United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
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 Identification No.)
incorporation or organization)
288 Union Street
Rockland, Massachusetts 02370
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 878-6100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, $.0l par value per share
(Title of Class)
Preferred Stock Purchase Rights
(Title of Class)
Indicate by check mark whether, the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
As of February 29, 1996, the aggregate market value of the 12,082,149
shares of Common Stock of the Registrant issued and outstanding on such
date, excluding 2,448,909 shares held by all directors and executive
officers of the Registrant as group, was $84,575,043. This figure is based
on the closing sale price of $7.00 per share on February 29, 1996, as
reported in The Wall Street Journal on March 1, 1996.
Number of shares of Common Stock outstanding as of February 29, 1996:
14,531,058
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents incorporated by reference and the
Part of Form 10-K into which the document is incorporated:
(1) Portions of the Registrant's Annual Report to Stockholders for the
fiscal year ended December 31, 1995 are incorporated into Part II,
Items 5-8 of this Form 10-K.
(2) Portions of the Registrant's definitive proxy statement for its 1996
Annual Meeting of Stockholders are incorporated into Part III, Items
10-13 of this Form 10-K.
PART 1.
Item 1. Business
General. Independent Bank Corp. (the "Company")
is a state chartered, federally registered bank holding
company headquartered in Rockland, Massachusetts. The
Company is the sole stockholder of Rockland Trust
Company ("Rockland" or "the Bank"), a Massachusetts
trust company chartered in 1907. Rockland offers a
full range of commercial and retail banking and trust
services through its network of 33 banking offices, seven
commercial lending centers, and two trust and financial
services offices located throughout Plymouth,
Norfolk, and Bristol Counties in Southeastern
Massachusetts. At December 31, 1995, the Company had
total assets of $987.6 million, total deposits of $871.1
million, and stockholders' equity of $72.6 million. It
should be noted that the 1995 year-end asset and deposit
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.
Rockland has a deep rooted history as a community
oriented commercial bank. As a result of its strong
commitment to the local business community, the Bank has
become one of the prominent financial institutions in
Plymouth County which represents the majority of its market
area. The Bank had approximately 16.9% of the total
deposits within Plymouth County as of June 30, 1995, the
most recent date for which such data is available, or almost
157% of the market share of its nearest competitor. In
addition, Rockland has been the leading originator of
mortgages in Plymouth County for the last four years. Due
to the continuing consolidation within the financial
services industry, Rockland is the only remaining locally
based commercial bank in Plymouth County.
The Company experienced significant growth and
profitability during the early and mid-1980's as the New
England economy prospered. Total assets surpassed the $1
billion level and earnings reached record levels. However,
with the onset of an economic recession in New England in
the late 1980's, and a resulting significant decline in
local real estate values, the Company experienced serious
financial problems. The quality of the loan portfolio
declined sharply as nonperforming assets rose to over 10% of
total assets. This deterioration required significant loan
loss provisions which resulted in the Company reporting
substantial losses in 1990 and 1991.
After implementing a number of managerial, operational,
and financial changes during 1991 and 1992, the Company
returned to profitability in 1992. In December of that
year, the Company issued 9.2 million shares of common stock,
strengthening its capital base. These measures contributed
to improved operating results for the Company which recorded
net income of $4.6 million and $8.1 million for the years
ended December 31, 1993 and 1994, respectively. The
improvement in 1994 earnings over 1993 was primarily
attributable to higher net interest income and a lower
provision for possible loan losses.
For the year ended December 31, 1995, the Company
recorded net income of $10.4 million, an increase of 28.0%
over 1994 earnings. The improved 1995 results were
principally due to higher net interest income and lower non
interest expenses. Net interest income of $43.9 million was
$2.4 million higher than 1994 due to increased interest
income. The decline in non-interest expenses is
attributable to lower legal fees and other real estate owned
(OREO) expenses and a reduction in the FDIC insurance
assessment.
The Company is registered as a bank holding company
under the Bank Holding Company Act of 1956 ("BHCA"), as
amended, and as such is subject to regulation by the Board
of Governors of the Federal Reserve System ("Federal
Reserve"). The Company is also regulated by the
Commissioner of Banks of the Commonwealth ofMassachusetts
("Commissioner"). Rockland is subject to regulation and
examination by the Commissioner and the Federal Deposit
Insurance Corporation ("FDIC"). The majority of Rockland's
deposit accounts are insured to the maximum extent permitted by
law by the Bank Insurance Fund ("BIF") which is
administered by the FDIC. In 1994, the Bank purchased
the deposits of three branches of a failed savings and
loan association from the Resolution Trust Corporation.
These deposits are insured to the maximum extent permitted by
law by the Savings Association Insurance Fund ("SAIF").
Lending Activities
General. The Bank's gross loan portfolio amounted
to $638.0 million on December 31, 1995, or 64.6% of
total assets on that date. The Bank classifies
loans as commercial, real estate, or consumer. Commercial
loans consist primarily of loans to businesses for working
capital and other business related purposes and floor plan
financing. Real estate loans are comprised of commercial
mortgages which are secured by nonresidential
properties, residential mortgages which are secured
primarily by owner occupied residences, home equity
loans, and mortgages for the construction of commercial
and residential properties. Consumer loans consist of
instalment obligations, the majority of which are
automobile loans, and other consumer loans.
The Bank's borrowers consist of small-to-medium
sized businesses and retail customers. The Bank's market
area is generally comprised of Plymouth, Norfolk,
and Bristol Counties located in Southeastern Massachusetts.
Substantially all of the Bank's commercial and consumer
loan portfolios consist of loans made to residents
of and businesses located in Southeastern Massachusetts.
Virtually all of the real estate loans in the Bank's
loan portfolio are secured by properties located within
this market area. On December 31 1995, approximately
$3.2 million of real estate loans, including
approximately $1.3 million of residential mortgages,
were secured by properties located outside of Southeastern
Massachusetts.
In accordance with governing banking statutes,
Rockland is permitted, with certain exceptions, to make
loans and commitments to any one borrower, including
related entities, in the aggregate amount of not more than 20%
of stockholders' equity, or $14.5 million at December 31,
1995. Notwithstanding the foregoing, the Bank has
established a more restrictive limit of not more than 15%
of stockholders' equity, or $10.9 million at December 31,
1995, which limit may be exceeded with the approval of
the Board of Directors. There were no borrowers whose
total indebtedness aggregated or exceeded $10.9 million as
of December 31, 1995.
The Bank's principal earning assets are its
loans. Although the Bank judges its borrowers to be
creditworthy, the risk of deterioration in borrowers'
abilities to repay their loans in accordance with
their existing loan agreements is inherent in any lending
function. Participating as a lender in the credit markets
requires a strict monitoring process to minimize credit risk.
This process requires substantial analysis of the loan
application, an evaluation of the customer's capacity to
repay according to the loan's contractual terms, and
an objective determination of the value of the collateral.
The Bank also utilizes the services of an independent
third party consulting firm to provide loan review
services.
The Bank's Controlled Asset Department is
responsible for the management and resolution of
nonperforming assets. In the course of resolving
nonperforming loans, the Bank may choose to
restructure certain contractual provisions. In
order to facilitate the disposition of other real
estate owned (OREO), the Bank may finance the purchase
of such properties at market rates if the borrower
qualifies under the Bank's standard underwriting
guidelines.
Loan Portfolio Composition and Maturity. The following
table sets forth information concerning the composition of the
Bank's loan portfolio by loan type at the dates indicated.
<TABLE>
<CAPTION>
At December 31,
1995 1994 1993
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Commercial $121,679 19.1% $122,944 20.5% $117,332 23.8%
Real estate:
Commercial 187,608 29.4 169,693 28.4 142,619 29.0
Residential 187,652 29.4 184,958 30.9 155,182 31.5
Construction 27,863 4.4 28,892 4.8 20,147 4.1
Consumer:
Instalment 102,088 16.0 80,441 13.4 46,909 9.5
Other 11,076 1.7 11,882 2.0 10,415 2.1
Gross Loans 637,966 100.0% 598,810 100.0% 492,6046 100.0%
Unearned
Discount 9,825 8,121 5,020
Reserve for
Possible
Loan Losses 12,088 13,719 15,485
Net Loans $616,053 $576,970 $472,099
</TABLE>
<TABLE>
<CAPTION>
1992 1991
Amount Percent Amount Percent
<S> <C> <C> <C> <C>
Commercial $133,192 26.4% $165,675 27.9%
Real estate:
Commercial 129,803 25.7 127,799 21.6
Residential 163,426 32.4 146,122 24.7
Construction 26,416 5.2 51,674 8.7
Consumer:
Instalment 45,454 9.1 69,850 11.8
Other 6,015 1.2 31,650 5.3
Gross Loans 504,306 100.0% 592,770 100.0%
Unearned
Discount 5,254 9,304
Reserve for
Possible
Loan Losses 15,971 16,165
Net Loans $483,081 $567,301
</TABLE>
The Company's outstanding loans grew by 6.8% in
1995, following a 22.2% increase in 1994. This loan
growth, which was primarily centered in commercial
mortgages and instalment loans, is a result of sales programs
implemented by the Bank over the past three years and an
opportunity to expand the Bank's customer base as a result of
the consolidation of its larger competitors.
Commercial loans decreased $1.3 million, or 1.0%,in
1995, following an increase of $5.6 million, or 4.8%,in
1994. The decline in commercial loans in 1995 is due to
the rate of loan repayments exceeding the volume of new
loan originations, as well as lower utilization of credit
lines by commercial borrowers in late 1995 as compared
to late 1994. The 1994 growth was primarily attributable
to an increase in floor plan loans.
Real estate loans comprised 63.2% of gross loans at
December 31, 1995, as compared to 64.1% at December
31, 1994. Commercial real estate loans have reflected
increases over the last two years of $17.9 million, or
10.6%, in 1995, and $27.1 million, or 19.0%, in 1994. These
increases are indicative of the improving prospects for small
and medium sized businesses in the Bank's slowly recovering
market area. Residential real estate loans increased $2.7 million,
or 1.5%, in 1995 as the Bank sold most of the residential
mortgage loans originated during the year. In 1994,
residential real estate loans increased $29.8 million, or 19.2%,
due to a management decision to retain more adjustable rate
residential mortgages in the portfolio and a rising interest rate
environment which depressed secondary market sales potential.
During 1995, the Bank sold $16 million of residential mortgages
as part of overall asset/liability management. Real estate construction
loans declined $1.0 million, or 3.6%, in 1995 following an
increase of $8.7 million, or 43.4%, in 1994.
Consumer instalment loans increased $21.6 million, or 26.9%,
and $33.5 million, or 71.5%, during 1995 and 1994, respectively.
The increases over the past two years are attributed to a focused
effort directed at establishing solid banking relationships with new
and used automobile dealers within the market area. As a result, strong
growth was reported in 1995 and 1994. Since the sale of the Bank's
credit card portfolio during 1991 and 1992, other consumer loans have
consisted primarily of cash reserve loans. Introduced in 1992, cash
reserve loans are designed to afford the Bank's customers overdraft
protection. The balances of these loans declined $.8 million, or 6.8%,
in 1995 following an increase of $1.5 million, or 14.1%, in 1994.
The following table sets forth the scheduled contractual amortization
of the Bank's loan portfolio at December 31, 1995. Loans having no
schedule of repayments or no stated maturity are reported as due in one
year or less. The following table also sets forth the rate
structure of loans scheduled to mature after one year.
<TABLE>
<CAPTION>
Real Real Real
Commercial Estate Estate Estate
Commercial Residential Construction
(Thousands)
<S> <C> <C> <C> <C>
Amounts due in:
One year or less $98,965 $72,777 $84,386 $27,863
After one year
through five 21,374 107,880 63,639 ---
years
Beyond five years 1,340 6,951 39,627 ---
Total $121,679 $187,608 $187,652 $27,863
Interest rates on
amounts due after
one year:
Fixed Rate $22,714 $98,315 $44,552 $ ---
Adjustable Rate ___ 16,516 58,714 ---
</TABLE>
<TABLE>
<CAPTION>
Consumer - Consumer -
Instalment Other Total
<S> <C> <C> <C>
Amounts due in:
One year or less $34,453 $--- $318,444
After one year
through five 65,297 11,076 269,266
years
Beyond five years 2,338 --- 50,256
Total $102,088 $11,076 $637,966
Interest rates on
amounts due after
one year:
Fixed Rate $67,635 $--- $233,216
Adjustable Rate --- 11,076 86,306
</TABLE>
Generally, the average actual maturity of loans is
substantially less than their average contractual maturity
due to prepayments and, in the case of real estate loans,
due-on-sale clauses, which generally give the Bank the right
to declare a loan immediately due and payable in the event
that, among other things, the borrower sells the property
subject to the mortgage and the loan is not repaid. The
average life of real estate loans tends to increase when
current real estate loan rates are higher than rates on
mortgages in the portfolio and, conversely, tends to
decrease when rates on mortgages in the portfolio are higher
than current real estate loan rates. Under the latter
scenario, the weighted average yield on the portfolio tends
to decrease as higher yielding loans are repaid or
refinanced at lower rates. Due to the fact that the Bank
will, consistent with industry practice, "roll over" a
significant portion of commercial and commercial real estate
loans at or immediately prior to their maturity by renewing
the loans on substantially similar or revised terms, the
principal repayments actually received by the Bank are
anticipated to be significantly less than the amounts
contractually due in any particular period. In addition, a
loan, or a portion of a loan, may not be repaid due to the
borrower's inability to satisfy the contractual obligations
of the loan. As of December 31, 1995, $1.3 million of loans
scheduled to mature within one year were nonperforming. See
"Lending Activities - Nonperforming Assets."
Origination of Loans. The Bank accepts applications
for commercial loans at any of its seven commercial lending
centers. Commercial loan applications are obtained through
existing customers, solicitation by Bank loan officers,
referrals from current or past customers, or walk-in
customers. Commercial real estate loan applications are
obtained primarily from previous borrowers, direct contacts
with the Bank, or referrals. Applications for residential
real estate loans and all types of consumer loans are taken
at all of the Bank's full-service branch offices.
Residential real estate loan applications primarily result
from referrals by real estate brokers, home builders, and
existing or walk-in customers. The Bank also maintains a
staff of field originators who solicit and refer residential
real estate loan applications to the Bank. These employees
are compensated on a commission basis and provide convenient
origination services during banking and nonbanking hours.
Consumer loan applications are directly obtained through
existing or walk-in customers who have been made aware of
the Bank's consumer loan services through advertising and
other media, as well as indirectly through a network of
automobile dealers who are financed by the Bank.
Commercial loans, commercial real estate loans, and
construction loans may be approved by commercial loan
officers up to their individually assigned lending limits
which are established and modified periodically to reflect
the officer's expertise and experience. Commercial lending
center managers are seasoned lending officers with
considerable experience in commercial loan underwriting.
Generally, commercial loans, commercial real estate loans,
and construction loans in amounts between $150,000 and
$250,000 must be approved by the respective commercial
lending center manager. Loans over $250,000 up to and
including $500,000 must be approved by one of two Commercial
Loan Regional Managers or the Executive Vice President
Commercial Lending Division. Loans over $500,000 up to and
including $2.0 million must be approved by the Senior Loan
Committee. This committee is comprised of the Bank's
President and Chief Executive Officer, the Executive Vice
President - Commercial Lending Division (Committee
Chairman), the Senior Credit Administrator, and the Bank's
two Regional Lending Managers. All loans where
relationships in the aggregate are over $2.0 million must be
approved by the Executive Committee of the Board of
Directors.
Residential real estate loans which conform to
requirements for resale in the secondary market are approved
by the Bank's residential mortgage underwriters. Non-
conforming residential mortgage loans up to $500,000 may be
approved by the Executive Vice President - Retail and
Operations Division or the Senior Vice President - Consumer
Mortgage Department. Loans over $500,000 are approved by
the Senior Loan Committee. Home equity loans up to $100,000
may be approved by the Bank's home equity loan underwriter.
Home equity loans in excess of this amount up to $200,000
may be approved by the Consumer Loan Administrator and
thereafter, loans in an amount up to $500,000 may be
approved by the Executive Vice President - Retail and
Operations Division. Home equity loans over $500,000 must
be approved by the Senior Loan Committee.
Sale of Loans. The Bank's owner-occupied residential
real estate loans are generally originated in compliance
with terms, conditions and documentation which permit the
sale of such loans to the Federal Home Loan Mortgage
Corporation ("FHLMC"), the Federal National Mortgage
Association ("FNMA"), the Government National Mortgage
Association ("GNMA"), and other institutional investors in
the secondary market. Substantially all fixed rate, long
term residential mortgages originated by the Bank are sold
without recourse in the secondary market. Loan sales in the
secondary market provide funds for additional lending and
other banking activities. The Bank generally retains the
servicing on all loans sold. As part of its asset/liability
management strategy, the Bank may retain a portion of
adjustable rate residential real estate loans or fixed-rate
residential real estate loans with maturities of 15 years or
less. In 1995, the Bank retained $28.0 million of
residential real estate loans in its portfolio, which
constituted 45.8% of all residential real estate loans
originated during the year.
The principal balance of loans serviced by the Bank
amounted to $246.6 million at December 31, 1995 and $225.7
million at December 31, 1994. Under its mortgage servicing
arrangements, the Bank generally continues to collect
payments on loans, to inspect the mortgaged property, to
make insurance and tax advances on behalf of borrowers and
to otherwise service the loans and receives a fee for
performing these services. Net servicing fee income
amounted to $704,000 and $412,000 for the years ended
December 31, 1995 and 1994, respectively. Unamortized loan
origination fees which relate to loans sold by the Bank are
recognized as non-interest income at the time of the loan
sale. Under its sales agreements, the Bank pays the
purchaser of mortgage loans a specified yield on the loans
sold. The difference, after payment of any guarantee fee,
is retained by the Bank and recognized as fee income over
the life of the loan. In addition, loans may be sold at a
premium or a discount with any resulting gain or loss
recognized at the time of sale. For the years ended
December 31, 1995, and 1994, the Bank recognized net gains
on the sales of mortgages of $18,000 and $29,000,
respectively.
Commercial Loans. The Bank offers secured and
unsecured commercial loans for business purposes, including
issuing letters of credit. The Bank's commercial loans
decreased $1.3 million, or 1.0%, in 1995, following an
increase of $5.6 million, or 4.8%, in 1994. At December 31,
1995, $121.7 million, or 19.1%, of the Bank's gross loan
portfolio consisted of commercial loans, compared to $122.9
million, or 20.5%, of the Bank's gross loan portfolio at
December 31, 1994 and $117.3 million, or 23.8 %, of the
gross loan portfolio at December 31, 1993.
Commercial loans are generally provided to small-to
medium-sized businesses located within the Company's market
area. Commercial loans may be structured as term loans or
as revolving lines of credit. Commercial term loans
generally have a repayment schedule of five years or less,
and although the Bank does originate some commercial term
loans with interest rates which float in relation to the
Rockland base rate, the majority of commercial term loans
have fixed rates of interest. Generally, Rockland's base
rate is determined by reference to the Wall Street Journal
prime rate. The Bank's base rate is monitored by the
Executive Vice President - Commercial Lending Division, and
revised when appropriate in accordance with guidelines
established by the Asset/Liability Management Committee. The
majority of commercial term loans are collateralized by
equipment, machinery or other corporate assets. In
addition, the Bank generally obtains personal guarantees
from the principals of the borrower.
The Bank's commercial revolving lines of credit
generally are for the purpose of providing working capital
to the borrower and may be secured or unsecured. Collateral
for commercial revolving lines of credit may consist of
inventory or accounts receivable or both, as well as other
corporate assets. Generally, the Bank will lend up to 80%
of accounts receivable, provided that such receivables have
not aged more than 60 days and/or up to 20% to 40% of the
value of raw materials and finished goods inventory securing
the line. Commercial revolving lines of credit generally
are reviewed on an annual basis and usually require
substantial repayment of principal during the year. At
December 31, 1995, the Bank had $29.8 million outstanding
under commercial revolving lines of credit, and $42.0
million of unused commitments under such lines on that date.
The Bank's commercial loans also include any advances
which might be made under standby letters of credit, which
are unconditional commitments on the part of the Bank to
lend up to a stated dollar amount within a specified period
of time on behalf of the customer, assuming the terms and
conditions specified in the standby letter of credit are
satisfied. The Bank's standby letters of credit generally
are secured, have terms of not more than one year, and are
reviewed for renewal. As of December 31, 1995, the Bank had
$2.4 million in outstanding commitments pursuant to standby
letters of credit.
The Bank also provides automobile and, to a lesser
extent, boat and other vehicle floor-plan financing. Floor
plan loans which are secured by the automobiles, boats, or
other vehicles constituting the dealer's inventory amounted
to $17.7 million as of December 31, 1995. Upon the sale of
a floor-plan unit, the proceeds of the sale are applied to
reduce the loan balance. In the event a unit financed under
a floor-plan line of credit remains in the dealer's
inventory for an extended period, the amount of the line is
reduced with respect to such unit. Bank personnel make
unannounced monthly inspections of each dealer to review the
value and condition of the underlying collateral.
Real Estate Loans. The Bank's real estate loans
consist of loans secured by commercial properties, loans
secured by owner-occupied residences, home equity loans, and
construction loans. As of December 31, 1995, the Bank's
loan portfolio included $187.6 million in commercial real
estate loans, $141.5 million in residential real estate
loans, $46.2 million in home equity loans, and $27.9 million
in construction loans.
The majority of the Bank's commercial real estate loans
are made to finance the development of residential projects.
As such, commercial real estate loans are primarily secured
by residential development tracts and, to a lesser extent,
owner-occupied commercial and industrial buildings and
warehouses. Commercial real estate loans also include multi
family residential loans which are primarily secured by
condominiums and, to a lesser extent, apartment buildings.
The Bank does not emphasize loans secured by special purpose
properties, such as hotels, motels, or restaurants.
Although terms vary, commercial real estate loans
generally have maturities of three years or less,
amortization periods of 15 or 20 years, and interest rates
which either float in accordance with a designated index or
have fixed rates of interest. The Bank's adjustable-rate
commercial real estate loans generally are indexed off of
the Rockland base rate. Loan-to-value ratios on commercial
real estate loans generally do not exceed 80% (70% for
special purpose properties) of the appraised value of the
property. In addition, as part of the criteria for
underwriting permanent commercial real estate loans, the
Bank generally imposes a debt service coverage ratio of not
less than 120%. It is also the Bank policy to obtain
personal guarantees from the principals of the borrower on
commercial real estate loans and to obtain periodic
financial statements from all commercial and multi-family
borrowers on an annual basis and, in some cases, more
frequently.
Commercial real estate lending entails additional risks
as compared to residential real estate lending. Commercial
real estate loans typically involve larger loan balances to
single borrowers or groups of related borrowers.
Development of commercial real estate projects also may be
subject to numerous land use and environmental issues. The
payment experience on such loans is typically dependent on
the successful operation of the real estate project which
can be significantly impacted by supply and demand
conditions in the market for commercial and retail space.
Rockland originates both fixed-rate and adjustable-rate
residential real estate loans. The Bank will lend up to 95%
of the lesser of the appraised value of the property
securing the loan or the purchase price, and generally
requires borrowers to obtain private mortgage insurance when
the amount of the loan exceeds 80% of the value of the
property. The rates of these loans are typically
competitive with market rates. As previously noted, the
Bank's residential real estate loans are generally
originated only under terms, conditions and documentation
which permit sale in the secondary market.
The Bank generally requires title insurance protecting
the priority of its mortgage lien, as well as fire and
extended coverage casualty insurance in order to protect the
properties securing its residential and other real estate
loans. Properties securing all of the Bank's real estate
loans are appraised by independent appraisers.
Home equity loans may be made as a term loan or under a
revolving line of credit secured by a second mortgage on the
borrower's residence. The Bank will originate home equity
loans in an amount up to 80% of the appraised value or,
without appraisal, up to 70% of the tax assessed value,
whichever is lower, reduced for any loans outstanding
secured by such collateral. As of December 31, 1995, there
was $29.8 million in unused commitments under revolving home
equity lines of credit.
Construction loans are intended to finance the
construction of residential and commercial properties,
including loans for the acquisition and development of land.
Construction loans generally have terms of six months to two
years and do not provide for amortization of the loan
balance during the term. The Bank's construction loans have
floating rates of interest based upon the Rockland base rate
or, in some cases, the Wall Street Journal prime rate.
A significant portion of the Bank's construction
lending has been related to one-to-four family residential
development within the Bank's market area. The Bank
typically has focused its construction lending on relatively
small projects and the Bank has developed and maintains a
relationship with a significant number of homebuilders in
Plymouth, Norfolk, and Bristol Counties As of December 31,
1995, $11.8 million, or 42.2%, of total construction loans
at such date were for the acquisition and development of
onetofour family residential lots or the construction of
onetofour family residences.
The Bank evaluates the feasibility of construction
projects based upon appraisals of the project performed by
independent appraisers. In addition, the Bank may obtain
architects' or engineers' estimations of the cost of
construction. The Bank generally requires the borrower to
fund at least 20% of the project costs and generally does
not provide for an interest reserve in its construction
loans. The Bank's construction loans generally do not
exceed 80% of the lesser of the appraised value upon
completion or the sales price. Land acquisition and
development loans generally do not exceed the lesser of 70%
of the appraised value (without improvements) or the
purchase price. The Bank's loan policy requires that
permanent mortgage financing be secured prior to extending
any non-residential construction loans. In addition, the
Bank generally requires that the units securing its
residential construction loans be pre-sold. Loan proceeds
are disbursed in stages after inspections of the project
indicate that the required work has been performed and that
such disbursements are warranted.
Construction loans are generally considered to present
a higher degree of risk than permanent real estate loans. A
borrower's ability to complete construction may be affected
by a variety of factors such as adverse changes in interest
rates and the borrower's ability to control costs and adhere
to time schedules. The latter will depend upon the
borrower's management capabilities, and may also be affected
by strikes, adverse weather and other conditions beyond the
borrower's control.
Consumer Loans. The Bank makes loans for a wide
variety of personal and consumer needs. Consumer loans
primarily consist of instalment loans and cash reserve
loans. As of December 31, 1995, $113.2 million, or 17.7%, of
the Bank's gross loan portfolio consisted of consumer loans.
The Bank's instalment loans consist primarily of
automobile loans, which amounted to $85.6 million at
December 31, 1995. A substantial portion of the
Bank's automobile loans are originated indirectly by a
network of over 95 new and used automobile dealers located within
the Bank's market area. Indirect automobile loans
accounted for approximately 75.6% and 74.6% of the Bank's
total instalment loan originations during 1995 and 1994,
respectively. The increase in indirect automobile loan
originations in 1995 and 1994 reflects the effect of a focused
program undertaken by the Bank to improve business relationships with
automobile dealers within its market area. Although applications
for such loans are taken by employees of the dealer, the
loans are made pursuant to Rockland's underwriting standards
using Rockland's documentation, and all indirect loans must be
approved by a Rockland loan officer. In addition to indirect automobile
lending, the Bank also originates automobile loans directly.
The maximum term for the Bank's automobile loans is 66
months for a new car loan and 48 months with respect to
a used car loan. The Bank will lend up to 100% of
the purchase price of a new automobile or, with respect to
used cars, up to 100% of the lesser of the purchase price
or the National Automobile Dealer's Association book
value. Loans on new automobiles are generally made
without recourse to the dealer. The Bank requires all
borrowers to maintain automobile insurance, including full
collision, fire and theft, with a maximum allowable deductible and
with the Bank listed as loss payee. The majority of the
Bank's loans on used automobiles are made with recourse to the dealer,
who is required to pay off the loan balance upon the
Bank's repossession of the financed vehicle, provided that
the Bank delivers the vehicle to the dealer within 120
days of the loan due date. In addition, in order to
ameliorate the adverse effect on interest income caused
by prepayments, all dealers are required to maintain a
reserve, ranging from 0% to 3% of the outstanding balance,
which is rebated to the customer on a pro-rata basis in the event
of repayment prior to maturity.
The Bank's instalment loans also include loans
secured by deposit accounts, loans to purchase
motorcycles, recreational vehicles, motor homes, boats, or mobile
homes. As of December 31, 1995, instalment loans
other than automobile loans amounted to $16.1
million. The Bank generally will lend up to 100% of
the purchase price of vehicles other than automobiles with
terms of up to three years for motorcycles and up to
fifteen years for recreational vehicles.
Cash reserve loans are made pursuant to
previously approved unsecured cash reserve lines of
credit. The rate on these loans is subject to change
due to market conditions. As of December 31, 1995, an additional
$13.9 million had been committed to but was unused
under cash reserve lines of credit.
Nonperforming Assets. The following table sets forth
information regarding nonperforming assets held by the
Bank at the dates indicated.
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Loans past
due 90 days
or more but
still
accruing $553 $598 $1,042 $2,877 $5,059
Loans
accounted
for on a
nonaccrual
basis (1) 4,718 7,266 15,940 25,925 39,103
Total
nonperforming
loans 5,271 7,864 16,982 28,802 44,162
Other real
estate owned 638 3,866 8,884 11,655 20,180
Loans held
for sale --- --- --- 4,257 ---
Total
nonperforming
assets $5,909 $11,730 $25,866 $44,714 $63,342
Restructured
loans $2,629 $2,898 $4,202 $6,875 $727
Nonperforming
loans as a
percent of
gross loans 0.83% 1.31% 3.45% 5.71% 7.45%
Nonperforming
assets as a
percent of
total assets 0.60% 1.26% 3.12% 5.54% 7.60%
</TABLE>
(1) Includes $.6 million, $1.1 million, $1.4 million, $4.6
million, and $.7 million of restructured loans at December 31, 1995, 1994,
1993, 1992, and 1991, respectively, which were included in nonaccrual loans
as of such dates.
Gross interest income that would have been recognized
for the years ended December 31, 1995 and 1994 if
nonperforming loans at the respective dates had been
performing in accordance with their original terms
approximated $.4 million and $1.1 million, respectively.
The actual amount of interest that was collected on these
loans during those periods and included in interest income
approximated $63,000 and $80,000, respectively. Through the
Controlled Asset Department, the Bank strives to ensure
that loans do not become nonperforming. In the case that
they do, this department will restore nonperforming assets to
performing status or, alternatively, dispose of such assets.
On occasion, this effort may require the restructure of
loan terms for certain nonperforming loans. The Bank works
closely with independent real estate brokers throughout
its market area, and all of the Bank's other real estate
owned is listed with brokers who are members of a multiple
listing service.
Reserve for Possible Loan Losses. The reserve
for possible loan losses is maintained at a level
that management considers adequate to provide for
potential loan losses based upon an evaluation of known
and inherent risks in the loan portfolio. The
reserve is increased by provisions for possible loan
losses and by recoveries of loans previously charged-off
and reduced by loan charge offs. Determining an
appropriate level of reserve for possible loan losses
necessarily involves a high degree of judgment. For
additional information, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
in Item 8 hereof.
The following table summarizes changes in the reserve
for possible loan losses and other selected statistics for
the periods presented.
<TABLE>
<CAPTION>
Year Ending December 31,
1995 1994 1993
(Dollars In Thousands)
<S> <C> <C> <C>
Average loans, net of
unearned discount $612,481 $534,052 $494,288
Reserve for Possible loan
losses, beginning of year $13,719 $15,485 $15,971
Charged-off loans
Commercial 2,097 2,396 3,568
Real estate - commercial 690 682 1,285
Real estate - residential 558 618 1,107
Real estate - construction -- 63 111
Consumer - instalment 273 188 587
Consumer - other 464 346 861
Total charged-off loans 4,082 4,293 7,519
Recoveries on loans
previously charged off
Commercial 436 890 1,232
Real estate - commercial 665 425 191
Real estate - residential 3 2 41
Real estate - construction -- -- 20
Consumer - instalment 169 133 182
Consumer - other 178 276 292
Total recoveries 1,451 1,726 1,958
Net loans charged-off 2,631 2,567 5,561
Provision for loan losses 1,000 801 5,075
Reserve for possible loan
losses, end of period $12,088 $13,719 $15,485
Net loans charged-off as a
percent of average loans,
net of unearned discount 0.43% 0.48% 1.13%
Reserve for possible loan
losses as a percent of
loans, net of unearned
discount 1.92 2.32 3.18
Reserve for possible loan
losses as a percent of
nonperforming loans 229.29 174.45 91.18
Net loans charged-off as a
percent of reserve for
possible loan losses 21.77 18.71 35.91
Recoveries as a percent of
charge-offs 35.55 40.20 26.04
</TABLE>
<TABLE>
<CAPTION>
Year Ending December 31,
1992 1991
(Dollars In Thousands)
<S> <C> <C>
Average loans, net of
unearned discount $551,694 $688,127
Reserve for Possible loan
losses, beginning of year $16,165 $20,264
Charged-off loans
Commercial 6,150 12,385
Real estate - commercial 1,786 2,479
Real estate - residential 941 3,945
Real estate - construction 1,180 2,951
Consumer - instalment 807 1,580
Consumer - other 1,962 5,001
Total charged-off 12,826 28,341
Recoveries on loans
previously charged off
Commercial 579 505
Real estate - commercial 9 60
Real estate - residential 128 30
Real estate - construction 162 --
Consumer - instalment 183 149
Consumer - other 557 505
Total recoveries 1,618 1,249
Net loans charged-off 11,208 27,092
Provision for loan losses 11,014 22,993
Reserve for possible loan
losses, end of period $15,971 $16,165
Net loans charged-off as a
percent of average loans,
net of unearned discount 2.03% 3.94%
Reserve for possible loan
losses as a percent of
loans, net of unearned discount 3.20 2.77
Reserve for possible loan
losses as a percent of
nonperforming loans 55.45 36.60
Net loans charged-off as a
percent of reserve for
possible loan losses 70.18 167.59
Recoveries as a percent of
charge-offs 12.62 4.40
</TABLE>
The reserve for possible loan losses is allocated
to various loan categories as part of the Bank's process for
evaluating the adequacy of the reserve for possible loan
losses. The following table sets forth certain information
concerning the allocation of the Bank's reserve for
possible loan losses by loan categories at December 31,
1995. For information about the percent of loans in each
category to total loans, see "Lending Activities - Loan
Portfolio Composition and Maturity."
<TABLE>
<CAPTION>
Percent of
Amount Total Loans by
Category
(Dollars In Thousands)
<S> <C> <C>
Commercial Loans $4,139 3.40%
Real Estate Loans 6,424 1.59%
Consumer Loans 1,525 1.35%
Total Loans $12,088 1.92%
</TABLE>
The Bank determines the level of the reserve
for possible loan losses based on a number of
factors. An individual analysis of all commercial,
commercial real estate, and construction loans, as well
as all internally classified loans is conducted and
reserves are assigned for those loans which are
determined to have certain weaknesses which make
ultimate collectibility of both principal and interest
uncertain. A portion of the reserve is allocated as a
general reserve for those loans which are not
individually reviewed. In conjunction with its
review, management considers both internal and
external factors which may affect the adequacy of the
reserve for possible loan losses. Such factors may
include, but are not limited to, industry trends, regional
and national economic conditions, past estimates of
possible loan losses as compared to actual losses, and
historical loan losses. Management assesses the adequacy of
the reserve for possible loan losses quarterly, and reviews its
assessment with the Board of Directors. Management's
assessment of the adequacy of the reserve for
possible loan losses is reviewed periodically by the
Company's independent public accountants as well as by
an independent third-party loan review consultant.
As of December 31, 1995, the reserve for possible
loan losses totaled $12.1 million. Based on the
processes described above, management believes that the
level of the reserve for possible loan losses at
December 31, 1995 is adequate. A review of the Bank's
loan portfolio and its reserve for possible loan
losses as of June 30, 1995 was also conducted by FDIC
bank examiners. Notwithstanding the foregoing, since
the level of the reserve is based on an estimate of
future events, ultimate loan losses may vary from
current estimates.
Investment Activities
The Bank's securities portfolio primarily consists of
U.S. Treasury and U.S. Government Agency securities,
mortgage-backed securities, and, to a lesser extent,
securities issued by states, counties and municipalities.
Most of these securities are A-rated (or equivalent) debt
obligations with average lives of less than five years.
Mortgage-backed securities entail a lesser degree of risk
than loans made by the Bank by virtue of the guarantees that
back them, require less capital under risk-based capital
rules than non-insured or non-guaranteed mortgage loans, are
more liquid than individual mortgage loans, and may be used
to collateralize borrowings or other obligations of the
Bank. However, these securities are subject to prepayment
risk which could result in significantly less future income
than would have been the case based on the contractual
coupon rate and term. The Bank had no investments in
marketable equity securities at December 31, 1995 or 1994,
and presently has no intention to make investments in such
securities.
The Bank views its securities portfolio as a source
of income and, with regard to maturing securities,
liquidity. Interest generated from securities also
provides a source of liquidity to fund loans and meet
short-term cash needs. The Bank's securities portfolio
is managed in accordance with the Rockland Trust
Company Investment Policy adopted by the Board of
Directors. Investments may be made by the Chief
Executive Officer or the Chief Financial Officer with
the approval of one additional member of the
Asset/Liability Management Committee, subject to limits
on the type, size and quality of all investments, which
are specified in the Investment Policy. The Bank's
Asset/Liability Management Committee, or its designee,
is required to evaluate any proposed purchase from
the standpoint of overall diversification of the
portfolio.
The investment portfolio includes securities
which management intends to hold until maturity and
securities available for sale. This classification of
the securities portfolio is required by Statement of
Financial Accounting Standards (SFAS) No. 115,
"Accounting For Certain Investments in Debt and Equity
Securities," which the Bank adopted effective January 1, 1994.
Securities held to maturity as of December 31,
1995 are carried at their amortized cost of $226.9
million and exclude gross unrealized gains of $2.1
million and gross unrealized losses of $1.6
million. A year earlier, securities held to
maturity totaled $256.8 million, excluding gross
unrealized gains of $.8 million and gross unrealized
losses of $17.7 million.
Securities available for sale are carried at
fair market value and unrealized gains and losses, net
of the related tax effect, are recognized as a separate
component of stockholders' equity. The fair market
value of securities available for sale at December 31, 1995
totaled $32.6 million, and net unrealized losses totaled
$60,000. A year earlier, securities available for
sale were $4.2 million, with net unrealized losses of
$254,000. In the fourth quarter of 1995, the Bank
transferred $28.6 million of securities from held to
maturity status to available for sale in accordance with
the "FASB Special Report, A Guide to the Implementation of
SFAS No. 115."
The following table sets forth the amortized cost
and percentage distribution of securities held to
maturity at the dates indicated. For additional
information, see Note 3 to the Consolidated Financial
Statements included in Item 8 hereof.
<TABLE>
<CAPTION>
At December 31,
1995 1994 1993
Amount Percent Amount Percent Amount Percent
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. treasury
and government
agency securities $73,484 32.4% $70,904 27.6% $80,303 30.1%
Mortgage-backed
securities 128,361 56.6 157,197 61.2 153,517 57.6
Collateralized
mortgage
obligations 17,473 7.7 24,259 9.5 24,642 9.2
State, county,
and municipal
securities 6,578 2.9 3,425 1.3 7,067 2.7
Other
investment 1,000 0.4 1,000 0.4 1,015 0.4
securities
$226,896 100.0% $256,785 100.0% $266,544 100.0%
</TABLE>
The following table sets forth the fair market value and percentage
distribution of securities available for sale at the dates indicated.
For additional information, see Note 3 to the Consolidated Financial
Statements included in Item 8 hereof.
<TABLE>
<CAPTION>
At December 31,
1995 1994 1993
Amount Percent Amount Percent Amount Percent
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage-backed
securities $29,676 91.0% $4,250 100.0% --- ---
securities
Collateralized
mortgage
obligations $2,952 9.0% --- --- --- ---
$32,628 100.0% $4,250 100.0% --- ---
</TABLE>
At December 31, 1995 and 1994, the Bank had no
investment in obligations of individual states, counties or
municipalities which exceeded 10% of stockholders' equity.
In addition, there were no sales of securities in 1995,
1994, or 1993.
Sources of Funds
Deposits. Deposits obtained through Rockland's
branch banking network have traditionally been the
principal source of the Bank's funds for use in lending
and for other general business purposes. The Bank's has
built a stable base of in market core deposits from the
residents of and businesses located in Southeastern
Massachusetts. The Bank does not solicit nor accept
brokered deposits. Rockland offers a range of demand
deposits, NOW accounts, money market accounts, savings
accounts and time certificates of deposit. Interest rates
on deposits are based on factors which include loan
demand, deposit maturities, and interest rates
offered by competing financial institutions in the
Bank's market area. The Bank believes it has been able
to attract and maintain satisfactory levels of deposits
based on the level of service it provides to its
customers, the convenience of its banking locations, and its
interest rates which are generally competitive with those
of competing financial institutions.
Rockland's branch locations are supplemented by
the Bank's Trust/24 card which may be used to conduct
various banking transactions at automated teller machines
("ATMs") maintained at each of the Bank's full-service
offices and three additional locations. The Trust/24
card also allows customers access to the "NYCE" regional
ATM network, as well as the "Cirrus" nationwide ATM
network. These networks provide the Bank's customers
with access to their accounts through ATMs located
throughout Massachusetts, the United States, and the
world.
The following table sets forth the average balances
of the Bank's deposits for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $153,142 18.7% $141,533 18.5% $121,057 16.9%
Savings and
NOW accounts 261,302 32.0% 290,719 37.9% 277,633 38.8%
Money Market
and Super Now
accounts 110,431 13.5% 119,347 15.6% 104,723 14.6%
Time deposits 292,206 35.8% 214,780 28.0% 212,488 29.7%
Total $817,081 100.0% $766,379 100.0% $715,901 100.0%
</TABLE>
The Bank's interest-bearing time certificates of
deposit of $100,000 or more totaled $30.1 million at
December 31, 1995. The maturity of these certificates is as
follows: $10.3 million within three months; $14.2 million
over three through 12 months; and $5.6 million thereafter.
Borrowings. Borrowings consist of short-term and
intermediate-term obligations. Short-term borrowings
consist primarily of federal funds purchased, assets sold
under repurchase agreements, and treasury tax and loan
notes. The Bank has established two unsecured federal funds
lines totaling $18 million with Boston-based banks. The
Bank also obtains funds under repurchase agreements. In a
repurchase agreement transaction, the Bank will generally
sell a security agreeing to repurchase either the same or
a substantially identical security on a specified later
date at a price slightly greater than the original sales price.
The difference in the sale price and purchase price is
the cost of the proceeds. The securities underlying
the agreements are delivered to the dealer who arranges
the transactions as security for the repurchase
obligation. Payments on such borrowings are interest
only until the scheduled repurchase date, which
generally occurs within a period of 30 days or less.
Repurchase agreements represent a non-deposit funding
source for the Bank. However, the Bank is subject to
the risk that the lender may default at maturity and not
return the collateral. In order to minimize this
potential risk, the Bank only deals with established
investment brokerage firms when entering into these transactions.
The Bank has repurchase agreements with four major brokerage
firms. At December 31, 1995, the Bank had no outstanding balances
under the repurchase agreement lines, while at December 31, 1994,
the Bank had $25.4 million in outstanding repurchase agreements.
In July 1994, Rockland became a member of the Federal Home
Loan Bank ("FHLB") of Boston. Among the many
advantages of this membership, this affiliation provides
the Bank with access to approximately $300 million of
short-to medium term borrowing capacity as of December
31, 1995, based on the Bank's assets at that time. At December
31, 1995, the Bank had $20 million outstanding in
FHLB borrowings with initial maturities ranging from 12 to
18 months.
While the Bank has not traditionally placed significant
reliance on borrowings as a source of liquidity, it
established the borrowing arrangements described above in
order to provide management with greater flexibility in
overall funds management.
The Company's borrowings at December 31, 1995
also include $4.8 million of subordinated capital notes
privately issued by Rockland in 1986 and 1988, and by the
Company in 1986. Substantially all of the outstanding
notes have interest rates which range from 9.50% to 10.00%
and are payable in full at their maturity in 1996. The
notes are subordinated to all other indebtedness of
the Bank, including deposit accounts. At December 31,
1995, none of these notes were included in the Bank's or
the Company's Tier 2 capital for purposes of the FDIC's risk-based
capital requirements.
Management believes that the Bank has adequate
liquidity available to respond to current and anticipated
liquidity demands. See Notes 3 and 6 of the Notes to
Consolidated Financial Statements, included in Item 8
hereof.
The following table sets forth the Bank's borrowings
at the dates indicated.
<TABLE>
<CAPTION>
At December 31,
1995 1994 1993
(in Thousands)
<S> <C> <C> <C>
Federal funds
purchased $4,060 $1,165 $1,625
Assets sold under
repurchase agreements --- 25,420 10,303
Treasury tax and loan
notes 4,031 3,802 6,950
Federal Home Loan Bank
borrowings 20,000 25,000 ---
Subordinated capital
notes 4,843 4,965 4,965
$32,934 $60,352 $23,843
</TABLE>
The following table presents certain information
regarding the Bank's short-term borrowings at the dates
and for the periods indicated.
<TABLE>
<CAPTION>
At or For the Year Ended December 31,
1995 1994 1993
(Dollars in Thousands)
<S> <C> <C> <C>
Balance outstanding at
end of year $8,091 $30,387 $18,878
Average daily balance
outstanding 18,995 18,034 5,284
Maximum balance
outstanding at any
month-end 63,988 30,387 20,062
Weighted average
interest rate for the
year 5.74% 4.03% 2.86%
Weighted average
interest rate at end
of year 4.36% 5.74% 2.74%
</TABLE>
Trust and Financial Services
Rockland's Trust and Financial Services Division
offers a variety of trust and financial services.
Financial services, including assistance with
investments, estate planning, custody services, employee
benefit plans, and tax planning, are provided primarily
to individuals and small businesses located in
Southeastern Massachusetts. In addition, the Bank
acts as executor or administrator of estates and as
trustee for various types of trusts. As of December 31,
1995, the Trust and Financial Services Division maintained
approximately 1,500 trust/fiduciary accounts, with an
aggregate market value of over $400 million on that date.
Income from the Trust and Financial Services Division
amounted to $2.4 million, $2.2 million, and $2.2 million
for 1995, 1994, and 1993, respectively.
Accounts maintained by the Trust and Financial
Services Division consist of "managed" and "non-managed"
accounts. "Managed accounts" are those accounts under
custody for which Rockland has responsibility for
administration and investment management and/or
investment advice. "Non managed" accounts are those
accounts for which Rockland acts as a custodian. The
Bank receives fees dependent upon the level and type of
service(s) provided.
The administration of trust and fiduciary accounts is
monitored by the Trust Committee of the Bank's Board
of Directors. The Trust Committee has delegated
administrative responsibilities to two committees - one
for investments and one for administration - comprised
of Trust and Financial Services Division officers who
meet no less than monthly.
Regulation
The Company - General. The Company, as a
federally registered bank holding company, is subject to
regulation and supervision by the Federal Reserve Board
(the "Federal Reserve"). The Company is required to
file an annual report of its operations with, and is
subject to examination by, the Federal Reserve.
BHCA - Activities and Other Limitations. The BHCA
prohibits a bank holding company from acquiring direct
or indirect ownership or control of more than 5% of the
voting shares of any bank, or increasing such ownership
or control of any bank, without prior approval of the
Federal Reserve. No approval under the BHCA is required,
however, for a bank holding company already owning or
controlling 50% of the voting shares of a bank to
acquire additional shares of such bank.
The BHCA also prohibits a bank holding company
from, with certain exceptions, acquiring more than 5%
of the voting shares of any company that is not a bank
and from engaging in any business other than banking or
managing or controlling banks. Under the BHCA, the
Federal Reserve is authorized to approve the ownership
of shares by a bank holding company in any company, the
activities of which the Federal Reserve has determined
to be so closely related to banking or to managing or
controlling banks as to be a proper incident thereto.
In making such determination, the Federal Reserve is
required to weigh the expected benefit to the
public, such as greater convenience, increased
competition or gains in efficiency, against the
possible adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of
interest or unsound banking practices.
The Federal Reserve has, by regulation, determined
that certain activities are closely related to banking
within the meaning of the BHCA. These activities include
operating a mortgage company, finance company, credit
card company, factoring company, trust company or
savings association; performing certain data processing
operations; providing limited securities brokerage
services; acting as an investment or financial adviser;
acting as an insurance agent for certain types of credit-related
insurance; leasing personal property on a full-payout,
nonoperating basis; providing tax planning and
preparation services; operating a collection agency; and
providing certain courier services. The Federal Reserve
also has determined that certain other activities,
including real estate brokerage and syndication, land
development, property management and underwriting of
life insurance not related to credit transactions are
not closely related to banking and are not a proper
incident thereto.
Interstate Banking Legislation. On September 24,
1994, President Clinton signed, and as of September 29,
1995, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Act") became
effective. The Interstate Act facilitates interstate
branching by permitting (i) bank holding companies that are
adequately capitalized and adequately managed to acquire
banks outside their home states regardless of whether
such acquisitions are permissible under the laws of the
target bank's home state; (ii) commencing June 1, 1997,
interstate bank mergers regardless of state law, unless a
state specifically "opts out" or "opts in" after
September 29, 1994 and prior to June 1, 1997; (iii)
banks to establish new branches on an interstate
basis provided the state of the new branch
specifically permits such activity; (iv) foreign banks
to establish, with regulatory approval, foreign
branches outside their home state to the same extent as if
they were national or state banks; and (v) affiliates
of banks in different states to receive deposits, renew
time deposits, close loans, service loans, and receive
loan payments on loans and other obligations as agents
for each other.
Capital Requirements. The Federal Reserve has
adopted capital adequacy guidelines pursuant to which it
assesses the adequacy of capital in examining and
supervising a bank holding company and in analyzing
applications to it under the BHCA. The Federal
Reserve's capital adequacy guidelines which generally
require bank holding companies to maintain total capital
equal to 8% of total risk-adjusted assets, with at least
one-half of that amount consisting of Tier 1, or core,
capital and up to one-half of that amount
consisting of Tier 2, or supplementary, capital. Tier
1 capital for bank holding companies generally consists of
the sum of common stockholders' equity and perpetual
preferred stock (subject in the case of the latter to
limitations on the kind and amount of such stocks which
may be included as Tier 1 capital), less goodwill and
other intangible assets required to be deducted from
capital. Tier 2 capital generally consists of hybrid
capital instruments: perpetual preferred stock which is
not eligible to be included as Tier 1 capital; term
subordinated debt and intermediate-term preferred
stock; and, subject to limitations, the reserve for
loan losses. Assets are adjusted under the risk-based
guidelines to take into account different
risk characteristics, with the categories ranging from 0%
(requiring no additional capital) for assets such as cash
to 100% for the majority of assets which are typically
held by a bank holding company, including commercial
real estate loans, commercial loans and consumer loans.
Single family residential first mortgage loans which are
not 90 days or more past due or nonperforming and
which have been made in accordance with prudent
underwriting standards are assigned a 50% level in the
risk-weighting system, as are certain privately-issued
mortgage-backed securities representing indirect ownership
of such loans and certain multi-family housing loans.
Off-balance sheet items also are adjusted to take into
account certain risk characteristics.
In addition to the risk-based capital requirements,
the Federal Reserve requires bank holding companies to
maintain a minimum leverage capital ratio of Tier 1
capital to total assets of 3.0%. Total assets for this
purpose does not include goodwill and any other
intangible assets or investments that the Federal Reserve
determines should be deducted from Tier 1 capital. The
Federal Reserve has announced that the 3.0% Tier 1
leverage capital ratio requirement is the minimum for the
top-rated bank holding companies without any supervisory,
financial or operational weaknesses or deficiencies or those
which are not experiencing or anticipating significant growth.
Other bank holding companies (including the Company) will be
expected to maintain Tier 1 leverage capital ratios of at
least 4.0% to 5.0% or more, depending on their overall condition.
The Company currently is in compliance with the
above described regulatory capital requirements. At
December 31, 1995, the Company had Tier 1 capital and
total capital equal to 10.90% and 12.15% of total
risk-adjusted assets, respectively, and Tier 1 leverage
capital equal to 7.37 % of total assets. As of such date,
Rockland complied with the applicable federal regulatory
capital requirements, with Tier 1 capital and total capital
equal to 10.54% and 11.79% of total risk-adjusted assets,
respectively, and Tier 1 leverage capital equal to 7.12% of
total assets.
Commitments to Affiliated Institutions. Under
Federal Reserve policy, the Company is expected to act as
a source of financial strength to Rockland and to commit
resources to support Rockland in circumstances when it
might not do so absent such policy.
Limitations on Acquisitions of Common Stock.
The federal Change in Bank Control Act ("CBCA")
prohibits a person or group of persons from acquiring
"control" of a bank holding company or bank unless the
appropriate federal bank regulator has been given 60 days
prior written notice of such proposed acquisition and
within that time period such regulator has not issued a
notice disapproving the proposed acquisition or extending
for up to another 30 days the period during which such a
disapproval may be issued. An acquisition may be made prior
to expiration of the disapproval period if such regulator
issues written notice of its intent not to disapprove
the action. Under a rebuttable presumption
established under the CBCA regulations, the
acquisition of 10% or more of a class of voting stock
of a bank holding company or a FDIC-insured bank, with a
class of securities registered under or subject to the
requirements of Section 12 of the Securities Exchange Act
of 1934 would, under the circumstances set forth in the
presumption, constitute the acquisition of control.
In addition, any "company" would be required to
obtain the approval of the Federal Reserve under the
BHCA before acquiring 25% (5% in the case of an acquirer
that is a bank holding company) or more of the
outstanding common stock of, or such lesser number of
shares as constitute control over, the Company. Such
approval would be contingent upon, among other things,
the acquirer registering as a bank holding company,
divesting all impermissible holdings and ceasing any
activities not permissible for a bank holding company.
Massachusetts Law. Massachusetts law requires all
bank holding companies (those companies which control,
own, or have the power to vote 25% or more of the stock
of each of two or more banks) to receive prior written
approval of the Massachusetts Board of Bank Incorporation
to, among other things, acquire all or substantially all
of the assets of a banking institution located within
the Commonwealth of Massachusetts or to merge or consolidate
with a Massachusetts bank holding company. The Company owns
no voting stock in any banking institution other than
Rockland. In addition, prior approval of the Board of Bank
Incorporation is required before any bank holding
company owning 25% or more of the stock of two banking
institutions may acquire additional voting stock in those
banking institutions equal to 5% or more. Generally, no approval
to acquire a banking institution, acquire additional
shares in an institution, acquire substantially all the
assets of a banking institution or merge or consolidate
with another bank holding company may be given if, as a result,
the bank holding company would control in excess of 25% of the
total deposits of all state and federally chartered
banks in Massachusetts. Similarly, no bank which is not
a member of the Federal Reserve can merge or consolidate
with any other insured depository institution or,
either directly or indirectly, acquire the assets of or assume
the liability to pay any deposits made in any other depository
institution except with the prior written approval of the
FDIC.
A bank holding company whose principal operations
are located in another state may acquire more than 5%
of the voting stock of a Massachusetts bank holding
company (with the prior written approval of the
Massachusetts Board of Bank Incorporation) only if such
state has enacted a similar banking law which is
deemed by the Commissioner to be reciprocal for
Massachusetts bank holding companies. Presently all
of the New England states have adopted legislation
permitting interstate acquisitions among New England
states with reciprocal legislation. In addition, the
so-called Massachusetts Nationwide Interstate Banking
Act, passed in June 1990, permits nationwide
interstate banking within certain restrictions,
with and by Massachusetts bank holding companies, through
ownership of or by bank holding companies the principal
offices of which are in a state or jurisdiction outside of
Massachusetts. Massachusetts currently has legislation
pending which would result in the Commonwealth's
"opting in" to the interstate branching provisions of the
Interstate Act.
Before the Massachusetts Board of Bank
Incorporation may grant approval with respect to the
foregoing matters, it must make a determination that the
proposed transaction will not unreasonably affect competition
among banking institutions, that the public convenience and advantage
will be promoted and it must receive notice from the
Massachusetts Housing Partnership Fund that arrangements
satisfactory to the Fund have been made for the acquiring bank
holding company to make .9% of its assets available for a period
of ten years for financing, down payment assistance, share loans,
closing costs and other costs related to programs promoted by
that Fund, including those related to creating affordable rental
housing, limited equity cooperatives, and tenant management programs.
Subsidiary Bank - General. Rockland is subject
to extensive regulation and examination by the
Commissioner and by the FDIC, which insures its
deposits to the maximum extent permitted by law, and
to certain requirements established by the Federal Reserve.
The federal and state laws and regulations which are applicable
to banks regulate, among other things, the scope of their
business, their investments, their reserves against
deposits, the timing of the availability of deposited
funds and the nature and amount of and collateral for
certain loans. The laws and regulations governing Rockland
generally have been promulgated to protect depositors and not
for the purpose of protecting stockholders.
Deposit Insurance Premiums. Rockland currently
pays deposit insurance premiums to the FDIC based on a
single, uniform assessment rate established by the FDIC
for all BIF member institutions. The lowest assessment
rate which is presently applicable to BIF-member
institutions amounts to .04% of insured deposits per
annum. Under the FDIC's risk based assessment system,
institutions are assigned to one of three capital groups
which assignment is based solely on the level of an
institution's capital - "well capitalized, " "adequately
capitalized," and "undercapitalized" - which are defined
in the same manner as the regulations establishing the prompt
corrective action system under Section 38 of the Federal
Deposit Insurance Act ("FDIA"), as discussed below. These
three groups are then divided into three subgroups
which reflect varying levels of supervisory concern,
from those which are considered to be healthy to those
which are considered to be of substantial supervisory
concern. The matrix so created results in nine assessment
risk classifications, with rates ranging from .04% for
well capitalized, healthy institutions to .31%
for undercapitalized institutions with substantial
supervisory concerns. Rockland is presently "well
capitalized" and its premium as of January 1, 1996 has
been established at .04%. Due to the strength of the
financial institutions insured by the BIF and the
resultant level of the insurance fund, the FDIC gave a
refund to BIF insured banks in the third quarter of 1995
and excused the premium payment for the first two
quarters of 1996.
The Bank acquired the deposits of three branches of
a failed savings and loan association in 1994. These
deposits, which amount to approximately $21 million,
are insured by the SAIF. Due to the financial
condition of financial institutions insured by SAIF and
the level of that insurance fund, the premiums remain
higher than BIF insured deposits. The Bank currently
pays a rate of .23% of these insured deposits per annum.
Capital Requirements. The FDIC has promulgated
regulations and adopted a statement of policy regarding
the capital adequacy of state-chartered banks which,
like Rockland, are not members of the Federal Reserve
System. These requirements are substantially similar
to those adopted by the Federal Reserve regarding bank
holding companies, as described above.
The FDIC's capital regulations establish a minimum
3.0% Tier 1 leverage capital requirement for the most
highly rated state-chartered, nonmember banks, with an
additional cushion of at least 100 to 200 basis points
for all other state-chartered, nonmember banks, which
effectively will increase the minimum Tier 1 leverage
capital ratio for such banks to
4.0% or 5.0% or more. Under the FDIC's
regulations, the highest-rated banks are those that the
FDIC determines are not anticipating or experiencing
significant growth and have well diversified risk,
including no undue interest rate risk exposure,
excellent asset quality, high liquidity, good earnings
and in general which are considered strong banking
organizations, rated composite 1 under the Uniform
Financial Institutions Rating System. A bank having less
than the minimum leverage capital requirement shall,
within 45 days of the date as of which it receives notice
or is deemed to have notice that it is undercapitalized,
submit to its FDIC regional director for review and
approval a written capital restoration plan describing
the means and timing by which the bank shall achieve
its minimum leverage capital requirement. A bank which
fails to file such plan with the FDIC is deemed to be
operating in an unsafe and unsound manner, and could
subject the bank to a cease and desist order from the
FDIC. The FDIC's regulations also provide that any
insured depository institution with a ratio of Tier 1
capital to total assets that is less than 2.0% is deemed
to be operating in an unsafe or unsound condition
pursuant to Section 8(a) of the FDIA and is subject to
potential termination of deposit insurance. However,
such an institution will not be subject to an
enforcement proceeding thereunder solely on account of
its capital ratios if it has entered into and is in
compliance with a written agreement with the FDIC to
increase its Tier 1 leverage capital ratio to such
level as the FDIC deems appropriate and to take
such other action as may be necessary for the
institution to be operated in a safe and sound manner.
The FDIC capital regulation also provides for, among
other things, the issuance by the FDIC or its
designee(s) of a capital directive, which is a final
order issued to a bank that fails to maintain minimum
capital to restore its capital to the minimum leverage
capital requirement within a specified time period. Such
directive is enforceable in the same manner as a final
cease and desist order.
Pursuant to the requirements of the FDIA, each
federal banking agency has adopted or proposed
regulations relating to its review of and revisions to
its risk-based capital standards for insured
institutions to ensure that those standards take
adequate account of interest-rate risk, concentration
of credit risk and the risks of non traditional
activities, as well as to reflect the actual
performance and expected risk of loss on multi-
family residential loans.
Prompt Corrective Action. Under Section 38 of the
FDIA, as amended by the Federal Deposit Insurance
Corporation Improvement Act ("FDICIA"), each federal
banking agency has broad powers to implement a system
of prompt corrective action to resolve problems of
institutions which it regulates which are not
adequately capitalized. Under FDICIA, a bank shall be
deemed to be (i) "well capitalized" if it has total risk-
based capital of 10.0% or more, has a Tier 1 risk-based
capital ratio of 6.0% or more, has a Tier 1 leverage
capital ratio of 5.0% or more and is not subject to any
written capital order or directive; (ii) "adequately
capitalized" if it has a total risk-based capital ratio
of 8.0% or more, a Tier 1 risk-based capital ratio of 4.0%
or more, a Tier 1 leverage capital ratio of 4.0% or more
(3.0% under certain circumstances) and does not meet the
definition of "well capitalized"; (iii) "undercapitalized"
if it has a total risk-based capital ratio that is less than
8.0%, or a Tier 1 risk-based capital ratio that is less than
4.0% or a Tier 1 leverage capital ratio of less than 4.0%
(3.0% under certain circumstances); (iv) "significantly
undercapitalized" if it has a total risk-based capital ratio
that is less than 6.0%, or a Tier 1 risk-based capital ratio
that is less than 3.0%, or a Tier 1 leverage capital ratio
that is less than 3.0%; and (v) "critically
undercapitalized" if it has a ratio of tangible equity
to total assets that is equal to or less than 2.0%.
FDICIA also specifies circumstances under which a federal
banking agency may reclassify a well capitalized
institution as adequately capitalized and may require an
adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it
were in the next lower category (except that the FDIC may
not reclassify a significantly undercapitalized
institution as critically undercapitalized). As of
December 31, 1995, Rockland was deemed a "well-
capitalized institution" for this purpose.
Brokered Deposits. FDICIA restricts the use of
brokered deposits by certain depository institutions.
Well capitalized insured depository institutions may
solicit and accept, renew or roll over any brokered deposit
deposit without restriction. Adequately capitalized insured
depository institutions may not accept, renew or roll over
any brokered deposit unless they have applied for and
been granted a waiver of this prohibition by the
FDIC. Undercapitalized insured depository institutions
may not (i) accept, renew or roll over any brokered
deposit or (ii) solicit deposits by offering an
effective yield that exceeds by more than 75 basis
points the prevailing effective yields on insured
deposits of comparable maturity in such institution's
normal market area or in the market area in which such
deposits are being solicited. While Rockland can solicit
and accept brokered deposits, the Bank historically has not
relied upon brokered deposits as a source of funding and, at
December 31, 1995, the Bank did not have any brokered
deposits. See "Sources of Funds - Deposits. "
Safety and Soundness. In August, 1995, the
FDIC adopted regulations pursuant to FDICIA relating to
operational and managerial safety and soundness
standards for financial institutions relating to
internal controls, information systems and internal
audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth and compensation,
fees, and benefits. The standards are to serve as
guidelines for institutions to help identify potential
safety and soundness concerns. If an institution fails
to meet any safety and soundness standard, the FDIC may
require it to submit a written safety and soundness compliance
plan within thirty (30) days following a request therefor, and
if it fails to do so or fails to correct safety and soundness
deficiencies, the FDIC may take administrative enforcement
action against the institution, including assessing civil
money penalties, issuing supervisory orders and other available remedies.
Miscellaneous. Rockland is subject to
certain restrictions on loans to the Company, on
investments in the stock or securities thereof, on the
taking of such stock or securities as collateral for
loans to any borrower, and on the issuance of a
guarantee or letter of credit on behalf of the
Company. Rockland also is subject to certain
restrictions on most types of transactions with the
Company, requiring that the terms of such
transactions be substantially equivalent to terms of similar
transactions with non-affiliated firms. In addition
under state law, there are certain conditions for and
restrictions on the distribution of dividends to the
Company by Rockland.
In addition to the laws and regulations
discussed above, regulations have been promulgated under
FDICIA which increase the requirements for
independent audits, set standards for real estate lending
and increase lending restrictions with respect to bank officers
and directors. FDICIA also contains provisions which amend
various consumer banking laws, limit the ability of
"undercapitalized banks" to borrow from the Federal
Reserve Board's discount window, and require regulators
to perform annual on-site bank examinations.
Regulatory Enforcement Authority. The Financial
Institutions Reform, Recovery, and Enforcement Act of
1989 ("FIRREA") included substantial enhancement to the
enforcement powers available to federal banking
regulators, This enforcement authority includes, among
other things, the ability to assess civil money penalties,
to issue cease and desist or removal orders and to
initiate injunctive actions against banking
organizations and institution-affiliated
parties, as defined. In general, these enforcement
actions may be initiated for violations of laws and
regulations and unsafe or unsound practices. Other
actions or inactions may provide the basis for
enforcement action, including misleading or untimely
reports filed with regulatory authorities. FIRREA
significantly increased the amount of and grounds for
civil money penalties and requires, except under certain
circumstances, public disclosure of final enforcement
actions by the federal banking agencies.
The foregoing references to laws and regulations
which are applicable to the Company and Rockland
are brief summaries thereof which do not purport to be
complete and which are qualified in their entirety by
reference to such laws and regulations.
Federal Taxation. The Company and its subsidiaries
are subject to those rules of federal income taxation
generally applicable to corporations under the Internal
Revenue Code (the "Code"). The Company and its
subsidiaries, as members of an affiliated group of
corporations within the meaning of Section 1504 of the
Code, file a consolidated federal income tax return, which
has the effect of eliminating or deferring the tax
consequences of inter-company distributions, including
dividends, in the computation of consolidated taxable
income.
State Taxation. The Commonwealth of
Massachusetts imposes a tax on the Massachusetts net
income of banks at a rate of 12.13% as of December 31,
1995. As a result of legislation in 1995, the state
tax rate for financial institutions and their related
corporations will be gradually reduced to 10.5% by January 1,
1999. In addition, the Company is subject to an excise tax
at the rate of .26% of its net worth. The Bank's
security corporation subsidiary will, for state tax purposes,
continue to be taxed at a rate of 1.32% of its gross income.
Massachusetts net income for banks is generally similar to
federal taxable income except deductions with respect to
the following items are generally not allowed: (i)
dividends received, (ii) losses sustained in other
taxable years, and (iii) income or franchise taxes
imposed by other states. The Company is permitted to
carry a percentage of its losses forward for not more
than five years, while Rockland is not permitted to carry
its losses forward or back for Massachusetts tax
purposes.
For additional information, see Note 8 of the Notes
to Consolidated Financial Statements included in Item 8
hereof.
Item 2. Properties
At February 29, 1996, the Bank conducted its
business from its headquarters and main office at 288
Union Street, Rockland, Massachusetts, and 32 other
branch offices located in Southeastern Massachusetts in
Plymouth County, Bristol County and Norfolk County. In
addition to its main office, the Bank owns four of its
branch offices and leases the remaining 28 offices.
Of the branch offices which are leased by the Bank, 16
have remaining lease terms, including options renewable
at the Bank's option, of five years or less, nine have
remaining lease terms of greater than five years and less
than 10 years, and three have remaining lease terms of
10 years or more. The Bank's aggregate rental expense
under such leases was $1.6 million in 1995. Certain of
the Bank's branch offices are leased from companies with
whom directors of the Company are affiliated. The
Bank leases space for its Trust and Financial Services
Division in a building in Hanover, Massachusetts developed by a
joint venture consisting of the Bank and A. W. Perry, Inc.,
and a building in Attleboro. It also leases office space
in two buildings in Rockland, Massachusetts for
administrative purposes as well as space in four additional
facilities used as lending centers. At December 31,
1995, the net book value of the property and
leasehold improvements of the offices of the Bank
amounted to $4.9 million. The Bank's properties which are
not leased are owned free and clear of any mortgages. The
Bank believes that all of its properties are well
maintained and are suitable for their respective present
needs and operations. For additional information
regarding the Bank's lease obligations, see Note 12 to
the Consolidated Financial Statements, included in
Item 8 hereof.
Item 3. Legal Proceedings
The Company is involved in routine legal
proceedings which arise in the ordinary course of
business. Management has reviewed these actions with
legal counsel and has taken into consideration the view of
counsel as to the outcome of the litigation. In the
opinion of management, final disposition of these
lawsuits is not expected to have a material adverse
effect on the Company's financial position or results of
operation.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The information required herein is incorporated by
reference from page 40 of the Company's 1995 Annual Report
to Stockholders ("Annual Report"), which is included herein
as Exhibit 13.
Item 6. Selected Financial Data
The information required herein is incorporated by reference from
page 5 of the Annual Report.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information required herein is incorporated
by reference from pages 6 through 19 of the Annual Report.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data
required herein are incorporated by reference from pages 20
through 37 of the Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required herein is incorporated by reference
from the Company's definitive proxy statement (the "Proxy Statement")
relating to its 1996 Annual Meeting of Stockholders filed with the
Commission on March 25,1996.
Item 11. Executive Compensation
The information required herein is incorporated by reference
from the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required herein is incorporated by reference from
the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required herein is incorporated by
reference from the Proxy Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) The following financial statements are incorporated herein
by reference from pages 20 through 37 of the Annual Report.
Report of Independent Public Accountants
Consolidated balance sheets as of December 31, 1995 and 1994
Consolidated statements of income for each of the years in the three
year period ended December 31, 1995
Consolidated statements of cash flows for each of the years in the
three year period ended December 31, 1995
Notes to Consolidated Financial Statements
(a)(2) There are no financial statement schedules filed herewith.
All information required by financial statement schedules is disclosed
in Notes to Consolidated Financial Statements or is not applicable to the
Company.
(a)(3) The following exhibits are filed as part of this report.
EXHIBIT INDEX
No. Exhibit Page
3.(i) Restated Articles of Organization, as (5)
amended to date
3.(ii) Bylaws of the Company, as amended (1)
to date
4.1 Specimen Common Stock Certificate (4)
4.2 Specimen Preferred Stock Purchase (2)
Rights Certificate
4.3 Amended and Restated Independent (6)
Bank Corp. 1987 Incentive Stock
Option Plan ("Stock Option Plan").
(Management contract under Item
601(10)(iii)(A).
10.1 Second amended and Restated E -37
Employment Agreement between the
Company, Rockland and Douglas H.
Philipsen, dated February 21, 1996
("Philipsen Employment Agreement").
(Management contract under Item
601(10)(iii)(A).
10.2 Second amended and Restated E - 57
Employment Agreement between Rockland
Trust Company and Richard F. Driscoll,
dated January 19, 1996 (the "Driscoll
Agreement"). Employment Agreements
between Rockland and Richard J.
Seaman, Ferdinand T. Kelley, S. Lee
Miller, and Raymond G. Fuerschbach
are substantially similar to the
Driscoll agreement. (Management
contract under Item 601(10)(iii)(A)
10.3 Rockland Trust Company Deferred (3)
Compensation Plan for Directors, as
Amended and Restated dated September
1992. (Management contract under Item
601(10)(iii)(A)
10.4 Stockholders Rights Agreement, dated (2)
January 24, 1991, between the Company
and Rockland, as Rights Agent
10.5 Master Securities Repurchase (3)
Agreement
13 Annual Report to Stockholders E - 76
21 Subsidiaries of the Registrant (3)
23 Consent of Independent Public E- 120
Accountants
Footnotes:
(1) Incorporated by reference from the Company's report
on Form 10-K for the year ended December 31, 1990.
(2) Exhibit is incorporated by reference to the Form 8-A
Registration Statement (No. 0-19264) filed by the
Company.
(3) Exhibit is incorporated by reference to the Form S-1
Registration Statement (No. 33-52216) filed by the
Company.
(4) Incorporated by reference from the Company's report
on Form 10-K for the year ended December 31, 1992.
(5) Incorporated by reference from the Company's report
on Form 10-K for the year ended December 31, 1993.
(6) Incorporated by reference from the Company's report
on Form 10-K for the year ended December 31, 1994.
(b) There were no reports on Form 8-K filed by the
Company during the three months ended
December 31, 1995.
(c) See (a)(3) above for all exhibits filed
herewith and the Exhibit Index.
(d) All schedules are omitted as the required
information is not applicable or the information
is presented in the Consolidated Financial
Statements or related notes.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 14, 1996 /s/ John F. Spence, Jr.
John F. Spence, Jr.
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the
followings persons on behalf of the Registrant and in the
capacities and on the dates indicated. Each person whose
signature appears below hereby makes, constitutes and
appoints Douglas H. Philipsen, John F. Spence, Jr., Richard
Seaman and each of them acting individually, his true and
lawful attorneys, with full power to sign for such person
and in such person's name and capacity indicated below any
and all amendments to this Form 10-K, hereby ratifying and
confirming such person's signature as it may be signed by
said attorneys to any and all amendments.
/s/ Richard S. Anderson Date: March 14, 1996
Richard S. Anderson
Director
/s/ Donald K. Atkins Date: March 14, 1996
Donald K. Atkins
Director
/s/ W. Paul Clark Date: March 14, 1996
W. Paul Clark
Director
/s/ Robert L. Cushing Date: March 14, 1996
Robert L. Cushing
Director
/s/ Benjamin A. Gilmore, II Date: March 14, 1996
Benjamin A. Gilmore, II
Director
/s/ James T. Jones Date: March 14, 1996
James T. Jones
Director
/s/ Lawrence M. Levinson Date: March 14, 1996
Lawrence M. Levinson
Director
/s/ Douglas H. Philipsen Date: March 14,1996
Douglas H. Philipsen
Director and President
/s/ Richard H. Sgarzi Date: March 14, 1996
Richard H. Sgarzi
Director
/s/ Robert J. Spence Date: March 14, 1996
Robert J. Spence
Director
/s/ William J. Spence Date: March 14, 1996
William J. Spence
Director
/s/ Brian S. Tedeschi Date: March 22, 1996
Brian S. Tedeschi
Director
/s/ Thomas J. Teuten Date: March 14, 1996
Thomas J. Teuten
Director
/s/ Richard J. Seaman Date: March 14, 1996
Richard J. Seaman
Chief Financial Officer and Treasurer
(principal financial and accounting
officer)
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT, dated and effective as of December 12, 1991
by and between Rockland Trust Company, a Massachusetts trust
company (the "Company"), Douglas H. Philipsen, of Duxbury,
Massachusetts, (the "Executive"), and Independent Bank
Corp., a Massachusetts corporation ("IBC"), as amended by a
certain Amendment to Employment Agreement dated as of
February 3, 1993 and as amended and restated as of June 21,
1994, and as further amended by a certain Amendment No. 1 to
Amended and Restated Employment Agreement dated as of
January 12, 1995, and as further amended by Amendment No. 2
to Amended and Restated Employment Agreement dated as of
October 17, 1995 (the "Employment Agreement") and as amended
and restated as of this 21st day of February, 1996.
W I T N E S S E T H:
WHEREAS, the Executive, the Company and IBC are
desirous of amending certain provisions of the Employment
Agreement to change the term of the Employment Agreement to
a rolling thirty-six (36) month term, on the terms and
conditions herein set forth; and
WHEREAS, the Executive, the Company and IBC are
desirous of setting forth provisions relating to the
benefits to which the Executive will be entitled upon his
death or disability; and
WHEREAS, the Executive, the Company and IBC are
desirous of amending the Employment Agreement as set forth
above and restating for the second time the amended
Employment Agreement as herein set forth.
NOW, THEREFORE, in consideration of the mutual
covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as
follows:
1. Employment; Position and Duties; Exclusive Services.
(a) Employment. The Company and IBC agree to
employ the Executive, and the Executive agrees to be
employed by the Company and IBC for the Term provided in
Section 2 below and upon the other terms and conditions
hereinafter provided.
(b) Position and Duties/Company. So long as the
Executive is employed by the Company, the Executive (i)
agrees to serve as the President and Chief Executive
Officer of the Company and to perform such reasonable duties
consistent with such position as may be delineated in the By-
Laws of the Company and as may be assigned to him from time
to time by the Board of Directors of the Company (the
"Board"), (ii) shall report, as President and Chief
Executive Officer of the Company, only to the Board and its
duly appointed committees (iii) shall serve as a member of
the Board and of any executive or other committee thereof,
if applicable, (iv) shall be given such authority as is
appropriate to carry out the duties described above, it
being understood that, in his capacities as President and
Chief Executive Officer of the Company, his duties shall be
consistent in scope, prestige and authority with the
customary duties of a President and Chief Executive Officer
of a comparable corporation, and (v) agrees to serve, if
elected, at no additional compensation (if the other
officers or directors who are officers of the Company also
serve at no additional compensation) in the position of
officer or director of any subsidiary or affiliate of the Company.
No other employee will hold the title of "Chief Operating Officer"
without the Executive's express permission.
(c) Position and Duties/IBC. So long as the Executive
is employed by the Company, the Executive agrees to serve as
the President of IBC and to perform such reasonable duties
consistent with such position as may be delineated in the By-
Laws of IBC and as may be assigned to him from time to time
by the Board of Directors of IBC (the "IBC Board"). In the
event at any time during the term John F. Spence, Jr. shall
cease to serve as Chief Executive Officer of IBC, the
Executive shall succeed to such position and shall serve in
such position during the remainder of the Term at no
additional compensation. It is acknowledged by the parties
hereto that as President of IBC (and as Chief Executive
Officer, if such becomes the case), the Executive shall
report only to the IBC Board and its duly appointed
committees and not to any other officer regardless of title.
(d) Exclusive Services. So long as the Executive is
employed by the Company, and except for illness or
incapacity, the Executive shall devote all of his business
time, attention, skill and efforts exclusively to the
business and affairs of the Company, IBC and its affiliates,
shall not be engaged in any other business activity, and
shall perform and discharge well and faithfully the duties
which may be assigned to him from time to time by the Board
and the IBC Board; provided, however, that nothing in this
Agreement shall preclude the Executive from devoting
reasonable time during reasonable periods required for any
or all of the following:
(i) serving, in accordance with the
Company's policies and with the prior approval of the Board,
as a director or member of a committee of any other company
or organization involving no actual or potential conflict of
interest with the Company, IBC or any of their subsidiaries
or affiliates;
(ii) investing his personal assets in
businesses in which his participation is solely that of a
passive investor in such form or manner as will not require
any services on the part of the Executive in the operation
or affairs of such businesses;
(iii) managing the commercial farming
activities of the Executive's Johnson, Vermont farm
property, provided the scope of such activities are
consistent with current operations; provided, however, that
such activities in the aggregate shall not materially and
adversely affect or interfere with the performance of the
Executive's duties and obligations to the Company or IBC hereunder.
2. Term of Employment.
The Company hereby agrees to employ the Executive,
and the Executive hereby agrees to accept such employment in
the capacity set forth herein, for a period commencing
December 16, 1991 ("Commencement Date") and ending thirty-
six (36) months from the date of termination or resignation
(as defined in Section 6(a)(v) hereof). The term of this
Agreement, as hereinabove defined shall hereinafter be
referred to as the "Term."
3. Cash Compensation.
Except as otherwise specifically provided herein,
as compensation to the Executive for all services to be
rendered by him in any capacity hereunder, the Company shall
pay during the Term an annual base salary at the current
rate of Two Hundred Seventy-Five Thousand and No/100 Dollars
($275,000) per annum ("Base Salary"), payable no less
frequently than bi-weekly. The Board may from time to time
at its discretion review the compensation provisions of this
Agreement and shall have the authority to pay an increased
base salary, and/or bonus and/or other additional
compensation to the Executive, but in no event shall any
such compensation adjustment reduce the base salary below
the rate hereinabove specified.
4. INTENTIONALLY OMITTED
5. Benefits.
Except as otherwise specifically provided herein,
so long as the Executive is employed by the Company, the
Executive shall be entitled to the following benefits:
(a) Travel and Business Related Expenses. Until
the earlier of the end of the Term or the Executive's
purchase pursuant to Section 5(b)(i)(E) hereof, the
Executive shall be provided with a Company owned automobile
and reimbursed in accordance with the policies of the
Company as in effect from time to time for travel and other
reasonable expenses incurred in the performance of the
business of the Company.
(b) Group Life Insurance. The Company agrees to
include the Executive under the Company's group term life
insurance policy in accordance with the policies of the
Company as in effect from time to time. The Company shall
pay all premiums for such coverage.
(c) Sick Leave/Disability. The Executive will
enjoy the same sick leave and short term and long term
disability coverage as employees of the Company generally.
(d) Retirement Plans. The Executive will be
eligible to participate in the Company's retirement benefit
plans (collectively the "Plans") each in accordance with the
terms of the Plans.
(e) Vacation/Holidays. The Executive will
receive four (4) weeks paid vacation, on an "as earned"
basis each year and will receive ten (10) holidays each
year.
(f) Insurance. The Executive shall participate
in all insurance programs (medical, dental, surgical,
hospital) adopted by the Company, including dependent
coverage, to the same extent as other executives of the
Company.
(g) 401K Profit Sharing Plan and Other Incentive
Compensation Plans. The Executive will be eligible to
participate in the Company's profit sharing and other
management incentive compensation plans each in accordance
with their respective terms.
(h) Taxes. Except as otherwise specifically
provided herein, the Executive recognizes that some or all
of these benefits may give rise to a federal and/or state
income tax liability, and agrees to be responsible for such
liability.
(i) Split Dollar Agreement. Notwithstanding
anything to the contrary contained herein, the Company agrees to
gross-up the compensation of the Executive in an amount determined by
the Company as necessary to reimburse the Executive for (A)
an amount equal to the sum of all applicable federal and
state income and employment tax incurred by the Executive on
account of the P.S.58 benefit in the insurance policy
described under a Split Dollar Agreement dated as of
December 23, 1994 by and between the Company and the
Executive, as amended from time to time, (the "Split Dollar
Agreement"), and (B) the cost of any insurance policy that
the Executive purchases for the waiver of premiums on the
insurance policy described in the Split Dollar Agreement in
the event of his disability, and (C) the tax effect of the
reimbursements set forth in (A) and (B) hereof, and to pay
such amounts to the Executive in a lump sum payment no later
than three (3) business days prior to the earliest date on
which any such federal or state income and employment taxes
are due on account of such P.S.-58 benefit and/or the cost
for the waiver of premiums. This clause (i) of Section 5
shall remain in full force and effect and shall survive any
termination of the Executive and of this Agreement by reason
of the disability of the Executive, provided however that
the Company's obligation to gross up the compensation of the
Executive under this Section 5(i) for the amounts described
above in Section 5(i)(A) and (C) at any time following
termination of the Executive and this Agreement by reason of
disability, shall be limited to such number of years for
which premiums on the Split Dollar Agreement continue to be
payable by the Company under the terms of the Split Dollar
Agreement.
6. Termination of Employment.
(a) Termination for Cause; Resignation Without Good
Reason.
(i) If the Executive is terminated by the
Board for any reason other than for Cause, as defined below
in Section 6(a)(iii), such termination shall be deemed to be
without Cause, or if the Executive should resign for Good
Reason, as defined below in Section 6(a)(iv), prior to the
expiration of the Term, the Executive shall be entitled to
the payments and benefits provided in Section 6(b)(i).
Notwithstanding anything to the contrary contained in this
Agreement, the Executive shall be entitled to the payments
and benefits set forth in Section 6(b)(i) hereof in all
cases in the event the Executive ceases to be an employee of
the Company for any reason (other than death or disability
(as defined in Section 6(e) hereof)) at any time following a
Change of Control.
(ii) If the Executive's employment is
terminated by the Company for Cause or if the Executive
resigns from his employment for any reason other than death,
disability (as defined in Section 6(e) hereof) or for Good
Reason, as defined below in Section 6(a)(iv), prior to the
expiration of the Term, the Executive shall have no right to
receive compensation or other benefits for any period after
such termination for Cause or resignation for any reason
other than death, disability or for Good Reason, except as
may be required by law and except that the Executive's
rights to exercise his stock options in the event his
employment terminates shall be governed by the Independent
Bank Corp. 1987 Incentive Stock Option Plan and/or any other
relevant stock option plans, as appropriate (the "Plans")
and the relevant stock option agreement.
(iii) Termination for "Cause" shall mean
action by the Board to terminate the service of the
Executive with the Company at any time because of: (A) the
Executive's conviction of, or plea of nolo contendre to, a
felony or crime involving moral turpitude; (B) activities
involving the Executive's personal profit as a result of his
dishonesty, incompetence, willful misconduct, willful violation
of any law, rule, or regulation, or breach of fiduciary duty; (C)
the Executive's commission of an act involving gross negligence on
the part of the Executive in the conduct of his duties hereunder; (D)
drug addiction on the part of the Executive; or (E) the
Executive's material breach of any provision of this
Agreement; provided, however, that, in the case of any
termination pursuant to clauses (C), (D), or (E) above, the
Company shall give the Executive thirty (30) business days'
written notice thereof, an opportunity to cure within such
thirty (30) day period, and a reasonable opportunity to be
heard by the Board to show just cause for his actions, and
to have the Board, in its discretion, reverse or rescind the
prior action of the Board under the clause(s).
(iv) Resignation for "Good Reason" shall mean
the resignation of the Executive after (A) the Company or
IBC, without the express written consent of the Executive,
materially breaches this Agreement to the substantial
detriment of the Executive; (B) the Board or the IBC Board,
without Cause (as defined in Section 6(a)(iii) above),
substantially changes the Executive's core duties or removes
the Executive's responsibility for those core duties, so as
to effectively cause the Executive to no longer be
performing the duties of Chief Executive Officer and
President of the Company and the President of IBC; (C) the
Board or the IBC Board, without Cause (as defined in Section
6(a)(iii) above) places another executive above the
Executive in the Company or IBC (except for the current
designation of John F. Spence, Jr. as Chief Executive
Officer of IBC); or (D) a Change of Control as defined in
Section 6(c) below; provided, however, that, in the case of
resignation pursuant to clauses (A) through (C) above, the
Executive shall give the Company or IBC, as the case may be,
30 business days' written notice thereof and, during such 30
day period, an opportunity to cure.
(v) The date of termination of employment by
the Company pursuant to Section 6(a) (or pursuant to Section
6(b) below) shall be the date that the written notice of
termination from the Company to the Executive is written,
and the Company agrees to use all good faith efforts to
deliver the written notice to the Executive as soon as
possible after the notice is written. The date of a
resignation by the Executive pursuant to this Section 6(a)
(or pursuant to Section 6(b) below) shall be the date
specified in the written notice of resignation from the
Executive to the Company.
(b) Termination Without Cause; Resignation for
Good Reason.
(i) If the Executive's employment is
terminated by the Company for any reason other than death,
disability (as defined in Section 6(e) hereof) or for Cause,
or, if the Executive should resign for Good Reason prior to
the expiration of the Term, he shall be entitled (A) to
receive a lump sum severance payment in an amount equal to
the Executive's then current base salary for the then
remaining portion of the Term, plus (B) all amounts due to
the Executive under Section 5(i) above shall be accelerated
and due and payable to the Executive, to the extent not paid
to the Executive as of the termination of this Agreement,
which payments shall be due immediately upon the termination
or resignation of the Executive's employment and, if not so
paid, shall bear interest at the rate of 15% per annum from
such date until paid, and (C) (1) to continue participation
in the plans and arrangements described in clauses (b) and
(f) of Section 5 hereof (to the extent permissible by law and the
terms of such plans and arrangements) for the then remaining
portion of the Term (the "Benefits Period"), or (2) at the
election of the Executive at any time following termination
of this Agreement and during the Benefits Period, to receive
a gross bonus payment in an amount which after payment
therefrom of all applicable federal and state income and
employment taxes, will equal the cost to the Company at the
time of the Executive's election, attributable to the
Executive's participation in the plans and arrangements
described in clauses (b) and (f) of Section 5 hereof for the
Benefits Period less any portion thereof during which the
Executive has continued his participation in such plans and
arrangements described in clause (b) and (f) of Section 5
hereof in accordance with subsection 6(b)(i)(C)(1) above;
which payment shall be due following termination or
resignation of the Executive's employment immediately upon
the Executive's delivery of written notice to the Company of
his election pursuant to subsection 6(b)(i)(C)(2), and if
not so paid, shall bear interest at the rate of 15% per
annum for such date until paid, and (D) to have all stock
options which have been granted to the Executive to
immediately become fully exercisable for a period of three
(3) months after the termination or resignation date (as the
case may be) in accordance with the terms of the Plans and
the relevant stock option agreement, and (E) upon his
written notice to the Company at any time within three
months following the termination or resignation date (as the
case may be), to purchase his Company owned automobile at a
purchase price equal to the book value of said automobile as
carried on the books and records of the Company, plus all
applicable excise taxes.
(ii) In the event of any dispute as to
whether the Executive's employment was terminated by the
Company for a reason other than for Cause or whether the
Executive resigned for Good Reason, the Executive shall
continue to be provided with the health insurance benefits
provided by the Company during the arbitration proceedings
provided for in Section 8 below. Further, any monies which
would be payable to the Executive pursuant to this Section
6(b) if the Executive were to prevail in such arbitration
proceedings shall be deposited promptly into interest
bearing escrow accounts to be established by the Company in
the name of the American Arbitration Association, as
trustee, in a federally insured depository institution
(other than the Company or any affiliated entity) for such
purpose, and the accounts shall be established at separate
institutions in amounts such that the principal plus
interest anticipated to accrue during the course of
arbitration proceedings shall not exceed the limit of
federal insurance applicable to each such account. The
total of the escrowed amounts, together with the accrued
interest thereon, shall be paid to the Executive or revert
to the Company, as the case may be, in accordance with the
final resolution of the dispute pursuant to Section 8.
(c) Change of Control.
(i) A "Change of Control" shall be deemed to
have occurred if, subsequent to the Commencement Date, (A)
any "person" (as such term is defined in Section 13(d) of
the Securities Exchange Act of 1934, as amended) is or
becomes the beneficial owner, directly or indirectly, of
either (x) a majority of either the Company's outstanding
common stock or IBC's outstanding common stock, or (y)
securities of the Company or IBC representing a majority of
the combined voting power of either the Company's then
outstanding voting securities or IBC's then outstanding
voting securities, or (B) during any period of two
consecutive years, individuals who at the beginning of such
period constitute the Board cease, at any time after the
beginning of such period, for any reason to constitute a majority
of the Board unless the election of each new director was
nominated or approved by at least two-thirds of the
directors then still in office who were either directors at
the beginning of such two-year period or whose nomination
for election was previously approved.
(ii) In the event any amount payable as
compensation to the Executive under this Agreement when
aggregated with any other amounts payable as compensation to
the Executive other than pursuant to this Agreement would
constitute a Parachute Payment (as hereinafter defined), the
amount payable as compensation under Section 6 (b)(i) of
this Agreement shall be reduced (but not below zero) to the
largest amount which is not a Parachute Payment (as
hereinafter defined) when aggregated with any other amounts
payable as compensation to the Executive other than pursuant
to this Agreement. For purposes hereof, the term Parachute
Payment shall have the meaning given to parachute payments
set out in Internal Revenue Code of 1986 280G(b)(2)(A)
(relating to the quantification of parachute payments) as
then in effect determined without regard to the provisions
of Internal Revenue Code of 1986 280G(b)(4) (relating to the
exclusion of reasonable compensation from parachute
payments) as then in effect. Notwithstanding the foregoing,
if the Executive proves to the satisfaction of the
Compensation Committee of the Board (if no such Compensation
Committee then is in existence, then any other committee of
the Board of the Company then performing the functions of a
compensation committee) with clear and convincing evidence
that all or any portion of the amount of the reduction
provided in the preceding sentence would not constitute a
parachute payment within the meaning of such term as defined
in Internal Revenue Code of 1986 280G(b)(2)(A) as then in
effect determined with regard to the provisions of Internal
Revenue Code of 1986 280G(b)(4) as then in effect and that
the Company's tax reporting position in regard to the
payment is overwhelmingly likely to be sustained, then the
reduction provided in the preced ing sentence shall be
adjusted to permit payment of so much of such reduction as
the said Compensation Committee determines will result in
the largest amount which would not constitute a parachute
payment within the meaning of such term as defined in
Internal Revenue Code of 1986 280G(b)(2)(A) as then in
effect determined with regard to the provisions of Internal
Revenue Code of 1986 280G(b)(4) as then in effect.
(d) Mitigation of Damages; Legal Fees. The Executive
shall not be required to mitigate the amount of any payment
or benefit provided for in Section 6(b) by seeking other
employment or otherwise, nor shall the amount of any payment
or benefit provided for in Section 6(b) be reduced by any
compensation earned by the Executive as a result of self-
employment or employment by another employer, by retirement
benefits or by offset against any amount claimed to be owed
by the Executive to the Company or otherwise. The Company
agrees to pay, as incurred, all legal fees and expenses
which the Executive may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the Company,
the Executive or others of the validity or enforceability
of, or liability under, any provision of this Agreement or
any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any
payment pursuant to this Agreement) plus in each case
interest on any delayed payment at the rate of fifteen
percent (15%) per annum.
(e) Termination by Reason of Death or Disability.
(i) Notwithstanding anything to the contrary
contained herein, in the event the Executive should die while
he is employed by the Company, the Executive's employment shall
be automatically terminated and the Company shall have no
further obligations under this Agreement to pay compensation
or benefits to the Executive or his estate, except to the
extent any compensation or benefits are due to the Executive
or his estate for any period prior to his death, provided,
however, that this Section 6(e)(i) shall not affect in any
manner any other benefits to which the Executive or his
estate may be entitled or which may vest or accrue upon his
death under any arrangement, program or plan with the
Company (other than this Agreement), by law or otherwise.
(ii) Except as set forth in Section 5(i)
hereof, notwithstanding anything to the contrary contained
herein, in the event the Executive should be unable to
perform his duties hereunder by reason of disability,
whether by reason of injury (physical or mental), illness
(physical or mental) or otherwise, incapacitating the
Executive for a continuous period exceeding one hundred and
eighty (180) days, as certified by a physician selected by
the Company in good faith, the Executive's employment may be
terminated by the Company upon written notice to the
Executive and upon such termination, the Company's only
obligations hereunder shall be to (A) pay to the Executive
an amount equal to fifty percent (50%) of the Executive's
Base Salary on the date of termination of employment for the
then remaining portion of the Term at such times as such
Base Salary would have been payable if the Executive had not
been terminated, less any benefits which the Executive
receives under any disability insurance program provided by
the Company and in effect at the date of such termination,
and (B) continue to permit the Executive to participate in
the plans and arrangements described in clause (b) and (f)
of Section 5 hereof (to the extent permissible by law and
the terms of such plans and arrangements) for the then
remaining portion of the Term; provided, however, that if
the Executive dies following a termination pursuant to this
Section 6(e)(ii), then the provisions of Section 6(e)(i)
shall supersede this Section 6(e)(ii) from and after the
date of death of the Executive.
(iii) The Executive's right to exercise his
stock options in the event of his death or disability shall
be governed by the terms of the Plans and the relevant stock
option agreement.
7. Confidentiality and Non Competition.
(a) Confidentiality. The Executive recognizes
and acknowledges as an employee of the Company, he will have
access to, become acquainted with, and obtain financial
information and knowledge relating to the business,
financial condition, methods of operation and other aspects
of the Company, its parent, subsidiaries and affiliates
("Affiliated Companies") and their customers, employees and
suppliers, some of which information and knowledge is
confidential and proprietary and that the Executive could
substantially detract from the value and business prospects
of the Affiliated Companies in the event, while employed by
the Company or any time thereafter, the Executive were to
disclose to any person not related to the Affiliated
Companies or use such information and knowledge for his or
such other person's advantage. Accordingly, the Executive
hereby agrees that he will not disclose to any person, other
than directors, officers, employees, accountants, lawyers,
consultants, advisors, agents and representative of, or
other persons related to, the Affiliated Companies on a need
to know basis in the course of carrying out his duties
hereunder, any knowledge or information of a confidential
nature pertaining to the Affiliated Companies,
or their successors and assigns, including without
limitation, all unpublished matters relating to the
business, properties, accounts, books and records, business
plan and customers of the said corporations, or their
successors and assigns, except with the prior written
approval of the Board of Directors of the Company, or except
as may be required by law.
(b) Equitable Relief. The Executive acknowledges
and agrees (i) that the provisions of this Section 7 are
reasonable and necessary for the protection of the Company,
its subsidiaries and affiliates or its or their successors
and assigns, and (ii) that the remedy at law for any breach
by him of the provisions of this Section 7 will be
inadequate and, accordingly, the Executive hereby agrees
that in the case of any such breach (i) the Company or its
successors and assigns shall be entitled to injunctive
relief, in addition to any other remedy they may have, and
(ii) the Executive shall forfeit any future payments or
benefits to which he might be entitled hereunder.
(c) Non-Solicitation/Non Competition. For a
period of one (1) year after the Executive receives any
compensation pursuant to this Agreement he will not (i)
solicit, divert or take away, directly or indirectly, any
Major Customer of the Company, its parent, subsidiaries or
affiliates, or its or their successors and assigns, or (ii)
directly or indirectly induce or attempt to influence any
employee of the Company, its parent or any of its
subsidiaries or affiliates, or their successors and assigns,
to terminate his employment with the Company, its parent or
any of its subsidiaries or affiliates or their successors or
assigns. As used herein, "Major Customer" shall mean any
customer of the Company who has maintained an average
deposit balance of at least $100,000 during the last six
months of the Term or who has maintained or obtained a
credit facility of at least $100,000 from the Company during
the last six months of the Term.
(d) Enforceability. The covenants on the part of
the Executive contained in this Section 7 shall be construed
as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action
by the Executive against the Company or IBC, whether
predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of
said covenants. This Section shall survive the termination
of this Agreement. The period, geographical area and the
scope of the restrictions on the Executive set forth herein
are divisible so that if any provision of this Section 7 is
invalid, that provision shall be automatically modified to
the extent necessary to make it valid.
8. Disputes.
(a) Any dispute relating to this Agreement, or to
the breach of this Agreement, arising between the Executive
and the Company, IBC or any of their affiliates or
subsidiaries shall be settled by arbitration in accordance
with the commercial arbitration rules of the American
Arbitration Association ("AAA"). The arbitration
proceeding, including the rendering of an award, shall take
place in Boston, Massachusetts, and shall be administered by
the AAA.
(b) The arbitral tribunal shall be appointed
within 30 days of the notice of dispute, and shall consist
of three arbitrators, one of whom shall be appointed by the
Company or IBC, one by the Executive, and the third by both
the Company or IBC and the Executive jointly; provided,
however, if the Company or IBC and the Executive do not
select the third arbitrator within such 30 day period, such
third arbitrator shall be chosen by the AAA as soon as
practicable following notice to the AAA by the parties of
their inability to choose such third arbitrator.
(c) The award of any such arbitral tribunal shall
be final except as otherwise provided by the laws of the
Commonwealth of Massachusetts and the Federal laws of the
United States, to the extent applicable. Judgment upon such
award may be entered by the prevailing party in any state or
federal court sitting in Boston, Massachusetts.
(d) No arbitration proceedings hereunder shall be
binding upon or in any way affect the interests of any party
other than the Company, IBC and the Executive with respect
to such arbitration.
9. Indemnification.
IBC and the Company shall indemnify the Executive
to the fullest extent permitted by the Massachusetts General
Corporation Law. This indemnification requires the advance
of expenses to the Executive, as permitted by such law. The
parties to this Agreement further agree that this Agreement
has been negotiated by each in an arm's length transaction,
and that each has been represented by counsel in the
negotiation and execution of the Agreement.
10. Tax Withholding and Excessive Payments.
(a) Payments to the Executive of all compensation
contemplated under this Agreement shall be subject to all
applicable legal requirements with respect to the
withholding of taxes and other deductions required by law.
(b) In the event the sum of (A) the amount
payable to the Executive hereunder which is characterized as
applicable employee remuneration for federal income tax
purposes under Internal Revenue Code of 1986, 162(m)(4) for
any tax year of the Company and (B) the aggregate of all
other amounts which are characterized as applicable employee
remuneration under Internal Revenue Code of 1986, 162(m)(4)
paid by the Company in respect to the Executive for such tax
year exceeds (C) $1,000,000 (or such greater or lesser sum
as equals the maximum amount allowable as a deduction to the
Company for federal income tax purposes under Internal
Revenue Code of 1986, 162(m) in respect to applicable
employee remuneration to the Executive for such tax year),
the amount payable hereunder in respect to such year shall
be reduced (but not below zero) to the amount which shall
result in the sum of (D) the amount payable hereunder which
is characterized as applicable employee remuneration under
said 162(m)(4) and (E) all other remuneration paid by the
Company in respect to the Executive for such tax year which
is characterized as applicable employee remuneration under
said 162(m)(4) equaling (F) $1,000,000 (or such greater or
lesser sum as equals the maximum amount allowable as a
deduction to the Company for federal income tax purposes
under said 162(m) in respect to applicable employee
remuneration under said 162(m)(4) to the Executive for such
tax year. If, after the maximum reduction in the preceding
sentence, any other amounts remain payable otherwise than
under this Agreement which would, if paid, be applicable
employee remuneration (as defined above) in excess of the
amount which is allowable as a deduction for the same under
said 162(m), such amounts shall be reduced to the maximum
amount allowable as a deduction to the Company for federal
income tax purposes under said 162(m) in respect to
applicable employee remuneration to the Executive for such
tax year. So much of the amount of the reductions provided
in the two preceding sentences as may be paid in the tax year
of the Company next succeeding without resulting in a disallowance
of a federal income tax deduction under said 162(m) in respect to the
portion of such reduction so paid shall be paid on the first
business day in such succeeding tax year. If the full
amount of such reductions is not paid in such tax year of
the Company next succeeding, the remainder of such reduction
shall be paid in installments equal to the lesser of (G) the
unpaid balance of such reduction or (H) the amount which may
be paid in each successive tax year without resulting in a
disallowance of a federal income tax deduction under said
162(m) in respect to the portion of such reduction so paid
until the full amount of such reductions have been paid.
References to sections of the Internal Revenue Code of 1986
shall refer to the successors (to the sections cited as
presently constituted) which are in effect when applied.
11. Non-Assignability; Binding Agreement.
Neither this Agreement nor any right, duty,
obligation or interest hereunder shall be assignable or
delegable by the Executive without the Company's prior
written consent; provided, however, that (i) nothing in this
Section shall preclude the Executive from designating any of
his beneficiaries to receive any benefits payable thereunder
upon his death or disability, or his executors,
administrators, or other legal representatives, from
assigning any rights hereunder to the person or persons
entitled thereto, and (ii) any successor to the Company or
IBC pursuant to any merger or consolidation involving the
Company or IBC, and any purchaser of all or substantially
all the assets of the Company or IBC, shall succeed to the
rights and assume the obligations of the Company or IBC
under this Agreement, and the Company and IBC covenant that
they will not enter into or consummate any such transaction
which does not make express provision for such succession
and assumption. Subject to the foregoing, this Agreement
shall be binding upon, and inure to the benefit of, the
parties hereto, any successors to or assigns of the Company
and IBC, the Executive's heirs and the personal
representatives of the Executive's estate.
12. Amendment; Waiver.
This Agreement may not be modified, amended or
waived in any manner except by an instrument in writing
signed by the parties hereto. The waiver by any party of
compliance with any provision of this Agreement by the other
party shall not operate or be construed as a waiver of any
provision of this Agreement.
13. Notices.
Any notice hereunder by either party to the other
shall be given in writing by personal delivery, telex,
telecopy or certified mail, return receipt requested, to the
applicable address set forth below:
(i) To the Company: Rockland Trust Company
or IBC
288 Union Street
Rockland, MA 02370
(ii) To the Executive: Douglas H. Philipsen
634 Chandler
Street Duxbury, MA 02332
(or such other address as may from time to time be designated
by notice by either party hereto for such purpose). Notice shall
be deemed given, if by personal delivery, on the date of such
delivery or, if by telex or telecopy, on the business day
following receipt of answer back or telecopy confirmation or if
by certified mail, on the date shown on the applicable return
receipt.
14. Governing Law.
This Agreement is to be governed by and interpreted
in accordance with the laws of the Commonwealth of
Massachusetts. If, under such law, any portion of this
Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation or ordinance, such portion
shall be deemed to be modified or altered to conform thereto
or, if that is not possible, to be omitted from this Agreement,
and the invalidity of any such portion shall not affect the
force, effect and validity of the remaining portion thereof.
15. Supersedes Previous Agreements.
This Agreement and the Split Dollar Agreement
constitute the entire understanding between the Company, IBC
and the Executive relating to the employment of the Executive
by the Company and supersedes and cancel all prior written and
oral agreements and understandings with respect to the subject
matter of this Agreement. Except as otherwise specifically
provided herein, all amounts payable to the Executive or the
Company under the Split Dollar Agreement shall be exclusively
governed by the terms of the Split Dollar Agreement.
16. Counterparts.
This Agreement may be executed by the parties hereto
in counterparts, each of which shall be deemed to be an
original, but such counterparts shall together constitute one
and the same instrument.
17. Joint and Several Liability.
The obligations and liability of IBC and the Company
hereunder shall be joint and several.
IN WITNESS WHEREOF, the parties have executed this Second
Amended and Restated Employment Agreement as of the date first
above written.
ROCKLAND TRUST COMPANY
By:_____________________________
Its:____________________________
INDEPENDENT BANK CORP.
By:_____________________________
Its:____________________________
________________________________
DOUGLAS H. PHILIPSEN
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Amended and restated employment agreement dated and
effective as of March 4, 1992 by and between Rockland Trust
Company, a Massachusetts trust company (the "Company") and
Richard F. Driscoll of Plymouth, Massachusetts (the
"Executive"), as amended by a certain amendment dated and
effective as of February 3, 1993, and as further amended and
restated as of October 31, 1994 and as further amended and
restated as of this 19th day of January, 1996 (the
"Employment Agreement").
W I T N E S S E T H
WHEREAS, the Executive and the Company are desirous of
amending certain provisions of the Employment Agreement to
provide that certain additional benefits be paid to the
Executive upon (a) the occurrence of a change of control of
Independent Bank Corp. ("IBC"), the parent bank holding
company of the Company, where such occurrence is followed by
a termination of the Executive's employment without cause or
the Executive's resignation with good reason as such terms
are defined herein, or (b) termination of the Executive's
employment for any reason during a thirty (30) day period
following the one year anniversary of a change of control,
on the terms and conditions herein set forth;
WHEREAS, the Executive and the Company are desirous of
amending the Employment Agreement as set forth above and
restating the amended Employment Agreement as herein set
forth.
NOW THEREFORE, in consideration of mutual covenants
herein contained, and other good and valuable consideration,
the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment; Position and Duties; Exclusive
Services.
(a) Employment. The Company agrees to employ the
Executive, and the Executive agrees to be employed by the
Company, for the Term provided in Section 2 hereof and upon
the other terms and conditions hereinafter provided.
(b) Position and Duties/Company. During the Term
as defined in Section 2 hereof, the Executive (i) agrees to
oversee and manage all the retail banking operations and
functions of the Company and hold the title of Executive
Vice President of the Company and to perform such reasonable
duties as may be assigned to him from time to time by the
President and Chief Executive Officer of the Company, and
(ii) shall report to the President and Chief Executive
Officer of the Company.
(c) Exclusive Services. During the Term, and
except for illness or incapacity, the Executive shall devote
all of his business time, attention, skill and efforts
exclusively to the business and affairs of the Company, and
its affiliates, shall not be engaged in any other business
activity, and shall perform and discharge well and
faithfully the duties which may be assigned to him from time
to time by the President and Chief Executive; provided,
however, that nothing in this Agreement shall preclude the
Executive from devoting reasonable time during
reasonable periods required for any or all of the following:
(i) serving, in accordance with the
Company's policies and with the prior approval of the
President and Chief Executive Officer of the Company, as a
director or member of a committee of any other company or
organization involving no actual or potential conflict of
interest with the Company, or any of its subsidiaries or
affiliates;
(ii) investing his personal assets in
businesses in which his participation is solely that of a
passive investor in such form or manner as will not require
any services on the part of the Executive in the operation
or affairs of such businesses and in such form or manner
which will not create any conflict of interest with or
create the appearance of any conflict of interest with, his
duties at the Company; provided, however, that such activities
in the aggregate shall not materially adversely affect or interfere
with the performance of the Executive's duties and obligations to the
Company hereunder.
2. Term of Employment.
The Company hereby agrees to employ the Executive,
and the Executive hereby agrees to accept such employment in
the capacity set forth herein, for a period commencing on
the date hereof ("Commencement Date") and ending "at will"
by either party upon written notice of termination by one
party given to the other at least fourteen (14) days prior
to the termination date specified in such notice, except as
provided by Section 5 hereof. The term of this Agreement, as
the same may be terminated pursuant to Section 5, shall
hereinafter be referred to as the "Term."
3. Cash Compensation. As compensation to the Executive
for all services to be rendered by him in any capacity
hereunder, the Company shall pay during the Term an annual
base salary at the current rate of One Hundred Fifty Eight
Thousand Six Hundred and 00/100 Dollars ($158,600.00) per
annum, payable no less frequently than bi-weekly ("Base
Salary"). The Board of Directors (the "Board") may from
time to time at its discretion review the compensation
provisions of this Agreement and shall have the authority to
pay an increased base salary, or bonus or other additional
compensation to the Executive.
4. Benefits.
(a) Travel and Business-Related Expenses. The
Executive shall be provided with a Company owned automobile
in accordance with the policies of the Company regarding
automobiles as in effect from time to time. During the
Term, the Executive shall be reimbursed in accordance with
the policies of the Company as in effect from time to time
for travel and other reasonable expenses incurred in the
performance of the business of the Company.
(b) Group Life Insurance. The Company agrees to
include the Executive under the Company's group term life
insurance policy in accordance with the policies of the
Company as in effect from time to time. The Company shall
pay all premiums for such coverage.
(c) Sick Leave/Disability. The Executive will
enjoy the same sick leave and short term and long term
disability coverage as in effect from time to time for
employees of the Company generally.
(d) Retirement Plans. The Executive will be
eligible to participate in the Company's retirement benefit
plans each in accordance with the terms of such plans as in
effect from time to time.
(e) Vacation/Holidays. The Executive will
receive four (4) weeks paid vacation, on an "as earned"
basis each year and will receive ten (10) holidays each
year.
(f) Insurance. During the Term, the Executive
shall participate in all insurance programs (medical,
dental, surgical, hospital) adopted by the Company,
including dependent coverage, to the same extent as other
executives of the Company from time to time.
(g) Incentive Compensation Plan. The Executive
shall be eligible to participate in the Company's Executive
Incentive Compensation Plan, in accordance with the terms of
such plan as in effect from time to time.
(h) Taxes. Except as otherwise specifically
provided herein, the Executive recognizes that some or all
of the foregoing benefits and those set forth in Section 3
may give rise to a federal and/or state income tax
liability, and agrees to be responsible for such liability.
(i) Split Dollar Agreement. Notwithstanding
anything to the contrary contained herein, the Company
agrees to gross-up the compensation of the Executive in an
amount determined by the Company as necessary to reimburse
the Executive for (A) the sum of federal and state income
and employment tax incurred by the Executive on account of
the P.S.-58 benefit in the insurance policy described under
a Split Dollar Agreement dated as of January 19, 1996 by and
between the Company and the Executive (the "Split Dollar
Agreement"), and (B) the cost of any insurance policy that
the Executive purchases for the waiver of premiums on the
insurance policy described in the Split Dollar Agreement in
the event of his disability, and (C) the tax effect of the
reimbursements set forth in (A) and (B) hereof, and to pay
such amounts to the Executive in a lump sum payment no later
than three (3) business days prior to the earliest date on
which any federal or state income or employment taxes are
due on account of such P.S.-58 benefit and/or the cost for
the waiver of premiums.
5. Termination of Employment.
(a) Termination For Cause; Resignation Without
Good Reason.
(i) If the Executive's employment is
terminated by the Company for Cause or if the Executive
resigns from his employment for any reason other than for
Good Reason, as defined below in Section 5(a)(iii), the
Executive shall have no right to receive compensation or
other benefits for any period after such Termination for
Cause or resignation for any reason other than for Good
Reason, except as may be required by law and except that the
Executive's rights to exercise his stock options in the
event his employment terminates shall be governed by the
Independent Bank Corp. 1987 Incentive Stock Option Plan
and/or any other relevant stock option plan, as appropriate
(the "Plans") and the relevant stock option agreement.
(ii) Termination for "Cause" shall refer to
the Company's termination of the Executive's service with the
Company at any time because the Executive has: (A) refused or
failed to devote his full normal working time, skills,
knowledge, and abilities to the business of the Company, its
subsidiaries and affiliates, and in promotion of their
respective interests pursuant to Section 1 hereof; or (B)
engaged in (1) activities involving his personal profit as a
result of his dishonesty, incompetence, willful misconduct,
willful violation of any law, rule or regulation or breach
of fiduciary duty, or (2) dishonest activities involving the
Executive's relations with the Company, its subsidiaries and
affiliates or any of their respective employees, customers
or suppliers; or (C) committed larceny, embezzlement,
conversion or any other act involving the misappropriation
of Company or customer funds in the course of his
employment; or (D) been convicted of any crime which
reasonably could affect in an adverse manner the reputation
of the Company or the Executive's ability to perform the
duties required hereunder; or (E) committed an act involving
gross negligence on the part of the Executive in the conduct
of his duties hereunder; or (F) evidenced a drug addiction
or dependency; or (G) materially breached this Agreement;
provided, however, that, in the case of any termination
pursuant to clauses (A), (E), (F), or (G) above, the Company
shall give the Executive thirty (30) business days' written
notice thereof, an opportunity to cure within such thirty-
day period, and a reasonable opportunity to be heard by the
Board to show just cause for his actions, and to have the
Board, in its discretion, reverse or rescind the prior
action of the Company under the clause(s).
(iii) Resignation for "Good Reason" shall mean
the resignation of the Executive after (A) the Company
without the express written consent of the Executive,
materially breaches this Agreement to the substantial
detriment of the Executive; or (B) the Board or the
President and Chief Executive Officer, without Cause (as
defined in Section 5(a)(ii) above), substantially changes
the Executive's core duties or removes the Executive's
responsibility for those core duties, so as to effectively
cause the Executive to no longer be performing the duties of
an executive in the capacity for which the Executive was
hired; provided, however, that, in the case of resignation
pursuant to this subsection (iii), the Executive shall give
the Company thirty (30) business days' written notice
thereof and, during such thirty day period, an opportunity
to cure. Anything to the contrary in this Agreement
notwithstanding, a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the effective date of a Change of
Control (as defined in Section 5(c) hereof) shall be deemed
to be a resignation for Good Reason for all purposes of this
Agreement.
(iv) The date of termination of employment by
the Company for purposes of Section 5 hereof shall be the
date that the written notice of termination from the Company
to the Executive is written, and the Company agrees to use
all good faith efforts to deliver the written notice to the
Executive as soon as possible after the notice is written.
The date of a resignation by the Executive for purposes of
Section 5 hereof shall be the date specified in the written
notice of resignation from the Executive to the Company.
(b) Termination Without Cause; Resignation for
Good Reason. If during the term of this Agreement, either (A)
the Executive's employment with the Company and/or any of its
parent, subsidiaries or affiliates is terminated for any
reason other than death, disability (as defined in Section
5(e) hereof) or for Cause (as such term is defined in
Section 5(a)(ii) hereof), or (B) the Executive resigns for
Good Reason (as such term is defined in Section 5(a)(iii)
hereof) from employment with the Company and/or any of its
parent, subsidiaries or affiliates, the Executive shall be
entitled (C)(x) to receive his then current Base Salary for
a period of twelve (12) months from the termination or resignation
date, payable at such times as such Base Salary would be payable
as if no such termination or resignation had occurred,
(C)(y)(1) to continue participation in the plans and
arrangements described in clauses (b) and (f) of Section 4
hereof (to the extent permissible by law and the terms of
such plans and arrangements) for a period of twelve (12)
months after such termination or resignation (the
"Continuation Period"), or (C)(y)(2) to the extent at any
time following termination of this Agreement and during the
Continuation Period that the plans and arrangements
described in clauses (b) and (f) of Section 4 hereof are
discontinued or terminated and no comparable plans in which
the Executive is permitted to continue participation are
established in their place, then to receive a gross bonus
payment in an amount which after payment therefrom of all
applicable federal and state income and employment taxes,
will equal the cost to the Company at the time of the
termination, resignation or discontinuation of any such
plans, attributable to the Executive's participation in the
plans and arrangements described in clauses (b) and (f) of
Section 4 hereof for the Continuation Period less any
portion thereof in which the Executive has continued his
participation in such plans and arrangements described in
clauses (b) and (f) of Section 4 hereof in accordance with
subsection 5(b)(C)(y)(1) above; which payment shall be due
following termination or resignation of the Executive's
employment immediately upon the date of termination,
resignation or discontinuation of any such plan, and (C)(z)
to have all stock options which have been granted to the
Executive to immediately become fully exercisable and to
remain exercisable for a period of three (3) months after
the employment termination date in accordance with the terms
of the Plans and the relevant stock option agreement,
provided, however, that if the provisions of Section 5(c)
are applicable to such termination or resignation of
employment, the Executive's rights shall be governed by
Section 5(c).
(c) Change in Control.
(i) If during the term of this Agreement,
any of the events constituting a Change of Control (as such
term is defined in Section 5(c)(ii) hereof), shall be deemed
to have oc curred, and following such Change of Control,
either (A) the Executive's employment with the Company
and/or any of its parent, subsidiaries, affiliates, or
successors by merger or otherwise as a result of the Change
of Control, is terminated for any reason other than death,
disability (as defined in Section 5(e) hereof) or for Cause
(as such term is defined in Section 5(a)(ii) hereof), or (B)
the Executive resigns for Good Reason (as such term is
defined in Section 5(a)(iii) hereof) from employment with
the Company and/or any of its parent, subsidiaries,
affiliates, or successors by merger or otherwise as a result
of the Change of Control, the Executive shall be entitled
(C)(x) to receive his then current Base Salary for a period
of twenty four (24) months from the date of termination of
this Agreement without Cause or resignation for Good Reason,
payable in a lump sum cash payment immediately following
such termination, and (C)(y)(1) to continue participation in
the plans and arrangements described in clauses (b) and (f)
of Section 4 hereof (to the extent permissible by law and
the terms of such plans and arrangements) for the period of
twenty four (24) months after such termination or
resignation (the "Benefits Period"), or (C)(y)(2) at the
election of the Executive at any time following termination
of this Agreement and during the Benefits Period, to receive
a gross bonus payment in an amount which after payment therefrom
of all applicable federal and state income and employment taxes,
will equal the cost to the Company at the time of the Executive's
election, attributable to the Executive's participation in
the plans and arrangements described in clauses (b) and (f)
of Section 4 hereof for the Benefits Period less any portion
thereof in which the Executive has continued his
participation in such plans and arrangements described in
clauses (b) and (f) of Section 4 hereof in accordance with
subsection 5(c)(i)(C)(y)(1) above; which payment shall be
due following termination or resignation of the Executive's
employment immediately upon the Executive's delivery of
written notice to the Company of his election pursuant to
subsection 5(c)(i)(C)(y)(2), and (C)(z) to have all stock
options which have been granted to the Executive to
immediately become fully exercisable and to remain
exercisable for a period of three (3) months after the
termination or resignation date (as the case may be) in
accordance with the terms of the Plans and the relevant
stock option agreement, and (C)(zz) upon his written notice
to the Company during a period of three months following the
termination or resignation date (as the case may be), to
purchase his Company owned automobile at a purchase price
equal to the book value of said automobile as carried on the
books and records of the Company, plus all applicable excise
taxes.
(ii) A "Change of Control" shall be deemed to
have occurred if, subsequent to the date hereof and during
the term of this Agreement (A) any "person" (as such term is
defined in Sec tion 13(d) of the Securities Exchange Act of
1934, as amended) is or becomes the beneficial owner,
directly or indirectly, of either (x) a majority of the
outstanding common stock of IBC or the Company, or (y)
securities of either IBC or the Company representing a
majority of the combined voting power of the then
outstanding voting securities of either IBC or the Company,
respectively, or (B) during any period of two consecutive
years following the date hereof, individuals who at the
beginning of any such two year period constitute the Board
of Directors of IBC cease, at any time after the beginning
of such period, for any reason to constitute a majority of
the Board of Directors of IBC, unless the election of each
new director was nominated or approved by at least two
thirds of the directors of the Board then still in office
who were either directors at the beginning of such two year
period or whose election or whose nomination for election
was previously so approved.
(iii) In the event any amount payable as
compensation to the Executive under this Agreement when
aggregated with any other amounts payable as compensation to
the Executive other than pursuant to this Agreement would
constitute a Parachute Payment (as hereinafter defined), the
amount payable as compensation under Section 5(c)(i) of this
Agreement shall be reduced (but not below zero) to the
largest amount which is not a Parachute Payment (as
hereinafter defined) when aggregated with any other amounts
payable as compensation to the Executive other than pursuant
to this Agreement. For purposes hereof, the term Parachute
Payment shall have the meaning given to parachute payments
set out in Internal Revenue Code of 1986 280G(b)(2)(A)
(relating to the quantification of parachute payments) as
then in effect determined without regard to the provisions
of Internal Revenue Code of 1986 280G(b)(4) (relating to the
exclusion of reasonable compensation from parachute
payments) as then in effect. Notwithstanding the foregoing,
if the Executive proves to the satisfaction of the
Compensation Committee of the Company's Board of Directors
(if no such Compensation Committee then is in existence,
then any other committee of the Board of Directors of
Company then performing the functions of a compensation
committee) with clear and convincing evidence that
all or any portion of the amount of the reduction provided
in the preceding sentence would not constitute a parachute
payment within the meaning of such term as defined in
Internal Revenue Code of 1986 280G(b)(2)(A) as then in
effect determined with regard to the provisions of Internal
Revenue Code of 1986 280G(b)(4) as then in effect and that
the Company's tax reporting position in regard to the
payment is overwhelmingly likely to be sustained, then the
reduction provided in the preceding sentence shall be
adjusted to permit payment of so much of such reduction as
the said Compensation Committee determines will result in
the largest amount which would not constitute a parachute
payment within the meaning of such term as defined in
Internal Revenue Code of 1986 280G(b)(2)(A) as then in
effect determined with regard to the provisions of Internal
Revenue Code of 1986 280G(b)(4) as then in effect.
(d) Mitigation; Legal Fees. The Executive shall
not be required to mitigate the amount of any payment
provided for in either Section 5(b) or Section 5(c)(i) by
seeking other employment or otherwise, nor shall the amount
of any payment or benefit provided for in Section 5(b) or
Section 5(c)(i) be reduced by any compensation earned by the
Executive as a result of self-employment or employment by
another employer, by retirement benefits or by offset
against any amount claimed to be owed by the Executive to
the Company or otherwise. The Company agrees to pay, as
incurred, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by
the Executive about the amount of any payment pursuant to
this Agreement) plus in each case interest on any delayed
payment at the applicable federal rate provided for in
Section 7872(f)(2)(A) of the Internal Revenue Code of 1986
as then in effect.
(e) Termination By Reason of Death or Disability.
(i) Notwithstanding anything to the contrary
contained in this Agreement, the employment hereunder of the
Executive shall be automatically terminated upon the death
of the Executive after which time the Company shall have no
further obligation to the Executive or his estate for any
compensation or benefits hereunder, except to the extent any
compensation or benefits are due to the Executive or his
estate for any period prior to his death, provided, however,
that this Section 5(e)(i) shall not affect in any manner any
other benefits to which the Executive or his estate may be
entitled or which may vest or accrue upon his death under
any arrangement, plan or program (other than this Agreement)
with the Company, by law or otherwise.
(ii) Notwithstanding anything to the contrary
contained in this Agreement, the employment hereunder of the
Executive may be terminated by reason of disability, upon
written notice to the Executive, in the event of the
inability of the Executive to perform his duties hereunder
by reason of disability, whether by reason of injury
(physical or mental), illness (physical or mental) or
otherwise, incapacitating the Executive for a continuous
period exceeding one hundred and eighty (180) days, as
certified by a physician selected by the Company in good
faith, and the Company shall have no further obligation
under this Agreement to the Executive for any compensation
or benefits hereunder, except to the extent any compensation
or benefits are due to the Executive for any period prior to
his termination by reason of disability, provided,
however, that this Section 5(e)(ii) shall not affect in any
manner other benefits to which the Executive may be entitled
or which may accrue or vest upon his disability and the
Executive shall be entitled to receive such compensation and
benefits during and after such period of disability as the
Company's policies and procedures in effect from time to
time provide for similarly situated executives, as if the
Executive and the Company had not entered into this
Agreement.
(iii) The Executive's rights to exercise his
stock options in the event of termination of his employment
by reason of his death or disability shall be governed by
the Plans and the relevant stock option agreement.
6. Confidentiality and Non-Competition.
(a) Confidentiality. The Executive recognizes
and acknowledges as an employee of the Company, he will have
access to, become acquainted with, and obtain financial
information and knowledge relating to the business,
financial condition, methods of operation and other aspects
of the Company, its parent, subsidiaries and affiliates
("Affiliated Companies") and their customers, employees and
suppliers, some of which information and knowledge is
confidential and proprietary and that the Executive could
substantially detract from the value and business prospects
of the Affiliated Companies in the event, while employed by
the Company or any time thereafter, the Executive were to
disclose to any person not related to the Affiliated
Companies or use such information and knowledge for his or
such other person's advantage. Accordingly, the Executive
hereby agrees that he will not disclose to any person, other
than directors, officers, employees, accountants, lawyers,
consultants, advisors, agents and representative of, or
other persons related to, the Affiliated Companies on a need
to know basis in the course of carrying out his duties
hereunder, any knowledge or information of a confidential
nature pertaining to the Affiliated Companies, or their
successors and assigns, including without limitation, all
unpublished matters relating to the business, properties,
accounts, books and records, business plan and customers of
the said corporations, or their successors and assigns,
except with the prior written approval of the Board, or
except as may be required by law.
(b) Equitable Relief. The Executive acknowledges
and agrees (i) that the provisions of this Section 6 are
reasonable and necessary for the protection of the Company,
its subsidiaries and affiliates or its or their successors
and assigns, and (ii) that the remedy at law for any breach
by him of the provisions of this Section 6 will be
inadequate and, accordingly, the Executive hereby agrees
that in the case of any such breach (x) the Company or its
successors and assigns shall be entitled to injunctive
relief, in addition to any other remedy they may have, and
(y) the Executive shall forfeit any future payments or
benefits to which he might be entitled hereunder.
(c) Non-Solicitation. For a period of one (1)
year after the Executive receives any compensation pursuant
to this Agreement he will not (i) solicit, divert or take
away, directly or indirectly, any Major Customer of the
Company, its parent, subsidiaries or affiliates, or its or
their successors and assigns, or (ii) directly or indirectly
induce or attempt to influence any employee of the Company,
its parent or any of its subsidiaries or affiliates, or
their successors and assigns, to terminate his employment
with the Company, its parent or any of its subsidiaries or
affiliates or their successors or assigns. As used herein,
"Major Customer" shall mean any customer of the
Company who has maintained an average deposit balance of at
least $100,000 during the last six months of the Term or who
has maintained or obtained a credit facility of at least
$100,000 from the Company during the last six months of the
Term.
(d) Enforceability. The covenants on the part of
the Executive contained in this Section 6 shall be construed
as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action
by the Executive against the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense
to the enforcement by the Company of said covenants. This
Section shall survive the termination of this Agreement.
The period, geographical area and the scope of the
restrictions on the Executive set forth herein are divisible
so that if any provision of this Section 6 is invalid, that
provision shall be automatically modified to the extent
necessary to make it valid.
(e) Jurisdiction. Employee hereby submits to the
exclusive jurisdiction of the courts of Massachusetts and
the Federal courts of the United States of America located
in such state in respect to the interpretation and
enforcement of the provisions of this Section 6, and
Employee hereby waives, and agrees not to assert, as a
defense in any action, suit or proceed ing for the
interpretation or enforcement of this Section 6, that
Employee is not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in said
courts or that this Agreement may not be enforced in or by
said courts or that Employee's property is exempt or immune
from execu tion, that the suit, action or proceeding is
brought in an inconvenient forum, or that venue is
improper.
7. Disputes.
(a) Any dispute relating to this Agreement, or to
the breach of this Agreement, except such as may concern
Section 6, arising between the Executive and the Company
shall be settled by arbitration in accordance with the
commercial arbitration rules of the American Arbitration
Association ("AAA"), which arbitration may be initiated by
any party hereto by written notice to the other of such
party's desire to arbitrate the dispute. The arbitration
proceedings, including the rendering of an award, shall take
place in Boston, Massachusetts, and shall be administered by
the AAA.
(b) The arbitrator shall be appointed within
thirty (30) days of the notice of dispute, and shall be
chosen by the parties from the names of available
arbitrators furnished to the parties in list form by the
AAA. The parties may review and reject names of available
arbitrators from up to an aggregate of three lists furnished
to the parties by the AAA. If, after having been furnished
three lists of arbitrators, the parties cannot agree on one
available arbitrator, either party may request that the AAA
appoint an arbitrator to arbitrate the dispute.
(c) The award of the arbitrator shall be final
except as otherwise provided by the laws of the Commonwealth
of Massachusetts and the federal laws of the United States,
to the extent applicable. Judgment upon such award may be
entered by the prevailing party in any state or federal
court sitting in Boston, Massachusetts.
(d) No arbitration proceedings hereunder shall be
bind ing upon or in any way affect the interests of any
party other than the Company, or its successors and the
Executive, with
respect to such arbitration.
8. Indemnification.
The Company shall indemnify the Executive to the
fullest extent permitted by Massachusetts law, which
indemnification may require the advance of expenses to the
Executive, if and to the extent permitted by such law. In
the event of any claim for indemnification by the Executive,
the Executive shall deliver written notice of any such claim
promptly upon such a claim being made known to the
Executive, which notice shall set forth the basis for such
claim. The Company shall have the right to undertake the
defense of such claim with counsel of its choice.
9. Non-Competition and Non-Disclosure Commitments.
The Executive hereby represents and warrants that
he is not a party to or otherwise bound by any contracts,
agreements or arrangements which contain covenants limiting
the freedom of the Executive to compete in any line of
business or with any person or entity, or which provide that
the Executive must maintain the confidentiality of, or
prohibit the Executive from using, any information in the
context of his professional or personal activities. The
Executive further represents and warrants that neither the
execution or delivery of this Agreement nor the performance
by the Executive of his duties hereunder will cause any
breach of any contract, agreement or arrangement to which he
is a party or by which he is bound.
10. Arm's Length Negotiations; Representation By
Counsel.
The parties to this Agreement further agree that
this Agreement has been negotiated by each in an arm's
length transaction. The Executive acknowledges that he has
had the opportunity to be represented by legal counsel in
connection with this Agreement.
11. Tax Withholdings.
Payments to the Executive of all compensation
contemplated under this Agreement shall be subject to all
applicable legal requirements with respect to the
withholding of taxes and other deductions required by law.
12. Non-Assignability; Binding Agreement.
Neither this Agreement nor any right, duty,
obligation or interest hereunder shall be assignable or
delegable by the Executive without the Company's prior
written consent; provided, however, that (i) nothing in this
Section shall preclude the Executive from designating any of
his beneficiaries to receive any benefits payable thereunder
upon his death or disability, or his executors,
administrators, or other legal representatives, from
assigning any rights hereunder to the person or persons
entitled thereto, and (ii) any successor to the Company
pursuant to any merger or consolidation involving the
Company, and any purchaser of all or substantially all the
assets of the Company, shall succeed to the rights and
assume the obligations of the Company under this Agreement,
and the Company covenants that it will not enter into or
consummate any such transaction which does not make express
provision for such succession and assumption. Subject to the
foregoing, this Agreement shall be binding upon, and inure
to the benefit of, the parties hereto, any successors to or
assigns of the Company, the Executive's heirs and the
personal representatives of the Executive's estate.
13. Amendment; Waiver.
This Agreement may not be modified, amended or
waived in any manner except by an instrument in writing
signed by the parties hereto. The waiver by any party of
compliance with any provision of this Agreement by the other
party shall not operate or be construed as a waiver of any
provision of this Agreement.
14. Notices.
Any notice hereunder by either party to the other
shall be given in writing by personal delivery, telex,
telecopy or certified mail, return receipt requested, to the
applicable ad dress set forth below:
(i) To the Company: Rockland Trust Company
288 Union Street
Rockland, MA 02370
Attn.: President
(ii) To the Executive: Richard F. Driscoll
76 Ellisville Road
Plymouth, MA 02360
(or such other address as may from time to time be designated
by notice by either party hereto for such purpose). Notice
shall be deemed given, if by personal delivery, on the date of
such delivery or, if by telex or telecopy, on the business day
following receipt of answer back or telecopy confirmation or if
by certified mail, on the date shown on the applicable return
receipt.
15. Governing Law.
This Agreement is to be governed by and interpreted
in accordance with the laws of the Commonwealth of
Massachusetts. If, under such law, any portion of this
Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation or ordinance, such portion
shall be deemed to be modified or altered to conform thereto
or, if that is not possible, to be omitted from this Agreement,
and the invalidity of any such portion shall not affect the
force, effect and validity of the remaining portion thereof.
16. Supersedes Previous Agreements.
This Agreement, as amended, constitutes the entire
understanding between the Company and the Executive relating to
the employment of the Executive by the Company, and supersedes
and cancels all prior written and oral agreements and
understandings with respect to the subject matter of this
Agreement.
17. Counterparts.
This Agreement may be executed by the parties hereto
in counterparts, each of which shall be deemed to be an
original, but such counterparts shall together constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Second
Amended and Restated Employment Agreement as of the date first
above written.
ROCKLAND TRUST COMPANY
By:_____________________________
Its:____________________________
INDEPENDENT BANK CORP.
By:_____________________________
Its:____________________________
_____________________________
RICHARD F. DRISCOLL
SELECTED CONSOLIDATED FINANCIAL INFORMATION & OTHER
DATA
The selected consolidated financial information and
other data of the Company set forth below does not
purport to be complete and should be read in
conjunction with,and is qualified in its entirety by,
the more detailed information, including the Consolidated
Financial Statements and related notes, appearing elsewhere
herein.
<TABLE>
<CAPTION>
As of or For the Year
Ended December 31, 1995 1994 1993 1992 1991
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
FINANCIAL CONDITION DATA:
Securities held
to maturity $226,896 $256,785 $266,544 $194,635 $156,161
Securities available
for sale 32,628 4,250 -- -- --
Loans, net of
unearned discount 628,141 590,689 487,584 499,052 583,466
Reserve for possible
loan losses 12,088 13,719 15,485 15,971 16,165
Total assets 987,589 929,194 829,681 807,146 846,293
Total deposits 871,085 796,612 743,385 729,020 794,078
Stockholders equity 72,572 64,202 57,385 52,746 31,251
Nonperforming loans 5,271 7,864 16,982 28,802 44,162
Nonperforming assets 5,909 11,730 25,866 44,714 64,342
OPERATING DATA:
Interest income $73,031 $63,487 $57,450 $63,055 $80,805
Interest expense 29,143 22,029 22,920 29,127 49,851
Net interest income 43,888 41,458 34,530 33,928 30,954
Provision for possible
loan losses 1,000 801 5,075 11,014 22,993
Non-interest income 11,480 11,470 12,995 17,059 21,648
Non-interest expenses 39,252 42,481 37,331 39,583 45,779
Net income (loss) 10,387 8,113 4,636 175 (11,869)
PER SHARE DATA:
Net income (loss) $0.71 $0.56 $0.32 $0.03 $(2.28)
Cash dividends declared 0.18 0.08 -- -- --
Book value, end of period 5.00 4.45 3.98 3.66 6.00
OPERATING RATIOS:
Return on average assets 1.10% 0.94% 0.59% 0.02% (1.29%)
Return on average equity 15.28% 13.36% 8.48% 0.56% (29.42%)
Net interest margin 4.99% 5.18% 4.74% 4.74% 3.88%
ASSET QUALITY RATIOS:
Nonperforming loans
as a percent of gross
loans .83% 1.31% 3.45% 5.71% 7.45%
Nonperforming assets as
a percent of total
assets .60% 1.26% 3.12% 5.54% 7.60%
Reserve for possible
loan losses as a
percent of loans, net
of unearned discount 1.92% 2.32% 3.18% 3.20% 2.77%
Reserve for possible
loan losses as a
percent of
nonperforming loans 229.33% 174.45% 91.18% 55.45% 36.60%
CAPITAL RATIOS:
Tier 1 leverage
capital ratio 7.37% 6.92% 7.01% 6.71% 3.56%
Tier 1 risk-based
capital ratio 10.90% 10.29% 11.01% 9.99% 4.99%
Total risk-based
capital ratio 12.15% 11.70% 12.84% 11.83% 7.61%
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
The condensed financial review which follows presents
managements discussion and analysis of the
consolidated financial condition and operating results
of Independent Bank Corp. (the Company) and its
subsidiary, Rockland Trust Company (Rockland or the
Bank). It should be read in conjunction with the
Consolidated Financial Statements and related notes
thereto.
Summary of Financial Condition. As of December 31,
1995, the Company's assets of $987.6 million reflected
an increase of $58.4 million, or 6.3%, over 1994 year-
end assets. This growth was driven by an increase in
loans of $37.5 million, centered in commercial
mortgages and consumer loans. A relatively stable
interest rate environment and a slowly recovering
regional economy were the primary factors contributing
to this loan growth. Although the total balance of
securities was relatively unchanged from 1994 to 1995,
the composition of the security portfolio was
different. Securities available for sale increased by
$28.4 million during 1995 to $32.6 million. This
increase, and an offsetting decline in securities held
to maturity, reflects the one-time reclassification of
certain mortgage-backed securities in December 1995
pursuant to a special report on Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting For
Certain Investments in Debt and Equity Securities." An
increase in deposits of $74.5 million was used to fund
the noted loan growth and reduce the Bank's usage of
its borrowing lines. It should be noted that the 1995
year-end asset and liability balances are inflated by a
$17 million deposit made on the last day of the year
which was subsequently withdrawn on the first business
day in January, 1996.
The Company's total assets grew to $929.2 million as of
December 31, 1994, an increase of $99.5 million, or
12.0%, over 1993 year-end assets. Healthy loan growth
resulting from an active customer contact program,
strong relationships with auto dealers, and an increase
in adjustable rate real estate loans retained in the
portfolio was the primary factor behind this increase.
Higher deposits and increased utilization of borrowing
lines were used to fund this loan growth.
Loan Portfolio. On December 31, 1995, the Bank's loan
portfolio amounted to $628.1 million, an increase of
$37.5 million, or 6.3%, from year-end 1994. This
increase was primarily centered in commercial mortgages
and consumer loans. Commercial loan balances were
relatively unchanged over the year.
The reserve for possible loan losses is maintained by
the related provision for possible loan losses at a
level that management of the Bank considers adequate
based upon relevant circumstances. The reserve for
possible loan losses was $12.1 million at December 31,
1995. The ratio of the reserve for possible loan losses
to non-performing loans was 229.3% at December 31,
1995, substantially better coverage than the level of
174.5% recorded a year earlier.
Outstanding loans increased $103.1 million, or 21.1%,
during 1994. This significant growth was reflected across
all loan sectors with consumer loans and mortgage loans
evidencing the largest increase.
The Bank provides its customers with access to capital
by offering a broad range of credit services. The
Bank's commercial customers consist of small-to-medium-
sized businesses which utilize demand, time, and term
loans, as well as fundings guaranteed by the Small
Business Administration, to finance their businesses.
The Bank's retail customers can choose from a variety
of mortgage and consumer loan products. The recovering
economy in the Bank's market area provides attractive
lending opportunities for commercial, real estate, and
consumer loans.
The Bank has centralized its credit services functions
to provide the requisite control that is consistent
with the needs of the Bank's management structure and
to enhance service quality. In addition to providing
credit analysis, underwriting and loan documentation
services, the commercial loan services department
performs certain administrative functions on behalf of
the Bank. The retail loan services department provides
the Bank with residential real estate mortgage loan
underwriting, servicing, and secondary market operations,
as well as instalment loan servicing and other
administrative services. The centralization of retail loan
services further provides for compliance with applicable
consumer protection laws and regulations.
The Bank's loan committee consists of the BankOs
President, the Executive Vice President of the
Commercial Lending Division, the Senior Credit Policy
Officer, and the Commercial Loan Regional Managers. The
committee considers a variety of policy issues,
including underwriting and credit standards, and
reviews loan proposals which exceed the individual loan
officer's lending authority.
Asset Quality. The Bank's principal earning assets are
its loans. Although the Bank judges its borrowers to be
creditworthy, the risk of deterioration in borrowers'
abilities to repay their loans in accordance with their
existing loan agreements is inherent in any lending
function.Participating as a lender in the credit
markets requires a strict monitoring process to
minimize credit risk. This process requires substantial
analysis of the loan application, the customer's
capacity to repay according to the loan's contractual
terms, and an objective determination of the value of
the collateral.
Nonperforming assets are comprised of nonperforming
loans and Other Real Estate Owned (OREO). Nonperforming
loans consist of loans that are more than
90 days past due but still accruing interest and
nonaccrual loans. OREO includes properties held by the
Bank as a result of foreclosure or by acceptance of a
deed in lieu of foreclosure. As of December 31, 1995,
nonperforming assets totaled $5.9 million, a reduction
of $5.8 million, or 49.6%, from the prior year-end.
Nonperforming assets have declined to 0.60% of total
assets as compared to 1.26% at the end of the preceding
year. Management believes that the current level of
nonperforming assets has reached an inherent base
level, given the risks in the industry and in the
environment within which the Bank operates.
The following table sets forth information regarding
nonperforming loans and nonperforming assets on the
dates indicated.
<TABLE>
<CAPTION>
Dec. Sept. June Mar. Dec. Dec.
31, 30, 30, 31, 31, 31,
1995 1995 1995 1995 1994 1993
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Nonperforming Loans:
Loans past due 90
days or more but
still accruing $553 $556 $640 $816 $598 $1,042
Loans accounted
for on a
nonaccrual basis 4,718 5,188 4,844 5,946 7,266 15,940
Total nonperforming
loans 5,271 5,744 5,484 6,762 7,864 16,982
Other real estate
owned 638 1,206 1,831 3,38 1 3,866 8,884
Total nonperforming
assets $5,909 $6,950 $7,315 $10,143 $11,730 $25,866
Nonperforming loans
as a percent of
gross loans 0.83% 0.92% 0.88% 1.09% 1.31% 3.45%
Nonperforming assets
as a percent of
total assets 0.60% 0.72% 0.77% 1.08% 1.26% 3.12%
</TABLE>
As permitted by banking regulations, consumer loans and
home equity loans past due 90 days or more continue to
accrue interest. In addition, certain commercial and
real estate loans that are more than 90 days past due
may be kept on an accruing status if the loan is well
secured and in the process of collection. As a general
rule, a commercial or real estate loan more than 90
days past due with respect to principal or interest is
classified as a nonaccrual loan. Income accruals are
suspended on all nonaccrual loans and all previously
accrued and uncollected interest is reversed against
current income. A loan remains on nonaccrual
status until it becomes current with respect to
principal and interest, or when the loan is liquidated,
or when the loan is determined to be uncollectible and
is charged-off against the reserve for possible loan
losses.
The following table sets forth the Bank's nonperforming
loans by loan category on the dates indicated.
<TABLE>
<CAPTION>
December 31, 1995 1994
(In Thousands)
<S> <C> <C>
Loans past due 90 days or more
but still accruing:
Real Estate - Residential $333 $344
Consumer - Instalment 67 90
Consumer - Other 153 164
Total $553 $598
Loans accounted for on a
nonaccrual basis:
Commercial $1,350 $3,111
Real Estate - Commercial 1,208 2,085
Real Estate - Residential 2,017 1,929
Real Estate - Construction -- 53
Consumer - Instalment 143 88
Total 4,718 7,266
Total Nonperforming Loans $5,271 $7,864
</TABLE>
In the course of resolving nonperforming loans, the
Bank may choose to restructure the contractual terms of
certain commercial and real estate loans. Terms may be
modified to fit the ability of the borrower to repay in
line with its current financial status. It is the
Bank's policy to maintain restructured loans on
nonaccrual status for approximately six months before
management considers its return to accrual status.
Real estate acquired by the Bank through foreclosure
proceedings or the acceptance of a deed in lieu of
foreclosure is classified as OREO. When property is
acquired, it is recorded at the lesser of the loanOs
remaining principal balance or the estimated fair value
of the property acquired, less estimated costs to sell.
Any loan balance in excess of the estimated fair value
on the date of transfer is charged to the reserve for
possible loan losses on that date. All costs incurred
thereafter in maintaining the property, as well as
subsequent declines in fair value, are charged to non-
interest expense.
The following table summarizes OREO activity during the
periods indicated.
<TABLE>
<CAPTION>
Activity Amount
(In Thousands)
<S> <C>
Balance, December 31, 1993 $8,884
Properties Acquired 4,200
Sales and Rental Proceeds (8,289)
OREO Write-Downs (929)
Balance, December 31, 1994 3,866
Properties Acquired 878
Sales and Rental Proceeds (3,953)
OREO Write-Downs (153)
Balance, December 31, 1995 $638
</TABLE>
At December 31, 1995, two OREO properties with a book
value of $250,000 were under contracts for sale which
had not yet closed.
The following table sets forth the types of properties,
all of which are located in the BankOs market area,
which comprise the BankOs OREO as of December 31, 1995.
<TABLE>
<CAPTION>
Type of Properties Amount
(In Thousands)
<S> <C>
Residential Condominiums $236
Land and Subdivisions 49
Commercial/Office/Retail Properties 189
Single-family Properties 164
Total $638
</TABLE>
In order to facilitate the disposition of OREO, the
Bank may finance the purchase of such properties at
market rates if the borrower qualifies under the BankOs
standard underwriting guidelines.
Securities Portfolio. The Bank's securities portfolio
consists of securities which management intends to hold
until maturity, securities available for sale, and
Federal Home Loan Bank (FHLB) stock. Securities which
management intends to hold until maturity consist of U.
S. Treasury and U. S. Government Agency obligations, as
well as mortgage-backed securities, including
collateralized mortgage obligations. Securities held to
maturity as of December 31, 1995 are carried at their
amortized cost of $226.9 million and exclude gross
unrealized gains of $2.1 million and gross unrealized
losses of $1.6 million. A year earlier, securities held
to maturity totaled $256.8 million, excluding gross
unrealized gains of $.8 million and gross unrealized
losses of $17.7 million. There were no sales of
securities held to maturity during 1995, 1994, or 1993.
Securities available for sale consist of certain
mortgage-backed securities, including collateralized
mortgage obligations. These securities are carried at
fair market value and unrealized gains and losses, net
of applicable income taxes, are recognized as a
separate component of stockholdersO equity. The fair
market value of securities available for sale at
December 31, 1995 totaled $32.6 million and net
unrealized losses totaled $60,000. A year earlier,
securities available for sale were $4.2 million with
net unrealized losses of $254,000. There were no sales
of securities available for sale during 1995 or 1994.
In the fourth quarter of 1995, the Bank transferred
$28.6 million of securities from held to maturity status
to available for sale under the provisions of SFAS No. 115.
The investment in the stock of the Federal Home Loan
Bank is related to the admission of Rockland as a
member of the Federal Home Loan Bank of Boston in July
1994. This investment was increased during 1995 to
maintain investment levels required by FHLB guidelines.
Deposits. Including two new branches opened in 1995,
the Bank's branch system consists of 32 locations, in
addition to the main office of its subsidiary. Each
full-service branch operates as a retail sales and
services outlet offering a complete line of deposits
and loans.
As of December 31, 1995, deposits of $871.1 million
were $74.5 million, or 9.3%, higher than the prior year-
end. An expanding customer base, extensive branch
network, and competitive market rates were responsible
for this increase. It should be noted that 1995 year-
end balances are inflated by a $17 million deposit made
on the last day of the year which was subsequently
withdrawn on the first business day in January, 1996.
Core deposits, consisting of demand, NOW, savings, and
money market accounts, decreased $6.3 million, or 1.1%.
Time deposits increased $80.7 million, or 33.6%,
primarily as a result of a first quarter promotion
featuring 15 month certificates.
Total deposits increased $53.2 million, or 7.2%, during
the year ended December 31, 1994. Core deposits
increased $25.6 million, or 4.8%, while time deposits
increased $27.6 million, or 13.0%. In addition, the
Bank purchased $21.6 million of savings and time
deposits of a failed savings and loan association from
the Resolution Trust Corporation in March 1994.
Borrowings. Short term borrowings, consisting of
federal funds purchased, assets sold under repurchase
agreements, and treasury tax and loan notes, amounted
to $8.1 million on December 31, 1995, a decrease of
$22.3 million from year-end 1994. On December 31, 1995,
the Bank did not have any borrowings under repurchase
agreement lines, as compared to $25.4 million at the
prior year-end. In addition to these short term
borrowings, the Bank had borrowings of $20.0 million
from the FHLB at year-end 1995, a reduction of $5.0
million from December 31, 1994. The initial maturities
of the current FHLB borrowings range from 12 to 18 months.
The $4.8 million of subordinated capital notes outstanding
at December 31, 1995 all mature in 1996.
Summary of Results of Operations. The Company's
results of operations are largely dependent on net
interest income, which is the difference between the
interest earned on loans and investments and interest
paid on deposits and borrowings. Net interest income is
affected by the interest rate spread, which is the
difference between the yields earned on loans and
investments and the rates of interest paid on deposits
and borrowings. The results of operations are also
affected by the level of income from loan, deposit, and
mortgage banking fees, operating expenses, the
provision for possible loan losses, the impact of
federal and state income taxes, and the relative levels
of interest rates and economic activity.
For the year ended December 31, 1995, the Company
recorded net income of $10.4 million, or $.71 per
share. These results are a 28.0% improvement over the
1994 net income of $8.1 million, or $.56 per share. The
improvement in the results of operations in 1995 is due
to higher net interest income and lower non-interest
expenses. Net interest income for 1995 of $43.9 million
was $2.4 million, or 5.9%, higher than 1994. The
decline in non-interest expenses is attributable to
lower legal fees and OREO-related expenses, and a
reduction in the FDIC insurance premium.
Non-interest income of $11.5 million for 1995 was
virtually the same as 1994, although the individual
components reflected a variety of changes. Trust and
Financial Services income increased $273,000 and
mortgage banking income was $197,000 higher than 1994.
Service charges on deposit accounts and other non-
interest income declined from 1994 levels.
Non-interest expenses for 1995 of $39.3 million were
$3.2 million, or 7.6%, lower than the preceding year.
Salaries and employee benefits increased slightly due
to merit increases, higher funding of a performance-
based incentive compensation plan, and additional
employee participation in the BankOs 401(k) plan which
requires a matching contribution. Occupancy expenses
for 1995 were substantially lower than 1994 due to the
write-downs of plant facilities in the previous year.
Equipment expenses were slightly higher in 1995, while
other non-interest expenses were significantly reduced
from 1994.
For the year ended December 31, 1994, the Company
recorded net income of $8.1 million, or $0.56 per
share. These results were a 75% improvement over 1993
net income of $4.6 million, or $0.32 per share. The
improved results in 1994 were due to higher net
interest income and lower provision for possible loan
losses. Net interest income for 1994 of $41.5 million
was $6.9 million, or 20.1%, higher than 1993 levels due
to increased interest income from loans. The 1994
provision for possible loan losses of $801,000 was $4.3
million, or 84.2%, less than the 1993 provision as a
result of the improved quality of the loan portfolio.
Non-interest income for 1994 was lower than that
recorded in 1993 due, in part, to lower data processing
fees resulting from the BankOs decision to close its
lockbox operations in April, 1993. The Bank also
experienced significantly lower gains from the sales of
mortgage loans in the secondary market due to a
management decision to retain more adjustable rate
residential mortgage loans in the loan portfolio and
rising interest rates which drove down secondary market
sales potential.
Non-interest expenses for 1994 were substantially
higher than the preceding year. The increase in
salaries and employee benefits was due to higher wages
resulting from an expansion of the employee ranks and
merit increases, as well as higher medical insurance
premiums and pension costs. In addition, the Bank
established a 401(k) plan and introduced a performance-
based incentive compensation plan in place of the
former profit sharing plan. Occupancy expenses for 1994
were substantially higher than 1993 due to the write-
downs of plant facilities related to actual and
anticipated facility consolidations and renovations.
Net Interest Income. The amount of net interest income
is affected by changes in interest rates and by the
volume, mix, and interest rate sensitivity of interest-
earning assets and interest-bearing liabilities.
On a fully tax-equivalent basis, net interest income
was $44.3 million in 1995, a 6.0% increase over 1994
net interest income of $41.8 million. The average
balance of interest-earning assets for 1995 was $887.6
million, an increase of $81.6 million, or 10.1%, over
the prior year. The average yield earned on interest-
earning assets in 1995 was 8.27%, up slightly from the
average yield of 7.91% in 1994. During 1995, the
average balance of interest-bearing liabilities
increased $58.5 million, or 8.9%, over 1994 average
balances. The average cost of these liabilities rose
from 3.37% in 1994 to 4.09% in 1995. These noted
changes in volumes, yields, and rates have combined to
produce the increase in net interest income.
The following table shows the Company's average
balances, net interest income, interest rate spread,
and net interest margin for each of the three years in
the period ended December 31, 1995. Non-taxable income
from loans and securities is presented on a fully tax-
equivalent basis whereby tax-exempt income is adjusted
upward by an amount equivalent to the prevailing
federal income taxes that would have been paid if the
income had been fully taxable. The assumed tax rate was
34% in these years.
<TABLE>
<CAPTION>
1995 1994
INTEREST INTEREST
AVERAGE EARNED/ AVERAGE EARNED/ AVERAGE
BALANCE PAID YIELD BALANCE PAID YIELD
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold
and assets
purchased under
resale agreements $16,666 $964 5.78% $7,841 $330 4.22%
Interest bearing
deposits 362 19 5.25% 563 21 3.73%
Taxable securities 251,588 15,900 6.32% 257,663 15,939 6.19%
Non-taxable
securities (1) 6,479 385 5.94% 5,890 293 4.97%
Loans, net of
unearned
discount (1) 612,481 56,138 9.17% 534,052 47,205 8.84%
Total interest
-earning assets $887,576 $73,406 8.27% $806,009 $63,788 7.91%
Cash and due from
banks 44,027 41,053
Other assets 14,367 17,637
Total Assets $945,970 $864,699
Interest-bearing
liabilities:
Savings and NOW
accounts $261,302 $5,760 2.20% $290,719 $6,562 2.26%
Money Market & Super
NOW accounts 110,431 3,030 2.74% 119,347 2,944 2.47%
Time deposits 292,206 17,252 5.90% 214,780 10,960 5.10%
Federal funds
purchased and assets
sold under repurchase
agreements 15,167 910 6.00% 14,417 603 4.18%
Treasury tax and loan
notes 3,828 181 4.73% 3,617 122 3.37%
Federal home loan bank
borrowings 24,384 1,531 6.28% 5,918 352 5.95%
Subordinated capital
notes 4,898 479 9.78% 4,965 486 9.77%
Total interest-bearing
liabilities $712,216 $29,143 4.09% $653,763 $22,029 3.37%
Demand deposits 153,142 141,533
Other liabilities 12,628 8,661
Total Liabilities 877,986 803,957
Stockholders' equity 67,984 60,742
Total Liabilities and
Stockholders' Equity $945,970 $864,699
Net Interest Income $44,263 $41,759
Interest Rate
Spread (2) 4.18% 4.54%
Net Interest Margin (2) 4.99% 5.18%
</TABLE>
(1) The total amount of adjustment to present interest
income and yield on a fully tax-equivalent basis is
$375 and $301 in 1995 and 1994, respectively.
(2) Interest rate spread represents the difference
between the weighted average yield on interest-earning
assets and the weighted average cost of interest-
bearing liabilities. Net interest margin represents net
interest income as a percent of average interest-
earning assets.
<TABLE>
<CAPTION>
1993
INTEREST
AVERAGE EARNED/ AVERAGE
BALANCE PAID YIELD
(Dollars in thousands)
<S> <C> <C> <C>
Interest-earning assets:
Federal funbds sold and
assets purchased under
resale agreements $20,294 $674 3.32%
Interest-bearing deposits 773 21 2.72%
Taxable securities 212,260 13,443 6.33%
Non-taxable securities (1) 6,166 378 6.13%
Loans, net of unearned
discount (1) 494,288 43,349 8.77%
Total interest-earning
assets 733,781 57,865 7.89%
Cash and due from banks 42,059
Other assets 16,016
Total Assets 791,856
Interest bearing
liabilities:
Savings and NOW accounts $277,633 $7,218 2.60%
Money Market & Super NOW
accounts 104,723 2,754 2.63%
Time deposits 212,488 11,982 5.64%
Federal funds purchased and
assets sold under
repurchase agreements 1,384 46 3.32%
Treasury tax and loan notes 3,900 105 2.69%
Federal home loan bank
borrowings -- -- --
Subordinated capital notes 8,611 815 9.46%
Total interest-bearing
liabilities 608,739 22,920 3.77%
Demand deposits 121,057
Other liabilities 7,381
Total Liabilities 737,177
Stockholders' Equity 54,679
Total Liabilities and
Stockholders' Equity 791,856
Net interest income 34,945
Interest rate spread (2) 4.12%
Net interest margin (2) 4.74%
</TABLE>
(1) The total amount of adjustment to present interest
income and yield on a flly tax-equivalent basis is
$415 in 1993.
(2) Interest rate spread represents the difference
between the weighted average yield on interest-earning
assets and the weighted average cost f interest-
bearing liabilities. Net interest margin represents net
interest income as a percent of average interest-
earning assets.
The following table presents certain information
regarding changes in interest income and interest
expense for the periods indicated. For each category of
interest-earning assets and interest-bearing
liabilities, information is provided with respect to
changes attributable to changes in rate and changes in
volume. Changes which are attributable to both volume
and rate have been consistently allocated to change due
to rate.
<TABLE>
<CAPTION>
Year Ended December 31,
1995 Compared To 1994 1994 Compared To 1993
Change Change Change Change
Due To Due To Total Due To Due To Total
Rate Volume Change Rate Volume Change
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Income on
interest-earning
assets:
Federal funds sold
and assets
purchased under
resale agreements $262 $372 $634 $69 ($413) ($344)
Interest bearing
deposits 6 (8) (2) 6 (6) --
Taxable securities 337 (376) (39) (378) 2,874 2,496
Non-taxable
securities (1) 63 29 92 (68) (17) (85)
Loans, net of unearned
discount (1) 2,000 6,933 8,933 369 3,487 3,856
Total $2,668 $6,950 $9,618 ($2) $5,925 $5,923
Expense of
interest-bearing
liabilities:
Savings and NOW
accounts ($137) ($665) ($802) ($996) $340 ($656)
Money Market and
Super NOW accounts 306 (220) 86 (195) 385 190
Time deposits 2,343 3,949 6,292 (1,151) 129 (1,022)
Federal funds
purchased and assets
sold under repurchase
agreements 276 31 307 124 433 557
Treasury tax and
loan notes 52 7 59 25 (8) 17
Federal home loan
bank borrowings 80 1,099 1,179 352 -- 352
Subordinated capital
notes -- (7) (7) 16 (345) (329)
Total $2,920 $4,194 $7,114 ($1,825) $934) ($891)
Change in net
interest income ($252) $2,756 $2,504 $1,823 $4,991 $6,814
</TABLE>
(1) Interest earned on non-taxable securities and
loans is shown on a fully tax equivalent basis.
Total interest income amounted to $73.4 million in
1995, an increase of $9.6 million, or 15.1%, over 1994.
This was due primarily to a rise of $8.9 million, or
18.9%, in interest earned on loans, attributable to a
$78.4 million, or 14.7%, increase in the average
balance of loans outstanding, as well as a 33 basis
point increase in the average yield earned on loans.
Interest earned on federal funds sold and assets
purchased under resale agreements increased almost 300%
due to higher average balances and increased yields.
Total income from the securities portfolio was $53,000
higher than in 1994. A decline in the average balance
of securities was offset by a slight increase in the
yield earned on the portfolio.
Total interest expense for the year ended December 31,
1995 increased $7.1 million, or 32.3%, over 1994. The
increase was primarily due to a higher balance of
costlier time deposit accounts. During 1995, the
average balance of interest-bearing deposit accounts
increased $39.1 million, or 6.3%. During the same
period, the average cost of interest bearing deposits
rose 64 basis points.
Total interest income amounted to $63.8 million in
1994, an increase of $5.9 million, or 10.2%, from 1993.
This was due primarily to an increase of $3.9 million,
or 8.9%, in interest earned on loans which is
attributable to a $39.8 million, or 8.0%, increase in
the average balance of loans outstanding and a 7 basis
point rise in the average yield earned on these loans.
Interest income on taxable securities in 1994 was $2.5
million, or 18.6%, higher than 1993 due to higher
average balances. The average yield on these securities
reflected a decline of 14 basis points for the year.
Interest income on the remaining earning assets
reflected small declines from 1993 due principally to
lower average balances.
Total interest expense for the year ended December 31,
1994 decreased $890,000, or 3.9%, from 1993. Average
balances of interest-bearing liabilities increased from
$608.7 million in 1993 to $653.8 million for 1994, an
increase of 7.4%. All deposit categories reflected this
growth due to an expanded customer base and the
purchase of the deposits of three branches of a failed
savings and loan association. Average rates on deposits
declined 41 basis points as the Bank maintained rates
on transaction accounts and benefited from the
maturities of higher rate time deposits.
The average balance of borrowings amounted to $28.9
million in 1994, as compared to $13.9 million in 1993.
This increase reflected the more frequent utilization
of the repurchase agreement lines and the introduction
of the borrowing facility at the Federal Home Loan
Bank.
Provision for Possible Loan Losses. The reserve for
possible loan losses is increased by the provision for
possible loan losses and decreased by loan charge-offs,
net of recoveries. Management's periodic evaluation of
the adequacy of the reserve considers past loan loss
experience, known and inherent risks in the loan
portfolio, adverse situations which may affect the
borrowers' ability to repay, the estimated value of the
underlying collateral, if any, and current and
prospective economic conditions. A substantial portion
of the Bank's loans are secured by real estate in
Massachusetts. Accordingly, the ultimate collectibility
of a substantial portion of the BankOs loan portfolio
is susceptible to changes in property values.
For the year ended December 31, 1995, the provision for
possible loan losses amounted to $1.0 million, an
increase of $199,000 from the 1994 provision. This
increase is indicative of the 1995 loan origination
volumes. For the year ended December 31, 1995, net loan
charge-offs totaled $2.6 million, virtually the same as
the prior year. As of December 31, 1995, the reserve
for possible loan losses represented 1.92% of loans,
net of unearned discount, as compared to 2.32% at
December 31, 1994. Substantial improvement in the
coverage of nonperforming loans was noted as the
reserve for possible loan losses at December 31, 1995
represented 229.3% of nonperforming loans on that date,
as compared to coverage of 174.5% at the prior year-
end.
The provision for possible loan losses for the year
ended December 31, 1994 amounted to $801,000, a
decrease of $4.3 million from the 1993 provision. This
decline was indicative of the improving quality of the
BankOs loan portfolio as evidenced by the continuing
decline in the level of nonperforming loans. For the
year ended December 31, 1994, net loan charge-off
totaled $2.6 million, as compared to $5.6 million in
the prior year. As of December 31, 1994, the reserve
for possible loan losses represented 2.32% of loans,
net of unearned discount, as compared to 3.18% at
December 31, 1993. Significant improvement in the
coverage of nonperforming loans was noted as the
reserve for possible loan losses at December 31, 1994
represented 174.5% of nonperforming loans on that date
as compared to coverage of 91.2% at the prior year-end.
The provision for possible loan losses is based upon
management's evaluation of the level of the reserve for
possible loan losses required in relation to the
estimate of loss exposure in the loan portfolio. An
analysis of individual loans and the overall risk
characteristics and size of the different loan
portfolios is conducted on an ongoing basis. This
managerial evaluation is reviewed periodically by the
Company's independent public accountants as well as by
a third-party loan review consultant. As adjustments
are required, they are reported in the earnings of the
period in which they become known.
Management believes that the reserve for possible loan
losses is adequate. While management uses available
information to recognize losses on loans, future
additions to the reserve may be necessary based on
increases in nonperforming loans, changes in economic
conditions, or for other reasons. Various regulatory
agencies, as an integral part of their examination
process, periodically review the Company's reserve for
possible loan losses. The Company was most recently
examined by Federal Reserve regulators in the second
quarter of 1994 and the Bank was most recently examined
by FDIC banking regulators in the third quarter of
1995. No additional provision for possible loan losses
was required as a result of these examinations.
Non-Interest Income. The following table sets forth
information regarding non-interest income for the
periods shown.
<TABLE>
<CAPTION>
Years Ended December 31, 1995 1994 1993
(In Thousands)
<S> <C> <C> <C>
Service charges on
deposit accounts $5,648 $5,709 $6,121
Trust and financial
services income 2,424 2,151 2,214
Mortgage banking income 2,243 2,046 2,697
Other non-interest income 1,165 1,564 1,963
TOTAL $11,480 $11,470 $12,995
</TABLE>
Non-interest income, which is generated by deposit
account service charges, fiduciary services, mortgage
banking activities, and miscellaneous other sources,
amounted to $11.5 million in 1995, virtually unchanged
from 1994.
Service charges on deposit accounts declined slightly
from $5.7 million in 1994 to $5.6 million in 1995. This
is attributed to an increase in the credit applied
against customer service charges based on U. S.
Treasury Bill rates which were slightly higher than
1994.
The Trust and Financial Services Division generated
record revenues of $2.4 million. These increased
revenues are primarily attributed to the first full
year of operating the trust satellite office located in
Attleboro and an increase in assets under
administration.
Mortgage banking income increased to $2.2 million in
1995, up from $2.0 million in 1994. The Company's
mortgage banking revenue consists primarily of
application fees and points, servicing income, and net
gains on the sale of loans originated for sale.
Residential mortgage loans are originated as necessary
to meet consumer demand. Sales of such loans in the
secondary market occur to lend balance to the CompanyOs
interest rate sensitivity. These sales generate gain or
loss at the time of sale, produce future servicing
income, and provide funds for additional lending and
other purposes. Typically, loans are sold with the Bank
retaining responsibility for collecting and remitting
loan payments, inspecting properties, making certain
insurance and tax payments on behalf of the borrowers,
and otherwise servicing the loans and receiving a fee
for performing these services.
Other non-interest income for 1995 declined $399,000
from 1994 primarily due to lower data processing fees
and miscellaneous other income.
For the year ended December 31, 1994, total non-
interest income decreased $1.5 million, or 11.7%, from
1993. Service charges on deposit accounts decreased
$412,000, or 6.7%, due to a sharp increase in the
credit applied against customer service charges based
on U. S. Treasury Bill rates which increased
substantially in 1994. Trust and financial services
income recorded a modest decrease of $63,000, or 2.8%,
from 1993 primarily attributable to a declining
securities market and a reduction in assets under
administration. Mortgage banking income declined
$651,000, or 24.1%, from 1993 as the Bank experienced a
lower level of mortgage originations and related fees
due to increases in mortgage rates. In addition, the
Bank recorded a $453,000 decline in gains realized from
the sale of mortgage loans in the secondary market. Other
non-interest income was $399,000 lower than 1993 due
primarily to lower data processing fees resulting from the
Bank's decision to close its lockbox operations in April, 1993.
Non-Interest Expense. The following table sets forth
information regarding non-interest expense for the
periods shown.
<TABLE>
<CAPTION>
Years Ended December 31, 1995 1994 1993
(In Thousands)
<S> <C> <C> <C>
Salaries and employee benefits $22,143 $20,802 $17,341
Occupancy expenses 3,458 4,726 2,950
Equipment expenses 2,335 2,005 2,027
Advertising 710 814 599
Legal fees - loan collection 681 1,610 2,195
Legal fees - other 381 320 139
FDIC assessment 1,070 1,863 2,009
OREO expenses 599 1,182 1,817
OREO write-downs 152 929 1,334
Other non-interest expenses 7,723 8,230 6,920
TOTAL $39,252 $42,481 $37,331
</TABLE>
For the year ended December 31, 1995, non-interest
expenses totaled $39.3 million, a decrease of $3.2
million, or 7.6%, from 1994. Salaries and employee
benefits increased $1.3 million, or 6.4%, due to merit
increases, higher funding of the 401(k) and the
performance-based incentive compensation plans, and a
rise in medical insurance premiums and pension costs.
The decrease in occupancy expenses of $1.3 million, or
26.8%, is attributable to the substantial write-downs
of certain buildings in 1994 related to actual and
anticipated facility consolidations and renovations.
The 1995 total includes $265,000 of plant facility
write-downs related to impending branch consolidations.
Equipment expenses for 1995 were $330,000, or 16.5%,
higher than the prior year due to an increase in
equipment rental charges. The reduction in legal fees
related to loan collection efforts in 1995 of $929,000,
or 57.7%, is indicative of the declining portfolio of
troubled loans which require legal assistance to
resolve and recoveries of certain legal expenses. The
FDIC insurance premium was $793,000, or 42.6%, lower
than 1994 due to a reduced risk-based assessment and a
refund from the Bank Insurance Fund. The Bank currently
is assessed the lowest FDIC insurance premium rate as a
result of its strong financial condition. The
substantial decline in OREO-related expenses is
attributed to the low volume of foreclosed properties.
1995 other non-interest expenses decreased
approximately $507,000, or 6.2%, from 1994 despite the
recording of $439,000 of expenses related to the data
processing change.
Non-interest expenses totaled $42.5 million for the
year ended December 31, 1994, an increase of $5.2
million, or 13.8%, from 1993. Salaries and employee
benefits increased $3.5 million, or 20.0%, due to
higher wages resulting from an expansion of the
employee ranks and merit increases, the introduction of
a performance-based incentive compensation plan, the
establishment of a 401(k) Plan, and higher medical
insurance premiums and pension costs. The increase in
occupancy expenses of $1.8 million, or 60.2%, is
attributable to the write-downs of certain buildings
related to actual and anticipated facility
consolidations and renovations. The reduction in loan
collection legal fees of $585,000, or 26.7%, is
indicative of the shrinking portfolio of troubled loans
which require legal assistance to resolve. The increase
in other legal fees of $181,000, or 130.2%, is due to
legal fees incurred in connection with the acquisition
of deposits from the Resolution Trust Corporation and
managed trust assets from Pawtucket Trust Company. The
FDIC insurance premium was $146,000, or 7.3%, lower
than 1993 due to a reduced risk-based premium,
indicative of the BankOs improved financial strength.
The decline in OREO expenses of $635,000, or 34.9%, is
attributed to the reduction in the volume of foreclosed
properties. The decline in OREO write-downs of
$405,000, or 30.4%, is indicative of the reduced
holdings of foreclosed properties and a more stable
real estate market. Other non-interest expenses
increased approximately $1.3 million, or 18.9%. Of this
amount, $821,000 relates to the write-down of aged
computer software. In addition, education and training,
and telephone costs increased over 1993.
Income Taxes. For the years ended December 31, 1995,
1994, and 1993, the Company recorded combined federal
and state income tax provisions of $4,729,000,
$1,533,000, and $483,000, respectively. These
provisions reflect effective income tax rates of 31.3%,
15.9%, and 9.4% in 1995, 1994, and 1993, respectively,
which are less than the Company's combined statutory
tax rate of 42%. The lower effective income tax rates
are attributable to benefits recorded in these years in
compliance with SFAS No. 109. These benefits, which
amounted to $1.6 million, $2.6 million, and $1.7
million in 1995, 1994, and 1993, respectively, reduced
the valuation allowance which had been established
prior to 1993 due to the uncertainty of the
realizability of the Company's net deferred tax asset
at that time.
The tax effects of all income and expense transactions
are recognized by the Company in each yearOs
consolidated statements of income regardless of the
year in which the transactions are reported for income
tax purposes.
ASSET/LIABILITY MANAGEMENT
The Bank's asset/liability management process monitors
and manages, among other things, the interest rate
sensitivity of the balance sheet, the composition of
the securities portfolio, funding needs and sources,
and the liquidity position. All of these factors, as
well as projected asset growth, current and potential
pricing actions, competitive influences, national
monetary and fiscal policy, and the regional economic
environment are considered in the asset/liability
management process.
The Asset/Liability Management Committee, whose members
comprise the Bank's senior management, develops
procedures, consistent with policies established by the
Board of Directors, to monitor and coordinate the
Bank's interest rate sensitivity and the sources, uses,
and pricing of funds. Interest rate sensitivity refers
to the BankOs exposure to fluctuations in interest
rates and its effect on earnings. If assets and
liabilities do not reprice simultaneously and in equal
volume, the potential for interest rate exposure
exists. It is managementOs objective to maintain
stability in the growth of net interest income through
the maintenance of an appropriate mix of interest-
earning assets and interest-bearing liabilities and,
when necessary, within prudent limits, through the use of
off-balance sheet hedging instruments such as interest rate
swaps, floors, and caps. The Committee employs simulation
analyses in an attempt to quantify, evaluate and manage the
impact of changes in interest rates on the BankOs net
interest income. In addition, the Bank engages an independent
consultant to render advice with respect to asset/liability
management strategy.
The Bank implements a deposit pricing strategy in an
effort to maintain a balanced cost of funds. As an
alternative to retail deposits, management has
implemented funding strategies that include FHLB
advances and repurchase agreement lines. These non-
deposit funds are also viewed as a contingent source of
liquidity and, when profitable lending and investment
opportunities exist, access to such funds provides a
means to fund this asset growth.
At December 31, 1995, approximately 43.4% of total
assets consisted of assets which will reprice or mature
within one year. As of that date, the amount of the
cumulative hedged gap was a negative $120.9 million, or
12.2% of total assets.
From time to time the Bank has utilized interest rate
swaps, floors, and caps as hedging instruments against
stable or declining interest rates. An interest rate
swap is an agreement whereby one party agrees to pay a
floating rate of interest on a notional principal
amount in exchange for receiving a fixed rate of
interest on the same notional amount for a
predetermined period of time from a second party.
The assets relating to the notional principal amount
are not actually exchanged.
The Bank had entered into interest rate swap agreements
with a total notional value of $90 million at December
31, 1995. These swaps were arranged through two large
international financial institutions, have initial
maturities ranging from four to five years, and provide
for net settlement on a semiannual basis. The Bank
receives fixed rate payments and pays a variable rate
of interest tied to 3-month LIBOR. At December 31,
1995, the weighted average fixed payment rate was 5.88%
and the weighted average rate of the variable interest
payments was 5.84%. As a result of these interest rate
swaps, the Bank realized net interest expense of $.4
million for the year ended December 31, 1995 and net
interest income of $1.5 million and $2.9 million for
the years ended December 31, 1994 and 1993,
respectively.
Rockland also purchased two 2-year interest rate caps
with a total notional value of $70 million in May 1995.
The caps will pay the Bank the difference between LIBOR
and the cap level if LIBOR exceeds the cap level at any
of the quarterly reset dates. If LIBOR remains below
the cap level, no payment is made to the Bank.
The following table presents the expected maturities or
repricing opportunities of interest-earning assets and
interest-bearing liabilities at December 31, 1995 based
on the information and the assumptions set forth in the
notes below.
<TABLE>
<CAPTION>
Amounts Maturing or Repricing
Within Over Three
Three To Twelve Over One
Months Months Year Total
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Interest-earning
assets (1):
Federal funds sold and
assets purchased under
resale agreements $13,000 -- -- $13,000
Interest bearing deposits -- 296 -- 296
Securities 47,920 58,140 156,926 262,986
Loans - fixed rate (2) 24,141 55,093 241,811 321,045
Loans - floating rate (2) 190,597 39,250 71,978 301,825
Total interest-earning
assets 275,658 152,779 470,715 899,152
Interest-bearing
liabilities:
Savings and NOW
accounts (3) 61,935 -- 197,794 259,729
Money Market and Super
NOW accounts (3) 111,681 -- 11,978 123,659
Time certificates of
deposit over $100,000 10,273 14,194 5,619 30,086
Other time deposits 56,414 191,919 42,825 291,158
Borrowings 18,091 10,000 -- 28,091
Subordinated capital notes -- 4,843 -- 4,843
Total interest-bearing
liabilities 258,394 220,956 258,216 737,566
Net interest sensitivity
gap during the period 17,264 (68,177) 212,499 161,586
Cumulative gap 17,264 (50,913) 161,586 161,586
Effect of hedging
activities (90,000) 20,000 70,000 --
Cumulative hedged gap $(72,736) $(120,913) $161,586 $161,586
Interest-earning assets
as a percent of
interest-bearing
liabilities (cumulative) 106.68% 89.38% 121.91% 121.91%
Interest-earning assets
as a percent of total
assets (cumulative) 27.91% 43.38% 91.05% 91.05%
Ratio of unhedged gap to
total assets 1.75% (6.90)% 21.52% 16.36%
Ratio of cumulative unhedged
gap to total assets 1.75% (5.16)% 16.36% 16.36%
Ratio of hedged gap to total
assets (7.37)% (4.88)% 28.60% 16.36%
Ratio of cumulative hedged
gap to total assets (7.37)% (12.24)% 16.36% 16.36%
</TABLE>
(1) Adjustable and floating-rate assets are included
in the period in which interest rates are next
scheduled to adjust rather than
in the period in which they are due, and fixed-rate
loans are included in the periods in which they are
scheduled to be repaid.
(2) Balances have been reduced for nonperforming loans
which amounted to $5.3 million at the same date.
(3) Although the BankOs regular savings accounts
generally are subject to immediate withdrawal,
management considers most ofthese accounts to be
core deposits having significantly longer effective
maturities based on the Bank's experience of retention
of such deposits in changing interest rate
environments.
LIQUIDITY
Liquidity, as it pertains to commercial banks, is the
ability to generate cash in the most economical way to
pay savings withdrawals and maturing certificates of
deposit and fund loan commitments. Liquidity is
provided by earning assets and both non-interest
bearing and interest bearing liabilities, principally
core deposits.
The Bank utilizes its extensive branch network to
access retail customers who provide a stable base of in-
market core deposits. These funds are principally comprised of
demand deposits, NOW and Super NOW accounts, savings
accounts, and money market accounts. Deposit levels are
greatly influenced by interest rates, economic
conditions, and competitive factors. The Bank has also
established four repurchase agreements lines with major
brokerage firms as potential sources of liquidity. At
December 31, 1995, there were no repurchase agreements
outstanding. The Bank is a member of the Federal Home
Loan Bank of Boston which provides another source of
funds for liquidity purposes. This affiliation provides
the Bank with access to approximately $300 million of
potential funding. On December 31, 1995, the Bank had
$20 million outstanding in FHLB borrowings, with
initial maturities of 12 to 18 months.
The Parent Company, as a separately incorporated bank holding
company, has no significant operations other than
serving as the sole stockholder of the Bank. On an
unconsolidated basis, the CompanyOs assets include its
investment in the Bank, $1.0 million of other
investments, and $1.5 million of goodwill. The Company
has no employees and no significant liabilities or
sources of income. Expenses incurred by the Company
relate to its reporting obligations under the
Securities Exchange Act of 1934, as amended, and
related expenses as a publicly traded company. The
Company is directly reimbursed by the Bank for
virtually all such expenses.
The Bank actively manages its liquidity position under
the direction of the Asset/Liability Management
Committee. Periodic review under prescribed policies
and procedures is intended to ensure that the Bank will
maintain adequate levels of available funds. At
December 31, 1995, the Bank's liquidity position was
well above policy guidelines.
CAPITAL RESOURCES
The Federal Reserve Board (FRB), the Federal Deposit
Insurance Corporation (FDIC), and other regulatory
agencies have established capital guidelines for banks
and bank holding companies. Risk-based capital
guidelines issued by the federal regulatory agencies
require banks to meet a minimum Tier 1 risk-based
capital ratio of 4.0% and a total risk-based capital
ratio of 8.0%. At December 31, 1995, the Company and
the Bank substantially exceeded the minimum
requirements for Tier 1 risk-based and total risk-based
capital.
An additional requirement of a minimum 3.0% Tier 1
leverage capital ratio is mandated. On December 31,
1995, the Tier 1 leverage capital ratio for the Company
and the Bank was 7.37% and 7.12%, respectively.
Capital ratios of the Company and the Bank are shown
below for the last two year-ends.
<TABLE>
<CAPTION>
December 31, 1995 1994
<S> <C> <C>
The Company
Tier 1 leverage capital ratio 7.37% 6.92%
Tier 1 risk-based capital ratio 10.90% 10.29%
Total risk-based capital ratio 12.15% 11.70%
The Bank
Tier 1 leverage capital ratio 7.12% 6.62%
Tier 1 risk-based capital ratio 10.54% 9.86%
Total risk-based capital ratio 11.79% 11.27%
</TABLE>
DIVIDENDS
The Company declared cash dividends of $.18 per share
in 1995, following the resumption of dividend payments
in the third quarter of 1994. The 1995 ratio of
dividends paid to earnings was 25.4%.
Payment of dividends by the Company on its common stock
is subject to various regulatory restrictions. The
Company is regulated by the Federal Reserve and, as
such, is subject to its regulations and guidelines with
respect to the payment of dividends. Since
substantially all of the funds available for the
payment of dividends are derived from the Bank, future
dividends will depend on the earnings of the Bank, its
financial condition, its need for funds, applicable
governmental policies and regulations, and other such
matters as the Board of Directors deems appropriate.
Management believes that the Bank will generate
adequate earnings to continue to pay dividends.
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and related notes
thereto presented elsewhere herein have been prepared
in accordance with generally accepted accounting
principles which require the measurement of financial
position and operating results in terms of historical
dollars without considering changes in the relative
purchasing power of money over time due to inflation.
The financial nature of the Company's consolidated
financial statements is more clearly affected by
changes in interest rates than by inflation. Interest
rates do not necessarily fluctuate in the same
direction or in the same magnitude as the prices of
goods and services. However, inflation does affect the
Company because, as prices increase, the money supply
grows and interest rates are affected by inflationary
expectations. The impact on the Company is a noted
increase in the size of loan requests with resulting
growth in total assets. In addition, operating expenses
may increase without a corresponding increase in
productivity. There is no precise method, however, to
measure the effects of inflation on the Company's
consolidated financial statements. Accordingly, any
examination or analysis of the financial statements
should take into consideration the possible effects of
inflation.
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 1994
(Dollars In Thousands)
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS $67,354 $48,555
FEDERAL FUNDS SOLD AND
ASSETS PURCHASED UNDER
RESALE AGREEMENTS 13,000 10,000
INTEREST BEARING DEPOSITS 296 502
SECURITIES HELD TO MATURITY
(Notes 1 and 3) 226,896 256,785
(market value $227,409
and $239,875)
SECURITIES AVAILABLE FOR SALE
(Notes 1 and 3) 32,628 4,250
FEDERAL HOME LOAN BANK STOCK
(Note 6) 3,462 3,100
LOANS, NET OF UNEARNED DISCOUNT
(Notes 1 and 4) 628,141 590,689
LESS: RESERVE FOR POSSIBLE
LOAN LOSSES (12,088) (13,719)
Net Loans 616,053 576,970
BANK PREMISES AND EQUIPMENT
(Notes 1 and 5) 8,903 7,088
OTHER REAL ESTATE OWNED (Note 1) 638 3,866
OTHER ASSETS (Notes 1 and 8) 18,359 18,078
TOTAL ASSETS $987,589 $929,194
LIABILITIES
DEPOSITS
Demand Deposits $166,453 $157,144
Savings and NOW Accounts 259,729 277,827
Money Market and Super NOW
Accounts 123,659 121,133
Time Certificates of Deposit
over $100,000 30,086 21,219
Other Time Deposits 291,158 219,289
Total Deposits 871,085 796,612
FEDERAL FUNDS PURCHASED AND
ASSETS SOLD UNDER REPURCHASE
AGREEMENTS (Notes 3 and 6) 4,060 26,585
TREASURY TAX AND LOAN NOTES
(Notes 3 and 6) 4,031 3,802
FEDERAL HOME LOAN BANK BORROWINGS
(Note 6) 20,000 25,000
OTHER LIABILITIES 10,998 8,028
SUBORDINATED CAPITAL NOTES
(Note 7) 4,843 4,965
TOTAL LIABILITIES 915,017 864,992
STOCKHOLDERS' EQUITY
(Notes 1 and 11)
Preferred Stock, $.01 par value.
Authorized:1,000,000 Shares
Outstanding: No Shares in 1995
or 1994 -- --
Common Stock, $.01 par value.
Authorized: 30,000,000 Shares
Outstanding: 14,507,925 Shares
in 1995 and 14,433,632 Shares
in 1994 145 144
Surplus 43,777 43,381
Retained Earnings 28,710 20,931
Unrealized Loss on Securities
Available For Sale, Net of Tax
(Note 3) (60) (254)
TOTAL STOCKHOLDERS' EQUITY 72,572 64,202
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $987,589 $929,194
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 1994 1993
(Dollars In Thousands, Except Share and Per Share Data)
<S> <C> <C> <C>
INTEREST INCOME
Interest on Loans
(Notes 1 and 4) $55,870 $46,981 $43,057
Interest and Dividends
on Securities (Note 3) 16,178 16,155 13,698
Interest on Federal
Funds Sold and Repurchase
Agreements 964 330 674
Interest on Interest Bearing
Deposits 19 21 21
Total Interest Income 73,031 63,487 57,450
INTEREST EXPENSE
Interest on Deposits 26,042 20,467 21,954
Interest on Borrowings
(Notes 1 and 6) 2,623 1,076 151
Interest on Subordinated
Capital Notes (Note 7) 478 486 815
Total Interest Expense 29,143 22,029 22,920
Net Interest Income 43,888 41,458 34,530
PROVISION FOR POSSIBLE LOAN
LOSSES (Notes 1 and 4) 1,000 801 5,075
Net Interest Income After
Provision For Possible
Loan Losses 42,888 40,657 29,455
NON-INTEREST INCOME
Service Charges on Deposit
Accounts 5,648 5,709 6,121
Trust and Financial
Services Income 2,424 2,151 2,214
Mortgage Banking Income 2,243 2,046 2,697
Other Non-Interest Income 1,165 1,564 1,963
Total Non-Interest Income 11,480 11,470 12,995
NON-INTEREST EXPENSES
Salaries and Employee
Benefits (Note 9) 22,143 20,802 17,341
Occupancy Expenses
(Notes 5 and 12) 3,458 4,726 2,950
Equipment Expenses 2,335 2,005 2,027
Other Non-Interest
Expenses (Note 10) 11,316 14,948 15,013
Total Non-Interest
Expenses 39,252 42,481 37,331
INCOME BEFORE INCOME TAXES 15,116 9,646 5,119
PROVISION FOR INCOME TAXES
(Notes 1 and 8) 4,729 1,533 483
NET INCOME $10,387 $8,113 $4,636
NET INCOME PER SHARE $0.71 $0.56 $0.32
Weighted average common and
common equivalent shares
outstanding
(Notes 1 and 11) 14,631,493 14,415,443 14,408,436
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
UNREALIZED
LOSS ON
SECURITIES
COMMON RETAINED AVAILABLE
STOCK SURPLUS EARNINGS FOR SALE TOTAL
(In Thousands)
<S> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31, 1992 $144 $43,266 $9,336 $-- $52,746
Net Income 4,636 4,636
Proceeds From Exercise
of Stock Options
(Note 11) 3 3
BALANCE,
DECEMBER 31, 1993 144 43,269 13,972 -- 57,385
Cumulative Effect of
Adoption of SFAS No.
115, Net of Tax
(Notes 1 and 3) (44) (44)
Net Income 8,113 8,113
Cash Dividends Declared
($.08 per share) (1,154) (1,154)
Proceeds From Exercise
of Stock Options
(Note 11) 39 39
Common Stock Sold Under
Dividend Reinvestment
and Stock Purchase Plan
(Note 11) 73 73
Change in Unrealized
Loss on Securities
Available For Sale,
Net of Tax (Note 3) (210) (210)
BALANCE,
DECEMBER 31, 1994 144 43,381 20,931 (254) 64,202
Net Income 10,387 10,387
Cash Dividends Declared
($.18 per share) (2,608) (2,608)
Proceeds From Exercise
of Stock Options
(Note 11) 44 44
Common Stock Sold Under
Dividend Reinvestment
and Stock Purchase Plan
(Note 11) 1 352 353
Change in Unrealized
Loss on Securities
Available For Sale,
Net of Tax (Note 3) 194 194
BALANCE,
DECEMBER 31, 1995 $145 $43,777 $28,710 $(60) $72,572
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: (In Thousands)
Net Income $10,387 $8,113 $4,636
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH PROVIDED
FROM OPERATING ACTIVITIES:
Depreciation and amortization 3,214 5,406 3,292
Provision for possible loan losses 1,000 801 5,075
Prepaid income taxes 55 (2,013) (943)
Loans originated for resale (47,472) (30,148) (87,125)
Proceeds from mortgage loan sales 47,490 30,177 87,607
Gain on sale of mortgages (18) (29) (482)
Proceeds from sale of assets held
for sale -- -- 1,200
Other Real Estate Owned write-downs 153 929 1,334
Changes in assets and liabilities
Decrease in other assets 100 4,271 5,708
Increase in other liabilities 2,736 2,382 985
TOTAL ADJUSTMENTS 7,258 11,776 6,651
NET CASH PROVIDED FROM OPERATING
ACTIVITIES 17,645 19,889 21,287
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in Interest Bearing
Deposits 206 200 197
Proceeds from maturities of
Securities Held to Maturity 52,511 53,036 67,845
Proceeds from maturities of
Securities Available For Sale 485 797 --
Purchase of Securities Held to
Maturity (51,917) (49,565) (140,569)
Purchase of Federal Home Loan
Bank Stock (362) (3,100) --
Net increase in Loans (42,178) (113,720) (2,647)
Proceeds from sale of Other
Real Estate Owned 3,953 8,289 8,703
Investment in Bank Premises
and Equipment (3,536) (2,480) (909)
Premium Paid for Plymouth Fed
deposits and Pawtucket Trust
assets -- (1,923) --
NET CASH USED IN INVESTING
ACTIVITIES (40,838) (108,466) (67,380)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Acquired Deposits -- 21,574 --
Net increase (decrease) in
Time Deposits 80,736 21,618 (2,966)
Net increase (decrease) in
Other Deposits (6,263) 10,035 17,331
Net increase (decrease) in
Federal Funds Purchased
and Assets Sold Under
Repurchase Agreements (22,525) 14,657 3,898
Net increase (decrease) in
Federal Home Loan Bank
Borrowings (5,000) 25,000 --
Net increase (decrease) in
Treasury Tax & Loan Notes 229 (3,148) 2,114
Repayment of Capital Notes (122) -- (3,666)
Proceeds from stock issuance 397 112 3
Dividends paid (2,460) (576) --
NET CASH PROVIDED FROM FINANCING
ACTIVITIES 44,992 89,272 16,714
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 21,799 695 (29,379)
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR 58,555 57,860 87,239
CASH AND CASH EQUIVALENTS AT THE
END OF THE YEAR $80,354 $58,555 $57,860
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest $28,862 $21,398 $23,157
Income taxes 3,999 2,359 1,444
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
OREO Properties Acquired 878 4,200 7,233
Loans transferred from assets
held for sale -- -- (4,255)
Securities transferred to
Securities Available For Sale 28,619 -- --
</TABLE>
DISCLOSURE OF ACCOUNTING POLICY:
For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due from
banks, and federal funds sold and assets purchased
under resale agreements. Generally, federal funds are
sold for up to two week periods.
The accompanying notes are an integral part of these
consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements
include the accounts of Independent Bank Corp. (the
Company) and its wholly-owned subsidiary, Rockland
Trust Company (Rockland or the Bank). All material
intercompany accounts and transactions have been
eliminated from these statements. Certain amounts in
prior year financial statements have been reclassified
to conform to the current yearOs presentation.
NATURE OF OPERATIONS
Independent Bank Corp. is a one-bank holding company
whose primary asset is its investment in Rockland Trust
Company. Rockland is a state-chartered commercial bank
which operates 33 banking offices in southeastern
Massachusetts. The Company's primary source of income
is from providing loans to individuals and small-to-
medium-sized businesses in its market area.
USES OF ESTIMATES IN THE PREPARATION OF FINANCIAL
STATEMENTS
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at
the date of the finan-cial statements and the reported
amounts of revenues and expenses during the reporting
periods. Actual results could vary from these
estimates.
SECURITIES
On January 1, 1994, the Bank adopted Statement of
Financial Accounting Standards (SFAS) No. 115,
OAccounting for Certain Investments in Debt and Equity
Securities." This statement addresses the accounting
and reporting for all investments in debt securities
and for investments in equity securities that have
readily determinable fair values.
When securities are purchased, they are classified as
securities held to maturity if it is managementOs
intent and ability to hold them until maturity. These
securities are carried at cost, adjusted for
amortization of premiums and accretion of discounts,
both computed by the effective yield method. If it is
management's intent at the time of purchase not to hold
the securities to maturity, these securities are
classified as securities available for sale and are
carried at market value with unrealized gains and
losses reported, net of the related tax effect, as a
separate component of stockholders' equity. When
securities are sold, the adjusted cost of the specific
security sold is used to compute gain or loss on the
sale. There were no sales of securities in 1995, 1994,
or 1993.
LOANS AND RESERVE FOR POSSIBLE LOAN LOSSES
Loans are stated at their principal balance
outstanding. Interest income for commercial, real
estate, and consumer loans is accrued based upon the
daily principal amount outstanding except for loans on
nonaccrual status. Interest income on instalment loans
is generally recorded based upon the level-yield
method. Interest accruals are generally suspended on
commercial or real estate loans more than 90 days past
due with respect to principal or interest. When a loan
is placed on nonaccrual status all previously accrued
and uncollected interest is reversed against current
income. Interest income on nonaccrual loans is
recognized on a cash basis when the ultimate
collectibility of principal is no longer considered
doubtful.
Loan fees in excess of certain direct origination costs
are deferred and amortized into interest income over
the expected term of the loan using the level-yield
method.
The reserve for possible loan losses is funded by
periodic charges against expense and is maintained at a
level that management considers adequate to provide for
potential loan losses based upon an evaluation of known
and inherent risks in the loan portfolio. The reserve
is based on estimates, and ultimate losses may vary
from current estimates. These estimates are reviewed
periodically and, as adjustments are required, are
reported in earnings in the period in which they become
known. When a loan, or any portion thereof,
is considered to be uncollectible, it is charged
against the reserve for possible loan losses.
Subsequent recoveries are credited to the reserve.
IMPAIRED LOANS AND TROUBLED DEBT RESTRUCTURINGS
The Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan," and SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan D
Income Recognition and Disclosures," as of January 1,
1995. SFAS No. 114 requires that certain impaired loans
be measured based on the present value of the expected
future cash flows discounted at the loan's original
effective interest rate or the collateral value.
When the measure of the impaired loan is less than the
recorded investment in the loan, the impairment is
recorded through a valuation allowance.
The Company had previously determined the adequacy of
the reserve for possible loan losses using methods
similar to those prescribed in SFAS No. 114. As a
result of adopting these statements, no additional
provision for possible loan losses was required as of
January 1, 1995.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed
using the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are
amortized over the shorter of the lease terms or the
estimated useful lives of the improvements.
OTHER REAL ESTATE OWNED
Other real estate owned (OREO) is comprised of real
estate acquired through foreclosure or acceptance of a
deed in lieu of foreclosure. OREO is carried at the
lower of the related loan's remaining principal balance
or the estimated fair value of the property acquired,
less estimated costs to sell. Any loan balance in
excess of the estimated fair value on the date of
transfer is charged to the reserve for possible loan
losses on that date. The carrying value of other real
estate owned is reviewed periodically. Subsequent
declines in value are charged to other non-interest
expense.
Upon the adoption of SFAS No. 114, loans classified as
in-substance foreclosures (ISF), totaling $1.6 million
as of December 31, 1994, were reclassified as loans
from OREO. All transactions involving ISF loans have
been reclassified in the accompanying consolidated
financial statements to conform with this new
pronouncement.
INTANGIBLE ASSETS
In connection with the acquisition of Middleborough
Trust Company in January 1986, the Company allocated
$2,951,000 of the purchase price to goodwill. This
amount is being amortized over a 20 year period using
the straight-line method. The balance at December 31,
1995 is $1,475,000.
In March 1994, Rockland purchased $21.6 million of
deposits from the Resolution Trust Corporation. In May
1994, Rockland purchased approximately $50 million of
trust assets from Pawtucket Trust Company. The Bank
allocated $1,923,000 of the purchase price of these
transactions to intangible assets, which is being
amortized over a 15 year period using the straight-line
method. The balance at December 31, 1995 is $1,692,000.
INCOME TAXES
The Company records income taxes using the liability
method of accounting for income taxes pursuant to SFAS
No. 109, "Accounting For Income Taxes," which it
adopted effective January 1, 1993. Under this method,
deferred taxes are determined based upon the difference
between the financial statement and the tax bases of
the assets and liabilities using the statutory tax
rates in effect in the years in which these differences
are expected to reverse.
TRUST AND FINANCIAL SERVICES
Assets held in a fiduciary or agency capacity for
customers are not included in the accompanying
consolidated balance sheets, as such assets are not
assets of the Company. Trust and Financial Services
income is recorded on the cash basis, the results of
which approximates the accrual basis of accounting for
such fees.
NET INCOME PER SHARE
Income per share amounts are based on the weighted
average number of common and common equivalent shares
outstanding each year.
OFF-BALANCE SHEET AGREEMENTS
From time to time the Bank has utilized interest rate
swap agreements, caps, or floors as hedging instruments
for asset and liability management purposes. As such,
these instruments are accounted for under the accrual
method. Income received from the fixed rate payments
and interest paid under variable rate obligations is
recorded net as interest income on loans. Gains or
losses on the sale of swap agreements are deferred and
amortized into interest income over the remainder of
the original term of the swap.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 1995, the FASB issued SFAS No. 122, "Accounting
for Mortgage Servicing Rights," which is to become
effective for fiscal years beginning after December 15,
1995. SFAS No. 122 requires that a bank recognize the
rights to service mortgage loans for others, regardless
of the manner in which the servicing rights are
acquired, as separate assets. In addition, capitalized
mortgage servicing rights are required to be assessed
for impairment based on the fair value of those rights.
SFAS No. 122 will be applied prospectively beginning
January 1, 1996, to transactions in which mortgage
loans are sold with servicing rights retained. The
Company expects that the adoption of SFAS No. 122 will
have a positive impact on income in 1996, the
significance of which will depend on the volume of
loans sold during the year.
(2) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures About Fair Value Of
Financial Instruments," requires disclosure of fair
value information about financial instruments for which
it is practicable to estimate that value, whether or
not recognized on the balance sheet. In cases where
quoted market values are not available, fair values are
based upon estimates using present value or other
valuation techniques. Those techniques are
significantly affected by the assumptions used,
including the discount rate and estimates of future
cash flows. In that regard, the derived fair value
estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be
realized in immediate settlement of the instrument.
The carrying amount reported on the balance sheet for
cash, federal funds sold and assets purchased under
resale agreements, and interest bearing deposits
approximates those assets' fair values. SFAS No. 107
excludes certain financial instruments and all
nonfinancial instruments from its disclosure
requirements. Accordingly, the aggregate fair value
amounts presented do not represent the underlying value
of the Company.
The following table reflects the book and fair values
of financial instruments, including on balance sheet
and off balance sheet instruments as of December 31,
1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
(In Thousands)
<S> <C> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and Due From Banks $67,354 $67,354 $48,555 $48,555 (a)
Federal Funds Sold and
Assets Purchased Under
Resale Agreements 13,000 13,000 10,000 10,000 (a)
Interest Bearing Deposits 296 296 502 502 (a)
Securities Held To Maturity 226,896 227,409 256,785 239,875 (b)
Securities Available For
Sale 32,628 32,628 4,250 4,250 (b)
Federal Home Loan Bank
Stock 3,462 3,462 3,100 3,100 (c)
Net Loans 616,053 615,772 576,970 575,932 (d)
FINANCIAL LIABILITIES
Demand Deposits 166,453 166,453 157,144 157,144 (e)
Savings and Now Accounts 259,729 259,729 277,827 277,827 (e)
Money Market and Super
NOW Accounts 123,659 123,659 121,133 121,133 (e)
Time Deposits 321,244 319,886 240,508 239,158 (f)
Federal Funds Purchased
and Assets Sold Under
Repurchase Agreements 4,060 4,060 26,585 26,585 (a)
Treasury Tax and Loan
Notes 4,031 4,031 3,802 3,802 (a)
Federal Home Loan Bank
Borrowings 20,000 20,079 25,000 25,027 (f)
Subordinated Capital Notes 4,843 5,026 4,965 5,513 (f)
UNRECOGNIZED FINANCIAL INSTRUMENTS
Standby Letters of Credit 2,419 2,436 2,593 2,599 (g)
Commitments to Extend Credit 6,511 6,511 3,768 3,768 (a)
Interest Rate Swap Agreements 90,000 90,481 115,000 108,215 (b)
Interest Rate Caps 70,000 70,500 -- -- (b)
</TABLE>
(a) Book value approximates fair value due to short
term nature of these instruments.
(b) Fair value was determined based on market prices
or dealer quotes.
(c) Federal Home Loan Bank stock is redeemable at cost
(d) The fair value of loans was estimated by
discounting anticipated future cash flows using current
rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining
maturities.
(e) Fair value is presented as equaling book value.
SFAS No. 107 requires that deposits which can be
withdrawn without penalty at any time be presented at
such amount without regard to the inherent value of
such deposits and the BankOs relationship with such
depositors.
(f) The fair value of these instruments is estimated
by discounting anticipated future cash payments using
rates currently available for instruments with similar
remaining maturities.
(g) The fair value of these instruments was estimated
using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of
the agreements and the present creditworthiness of
customers.
(3) SECURITIES
The amortized cost, gross unrealized gains and losses,
and fair market value of securities held to maturity at
December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(In Thousands)
<S> <C> <C> <C> <C>
U.S. Treasury and U.S.
Government Agency Securities $73,484 $559 ($789) $73,254
Mortgage-Backed Securities 128,361 1,377 (749) 128,989
Collateralized Mortgage
Obligations 17,473 152 (54) 17,571
State, County, and Municipal
Securities 6,578 20 (3) 6,595
Other Securities 1,000 -- -- 1,000
Total $226,896 $2,108 ($1,595) $227,409
</TABLE>
<TABLE>
<CAPTION>
1994
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(In Thousands)
<S> <C> <C> <C> <C>
U. S. Treasury and U. S.
Goverment Agency Securities $70,904 $699 ($5,432) $66,171
Mortgage-Backed Securities 157,197 -- (11,229) 145,968
Collateralized Mortgage
Obligations 24,259 52 (990) 23,321
State, County, and Municipal
Securities 3,425 12 (22) 3,415
Other Securities 1,000 -- -- 1,000
Total $256,785 $763 ($17,673) $239,875
</TABLE>
The amortized cost, gross unrealized gains and losses,
and fair market value of securities available for sale
at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(In Thousands)
<S> <C> <C> <C> <C>
Mortgage-Backed Securities $29,751 $38 ($113) $29,676
Collateralized Mortgage
Obligations 2,968 -- (16) 2,952
Total $32,719 $38 ($129) $32,628
</TABLE>
<TABLE>
<CAPTION>
1994
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(In Thousands)
<S> <C> <C> <C> <C>
Mortgage-Backed Securities $4,636 -- ($386) $4,250
Collateralized Mortgage
Obligations -- -- -- --
Total $4,636 -- ($386) $4,250
</TABLE>
Securities totalling $28,619,000 were reclassified from
held to maturity to available for sale in December 1995
in accordance with the "FASB Special Report, A Guide to
the Implementation of Statement 115." On the date of
transfer, the net unrealized loss on these securities was
$31,312.
A schedule of the contractual maturities of securities
held to maturity and securities available for sale
at December 31, 1995 is presented below:
<TABLE>
<CAPTION>
Held to maturity Available for sale
Fair Fair
Amortized Market Amortized Market
Cost Value Cost Value
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Due in one year or less $11,941 $11,973 $-- $--
Due from one year
to five years 68,007 67,388 25,650 25,620
Due from five to
ten years 60,404 60,405 7,069 7,008
Due after ten
years 86,544 87,643 -- --
Total $226,896 $227,409 $32,719 $32,628
</TABLE>
The actual maturities of mortgage-backed securities and
collateralized mortgage obligations will differ from
the contractual maturities due to the ability of the
borrowers to prepay underlying mortgage obligations. On
December 31, 1995 and 1994, investment securities
carried at $33,253,000 and $67,525,000, respectively,
were pledged to secure public deposits, assets sold
under repurchase agreements, treasury tax and loan
notes, and for other purposes as required by law. At
year end 1995 and 1994, the Company had no investments
in obligations of individual states, counties, or
municipalities which exceeded 10% of stockholders'
equity.
(4) LOANS AND RESERVE FOR POSSIBLE LOAN LOSSES
The composition of loans, net of unearned discount, at
December 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
(In Thousands)
<S> <C> <C>
Commercial $121,679 $122,944
Real Estate - Commercial 187,608 169,693
Real Estate - Residential 187,652 184,958
Real Estate - Construction 27,863 28,892
Consumer - Instalment 102,088 80,441
Consumer - Other 11,076 11,882
Gross Loans 637,966 598,810
Unearned Discount 9,825 8,121
Loans, Net of Unearned Discount $628,141 $590,689
</TABLE>
In addition to the loans noted above, at December 31,
1995 and December 31, 1994, the Bank serviced
approximately $246,569,000 and $225,734,000, respectively,
of loans sold to investors in the secondary mortgage
market and other financial institutions. Of the loans
sold at December 31, 1995, $6,074,147 were sold with
recourse. All other loans sold at December 31, 1995 and
all loans sold at December 31, 1994 were sold without recourse.
At December 31, 1995, $3.6 million of residential
mortgages were held for sale.
At December 31, 1995 and 1994, the principal amount of
loans which were not accruing interest was
approximately $4,718,000 and $7,266,000, respectively.
Gross interest income that would have been recognized
for the years ended December 31, 1995, 1994, and 1993
if nonperforming loans at the respective dates had been
performing in accordance with their original terms
approximated $448,000, $1.1 million, and $2.1 million,
respectively. The actual amount of interest on these
loans that was collected during those periods and
included in interest income approximated $63,000,
$80,000, and $145,000, respectively.
As of December 31, 1995 the BankOs recorded investment
in impaired loans and the related valuation allowance
calculated under SFAS No. 114 is as follows.
<TABLE>
<CAPTION>
Recorded Valuation
Investment Allowance
<S> <C> <C>
Impaired loans:
Valuation allowance required $3,401 $1,269
No valuation allowance required 1,321 --
Total $4,722 $1,269
</TABLE>
The valuation allowance is included in the reserve for
possible loan losses on the balance sheet.
The average recorded investment in impaired loans
for the year ended December 31, 1995 was $3.7 million.
Interest payments received on impaired loans are
recorded as interest income unless collection of the
remaining recorded investment is doubtful at which time
payments received are recorded as reductions of
principal. The Bank recognized interest income on
impaired loans of $169,000 for the year ended December
31, 1995.
Restructured loans totaled $2,629,000 and $2,898,000 at
December 31, 1995 and 1994, respectively, of which
$644,000 and $1,071,000, respectively, are included in
nonaccruing loans above. Interest income of
approximately $262,000, $220,000, and $215,000 was
recognized on these loans in 1995, 1994, and 1993,
respectively. If these loans had been repaying in
accordance with original contractual terms,
approximately $37,000, $57,000, and $444,000 of
additional interest income would have been recognized
on these loans in the respective periods. At December
31, 1995, the Bank was not committed to lend any
additional funds to borrowers with loans whose terms
have been restructured.
The aggregate amount of loans in excess of $60,000
outstanding to directors, principal officers, and
principal security holders at December 31, 1995 and
1994 and for the years then ended is as follows
(in thousands).
<TABLE>
<S> <C>
Balance, January 1, 1994 $17,406
New loans 4,395
Loan repayments (3,743)
Balance, December 31, 1994 18,058
New loans 601
Loan repayments (7,086)
Balance, December 31, 1995 $11,573
</TABLE>
All such loans were made in the ordinary course of
business on substantially the same terms, including
interest rate and collateral, as those prevailing at
the time for comparable transactions with other
persons, and do not involve more than the normal risk
of collectibility or present other unfavorable
features.
An analysis of the reserve for possible loan losses for
each of the three years in the period ended December
31, 1995 is as follows.
<TABLE>
<CAPTION>
1995 1994 1993
(In Thousands)
<S> <C> <C> <C>
Reserve, beginning of year $13,719 $15,485 $15,971
Loans charged-off (4,082) (4,293) (7,519)
Recoveries on loans
reviously charged-off 1,451 1,726 1,958
Net charge-offs (2,631) (2,567) (5,561)
Provision charged to expense 1,000 801 5,075
Reserve, end of year $12,088 $13,719 $15,485
</TABLE>
(5) BANK PREMISES AND EQUIPMENT
Bank premises and equipment at December 31, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
(In Thousands)
<S> <C> <C>
Cost:
Land $356 $356
Bank Premises 6,661 5,999
Leasehold Improvements 4,724 4,121
Equipment 14,741 12,500
Total Cost 26,482 22,976
Accumulated Depreciation (17,579) (15,888)
Net Bank Premises and Equipment $8,903 $7,088
</TABLE>
Depreciation and amortization expense related to
bank premises and equipment reflected in the
consolidated statements of income was $1,721,000 in
1995, $3,193,000 in 1994, and $1,527,000 in 1993. The
1995 and 1994 expenses include $265,000 and $1,800,000,
respectively, of writedowns of the book values of
certain facilities related to actual and anticipated
facility consolidations and renovations.
(6) BORROWINGS
Short-term borrowings consist of federal funds
purchased, assets sold under repurchase agreements, and
treasury tax and loan notes. Information on the amounts
outstanding and interest rates of short term borrowings
for each of the three years in the period ended
December 31, 1995 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
(Dollars In Thousands)
<S> <C> <C> <C>
Balance outstanding at
end of year $8,091 $30,387 $18,878
Average daily balance
outstanding 18,995 18,034 5,284
Maximum balance outstanding
at any month end 63,988 30,387 20,062
Weighted average interest rate
for the year 5.74% 4.03% 2.86%
Weighted average interest rate
at end of year 4.36% 5.74% 2.74%
</TABLE>
The Bank has established two federal funds lines
totaling $18 million. Borrowings under these lines are
classified as federal funds purchased. At December 31,
1995, the Bank had $4.1 million of federal funds
purchased. The Bank has also established four
repurchase agreement lines with major brokerage firms.
Amounts outstanding under these lines
are classified as assets sold under repurchase
agreements. At December 31, 1995 the Bank had no
outstanding balances under the repurchase agreement
lines, while at December 31, 1994, repurchase
agreements totaled $25.4 million.
Federal Home Loan Bank (FHLB) borrowings are
collateralized by a blanket pledge agreement on the
BankOs FHLB stock, certain qualified securities,
deposits at the Federal Home Loan Bank, and residential
mortgages held in the BankOs portfolio. The borrowing
capacity at the Federal Home Loan Bank is approximately
$300 million. A schedule of the maturity distribution
of FHLB advances with the weighted average interest
rates at December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
Weighted Weighted
Average Average
Amount Rate Amount Rate
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Due in one year
or less $20,000 6.29% $15,000 5.76%
Due from one year
to two years -- -- 10,000 6.48%
$20,000 6.29% $25,000 6.05%
</TABLE>
(7) SUBORDINATED CAPITAL NOTES
The following table summarizes the outstanding
subordinated capital notes at December 31, 1995 and
1994:
<TABLE>
<CAPTION>
INTEREST YEAR OF
RATE MATURITY 1995 1994
(In Thousands)
<S> <C> <C> <C> <C>
9.50% 1995 $-- $122
9.50% 1996 2,102 2,102
10.00% 1996 2,732 2,732
14.00% 1996 9 9
TOTAL $4,843 $4,965
</TABLE>
These subordinated notes do not contain provisions
enabling the Company to redeem them prior to their
scheduled maturities.
(8) INCOME TAXES
The provision for income taxes is comprised of the
following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1995 1994 1993
(In Thousands)
<S> <C> <C> <C>
Current Provision
Federal $3,616 $2,760 $907
State 1,058 786 519
TOTAL CURRENT PROVISION 4,674 3,546 1,426
Deferred Provision (Benefit)
Federal 965 460 755
State 715 81 (36)
Change in Valuation Allowance (1,625) (2,554) (1,662)
TOTAL DEFERRED PROVISION
(BENEFIT) 55 (2,013) (943)
TOTAL PROVISION $4,729 $1,533 $483
</TABLE>
The income tax provision shown in the consolidated
statements of income differs from the expected amount,
determined by applying the statutory federal tax rate
of 34% to income before income taxes. The following
summary reconciles the differences between these
amounts.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1995 1994 1993
(In Thousands)
<S> <C> <C> <C>
Computed statutory federal
income tax provision $5,139 $3,279 $1,740
Nontaxable interest, net (257) (223) (240)
State taxes, net of federal
tax benefit 1,152 572 319
Change in valuation allowance (1,625) (2,554) (1,662)
Other, net 320 459 326
TOTAL PROVISION $4,729 $1,533 $483
</TABLE>
The net deferred tax asset which is included in other
assets amounted to approximately $4,950,000,
$5,005,000, and $2,992,000 at December 31, 1995, 1994
and 1993, respectively. The tax-effected components of
the net deferred tax asset for each of the three years
in the period ended December 31, 1995 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 1994 1993
(In Thousands)
<S> <C> <C> <C>
Reserve for possible loan losses $4,231 $4,664 $5,265
Tax depreciation 546 415 (409)
Write-down of OREO 205 825 1,183
Mark to market adjustment (1,986) (1,477) (1,020)
Accrued expenses not deducted
for tax purposes 1,179 826 710
Deferred income 123 189 136
State taxes 1,063 1,552 1,606
Other, net (143) (96) (32)
TOTAL DEFERRED TAX ASSET 5,218 6,898 7,439
Valuation allowance (268) (1,893) (4,447)
NET DEFERRED TAX ASSET $4,950 $5,005 $2,992
</TABLE>
The valuation allowance is provided when it is more
likely than not that some portion of the net deferred
tax asset will not be realized. As the Company's
earnings performance improved in 1994 and 1995, the
uncertainty surrounding the realizability of this asset
declined. At December 31, 1995, the valuation allowance
relates to certain state deferred tax assets that may
expire prior to realization.
(9) EMPLOYEE BENEFIT PLANS RETIREMENT PLAN
The Bank's noncontributory pension plan covers
substantially all employees of the Bank. The plan
provides pension benefits that are based upon the
employee's highest base annual salary during five
consecutive years of employment. The BankOs funding
policy is to contribute an amount within the range
permitted by applicable regulations on an annual basis.
Net pension cost for the Bank for each of the three
years in the period ended December 31, 1995 included the
following components:
<TABLE>
<CAPTION>
1995 1994 1993
(In Thousands)
<S> <C> <C> <C>
Service cost-benefits earned
during the period $750 $620 $502
Interest cost on projected
benefit obligation 938 821 773
Net amortization (deferral) 1,358 (1,053) 433
Actual loss (return) on assets (2,416) 36 (1,393)
Net pension cost $630 $424 $315
Assumptions used in the measurement
of net pension cost were:
Discount rate 7.75% 7.00% 7.00%
Rate of increase in
compensation levels 5.50% 5.50% 5.50%
Expected long-term rate
of return on assets 8.25% 8.25% 8.25%
</TABLE>
The plan's assets are invested primarily in listed
stocks, bonds, and mutual funds. The following table
sets forth the the planOs funded status at December 31,
1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
(In Thousands)
<S> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit obligation,
including vested benefits of
$9,529 in 1995 and $8,961
in 1994 $9,863 $9,170
Projected benefit obligation $12,792 $12,317
Plan assets at fair value $14,524 $12,645
Plan assets in excess of
projected benefit obligation $1,732 $328
Unrecognized net gain (2,960) (886)
Unrecognized net asset at
transition (327) (368)
Accrued pension expense $(1,555) $(926)
</TABLE>
OTHER EMPLOYEE BENEFIT PLANS
In 1994, the Bank implemented an incentive compensation
plan in which senior management, officers, and non-
officer employees are eligible to participate at
varying levels. The plan provides for awards based upon
the attainment of a combination of Bank, divisional,
and individual performance objectives. The expense for
this plan amounted to $979,000 and $954,000 in 1995 and
1994, respectively.
Also, in 1994, the Bank amended its Profit Sharing Plan
by converting it to an Employee Savings Plan that
qualifies as a deferred salary arrangement under
Section 401(k) of the Internal Revenue Code. Under the
Employee Savings Plan, participating employees may
defer a portion of their pre-tax earnings, not to
exceed Internal Revenue Service annual contribution
limits. The Bank matches 50% of each employeeOs
contributions up to 6% of the employeeOs earnings. In
1995 and 1994, the expense for this plan amounted to
$305,000 and $284,000, respectively. No expense was
recorded in 1993.
POSTEMPLOYMENT BENEFITS
Employees retiring from the Bank on or after attaining
age 65 and who have rendered at least 10 years of
continuous service to the Bank are entitled to
postretirement health care benefits. These benefits are
subject to deductibles, copayment provisions, and other
limitations. The Bank may amend or change these
benefits periodically.
Effective January 1, 1993, the Bank adopted SFAS No.
106, "Employers' Accounting For Postretirement Benefits
Other Than Pensions," which requires the recognition of
postretirement benefits over the service lives of the
employees rather than on a cash basis. Prior to 1993,
the costs of these benefits were expensed as paid. The
Bank elected to recognize its accumulated benefit
obligation of approximately $597,000 at January 1, 1993
prospectively on a straight-line basis over the average
life expectancy of current retirees, which is
anticipated to be less than 20 years. The
postretirement benefit expense recorded in 1995, 1994
and 1993 in accordance with this standard was
approximately $120,000, $100,000 and $94,000,
respectively. This includes the amortization of the
accumulated benefit obligation and service and interest
costs. The total cost of all postretirement benefits
charged to income was $192,000, $175,000, and $167,000,
in 1995, 1994, and 1993, respectively.
The Bank continues to evaluate ways in which it can
better manage these benefits and control the costs. Any
changes in the plan or revisions to assumptions that
affect the amount of expected future benefits may have
a significant effect on the amount of the reported
obligation and annual expense.
(10) OTHER NON-INTEREST EXPENSES
Included in other non-interest expenses for each of the
three years in the period ended December 31, 1995 were
the following:
<TABLE>
<CAPTION>
1995 1994 1993
(In Thousands)
<S> <C> <C> <C>
Advertising $710 $814 $599
Legal fees - loan collection 681 1,610 2,195
Legal fees - other 381 320 139
FDIC assessment 1,070 1,863 2,009
OREO expenses 599 1,182 1,817
OREO write-downs 153 929 1,334
Other non-interest expenses 7,722 8,230 6,920
TOTAL $11,316 $14,948 $15,013
</TABLE>
(11) COMMON STOCK PURCHASE AND OPTION PLANS
The Company maintains a Dividend Reinvestment
and Stock Purchase Plan. Under the terms of the plan,
stockholders may elect to have cash dividends
reinvested in newly issued shares of common stock at a
5% discount from the market price on the date of the
dividend payment. Stockholders also have the option of
purchasing additional new shares, at the full market
price, up to the aggregate amount of dividends payable
to the stockholder during the calendar year.
The Company has granted stock options under its Amended
and Restated 1987 Incentive Stock Option Plan to
certain key employees of the Bank. The Company has
reserved 800,000 shares of common stock for issuance
under the plan. The option price is equal to the fair
market value of the stock on the date of grant and
currently ranges from $2.00 to $7.3125 per share.
Current options vest over a two year period and expire
between 1997 and 2005. Common shares under option are
shown below.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Balance, January 1 410,950 320,333 246,750
Options granted 91,950 141,450 95,500
Options canceled -- (40,833) (21,083)
Options exercised (20,034) (10,000) (834)
Balance, December 31 482,866 410,950 320,333
</TABLE>
(12) COMMITMENTS AND CONTINGENCIES FINANCIAL
INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank is a party to financial instruments with off-
balance sheet risk in the normal course of business to
meet the financing needs of its customers and to reduce
its own exposure to fluctuations in interest rates.
These financial instruments involve, to varying
degrees, elements of credit and interest rate risk in
excess of amounts recognized in the consolidated
balance sheets. The Bank uses the same credit policies
in making commitments and conditional obligations as it
does for on-balance sheet instruments.
Off-balance sheet financial instruments whose
contractual amounts present credit risk include the
following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
(In Thousands)
<S> <C> <C>
Commitments to extend credit:
Fixed Rate $2,915 $1,466
Adjustable Rate 3,596 2,302
Unused portion of existing credit
lines 103,720 79,401
Unadvanced construction loans 7,704 8,839
Standby letters of credit 2,419 2,593
Interest rate swaps D notional value 90,000 115,000
Interest rate caps D notional value 70,000 --
</TABLE>
The Bank's exposure to credit loss in the event of non-
performance by the other party for commitments to
extend credit and standby letters of credit is
represented by the contractual amounts of those
instruments. Commitments to extend credit are
agreements to lend to a customer as long as there is no
violation of any condition established in the contract.
The Bank evaluates each customer's creditworthiness on
an individual basis. The amount of collateral obtained
upon extension of the credit is based upon managementOs
credit evaluation of the customer. Collateral varies
but may include accounts receivable, inventory,
property, plant and equipment, and income-producing
commercial real estate. Commitments generally have
fixed expiration dates or other termination clauses and
may require payment of a fee. Since some of the
commitments may expire without being drawn upon, the
total commitment amounts do not necessarily represent
future cash requirements.
Standby letters of credit are conditional commitments
issued by the Bank to guarantee performance of a
customer to a third party. These guarantees are
primarily issued to support public and private
borrowing arrangements. The credit risk involved in
issuing letters of credit is essentially the same as
that involved in extending loans to customers. The
collateral supporting those commitments is essentially
the same as for other commitments. Most guarantees
extend for one year.
As a component of its asset/liability management
activities intended to manage interest rate exposure,
the Bank has entered into certain off-balance sheet
hedging transactions. Interest rate swap agreements
represent transactions which involve the exchange of
fixed and floating rate interest payment obligations
without the exchange of the underlying principal
amounts. The notional principal amount of interest
rate swaps outstanding were $90 million and $115
million at December 31, 1995 and 1994, respectively.
The weighted average fixed payment rates were 5.88% and
5.75% at December 31, 1995 and 1994, respectively,
while the weighted average rates of variable interest
payments, based on the 3-month London Interbank
Offering Rate (LIBOR), were 5.84% and 6.18% at December
31, 1995 and 1994, respectively. As a result of these
interest rate swaps, the Bank realized net interest
expense of $.4 million and net interest income of $1.5
million and $2.9 million for the years ended December
31, 1995, 1994, and 1993, respectively.
Entering into interest rate swap agreements involves
both the credit risk of dealing with counterparties and
their ability to meet the terms of the contracts and an
interest rate risk. While notional principal amounts
are generally used to express the volume of these
transactions, the amounts potentially subject to credit
risk are small due to the structure of the agreements.
The Bank is a direct party to these agreements which
provide for net settlement between the Bank and the
counterparty on a semiannual basis. Should the
counterparty fail to honor the agreement, the BankOs
credit exposure is limited to the net settlement
amount. At December 31, 1995 and 1994, the Bank had a
net payable of $57,000 and a net receivable of $77,000,
respectively, on the interest rate swaps.
Rockland also purchased two 2-year interest rate caps
with a total notional value of $70 million in May 1995.
Interest rate caps involve the credit risk of dealing
with counterparties and their ability to meet the terms
of the contract. The caps will pay the Bank the
difference between LIBOR and the cap level if LIBOR
exceeds the cap levels (7.00% and 6.50%)at any of the
quarterly reset dates. If LIBOR remains below the cap
level, no payment is made to the Bank. The transaction
fees for these instruments are being amortized over the
term of the agreements.
LEASE COMMITMENTS
The Bank leases equipment, office space and certain
branch locations under noncancelable operating leases.
The following is a schedule of minimum future lease
commitments under such leases as of December 31, 1995
(in thousands):
<TABLE>
<S> <C>
1996 $1,445
1997 1,379
1998 1,060
1999 857
2000 781
Thereafter 4,116
Total future minimum rentals $9,638
</TABLE>
Rent expense incurred under operating leases was
approximately $2,047,000 in 1995, $1,526,000 in 1994,
and $1,438,000 in 1993. Renewal options ranging from 3
to 10 years exist for several of these leases.
OTHER CONTINGENCIES
At December 31, 1995 there were lawsuits pending which
arose in the ordinary course of business. Management
has reviewed these actions with legal counsel and has
taken into consideration the view of counsel as to the
outcome of the litigation. In the opinion of
management, final disposition of these lawsuits is not
expected to have a material adverse effect on the
Company's financial position or results of operations.
(13) SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
1995 1995 1995 1995
(Unaudited - Dollars in Thousands Except Share and Per Share Data)
<S> <C> <C> <C> <C>
INTEREST INCOME $17,467 $17,907 $18,502 $19,155
INTEREST EXPENSE 6,568 7,195 7,686 7,694
NET INTEREST INCOME 10,899 10,712 10,816 11,461
PROVISION FOR
POSSIBLE LOAN
LOSSES 250 250 250 250
NON-INTEREST INCOME 2,755 3,002 2,957 2,766
NON-INTEREST EXPENSES 9,915 9,635 9,658 10,044
PROVISION FOR INCOME
TAXES 1,099 1,207 1,192 1,231
NET INCOME $2,390 $2,622 $2,673 $2,702
NET INCOME PER SHARE $0.17 $0.18 $0.18 $0.18
AVERAGE SHARES
OUTSTANDING 14,449,892 14,631,050 14,658,788 14,699,643
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
1994 1994 1994 1994
(Unaudited - Dollars in thousands Except Share and Per Share Data)
<S> <C> <C> <C> <C>
INTEREST INCOME $14,820 $15,505 $15,979 $17,183
INTEREST EXPENSE 5,334 5,286 5,417 5,992
NET INTEREST INCOME 9,486 10,219 10,562 11,191
PROVISION FOR
POSSIBLE LOAN
LOSSES 298 159 150 194
NON-INTEREST INCOME 2,846 3,018 2,839 2,767
NON-INTEREST EXPENSE 9,608 10,377 12,054 10,442
PROVISION FOR INCOME
TAXES 712 788 (938) 971
NET INCOME $1,714 $1,913 $2,135 $2,351
NET INCOME PER SHARE $0.12 $0.13 $0.15 $0.16
AVERAGE SHARES
OUTSTANDING 14,409,078 14,409,078 14,411,578 14,429,765
</TABLE>
(14) PARENT COMPANY FINANCIAL STATEMENTS
Condensed financial information relative to the
Company's balance sheets at December 31, 1995 and 1994,
and the related statements of income and cash flows for
the years ended December 31, 1995, 1994, and 1993 are
presented below.
<TABLE>
<CAPTION>
BALANCE SHEETS
DECEMBER 31, 1995 1994
(In Thousands)
<S> <C> <C>
Assets:
Cash* $220 $96
Investments in subsidiary* 70,609 62,066
Other investments 1,000 1,000
Other assets 1,477 1,626
Total assets $73,306 $64,788
Liabilities and Stockholders' Equity:
Dividends Payable $725 $577
Subordinated capital notes 9 9
Total Liabilities 734 586
Stockholders' equity 72,572 64,202
Total liabilities and stockholders'
equity $73,306 $64,788
</TABLE>
*Eliminated in consolidation.
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 1994 1993
(In Thousands)
<S> <C> <C> <C>
Income:
Dividend received from
subsidiary* $2,152 $514 $--
Interest income 39 28 21
Other income -- -- 1
Total income 2,191 542 22
Expenses:
Interest expense 1 1 1
Other expenses 152 149 151
Total expenses 153 150 152
Income (loss ) before income taxes and
equity in undistributed income
of subsidiary 2,038 392 (130)
Provision for income taxes -- -- (5)
Equity in undistributed income of
subsidiary 8,349 7,721 4,771
Net income $10,387 $8,113 $4,636
</TABLE>
*Eliminated in consolidation.
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 1994 1993
(In Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $10,387 $8,113 $4,636
ADJUSTMENTS TO RECONCILE NET INCOME
TO CASH PROVIDED FROM OPERATING
ACTIVITIES:
Amortization 148 147 147
Decrease (increase) in other assets 1 (4) 2
Decrease in other liabilities -- -- (1)
Equity in income of subsidiary* (8,349) (7,721) (4,771)
TOTAL ADJUSTMENTS (8,200) (7,578) (4,623)
NET CASH PROVIDED FROM OPERATING
ACTIVITIES 2,187 535 13
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities -- -- (500)
NET CASH USED IN INVESTING
ACTIVITIES -- -- (500)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock options exercised 60 39 3
Proceeds from dividend reinvestment
and optional stock purchases 337 73 --
Dividends paid (2,460) (576) --
NET CASH PROVIDED FROM (USED IN)
FINANCING ACTIVITIES (2,063) (464) 3
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 124 71 (484)
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR* 96 25 509
CASH AND CASH EQUIVALENTS AT THE
END OF THE YEAR* $220 $96 $25
</TABLE>
*Eliminated in consolidation.
To The Board of Directors of Independent Bank Corp.:
We have audited the consolidated balance sheets of
Independent Bank Corp. and its subsidiary as of
December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in
the period ended December 31, 1995. These consolidated
financial statements are the responsibility of the
Company's management. Our responsibility is to express
an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the
accounting principles used and significant estimates
made by management, as well as evaluating the overall
consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material
respects, the financial position of Independent Bank
Corp. and its subsidiary as of December 31, 1995 and
1994, and the results of their operations and their
cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally
accepted accounting principles.
As explained in Note 1 to the consolidated financial
statements, the Company changed its method of
accounting for investments by adopting Statement of
Financial Accounting Standards No. 115, "Accounting For
Certain Investments in Debt and Equity Securities,"
effective January 1, 1994.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 23, 1996
DIRECTORS OF INDEPENDENT BANK CORP.
Richard S. Anderson
President and Treasurer
Anderson-Cushing
Insurance Agency, Inc.
Donald K. Atkins
Retired, Former President
and Chief Executive Officer
Winthrop - Atkins Co., Inc.
W. Paul Clark
President and General Manager
Paul Clark, Inc.
Robert L. Cushing
Owner
Robert L. Cushing Insurance
Benjamin A. Gilmore, II
Owner and President
Gilmore Cranberry Co.
James T. Jones
Treasurer
Plumber's Supply Company
Lawrence M. Levinson
Partner
Burns & Levinson
Douglas H. Philipsen
President and Chief Executive Officer
Rockland Trust Company
Richard H. Sgarzi
President and Treasurer
Black Cat Cranberry Corp.
John F. Spence, Jr.
Chairman of the Board
Rockland Trust Company
Robert J. Spence
President
Albert Culver Co.
William J. Spence
President
Mass. Bay Lines, Inc.
Brian S. Tedeschi
President
Tedeschi Realty Corp.
Thomas J. Teuten
Executive Vice President
A. W. Perry, Inc.
OFFICERS OF INDEPENDENT BANK CORP.
John F. Spence, Jr.
Chairman of the Board
and Chief Executive Officer
Douglas H. Philipsen
President
Linda M. Campion
Clerk
Richard J. Seaman
Chief Financial Officer and
Treasurer
Tara M. Villanova
Assistant Clerk
DIRECTORS OF ROCKLAND TRUST COMPANY
Richard S. Anderson
President and Treasurer
Anderson-Cushing
Insurance Agency, Inc.
*John B. Arnold
President and Treasurer
H.H. Arnold Co., Inc.
Donald K. Atkins
Retired, Former President
and Chief Executive Officer
Winthrop-Atkins Co., Inc.
Theresa J. Bailey
Retired, Former Senior Vice President
and Clerk, Rockland Trust Company
W. Paul Clark
President and General Manager
Paul Clark, Inc.
*Robert L. Cushing
Owner
Robert L. Cushing Insurance
*H. Thomas Davis
Retired, Former Chairman
Clipper Abrasives, Inc.
Alfred L. Donovan
Consultant
*Ann M. Fitzgibbons
Volunteer
Benjamin A. Gilmore, II
Owner and President
Gilmore Cranberry Co.
*Donald A. Greenlaw
Retired, Former President
Rockland Trust Company
E. Winthrop Hall
Chairman and President
F.L. and J.C. Codman Company
James T. Jones
Treasurer
Plumber's Supply Company
*Lawrence M. Levinson
Partner
Burns & Levinson
Douglas H. Philipsen
President and Chief Executive Officer
Rockland Trust Company
Richard H. Sgarzi
President and Treasurer
Black Cat Cranberry Corp.
*Nathan Shulman
Retired, Former President
Best Chevrolet, Inc.
John F. Spence, Jr.
Chairman of the Board
Rockland Trust Company
Robert J. Spence
President
Albert Culver Co.
William J. Spence
President
Mass. Bay Lines, Inc.
*Richard A. Spencer
Retired, Former Chairman of
the Board, Hingham Mutual Fire Insurance Co.
John H. Spurr, Jr.
Senior Vice President and Treasurer
A.W. Perry, Inc.
Robert D. Sullivan
President
Sullivan Tire Company, Inc.
Brian S. Tedeschi
President
Tedeschi Realty Corp.
*Ralph D. Tedeschi
Consultant, Former Chairman,
Angelo's Supermarkets, Inc.
Thomas J. Teuten
Executive Vice President
A.W. Perry, Inc.
*Honorary Director
OFFICERS OF ROCKLAND TRUST COMPANY
John F. Spence, Jr.
Chairman of the Board
Douglas H. Philipsen
President and
Chief Executive Officer
Richard J. Seaman
Chief Financial Officer
and Treasurer
Richard F. Driscoll
Executive Vice President
Retail and Operations Division
S. Lee Miller
Executive Vice President
Trust and Financial Services Division
Ferdinand T. Kelley
Executive Vice President
Commercial Lending Division
Raymond G. Fuerschbach
Senior Vice President
Human Resources
Russell N. Viau
Vice President and
Chief Internal Auditor
Linda M. Campion
Clerk
Tara M. Villanova
Assistant Clerk
STOCKHOLDER INFORMATION
ANNUAL MEETING
The Annual Meeting of Stockholders will be held at 3:30
P. M. on Thursday, April 11, 1996
at the Sheraton Tara Hotel, Braintree, Massachusetts.
COMMON STOCK
The Common Stock of the Company is traded over the
counter through the NASDAQ
National Market System under the symbol of INDB.
<TABLE>
<CAPTION>
PRICE RANGE OF COMMON STOCK
HIGH LOW DIVIDEND
<S> <C> <C> <C>
1995
4th Quarter $7.50 $6.63 $0.05
3rd Quarter 7.63 6.63 0.05
2nd Quarter 7.50 6.25 0.04
1st Quarter 6.63 5.13 0.04
1994
4th Quarter $5.87 $4.87 $0.04
3rd Quarter 7.00 5.75 0.04
2nd Quarter 6.50 4.63 0.00
1st Quarter 5.88 4.38 0.00
</TABLE>
STOCKHOLDER RELATIONS
Inquiries should be directed to:
Richard J. Seaman, Chief Financial Officer and Treasurer, or
Jeanne Govoni, Shareholder Relations
Independent Bank Corp.
288 Union Street
Rockland, MA 02370
(617) 878-6100
FORM 10-K
A copy of the Annual Report on Form 10-K filed with the
Securities and Exchange Commission for fiscal 1995 is
available without charge by writing to:
Jeanne Govoni, Shareholder Relations
Independent Bank Corp.
288 Union Street
Rockland, MA 02370
TRANSFER AGENT AND REGISTRAR
Transfer Agent and Registrar for the Company is:
Boston EquiServe
P. O. Box 8200
Boston, Ma. 02266-8200
Consent of Independent Public Accountants
As independent public accountants, we hereby consent
to the incorporation of our report, dated January 23, 1996,
with respect to the consolidated financial statements of
Independent Bank Corp. incorporated by reference in this
Form 10-K for the year ended December 31, 1995, into
Independent Bank Corp.'s previously filed Registration
Statements File Numbers 33-13158, 33-27999 and 3350770.
Arthur Andersen LLP
Boston, Massachusetts
March 22, 1996
