<PAGE>
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 March 31, 1999
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 May 1,1999 there were 14,164,241 shares of the issuer's common
stock outstanding.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - March 31, 1999 and
December 31, 1998
Consolidated Statements of Income - Three months ended March 31,
1999 and 1998
Consolidated Statements of Cash Flows - Three months ended
March 31, 1999 and 1998
Notes to Consolidated Financial Statements - March 31, 1999
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 3. Quantitative and Qualitative Disclosure 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
<PAGE>
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT BANK CORP.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED - IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------------------------
<S> <C> <C>
ASSETS
Cash and Due From Banks $ 43,945 $ 47,755
Federal Funds Sold 11,522 38,443
Securities Held To Maturity 264,480 284,944
Securities Available For Sale 200,705 195,199
Federal Home Loan Bank Stock 17,036 16,035
Loans, Net of Unearned Discount 973,211 941,112
Less: Reserve for Possible Loan Losses (13,896) (13,695)
- -------------------------------------------------------------------------------------------------------
Net Loans 959,315 927,417
- -------------------------------------------------------------------------------------------------------
Bank Premises and Equipment 15,454 15,200
Other Real Estate Owned 126 -
Other Assets 51,273 50,076
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,563,856 $ 1,575,069
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits
Demand Deposits $ 205,603 $ 219,090
Savings and Interest Checking Accounts 275,968 278,306
Money Market and Super Interest Checking Accounts 108,251 113,811
Time Certificates of Deposit over $100,000 94,065 95,706
Other Time Deposits 349,546 336,404
- -------------------------------------------------------------------------------------------------------
Total Deposits 1,033,433 1,043,317
- -------------------------------------------------------------------------------------------------------
Federal Funds Purchased and Assets Sold Under Repurchase Agreements 80,812 82,376
Federal Home Loan Bank Borrowings 311,224 313,724
Treasury Tax and Loan Notes 1,555 471
Other Liabilities 14,534 10,583
- -------------------------------------------------------------------------------------------------------
Total Liabilities 1,441,558 1,450,471
- -------------------------------------------------------------------------------------------------------
Corporation-obligated mandatorily redeemable trust preferred securities of
subsidiary trust holding solely junior subordinated debentures of the
Corporation 28,750 28,750
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value Authorized: 30,000,000 Shares
Outstanding: 14,863,821 Shares at March 31, 1999
and 14,863,821 at December 31, 1998 149 149
Treasury Stock: 701,043 Shares at March 31, 1999
and 406,638 Shares at December 31, 1998 (10,936) (6,431)
Surplus 45,119 45,303
Retained Earnings 58,620 56,063
Other Accumulated Comprehensive Income, Net of Tax 596 764
- -------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 93,548 95,848
- -------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES, MINORITY INTEREST & STOCKHOLDERS' EQUITY $ 1,563,856 $ 1,575,069
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
INDEPENDENT BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED - IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, MARCH 31,
1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Interest on Loans $19,556 $18,440
Interest and Dividends on Securities 7,886 7,522
Interest on Federal Funds Sold 165 123
- ---------------------------------------------------------------------------------------------------
Total Interest Income 27,607 26,085
- ---------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on Deposits 7,472 7,819
Interest on Borrowed Funds 5,273 3,840
- ---------------------------------------------------------------------------------------------------
Total Interest Expense 12,745 11,659
- ---------------------------------------------------------------------------------------------------
Net Interest Income 14,862 14,426
- ---------------------------------------------------------------------------------------------------
PROVISION FOR POSSIBLE LOAN LOSSES 981 907
- ---------------------------------------------------------------------------------------------------
Net Interest Income After Provision
For Possible Loan Losses 13,881 13,519
- ---------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Service Charges on Deposit Accounts 1,271 1,329
Trust and Investment Services Income 917 893
Mortgage Banking Income 501 468
Other Non-Interest Income 736 397
- ---------------------------------------------------------------------------------------------------
Total Non-Interest Income 3,425 3,087
- ---------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSES
Salaries and Employee Benefits 5,662 5,001
Occupancy Expenses 961 999
Equipment Expenses 767 730
Other Non-Interest Expenses 3,719 3,638
- ---------------------------------------------------------------------------------------------------
Total Non-Interest Expenses 11,109 10,368
- ---------------------------------------------------------------------------------------------------
Minority Interest 667 667
INCOME BEFORE INCOME TAXES 5,530 5,571
PROVISION FOR INCOME TAXES 1,684 1,866
- ---------------------------------------------------------------------------------------------------
NET INCOME $3,846 $3,705
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE $0.27 $0.25
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE $0.27 $0.25
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Weighted average common shares (Basic) 14,312,093 14,828,992
Common stock equivalents 169,506 253,334
- ---------------------------------------------------------------------------------------------------
Weighted average common shares (Diluted) 14,481,599 15,082,326
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
INDEPENDENT BANK CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 1998
----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 3,846 $ 3,705
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED FROM OPERATING ACTIVITIES:
Depreciation and amortization 1,270 953
Provision for loan losses 981 907
Loans originated for resale (16,793) (17,461)
Proceeds from mortgage loan sales 16,730 17,429
Loss on sale of mortgages 63 32
Gain on mortgage servicing rights (97) (155)
Other Real Estate Owned recoveries - (77)
Changes in assets and liabilities:
Decrease / (Increase) in other assets (1,100) 1,290
Increase in other liabilities 4,063 3,096
- --------------------------------------------------------------------------------
TOTAL ADJUSTMENTS 5,117 6,014
- --------------------------------------------------------------------------------
NET CASH PROVIDED FROM OPERATING ACTIVITIES 8,963 9,719
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of Investment Securities 36,108 33,538
Purchase of Investment Securities (22,874) (15,917)
Net increase in Loans (33,005) (24,104)
Proceeds from sale of Other Real Estate Owned - 159
Investment in Bank Premises and Equipment (1,055) (314)
- --------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (20,826) (6,638)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in Deposits (9,884) (38,945)
Net increase / (decrease) in Federal Funds Purchased
and Assets Sold Under Repurchase Agreements (1,564) 10,313
Net increase / (decrease) in FHLB Borrowings (2,500) 12,000
Net increase / (decrease) in TT&L Notes 1,084 (212)
Dividends Paid (1,315) (1,484)
Purchase of Treasury Shares (4,787) -
Proceeds from stock issuance 98 304
- --------------------------------------------------------------------------------
NET CASH PROVIDED FROM (USED IN) FINANCING ACTIVITIES (18,868) (18,024)
- --------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (30,731) (14,943)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 86,198 65,016
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AS OF MARCH 31, $ 55,467 $ 50,073
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
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. 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 month
period ended March 31, 1999 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1999 or any other interim
period. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1998.
RECENT ACCOUNTING DEVELOPMENTS
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 income 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 statement of income and
requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting. SFAS No. 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, financial quarters beginning June 16, 1998 and thereafter). SFAS No.
133 cannot be applied retroactively. SFAS No. 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
has not yet quantified the impact of adopting SFAS No. 133 on its consolidated
financial statements and has not determined the timing nor method of its
adoption of the statement. However, the Company does not expect that the
adoption of this statement will have a material impact on its financial position
or results of operations.
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires
computer software costs associated with internal-use software to be expensed as
incurred until
<PAGE>
certain capitalization criteria are met. This statement was adopted January 1,
1999 and did not have a material impact on the Company's financial position.
In April 1998, AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities." SOP 98-5 requires all costs associated with pre-opening
and organization activities to be expensed as incurred. This statement was
adopted January 1, 1999 and did not have a material impact on the Company's
financial position.
In October 1998, the FASB issued SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained After the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise." This statement requires that
after the securitization of mortgage loans held for sale, an entity engaged in
mortgage banking activities classify the resulting mortgage-backed securities or
other retained interests based on its ability and intent to sell or hold those
investments. This statement was adopted January 1, 1999 and did not have a
material impact on the Company's financial position.
EARNINGS PER SHARE
In 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards Board No. 128, "Earnings per Share." This
statement was issued by the Financial Accounting Standards Board 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. This
statement also requires a restatement of all prior period EPS data presented.
<TABLE>
<CAPTION>
NET INCOME WEIGHTED AVERAGE SHARES NET INCOME PER SHARE
March 31, March 31, March 31, March 31, March 31, March 31,
1999 1998 1999 1998 1999 1998
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $3,846 $3,705 14,312 14,829 $0.27 $0.25
Effect of dilutive securities - - 170 253 - -
---------------------------------------------------------------------------------------------
Diluted EPS $3,846 $3,705 14,482 15,082 $0.27 $0.25
---------------------------------------------------------------------------------------------
</TABLE>
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:
<PAGE>
<TABLE>
<CAPTION>
March 31,
1999 1998
<S> <C> <C>
Net Income $3,846 $3,705
Change in unrealized gain/(loss) on securities available for sale (168) (138)
Less: reclassification adjustment for losses included in net income - -
---------------------
Comprehensive Income $3,678 $3,567
---------------------
</TABLE>
SEGMENT INFORMATION
On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which establishes standards for reporting operating
segments of a business enterprise. The new rules establish revised standards for
public companies relating to the reporting of financial and descriptive
information about their operating segments in financial statements. Operating
segments are components of an enterprise, which are evaluated regularly by the
chief operating decision-maker in deciding how to allocate resources and in
assessing performance. The Company's chief operating decision-maker is the
President, Chief Executive Officer and Chairman of the Board of the Company. The
adoption of SFAS No. 131 did not have a material effect on the Company's primary
financial statements, but did result in the disclosure of segment information
contained herein. The Company has identified its reportable operating business
segment as Community Banking, based on how the business is strategically
managed.
The Company's community banking business segment consists of commercial
banking, retail banking and trust services. The community banking business
segment is managed as a single strategic unit which derives it's revenues from a
wide range of banking services, including lending activities, acceptance of
demand, savings and time deposits, trust and investment management, and mortgage
servicing income from investors.
Non reportable operating segments of the Company's operations which do
not have similar characteristics to the community banking operations and do not
meet the quantitative thresholds requiring disclosure, are included in the Other
category in the disclosure of business segments below. These non-reportable
segments include parent company financial information. Consolidation adjustments
are also included in the Other category.
The accounting policies used in the disclosure of business segments are
the same as those described in Note 1 "Summary of significant accounting
policies" of the Company's "1998 Annual Report" included in Form 10K. The
consolidation adjustments reflect certain eliminations of inter-segment revenue,
cash and Parent Company investments in subsidiaries.
<TABLE>
<CAPTION>
RECONCILIATION TO CONSOLIDATED FINANCIAL INFORMATION
Community Other Adjustments
Banking Other and Eliminations Consolidated
<S> <C> <C> <C> <C>
March 31, 1999
Securities, Available for Sale $480,821 $1,400 $0 $482,221
and Held to Maturity
Total Assets 1,560,106 154,262 (150,512) 1,563,856
Total Deposits 1,052,049 - (18,616) 1,033,433
Total Liabilities $1,458,752 $ 31,074 $ (48,268) $1,441,558
Total Interest Income 27,578 866 (837) 27,607
Total Interest Expense 12,894 688 (837) 12,745
Net Interest Income 14,684 178 - 14,862
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Provisions for Possible Loan Losses 981 - - 981
Total Non-Interest Income 3,424 4,411 (4,410) 3,425
Total Non-Interest Expense 11,054 55 - 11,109
Net Income $ 4,389 $ 3,867 $(4,410) $ 3,846
March 31, 1998
Securities, Available for Sale $ 436,446 $ 1,400 $ 0 $ 437,846
and Held to Maturity
Total Assets 1,354,532 155,658 (151,615) 1,358,575
Total Deposits 977,544 - (28,341) 949,203
Total Liabilities 1,263,291 31,138 (59,484) 1,234,945
Total Interest Income 26,056 987 (958) 26,085
Total Interest Expense 11,929 688 (958) 11,659
Net Interest Income 14,127 299 - 14,426
Provisions for Possible Loan Losses 907 - - 907
Total Non-Interest Income 3,086 4,151 (4,150) 3,087
Total Non-Interest Expense 10,310 58 - 10,368
Net Income $ 4,130 $ 3,726 ($ 4,151) $ 3,705
</TABLE>
<PAGE>
REPORTABLE SEGMENT SPECIFIC INFORMATION
<TABLE>
<CAPTION>
Community Banking
March 31,
1999 1998
<S> <C> <C>
Interest Income
Interest on Loans $19,556 $18,440
Interest and Dividends on Securities 7,857 7,493
Interest on Federal Funds Sold 165 123
Total Interest Income 27,578 26,056
Interest Expense
Interest on Deposits 7,621 8,089
Interest on Borrowings 5,273 3,840
Total Interest Expense 12,894 11,929
Non-Interest Income
Service Charges on Deposit Accounts 1,271 1,329
Trust and Financial Services Income 917 893
Mortgage Banking Income 501 468
Other Non-Interest Income 735 396
Total Non-Interest Income 3,424 3,086
Non-Interest Expenses
Salaries and Employee Benefits 5,662 5,001
Occupancy Expenses 961 999
Equipment Expenses 767 730
Other Non-Interest Expenses 3,664 3,580
Total Non-Interest Expense 11,054 10,310
Net Income $ 4,389 $ 4,130
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1999
SUMMARY
For the three months ended March 31, 1999, Independent Bank Corp. (the
Company) recorded net income of $3.85 million, compared with net income of $3.71
million for the same period last year. Diluted and Basic earnings per share were
$.27 for the quarter ended March 31, 1999 versus $.25 per share for the prior
year. Per share earnings have been calculated in accordance with SFAS No. 128,
"Earnings per Share." This improvement in 1999 is primarily due to increased net
interest income.
Interest income associated with loan growth and a higher securities
portfolio, net of funding costs, contributed to an increase in net interest
income of $.5 million (to $14.9 million in 1999 from $14.4 million) in 1998. The
provision for loan losses increased to $981,000 for the first three months of
1999 compared with $907,000 for the same period last year consistent with loan
growth. Non-interest income and non-interest expenses increased 10.95% and 7.15%
respectively from the same period last year.
The annualized consolidated returns on average equity and average
assets for the first three months of 1999 were 16.13% and .99%, respectively.
This compares to annualized consolidated returns on average equity and average
assets for the first three months of 1998 of 15.66% and 1.09%, respectively.
As of March 31, 1999, total assets amounted to $1.6 billion, a
decrease of $11.2 million or less than 1.00% over the 1998 year end balance.
Loans, net of unearned discount, increased $32.1 million, or 3.4%, since
year-end 1998 due to strong commercial loan originations. Investments
decreased by $14.0 million, or 2.8% from year-end 1998, primarily due to
prepayments. Deposit balances have decreased by $9.9 million since year-end
1998, reflecting normal seasonal fluctuations, while borrowings have
decreased by $3.0 million, or less than 1.0%.
Nonperforming assets totaled $5.3 million as of March 31, 1999 down
from $5.4 million on December 31, 1998. Nonperforming assets for both periods
represented 34 basis points of total assets.
NET INTEREST INCOME
The discussion of net interest income that follows is presented on a
fully tax-equivalent basis. Net interest income for the three months ended March
31, 1999, amounted to $15.1 million, an increase of $.5 million, or 3.6%, from
the comparable 1998 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 17 basis
points. This reflects the current pressure on interest rates in the market.
The average balance of interest-earning assets for the first three
months of 1999 was $159.9 million, or 12.3%, higher than the comparable 1998
time frame, while the average balance of interest-bearing liabilities was $171.3
million, or 16.4% higher. The Company's net interest margin for the first three
months of 1999 was 4.15% as compared to 4.49% for the comparable 1998 time
frame. The Bank purchased $30 million of bank-owned life insurance ("BOLI") in
the fourth quarter of 1998. The funding for the BOLI is reflected in net
interest income and is a component of the decrease in
<PAGE>
the net interest margin. The pre-tax benefit of BOLI is captured in non-interest
income. Another contributing factor to the drop in margin is the continued
downward pressure on interest rates. The prime lending rate has dropped 0.75%
since this time last year.
Income from interest-earning assets amounted to $27.9 million for the
three months ended March 31, 1999, an increase of $1.6 million, or 6.16%, from
the first three months of 1998. The average balance of taxable investment
securities increased by $22.2 million, or 5.2% and the average balance of loans,
net of unearned discount, increased $114.4 million, or 13.6% resulting from
increases in both the commercial real estate portfolio and indirect automobile
lending.
Interest income is impacted by changes in market rates of interest due
to variable and floating rate loans in the Company's portfolio. At March 31,
1999, loans having interest rates which adjust in accordance with changes in the
Company's base lending rate or other market indices amounted to approximately
$246.2 million, or 25.3% of loans, net of unearned discount.
Interest income is also impacted by the amount of non-performing loans.
The amount of interest due, but not recognized, on non-performing loans amounted
to approximately $108,000 for the three months ended March 31, 1999, compared to
$115,000 for the three months ended March 31, 1998.
The growth in interest earning assets was funded primarily by
borrowings. Average interest bearing deposits increased by $33.9 million, or
4.4%, for the first three months of 1999 over the same period last year,
primarily in the consumer certificate of deposit category. For the three months
ended March 31, 1999, average borrowings were $137.3 million, or 51.5%, higher
than the first three months of 1998. Interest expense on deposits and borrowings
increased by $1.09 million, or 9.3%, to $12.7 million in the first quarter of
1999 as compared to the same period last year.
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. Management of the
Company, based upon known and anticipated circumstances and conditions,
determines the level of the reserve for possible loan losses. 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 three months ended March 31, 1999, Management increased the
provision for possible loan losses, consistent with the level of loan growth
experienced, to $981,000 as compared to $907,000 for the same period last year.
For the first three months of 1999, loans charged-off, net of recoveries of
loans previously charged-off, amounted to $780,000 as compared to $246,000 for
the comparable 1998 time frame.
As of March 31, 1999, the ratio of the reserve for possible loan losses
to loans, net of unearned discount, was 1.43%, as compared to the 1998 year-end
level of 1.46%. The ratio of the reserve for possible loan losses to
non-performing loans was 267.5% at March 31, 1999, higher than the 255.7%
coverage recorded at year-end.
<PAGE>
NON-INTEREST INCOME
Non-interest income for the three months ended March 31, 1999 was $3.4
million, compared to $3.1 million for the same period in 1998. Income from Trust
and Financial Services increased by $24,000, or 2.7%. The March 1998 quarter
included a non-recurring recovery of $77,000 associated with a former real
estate owned property. As mentioned above, the Bank purchased $30 million of
BOLI in the fourth quarter of 1998. The pre-tax benefit of BOLI, $393,000 in the
first quarter of 1999, is reflected in non-interest income.
NON-INTEREST EXPENSES
Non-interest expenses totaled $11.1 million for the three months
ended March 31, 1999, a $741,000 increase from the comparable 1998 period.
Salaries and employee benefits increased by $661,000, or 13.2%, due to the
fact that the personal computer and networking department was transferred to
the Bank from Alltel, the Bank's data processing partner. Wage inflation,
resulting from the tight labor market, was also a significant contributor to
that increase. Occupancy and equipment expenses were flat and other
non-interest expense reflects a modest 2.2% or $81,000 increase year over
year.
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 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 Corporation". 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 three
months ended March 31, 1999 and March 31, 1998 was $667,000.
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 three months ended
March 31, 1999 and 1998 were 30.5% and 33.5% respectively.
ASSET/LIABILITY MANAGEMENT
The principal objective of the Company's asset/liability management
strategy is to reduce the vulnerability of the Company to changes in interest
rates. This is accomplished by managing the volume of assets and liabilities
maturing, or subject to
<PAGE>
repricing, and by adjusting rates in relation to market conditions to
influence volumes and spreads.
The effect of interest rate volatility on net interest income is
minimized when the interest sensitivity gap (the difference between assets and
liabilities that reprice within a given time period) is the smallest. Given the
inherent uncertainty of future interest rates, the Bank's Asset/Liability
Management Committee evaluates the interest sensitivity gap and executes
strategies, which may include off-balance sheet activities, in an effort to
minimize the Company's exposure to interest rate movements while providing
adequate earnings in the most likely 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 March 31, 1999, the
Bank had one interest rate swap agreement with a total notional value of $20
million. This swap was arranged through an international banking institution and
matures in June 1999. 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 and narrower guidelines approved by the Asset/Liability Management
Committee. These limits and guidelines reflect the Company's tolerance for
interest-rate risk by identifying exposures and quantifying and hedging them.
The Company quantifies its interest-rate exposures using 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, interest rate swaps and options.
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.
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 (1.72%)
-200 1.30%
</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, 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
<PAGE>
five repurchase agreements with major brokerage firms as potential sources of
liquidity. On March 31, 1999 the Company had $35.6 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 $45.3
million at March 31, 1999. As a member of the Federal Home Loan Bank, Rockland
has access to approximately $358.7 million of borrowing capacity. At March 31,
1999, the Bank had $311.2 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 March 31, 1999, 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 March 31,
1999, the Company had a Tier 1 risked-based capital ratio of 10.97% and a total
risked-based capital ratio of 12.13%. Rockland had a Tier 1 risked-based capital
ratio of 9.06% and a total risked-based capital ratio of 10.31% as of the same
date.
An additional capital requirement of a minimum 4.00% Tier 1 leverage
capital is mandated by the regulatory agencies. As of March 31, 1999, the
Company and the Bank had Tier 1 leverage capital ratios of 7.69% and 6.42%,
respectively.
In March, the Company's Board of Directors declared a cash dividend of
$.10 per share to shareholders of record as of March 26, 1999. This dividend was
paid on April 9, 1999. On an annualized basis, the dividend payout ratio
amounted to 36.4% of the trailing four quarters earnings.
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. Senior Management and the Board of
Directors approved these plans. 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 2000 Complete.
(Y2K) problem, establishes a project
team and develops a plan to rectify.
Assessment Inventory of Information Technology Complete. Assessments need continual update based
(IT) and Non-IT systems, vendors. on changes to inventory i.e., new vendor relationships,
Assign priorities based upon level of additional equipment purchases.
risk. Establish continual monitoring
process.
Renovation Code enhancements, hardware, See Note (1). The Company has been advised by its key
software upgrades third party software vendors that software renovation is
complete. Management performed comprehensive tests
to ensure compliance.
Validation Process where upgraded hardware, The Company's testing program for mission critical systems
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
software etc. is tested. began in September 1998 and concluded
successfully in March 1999. This allows the rest of 1999
for additional system renovation and testing, if the need
should arise.
Implementation Systems should be certified as Year The Y2K ready versions of critical mainframe software applications
2000 (Y2K) compliant and put into were put into production in February 1999. Many of the Company's
production. P.C. applications are already Y2K compliant. The remaining
P.C. applications will be converted to a Y2K compliant version
throughout 1999.
</TABLE>
NOTES:
(1) The Company relies upon third party vendors to provide the Bank
with various products and services that are fundamental to its 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 Bank 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 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 $131,000 for the year ended 1998 and $50,000 for the three months ended
March 31, 1999. 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
<PAGE>
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 has developed contingency plans in
response to the Year 2000 challenge:
REMEDIATION PLAN. This plan is designed to mitigate the risks associated with
the failure to successfully complete renovation, validation, and implementation
of mission-critical systems. The plan would be invoked in the event of
unsuccessful testing of a mission critical system and includes the designation
of alternate vendors that would essentially constitute replacement of the
existing vendor with a new one.
BUSINESS INTERRUPTION PLAN This plan of action ensures the ability of the Bank
to continue functioning as a business entity in the event of unanticipated
systems failures at critical dates prior to, on and after the Year 2000. The
base assumptions of this plan are:
- Regional utility and telecommunication outages
- Spotty utility and telecommunication outages
- Failure of the Company's software applications to
function in the Year 2000.
The Company has developed a strategy to deal with each of the assumptions,
including but not limited to; manual workarounds, limited hours of operation and
the possibility of backup item processing support.
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
<PAGE>
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 and Use of Proceeds - 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 March 31, 1999 and the year ended
December 31, 1998
Consolidated Average Balance Sheet and Average Rate Data -
Three months ended March 31, 1999 and 1998.
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 March 31, 1999.
<PAGE>
INDEPENDENT BANK CORP.
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
(UNAUDITED - IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER
COMMON TREASURY RETAINED COMPREHENSIVE
STOCK STOCK SURPLUS EARNINGS INCOME TOTAL
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 $148 - $45,147 $45,825 $ 1,373 $92,493
Net Income 16,139 16,139
Cash Dividends Declared ($.34 per share) (5,901) (5,901)
Proceeds from Exercise of Stock Options 1 409 156 566
Repurchase Common Stock (6,840) (6,840)
Change in Unrealized Gain (Loss) on Investments (609)
Available for Sale, Net of Tax (609)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 149 (6,431) 45,303 56,063 764 95,848
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, January 1, 1999 149 45,303 56,063 764 95,848
Net Income 3,846 3,846
Dividends Declared ($.10 per share) (1,289) (1,289)
Proceeds from Exercise of Stock Options 282 (184) 98
Repurchase Common Stock (4,787) (4,787)
Change in Unrealized Gain on Investments
Available for Sale, Net of Tax (168) (168)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1999 $149 (10,936) $45,119 $58,620 $596 $93,548
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
INDEPENDENT BANK CORP.
SUPPLEMENTAL FINANCIAL INFORMATION
CONSOLIDATED AVERAGE BALANCE SHEET AND AVERAGE RATE DATA
(UNAUDITED - IN THOUSANDS)
<TABLE>
<CAPTION>
AVERAGE INTEREST
OUTSTANDING EARNED/ AVERAGE
BALANCE PAID YIELD
FOR THE THREE MONTHS ENDED MARCH 31, 1999 1999 1999
----------- -------- -------
<S> <C> <C> <C>
Interest-Earning Assets
Taxable Investment Securities $ 449,080 $ 7,355 6.55%
Non-taxable Investment Securities 41,768 789 7.56%
Loans, net of Unearned Discount 954,764 19,572 8.20%
Federal Funds Sold 14,486 165 4.56%
---------- ------- -----
Total Interest-Earning Assets $1,460,098 $27,881 7.64%
---------- ------- -----
------- -----
Cash and Due From Banks 44,464
Other Assets 49,945
----------
Total Assets $1,554,507
----------
----------
Interest-Bearing Liabilities
Savings and Interest Checking Accounts $ 273,394 $ 1,210 1.77%
Money Market & Super Interest Checking Accounts 106,695 644 2.41%
Time Deposits 431,092 5,618 5.21%
Federal Funds Purchased and Assets
Sold Under Repurchase Agreements 80,884 957 4.73%
Federal Home Loan Bank Borrowings 321,326 4,277 5.32%
Treasury Tax and Loan Notes 2,039 39 7.65%
---------- ------- -----
Total Interest-Bearing Liabilities $1,215,430 $12,745 4.19%
---------- ------- -----
------- -----
Demand Deposits 204,933
Corporation-obligated mandatorily redeemable trust preferred
securities of subsidiary trust holding solely junior subordinated 28,750
debentures of the Corporation
Other Liabilities 10,015
----------
Total Liabilities 1,459,128
----------
Stockholders' Equity 95,379
----------
Total Liabilities and Stockholders' Equity $1,554,507
----------
----------
Net Interest Income $15,136
--------
--------
Interest Rate Spread 3.44%
-----
-----
Net Interest Margin 4.15%
-----
-----
Interest income and yield are stated on a fully tax-equivalent basis
The total amount of adjustment is $274 in 1999
</TABLE>
<PAGE>
INDEPENDENT BANK CORP.
SUPPLEMENTAL FINANCIAL INFORMATION
CONSOLIDATED AVERAGE BALANCE SHEET AND AVERAGE RATE DATA
(UNAUDITED - IN THOUSANDS)
<TABLE>
<CAPTION>
AVERAGE INTEREST
OUTSTANDING EARNED/ AVERAGE
BALANCE PAID YIELD
FOR THE THREE MONTHS ENDED MARCH 31, 1998 1998 1998
------------ --------- ---------
<S> <C> <C> <C>
Interest-Earning Assets
Taxable Investment Securities $ 426,917 $ 7,229 6.77%
Non-taxable Investment Securities 23,432 431 7.36%
Loans, net of Unearned Discount 840,384 18,480 8.80%
Federal Funds Sold 9,423 123 5.22%
----------- ------- -----
Total Interest-Earning Assets 1,300,156 $26,263 8.08%
----------- ------- -----
------- -----
Cash and Due From Banks 38,850
Other Assets 19,305
-----------
Total Assets 1,358,311
-----------
-----------
Interest-Bearing Liabilities
Savings and Interest Checking Accounts $ 256,926 $ 1,335 2.08%
Money Market & Super Interest Checking Accounts 111,415 728 2.61%
Time Deposits 408,897 5,757 5.63%
Federal Funds Purchased and Assets
Sold Under Repurchase Agreements 38,631 564 5.84%
Federal Home Loan Bank Borrowings 226,239 3,239 5.73%
Treasury Tax and Loan Notes 2,038 36 7.07%
----------- ------- -----
Total Interest-Bearing Liabilities $1,044,146 $11,659 4.47%
----------- ------- -----
------- -----
Demand Deposits 177,920
Corporation-obligated mandatorily redeemable trust preferred
securities of subsidiary trust holding solely junior subordinated
debentures of the Corporation 28,750
Other Liabilities 12,837
-----------
Total Liabilities 1,263,653
-----------
Stockholders' Equity 94,658
-----------
Total Liabilities and Stockholders' Equity $1,358,311
-----------
-----------
Net Interest Income $14,604
-------
-------
Interest Rate Spread 3.61%
-----
-----
Net Interest Margin 4.49%
-----
-----
Interest income and yield are stated on a fully tax-equivalent basis.
The total amount of adjustment is $177 in 1998.
</TABLE>
<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: May 14, 1999 /s/ Douglas H. Philipsen
--------------------------------
Douglas H. Philipsen
Chairman of the Board, President
and Chief Executive Officer
Date: May 14, 1999 /s/ Richard J. Seaman
--------------------------------
Richard J. Seaman
Chief Financial Officer
and Treasurer
(Principal Financial and
Principal Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 43,945
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 11,522
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 200,705
<INVESTMENTS-CARRYING> 264,480
<INVESTMENTS-MARKET> 264,157
<LOANS> 973,211
<ALLOWANCE> (13,896)
<TOTAL-ASSETS> 1,563,856
<DEPOSITS> 1,033,433
<SHORT-TERM> 82,367
<LIABILITIES-OTHER> 14,534
<LONG-TERM> 0
28,750
0
<COMMON> 149
<OTHER-SE> 93,399
<TOTAL-LIABILITIES-AND-EQUITY> 1,563,856
<INTEREST-LOAN> 19,556
<INTEREST-INVEST> 7,886
<INTEREST-OTHER> 165
<INTEREST-TOTAL> 27,607
<INTEREST-DEPOSIT> 7,472
<INTEREST-EXPENSE> 12,745
<INTEREST-INCOME-NET> 14,862
<LOAN-LOSSES> 981
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 11,109
<INCOME-PRETAX> 5,530
<INCOME-PRE-EXTRAORDINARY> 5,530
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,846
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
<YIELD-ACTUAL> 7.64
<LOANS-NON> 4,514
<LOANS-PAST> 680
<LOANS-TROUBLED> 1,029
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 13,695
<CHARGE-OFFS> (1,265)
<RECOVERIES> 485
<ALLOWANCE-CLOSE> 13,896
<ALLOWANCE-DOMESTIC> 13,896
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
