officer and Treasurer, or
Michelle Newcomb, Shareholder Relations
Independent Bank Corp.
288 Union Street
Rockland, MA 02370
(781) 878-6100
Form 10-K
Additional information about the Company may be obtained from the Annual Report
on Form 10-K filed with the Securities and Exchange Commission for fiscal year
2001. A copy of the Company's Form 10-K for 2001, without its attached exhibits,
has been provided herein. A complete copy of the Company's Form 10-K for 2001,
with its attached exhibits, may be obtained without charge upon written request
submitted to:
Michelle Newcomb, Shareholder Relations
Independent Bank Corp.
288 Union Street
Rockland, MA 02370
Transfer Agent and Registrar
Transfer Agent and Registrar for the Company is:
EquiServe Trust Company, N.A.
P.O. Box 43011
Providence, RI 02940-3011
1-800-426-5523
ROCKLAND TRUST
COMPANY OFFICES
Attleboro
21 North Main Street
Braintree
400 Washington Street
Bridgewater
Route 18, Broad Street
Brockton
1670 S. Main Street
100 Belmont Street
(Anticipated opening 4/02)
485 Belmont Street
34 School Street
836 N. Main Street
Carver
Carver Square, Rte. 58
Centerville
1195 Falmouth Road
Chatham
655 Main Street
Cohasset
Shaw's Cushing Plaza, Rte. 3A
Duxbury
Hall's Corner, 27 Bay Road
The Village at Duxbury*
Falmouth
763 Main Street
Halifax
Plymouth Street, Rte. 106
Hanover
272 Columbia Road, Rte. 53
Hanson
Hanson Shopping Center, Liberty Street
Harwichport
336 Rte. 28
Hingham
Lincoln Plaza, Rte. 3A
Hull
264 Nantasket Avenue
Hyannis
442 Main Street
375 Lyanough Road
Kingston
Kingsbury Square,
Rts. 3A & 53
Manomet
728 State Road
Marshfield
Webster Square
Mashpee
Mashpee Rotary
Middleboro
8B Station Street
Middleboro Plaza
135 So. Main Street
North Eastham
75 Brackett Road
North Plymouth
438 Court Street
Norwell
Queen Anne's Plaza,
Rts. 228 & 53
Orleans
70 Main Street & Rte. 28
Osterville
22 Wianno Avenue
Pembroke
147 Center Street
Plymouth
1 Pilgrim Hill Road, Rte. 44 / Samoset Street
32 Long Pond Road
South High School*
Pocasset
301 Barlows Landing Road
Randolph
84 North Main Street
Rockland
Main Office, 288 Union Street
Rockland Plaza
Market Street
Sandwich
95 Rte. 6A
Scituate
Front Street
South Yarmouth
1123 Main Street
428 Station Avenue
Stoughton
608 Washington Street
Wareham
Cranberry Plaza, Rts. 6 & 28
West Dennis
932 Rte. 28
Weymouth
104 Main Street, Rte. 18
Whitman
692 Bedford Street
Whitman/Hanson High School*
*Limited Service
COMMERCIAL LENDING CENTERS
Attleboro
8 North Main Street
Braintree
400 Washington Street
Brockton
942 West Chestnut Street
(Relocating 4/02)
34 School Street
Hyannis
442 Main Street
Middleboro
8A Station Street
Plymouth
One Pilgrim Hill Road
Randolph
84 North Main Street
Rockland
288 Union Street
INVESTMENT MANAGEMENT GROUP OFFICES
Attleboro
8 North Main Street
Hanover
2036 Washington Street
Hyannis
442 Main Street
MORTGAGE BANKING
CENTERS
Braintree
400 Washington Street
Hyannis
442 Main Street
Middleboro
8A Station Street