e10vk
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31, 2010
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File Number: 1-9047
Independent Bank
Corp.
(Exact name of registrant as
specified in its charter)
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Massachusetts
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04-2870273
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Office Address: 2036 Washington Street,
Hanover Massachusetts
Mailing Address: 288 Union Street,
Rockland, Massachusetts
(Address of principal
executive offices)
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02339
02370
(Zip Code)
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Registrants telephone number, including area code:
(781) 878-6100
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $.01 par value per share
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NASDAQ Global Select Market
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Preferred Stock Purchase Rights
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NASDAQ Global Select Market
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Securities
registered pursuant to section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act.
Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act.
Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding
12 months (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 þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to
submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the Exchange Act. (Check one):
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
The aggregate market value of the voting common stock held by
non-affiliates of the registrant, computed by reference to the
closing price of such stock on June 30, 2010, was
approximately $481,623,191.
Indicate the number of shares outstanding of each of the
registrants classes of common stock, as of the latest
practicable date. January 31,
2011 21,255,620
DOCUMENTS
INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by
reference and the Part of the
Form 10-K
(e.g., Part I, Part II, etc.) into which the document
is incorporated: (1) Any annual report to security holders;
(2) Any proxy or information statement; and (3) Any
prospectus filed pursuant to Rule 424(b) or (c) under
the Securities Act of 1933. The listed documents should be
clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended
December 24, 1980).
Portions of the Registrants definitive proxy statement for
its 2010 Annual Meeting of Stockholders are incorporated into
Part III,
Items 10-13
of this
Form 10-K.
INDEPENDENT
BANK CORP.
2010
ANNUAL REPORT ON
FORM 10-K
TABLE OF
CONTENTS
1
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
A number of the presentations and disclosures in this
Form 10-K,
including, without limitation, statements regarding the level of
allowance for loan losses, the rate of delinquencies and amounts
of charge-offs, and the rates of loan growth, and any statements
preceded by, followed by, or which include the words
may, could, should,
will, would, hope,
might, believe, expect,
anticipate, estimate,
intend, plan, assume or
similar expressions constitute forward-looking statements within
the meaning of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995.
These forward-looking statements, implicitly and explicitly,
include the assumptions underlying the statements and other
information with respect to the beliefs, plans, objectives,
goals, expectations, anticipations, estimates, intentions,
financial condition, results of operations, future performance
and business, of the Company including the Companys
expectations and estimates with respect to the Companys
revenues, expenses, earnings, return on average equity, return
on average assets, efficiency ratio, asset quality and other
financial data and capital and performance ratios.
Although the Company believes that the expectations reflected in
the Companys forward-looking statements are reasonable,
these statements involve risks and uncertainties that are
subject to change based on various important factors (some of
which are beyond the Companys control). The following
factors, among others, could cause the Companys financial
performance to differ materially from the Companys goals,
plans, objectives, intentions, expectations and other
forward-looking statements:
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a weakening in the United States economy in general and the
regional and local economies within the New England region and
Massachusetts, which could result in a deterioration of credit
quality, a change in the allowance for loan losses, or a reduced
demand for the Companys credit or fee-based products and
services;
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adverse changes in the local real estate market could result in
a deterioration of credit quality and an increase in the
allowance for loan loss, as most of the Companys loans are
concentrated in eastern Massachusetts and Cape Cod, and to a
lesser extent, Rhode Island, and a substantial portion of these
loans have real estate as collateral;
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the effects of, and changes in, trade, monetary and fiscal
policies and laws, including interest rate policies of the Board
of Governors of the Federal Reserve System, could affect the
Companys business environment or affect the Companys
operations;
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the effects of, any changes in, and any failure by the Company
to comply with tax laws generally and requirements of the
federal New Markets Tax Credit program in particular could
adversely affect the Companys tax provision and its
financial results;
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inflation, interest rate, market and monetary fluctuations could
reduce net interest income and could increase credit losses;
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adverse changes in asset quality could result in increasing
credit risk-related losses and expenses;
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changes in the deferred tax asset valuation allowance in future
periods may adversely affect financial results;
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competitive pressures could intensify and affect the
Companys profitability, including continued industry
consolidation, the increased financial services provided by
non-banks and banking reform;
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a deterioration in the conditions of the securities markets
could adversely affect the value or credit quality of the
Companys assets, the availability and terms of funding
necessary to meet the Companys liquidity needs, and the
Companys ability to originate loans and could lead to
impairment in the value of securities in the Companys
investment portfolios, having an adverse effect on the
Companys earnings;
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the potential need to adapt to changes in information technology
could adversely impact the Companys operations and require
increased capital spending;
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changes in consumer spending and savings habits could negatively
impact the Companys financial results;
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3
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acquisitions may not produce results at levels or within time
frames originally anticipated and may result in unforeseen
integration issues or impairment of goodwill
and/or other
intangibles;
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new laws and regulations regarding the financial services
industry including but not limited to, the
Dodd-Frank
Wall Street Reform & Consumer Protection Act, may have
significant effects on the financial services industry in
general,
and/or the
Company in particular, the exact nature and extent of which is
uncertain;
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changes in laws and regulations (including laws and regulations
concerning taxes, banking, securities and insurance) generally
applicable to the Companys business could adversely affect
the Companys operations; and
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changes in accounting policies, practices and standards, as may
be adopted by the regulatory agencies as well as the Public
Company Accounting Oversight Board, the Financial Accounting
Standards Board, and other accounting standard setters, could
negatively impact the Companys financial results.
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If one or more of the factors affecting the Companys
forward-looking information and statements proves incorrect,
then the Companys actual results, performance or
achievements could differ materially from those expressed in, or
implied by, forward-looking information and statements contained
in this
Form 10-K.
Therefore, the Company cautions you not to place undue reliance
on the Companys forward-looking information and statements.
The Company does not intend to update the Companys
forward-looking information and statements, whether written or
oral, to reflect change. All forward-looking statements
attributable to the Company are expressly qualified by these
cautionary statements.
4
PART I.
General
Independent Bank Corp. (the Company) is a state
chartered, federally registered bank holding company
headquartered in Rockland, Massachusetts that was incorporated
under Massachusetts law in 1985. The Company is the sole
stockholder of Rockland Trust Company (Rockland
or the Bank), a Massachusetts trust company
chartered in 1907. Rockland is a community-oriented commercial
bank. The community banking business is the Companys only
reportable operating segment. The community banking business is
managed as a single strategic unit and derives its revenues from
a wide range of banking services, including lending activities,
acceptance of demand, savings, and time deposits, and wealth
management. At December 31, 2010, the Company had total
assets of $4.7 billion, total deposits of
$3.6 billion, stockholders equity of
$436.5 million, and 919 full-time equivalent employees.
The Company is currently the sponsor of Independent Capital
Trust V (Trust V), a Delaware statutory
trust, and Slades Ferry Statutory Trust I
(Slades Ferry Trust I), a Connecticut
statutory trust, each of which was formed to issue trust
preferred securities. Trust V and Slades Ferry
Trust I are not included in the Companys consolidated
financial statements in accordance with the requirements of the
consolidation topic of the Financial Accounting Standards Board
(FASB) Accounting Standards Codification
(ASC).
Periodically, the Bank acts as Qualified Intermediary
(QI)
and/or
Exchange Accommodation Titleholder (EAT) in
connection with customers like-kind exchanges under
Section 1031 of the Internal Revenue Code through its
subsidiary Compass Exchange Advisors, LLC. The Internal Revenue
Service established a safe harbor procedure, Revenue
Procedure
2000-37,
that allows an EAT to hold title to property for up to
180 days. This Revenue Procedure also allows the customer
to: lend the EAT all of the funds needed to acquire the property
on a non-recourse basis, manage the property, and receive all of
the economic benefit of the property while title is held by the
EAT. Compass Exchange Advisors LLC may form various entities to
act as EATs and take title to customers property in
connection with the customers 1031 exchange. In each
transaction in which an entity owned by the Bank acts as EAT,
any funds borrowed are non-recourse to the EAT and Bank, no
economic investment is made in the property and the EAT derives
no profit or loss from the ownership or operation of the
property (other than its fees for services). Accordingly, any
property owned by an entity as EAT is not consolidated by the
Bank.
As of December 31, 2010, the Bank had the following
corporate subsidiaries, all of which were wholly-owned by the
Bank and included in the Companys consolidated financial
statements:
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Three Massachusetts security corporations, namely Rockland
Borrowing Collateral Securities Corp., Rockland Deposit
Collateral Securities Corp., and Taunton Avenue Securities
Corp., which hold securities, industrial development bonds, and
other qualifying assets;
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Rockland Trust Community Development Corporation, which has
two wholly-owned subsidiaries named Rockland
Trust Community Development LLC and Rockland Trust
Community Development Corporation II, and which also serves as
the manager of two Limited Liability Company subsidiaries
wholly-owned by the Bank named Rockland Trust Community
Development III LLC and Rockland Trust Community
Development IV LLC, all of which were all formed to qualify
as community development entities under federal New Markets Tax
Credit Program criteria;
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Rockland Trust Phoenix LLC, which was established to hold
other real estate owned acquired during loan workouts;
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Compass Exchange Advisors LLC which provides like-kind exchange
services pursuant to section 1031 of the Internal Revenue
Code; and
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Bright Rock Capital Management LLC, which was established to act
as a registered investment advisor under the Investment Advisors
Act of 1940.
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5
Market
Area and Competition
The Bank contends with considerable competition both in
generating loans and attracting deposits. The Banks
competition for generating loans is primarily from other
commercial banks, savings banks, credit unions, mortgage banking
companies, insurance companies, finance companies, and other
institutional lenders. Competitive factors considered for loan
generation include interest rates, terms offered, loan fees
charged, loan products offered, service provided, and geographic
locations.
In attracting deposits, the Banks primary competitors are
savings banks, commercial and co-operative banks, credit unions,
internet banks, as well as other non-bank institutions that
offer financial alternatives such as brokerage firms and
insurance companies. Competitive factors considered in
attracting and retaining deposits include deposit and investment
products and their respective rates of return, liquidity, and
risk, among other factors, such as convenient branch locations
and hours of operation, personalized customer service, online
access to accounts, and automated teller machines.
The Banks market area is attractive and entry into the
market by financial institutions previously not competing in the
market area may continue to occur which could impact the
Banks growth or profitability.
Lending
Activities
The Banks gross loan portfolio (loans before allowance for
loan losses) amounted to $3.6 billion on December 31,
2010, or 75.7% of total assets. The Bank classifies loans as
commercial, consumer real estate, or other consumer. Commercial
loans consist of commercial and industrial loans, commercial
real estate, commercial construction, and small business loans.
Commercial and industrial loans consist of loans with credit
needs in excess of $250,000 and revenue in excess of
$2.5 million, for working capital and other
business-related purposes and floor plan financing. Commercial
real estate loans are comprised of commercial mortgages that are
secured by non-residential properties, as well as mortgages for
construction loans on non-residential properties. Small business
loans, including real estate loans, consist primarily of loans
to businesses with commercial credit needs of less than or equal
to $250,000 and revenues of less than $2.5 million.
Consumer real estate consists of residential mortgages and home
equity loans and lines that are secured primarily by
owner-occupied residences and mortgages for the construction of
residential properties. Other consumer loans are mainly personal
loans and automobile loans.
The Banks borrowers consist of
small-to-medium
sized businesses and retail customers. The Banks market
area is generally comprised of eastern Massachusetts, including
Cape Cod, and to a lesser extent, Rhode Island. Substantially
all of the Banks commercial, consumer real estate, and
other consumer loan portfolios consist of loans made to
residents of and businesses located in the Banks market
area. The majority of the real estate loans in the Banks
loan portfolio are secured by properties located within this
market area.
Interest rates charged on loans may be fixed or variable and
vary with the degree of risk, loan term, underwriting and
servicing costs, loan amount, and the extent of other banking
relationships maintained with customers. Rates are further
subject to competitive pressures, the current interest rate
environment, availability of funds, and government regulations.
The Banks principal earning assets are its loans. Although
the Bank judges its borrowers to be creditworthy, the risk of
deterioration in borrowers abilities to repay their loans
in accordance with their existing loan agreements is inherent in
any lending function. Participating as a lender in the credit
market requires a strict underwriting and monitoring process to
minimize credit risk. This process requires substantial analysis
of the loan application, an evaluation of the customers
capacity to repay according to the loans contractual
terms, and an objective determination of the value of the
collateral. The Bank also utilizes the services of an
independent third-party to provide loan review services, which
consist of a variety of monitoring techniques performed after a
loan becomes part of the Banks portfolio.
The Banks Controlled Asset and Consumer Collections
departments are responsible for the management and resolution of
nonperforming loans. Nonperforming loans consist of nonaccrual
loans and loans that are more than 90 days past due but
still accruing interest. In the course of resolving
nonperforming loans, the Bank may choose to restructure the
contractual terms of certain loans. Terms may be modified to fit
the ability of the borrower to repay in
6
line with its current financial status. It is the Banks
policy to have any restructured loans which are on nonaccrual
status prior to being modified remain on nonaccrual status for
approximately six months before management considers its return
to accrual status. If the restructured loan is on accrual status
prior to being modified, it is reviewed to determine if the
modified loan should remain on accrual status.
Other Real Estate Owned (OREO) includes properties
controlled by the Bank. In order to facilitate the disposition
of OREO, the Bank may finance the purchase of such properties at
market rates if the borrower qualifies under the Banks
standard underwriting guidelines. The Bank had sixteen
properties held as OREO at December 31, 2010, with a net
realizable value totaling $7.3 million.
Origination of Loans Commercial and
industrial, commercial real estate, and construction loan
applications are obtained through existing customers,
solicitation by Bank personnel, referrals from current or past
customers, or walk-in customers. Small business loan
applications are typically originated by the Banks retail
staff, through a dedicated team of business officers, by
referrals from other areas of the Bank, referrals from current
or past customers, or through walk-in customers. Customers for
consumer real estate loans are referred to Mortgage Loan
Officers who will meet with the borrowers at the borrowers
convenience. Residential real estate loan applications primarily
result from referrals by real estate brokers, homebuilders, and
existing or walk-in customers. Mortgage Loan Officers are
compensated on a commission basis and provide convenient
origination services during banking and non-banking hours. Other
consumer loan applications are directly obtained through
existing or walk-in customers who have been made aware of the
Banks consumer loan services through advertising, direct
mail, and other media.
Loans are approved based upon a hierarchy of authority,
predicated upon the size of the loan. Levels within the
hierarchy of lending authorities range from individual lenders
to Executive Committee of the Board of Directors. In accordance
with governing banking statutes, Rockland is permitted, with
certain exceptions, to make loans and commitments to any one
borrower, including related entities, in the aggregate amount of
not more than 20% of the Banks stockholders equity,
which is the Banks legal lending limit, or
$97.0 million at December 31, 2010. Notwithstanding
the foregoing, the Bank has established a more restrictive limit
of not more than 75% of the Banks legal lending limit, or
$72.8 million at December 31, 2010, which may only be
exceeded with the approval of the Board of Directors. There were
no borrowers whose total indebtedness in aggregate exceeded the
Banks self-imposed restrictive limit. The Banks largest
relationship as of December 31, 2010 consisted of
thirty-three loans which aggregates to $41.9 million in
exposure.
Sale of Loans The Banks residential
mortgage loans are generally originated in compliance with
terms, conditions and documentation which permit the sale of
such loans to investors, such as the Federal Home Loan Mortgage
Corporation (FHLMC), Federal National Mortgage
Association (Fannie Mae), the Government National
Mortgage Association (GNMA), and other investors in
the secondary market. Loan sales in the secondary market provide
funds for additional lending and other banking activities. The
Bank sells the servicing on a majority of the sold loans for a
servicing released premium, simultaneous with the sale of the
loan. For the remainder of the sold loans for which the Company
retains the servicing, a mortgage servicing asset is recognized.
As part of its asset/liability management strategy, the Bank may
retain a portion of the adjustable rate and fixed rate
residential real estate loan originations for its portfolio.
During 2010, the Bank originated $418.7 million in
residential real estate loans of which $63.7 million were
retained in its portfolio, and comprised primarily of fifteen or
twenty year terms.
7
Below is a discussion of the loan categories in the
Companys portfolio. The following table shows the balance
of the loans, the percentage of the gross loan portfolio, and
the percentage of total interest income that loans generated, by
category, for the fiscal years indicated:
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% of Total Interest Income Generated
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As of
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% of Total
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For the Year Ended December 31,
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December 31, 2010
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Loans
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2010
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2009
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2008
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(Dollars in thousands)
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Commercial
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$
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2,429,517
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68.3
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%
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61.8
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%
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57.3
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%
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55.1
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%
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Consumer Real Estate
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1,057,389
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29.8
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%
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22.2
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%
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22.5
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%
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23.3
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%
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Other Consumer
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68,773
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1.9
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%
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3.4
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%
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5.1
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%
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7.5
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%
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Total
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$
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3,555,679
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100.0
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%
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Commercial Loans Commercial loans consist of
commercial and industrial loans, commercial real estate loans,
commercial construction loans and small business loans. The Bank
offers secured and unsecured commercial loans for business
purposes, including issuing letters of credit.
Commercial loans may be structured as term loans or as revolving
lines of credit including overdraft protection, credit cards,
automatic clearinghouse (ACH) exposure, owner and
non-owner occupied commercial mortgages and standby letters of
credit.
Commercial term loans generally have a repayment schedule of
five years or less and, although the Bank occasionally
originates some commercial term loans with interest rates which
float in accordance with a designated index rate, the majority
of commercial term loans have fixed rates of interest and are
collateralized by equipment, machinery or other corporate
assets. In addition, the Bank generally obtains personal
guarantees from the principals of the borrower for virtually all
of its commercial loans. At December 31, 2010, there were
$246.8 million of term loans in the commercial loan
portfolio.
The following pie chart shows the diversification of the
commercial and industrial portfolio as of December 31, 2010:
C&I
Loan Portfolio Composition as of
12/31/10
8
Collateral for commercial revolving lines of credit may consist
of accounts receivable, inventory or both, as well as other
business assets. Commercial revolving lines of credit generally
are reviewed on an annual basis and usually require substantial
repayment of principal during the course of a year. The vast
majority of these revolving lines of credit have variable rates
of interest. At December 31, 2010, there were
$256.1 million of revolving lines of credit in the
commercial loan portfolio.
The Banks standby letters of credit generally are secured,
have terms of not more than one year, and are reviewed for
renewal on an annualized basis. At December 31, 2010, the
Bank had $21.5 million of commercial and standby letters of
credit.
The Bank also provides automobile and, to a lesser extent, boat
and other vehicle floor plan financing. Floor plan loans are
secured by the automobiles, boats, or other vehicles, which
constitute the dealers inventory. Upon the sale of a floor
plan unit, the proceeds of the sale are applied to reduce the
loan balance. In the event a unit financed under a floor plan
line of credit remains in the dealers inventory for an
extended period, the Bank requires the dealer to pay-down the
outstanding balance associated with such unit. Contractors hired
by the Bank make unannounced periodic inspections of each dealer
to review the value and condition of the underlying collateral.
At December 31, 2010, there were $35.9 million in
floor plan loans, all of which have variable rates of interest.
Small business lending caters to all of the banking needs of
businesses with commercial credit requirements and revenues
typically less than or equal to $250,000 and $2.5 million,
respectively, and uses partially automated loan underwriting
capabilities. The small business team makes use of the
Banks authority as a preferred lender with the
U.S. Small Business Administration (SBA). At
December 31, 2010, there were $5.2 million of SBA
guaranteed loans in the small business loan portfolio.
The Banks commercial real estate portfolio, inclusive of
commercial construction, is the Banks largest loan type
concentration. This portfolio is well-diversified with loans
secured by a variety of property types, such as owner-occupied
and non-owner-occupied commercial, retail, office, industrial,
warehouse, industrial development bonds, and other special
purpose properties, such as hotels, motels, nursing homes,
restaurants, churches, recreational facilities, marinas, and
golf courses. Commercial real estate also includes loans secured
by certain residential-related property types including
multi-family apartment buildings, residential development tracts
and condominiums. The following pie chart shows the
diversification of the commercial real estate portfolio as of
December 31, 2010:
Commercial
Real Estate Portfolio by Property Type
as of 12/31/10
9
Although terms vary, commercial real estate loans may have
maturities of five years or less, or rate resets every five
years for longer duration loans. These loan may have
amortization periods of 20 to 25 years, with interest rates
that float in accordance with a designated index or that are
fixed during the origination process. It is the Banks
policy to obtain personal guarantees from the principals of the
borrower on commercial real estate loans and to obtain financial
statements at least annually from all actively managed
commercial and multi-family borrowers.
Commercial real estate lending entails additional risks as
compared to residential real estate lending. Commercial real
estate loans typically involve larger loan balances to single
borrowers or groups of related borrowers. Development of
commercial real estate projects also may be subject to numerous
land use and environmental issues. The payment experience on
such loans is typically dependent on the successful operation of
the real estate project, which can be significantly impacted by
supply and demand conditions within the markets for commercial,
retail, office, industrial/warehouse and multi-family tenancy.
Additionally, classified in the commercial real estate portfolio
are industrial developmental bonds. The Bank owns certain bonds
issued by various state agencies, municipalities and non-profit
organizations that it classifies as loans and not securities on
the basis that another entity (i.e. the Banks customer),
not the issuing agency is responsible for the payment to the
Bank of the principal and interest on the debt, credit
underwriting is based solely on the credit of the customer (and
guarantors, if any), the banking relationship is with the
customer and not the agency, there is no secondary market for
the bonds, and the bonds are not available for sale, but are
intended to be held by the bank until maturity. Therefore, the
Bank believes that such bonds are more appropriately
characterized as loans, rather than securities.
Construction loans are intended to finance the construction of
residential and commercial properties, including loans for the
acquisition and development of land or rehabilitation of
existing properties. Non-permanent construction loans generally
have terms of at least six months, but not more than two years.
They usually do not provide for amortization of the loan balance
during the construction term. The majority of the Banks
commercial construction loans have floating rates of interest
based upon the Rockland base rate or the Prime or London
interbank offered rate (LIBOR) which are published
daily in the Wall Street Journal.
Construction loans are generally considered to present a higher
degree of risk than permanent real estate loans and may be
affected by a variety of factors, such as adverse changes in
interest rates and the borrowers ability to control costs
and adhere to time schedules. Other construction-related risks
may include market risk, that is, the risk that
for-sale or for-lease units may or may
not be absorbed by the market within a developers
anticipated time-frame or at a developers anticipated
price. When the Company enters into a loan agreement with a
borrower on a construction loan, an interest reserve may be
included in the amount of the loan commitment to the borrower
and it allows the lender to periodically advance loan funds to
pay interest charges on the outstanding balance of the loan. The
interest is capitalized and added to the loan balance.
Management actively tracks and monitors these accounts. At
December 31, 2010 the amount of interest reserves relating
to construction loans was approximately $1.6 million.
Consumer
Real Estate Loans
The Banks consumer real estate loans consist of loans
secured by
one-to-four
family residential properties, construction loans and home
equity loans and lines.
Rockland originates both fixed-rate and adjustable-rate
residential real estate loans. The Bank will lend up to 97% of
the lesser of the appraised value of the residential property
securing the loan or the purchase price, and generally requires
borrowers to obtain private mortgage insurance when the amount
of the loan exceeds 80% of the value of the property. The rates
of these loans are typically competitive with market rates. The
Banks residential real estate loans are generally
originated only under terms, conditions and documentation which
permit sale in the secondary market. The Bank generally requires
title insurance protecting the priority of its mortgage lien, as
well as fire, extended coverage casualty and flood insurance,
when necessary, in order to protect the properties securing its
residential and other real estate loans. Independent appraisers
appraise properties securing all of the Banks first
mortgage real estate loans, as required by regulatory standards.
10
The Banks residential construction lending is related to
residential development within the Banks market area and
the portfolio amounted to $4.2 million at December 31,
2010. The Bank typically has focused its construction lending on
relatively small projects and has developed and maintains
relationships with developers and operative homebuilders in the
Plymouth, Norfolk, Barnstable, Bristol, Middlesex, and Worcester
Counties of Massachusetts, and, to a lesser extent, in the state
of Rhode Island.
Home equity loans and lines may be made as a fixed rate term
loan or under a variable rate revolving line of credit secured
by a first or second mortgage on the borrowers residence
or second home. At December 31, 2010, 45% of the home
equity loans were in first position and 55% of the loans were in
second position. At December 31, 2010, $183.4 million,
or 31.7%, of the home equity portfolio were term loans and
$395.9 million, or 68.3%, of the home equity portfolio was
comprised of revolving lines of credit. The Bank will originate
home equity loans and lines in an amount up to 80.0%, and at the
Banks discretion it may loan up to 89.9%, of the appraised value
or on-line valuation, reduced for any loans outstanding which
are secured by such collateral. Home equity loans and lines are
underwritten in accordance with the Banks loan policy,
which includes a combination of credit score,
loan-to-value
(LTV) ratio, employment history and
debt-to-income
ratio.
The Bank does supplement performance data with current Fair
Isaac Corporation (FICO) and LTV estimates. Current
FICO data is purchased and appended to all consumer loans on a
quarterly basis. In addition, automated valuation services and
broker opinions of value are used to supplement original value
data for the residential and home equity portfolios. Use of
re-score and re-value data enables the Bank to better understand
the current credit risk associated with these loans, but is not
the only factor relied upon in determining a borrowers
credit worthiness. The following table shows the weighted
average FICO scores and the weighted average combined
loan-to-value
ratio for the periods indicated below:
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As of December 31,
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2010
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2009
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Residential Portfolio
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FICO Score (re-scored)
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738
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740
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Combined Loan-to-Value (re-valued)
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64.0
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%
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67.0
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%
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Home Equity Portfolio
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FICO Score (re-scored)
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760
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760
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Combined Loan- to-Value (re-valued)
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55.0
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%
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61.0
|
%
|
The average FICO scores above for 2010 are based upon re-scores
available from November 2010 and actual score data for loans
booked between December 1 and December 31, the LTV ratios
are based on updated automated valuations as of
November 30. The 2009 LTV ratios are based upon re-score
data available as of January 2010.
Other Consumer Loans The Bank makes loans for
a wide variety of personal needs. Consumer loans primarily
consist of installment loans and overdraft protection.
The Banks consumer loans also include auto, unsecured
loans, loans secured by deposit accounts, loans to purchase
motorcycles, recreational vehicles, or boats. The lending policy
allows lending up to 80% of the purchase price of vehicles other
than automobiles, with terms of up to three years for
motorcycles and up to fifteen years for recreational vehicles.
The Banks installment loans consist primarily of auto
loans, which totaled $41.9 million, at December 31,
2010, or 1.2% of loans, a decrease from 2.3% of loans at
year-end 2009. Effective August 1, 2009 the Company chose
to exit the indirect automobile business and consequently no
longer originates auto loans on an indirect basis. Prior to
August 2009, a portion of the Banks automobile loans were
originated indirectly by a network of new and used automobile
dealers located within the Banks market area.
Investment
Activities
The Banks securities portfolio consists of
U.S. Treasury securities, agency mortgage-backed
securities, agency collateralized mortgage obligations, private
mortgage-backed securities, state, county, and municipal
securities, single issuer trust preferred securities issued by
banks, pooled trust preferred securities issued by banks
11
and insurers, equity securities held for the purpose of funding
supplemental executive retirement plan obligations, and equity
securities comprised of an investment in a community development
affordable housing mutual fund. The majority of these securities
are investment grade debt obligations with average lives of five
years or less. U.S. Treasury securities entail a lesser
degree of risk than loans made by the Bank by virtue of the
guarantees that back them, require less capital under risk-based
capital rules than non-insured or non-guaranteed mortgage loans,
are more liquid than individual mortgage loans, and may be used
to collateralize borrowings or other obligations of the Bank.
The Bank views its securities portfolio as a source of income
and liquidity. Interest and principal payments generated from
securities provide a source of liquidity to fund loans and meet
short-term cash needs. The Banks securities portfolio is
managed in accordance with the Rockland Trust Company
Investment Policy adopted by the Board of Directors. The Chief
Executive Officer or the Chief Financial Officer may make
investments with the approval of one additional member of the
Asset/Liability Management Committee, subject to limits on the
type, size and quality of all investments, which are specified
in the Investment Policy. The Banks Asset/Liability
Management Committee, or its appointee, is required to evaluate
any proposed purchase from the standpoint of overall
diversification of the portfolio. The Company reviews its
security portfolio to ensure collection of interest. If any
securities are deferring interest payments, the Company would
place securities on nonaccrual status and reverse accrued but
uncollected interest. At December 31, 2010, securities
totaled $587.8 million. Total securities generated interest
and dividends of 12.2%, 14.6%, and 14.2% of total interest
income for the fiscal years ended 2010, 2009 and 2008,
respectively.
Sources
of Funds
Deposits At December 31, 2010 total
deposits were $3.6 billion. Deposits obtained through
Rocklands branch banking network have traditionally been
the principal source of the Banks funds for use in lending
and for other general business purposes. The Bank has built a
stable base of in-market core deposits from consumers,
businesses, and municipalities located in eastern Massachusetts,
including Cape Cod. Rockland offers a range of demand deposits,
interest checking, money market accounts, savings accounts, and
time certificates of deposit. Interest rates on deposits are
based on factors that include loan demand, deposit maturities,
alternative costs of funds, and interest rates offered by
competing financial institutions in the Banks market area.
The Bank believes it has been able to attract and maintain
satisfactory levels of deposits based on the level of service it
provides to its customers, the convenience of its banking
locations, and its interest rates, that are generally
competitive with those of competing financial institutions.
Rockland Trust also participates in the Certificate of Deposit
Registry Service (CDARS) program, allowing the Bank
to provide easy access to multi-million dollar Federal Deposit
Insurance Corporation (FDIC) insurance protection on
Certificate of Deposit investments for consumers, businesses and
public entities. As of December 31, 2010, CDARS deposits
totaled $13.6 million. Rockland has a municipal banking
department that focuses on providing core depository services to
local municipalities. As of December 31, 2010, municipal
deposits totaled $481.8 million.
The Federal Governments Emergency Economic Stabilization
Act of 2008 (the EESA) introduced the Temporary
Liquidity Guarantee Program (TLGP) effective
November 2008. One of the TLGPs main components resulted
in an increase, of deposit insurance coverage from $100,000 to
$250,000, per depositor. The
Dodd-Frank
Act made the increase in the deposit insurance to $250,000
permanent. At December 31, 2010 there were
$1.3 billion in deposits with balances over $250,000.
Additionally, during 2010, amendments to the Federal Deposit
Insurance Act were enacted, providing unlimited insurance
coverage for noninterest-bearing transaction accounts beginning
December 31, 2010, through December 31, 2012. These
deposits amounted to $141.6 million at December 31,
2010. This coverage applies to all insured depository
institutions and there are no separate assessments applicable on
these covered accounts.
Rockland Trusts seventy branch locations are supplemented
by the Banks internet banking services as well as
automated teller machine (ATM) cards and debit cards
which may be used to conduct various banking transactions at
ATMs maintained at each of the Banks full-service offices
and five additional remote ATM locations. The ATM cards and
debit cards also allow customers access to a variety of national
and international ATM networks. The Bank recently added mobile
banking services giving customers the ability to use a variety
of mobile devices to check balances, track account activity,
search transactions, and set up alerts for text or
e-mail
messages for changes in their account. They can also transfer
funds between Rockland Trust accounts and identify
12
the nearest branch or ATM directly from their phone. A new
feature to the mobile banking suite is a capability called
mDeposit, which allows the Banks customers to deposit a
check into their account directly from their mobile device.
The chart below shows the categories of deposits at
December 31, 2010:
Borrowings As of December 31, 2010, total
borrowings were $565.4 million. Borrowings consist of
short-term and long-term obligations. Short-term borrowings may
consist of Federal Home Loan Bank of Boston (FHLBB)
advances, federal funds purchased, treasury tax and loan notes
and assets sold under repurchase agreements. The chart below
shows the categories of borrowings at December 31, 2010:
In 1994, Rockland became a member of the FHLBB. The primary
reason for FHLBB membership is to gain access to a reliable
source of wholesale funding, particularly term funding as a tool
to manage interest rate risk. At December 31, 2010, the
Bank had $302.4 million outstanding in FHLB borrowings with
initial maturities ranging from 3 months to 20 years.
In addition, the Bank had $370.4 million of borrowing
capacity remaining with the FHLB at December 31, 2010.
As a member of the FHLBB, the Bank is required to purchase stock
in the FHLBB. That stock amounted to $35.9 million at
December 31, 2010. During 2010 the FHLBB continued the
moratorium on excess stock repurchases that was put into effect
during 2008, as the FHLBBs board of directors have
continued to focus on building retained earnings while
delivering core solutions of liquidity and longer-term funding
to their members. As a result of these efforts the FHLBB was
able to restore a modest dividend as announced on
February 22, 2011.
13
In addition to borrowing from the FHLBB, the Company also has
access to other forms of borrowing, such as securities
repurchase agreements. In a security repurchase agreement
transaction, the Bank will generally sell a security, agreeing
to repurchase either the same or a substantially identical
security on a specified later date, at a price greater than the
original sales price. The difference in the sale price and
purchase price is the cost of the proceeds recorded as interest
expense. The securities underlying the agreements are delivered
to counterparties as security for the repurchase obligation.
Since the securities are treated as collateral and the agreement
stipulates that the borrower has an obligation to pay back the
cash in short order, the transaction does not meet the criteria
to be classified as a sale and is therefore considered a secured
borrowing transaction for accounting purposes. Payments on such
borrowings are interest only until the scheduled repurchase
date. Repurchase agreements represent a non-deposit funding
source for the Bank and the Bank is subject to the risk that the
purchaser may default at maturity and not return the securities
underlying the agreements. In order to minimize this potential
risk, the Bank either deals with established firms when entering
into these transactions or with customers whose agreements
stipulate that the securities underlying the agreement are not
delivered to the customer, instead they are held in segregated
safekeeping accounts by the Companys safekeeping agents.
At December 31, 2010, the Bank had $50.0 million and
$118.1 million of repurchase agreements with investment
brokerage firms and customers, respectively.
Also included in borrowings at December 31, 2010 were
$61.8 million of junior subordinated debentures, and
$30.0 million of subordinated debt. These instruments
provide long-term fixed rate funding as well as regulatory
capital benefits. The Bank has a line of credit with the FHLB
and FRB giving the Bank access to additional funds if necessary.
See Note 8, Borrowings within Notes to the
Consolidated Financial Statements included in Item 8 hereof
for more information regarding borrowings.
Wealth
Management
Investment Management The Rockland
Trust Investment Management Group provides investment
management and trust services to individuals, institutions,
small businesses, and charitable institutions throughout eastern
Massachusetts, including Cape Cod, and Rhode Island.
Accounts maintained by the Rockland Trust Investment
Management Group consist of managed and
non-managed accounts. Managed accounts
are those for which the Bank is responsible for administration
and investment management
and/or
investment advice. Non-managed accounts are those
for which the Bank acts solely as a custodian or directed
trustee. The Bank receives fees dependent upon the level and
type of service(s) provided. For the year ended
December 31, 2010, the Investment Management Group
generated gross fee revenues of $10.3 million. Total assets
under administration as of December 31, 2010, were
$1.6 billion, an increase of $295.8 million, or 23.2%,
from December 31, 2009. This increase is largely due to
strong sales results and general market appreciation.
The administration of trust and fiduciary accounts is monitored
by the Trust Committee of the Banks Board of
Directors. The Trust Committee has delegated administrative
responsibilities to three committees, one for investments, one
for administration, and one for operations, all of which are
comprised of Investment Management Group officers who meet not
less than monthly.
Additionally, during 2010, the Company established Bright Rock
Capital Management, LLC, (Bright Rock) a
wholly-owned subsidiary of Rockland Trust, to provide
institutional quality investment management services to the
institutional/intermediary marketplace. Bright Rock is a
registered investment advisor with the SEC and employs a
fundamentally based investment philosophy and a highly
disciplined investment management process. At December 31,
2010 Bright Rock had $103.6 million of assets under
administration.
Retail Wealth Management The Bank has an
agreement with LPL Financial (LPL) and its
affiliates and their insurance subsidiary LPL Insurance
Associates, Inc. to offer the sale of mutual fund shares, unit
investment trust shares, general securities, fixed and variable
annuities and life insurance. Registered representatives who are
both employed by the Bank and licensed and contracted with LPL
are onsite to offer these products to the Banks customer
base. The Bank also has an agreement with Savings Bank Life
Insurance of Massachusetts (SBLI) to enable
appropriately licensed Bank employees to offer SBLIs fixed
annuities and life insurance to the Banks customer base.
For the year ended December 31, 2010, the retail
investments and insurance group generated gross fee revenues of
$1.4 million.
14
Regulation
The following discussion sets forth certain of the material
elements of the regulatory framework applicable to bank holding
companies and their subsidiaries and provides certain specific
information relevant to the Company. To the extent that the
following information describes statutory and regulatory
provisions, it is qualified in its entirety by reference to the
particular statutory and regulatory provisions. A change in
applicable statutes, regulations or regulatory policy, may have
a material effect on the Companys business. The laws and
regulations governing the Company and the Bank generally have
been promulgated to protect depositors and not for the purpose
of protecting stockholders.
General The Company is registered as a bank
holding company under the Bank Holding Company Act of 1956
(BHCA), as amended, and as such is subject to
regulation by the Board of Governors of the Federal Reserve
System (Federal Reserve). Rockland is subject to
regulation and examination by the Commissioner of Banks of The
Commonwealth of Massachusetts (the Commissioner) and
the FDIC.
The Bank Holding Company Act BHCA prohibits
the Company from acquiring direct or indirect ownership or
control of more than 5% of any class of voting shares of any
bank, or increasing such ownership or control of any bank,
without prior approval of the Federal Reserve. The BHCA also
prohibits the Company from, with certain exceptions, acquiring
more than 5% of any class of voting shares of any company that
is not a bank and from engaging in any business other than
banking or managing or controlling banks.
Under the BHCA, the Federal Reserve is authorized to approve the
ownership by the Company of shares in any company, the
activities of which the Federal Reserve has determined to be so
closely related to banking or to managing or controlling banks
as to be a proper incident thereto. The Federal Reserve has, by
regulation, determined that some activities are closely related
to banking within the meaning of the BHCA. These activities
include, but are not limited to, operating a mortgage company,
finance company, credit card company, factoring company, trust
company or savings association; performing data processing
operations; providing some securities brokerage services; acting
as an investment or financial adviser; acting as an insurance
agent for types of credit-related insurance; engaging in
insurance underwriting under limited circumstances; leasing
personal property on a full-payout, non-operating basis;
providing tax planning and preparation services; operating a
collection agency and a credit bureau; providing consumer
financial counseling and courier services. The Federal Reserve
also has determined that other activities, including real estate
brokerage and syndication, land development, property management
and, except under limited circumstances, underwriting of life
insurance not related to credit transactions, are not closely
related to banking and are not a proper incident thereto.
Financial Services Modernization
Legislation In November 1999, the
Gramm-Leach-Bliley Act (GLB) was enacted. The GLB
repeals provisions of the Glass-Steagall Act which restricted
the affiliation of Federal Reserve member banks with firms
engaged principally in specified securities
activities, and which restricted officer, director, or employee
interlocks between a member bank and any company or person
primarily engaged in specified securities activities.
In addition, the GLB also contains provisions that expressly
preempt any state law restricting the establishment of financial
affiliations, primarily related to insurance. The general effect
of the law is to establish a comprehensive framework to permit
affiliations among commercial banks, insurance companies,
securities firms and other financial service providers, by
revising and expanding the BHCA framework to permit a holding
company to engage in a full range of financial activities
through a new entity known as a financial holding
company. Financial activities is broadly
defined to include not only banking, insurance and securities
activities, but also merchant banking and additional activities
that the Federal Reserve Board, in consultation with the
Secretary of the Treasury, determines to be financial in nature,
incidental to such financial activities or complementary
activities that do not pose a substantial risk to the safety and
soundness of depository institutions or the financial system
generally.
The GLB also permits national banks to engage in expanded
activities through the formation of financial subsidiaries. A
national bank may have a subsidiary engaged in any activity
authorized for national banks directly or any financial
activity, except for insurance underwriting, insurance
investments, real estate investment or development, or merchant
banking, which may only be conducted through a subsidiary of a
financial holding company. Financial activities include all
activities permitted under new sections of the BHCA or permitted
by regulation.
15
To the extent that the GLB permits banks, securities firms and
insurance companies to affiliate, the financial services
industry may experience further consolidation. The GLB is
intended to grant to community banks certain powers as a matter
of right that larger institutions have accumulated on an ad hoc
basis and which unitary savings and loan holding companies
already possess. Nevertheless, the GLB may have the result of
increasing the amount of competition that the Company faces from
larger institutions and other types of companies offering
financial products, many of which may have substantially more
financial resources than the Company.
Interstate Banking Pursuant to the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the
Interstate Banking Act), bank holding companies may
acquire banks in states other than their home state without
regard to the permissibility of such acquisitions under state
law, but subject to any state requirement that the bank has been
organized and operating for a minimum period of time, not to
exceed five years, and the requirement that the bank holding
company, after the proposed acquisition, controls no more than
10 percent of the total amount of deposits of insured
depository institutions in the United States and no more than
30 percent or such lesser or greater amount set by state
law of such deposits in that state.
Pursuant to Massachusetts law, no approval to acquire a banking
institution, acquire additional shares in a banking institution,
acquire substantially all the assets of a banking institution,
or merge or consolidate with another bank holding company, may
be given if the bank being acquired has been in existence for a
period less than three years or, as a result, the bank holding
company would control, in excess of 30%, of the total deposits
of all state and federally chartered banks in Massachusetts,
unless waived by the Commissioner. With the prior written
approval of the Commissioner, Massachusetts also permits the
establishment of de novo branches in Massachusetts to the full
extent permitted by the Interstate Banking Act, provided the
laws of the home state of such
out-of-state
bank expressly authorize, under conditions no more restrictive
than those of Massachusetts, Massachusetts banks to
establish and operate de novo branches in such state.
Capital Requirements The Federal Reserve has
adopted capital adequacy guidelines pursuant to which it
assesses the adequacy of capital in examining and supervising a
bank holding company and in analyzing applications to it under
the BHCA. The Federal Reserves capital adequacy guidelines
which generally require bank holding companies to maintain total
capital equal to 8% of total risk-weighted assets, with at least
one-half of that amount consisting of Tier 1, or core
capital, and up to one-half of that amount consisting of
Tier 2, or supplementary capital. Tier 1 capital for
bank holding companies generally consists of the sum of common
stockholders equity and perpetual preferred stock (subject
in the latter case to limitations on the kind and amount of such
stocks which may be included as Tier 1 capital), less net
unrealized gains and losses on available for sale securities and
on cash flow hedges, post retirement adjustments recorded in
accumulated other comprehensive income (AOCI), and
goodwill and other intangible assets required to be deducted
from capital. Tier 2 capital generally consists of
perpetual preferred stock which is not eligible to be included
as Tier 1 capital; hybrid capital instruments such as
perpetual debt and mandatory convertible debt securities, and
term subordinated debt and intermediate-term preferred stock;
and, subject to limitations, the allowance for loan losses.
Assets are adjusted under the risk-based guidelines to take into
account different risk characteristics, with the categories
ranging from 0% (requiring no additional capital), for assets
such as cash, up to 1250%, which is a
dollar-for-dollar
capital charge on certain assets such as securities that are not
eligible for the ratings based approach. The majority of assets
held by a bank holding company are risk-weighted at 100%,
including certain commercial real estate loans, commercial loans
and consumer loans. Single family residential first mortgage
loans which are not 90 days or more past due or
nonperforming and which have been made in accordance with
prudent underwriting standards are assigned a 50% level in the
risk-weighting system, as are certain privately-issued
mortgage-backed securities representing indirect ownership of
such loans and certain multi-family housing loans. Off-balance
sheet items also are adjusted to take into account certain risk
characteristics.
In addition to the risk-based capital requirements, the Federal
Reserve requires bank holding companies to maintain a minimum
leverage capital ratio of Tier 1 capital to total assets of
3.0%. Total assets for this purpose do not include goodwill and
any other intangible assets or investments that the Federal
Reserve determines should be deducted from Tier 1 capital.
The Federal Reserve has announced that the 3.0% Tier 1
leverage capital ratio requirement is the minimum for the
top-rated bank holding companies without any supervisory,
financial or operational weaknesses or deficiencies or those
which are not experiencing or anticipating significant growth.
Other
16
bank holding companies (including the Company) are expected to
maintain Tier 1 leverage capital ratios of at least 4.0% to
5.0% or more, depending on their overall condition.
The Company currently is in compliance with the above-described
regulatory capital requirements. At December 31, 2010, the
Company had Tier 1 capital and total capital equal to
10.28% and 12.37% of total risk-weighted adjusted assets,
respectively, and Tier 1 leverage capital equal to 8.19% of
total average assets. As of such date, the Bank complied with
the applicable bank federal regulatory risked based capital
requirements, with Tier 1 capital and total capital equal
to 9.84% and 11.92% of total risk-weighted assets, respectively,
and Tier 1 leverage capital equal to 7.83% of total average
assets.
The FDIC has promulgated regulations and adopted a statement of
policy regarding the capital adequacy of state-chartered banks,
which, like the Bank, are not members of the Federal Reserve
System. These requirements are substantially similar to those
adopted by the Federal Reserve regarding bank holding companies,
as described above. The FDICs capital regulations
establish a minimum 3.0% Tier 1 leverage capital to total
assets requirement for the most highly-rated state-chartered,
non-member banks, with an additional cushion of at least 100 to
200 basis points for all other state-chartered, non-member
banks, which effectively will increase the minimum Tier 1
leverage capital ratio for such banks to 4.0% or 5.0% or more.
Beginning in 2011, the Federal Reserve will limit the inclusion
of restricted core capital elements, which include trust
preferred securities, in tier 1 capital of bank holding
companies. The inclusion of these elements will be limited to an
amount equal to one-third of the sum of unrestricted core
capital less goodwill net of deferred tax liabilities. Based on
these limits, the Company does not anticipate excluding its
trust preferred securities when calculating tier 1 capital.
Each federal banking agency has broad powers to implement a
system of prompt corrective action to resolve problems of
financial institutions that it regulates which are not
adequately capitalized. The minimum levels are defined as
follows:
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Bank
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Holding Company
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Tier 1
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Tier 1
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Total
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Tier 1
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Leverage
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Total
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Tier 1
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Leverage
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Risk-Based
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Risk-Based
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Capital
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Risk-Based
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Risk-Based
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Capital
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Category
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Ratio
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Ratio
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Ratio
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Ratio
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Ratio
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Ratio
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Well Capitalized
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³
10% and
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³
6% and
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³
5%
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n/a
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|
|
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Adequately Capitalized
|
|
³
8% and
|
|
³
4% and
|
|
|
³
4%
|
*
|
|
|
³
8
|
% and
|
|
|
|
|
|
|
³
4
|
% and
|
|
|
³
4
|
%
|
Undercapitalized
|
|
< 8% or
|
|
< 4% or
|
|
|
< 4%
|
*
|
|
|
< 8
|
% or
|
|
|
|
|
|
|
< 4
|
% or
|
|
|
< 4
|
%
|
Significantly Undercapitalized
|
|
< 6% or
|
|
< 3% or
|
|
|
< 3%
|
|
|
|
n/a
|
|
|
|
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
* |
|
3% for institutions with a rating of one under the regulatory
CAMELS or related rating system that are not anticipating or
experiencing significant growth and have well-diversified risk. |
A bank is considered critically undercapitalized if it has a
ratio of tangible equity to total assets that is equal to or
less than 2.0%. At December 31, 2010 the Companys
tangible equity ratio was 6.47%. The Companys tangible
equity ratio proforma to include the tax deductibility of
goodwill was 6.89%. As of December 31, 2010, the Bank was
deemed a well-capitalized institution as defined by
federal banking agencies.
Commitments to Affiliated Institutions Under
Federal Reserve policy, the Company is expected to act as a
source of financial strength to the Bank and to commit resources
to support the Bank. This support may be required at times when
the Company may not be able to provide such support. Similarly,
under the cross-guarantee provisions of the Federal Deposit
Insurance Act, in the event of a loss suffered or anticipated by
the FDIC either as a result of default of a banking
or thrift subsidiary of a bank/financial holding company such as
the Company or related to FDIC assistance provided to a
subsidiary in danger of default the other banking
subsidiaries of such bank/financial holding company may be
assessed for the FDICs loss, subject to certain exceptions.
Limitations on Acquisitions of Common
Stock The federal Change in Bank Control Act
(CBCA) prohibits a person or group of persons from
acquiring control of a bank holding company or bank unless the
appropriate federal bank regulator has been given 60 days
prior written notice of such proposed acquisition and within
that time period such regulator has not issued a notice
disapproving the proposed acquisition or extending for up to
another
17
30 days the period during which such a disapproval may be
issued. The acquisition of 25% or more of any class of voting
securities constitutes the acquisition of control under the
CBCA. In addition, under a rebuttal presumption established
under the CBCA regulations, the acquisition of 10% or more of a
class of voting stock of a bank holding company or a FDIC
insured bank, with a class of securities registered under or
subject to the requirements of Section 12 of the Securities
Exchange Act of 1934 would, under the circumstances set forth in
the presumption, constitute the acquisition of control.
Any company would be required to obtain the approval of the
Federal Reserve under the BHCA before acquiring 25% (5% in the
case of an acquirer that is a bank holding company) or more of
the outstanding common stock of, or such lesser number of shares
as constitute control over the company. Such approval would be
contingent upon, among other things, the acquirer registering as
a bank holding company, divesting all impermissible holdings and
ceasing any activities not permissible for a bank holding
company. The Company does not own more than 5% voting stock in
any banking institution other than Rockland.
FDIC Deposit Insurance The majority of
Rocklands deposit accounts are insured to the maximum
extent permitted by law by the Deposit Insurance Fund
(DIF) which is administered by the FDIC. The FDIC
offers insurance coverage on deposits up to the federally
insured limit of $250,000. Additionally, during 2010, amendments
to the Federal Deposit Insurance Act were enacted, providing
unlimited insurance coverage for noninterest-bearing transaction
accounts beginning December 31, 2010, for a two year
period. This coverage applies to all insured depository
institutions and there is no separate assessments applicable on
these covered accounts.
The Bank currently pays deposit insurance premiums to the FDIC
based upon a combination of financial ratios and supervisory
factors. There are four established risk categories under the
new assessment rules and accordingly the Bank has initial base
assessment rates ranging from 12 to 16 basis points of the
deposit assessment base, as defined by the FDIC. Effective April
2011, the assessment base will be defined as average
consolidated total assets minus average tangible equity.
Additionally, as a result of these changes, the FDIC has
proposed a change to the initial base assessment rates which
will potentially range from 5 to 9 basis points of the
newly defined assessment base.
During 2009, the FDIC voted to amend its assessment regulations
to require all institutions to prepay the estimated risk-based
assessments for the fourth quarter of 2009 (which would have
been due in March 2010) and for all of 2010, 2011, and 2012. As
a result, the Bank was required to pay $20.4 million on
December 30, 2009, of which approximately
$13.1 million and $17.9 million reflected prepaid
balances as of December 31, 2010 and 2009, respectively.
Community Reinvestment Act
(CRA) Pursuant to the CRA and similar
provisions of Massachusetts law, regulatory authorities review
the performance of the Company and the Bank in meeting the
credit needs of the communities served by the Bank. The
applicable regulatory authorities consider compliance with this
law in connection with applications for, among other things,
approval of new branches, branch relocations, engaging in
certain new financial activities under the Gramm-Leach-Bliley
Act of 1999 (GLB), and acquisitions of banks and
bank holding companies. The FDIC and the Massachusetts Division
of Banks has assigned the Bank a CRA rating of outstanding as of
the latest examination.
Bank Secrecy Act The Bank Secrecy Act requires
financial institutions to keep records and file reports that are
determined to have a high degree of usefulness in criminal, tax
and regulatory matters, and to implement counter-money
laundering programs and compliance procedures.
USA Patriot Act of 2001 The Patriot Act
strengthens U.S. law enforcements and the
intelligence communities abilities to work cohesively to
combat terrorism on a variety of fronts. The impact of the
Patriot Act on financial institutions of all kinds is
significant and wide ranging. The Patriot Act contains sweeping
anti-money laundering and financial transparency laws and
imposes various regulations, including standards for verifying
client identification at account opening, and rules to promote
cooperation among financial institutions, regulators and law
enforcement entities in identifying parties that may be involved
in terrorism or money laundering.
Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley
Act (SOX) of 2002 includes very specific disclosure
requirements and corporate governance rules, and the Securities
and Exchange Commission (SEC) and securities
exchanges have adopted extensive disclosure, corporate
governance and other related rules, due to SOX. The
18
Company has incurred additional expenses in complying with the
provisions of SOX and the resulting regulations. As the SEC
provides any new requirements under SOX, management will review
those rules, comply as required and may incur more expenses.
However, management does not expect that such compliance will
have a material impact on the results of operation or financial
condition.
Regulation W Transactions between a bank
and its affiliates are quantitatively and
qualitatively restricted under the Federal Reserve Act. The
Federal Deposit Insurance Act applies Sections 23A and 23B
to insured nonmember banks in the same manner and to the same
extent as if they were members of the Federal Reserve System.
The Federal Reserve Board has also issued Regulation W,
which codifies prior regulations under Sections 23A and 23B
of the Federal Reserve Act and interpretative guidance with
respect to affiliate transactions. Regulation W
incorporates the exemption from the affiliate transaction rules,
but expands the exemption to cover the purchase of any type of
loan or extension of credit from an affiliate. Affiliates of a
bank include, among other entities, the banks holding
company and companies that are under common control with the
bank. The Company is considered to be an affiliate of the Bank.
In general, subject to certain specified exemptions, a bank and
its subsidiaries are limited in their ability to engage in
covered transactions with affiliates:
|
|
|
|
|
to an amount equal to 10% of the banks capital and
surplus, in the case of covered transactions with any one
affiliate; and
|
|
|
|
to an amount equal to 20% of the banks capital and
surplus, in the case of covered transactions with all affiliates.
|
In addition, a bank and its subsidiaries may engage in covered
transactions and other specified transactions only on terms and
under circumstances that are substantially the same, or at least
as favorable to the bank or its subsidiary, as those prevailing
at the time for comparable transactions with nonaffiliated
companies. A covered transaction includes:
|
|
|
|
|
a loan or extension of credit to an affiliate;
|
|
|
|
a purchase of, or an investment in, securities issued by an
affiliate;
|
|
|
|
a purchase of assets from an affiliate, with some exceptions;
|
|
|
|
the acceptance of securities issued by an affiliate as
collateral for a loan or extension of credit to any
party; and
|
|
|
|
the issuance of a guarantee, acceptance or letter of credit on
behalf of an affiliate.
|
In addition, under Regulation W:
|
|
|
|
|
a bank and its subsidiaries may not purchase a low-quality asset
from an affiliate;
|
|
|
|
covered transactions and other specified transactions between a
bank or its subsidiaries and an affiliate must be on terms and
conditions that are consistent with safe and sound banking
practices; and
|
|
|
|
with some exceptions, each loan or extension of credit by a bank
to an affiliate must be secured by collateral with a market
value ranging from 100% to 130%, depending on the type of
collateral, or the amount of the loan or extension of credit.
|
Regulation W generally excludes all non-bank and
non-savings association subsidiaries of banks from treatment as
affiliates, except to the extent that the Federal Reserve Board
decides to treat these subsidiaries as affiliates.
Emergency Economic Stabilization Act of
2008 In response to the financial crisis
affecting the banking and financial markets, in October 2008,
the EESA was signed into law. Pursuant to the EESA,
the U.S. Treasury (the Treasury) has the
authority to, among other things, purchase up to
$700 billion of mortgages, mortgage-backed securities and
certain other financial instruments from financial institutions
for the purpose of stabilizing and providing liquidity to the
U.S. financial markets.
The Treasury was authorized to purchase equity stakes in
U.S. financial institutions. Under this program, known as
the Capital Purchase Program (CPP), from the
$700 billion authorized by the EESA, the Treasury made
19
$250 billion of capital available to U.S. financial
institutions through the purchase of preferred stock or
subordinated debentures by the Treasury. In conjunction with the
purchase of preferred stock from publicly-held financial
institutions, the Treasury also received warrants to purchase
common stock with an aggregate market price equal to 15% of the
total amount of the preferred investment. Participating
financial institutions are required to adopt the Treasurys
standards for executive compensation and corporate governance
for the period during which the Treasury holds equity issued
under the CPP and are restricted from increasing dividends to
common shareholders or repurchasing common stock for three years
without the consent of the Treasury.
The Company had initially elected to participate in the CPP in
January of 2009 and subsequently returned the funds in April of
2009. For further details, see Note 11 Capital
Purchase Program within Notes to the Consolidated
Financial Statements included in Item 8 hereof.
New Markets Tax Credit Program The New Markets
Tax Credit Program was created in December 2000 under federal
law to provide federal tax incentives to induce private-sector,
market-driven investment in businesses and real estate
development projects located in low-income urban and rural
communities across the nation. The New Markets Tax Credit
Program is part of the United States Department of the Treasury
Community Development Financial Institutions Fund. The New
Markets Tax Credit Program enables investors to acquire federal
tax credits by making equity investments for a period of at
least seven years in qualified community development entities
which have been awarded tax credit allocation authority by, and
entered into an Allocation Agreement with, the United States
Treasury. Community development entities must use equity
investments to make loans to, or other investments in, qualified
businesses and individuals in low-income communities in
accordance with New Markets Tax Credit Program criteria.
Investors receive an overall tax credit equal to 39% of their
total equity investment, credited at a rate of 5% in each of the
first 3 years and 6% in each of the final 4 years.
More information on the New Markets Tax Credit Program may be
obtained at www.cdfifund.gov.
The United States Treasury has honored the Banks qualified
community development entity subsidiaries on multiple occasions
with awards of tax credit allocation authority pursuant to the
New Markets Tax Credit Program. For further details about the
Banks New Markets Tax Credit Program, see the paragraph
entitled Income Taxes included in Item 7 below.
Dodd-Frank Wall Street Reform and Consumer Protection
Act During 2010, Congress enacted the
Dodd-Frank
Wall Street Reform and Consumer Protection Act (the
Dodd-Frank Act). This new law will significantly
change the current bank regulatory structure and affect the
lending, deposit, investment, trading and operating activities
of financial institutions and their holding companies. The
Dodd-Frank Act requires various federal agencies to adopt a
broad range of new implementing rules and regulations, and to
prepare numerous studies and reports for Congress. The federal
agencies are given significant discretion in drafting the
implementing rules and regulations, and consequently, many of
the details and much of the impact of the Dodd-Frank Act may not
be known for many months or years.
Effective July 1, 2011, the Dodd-Frank Act eliminates the
federal prohibitions on paying interest on demand deposits, thus
allowing businesses to have interest bearing checking accounts.
Depending on competitive responses, this significant change to
existing law could have an adverse impact on the Companys
interest expense.
The Dodd-Frank Act also broadens the base for Federal Deposit
Insurance Corporation insurance assessments. Assessments will
now be based on the average consolidated total assets less
tangible equity capital of a financial institution. The
Dodd-Frank Act also permanently increases the maximum amount of
deposit insurance for banks, savings institutions and credit
unions to $250,000 per depositor, retroactive to January 1,
2009, and non-interest bearing transaction accounts have
unlimited deposit insurance through December 31, 2012.
The Dodd-Frank Act requires publicly traded companies to give
stockholders a non-binding vote on executive compensation and
so-called golden parachute payments, and authorizes
the Securities and Exchange Commission to promulgate rules that
would allow stockholders to nominate their own candidates using
a companys proxy materials. The legislation also directs
the Federal Reserve Board to promulgate rules prohibiting
excessive compensation paid to bank holding company executives,
regardless of whether the company is publicly traded or not.
20
The Dodd-Frank Act creates a new Consumer Financial Protection
Bureau with broad powers to supervise and enforce consumer
protection laws. The Consumer Financial Protection Bureau has
broad rule-making authority for a wide range of consumer
protection laws that apply to all banks and savings
institutions, including the authority to prohibit unfair,
deceptive or abusive acts and practices. Banks and savings
institutions with $10 billion or less in assets will
continue to be examined for compliance with consumer laws by
their primary bank regulators.
The Company is actively reviewing the provisions of the
Dodd-Frank Act and assessing its probable impact on its
business, financial condition, and results of operations.
However, the ultimate effect of the Dodd-Frank Act on the
financial services industry in general, and on the Company in
particular, is uncertain at this time.
Regulation E Federal Reserve Board
Regulation E governs electronic fund transfers and provides
a basic framework that establishes the rights, liabilities, and
responsibilities of participants in electronic fund transfer
systems such as automated teller machine transfers, telephone
bill-payment services,
point-of-sale
terminal transfers in stores, and preauthorized transfers from
or to a consumers account (such as direct deposit and
social security payments). The term electronic fund
transfer generally refers to a transaction initiated
through an electronic terminal, telephone, computer, or magnetic
tape that instructs a financial institution either to credit or
to debit a consumers asset account. Regulation E
describes the disclosures which financial institutions are
required to make to consumers who engage in electronic fund
transfers and generally limits a consumers liability for
unauthorized electronic fund transfers, such as those arising
from loss or theft of an access device, to $50 for consumers who
notify their bank in a timely manner.
Employees As of December 31, 2010, the
Bank had 919 full time equivalent employees. None of the
Companys employees are represented by a labor union and
management considers relations with its employees to be good.
Miscellaneous The Bank is subject to certain
restrictions on loans to the Company, investments in the stock
or securities thereof, the taking of such stock or securities as
collateral for loans to any borrower, and the issuance of a
guarantee or letter of credit on behalf of the Company. The Bank
also is subject to certain restrictions on most types of
transactions with the Company, requiring that the terms of such
transactions be substantially equivalent to terms of similar
transactions with non-affiliated firms. In addition, under state
law, there are certain conditions for and restrictions on the
distribution of dividends to the Company by the Bank.
The regulatory information referenced briefly summarizes certain
material statutes and regulations affecting the Company and the
Bank and is qualified in its entirety by reference to the
particular statutory and regulatory provisions.
Statistical
Disclosure by Bank Holding Companies
For information regarding borrowings, see Note 8,
Borrowings within Notes to the Consolidated
Financial Statements included in Item 8 hereof, which
includes information regarding short-term borrowings.
For information regarding the Companys business and
operations, see Selected Financial Data in Item 6
hereof, Managements Discussion and Analysis of
Financial Condition and Results of Operations in Item 7
hereof and the Consolidated Financial Statements in
Item 8 hereof and incorporated by reference herein.
Securities
and Exchange Commission Availability of Filings on Company Web
Site
Under Section 13 and 15(d) of the Securities Exchange Act
of 1934 the Company must file periodic and current reports with
the SEC. The public may read and copy any materials filed with
the SEC at the SECs Public Reference Room at
100 F Street N.E. Washington, DC 20549. The public may
obtain information on the operation of the Public Reference Room
by calling the Public Reference Room at
1-800-SEC-0330.
The Company electronically files the following reports with the
SEC:
Form 10-K
(Annual Report),
Form 10-Q
(Quarterly Report),
Form 11-K
(Annual Report for Employees Savings, Profit Sharing and
Stock Ownership Plan),
Form 8-K
(Report of Unscheduled Material Events),
Forms S-4,
S-3 and
8-A
(Registration Statements), and Form DEF 14A (Proxy
Statement). The Company may file additional forms. The SEC
maintains an internet site that contains reports, proxy and
information statements, and other information regarding issuers
that file electronically with the SEC, at www.sec.gov, in
which all forms filed electronically may be accessed.
Additionally, the Companys annual
21
report on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after the Company electronically files
such material with, or furnishes to, the SEC and additional
shareholder information are available free of charge on the
Companys website: www.RocklandTrust.com (within the
investor relations tab). Information contained on the
Companys website and the SEC website is not incorporated
by reference into this
Form 10-K.
The Company has included the web address and the SEC website
address only as inactive textual references and does not intend
them to be active links to our website or the SEC website. The
Companys Code of Ethics and other Corporate Governance
documents are also available on the Companys website in
the Investor Relations section of the website.
22
Changes in interest rates could adversely impact the
Companys financial condition and results of
operations. The Companys ability to make a
profit, like that of most financial institutions, substantially
depends upon its net interest income, which is the difference
between the interest income earned on interest earning assets,
such as loans and investment securities, and the interest
expense paid on interest-bearing liabilities, such as deposits
and borrowings. However, certain assets and liabilities may
react differently to changes in market interest rates. Further,
interest rates on some types of assets and liabilities may
fluctuate prior to changes in broader market interest rates,
while rates on other types of assets may lag behind.
Additionally, some assets such as adjustable-rate mortgages have
features, such as rate caps and floors, which restrict changes
in their interest rates.
Factors such as inflation, recession, unemployment, money
supply, global disorder, instability in domestic and foreign
financial markets, and other factors beyond the Companys
control, may affect interest rates. Changes in market interest
rates will also affect the level of voluntary prepayments on
loans and the receipt of payments on mortgage-backed securities,
resulting in the receipt of proceeds that may have to be
reinvested at a lower rate than the loan or mortgage-backed
security being prepaid.
The state of the financial and credit markets may severely
impact the global and domestic economies and may lead to a
significantly tighter environment in terms of liquidity and
availability of credit. Economic growth may slow down and the
national economy may experience additional recession periods.
Market disruption, government, and central bank policy actions
intended to counteract the effects of recession, changes in
investor expectations regarding compensation for market risk,
credit risk and liquidity risk and changing economic data could
continue to have dramatic effects on both the volatility of and
the magnitude of the directional movements of interest rates.
Although the Company pursues an asset/liability management
strategy designed to control its risk from changes in interest
rates, changes in market interest rates can have a material
adverse effect on the Companys profitability.
If the Company has higher than anticipated loan losses than
it has modeled, its earnings could materially
decrease. The Companys loan customers may
not repay loans according to their terms, and the collateral
securing the payment of loans may be insufficient to assure
repayment. The Company may therefore experience significant
credit losses which could have a material adverse effect on its
operating results and capital ratios. The Company makes various
assumptions and judgments about the collectability of its loan
portfolio, including the creditworthiness of borrowers and the
value of the real estate and other assets serving as collateral
for the repayment of loans. In determining the amount of the
allowance for loan losses, the Company relies on its experience
and its evaluation of economic conditions. If its assumptions
prove to be incorrect, its current allowance for loan losses may
not be sufficient to cover losses inherent in its loan portfolio
and an adjustment may be necessary to allow for different
economic conditions or adverse developments in its loan
portfolio. Consequently, a problem with one or more loans could
require the Company to significantly increase the level of its
provision for loan losses. In addition, federal and state
regulators periodically review the Companys allowance for
loan losses and may require it to increase its provision for
loan losses or recognize further loan charge-offs. Material
additions to the allowance would materially decrease the
Companys net income.
A significant amount of the Companys loans are
concentrated in Massachusetts, and adverse conditions in this
area could negatively impact its
operations. Substantially all of the loans the
Company originates are secured by properties located in, or are
made to businesses which operate in Massachusetts. Because of
the current concentration of the Companys loan origination
activities in Massachusetts, in the event of continued adverse
economic conditions, including, but not limited to, increased
unemployment, continued downward pressure on the value of
residential and commercial real estate, political or business
developments, that may affect Massachusetts and the ability of
property owners and businesses in Massachusetts to make payments
of principal and interest on the underlying loans, the Company
would likely experience higher rates of loss and delinquency on
its loans than if its loans were more geographically
diversified, which could have an adverse effect on its results
of operations or financial condition.
The Company operates in a highly regulated environment and
may be adversely impacted by changes in law and
regulations. The Company is subject to extensive
regulation, supervision and examination. See
Regulation in Item 1 hereof, Business.
Any change in the laws or regulations and failure by the
Company to comply with applicable law and regulation, or a
change in regulators supervisory policies or examination
procedures, whether
23
by the Massachusetts Commissioner of Banks, the FDIC, the
Federal Reserve Board, other state or federal regulators, the
United States Congress, or the Massachusetts legislature could
have a material adverse effect on the Companys business,
financial condition, results of operations, and cash flows.
The Company has strong competition within its market area
which may limit the Companys growth and
profitability. The Company faces significant
competition both in attracting deposits and in the origination
of loans. See Market Area and Competition in
Item 1 hereof, Business. Commercial banks, credit
unions, savings banks, savings and loan associations operating
in the Companys primary market area have historically
provided most of its competition for deposits. Competition for
the origination of real estate and other loans come from other
commercial banks, thrift institutions, credit unions, insurance
companies, finance companies, other institutional lenders and
mortgage companies.
The success of the Company is dependent on hiring and
retaining certain key personnel. The
Companys performance is largely dependent on the talents
and efforts of highly skilled individuals. The Company relies on
key personnel to manage and operate its business, including
major revenue generating functions such as loan and deposit
generation. The loss of key staff may adversely affect the
Companys ability to maintain and manage these functions
effectively, which could negatively affect the Companys
revenues. In addition, loss of key personnel could result in
increased recruiting and hiring expenses, which could cause a
decrease in the Companys net income. The Companys
continued ability to compete effectively depends on its ability
to attract new employees and to retain and motivate its existing
employees.
The Companys business strategy of growth in part
through acquisitions could have an impact on its earnings and
results of operations that may negatively impact the value of
the Companys stock. In recent years, the
Company has focused, in part, on growth through acquisitions.
From time to time in the ordinary course of business, the
Company engages in preliminary discussions with potential
acquisition targets. The consummation of any future acquisitions
may dilute stockholder value.
Although the Companys business strategy emphasizes organic
expansion combined with acquisitions, there can be no assurance
that, in the future, the Company will successfully identify
suitable acquisition candidates, complete acquisitions and
successfully integrate acquired operations into our existing
operations or expand into new markets. There can be no assurance
that acquisitions will not have an adverse effect upon the
Companys operating results while the operations of the
acquired business are being integrated into the Companys
operations. In addition, once integrated, acquired operations
may not achieve levels of profitability comparable to those
achieved by the Companys existing operations, or otherwise
perform as expected. Further, transaction-related expenses may
adversely affect the Companys earnings. These adverse
effects on the Companys earnings and results of operations
may have a negative impact on the value of the Companys
stock.
Difficult market conditions have adversely affected the
industry in which the Company operates. Dramatic
declines in the housing market with falling real estate values
and increasing foreclosures and unemployment, have negatively
impacted the credit performance of mortgage loans and resulted
in significant write-downs of asset values by financial
institutions, including government-sponsored entities as well as
major commercial and investment banks. These write-downs,
initially of mortgage-backed securities but spreading to credit
default swaps and other derivative and cash securities, in turn,
have caused many financial institutions to seek additional
capital, to merge with larger and stronger institutions and, in
some cases to fail. Reflecting concern about the stability of
the financial markets generally and the strength of
counterparties, many lenders and institutional investors have
reduced or ceased providing funding to borrowers, including to
other financial institutions. This market turmoil and tightening
of credit have led to an increased level of commercial and
consumer delinquencies, lack of consumer confidence, increased
market volatility and widespread reduction of business activity
generally. The resulting economic pressure on consumers and lack
of confidence in the financial markets could materially affect
the Companys business, financial condition and results of
operations. A worsening of these conditions would likely
exacerbate the adverse effects of these difficult market
conditions on the Company and others in the financial services
industry. In particular, the Company may face the following
risks in connection with these events:
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The Company may expect to face increased regulation of its
industry. Compliance with such regulation may increase its costs
and limit its ability to pursue business opportunities.
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24
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Market developments may affect customer confidence levels and
may cause increases in loan delinquencies and default rates,
which the Company expects could impact its loan charge-offs and
provision for loan losses.
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Continued illiquidity in the capital markets for certain types
of investment securities may cause additional credit related
other-than-temporary
impairment charges to the Companys income statement.
|
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The Companys ability to borrow from other financial
institutions or to access the debt or equity capital markets on
favorable terms or at all could be adversely affected by further
disruptions in the capital markets or other events, including
actions by rating agencies and deteriorating investor
expectations.
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Competition in the industry could intensify as a result of the
increasing consolidation of financial services companies in
connection with current market conditions.
|
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The Company may be required to pay significantly higher FDIC
premiums because market developments have significantly depleted
the insurance fund of the FDIC and reduced the ratio of reserves
to insured deposits.
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It may become necessary or advisable for the Company, due to
changes in regulatory requirements, change in market conditions,
or for other reasons, to hold more capital or to alter the forms
of capital it currently maintains.
|
The Companys securities portfolio performance in
difficult market conditions could have adverse effects on the
Companys results of operations. Under
Generally Accepted Accounting Principles, the Company is
required to review the Companys investment portfolio
periodically for the presence of
other-than-temporary
impairment of its securities, taking into consideration current
market conditions, the extent and nature of changes in fair
value, issuer rating changes and trends, volatility of earnings,
current analysts evaluations, the Companys ability
and intent to hold investments until a recovery of fair value,
as well as other factors. Adverse developments with respect to
one or more of the foregoing factors may require the Company to
deem particular securities to be
other-than-temporarily
impaired, with the credit related portion of the reduction in
the value recognized as a charge to the Companys earnings.
Recent market volatility has made it extremely difficult to
value certain of the Companys securities. Subsequent
valuations, in light of factors prevailing at that time, may
result in significant changes in the values of these securities
in future periods. Any of these factors could require the
Company to recognize further impairments in the value of the
Companys securities portfolio, which may have an adverse
effect on the Companys results of operations in future
periods.
Impairment of goodwill
and/or
intangible assets could require charges to earnings, which could
result in a negative impact on our results of
operations. Goodwill arises when a business is
purchased for an amount greater than the net fair value of its
assets. The Bank has recognized goodwill as an asset on the
balance sheet in connection with several recent acquisitions
(see Note 6 Goodwill and Identifiable Intangible
Assets within Notes to the Consolidated Financial
Statements included in Item 8 hereof). When an intangible
asset is determined to have an indefinite useful life, it shall
not be amortized, and instead is evaluated for impairment. The
Company evaluates goodwill and intangibles for impairment at
least annually by comparing fair value to carrying amount.
Although the Company determined that goodwill and other
intangible assets were not impaired during 2010, a significant
and sustained decline in the Companys stock price and
market capitalization, a significant decline in the Companys
expected future cash flows, a significant adverse change in the
business climate, slower growth rates or other factors could
result in impairment of goodwill or other intangible assets. If
the Company were to conclude that a future write-down of the
goodwill or intangible assets is necessary, then the Company
would record the appropriate charge to earnings, which could be
materially adverse to the results of operations and financial
position.
Deterioration in the Federal Home Loan Bank Bostons
(FHLBB) capital might restrict the FHLBBs
ability to meet the funding needs of its members, cause a
suspension of its dividend, and cause its stock to be determined
to be impaired. Significant components of the
Banks liquidity needs are met through its access to
funding pursuant to its membership in the FHLBB. The FHLBB is a
cooperative that provides services to its member banking
institutions. The primary reason for joining the FHLBB is to
obtain funding from the FHLBB. The purchase of stock in the
FHLBB is a requirement for a member to gain access to funding.
Any deterioration in the FHLBBs
25
performance may affect the Companys access to funding and/or
require the Company to deem the required investment in FHLBB
stock to be impaired.
Reductions in the value of the Companys deferred tax
assets could affect earnings adversely. A
deferred tax asset is created by the tax effect of the
differences between an assets book value and its tax
basis. The Company assesses the deferred tax assets periodically
to determine the likelihood of the Companys ability to
realize their benefits. These assessments consider the
performance of the associated business and its ability to
generate future taxable income. If the information available to
the Company at the time of assessment indicates there is a
greater than 50% chance that the Company will not realize the
deferred tax asset benefit, the Company is required to establish
a valuation allowance for it and reduce its future tax assets to
the amount the Company believes could be realized in future tax
returns. Recording such a valuation allowance could have a
material adverse effect on the results of operations or
financial position.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None
At December 31, 2010, the Bank conducted its business from
its main office located at 288 Union Street, Rockland,
Massachusetts and sixty-nine banking offices located within
Barnstable, Bristol, Middlesex, Norfolk, Plymouth and Worcester
Counties in eastern Massachusetts. In addition to its main
office, the Bank leased fifty-two of its branches and owned the
remaining seventeen branches. In addition to these branch
locations, the Bank had five remote ATM locations all of which
were leased.
The Banks executive administration offices are located in
Hanover, while the remaining administrative and operations
locations are housed in several different campuses.
Additionally, there are a number of sales offices not associated
with a branch location throughout the Banks footprint.
For additional information regarding the Companys premises
and equipment and lease obligations, see Notes 5,
Bank Premises and Equipment and 18,
Commitments and Contingencies, respectively,
within Notes to Consolidated Financial Statements included
in Item 8 hereof.
|
|
Item 3.
|
Legal
Proceedings
|
The Company is not involved in any legal proceedings other than
routine legal proceedings occurring in the ordinary course of
business. Management believes that those routine legal
proceedings involve, in the aggregate, amounts that are
immaterial to the Companys financial condition and results
of operations.
26
PART II
|
|
Item 5.
|
Market
for Independent Bank Corp.s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities
|
(a.) Independent Bank Corp.s common stock trades on the
National Association of Securities Dealers Automated Quotation
System (NASDAQ) under the symbol INDB. The Company
declared cash dividends of $0.72 per share in 2010 and in 2009.
The ratio of dividends paid to earnings in 2010 and 2009 was
37.9% and 82.8%, respectively.
Payment of dividends by the Company on its common stock is
subject to various regulatory restrictions and guidelines. Since
substantially all of the funds available for the payment of
dividends are derived from the Bank, future dividends will
depend on the earnings of the Bank, its financial condition, its
need for funds, applicable governmental policies and
regulations, and other such matters as the Board of Directors
deem appropriate. Management believes that the Bank will
continue to generate adequate earnings to continue to pay common
dividends on a quarterly basis.
On January 9, 2009, as part of the CPP established by the
U.S. Department of Treasury (Treasury) under
the EESA of 2008, the Company entered into a Letter Agreement
with the Treasury pursuant to which the Company issued and sold
to the Treasury 78,158 shares of the Companys Fixed
Rate Cumulative Perpetual Preferred Stock, Series C, par
value $0.01 per share, having a liquidation preference of $1,000
per share and a ten-year warrant to purchase up to
481,664 shares of the Companys common stock, par
value $0.01 per share.
Subsequently, on April 22, 2009 the Company repaid with
regulatory approval, the preferred stock issued to the Treasury
pursuant to the Capital Purchase Program. As a result, during
the second quarter of 2009 the Company recorded a
$4.4 million non-cash deemed dividend charged to earnings,
amounting to $0.22 per diluted share, associated with the
repayment of the preferred stock and an additional preferred
stock dividend of $141,000 for the second quarter of 2009. The
Company and the Bank remained well capitalized following this
event. The Company also repurchased the common stock warrant
issued to the Treasury for $2.2 million, the cost of which
was recorded as a reduction in capital during 2009, in
accordance with the United States Generally Accepted Accounting
Principles (U.S. GAAP).
On April 10, 2009 the Company completed its acquisition of
Ben Franklin, the parent of Benjamin Franklin Bank. The
transaction qualified as a tax-free reorganization for federal
income tax purposes, and former Ben Franklin shareholders
received 0.59 shares of the Companys common stock for
each share of Ben Franklin common stock which they owned. Under
the terms of the merger, cash was issued in lieu of fractional
shares. Based upon the Companys $18.27 per share closing
price on April 9, 2009, the transaction was valued at
$10.7793 per share of Ben Franklin common stock or approximately
$84.5 million in the aggregate. As a result of the
acquisition, the Companys outstanding shares increased by
4,624,948 shares.
The following schedule summarizes the closing price range of
common stock and the cash dividends paid for the fiscal years
2010 and 2009:
Price
Range of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
High
|
|
|
Low
|
|
|
Dividend
|
|
|
4th Quarter
|
|
$
|
28.09
|
|
|
$
|
22.35
|
|
|
$
|
0.18
|
|
3rd Quarter
|
|
|
25.55
|
|
|
|
20.91
|
|
|
|
0.18
|
|
2nd Quarter
|
|
|
28.09
|
|
|
|
23.21
|
|
|
|
0.18
|
|
1st Quarter
|
|
|
26.76
|
|
|
|
21.00
|
|
|
|
0.18
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
High
|
|
|
Low
|
|
|
Dividend
|
|
|
4th Quarter
|
|
$
|
22.80
|
|
|
$
|
20.06
|
|
|
$
|
0.18
|
|
3rd Quarter
|
|
|
24.34
|
|
|
|
19.19
|
|
|
|
0.18
|
|
2nd Quarter
|
|
|
21.75
|
|
|
|
14.93
|
|
|
|
0.18
|
|
1st Quarter
|
|
|
26.26
|
|
|
|
10.94
|
|
|
|
0.18
|
|
As of December 31, 2010 there were 21,220,801 shares
of common stock outstanding which were held by approximately
2,751 holders of record. The closing price of the Companys
stock on December 31, 2010 was $27.05. The number of record
holders may not reflect the number of persons or entities
holding stock in nominee name through banks, brokerage firms,
and other nominees.
The information required by S-K Item 201(d) is incorporated
by reference from Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters hereof.
28
Comparative
Stock Performance Graph
The stock performance graph below and associated table compare
the cumulative total shareholder return of the Companys
common stock from December 31, 2005 to December 31,
2010 with the cumulative total return of the NASDAQ Composite
Index (U.S. Companies) and the SNL Bank NASDAQ Index. The
lines in the graph and the numbers in the table below represent
monthly index levels derived from compounded daily returns that
include reinvestment or retention of all dividends. If the
monthly interval, based on the last day of a fiscal year, was
not a trading day, the preceding trading day was used. The index
value for all of the series was set to 100.00 on
December 31, 2005 (which assumes that $100.00 was invested
in each of the series on December 31, 2005).
Independent
Bank Corp.
Total Return Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ending
|
Index
|
|
12/31/05
|
|
12/31/06
|
|
12/31/07
|
|
12/31/08
|
|
12/31/09
|
|
12/31/10
|
|
Independent Bank Corp.
|
|
|
100.00
|
|
|
|
128.80
|
|
|
|
99.52
|
|
|
|
98.23
|
|
|
|
81.31
|
|
|
|
108.54
|
|
NASDAQ Composite
|
|
|
100.00
|
|
|
|
110.39
|
|
|
|
122.15
|
|
|
|
73.32
|
|
|
|
106.57
|
|
|
|
125.91
|
|
SNL Bank NASDAQ
|
|
|
100.00
|
|
|
|
112.27
|
|
|
|
88.14
|
|
|
|
64.01
|
|
|
|
51.93
|
|
|
|
61.27
|
|
Source: SNL Financial LC
(b.) Not applicable
(c.) Not applicable
29
|
|
Item 6.
|
Selected
Financial Data
|
The selected consolidated financial and other data of the
Company set forth below does not purport to be complete and
should be read in conjunction with, and is qualified in its
entirety by, the more detailed information, including the
Consolidated Financial Statements and related notes, appearing
elsewhere herein.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the Years Ended December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
|
|
|
(Dollars in thousands, except per share data)
|
|
|
|
FINANCIAL CONDITION DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
$
|
377,457
|
|
|
$
|
508,650
|
|
|
$
|
575,688
|
|
|
$
|
427,998
|
|
|
$
|
395,378
|
|
Securities held to maturity
|
|
|
202,732
|
|
|
|
93,410
|
|
|
|
32,789
|
|
|
|
45,265
|
|
|
|
76,747
|
|
Loans
|
|
|
3,555,679
|
|
|
|
3,395,515
|
|
|
|
2,652,536
|
|
|
|
2,031,824
|
|
|
|
2,013,050
|
|
Allowance for loan losses
|
|
|
46,255
|
|
|
|
42,361
|
|
|
|
37,049
|
|
|
|
26,831
|
|
|
|
26,815
|
|
Goodwill and core deposit intangibles
|
|
|
141,956
|
|
|
|
143,730
|
|
|
|
125,710
|
|
|
|
60,411
|
|
|
|
56,535
|
|
Total assets
|
|
|
4,695,738
|
|
|
|
4,482,021
|
|
|
|
3,628,469
|
|
|
|
2,768,413
|
|
|
|
2,828,919
|
|
Total deposits
|
|
|
3,627,783
|
|
|
|
3,375,294
|
|
|
|
2,579,080
|
|
|
|
2,026,610
|
|
|
|
2,090,344
|
|
Total borrowings
|
|
|
565,434
|
|
|
|
647,397
|
|
|
|
695,317
|
|
|
|
504,344
|
|
|
|
493,649
|
|
Stockholders equity
|
|
|
436,472
|
|
|
|
412,649
|
|
|
|
305,274
|
|
|
|
220,465
|
|
|
|
229,783
|
|
Non-performing loans
|
|
|
23,108
|
|
|
|
36,183
|
|
|
|
26,933
|
|
|
|
7,644
|
|
|
|
6,979
|
|
Non-performing assets
|
|
|
31,493
|
|
|
|
41,245
|
|
|
|
29,883
|
|
|
|
8,325
|
|
|
|
7,169
|
|
OPERATING DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
202,724
|
|
|
$
|
202,689
|
|
|
$
|
175,440
|
|
|
$
|
158,524
|
|
|
$
|
166,298
|
|
Interest expense
|
|
|
38,763
|
|
|
|
51,995
|
|
|
|
58,926
|
|
|
|
63,555
|
|
|
|
65,038
|
|
Net interest income
|
|
|
163,961
|
|
|
|
150,694
|
|
|
|
116,514
|
|
|
|
94,969
|
|
|
|
101,260
|
|
Provision for loan losses
|
|
|
18,655
|
|
|
|
17,335
|
|
|
|
10,888
|
|
|
|
3,130
|
|
|
|
2,335
|
|
Non-interest income
|
|
|
46,906
|
|
|
|
38,192
|
|
|
|
29,032
|
|
|
|
33,265
|
|
|
|
28,039
|
|
Non-interest expenses
|
|
|
139,745
|
|
|
|
141,815
|
|
|
|
104,143
|
|
|
|
87,932
|
|
|
|
79,354
|
|
Net income
|
|
|
40,240
|
|
|
|
22,989
|
|
|
|
23,964
|
|
|
|
28,381
|
|
|
|
32,851
|
|
Preferred stock dividend
|
|
|
|
|
|
|
5,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to the common shareholder
|
|
|
40,240
|
|
|
|
17,291
|
|
|
|
23,964
|
|
|
|
28,381
|
|
|
|
32,851
|
|
PER SHARE DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income basic
|
|
$
|
1.90
|
|
|
$
|
0.88
|
|
|
$
|
1.53
|
|
|
$
|
2.02
|
|
|
$
|
2.20
|
|
Net income diluted
|
|
|
1.90
|
|
|
|
0.88
|
|
|
|
1.52
|
|
|
|
2.00
|
|
|
|
2.17
|
|
Cash dividends declared
|
|
|
0.72
|
|
|
|
0.72
|
|
|
|
0.72
|
|
|
|
0.68
|
|
|
|
0.64
|
|
Book value(1)
|
|
|
20.57
|
|
|
|
19.58
|
|
|
|
18.75
|
|
|
|
16.04
|
|
|
|
15.65
|
|
OPERATING RATIOS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
0.88
|
%
|
|
|
0.40
|
%
|
|
|
0.73
|
%
|
|
|
1.05
|
%
|
|
|
1.12
|
%
|
Return on average common equity
|
|
|
9.46
|
%
|
|
|
4.29
|
%
|
|
|
8.20
|
%
|
|
|
12.93
|
%
|
|
|
14.60
|
%
|
Net interest margin (on a fully tax equivalent basis)
|
|
|
3.95
|
%
|
|
|
3.89
|
%
|
|
|
3.95
|
%
|
|
|
3.90
|
%
|
|
|
3.85
|
%
|
Equity to assets
|
|
|
9.30
|
%
|
|
|
9.21
|
%
|
|
|
8.41
|
%
|
|
|
7.96
|
%
|
|
|
8.12
|
%
|
Dividend payout ratio
|
|
|
37.93
|
%
|
|
|
82.79
|
%
|
|
|
48.95
|
%
|
|
|
33.41
|
%
|
|
|
29.10
|
%
|
ASSET QUALITY RATIOS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans as a percent of gross loans
|
|
|
0.65
|
%
|
|
|
1.07
|
%
|
|
|
1.02
|
%
|
|
|
0.38
|
%
|
|
|
0.35
|
%
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the Years Ended December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
|
|
|
(Dollars in thousands, except per share data)
|
|
|
|
Non-performing assets as a percent of total assets
|
|
|
0.67
|
%
|
|
|
0.92
|
%
|
|
|
0.82
|
%
|
|
|
0.30
|
%
|
|
|
0.25
|
%
|
Allowance for loan losses as a percent of total loans
|
|
|
1.30
|
%
|
|
|
1.25
|
%
|
|
|
1.40
|
%
|
|
|
1.32
|
%
|
|
|
1.33
|
%
|
Allowance for loan losses as a percent of non-performing loans
|
|
|
200.17
|
%
|
|
|
117.07
|
%
|
|
|
137.56
|
%
|
|
|
351.01
|
%
|
|
|
384.22
|
%
|
CAPITAL RATIOS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage capital ratio
|
|
|
8.19
|
%
|
|
|
7.87
|
%
|
|
|
7.55
|
%
|
|
|
8.02
|
%
|
|
|
8.05
|
%
|
Tier 1 risk-based capital ratio
|
|
|
10.28
|
%
|
|
|
9.83
|
%
|
|
|
9.50
|
%
|
|
|
10.27
|
%
|
|
|
11.05
|
%
|
Total risk-based capital ratio
|
|
|
12.37
|
%
|
|
|
11.92
|
%
|
|
|
11.85
|
%
|
|
|
11.52
|
%
|
|
|
12.30
|
%
|
|
|
|
(1) |
|
Calculated by dividing total stockholders equity by the
total outstanding shares as of the end of each period. |
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
The Company is a state chartered, federally registered bank
holding company, incorporated in 1985. The Company is the sole
stockholder of Rockland Trust, a Massachusetts trust company
chartered in 1907. For a full list of corporate entities see
Item 1 Business General
hereto.
All material intercompany balances and transactions have been
eliminated in consolidation. When necessary, certain amounts in
prior year financial statements have been reclassified to
conform to the current years presentation. The following
should be read in conjunction with the Consolidated Financial
Statements and related notes thereto.
Executive
Level Overview
During 2010, the Company experienced strong origination volumes
across each of its primary business lines and continued strength
and stability in asset quality measures. The Company achieved
strong growth in the commercial and industrial portfolio which
increased by 34.7% in 2010. Additionally, the commercial real
estate portfolio and home equity portfolio experienced
significant growth, increasing by 6.4% and 22.8%, respectively,
during 2010. This growth is a result of the Companys
continual relationship building efforts and by capitalizing on
marketplace opportunities. The following table illustrates key
performance measures for the periods indicated, highlighting
these positive results:
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Diluted Earnings Per Share
|
|
$
|
1.90
|
|
|
$
|
0.88
|
|
Return on Average Assets
|
|
|
0.88
|
%
|
|
|
0.40
|
%
|
Return on Average Common Equity
|
|
|
9.46
|
%
|
|
|
4.29
|
%
|
Net Interest Margin
|
|
|
3.95
|
%
|
|
|
3.89
|
%
|
31
The Companys continued stability in asset quality was
marked by a decrease in nonperforming loans. Total nonperforming
loans decreased to 0.65% of total loans at December 31,
2010 compared to 1.07% at December 31, 2009.
Shown in the table presented below is a reconcilement of the
change in the Companys nonperforming assets:
|
|
|
|
|
|
|
For the Year
|
|
|
|
Ending
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
Nonperforming Assets Beginning Balance
|
|
$
|
41,245
|
|
New to Nonperforming
|
|
|
47,220
|
|
Loans Charged-Off
|
|
|
(16,187
|
)
|
Loans Paid-Off
|
|
|
(20,484
|
)
|
Loans Transferred to Other Real Estate Owned/Other Assets
|
|
|
(10,836
|
)
|
Loans Restored to Accrual Status
|
|
|
(11,878
|
)
|
New to Other Real Estate Owned
|
|
|
10,836
|
|
Sale of Other Real Estate Owned
|
|
|
(7,500
|
)
|
Other
|
|
|
(923
|
)
|
|
|
|
|
|
Nonperforming Assets Ending Balance
|
|
$
|
31,493
|
|
|
|
|
|
|
32
Loan delinquency, both early and late stage improved in 2010 due
to focused loan workout efforts and a relatively stable economy.
Net loan charge-offs increased modestly to 0.43% of loans in
2010 as compared to 0.38% of
loans in 2009.
The allowance for loan losses increased modestly in 2010 to
1.30% of loans from 1.25% of loans in 2009 largely due to shifts
in the composition of loan portfolio mix.
Despite the weak economic conditions, the Company was able to
achieve several significant accomplishments during 2010:
|
|
|
|
|
Strong growth realized in the commercial and industrial
portfolio as the Bank continued to add high-quality corporate
customers across a variety of industries.
|
33
|
|
|
|
|
Home equity portfolio origination remained strong driven by
refinancing volume and promotional campaigns.
|
|
|
|
Residential real estate portfolio balances declined as loans
refinanced into longer-term, fixed-rate loans, which are not
commonly held in portfolio by the Company.
|
|
|
|
Commercial real estate origination volumes maintained a healthy
pace as the Company took advantage of opportunities in the
marketplace.
|
|
|
|
Commercial construction portfolio balances declined as projects
transitioned to permanent financing, with the Company or
elsewhere.
|
|
|
|
|
|
Higher fee revenue was a result of improved deposit fee revenue
and wealth management revenue, as assets under administration
reached $1.6 billion.
|
|
|
|
Deposits grew significantly in 2010 as a result of the
Companys strategy to grow the municipal and commercial
banking business. In addition, improving the deposit mix and
focusing on lower cost core deposits has driven a steady decline
in overall funding costs.
|
The Company continues to generate adequate levels of capital
internally to fund future growth. The Companys tangible
common equity ratio is 6.89%, pro forma to include the tax
deductibility of certain goodwill. Regulatory capital levels
exceeded prescribed thresholds, and the Company maintained a
common stock dividend of $0.72 per share for the year ended
December 31, 2010.
Key items affecting comparative earnings are as follows:
Net Interest Income
Although interest rates remained at historically low levels in
2010, the Company effectively managed its loan portfolio yield
and deposit cost to maintain strong net interest income.
Provision for Loan Losses
Net charge-off activity increased modestly on a
year-to-year
basis reflecting general economic weakness. Net charge-offs
amounted to $14.8 million, or 0.43% on an annualized basis
of average loans for the year ended December 31, 2010,
compared to $12.0 million or 0.38% for the year ended
December 31, 2009. The provision for loan losses was
$18.7 million and $17.3 million for the years ended
December 31, 2010 and December 31, 2009, respectively.
A number of non-core items in 2009, as described in the table
below, contributed to the improvement in earnings in 2010. The
following table summarizes the impact of non-core items recorded
for the time periods indicated below and reconciles them in
accordance with GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
Net Income
|
|
|
|
|
|
|
Available to Common
|
|
|
Diluted
|
|
|
|
Shareholders
|
|
|
Earnings Per Share
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
AS REPORTED (GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
40,240
|
|
|
$
|
22,989
|
|
|
$
|
1.90
|
|
|
$
|
1.17
|
|
Preferred Stock Dividend
|
|
|
|
|
|
|
(5,698
|
)
|
|
|
|
|
|
|
(0.29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income available to Common Shareholders (GAAP)
|
|
$
|
40,240
|
|
|
$
|
17,291
|
|
|
$
|
1.90
|
|
|
$
|
0.88
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
Net Income
|
|
|
|
|
|
|
Available to Common
|
|
|
Diluted
|
|
|
|
Shareholders
|
|
|
Earnings Per Share
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Non-GAAP Measures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Interest Income Components
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Gain on Sale of Securities, net of tax
|
|
|
(271
|
)
|
|
|
(880
|
)
|
|
|
(0.01
|
)
|
|
|
(0.04
|
)
|
Gain Resulting from Early Termination of Hedging Relationship,
net of tax
|
|
|
|
|
|
|
(2,456
|
)
|
|
|
|
|
|
|
(0.12
|
)
|
Non-Interest Expense Components
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger & Acquisition Expenses, net of tax
|
|
|
|
|
|
|
9,706
|
|
|
|
|
|
|
|
0.49
|
|
Fair Value Mark on a Terminated Hedging Relationship, net of tax
|
|
|
328
|
|
|
|
|
|
|
|
0.01
|
|
|
|
|
|
Deemed Preferred Stock Dividend
|
|
|
|
|
|
|
4,384
|
|
|
|
|
|
|
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL IMPACT OF NON-CORE ITEMS
|
|
|
57
|
|
|
|
10,754
|
|
|
|
|
|
|
|
0.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AS ADJUSTED (NON-GAAP)
|
|
$
|
40,297
|
|
|
$
|
28,045
|
|
|
$
|
1.90
|
|
|
$
|
1.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
When management assesses the Companys financial
performance for purposes of making
day-to-day
and strategic decisions, it does so based upon the performance
of its core banking business, which is primarily derived from
the combination of net interest income and non-interest or fee
income, reduced by operating expenses, the provision for loan
losses, and the impact of income taxes. The Companys
financial performance is determined in accordance with Generally
Accepted Accounting Principles (GAAP) which
sometimes includes gain or loss due to items that management
does not believe are related to its core banking business, such
as gains or losses on the sales of securities, merger and
acquisition expenses, and other items. Management, therefore,
also computes the Companys non-GAAP operating earnings,
which excludes these items, to measure the strength of the
Companys core banking business and to identify trends that
may to some extent be obscured by gains or losses which
management deems not to be core to the Companys
operations. Management believes that the financial impact of the
items excluded when computing non-GAAP operating earnings will
disappear or become immaterial within a near-term finite
period.
Managements computation of the Companys non-GAAP
operating earnings are set forth above because management
believes it may be useful for investors to have access to the
same analytical tool used by management to evaluate the
Companys core operational performance so that investors
may assess the Companys overall financial health and
identify business and performance trends that may be more
difficult to identify and evaluate when non-core items are
included. Management also believes that the computation of
non-GAAP operating earnings may facilitate the comparison of the
Company to other companies in the financial services
industry.
Non-GAAP operating earnings should not be considered a
substitute for GAAP operating results. An item which management
deems to be non-core and excludes when computing non-GAAP
operating earnings can be of substantial importance to the
Companys results for any particular quarter or year. The
Companys non-GAAP operating earnings set forth above are
not necessarily comparable to non-GAAP information which may be
presented by other companies.
Financial
Position
Securities Portfolio The Companys
securities portfolio consists of trading assets, securities
available for sale, and securities which management intends to
hold until maturity. Securities decreased by $20.4 million,
or 3.4%, at December 31, 2010 as compared to
December 31, 2009. The ratio of securities to total assets
as of December 31, 2010 was 12.5%, compared to 13.6% at
December 31, 2009.
35
The Company continually reviews investment securities for the
presence of
other-than-temporary
impairment (OTTI). Further analysis of the
Companys OTTI can be found in Note 3
Securities within Notes to Consolidated Financial
Statements included in Item 8 hereof.
The Companys trading assets were $7.6 million and
$6.2 million at December 31, 2010 and 2009,
respectively. Trading assets are comprised of securities which
are held solely for the purpose of funding certain executive
non-qualified retirement obligations and equity securities which
are entirely comprised of a fund whose investment objective is
to invest in geographically specific private placement debt
securities designed to support underlying economic activities
such as community development and affordable housing.
The following table sets forth the fair value and percentage
distribution of securities available for sale at the dates
indicated:
Table
1 Fair Value of Securities Available for
Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
|
(Dollars in thousands)
|
|
|
U.S. Treasury Securities
|
|
$
|
717
|
|
|
|
0.2
|
%
|
|
$
|
744
|
|
|
|
0.1
|
%
|
|
$
|
710
|
|
|
|
0.1
|
%
|
Agency Mortgage-Backed Securities
|
|
|
313,302
|
|
|
|
83.0
|
%
|
|
|
451,909
|
|
|
|
88.9
|
%
|
|
|
475,083
|
|
|
|
79.1
|
%
|
Agency Collateralized Mortgage Obligations
|
|
|
46,135
|
|
|
|
12.2
|
%
|
|
|
32,022
|
|
|
|
6.3
|
%
|
|
|
56,784
|
|
|
|
9.5
|
%
|
Corporate Debt Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,852
|
|
|
|
4.3
|
%
|
Private Mortgage-Backed Securities
|
|
|
10,254
|
|
|
|
2.7
|
%
|
|
|
14,289
|
|
|
|
2.8
|
%
|
|
|
15,513
|
|
|
|
2.6
|
%
|
State, County and Municipal Securities
|
|
|
|
|
|
|
|
|
|
|
4,081
|
|
|
|
0.8
|
%
|
|
|
18,954
|
|
|
|
3.2
|
%
|
Single Issuer Trust Preferred Securities Issued by Banks
|
|
|
4,221
|
|
|
|
1.1
|
%
|
|
|
3,010
|
|
|
|
0.6
|
%
|
|
|
2,202
|
|
|
|
0.4
|
%
|
Pooled Trust Preferred Securities Issued by Banks and
Insurers
|
|
|
2,828
|
|
|
|
0.7
|
%
|
|
|
2,595
|
|
|
|
0.5
|
%
|
|
|
5,193
|
|
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
377,457
|
|
|
|
100.0
|
%
|
|
$
|
508,650
|
|
|
|
100.0
|
%
|
|
$
|
600,291
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the amortized cost and percentage
distribution of securities held to maturity at the dates
indicated:
Table
2 Amortized Cost of Securities Held to
Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
|
(Dollars in thousands)
|
|
|
Agency Mortgage-Backed Securities
|
|
$
|
95,697
|
|
|
|
47.2
|
%
|
|
$
|
54,064
|
|
|
|
57.9
|
%
|
|
$
|
3,470
|
|
|
|
10.6
|
%
|
Agency Collateralized Mortgage Obligations
|
|
|
89,823
|
|
|
|
44.3
|
%
|
|
|
14,321
|
|
|
|
15.3
|
%
|
|
|
|
|
|
|
|
|
State, County and Municipal Securities
|
|
|
10,562
|
|
|
|
5.2
|
%
|
|
|
15,252
|
|
|
|
16.3
|
%
|
|
|
19,517
|
|
|
|
59.5
|
%
|
Single Issuer Trust Preferred Securities Issued by Banks
|
|
|
6,650
|
|
|
|
3.3
|
%
|
|
|
9,773
|
|
|
|
10.5
|
%
|
|
|
9,803
|
|
|
|
29.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
202,732
|
|
|
|
100.0
|
%
|
|
$
|
93,410
|
|
|
|
100.0
|
%
|
|
$
|
32,790
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
The following two tables set forth contractual maturities of the
Banks securities portfolio at December 31, 2010.
Actual maturities will differ from contractual maturities
because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
Table
3 Fair Value of Securities Available for Sale
Amounts Maturing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
One Year
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Within
|
|
|
%
|
|
|
Average
|
|
|
to Five
|
|
|
%
|
|
|
Average
|
|
|
Five Years
|
|
|
%
|
|
|
Average
|
|
|
Over
|
|
|
% of
|
|
|
Average
|
|
|
|
|
|
% of
|
|
|
Average
|
|
|
|
One Year
|
|
|
of Total
|
|
|
Yield
|
|
|
Years
|
|
|
of Total
|
|
|
Yield
|
|
|
to Ten Years
|
|
|
of Total
|
|
|
Yield
|
|
|
Ten Years
|
|
|
Total
|
|
|
Yield
|
|
|
Total
|
|
|
Total
|
|
|
Yield
|
|
|
|
(Dollars in thousands)
|
|
|
U.S. Treasury Securities
|
|
$
|
717
|
|
|
|
0.2
|
%
|
|
|
0.9
|
%
|
|
$
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
$
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
$
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
$
|
717
|
|
|
|
0.2
|
%
|
|
|
0.9
|
%
|
Agency Mortgage-Backed Securities
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
24,204
|
|
|
|
6.4
|
%
|
|
|
4.2
|
%
|
|
|
70,372
|
|
|
|
18.7
|
%
|
|
|
4.5
|
%
|
|
|
218,726
|
|
|
|
58.0
|
%
|
|
|
5.0
|
%
|
|
|
313,302
|
|
|
|
83.1
|
%
|
|
|
4.8
|
%
|
Agency Collateralized Mortgage Obligations
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
19,395
|
|
|
|
5.1
|
%
|
|
|
3.9
|
%
|
|
|
26,740
|
|
|
|
7.1
|
%
|
|
|
1.0
|
%
|
|
|
46,135
|
|
|
|
12.2
|
%
|
|
|
2.2
|
%
|
Private Mortgage-Backed Securities
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
10,254
|
|
|
|
2.7
|
%
|
|
|
6.0
|
%
|
|
|
10,254
|
|
|
|
2.7
|
%
|
|
|
6.0
|
%
|
Single Issuer Trust Preferred Securities Issued by Banks
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
4,221
|
|
|
|
1.1
|
%
|
|
|
7.7
|
%
|
|
|
4,221
|
|
|
|
1.1
|
%
|
|
|
7.7
|
%
|
Pooled Trust Preferred Securities Issued by Banks and
Insurers
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
2,828
|
|
|
|
0.7
|
%
|
|
|
0.9
|
%
|
|
|
2,828
|
|
|
|
0.7
|
%
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
717
|
|
|
|
0.2
|
%
|
|
|
0.9
|
%
|
|
$
|
24,204
|
|
|
|
6.4
|
%
|
|
|
4.2
|
%
|
|
$
|
89,767
|
|
|
|
23.8
|
%
|
|
|
4.4
|
%
|
|
$
|
262,769
|
|
|
|
69.6
|
%
|
|
|
4.6
|
%
|
|
$
|
377,457
|
|
|
|
100.0
|
%
|
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table
4 Amortized Cost of Securities Held to Maturity
Amounts Maturing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Within
|
|
|
%
|
|
|
Average
|
|
|
One Year
|
|
|
%
|
|
|
Average
|
|
|
Five Years
|
|
|
%
|
|
|
Average
|
|
|
Over
|
|
|
% of
|
|
|
Average
|
|
|
|
|
|
% of
|
|
|
Average
|
|
|
|
One Year
|
|
|
of Total
|
|
|
Yield
|
|
|
to Five Years
|
|
|
of Total
|
|
|
Yield
|
|
|
to Ten Years
|
|
|
of Total
|
|
|
Yield
|
|
|
Ten Years
|
|
|
Total
|
|
|
Yield
|
|
|
Total
|
|
|
Total
|
|
|
Yield
|
|
|
|
(Dollars in thousands)
|
|
|
Agency Mortgage-Backed Securities
|
|
$
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
$
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
$
|
1,849
|
|
|
|
0.9
|
%
|
|
|
5.5
|
%
|
|
$
|
93,848
|
|
|
|
46.3
|
%
|
|
|
3.6
|
%
|
|
$
|
95,697
|
|
|
|
47.2
|
%
|
|
|
3.6
|
%
|
Agency Collateralized Mortgage Obligations
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
89,823
|
|
|
|
44.3
|
%
|
|
|
2.9
|
%
|
|
|
89,823
|
|
|
|
44.3
|
%
|
|
|
2.9
|
%
|
State, County and Municipal Securities
|
|
|
1,483
|
|
|
|
0.7
|
%
|
|
|
4.0
|
%
|
|
|
5,008
|
|
|
|
2.5
|
%
|
|
|
4.3
|
%
|
|
|
2,975
|
|
|
|
1.5
|
%
|
|
|
4.7
|
%
|
|
|
1,096
|
|
|
|
0.5
|
%
|
|
|
5.0
|
%
|
|
|
10,562
|
|
|
|
5.2
|
%
|
|
|
4.4
|
%
|
Single Issuer Trust Preferred Securities Issued by Banks
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
6,650
|
|
|
|
3.3
|
%
|
|
|
7.4
|
%
|
|
|
6,650
|
|
|
|
3.3
|
%
|
|
|
7.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,483
|
|
|
|
0.7
|
%
|
|
|
4.0
|
%
|
|
$
|
5,008
|
|
|
|
2.5
|
%
|
|
|
4.3
|
%
|
|
$
|
4,824
|
|
|
|
2.4
|
%
|
|
|
5.0
|
%
|
|
$
|
191,417
|
|
|
|
94.4
|
%
|
|
|
3.4
|
%
|
|
$
|
202,732
|
|
|
|
100.0
|
%
|
|
|
3.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010 and 2009, the Bank had no investments
in obligations of individual states, counties or municipalities
which exceeded 10% of stockholders equity.
Residential Mortgage Loan Sales The
Companys primary loan sale activity arises from the sale
of government sponsored enterprise eligible residential mortgage
loans to other financial institutions. During 2010 and 2009, the
Bank originated residential loans with the intention of selling
them in the secondary market. Loans are sold with servicing
rights released and with servicing rights retained. The amounts
of loans originated and sold with servicing rights released were
$331.1 million and $338.5 million in 2010 and 2009,
respectively. The amounts of loans originated and sold with
servicing rights retained were $11.4 million and
$11.6 million in 2010 and 2009, respectively. The Company
recognizes a mortgage servicing assets when it sells a loan with
servicing rights retained. When the Company sells a loan with
servicing rights released the Company enters into agreements
that contain representations and warranties about the
characteristics of the loans sold and their origination. The
Company may be required to either repurchase mortgage loans or
to indemnify the purchaser from losses if representations and
warranties are breached. The Company has not at this time
established a reserve for loan repurchases as it believes
material losses are not probable.
Forward sale contracts of mortgage loans, considered derivative
instruments for accounting purposes, are utilized by the Company
in its efforts to manage risk of loss associated with its
mortgage loan commitments and mortgage loans held for sale.
Prior to closing and funding certain single-family residential
mortgage loans, an interest rate lock commitment is generally
extended to the borrower. During the period from commitment date
to closing date, the Company is subject to the risk that market
rates of interest may change. If market rates rise, investors
generally will pay less to purchase such loans resulting in a
reduction in the gain on sale of the loans or, possibly, a loss.
In an effort to mitigate such risk, forward delivery sales
commitments are executed, under which the Company agrees to
deliver whole mortgage loans to various investors. See
Note 12, Derivative and Hedging Activities
within Notes to Consolidated Financial statements included
in Item 8 hereof for more information on mortgage loan
commitments and forward sales agreements.
37
Effective July 1, 2010, pursuant to FASB ASC Topic
No. 825, Financial Instruments, the Company
elected to carry newly originated closed loans held for sale at
fair value. Changes in fair value relating to loans held for
sale and forward sale commitments are recorded in earnings and
are offset by changes in fair value relating to interest rate
lock commitments. Gains and losses on loan sales (sales proceeds
minus carrying amount) are recorded in mortgage banking income.
Loan Portfolio Management has been focusing on
changing the overall composition of the balance sheet by
emphasizing the growth in commercial and home equity lending
categories, while placing less emphasis on the other lending
categories. Although changing the composition of the
Companys loan portfolio has led to a slower growth rate,
management believes the change to be prudent, given the
prevailing interest rate and economic environment. At
December 31, 2010, the Banks loan portfolio amounted
to $3.6 billion, an increase of $160.2 million, or
4.7%, from December 31, 2009. The total commercial loan
category, which includes small business loans, increased by
$183.6 million, or 8.2%, with commercial and industrial
comprising most of the change with an increase of
$129.4 million, or 34.7%, and an increase in the commercial
real estate category of $102.6 million, or 6.4%, while the
commercial construction and small business categories decreased
by $45.9 million, or 26.2%, and $2.5 million, or 3.1%,
respectively. Home equity loans increased $107.4 million,
or 22.8%, during the year ended December 31, 2010. Consumer
loans decreased $43.0 million, or 38.4%, and residential
real estate loans decreased $87.9 million, or 15.5%, during
the year ended December 31, 2010, as loans refinanced into
longer-term, fixed-rate loans, which are not commonly held in
portfolio by the Company. The following table sets forth
information concerning the composition of the Banks loan
portfolio by loan type at the dates indicated:
Table
5 Loan Portfolio Composition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
|
(Dollars in thousands)
|
|
|
Commercial and Industrial
|
|
$
|
502,952
|
|
|
|
14.1
|
%
|
|
$
|
373,531
|
|
|
|
11.0
|
%
|
|
$
|
270,832
|
|
|
|
10.2
|
%
|
|
$
|
190,522
|
|
|
|
9.4
|
%
|
|
$
|
174,356
|
|
|
|
8.7
|
%
|
Commercial Real Estate
|
|
|
1,717,118
|
|
|
|
48.4
|
%
|
|
|
1,614,474
|
|
|
|
47.5
|
%
|
|
|
1,126,295
|
|
|
|
42.4
|
%
|
|
|
797,416
|
|
|
|
39.2
|
%
|
|
|
740,517
|
|
|
|
36.7
|
%
|
Commercial Construction
|
|
|
129,421
|
|
|
|
3.6
|
%
|
|
|
175,312
|
|
|
|
5.2
|
%
|
|
|
171,955
|
|
|
|
6.5
|
%
|
|
|
133,372
|
|
|
|
6.6
|
%
|
|
|
119,685
|
|
|
|
5.9
|
%
|
Small Business
|
|
|
80,026
|
|
|
|
2.3
|
%
|
|
|
82,569
|
|
|
|
2.4
|
%
|
|
|
86,670
|
|
|
|
3.3
|
%
|
|
|
69,977
|
|
|
|
3.4
|
%
|
|
|
59,910
|
|
|
|
3.0
|
%
|
Residential Real Estate
|
|
|
473,936
|
|
|
|
13.3
|
%
|
|
|
555,306
|
|
|
|
16.4
|
%
|
|
|
413,024
|
|
|
|
15.6
|
%
|
|
|
323,847
|
|
|
|
15.9
|
%
|
|
|
378,368
|
|
|
|
18.8
|
%
|
Residential Construction
|
|
|
4,175
|
|
|
|
0.1
|
%
|
|
|
10,736
|
|
|
|
0.3
|
%
|
|
|
10,950
|
|
|
|
0.4
|
%
|
|
|
6,115
|
|
|
|
0.3
|
%
|
|
|
7,277
|
|
|
|
0.4
|
%
|
Home Equity
|
|
|
579,278
|
|
|
|
16.3
|
%
|
|
|
471,862
|
|
|
|
13.9
|
%
|
|
|
406,240
|
|
|
|
15.3
|
%
|
|
|
308,744
|
|
|
|
15.2
|
%
|
|
|
277,015
|
|
|
|
13.8
|
%
|
Consumer Other
|
|
|
68,773
|
|
|
|
1.9
|
%
|
|
|
111,725
|
|
|
|
3.3
|
%
|
|
|
166,570
|
|
|
|
6.3
|
%
|
|
|
201,831
|
|
|
|
10.0
|
%
|
|
|
255,922
|
|
|
|
12.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Loans
|
|
|
3,555,679
|
|
|
|
100.0
|
%
|
|
|
3,395,515
|
|
|
|
100.0
|
%
|
|
|
2,652,536
|
|
|
|
100.0
|
%
|
|
|
2,031,824
|
|
|
|
100.0
|
%
|
|
|
2,013,050
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
|
|
|
46,255
|
|
|
|
|
|
|
|
42,361
|
|
|
|
|
|
|
|
37,049
|
|
|
|
|
|
|
|
26,831
|
|
|
|
|
|
|
|
26,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loans
|
|
$
|
3,509,424
|
|
|
|
|
|
|
$
|
3,353,154
|
|
|
|
|
|
|
$
|
2,615,487
|
|
|
|
|
|
|
$
|
2,004,993
|
|
|
|
|
|
|
$
|
1,986,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the scheduled contractual
amortization of the Banks loan portfolio at
December 31, 2010. Loans having no schedule of repayments
or no stated maturity are reported as due in one
38
year or less. Adjustable rate mortgages are included in the
adjustable rate category. The following table also sets forth
the rate structure of loans scheduled to mature after one year:
Table
6 Scheduled Contractual Loan Amortization At
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Commercial
|
|
|
Small
|
|
|
Residential
|
|
|
Residential
|
|
|
Consumer
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Real Estate
|
|
|
Construction
|
|
|
Business
|
|
|
Real Estate
|
|
|
Construction
|
|
|
Home Equity
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
Amounts due in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One year or less
|
|
$
|
222,911
|
|
|
$
|
345,021
|
|
|
$
|
57,875
|
|
|
$
|
26,533
|
|
|
$
|
20,598
|
|
|
$
|
4,175
|
|
|
$
|
11,434
|
|
|
$
|
29,714
|
|
|
$
|
718,261
|
|
|
|
|
|
After one year through five years
|
|
|
207,642
|
|
|
|
872,774
|
|
|
|
38,986
|
|
|
|
31,153
|
|
|
|
80,940
|
|
|
|
|
|
|
|
49,600
|
|
|
|
32,197
|
|
|
|
1,313,292
|
|
|
|
|
|
Beyond five years
|
|
|
72,399
|
|
|
|
499,323
|
|
|
|
32,560
|
|
|
|
22,340
|
|
|
|
372,398
|
|
|
|
|
|
|
|
518,244
|
|
|
|
6,862
|
|
|
|
1,524,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
502,952
|
|
|
$
|
1,717,118
|
|
|
$
|
129,421
|
(1)
|
|
$
|
80,026
|
|
|
$
|
473,936
|
|
|
$
|
4,175
|
|
|
$
|
579,278
|
|
|
$
|
68,773
|
|
|
$
|
3,555,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate terms on amounts due after one year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate
|
|
$
|
101,013
|
|
|
$
|
561,593
|
|
|
$
|
24,350
|
|
|
$
|
24,437
|
|
|
$
|
272,340
|
|
|
$
|
|
|
|
$
|
172,460
|
|
|
$
|
39,059
|
|
|
$
|
1,195,252
|
|
|
|
|
|
Adjustable Rate
|
|
|
179,028
|
|
|
|
810,504
|
|
|
|
47,196
|
|
|
|
29,056
|
|
|
|
180,998
|
|
|
|
|
|
|
|
395,384
|
|
|
|
|
|
|
|
1,642,166
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes certain construction loans
that convert to commercial mortgages. These loans are
reclassified to commercial real estate upon the completion of
the construction phase.
|
As of December 31, 2010, $3.8 million of loans
scheduled to mature within one year were nonperforming.
Generally, the actual maturity of loans is substantially shorter
than their contractual maturity due to prepayments and, in the
case of real estate loans,
due-on-sale
clauses, which generally gives the Bank the right to declare a
loan immediately due and payable in the event that, among other
things, the borrower sells the property subject to the mortgage
and the loan is not repaid. The average life of real estate
loans tends to increase when current real estate loan rates are
higher than rates on mortgages in the portfolio and, conversely,
tends to decrease when rates on mortgages in the portfolio are
higher than current real estate loan rates. Under the latter
scenario, the weighted average yield on the portfolio tends to
decrease as higher yielding loans are repaid or refinanced at
lower rates. Due to the fact that the Bank may, consistent with
industry practice, renew a significant portion of commercial and
commercial real estate loans at or immediately prior to their
maturity by renewing the loans on substantially similar or
revised terms, the principal repayments actually received by the
Bank are anticipated to be significantly less than the amounts
contractually due in any particular period. In other
circumstances, a loan, or a portion of a loan, may not be repaid
due to the borrowers inability to satisfy the contractual
obligations of the loan.
Asset Quality The Company continually monitors
the asset quality of the loan portfolio using all available
information. Based on this information, loans demonstrating
certain payment issues or other weaknesses may be categorized as
delinquent, impaired, nonperforming
and/or put
on nonaccrual status. Additionally, in the course of resolving
such loans, the Company may choose to restructure the
contractual terms of certain loans to match the borrowers
ability to repay the loan based on their current financial
condition. If a restructured loan meets certain criteria, it may
be categorized as a troubled debt restructuring
(TDR).
Delinquency The Banks philosophy toward
managing its loan portfolios is predicated upon careful
monitoring, which stresses early detection and response to
delinquent and default situations. The Bank seeks to make
arrangements to resolve any delinquent or default situation over
the shortest possible time frame. Generally, the Bank requires
that a delinquency notice be mailed to a borrower upon
expiration of a grace period (typically no longer than
15 days beyond the due date). Reminder notices may be sent
and telephone calls may be made prior to the expiration of the
grace period. If the delinquent status is not resolved within a
reasonable time frame following the mailing of a delinquency
notice, the Banks personnel charged with managing its loan
portfolios, contacts the borrower to ascertain the reasons for
delinquency and the prospects for payment. Any subsequent
actions taken to resolve the delinquency will depend upon the
nature of the loan and the length of time that the loan has been
delinquent. The borrowers needs are considered as much as
reasonably possible without jeopardizing the Banks
position. A late charge is usually assessed on loans upon
expiration of the grace period.
Nonaccrual Loans As permitted by banking
regulations, certain consumer loans past due 90 days or
more continue to accrue interest. In addition, certain
commercial and real estate loans that are more than 90 days
past due may be kept on an accruing status if the loan is well
secured and in the process of collection. As a general rule,
39
within commercial, real estate, or home equity categories, loans
more than 90 days past due with respect to principal or
interest are classified as a nonaccrual loan. Income accruals
are suspended on all nonaccrual loans and all previously accrued
and uncollected interest is reversed against current income. A
loan remains on nonaccrual status until it becomes current with
respect to principal and interest (and in certain instances
remains current for up to six months), when the loan is
liquidated, or when the loan is determined to be uncollectible
and is charged-off against the allowance for loan losses.
Troubled Debt Restructurings In the course of
resolving nonperforming loans, the Bank may choose to
restructure the contractual terms of certain loans. The Bank
attempts to work-out an alternative payment schedule with the
borrower in order to avoid foreclosure actions. Any loans that
are modified are reviewed by the Bank to identify if a TDR has
occurred, which is when, for economic or legal reasons related
to a borrowers financial difficulties, the Bank grants a
concession to the borrower that it would not otherwise consider.
Terms may be modified to fit the ability of the borrower to
repay in line with its current financial status and the
restructuring of the loan may include the transfer of assets
from the borrower to satisfy the debt, a modification of loan
terms, or a combination of the two. If such efforts by the Bank
do not result in a satisfactory arrangement, the loan is
referred to legal counsel, at which time foreclosure proceedings
are initiated. At any time prior to a sale of the property at
foreclosure, the Bank may terminate foreclosure proceedings if
the borrower is able to work-out a satisfactory payment plan.
It is the Banks policy to have any restructured loans
which are on nonaccrual status prior to being modified remain on
nonaccrual status for approximately six months, subsequent to
being modified, before management considers its return to
accrual status. If the restructured loan is on accrual status
prior to being modified, it is reviewed to determine if the
modified loan should remain on accrual status. Loans that are
considered TDRs are classified as performing, unless they are on
nonaccrual status or greater than 90 days delinquent. All
TDRs are considered impaired by the Company, unless it is
determined that the borrower is performing under modified terms
and the restructuring agreement specified an interest rate
greater than or equal to an acceptable rate for a comparable new
loan. The Company individually reviews all material loans to
determine if a loan meets both of these criteria and smaller
balance loans are reviewed for a performance period of six
months before the Company will consider the TDR loan to no
longer be impaired.
Nonperforming Assets Nonperforming assets are
comprised of nonperforming loans, nonperforming securities,
Other Real Estate Owned (OREO), and other assets in
possession. Nonperforming loans consist of loans that are more
than 90 days past due but still accruing interest and
nonaccrual loans.
Nonperforming securities consist of securities that are on
nonaccrual status. The Company holds six collateralized debt
obligation securities (CDOs) comprised of pools of
trust preferred securities issued by banks and insurance
companies, which are currently deferring interest payments on
certain tranches within the bonds structures including the
tranches held by the Company. The bonds are anticipated to
continue to defer interest until cash flows are sufficient to
satisfy certain collateralization levels designed to protect
more senior tranches. As a result the Company has placed the six
securities on nonaccrual status and has reversed any previously
accrued income related to these securities.
OREO When a property is deemed to be in
control, it is recorded at fair value less cost to sell at the
date control is established, resulting in a new cost basis. The
amount by which the recorded investment in the loan exceeds the
fair value (net of estimated cost to sell) of the foreclosed
asset is charged to the allowance for loan losses. Subsequent
declines in the fair value of the foreclosed asset below the new
cost basis are recorded through the use of a valuation
allowance. Subsequent increases in the fair value are recorded
as reductions in the allowance, but not below zero. All costs
incurred thereafter in maintaining the property are charged to
non-interest expense. In the event the real estate is utilized
as a rental property, rental income and expenses are recorded as
incurred and included in non-interest income and non-interest
expense, respectively.
Other assets in possession reflect the estimated discounted cash
flow value of retention payments from the sale of a customer
list associated with a troubled borrower.
40
The following table sets forth information regarding
nonperforming assets held by the Bank at the dates indicated:
Table
7 Nonperforming Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(Dollars in thousands)
|
|
|
Loans past due 90 days or more but still accruing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity
|
|
$
|
4
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Consumer Other
|
|
|
273
|
|
|
|
292
|
|
|
|
275
|
|
|
|
500
|
|
|
|
389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
277
|
|
|
$
|
292
|
|
|
$
|
275
|
|
|
$
|
500
|
|
|
$
|
389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans accounted for on a nonaccrual basis (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial
|
|
$
|
3,123
|
|
|
$
|
4,205
|
|
|
$
|
1,942
|
|
|
$
|
306
|
|
|
$
|
872
|
|
Small Business
|
|
|
887
|
|
|
|
793
|
|
|
|
1,111
|
|
|
|
439
|
|
|
|
74
|
|
Commercial Real Estate
|
|
|
9,836
|
|
|
|
18,525
|
|
|
|
12,370
|
|
|
|
2,568
|
|
|
|
2,346
|
|
Residential Real Estate
|
|
|
6,728
|
|
|
|
10,829
|
|
|
|
9,394
|
|
|
|
2,380
|
|
|
|
2,318
|
|
Home Equity
|
|
|
1,752
|
|
|
|
1,166
|
|
|
|
1,090
|
|
|
|
872
|
|
|
|
358
|
|
Consumer Other
|
|
|
505
|
|
|
|
373
|
|
|
|
751
|
|
|
|
579
|
|
|
|
622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
22,831
|
|
|
$
|
35,891
|
|
|
$
|
26,658
|
|
|
$
|
7,144
|
|
|
$
|
6,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans
|
|
$
|
23,108
|
|
|
$
|
36,183
|
|
|
$
|
26,933
|
|
|
$
|
7,644
|
|
|
$
|
6,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual securities
|
|
|
1,051
|
|
|
|
920
|
|
|
|
910
|
|
|
|
|
|
|
|
|
|
Other assets in possession
|
|
|
61
|
|
|
|
148
|
|
|
|
231
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
|
7,273
|
|
|
|
3,994
|
|
|
|
1,809
|
|
|
|
681
|
|
|
|
190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming assets
|
|
$
|
31,493
|
|
|
$
|
41,245
|
|
|
$
|
29,883
|
|
|
$
|
8,325
|
|
|
$
|
7,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans as a percent of gross loans
|
|
|
0.65
|
%
|
|
|
1.07
|
%
|
|
|
1.02
|
%
|
|
|
0.38
|
%
|
|
|
0.35
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets as a percent of total assets
|
|
|
0.67
|
%
|
|
|
0.92
|
%
|
|
|
0.82
|
%
|
|
|
0.30
|
%
|
|
|
0.25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
There were $4.0 million, $3.4 million, and $74,000
TDRs on nonaccrual at December 31, 2010, 2009 and 2008,
respectively, and none at December 31, 2007 and 2006. |
Potential problem loans are any loans which are not included in
nonaccrual or nonperforming loans and which are not considered
TDRs, where known information about possible credit problems of
the borrowers causes management to have concerns as to the
ability of such borrowers to comply with present loan repayment
terms. The table below shows the potential problem commercial
loans at the time periods indicated:
Table
8 Potential Problem Commercial Loans
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Number of Loan Relationships
|
|
|
62
|
|
|
|
102
|
|
Aggregate Outstanding Balance
|
|
$
|
126,167
|
|
|
$
|
122,140
|
|
At December 31, 2010, these potential problem loans
continued to perform with respect to payments. Management
actively monitors these loans and strives to minimize any
possible adverse impact to the Bank.
41
Income accruals are suspended on all nonaccrual loans and all
previously accrued and uncollected interest is reversed against
current income. The table below shows interest income that was
recognized or collected on nonaccrual and performing TDRs as of
the dates indicated:
Table
9 Interest Income Recognized/Collected on Nonaccrual
and Troubled Debt Restructurings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Interest income that would have been recognized if nonaccruing
loans had been performing
|
|
$
|
2,749
|
|
|
$
|
2,004
|
|
|
$
|
890
|
|
Interest income recognized on TDRs still accruing
|
|
|
1,425
|
|
|
|
330
|
|
|
|
21
|
|
Interest collected on these nonaccrual and TDRs and included in
interest income
|
|
$
|
1,874
|
|
|
$
|
359
|
|
|
$
|
198
|
|
A loan is considered impaired when, based on current information
and events, it is probable that the Bank will be unable to
collect the scheduled payments of principal or interest when due
according to the contractual terms of the loan agreement.
Factors considered by management in determining impairment
include payment status, collateral value, and the probability of
collecting scheduled principal and interest payments when due.
Loans that experience insignificant payment delays and payment
shortfalls generally are not classified as impaired. Management
determines the significance of payment delays and payment
shortfalls on a
case-by-case
basis, taking into consideration all of the circumstances
surrounding the loan and the borrower, including the length of
the delay, the reasons for the delay, the borrowers prior
payment record, and the amount of the shortfall in relation to
the principal and interest owed.
Impairment is measured on a loan by loan basis for commercial
and industrial, commercial real estate, and commercial
construction categories by either the present value of expected
future cash flows discounted at the loans effective
interest rate, the loans obtainable market price, or the
fair value of the collateral if the loan is collateral dependent.
For impaired loans deemed collateral dependent, where impairment
is measured using the fair value of the collateral, the Bank
will either order a new appraisal or use another available
source of collateral assessment such as a brokers opinion
of value to determine a reasonable estimate of the fair value of
the collateral.
At December 31, 2010, impaired loans included all
commercial and industrial loans, commercial real estate loans,
commercial construction, and small business loans that are on
nonaccrual status, TDRs, and other loans that have been
categorized as impaired. Total impaired loans at
December 31, 2010 and 2009 were $47.4 million and
$42.7 million, respectively. For additional information
regarding the Banks asset quality, including delinquent
loans, nonaccruals, TDRs, and impaired loans, see
Note 4, Loans, Allowance for Loan Losses, and
Credit Quality within Notes to Consolidated Financial
Statements included in Item 8 hereof.
Allowance for Loan Losses The allowance for
loan losses is maintained at a level that management considers
adequate to provide for probable loan losses based upon
evaluation of known and inherent risks in the loan portfolio.
The allowance is increased by providing for loan losses through
a charge to expense and by recoveries of loans previously
charged-off and is reduced by loans being charged-off.
While management uses available information to recognize losses
on loans, future additions to the allowance may be necessary
based on increases in nonperforming loans, changes in economic
conditions, or for other reasons. Additionally, various
regulatory agencies, as an integral part of the Banks
examination process, periodically assess the adequacy of the
allowance for loan losses and may require it to increase its
provision for loan losses or recognize further loan charge-offs.
As of December 31, 2010, the allowance for loan losses
totaled $46.3 million, or 1.30% of total loans as compared
to $42.4 million, or 1.25% of total loans, at
December 31, 2009. The increase in allowance was due to a
combination of factors including shifts in the composition of
the loan portfolio mix, changes in asset quality and loan growth.
42
The following table summarizes changes in the allowance for loan
losses and other selected statistics for the periods presented:
Table
10 Summary of Changes in the Allowance for Loan
Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(Dollars in thousands)
|
|
|
Average Total Loans
|
|
$
|
3,434,769
|
|
|
$
|
3,177,949
|
|
|
$
|
2,489,028
|
|
|
$
|
1,994,273
|
|
|
$
|
2,041,098
|
|
Allowance for Loan Losses, Beginning of Year
|
|
$
|
42,361
|
|
|
$
|
37,049
|
|
|
$
|
26,831
|
|
|
$
|
26,815
|
|
|
$
|
26,639
|
|
Charged-Off Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial
|
|
|
5,170
|
|
|
|
1,663
|
|
|
|
595
|
|
|
|
498
|
|
|
|
185
|
|
Commercial Real Estate
|
|
|
3,448
|
|
|
|
834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Construction
|
|
|
1,716
|
|
|
|
2,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small Business
|
|
|
2,279
|
|
|
|
2,047
|
|
|
|
1,350
|
|
|
|
789
|
|
|
|
401
|
|
Residential Real Estate
|
|
|
557
|
|
|
|
829
|
|
|
|
362
|
|
|
|
|
|
|
|
|
|
Residential Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity
|
|
|
939
|
|
|
|
1,799
|
|
|
|
1,200
|
|
|
|
122
|
|
|
|
|
|
Consumer Other
|
|
|
2,078
|
|
|
|
3,404
|
|
|
|
3,631
|
|
|
|
2,459
|
|
|
|
2,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Charged-Off Loans
|
|
|
16,187
|
|
|
|
13,255
|
|
|
|
7,138
|
|
|
|
3,868
|
|
|
|
3,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries on Loans Previously Charged-Off:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial
|
|
|
361
|
|
|
|
27
|
|
|
|
168
|
|
|
|
63
|
|
|
|
219
|
|
Commercial Real Estate
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Commercial Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small Business
|
|
|
217
|
|
|
|
204
|
|
|
|
159
|
|
|
|
26
|
|
|
|
92
|
|
Residential Real Estate
|
|
|
59
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity
|
|
|
131
|
|
|
|
41
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
Consumer Other
|
|
|
657
|
|
|
|
855
|
|
|
|
612
|
|
|
|
665
|
|
|
|
709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recoveries
|
|
|
1,426
|
|
|
|
1,232
|
|
|
|
944
|
|
|
|
754
|
|
|
|
1,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loans Charged-Off
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial
|
|
|
4,809
|
|
|
|
1,636
|
|
|
|
427
|
|
|
|
435
|
|
|
|
(34
|
)
|
Commercial Real Estate
|
|
|
3,447
|
|
|
|
834
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Commercial Construction
|
|
|
1,716
|
|
|
|
2,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small Business
|
|
|
2,062
|
|
|
|
1,843
|
|
|
|
1,191
|
|
|
|
763
|
|
|
|
309
|
|
Residential Real Estate
|
|
|
498
|
|
|
|
724
|
|
|
|
362
|
|
|
|
|
|
|
|
|
|
Residential Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity
|
|
|
808
|
|
|
|
1,758
|
|
|
|
1,195
|
|
|
|
122
|
|
|
|
|
|
Consumer Other
|
|
|
1,421
|
|
|
|
2,549
|
|
|
|
3,019
|
|
|
|
1,794
|
|
|
|
1,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Loans Charged-Off
|
|
|
14,761
|
|
|
|
12,023
|
|
|
|
6,194
|
|
|
|
3,114
|
|
|
|
2,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance Related to Business Combinations
|
|
|
|
|
|
|
|
|
|
|
5,524
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses
|
|
|
18,655
|
|
|
|
17,335
|
|
|
|
10,888
|
|
|
|
3,130
|
|
|
|
2,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Allowances for Loan Losses, End of Year
|
|
$
|
46,255
|
|
|
$
|
42,361
|
|
|
$
|
37,049
|
|
|
$
|
26,831
|
|
|
$
|
26,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loans Charged-Off as a Percent of Average Total Loans
|
|
|
0.43
|
%
|
|
|
0.38
|
%
|
|
|
0.25
|
%
|
|
|
0.16
|
%
|
|
|
0.11
|
%
|
Allowance for Loan Losses as a Percent of Total Loans
|
|
|
1.30
|
%
|
|
|
1.25
|
%
|
|
|
1.40
|
%
|
|
|
1.32
|
%
|
|
|
1.33
|
%
|
Allowance for Loan Losses as a Percent of Nonperforming Loans
|
|
|
200.17
|
%
|
|
|
117.07
|
%
|
|
|
137.56
|
%
|
|
|
351.01
|
%
|
|
|
384.22
|
%
|
Net Loans Charged-Off as a Percent of Allowance for Loan Losses
|
|
|
31.91
|
%
|
|
|
28.38
|
%
|
|
|
16.72
|
%
|
|
|
11.61
|
%
|
|
|
8.05
|
%
|
Recoveries as a Percent of Charge-Offs
|
|
|
8.81
|
%
|
|
|
9.29
|
%
|
|
|
13.22
|
%
|
|
|
19.49
|
%
|
|
|
32.11
|
%
|
For purposes of the allowance for loan losses, management
segregates the loan portfolio into the portfolio segments
detailed in the table below. The allocation of the allowance for
loan losses is made to each loan category using the analytical
techniques and estimation methods described herein. While these
amounts represent managements best estimate of the
distribution of probable losses at the evaluation dates, they
are not necessarily indicative of either the categories in which
actual losses may occur or the extent of such actual losses that
may be recognized within each category. Each of these loan
categories possess unique risk characteristics that are
considered when determining the appropriate level of allowance
for each segment. The total allowance is available to absorb
losses from any segment of the loan portfolio.
43
The following table sets forth the allocation of the allowance
for loan losses by loan category at the dates indicated:
Table
11 Summary of Allocation of Allowance for Loan
Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
Loans
|
|
|
|
|
|
Loans
|
|
|
|
|
|
Loans
|
|
|
|
|
|
Loans
|
|
|
|
|
|
Loans
|
|
|
|
Allowance
|
|
|
In Category
|
|
|
Allowance
|
|
|
In Category
|
|
|
Allowance
|
|
|
In Category
|
|
|
Allowance
|
|
|
In Category
|
|
|
Allowance
|
|
|
In Category
|
|
|
|
Amount
|
|
|
To Total Loans
|
|
|
Amount
|
|
|
To Total Loans
|
|
|
Amount
|
|
|
To Total Loans
|
|
|
Amount
|
|
|
To Total Loans
|
|
|
Amount
|
|
|
To Total Loans
|
|
|
|
(Dollars in thousands)
|
|
|
Allocated Allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial
|
|
$
|
10,423
|
|
|
|
14.1
|
%
|
|
$
|
7,545
|
|
|
|
11.0
|
%
|
|
$
|
5,532
|
|
|
|
10.2
|
%
|
|
$
|
3,850
|
|
|
|
9.4
|
%
|
|
$
|
3,615
|
|
|
|
8.7
|
%
|
Commercial Real Estate
|
|
|
21,939
|
|
|
|
52.0
|
%
|
|
|
19,451
|
|
|
|
47.5
|
%
|
|
|
15,942
|
|
|
|
42.4
|
%
|
|
|
13,939
|
|
|
|
39.2
|
%
|
|
|
13,136
|
|
|
|
36.7
|
%
|
Commercial Construction
|
|
|
2,145
|
|
|
|
0.1
|
%
|
|
|
2,457
|
|
|
|
5.5
|
%
|
|
|
4,203
|
|
|
|
6.9
|
%
|
|
|
3,408
|
|
|
|
6.9
|
%
|
|
|
2,955
|
|
|
|
6.3
|
%
|
Small Business
|
|
|
3,740
|
|
|
|
2.3
|
%
|
|
|
3,372
|
|
|
|
2.4
|
%
|
|
|
2,170
|
|
|
|
3.3
|
%
|
|
|
1,265
|
|
|
|
3.4
|
%
|
|
|
1,340
|
|
|
|
3.0
|
%
|
Residential Real Estate(1)
|
|
|
2,915
|
|
|
|
13.3
|
%
|
|
|
2,840
|
|
|
|
16.4
|
%
|
|
|
2,447
|
|
|
|
15.6
|
%
|
|
|
741
|
|
|
|
15.9
|
%
|
|
|
566
|
|
|
|
18.8
|
%
|
Home Equity
|
|
|
3,369
|
|
|
|
16.3
|
%
|
|
|
3,945
|
|
|
|
13.9
|
%
|
|
|
3,091
|
|
|
|
15.3
|
%
|
|
|
1,326
|
|
|
|
15.2
|
%
|
|
|
1,024
|
|
|
|
13.8
|
%
|
Consumer Other
|
|
|
1,724
|
|
|
|
1.9
|
%
|
|
|
2,751
|
|
|
|
3.3
|
%
|
|
|
3,664
|
|
|
|
6.3
|
%
|
|
|
2,302
|
|
|
|
10.0
|
%
|
|
|
2,718
|
|
|
|
12.7
|
%
|
Imprecision Allowance
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
N/A
|
|
|
|
1,461
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Allowance for Loan Losses
|
|
$
|
46,255
|
|
|
|
100.0
|
%
|
|
$
|
42,361
|
|
|
|
100.0
|
%
|
|
$
|
37,049
|
|
|
|
100.0
|
%
|
|
$
|
26,831
|
|
|
|
100.0
|
%
|
|
$
|
26,815
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes residential construction.
|
When available information confirms that specific loans or
financing receivables, or portions thereof, are uncollectible,
these amounts are promptly charged-off against the allowance for
loan losses. All charge-offs of loans or financing receivables
are charged directly to the allowance for loan losses and any
recoveries of such previously charged-off amounts are credited
to the allowance.
Loans whose collectability is sufficiently questionable that
management can no longer justify showing the receivable as an
asset on the balance sheet are charged-off. To determine if a
loan should be charged-off, all possible sources of repayment
are analyzed. Possible sources of repayment include the
potential for future cash flows, the value of the Banks
collateral, and the strength of co-makers or guarantors.
Regardless of whether a loan is unsecured or collateralized, the
Company charges off the amount of any confirmed loan loss in the
period when the loans, or portions of loans, are deemed
uncollectible. For troubled, collateral-dependent loans,
loss-confirming events may include an appraisal or other
valuation that reflects a shortfall between the value of the
collateral and the book value of the loan or receivable, or a
deficiency balance following the sale of the collateral. During
2010, allocated allowance amounts increased by approximately
$3.9 million to $46.3 million at December 31,
2010.
For additional information regarding the Banks allowance
for loan losses, see Note 1, Summary of
Significant Accounting Policies and Note 4,
Loans, Allowance for Loan Losses, and Credit Quality
within Notes to Consolidated Financial Statements included
in Item 8 hereof.
Federal Home Loan Bank Stock The Bank held an
investment in Federal Home Loan Bank Boston (FHLBB)
of $35.9 million at December 31, 2010 and
December 31, 2009, respectively. The FHLBB is a cooperative
that provides services to its member banking institutions. The
primary reason for the FHLBB membership is to gain access to a
reliable source of wholesale funding, particularly term funding,
as a tool to manage interest rate risk. The purchase of stock in
the FHLBB is a requirement for a member to gain access to
funding. The Company purchases FHLBB stock proportional to the
volume of funding received and views the purchases as a
necessary long-term investment for the purposes of balance sheet
liquidity and not for investment return.
During 2010 the FHLBB continued the moratorium on excess stock
repurchases that was put into effect during 2008, as the
FHLBBs board of directors have continued to focus on
building retained earnings while delivering core solutions of
liquidity and longer-term funding to their members. As a result
of these efforts the FHLBB was able to restore a modest dividend
as announced on February 22, 2011.
44
Goodwill and Identifiable Intangible Assets
Goodwill and Identifiable Intangible Assets were
$142.0 million and $143.7 million at December 31,
2010 and December 31, 2009, respectively. For additional
information regarding the goodwill and identifiable intangible
assets, see Note 6, Goodwill and Identifiable
Intangible Assets within Notes to Consolidated
Financial Statements included in Item 8 hereof.
Bank Owned Life Insurance The bank holds Bank
Owned Life Insurance (BOLI) for the purpose of
offsetting the Banks future obligations to its employees
under its retirement and benefits plans. The value of BOLI was
$82.7 and $79.3 million at December 31, 2010 and
December 31, 2009, respectively. The bank recorded tax
exempt income from BOLI of $3.2 million in 2010,
$2.9 million in 2009, and $2.6 million in 2008.
Deposits As of December 31, 2010,
deposits of $3.6 billion were $252.5 million, or 7.5%,
higher than the prior year-end. Core deposits increased by
$477.1 million, or 19.4%, during 2010 and now comprise
80.9% of total deposits.
The following table sets forth the average balances of the
Banks deposits for the periods indicated:
Table
12 Average Balances of Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
|
(Dollars in thousands)
|
|
|
Demand Deposits
|
|
$
|
773,718
|
|
|
|
22.0
|
%
|
|
$
|
659,916
|
|
|
|
21.0
|
%
|
|
$
|
533,543
|
|
|
|
21.9
|
%
|
Savings and Interest Checking
|
|
|
1,183,247
|
|
|
|
33.7
|
%
|
|
|
913,881
|
|
|
|
29.2
|
%
|
|
|
688,336
|
|
|
|
28.3
|
%
|
Money Market
|
|
|
739,264
|
|
|
|
21.1
|
%
|
|
|
639,231
|
|
|
|
20.4
|
%
|
|
|
472,065
|
|
|
|
19.4
|
%
|
Time Certificates of Deposits
|
|
|
814,462
|
|
|
|
23.2
|
%
|
|
|
921,787
|
|
|
|
29.4
|
%
|
|
|
740,779
|
|
|
|
30.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,510,691
|
|
|
|
100.0
|
%
|
|
$
|
3,134,815
|
|
|
|
100.0
|
%
|
|
$
|
2,434,723
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Banks time certificates of deposit in an amount of
$100,000 or more totaled $219.5 million at
December 31, 2010. The maturity of these certificates is as
follows:
Table
13 Maturities of Time Certificate of Deposits Over
$100,000
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
Percentage
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
1 to 3 months
|
|
$
|
66,494
|
|
|
|
30.3
|
%
|
4 to 6 months
|
|
|
61,407
|
|
|
|
28.0
|
%
|
7 to 12 months
|
|
|
58,364
|
|
|
|
26.6
|
%
|
Over 12 months
|
|
|
33,215
|
|
|
|
15.1
|
%
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
219,480
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
The Bank also participates in the Certificate of Deposit
Registry Service (CDARS) program, allowing the Bank
to provide easy access to multi-million dollar FDIC deposit
insurance protection on certificate of deposits investments for
consumers, businesses and public entities. The economic downturn
and subsequent flight to safety makes CDARS an attractive
product for customers and as of December 31, 2010 and 2009,
CDARS deposits totaled $13.6 million and
$52.9 million, respectively.
Borrowings The Companys borrowings
amounted to $565.4 million at December 31, 2010, a
decrease of $82.0 million from year-end 2009. At
December 31, 2010, the Banks borrowings consisted
primarily of FHLBB borrowings totaling $302.4 million, a
decrease of $60.5 million from the prior year-end. The
remaining borrowings consisted of federal funds purchased,
assets sold under repurchase agreements, junior subordinated
debentures and other borrowings. These borrowings totaled
$263.0 million at December 31, 2010, a decrease of
$21.4 million from the prior year-end. See Note 8,
Borrowings within Notes to Consolidated Financial
Statements included in Item 8 hereof for a schedule of
borrowings outstanding, their interest rates, and other
information related to the Companys borrowings.
45
The following table shows the balance of borrowings at the
periods indicated:
Table
14 Borrowings by Category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
%Change
|
|
|
|
(Dollars in thousands)
|
|
|
Federal Home Loan Bank Advances
|
|
$
|
302,414
|
|
|
$
|
362,936
|
|
|
|
−16.7
|
%
|
Fed Funds Purchased and Assets Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Under Repurchase Agreements
|
|
|
168,119
|
|
|
|
190,452
|
|
|
|
−11.7
|
%
|
Junior Subordinated Debentures
|
|
|
61,857
|
|
|
|
61,857
|
|
|
|
0.0
|
%
|
Subordinated Debentures
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
0.0
|
%
|
Other Borrowings
|
|
|
3,044
|
|
|
|
2,152
|
|
|
|
41.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Borrowings
|
|
$
|
565,434
|
|
|
$
|
647,397
|
|
|
|
−12.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Resources The Federal Reserve, the
FDIC, and other regulatory agencies have established capital
guidelines for banks and bank holding companies. Risk-based
capital guidelines issued by the federal regulatory agencies
require banks to meet a minimum Tier 1 risk-based capital
ratio of 4.0% and a total risk-based capital ratio of 8.0%. A
minimum requirement of 4.0% Tier 1 leverage capital is also
mandated. At December 31, 2010, the Company and the Bank
exceeded the minimum requirements for Tier 1 risk-based,
total risk-based capital, and Tier 1 leverage capital. See
Note 19, Regulatory Capital Requirements
within Notes to Consolidated Financial Statements included
in Item 8 hereof for more information regarding capital
requirements.
Capital Purchase Program On January 9,
2009, the Company participated in the CPP established by the
Treasury and subsequently exited the program on April 22,
2009. See Note 11, Capital Purchase Program
within Notes to Consolidated Financial Statements included
in Item 8 hereof for more information regarding the Capital
Purchase Program.
Wealth
Management
Investment Management As of December 31,
2010, the Rockland Trust Investment Management Group had
assets under administration of $1.6 billion which
represents approximately 3,181 trust, fiduciary, and agency
accounts. At December 31, 2009, assets under administration
were $1.3 billion, representing approximately 2,922 trust,
fiduciary, and agency accounts. Revenue from the Investment
Management Group amounted to $10.3 million,
$8.6 million, and $9.9 million for 2010, 2009, and
2008, respectively. Additionally, during 2010 the Company
established Bright Rock Capital Management, LLC, a registered
investment advisor to provide institutional quality investment
management services to the institutional/intermediary
marketplace. At December 31, 2010 Bright Rock had
$103.6 million of assets under administration.
Retail Investments and Insurance For the
years ending December 31, 2010, 2009 and 2008, retail
investments and insurance revenue was $1.4 million,
$1.4 million, and $1.2 million, respectively. Retail
investments and insurance includes revenue from LPL Financial
(LPL) and its affiliates, LPL Insurance Associates,
Inc., Savings Bank Life Insurance of Massachusetts
(SBLI), Independent Financial Market Group, Inc.
(IFMG) and their insurance subsidiary IFS Agencies,
Inc. (IFS).
Mortgage
Banking
Servicing assets are recorded at fair value and recognized as
separate assets when rights are acquired through sale of loans
with servicing rights retained. Mortgage servicing assets are
amortized into non-interest income in proportion to, and over
the period of, the estimated net servicing income. The principal
balance of loans serviced by the Bank on behalf of investors
amounted to $279.7 million at December 31, 2010 and
$350.5 million at December 31, 2009. Upon sale, the
mortgage servicing asset (MSA) is established, which
represents the then current estimated fair value based on market
prices for comparable mortgage servicing contracts, when
available or alternatively, is based on a valuation model that
calculates the present value of estimated future net servicing
46
income. The valuation model incorporates assumptions that market
participants would use in estimating future net servicing
income, such as the cost to service, the discount rate, an
inflation rate, ancillary income, prepayment speeds and default
rates and losses. Impairment is determined by stratifying the
rights based on predominant characteristics, such as interest
rate, loan type and investor type. Impairment is recognized
through a valuation allowance, to the extent that fair value is
less than the capitalized amount. If the Company later
determines that all or a portion of the impairment no longer
exists, a reduction of the allowance may be recorded as an
increase to income. Servicing rights are recorded in other
assets and are amortized in proportion to, and over the period
of estimated net servicing income and are assessed for
impairment based on fair value at each reporting date. MSAs are
reported in other assets in the consolidated balance sheets. The
following table shows fair value of the servicing rights
associated with these loans and the changes for the periods
indicated:
Table
15 Mortgage Servicing Asset
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Balance as of January 1,
|
|
$
|
2,195
|
|
|
$
|
1,498
|
|
Additions
|
|
|
77
|
|
|
|
1,642
|
(1)
|
Amortization
|
|
|
(652
|
)
|
|
|
(802
|
)
|
Change in Valuation Allowance
|
|
|
(1
|
)
|
|
|
(143
|
)
|
|
|
|
|
|
|
|
|
|
Balance as of December 31,
|
|
$
|
1,619
|
|
|
$
|
2,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Included in this number is a mortgage servicing asset of $1.2
million acquired as part of the Ben Franklin acquisition. |
The Banks mortgage banking revenue consists primarily of
premiums received on loans sold with servicing released,
origination fees, and gains and losses on sold mortgages which
are recorded as mortgage banking income. The gains and losses
resulting from the sales of loans with servicing retained are
adjusted to recognize the present value of future servicing fee
income over the estimated lives of the related loans.
RESULTS
OF OPERATIONS
The following table provides a summary of results of operations:
Table
16 Summary of Results of Operations
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Net Income
|
|
$
|
40,240
|
|
|
$
|
22,989
|
|
Preferred Stock Dividend
|
|
$
|
|
|
|
$
|
5,698
|
|
Net Income Available to Common Shareholders
|
|
$
|
40,240
|
|
|
$
|
17,291
|
|
Diluted Earnings Per Share
|
|
$
|
1.90
|
|
|
$
|
0.88
|
|
Return on Average Assets
|
|
|
0.88
|
%
|
|
|
0.40
|
%
|
Return on Average Equity
|
|
|
9.46
|
%
|
|
|
4.29
|
%
|
Stockholders Equity as % of Assets
|
|
|
9.30
|
%
|
|
|
9.21
|
%
|
Results of operations for 2009 were impacted by the
Companys recording of several large expenses associated
with the Ben Franklin acquisition, as well as costs associated
with the recession including loan workout costs, loss
provisions, and deposit insurance assessment fees. In addition,
the cost of entering and exiting the U.S. Treasury CPP
program were significant.
Net Interest Income The amount of net
interest income is affected by changes in interest rates and by
the volume, mix, and interest rate sensitivity of
interest-earning assets and interest-bearing liabilities.
On a fully tax-equivalent basis, net interest income was
$165.1 million in 2010, an 8.8% increase from 2009 net
interest income of $151.7 million.
47
The following table presents the Companys average
balances, net interest income, interest rate spread, and net
interest margin for 2010, 2009, and 2008. Non-taxable income
from loans and securities is presented on a fully tax-equivalent
basis whereby tax-exempt income is adjusted upward by an amount
equivalent to the prevailing income taxes that would have been
paid if the income had been fully taxable.
Table
17 Average Balance, Interest
Earned/Paid & Average Yields
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
Average
|
|
|
Earned/
|
|
|
Average
|
|
|
Average
|
|
|
Earned/
|
|
|
Average
|
|
|
Average
|
|
|
Earned/
|
|
|
Average
|
|
|
|
Balance
|
|
|
Paid
|
|
|
Yield
|
|
|
Balance
|
|
|
Paid
|
|
|
Yield
|
|
|
Balance
|
|
|
Paid
|
|
|
Yield
|
|
|
|
(Dollars in thousands)
|
|
|
Interest-Earning Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Bearing Cash, Federal Funds Sold, and Short Term
Investments
|
|
$
|
132,019
|
|
|
$
|
337
|
|
|
|
0.26
|
%
|
|
$
|
67,296
|
|
|
$
|
290
|
|
|
|
0.43
|
%
|
|
$
|
5,908
|
|
|
$
|
148
|
|
|
|
2.51
|
%
|
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading Assets
|
|
|
7,225
|
|
|
|
262
|
|
|
|
3.63
|
%
|
|
|
12,126
|
|
|
|
239
|
|
|
|
1.97
|
%
|
|
|
3,060
|
|
|
|
140
|
|
|
|
4.58
|
%
|
Taxable Investment Securities
|
|
|
569,069
|
|
|
|
23,722
|
|
|
|
4.17
|
%
|
|
|
605,453
|
|
|
|
28,456
|
|
|
|
4.70
|
%
|
|
|
447,343
|
|
|
|
22,359
|
|
|
|
5.00
|
%
|
Non-Taxable Investment Securities(1)
|
|
|
15,877
|
|
|
|
1,138
|
|
|
|
7.17
|
%
|
|
|
22,671
|
|
|
|
1,457
|
|
|
|
6.43
|
%
|
|
|
41,203
|
|
|
|
2,597
|
|
|
|
6.30
|
%
|
Total Securities
|
|
|
592,171
|
|
|
|
25,122
|
|
|
|
4.24
|
%
|
|
|
640,250
|
|
|
|
30,152
|
|
|
|
4.71
|
%
|
|
|
491,606
|
|
|
|
25,096
|
|
|
|
5.10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Held for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans(2)
|
|
|
16,266
|
|
|
|
666
|
|
|
|
4.09
|
%
|
|
|
14,320
|
|
|
|
629
|
|
|
|
4.39
|
%
|
|
|
6,242
|
|
|
|
325
|
|
|
|
5.21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial
|
|
|
427,004
|
|
|
|
19,457
|
|
|
|
4.56
|
%
|
|
|
336,776
|
|
|
|
15,955
|
|
|
|
4.74
|
%
|
|
|
246,500
|
|
|
|
14,574
|
|
|
|
5.91
|
%
|
Commercial Real Estate
|
|
|
1,646,419
|
|
|
|
94,217
|
|
|
|
5.72
|
%
|
|
|
1,418,997
|
|
|
|
86,016
|
|
|
|
6.06
|
%
|
|
|
1,026,190
|
|
|
|
67,652
|
|
|
|
6.59
|
%
|
Commercial Construction
|
|
|
155,524
|
|
|
|
7,507
|
|
|
|
4.83
|
%
|
|
|
193,498
|
|
|
|
9,502
|
|
|
|
4.91
|
%
|
|
|
160,330
|
|
|
|
9,275
|
|
|
|
5.78
|
%
|
Small Business
|
|
|
81,091
|
|
|
|
4,829
|
|
|
|
5.96
|
%
|
|
|
85,567
|
|
|
|
5,143
|
|
|
|
6.01
|
%
|
|
|
81,459
|
|
|
|
5,771
|
|
|
|
7.08
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commercial
|
|
|
2,310,038
|
|
|
|
126,010
|
|
|
|
5.45
|
%
|
|
|
2,034,838
|
|
|
|
116,616
|
|
|
|
5.73
|
%
|
|
|
1,514,479
|
|
|
|
97,272
|
|
|
|
6.42
|
%
|
Residential Real Estate
|
|
|
525,203
|
|
|
|
25,235
|
|
|
|
4.80
|
%
|
|
|
542,758
|
|
|
|
27,333
|
|
|
|
5.04
|
%
|
|
|
406,565
|
|
|
|
21,329
|
|
|
|
5.25
|
%
|
Residential Construction
|
|
|
6,565
|
|
|
|
334
|
|
|
|
5.09
|
%
|
|
|
12,798
|
|
|
|
805
|
|
|
|
6.29
|
%
|
|
|
9,637
|
|
|
|
631
|
|
|
|
6.55
|
%
|
Consumer Home Equity
|
|
|
504,886
|
|
|
|
19,369
|
|
|
|
3.84
|
%
|
|
|
447,890
|
|
|
|
17,523
|
|
|
|
3.91
|
%
|
|
|
367,825
|
|
|
|
18,857
|
|
|
|
5.13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consumer Real Estate
|
|
|
1,036,654
|
|
|
|
44,938
|
|
|
|
4.33
|
%
|
|
|
1,003,446
|
|
|
|
45,661
|
|
|
|
4.55
|
%
|
|
|
784,027
|
|
|
|
40,817
|
|
|
|
5.21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Consumer
|
|
|
88,077
|
|
|
|
6,799
|
|
|
|
7.72
|
%
|
|
|
139,665
|
|
|
|
10,338
|
|
|
|
7.40
|
%
|
|
|
184,280
|
|
|
|
13,158
|
|
|
|
7.14
|
%
|
Total Loans
|
|
|
3,434,769
|
|
|
|
177,747
|
|
|
|
5.17
|
%
|
|
|
3,177,949
|
|
|
|
172,615
|
|
|
|
5.43
|
%
|
|
|
2,482,786
|
|
|
|
151,247
|
|
|
|
6.09
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest-Earning Assets
|
|
$
|
4,175,225
|
|
|
$
|
203,872
|
|
|
|
4.88
|
%
|
|
$
|
3,899,815
|
|
|
$
|
203,686
|
|
|
|
5.22
|
%
|
|
$
|
2,986,542
|
|
|
$
|
176,816
|
|
|
|
5.92
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Due from Banks
|
|
|
62,103
|
|
|
|
|
|
|
|
|
|
|
|
65,509
|
|
|
|
|
|
|
|
|
|
|
|
65,992
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank Stock
|
|
|
35,854
|
|
|
|
|
|
|
|
|
|
|
|
33,135
|
|
|
|
|
|
|
|
|
|
|
|
23,325
|
|
|
|
|
|
|
|
|
|
Other Assets
|
|
|
316,234
|
|
|
|
|
|
|
|
|
|
|
|
278,057
|
|
|
|
|
|
|
|
|
|
|
|
219,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
4,589,416
|
|
|
|
|
|
|
|
|
|
|
$
|
4,276,516
|
|
|
|
|
|
|
|
|
|
|
$
|
3,295,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Bearing Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings and Interest Checking Accounts
|
|
$
|
1,183,247
|
|
|
$
|
4,397
|
|
|
|
0.37
|
%
|
|
$
|
913,881
|
|
|
$
|
4,753
|
|
|
|
0.52
|
%
|
|
$
|
688,336
|
|
|
$
|
6,229
|
|
|
|
0.90
|
%
|
Money Market
|
|
|
739,264
|
|
|
|
4,565
|
|
|
|
0.62
|
%
|
|
|
639,231
|
|
|
|
6,545
|
|
|
|
1.02
|
%
|
|
|
472,065
|
|
|
|
9,182
|
|
|
|
1.95
|
%
|
Time Certificates of Deposits
|
|
|
814,462
|
|
|
|
11,292
|
|
|
|
1.39
|
%
|
|
|
921,787
|
|
|
|
19,865
|
|
|
|
2.16
|
%
|
|
|
740,779
|
|
|
|
23,485
|
|
|
|
3.17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest Bearing Deposits
|
|
|
2,736,973
|
|
|
|
20,254
|
|
|
|
0.74
|
%
|
|
|
2,474,899
|
|
|
|
31,163
|
|
|
|
1.26
|
%
|
|
|
1,901,180
|
|
|
|
38,896
|
|
|
|
2.05
|
%
|
Borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank Borrowings
|
|
|
318,151
|
|
|
|
9,589
|
|
|
|
3.01
|
%
|
|
|
409,551
|
|
|
|
11,519
|
|
|
|
2.81
|
%
|
|
|
312,451
|
|
|
|
10,714
|
|
|
|
3.43
|
%
|
Federal Funds Purchased and Assets Sold Under
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase Agreements
|
|
|
182,467
|
|
|
|
3,084
|
|
|
|
1.69
|
%
|
|
|
180,632
|
|
|
|
3,396
|
|
|
|
1.88
|
%
|
|
|
154,440
|
|
|
|
4,663
|
|
|
|
3.02
|
%
|
Junior Subordinated Debentures
|
|
|
61,857
|
|
|
|
3,666
|
|
|
|
5.93
|
%
|
|
|
61,857
|
|
|
|
3,739
|
|
|
|
6.04
|
%
|
|
|
60,166
|
|
|
|
3,842
|
|
|
|
6.39
|
%
|
Subordinated Debt
|
|
|
30,000
|
|
|
|
2,170
|
|
|
|
7.23
|
%
|
|
|
30,000
|
|
|
|
2,178
|
|
|
|
7.26
|
%
|
|
|
10,410
|
|
|
|
750
|
|
|
|
7.20
|
%
|
Other Borrowings
|
|
|
2,802
|
|
|
|
|
|
|
|
0.00
|
%
|
|
|
2,054
|
|
|
|
|
|
|
|
0.00
|
%
|
|
|
2,381
|
|
|
|
61
|
|
|
|
2.56
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Borrowings
|
|
|
595,277
|
|
|
|
18,509
|
|
|
|
3.11
|
%
|
|
|
684,094
|
|
|
|
20,832
|
|
|
|
3.05
|
%
|
|
|
539,848
|
|
|
|
20,030
|
|
|
|
3.71
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest-Bearing Liabilities
|
|
$
|
3,332,250
|
|
|
$
|
38,763
|
|
|
|
1.16
|
%
|
|
$
|
3,158,993
|
|
|
$
|
51,995
|
|
|
|
1.65
|
%
|
|
$
|
2,441,028
|
|
|
$
|
58,926
|
|
|
|
2.41
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand Deposits
|
|
|
773,718
|
|
|
|
|
|
|
|
|
|
|
|
659,916
|
|
|
|
|
|
|
|
|
|
|
|
533,543
|
|
|
|
|
|
|
|
|
|
Other Liabilities
|
|
|
58,199
|
|
|
|
|
|
|
|
|
|
|
|
54,697
|
|
|
|
|
|
|
|
|
|
|
|
28,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
4,164,167
|
|
|
|
|
|
|
|
|
|
|
$
|
3,873,606
|
|
|
|
|
|
|
|
|
|
|
$
|
3,003,263
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
425,249
|
|
|
|
|
|
|
|
|
|
|
|
402,910
|
|
|
|
|
|
|
|
|
|
|
|
292,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity
|
|
$
|
4,589,416
|
|
|
|
|
|
|
|
|
|
|
$
|
4,276,516
|
|
|
|
|
|
|
|
|
|
|
$
|
3,295,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income(1)
|
|
|
|
|
|
$
|
165,109
|
|
|
|
|
|
|
|
|
|
|
$
|
151,691
|
|
|
|
|
|
|
|
|
|
|
$
|
117,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Spread(3)
|
|
|
|
|
|
|
|
|
|
|
3.72
|
%
|
|
|
|
|
|
|
|
|
|
|
3.58
|
%
|
|
|
|
|
|
|
|
|
|
|
3.51
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Margin(4)
|
|
|
|
|
|
|
|
|
|
|
3.95
|
%
|
|
|
|
|
|
|
|
|
|
|
3.89
|
%
|
|
|
|
|
|
|
|
|
|
|
3.95
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Deposits, Including Demand Deposits
|
|
$
|
3,510,691
|
|
|
$
|
20,254
|
|
|
|
|
|
|
$
|
3,134,815
|
|
|
$
|
31,163
|
|
|
|
|
|
|
$
|
2,434,723
|
|
|
$
|
38,896
|
|
|
|
|
|
Cost of Total Deposits
|
|
|
|
|
|
|
|
|
|
|
0.58
|
%
|
|
|
|
|
|
|
|
|
|
|
0.99
|
%
|
|
|
|
|
|
|
|
|
|
|
1.60
|
%
|
Total Funding Liabilities, Including Demand Deposits
|
|
$
|
4,105,968
|
|
|
$
|
38,763
|
|
|
|
|
|
|
$
|
3,818,909
|
|
|
$
|
51,995
|
|
|
|
|
|
|
$
|
2,974,571
|
|
|
$
|
58,926
|
|
|
|
|
|
Cost of Total Funding Liabilities
|
|
|
|
|
|
|
|
|
|
|
0.94
|
%
|
|
|
|
|
|
|
|
|
|
|
1.36
|
%
|
|
|
|
|
|
|
|
|
|
|
1.98
|
%
|
48
|
|
|
(1) |
|
The total amount of adjustment to present interest income and
yield on a fully tax-equivalent basis is $1,148, $997 and $1,376
in 2010, 2009 and 2008, respectively. |
|
(2) |
|
Average nonaccruing loans are included in loans. |
|
(3) |
|
Interest rate spread represents the difference between the
weighted average yield on interest-earning assets and the
weighted average costs of interest-bearing liabilities. |
|
(4) |
|
Net interest margin represents net interest income as a
percentage of average interest-earning assets. |
The following table presents certain information on a fully-tax
equivalent basis regarding changes in the Companys
interest income and interest expense for the periods indicated.
For each category of interest-earning assets and
interest-bearing liabilities, information is provided with
respect to changes attributable to (1) changes in rate
(change in rate multiplied by prior year volume),
(2) changes in volume (change in volume multiplied by prior
year rate) and (3) changes in volume/rate (change in rate
multiplied by change in volume) which is allocated to the change
due to rate column.
Table
18 Volume Rate Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010 Compared To 2009
|
|
|
2009 Compared To 2008
|
|
|
2008 Compared To 2007
|
|
|
|
Change
|
|
|
Change
|
|
|
|
|
|
Change
|
|
|
Change
|
|
|
|
|
|
Change
|
|
|
Change
|
|
|
|
|
|
|
Due to
|
|
|
Due to
|
|
|
Total
|
|
|
Due to
|
|
|
Due to
|
|
|
Total
|
|
|
Due to
|
|
|
Due to
|
|
|
Total
|
|
|
|
Rate(1)
|
|
|
Volume
|
|
|
Change
|
|
|
Rate(1)
|
|
|
Volume
|
|
|
Change
|
|
|
Rate(1)
|
|
|
Volume
|
|
|
Change
|
|
|
|
(Dollars in thousands)
|
|
|
Income on Interest-Earning Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Bearing Cash, Federal Funds Sold and Short Term
Investments
|
|
$
|
(232
|
)
|
|
$
|
279
|
|
|
$
|
47
|
|
|
$
|
(1,396
|
)
|
|
$
|
1,538
|
|
|
$
|
142
|
|
|
$
|
(178
|
)
|
|
$
|
(1,142
|
)
|
|
$
|
(1,320
|
)
|
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading Assets
|
|
|
120
|
|
|
|
(97
|
)
|
|
|
23
|
|
|
|
(316
|
)
|
|
|
415
|
|
|
|
99
|
|
|
|
53
|
|
|
|
39
|
|
|
|
92
|
|
Taxable Securities
|
|
|
(3,024
|
)
|
|
|
(1,710
|
)
|
|
|
(4,734
|
)
|
|
|
(1,806
|
)
|
|
|
7,903
|
|
|
|
6,097
|
|
|
|
822
|
|
|
|
1,791
|
|
|
|
2,613
|
|
Non-Taxable Securities(2)
|
|
|
118
|
|
|
|
(437
|
)
|
|
|
(319
|
)
|
|
|
28
|
|
|
|
(1,168
|
)
|
|
|
(1,140
|
)
|
|
|
(50
|
)
|
|
|
(641
|
)
|
|
|
(691
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Securities
|
|
|
(2,786
|
)
|
|
|
(2,244
|
)
|
|
|
(5,030
|
)
|
|
|
(2,094
|
)
|
|
|
7,150
|
|
|
|
5,056
|
|
|
|
825
|
|
|
|
1,189
|
|
|
|
2,014
|
|
Loans Held for Sale
|
|
|
(48
|
)
|
|
|
85
|
|
|
|
37
|
|
|
|
(117
|
)
|
|
|
421
|
|
|
|
304
|
|
|
|
26
|
|
|
|
(34
|
)
|
|
|
(8
|
)
|
Loans(2)(3)
|
|
|
(8,818
|
)
|
|
|
13,950
|
|
|
|
5,132
|
|
|
|
(20,980
|
)
|
|
|
42,348
|
|
|
|
21,368
|
|
|
|
(18,037
|
)
|
|
|
33,743
|
|
|
|
15,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(11,884
|
)
|
|
$
|
12,070
|
|
|
$
|
186
|
|
|
$
|
(24,587
|
)
|
|
$
|
51,457
|
|
|
$
|
26,870
|
|
|
$
|
(17,364
|
)
|
|
$
|
33,756
|
|
|
$
|
16,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense of Interest-Bearing Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings and Interest Checking Accounts
|
|
$
|
(1,757
|
)
|
|
$
|
1,401
|
|
|
$
|
(356
|
)
|
|
$
|
(3,517
|
)
|
|
$
|
2,041
|
|
|
$
|
(1,476
|
)
|
|
$
|
(3,021
|
)
|
|
$
|
1,519
|
|
|
$
|
(1,502
|
)
|
Money Market
|
|
|
(3,004
|
)
|
|
|
1,024
|
|
|
|
(1,980
|
)
|
|
|
(5,888
|
)
|
|
|
3,251
|
|
|
|
(2,637
|
)
|
|
|
(4,894
|
)
|
|
|
287
|
|
|
|
(4,607
|
)
|
Time Certificates of Deposits
|
|
|
(6,260
|
)
|
|
|
(2,313
|
)
|
|
|
(8,573
|
)
|
|
|
(9,359
|
)
|
|
|
5,739
|
|
|
|
(3,620
|
)
|
|
|
(7,371
|
)
|
|
|
8,737
|
|
|
|
1,366
|
|
Total Interest-Bearing Deposits
|
|
|
(11,021
|
)
|
|
|
112
|
|
|
|
(10,909
|
)
|
|
|
(18,764
|
)
|
|
|
11,031
|
|
|
|
(7,733
|
)
|
|
|
(15,286
|
)
|
|
|
10,543
|
|
|
|
(4,743
|
)
|
Borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank Borrowings
|
|
|
641
|
|
|
|
(2,571
|
)
|
|
|
(1,930
|
)
|
|
|
(2,525
|
)
|
|
|
3,330
|
|
|
|
805
|
|
|
|
(3,178
|
)
|
|
|
2,576
|
|
|
|
(602
|
)
|
Federal Funds Purchased and Assets Sold Under Repurchase
Agreements
|
|
|
(346
|
)
|
|
|
34
|
|
|
|
(312
|
)
|
|
|
(2,058
|
)
|
|
|
791
|
|
|
|
(1,267
|
)
|
|
|
(132
|
)
|
|
|
1,400
|
|
|
|
1,268
|
|
Junior Subordinated Debentures
|
|
|
(73
|
)
|
|
|
|
|
|
|
(73
|
)
|
|
|
(211
|
)
|
|
|
108
|
|
|
|
(103
|
)
|
|
|
(1,224
|
)
|
|
|
18
|
|
|
|
(1,206
|
)
|
Subordinated Debt
|
|
|
(8
|
)
|
|
|
|
|
|
|
(8
|
)
|
|
|
17
|
|
|
|
1,411
|
|
|
|
1,428
|
|
|
|
750
|
|
|
|
|
|
|
|
750
|
|
Other Borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53
|
)
|
|
|
(8
|
)
|
|
|
(61
|
)
|
|
|
(81
|
)
|
|
|
(15
|
)
|
|
|
(96
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Borrowings
|
|
|
214
|
|
|
|
(2,537
|
)
|
|
|
(2,323
|
)
|
|
|
(4,830
|
)
|
|
|
5,632
|
|
|
|
802
|
|
|
|
(3,865
|
)
|
|
|
3,979
|
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(10,807
|
)
|
|
$
|
(2,425
|
)
|
|
$
|
(13,232
|
)
|
|
$
|
(23,594
|
)
|
|
$
|
16,663
|
|
|
$
|
(6,931
|
)
|
|
$
|
(19,151
|
)
|
|
$
|
14,522
|
|
|
$
|
(4,629
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Net Interest Income
|
|
$
|
(1,077
|
)
|
|
$
|
14,495
|
|
|
$
|
13,418
|
|
|
$
|
(993
|
)
|
|
$
|
34,794
|
|
|
$
|
33,801
|
|
|
$
|
1,787
|
|
|
$
|
19,234
|
|
|
$
|
21,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The changes for each category of interest income and expense are
divided between the portion of change attributable to the
variance in volume and the portion of the change attributable to
the variances in rate for that category. The unallocated change
in rate or volume variance has been allocated to the rate
variances. |
|
(2) |
|
The total amount of adjustment to present interest income and
yield on a fully tax-equivalent basis is $1,148, $997 and $1,376
in 2010, 2009 and 2008, respectively. |
49
|
|
|
(3) |
|
Loans include portfolio loans and nonaccrual loans, however
unpaid interest on nonaccrual loans has not been included for
purposes of determining interest income. |
The increase in net interest income is driven mainly by
reductions in the Companys overall cost of funding,
stemming from the Companys strategy to create a funding
mix that focuses on core deposits. Although loan balances
(including held for sale) increased by $174.6 million, a
decline in the size of and yield on the securities portfolio, as
well as a reduction in loan yields, reduced overall growth in
interest income.
Interest expense for the year ended December 31, 2010
decreased to $38.8 million from the $52.0 million
recorded in 2009, a decrease of $13.2 million, or 25.4%, of
which $11.0 million is due to the decrease in rates on
deposits. The total cost of funds decreased 42 basis points
to 0.94% for 2010 as compared to 1.36% for 2009. Average
interest-bearing deposits increased $262.1 million, or
10.6%, over the prior year while the cost of these deposits
decreased from 1.26% to 0.74% primarily attributable to the
active management of deposit costs.
Average borrowings decreased in 2010 by $88.8 million, or
13.0%, from the 2009 average balance. The average cost of
borrowings increased to 3.11% from 3.05%.
Provision For Loan Losses The provision for
loan losses represents the charge to expense that is required to
maintain an adequate level of allowance for loan losses. The
provision for loan losses totaled $18.7 million in 2010,
compared with $17.3 million in 2009, an increase of
$1.3 million. The Companys allowance for loan losses,
as a percentage of total loans, was 1.30%, as compared to 1.25%
at December 31, 2009. For the year ended December 31,
2010, net loan charge-offs totaled $14.8 million, an
increase of $2.7 million from the prior year.
The increase in the amount of the provision for loan losses is
the result of a combination of factors including: shifting
growth rates among various components of the Banks loan
portfolio with differing facets of risk; higher levels of net
loan charge-offs; and continued uncertainty with respect to the
economic environment. While the total loan portfolio increased
by 4.7% for the year ended December 31, 2010, as compared
to 2.1% organic growth, excluding the impact of acquisition, for
2009, growth among the commercial components of 8.2% continued
to outpace the consumer lending components which decreased 2.0%.
These lending categories each exhibit different credit risk
characteristics.
While the economic environment remains challenging, regional and
local general economic conditions showed improvement during
2010, as measured in terms of employment levels, statewide
economic activity, and other regional economic indicators. Local
residential real estate markets fundamentals weakened toward the
end of the year, resulting from the expiration of the Federal
Housing Tax Credit earlier in 2010. Additionally, Massachusetts
foreclosures increased in 2010 compared to 2009, although
activity slowed toward the end of the year. Regional commercial
real estate market conditions were mixed during 2010, with some
areas experiencing a slow recovery, while others were
characterized by higher vacancy rates and negative absorption.
Leading economic indicators signal continued economic
improvement in 2011, however uncertainty persists and growth is
expected to be slow.
Managements periodic evaluation of the adequacy of the
allowance for loan losses considers past loan loss experience,
known and inherent risks in the loan portfolio, adverse
situations which may affect the borrowers ability to
repay, the estimated value of the underlying collateral, if any,
and current and prospective economic conditions. Substantial
portions of the Banks loans are secured by real estate in
Massachusetts. Accordingly, the ultimate collectability of a
substantial portion of the Banks loan portfolio is
susceptible to changes in property values within the state.
50
Non-Interest Income The following table sets
forth information regarding non-interest income for the periods
shown:
Table
19 Non-Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Service charges on deposit accounts
|
|
$
|
18,708
|
|
|
$
|
17,060
|
|
|
$
|
15,595
|
|
Wealth management
|
|
|
11,723
|
|
|
|
10,047
|
|
|
|
11,133
|
|
Mortgage banking
|
|
|
5,041
|
|
|
|
4,857
|
|
|
|
3,072
|
|
Bank owned life insurance
|
|
|
3,192
|
|
|
|
2,939
|
|
|
|
2,555
|
|
Net gain/(loss) on sales of securities
|
|
|
458
|
|
|
|
1,354
|
|
|
|
(609
|
)
|
Gain resulting from early termination of hedging relationship
|
|
|
|
|
|
|
3,778
|
|
|
|
|
|
Loan level derivatives
|
|
|
3,000
|
|
|
|
5,436
|
|
|
|
|
|
Gross change on write-down of certain investments to fair value
|
|
|
497
|
|
|
|
(7,382
|
)
|
|
|
(7,211
|
)
|
Less: non-credit related
other-than-temporary
impairment(1)
|
|
|
(831
|
)
|
|
|
(1,576
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss on write-down of certain investments to fair value
|
|
|
(334
|
)
|
|
|
(8,958
|
)
|
|
|
(7,211
|
)
|
Other non-interest income
|
|
|
5,118
|
|
|
|
1,679
|
|
|
|
4,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
46,906
|
|
|
$
|
38,192
|
|
|
$
|
29,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents losses previously recognized in other comprehensive
income not determined to be credit related. |
Non-interest income, which is generated by deposit account
service charges, investment management services, mortgage
banking activities, BOLI, and miscellaneous other sources,
amounted to $46.9 million in 2010, a $8.7 million, or
22.8%, increase from the prior year.
Service charges on deposit accounts, which represented 39.9% of
total non-interest income in 2010, increased from
$17.1 million in 2009 to $18.7 million in 2010, mainly
due to service charges related to debit card usage and overdraft
privileges on checking accounts.
Wealth management revenue increased by $1.7 million, or
16.7%, for the year ended December 31, 2010, as compared to
the same period in 2009. Assets under administration at
December 31, 2010 were $1.6 billion, an increase of
$295.8 million, or 23.2%, as compared to December 31,
2009. This increase is largely due to strong sales results and
general market appreciation.
Mortgage banking revenue of $5.0 million in 2010, increased
by 3.8% from the $4.9 million recorded in 2009. Capitalized
servicing rights are reported as mortgage servicing rights and
are amortized into non-interest income in proportion to, and
over the period of, the estimated future servicing of the
underlying financial assets. The Banks assumptions with
respect to prepayments, which affect the estimated average life
of the loans, are adjusted periodically to consider market
consensus loan prepayment predictions at that date. At
December 31, 2010 the mortgage servicing rights asset
totaled $1.6 million, or 0.63% of the serviced loan
portfolio. At December 31, 2009 the mortgage servicing
rights asset totaled $2.2 million, or 0.63%, of the
serviced loan portfolio.
A $458,000 net gain on the sale of securities was recorded
for the year ended December 31, 2010 as compared to a
$1.4 million net gain on the sale of securities for the
year ended December 31, 2009.
The Company recorded total credit related impairment charges on
certain pooled trust preferred securities and one private
mortgage-backed securities of $334,000 and $9.0 million,
pre-tax, for the years ended December 31, 2010 and
December 31, 2009, respectively.
Other non-interest income increased by $1.0 million, or
14.1%, for the year ended December 31, 2010, as compared to
the same period in 2009, largely attributable to increases in
income from the Companys loan level derivatives program.
51
Non-Interest Expense The following table sets
forth information regarding non-interest expense for the periods
shown:
Table
20 Non-Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Salaries and employee benefits
|
|
$
|
76,983
|
|
|
$
|
68,257
|
|
|
$
|
58,275
|
|
Occupancy and equipment expenses
|
|
|
16,011
|
|
|
|
15,673
|
|
|
|
12,757
|
|
Data processing and facilities management
|
|
|
5,773
|
|
|
|
5,779
|
|
|
|
5,574
|
|
Merger and acquisition expense
|
|
|
|
|
|
|
12,423
|
|
|
|
1,120
|
|
FDIC assessment
|
|
|
5,247
|
|
|
|
6,975
|
|
|
|
1,388
|
|
Legal fees
|
|
|
3,277
|
|
|
|
2,961
|
|
|
|
1,154
|
|
Consulting
|
|
|
2,523
|
|
|
|
1,951
|
|
|
|
1,852
|
|
Advertising
|
|
|
2,171
|
|
|
|
2,199
|
|
|
|
2,016
|
|
Telephone
|
|
|
2,101
|
|
|
|
2,635
|
|
|
|
1,694
|
|
Other intangibles amortization
|
|
|
2,080
|
|
|
|
2,539
|
|
|
|
1,803
|
|
Software maintenance
|
|
|
1,963
|
|
|
|
1,862
|
|
|
|
1,486
|
|
Other non-interest expense
|
|
|
21,616
|
|
|
|
18,561
|
|
|
|
15,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
139,745
|
|
|
$
|
141,815
|
|
|
$
|
104,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense decreased by $2.1 million, or 1.5%,
during the year ended December 31, 2010 as compared to the
same period in 2009. Excluding the merger and acquisition
expense, associated with the Ben Franklin acquisition in 2009,
the primary reason for the increase in non-interest expense by
category in the table shown above is the annualized impact of
the Ben Franklin acquisition, other variance explanations are
noted below:
Salaries and employee benefits increased by $8.7 million,
or 12.8%, for the year ended December 31, 2010, as compared
to the same period in 2009, attributable to the addition of
employees as a result of Ben Franklin acquisition in April 2009,
as well as higher levels of performance based incentive
compensation, pension expense, and medical insurance increases.
There were no merger and acquisition expenses for the year ended
December 31, 2010. Merger and acquisition related
expenditures totaled $12.4 million for the year ended
December 31, 2009, associated with the Ben Franklin
acquisition in April 2009.
Total other non-interest expense increased by $3.0 million,
or 9.2%, for the year ended December 31, 2010, as compared
to the same period in 2009. The increase is primarily
attributable to the increases in loan level derivative expense
of $945,000, computer software write-off of $560,000, consultant
fees of $572,000, and loan work-out costs of $427,000, offset by
decreases in telephone expense of $534,000.
Income Taxes For the years ended
December 31, 2010, 2009, and 2008 the Company recorded
combined federal and state income tax provisions of
$12.2 million, $6.7 million and $6.6 million,
respectively. These provisions reflect effective income tax
rates of 23.3%, 22.7% and 21.5%, in 2010, 2009, and 2008,
respectively, which are less than the Banks blended 2010
federal and state statutory tax rate of 40.9%. The lower
effective income tax rates are attributable to certain tax
preference assets such as BOLI and tax exempt bonds as well as
federal tax credits recognized in connection with the New
Markets Tax Credit (NMTC) program. Effective
July 1, 2008 Massachusetts state legislation was passed
which enacted corporate tax reform. As a result of this new
legislation, the state tax rate is being reduced 1.5% over a
three year period which began on January 1, 2010.
Deferred tax assets generally represent items that can be used
as a tax deduction or credit in future income tax returns, for
which a financial statement tax benefit has already been
recognized. The realization of the net deferred tax asset
generally depends upon future levels of taxable income and the
existence of prior years taxable income to which
carry-back refund claims could be made. Valuation
allowances are established against those deferred tax
52
assets determined not likely to be realized. The Company had no
recorded tax valuation allowance as of December 31, 2010
and 2009.
The Company has several wholly-owned community development
entity subsidiaries which are described above in the
General section of Item 1 Business.
These entities provide financing to low income communities and
as a result the Company has been awarded tax credits under the
New Markets Tax Credit program.
To date the Company has been awarded a total of
$125.0 million in tax credit allocation authority under the
Federal New Markets Tax Credit Program. Tax credits are eligible
to be recognized over a seven year period totaling 39% of the
total award, as capital is invested into a subsidiary which will
lend to qualifying businesses in low income communities.
Accordingly, the Company will be eligible to receive aggregate
tax credits totaling $48.8 million. The tax effect of all
income and expense transactions is recognized by the Company in
each years consolidated statements of income, regardless
of the year in which the transactions are reported for income
tax purposes. The following table details the tax credit
recognition by year associated with this program:
Table
21 New Markets Tax Credit Recognition
Schedule
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Investment
|
|
|
2004 - 2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
Credits
|
|
|
|
(Dollars in thousands)
|
|
|
2004
|
|
$
|
15 M
|
|
|
$
|
4,950
|
|
|
$
|
900
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5,850
|
|
2005
|
|
|
15 M
|
|
|
|
4,050
|
|
|
|
900
|
|
|
|
900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,850
|
|
2007
|
|
|
38.2 M
|
|
|
|
5,730
|
|
|
|
2,292
|
|
|
|
2,292
|
|
|
|
2,292
|
|
|
|
2,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,898
|
|
2008
|
|
|
6.8 M
|
|
|
|
680
|
|
|
|
340
|
|
|
|
408
|
|
|
|
408
|
|
|
|
408
|
|
|
|
408
|
|
|
|
|
|
|
|
|
|
|
|
2,652
|
|
2009
|
|
|
10 M
|
|
|
|
500
|
|
|
|
500
|
|
|
|
500
|
|
|
|
600
|
|
|
|
600
|
|
|
|
600
|
|
|
|
600
|
|
|
|
|
|
|
|
3,900
|
|
2010
|
|
|
40 M
|
|
|
|
|
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
2,400
|
|
|
|
2,400
|
|
|
|
2,400
|
|
|
|
2,400
|
|
|
|
15,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
125 M
|
|
|
$
|
15,910
|
|
|
$
|
6,932
|
|
|
$
|
6,100
|
|
|
$
|
5,300
|
|
|
$
|
5,700
|
|
|
$
|
3,408
|
|
|
$
|
3,000
|
|
|
$
|
2,400
|
|
|
$
|
48,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
&n |