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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2007
Commission File Number: 1-9047
Independent Bank Corp.
(Exact name of registrant as specified in its charter)
     
Massachusetts   04-2870273
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
288 Union Street, Rockland, Massachusetts 02370
(Address of principal executive offices, including zip code)
(781) 878-6100
(Registrant’s telephone number, including area code)
     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ      No o
     Indicate by check mark whether the registrant is a large accelerated filer; an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act) (check one).
Large Accelerated Filer o      Accelerated Filer þ      Non-accelerated Filer o
     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
     As of August 1, 2007, there were 13,800,543 shares of the issuer’s common stock outstanding, par value $0.01 per share.
 
 

 


 

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    53  
 Ex-31.1 Section 302 Certification of the CEO
 Ex-31.2 Section 302 Certification of the CFO
 Ex-32.1 Section 906 Certification of the CEO
 Ex-32.2 Section 906 Certification of the CFO

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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
INDEPENDENT BANK CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited- Dollars in Thousands, Except Share and Per Share Amounts)
                 
    June 30,   December 31,
    2007   2006
 
ASSETS
               
CASH AND DUE FROM BANKS
  $ 62,208     $ 62,773  
FEDERAL FUNDS SOLD AND SHORT TERM INVESTMENTS
    1,000       75,518  
SECURITIES
               
TRADING ASSETS
    1,703       1,758  
SECURITIES AVAILABLE FOR SALE
    394,915       417,088  
SECURITIES HELD TO MATURITY (fair value $48,045 and $78,038)
    47,568       76,747  
FEDERAL HOME LOAN BANK STOCK
    16,260       21,710  
 
TOTAL SECURITIES
    460,446       517,303  
 
LOANS
               
COMMERCIAL AND INDUSTRIAL
    172,383       174,356  
COMMERCIAL REAL ESTATE
    751,142       740,517  
COMMERCIAL CONSTRUCTION
    116,029       119,685  
BUSINESS BANKING
    66,109       59,910  
RESIDENTIAL REAL ESTATE
    343,416       378,368  
RESIDENTIAL CONSTRUCTION
    5,675       7,277  
RESIDENTIAL LOANS HELD FOR SALE
    10,841       11,859  
CONSUMER — HOME EQUITY
    288,271       277,015  
CONSUMER — AUTO
    178,895       206,845  
CONSUMER — OTHER
    48,209       49,077  
 
TOTAL LOANS
    1,980,970       2,024,909  
LESS: ALLOWANCE FOR LOAN LOSSES
    (26,650 )     (26,815 )
 
NET LOANS
    1,954,320       1,998,094  
 
BANK PREMISES AND EQUIPMENT, NET
    38,020       37,316  
GOODWILL
    57,156       55,078  
CORE DEPOSIT INTANGIBLES
    1,296       1,457  
MORTGAGE SERVICING RIGHTS
    2,261       2,439  
BANK OWNED LIFE INSURANCE
    48,188       45,759  
OTHER ASSETS
    33,603       33,182  
 
TOTAL ASSETS
  $ 2,658,498     $ 2,828,919  
 
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
DEPOSITS
               
DEMAND DEPOSITS
  $ 500,924     $ 490,036  
SAVINGS AND INTEREST CHECKING ACCOUNTS
    580,897       577,443  
MONEY MARKET
    444,787       455,737  
TIME CERTIFICATES OF DEPOSIT OVER $100,000
    169,038       179,154  
OTHER TIME CERTIFICATES OF DEPOSIT
    356,441       387,974  
 
TOTAL DEPOSITS
    2,052,087       2,090,344  
 
FEDERAL HOME LOAN BANK BORROWINGS
    231,215       305,128  
FEDERAL FUNDS PURCHASED AND ASSETS SOLD UNDER REPURCHASE AGREEMENTS
    94,199       108,248  
JUNIOR SUBORDINATED DEBENTURES
    51,547       77,320  
TREASURY TAX AND LOAN NOTES
    1,070       2,953  
 
TOTAL BORROWINGS
    378,031       493,649  
 
OTHER LIABILITIES
    16,318       15,143  
 
TOTAL LIABILITIES
  $ 2,446,436     $ 2,599,136  
 
COMMITMENTS AND CONTINGENCIES
               
STOCKHOLDERS’ EQUITY
               
PREFERRED STOCK, $0.01 par value. Authorized: 1,000,000 Shares
Outstanding: None
  $     $  
COMMON STOCK, $0.01 par value. Authorized: 30,000,000
Issued and Outstanding: 13,907,543 Shares at June 30, 2007 and 14,686,481 Shares at December 31, 2006
    139       147  
SHARES HELD IN RABBI TRUST AT COST
166,447 Shares at June 30, 2007 and 168,961 Shares at December 31, 2006
    (1,866 )     (1,786 )
DEFERRED COMPENSATION OBLIGATION
    1,866       1,786  
ADDITIONAL PAID IN CAPITAL
    60,411       60,181  
RETAINED EARNINGS
    157,983       175,146  
ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX
    (6,471 )     (5,691 )
 
TOTAL STOCKHOLDERS’ EQUITY
    212,062       229,783  
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 2,658,498     $ 2,828,919  
 
The accompanying notes are an integral part of these consolidated financial statements.

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INDEPENDENT BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in Thousands, Except Share and Per Share Data)
                                 
    THREE MONTHS ENDED   SIX MONTHS ENDED
    June 30,   June 30,
    2007   2006   2007   2006
     
INTEREST INCOME
                               
Interest on Loans
  $ 33,788     $ 34,082     $ 67,487     $ 66,786  
Taxable Interest and Dividends on Securities
    4,984       6,411       10,400       13,639  
Non-taxable Interest and Dividends on Securities
    542       662       1,106       1,332  
Interest on Federal Funds Sold and Short-Term Investments
    289       52       733       152  
         
Total Interest and Dividend Income
    39,603       41,207       79,726       81,909  
           
INTEREST EXPENSE
                               
Interest on Deposits
    10,816       9,404       21,910       17,864  
Interest on Borrowings
    5,354       5,994       10,395       11,929  
         
Total Interest Expense
    16,170       15,398       32,305       29,793  
           
Net Interest Income
    23,433       25,809       47,421       52,116  
     
PROVISION FOR LOAN LOSSES
    584       350       1,475       1,100  
           
Net Interest Income After Provision For Loan Losses
    22,849       25,459       45,946       51,016  
           
NON-INTEREST INCOME
                               
Service Charges on Deposit Accounts
    3,531       3,565       6,941       6,983  
Wealth Management
    2,180       1,704       3,994       3,059  
Mortgage Banking Income, Net
    820       650       1,594       1,468  
Bank Owned Life Insurance Income
    427       506       915       2,250  
Net (Loss) on Sales of Securities Available for Sale
                      (1,769 )
Other Non-Interest Income
    1,081       797       2,388       1,651  
     
Total Non-Interest Income
    8,039       7,222       15,832       13,642  
           
NON-INTEREST EXPENSE
                               
Salaries and Employee Benefits
    13,013       12,072       26,166       23,937  
Occupancy and Equipment Expenses
    2,607       2,526       5,161       5,239  
Data Processing and Facilities Management
    1,202       1,036       2,290       2,096  
Other Non-Interest Expense
    6,444       5,012       11,102       9,846  
     
Total Non-Interest Expense
    23,266       20,646       44,719       41,118  
           
INCOME BEFORE INCOME TAXES
    7,622       12,035       17,059       23,540  
PROVISION FOR INCOME TAXES
    1,908       3,745       4,720       7,346  
     
NET INCOME
  $ 5,714     $ 8,290     $ 12,339     $ 16,194  
           
BASIC EARNINGS PER SHARE
  $ 0.41     $ 0.55     $ 0.86     $ 1.07  
           
DILUTED EARNINGS PER SHARE
  $ 0.40     $ 0.55     $ 0.86     $ 1.06  
           
 
                               
Weighted average common shares (Basic)
    14,101,468       14,999,127       14,282,226       15,159,252  
Common share equivalents
    129,796       162,747       146,097       159,472  
           
Weighted average common shares (Diluted)
    14,231,264       15,161,874       14,428,323       15,318,724  
           
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited - Dollars in Thousands, Except Share and Per Share Data)
                                                                 
                                                    ACCUMULATED    
    COMMON           SHARES   DEFERRED   ADDITIONAL           OTHER    
    SHARES   COMMON   HELD IN   COMPENSATION   PAID-IN   RETAINED   COMPREHENSIVE    
    OUTSTANDING   STOCK   RABBI TRUST   OBLIGATION   CAPITAL   EARNINGS   (LOSS)   TOTAL
 
BALANCE DECEMBER 31, 2005
    15,402,391     $ 154       ($1,577 )   $ 1,577     $ 59,700     $ 175,284       ($6,986 )   $ 228,152  
 
Net Income
                                            32,851               32,851  
Cash Dividends Declared ($0.64 per share)
                                            (9,514 )             (9,514 )
Purchases and Retirements of Common Stock
    (800,000 )     (8 )                             (24,818 )             (24,826 )
Proceeds From Exercise of Stock Options
    82,118       1                               1,343               1,344  
Excess Tax Benefit Related to Equity Award Activity
                                    326                       326  
Equity Based Compensation
                                    159                       159  
Restricted Shares Issued
    1,972                               (4 )                     (4 )
Change in Fair Value of Derivatives During Period, Net of Tax, and Realized Gains
                                                    (909 )     (909 )
Deferred Compensation Obligation
                    (209 )     209                                
Adjustments or reduction of amortization amounts recognized as a component of net periodic post retirement cost , net of tax
                                                    (413 )     (413 )
Change in Unrealized Gain on Securities Available For Sale, Net of Tax and Realized Gains
                                                    2,617       2,617  
 
BALANCE DECEMBER 31, 2006
    14,686,481     $ 147       ($1,786 )   $ 1,786     $ 60,181     $ 175,146       ($5,691 )   $ 229,783  
 
Net Income
                                            12,339               12,339  
Cash Dividends Declared ($0.34 per share)
                                            (4,824 )             (4,824 )
Purchases and Retirements of Common Stock
    (805,747 )     (8 )                             (25,284 )             (25,292 )
Proceeds From Exercise of Stock Options
    25,209                                     429               429  
Excess Tax Benefit Related to Equity Award Activity
                                    43                       43  
Equity Based Compensation
                                    187                       187  
Restricted Shares Issued
    1,600                                                    
Change in Fair Value of Derivatives During Period, Net of Tax, and Realized Gains
                                                    718       718  
Deferred Compensation Obligation
                    (80 )     80                                
Cumulative Effect of Accounting Change (Adoption of FIN No. 48)
                                            177               177  
Amortization of Certain Costs Included in Net Periodic Pension Costs, net of tax
                                                    55       55  
Change in Unrealized Gain on Securities Available For Sale, Net of Tax and Realized Gains
                                                    (1,553 )     (1,553 )
 
BALANCE JUNE 30, 2007
    13,907,543     $ 139       ($1,866 )   $ 1,866     $ 60,411     $ 157,983       ($6,471 )   $ 212,062  
 
The accompanying notes are an integral part of these consolidated financial statements.

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INDEPENDENT BANK CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - Dollars in Thousands)
                 
    SIX MONTHS ENDED
    JUNE 30,
    2007   2006
 
CASH FLOWS FROM OPERATING ACTIVITIES:
               
Net Income
  $ 12,339     $ 16,194  
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED FROM OPERATING ACTIVITIES:
               
Depreciation and Amortization
    3,221       2,865  
Provision for Loan Losses
    1,475       1,100  
Deferred income tax benefit
    (506 )     (1,415 )
Mortgage loans originated for resale
    (100,983 )     (79,470 )
Proceeds from Mortgage loan sales
    102,360       76,446  
Gain on sale of Mortgages
    (359 )     (645 )
Proceeds from Bank Owned Life Insurance
          (1,316 )
Loss on sale of Securities
          1,769  
Other Real Estate Owned
    (305 )      
Gain on sale of Other Real Estate Owned
    (43 )      
Gain recorded from Mortgage Servicing Rights, net of amortization
    178       186  
Stock Based Compensation expense
    187       81  
Changes in Assets and Liabilities:
               
(Increase) decrease in Other Assets
    (1,342 )     3,745  
Increase (decrease) in Other Liabilities
    1,150       (1,046 )
 
TOTAL ADJUSTMENTS
    5,033       2,300  
 
NET CASH PROVIDED FROM OPERATING ACTIVITIES
    17,372       18,494  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Proceeds from maturities and principal repayments of Securities Held to Maturity
    28,374       4,227  
Proceeds from maturities and principal repayments and sales of Securities Available For Sale
    30,270       69,109  
Purchase of Securities Available For Sale
    (10,502 )      
Net change in Federal Funds Sold and Short Term Investments
    74,518       48,617  
Redemption of Federal Home Loan Bank Stock
    5,450       6,653  
Net decrease (increase) in Loans
    41,282       (3,651 )
Cash paid for acquisition of CEA LLC
    (2,097 )      
Investment in Bank Premises and Equipment
    (2,893 )     (2,029 )
Proceeds from sale of OREO
    233        
 
NET CASH PROVIDED FROM INVESTING ACTIVITIES
    164,635       122,926  
 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Net (decrease)/ increase in Time Certificates of Deposits
    (41,649 )     40,030  
Net increase/ (decrease) in Other Deposits
    3,392       (68,163 )
Net decrease/ (increase) in Federal Funds Purchased and Assets Sold Under Repurchase Agreements
    (14,049 )     1,432  
Net decrease in Federal Home Loan Bank Borrowings
    (73,913 )     (77,058 )
Net decrease in Treasury Tax and Loan Notes
    (1,883 )     (3,108 )
Redemption of Junior Subordinated Debentures
    (25,773 )      
Amortization/ write-off of issuance costs
    922       44  
Proceeds from exercise of stock options
    429       1,019  
Excess tax benefit related to equity award activity
    43       223  
Payments for purchases and retirements of Common Stock
    (25,292 )     (22,024 )
Dividends paid
    (4,799 )     (4,767 )
 
NET CASH USED IN FINANCING ACTIVITIES
    (182,572 )     (132,372 )
 
NET DECREASE IN CASH AND CASH EQUIVALENTS
    (565 )     9,048  
 
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD
    62,773       66,289  
 
CASH AND CASH EQUIVALENTS AS OF JUNE 30,
  $ 62,208     $ 75,337  
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
               
Cash paid during the six months for:
               
Interest on deposits and borrowings
  $ 31,893     $ 29,701  
Income taxes
    6,709       7,377  
Noncash investing and financing activities:
               
Change in fair value of derivatives, net of tax and realized gains
    718       1,668  
Change in fair value of securities available for sale, net of tax and realized gains
    (1,553 )     (4,239 )
Adjustments or reduction of amortization amounts recognized as a component of net periodic post retirement cost , net of tax
    55        
Cumulative Effect of Accounting Change (Adoption of FIN No. 48)
    177        
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

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CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — BASIS OF PRESENTATION
     Independent Bank Corp. (the “Company”) is a state chartered, federally registered bank holding company headquartered in Rockland, Massachusetts, incorporated in 1985. The Company is the sole stockholder of Rockland Trust Company (“Rockland” or the “Bank”), a Massachusetts trust company chartered in 1907. The Company was the sponsor of Delaware statutory trusts named Independent Capital Trust III (“Trust III”), Independent Capital Trust IV (“Trust IV”), and is currently the sponsor of Independent Capital Trust V (“Trust V”), each of which were formed to issue trust preferred securities.
     The proceeds which the Company derived from Trust V were used on December 31, 2006 and April 30, 2007 to redeem all of the outstanding trust preferred securities of Trust III and Trust IV respectively. Trust III and IV have been dissolved. Trust V is not included in the Company’s consolidated financial statements.
     As of June 30, 2007 the Bank had the following corporate subsidiaries, all of which were wholly-owned by the Bank and were included in the Company’s consolidated financial statements:
    Four Massachusetts security corporations, namely Rockland Borrowing Collateral Securities Corp., Rockland IMG Collateral Securities Corp., Rockland Deposit Collateral Securities Corp., and Taunton Avenue Securities Corp., which hold securities, industrial development bonds, and other qualifying assets;
 
    Rockland Trust Community Development Corporation (the “Parent CDE”) which, in turn, has two wholly-owned corporate subsidiaries named Rockland Trust Community Development LLC (“RTC CDE I”) and Rockland Trust Community Development Corporation II (“RTC CDE II”). The Parent CDE, CDE I, and CDE II were all formed to qualify as community development entities under federal New Markets Tax Credit Program criteria; and,
 
    Compass Exchange Advisors LLC, which provides like-kind exchange services pursuant to section 1031 of the Internal Revenue Code.
     All material intercompany balances and transactions have been eliminated in consolidation. When necessary, certain amounts in prior period’s financial statements have been reclassified to conform to the current period presentation.
     The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of

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the financial statements, primarily consisting of normal recurring adjustments, have been included. Operating results for the quarter ended June 30, 2007 are not necessarily indicative of the results that may be expected for the year ended December 31, 2007 or any other interim period. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 filed with the Securities and Exchange Commission.
NOTE 2- STOCK BASED COMPENSATION
     On April 17, 2007 the Company granted 5,200 restricted stock awards from the 2006 Non-Employee Director Stock Plan to certain directors of the Company and/or the Bank. The restricted stock awards have been determined to have a fair value of $31.57 per share. The Company measured the fair market value of the awards based on the average of the high price and low price at which the Company’s common stock traded on the date of grant. The restricted stock awards vest at the end of a five year period.
     On February 15, 2007 the Company awarded 133,000 options from the 2005 Employee Stock Plan to certain officers of the Company and/or the Bank. The expected volatility, expected life, expected dividend yield, and expected risk free interest rate for this grant used to determine their fair value were determined on February 15, 2007 and were 30%, 6.5 years, 1.95%, and 4.68%, respectively. The options have been determined to have a fair value of $10.51 per share.
     On April 18, 2006 the Company granted 10,000 options and 5,200 restricted stock awards from the 2006 Non-Employee Director Stock Plan to certain directors of the Company and/or the Bank. The expected volatility, expected life, expected dividend yield, and expected risk free interest rate for this grant of options used to determine their fair value were determined on April 18, 2006 and were 27%, 4 years, 2.36%, and 4.86%, respectively. The options have been determined to have a fair value of $7.30 per share. The restricted stock awards have been determined to have a fair value of $32.23 per share. The Company measured the fair value of the restricted awards based on the average of the high price and low price at which the Company’s common stock traded on the date of grant. The restricted stock awards vest at the end of a five year period.
NOTE 3 - RECENT ACCOUNTING DEVELOPMENTS
Accounting Pronouncements Adopted in the First Six Months of 2007
     FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes” In June 2006, the FASB issued FIN 48, an interpretation of SFAS No. 109, “Accounting for Income Taxes,” in order to add clarity to the accounting for uncertainty in income taxes recognized in a Company’s financial statements. The interpretation requires that only tax positions that are more likely than not to be sustained upon a tax examination are to be recognized in a Company’s financial statements to the extent that the benefit has a greater than 50% likelihood of being recognized. The differences that arise between the amounts recognized in the financial statements and the amounts recognized in the tax return will lead to an increase or decrease in current taxes, an increase or decrease to the deferred tax asset or deferred tax liability, respectively, or both. FIN 48 is effective for fiscal years beginning after December 15, 2006 with early application encouraged if interim financial statements have not

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yet been issued. Upon the adoption of FIN 48 the Company recognized a $177,000 decrease in the liability for unrecognized tax benefits, which was accounted for as an increase to the January 1, 2007 balance of retained earnings.
New Accounting Pronouncements Not Yet Adopted
     SFAS No. 157 (“SFAS 157”), “Fair Value Measurements” In September 2006, the FASB issued SFAS 157. SFAS 157 was issued to provide consistency and comparability in determining fair value measurements and to provide for expanded disclosures about fair value measurements. The definition of fair value maintains the exchange price notion in earlier definitions of fair value but focuses on the exit price of the asset or liability. The exit price is the price that would be received to sell the asset or paid to transfer the liability adjusted for certain inherent risks and restrictions. Expanded disclosures are also required about the use of fair value to measure assets and liabilities. The effective date is for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating if the adoption of SFAS 157 will have a material impact on the Company’s financial position or results of operations.
     SFAS No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and Financial Liabilities” In February 2007, the FASB issued SFAS 159. SFAS 159 allows entities to choose to measure financial instruments and certain other items at fair value. By doing so, companies can mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting. The fair value option can be applied on an instrument by instrument basis (with some exceptions), is irrevocable unless a new election date occurs, and is applied only to entire instruments and not to portions of instruments. The effective date is as of the beginning of the first fiscal year beginning after November, 15, 2007. Early adoption is permissible as of the beginning of the fiscal year that begins before November 17, 2007 provided that SFAS No. 157, Fair Value Measurements, is adopted as well. The Company plans to adopt SFAS 159 as of January 1, 2008. The Company has not yet determined the impact of the adoption of SFAS 159 to the Company’s statement of financial position or results of operations.
     Emerging Issues Task Force (“EITF”) 06-10 “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements” In March 2007, the FASB ratified the consensus reached by the EITF on EITF 06-10. EITF 06-10 will require employers to recognize a liability for the postretirement benefit related to a collateral assignment split-dollar life insurance arrangement if the employer remains subject to the risks or rewards associated with the underlying insurance contract (in the postretirement period) that collateralizes the employer’s asset. Additionally, an employer should recognize and measure an asset based on the nature and substance of the collateral assignment split-dollar life insurance arrangement by assessing what future cash flows the employer is entitled to, if any, as well as the employee’s obligation and ability to repay the employer. The employer’s asset should be limited to the amount of the cash surrender value of the insurance policy unless the arrangement requires the employee (or retiree) to repay the employer irrespective of the amount of the cash surrender value of the insurance policy (and assuming the employee (or retiree) is an adequate credit risk), then the employer should recognize the value of the loan (including accrued interest, if applicable). EITF 06-10 is effective for fiscal years beginning after December 15, 2007, with earlier

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application permitted. Entities should recognize the effects of applying EITF 06-10 through either a change in accounting principle through a cumulative-effect adjustment to retained earnings in the statement of financial position as of the beginning of the year of adoption or through a change in accounting principle through retrospective application to all prior periods. The Company has not yet determined the impact of EITF 06-10 to the Company’s consolidated financial statements or results of operations.
NOTE 4 - EARNINGS PER SHARE
     Basic earnings per share (“EPS”) are calculated by dividing net income by the weighted average number of common shares (excluding shares of unvested restricted stock) outstanding before any dilution during the period. Diluted earnings per share have been calculated in a manner similar to that of basic earnings per share except that the weighted average number of common shares outstanding is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares (such as those resulting from the exercise of stock options and unvested restricted stock awards) were issued during the period, computed using the treasury stock method.
     Earnings per share consisted of the following components for the three and six months ended June 30, 2007 and 2006:

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For the Three Months Ended June 30,   Net Income  
    2007     2006  
    (Dollars in Thousands)  
Net Income
  $ 5,714     $ 8,290  
 
           
                 
    Weighted Average
    Shares
    2007   2006
Basic EPS
    14,101,468       14,999,127  
Effect of dilutive securities
    129,796       162,747  
 
               
Diluted EPS
    14,231,264       15,161,874  
 
               
                 
    Net Income  
    Per Share  
    2007     2006  
Basic EPS
  $ 0.41     $ 0.55  
Effect of dilutive securities
  $ 0.01     $ 0.00  
 
           
Diluted EPS
  $ 0.40     $ 0.55  
 
           
                 
For the Six Months Ended June 30,   Net Income  
    2007     2006  
    (Dollars in Thousands)  
Net Income
  $ 12,339     $ 16,194  
 
           
                 
    Weighted Average
    Shares
    2007   2006
Basic EPS
    14,282,226       15,159,252  
Effect of dilutive securities
    146,097       159,472  
 
               
Diluted EPS
    14,428,323       15,318,724  
 
               
                 
    Net Income  
    Per Share  
    2007     2006  
Basic EPS
  $ 0.86     $ 1.07  
Effect of dilutive securities
  $ 0.00     $ 0.01  
 
           
Diluted EPS
  $ 0.86     $ 1.06  
 
           
     For the three months ended June 30, 2007, there were 342,592 options to purchase common stock and 3,626 shares of restricted stock excluded from the calculation of diluted earnings per share because they were anti-dilutive. For the six months ended June 30, 2007, there were 274,907 options to purchase common stock and no shares of restricted stock excluded from the calculation of diluted earnings per share because they were anti-dilutive. For the three and six months ended June 30, 2006, there were 168,732 and 208,442, respectively, options to purchase common stock excluded from the calculation of diluted earnings per share because they were anti-dilutive. For the three and six months ended June 30, 2006, there were 325 and 1,635 shares of restricted stock excluded from the calculation of diluted earnings per share because they were anti-dilutive.

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NOTE 5- COMMON STOCK REPURCHASE PROGRAM
     On January 19, 2006, the Company’s Board of Directors approved a common stock repurchase program. Under the program, the Company was authorized to repurchase up to 800,000 shares, or approximately 5% of the Company’s outstanding common stock. During the quarter ended September 30, 2006, the Company completed its repurchase plan with a total of 800,000 shares of common stock repurchased at a weighted average share price of $31.04.
     On December 14, 2006, the Company’s Board of Directors approved another common stock repurchase program. Under the program, which was effective immediately, the Company is authorized to repurchase up to 1,000,000 shares, or approximately 7%, of the Company’s outstanding common stock. The Company placed no deadline on the repurchase program, but expects to make open market or privately negotiated purchases from time to time. The timing and amount of stock repurchases will depend upon market conditions, securities law limitations, and other corporate considerations. The repurchase program may be modified, suspended, or terminated by the Board of Directors at any time. During the quarter ended June 30, 2007, the Company repurchased 393,900 shares of common stock at a weighted average share price of $30.32. For the year to date period ending June 30, 2007 the Company repurchased 805,747 shares of common stock with at a weighted average price of $31.39.

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NOTE 6- EMPLOYEE BENEFITS
POST RETIREMENT BENEFITS AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
     The following table illustrates the status of the post-retirement benefit plan and supplemental executive retirement plans (“SERPs”) as of June 30, for the periods presented:
Components of Net Periodic Benefit Cost
                                 
    Post Retirement Benefits     SERPs  
    Three months ended June 30,  
    2007     2006     2007     2006  
    (Unaudited - Dollars in Thousands)  
Service cost
  $ 22     $ 23     $ 50     $ 50  
Interest cost
    18       18       37       34  
Amortization of transition obligation
    9       8              
Amortization of prior service cost
    3       3       10       10  
Recognized net actuarial (gain)/loss
                (1 )     (1 )
 
                       
Net periodic benefit cost
  $ 52     $ 52     $ 96     $ 93  
 
                       
                                 
    Post Retirement Benefits     SERPs  
    Six months ended June 30,  
    2007     2006     2007     2006  
    (Unaudited - Dollars in Thousands)  
Service cost
  $ 45     $ 46     $ 154     $ 99  
Interest cost
    36       36       80       68  
Amortization of transition obligation
    17       17              
Amortization of prior service cost
    6       6       20       21  
Recognized net actuarial (gain)/loss
                (2 )     (2 )
 
                       
Net periodic benefit cost
  $ 104     $ 105     $ 252     $ 186  
 
                       
     Included in the SERP net periodic benefit cost above is an additional $60,000 accrued during the first quarter of 2007 associated with the early retirement of an executive.
     The Company previously disclosed in its financial statements for the fiscal year ended December 31, 2006 that it expected to contribute $59,000 to its post retirement benefit plan and $113,000 to its SERPs in 2007 and presently anticipates making these contributions. For the three months ended June 30, 2007, $10,000 and $28,000 of contributions have been made to the post retirement benefit plan and the SERPs, respectively. For the six months ended June 30, 2007, $21,000 and $60,000 of contributions have been made to the post retirement benefit plan and the SERPs, respectively.
     Not included in the above summary are the components of net periodic benefit cost for the noncontributory defined benefit pension plan administered by Pentegra (“the Fund”). The Fund does not segregate the assets or liabilities of all participating employers and, accordingly, disclosure of accumulated vested and non-vested benefits is not possible. The pension plan year is July 1st through June 30th. Contributions for the 2006-2007 plan year were all paid in 2006. It has not yet been determined what pension expense is expected to be related to the

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2007-2008 plan year. $355,000 and $709,000 of pension expense has been recognized during the three and six months ended June 30, 2007 for the 2006-2007 plan year.
NOTE 7 - REPURCHASE AGREEMENTS
     Both wholesale and retail repurchase agreements are collateralized by mortgage-backed securities and U.S. Government enterprises. At June 30, 2007, the Company had no securities of repurchase agreements outstanding with third party brokers and $94.2 million of customer repurchase agreements outstanding. The related securities are included in the securities available for sale portfolio.
NOTE 8 - COMPREHENSIVE INCOME
     Information on the Company’s comprehensive income, presented net of taxes, is set forth below for the three and six months ended June 30, 2007 and 2006 .
Comprehensive income (loss) is reported net of taxes, as follows:
(Unaudited - Dollars in Thousands)
                                 
    FOR THE THREE     FOR THE SIX  
    MONTHS ENDED     MONTHS ENDED  
    JUNE 30,     JUNE 30,  
    2007     2006     2007     2006  
Net Income
  $ 5,714     $ 8,290     $ 12,339     $ 16,194  
 
                               
Other Comprehensive Income/(Loss), Net of Tax:
                               
 
                               
Decrease in fair value of securities available for sale, net of tax of $1,242 and $980 for the three months ended June 30, 2007 and 2006, respectively, and $769 and $3,260 for the six months ended June 30, 2007 and 2006, respectively.
    (2,296 )     (1,593 )     (1,553 )     (5,371 )
 
                               
Less: reclassification adjustment for realized losses included in net income, net of tax of $637 for the six months ended June 30, 2006.
                      1,132  
 
           
 
                               
Net change in fair value of securities available for sale, net of tax of $1,242 and $980 for the three months ended June 30, 2007 and 2006, respectively, and $769 and $2,623 for the six months ended June 30, 2007 and 2006, respectively.
    (2,296 )     (1,593 )     (1,553 )     (4,239 )
 
                               
Increase in fair value of derivatives, net of tax of $936 and $678 for the three months ended June 30, 2007 and 2006, respectively, and $623 and $1,462 for the six months ended June 30, 2007 and 2006, respectively.
    1,293       937       860       2,019  
 
                               
Less: reclassification of realized gains on derivatives, net of tax of $26 and $77 for the three months ended June 30, 2007 and 2006, respectively, and $103 and $254 for the six months ended June 30, 2007 and 2006, respectively
    (36 )     (107 )     (142 )     (351 )
 
           
 
                               
Net change in fair value of derivatives, net of tax of $910 and $601 for the three months ended June 30, 2007 and 2006, respectively, and $520 and $1,208, for the six months ended June 30, 2007 and 2006, respectively.
    1,257       830       718       1,668  
 
           
 
                               
Adjustments or reduction of amounts not yet recognized as a component of net periodic post retirement cost, net of tax of $20 for the three months ended June 30, 2007 and $40 for the six months ended June 30, 2007.
    27             55        
 
           
 
                               
Other Comprehensive Loss, Net of Tax:
    (1,012 )     (763 )     (780 )     (2,571 )
 
           
 
                               
Comprehensive Income
  $ 4,702     $ 7,527     $ 11,559     $ 13,623  
 
           

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NOTE 9 - UNCERTAINTY IN INCOME TAXES
     The Company adopted FASB Interpretation No. 48 (“FIN No. 48), “Accounting for Uncertainty in Income Taxes” on January 1, 2007. As a result of the implementation of FIN No. 48, the Company recognized a $177,000 decrease in the liability for unrecognized tax benefits, which was accounted for as an increase to the January 1, 2007, balance of retained earnings.
     At January 1, 2007, after implementation of FIN No. 48, the Company had unrecognized tax benefits of approximately $760,000 largely related to certain deductions of interest expense, all of which if recognized would be recorded as a component of income tax expense therefore affecting the effective tax rate.
     The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and in the state of Massachusetts and various other states as required. The Company is subject to U.S. federal, state and local income tax examinations by tax authorities for the years 2003 to the present.
     Upon filing the 2006 returns in September of 2007 the income tax returns for 2003 will no longer be subject to income tax examinations and therefore the related uncertainties in income taxes will be realized.
     The Company recognizes interest accrued and penalties related to unrecognized tax benefits as income taxes. As of January 1, 2007 the Company had approximately $79,000 accrued for the payment of interest and penalties.
NOTE 10 - SUBSEQUENT EVENT
     As previously disclosed, Rockland Trust is the plaintiff in the pending federal court case commonly known as Rockland Trust Company v. Computer Associates International, Inc., United States District Court for the District of Massachusetts Civil Action No. 95-11683-DPW (the “CA Case”). At trial Computer Associates International, Inc. (“CA”) asserted that Rockland Trust owes CA at least approximately $1.1 Million.
     On July 24, 2007 the judge who is presiding over the CA Case informed the parties that he is “going to enter judgment for Computer Associates.” The judge, however, has not yet rendered a Final Judgment or any written opinion to describe the basis for his decision or the amount of any damages to be awarded.
     On August 1, 2007 the Company established a $1.4 Million reserve for the CA Case, effective as of June 30, 2007. While the final outcome of the CA Case may differ from the $1.4 Million charge that the Company has recorded, the Company does not believe that the final outcome will have either an impact on its operations or any significant effect on its financial position.

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     Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
     The following discussion should be read in conjunction with the consolidated financial statements, notes and tables included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, filed with the Securities and Exchange Commission.
Cautionary Statement Regarding Forward-Looking Statements
     A number of the presentations and disclosures in this Form 10-Q, including, without limitation, statements regarding the level of allowance for loan losses, the rate of delinquencies, amounts of charge-offs, 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.
     These forward-looking statements, implicitly and explicitly, include the assumptions underlying the statements and other information with respect to the Company’s beliefs, plans, objectives, goals, expectations, anticipations, estimates, intentions, financial condition, results of operations, future performance and business, including the Company’s expectations and estimates with respect to the Company’s revenues, expenses, earnings, return on equity, return on assets, efficiency ratio, asset quality and other financial data and capital and performance ratios.
     Although the Company believes that the expectations reflected in the Company’s 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 Company’s control). The following factors, among others, could cause the Company’s financial performance to differ materially from the Company’s goals, plans, objectives, intentions, expectations and other forward-looking statements:
    a weakening in the strength of the United States economy in general and the strength of 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 Company’s credit or fee-based products and services;
 
    adverse changes in the local real estate market, as most of the Company’s loans are concentrated in southeastern Massachusetts and Cape Cod and a substantial portion of these loans have real estate as collateral, could result in a deterioration of credit quality and an increase in the allowance for loan losses;
 
    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 Company’s business environment or affect the Company’s operations;
 
    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 Company’s 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;
 
    adverse changes in asset quality could result in increasing credit risk-related losses and expenses;
 
    competitive pressures, including those pressures resulting from continued industry consolidation and the increase in non-banks providing financial services could intensify and affect the Company’s profitability;
 
    a deterioration in the conditions of the securities markets could adversely affect the value or credit quality of the Company’s assets, the availability and terms of funding necessary to meet the Company’s liquidity needs, and the Company’s ability to originate loans;
 
    the potential to adapt to changes in information technology could adversely impact the Company’s operations and require increased capital spending;
 
    changes in consumer spending and savings habits could negatively impact the Company’s financial results; and
 
    future acquisitions may not produce results at levels or within time frames originally anticipated and may result in unforeseen integration issues.
     If one or more of the factors affecting the Company’s forward-looking information and statements proves incorrect, then the Company’s 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-Q. Therefore, the Company cautions you not to place undue reliance on the Company’s forward-looking information and statements.
     The Company does not intend to update the Company’s 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.
EXECUTIVE LEVEL OVERVIEW
     The Company’s results of operations are largely dependent on net interest income, which is the difference between the interest earned on loans and securities and interest paid on deposits and borrowings. The results of operations are also affected by the level of income/fees from loans, deposits, mortgage banking, and wealth management activities, as well as operating expenses, the provision for loan losses, the impact of federal and state income taxes, and the relative levels of interest rates and economic activity.
     During the second quarter of 2007 management continued to implement its strategy to alter the overall composition of the Company’s earning assets in order to focus resources in higher return segments. While net income of $5.7 million and earnings per share on a diluted basis of $0.40 for the second quarter of 2007 were down from $8.3 million, or 31.1%, and $0.15, or 27.3%, respectively, as compared to the same period in 2006, the net interest margin

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remains strong. The net interest margin for the second quarter of 2007 was 3.85% (which includes a write-off of debt issuance costs as interest expense of $907,000, contributing to a decrease in the margin of 15 basis points), as compared to a net interest margin of 3.84% for the first quarter of 2007 and 3.89% for the second quarter of 2006.
     The following graph shows the trend in the net interest margin versus the Federal Funds Rate for each quarter end beginning March 31, 2005 through June 30, 2007:
(LINE GRAPH)
 
*   The Q4 2006 Net Interest Margin is normalized for the impact of the write-off of $995K of issuance costs to interest expense associated with the refinancing of higher rate trust preferred securities during the fourth quarter of 2006.
 
**   The Q2 2007 Net Interest Margin is normalized for the impact of the write-off of $907K of issuance costs to interest expense associated with the refinancing of higher rate trust preferred securities during the second quarter of 2007.
     While changes in the prevailing interest rate environment (see Historical U.S. Treasury Yield Curve graph above) have and will continue to have an impact on the Company’s earnings, management strives to mitigate volatility in net interest income resulting from changes in benchmark interest rates through adjustable rate asset generation, effective liability management, and utilization of off-balance sheet interest rate derivatives. (For a discussion of interest rate derivatives and interest rate sensitivity see the Asset/Liability Management section, Table 8 – “Interest Rate Derivatives”, and Market Risk section, Table 10 – “Interest Rate Sensitivity” within the Management’s Discussion and Analysis of Financial Condition and Results of Operations hereof.)
     Below is a graph showing the historical U.S. Treasury yield curve for the past four years for the period ending June 30. As the graph illustrates, the shape of the yield curve has changed dramatically over the past four years from a normal sloping yield curve into a relatively flat yield curve.

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(LINE GRAPH)
     “A yield curve is a graphic line chart that shows interest rates at a specific point for all securities having equal risk, but different maturity dates.” 1 “A flat yield curve is one in which there is little difference between short-term and long-term rates for bonds of the same credit quality. When short- and long-term bonds are offering equivalent yields, there is usually little benefit in holding the longer-term instruments — that is, the investor does not gain any excess compensation for the risks associated with holding longer-term securities. For example, a flat yield curve on U.S. Treasury Securities would be one in which the yield on a two-year bond is 5% and the yield on a 30-year bond is 5.1%.” 2
 
1   The Free Dictionary.com
 
2   Investopedia.com
     The Company’s return on average assets and return on average equity were 0.85% and 10.44%, respectively, for the three month period ending June 30, 2007. The Company’s return on average assets and return on average equity were 1.14% and 14.90%, respectively, for the three month period ending June 30, 2006.
     A table describing the impact of certain items on the statements of income for the quarters and six months ending on June 30, 2007 and 2006 is set forth below:

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     The following table summarizes the impact of non-core items recorded for the time periods indicated below:
Table of Impact of Non-core Items
                                                 
    Quarter Ending June 30,  
                                    Impact on Diluted  
    Pretax Impact     Impact on Net Income     Earnings Per Share  
    2007     2006     2007     2006     2007     2006  
    (Dollars in Thousands, except per share amounts)  
Net Interest Income Components
                                               
Write-Off of Debt Issuance Cost
  $ 907     $     $ 590     $     $ 0.04     $  
Non-Interest Expense Components
                                               
Litigation Reserve
    1,361             885             0.06        
 
                         
Total
  $ 2,268     $     $ 1,475     $     $ 0.10     $  
 
     
                                                 
    Year to Date Ending June 30,  
                                    Impact on Diluted  
    Pretax Impact     Impact on Net Income     Earnings Per Share  
    2007     2006     2007     2006     2007     2006  
            (Dollars in Thousands, except per share amounts)          
Net Interest Income Components
                                               
Write-Off of Debt Issuance Cost
  $ 907     $     $ 590     $     $ 0.04     $  
Non-Interest Income Components
                                               
Loss on Sale of Securities
          1,769             1,150             0.08  
BOLI Benefit Proceeds
          (1,316 )           (1,316 )           (0.09 )
Non-Interest Expense Components
                                               
Executive Early Retirement Costs
    406             264             0.02        
Litigation Reserve
    1,361             885             0.06          
 
     
Total
  $ 2,674     $ 453     $ 1,739     $ (166 )   $ 0.12     $ (0.01 )
 
     
     Certain non-core items are included in the computation of earnings in accordance with generally accepted accounting principles (“GAAP”) in both 2007 and 2006 as indicated by the table above. In an effort to provide investors information regarding the Company’s results, the Company has disclosed in the tables above certain non-GAAP information, which management believes provides useful information to the investor. This information should not be viewed as a substitute for operating results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP information which may be presented by other companies.
     Non interest income grew by 11.3% and 16.1%, respectively, for this quarter and year to date as compared to the same periods in 2006. Leading the growth in non interest income is the Company’s Wealth Management product set, the aggregate revenues of which have grown by 27.9% and 30.6%, respectively, for the three and six month periods ending June 30, 2007 as compared to the same periods in 2006.
     Non interest expense has grown by 12.7% and 8.8% for the three and six month periods ending June 30, 2007 compared to the same periods in the prior year. The increase in expenses is partially attributable to early retirement costs of $406,000 recorded in the first quarter of 2007 as well as a charge of $1.4 million recorded in the second quarter of 2007 associated with the Computer Associates litigation reserve. See Item 1, Note 10-Subsequent Event, above. The remaining increase in expenses is driven by the investments made in the Company’s growth initiatives such as adding commercial lenders to its commercial business, costs associated with acquiring the 1031 like-kind exchange business, commissions connected with retail wealth management, and adding originators to the mortgage lending business.
     Management continues to focus on earning asset growth in the commercial and home equity lending segments, while de-emphasizing indirect auto, portfolio residential lending, and the securities portfolio. Loan growth during the second quarter of 2007 remained a challenge

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for the Company. The commercial loan growth has slowed due to a reduction of the development of real estate in the Company’s market area. However, the commercial pipeline remains strong and the Company continues to implement its New Market Tax Credit Lending program. Overall, year to date total business lending is up 1.0%.
     Consumer home equity loans have increased by $11.3 million, or 4.1%, since the year ended December 31, 2006. Residential real estate and consumer auto lending loan categories have decreased by $35.0 million, or 9.2%, and $28.0 million, or 13.5%, respectively from year end 2006. Overall growth in the loan portfolio is expected to be down by 3.0% by year-end.
     As the current interest rate environment is not conducive to maintaining or increasing the securities portfolio, the Company is permitting the securities portfolio to run-off and thereby decrease on both a relative basis (as a percent of earning assets) and an actual basis.
     The following pie charts depict the continuing shift in the composition of earning assets into the commercial, home equity, and small business banking lending as of June 30, 2007, 2006, and 2005.
(PIE CHART)
     The following graph shows the decline in the Company’s securities portfolio on both an actual and relative basis from March 2006 into June 2007:

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(PIE CHART)
     Management is also focused on other initiatives and opportunities, some of which are described below:
    For the second year in a row, the Company is engaged in a stock buyback program to return excess capital to the Company’s shareholders;
 
    Adding new commercial bankers to facilitate commercial loan growth;
 
    Increasing utilization of the second New Markets Tax Credit award to offer preferential rates and terms to businesses operating in economically distressed areas;
 
    Increasing the number of net new household banking relationships;
 
    Expanding fee income through organic growth of the wealth management business and offering new fee income services such as the 1031 like-kind exchange services offered by the Company’s new Compass Exchange Advisors (“CEA”) subsidiary;
 
    Closely managing expenses, while we plan to open two new branches in 2007, we closed a location in the first half of 2007; and
 
    Targeting expansion through opening new branches in selected markets and evaluating potential acquisition opportunities in the wealth management industry.
     Total deposits of $2.1 billion at June 30, 2007 decreased $38.3 million, or 1.8%, compared to December 31, 2006, due in part to the competitive pricing environment. The Company remains committed to deposit generation, with careful management of deposit pricing and selective deposit promotion, in an effort to control the Company’s cost of funds. In the current interest rate environment the Company is focused on pricing deposits for customer

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retention as well as core deposit growth and does not feel a need to aggressively grow non-core deposits to fund balance sheet growth.
     While net loan charge-offs were somewhat higher in the second quarter of 2007 than in the same period in 2006, they were still relatively low at an annualized rate of 16 basis points of average loans. Net charge-offs were 9 basis points of average loans on annualized basis at June 30, 2006. The allowance for loan losses increased to 1.35% of loans as compared to 1.32% at December 31, 2006. Nonperforming assets were $6.2 million at June 30, 2007, a decrease of $1.0 million from December 31, 2006. See Table 2- Nonperforming Assets/ Loans for detail on nonperforming assets.
     The following graph depicts the Company’s non-performing assets to total assets at the periods indicated:
(PIE CHART)
     Some of the Company’s other highlights for the first six months of 2007 included:
o   Acquired Compass Exchange Advisors LLC on January 2, 2007.
 
o   Projecting a $25 million capital contribution, in the aggregate, during 2007 into RTC CDE II to continue implementation of the $45 million in tax credit allocation authority recently awarded under the New Markets Tax Credit Program.
 
o   Continued disciplined capital management, as reflected by the following:
  §   During the quarter ending June 30, 2007 the Company repurchased 393,900 shares of common stock with a weighted average price of $30.32. For the year to date period ending June 30, 2007 the Company repurchased 805,747 shares of common stock with a weighted average price of $31.39.
 
  §   The Bank redeemed all of its outstanding 8.375% Cumulative Trust Preferred Securities on April 30, 2007 which completed the refinancing plan of its Trust

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      Preferred Securities. The Company will benefit from the redemption with a savings of approximately $1.0 million in interest expense, on an annualized basis (the Company also wrote-off unamortized issuance costs associated with the debt of approximately $907,000 in April of 2007 upon redemption of these Trust Preferred Securities); and, by
 
  §   The quarterly dividend increased 6.3% to $0.17 per share, compared to second quarter 2006.
FINANCIAL POSITION
     Loan Portfolio Total loans decreased by $43.9 million, or 2.2%, during the six months ended June 30, 2007. The decreases were mainly in residential real estate which decreased in total by $37.6 million, or 9.5%, and the consumer-auto portfolio, which decreased by $28.0 million, or 13.5%. Partially offsetting these decreases were increases in the total commercial portfolio, which increased by $5.0 million, or 0.5%, the consumer-home equity portfolio of $11.3 million, or 4.1%, and in small business banking loans of $6.2 million, or 10.4%.
     The Bank’s commercial real estate portfolio, the Bank’s largest 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 and other special purpose properties, such as hotels, motels, restaurants, 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, to a lesser extent, condominiums. The following pie chart shows the diversification of the commercial real estate portfolio as of June 30, 2007.

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Commercial Real Estate Portfolio by Property Type
(PIE CHART)
     The Bank considers a concentration of credit to a particular industry to exist when the aggregate credit exposure to a borrower, an affiliated group of borrowers or a non-affiliated group of borrowers engaged in one industry exceeds 10% of the Bank’s loan portfolio which includes direct, indirect or contingent obligations. As of June 30, 2007, loans made by the Company to the industry concentration of lessors of non-residential buildings constituted 10.9% of the Company’s total loan portfolio. All of these loans were performing at June 30, 2007.
     Asset Quality Rockland Trust Company actively manages all delinquent loans in accordance with formally drafted policies and established procedures. In addition, Rockland Trust Company’s Board of Directors reviews delinquency statistics, by loan type, on a monthly basis.
     Delinquency The Bank’s 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. 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 and telephone calls may be issued prior to the expiration of the grace period. If the delinquent status is not resolved within a reasonable time following the mailing of a delinquency notice, the Bank personnel charged with managing its loan portfolios contact the borrower to determine 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 borrower’s needs are considered as much as reasonably possible without jeopardizing the Bank’s position. A late charge is usually assessed on loans upon expiration of the grace period.
     On loans secured by one-to-four family owner-occupied properties, the Bank attempts to work out an alternative payment schedule with the borrower in order to avoid foreclosure action. If such efforts do not result in a satisfactory arrangement, the loan is referred to legal

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counsel to initiate foreclosure proceedings. At any time prior to a sale of the property at foreclosure, the Bank may and will terminate foreclosure proceedings if the borrower is able to work out a satisfactory payment plan. On loans secured by commercial real estate or other business assets, the Bank similarly seeks to reach a satisfactory payment plan so as to avoid foreclosure or liquidation.
     The following table sets forth a summary of certain delinquency information as of the dates indicated:
                                                                 
    Table 1 - Summary of Delinquency Information  
    At June 30, 2007     At December 31, 2006  
    60-89 days     90 days or more     60-89 days     90 days or more  
    Number     Principal     Number     Principal     Number     Principal     Number     Principal  
    of Loans     Balance     of Loans     Balance     of Loans     Balance     of Loans     Balance  
    (Unaudited - Dollars in Thousands)  
Commercial and Industrial
    2     $ 323       5     $ 304       6     $ 1,173       6     $ 528  
Commercial Real Estate
    1       357       7       1,585       1       104       3       538  
Commercial Construction
                                               
Business Banking
    4       25       13       222       3       86       6       74  
Residential Real Estate
    2       101       2       1,142       4       621       3       1,409  
Residential Construction
                                               
Consumer - Home Equity
    3       145       7       373       1       16       7       345  
Consumer - Auto
    50       575       73       554       68       553       62       676  
Consumer - Other
    38       155       30       116       11       67       23       199  
 
                                               
Total
    100     $ 1,681       137     $ 4,296       94     $ 2,620       110     $ 3,769  
 
                                               
     The Company’s total loan delinquency was 0.85% of total loans outstanding at June 30, 2007, as compared to 0.72% at December 31, 2006. Increases shown above in the 90 day category are contained primarily in the commercial real estate category. Management believes these loans are adequately collateralized.
     Nonaccrual Loans As permitted by banking regulations, consumer loans past due 90 days or more may continue to accrue interest. In addition, certain commercial, business banking, or real estate loans, including consumer home equity loans, that are generally 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, commercial, business banking, or real estate loans, including consumer home equity loans, more than 90 days past due with respect to principal or interest are classified as nonaccrual loans. Income accruals are suspended on all nonaccrual loans and all previously accrued and uncollected interest is reversed against current income. Generally, 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 three months), when the loan is liquidated, or when the loan is determined to be uncollectible and it is charged-off against the allowance for loan losses.
     Nonperforming Assets Nonperforming assets are comprised of nonperforming loans, nonperforming securities and Other Real Estate Owned (“OREO”). Nonperforming loans consist of loans that are more than 90 days past due, but still accruing interest, and nonaccrual loans. OREO includes properties held by the Bank as a result of foreclosure or by acceptance of a deed in lieu of foreclosure. As of June 30, 2007, nonperforming assets totaled $6.2 million, a decrease of $1.0 million, or 14.0%, compared to December 31, 2006. The overall decrease in nonperforming assets is attributable mainly to decreases in nonperforming loans shown in the commercial and residential mortgage loan categories and in the commercial and industrial category. Nonperforming assets represented 0.23% of total assets at June 30, 2007 and 0.25% at December 31, 2006. The Bank had one property held as OREO totaling $305,000 and no nonperforming securities for the period ending June 30, 2007.

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     Repossessed automobile loan balances continue to be classified as nonperforming loans, and not as other assets, because the borrower has the potential to satisfy the obligation within twenty days from the date of repossession (before the Bank can schedule disposal of the collateral). The borrower can redeem the property by payment in full at any time prior to the property’s disposal by the Bank. Repossessed automobile loan balances amounted to $567,000 $451,000 and $392,000 as of June 30, 2007, December 31, 2006, and June 30, 2006, respectively.
     The following table sets forth information regarding nonperforming assets held by the Company at the dates indicated.
Table 2 - Nonperforming Assets / Loans
(Unaudited - Dollars in Thousands)
                         
    As of     As of     As of  
    June 30,     December 31,     June 30,  
    2007     2006     2006  
Loans past due 90 days or more but still accruing
                       
Consumer - Home Equity
  $     $     $ 16  
Consumer - Auto
    243       252       298  
Consumer - Other
    67       137       69  
 
                 
Total
  $ 310     $ 389     $ 383  
 
                 
 
                       
Loans accounted for on a nonaccrual basis (1)
                       
Commercial and Industrial
  $ 301     $ 872     $ 322  
Business Banking
    343       74       80  
Commercial Real Estate
    2,014       2,346       2,801  
Residential Real Estate
    1,927       2,318       918  
Consumer - Home Equity
    373       358        
Consumer - Auto
    567       451       392  
Consumer - Other
    23       171       31  
 
                 
Total
  $ 5,548     $ 6,590     $ 4,544  
 
                 
 
                       
Total nonperforming loans
  $ 5,858     $ 6,979     $ 4,927  
 
                 
 
                       
Other real estate owned
  $ 305     $ 190     $  
 
                       
Total nonperforming assets
  $ 6,163     $ 7,169     $ 4,927  
 
                 
 
                       
Restructured loans
  $     $     $  
 
                 
 
                       
Nonperforming loans as a percent of gross loans
    0.30 %     0.34 %     0.24 %
 
                 
 
                       
Nonperforming assets as a percent of total assets
    0.23 %     0.25 %     0.17 %
 
                 
 
(1)   There were no restructured nonaccruing loans at June 30, 2007, December 31, 2006 and June 30, 2006.
     In the course of resolving nonperforming loans, the Bank may choose to restructure the contractual terms of certain commercial and real estate loans. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status. It is the Bank’s policy to maintain restructured loans on nonaccrual status for approximately six months before management considers a restructured loan’s return to accrual status. At June 30, 2007, December 31, 2006 and June 30, 2006 the Bank had no restructured loans.
     Potential problem loans are any loans, which are not categorized as nonaccrual or non-performing loans and which are not considered troubled debt restructures, 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. At

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June 30, 2007 the Bank had fourteen potential problem loan relationships and at December 31, 2006 the Bank had fifteen potential problem loan relationships, which are not included in nonperforming loans. Outstanding balances on these loans totaled $23.7 million and $21.8 million at June 30, 2007 and December 31, 2006, respectively. At June 30, 2007, these problem loans continued to perform and the Company’s management actively monitors these loans and strives to minimize any possible adverse impact to the Bank.
     Real estate acquired by the Bank through foreclosure proceedings or the acceptance of a deed in lieu of foreclosure is classified as OREO. When property is acquired, it is recorded at the lesser of the loan’s remaining principal balance or the estimated fair value of the property acquired, less estimated costs to sell. Any loan balance in excess of the estimated fair value less estimated cost to sell on the date of transfer is charged to the allowance for loan losses on that date. All costs incurred thereafter in maintaining the property, as well as subsequent declines in fair value are charged to non-interest expense.
     Interest income that would have been recognized for both the three months ended June 30, 2007, and June 30, 2006, if nonperforming loans at the respective dates had been performing in accordance with their original terms, approximated $34,000 and $52,000, respectively. Interest income that would have been recognized for both the six months ended June 30, 2007, and June 30, 2006, if nonperforming loans at the respective dates had been performing in accordance with their original terms, approximated $122,000 and $118,000, respectively. The actual amount of interest that was collected on these nonaccrual and restructured loans during the three months ended June 30, 2007 and June 30, 2006 and included in interest income was approximately $28,000 and $8,000, respectively. The actual amount of interest that was collected on these nonaccrual and restructured loans during the six months ended June 30, 2007 and June 30, 2006, including interest income, was approximately $94,000 and $47,000, respectively.
     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 borrower’s 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, commercial real estate and construction, and selectively, for certain consumer, residential or home equity loans, by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Large groups of homogeneous loans are collectively evaluated for impairment. As such, the Bank does not typically identify individual loans within these groupings for impairment evaluation and disclosure.
     At June 30, 2007, impaired loans include all commercial real estate loans and commercial and industrial loans on nonaccrual status and other loans that have been categorized as impaired. Total impaired loans at June 30, 2007 and December 31, 2006 were $2.7 million and $3.6 million, respectively.

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     Allowance For Loan Losses 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. Various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s 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 provisions for loan losses and by recoveries of loans previously charged-off and is reduced by loans charged-off.
     As of June 30, 2007, the allowance for loan losses totaled $26.7 million, or 1.35%, of total loans as compared to $26.8 million, or 1.32%, of total loans at December 31, 2006. Based on management’s analysis, management believes that the level of the allowance for loan losses at June 30, 2007 is adequate.
     The following table summarizes changes in the allowance for loan losses and other selected loan data for the periods presented:

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Table 3 - Summary of Changes in the Allowance for Loan Losses
                                         
    Quarter to Date  
    June 30,     March 31,     December 31,     September 30,     June 30,  
    2007     2007     2006     2006     2006  
    (Unaudited - Dollars in Thousands)  
Average loans
  $ 1,987,156     $ 2,003,218     $ 2,032,331     $ 2,038,194     $ 2,051,032  
 
                             
Allowance for loan losses, beginning of period
  $ 26,815     $ 26,815     $ 26,814     $ 26,811     $ 26,746  
Charged-off loans:
                                       
Commercial and Industrial
    133       334       45              
Business Banking
    178       93       234       69       49  
Commercial Real Estate
                             
Residential Real Estate
                             
Commercial Construction
                             
Residential Construction
                             
Consumer - Home Equity
    80                          
Consumer - Auto
    324       420       498       469       292  
Consumer - Other
    189       276       211       262       158  
 
                             
Total charged-off loans
    904       1,123       988       800       499  
 
                             
Recoveries on loans previously charged-off:
                                       
Commercial and Industrial
    4       39       41       99       29  
Business Banking
    1       3       80       1       11  
Commercial Real Estate
                             
Residential Real Estate
                             
Commercial Construction
                             
Residential Construction
                             
Consumer - Home Equity
                             
Consumer - Auto
    86       126       125       111       129  
Consumer - Other
    64       64       38       62       45  
 
                             
Total recoveries
    155       232       284       273       214  
 
                             
Net loans charged-off
    749       891       704       527       285  
Provision for loan losses
    584       891       705       530       350  
 
                             
Total allowance for loan losses, end of period
  $ 26,650     $ 26,815     $ 26,815     $ 26,814     $ 26,811  
 
                             
 
                                       
Net loans charged-off as a percent of average total loans (annualized)
    0.15 %     0.18 %     0.14 %     0.10 %     0.06 %
Total allowance for loan losses as a percent of total loans
    1.35 %     1.34 %     1.32 %     1.31 %     1.31 %
Total allowance for loan losses as a percent of nonperforming loans
    454.93 %     364.65 %     384.22 %     390.99 %     544.16 %
Net loans charged-off as a percent of allowance for loan losses (annualized)
    11.24 %     13.29 %     10.50 %     7.86 %     4.25 %
Recoveries as a percent of charge-offs (annualized)
    17.15 %     20.66 %     28.74 %     34.13 %     42.89 %
     The allowance for loan losses is allocated to various loan categories as part of the Bank’s process of evaluating its adequacy. The amount of allowance allocated to these loan categories was $24.5 million at June 30, 2007, compared to $25.4 million at December 31, 2006. The distribution of allowances allocated among the various loan categories as of June 30, 2007 was categorically similar to the distribution as of December 31, 2006. Increases or decreases in the amounts allocated to each category, as compared to those shown as of December 31, 2006, generally, reflect changes in portfolio balances outstanding due to new loan originations, loans re-paid, changes in levels of credit line usage and the results of ongoing credit risk assessments of the loan portfolio.

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     The following table sets for the allocation of the allowance for loan losses by loan category at the dates indicated. The allocation is made for analytical purposes and is not necessarily indicative of the categories in which actual losses may occur. The total allowance is available to absorb losses from any segment of the loan portfolio.
Table 4 - Summary of Allocation of the Allowance for Loan Losses
(Unaudited - Dollars In Thousands)
                                 
    AT JUNE 30,     AT DECEMBER 31,  
    2007     2006  
            Percent of             Percent of  
            Loans             Loans  
    Allowance     In Category     Allowance     In Category  
    Amount     To Total Loans     Amount     To Total Loans  
Allocated Allowances:
                               
Commercial and Industrial
  $ 3,332       8.7 %   $ 3,615       8.6 %
Business Banking
    1,037       3.3 %     1,340       3.0 %
Commercial Real Estate
    13,160       37.9 %     13,136       36.5 %
Real Estate Construction
    2,882       6.1 %     2,955       6.3 %
Real Estate Residential
    517       18.0 %     566       19.3 %
Consumer - Home Equity
    1,058       14.6 %     1,024       13.7 %
Consumer - Auto
    1,786       9.0 %     2,066       10.2 %
Consumer - Other
    742       2.4 %     652       2.4 %
Unallocated Allowance
    2,136     NA       1,461     NA  
 
                       
 
                               
Total Allowance for Loan Losses
  $ 26,650       100.0 %   $ 26,815       100.0 %
 
                       
     Allocated allowances for loan losses are determined using both a formula-based approach applied to groups of loans and an analysis of certain individual loans for impairment.
     The formula-based approach evaluates groups of loans to determine the allocation appropriate within each portfolio section. Individual loans within the commercial and industrial, commercial real estate and real estate construction loan portfolio sections are assigned internal risk ratings to group them with other loans possessing similar risk characteristics. The level of allowance allocable to each group of risk-rated loans is then determined by management applying a loss factor that estimates the amount of probable loss inherent in each category. The assigned loss factor for each risk rating is a formula-based assessment of historical loss data, portfolio characteristics, economic trends, overall market conditions, past experience and management’s analysis of considerations of probable loan loss based on these factors.
     Allocations for business banking, residential real estate and other consumer loan categories are principally determined by applying loss factors that represent management’s estimate of probable or expected losses inherent in those categories. In each section, inherent losses are estimated, based on a formula-based assessment of historical loss data, portfolio characteristics, economic trends, overall market conditions, past loan loss experience and management’s considerations of probable loan loss based on these factors.
     The other method used to allocate allowances for loan losses entails the assignment of allowance amounts to individual loans on the basis of loan impairment. Certain loans are evaluated individually and are judged to be impaired when management believes it is probable that the Bank will not collect all of the contractual interest and principal payments as scheduled in the loan agreement. Under this method, loans are selected for evaluation based upon a change in internal risk rating, occurrence of delinquency, loan classification or non-accrual

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status. A specific allowance amount is allocated to an impaired loan on the basis of: (a) the present value of anticipated future cash flows or on the loan’s observable fair market value or (b) the fair value of collateral if the loan is collateral dependent. Loans evaluated for impairment and the specific allowance assigned to these loans totaled $2.7 million and $0, respectively, at June 30, 2007 and $3.6 million and $414,000, respectively, at December 31, 2006. In addition, at June 30, 2007, there were $1.2 million of residential loans that were evaluated individually and assigned a specific allowance of $194,000.
     A portion of the allowance for loan losses is not allocated to any specific section of the loan portfolio. This unallocated allowance is maintained for two primary reasons: (a) there exists an inherent subjectivity and imprecision to the analytical processes employed and (b) the prevailing business environment, as it is affected by changing economic conditions and various external factors, may impact the portfolio. Moreover, management has identified certain risk factors, which could impact the degree of loss sustained within the portfolio. These include: (a) market risk factors, such as the effects of economic variability on the entire portfolio, and (b) unique portfolio risk factors that are inherent characteristics of the Bank’s loan portfolio. Market risk factors may consist of changes to general economic and business conditions that may impact the Bank’s loan portfolio customer base in terms of ability to repay and that may result in changes in value of underlying collateral. Unique portfolio risk factors may include industry concentration or covariant industry concentrations, geographic concentrations or trends that may exacerbate losses resulting from economic events which the Bank may not be able to fully diversify out of its portfolio.
     Due to the imprecise nature of the loan loss estimation process and ever changing conditions, these risk attributes may not be adequately captured in data related to the formula- based loan loss components used to determine allocations in the Bank’s analysis of the adequacy of the allowance for loan losses. Management, therefore, has established and maintains an unallocated allowance for loan losses. The amounts of the unallocated allowance were $2.1 million, $1.5 million, and $2.5 million at June 30, 2007, December 31, 2006, and December 31, 2005, respectively.
     The unallocated allowance was reduced at December 31, 2006 due to an incremental increase in the amount of allowance allocated towards the commercial loan portfolio. Certain commercial credit relationships were identified as classified in the third quarter of 2006, requiring greater allowance amounts based upon the application of standard loan loss allocation factors reflecting expected losses for classified loans. In light of the recognition of the incremental increase in risk for certain of these credit relationships, management elected to pursue its available options to exit these relationships during the latter half of 2006. It was the expectation of management that the disposition of these credit relationships might not require the entire allowance allocated to them by the use of the standard loss factor, pending the outcome of the bank’s exit strategy. Accordingly, as management was actively seeking to exit out of these relationships through its portfolio management practices, the unallocated allowance was reduced during the third and fourth quarters of 2006 as expectations related to these relationships improved. In the first half of 2007, substantive amounts of these higher-risk relationships were resolved, and removed from their respective loan categories. As a result, the unallocated allowance amount at June 30, 2007 was aligned more closely with its 2005 level.
     Management has deemed the current unallocated allowance level adequate based on a careful analysis of national and local economic conditions in conjunction with an evaluation of asset quality trends in the loan portfolio. The Massachusetts economy exhibited significant growth during the first quarter of 2007, outpacing national GDP growth according to the most

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recent data from local economic experts. Additionally, statewide growth is expected to remain robust over the next one to two quarters. The weak dollar has boosted exports statewide, especially in the technology and science-related sectors, and employment growth has remained strong. Within the bank’s loan portfolio, delinquency balances remained at acceptable levels, nonperforming asset balances decreased during the second quarter, and the level of charge-offs has slowed from the first quarter of 2007.
     Goodwill and Core Deposit Intangibles Goodwill and Core Deposit Intangibles (“CDI”) increased $1.9 million, or 3.4%, to $58.5 million at June 30, 2007 from December 31, 2006. Goodwill increased $2.1 million as a result of the asset acquisition of Compass Exchange Advisors LLC completed on January 2, 2007. In connection with that acquisition the Bank established a wholly-owned subsidiary known as Compass Exchange Advisors LLC (“CEA”). CEA offers qualified intermediary like-kind exchange services pursuant to Internal Revenue Code Section 1031 to corporate, institutional, and individual property owners.
     Core deposit intangibles decreased $161,000 due to normal amortization.
     Securities Securities decreased by $56.9 million, or 11.0%, during the six months ended June 30, 2007. This decrease resulted mainly from the call of securities and normal runoff in the portfolio. The ratio of securities to total assets as of June 30, 2007 was 17.3%, as compared to 18.3% at December 31, 2006 and 21.5% at June 30, 2006.
     Deposits Total deposits of $2.1 billion at June 30, 2007 decreased $38.3 million, or 1.8%, compared to December 31, 2006. The Company experienced an increase in core deposits of $3.4 million, or 0.2%, offset by a decrease in time deposits of $41.6 million, or 7.3%.
     Borrowings Total borrowings decreased $115.6 million, or 23.4%, from December 31, 2006 to $378.0 million at June 30, 2007, of which $25.8 million relates to the calling of the $25.0 million trust preferred securities as part of the Company’s trust preferred refinancing strategy. The remaining decrease is due to the excess cash flow from the securities portfolio and certain loan categories being used to decrease wholesale borrowing.
     Stockholders’ Equity Stockholders’ equity as of June 30, 2007 totaled $212.1 million, as compared to $229.8 million at December 31, 2006. Equity decreased due to stock repurchases of $25.3 million, dividends declared of $4.8 million, and the net change in the unrealized losses on securities of $1.6 million, offset by net income of $12.3 million, a net increase in the change in fair value of derivatives of $718,000, and stock option exercise proceeds of $429,000.
     Equity to Assets Ratio The ratio of equity to assets was 8.0% and 8.1% at June 30, 2007 and at December 31, 2006, respectively.
RESULTS OF OPERATIONS
     Summary of Results of Operations The Company’s results of operations are largely dependent on net interest income, which is the difference between the interest earned on

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loans and securities and interest paid on deposits and borrowings. The results of operations are also affected by the level of income/fees from loans, deposits, mortgage banking, and wealth management activities, as well as operating expenses, the provision for loan losses, the impact of federal and state income taxes, and the relative levels of interest rates and economic activity.
     The Company reported net income of $5.7 million, a $2.6 million, or 31.1% decrease, for the second quarter of 2007 as compared to the second quarter of 2006. Diluted earnings per share were $0.40 for the three months ended June 30, 2007, compared to $0.55 for the three months ended June 30, 2006. The Company reported net income of $12.3 million, a $3.9 million, or 23.8% decrease, for the six months ended June 30, 2007 as compared with the same period in 2006. Diluted earnings per share were $0.86 for the six months ended June 30, 2007, compared to $1.06 for the six months ended June 30, 2006.
Net Interest Income The amount of net interest income is affected by changes in
     interest rates and by the volume and mix of interest earning assets and interest bearing liabilities.
     On a fully tax equivalent basis, net interest income for the second quarter of 2007 decreased $2.4 million, or 9.2%, to $23.8 million, as compared to the second quarter of 2006. The Company’s net interest margin was 3.85% for the quarter ended June 30, 2007 as compared to 3.89% for the quarter ended June 30, 2006. The Company’s interest rate spread (the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities) was 3.17% for the second quarter of 2007, 18 basis points less than the comparable period in the prior year.
     The decrease in net interest income on a fully tax equivalent basis in the second quarter of 2007 compared with that of 2006 is primarily attributable to a smaller balance sheet and an increase in the cost of deposits. Additionally, the Company wrote off $907,000 of unamortized debt issuance costs upon redemption of $25.0 million of trust preferred securities in April 2007 which was realized as a component of interest expense on borrowings.
     The yield on earning assets was 6.45% for the quarter ending June 30, 2007, compared with 6.18% the same quarter ending in 2006. The average balance of securities has deliberately decreased by $170.1 million, or 26.5%, as compared with the prior year as management has decided not to reinvest the normal amortization of the securities in the current low interest rate environment. The average balance of loans decreased by $63.9 million, or 3.1%, and the yield on loans increased by 16 basis points to 6.83% for the second quarter of 2007 compared to 6.67% for the second quarter in 2006. This increase in the yield on earning assets is largely attributable to variable rate loans re-pricing higher with increases in the underlying rate index (e.g. LIBOR, Prime).
     During the second quarter of 2007, as compared to the same period in 2006, the average balance of interest-bearing liabilities decreased by $205.3 million, or 9.4%. The average cost of these liabilities increased to 3.29% compared to 2.83% in 2006. The write-off of the unamortized debt issuance costs represented 0.19% of the increase. The majority of the remaining increase in cost of funds is due to the cost of deposits primarily attributable to deposit competition.

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     For the six months ending June 30, 2007 the cost of funds increased 53 basis points to 3.23% as compared to the same period in 2006 and the average balance decreased by $201.3 million. In addition to the contributors to the increase in cost of funds for the quarter ended June 30, 2007, the additional $25.7 million of junior subordinated debentures outstanding as part of the refinancing strategy of the trust preferred securities contributed to the higher cost of funds for the six month period ending June 30, 2007. On April 30, 2007, $25.8 million of 8.375% junior subordinated debentures were called (see Borrowings discussion above).
     The following tables present the Company’s daily average balances, net interest income, interest rate spread, and net interest margin for the three and six months ending June 30, 2007 and June 30, 2006. For purposes of the table and the following discussion, income from interest-earning assets and net interest income are presented on a fully-taxable equivalent basis by adjusting income and yields earned on tax-exempt interest received on loans to qualifying borrowers and on certain of the Company’s securities to make them equivalent to income and yields on fully-taxable investments, assuming a federal income tax rate of 35%.

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Table 5 - Average Balance, Interest Earned/Paid & Average Yields
(Unaudited - Dollars in Thousands)
                                                 
            INTEREST                     INTEREST        
    AVERAGE     EARNED/     AVERAGE     AVERAGE     EARNED/     AVERAGE  
    BALANCE     PAID     YIELD/RATE     BALANCE     PAID     YIELD/RATE  
FOR THE THREE MONTHS ENDED JUNE 30,   2007     2007     2007     2006     2006     2006  
Interest-earning Assets:
                                               
Federal Funds Sold and Short Term Investments
  $ 20,962     $ 289       5.51 %   $ 4,005     $ 52       5.19 %
Securities:
                                               
Trading Assets
    1,647       9       2.19 %     1,597       6       1.50 %
Taxable Investment Securities (1)
    418,893       4,975       4.75 %     582,922       6,405       4.40 %
Non-taxable Investment Securities (1)(2)
    51,893       834       6.43 %     58,036       1,018       7.02 %
 
                                   
Total Securities:
    472,433       5,818       4.93 %     642,555       7,429       4.62 %
Loans (1)
    1,987,156       33,911       6.83 %     2,051,032       34,177       6.67 %
 
                                   
Total Interest-Earning Assets
  $ 2,480,551     $ 40,018       6.45 %   $ 2,697,592     $ 41,658       6.18 %
 
                                   
Cash and Due from Banks
    60,949                       58,671                  
Other Assets
    148,885                       152,569                  
 
                                           
Total Assets
  $ 2,690,385                     $ 2,908,832                  
 
                                           
 
                                               
Interest-bearing Liabilities:
                                               
Deposits:
                                               
Savings and Interest Checking Accounts
  $ 580,449     $ 1,994       1.37 %   $ 560,402     $ 999       0.71 %
Money Market
    467,846       3,509       3.00 %     520,827       3,505       2.69 %
Time Deposits
    522,282       5,313       4.07 %     549,066       4,900       3.57 %
 
                                   
Total interest-bearing deposits:
    1,570,577       10,816       2.75 %     1,630,295       9,404       2.31 %
Borrowings:
                                               
Federal Home Loan Bank Borrowings
  $ 238,246     $ 2,668       4.48 %   $ 383,200     $ 4,165       4.35 %
Federal Funds Purchased and Assets Sold Under Repurchase Agreement
    99,300       733       2.95 %     107,927       699       2.59 %
Junior Subordinated Debentures
    59,760       1,935       12.95 %     51,546       1,117       8.67 %
Other Borrowings
    997       18       7.22 %     1,216       13       4.28 %
 
                                   
Total borrowings:
    398,303       5,354       5.38 %     543,889       5,994       4.41 %
 
                                   
Total Interest-Bearing Liabilities
  $ 1,968,880     $ 16,170       3.29 %   $ 2,174,184     $ 15,398       2.83 %
 
                                   
Demand Deposits
    488,571                       492,945                  
 
                                               
Other Liabilities
    13,908                       19,131                  
 
                                           
Total Liabilities
    2,471,359                       2,686,260                  
Stockholders’ Equity
    219,026                       222,572                  
 
                                           
Total Liabilities and Stockholders’ Equity
  $ 2,690,385                     $ 2,908,832                  
 
                                           
 
                                               
Net Interest Income
          $ 23,848                     $ 26,260          
 
                                           
 
                                               
Interest Rate Spread (3)
                    3.17 %                     3.35 %
 
                                           
 
                                               
Net Interest Margin (3)
                    3.85 %                     3.89 %
 
                                           
 
                                               
Supplemental Information:
                                               
Total Deposits, including Demand Deposits
  $ 2,059,148     $ 10,816             $ 2,123,240     $ 9,404          
Cost of Total Deposits
                    2.10 %                     1.77 %
Total Funding Liabilities, including Demand Deposits
  $ 2,457,451     $ 16,170             $ 2,667,129     $ 15,398          
Cost of Total Funding Liabilities
                    2.63 %                     2.31 %
 
(1)   Investment Securities are at average fair value.
 
(2)   The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $415 and $451 for the three months ended June 30, 2007 and 2006, respectively. Also, non-accrual loans have been included in the average loan category; however, unpaid interest on non-accrual loans has not been included for purposes of determining interest income.
 
(3)   Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. Net interest margin represents annualized net interest income as a percent of average interest-earning assets.

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Table 6 - Average Balance, Interest Earned/Paid & Average Yields
(Unaudited - Dollars in Thousands)
                                                 
            INTEREST                     INTEREST        
    AVERAGE     EARNED/     AVERAGE     AVERAGE     EARNED/     AVERAGE  
    BALANCE     PAID     YIELD/RATE     BALANCE     PAID     YIELD/RATE  
FOR THE SIX MONTHS ENDED JUNE 30,   2007     2007     2007     2006     2006     2006  
Interest-earning Assets:
                                               
Federal Funds Sold and Short Term Investments
  $ 27,265     $ 733       5.38 %   $ 6,914     $ 152       4.40 %
Securities:
                                               
Trading Assets
    1,669       23       2.76 %     1,576       19       2.41 %
Taxable Investment Securities (1)
    433,625       10,377       4.79 %     611,327       13,620       4.46 %
Non-taxable Investment Securities (1)(2)
    52,722       1,701       6.45 %     59,777       2,049       6.86 %
 
                                   
Total Securities:
    488,016       12,101       4.96 %     672,680       15,688       4.66 %
Loans (2)
    1,995,143       67,727       6.79 %     2,047,030       66,975       6.54 %
 
                                   
Total Interest-Earning Assets
  $ 2,510,424     $ 80,561       6.42 %   $ 2,726,624     $ 82,815       6.07 %
 
                                   
Cash and Due from Banks
    60,142                       59,840                  
Other Assets
    148,565                       151,456                  
 
                                           
Total Assets
  $ 2,719,131                     $ 2,937,920                  
 
                                           
 
                                               
Interest-bearing Liabilities:
                                               
Deposits:
                                               
Savings and Interest Checking Accounts
  $ 576,067     $ 3,794       1.32 %   $ 567,135     $ 1,908       0.67 %
Money Market
    468,603       7,049       3.01 %     533,091       6,852       2.57 %
Time Deposits
    540,289       11,067       4.10 %     543,292       9,104       3.35 %
 
                                   
Total interest-bearing deposits:
    1,584,959       21,910       2.76 %     1,643,518       17,864       2.17 %
Borrowings:
                                               
Federal Home Loan Bank Borrowings
  $ 245,471     $ 5,459       4.45 %   $ 399,551     $ 8,331       4.17 %
Federal Funds Purchased and Assets Sold Under Repurchase Agreement
    102,483       1,585       3.09 %     107,589       1,335       2.48 %
Junior Subordinated Debentures
    68,492       3,326       9.71 %     51,546       2,235       8.67 %
Other Borrowings
    792       25       6.31 %     1,329       28       4.21 %
 
                                   
Total borrowings:
    417,238       10,395       4.98 %     560,015       11,929       4.26 %
 
                                   
Total Interest-Bearing Liabilities
  $ 2,002,197     $ 32,305       3.23 %   $ 2,203,533     $ 29,793       2.70 %
 
                                   
Demand Deposits
    480,671                       489,490                  
 
                                               
Other Liabilities
    13,831                       18,544                  
 
                                           
Total Liabilities
    2,496,699                       2,711,567                  
Stockholders’ Equity
    222,432                       226,353                  
 
                                           
Total Liabilities and Stockholders’ Equity
  $ 2,719,131                     $ 2,937,920                  
 
                                           
 
                                               
Net Interest Income
          $ 48,256                     $ 53,022          
 
                                           
 
                                               
Interest Rate Spread (3)
                    3.19 %                     3.37 %
 
                                           
 
                                               
Net Interest Margin (3)
                    3.84 %                     3.89 %
 
                                           
 
                                               
Supplemental Information:
                                               
Total Deposits, including Demand Deposits
  $ 2,065,630     $ 21,910             $ 2,133,008     $ 17,864          
Cost of Total Deposits
                    2.12 %                     1.68 %
Total Funding Liabilities, including Demand Deposits
  $ 2,482,868     $ 32,305             $ 2,693,023     $ 29,793          
Cost of Total Funding Liabilities
                    2.60 %                     2.21 %
 
(1)   Investment Securities are at average fair value.
 
(2)   The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $835 and $906 for the six months ended June 30, 2007 and 2006, respectively. Also, non-accrual loans have been included in the average loan category; however, unpaid interest on non-accrual loans has not been included for purposes of determining interest income.
 
(3)   Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. Net interest margin represents annualized net interest income as a percent of average interest-earning assets.
     The following table presents certain information on a fully tax-equivalent basis regarding changes in the Company’s 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 old volume), (2) changes in volume (change in volume multiplied by old rate), and (3) changes in volume/rate (change in volume multiplied by change in rate).

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Table 7 - Volume Rate Analysis
                                                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2007 Compared to 2006     2007 Compared to 2006  
                    Change                             Change        
    Change     Change     Due to             Change     Change     Due to        
    Due to     Due to     Volume/     Total     Due to     Due to     Volume/     Total  
    Rate     Volume     Rate     Change     Rate     Volume     Rate     Change  
    (Unaudited - Dollars in Thousands)     (Unaudited - Dollars in Thousands)  
Income on interest-earning assets:
                                                               
Federal funds sold
  $ 3     $ 220     $ 14     $ 237     $ 34     $ 447     $ 100     $ 581  
Securities:
                                                               
Taxable securities
    518       (1,802 )     (146 )     (1,430 )     1,009       (3,959 )     (293 )     (3,243 )
Non-taxable securities (1)
    (85 )     (108 )     9       (184 )     (120 )     (242 )     14       (348 )
Trading assets
    3                   3       3       1             4  
 
                                               
Total Securities:
    436       (1,910 )     (137 )     (1,611 )     892       (4,200 )     (279 )     (3,587 )
Loans (1) (2)
    824       (1,064 )     (26 )     (266 )     2,514       (1,698 )     (64 )     752  
 
                                               
Total
  $ 1,263     $ (2,754 )   $ (149 )   $ (1,640 )   $ 3,440     $ (5,451 )   $ (243 )   $ (2,254 )
 
                                               
 
                                                               
Expense of interest-bearing liabilities:
                                                               
Deposits:
                                                               
Savings and Interest Checking accounts
  $ 926     $ 36     $ 33     $ 995     $ 1,827     $ 30     $ 29     $ 1,886  
Money Market
    402       (357 )     (41 )     4       1,167       (829 )     (141 )     197  
Time deposits
    685       (239 )     (33 )     413       2,024       (50 )     (11 )     1,963  
 
                                               
Total interest-bearing deposits:
    2,013       (560 )     (41 )     1,412       5,018       (849 )     (123 )     4,046  
Borrowings:
                                                               
Federal Home Loan Bank borrowings
  $ 127     $ (1,576 )   $ (48 )   $ (1,497 )   $ 555     $ (3,213 )   $ (214 )   $ (2,872 )
Federal funds purchased and assets sold under repurchase agreements
    98       (56 )     (8 )     34       329       (63 )           266  
Junior Subordinated Debentures
    552       178       88       818       268       735       88       1,091  
Other Borrowings
    9       (2 )     (2 )     5       14       (11 )     (6 )     (3 )
 
                                               
Total borrowings:
    786       (1,456 )     30       (640 )     1,166       (2,552 )     (132 )     (1,518 )
 
                                               
Total
  $ 2,799     $ (2,016 )   $ (11 )   $ 772     $ 6,184     $ (3,401 )   $ (255 )   $ 2,528  
 
                                               
Change in net interest income
  $ (1,536 )   $ (738 )   $ (138 )   $ (2,412 )   $ (2,744 )   $ (2,050 )   $ 12     $ (4,782 )
 
                                               
 
(1)   The total amount of adjustment to present income and yield on a fully tax-equivalent basis is $415 and $451 for the three months ended June 30, 2007 and 2006, respectively, and is $835 and $906 for the six months ended June 30, 2007 and 2006, respectively.
 
(2)   Loans include portfolio loans, loans held for sale and nonperforming loans; however unpaid interest on nonaccrual loans has not been included for purposes of determining interest income.
     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. Management’s periodic evaluation of the adequacy of the allowance 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 economic conditions. Substantial portions of the Bank’s loans are secured by real estate in Massachusetts. Accordingly, the ultimate collectibility of a substantial portion of the Bank’s loan portfolio is susceptible to changes in property values within the state.
     The provision for loan losses increased to $584,000 and $1.5 million for the three and six months ended June 30, 2007, respectively, compared with the $350,000 and $1.1 million reported in the comparable year-ago period. The increase in the level of loan loss provisions is due to increased charge-offs and nonperforming loans slightly offset by the decline in the loan portfolio.
     The ratio of the allowance for loan losses to total loans increased to 1.35% at June 30, 2007 from 1.32% at December 31, 2006 and 1.31% at June 30, 2006. The allowance for loan losses at June 30, 2007 was 454.93% of nonperforming loans, as compared to 384.22% at December 31, 2006 and 544.16% at June 30, 2006.
     The provision for loan losses is based upon management’s evaluation of the level of the allowance for loan losses in relation to the estimate of loss exposure in the loan portfolio. An analysis of individual loans and the overall risk characteristics and size of the different loan

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portfolios is conducted on an ongoing basis and is reviewed periodically by an independent third-party loan review consultant. As adjustments are identified, they are reported in the earnings of the period in which they become known.
     Non-Interest Income Non-interest income increased by $817,000, or 11.3%, and by $2.2 million, or 16.1%, during the three and six months ended June 30, 2007, respectively, as compared to the same period in the prior year.
     Service charges on deposit accounts decreased by $34,000, or 1.0%, and by $42,000, or 0.6%, for the three and six months ended June 30, 2007, as compared to the same periods in 2006.
     Wealth management revenue increased by $476,000, or 27.9%, and $935,000, or 30.6%, for the three and six months ended June 30, 2007, compared to the same period in 2006. Investment management income increased by $257,000, or 16.9%, and $541,000, or 19.5%, for the three and six months ended June 30, 2007. Assets under administration at June 30, 2007 were $895.9 million, an increase of $180.1 million, or 25.2%, as compared to June 30, 2006. Retail wealth management revenue improved by $219,000, or 117.2%, and $394,000, or 141.4%, for the three and six months ended June 30, 2007, due to a change in the model of annuities and mutual funds origination and an increase in sales.
     Mortgage banking income increased by $170,000, or 26.2%, and $126,000, or 8.6%, for the three and six months ended June 30, 2007, as compared to the same period in 2006. The balance of the mortgage servicing asset was $2.3 million and loans serviced amounted to $270.5 million as of June 30, 2007. The increase in mortgage banking income for both the three and six month periods in 2007 is mainly attributable to the premiums received on loans sold with servicing released.
     Bank owned life insurance (“BOLI”) income decreased $79,000, or 15.6%, and $1.3 million, or 59.3%, for the three and six months ended June 30, 2007 as compared to the same period ended June 30, 2006. The decrease in the six month period is due to the $1.3 million tax exempt BOLI death benefit proceeds realized during the first quarter of 2006.
     There were no gains or losses on the sale of securities during the second quarter of 2007 or 2006 and no gain or losses on the sale of securities were recorded during the first six months of 2007. A $1.8 million loss on the sale of securities was recorded in the first quarter of 2006 reflecting a loss for the six months ended June 30, 2006.
     Other non-interest income increased by $284,000, or 35.6%, and $737,000, or 44.6%, for the three and six months ended June 30, 2007, as compared to the same period in 2006, largely attributable to the revenue associated with the new 1031 deferred exchange business.
     Non-Interest Expense Non-interest expense increased by $2.6 million, or 12.7%, and $3.6 million, or 8.8%, for the three and six months ended June 30, 2007, as compared to the same period in 2006.
     Salaries and employee benefits increased by $941,000, or 7.8%, and $2.2 million, or 9.3%, for the three and six months ended June 30, 2007, as compared to the same period in 2006. Included in salaries and benefits are executive early retirement costs amounting to $406,000 recorded in the first quarter of 2007. The remaining increase in salaries and benefits

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is attributable to annual merit increases, the Compass Exchange Advisors acquisition at the beginning of 2007, commissions, and other new hires to support growth initiatives.
     Occupancy and equipment related expense increased by $81,000, or 3.2%, and decreased by $78,000, or 1.5%, for the three and six months ending June 30, 2007, as compared to the same period in 2006.
     Data processing and facilities management increased by $166,000, or 16.0%, and $194,000, or 9.3%, for the three and six month periods ending June 30, 2007, respectively, as compared to the same periods in 2006. The increases are largely due to the outsourcing of the Bank’s computer support in the second quarter of 2006.
     Other non-interest expense increased by $1.4 million, or 28.6%, and increased $1.3 million, or 12.8%, for the three and six months ended June 30, 2007, as compared to the same period in the prior year. The increase for both the three and six month periods is due to the $1.4 Million charge described above in Item 1, Note 10 – Subsequent Event.
     Income Taxes For the quarters ending June 30, 2007 and June 30, 2006, the Company recorded combined federal and state income tax provisions of $1.9 million and $4.7 million, respectively. These provisions reflect effective income tax rates of 25.0% and 31.1% for the quarters ending June 30, 2007 and June 30, 2006, respectively. The decrease in the effective tax rate is mainly attributable to additional new markets tax credits being recognized in 2007 (see below for more information).
     The tax effects of all income and expense transactions are recognized by the Company in each year’s consolidated statements of income regardless of the year in which the transactions are reported for income tax purposes.
     During the second quarter of 2004, the Company announced that one of its subsidiaries (a Community Development Entity, or “CDE,” described above as RTC CDE I), had been awarded $30.0 million in tax credit allocation authority under the New Markets Tax Credit (“NMTC”) program of the United States Department of Treasury. During 2006, the Company, through another of its CDE subsidiaries described above as RTC CDE II, was awarded an additional $45.0 million in tax credit allocation authority under the New Markets Tax Credit program.
     In both 2004 and 2005, the Bank invested $15.0 million during each year from the first $30.0 million award into RTC CDE I. During the first six months of 2007 the Bank invested $13.0 million into RTC CDE II to provide it with the capital necessary to begin assisting qualified businesses in low-income communities throughout its market area. The Company plans to invest an additional $12.0 million during 2007 and therefore has recognized the related credits in its effective tax rate. Based upon the Bank’s total $43.0 million investment in RTC CDE I and RTC CDE II and a planned additional $12.0 million investment to be made in 2007, it is eligible to receive tax credits over an eight year period totaling 39.0% of its investment, or $21.5 million. The Company recognized a $1.5 million benefit of these tax credits for the six months ending June 30, 2007, of which $1.3 million relates to investments made to date and the remainder recognized through the effective tax rate based upon the expected additional $12.0 million investment to be made in CDE II during 2007. A $750,000 tax credit benefit was recognized for the six months ending June 30, 2006. The following table details the remaining expected tax credit recognition by year based upon the two $15.0 million investments made in 2004 and 2005, the $13.0 million investment made in the first six months of 2007 and the planned additional $12.0 million investment to be made in 2007.

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Table 8 - New Markets Tax Credit Recognition Schedule
(Dollars in Thousands)
                                                                                                 
                                                                            Remaining        
                                                                            Total        
            January - June   July - December                                                   (including   Recognized In   Total
Investment   2007   2007   2008   2009   2010   2011   2012   2013   current year)   Prior Periods   Credits
2004
  $ 15M     $ 450     $ 450     $ 900     $ 900     $ 900     $     $     $     $ 3,600     $ 2,250     $ 5,850  
2005
  $ 15M     $ 375     $ 375     $ 900     $ 900     $ 900     $ 900     $     $     $ 4,350     $ 1,500     $ 5,850  
2007
  $ 25M (1)   $ 625     $ 625     $ 1,250     $ 1,250     $ 1,500     $ 1,500     $ 1,500     $ 1,500     $ 9,750     $     $ 9,750  
     
Total
  $ 55M     $ 1,450     $ 1,450     $ 3,050     $ 3,050     $ 3,300     $ 2,400     $ 1,500     $ 1,500     $ 17,700     $ 3,750     $ 21,450  
     
 
(1)   At June 30, 2007 $13M of the $25M has been invested.
     Return on Average Assets and Equity The annualized consolidated returns on average equity and average assets for the three months ended June 30, 2007 were 10.44% and 0.85%, respectively, compared to 14.90% and 1.14% reported for the same period last year. For the six months ended June 30, 2007, annualized consolidated returns on average equity and were 11.09% and 0.91%, respectively, compared to 14.31% and 1.10% for the six months ended June 30, 2006.
Asset/Liability Management
     The Bank’s asset/liability management process monitors and manages, among other things, the interest rate sensitivity of the balance sheet, the composition of the securities portfolio, funding needs and sources, and the liquidity position. All of these factors, as well as projected asset growth, current and potential pricing actions, competitive influences, national monetary and fiscal policy, and the regional economic environment are considered in the asset/liability management process.
     The Asset/Liability Management Committee (“ALCO”), whose members are comprised of the Bank’s senior management, develops procedures consistent with policies established by the Board of Directors, which monitor and coordinate the Bank’s interest rate sensitivity and the sources, uses, and pricing of funds. Interest rate sensitivity refers to the Bank’s exposure to fluctuations in interest rates and its effect on earnings. If assets and liabilities do not re-price simultaneously and in equal volume, the potential for interest rate exposure exists. It is management’s objective to maintain stability in the growth of net interest income through the maintenance of an appropriate mix of interest-earning assets and interest-bearing liabilities and, when necessary, within prudent limits, through the use of off-balance sheet hedging instruments such as interest rate swaps, floors and caps. The Committee employs simulation analyses in an attempt to quantify, evaluate, and manage the impact of changes in interest rates on the Bank’s net interest income. In addition, the Bank engages an independent consultant to render advice with respect to asset and liability management strategy.
     The Bank is careful to increase deposits without adversely impacting the weighted average cost of those funds. Accordingly, management has implemented funding strategies that include FHLB advances and repurchase agreement lines. These non-deposit funds are also viewed as a contingent source of liquidity and, when profitable lending and investment opportunities exist, access to such funds provides a means to leverage the balance sheet.
     From time to time, the Bank has utilized interest rate swap agreements and interest rates caps and floors as hedging instruments against interest rate risk. An interest rate swap is an agreement whereby one party agrees to pay a floating rate of interest on a notional principal amount in exchange for receiving a fixed rate of interest on the same notional amount

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for a predetermined period of time from a second party. Interest rate caps and floors are agreements whereby one party agrees to pay a floating rate of interest on a notional principal amount for a predetermined period of time to a second party if certain market interest rate thresholds are realized. The amounts relating to the notional principal amount are not actually exchanged.
     At June 30, 2007 and December 31, 2006 the Company had interest rate swaps and interest rate caps designated as “cash flow” hedges. The purpose of these swaps is to hedge the variability in the cash outflows of LIBOR-based borrowings attributable to changes in interest rates. The table below shows interest rate derivatives the Company held as of June 30, 2007 and December 31, 2006:
Table 9 - Interest Rate Derivatives
As of June 30, 2007
                                                                 
                                    Receive             Pay Fixed        
    Notional     Trade     Effective     Maturity     (Variable)     Current Rate     Swap Rate/     Market Value  
    Amount     Date     Date     Date     Index     Received     Cap Strike Rate     at June 30, 2007  
    (Dollars in Thousands)  
Interest Rate Swaps
                                                               
 
  $ 35,000     18-Jan-05   20-Jan-05   20-Jan-10   3 Month LIBOR     5.36 %     4.06 %   $ 1,018  
 
  $ 25,000     16-Feb-06   28-Dec-06   28-Dec-16   3 Month LIBOR     5.36 %     5.04 %   $ 927  
 
  $ 25,000     16-Feb-06   28-Dec-06   28-Dec-16   3 Month LIBOR     5.36 %     5.04 %   $ 923  
 
                                                           
Total
  $ 85,000                                             Total   $ 2,868  
 
                                                           
 
                                                               
Interest Rate Caps
                                                               
 
  $ 100,000     27-Jan-05   31-Jan-05   31-Jan-08   3 Month LIBOR     5.36 %     4.00 %   $ 768  
 
                                                           
 
                                                               
Grand Total
  $ 185,000                                             Grand Total   $ 3,636  
 
                                                           
As of December 31, 2006
                                                                 
                                    Receive             Pay Fixed        
    Notional     Trade     Effective     Maturity     (Variable)     Current Rate     Swap Rate/     Market Value  
    Amount     Date     Date     Date     Index     Received     Cap Strike Rate     at December 31, 2006  
    (Dollars in Thousands)  
Interest Rate Swaps
                                                               
 
  $ 25,000     16-Jan-04   21-Jan-04   21-Jan-07   3 Month LIBOR     5.37 %     2.49 %   $ 47  
 
  $ 35,000     18-Jan-05   20-Jan-05   20-Jan-10   3 Month LIBOR     5.37 %     4.06 %   $ 936  
 
  $ 25,000     16-Feb-06   28-Dec-06   28-Dec-16   3 Month LIBOR     5.36 %     5.04 %   $ 82  
 
  $ 25,000     16-Feb-06   28-Dec-06   28-Dec-16   3 Month LIBOR     5.36 %     5.04 %   $ 89  
 
                                                           
Total
  $ 110,000                                             Total   $ 1,154  
 
                                                               
Interest Rate Caps
                                                               
 
  $ 100,000     27-Jan-05   31-Jan-05   31-Jan-08   3 Month LIBOR     5.38 %     4.00 %   $ 1,284  
 
                                                           
 
                                                               
Grand Total
  $ 210,000                                             Grand Total   $ 2,438  
 
                                                           
     During February, 2006 the Company entered into two forward starting swaps, each with a $25.0 million notional amount, with the intention of hedging $50.0 million variable rate (LIBOR plus 148 basis points) trust preferred securities. On December 28, 2006, these forward starting swaps became effective when Trust V issued $50.0 million of trust preferred securities which pay interest at a variable rate of interest of LIBOR plus 148 basis points. Through these swaps the Company has effectively locked in a fixed rate of 6.52% on that debt obligation.
     As a result of the prolonged flat/inverted yield curve environment and the resulting strategy to de-leverage the balance sheet, management unwound $25.0 million of notional value of interest rate swaps hedging 3 month revolving FHLB advances tied to LIBOR and paid down the underlying borrowings during 2006. The influx of liquidity associated with cash flows from the securities portfolio not being reinvested made the borrowings unnecessary. Gains of $237,000 were realized against interest expense in the first quarter of 2006 associated with the sale of these interest rate swaps.

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     Additionally, the Company enters into commitments to fund residential mortgage loans with the intention of selling them in the secondary markets. The Company also enters into forward sales agreements for certain funded loans and loan commitments to protect against changes in interest rates. The Company records unfunded commitments and forward sales agreements at fair value with changes in fair value as a component of Mortgage Banking Income.
     The following table set forth the fair value of residential mortgage loan commitments and forward sales agreements at the periods indicated:
Table 10 - Fair Value of Residential Mortgage Loan Commitments and Forward Sales Agreements
                         
    Fair Value At
    June 30,   December 31,   June 30,
    2007   2006   2006
    (Dollars in Thousands)
Residential Mortgage Loan Commitments
  $ 148     $ 93     $ 122  
Forward Sales Agreements
  $ 158     $ 60     $ 107  
                 
    Change for the Six Months  
    Ended June 30,  
    2007     2006  
Residential Mortgage Loan Commitments
  $ 54     $ 14  
Forward Sales Agreements
  $ 98     $ 129  
 
           
Total Change in Fair Value
  $ 152     $ 143  
 
           
     Changes in these fair values are recorded as a component of mortgage banking income.
     Market Risk Market risk is the sensitivity of income to changes in interest rates, foreign exchange rates, commodity prices and other market-driven rates or prices. The Company has no trading operations, with the exception of funds managed by the Company’s investment management group and that are held within a trust to fund non-qualified executive retirement obligations, and thus is only primarily exposed to non-trading market risk.
     Interest-rate risk is the most significant non-credit risk to which the Company is exposed. Interest-rate risk is the sensitivity of income to changes in interest rates. Changes in interest rates, as well as fluctuations in the level and duration of assets and liabilities, affect net interest income, the Company’s primary source of revenue. Interest-rate risk arises directly from the Company’s core banking activities. In addition to directly impacting net interest income, changes in the level of interest rates can also affect the amount of loans originated, the timing of cash flows on loans and securities and the fair value of securities and derivatives as well as other affects.
     The primary goal of interest-rate risk management is to control this risk within limits approved by the Board. These limits reflect the Company’s tolerance for interest-rate risk over both short-term and long-term horizons. The Company attempts to control interest-rate risk by identifying, quantifying and, where appropriate, hedging its exposure. The Company manages its interest-rate exposure using a combination of on and off-balance sheet instruments, primarily fixed rate portfolio securities, and interest rate swaps.

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     The Company quantifies its interest-rate exposures using net interest income simulation models, as well as simpler gap analysis, and Economic Value of Equity (EVE) analysis. Key assumptions in these simulation analyses relate to behavior of interest rates and behavior of the Company’s deposit and loan customers. The most material assumptions relate to the prepayment of mortgage assets (including mortgage loans and mortgage-backed securities) and the life and sensitivity of nonmaturity deposits (e.g. DDA, NOW, savings and money market). The risk of prepayment tends to increase when interest rates fall. Since future prepayment behavior of loan customers is uncertain, the resultant interest rate sensitivity of loan assets cannot be determined exactly.
     To mitigate these uncertainties, the Company gives careful attention to its assumptions. In the case of prepayment of mortgage assets, assumptions are derived from published dealer median prepayment estimates for comparable mortgage loans.
     The Company manages the interest-rate risk inherent in its mortgage banking operations by entering into forward sales contracts. An increase in market interest rates between the time the Company commits to terms on a loan and the time the Company ultimately sells the loan in the secondary market will have the effect of reducing the gain (or increasing the loss) the Company records on the sale. The Company attempts to mitigate this risk by entering into forward sales commitments in amounts sufficient to cover all closed loans and a majority of rate-locked loan commitments.
     The Company’s policy on interest-rate risk simulation specifies that if interest rates were to shift gradually up or down 200 basis points, estimated net interest income for the subsequent 12 months should decline by less than 6.0%.
     The following table sets forth the estimated effects on the Company’s net interest income over a 12-month period following the indicated dates in the event of the indicated increases or decreases in market interest rates:
Table 11 - Interest Rate Sensitivity
                 
    200 Basis Point   200 Basis Point
    Rate Increase   Rate Decrease
June 30, 2007
    (2.49 %)     0.39 %
June 30, 2006
    (1.76 %)     (0.55 %)
     The results implied in the above table indicate estimated changes in simulated net interest income for the subsequent 12 months assuming a gradual shift up or down in market rates of 200 basis points across the entire yield curve. It should be emphasized, however, that the results are dependent on material assumptions such as those discussed above. For instance, asymmetrical rate behavior can have a material impact on the simulation results. If competition for deposits forced the Company to raise rates on those liabilities quicker than is assumed in the simulation analysis without a corresponding increase in asset yields net interest income may be negatively impacted. Alternatively, if the Company is able to lag increases in deposit rates as loans re-price upward net interest income would be positively impacted.

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     The most significant factors affecting market risk exposure of the Company’s net interest income during the second quarter of 2007 were (i) changes in the composition and prepayment speeds of mortgage assets and loans, (ii) the shape of the U.S. Government securities and interest rate swap yield curve, (iii) the level of U.S. prime interest rates, and (iv) the level of rates paid on deposit accounts.
     The Company’s earnings are not directly and materially impacted by movements in foreign currency rates or commodity prices. Movements in equity prices may have an indirect but modest impact on earnings by affecting the volume of activity or the amount of fees from investment-related business lines.
     Liquidity Liquidity, as it pertains to the Company, is the ability to generate adequate amounts of cash in the most economical way for the institution to meet its ongoing obligations to pay deposit withdrawals and to fund loan commitments. The Company’s primary sources of funds are deposits, borrowings, and the amortization, prepayment and maturities of loans and securities.
     The Bank utilizes its extensive branch network to access retail customers who provide a stable base of in-market core deposits. These funds are principally comprised of demand deposits, interest checking accounts, savings accounts, and money market accounts. Deposit levels are greatly influenced by interest rates, economic conditions, and competitive factors. The Bank has also established repurchase agreements with major brokerage firms as potential sources of liquidity. At June 30, 2007, the Company had no outstanding repurchase agreements. In addition to agreements with brokers, the Bank also had customer repurchase agreements outstanding amounting to $94.2 million at June 30, 2007. As a member of the Federal Home Loan Bank, the Bank has access to approximately $615.3 million of borrowing capacity. On June 30, 2007, the Bank had $231.2 million outstanding in FHLB borrowings.
     The Company, as a separately incorporated bank holding company, has no significant operations other than serving as the sole stockholder of the Bank. Its commitments and debt service requirement, at June 30, 2007, consist of $51.5 million junior subordinated debentures, including accrued interest, issued to an unconsolidated subsidiary Independent Capital Trust V, in connection with the issuance of variable rate (LIBOR plus 1.48%) Capital Securities due in 2037, for which the Company has locked in a fixed rate of interest of 6.52% for 10 years through an interest rate swap. The Company called the junior subordinated debentures issued to Independent Capital Trust IV in April 2007. The Company’s only obligations relate to its reporting obligations under the Securities and Exchange Act of 1934, as amended and related expenses as a publicly traded company. The Company funds virtually all expenses through dividends paid by the Bank.
     The Company actively manages its liquidity position under the direction of the Asset/Liability Management Committee. Periodic review under prescribed policies and procedures is intended to ensure that the Company will maintain adequate levels of available funds. At June 30, 2007, the Company’s liquidity position was well above policy guidelines. Management believes that the Bank has adequate liquidity available to respond to current and anticipated liquidity demands.
     Capital Resources and Dividends The Federal Reserve Board, the Federal Deposit Insurance Corporation, and other regulatory agencies have established capital guidelines for banks and bank holding companies. Risk-based capital guidelines issued by the federal

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regulatory agencies require banks to meet a minimum Tier 1 risk-based capital ratio of 4.0% and a total risk-based capital ratio of 8.0%. At June 30, 2007, the Company had a Tier 1 risk-based capital ratio of 10.40% and a total risk-based capital ratio of 11.65%. The Bank had a Tier 1 risk-based capital ratio of 10.51% and a total risk-based capital ratio of 11.76% as of the same date.
     A minimum requirement of 4.0% Tier 1 leverage capital is also mandated. On June 30, 2007, the Company and the Bank had Tier 1 leverage capital ratios of 7.94% and 8.03%, respectively.
     On June 21, 2007 the Company’s Board of Directors declared a cash dividend of $0.17 per share, a 6.3% increase from December 2006, to stockholders of record as of the close of business on June 26, 2007. This dividend was paid on July 6, 2007. On an annualized basis, the dividend payout ratio amounted to 32.66% of the trailing four quarters’ earnings.
     Contractual Obligations, Commitments, Contingencies, and Off-Balance Sheet Financial Instruments The Company has entered into contractual obligations and commitments and off-balance sheet financial instruments. The following tables summarize the Company’s contractual cash obligation and other commitment and off-balance sheet financial instruments at June 30, 2007:
Table 12 - Contractual Obligations, Commitments and Off-Balance Sheet Financial Instruments by Maturity
(Unaudited - Dollars in Thousands)
                                         
    Payments Due - By Period
            Less than   One to   Four to   After
Contractual Obligations   Total   One Year   Three Years   Five Years   Five Years
FHLB advances (1)
  $ 231,215     $ 161,092     $ 6     $ 70,006     $ 111  
Junior subordinated debentures (1)
    51,547                         51,547  
Lease obligations
    16,437       2,627       4,739       3,072       5,999  
Data processing and core systems
    15,931       5,201       9,486       1,244        
Other vendor contracts
    2,603       1,408       1,133       62        
Retirement benefit obligations (2)
    26,971       1,183       517       619       24,652  
Other
                                       
Treasury tax & loan notes
    1,070       1,070                    
Securities sold under repurchase agreements
                             
Customer repurchase agreements
    94,199       94,199                    
 
Total contractual cash obligations
  $ 439,973     $ 266,780     $ 15,881     $ 75,003     $ 82,309  
 
                                         
    Amount of Commitment Expiring - By Period
Off-Balance Sheet           Less than   One to   Four to   After
Financial Instruments   Total   One Year   Three Years   Five Years   Five Years
Lines of credit
  $ 331,040     $ 45,718     $     $     $ 285,322  
Standby letters of credit
    9,122       9,122                    
Other loan commitments
    269,863       203,022       51,751       3,446       11,644  
Forward commitments to sell loans
    27,959       27,959                    
Interest rate swaps - notional value (1) (3)
    85,000             35,000             50,000  
Interest rate caps - notional value (1) (4)
    100,000       100,000                    
 
Total Commitments
  $ 822,984     $ 385,821     $ 86,751     $ 3,446     $ 346,966  
 
 
(1)   The Company has hedged certain short-term borrowings and junior subordinated debentures.
 
(2)   Retirement benefit obligations include expected contributions to the Company’s pension plan, post retirement plan, and supplemental executive retirement plans. Expected contributions for the pension plan have been included only through plan year July 1, 2007 — June 30, 2008. Contributions beyond this plan year can not be quantified as they will be determined based upon the return on the investments in the plan. Expected contributions for the post retirement plan and supplemental executive retirement plans include obligations that are payable over the life of the participants.
 
(3)   Interest rate swaps on borrowings and junior subordinated debentures (Bank pays fixed, receives variable).
 
(4)   Interest rate cap on borrowings (4.00% 3-month LIBOR strike rate).

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Item 3. Quantitative and Qualitative Disclosures About Market Risk
     Information required by this Item 3 is included in Item 2 of Part I of this Form 10-Q, entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Item 4. Controls and Procedures
     Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures. The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this quarterly report.
     Changes in Internal Controls over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the second quarter of 2007 that have materially affected or are reasonably likely to materially affect the Company’s internal controls over financial reporting.
Item 4T. Controls and Procedures – N/A
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
     As previously disclosed, Rockland Trust is the plaintiff in the pending federal court case commonly known as Rockland Trust Company v. Computer Associates International, Inc., United States District Court for the District of Massachusetts Civil Action No. 95-11683-DPW (the “CA Case”). At trial Computer Associates International, Inc. (“CA”) asserted that Rockland Trust owes CA at least approximately $1.1 Million.
     On July 24, 2007 the judge who is presiding over the CA Case informed the parties that he is “going to enter judgment for Computer Associates.” The judge, however, has not yet rendered a Final Judgment or any written opinion to describe the basis for his decision or the amount of any damages to be awarded.
     On August 1, 2007 the Company established a $1.4 Million reserve for the CA Case, effective as of June 30, 2007. While the final outcome of the CA Case may differ from the $1.4 Million charge that the Company has recorded, the Company does not believe that the final

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outcome will have either an impact on its operations or any significant effect on its financial position.
          In addition to the foregoing, the Company is involved in routine legal proceedings occurring in the ordinary course of business which in the aggregate are believed by us to be immaterial to our financial condition and results of operations.
Item 1A. Risk Factors
          As of the date of this report, there have been no material changes with regard to the Risk Factors disclosed in Item 1A of our 2006 Annual Report on Form 10-K, which are incorporated herein by reference.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) - (b) Not applicable.
(c) The following table sets forth information with respect to any purchase made by or on behalf of Independent Bank Corp. or any “affiliated purchaser,” as defined in 204.10b-18(a)(3) under the Exchange Act, of shares of Independent Bank Corp. common stock during the indicated periods:
                                 
    Issuer Purchases of Equity Securities  
                    Total number of shares     Maximum number of  
            Weighted     purchased as part of     shares that may yet be  
    Total number of     Average price paid     publicly announced plans     purchased under the  
Period   shares purchased     per share     or programs     plans or programs (1)  
 
                            1,000,000  
January 1st - 31st, 2007
    192,980     $ 33.09       192,980       807,020  
February 1st - 28th, 2007
    131,663     $ 32.54       131,663       675,357  
March 1st - 31st, 2007
    87,204     $ 30.71       87,204       588,153  
April 1st - 30th, 2007
    101,500     $ 31.57       101,500       486,653  
May 1st - 31st, 2007
    195,800     $ 30.06       195,800       290,853  
June 1st - 30th, 2007
    96,600     $ 29.55       96,600       194,253  
 
                       
Total
    805,747     $ 31.39       805,747       194,253  
 
                       
 
(1)   On December 14, 2006, the Company announced a common stock repurchase program to repurchase up to 1,000,000 shares. The Company placed no deadline on the repurchase program. There were no shares purchased other than through a publicly announced plan or program.
Item 3. Defaults Upon Senior Securities – None
Item 4. Submission of Matters to a Vote of Security Holders
     The Company’s Annual Stockholders’ Meeting was held on April 12, 2007. Information regarding each Director who was elected at that Meeting, and information regarding each other

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Director whose term of office as a Director continued after that Meeting, is incorporated by reference to pages 8 – 14 of the Company’s definitive Proxy Statement for that Meeting.
     The matters voted upon at the Meeting and the outcome of voting is as follows:
Proposal 1. Re-elect W. Paul Clark, Benjamin A. Gilmore, II, Eileen C. Miskell, and John H. Spurr, Jr. to serve as Class II Directors;
                 
Director   For   Withheld
W. Paul Clark
    12,352,539       124,220  
Benjamin A Gilmore, II
    12,357,913       118,846  
Eileen C. Miskell
    12,383,474       93,285  
John H. Spurr, Jr.
    11,483,379       993,380  
Proposal 2. Ratify the selection of KPMG LLP as the independent registered public accounting firm of Independent Bank Corp. for 2007.
         
For
    12,412,374  
Against
    55,676  
Abstain
    8,709  
No Vote
    0  
Item 5. Other Information – None
Item 6. Exhibits
Exhibits Index
     
No.   Exhibit
 
   
3.(i)
  Restated Articles of Organization, as amended as of February 10, 2005, incorporated by reference to the Company’s Form 8-K filed on May 18, 2005.
 
   
3.(ii)
  Amended and Restated Bylaws of the Company, as amended as of February 10, 2005, incorporated by reference to the Company’s Form 8-K filed on May 18, 2005.
 
   
4.1
  Specimen Common Stock Certificate, incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 1992.
 
   
4.2
  Specimen preferred Stock Purchase Rights Certificate, incorporated by reference to the Company’s Form 8-A Registration Statement filed by the Company on November 5, 2001.
 
   
4.3
  Indenture of Registrant relating to the 8.375% Junior Subordinated Debentures issued to Independent Capital Trust IV, incorporated by reference to the Form 8-K filed by the Company on April 18, 2002.

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No.   Exhibit
 
   
4.4
  Form of Certificate of 8.375% Junior Subordinated Debenture (included as Exhibit A to Exhibit 4.3).
 
   
4.5
  Amended and Restated Declaration of Trust for Independent Capital Trust IV, incorporated by reference to the Form 8-K filed by the Company on April 18, 2002.
 
   
4.6
  Form of Preferred Security Certificate for Independent Capital Trust IV (included as Exhibit D to Exhibit 4.5).
 
   
4.7
  Preferred Securities Guarantee Agreement of Independent Capital Trust IV, incorporated by reference to the Form 8-K filed by the Company on April 18, 2002.
 
   
4.8
  Indenture of Registrant relating the Junior Subordinated Debt Securities issued to Independent Capital Trust V is incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2006, filed by the Company on February 28, 2007.
 
   
4.9
  Form of Certificate of Junior Subordinated Debt Security for Independent Capital Trust V (included as Exhibit A to Exhibit 4.8)
 
   
4.10
  Amended and Restated Declaration of Trust for Independent Capital Trust V is incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2006, filed by the Company on February 28, 2007.
 
   
4.11
  Form of Capital Security Certificate for Independent Capital Trust V (included as Exhibit A-1 to Exhibit 4.10).
 
   
4.12
  Guarantee Agreement relating to Independent Capital Trust V is incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2006, filed by the Company on February 28, 2007.
 
   
4.13
  Forms of Capital Securities Purchase Agreements for Independent Capital Trust V is incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2006, filed by the Company on February 28, 2007.
 
   
10.1
  Independent Bank Corp. 1996 Non-Employee Directors’ Stock Option Plan (Management contract under Item 601 (10)(iii)(A)). Incorporated by reference to the Company’s Definitive Proxy Statement for the 1996 Annual Meeting of Stockholders filed with the Commission on March 19, 1996.
 
   
10.2
  Independent Bank Corp. 1997 Employee Stock Option Plan (Management contract under Item 601 (10)(iii)(A)). Incorporated by reference to the Company’s Definitive Proxy Statement for the 1997 Annual Meeting of Stockholders filed with the Commission on March 20, 1997.
 
   
10.3
  Independent Bank Corp. 2005 Employee Stock Plan incorporated by reference to Form S-8 filed by the Company on July 28, 2005.
 
   
10.4
  Renewal Rights Agreement noted as of September 14, 2000 by and between the Company and Rockland, as Rights Agent (Exhibit to Form 8-K filed on October 23, 2000).

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No.   Exhibit
 
   
10.5
  Independent Bank Corp. Deferred Compensation Program for Directors (restated as amended as of December 1, 2000). Incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2000.
 
   
10.6
  Master Securities Repurchase Agreement, incorporated by reference to Form S-1 Registration Statement filed by the Company on September 18, 1992.
 
   
10.7
  First Amended and Restated Employment Agreement between Christopher Oddleifson and the Company and Rockland Trust dated April 14, 2005 is filed as an exhibit under the Form 8-K filed on April 14, 2005.
 
   
10.8
  Revised employment agreements between Raymond G. Fuerschbach, Edward F. Jankowski, Ferdinand T. Kelley, Jane L. Lundquist, Edward H. Seksay and Denis K. Sheahan and the Company and Rockland Trust (Management Contracts under Item 601 (10)(iii)(A)) dated December 6, 2004 are filed as an exhibit under the Form 8-K filed on December 9, 2004.
 
   
10.9
  Amended employment agreement with Ferdinand T. Kelley filed as an exhibit under the 8-K filed on March 16, 2007.
 
   
10.10
  Options to acquire shares of the Company’s Common Stock pursuant to the Independent Bank Corp. 1997 Employee Stock Option Plan were awarded to Christopher Oddleifson, Raymond G. Fuerschbach, Edward F. Jankowski, Ferdinand T. Kelley, Jane L. Lundquist, Edward H. Seksay and Denis K. Sheahan pursuant to option agreements dated December 9, 2004. The form of these option agreements were filed as exhibits under the Form 8-K filed on December 15, 2004.
 
   
10.11
  On-Site Outsourcing Agreement by and between Fidelity Information Services, Inc. and Independent Bank Corp., effective as of November 1, 2004. Incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2004 filed on March 4, 2005. (PLEASE NOTE: Portions of this contract, and its exhibits and attachments, have been omitted pursuant to a request for confidential treatment sent on March 4, 2005 to the Securities and Exchange Commission. The locations where material has been omitted are indicated by the following notation: “{****}”. The entire contract, in unredacted form, has been filed separately with the Commission with the request for confidential treatment.)
 
   
10.12
  New Markets Tax Credit program Allocation Agreement between the Community Development Financial Institutions Fund of the United States Department of the Treasury and Rockland Community Development with an Allocation Effective Date of September 22, 2004 is filed as an exhibit under the Form 8-K filed on October 14, 2004.
 
   
10.13
  Options to acquire shares of the Company’s Common Stock pursuant to the Independent Bank Corp. 2005 Employee Stock Plan were awarded to Christopher Oddleifson, Raymond G. Fuerschbach, Edward F. Jankowski, Ferdinand T. Kelley, Jane L. Lundquist, Edward H. Seksay, and Denis K. Sheahan pursuant to option agreements dated December 15, 2005. The form of option agreements used for these awards were filed as exhibits under the Form 8-K filed on December 20, 2005.
 
   
10.14
  Independent Bank Corp. 2006 Non-Employee Director Stock Plan incorporated by reference to Form S-8 filed by the Company on April 17, 2006.
 
   
10.15
  Independent Bank Corp. Stock Option Agreement for Non-Employee Director is filed as an exhibit under the Form 10-Q filed on May 9, 2006.
 
   
10.16
  Independent Bank Corp. Restricted Stock Agreement for Non-Employee Director is filed as an exhibit under the Form 10-Q filed on May 9, 2006.

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No.   Exhibit
 
   
10.17
  New Markets Tax Credit program Allocation Agreement between the Community Development Financial Institutions Fund of the United States Department of the Treasury and Rockland Community Development with an Allocation Effective Date of January 9, 2007 is incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2006, filed by the Company on February 28, 2007.
 
   
10.18
  Independent Bank Corp. and Rockland Trust Company 2007 Executive Officer Performance Incentive Plan (the “2007 Executive Incentive Plan”) (Management contract under Item 601 (10)(iii)(A)). Incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2006, filed by the Company on February 28, 2007. (PLEASE NOTE: Portions of the 2007 Executive Incentive Plan, and its exhibits and attachments, have been omitted pursuant to a request for confidential treatment sent on March 1, 2007 to the Securities and Exchange Commission. The locations where material has been omitted are indicated by the following notation: “{****}”. The entire 2007 Executive Incentive Plan, in unredacted form, has been filed separately with the Commission with the request for confidential treatment.)
 
   
31.1
  Section 302 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.*
 
   
31.2
  Section 302 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.*
 
   
32.1
  Section 906 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.+
 
   
32.2
  Section 906 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.+
 
*   Filed herewith
 
+   Furnished herewith

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SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
  INDEPENDENT BANK CORP.
     (registrant)
 
 
Date: August 1, 2007  /s/ Christopher Oddleifson    
  Christopher Oddleifson   
  President and Chief Executive Officer   
 
     
Date: August 1, 2007  /s/ Denis K. Sheahan    
  Denis K. Sheahan   
  Chief Financial Officer and Treasurer (Principal Financial and Principal Accounting Officer)   
 
  INDEPENDENT BANK CORP.
     (registrant)
 
 
     
     
     

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