SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
Commission File Number: 1-9047
Independent Bank Corp.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2870273
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
288 Union Street, Rockland, Massachusetts 02370
(Address of principal executive offices, including zip code)
(781) 878-6100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
As of October 1,1998 there were 14,863,821 shares of the registrant's
common stock outstanding, par value $.01 per share.
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INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - September 30, 1998 and
December 31, 1997
Consolidated Statements of Income - Nine months and quarters
ended September 30, 1998 and 1997
Consolidated Statements of Cash Flows - Nine months ended
September 30, 1998 and 1997
Notes to Consolidated Financial Statements - September 30, 1998
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
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PART 1 FINANCIAL INFORMATION
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<CAPTION>
Item 1. Financial Statements
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INDEPENDENT BANK CORP.
CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, DECEMBER 31,
(Unaudited - in thousands) 1998 1997
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ASSETS
Cash and Due From Banks $42,510 $42,544
Federal Funds Sold 14,490 22,472
Securities Held To Maturity 308,743 308,112
Securities Available For Sale 200,916 131,842
Federal Home Loan Bank Stock 16,035 16,035
Loans, Net of Unearned Discount 909,284 828,132
Less: Reserve for Possible Loan Losses (13,600) (12,674)
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Net Loans 895,684 815,458
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Bank Premises and Equipment 15,143 12,776
Other Real Estate Owned -- 2
Other Assets 21,209 20,766
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TOTAL ASSETS $1,514,730 $1,370,007
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LIABILITIES
Deposits
Demand Deposits $199,493 $189,577
Savings and Interest Checking Accounts 267,703 257,980
Money Market and Super Interest Checking Accounts 101,212 119,316
Time Certificates of Deposit over $100,000 71,646 69,424
Other Time Deposits 346,278 351,851
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Total Deposits 986,332 988,148
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Federal Funds Purchased and Assets
Sold Under Repurchase Agreements 80,811 38,327
Federal Home Loan Bank Borrowings 301,224 206,724
Treasury Tax and Loan Notes 5,123 3,217
Other Liabilities 16,199 12,348
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Total Liabilities 1,389,689 1,248,764
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Company-Obligated Mandatorily Redeemable Trust Preferred Securities of
Subsidiary Trust Holding Solely Junior Subordinated debentures of the 28,750 28,750
Company
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STOCKHOLDERS' EQUITY
Common Stock, $.01 par value, Authorized: 30,000,000 Shares
Outstanding: 14,863,821 Shares at September 30, 1998
and 14,801,904 at December 31, 1997 149 148
Treasury Stock at cost-250,688 shares (3,921) --
Surplus 45,343 45,147
Retained Earnings 53,104 45,825
Accumulated Other Comprehensive Income 1,616 1,373
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Total Stockholders' Equity 96,291 92,493
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TOTAL LIABILITIES, MINORITY INTEREST IN SUBSIDIARIES
AND STOCKHOLDERS' EQUITY $1,514,730 $1,370,007
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INDEPENDENT BANK CORP.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited - in thousands, except share and per share data)
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<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
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INTEREST INCOME
Interest on Loans $56,628 $48,753 $19,375 $17,177
Interest and Dividends on Securities 23,113 18,816 8,347 7,698
Interest on Federal Funds Sold 621 132 290 49
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Total Interest Income 80,362 67,701 28,012 24,924
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INTEREST EXPENSE
Interest on Deposits 23,617 23,471 8,047 8,160
Interest on Borrowed Funds 12,863 6,057 5,017 3,144
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Total Interest Expense 36,480 29,528 13,064 11,304
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Net Interest Income 43,882 38,173 14,948 13,620
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PROVISION FOR POSSIBLE LOAN LOSSES 2,721 1,560 907 530
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Net Interest Income After Provision
For Possible Loan Losses 41,161 36,613 14,041 13,090
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NON-INTEREST INCOME
Service Charges on Deposit Accounts 3,999 4,255 1,335 1,401
Trust and Investment Services Income 2,824 2,284 849 726
Mortgage Banking Income 2,695 2,083 908 667
Other Non-Interest Income 1,310 952 527 309
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Total Non-Interest Income 10,828 9,574 3,619 3,103
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NON-INTEREST EXPENSES
Salaries and Employee Benefits 16,675 15,129 5,688 5,218
Occupancy Expenses 2,802 2,692 930 850
Equipment Expenses 2,180 2,080 737 646
Other Non-Interest Expenses 10,798 9,718 3,615 3,210
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Total Non-Interest Expenses 32,455 29,619 10,970 9,924
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Minority Interest Expense 2,001 978 667 667
INCOME BEFORE INCOME TAXES 17,533 15,590 6,023 5,602
PROVISION FOR INCOME TAXES 5,785 5,316 1,928 1,910
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NET INCOME $11,748 $10,274 $4,095 $3,692
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BASIC EARNINGS PER SHARE $0.79 $0.70 $0.28 $0.25
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DILUTED EARNINGS PER SHARE $0.78 $0.69 $0.27 $0.25
======================================================================================================================
Weighted average common shares (Basic) 14,812,566 14,629,145 14,774,324 14,646,537
Common stock equivalents 225,785 292,533 209,022 323,365
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Weighted average common shares (Diluted) 15,038,351 14,921,678 14,983,346 14,969,902
======================================================================================================================
</TABLE>
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<TABLE>
<CAPTION>
INDEPENDENT BANK CORP. NINE MONTHS ENDED
CONSOLIDATED STATEMENTS OF CASH FLOWS SEPTEMBER 30,
(Unaudited - in thousands) 1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $11,748 $10,274
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED FROM OPERATING ACTIVITIES
Depreciation and amortization 3,090 2,860
Provision for loan losses 2,721 1,560
Loans originated for resale (57,522) (33,539)
Proceeds from mortgage loan sales 57,388 33,497
Loss on sale of mortgages 134 42
Gain recorded from mortgage servicing rights (546) (316)
Other Real Estate Owned recoveries (157) (110)
Changes in assets and liabilities::
Decrease (increase) in other assets 103 (1,143)
Increase in other liabilities 3,728 6,656
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TOTAL ADJUSTMENTS 8,939 9,507
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NET CASH PROVIDED FROM OPERATING ACTIVITIES 20,688 19,781
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of Securities Held to Maturity 85,098 59,318
Proceeds from maturities of Securities Available for Sale 54,158 11,577
Purchase of Held to Maturity Securities (86,339) (99,009)
Purchase of Available for Sale Securities (123,387) (123,937)
Purchase of FHLB Stock -- (7,329)
Net increase in Loans (82,947) (97,724)
Proceeds from sale of OREO 159 404
Investment in Bank Premises and Equipment (4,326) (2,903)
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NET CASH USED IN INVESTING ACTIVITIES (157,584) (259,603)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Deposits (1,816) 36,537
Net increase in Federal Funds Purchased
and Assets Sold Under Repurchase Agreements 42,484 79,146
Net increase in FHLB Borrowings 94,500 93,500
Net increase in TT&L Notes 1,906 2,663
Issuance of company-obligated mandatorily
Redeemable trust preferred securities of subsidiary trust
holding solely junior subordinated debentures of the company -- 28,750
Dividends Paid (4,469) (3,371)
Proceeds from stock issuance 511 205
Payments for treasury stock purchase (4,235) --
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NET CASH PROVIDED FROM FINANCING ACTIVITIES 128,881 237,430
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NET DECREASE IN CASH AND CASH EQUIVALENTS (8,016) (2,392)
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE YEAR 65,016 53,486
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CASH AND CASH EQUIVALENTS AS OF SEPTEMBER 30, $57,000 $51,094
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</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation of the financial statements, primarily
consisting of normal recurring adjustments, have been included. Operating
results for the three and nine month periods ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998 or any other interim period. For further information, refer to
the consolidated financial statements and footnotes thereto included in
Independent Bank Corp.'s (the "Company") annual report on Form 10-K for the year
ended December 31, 1997.
RECENT ACCOUNTING DEVELOPMENTS
In March, 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1). SOP 98-1
requires computer software costs associated with internal use software to be
expensed as incurred until certain capitalization criteria are met. The Company
does not believe that adoption of SOP 98-1 will have a material impact on the
Company's financial statements.
In April, 1998, the AICPA issued Statement of Position 98-5, "Reporting
on the Costs of Start-Up Activities" (SOP 98-5). SOP 98-5 requires all costs
associated with pre-opening, pre-operating, and organization activities to be
expensed as incurred. The Company will adopt SOP 98-5 beginning January 1, 1999.
The Company believes that adoption of SOP 98-5 will have no material impact on
the Company's financial statements.
In June, 1998 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The Statement requires that changes in the derivative's fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivative's gains
and losses to offset related results on the hedged item in the income statement,
and requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15,
1999. A company may also implement the Statement as of the beginning of any
fiscal quarter after issuance (that is, fiscal quarters beginning June 16, 1998
and thereafter). Statement 133 cannot be applied retroactively. Statement 133
must be applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts that were issued, acquired, or
substantively modified after December 31, 1997 (and, at the Company's election,
before January 1, 1998).
The Company does not expect that the adoption of this statement will
have a material impact on the Company's financial position or results of
operation.
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EARNINGS PER SHARE
In 1997, the Company adopted the provisions of Statement of Financial
Accounting Standards Board (SFAS) No. 128, "Earnings per share." This statement
was issued by the Financial Accounting Standards Board (FASB) in March 1997 and
establishes standards for computing and presenting earnings per share (EPS) and
applies to entities with publicly held common stock or potential common stock.
This statement replaces the presentation of primary EPS with a presentation of
basic EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures
and requires a reconciliation of the numerators and denominators of the basic
and diluted EPS computations. The company's common stock equivalents consist of
dilutive outstanding stock options computed under the treasury stock method.
This statement also requires a restatement of all prior period EPS data
presented.
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<CAPTION>
(In Thousands, except per share data)
NET INCOME WEIGHTED AVERAGE NET INCOME
SHARES PER SHARE
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For the nine months ended September 30, 1998 1997 1998 1997 1998 1997
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<S> <C> <C> <C> <C> <C> <C>
Basic EPS $11,748 $10,274 14,812 14,629 $0.79 $0.70
Effect of dilutive securities 226 293 0.01 0.01
Diluted EPS $11,748 $10,274 15,038 14,922 $0.78 $0.69
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<CAPTION>
(In Thousands, except per share data)
NET INCOME WEIGHTED AVERAGE NET INCOME
SHARES PER SHARE
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For the three months ended September 30, 1998 1997 1998 1997 1998 1997
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Basic EPS $4,095 $3,692 14,774 14,647 $0.28 $0.25
Effect of dilutive securities 209 323 0.01 0.00
Diluted EPS $4,095 $3,692 14,983 14,970 $0.27 $0.25
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COMPREHENSIVE INCOME
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income." This statement establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses
and all other nonowner changes in equity). This statement requires that an
enterprise (a) classify items of other comprehensive income by their nature in a
financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid in
capital in the equity section of a statement of financial position.
Comprehensive income is reported net of taxes, as follows:
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<CAPTION>
For the Nine Months Ended For the Three Months Ended
September 30, September 30,
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Net Income $11,748 $10,274 $4,095 $3,692
Other Comprehensive Income, net of tax:
Unrealized gain/(loss) on Securities
Available for Sale 257 1,246 585 704
Reclassification adjustment for
(gains)/losses included in net income (14) 7 (12) --
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Other Comprehensive Income 243 1,253 573 704
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Comprehensive Income $11,991 $11,527 $4,668 $4,396
=====================================================================
</TABLE>
<PAGE>
SEGMENT INFORMATION
In June, 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information." This statement establishes standards
for reporting information about segments in annual and interim financial
statements. SFAS 131 introduces a new model for segment reporting, called the
"management approach." The management approach is based on the way the chief
operating decision-maker organizes segments within a company for making
operation decisions and assessing performance. Reportable segments are based on
products and services, geography, legal structure, management structure - any
manner in which management disaggregates a company. This statement is effective
and will be adopted for the Company's financial statements for the fiscal year
ending December 31, 1998 and requires the restatement of previously reported
segment information for all periods presented.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
The following discussion should be read in conjunction with the financial
statements, notes and tables included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997. The discussion contains
certain forward-looking statements regarding the future performance of the
Company. All forward-looking information is inherently uncertain and actual
results may differ materially from the assumptions, estimates or expectations
reflected or contained in the forward-looking information. Please refer to
`Cautionary Statement Regarding Forward-looking Information" of this Form 10-Q
for a further discussion.
SUMMARY
For the nine months ended September 30, 1998, Independent Bank Corp.
(the Company) recorded net income of $11.7 million compared with net income of
$10.3 million for the same period last year. Diluted earnings per share were
$.78 for the nine months ended September 30, 1998 compared to $.69 per share for
the prior year. Basic earnings per share, before the dilutive effect of stock
options, were $.79 in 1998 compared to $.70 for the same period in 1997. Per
share earnings have been calculated in accordance with SFAS No. 128, "Earnings
per Share." This improvement in net income was due to a $5.7 million, or 15.0%
increase in net interest income. The provision for loan losses increased to $2.7
million for the first nine months of 1998 compared with $1.6 million for the
same period last year. Non-interest income increased $1.3 million or 13.1%,
while non-interest expenses increased $2.8 million, or 9.6% over the first nine
months of 1997.
The annualized consolidated returns on average equity and average assets
for the first nine months of 1998 were 16.20% and 1.11%, respectively. This
compares to annualized consolidated returns on average equity and average assets
for the first nine months of 1997 of 16.21% and 1.16%, respectively.
As of September 30, 1998, total assets amounted to $1.5 billion, an
increase of $144.7 million over the 1997 year end balance. Investments increased
$69.7 million, or 15.8% from $440.0 million at year-end 1997, primarily due to
an investment leverage strategy that the Company has implemented during the
second and third quarters of 1998. Loans, net of unearned discount, increased
$81.2 million, or 9.8%, since year-end 1997 with strong growth in the commercial
real
<PAGE>
estate portfolio and the installment loan portfolio. Deposit balances have
decreased by $1.8 million, or 18 basis points. Borrowings increased by $138.9
million, or 55.9%, since year-end 1997.
In the second quarter of 1997, Independent Capital Trust I (a subsidiary
of the Company) was formed for the purpose of issuing Trust Preferred
Securities. A total of $28.8 million of 9.28% Trust Preferred Securities were
issued on May 19, 1997. Net income for the nine months ended September 30, 1998,
reflects pre-tax minority interest expense of $2.0 million, while the period
ended September 30,1997 reflected $978,000.
Nonperforming assets totaled $5.6 million as of September 30, 1998
compared to $5.9 million at December 31, 1997. Nonperforming assets represented
37 and 43 basis points of total assets as of September 30, 1998 and December
31,1997, respectively.
NET INTEREST INCOME
The discussion of net interest income, which follows, is presented on a
fully tax-equivalent basis. Net interest income for the nine months ended
September 30, 1998, amounted to $44.5 million, an increase of $6.0 million, or
15.6%, from the comparable 1997 time frame. This is due to strong loan growth as
well as an expanding securities portfolio, financed by borrowings, to take
advantage of a strong capital position. While these funding and investment
actions increased net interest income, the net interest margin ( net interest
income as a percent of average interest earning assets) reflects the lower net
interest spread on such transactions. The Company's net interest margin for the
first nine months of 1998 was 4.39%, compared to 4.58% for the comparable 1997
time frame. The Company's interest rate spread (the difference between the
weighted average yield on interest-earning assets and the weighted average cost
of interest-bearing liabilities) decreased by 24 basis points to 3.50%.
The average balance of interest-earning assets for the first nine months
of 1998 amounted to $1.35 billion, an increase of $230 million, or 20.5%, from
the comparable 1997 time frame. Income from interest-earning assets amounted to
$81.0 million for the nine months ended September 30, 1998, an increase of $13.0
million, or 19.1%, from the first nine months of 1997. The increase in interest
income was the result of a $131.2 million, or 17.8% increase in the average
balance of the loan portfolio, net of unearned discount, resulting from
increases in the commercial real estate portfolio and indirect automobile
lending, as well as a $87.2 million, or 23.0%, increase in the securities
portfolio.
Interest income is impacted by changes in market rates of interest due
to variable and floating rate loans in the Company's portfolio. At September 30,
1998, loans having interest rates which adjust in accordance with changes in the
Company's base lending rate or other market indices amounted to approximately
$234.2 million, or 25.7% of loans, net of unearned discount.
Interest income is also impacted by the amount of non-performing loans.
The amount of interest due, but not recognized, on non-performing loans amounted
to approximately $354,000 for the nine months ended September 30, 1998 compared
to $263,000 for the nine months ended September 30, 1997.
The average balance of interest-bearing liabilities for the first nine
months of 1998 was $180.5 million, or 20.0%, higher than the comparable 1997
time frame. Average interest bearing deposits increased by $19.9 million, or
2.6%, for the first nine months of 1998 over the same period last year, with
increases evenly split between savings and interest checking accounts and
consumer certificates of deposit. For the nine months ended September 30, 1998,
average borrowings were $160.6 million, or 113.8%, higher than the first nine
months of 1997, primarily in FHLB borrowings which increased by $144.4 million.
Interest expense on deposits increased by $146,000 to $23.6 million in the first
nine months of 1998 and interest expense on borrowings increased by $6.8
million, or 112.4%, to $12.9 million as compared to the same period last year.
<PAGE>
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses represents the charge to expense
that is required to fund the reserve for possible loan losses. The level of the
reserve for possible loan losses is determined by management of the Company
based upon known and anticipated circumstances and conditions. An analysis of
individual loans and the overall risk characteristics and size of the different
loan portfolios is conducted on an ongoing basis. In addition, the Company
considers industry trends, regional and national economic conditions, past
estimates of possible losses as compared to actual losses, and historical loss
patterns. Management assesses the adequacy of the reserve for possible loan
losses and reviews that assessment quarterly with the Board of Directors.
For the nine months ended September 30, 1998, management increased the
provision for possible loan losses, consistent with the level of loan growth
experienced, to $2.7 million as compared to $1.6 million for the same period
last year. For the first nine months of 1998, loans charged-off, net of
recoveries of loans previously charged-off, amounted to $1.8 million as compared
to $1.2 million for the comparable 1997 time frame.
As of September 30, 1998, the ratio of the reserve for possible loan
losses to loans, net of unearned discount, was 1.50%, as compared to the 1997
year-end level of 1.60%. The ratio of the reserve for possible loan losses to
non-performing loans was 242.94% at September 30, 1998, an increase over the
215.14% coverage recorded at year-end 1997.
NON-INTEREST INCOME
Non-interest income for the nine months ended September 30, 1998 was
$10.8 million, compared to $9.6 million for the same period in 1997. Income from
Trust and Financial Services increased by $540,000, or 23.6%, due to an increase
in funds under management. Mortgage banking income increased by $612,000, or
29.4%, over the 1997 time frame due to a strong refinancing market. These
increases were slightly offset by a decrease in service charge income of
$256,600, or 6.0%, primarily in lower overdraft revenue.
NON-INTEREST EXPENSES
Non-interest expenses totaled $32.5 million for the nine months ended
September 30, 1998, a $2.8 million, or 9.6% increase from the comparable 1997
period. Salaries and employee benefits increased $1.5 million, or 10.2%. As
previously reported, in connection with a change in the Bank's pension plan
which was effective January 1, 1997, the Company recognized $394,000 of
previously accrued pension liability as a credit to salaries and benefits during
the first quarter of 1997. Excluding this item, non-interest expenses increased
by $2.4 million, or 8.1% and salaries and employee benefits increased $1.1
million, or 7.4% from the same period in 1997.
Occupancy and equipment expenses for the first nine months of 1998
increased $210,000, or 4.4%, from the comparable 1997 period. This increase is
due to a combination of the cost of facility upgrades and bankwide technology
improvements. Other non-interest expenses for the first nine months of 1998
increased $1.1 million to $10.8 million from $9.7 million in the first nine
months of 1997. This increase was primarily due to a combination of increased
collection expenses associated with the Bank's indirect automobile lending,
increased facilities management expense, as well as a second quarter 1997
recovery of a fraudulent check loss.
MINORITY INTEREST
In the second quarter of 1997, Independent Capital Trust I (the "Trust")
was formed for the purpose of issuing trust preferred securities (the "Trust
Preferred Securities") and investing the proceeds of the sale of these
securities in junior subordinated debentures issued by the Company. A total of
$28.75 million of 9.28% Trust Preferred Securities were issued and are scheduled
to mature in 2027, callable at the option of the Company after May 19, 2002.
Distributions on these
<PAGE>
securities are payable quarterly in arrears on the last day of March, June,
September and December, such distributions can be deferred at the option of the
Company for up to five years. The Trust Preferred Securities can be prepaid in
whole or in part on or after May 19, 2002 at a redemption price equal to $25 per
Trust Preferred Security plus accumulated but unpaid distributions thereon to
the date of the redemption.
The Trust Preferred Securities are presented in the consolidated balance
sheets of the Company entitled "Corporation-Obligated Mandatorily Redeemable
Trust Preferred Securities of Subsidiary Trust Holding Solely Junior
Subordinated Debentures of the Company". The Company records distributions
payable on the Trust Preferred Securities as minority interest expense in its
consolidated statements of income. The minority interest expense for the nine
months ended September 30, 1998 was $2.0 million as compared to the $978,000
recorded as of September 30, 1997.
INCOME TAXES
The Company records income tax expense pursuant to Statement of
Financial Accounting Standards No. 109, "Accounting For Income Taxes". The
Company evaluates the deferred tax asset and the valuation reserve on a
quarterly basis. The Company's effective tax rates for the nine months ended
September 30, 1998 and 1997 were 33.0% and 34.1% respectively. The lower rate in
1998 reflects tax planning strategies enacted by the Company in 1997 and
continued in 1998.
ASSET/LIABILITY MANAGEMENT
The principal objective of the Company's asset/liability management
strategy is to reduce the vulnerability of the Company to changes in interest
rates. This is accomplished by managing the volume of assets and liabilities
maturing, or subject to repricing, and by adjusting rates in relation to market
conditions to influence volumes and spreads.
The effect of interest rate volatility on net interest income is
minimized when the interest sensitivity gap (the difference between assets and
liabilities that reprice within a given time period) is the smallest. Given the
inherent uncertainty of future interest rates, Rockland Trust Company's (the
Bank or Rockland) Asset/Liability Management Committee evaluates the interest
sensitivity gap and executes strategies, which may include off-balance sheet
activities, in an effort to minimize the Company's exposure to interest rate
movements while providing adequate earnings in the most plausible future
interest rate environments.
Beginning in 1992, Rockland entered into interest rate swap agreements
as a hedge against stable or declining interest rates. As of September 30, 1998,
the Bank had one interest rate swap agreement with a notional value of $20
million. This swap as arranged through an international banking institution and
has an initial maturity of three years. The Bank receives fixed rate payments
and pays a variable rate of interest tied to 3-month LIBOR.
INTEREST RATE RISK
Interest rate risk is the sensitivity of income to variations in
interest rates over both short-term and long-term horizons. The primary goal of
interest-rate risk management is to control this risk within limits approved by
the Board. These limits reflect the Company's tolerance for interest-rate risk
by identifying exposures, quantifying and hedging them as needed. The Company
quantifies its interest-rate exposures using net interest income simulation
models, as well as simpler gap analyses. The Company manages its interest-rate
exposure using a combination of on and off balance sheet instruments, primarily
fixed rate portfolio securities and interest rate swaps.
The Company uses simulation analysis to measure the exposure of net
interest income to changes in interest rates over a relatively short (i.e., less
than 2 years) time horizon. Simulation analysis involves projecting future
interest income and expense from the Company's asset, liabilities and off
balance sheet positions under various scenarios.
<PAGE>
The Company's limits on interest rate risk specify that if interest
rates were to shift up or down 200 basis points, estimated net income for the
next 12 months should decline by less than 6%. The following table reflects the
Company's estimated exposure, as a percentage of estimated net interest income
for the next 12 months.
<TABLE>
<CAPTION>
Rate Change Estimated Exposure as %
(Basis Points) of Net Interest Income
- --------------------------------------------------------------------------------
<S> <C>
+200 (1.54%)
-200 0.67%
</TABLE>
LIQUIDITY AND CAPITAL
Liquidity, as it pertains to the Company, is the ability to generate
cash in the most economical way, in order to meet ongoing obligations to pay
deposit withdrawals and to fund loan commitments. The Company's primary sources
of funds are deposits, borrowings, and the amortization, prepayment, and
maturities of loans and investments.
A strong source of liquidity is the Company's core deposits, those
deposits which management considers, based on experience, are not likely to be
withdrawn in the near term. The Company utilizes its extensive branch banking
network to attract retail customers who provide a stable source of core
deposits. The Company has established five repurchase agreements with major
brokerage firms as potential sources of liquidity. On September 30, 1998, the
Company had $34.2 million outstanding under such lines classified on the Balance
Sheet as "Federal Funds Purchased and Assets Sold Under Repurchase Agreements".
As an additional source of funds, the Bank has entered into repurchase
agreements with customers totaling $46.6 million at September 30, 1998. In
addition, as a member of the Federal Home Loan Bank, Rockland has access to
approximately $400 million of borrowing capacity. At September 30, 1998, the
Company had $301.2 million outstanding under such lines. The Company actively
manages its liquidity position under the direction of the Bank's Asset/Liability
Management Committee. Periodic review under formal policies and procedures is
intended to ensure that the Company will maintain access to adequate levels of
available funds. At September 30, 1998, the Company's liquidity position was
well above policy guidelines.
CAPITAL RESOURCES AND DIVIDENDS
The Company and Rockland are subject to capital requirements established
by the Federal Reserve Board and the FDIC, respectively. One key measure of
capital adequacy is the risk-based ratio for which the regulatory agencies have
established minimum requirements of 4.00% and 8.00% for Tier 1 risk-based
capital and total risk-based capital, respectively. As of September 30, 1998,
the Company had a Tier 1 risked-based capital ratio of 11.97% and a total
risked-based capital ratio of 13.23%. Rockland had a Tier 1 risked-based capital
ratio of 9.18% and a total risked-based capital ratio of 10.43% as of the same
date.
An additional capital requirement of a minimum 4.00% Tier 1 leverage
capital is mandated by the regulatory agencies for most banking organizations
and a 5.00% Tier 1 leverage capital ratio is required for a "well capitalized"
institution. As of September 30, 1998, the Company and the Bank had Tier 1
leverage capital ratios of 8.13% and 6.32%, respectively.
The Company's capital ratios increased significantly in the second
quarter of 1997 due to the issuance of $28.8 million of Trust Preferred
Securities.
In September, the Company's Board of Directors declared a cash dividend
of $.10 per share to shareholders of record as of September 25, 1998. This
dividend was paid on October 9, 1998. On an annualized basis, the dividend
payout ratio amounted to 39.0% of the trailing four quarters earnings.
<PAGE>
On July 9, 1998, the Company announced that its Board of Directors
approved a plan to buy back up to five percent, or approximately 743,000 shares
of its outstanding common stock. The Company has 14,863,821 shares of common
stock outstanding as of September 30, 1998. The Company placed no deadline on
the purchase plan but expects to make open market and/or privately negotiated
purchases, from time to time based on stock price and market conditions. As of
September 30, 1998, the company had re-purchased 271,500 shares.
Year 2000 Readiness Disclosure
- ------------------------------
The Company's state of readiness
- ---------------------------------
The Company has developed plans to address the possible exposure related to the
impact of the Year 2000 on its computer systems and key service providers. These
plans were approved by Senior Management and the Board of Directors. The
following five phases were identified as critical to the success of the
Company's Year 2000 plan:
<TABLE>
<CAPTION>
Phase Description Progress/Anticipated Completion
- ----- ----------- -------------------------------
<S> <C> <C>
Awareness Process that identifies the Year Complete.
- --------- 2000 problem, establishes a
project team and develops a
plan to rectify.
Assessment Inventory of Information Complete. Assessments need continual
- ---------- Technology (IT) and Non-IT update based on changes to inventory i.e.
Systems and vendors. Assign new vendor relationships, additional
priorities based upon level of equipment purchases.
risk. Establish continual
monitoring process.
Renovation Code enhancements, See Note (1). The Company has been
- ---------- hardware, software upgrades advised by its key third party software
vendors that software renovation is
complete. Management will perform
comprehensive tests to ensure compliance
Validation Process where upgraded The Company's testing program for
- ---------- hardware, software etc. is mission critical systems began in
tested. September 1998. The Company's Testing
Plan calls for this process to be substantially
complete by March 1999.
Implementation Systems should be certified as This phase is planned to be completed in
- -------------- Year 2000 complaint and put 1999.
into production.
</TABLE>
Notes:
(1) The Company relies upon third party vendors to provide the Bank with
various products and services that are fundamental to the delivery of
products and services to customers. These third party vendors are
responsible for the renovations and replacements necessary to achieve Year
2000 compliance for their products and services. The Company has
established a process that will continually monitor and test these vendors'
abilities to achieve Year 2000 compliance.
In 1997, the Company converted its core operating system software to a leading
provider of data processing services, Alltel. As a consequence, Alltel is
leading the effort for ensuring Year 2000 compliance for all mainframe
application software. Management has overall responsibility for ensuring
compliant systems and is working closely with Alltel to ensure this compliance
by
<PAGE>
December 31, 1999. Costs related to this aspect of the Year 2000 effort are
the responsibility of Alltel. Management believes Alltel has the financial
resources to complete this effort.
The costs to address the Company's Year 2000 issues
- ---------------------------------------------------
The Company expects to incur costs to replace existing personal computer
hardware and software, which will be capitalized and amortized in accordance
with the Company's existing accounting policy. The replacement of this hardware
and software is, with few exceptions, a component of the Company's existing
technology plan and not as a result of Year 2000 deficiencies. In addition to
capitalizing hardware and software, the Company will incur expenses in 1998 and
1999, estimated to be $500,000, which represents the out of pocket costs to
address the Year 2000 problem. These costs totaled $63,000 year to date
September 30, 1998.
This cost estimate does not include the existing cost of the Data Processing
Facilities Management Agreement with Alltel. A large part of the resources
associated with this agreement are dedicated to the Year 2000 Project. Under
other circumstances these resources could be employed in improving customer
services and the introduction of new products. It is difficult to estimate this
lost opportunity cost.
The risks of the Company's Year 2000 issues
- -------------------------------------------
All financial institutions are heavily dependent on technology and the services
of third party vendors in the delivery of products and services. An interruption
in these services would severely hamper the Company's ability to provide
products and services to its customers. For example, without telephone, power or
mainframe computer access in 2000 the Company would have to resort to manual
processing in order to serve customers. This type of scenario could not continue
indefinitely without severe erosion in service levels and consequently earnings.
An additional type of risk that Banks face is customer risk. Specifically, large
corporate borrowers face many of the Year 2000 issues that the Bank faces. To
the extent that many of these issues are not resolved and the viability of the
borrower organization is compromised, a credit risk issue could be created for
the Bank. Management has initiated a process to monitor and manage the customer
risk posed in this type of scenario.
Bank regulatory agencies have issued guidance as to the standards they will use
when assessing Year 2000 readiness. The failure of a financial institution, such
as the Company, to take appropriate steps to address deficiencies in its Year
2000 project management process may result in regulatory enforcement actions
which could have material adverse effect on the institution, result in the
imposition of civil money penalties, or result in the delay (or receipt of an
unfavorable or critical evaluation of the management of a financial institution
in connection with regulatory review) of applications seeking to acquire other
entities or otherwise expand the institution's activities.
The Company's Contingency Plans
- -------------------------------
The Company is in the process of developing contingency plans in response to the
Year 2000 challenge. The contingency plans will take into consideration the type
of risks identified above and are expected to be completed by March 31, 1999.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDING SEPTEMBER 30, 1998
SUMMARY
For the three months ended September 30, 1998, Independent Bank Corp.
(the Company) recorded net income of $4.1 million compared with net income of
$3.7 million for the same period last year. Diluted earnings per share were $.27
for the three months ended September 30, 1998 versus $.25 per share for the same
period in the prior year. Basic earnings per share, before the dilutive effect
of stock options, were $.28 in 1998 compared with $.25 for the same period in
1997. Per share earnings have been calculated in accordance with SFAS No. 128,
"Earnings per Share." This improvement in net income was due to a $1.3 million,
or 9.8% increase in net interest income. The provision for loan losses increased
to $907,000 for the third quarter of 1998 compared with $530,000 for the same
period last year. Non-interest income increased $516,000, or 16.6%, while
non-interest expenses increased $1.0 million, or 10.5% over the third quarter of
1997.
The annualized consolidated returns on average equity and average assets
for the third quarter of 1998 were 16.67% and 1.10%, respectively. This compares
to annualized consolidated returns on average equity and average assets for the
third quarter of 1997 of 16.91% and 1.14%, respectively.
NET INTEREST INCOME
The discussion of net interest income, which follows, is presented on a
fully tax-equivalent basis. Net interest income for the three months ended
September 30, 1998, amounted to $15.2 million, an increase of $1.4 million, or
10.4%, from the comparable 1997 time frame. The Company's interest rate spread
(the difference between the weighted average yield on interest-earning assets
and the weighted average cost of interest-bearing liabilities) decreased by 15
basis points, to 3.40%. The Company's net interest margin for the third quarter
of 1998 was 4.27%, compared to 4.46% for the comparable 1997 time frame.
The average balance of interest-earning assets for the third quarter of
1998 amounted to $1.42 billion an increase of $188.2 million, or 15.2%, over the
comparable 1997 time frame. Income from interest-earning assets amounted to
$28.3 million for the third quarter of 1998, an increase of $3.2 million, or
12.7%, from the third quarter of 1997. The increase in interest income was
attributable to a $121.5 million, or 15.7% increase in the average balance of
the loan portfolio, net of unearned discount, resulting from increases in the
commercial real estate portfolio and indirect automobile lending. In addition,
the securities portfolio increased by $49.5 million, or 10.8% which reflects the
Company's strategy of leveraging its capital.
The average balance of interest-bearing liabilities for the third
quarter of 1998 was $161.2 million, or 16.3%, higher than the comparable 1997
time frame. Average interest bearing deposits increased by $17.0 million, or
2.2%, for the third quarter of 1998 over the same period last year, with the
increases divided between savings and consumer time deposits. For the three
months ended September 30, 1998, average borrowings were $144.2 million, or
68.3%, higher than the third quarter of 1997. Interest expense on deposits
decreased by $113 thousand or 1.34%. Interest expense on borrowings increased by
$1.6 million, or 50.0%. Interest expense on deposit accounts, remained virtually
unchanged for the quarter ended September 30, 1998 and the quarter ended
September 30, 1997. While balances increased, the Bank has decreased its cost
for these deposits.
NON-INTEREST INCOME
Non-interest income for the three months ended September 30, 1998 was
$3.6 million, compared to $3.1 million for the same period in 1997. Income from
Trust and Financial Services
<PAGE>
increased by $123,000, or 16.9%, due to an increase in funds under management.
Mortgage banking income also increased by $241,000, or 36.1%, over the 1997 time
frame due to a strong refinancing market.
NON-INTEREST EXPENSES
Non-interest expenses totaled $11.0 million for the three months ended
September 30, 1998, a $1.0 million increase from the comparable 1997 period. The
increase in non-interest expense was due to a $470,000 or 9.0% increase in
salaries and employee benefits, due to anticipated merit increases and additions
to staff associated with business expansion, as well as a $405,000, or 12.6%
increase in other non-interest expenses. Occupancy and equipment expenses
increased $171,000 or 11.4%.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
The preceding Management's Discussion and Analysis and Notes to
Consolidated Financial Statements of this Form 10-Q contain certain
forward-looking statements, including without limitation, statements regarding
(i) the level of reserve for possible loan losses, (ii) the rate of
delinquencies and amounts of charge-offs, (iii) the rates of loan growth, and
(iv) the Company's ability to minimize any detrimental effects of the Year 2000
problem and associated expenses. Moreover, the Company may from time to time, in
both written reports and oral statements by Company management, express its
expectations regarding future performance of the Company. These forward-looking
statements are inherently uncertain and actual results may differ from Company
expectations. The following factors which, among others, could impact current
and future performance include but are not limited to: (I) adverse changes in
asset quality and resulting credit risk-related losses and expenses; (ii)
adverse changes in the economy of the New England region, the Company's primary
market, (iii) adverse changes in the local real estate market, as most of the
Company's loans are concentrated in Southeastern Massachusetts and a substantial
portion of these loans have real estate as collateral; (iv) fluctuations in
market rates and prices which can negatively affect net interest margin asset
valuations and expense expectations; and (v) changes in regulatory requirements
of federal and state agencies applicable to banks and bank holding companies,
such as the Company and Rockland, which could have materially adverse effect on
the Company's future operating results. When relying on forward-looking
statements to make decisions with respect to the Company, investors and others
are cautioned to consider these and other risks and uncertainties.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information required by this Item 3 is included in Item 2 of Part I of
this Form 10-Q, entitled "Management's Discussion and Analysis."
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information
The financial information detailed below is included hereafter
in this report:
Consolidated Statements of Changes in Stockholders' Equity
Three months ended September 30, 1998 and the year ended
December 31, 1997
Consolidated Average Balance Sheet and Average Rate Data - Nine
months and three months ended September 30, 1998 and 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
No. Page
--- ----
27 Financial Data Schedule E-1
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during
the quarter ended September 30, 1998.
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT BANK CORP.
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
(Unaudited - in thousands)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
COMMON TREASURY RETAINED INVESTMENTS
STOCK STOCK SURPLUS EARNINGS AVAILABLE TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 $146 $44,433 $36,666 ($135) $81,110
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income 14,158 14,158
Dividends Declared (4,999) (4,999)
Proceeds From Exercise of Stock Options 2 710 712
Tax Benefit of Stock Option Exercises 4 4
Change in Unrealized Gain (Loss) on Securities
Available for Sale, Net of Tax 1,508 1,508
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 148 45,147 45,825 1,373 92,493
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, January 1, 1998 148 45,147 45,825 1,373 92,493
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income 11,748 11,748
Dividends Declared (4,469) (4,469)
Common Stock Re-purchased Net of Stock Issued (3,921) (3,921)
Due to Stock Options Exercised
Proceeds From Exercise of Stock Options 1 196 197
Change in Unrealized Gain on Securities Available
for Sale, Net of Tax 243 243
===================================================================================================================================
Balance, September 30, 1998 $149 ($3,921) $45,343 $53,104 $1,616 $96,291
===================================================================================================================================
</TABLE>
<PAGE>
INDEPENDENT BANK CORP.
SUPPLEMENTAL FINANCIAL INFORMATION
CONSOLIDATED AVERAGE BALANCE SHEET AND AVERAGE RATE DATA
(Unaudited - in thousands)
<TABLE>
<CAPTION>
AVERAGE
OUTSTANDING INTEREST EARNED/ AVERAGE
BALANCE PAID YIELD
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 1998 1998
----------------- -------------------- -------------------
<S> <C> <C> <C>
Interest-Earning Assets
Taxable Investment Securities $437,418 $22,028 6.71%
Non-taxable Investment Securities 28,627 1,599 7.45%
Loans, net of Unearned Discount 869,512 56,742 8.70%
Federal Funds Sold 15,128 621 5.47%
----------------- -------------------- -------------------
Total Interest-Earning Assets $1,350,685 $80,990 7.99%
----------------- ==================== ===================
Cash and Due From Banks 41,686
Other Assets 19,741
-----------------
Total Assets $1,412,112
=================
Interest-Bearing Liabilities
Savings and Interest Checking Accounts $263,620 $3,975 2.01%
Money Market & Super Interest Checking Accounts 108,884 2,175 2.66%
Other Time Deposits 409,443 17,467 5.69%
Federal Funds Purchased and Assets
Sold Under Repurchase Agreements 56,789 2,375 5.58%
Federal Home Loan Bank Borrowings 241,844 10,343 5.70%
Treasury Tax and Loan Notes 2,984 145 6.48%
----------------- -------------------- -------------------
Total Interest-Bearing Liabilities $1,083,564 $36,480 4.49%
================= ==================== ===================
Demand Deposits 190,665
Corporation-Obligated Mandatorily Redeemable Trust Preferred
Securities of Subsidiary Trust Holding Solely Junior 28,750
Subordinated debentures of the Corporation
Other Liabilities 12,431
-----------------
Total Liabilities 1,315,410
-----------------
Stockholders' Equity 96,702
-----------------
Total Liabilities and Stockholders' Equity $1,412,112
=================
Net Interest Income $44,510
====================
Interest Rate Spread 3.50%
===================
Net Interest Margin 4.39%
===================
</TABLE>
Interest income and yield are stated on a fully tax-equivalent basis. The
total amount of adjustment is $628 in 1998.
<PAGE>
INDEPENDENT BANK CORP.
SUPPLEMENTAL FINANCIAL INFORMATION
CONSOLIDATED AVERAGE BALANCE SHEET AND AVERAGE RATE DATA
(Unaudited - in thousands)
<TABLE>
<CAPTION>
AVERAGE INTEREST
OUTSTANDING EARNED/ AVERAGE
BALANCE PAID YIELD
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 1997 1997
--------------- --------------- -------
<S> <C> <C> <C>
Interest-Earning Assets
Taxable Investment Securities $367,768 $18,400 6.67%
Non-taxable Investment Securities 11,110 600 7.20%
Loans, net of Unearned Discount 738,293 48,895 8.83%
Federal Funds Sold and Assets
Purchased Under Resale Agreements 3,267 132 5.39%
----------- ----------- -------
Total Interest-Earning Assets 1,120,438 $68,027 8.10%
----------- ----------- -------
Cash and Due From Banks 43,724
Other Assets 18,908
-----------
Total Assets 1,183,070
-----------
Interest-Bearing Liabilities
Savings and Interest Checking Accounts $254,419 $4,079 2.14%
Money Market & Super Interest Checking Accounts 108,450 2,279 2.80%
Other Time Deposits 399,158 17,113 5.72%
Federal Funds Purchased and Assets
Sold Under Repurchase Agreements 39,890 1,695 5.67%
Federal Home Loan Bank Borrowings 97,473 4,221 5.77%
Treasury Tax and Loan Notes 3,704 141 5.08%
----------- ------------ ------
Total Interest-Bearing Liabilities $903,094 $29,528 4.36%
----------- ------------ ------
Demand Deposits 167,062
Corporation-Obligated Mandatorily Redeemable Trust
Preferred Securities of Subsidiary Trust Holding
Solely Junior Subordinated debentures of the Corporation 7,526
Other Liabilities 20,891
-----------
Total Liabilities 1,098,573
-----------
Stockholders' Equity 84,497
Total Liabilities and Stockholders' Equity $1,183,070
===========
Net Interest Income $38,499
============
Interest Rate Spread 3.74%
=======
Net Interest Margin 4.58%
=======
</TABLE>
Interest income and yield are stated on a fully tax-equivalent basis. The
total amount of adjustment is $326 in 1997.
<PAGE>
INDEPENDENT BANK CORP.
SUPPLEMENTAL FINANCIAL INFORMATION
CONSOLIDATED AVERAGE BALANCE SHEET AND AVERAGE RATE DATA
(Unaudited - in thousands)
<TABLE>
<CAPTION>
AVERAGE INTEREST
OUTSTANDING EARNED/ AVERAGE
BALANCE PAID YIELD
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 1998 1998
------------------- --------------- ---------------
<S> <C> <C> <C>
Interest-Earning Assets
Taxable Investment Securities $468,172 $7,858 6.71%
Non-taxable Investment Securities 38,581 727 7.54%
Loans, net of Unearned Discount 897,086 19,408 8.65%
Federal Funds Sold 20,770 290 5.58%
------------------- --------------- ---------------
Total Interest-Earning Assets 1,424,609 $28,283 7.94%
------------------- =============== ===============
Cash and Due From Banks 43,962
Other Assets 21,859
-------------------
Total Assets 1,490,430
===================
Interest-Bearing Liabilities
Savings and Interest Checking Accounts $269,586 $1,332 1.98%
Money Market & Super Interest Checking Accounts 105,516 701 2.66%
Other Time Deposits 419,879 6,014 5.73%
Federal Funds Purchased and Assets
Sold Under Repurchase Agreements 73,251 1,000 5.46%
Federal Home Loan Bank Borrowings 278,506 3,951 5.67%
Treasury Tax and Loan Notes 3,482 66 7.58%
------------------- --------------- ---------------
Total Interest-Bearing Liabilities $1,150,220 $13,064 4.54%
=================== =============== ===============
Demand Deposits 201,089
Corporation-Obligated Mandatorily Redeemable Trust
Preferred Securities of Subsidiary Trust Holding Solely
Junior Subordinated debentures of the Corporation 28,750
Other Liabilities 12,093
-------------------
Total Liabilities 1,392,152
-------------------
Stockholders' Equity 98,278
-------------------
Total Liabilities and Stockholders' Equity $1,490,430
===================
Net Interest Income $15,219
===============
Interest Rate Spread 3.40%
===============
Net Interest Margin 4.27%
===============
</TABLE>
Interest income and yield are stated on a fully tax-equivalent basis. The
total amount of adjustment is $271 in 1998.
<PAGE>
INDEPENDENT BANK CORP.
SUPPLEMENTAL FINANCIAL INFORMATION
CONSOLIDATED AVERAGE BALANCE SHEET AND AVERAGE RATE DATA
(Unaudited - in thousands)
<TABLE>
<CAPTION>
AVERAGE INTEREST
OUTSTANDING EARNED/ AVERAGE
BALANCE PAID YIELD
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 1997 1997
-------------- ---------------- --------------
<S> <C> <C> <C>
Interest-Earning Assets
Taxable Investment Securities $436,976 $7,439 6.81%
Non-taxable Investment Securities 20,282 376 7.42%
Loans, net of Unearned Discount 775,549 17,224 8.88%
Federal Funds Sold 3,575 49 5.48%
-------------- ---------------- --------------
Total Interest-Earning Assets 1,236,382 $25,088 8.12%
-------------- ================ ==============
Cash and Due From Banks 39,782
Other Assets 20,354
--------------
Total Assets $1,296,518
==============
Interest-Bearing Liabilities
Savings and NOW Accounts $256,767 $1,381 2.15%
Money Market & Super NOW Accounts 108,334 2.81%
760
Other Time Deposits 412,868 6,019 5.83%
Federal Funds Purchased and Assets
Sold Under Repurchase Agreements 64,688 945 5.84%
Federal Home Loan Bank Borrowings 143,491 2,147 5.99%
Treasury Tax and Loan Notes 2,884 52 7.21%
-------------- ---------------- --------------
Total Interest-Bearing Liabilities $989,032 $11,304 4.57%
============== ================ ==============
Demand Deposits 175,960
Corporation-Obligated Mandatorily Redeemable
Trust Preferred Securities of Subsidiary Trust Holding Solely
Junior Subordinated debentures of the Corporation 28,750
Other Liabilities 15,457
--------------
Total Liabilities 1,209,199
--------------
Stockholders' Equity 87,319
--------------
Total Liabilities and Stockholders'
--------------
Equity $1,296,518
==============
Net Interest Income $13,784
================
Interest Rate Spread 3.55%
==============
Net Interest Margin 4.46%
==============
</TABLE>
Interest income and yield are stated on a fully tax-equivalent basis. The
total amount of adjustment is $164 in 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INDEPENDENT BANK CORP.
(registrant)
Date: November 13, 1998 /s/ Douglas H. Philipsen
Douglas H. Philipsen
President, Chairman of the Board and
Chief Executive Officer
Date: November 13, 1998 /s/ Richard J. Seaman
Richard J. Seaman
Chief Financial Officer
and Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANACIAL INFORMATION EXTRACTED FROM SEC FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 42,510
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 14,490
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 308,743
<INVESTMENTS-CARRYING> 200,916
<INVESTMENTS-MARKET> 309,448
<LOANS> 909,284
<ALLOWANCE> (13,600)
<TOTAL-ASSETS> 1,514,730
<DEPOSITS> 986,332
<SHORT-TERM> 85,934
<LIABILITIES-OTHER> 16,199
<LONG-TERM> 0
28,750
0
<COMMON> 149
<OTHER-SE> 96,142
<TOTAL-LIABILITIES-AND-EQUITY> 1,514,730
<INTEREST-LOAN> 56,628
<INTEREST-INVEST> 23,113
<INTEREST-OTHER> 621
<INTEREST-TOTAL> 80,362
<INTEREST-DEPOSIT> 23,617
<INTEREST-EXPENSE> 36,480
<INTEREST-INCOME-NET> 43,882
<LOAN-LOSSES> 2,721
<SECURITIES-GAINS> 32
<EXPENSE-OTHER> 32,455
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<EPS-PRIMARY> 0.79
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<YIELD-ACTUAL> 7.99
<LOANS-NON> 4,663
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<ALLOWANCE-OPEN> 12,674
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</TABLE>
