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 June 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 (I.R.S. Employer
of 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 August 1,1996 there were 14,564,749 shares of the issuer's common
stock outstanding.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - June 30, 1996 and December 31,
1995
Consolidated Statements of Income - Six months and quarter
ended June 30, 1996 and 1995
Consolidated Statements of Cash Flows - Six months ended June 30,
1996 and 1995
Notes to Consolidated Financial Statements - June 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>
<TABLE>
<CAPTION>
INDEPENDENT BANK CORP.
CONSOLIDATED BALANCE SHEETS JUNE 30, DECEMBER 31,
(Unaudited - in thousands) 1996 1995
<S> <C> <C>
ASSETS
Cash and Due From Banks $56,170 $67,354
Federal Funds Sold and Assets Purchased
Under Resale Agreements - 13,000
Interest Bearing Deposits - 296
Securities Held To Maturity 277,949 226,896
Securities Available For Sale 28,890 32,628
Federal Home Loan Bank Stock 6,831 3,462
Loans, Net of Unearned Discount 658,302 628,141
Less: Reserve for Possible Loan Losses (11,961) (12,088)
Net Loans 646,341 616,053
Bank Premises and Equipment 9,369 8,903
Other Real Estate Owned 10 638
Other Assets 21,276 18,359
TOTAL ASSETS $1,046,836 $987,589
LIABILITIES
Deposits
Demand Deposits $167,019 $166,453
Savings and NOW Accounts 262,368 259,729
Money Market and Super NOW Accounts 105,274 123,659
Time Certificates of Deposit over $100,000 29,485 30,086
Other Time Deposits 285,525 291,158
Total Deposits 849,671 871,085
Federal Funds Purchased and Assets
Sold Under Repurchase Agreements 34,728 4,060
Federal Home Loan Bank Borrowings 60,500 20,000
Treasury Tax and Loan Notes 6,378 4,031
Other Liabilities 14,779 10,998
Subordinated Capital Notes 4,834 4,843
Total Liabilities 970,890 915,017
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value
Authorized: 30,000,000 Shares
<PAGE>
Outstanding: 14,548,225 Shares at June 30, 1996
and 14,507,925 at December 31, 1995 145 145
Surplus 44,023 43,777
Retained Earnings 32,299 28,710
Unrealized Loss on Securities Available For
Sale, Net of Tax (521) (60)
Total Stockholders' Equity 75,946 72,572
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $1,046,836 $987,589
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INDEPENDENT BANK CORP. SIX MONTHS ENDED QUARTER ENDED
CONSOLIDATED STATEMENTS OF INCOME JUNE 30, JUNE 30, JUNE 30, JUNE 30,
(Unaudited - in thousands) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest on Loans $28,435 $27,053 $14,278 $13,738
Interest and Dividends on
Securities 9,005 8,144 4,680 4,055
Interest on Federal Funds Sold
and Repurchase Agreements 116 167 38 110
Interest on Interest Bearing Deposits 7 10 3 4
Total Interest Income 37,563 35,374 18,999 17,907
INTEREST EXPENSE
Interest on Deposits 13,739 11,812 6,860 6,309
Interest on Borrowed Funds 1,921 1,951 1,101 886
Total Interest Expense 15,660 13,763 7,961 7,195
Net Interest Income 21,903 21,611 11,038 10,712
PROVISION FOR POSSIBLE LOAN LOSSES 750 500 500 250
Net Interest Income After Provision
For Possible Loan Losses 21,153 21,111 10,538 10,462
NON-INTEREST INCOME
Service Charges on Deposit Accounts 2,904 2,878 1,515 1,458
Trust and Financial Services Income 1,414 1,214 791 691
Mortgage Banking Income 1,588 1,032 864 518
Other Non-Interest Income 727 633 320 335
Total Non-Interest Income 6,633 5,757 3,490 3,002
NON-INTEREST EXPENSES
Salaries and Employee Benefits 10,820 10,961 5,365 5,520
Occupancy Expenses 1,674 1,517 796 743
Equipment Expenses 1,251 1,088 607 596
Other Non-Interest Expenses 5,710 5,984 3,000 2,776
Total Non-Interest Expenses 19,455 19,550 9,768 9,635
INCOME BEFORE INCOME TAXES 8,331 7,318 4,260 3,829
PROVISION FOR INCOME TAXES 2,999 2,306 1,505 1,207
NET INCOME $5,332 $5,012 $2,755 $2,622
NET INCOME PER SHARE $0.36 $0.34 $0.19 $0.18
Weighted average common and common
equivalent shares outstanding 14,713,291 14,608,840 14,731,641 14,631,050
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INDEPENDENT BANK CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30,
(Unaudited - in thousands) 1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $5,332 $5,012
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED FROM OPERATING ACTIVITIES:
Depreciation and amortization 1,667 1,289
Provision for possible loan losses 750 500
Loans originated for resale (25,130) (12,428)
Proceeds from mortgage loan sales 25,147 12,412
Loss (gain) on sale of mortgages (17) 16
Other Real Estate Owned write-downs - 81
Changes in assets and liabilities:
Decrease (Increase) in other assets (1,420) 473
Increase in other liabilities 2,337 3,418
TOTAL ADJUSTMENTS 3,334 5,761
NET CASH PROVIDED FROM OPERATING ACTIVITIES 8,666 10,773
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in Interest Bearing Deposits 296 206
Proceeds from maturities of Securities
Held to Maturity 36,422 24,259
Proceeds from maturities of Securities
Available for Sale 2,985 211
Purchase of Securities Held to Maturity (88,014) (15,031)
Purchase of FHLB Stock (3,369) (362)
Net increase in Loans (31,037) (30,043)
Proceeds from sale of Other Real Estate Owned 810 3,889
Investment in Bank Premises and Equipment (1,685) (2,099)
NET CASH USED IN INVESTING ACTIVITIES (83,592) (18,970)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Deposits (21,415) 31,261
Net increase (decrease) in Federal Funds Purchased
and Assets Sold Under Repurchase Agreements 30,668 (24,445)
Net increase in Federal Home Loan Bank Borrowings 40,500 10,000
Net increase in Treasury Tax & Loan Notes 2,348 2,139
Net decrease in Capital Notes (9) (122)
Dividends Paid (1,597) (1,157)
Proceeds from stock issuance 247 198
NET CASH PROVIDED FROM FINANCING
ACTIVITIES 50,742 17,874
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (24,184) 9,677
<PAGE>
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE YEAR 80,354 58,555
CASH AND CASH EQUIVALENTS AS OF JUNE 30, $56,170 $68,232
</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 six month periods ended June 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 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.
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 SIX MONTHS ENDED JUNE 30, 1996
SUMMARY
For the six months ended June 30, 1996, Independent Bank Corp. (the
Company) recorded net income of $5,332,000, or $0.36 per share, compared with
net income of $5,012,000, or $0.34 per share, for the same period last year.
This improvement in 1996 is primarily due to increased non-interest income and
lower operating expenses.
Significant loan growth and increased purchases of investment securities
contributed to an increase in net interest income of $292,000 from $21,611,000
in 1995 to $21,903,000 in 1996. The provision for loan losses increased to
$750,000 for the first six months of 1996 compared with $500,000 for the same
period last year. For the first six months, non-interest income increased 15% to
$6,633,000 in 1996 compared with $5,757,000 in 1995. This is due primarily to an
increase in fees on commercial and residential mortgage loan originations in
addition to the adoption of SFAS No. 122.
Non-interest expense decreased by $95,000 to $19,455,000 in the first
six months of 1996 from $19,550,000 in 1995. The decline in foreclosure
expenses, FDIC insurance premiums and other losses and charge offs, partially
offset by increased facility expenses contribute to this improvement.
The annualized consolidated returns on average equity and average assets
for the first six months of 1996 were 14.38% and 1.07%, respectively. This
compares to annualized consolidated returns on average equity and average assets
for the first six months of 1995 of 15.24% and 1.08%, respectively.
As of June 30, 1996, total assets amounted to $1,046.8 million, an
increase of $59.2 million over the 1995 year end balance. Loans, net of unearned
discount, increased $30.2 million, or 5.0%, since year end 1995 with strong
growth in the real estate and installment loan categories. Deposit balances have
decreased by $21.4 million since year end 1995. Management believes that this
decline is seasonal. 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 in January, 1996. Loan demand
and an increase in the investment portfolio were funded with borrowings.
Nonperforming assets totaled $6.4 million as of June 30, 1996, $.5
million, or 7.8%, higher than the 1995 year end balance. Management believes
that the level of these assets, which currently represent 0.61% of total assets,
has reached an inherent base level, given the risks in the industry and in the
environment in which the Bank 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 six months ended June
30, 1996, amounted to $22,109,000, an increase of $295,000, or 1.35%, 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 37 basis points as
rates paid on interest-bearing liabilities increased faster than rates earned on
interest-earning assets. This is due to the Company's decision to expand the
securities portfolio, financed by borrowings and consumer certificate of deposit
balances, 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 half of 1996 was $62.9 million, or
7.2%, higher than the comparable 1995 time frame, while the average balance of
interest-bearing liabilities was $41 million, or 5.8%, higher. As a result, the
Company's net interest margin (net interest income as a percent of average
interest-earning assets) for the first six months of 1996 was 4.72% as compared
to 5.00% for the comparable 1995 time frame.
Income from interest-earning assets amounted to $37,769,000 for the six
months ended June 30, 1996, an increase of $2.2 million, or 6.2%, from the first
six months of 1995. The average balance of taxable investment securities
increased more than $23.9 million as the Company selectively took advantage of
attractive yields in the bond market. The average balance of non-taxable
investment securities increased $2.1 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 $39 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 June 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
$303.3 million, or 46.1% 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 $277,000 for the six months ended June 30, 1996, compared to
$316,000 for the six months ended June 30, 1995.
Average interest bearing deposits increased by $36.1 million, or 5.6%,
for the first six months of 1996 over the same period last year, primarily in
the consumer certificate of deposit category. For the six months ended June 30,
1996, average borrowings were $4.9 million higher than the first six 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 six months ended June 30, 1996, the provision for possible loan
losses amounted to $750,000 as compared to $500,000 for the same period last
year. For the first six months of 1996, loans charged-off, net of recoveries of
loans previously charged-off, amounted to $877,000 as compared to $965,000 for
the comparable 1995 time frame.
As of June 30, 1996, the ratio of the reserve for possible loan losses
to loans, net of unearned discount, was 1.82%, slightly below the 1995 year-end
level of 1.92%. The ratio of the reserve for possible loan losses to
non-performing loans was 188.0% at June 30, 1996, lower than the 241.6% coverage
recorded a year earlier.
NON-INTEREST INCOME
Non-interest income for the six months ended June 30, 1996 was
$6,633,000, an increase of $876,000, or 15.0%, from the comparable 1995 time
period. Service charges on deposit accounts for the first six months of 1996
showed a slight increase from the first six months of 1995. Trust and Investment
Services income was $200,000 higher due to an increase in funds under management
and a strong securities market. Mortgage banking income increased approximately
$550,000, or 53.3%, 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 $94,000, or 14.8%, primarily due to
a settlement received from an OREO property dispute.
NON-INTEREST EXPENSES
Non-interest expenses totaled $19,455,000 for the six months ended June
30, 1996, a $95,000 decrease from the comparable 1995 period. Salaries and
employee benefits decreased by $141,000, or 1.3%, 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 $157,000 to $1,674,000 for the six months ended June 30, 1996, from
$1,517,000 for the same period last year. The amortization of facility
improvements is the primary reason for this change. Equipment expenses for the
first six months of 1996 showed an increase of $163,000, or 14.9%, over the
first six months of 1995. This is due to higher equipment lease costs,primarily
<PAGE>
computer upgrades to take advantage of technology advances, and furniture and
fixture costs associated with the facility improvements.
Other non-interest expenses for the first six months of 1996 declined
$274,000, or 4.6%, from the first six months of 1995. The Company recorded a
decline in expenses incurred in connection with foreclosed properties in
addition to a reduction in FDIC insurance premiums due to the FDIC's declaration
of a premium moratorium for the first six 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 its offsetting valuation reserve on
a quarterly basis. The Company's effective tax rates for the six months ended
June 30, 1996 and 1995 were 36.0% and 31.5% 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, the Bank's 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 June 30, 1996,
Rockland had interest rate swap agreements with a total notional value of $90
million. These swaps were arranged through two large international banking
institutions and have initial maturities ranging from one to three years. The
Bank receives fixed rate payments and pays a variable rate of interest tied to
3-month LIBOR.
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.
<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 four $100 million repurchase agreements
with major brokerage firms as potential sources of liquidity. On June 30, 1996
the Company had $34.7 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 June 30, 1996 the
Company had $60.5 million outstanding under such lines classified on the Balance
Sheet as "Federal Home Loan Bank Borrowings."
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 June 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 June 30, 1996, the
Company had a Tier 1 risked-based capital ratio of 10.90% and a total
risked-based capital ratio of 12.15%. Rockland had a Tier 1 risked-based capital
ratio of 10.57% and a total risked-based capital ratio of 11.82% 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 June 30, 1996, the Company
and the Bank had Tier 1 leverage capital ratios of 7.38% and 7.14%,
respectively.
In June, the Company's Board of Directors declared a cash dividend of
$.06 per share to shareholders of record as of June 28, 1996. This dividend was
paid on July 12, 1996. On an annualized basis, the dividend payout ratio
amounted to 32.6% of the trailing four quarters earnings.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED JUNE 30, 1996
SUMMARY
The Company's net income was $2,755,000 for the second quarter of 1996,
or $0.19 per share, compared with net income of $2,622,000, or $0.18 per share,
for the second quarter of 1995. This increase is due to improved net interest
income and non-interest income partially offset by a modest increase in
non-interest expenses and a higher effective tax rate.
Net interest income improved by $326,000, or 3%, due to continuing loan
growth in addition to an increase in the securities portfolio. This growth was
funded through increased deposits and higher borrowings as management takes
advantage of the Company's strong capital position. The provision for loan
losses increased to $500,000 in the second quarter of 1996 from $250,000 in the
second quarter of 1995.
Non-interest income increased by $488,000, or 16.3%, due to an increase
in fees on commercial and residential loan originations as well as income
reported as a result of the adoption of SFAS No. 122.
Non-interest expenses increased by $133,000 in the second quarter of
1996 from the same period last year, primarily legal expense
The annualized consolidated returns on average equity and average assets
for the second quarter of 1996 were 14.70% and 1.09%, respectively. This
compares to annualized consolidated returns on average equity and average assets
for the second quarter of 1995 of 15.68% and 1.12%, 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 June
30, 1996, amounted to $11,133,000, an increase of $318,000, or 2.9%, over the
comparable 1995 time frame. The Company's interest rate spread decreased by 30
basis points as rates paid on interest-bearing liabilities increased faster than
rates earned on interest-earning assets. The average balance of interest-earning
assets for the second quarter of 1996 was $73.5 million, or 8.3%, higher than
the comparable 1995 time frame, while the average volume of interest-bearing
liabilities for the second quarter of 1995 was $51.3 million, or 7.2%, higher
than the second quarter of 1995.
Income from interest-earning assets amounted to $19,094,000 for the
three months ended June 30, 1996, an increase of $1.1 million, or 6.0%, from the
second quarter of 1995. The average balance of loans, net of unearned discount,
increased $39 million, or 6.3%. 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 $40.4 million, or 15.5%. The
lower yield on investments, as compared to loans, resulted in a reduction of the
Company's net interest margin for the second quarter of 1996 to 4.67% as
compared to 4.90% for the comparable 1995 time frame.
<PAGE>
Interest on loans is also impacted by the amount of non-performing
loans. For the three months ended June 30, 1996, the amount of interest due but
not recognized on nonperforming loans amounted to approximately $137,000,
compared to $142,000 for the three months ended June 30, 1995.
The increase in the second quarter 1996 average balance of
interest-bearing liabilities over second quarter 1995 average balances was
divided between deposits and borrowings. Interest-bearing deposits increased
$28.9 million, or 4.4%, attributable to an increase in time deposits of $37.7
million. During this same period, average borrowings increased $22.5 million.
NON-INTEREST INCOME
Non-interest income for the three months ended June 30, 1996 increased
by $488,000, or 16.3%, to $3,490,000 from $3,002,000 for the three months ended
June 30, 1995. Service charges on deposit accounts for the second quarter of
1996 showed an increase from the second quarter of 1995 of $57,000, or 3.9%.
Trust and Financial Services income increased by $100,000 , or 14.5%, due to an
increase in the volume of managed assets and an improved securities market.
Mortgage banking income improved by $346,000, or 66.8%, to $864,000 in the
second quarter of 1996 from $518,000 in the same quarter last year. Modestly
strong residential and commercial loan originations resulted in increased fees.
In addition income reported as result of the adoption of SFAS No. 122 caused an
improvement.
NON-INTEREST EXPENSES
Non-interest expenses totaled $9,768,000 for the quarter ended June 30,
1996 a $133,000, or 1.4%, increase from the comparable 1995 period. Salaries and
employee benefits decreased by $155,000, 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 $224,000, or 8%, to
$3,000,000 in the second quarter of 1996 from $2,776,000 in the second quarter
of 1995. The allocation of the data processing facilities management agreement
in addition to higher legal expenses are partially offset by lower FDIC
insurance premiums and foreclosure expenses. The increased legal expense is due,
in part to a lower level of legal expense recoveries in 1996 as compared to
1995.
<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
(a) The registrant held its 1996 Annual Meeting of Stockholders on April
11, 1996.
(b) Proxies for this meeting were solicited pursuant to Regulation 14
under the Securities Exchange Act of 1934.
There was no solicitation in opposition to the Management's
nominees as listed in the proxy statement and all nominees were
elected as follows:
NUMBER OF SHARES
WITHHELD
DIRECTOR FOR AUTHORITY
Donald K. Atkins 11,903,011 85,375
Douglas H. Philipsen 11,904,761 83,625
Robert J. Spence 11,901,655 86,730
Brian S. Tedeschi 11,904,461 83,925
The proposal to adopt the Independent Bank Corp. 1996 Non-Employee
Directors' Stock Option Plan was approved as follows:
Shares voted in favor: 11,285,523
Shares voted in opposition: 537,384
Shares abstained from voting: 126,204
Item 5. Other Information
The financial information detailed below is included hereafter
in this report:
Consolidated Statements of Changes in Stockholders'
Equity - Six months ended June 30, 1996 and the year ended
December 31, 1995
Consolidated Average Balance Sheet and Average Rate Data - Six
months ended June 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 June 30, 1996.
<PAGE>
<TABLE>
<CAPTION>
INDEPENDENT BANK CORP. UNREALIZED
CONSOLIDATED STATEMENTS OF CHANGES GAIN(LOSS)
IN STOCKHOLDERS' EQUITY 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 5,332 5,332
Dividends Declared (1,743) (1,743)
Common Stock Sold Under Dividend
Reinvestment & Stock Purchase Plan 230 230
Stock Option exercised - 8,000 16 16
shares
Unrealized Gain (Loss) on
Investments Available for Sale (461) (461)
Balance, June 30, 1996 $145 $44,023 $32,299 ($521) $75,946
</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
FOR THE SIX MONTHS ENDED JUNE 30, 1996 1996 1996
<S> <C> <C> <C>
Interest-Earning Assets
Taxable Investment Securities $280,962 $8,861 6.31%
Non-taxable Investment 7,219 210 5.82%
Securities
Loans, net of Unearned Discount 643,323 28,575 8.88%
Federal Funds Sold and Assets
Purchased Under Resale 4,209 116 5.51%
Agreements
Interest Bearing Deposits 257 7 5.45%
Total Interest-Earning Assets 935,970 $37,769 8.07%
Cash and Due From Banks 46,198
Other Assets 12,304
Total Assets $994,472
Interest-Bearing Liabilities
Savings and NOW Accounts $256,554 $2,765 2.16%
Money Market & Super NOW 106,517 1,478 2.78%
Accounts
Other Time Deposits 318,082 9,496 5.97%
Federal Funds Purchased and
Assets
Sold Under Repurchase 22,422 610 5.44%
Agreements
Federal Home Loan Bank 35,989 1,015 5.64%
Borrowings
Treasury Tax and Loan Notes 2,866 59 4.12%
Subordinated Capital Notes 4,836 237 9.80%
Total Interest-Bearing 747,266 $15,660 4.19%
Liabilities
Demand Deposits 158,577
Other Liabilities 14,457
Total Liabilities $920,300
Stockholders' Equity $74,172
Total Liabilities and $994,472
Stockholders' Equity
Net Interest Income $22,109
Interest Rate Spread 3.88%
Net Interest Margin 4.72%
</TABLE>
Interest income and yield are stated on a fully tax-equivalent basis. The
total amount of the adjustment is $206 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
FOR THE SIX MONTHS ENDED JUNE 30, 1995 1995 1995
<S> <C> <C> <C>
Interest-Earning Assets
Taxable Investment Securities $257,008 $8,035 6.25%
Non-taxable Investment 5,100 157 6.16%
Securities
Loans, net of Unearned Discount 604,327 27,208 9.00%
Federal Funds Sold and Assets
Purchased Under Resale 6,182 167 5.40%
Agreements
Interest Bearing Deposits 429 10 4.66%
Total Interest-Earning Assets 873,046 $35,577 8.15%
Cash and Due From Banks 42,412
Other Assets 14,663
Total Assets $930,121
Interest-Bearing Liabilities
Savings and NOW Accounts $267,229 $2,920 2.19%
Money Market & Super NOW 113,951 1,535 2.69%
Accounts
Other Time Deposits 263,857 7,357 5.58%
Federal Funds Purchased and
Assets
Sold Under Repurchase 26,601 802 6.03%
Agreements
Federal Home Loan Bank 26,271 826 6.29%
Borrowings
Treasury Tax and Loan Notes 3,375 80 4.74%
Subordinated Capital Notes 4,954 243 9.81%
Total Interest-Bearing 706,238 $13,763 3.90%
Liabilities
Demand Deposits 147,784
Other Liabilities 10,305
Total Liabilities $864,327
Stockholders' Equity $65,794
Total Liabilities and $930,121
Stockholders' Equity
Net Interest Income $21,814
Interest Rate Spread 4.25%
Net Interest Margin 5.00%
</TABLE>
Interest income and yield are stated on a fully tax-equivalent basis. The
total amount of adjustment is $203 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: August 12, 1996 /s/ John F. Spence, Jr.
John F. Spence, Jr.
Chairman of the Board and
Chief Executive Officer
Date: August 12, 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
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 56170
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 28890
<INVESTMENTS-CARRYING> 284780
<INVESTMENTS-MARKET> 280027
<LOANS> 658302
<ALLOWANCE> (11961)
<TOTAL-ASSETS> 1046836
<DEPOSITS> 849671
<SHORT-TERM> 41106
<LIABILITIES-OTHER> 14779
<LONG-TERM> 65334
0
0
<COMMON> 145
<OTHER-SE> 75801
<TOTAL-LIABILITIES-AND-EQUITY> 1046836
<INTEREST-LOAN> 28435
<INTEREST-INVEST> 9005
<INTEREST-OTHER> 123
<INTEREST-TOTAL> 37563
<INTEREST-DEPOSIT> 13739
<INTEREST-EXPENSE> 1921
<INTEREST-INCOME-NET> 21903
<LOAN-LOSSES> 750
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 19455
<INCOME-PRETAX> 8331
<INCOME-PRE-EXTRAORDINARY> 8331
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5332
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
<YIELD-ACTUAL> 8.07
<LOANS-NON> 5979
<LOANS-PAST> 382
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12088
<CHARGE-OFFS> (1184)
<RECOVERIES> 307
<ALLOWANCE-CLOSE> 11961
<ALLOWANCE-DOMESTIC> 11961
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
