SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 Commission File Number: 1-9047 Independent Bank Corp. (Exact name of registrant as specified in its charter) Massachusetts 04-2870273 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 288 Union Street, Rockland, Massachusetts 02370 (Address of principal executive offices, including zip code) (617) 878-6100 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of November 1,1996 there were 14,595,112 shares of the issuer's common stock outstanding.
INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets - September 30, 1996 and December 31, 1995 Consolidated Statements of Income - Nine months and quarter ended September 30, 1996 and 1995 Consolidated Statements of Cash Flows - Nine months ended September 30, 1996 and 1995 Notes to Consolidated Financial Statements - September 30, 1996 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K
INDEPENDENT BANK CORP. CONSOLIDATED BALANCE SHEETS (Unaudited - in thousands) <TABLE> <CAPTION> SEPTEMBER 30, DECEMBER 31, 1996 1995 <S> <C> <C> ASSETS Cash and Due From Banks $ 55,430 $ 67,354 Federal Funds Sold and Assets Purchased Under Resale Agreements 6,740 13,000 Interest Bearing Deposits -- 296 Securities Held To Maturity 274,618 226,896 Securities Available For Sale 27,718 32,628 Federal Home Loan Bank Stock 6,831 3,462 Loans, Net of Unearned Discount 668,242 628,141 Less: Reserve for Possible Loan Losses (12,020) (12,088) Net Loans 656,222 616,053 Bank Premises and Equipment 10,041 8,903 Other Real Estate Owned 345 638 Other Assets 20,215 18,359 TOTAL ASSETS $1,058,160 $ 987,589 LIABILITIES Deposits Demand Deposits $ 165,237 $ 166,453 Savings and NOW Accounts 257,005 259,729 Money Market and Super NOW Accounts 101,485 123,659 Time Certificates of Deposit over $100,000 35,462 30,086 Other Time Deposits 296,135 291,158 Total Deposits 855,324 871,085 Federal Funds Purchased and Assets Sold Under Repurchase Agreements 38,842 4,060 Federal Home Loan Bank Borrowings 60,000 20,000 Treasury Tax and Loan Notes 5,703 4,031 Other Liabilities 14,927 10,998 Subordinated Capital Notes 4,834 4,843 Total Liabilities 979,630 915,017 STOCKHOLDERS' EQUITY Common Stock, $.01 par value. Authorized: 30,000,000 Shares Outstanding: 14,570,366 Shares at September 30, 1996 and 14,507,925 at December 31, 1995 146 145 Surplus 44,173 43,777 Retained Earnings 34,446 28,710 Unrealized Loss on Securities Available For Sale, Net of Tax (235) (60) Total Stockholders' Equity 78,530 72,572 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $1,058,160 $987,589 </TABLE>
INDEPENDENT BANK CORP. CONSOLIDATED STATEMENTS OF INCOME (Unaudited - in thousands) <TABLE> <CAPTION> NINE MONTHS ENDED QUARTER ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1995 1996 1995 <S> <C> <C> <C> <C> INTEREST INCOME Interest on Loans $ 43,084 $ 41,095 $ 14,649 $ 14,042 Interest and Dividends on Securities 14,001 12,221 4,996 4,077 Interest on Federal Funds Sold and Repurchase Agreements 168 545 52 378 Interest on Interest Bearing Deposits 7 15 -- 5 Total Interest Income 57,260 53,876 19,697 18,502 INTEREST EXPENSE Interest on Deposits 20,425 18,880 6,686 7,068 Interest on Borrowed Funds 3,445 2,569 1,524 618 Total Interest Expense 23,870 21,449 8,210 7,686 Net Interest Income 33,390 32,427 11,487 10,816 PROVISION FOR POSSIBLE LOAN LOSSES 1,250 750 500 250 Net Interest Income After Provision Possible For Loan Losses 32,140 31,677 10,987 10,566 NON-INTEREST INCOME Service Charges on Deposit Accounts 4,365 4,272 1,461 1,394 Trust and Investment Services Income 2,114 1,805 700 591 Mortgage Banking Income 2,247 1,640 659 608 Other Non-Interest Income 1,018 893 291 260 Total Non-Interest Income 9,744 8,610 3,111 2,853 NON-INTEREST EXPENSES Salaries and Employee Benefits 15,908 16,323 5,088 5,362 Occupancy Expenses 2,479 2,346 805 829 Equipment Expenses 1,847 1,627 596 539 Other Non-Interest Expenses 8,695 8,808 2,985 2,824 Total Non-Interest Expenses 28,929 29,104 9,474 9,554 INCOME BEFORE INCOME TAXES 12,955 11,183 4,624 3,865 PROVISION FOR INCOME TAXES 4,599 3,498 1,600 1,192 NET INCOME 8,356 7,685 3,024 2,673 NET INCOME PER SHARE 0.57 0.52 0.20 0.18 Weighted average common and common equivalent shares outstanding 14,724,745 14,626,512 14,758,987 14,658,788 </TABLE>
INDEPENDENT BANK CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited - in thousands) <TABLE> <CAPTION> NINE MONTHS ENDED SEPTEMBER 30, 1996 1995 <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net Income 8,356 7,685 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED FROM OPERATING ACTIVITIES: Depreciation and amortization 2,441 1,955 Provision for possible loan losses 1,250 750 Loans originated for resale (33,181) (34,318) Proceeds from mortgage loan sales 33,192 34,305 Loss (gain) on sale of mortgages (11) 13 Other Real Estate Owned write-downs -- 149 Changes in assets and liabilities: Decrease (increase) in other assets (713) 388 Increase in other liabilities 2,516 5,978 TOTAL ADJUSTMENTS 5,494 9,220 NET CASH PROVIDED FROM OPERATING ACTIVITIES 13,850 16,905 CASH FLOWS FROM INVESTING ACTIVITIES: Net decrease in Interest Bearing Deposits 296 206 Proceeds from maturities of Securities Held to Maturity 117,599 33,246 Proceeds from maturities of Securities Available for Sale 4,565 349 Purchase of Securities Held to Maturity (166,120) (24,129) Purchase of FHLB Stock (3,369) (362) Net increase in Loans (41,440) (32,068) Proceeds from sale of Other Real Estate Owned 601 4,389 Investment in Bank Premises and Equipment (2,777) (2,552) NET CASH USED IN INVESTING ACTIVITIES (90,645) (20,921) CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in Deposits (15,762) 41,764 Net increase (decrease) in Federal Funds Purchased and Assets Sold Under Repurchase Agreements 34,782 (21,955) Net increase (decrease) in Federal Home Loan Bank Borrowings 40,000 (5,000) Net increase in Treasury Tax & Loan Notes 1,673 2,312 Net decrease in Capital Notes (9) (122) Dividends Paid (2,470) (1,735) Proceeds from stock issuance 397 280 NET CASH PROVIDED FROM FINANCING ACTIVITIES 58,611 15,544 NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (18,184) 11,528 CASH & CASH EQUIVALENTS AT BEGINNING OF THE YEAR 80,354 57,860 CASH AND CASH EQUIVALENTS AS OF SEPTEMBER 30, 62,170 69,388 </TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements, primarily consisting of normal recurring adjustments, have been included. Operating results for the three and nine month periods ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996 or any other interim period. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1995. RECENT ACCOUNTING DEVELOPMENTS On January 1, 1996, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 122, "Accounting For Mortgage Servicing Rights." SFAS No. 122 requires that a bank recognize the rights to service mortgage loans for others, regardless of the manner in which the servicing rights are acquired, as separate assets. In addition, capitalized mortgage servicing rights are required to be assessed for impairment based on the fair value of those rights. The Company expects the adoption of SFAS No. 122 will have a positive impact on income in 1996, the significance of which will depend on the volume of loans sold during the year. COMMITMENTS During 1995, management commenced a study to review its data processing environment. In connection therewith, a decision was made to outsource the data processing operations. In February, 1996, management executed an agreement with an independent third party for a data processing facilities management arrangement for a term of 70 months.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 SUMMARY For the nine months ended September 30, 1996, Independent Bank Corp. (the Company) recorded net income of $8,356,000 or $0.57 per share, compared with net income of $7,685,000, or $0.52 per share, for the same period last year. This improvement in 1996 is primarily due to increased net interest income, non interest income and lower operating expenses, as discussed below. Loan growth and increased purchases of investment securities, offset slightly by increased borrowings, contributed to an increase in net interest income of $963,000 to $33,390,000 in 1996 from $32,427,000 in 1995. The provision for loan losses increased to $1,250,000 for the first nine months of 1996 compared with $750,000 for the same period last year. For the first nine months, non-interest income increased 13% to $9,744,000 in 1996 compared with $8,610,000 in 1995. This is due primarily to an increase in service charges on deposits, the adoption of SFAS No. 122, and improved revenue from the Trust and Financial Services Division. Non-interest expense decreased by $175,000 to $28,929,000 in the first nine months of 1996 from $29,104,000 in 1995. The decline in foreclosure expenses, FDIC insurance premiums and other losses and charge offs, partially offset by increased facilities expenses and legal costs contributed to this improvement. The annualized consolidated returns on average equity and average assets for the first nine months of 1996 were 14.83% and 1.10%, respectively. This compares to annualized consolidated returns on average equity and average assets for the first nine months of 1995 of 15.30% and 1.09%, respectively. As of September 30, 1996, total assets amounted to $1,058.2 million, an increase of $70.6 million over the 1995 year end balance. Loans, net of unearned discount, increased $40.1 million, or 6.4%, since year end 1995 with growth in the real estate and installment loan categories. Deposit balances have decreased by $15.8 million since year end 1995. It should be noted that the 1995 year-end balances are inflated by a $17 million deposit made on the last day of the year which was subsequently withdrawn on the first business day of January, 1996. Loan demand and an increase in the investment portfolio were funded with lower cost borrowings and repurchase agreements. Nonperforming assets totaled $6.4 million as of September 30, 1996, $.5 million, or 8.2%, higher than the 1995 year end balance. Management believes that the level of these assets, which currently represent 0.60% of total assets, has reached an inherent base level, given the risks in the industry and in the environment in which the Company operates.
NET INTEREST INCOME The discussion of net interest income which follows is presented on a fully tax-equivalent basis. Net interest income for the nine months ended September 30, 1996, amounted to $33,692,000, an increase of $950,000, or 2.90%, from the comparable 1995 time frame. The Company's interest rate spread (the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities) decreased by 26 basis points. This is due to the Company's decision to expand the securities portfolio, financed by borrowings, repurchase agreements, and consumer certificates of deposit, to take advantage of a strong capital position. While these funding and investment actions increased net interest income, the net interest margin reflects the lower net interest spread on such transactions. The average balance of interest-earning assets for the first nine months of 1996 was $65.7 million, or 7.5%, higher than the comparable 1995 time frame, while the average balance of interest-bearing liabilities was $49.6 million, or 7.0%, higher. The Company's net interest margin (net interest income as a percent of average interest-earning assets) for the first nine months of 1996 was 4.74% as compared to 4.95% for the comparable 1995 time frame. Income from interest-earning assets amounted to $57.6 million for the nine months ended September 30, 1996, an increase of $3.4 million, or 6.2%, from the first nine months of 1995. The average balance of taxable investment securities increased more than $33.0 million as the Company selectively took advantage of attractive yields in the bond market. The average balance of non-taxable investment securities increased $1.6 million as the Company continued to invest in the local communities through tax-advantaged securities. The average balance of loans, net of unearned discount, increased $40 million, or 6.5%. Interest income is impacted by changes in market rates of interest due to variable and floating rate loans in the Company's portfolio. At September 30, 1996, loans having interest rates which adjust in accordance with changes in the Company's base lending rate or other market indices amounted to approximately $302.9 million, or 45.3% of loans, net of unearned discount. Interest income is also impacted by the amount of non-performing loans. The amount of interest due, but not recognized, on non-performing loans amounted to approximately $400,000 for the nine months ended September 30, 1996, compared to $459,000 for the nine months ended September 30, 1995. Average interest bearing deposits increased by $23.6 million, or 3.6%, for the first nine months of 1996 over the same period last year, primarily in the demand deposit and consumer certificate of deposit categories. For the nine months ended September 30, 1996, average borrowings were $26 million higher than the first nine months of 1995.
PROVISION FOR POSSIBLE LOAN LOSSES The provision for possible loan losses represents the charge to expense that is required to fund the reserve for possible loan losses. The level of the reserve for possible loan losses is determined by management of the Company based upon known and anticipated circumstances and conditions. An analysis of individual loans and the overall risk characteristics and size of the different loan portfolios is conducted on an ongoing basis. In addition, the Company considers industry trends, regional and national economic conditions, past estimates of possible losses as compared to actual losses, and historical loss patterns. This ongoing managerial assessment is reviewed periodically by third-party loan review consultants and annually by the Company's independent public accountants. Adjustments are reported in the earnings of the period in which they become known. For the nine months ended September 30, 1996, the provision for possible loan losses amounted to $1,250,000 as compared to $750,000 for the same period last year. For the first nine months of 1996, loans charged-off, net of recoveries of loans previously charged-off, amounted to $1.3 million as compared to $1.7 million for the comparable 1995 time frame. As of September 30, 1996, the ratio of the reserve for possible loan losses to loans, net of unearned discount, was 1.80%, as compared to the 1995 year-end level of 1.92%. The ratio of the reserve for possible loan losses to non-performing loans was 198.7% at September 30, 1996, lower than the 222.6% coverage recorded a year earlier. NON-INTEREST INCOME Non-interest income for the nine months ended September 30, 1996 was $9,744,000, an increase of $1,134,000, or 13.2%, from the comparable 1995 time period. Service charges on deposit accounts for the first nine months of 1996 showed a slight increase from the first nine months of 1995. Trust and Financial Services income was $309,000 higher due to an increase in funds under management and a strong securities market. Mortgage banking income increased approximately $607,000, or 37.0%, due to strong commercial and residential mortgage origination activity plus the impact of the adoption of SFAS No. 122. Other non-interest income increased approximately $125,000, or 14.0%. NON-INTEREST EXPENSES Non-interest expenses totaled $28,929,000 for the nine months ended September 30, 1996, a $175,000 decrease from the comparable 1995 period. Salaries and employee benefits decreased by $415,000, or 2.5%, due to the movement of these expenses to other expense as a result of the data processing facilities management agreement negotiated with a third party. Occupancy expenses increased by $133,000 to $2,479,000 for the nine months ended September 30, 1996, from $2,346,000 for the same period last year. The depreciation of facility improvements is the primary reason for this change. Equipment expenses for the first nine months of 1996 showed an increase of $220,000, or 13.5%, over the first nine months of 1995. This is due to higher equipment lease costs, primarily computer and communication upgrades to take advantage of technology advances, and furniture and fixture costs associated with the facility improvements.
Other non-interest expenses for the first nine months of 1996 declined $113,000, or 1.3%, from the first nine months of 1995. The Company recorded a decline in expenses incurred in connection with foreclosed properties and other losses and charge-offs in addition to a reduction in FDIC insurance premiums due to the FDIC's declaration of a premium moratorium for the first nine months of 1996. Partially offsetting these decreases were the allocation of the new data processing facilities management agreement and higher legal expenses. INCOME TAXES The Company records income tax expense pursuant to Statement of Financial Accounting Standards No. 109, "Accounting For Income Taxes". The Company evaluates the deferred tax asset and the valuation reserve on a quarterly basis. The Company's effective tax rates for the nine months ended September 30, 1996 and 1995 were 35.5% and 31.3% respectively. ASSET/LIABILITY MANAGEMENT The principal objective of the Company's asset/liability management strategy is to reduce the vulnerability of the Company to changes in interest rates. This is done by managing the volume of assets and liabilities maturing, or subject to repricing, and by adjusting rates in relation to market conditions to influence volumes and spreads. The effect of interest rate volatility on net interest income is minimized when the interest sensitivity gap (the difference between assets and liabilities that reprice within a given time period) is the smallest. Given the inherent uncertainty of future interest rates, Rockland Trust Company's (The Bank or Rockland) Asset/Liability Management Committee evaluates the interest sensitivity gap and executes strategies, which may include off-balance sheet activities, in an effort to minimize the Company's exposure to interest rate movements while providing adequate earnings in most plausible future interest rate environments. Beginning in 1992, Rockland entered into interest rate swap agreements as a hedge against stable or declining interest rates. As of September 30, 1996, the Bank had interest rate swap agreements with a total notional value of $90 million. These swaps were arranged through two international banking institutions and have initial maturities ranging from one to five years. The Bank receives fixed rate payments and pays a variable rate of interest tied to 3-month LIBOR. In May 1995, Rockland also purchased two 2-year interest rate caps with a total notional value of $70 million. The caps will pay the Bank the difference between LIBOR and the cap level if LIBOR exceeds the cap level at any of the quarterly reset dates. If LIBOR remains below the cap level, no payment is made to the bank.
LIQUIDITY AND CAPITAL Liquidity, as it pertains to the Company, is the ability to generate cash in the most economical way for the institution to meet its ongoing obligations to pay deposit withdrawals and to fund loan commitments. The Company's primary sources of funds are deposits, borrowings, and the amortization, prepayment, and maturities of loans and investments. A strong source of liquidity is the Company's core deposits, those deposits which management considers, based on experience, not likely to be withdrawn in the near term. The Company utilizes its extensive branch banking network to attract retail customers who provide a stable source of core deposits. The Company has established five $100 million repurchase agreements with major brokerage firms as potential sources of liquidity. On September 30, 1996 the Company had $38.9 million outstanding under such lines classified on the Balance Sheet as "Federal Funds Purchased and Assets Sold Under Repurchase Agreements". In addition, as a member of the Federal Home Loan Bank, Rockland has access to approximately $300 million of borrowing capacity. On September 30, 1996 the Company had $60 million outstanding under such lines classified on the Balance Sheet as "Federal Home Loan Bank Borrowings" with initial terms ranging from one to six months. The Company actively manages its liquidity position under the direction of the Bank's Asset/Liability Management Committee. Periodic review under formal policies and procedures is intended to ensure that the Company will maintain access to adequate levels of available funds. At September 30, 1996, the Company's liquidity position was well above policy guidelines. CAPITAL RESOURCES AND DIVIDENDS The Company and Rockland are subject to capital requirements established by the Federal Reserve Board and the FDIC, respectively. One key measure of capital adequacy is the risk-based ratio for which the regulatory agencies have established minimum requirements of 4.00% and 8.00% for Tier 1 risk-based capital and total risk-based capital, respectively. As of September 30, 1996, the Company had a Tier 1 risked-based capital ratio of 10.95% and a total risked-based capital ratio of 12.20%. Rockland had a Tier 1 risked-based capital ratio of 10.81% and a total risked-based capital ratio of 12.07% as of the same date. An additional capital requirement of a minimum 3.00% Tier 1 leverage capital is mandated by the regulatory agencies. As of September 30, 1996, the Company and the Bank had Tier 1 leverage capital ratios of 7.29% and 7.18%, respectively. In September, the Company's Board of Directors declared a cash dividend of $.06 per share to shareholders of record as of September 27, 1996. This dividend was paid on October 11, 1996. On an annualized basis, the dividend payout ratio amounted to 31.6% of the trailing four quarters earnings.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1996 SUMMARY The Company's net income was $3,024,000 for the third quarter of 1996, or $0.20 per share, compared with net income of $2,673,000, or $0.18 per share, for the third quarter of 1995. This increase is due to improved net interest income and non-interest income and a modest decrease in non-interest expenses partially offset by a higher effective tax rate. Net interest income improved by $671,000, or 6%, due to continuing loan growth and an increase in the investment portfolio. This growth was funded through increased deposits and higher borrowings. The provision for loan losses increased to $500,000 in the third quarter of 1996 from $250,000 in the third quarter of 1995. Non-interest income increased by $258,000, or 9.0%, due to an increase in the Trust and Financial Services Division fee income in addition to higher service charge revenue. Non-interest expenses decreased by $80,000 in the third quarter of 1996 from the same period last year, primarily a reduction in other losses and chargeoffs. The annualized consolidated returns on average equity and average assets for the third quarter of 1996 were 15.69% and 1.16%, respectively. This compares to annualized consolidated returns on average equity and average assets for the third quarter of 1995 of 15.44% and 1.11%, respectively. NET INTEREST INCOME The discussion of net interest income which follows is presented on a fully tax-equivalent basis. Net interest income for the three months ended September 30, 1996, amounted to $11,583,000, an increase of $655,000, or 6.0%, over the comparable 1995 time frame. The Company's interest rate spread decreased by 2 basis points primarily due to the Company's decision to expand the securities portfolio, financed by borrowings and repurchase agreements, to take advantage of a strong capital position. While these funding and investment actions increased net interest income and return on equity, the net interest margin and return on assets reflects the lower net interest spread on such transactions. The average balance of interest-earning assets for the third quarter of 1996 was $71.4 million, or 7.91% higher than the comparable 1995 time frame, while the average balance of interest-bearing liabilities for the third quarter of 1996 was $66.6 million, or 9.2%, higher than the third quarter of 1995. Income from interest-earning assets amounted to $19.8 million for the three months ended September 30, 1996, an increase of $1.2 million, or 6.3%, from the third quarter of 1995. The average balance of loans, net of unearned discount, increased $42 million, or 6.7%. Relative strength in commercial lending, installment lending and residential real estate supported this growth. The Company took advantage of favorable investment security yields, reflected in an increase in the average balance of investments of $51.9 million, or 20.2%. The lower yield on investments, as compared to loans, resulted in a reduction of the Company's net interest margin for the third quarter of 1996 to 4.77% from 4.85% for the comparable 1995 time frame. Interest on loans is also impacted by the amount of non-performing loans. For the three months ended September 30, 1996, the amount of interest due but not recognized
on nonperforming loans amounted to approximately $122,000, compared to $143,000 for the three months ended September 30, 1995. The increase in the third quarter 1996 average balance of interest-bearing liabilities over third quarter 1995 average balance was in the borrowing category. Interest-bearing deposits decreased $1.5 million. During this same period, average borrowings increased $68 million. NON-INTEREST INCOME Non-interest income for the three months ended September 30, 1996 increased by $258,000, or 9.0%, to $3,111,000 from $2,853,000 for the three months ended September 30, 1995. Service charges on deposit accounts for the third quarter of 1996 showed an increase of $67,000, or 4.8%, from the third quarter of 1995. Trust and Financial Services income increased by $109,000, or 18.4%, due to an increase in the volume of managed assets and an improved securities market. Mortgage banking income improved by $51,000, or 8.4%, to $659,000 in the third quarter of 1996 from $608,000 in the same quarter last year. NON-INTEREST EXPENSES Non-interest expenses totaled $9,474,000 for the quarter ended September 30, 1996 a $80,000, or 0.8%, decrease from the comparable 1995 period. Salaries and employee benefits decreased by $274,000, due to the movement of these expenses to other expense as a result of the data processing facilities management agreement. Other non-interest expenses increased by $161,000, or 6%, to $2,985,000 in the third quarter of 1996 from $2,824,000 in the third quarter of 1995. The increase in other expense from the allocation of the data processing facilities management agreement is partially offset by lower FDIC insurance premiums and a decrease in other losses and chargeoffs.
PART II. OTHER INFORMATION Item 1. Legal Proceedings - None Item 2. Changes in Securities - None Item 3. Defaults Upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders - None Item 5. Other Information The financial information detailed below is included hereafter in this report: Consolidated Statements of Changes in Stockholders' Equity Nine months ended September 30, 1996 and the year ended December 31, 1995 Consolidated Average Balance Sheet and Average Rate Data - Nine months ended September 30, 1996 and 1995. Item 6. Exhibits and Reports on Form 8-K The Company did not file any reports on Form 8-K during the quarter ended September 30, 1996.
INDEPENDENT BANK CORP. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY <TABLE> <CAPTION> UNREALIZED GAIN(LOSS) COMMON RETAINED INVESTMENTS STOCK SURPLUS EARNINGS AVAILABLE TOTAL <S> <C> <C> <C> <C> <C> Balance, January 1, 1995 $144 $43,381 $20,931 ($ 254) $64,202 Net Income 10,387 10,387 Dividends Declared (2,608) (2,608) Common Stock Sold Under Dividend Reinvestment & Stock Purchase Plan 1 352 353 Stock Option exercised - 10,000 shares 44 44 Unrealized Gain (Loss) on Investments Available for Sale 194 194 Balance, December 31, 1995 $145 $43,777 $28,710 ($ 60) $72,572 Net Income 8,356 8,356 Dividends Declared (2,620) (2,620) Common Stock Sold Under Dividend Reinvestment & Stock Purchase Plan 1 362 363 Stock Option exercised - 13,000 shares 34 34 Unrealized Gain (Loss) on Investments Available for Sale (175) (175) Balance, September 30, 1996 146 44,173 34,446 (235) 78,530 </TABLE>
INDEPENDENT BANK CORP. SUPPLEMENTAL FINANCIAL INFORMATION CONSOLIDATED AVERAGE BALANCE SHEET AND AVERAGE RATE DATA (Unaudited - in thousands) <TABLE> <CAPTION> AVERAGE INTEREST OUTSTANDING EARNED/ AVERAGE BALANCE PAID YIELD <S> <C> <C> <C> FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 1996 1996 Interest-Earning Assets Taxable Investment Securities $ 287,349 $13,775 6.39% Non-taxable Investment Securities 7,429 325 5.83% Loans, net of Unearned Discount 649,314 43,287 8.89% Federal Funds Sold and Assets Purchased Under Resale Agreements 4,091 168 5.48% Interest Bearing Deposits 171 7 5.46% Total Interest-Earning Assets 948,354 57,562 8.09% Cash and Due From Banks 46,633 Other Assets 15,533 Total Assets 1,010,520 Interest-Bearing Liabilities Savings and NOW Accounts 257,527 4,175 2.16% Money Market & Super NOW Accounts 105,688 2,206 2.78% Other Time Deposits 318,450 14,044 5.88% Federal Funds Purchased and Assets Sold Under Repurchase Agreements 25,991 1,071 5.49% Federal Home Loan Bank Borrowings 45,380 1,916 5.63% Treasury Tax and Loan Notes 3,185 102 4.27% Subordinated Capital Notes 4,836 356 9.82% Total Interest-Bearing Liabilities 761,057 23,870 4.18% Demand Deposits 160,157 Other Liabilities 14,168 Total Liabilities 935,382 Stockholders' Equity 75,138 Total Liabilities and Stockholders' Equity 1,010,520 Net Interest Income 33,692 Interest Rate Spread 3.91% Net Interest Margin 4.74% </TABLE> Interest income and yield are stated on a fully tax-equivalent basis. The total amount of the adjustment is $302 in 1996.
INDEPENDENT BANK CORP. SUPPLEMENTAL FINANCIAL INFORMATION CONSOLIDATED AVERAGE BALANCE SHEET AND AVERAGE RATE DATA (Unaudited - in thousands <TABLE> <CAPTION> AVERAGE INTEREST OUTSTANDING EARNED/ AVERAGE BALANCE PAID YIELD <S> <C> <C> <C> FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 1995 1995 Interest-Earning Assets Taxable Investment Securities $254,311 12,031 6.31% Non-taxable Investment Securities 5,795 272 6.26% Loans, net of Unearned Discount 609,427 41,328 9.04% Federal Funds Sold and Assets Purchased Under Resale Agreements 12,702 545 5.72% Interest Bearing Deposits 384 15 5.21% Total Interest-Earning Assets 882,619 54,191 8.19% Cash and Due From Banks 43,252 Other Assets 14,553 Total Assets 940,424 Interest-Bearing Liabilities Savings and NOW Accounts $264,412 $ 4,346 2.19% Money Market & Super NOW Accounts 111,816 2,284 2.72% Other Time Deposits 281,864 12,250 5.79% Federal Funds Purchased and Assets Sold Under Repurchase Agreements 18,786 849 6.03% Federal Home Loan Bank Borrowings 25,861 1,220 6.29% Treasury Tax and Loan Notes 3,839 139 4.83% Subordinated Capital Notes 4,917 361 9.79% Total Interest-Bearing Liabilities 711,495 21,449 4.02% Demand Deposits 150,578 Other Liabilities 11,401 Total Liabilities $873,474 Stockholders' Equity $ 66,950 Total Liabilities and Stockholders' Equity $940,424 Net Interest Income $ 32,742 Interest Rate Spread 4.17% Net Interest Margin 4.95% </TABLE> Interest income and yield are stated on a fully tax-equivalent basis. The total amount of adjustment is $315 in 1995.
INDEPENDENT BANK CORP. SUPPLEMENTAL FINANCIAL INFORMATION CONSOLIDATED AVERAGE BALANCE SHEET AND AVERAGE RATE DATA (Unaudited - in thousands) <TABLE> <CAPTION> AVERAGE INTEREST OUTSTANDING EARNED/ AVERAGE BALANCE PAID YIELD <S> <C> <C> <C> FOR THE QUARTER ENDED SEPTEMBER 30, 1996 1996 1996 Interest-Earning Assets Taxable Investment Securities 300,123 4,914 6.55% Non-taxable Investment Securities 7,849 115 5.86% Loans, net of Unearned Discount 661,296 14,712 8.90% Federal Funds Sold and Assets Purchased Under Resale Agreements 3,855 52 5.40% Interest Bearing Deposits 0 0 0 Total Interest-Earning Assets 973,123 19,793 8.14% Cash and Due From Banks 47,503 Other Assets 21,991 Total Assets 1,042,617 Interest-Bearing Liabilities Savings and NOW Accounts 259,473 1,410 2.17% Money Market & Super NOW Accounts 104,030 728 2.80% Other Time Deposits 319,186 4,548 5.70% Federal Funds Purchased and Assets Sold Under Repurchase Agreements 33,129 461 5.57% Federal Home Loan Bank Borrowings 64,162 901 5.62% Treasury Tax and Loan Notes 3,823 43 4.50% Subordinated Capital Notes 4,836 119 9.84% Total Interest-Bearing Liabilities 788,639 8,210 4.16% Demand Deposits 163,318 Other Liabilities 13,590 Total Liabilities 965,547 Stockholders' Equity 77,070 Total Liabilities and Stockholders' Equity 1,042,617 Net Interest Income 11,583 Interest Rate Spread 3.98% Net Interest Margin 4.77% </TABLE> Interest income and yield are stated on a fully tax-equivalent basis. The total adjustments are $96 for the third quarter 1996.
INDEPENDENT BANK CORP. SUPPLEMENTAL FINANCIAL INFORMATION CONSOLIDATED AVERAGE BALANCE SHEET AND AVERAGE RATE DATA (Unaudited - in thousands <TABLE> <CAPTION> AVERAGE INTEREST OUTSTANDING EARNED/ AVERAGE BALANCE PAID YIELD <S> <C> <C> <C> FOR THE QUARTER ENDED SEPTEMBER 30, 1995 1995 1995 Interest-Earning Assets Taxable Investment Securities $251,917 $ 4,026 6.39% Non-taxable Investment Securities 4,185 85 8.12% Loans, net of Unearned Discount 619,627 14,120 9.12% Federal Funds Sold and Assets Purchased Under Resale Agreements 25,742 378 5.87% Interest Bearing Deposits 294 5 6.80% Total Interest-Earning Assets 901,765 18,614 8.26% Cash and Due From Banks 44,932 Other Assets 14,333 Total Assets 961,030 Interest-Bearing Liabilities Savings and NOW Accounts $258,778 $ 1,426 2.20% Money Market & Super NOW Accounts 107,546 749 2.79% Other Time Deposits 317,878 4,893 6.16% Federal Funds Purchased and Assets Sold Under Repurchase Agreements 3,156 47 5.96% Federal Home Loan Bank Borrowings 25,041 394 6.29% Treasury Tax and Loan Notes 4,767 59 4.95% Subordinated Capital Notes 4,843 118 9.75% Total Interest-Bearing Liabilities 722,009 7,686 4.26% Demand Deposits 156,166 Other Liabilities 13,593 Total Liabilities 891,768 Stockholders' Equity 69,262 Total Liabilities and Stockholders' Equity 961,030 Net Interest Income 10,928 Interest Rate Spread 4.00% Net Interest Margin 4.85% </TABLE> Interest income and yield are stated on a fully tax-equivalent basis. The total amount of adjustment is $112 for the third quarter in 1995.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INDEPENDENT BANK CORP. (registrant) Date: November 14, 1996 /s/ John F. Spence, Jr. John F. Spence, Jr. Chairman of the Board and Chief Executive Officer Date: November 14, 1996 /s/ Richard J. Seaman Richard J. Seaman Chief Financial Officer and Treasurer