SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission File Number: 1-9047
Independent Bank Corp.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2870273
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
288 Union Street, Rockland, Massachusetts 02370
(Address of principal executive offices, including zip code)
(617) 878-6100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
As of November 1,1996 there were 14,595,112 shares of the issuer's common
stock outstanding.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - September 30, 1996 and
December 31, 1995
Consolidated Statements of Income - Nine months and
quarter ended September 30, 1996 and 1995
Consolidated Statements of Cash Flows - Nine months ended
September 30, 1996 and 1995
Notes to Consolidated Financial Statements - September 30,
1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
INDEPENDENT BANK CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
<S> <C> <C>
ASSETS
Cash and Due From Banks $ 55,430 $ 67,354
Federal Funds Sold and Assets Purchased
Under Resale Agreements 6,740 13,000
Interest Bearing Deposits -- 296
Securities Held To Maturity 274,618 226,896
Securities Available For Sale 27,718 32,628
Federal Home Loan Bank Stock 6,831 3,462
Loans, Net of Unearned Discount 668,242 628,141
Less: Reserve for Possible Loan Losses (12,020) (12,088)
Net Loans 656,222 616,053
Bank Premises and Equipment 10,041 8,903
Other Real Estate Owned 345 638
Other Assets 20,215 18,359
TOTAL ASSETS $1,058,160 $ 987,589
LIABILITIES
Deposits
Demand Deposits $ 165,237 $ 166,453
Savings and NOW Accounts 257,005 259,729
Money Market and Super NOW Accounts 101,485 123,659
Time Certificates of Deposit over $100,000 35,462 30,086
Other Time Deposits 296,135 291,158
Total Deposits 855,324 871,085
Federal Funds Purchased and Assets
Sold Under Repurchase Agreements 38,842 4,060
Federal Home Loan Bank Borrowings 60,000 20,000
Treasury Tax and Loan Notes 5,703 4,031
Other Liabilities 14,927 10,998
Subordinated Capital Notes 4,834 4,843
Total Liabilities 979,630 915,017
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value. Authorized: 30,000,000 Shares
Outstanding: 14,570,366 Shares at September 30, 1996
and 14,507,925 at December 31, 1995 146 145
Surplus 44,173 43,777
Retained Earnings 34,446 28,710
Unrealized Loss on Securities Available For Sale, Net of Tax (235) (60)
Total Stockholders' Equity 78,530 72,572
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $1,058,160 $987,589
</TABLE>
<PAGE>
INDEPENDENT BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED QUARTER ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest on Loans $ 43,084 $ 41,095 $ 14,649 $ 14,042
Interest and Dividends on
Securities 14,001 12,221 4,996 4,077
Interest on Federal Funds Sold
and Repurchase Agreements 168 545 52 378
Interest on Interest Bearing Deposits 7 15 -- 5
Total Interest Income 57,260 53,876 19,697 18,502
INTEREST EXPENSE
Interest on Deposits 20,425 18,880 6,686 7,068
Interest on Borrowed Funds 3,445 2,569 1,524 618
Total Interest Expense 23,870 21,449 8,210 7,686
Net Interest Income 33,390 32,427 11,487 10,816
PROVISION FOR POSSIBLE LOAN LOSSES 1,250 750 500 250
Net Interest Income After Provision
Possible For Loan Losses 32,140 31,677 10,987 10,566
NON-INTEREST INCOME
Service Charges on Deposit Accounts 4,365 4,272 1,461 1,394
Trust and Investment Services Income 2,114 1,805 700 591
Mortgage Banking Income 2,247 1,640 659 608
Other Non-Interest Income 1,018 893 291 260
Total Non-Interest Income 9,744 8,610 3,111 2,853
NON-INTEREST EXPENSES
Salaries and Employee Benefits 15,908 16,323 5,088 5,362
Occupancy Expenses 2,479 2,346 805 829
Equipment Expenses 1,847 1,627 596 539
Other Non-Interest Expenses 8,695 8,808 2,985 2,824
Total Non-Interest Expenses 28,929 29,104 9,474 9,554
INCOME BEFORE INCOME TAXES 12,955 11,183 4,624 3,865
PROVISION FOR INCOME TAXES 4,599 3,498 1,600 1,192
NET INCOME 8,356 7,685 3,024 2,673
NET INCOME PER SHARE 0.57 0.52 0.20 0.18
Weighted average common and common
equivalent shares outstanding 14,724,745 14,626,512 14,758,987 14,658,788
</TABLE>
<PAGE>
INDEPENDENT BANK CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income 8,356 7,685
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED FROM OPERATING ACTIVITIES:
Depreciation and amortization 2,441 1,955
Provision for possible loan losses 1,250 750
Loans originated for resale (33,181) (34,318)
Proceeds from mortgage loan sales 33,192 34,305
Loss (gain) on sale of mortgages (11) 13
Other Real Estate Owned write-downs -- 149
Changes in assets and liabilities:
Decrease (increase) in other assets (713) 388
Increase in other liabilities 2,516 5,978
TOTAL ADJUSTMENTS 5,494 9,220
NET CASH PROVIDED FROM OPERATING ACTIVITIES 13,850 16,905
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in Interest Bearing Deposits 296 206
Proceeds from maturities of Securities
Held to Maturity 117,599 33,246
Proceeds from maturities of Securities Available for Sale 4,565 349
Purchase of Securities Held to Maturity (166,120) (24,129)
Purchase of FHLB Stock (3,369) (362)
Net increase in Loans (41,440) (32,068)
Proceeds from sale of Other Real Estate Owned 601 4,389
Investment in Bank Premises and Equipment (2,777) (2,552)
NET CASH USED IN INVESTING ACTIVITIES (90,645) (20,921)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Deposits (15,762) 41,764
Net increase (decrease) in Federal Funds Purchased
and Assets Sold Under Repurchase Agreements 34,782 (21,955)
Net increase (decrease) in Federal Home Loan Bank Borrowings 40,000 (5,000)
Net increase in Treasury Tax & Loan Notes 1,673 2,312
Net decrease in Capital Notes (9) (122)
Dividends Paid (2,470) (1,735)
Proceeds from stock issuance 397 280
NET CASH PROVIDED FROM FINANCING ACTIVITIES 58,611 15,544
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (18,184) 11,528
CASH & CASH EQUIVALENTS AT BEGINNING OF THE YEAR 80,354 57,860
CASH AND CASH EQUIVALENTS AS OF SEPTEMBER 30, 62,170 69,388
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation of the financial statements, primarily
consisting of normal recurring adjustments, have been included. Operating
results for the three and nine month periods ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996 or any other interim period. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1995.
RECENT ACCOUNTING DEVELOPMENTS
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 122, "Accounting For Mortgage Servicing Rights." 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. The
Company expects 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.
COMMITMENTS
During 1995, management commenced a study to review its data processing
environment. In connection therewith, a decision was made to outsource the data
processing operations. In February, 1996, management executed an agreement with
an independent third party for a data processing facilities management
arrangement for a term of 70 months.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
SUMMARY
For the nine months ended September 30, 1996, Independent Bank Corp. (the
Company) recorded net income of $8,356,000 or $0.57 per share, compared with net
income of $7,685,000, or $0.52 per share, for the same period last year. This
improvement in 1996 is primarily due to increased net interest income, non
interest income and lower operating expenses, as discussed below.
Loan growth and increased purchases of investment securities, offset
slightly by increased borrowings, contributed to an increase in net interest
income of $963,000 to $33,390,000 in 1996 from $32,427,000 in 1995. The
provision for loan losses increased to $1,250,000 for the first nine months of
1996 compared with $750,000 for the same period last year. For the first nine
months, non-interest income increased 13% to $9,744,000 in 1996 compared with
$8,610,000 in 1995. This is due primarily to an increase in service charges on
deposits, the adoption of SFAS No. 122, and improved revenue from the Trust and
Financial Services Division.
Non-interest expense decreased by $175,000 to $28,929,000 in the first nine
months of 1996 from $29,104,000 in 1995. The decline in foreclosure expenses,
FDIC insurance premiums and other losses and charge offs, partially offset by
increased facilities expenses and legal costs contributed to this improvement.
The annualized consolidated returns on average equity and average assets
for the first nine months of 1996 were 14.83% and 1.10%, respectively. This
compares to annualized consolidated returns on average equity and average assets
for the first nine months of 1995 of 15.30% and 1.09%, respectively.
As of September 30, 1996, total assets amounted to $1,058.2 million, an
increase of $70.6 million over the 1995 year end balance. Loans, net of unearned
discount, increased $40.1 million, or 6.4%, since year end 1995 with growth in
the real estate and installment loan categories. Deposit balances have decreased
by $15.8 million since year end 1995. It should be noted that the 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 of January, 1996.
Loan demand and an increase in the investment portfolio were funded with lower
cost borrowings and repurchase agreements.
Nonperforming assets totaled $6.4 million as of September 30, 1996, $.5
million, or 8.2%, higher than the 1995 year end balance. Management believes
that the level of these assets, which currently represent 0.60% of total assets,
has reached an inherent base level, given the risks in the industry and in the
environment in which the Company operates.
<PAGE>
NET INTEREST INCOME
The discussion of net interest income which follows is presented on a fully
tax-equivalent basis. Net interest income for the nine months ended September
30, 1996, amounted to $33,692,000, an increase of $950,000, or 2.90%, from the
comparable 1995 time frame. The Company's interest rate spread (the difference
between the weighted average yield on interest-earning assets and the weighted
average cost of interest-bearing liabilities) decreased by 26 basis points. This
is due to the Company's decision to expand the securities portfolio, financed by
borrowings, repurchase agreements, and consumer certificates of deposit, to take
advantage of a strong capital position. While these funding and investment
actions increased net interest income, the net interest margin reflects the
lower net interest spread on such transactions. The average balance of
interest-earning assets for the first nine months of 1996 was $65.7 million, or
7.5%, higher than the comparable 1995 time frame, while the average balance of
interest-bearing liabilities was $49.6 million, or 7.0%, higher. The Company's
net interest margin (net interest income as a percent of average
interest-earning assets) for the first nine months of 1996 was 4.74% as compared
to 4.95% for the comparable 1995 time frame.
Income from interest-earning assets amounted to $57.6 million for the nine
months ended September 30, 1996, an increase of $3.4 million, or 6.2%, from the
first nine months of 1995. The average balance of taxable investment securities
increased more than $33.0 million as the Company selectively took advantage of
attractive yields in the bond market. The average balance of non-taxable
investment securities increased $1.6 million as the Company continued to invest
in the local communities through tax-advantaged securities. The average balance
of loans, net of unearned discount, increased $40 million, or 6.5%.
Interest income is impacted by changes in market rates of interest due to
variable and floating rate loans in the Company's portfolio. At September 30,
1996, loans having interest rates which adjust in accordance with changes in the
Company's base lending rate or other market indices amounted to approximately
$302.9 million, or 45.3% of loans, net of unearned discount.
Interest income is also impacted by the amount of non-performing loans. The
amount of interest due, but not recognized, on non-performing loans amounted to
approximately $400,000 for the nine months ended September 30, 1996, compared to
$459,000 for the nine months ended September 30, 1995.
Average interest bearing deposits increased by $23.6 million, or 3.6%, for
the first nine months of 1996 over the same period last year, primarily in the
demand deposit and consumer certificate of deposit categories. For the nine
months ended September 30, 1996, average borrowings were $26 million higher than
the first nine months of 1995.
<PAGE>
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses represents the charge to expense
that is required to fund the reserve for possible loan losses. The level of the
reserve for possible loan losses is determined by management of the Company
based upon known and anticipated circumstances and conditions. An analysis of
individual loans and the overall risk characteristics and size of the different
loan portfolios is conducted on an ongoing basis. In addition, the Company
considers industry trends, regional and national economic conditions, past
estimates of possible losses as compared to actual losses, and historical loss
patterns. This ongoing managerial assessment is reviewed periodically by
third-party loan review consultants and annually by the Company's independent
public accountants. Adjustments are reported in the earnings of the period in
which they become known.
For the nine months ended September 30, 1996, the provision for possible
loan losses amounted to $1,250,000 as compared to $750,000 for the same period
last year. For the first nine months of 1996, loans charged-off, net of
recoveries of loans previously charged-off, amounted to $1.3 million as compared
to $1.7 million for the comparable 1995 time frame.
As of September 30, 1996, the ratio of the reserve for possible loan losses
to loans, net of unearned discount, was 1.80%, as compared to the 1995 year-end
level of 1.92%. The ratio of the reserve for possible loan losses to
non-performing loans was 198.7% at September 30, 1996, lower than the 222.6%
coverage recorded a year earlier.
NON-INTEREST INCOME
Non-interest income for the nine months ended September 30, 1996 was
$9,744,000, an increase of $1,134,000, or 13.2%, from the comparable 1995 time
period. Service charges on deposit accounts for the first nine months of 1996
showed a slight increase from the first nine months of 1995. Trust and Financial
Services income was $309,000 higher due to an increase in funds under management
and a strong securities market. Mortgage banking income increased approximately
$607,000, or 37.0%, due to strong commercial and residential mortgage
origination activity plus the impact of the adoption of SFAS No. 122. Other
non-interest income increased approximately $125,000, or 14.0%.
NON-INTEREST EXPENSES
Non-interest expenses totaled $28,929,000 for the nine months ended
September 30, 1996, a $175,000 decrease from the comparable 1995 period.
Salaries and employee benefits decreased by $415,000, or 2.5%, due to the
movement of these expenses to other expense as a result of the data processing
facilities management agreement negotiated with a third party. Occupancy
expenses increased by $133,000 to $2,479,000 for the nine months ended September
30, 1996, from $2,346,000 for the same period last year. The depreciation of
facility improvements is the primary reason for this change. Equipment expenses
for the first nine months of 1996 showed an increase of $220,000, or 13.5%, over
the first nine months of 1995. This is due to higher equipment lease costs,
primarily computer and communication upgrades to take advantage of technology
advances, and furniture and fixture costs associated with the facility
improvements.
<PAGE>
Other non-interest expenses for the first nine months of 1996 declined
$113,000, or 1.3%, from the first nine months of 1995. The Company recorded a
decline in expenses incurred in connection with foreclosed properties and other
losses and charge-offs in addition to a reduction in FDIC insurance premiums due
to the FDIC's declaration of a premium moratorium for the first nine months of
1996. Partially offsetting these decreases were the allocation of the new data
processing facilities management agreement and higher legal expenses.
INCOME TAXES
The Company records income tax expense pursuant to Statement of Financial
Accounting Standards No. 109, "Accounting For Income Taxes". The Company
evaluates the deferred tax asset and the valuation reserve on a quarterly basis.
The Company's effective tax rates for the nine months ended September 30, 1996
and 1995 were 35.5% and 31.3% respectively.
ASSET/LIABILITY MANAGEMENT
The principal objective of the Company's asset/liability management
strategy is to reduce the vulnerability of the Company to changes in interest
rates. This is done by managing the volume of assets and liabilities maturing,
or subject to repricing, and by adjusting rates in relation to market conditions
to influence volumes and spreads.
The effect of interest rate volatility on net interest income is minimized
when the interest sensitivity gap (the difference between assets and liabilities
that reprice within a given time period) is the smallest. Given the inherent
uncertainty of future interest rates, Rockland Trust Company's (The Bank or
Rockland) Asset/Liability Management Committee evaluates the interest
sensitivity gap and executes strategies, which may include off-balance sheet
activities, in an effort to minimize the Company's exposure to interest rate
movements while providing adequate earnings in most plausible future interest
rate environments.
Beginning in 1992, Rockland entered into interest rate swap agreements as a
hedge against stable or declining interest rates. As of September 30, 1996, the
Bank had interest rate swap agreements with a total notional value of $90
million. These swaps were arranged through two international banking
institutions and have initial maturities ranging from one to five years. The
Bank receives fixed rate payments and pays a variable rate of interest tied to
3-month LIBOR.
In May 1995, Rockland also purchased two 2-year interest rate caps with a
total notional value of $70 million. 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.
<PAGE>
LIQUIDITY AND CAPITAL
Liquidity, as it pertains to the Company, is the ability to generate cash
in the most economical way for the institution to meet its ongoing obligations
to pay deposit withdrawals and to fund loan commitments. The Company's primary
sources of funds are deposits, borrowings, and the amortization, prepayment, and
maturities of loans and investments.
A strong source of liquidity is the Company's core deposits, those deposits
which management considers, based on experience, not likely to be withdrawn in
the near term. The Company utilizes its extensive branch banking network to
attract retail customers who provide a stable source of core deposits. The
Company has established five $100 million repurchase agreements with major
brokerage firms as potential sources of liquidity. On September 30, 1996 the
Company had $38.9 million outstanding under such lines classified on the Balance
Sheet as "Federal Funds Purchased and Assets Sold Under Repurchase Agreements".
In addition, as a member of the Federal Home Loan Bank, Rockland has access to
approximately $300 million of borrowing capacity. On September 30, 1996 the
Company had $60 million outstanding under such lines classified on the Balance
Sheet as "Federal Home Loan Bank Borrowings" with initial terms ranging from one
to six months. The Company actively manages its liquidity position under the
direction of the Bank's Asset/Liability Management Committee. Periodic review
under formal policies and procedures is intended to ensure that the Company will
maintain access to adequate levels of available funds. At September 30, 1996,
the Company's liquidity position was well above policy guidelines.
CAPITAL RESOURCES AND DIVIDENDS
The Company and Rockland are subject to capital requirements established by
the Federal Reserve Board and the FDIC, respectively. One key measure of capital
adequacy is the risk-based ratio for which the regulatory agencies have
established minimum requirements of 4.00% and 8.00% for Tier 1 risk-based
capital and total risk-based capital, respectively. As of September 30, 1996,
the Company had a Tier 1 risked-based capital ratio of 10.95% and a total
risked-based capital ratio of 12.20%. Rockland had a Tier 1 risked-based capital
ratio of 10.81% and a total risked-based capital ratio of 12.07% as of the same
date.
An additional capital requirement of a minimum 3.00% Tier 1 leverage
capital is mandated by the regulatory agencies. As of September 30, 1996, the
Company and the Bank had Tier 1 leverage capital ratios of 7.29% and 7.18%,
respectively.
In September, the Company's Board of Directors declared a cash dividend of
$.06 per share to shareholders of record as of September 27, 1996. This dividend
was paid on October 11, 1996. On an annualized basis, the dividend payout ratio
amounted to 31.6% of the trailing four quarters earnings.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
SUMMARY
The Company's net income was $3,024,000 for the third quarter of 1996, or
$0.20 per share, compared with net income of $2,673,000, or $0.18 per share, for
the third quarter of 1995. This increase is due to improved net interest income
and non-interest income and a modest decrease in non-interest expenses partially
offset by a higher effective tax rate. Net interest income improved by $671,000,
or 6%, due to continuing loan growth and an increase in the investment
portfolio. This growth was funded through increased deposits and higher
borrowings. The provision for loan losses increased to $500,000 in the third
quarter of 1996 from $250,000 in the third quarter of 1995. Non-interest income
increased by $258,000, or 9.0%, due to an increase in the Trust and Financial
Services Division fee income in addition to higher service charge revenue.
Non-interest expenses decreased by $80,000 in the third quarter of 1996 from the
same period last year, primarily a reduction in other losses and chargeoffs. The
annualized consolidated returns on average equity and average assets for the
third quarter of 1996 were 15.69% and 1.16%, respectively. This compares to
annualized consolidated returns on average equity and average assets for the
third quarter of 1995 of 15.44% and 1.11%, respectively.
NET INTEREST INCOME
The discussion of net interest income which follows is presented on a fully
tax-equivalent basis. Net interest income for the three months ended September
30, 1996, amounted to $11,583,000, an increase of $655,000, or 6.0%, over the
comparable 1995 time frame. The Company's interest rate spread decreased by 2
basis points primarily due to the Company's decision to expand the securities
portfolio, financed by borrowings and repurchase agreements, to take advantage
of a strong capital position. While these funding and investment actions
increased net interest income and return on equity, the net interest margin and
return on assets reflects the lower net interest spread on such transactions.
The average balance of interest-earning assets for the third quarter of 1996 was
$71.4 million, or 7.91% higher than the comparable 1995 time frame, while the
average balance of interest-bearing liabilities for the third quarter of 1996
was $66.6 million, or 9.2%, higher than the third quarter of 1995.
Income from interest-earning assets amounted to $19.8 million for the
three months ended September 30, 1996, an increase of $1.2 million, or 6.3%,
from the third quarter of 1995. The average balance of loans, net of unearned
discount, increased $42 million, or 6.7%. Relative strength in commercial
lending, installment lending and residential real estate supported this growth.
The Company took advantage of favorable investment security yields, reflected in
an increase in the average balance of investments of $51.9 million, or 20.2%.
The lower yield on investments, as compared to loans, resulted in a reduction of
the Company's net interest margin for the third quarter of 1996 to 4.77% from
4.85% for the comparable 1995 time frame.
Interest on loans is also impacted by the amount of non-performing loans.
For the three months ended September 30, 1996, the amount of interest due but
not recognized
<PAGE>
on nonperforming loans amounted to approximately $122,000, compared to
$143,000 for the three months ended September 30, 1995.
The increase in the third quarter 1996 average balance of interest-bearing
liabilities over third quarter 1995 average balance was in the borrowing
category. Interest-bearing deposits decreased $1.5 million. During this same
period, average borrowings increased $68 million.
NON-INTEREST INCOME
Non-interest income for the three months ended September 30, 1996 increased
by $258,000, or 9.0%, to $3,111,000 from $2,853,000 for the three months ended
September 30, 1995. Service charges on deposit accounts for the third quarter of
1996 showed an increase of $67,000, or 4.8%, from the third quarter of 1995.
Trust and Financial Services income increased by $109,000, or 18.4%, due to an
increase in the volume of managed assets and an improved securities market.
Mortgage banking income improved by $51,000, or 8.4%, to $659,000 in the third
quarter of 1996 from $608,000 in the same quarter last year.
NON-INTEREST EXPENSES
Non-interest expenses totaled $9,474,000 for the quarter ended September
30, 1996 a $80,000, or 0.8%, decrease from the comparable 1995 period. Salaries
and employee benefits decreased by $274,000, due to the movement of these
expenses to other expense as a result of the data processing facilities
management agreement. Other non-interest expenses increased by $161,000, or 6%,
to $2,985,000 in the third quarter of 1996 from $2,824,000 in the third quarter
of 1995. The increase in other expense from the allocation of the data
processing facilities management agreement is partially offset by lower FDIC
insurance premiums and a decrease in other losses and chargeoffs.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information
The financial information detailed below is included
hereafter in this report:
Consolidated Statements of Changes in Stockholders' Equity
Nine months ended September 30, 1996 and the year
ended December 31, 1995
Consolidated Average Balance Sheet and Average Rate Data -
Nine months ended September 30, 1996 and 1995.
Item 6. Exhibits and Reports on Form 8-K
The Company did not file any reports on Form 8-K during
the quarter ended September 30, 1996.
<PAGE>
INDEPENDENT BANK CORP.
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
GAIN(LOSS)
COMMON RETAINED INVESTMENTS
STOCK SURPLUS EARNINGS AVAILABLE TOTAL
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 $144 $43,381 $20,931 ($ 254) $64,202
Net Income 10,387 10,387
Dividends Declared (2,608) (2,608)
Common Stock Sold Under Dividend
Reinvestment & Stock Purchase Plan 1 352 353
Stock Option exercised - 10,000 shares 44 44
Unrealized Gain (Loss) on
Investments Available for Sale 194 194
Balance, December 31, 1995 $145 $43,777 $28,710 ($ 60) $72,572
Net Income 8,356 8,356
Dividends Declared (2,620) (2,620)
Common Stock Sold Under Dividend
Reinvestment & Stock Purchase Plan 1 362 363
Stock Option exercised - 13,000 shares 34 34
Unrealized Gain (Loss) on
Investments Available for Sale (175) (175)
Balance, September 30, 1996 146 44,173 34,446 (235) 78,530
</TABLE>
<PAGE>
INDEPENDENT BANK CORP.
SUPPLEMENTAL FINANCIAL INFORMATION
CONSOLIDATED AVERAGE BALANCE SHEET AND AVERAGE RATE DATA
(Unaudited - in thousands)
<TABLE>
<CAPTION>
AVERAGE INTEREST
OUTSTANDING EARNED/ AVERAGE
BALANCE PAID YIELD
<S> <C> <C> <C>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 1996 1996
Interest-Earning Assets
Taxable Investment Securities $ 287,349 $13,775 6.39%
Non-taxable Investment Securities 7,429 325 5.83%
Loans, net of Unearned Discount 649,314 43,287 8.89%
Federal Funds Sold and Assets
Purchased Under Resale Agreements 4,091 168 5.48%
Interest Bearing Deposits 171 7 5.46%
Total Interest-Earning Assets 948,354 57,562 8.09%
Cash and Due From Banks 46,633
Other Assets 15,533
Total Assets 1,010,520
Interest-Bearing Liabilities
Savings and NOW Accounts 257,527 4,175 2.16%
Money Market & Super NOW Accounts 105,688 2,206 2.78%
Other Time Deposits 318,450 14,044 5.88%
Federal Funds Purchased and Assets
Sold Under Repurchase Agreements 25,991 1,071 5.49%
Federal Home Loan Bank Borrowings 45,380 1,916 5.63%
Treasury Tax and Loan Notes 3,185 102 4.27%
Subordinated Capital Notes 4,836 356 9.82%
Total Interest-Bearing Liabilities 761,057 23,870 4.18%
Demand Deposits 160,157
Other Liabilities 14,168
Total Liabilities 935,382
Stockholders' Equity 75,138
Total Liabilities and Stockholders'
Equity 1,010,520
Net Interest Income 33,692
Interest Rate Spread 3.91%
Net Interest Margin 4.74%
</TABLE>
Interest income and yield are stated on a fully tax-equivalent basis. The
total amount of the adjustment is $302 in 1996.
<PAGE>
INDEPENDENT BANK CORP.
SUPPLEMENTAL FINANCIAL INFORMATION
CONSOLIDATED AVERAGE BALANCE SHEET AND AVERAGE RATE DATA
(Unaudited - in thousands
<TABLE>
<CAPTION>
AVERAGE INTEREST
OUTSTANDING EARNED/ AVERAGE
BALANCE PAID YIELD
<S> <C> <C> <C>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 1995 1995
Interest-Earning Assets
Taxable Investment Securities $254,311 12,031 6.31%
Non-taxable Investment Securities 5,795 272 6.26%
Loans, net of Unearned Discount 609,427 41,328 9.04%
Federal Funds Sold and Assets
Purchased Under Resale Agreements 12,702 545 5.72%
Interest Bearing Deposits 384 15 5.21%
Total Interest-Earning Assets 882,619 54,191 8.19%
Cash and Due From Banks 43,252
Other Assets 14,553
Total Assets 940,424
Interest-Bearing Liabilities
Savings and NOW Accounts $264,412 $ 4,346 2.19%
Money Market & Super NOW Accounts 111,816 2,284 2.72%
Other Time Deposits 281,864 12,250 5.79%
Federal Funds Purchased and Assets
Sold Under Repurchase Agreements 18,786 849 6.03%
Federal Home Loan Bank Borrowings 25,861 1,220 6.29%
Treasury Tax and Loan Notes 3,839 139 4.83%
Subordinated Capital Notes 4,917 361 9.79%
Total Interest-Bearing Liabilities 711,495 21,449 4.02%
Demand Deposits 150,578
Other Liabilities 11,401
Total Liabilities $873,474
Stockholders' Equity $ 66,950
Total Liabilities and Stockholders'
Equity $940,424
Net Interest Income $ 32,742
Interest Rate Spread 4.17%
Net Interest Margin 4.95%
</TABLE>
Interest income and yield are stated on a fully tax-equivalent basis. The
total amount of adjustment is $315 in 1995.
<PAGE>
INDEPENDENT BANK CORP.
SUPPLEMENTAL FINANCIAL INFORMATION
CONSOLIDATED AVERAGE BALANCE SHEET AND AVERAGE RATE DATA
(Unaudited - in thousands)
<TABLE>
<CAPTION>
AVERAGE INTEREST
OUTSTANDING EARNED/ AVERAGE
BALANCE PAID YIELD
<S> <C> <C> <C>
FOR THE QUARTER ENDED SEPTEMBER 30, 1996 1996 1996
Interest-Earning Assets
Taxable Investment Securities 300,123 4,914 6.55%
Non-taxable Investment Securities 7,849 115 5.86%
Loans, net of Unearned Discount 661,296 14,712 8.90%
Federal Funds Sold and Assets
Purchased Under Resale Agreements 3,855 52 5.40%
Interest Bearing Deposits 0 0 0
Total Interest-Earning Assets 973,123 19,793 8.14%
Cash and Due From Banks 47,503
Other Assets 21,991
Total Assets 1,042,617
Interest-Bearing Liabilities
Savings and NOW Accounts 259,473 1,410 2.17%
Money Market & Super NOW Accounts 104,030 728 2.80%
Other Time Deposits 319,186 4,548 5.70%
Federal Funds Purchased and Assets
Sold Under Repurchase Agreements 33,129 461 5.57%
Federal Home Loan Bank Borrowings 64,162 901 5.62%
Treasury Tax and Loan Notes 3,823 43 4.50%
Subordinated Capital Notes 4,836 119 9.84%
Total Interest-Bearing Liabilities 788,639 8,210 4.16%
Demand Deposits 163,318
Other Liabilities 13,590
Total Liabilities 965,547
Stockholders' Equity 77,070
Total Liabilities and Stockholders'
Equity 1,042,617
Net Interest Income 11,583
Interest Rate Spread 3.98%
Net Interest Margin 4.77%
</TABLE>
Interest income and yield are stated on a fully tax-equivalent basis. The
total adjustments are $96 for the third quarter 1996.
<PAGE>
INDEPENDENT BANK CORP.
SUPPLEMENTAL FINANCIAL INFORMATION
CONSOLIDATED AVERAGE BALANCE SHEET AND AVERAGE RATE DATA
(Unaudited - in thousands
<TABLE>
<CAPTION>
AVERAGE INTEREST
OUTSTANDING EARNED/ AVERAGE
BALANCE PAID YIELD
<S> <C> <C> <C>
FOR THE QUARTER ENDED SEPTEMBER 30, 1995 1995 1995
Interest-Earning Assets
Taxable Investment Securities $251,917 $ 4,026 6.39%
Non-taxable Investment Securities 4,185 85 8.12%
Loans, net of Unearned Discount 619,627 14,120 9.12%
Federal Funds Sold and Assets
Purchased Under Resale Agreements 25,742 378 5.87%
Interest Bearing Deposits 294 5 6.80%
Total Interest-Earning Assets 901,765 18,614 8.26%
Cash and Due From Banks 44,932
Other Assets 14,333
Total Assets 961,030
Interest-Bearing Liabilities
Savings and NOW Accounts $258,778 $ 1,426 2.20%
Money Market & Super NOW Accounts 107,546 749 2.79%
Other Time Deposits 317,878 4,893 6.16%
Federal Funds Purchased and Assets
Sold Under Repurchase Agreements 3,156 47 5.96%
Federal Home Loan Bank Borrowings 25,041 394 6.29%
Treasury Tax and Loan Notes 4,767 59 4.95%
Subordinated Capital Notes 4,843 118 9.75%
Total Interest-Bearing Liabilities 722,009 7,686 4.26%
Demand Deposits 156,166
Other Liabilities 13,593
Total Liabilities 891,768
Stockholders' Equity 69,262
Total Liabilities and Stockholders'
Equity 961,030
Net Interest Income 10,928
Interest Rate Spread 4.00%
Net Interest Margin 4.85%
</TABLE>
Interest income and yield are stated on a fully tax-equivalent basis.
The total amount of adjustment is $112 for the third quarter in 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INDEPENDENT BANK CORP.
(registrant)
Date: November 14, 1996 /s/ John F. Spence, Jr.
John F. Spence, Jr.
Chairman of the Board and
Chief Executive Officer
Date: November 14, 1996 /s/ Richard J. Seaman
Richard J. Seaman
Chief Financial Officer
and Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from
SEC Form 10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 55,430
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6,740
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 27,718
<INVESTMENTS-CARRYING> 274,618
<INVESTMENTS-MARKET> 270,297
<LOANS> 668,242
<ALLOWANCE> 12,020
<TOTAL-ASSETS> 1,058,160
<DEPOSITS> 855,324
<SHORT-TERM> 44,545
<LIABILITIES-OTHER> 14,927
<LONG-TERM> 64,834
0
0
<COMMON> 146
<OTHER-SE> 78,384
<TOTAL-LIABILITIES-AND-EQUITY> 1,058,160
<INTEREST-LOAN> 43,084
<INTEREST-INVEST> 14,001
<INTEREST-OTHER> 175
<INTEREST-TOTAL> 57,260
<INTEREST-DEPOSIT> 20,425
<INTEREST-EXPENSE> 3,445
<INTEREST-INCOME-NET> 33,390
<LOAN-LOSSES> 1,250
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 28,929
<INCOME-PRETAX> 12,955
<INCOME-PRE-EXTRAORDINARY> 12,955
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,356
<EPS-PRIMARY> .57
<EPS-DILUTED> .57
<YIELD-ACTUAL> 8.09
<LOANS-NON> 5,491
<LOANS-PAST> 559
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,088
<CHARGE-OFFS> (2,041)
<RECOVERIES> 723
<ALLOWANCE-CLOSE> 12,020
<ALLOWANCE-DOMESTIC> 12,020
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
