10-Q

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, 2005
Commission File Number: 1-9047

Independent Bank Corp.

(Exact name of registrant as specified in its charter)

Massachusetts
(State or other jurisdiction of
incorporation or organization) 04-2870273
(I.R.S. Employer
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

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes þ   No

     As of August 1, 2005, there were 15,395,028 shares of the issuer’s common stock outstanding, par value $0.01 per share.

INDEX

				PAGE
PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		Consolidated Balance Sheets (unaudited) -			3
			June 30, 2005 and December 31, 2004
		Consolidated Statements of Income (unaudited)-			4
			Three and six months ended June 30, 2005 and 2004
		Consolidated Statements of Stockholders’ Equity (unaudited)-			5
			Six months ended June 30, 2005 and for the year ended December 31, 2004
		Consolidated Statements of Cash Flows (unaudited)-			6
			Six months ended June 30, 2005 and 2004
		Condensed Notes to Consolidated Financial Statements - June 30, 2005
			Note 1 - Basis of Presentation		7
			Note 2 - Stock Based Compensation		7
			Note 3 - Recent Accounting Developments		11
			Note 4 - Earnings Per Share		13
			Note 5 - Employee Benefits		15
			Note 6 - Repurchase Agreements		16
			Note 7 - Comprehensive Income (Loss)		16
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations				17
			Table 1 - Summary of Delinquency Information		22
			Table 2 - Nonperforming Assets / Loans		24
			Table 3 - Summary of Changes in the Allowance for Loan Losses		27
			Table 4 - Summary of Allocation of the Allowance for Loan Losses		28
			Table 5 - Average Balance, Interest Earned/Paid & Average Yields - Three months ended June 30, 2005 and 2004		32
			Table 6 - Average Balance, Interest Earned/Paid & Average Yields - Six months ended June 30, 2005 and 2004		33
			Table 7 - Volume Rate Analysis		35
			Table 8 - Interest Rate Sensitivity		40
			Table 9 - Contractual Obligations, Commitments and Off-Balance Sheet Financial Instruments by Maturity		42
	Item 3. Quantitative and Qualitative Disclosures About Market Risk				43
	Item 4. Controls and Procedures				43
PART II. OTHER INFORMATION					43
	Item 1. Legal Proceedings				43
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds				44
	Item 3. Defaults Upon Senior Securities				44
	Item 4. Submission of Matters to a Vote of Security Holders				44
	Item 5. Other Information				47
	Item 6. Exhibits				47
Signatures					50

2

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,
	2005			2004
ASSETS
CASH AND DUE FROM BANKS	$	76,454		$	62,961
FEDERAL FUNDS SOLD AND ASSETS PURCHASED UNDER RESALE AGREEMENT & SHORT TERM INVESTMENTS SECURITIES		3,564			2,735
Trading Assets		1,539			1,572
Securities Available for Sale		614,760			680,286
Securities Held to Maturity (fair value $110,651 and $112,159)		106,724			107,967
Federal Home Loan Bank Stock		29,287			28,413
TOTAL SECURITIES		752,310			818,238
LOANS
Commercial and Industrial		160,345			156,260
Commercial Real Estate		635,977			613,300
Commercial Construction		150,340			126,632
Business Banking		48,742			43,673
Residential Real Estate		426,753			427,556
Residential Construction		9,423			7,316
Residential Loans Held for Sale		11,511			10,933
Consumer — Home Equity		229,899			194,458
Consumer — Auto		281,564			283,964
Consumer — Other		55,583			52,266
TOTAL LOANS		2,010,137			1,916,358
LESS: ALLOWANCE FOR LOAN LOSSES		(26,050	)		(25,197	)
NET LOANS		1,984,087			1,891,161
BANK PREMISES AND EQUIPMENT, Net		36,303			36,449
GOODWILL		55,185			55,185
CORE DEPOSIT INTANGIBLE		1,942			2,103
MORTGAGE SERVICING RIGHTS		2,956			3,291
BANK OWNED LIFE INSURANCE		43,654			42,664
OTHER ASSETS		33,929			29,139
TOTAL ASSETS	$	2,990,384		$	2,943,926
LIABILITIES
DEPOSITS
Demand Deposits	$	528,295		$	495,500
Savings and Interest Checking Accounts		611,050			614,481
Money Market		513,181			501,065
Time Certificates of Deposit over $100,000		145,729			117,258
Other Time Certificates of Deposits		351,142			331,931
TOTAL DEPOSITS		2,149,397			2,060,235
FEDERAL HOME LOAN BANK BORROWINGS		460,784			537,919
FEDERAL FUNDS PURCHASED AND ASSETS SOLD UNDER REPURCHASE AGREEMENTS		86,976			61,533
JUNIOR SUBORDINATED DEBENTURES		51,546			51,546
TREASURY TAX AND LOAN NOTES		3,047			4,163
TOTAL BORROWINGS		602,353			655,161
OTHER LIABILITIES		18,106			17,787
TOTAL LIABILITIES	$	2,769,856		$	2,733,183
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: 15,450,724 Shares at June 30, 2005 and at December 31, 2004.		155			155
TREASURY STOCK: 69,621 Shares at June 30, 2005 and 124,488 Shares at December 31, 2004.		(1,088	)		(1,946	)
TREASURY STOCK SHARES HELD IN RABBI TRUST AT COST 168,267 Shares at June 30, 2005 and 171,799 Shares at December 31, 2004		(1,504	)		(1,428	)
DEFERRED COMPENSATION OBLIGATION		1,504			1,428
ADDITIONAL PAID IN CAPITAL		59,575			59,470
RETAINED EARNINGS		163,474			152,130
ACCUMULATED OTHER COMPREHENSIVE(LOSS)/ INCOME, NET OF TAX		(1,588	)		934
TOTAL STOCKHOLDERS’ EQUITY		220,528			210,743
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,990,384		$	2,943,926

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

3

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,
	2005		2004		2005		2004
INTEREST INCOME
Interest on Loans	$	29,769	$	23,540	$	57,897	$	46,819
Taxable Interest and Dividends on Securities		8,146		7,907		16,299		14,955
Non-taxable Interest and Dividends on Securities		675		695		1,339		1,442
Interest on Federal Funds Sold and Short-Term Investments		36		—		66		—
Total Interest Income		38,626		32,142		75,601		63,216
INTEREST EXPENSE
Interest on Deposits		6,080		4,589		11,333		8,886
Interest on Borrowings		6,202		4,584		12,056		7,927
Total Interest Expense		12,282		9,173		23,389		16,813
Net Interest Income		26,344		22,969		52,212		46,403
PROVISION FOR LOAN LOSSES		1,105		744		2,035		1,488
Net Interest Income After Provision For Loan Losses		25,239		22,225		50,177		44,915
NON-INTEREST INCOME
Service Charges on Deposit Accounts		3,178		3,052		6,149		5,962
Investment Management Services Income		1,413		1,248		2,651		2,328
Mortgage Banking Income		583		856		1,512		1,592
BOLI Income		474		588		897		970
Net Gain on Sales of Securities		273		—		616		997
Other Non-Interest Income		788		713		1,470		1,863
Total Non-Interest Income		6,709		6,457		13,295		13,712
NON-INTEREST EXPENSE
Salaries and Employee Benefits		12,162		9,976		23,953		20,942
Occupancy and Equipment Expenses		2,597		2,209		5,192		4,497
Data Processing and Facilities Management		991		1,153		1,953		2,210
Merger & Acquisition Expense		—		221		—		221
Other Non-Interest Expense		4,586		5,332		9,027		9,986
Total Non-Interest Expense		20,336		18,891		40,125		37,856
Minority Interest Expense		—		—		—		1,072
INCOME BEFORE INCOME TAXES		11,612		9,791		23,347		19,699
PROVISION FOR INCOME TAXES		3,571		3,170		7,392		6,378
NET INCOME	$	8,041	$	6,621	$	15,955	$	13,321
BASIC EARNINGS PER SHARE	$	0.52	$	0.45	$	1.04	$	0.91
DILUTED EARNINGS PER SHARE	$	0.52	$	0.45	$	1.03	$	0.90
Weighted average common shares (Basic)		15,372,253		14,688,789		15,359,374		14,670,858
Common stock equivalents		132,723		164,961		148,650		185,150
Weighted average common shares (Diluted)		15,504,976		14,853,750		15,508,024		14,856,008

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

4

INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited — Dollars in Thousands, Except Per Share Data)

						TREASURY											ACCUMULATED
						STOCK											OTHER
						HELD IN			DEFERRED		ADDITIONAL						COMPREHENSIVE
	COMMON		TREASURY			RABBI			COMPENSATION		PAID-IN			RETAINED			(LOSS)
	STOCK		STOCK			TRUST			OBLIGATION		CAPITAL			EARNINGS			INCOME			TOTAL
BALANCE DECEMBER 31, 2003	$	149		($3,685	)		($1,281	)	$	1,281	$	42,292		$	129,760		$	3,331		$	171,847
Net Income															30,767						30,767
Cash Dividends Declared ($0.56 per share)															(8,397	)					(8,397	)
Proceeds From Exercise of Stock Options				1,739								69									1,808
Tax Benefit on Stock Option Exercise												247									247
Common Stock Issued for Acquisition		6										16,862									16,868
Change in Fair Value of Derivatives During Period, Net of Tax, and Realized Gains																		(135	)		(135	)
Deferred Compensation Obligation							(147	)		147											—
Change in Unrealized Gain on Securities Available For Sale, Net of Tax, and Realized Gains																		(2,262	)		(2,262	)
BALANCE DECEMBER 31, 2004	$	155		($1,946	)		($1,428	)	$	1,428	$	59,470		$	152,130		$	934		$	210,743
Net Income															15,955						15,955
Cash Dividends Declared ($0.30 per share)															(4,611	)					(4,611	)
Proceeds From Exercise of Stock Options				858								(24	)								834
Tax Benefit on Stock Option Exercise												129									129
Change in Fair Value of Derivatives During Period, Net of Tax, and Realized Gains																		(217	)		(217	)
Deferred Compensation Obligation							(76	)		76											—
Change in Unrealized Gain on Securities Available For Sale, Net of Tax, and Realized Gains																		(2,305	)		(2,305	)
BALANCE JUNE 30, 2005	$	155		($1,088	)		($1,504	)	$	1,504	$	59,575		$	163,474		($	1,588	)	$	220,528

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

5

INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited — Dollars in Thousands)

	SIX MONTHS ENDED
	JUNE 30,
	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	15,955		$	13,321
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED FROM OPERATING ACTIVITIES:
Depreciation and amortization		3,120			2,851
Provision for loan losses		2,035			1,488
Deferred income tax expense		(1,683	)		(4,301	)
Loans originated for resale		(94,065	)		(67,580	)
Proceeds from mortgage loan sales		94,246			67,363
Gain on sale of mortgages		(760	)		(216	)
Gain on sale of investments		(616	)		(997	)
Gain/(Loss) recorded from mortgage servicing rights, net of amortization		335			(12	)
Changes in assets and liabilities:
Increase in other assets		(2,797	)		(4,162	)
Increase in other liabilities		158			776
TOTAL ADJUSTMENTS		(27	)		(4,790	)
NET CASH PROVIDED FROM OPERATING ACTIVITIES		15,928			8,531
CASH FLOWS USED IN INVESTING ACTIVITIES:
Proceeds from maturities and principal repayments of Securities Held to Maturity		1,169			7,046
Proceeds from maturities and principal repayments and sales of Securities Available For Sale	158,747				112,400
Purchase of Securities Available For Sale		(96,796	)		(249,698	)
Purchase of Federal Home Loan Bank Stock		(874	)		(525	)
Net increase in Loans		(94,383	)		(115,533	)
Investment in Bank Premises and Equipment		(2,207	)		(2,685	)
NET CASH USED IN INVESTING ACTIVITIES		(34,344	)		(248,995	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in Time Deposits		47,682			14,772
Net increase in Other Deposits		41,480			189,229
Net increase in Federal Funds Purchased and Assets Sold Under Repurchase Agreements		25,443			10,997
Net (decrease) increase in Federal Home Loan Bank Borrowings		(77,135	)		25,598
Net decrease in Treasury Tax and Loan Notes		(1,116	)		(1,970	)
Proceeds from exercise of stock options		834			1,105
Dividends paid		(4,450	)		(3,955	)
NET CASH PROVIDED FROM FINANCING ACTIVITIES		32,738			235,776
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		14,322			(4,688	)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD		65,696			75,495
CASH AND CASH EQUIVALENTS AS OF JUNE 30,	$	80,018		$	70,807
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the three months for:
Interest on deposits and borrowings	$	21,626		$	15,745
Interest on shares subject to mandatory redemption		—			2,125
Income taxes		7,968			8,615
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Change in fair value of cash flow derivatives, net of tax and realized gains		(217	)		410
Change in fair value of securities available for sale, net of tax and realized gains	(2,305)				(7,268	)
Issuance of shares from Treasury Stock for the exercise of stock options		858			1,090

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

6

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 1986. The Company is the sole stockholder of Rockland Trust Company (“Rockland” or “the Bank”), a Massachusetts trust company chartered in 1907. The Company also owns 100% of the common stock of Independent Capital Trust III (“Trust III”) and Independent Capital Trust IV (“Trust IV”), each of which have issued trust preferred securities to the public. As of March 31, 2004, Trust III and Trust IV are no longer included in the Company’s consolidated financial statements (see FIN No. 46 discussion within Recent Accounting Pronouncements Note 3 below). The Bank’s subsidiaries consist of: two Massachusetts securities corporations, RTC Securities Corp. I and RTC Securities Corp. X; Taunton Avenue Inc.; and, Rockland Trust Community Development LLC. Taunton Avenue Inc. was formed in May 2003 to hold loans, industrial development bonds and other assets. Rockland Trust Community Development LLC was formed in August 2003 to make loans and to provide financial assistance to qualified businesses and individuals in low-income communities in accordance with New Markets Tax Credit Program criteria. All material intercompany balances and transactions have been eliminated in consolidation. Certain amounts in prior year financial statements have been reclassified to conform to the current year’s 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 the financial statements, primarily consisting of normal recurring adjustments, have been included. Operating results for the quarter and six months ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ended December 31, 2005 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, 2004 filed with the Securities and Exchange Commission.

NOTE 2 — STOCK BASED COMPENSATION

     The Company measures compensation cost for stock-based compensation plans as the excess, if any, of the fair market value of the Company’s stock at the date of grant over the exercise price of options granted. The Company discloses pro forma net income and earnings per share in the notes to its consolidated financial statements as if compensation was measured at the date of grant based on the fair value of the award and recognized over the service period. Beginning January 1, 2006, the Company will adopt Statement of Financial Accounting Standard (“SFAS”) No. 123 (revised 2004) (“SFAS 123R”), “Share-Based Payment (See discussion which follows in recent accounting pronouncements),” which will require the Company to record compensation measured at the date of grant based on the fair value of the awards and recognized over its requisite service period.

7

     The Company has four stock option plans: the Amended and Restated 1987 Incentive Stock Option Plan (“The 1987 Plan”), the 1996 Non-employee Directors’ Stock Option Plan (“The 1996 Plan”), the 1997 Employee Stock Option Plan (“The 1997 Plan”), and the 2005 Employee Stock Option Plan (“The 2005 Plan”). All four plans were approved by the Company’s Board of Directors and shareholders. The 2005 Plan was approved by the Company’s Board of Directors on February 10, 2005 and ratified by the Company’s shareholders on April 21, 2005. The 2005 Plan was approved to allow issuance of either stock options or restricted stock awards for up to 800,000 shares of common stock. No awards have been granted from the 2005 Plan to date.

     Statement of Financial Accounting Standards No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation” encourages, but does not require, adoption of a fair-value based method of accounting for employee stock-based compensation plans, where compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period. An entity may continue to apply Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees”, and related interpretations, whereby compensation cost is the excess, if any, of the fair market value of the Company’s stock at the date of grant over the exercise price of options granted, provided the entity discloses the pro forma net income and earnings per share as if the fair-value method had been applied. The Company measures compensation cost for stock-based compensation plans as the excess, if any, of the fair market value of the Company’s stock at the date of grant over the exercise price of options granted. Compensation cost is not recognized as the exercise price has historically equaled the grant date fair value of the underlying stock. Had the Company recognized compensation cost for these plans determined as the fair market value of the Company’s stock at the grant date and recognized over the service period, as determined using the Black-Scholes option-pricing model, the Company’s net income and earnings per share would have been reduced to the following pro forma amounts:

8

Three Months Ended June 30,		2005		2004
Net Income:	As Reported (000’s)	$	8,041	$	6,621
	Pro Forma (000’s)	$	7,813	$	6,490
Basic EPS:	As Reported	$	0.52	$	0.45
	Pro Forma	$	0.51	$	0.44
Diluted EPS:	As Reported	$	0.52	$	0.45
	Pro Forma	$	0.50	$	0.44

Six Months Ended June 30,		2005		2004
Net Income:	As Reported (000’s)	$	15,955	$	13,321
	Pro Forma (000’s)	$	15,514	$	13,023
Basic EPS:	As Reported	$	1.04	$	0.91
	Pro Forma	$	1.01	$	0.89
Diluted EPS:	As Reported	$	1.03	$	0.90
	Pro Forma	$	1.00	$	0.88

     The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants under the 1997 Plan and the 1996 Plan:

9

	1997 Plan			1996 Plan
Risk Free Interest Rate
June 30, 2005		3.53%	(1)		3.93%	(2)
Fiscal Year 2004		3.35%	(3)		—
		2.64%-3.49%	(4)		3.19%	(5)
Expected Dividend Yield
June 30, 2005		1.91%	(1)		2.21%	(2)
Fiscal Year 2004		1.64%	(3)		—
		1.71%-2.09%	(4)		2.02%	(5)
Expected Life
June 30, 2005	4 years (1)			4.5 years (2)
Fiscal Year 2004	4 years (3)				—
	3.5 years (4)			4 years (5)
Expected Volatility
June 30, 2005		26%	(1)		27%	(2)
Fiscal Year 2004		28%	(3)		—
		28-30%	(4)		28%	(5)

(1)	On January 13, 2005, 34,500 options were granted from the 1997 Plan to certain First Vice Presidents and Vice Presidents of the Company. Also on January 13, 2005, 5,000 options were granted to the Senior Vice President and Director of Marketing, Strategy and Analysis. The risk free rate, expected dividend yield, expected life and expected volatility for these grants was determined on January 13, 2005.
(2)	On April 26, 2005, 11,000 options were granted from the 1996 Plan to the Company’s Board of Directors. The risk free rate, expected dividend yield, expected life and expected volatility for this grant were determined on April 26, 2005.
(3)	On December 9, 2004, 175,500 options were granted from the 1997 Plan to the Company’s members of Senior Management. The risk free rate, expected dividend yield, expected life and expected volatility for this grant were determined on December 9, 2004.
(4)	On both January 8, 2004 and June 10, 2004, 5,000 options were granted from the 1997 Plan to the Company’s Managing Director of Business Banking. The risk free rate, expected dividend yield, expected life and expected volatility for these grants were determined on the respective grant dates. On both July 19, 2004 and October 20, 2004 10,000 options were granted from the 1997 Plan to the Company’s Executive Vice President of Retail Banking and Corporate Marketing. The risk free rate, expected dividend yield, expected life and expected volatility for these grants were determined on the respective grant dates.
(5)	On April 27, 2004, 11,000 options were granted from the 1996 Plan to the Company’s Board of Directors. The risk free rate, expected dividend yield, expected life and expected volatility for this grant were determined on April 27, 2004.

10

NOTE 3 — RECENT ACCOUNTING DEVELOPMENTS

     SFAS No. 123 (revised 2004) (“SFAS 123R”), “ Share-Based Payment ” In December 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004). SFAS No. 123R replaces SFAS No. 123 “Accounting for Stock-Based Compensation” and supersedes Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees”. SFAS No. 123R will require that the compensation cost relating to share-based payment transactions be recognized in the Company’s financial statements, eliminating pro forma disclosure as an alternative. That cost will be measured based on the grant-date fair value of the equity or liability instruments issued. On April 14, 2005, the SEC issued a press release deferring the compliance date of SFAS 123R, which had an original effective date of the first interim or annual period beginning after June 15, 2005, until the beginning of a company’s next fiscal year for calendar-year companies. For the Company, implementation would therefore be required beginning January 1, 2006. The impact of the Company adopting such accounting can be seen in Note 2, Stock-Based Compensation of the Notes to Consolidated Financial Statements included in Item 1 hereof. The Company estimates the 2006 compensation expense related to share-based payment transactions to be recognized will be approximately $800,000 before tax for the year ending December 31, 2006 for options granted to date upon adoption of SFAS 123R. Management has not yet decided the transition method it will use upon adoption of SFAS 123R nor has it decided the amount or type of share-based compensation to be issued for the remainder of 2005 and beyond.

     FIN No. 46 “Consolidation of Variable Interest Entities – an Interpretation of Accounting Research Bulletin No. 51” In January 2003, the FASB issued FIN No. 46. FIN 46 established accounting guidance for consolidation of variable interest entities (“VIE”) that function to support the activities of the primary beneficiary. The primary beneficiary of a VIE is the entity that absorbs a majority of the VIE’s expected losses, receives a majority of the VIE’s expected residual returns, or both, as a result of ownership, controlling interest, contractual relationship or other business relationship with a VIE. Prior to the implementation of FIN 46, VIEs were generally consolidated by an enterprise when the enterprise had a controlling financial interest through ownership of a majority of voting interest in the entity. The Company adopted FIN No. 46 as of February 1, 2003 for all arrangements entered into after January 31, 2003.

     In December 2003, the FASB issued a revised FIN No. 46 (“FIN 46R”), which, in part, addressed limited purpose trusts formed to issue trust preferred securities. FIN 46R required the Company to deconsolidate its two subsidiary trusts (Independent Capital Trust III and Independent Capital Trust IV) on March 31, 2004. The result of deconsolidating these trusts was that trust preferred securities of the trusts, which were classified between liabilities and equity on the balance sheet (mezzanine section), no longer appear on the consolidated balance sheet of the Company. The related minority interest expense also no longer is included in the consolidated statement of income. Due to FIN 46R, the junior subordinated debentures of the parent company that were previously eliminated in consolidation are now included on the consolidated balance sheet within total borrowings. The interest expense on the junior subordinated debentures is included in the net interest margin of the consolidated company, negatively impacting the net interest margin by approximately 0.19% on an annualized basis. There is no impact to net income as the amount of interest previously recognized as minority interest is equal to the amount of interest expense that is recognized currently in borrowings expense offset by the dividend income on the subsidiary trusts

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common stock that is recognized in other non-interest income. Prior periods were not restated to reflect the changes made by FIN 46R.

     On March 1, 2005, the Board of Governors of the Federal Reserve issued a final ruling amending its risk-based capital standards for bank holding companies to allow continued inclusion of outstanding and prospective issuances of trust preferred securities in Tier 1 capital for regulatory capital purposes subject to quantitative limits applied in the aggregate amount of trust preferred securities and certain other capital elements and qualitative standards. After a five-year transition period, the aggregate amount of trust preferred securities and certain other capital elements would be limited to 25 percent of Tier 1 capital elements, net of goodwill less any associated deferred tax liability. The amount of trust preferred securities and certain other elements in excess of the core capital limit generally will be includable in Tier 2 capital.

     For all other arrangements entered into subsequent to January 31, 2003, the Company adopted FIN 46R as of December 31, 2003. There was no material impact on the Company’s financial position or results of operations.

     Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 105 - “Application of Accounting Principles to Loan Commitments” In March 2004, the SEC issued SAB No. 105. SAB No. 105 summarizes the views of the SEC regarding the application of Generally Accepted Accounting Principles (“GAAP”) to loan commitments for mortgage loans that will be held for sale accounted for as derivatives. The guidance requires the measurement at fair value of such loan commitments include only the differences between the guaranteed interest rate in the loan commitment and a market interest rate; future cash flows related to servicing the loan or the customer relationship should not be recorded as a part of the loan commitment derivative. SAB No. 105 is effective for said loan commitments accounted for as derivatives entered into beginning April 1, 2004. The Company adopted this SAB on April 1, 2004. The adoption of SAB No. 105 did not have a material impact on the Company as the Company was valuing loan commitments to be accounted for as derivatives consistent with this guidance.

     FASB Staff Position (“FSP”) 106-2: “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” In May 2004, the FASB issued FSP 106-2. FSP 106-2 provides guidance on accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (“the Act”) for employers that sponsor postretirement health care plans that provide prescription drug benefits that are “actuarially equivalent” to Medicare Part D. It also requires certain disclosures regarding the effect of the Federal subsidy provided by the Act. FSP 106-2 is effective for interim or annual periods beginning after June 15, 2004. The reported measures of net periodic postretirement benefit costs for year to date June 30, 2005 do not reflect any amount associated with the Federal subsidy provided by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (“the Act”) because the Company does not believe that the benefits provided by the postretirement benefit plans that fall under the Act have a material impact upon the Company’s financial statements.

     FASB Emerging Issues Task Force (“EITF”) Issue 03-1: “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” In November 2003 and March 2004, the FASB’s EITF issued a consensus on EITF Issue 03-1. EITF 03-1 contains new guidance on other-than-temporary impairments of investment securities. The guidance dictates when impairment is deemed to exist, provides guidance on determining if impairment is other than temporary, and directs how to calculate impairment loss. Issue 03-1

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also details expanded annual disclosure rules. In September 2004, the FASB issued FSP EITF Issue No. 03-1-1 “Effective Date of Paragraphs 10-20 of EITF Issue 03-1 The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”, which delays the effective date for the measurement and recognition guidance contained in paragraphs 10-20 of EITF 03-1 to be concurrent with the final issuance of FSP EITF 03-1-a “Implementation Guidance for the Application of Paragraph 16 of EITF 03-1 The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”.

     On June 29, 2005, the FASB met and decided not to provide additional guidance on the meaning of other-than-temporary impairment. The FASB will issue the proposed FSP EITF 03-1-a as final and the final FSP will supersede EITF Issue No. 03-1 and EITF Topic No. D-44, “Recognition of Other-Than-Temporary Impairment upon the Planned Sale of a Security Whose Cost Exceeds Fair Value,” and will replace guidance set forth in paragraphs 10-18 of EITF Issue No. 03-1 with references to existing other-than-temporary impairment guidance. When issued, the final FSP will be titled, “FSP FAS 115-1 “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” The new FSP will be effective for other-than-temporary impairment analysis conducted in periods beginning after September 15, 2005. The adoption of the original EITF 03-1 (excluding paragraphs 10-20) did not have a material impact on the Company’s financial position or results of operations nor does the Company believe that the adoption of FSP FAS 115-1 will have a material impact on the Company’s financial position.

     Statement of Position 03-3 (“SOP 03-3”): “Accounting for Certain Loans or Debt Securities Acquired in a Transfer” In December 2003, the American Institute of Certified Public Accountants (“AICPA”) issued SOP 03-3. SOP 03-3 requires loans acquired through a transfer, such as a business combination, where there are differences in expected cash flows and contractual cash flows due in part to credit quality be recognized at their fair value. The yield that may be accreted is limited to the excess of the investor’s estimate of undiscounted expected principal, interest, and other cash flows over the investor’s initial investment in the loan. The excess of contractual cash flows over expected cash flows is not to be recognized as an adjustment of yield, loss accrual, or valuation allowance. Any future excess of cash flows over the original expected cash flows is to be recognized as an adjustment of future yield. Future decreases in actual cash flow compared to the original expected cash flow are recognized as a valuation allowance and expensed immediately. Valuation allowances can not be created nor “carried over” in the initial accounting for loans acquired in a transfer of loans with evidence of deterioration of credit quality since origination. However, valuation allowances for non-impaired loans acquired in a business combination can be carried over. This SOP is effective for loans acquired in fiscal years beginning after December 15, 2004, with early adoption encouraged. The Company does not believe the adoption of SOP 03-3 will have a material impact on the Company’s financial position or results of operations.

NOTE 4 — EARNINGS PER SHARE

     Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if options or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that share in the earnings of the entity.

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     Earnings per share consisted of the following components for the three and six months ended June 30, 2005 and 2004:

	Net Income
	2005		2004
For the Three Months Ended June 30,	(Dollars in Thousands)
Net Income	$	8,041	$	6,621

	Weighted Average
	Shares
	2005		2004
Basic EPS		15,372,253		14,688,789
Effect of dilutive securities		132,723		164,961
Diluted EPS		15,504,976		14,853,750

	Net Income
	Per Share
	2005		2004
Basic EPS	$	0.52	$	0.45
Effect of dilutive securities	$	0.00	$	0.00
Diluted EPS	$	0.52	$	0.45

	Net Income
	2005		2004
For the Six Months Ended June 30,	(Dollars in Thousands)
Net Income	$	15,955	$	13,321

	Weighted Average
	Shares
	2005		2004
Basic EPS		15,359,374		14,670,858
Effect of dilutive securities		148,650		185,150
Diluted EPS		15,508,024		14,856,008

	Net Income
	Per Share
	2005		2004
Basic EPS	$	1.04	$	0.91
Effect of dilutive securities	$	0.01	$	0.01
Diluted EPS	$	1.03	$	0.90

     Options to purchase common stock with an exercise price greater than the average market price of common shares for the period are excluded from the calculation of diluted earnings per share, as their effect on earnings per share would be anti-dilutive. For the three and six months ended June 30, 2005 there were 346,555 and 330,756 shares, respectively, excluded from the calculation of diluted earnings per share. For the three and six months ended June 30, 2004 there were 135,695 and 129,901, respectively, of shares excluded from the calculation of diluted earnings per share.

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NOTE 5 — 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,
	2005		2004		2005		2004
	(Unaudited - Dollars in Thousands)
Service cost	$	23	$	20	$	44	$	35
Interest cost		18		17		32		31
Amortization of transition obligation		9		9		—		—
Amortization of prior service cost		3		3		11		39
Net periodic benefit cost	$	53	$	49	$	87	$	105

Components of Net Periodic Benefit Cost

	Post Retirement Benefits				SERPs
	Six months ended June 30,
	2005		2004		2005		2004
	(Unaudited - Dollars in Thousands)
Service cost	$	46	$	40	$	88	$	69
Interest cost		36		34		64		62
Amortization of transition obligation		18		18		—		—
Amortization of prior service cost		6		6		23		78
Net periodic benefit cost	$	106	$	98	$	175	$	209

     The Company previously disclosed in its financial statements for the fiscal year ended December 31, 2004 that it expected to contribute $65,000 to its post retirement benefit plan and $124,000 to its SERPs in 2005 and presently anticipates making these contributions. For the three months ended June 30, 2005, $13,000 and $28,000 of contributions have been made to the post retirement benefit plan and the SERPs, respectively, and for the six months ended June 30, 2005, $44,000 and $57,000 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 1^st through June 30^th. The Company anticipates that contributions paid to the defined benefit pension plan will be $1.2 million beginning in the third quarter of 2005 related to the 2005-2006 plan year. Contributions for the 2004-2005 plan year were all paid in 2004. Pension expense was $1.8 million for the year 2004 and is expected to be $2.2 million for the full year 2005 of which $596,000 has been recognized for the three months ended June 30, 2005 and $1.1 million has been recognized year to date.

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NOTE 6 — REPURCHASE AGREEMENTS

     Both wholesale and retail repurchase agreements are collateralized by mortgage-backed securities and U.S. Government obligations. At June 30, 2005, the Company had $25.0 million securities of repurchase agreements outstanding with third party brokers and $62.0 million of customer repurchase agreements outstanding. The related securities are included in the securities available for sale.

NOTE 7 — COMPREHENSIVE INCOME (LOSS)

     Information on the Company’s comprehensive income (loss), presented net of taxes, is set forth below for the three and six months ended June 30, 2005 .

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,
	2005			2004			2005			2004
Net Income	$	8,041		$	6,621		$	15,955		$	13,321
Other Comprehensive Income/(Loss), Net of Tax:
Increase in unrealized gains/(losses) on securities available for sale, net of tax of $3,142 and $6,913 for the three months ended June 30, 2005 and 2004, respectively, and $1,167 and $3,964 for the six months ending June 30, 2005 and 2004, respectively.		5,236			(11,821	)		(1,919	)		(6,613	)
Less: reclassification adjustment for realized gains included in net earnings, net of tax of $105 and $0 for the three months ending June 30, 2005 and 2004, respectively, and $230 and $370, for the six months ending June 30, 2005 and 2004, respectively.		(168	)		—			(386	)		(655	)
Net change in unrealized gains/(losses) on securities available for sale, net of tax of $3,037 and $6,913 for the three months ending June 30, 2005 and 2004, respectively, and $1,397 and $4,334 for the six months ending June 30, 2005 and 2004, respectively.		5,068			(11,821	)		(2,305	)		(7,268	)
(Decrease) / Increase in fair value of derivatives, net of tax of $802 and $827 for the three months ending June 30, 2005 and 2004, respectively, and $40 and $574 for the six months ending June 30, 2005 and 2004, respectively.		(1,107	)		1,536			55			1,066
Less: reclassification of realized gains on derivatives, net of tax of $99 and $237 for the three months ending June 30, 2005 and 2004, respectively, and $198 and $475, for the six months ending June 30, 2005 and 2004, respectively.		(136	)		(327	)		(272	)		(656	)
Net change in fair value of derivatives, net of tax of $901 and $590 for the three months ending June 30, 2005 and 2004, respectively, and $158 and $99, for the six months ending June 30, 2005 and 2004, respectively.		(1,243	)		1,209			(217	)		410
Other Comprehensive (Loss) / Income		3,825			(10,612	)		(2,522	)		(6,858	)
Comprehensive Income (Loss)	$	11,866		($	3,991	)	$	13,433		$	6,463

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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, 2004, 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 and amounts of charge-offs, and the rates of loan growth, and any statements preceded by, followed by, or which include the words “may,” “could,” “should,” “will,” “would,” “hope,” “might,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “assume” or similar expressions constitute forward-looking statements.

     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 loss;

• 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 could intensify and affect the Company’s profitability, including as a result of continued industry consolidation, the increased financial services from non-banks and banking reform;

• 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 investment 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 strong earnings growth during the quarter. Net income for the quarter ended June 30, 2005 was $8.0 million, an increase of 21.5% from the same period last year. Strong growth in both loans and deposits as well as a stabilized net interest margin contributed significantly to the quarter’s growth in earnings.

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* In the 3^rd Quarter of 2004, the Company acquired $96.9 million of loans, resulting from the Falmouth Bancorp, Inc. acquisition.

* In the 3^rd Quarter of 2004, the Company acquired $136.7 million in deposits, resulting from the Falmouth Bancorp, Inc. acquisition.

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     * The net interest margin of the Company was negatively impacted by 0.19% on an annualized basis due to the adoption of Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46R “Consolidation of Variable Interest Entities - An Interpretation of ARB No. 51” (see Recent Accounting Pronouncements, Fin No. 46 in Item 1 hereof) effective March 31, 2004. The net interest margin for prior periods shown above have not been adjusted to reflect the adoption of this interpretation.

     While changes in the prevailing interest rate environment have and will continue to have an impact on the level of the Company’s earnings, management strives to mitigate volatility in net interest income resulting from changes in benchmark interest rates by adjustable rate asset generation, effective liability management and off-balance sheet interest rate derivatives, illustrated in Table 8 – Interest Rate Sensitivity and the discussion to follow within the Market Risk section of the management discussion and analysis.

     Looking ahead to the remainder of 2005, the Company expects the quarterly net interest margin to expand in to the high 3.80%’s for the remainder of the year, with deposit pricing being a key determinant. Competition for deposit generation in the Company’s footprint remains strong.

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     Asset quality continues to be a highlight for the Company’s strong performance and is not anticipated to change significantly in the near term.

     Management plans to continue to grow earnings through prudent asset growth, increasing deposit originations, generating growth in non-interest income, and non-interest expense control. As previously reported, there are a number of initiatives that are expected to contribute in 2005 and beyond. The Company’s continued success in 2005 will be predicated upon the disciplined execution and the careful monitoring of the Strategic Plan that has been put in place.

A number of the objectives in 2005 are:

o Significantly improve and expand our business development across all business units and channels.

o Improve the customer experience through:

o The development, measurement and continuous improvement upon service standards

o Improved product offerings

o Improving the appearance of the branch network

o Enhance our colleague capital through training and development.

o Build and leverage an enhanced information infrastructure and analysis capability designed to better understand:

o Customer and product contribution

o The effectiveness of direct mail campaigns

o Consumer credit losses

o Improve the efficiency and effectiveness with which we operate by leveraging the additional functionality of our core system provider and examining the efficiency of our branch network.

o Continued focus on compliance and risk management.

     Management believes that its commitment and execution of the objectives outlined above will be critical to continuing to deliver strong financial performance.

FINANCIAL POSITION

     Loan Portfolio Total loans increased by $93.8 million, or 4.9%, during the six months ended June 30, 2005. The increases were mainly in commercial loans which increased $50.5 million, or 5.6%, in total with commercial construction representing the largest growth of $23.7 million, or 18.7%. Commercial real estate loans increased by $22.7 million, or 3.7%, and commercial and industrial loans increased $4.1 million, or 2.6%. Consumer loans in total increased $36.4 million, or 6.9% primarily due to growth in variable Home Equity lending. The Consumer- Auto loan portfolio decreased by $2.4 million, or 0.85%, during the six months ended June 30, 2005 as this segment of the loan portfolio has been de-emphasized due to narrowing spreads. Business banking loans totaled $48.7 million, representing growth of 11.6% during the six months ending June 30, 2005. Residential loans increased $1.9 million, or 0.4% during the first six months.

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     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 frame. Generally, the Bank requires that a delinquency notice be mailed to a borrower upon expiration of a grace period (typically no longer than 15 days beyond the due date). Reminder notices 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 frame following the mailing of a delinquency notice, the Bank’s personnel charged with managing its loan portfolios, contacts the borrower to ascertain the reasons for delinquency and the prospects for payment. Any subsequent actions taken to resolve the delinquency will depend upon the nature of the loan and the length of time that the loan has been delinquent. The 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 counsel whereupon counsel initiates 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, 2005								At December 31, 2004
	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)
Real Estate Loans:
Residential		3	$	629		2	$	650		3	$	764		4	$	173
Residential Construction		—		—		—				—		—		—		—
Commercial		1		27		1		158		1		188		2		227
Commercial Construction		1		280		—		—		—		—		—		—
Commercial and Industrial Loans		1		200		4		165		1		130		4		207
Business Banking		4		53		4		79		1		11		4		167
Consumer - Home Equity		—		—		2		62		—		—		—		—
Consumer - Auto (1)		48		560		34		299		N/A		N/A		N/A		N/A
Consumer - Other		36		126		34		163		76		626		95		459
Total		94	$	1,875		81	$	1,576		82	$	1,719		109	$	1,233

(1) For periods prior to June 30, 2005, Consumer-Auto loans are included in Consumer-Other.

     Nonaccrual Loans As permitted by banking regulations, consumer loans and home equity loans past due 90 days or more continue to accrue interest. In addition, certain commercial and real estate loans that are more than 90 days past due may be kept on an accruing status if the loan is well secured and in the process of collection. As a general rule, a commercial or real estate loan more than 90 days past due with respect to principal or interest is classified as a nonaccrual loan. Income accruals are suspended on all nonaccrual loans

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and all previously accrued and uncollected interest is reversed against current income. A loan remains on nonaccrual status until it becomes current with respect to principal (and in certain instances remains current for up to three months) and interest, when the loan is liquidated, or when the loan is determined to be uncollectible and 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 nonaccrual loans and loans that are more than 90 days past due but still accruing interest. OREO includes properties held by the Bank as a result of foreclosure or by acceptance of a deed in lieu of foreclosure. Nonperforming assets totaled $2.1 million at June 30, 2005 (0.07% of total assets), as compared to the $2.7 million (0.09% of total assets) reported at December 31, 2004. The Company’s allowance for loan losses to nonperforming loans is 1,241.07% as compared to 932.53% at December 31, 2004 and the Company maintained an allowance to loan ratio of 1.30% at June 30, 2005 compared to 1.31% at December 31, 2004. The Bank held no OREO property on June 30, 2005 or December 31, 2004 and all securities were performing.

     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 disposal of it by the Bank. Repossessed automobile loan balances amounted to $490,000, $703,000 and $462,000 for the periods ending June 30, 2005, December 31, 2004, and June 30, 2004, respectively.

     The following table sets forth information regarding nonperforming assets held by the Company at the dates indicated.

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Table 2- Nonperforming Assets / Loans

(Unaudited - Dollars in Thousands)

	As of			As of			As of
	June 30,			December 31,			June 30,
	2005			2004			2004
Loans past due 90 days or more but still accruing
Home Equity	$	62		$	—		$	—
Consumer - Auto (2)		49			—			—
Consumer - Other		107			245			155
Total	$	218		$	245		$	155
Loans accounted for on a nonaccrual basis (1)
Commercial and Industrial	$	193		$	334		$	1,315
Business Banking (3)		80			N/A			N/A
Real Estate - Commercial Mortgage		158			227			328
Real Estate - Residential Mortgage		879			1,193			1,086
Consumer - Auto		489			703			—
Consumer - Other		82			—			462
Total	$	1,881		$	2,457		$	3,191
Total nonperforming loans	$	2,099		$	2,702		$	3,346
Other real estate owned	$	—		$	—		$	—
Total nonperforming assets	$	2,099		$	2,702		$	3,346
Restructured loans	$	397		$	416		$	436
Nonperforming loans as a percent of gross loans		0.10	%		0.14	%		0.20	%
Nonperforming assets as a percent of total assets		0.07	%		0.09	%		0.12	%

(1)	There were no restructured nonaccruing loans at June 30, 2005, December 31, 2004 and June 30, 2004.
(2)	For periods prior to June 30, 2005, Consumer-Auto loans due 90 days or more but still accruing are included in Consumer-Other.
(3)	For periods prior to June 30, 2005, Business Banking loans are included in Commercial and Industrial and Consumer-Other.

     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 the current financial status. It is the Bank’s policy to maintain restructured loans on nonaccrual status for approximately six months before management considers a return to accrual status. At June 30, 2005, the Bank had $397,000 of restructured loans. At June 30, 2005, the Bank also had 32 potential problem loans which were not included in nonperforming loans with an outstanding balance of $23.2 million. Potential problem loans are any loans, which are not included in 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 .

     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

24

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 the three months ended June 30, 2005 and June 30, 2004, if nonperforming loans at the respective dates had been performing in accordance with their original terms, approximated $47,000 and $68,000, respectively. Interest income that would have been recognized for the six months ended June 30, 2005 and June 30, 2004, if nonperforming loans at the respective dates had been performing in accordance with their original terms, approximated $113,000 and $158,000, respectively. The actual amount of interest that was collected on nonaccrual and restructured loans during the three months ended June 30, 2005 and June 30, 2004 and included in interest income was $13,000 and $78,000, respectively. The actual amount of interest that was collected on nonaccrual and restructured loans during the six months ended June 30, 2005 and June 30, 2004 and included in interest income was $44,000 and $119,000, 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 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 smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer or residential loans for impairment disclosures. At June 30, 2005, impaired loans include all commercial real estate loans and commercial and industrial loans on nonaccrual status, restructured loans and certain potential problem loans for which a collateral deficit exists and a specific allocation of allowance for loan loss has been assigned. Total impaired loans at June 30, 2005 and December 31, 2004 were $1.6 million and $2.6 million, respectively.

     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 non-performing loans, changes in economic conditions, or for other reasons. Various regulatory agencies, as an integral part of their examination processes, periodically review the Company’s allowance for loan losses. The Federal Deposit Insurance Corporation (“FDIC”) regulators examined the Company during the first quarter of 2005.

     The allowance for loan losses is maintained at a level that management considers adequate to provide for potential 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. Additionally, in 2004 the Bank’s allowance increased by $869,000 upon acquisition of Falmouth Bancorp, Inc.

25

This increase represents management’s estimate of potential inherent losses in the acquired portfolio.

     As of June 30, 2005, the allowance for loan losses totaled $26.1 million, or 1.30%, of total loans as compared to $25.2 million, or 1.31%, of total loans at December 31, 2004. Based on the analyses described herein, management believes that the level of the allowance for loan losses at June 30, 2005 is adequate.

     The following table summarizes changes in the allowance for possible 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,
	2005			2005			2004			2004			2004
	(Unaudited - Dollars in Thousands)
Average loans	$	1,958,097		$	1,932,768		$	1,898,874		$	1,814,143		$	1,657,043
Allowance for loan losses, beginning of period	$	25,505		$	25,197		$	25,253		$	23,931		$	23,467
Charged-off loans:
Commercial and Industrial		—			—			153			—			—
Business Banking (1)		48			151			78			—			—
Real Estate - Commercial		—			—			—			—			—
Real Estate - Residential		—			—			—			—			—
Real Estate - Construction		—			—			—			—			—
Home Equity		—			—			—			—			—
Consumer - Auto (2)		421			426			—			—			—
Consumer - Other		283			181			720			498			473
Total charged-off loans		752			758			951			498			473
Recoveries on loans previously charged-off:
Commercial and Industrial		51			6			11			52			31
Business Banking (1)		9			2			78			—			—
Real Estate - Commercial		—			—			—			1			1
Real Estate - Residential		—			—			—			30			—
Real Estate - Construction		—			—			—			—			—
Home Equity		—			20			—			—			—
Consumer - Auto (2)		105			65			—			—			—
Consumer - Other		27			43			36			107			161
Total recoveries		192			136			125			190			193
Net loans charged-off		560			622			826			308			280
Addition due to acquisition		—			—			—			870			—
Provision for loan losses		1,105			930			770			760			744
Total allowance for loan losses, end of period	$	26,050		$	25,505		$	25,197		$	25,253		$	23,931
Net loans charged-off as a percent of average total loans		0.03	%		0.03	%		0.04	%		0.02	%		0.02	%
Total allowance for loan losses as a percent of total loans		1.30	%		1.31	%		1.31	%		1.35	%		1.41	%
Total allowance for loan losses as a percent of nonperforming loans		1,241.07	%		917.12	%		932.53	%		627.56	%		715.21	%
Net loans charged-off as a percent of allowance for loan losses		2.15	%		2.44	%		3.28	%		1.22	%		1.17	%
Recoveries as a percent of charge-offs		25.53	%		17.94	%		13.14	%		38.15	%		40.80	%

(1)	For periods prior to December 31, 2004, Business Banking loans are included in Commercial and Industrial and Consumer-Other.
(2)	For periods prior to March 31, 2005, Consumer-Auto loans are included in Consumer-Other.

     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 $22.7 million at June 30, 2005, compared to $22.4 million at December 31, 2004. The distribution of allowances allocated among the various loan categories as of June 30, 2005 was categorically similar to the distribution as of December 31, 2004. Increases or decreases in the amounts allocated to each category, as compared to those shown as of December 31, 2004, generally, reflect changes in portfolio balances outstanding due to new loan originations, loans paid off, changes in levels of credit line usage and the results of ongoing credit risk assessments of the loan portfolio.

27

     The following table summarizes the allocation of the allowance for loan losses for the dates indicated:

Table 4 - Summary of Allocation of the Allowance for Loan Losses

(Unaudited - Dollars In Thousands)

	AT JUNE 30,					AT DECEMBER 31,
	2005					2004
			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	$	3,166		7.9	%	$	3,387		8.2	%
Business Banking		1,143		2.4	%		1,022		2.3	%
Commercial Real Estate		10,322		31.6	%		10,346		32.0	%
Real Estate Construction		3,141		8.1	%		2,905		7.0	%
Real Estate Residential		657		21.8	%		659		22.9	%
Consumer Home Equity		689		11.4	%		583		10.1	%
Consumer Auto		2,807		14.0	%		2,839		14.8	%
Consumer - Other		815		2.8	%		667		2.7	%
Imprecision Allowance		3,310	NA				2,789	NA
Total Allowance for Loan Losses	$	26,050		100.0	%	$	25,197		100.0	%

     Allocated amounts of allowance 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 segment. Individual loans within the commercial and industrial, commercial real estate and real estate construction loan portfolio segments 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.

     During the quarter-ended March 31, 2005, enhancements to the Bank’s internal risk-rating framework were implemented. These enhancements refine the definitional detail of the risk attributes and characteristics that compose each risk grouping and add granularity to the assessment of credit risk across those defined risk groupings.

     A similar formula-based approach, using a point-in-time credit grade distribution, was developed to evaluate the consumer installment segments of the loan portfolio. This method was developed in response both to the significance of the balance and the seasoning of this segment of the portfolio which has allowed for a more analytical overview of its inherent risk characteristics. This method has been combined with subjective factors, which reflect changing environmental conditions in the consumer installment loan market.

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     Allocations for 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 segment, 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 nonaccrual status. A specific allowance amount is allocated to an individual loan when such loan has been deemed impaired and when the amount of a probable loss is able to be estimated on the basis of: (a) fair value of collateral, (b) present value of anticipated future cash flows or (c) the loan’s observable fair market price. Loans with a specific allowance and the amount of such allowance totaled $1.1 million and $157,000, respectively at June 30, 2005 and $1.1 million and $400,000, respectively, at December 31, 2004.

     A portion of the allowance for loan loss is not allocated to any specific segment of the loan portfolio. This non-specific 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 in ways currently unforeseen. 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 imprecision allowance for loan losses. The amount of this measurement imprecision allocation was $3.3 million at June 30, 2005, compared to $2.8 million at December 31, 2004.

     Management has increased the measurement imprecision allocation based upon its prospective judgment concerning the possible effects of changing business and economic conditions on borrowers in the loan portfolio, including, but not limited to, the effects of: (a) slower than anticipated employment growth, (b) rising interest rates, (c) inflationary pressure on commodity and energy prices, (d) changing conditions within local and regional real estate markets and (e) the continued uncertainty of geopolitical dynamics. Business and economic conditions notwithstanding, the credit quality of the Bank’s loan portfolio has remained stable

29

and the incidence of default within the portfolio has not increased during the quarter-ended June 30, 2005.

     As of June 30, 2005, the allowance for loan losses totaled $26.1 million as compared to $25.2 million at December 31, 2004. Based on the processes described above, management believes that the level of the allowance for possible loan losses at June 30, 2005 is adequate.

     Goodwill and Core Deposit Intangible Goodwill and Core Deposit Intangible decreased $161,000, or 0.28%, to $57.1 million at June 30, 2005 from December 31, 2004 resulting from the amortization of the core deposit intangible.

     Securities Total securities decreased by $65.9 million, or 8.1%, to $752.3 million at June 30, 2005 from December 31, 2004, resulting from the sale of $62.9 million in longer duration securities. The ratio of securities to total assets is 25.2%. Sales consisted mostly of mortgage backed securities.

     Deposits Total deposits of $2.1 billion at June 30, 2005 increased $89.2 million, or 4.3%, compared to December 31, 2004. The Company experienced growth in core deposits of $41.5 million, or 2.6% partially attributable to seasonal inflows. Time deposits increased by $47.7 million, or 10.6% due to promotional certificate offerings.

     Borrowings Total borrowings decreased $52.8 million, or 8.1%, to $602.4 million at June 30, 2005 from December 31, 2004 as overnight borrowings were paid down.

     Stockholders’ Equity Stockholders’ equity as of June 30, 2005 totaled $220.5 million, as compared to $210.7 million at December 31, 2004 resulting from net income of $16.0 million offset mainly by dividends paid of $4.6 million and an other comprehensive loss of $2.3 million.

     Equity to Assets Ratio The ratio of equity to assets was 7.4% at June 30, 2005 and 7.2% at December 31, 2004.

RESULTS OF OPERATIONS

     Summary of Results of Operations The Company reported net income of $8.0 million for the second quarter of 2005 as compared with net income of $6.6 million for the second quarter of 2004. Diluted earnings per share were $0.52 for the three months ended June 30, 2005, compared to $0.45 per share for the same quarter in the prior year. Net income for the six months ended June 30, 2005 was $16.0 million compared to $13.3 million for the same period last year. Diluted earnings per share were $1.03 and $0.90 for the six months ended June 30, 2004.

     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 2005 increased $3.4 million, or 14.4%, to $26.8 million, as compared to the second quarter of 2004. The Company’s net interest margin was 3.84% for both the second quarter of 2005 and 2004.

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The Company’s interest rate spread (the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities) decreased to 3.42% during the second quarter of 2005, 5 basis points less than the comparable period in the prior year. The net interest margin for the six months ending June 30, 2005 was 3.84% as compared to 3.99% for the comparable period in 2004. The interest rate spread was 3.44% and 3.61% for the six months ending June 30, 2005 and 2004, respectively.

     The following tables present the Company’s average balances, net interest income, interest rate spread, and net interest margin for the three and six months ending June 30, 2005 and June 30, 2004. For purposes of the tables 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			BALANCE		PAID		YIELD
	2005		2005		2005			2004		2004		2004
FOR THE THREE MONTHS ENDED JUNE 30,
Interest-earning Assets:
Federal Funds Sold and Assets Purchased Under Resale Agreement	$	5,028	$	36		2.86	%	$	—	$	—		—
Securities:
Trading Assets		1,527		5		1.31	%		1,530		5		1.31	%
Taxable Investment Securities		741,518		8,142		4.39	%		719,125		7,902		4.40	%
Non-taxable Investment Securities (1)		62,444		1,037		6.64	%		64,369		1,069		6.64	%
Total Securities:		805,489		9,184		4.56	%		785,024		8,976		4.57	%
Loans (1)		1,983,148		29,855		6.02	%		1,657,043		23,620		5.70	%
Total Interest-Earning Assets	$	2,793,665	$	39,075		5.59	%	$	2,442,067	$	32,596		5.34	%
Cash and Due from Banks		65,267							67,175
Other Assets		144,838							107,780
Total Assets	$	3,003,770						$	2,617,022
Interest-bearing Liabilities:
Deposits:
Savings and Interest Checking Accounts	$	597,232	$	662		0.44	%	$	542,451	$	753		0.56	%
Money Market and Super Interest Checking Accounts		533,563		2,334		1.75	%		432,485		1,255		1.16	%
Time Deposits		502,743		3,084		2.45	%		471,974		2,582		2.19	%
Total interest-bearing deposits:		1,633,538		6,080		1.49	%		1,446,910		4,590		1.27	%
Borrowings:
Federal Home Loan Bank borrowings	$	502,255	$	4,804		3.83	%	$	388,976	$	3,278		3.37	%
Federal Funds Purchased and Assets Sold Under Repurchase Agreement		69,992		270		1.54	%		75,907		207		1.09	%
Junior Subordinated Debentures		51,546		1,118		8.68	%		51,546		1,095		8.50	%
Treasury Tax and Loan Notes		1,681		10		2.38	%		3,526		4		0.45	%
Total borrowings:		625,474		6,202		3.97	%		519,955		4,584		3.53	%
Total Interest-Bearing Liabilities	$	2,259,012	$	12,282		2.17	%	$	1,966,865	$	9,174		1.87	%
Demand Deposits		510,879							458,660
Corporation Obligated Mandatorily Redeemable Trust
Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures of the Corporation		—							—
Other Liabilities		17,230							14,879
Total Liabilities		2,787,121							2,440,404
Stockholders’ Equity		216,649							176,618
Total Liabilities and Stockholders’ Equity	$	3,003,770						$	2,617,022
Net Interest Income			$	26,793						$	23,422
Interest Rate Spread (2)						3.42	%						3.47	%
Net Interest Margin (2)						3.84	%						3.84	%
Supplemental Information:
Total Deposits, including Demand Deposits	$	2,144,417	$	6,080				$	1,905,570	$	4,590
Cost of Total Deposits						1.13	%						0.96	%
Total Funding Liabilities, including Demand Deposits	$	2,769,891	$	12,282				$	2,425,525	$	9,174
Cost of Total Funding Liabilities						1.77	%						1.51	%

(1)	The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $449 and $453 for the three months ended June 30, 2005 and 2004, 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.
(2)	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			BALANCE		PAID		YIELD
	2005		2005		2005			2004		2004		2004
FOR THE SIX MONTHS ENDED JUNE 30,
Interest-earning Assets:
Federal Funds Sold and Assets Purchased Under Resale Agreement	$	4,957	$	66		2.66	%	$	—	$	—		—
Securities:
Trading Assets		1,549		16		2.07	%		1,518		19		2.50	%
Taxable Investment Securities		740,721		16,283		4.40	%		678,262		14,937		4.40	%
Non-taxable Investment Securities (1)		62,549		2,059		6.58	%		65,592		2,218		6.76	%
Total Securities:		804,819		18,358		4.56	%		745,372		17,174		4.61	%
Loans (1)		1,958,097		58,070		5.93	%		1,629,941		46,980		5.76	%
Total Interest-Earning Assets	$	2,767,873	$	76,494		5.53	%	$	2,375,313	$	64,154		5.40	%
Cash and Due from Banks		63,450							66,263
Other Assets		142,710							105,921
Total Assets	$	2,974,033						$	2,547,497
Interest-bearing Liabilities:
Deposits:
Savings and Interest Checking Accounts	$	597,979	$	1,320		0.44	%	$	531,527	$	1,440		0.54	%
Money Market and Super Interest Checking Accounts		516,610		4,164		1.61	%		399,424		2,325		1.16	%
Time Deposits		500,050		5,849		2.34	%		470,578		5,121		2.18	%
Total interest-bearing deposits:		1,614,639		11,333		1.40	%		1,401,529		8,886		1.27	%
Borrowings:
Federal Home Loan Bank borrowings	$	505,597	$	9,342		3.70	%	$	391,465	$	6,511		3.33	%
Federal Funds Purchased and Assets Sold Under Repurchase Agreement		67,372		464		1.38	%		59,703		300		1.00	%
Junior Subordinated Debentures		51,546		2,235		8.67	%		26,056		1,107		8.50	%
Treasury Tax and Loan Notes		1,848		15		1.62	%		3,682		8		0.43	%
Total borrowings:		626,363		12,056		3.85	%		480,906		7,926		3.30	%
Total Interest-Bearing Liabilities	$	2,241,002	$	23,389		2.09	%	$	1,882,435	$	16,812		1.79	%
Demand Deposits		501,041							448,063
Corporation Obligated Mandatorily Redeemable Trust
Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures of the Corporation		—							23,668
Other Liabilities		17,217							16,669
Total Liabilities		2,759,260							2,370,835
Stockholders’ Equity		214,773							176,662
Total Liabilities and Stockholders’ Equity	$	2,974,033						$	2,547,497
Net Interest Income			$	53,105						$	47,342
Interest Rate Spread (2)						3.44	%						3.61	%
Net Interest Margin (2)						3.84	%						3.99	%
Supplemental Information:
Total Deposits, including Demand Deposits	$	2,115,680	$	11,333				$	1,849,592	$	8,886
Cost of Total Deposits						1.07	%						0.96	%
Total Funding Liabilities, including Demand Deposits	$	2,742,043	$	23,389				$	2,330,498	$	16,812
Cost of Total Funding Liabilities						1.71	%						1.44	%

(1)	The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $893 and $939 for the six months ended June 30, 2005 and 2004, 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.
(2)	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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     The increase in net interest income for the second quarter of 2005 was mainly due to an increase in income from interest-earning assets, specifically increases in interest income from loans which increased by $6.2 million, or 26.4%.

     Average loan balances for the three months ending June 30, 2005 have grown by $326.1 million from the comparative period with the yield on loans also increasing by 32 basis points from 5.70% to 6.02% reflecting increases in market rates. Contributing to the increase experienced in loans as well as deposits was the acquisition of Falmouth Bancorp, Inc. On July 16, 2004 the Company acquired $96.9 million of loans and $136.7 million of deposits associated with this acquisition. Partially offsetting the increase in interest income was an increase in interest expense of $3.1 million driven by increased funding needs to support loan growth and an increase in the total cost of funds of 26 basis points from 1.51% to 1.77%, driven by the lengthening of the duration of borrowings and the competitive pricing environment for deposits.

     As a result of the same drivers mentioned above, average loan balances for the six months ending June 30, 2005 have grown by $328.2 million from the comparative period with the yield on loans also increasing by 17 basis points from 5.76% to 5.93%. Securities have increased to $804.8 million at June 30, 2005 from $745.4 million at June 30, 2004 while the yield on securities decreased 5 basis points from 4.61% to 4.56%. Partially offsetting this increase in interest income was an increase in interest expense of $6.6 million and an increase in the total cost of funds of 27 basis points from 1.44% to 1.71%.

     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).

34

	Table 7 - Volume Rate Analysis
	Three Months Ended June 30,												Six Months Ended June 30,
	2005 Compared to 2004												2005 Compared to 2004
							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	$	(1	)	$	—		$	37		$	36		$	—		$	—		$	66		$	66
Securities:
Taxable securities		(6	)		246			—			240			(28	)		1,376			(2	)		1,346
Non-taxable securities (1)		—			(32	)		—			(32	)		(59	)		(103	)		3			(159	)
Trading assets		—			—			—			—			(3	)		—			—			(3	)
Total Securities:		(6	)		214			—			208			(90	)		1,273			1			1,184
Loans (1) (2)		1,326			4,648			261			6,235			1,358			9,459			273			11,090
Total	$	1,319		$	4,862		$	298		$	6,479		$	1,268		$	10,732		$	340		$	12,340
Expense of interest-bearing liabilities:
Deposits:
Savings and Interest Checking accounts	$	(152	)	$	76		$	(15	)	$	(91	)	$	(267	)	$	180		$	(33	)	$	(120	)
Money Market		637			293			149			1,079			895			682			262			1,839
Time deposits		314			168			20			502			383			321			24			728
Total interest-bearing deposits:		799			537			154			1,490			1,011			1,183			253			2,447
Borrowings:
Federal Home Loan Bank borrowings	$	443		$	954		$	129		$	1,526		$	722		$	1,899		$	210		$	2,831
Federal funds purchased and assets sold under repurchase agreements		86			(16	)		(7	)		63			111			39			14			164
Junior Subordinated Debentures		23			—			—			23			23			1,083			22			1,128
Treasury tax and loan notes		17			(2	)		(9	)		6			22			(4	)		(11	)		7
Total borrowings:		569			936			113			1,618			878			3,017			235			4,130
Total	$	1,368		$	1,473		$	267		$	3,108		$	1,889		$	4,200		$	488		$	6,577
Change in net interest income	$	(49	)	$	3,389		$	31		$	3,371		$	(621	)	$	6,532		$	(148	)	$	5,763

(1)	The total amount of adjustment to present income and yield on a fully tax-equivalent basis is $449 and $453 for the three months ended June 30, 2005 and 2004, respectively, and $893 and $939 for the six months ended June 30, 2005 and 2004, 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 borrowers’ ability to repay, the estimated value of the underlying collateral, if any, and current and prospective 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 $1.1 million for the three months ended June 30, 2005 compared with $744,000 for the three months ended June 30, 2004. The Company increased the provision for loan losses commensurate with loan growth. Asset quality remains sound with nonperforming assets of $2.1 million at June 30, 2005. At June 30, 2005 the allowance for loan loss covered nonperforming loans 12.4 times. Nonperforming assets at December 31, 2004 were $2.7 million, with the allowance covering nonperforming loans 9.3 times. The Company maintained a reserve to loan ratio of 1.30% at June 30, 2005.

     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 portfolios is conducted on an ongoing basis. This managerial evaluation of individual loans is

35

reviewed periodically by a third-party loan review consultant. As necessary, adjustments to the level of allowance for loan losses are reported in the earnings of the period in which they become known.

     Non-Interest Income Non-interest income increased by $252,000, or 3.9%, and decreased by $417,000, or 3.0%, during the three and six months ended June 30, 2005, respectively, as compared to the same period in the prior year.

     Service charges on deposit accounts increased by $126,000, or 4.1%, and by $187,000, or 3.1%, respectively, for the three and six months ended June 30, 2005, as compared to the same periods in 2004, reflecting growth in core deposits. Investment management services income increased by $165,000, or 13.2%, and $323,000, or 13.9%, for the three and six months ended June 30, 2005, compared to the same periods last year due to growth in managed assets. Assets under administration increased by 19.5% from the same period last year to $603.0 million due to growth in managed assets.

     Mortgage banking income decreased by $273,000, or 31.9%, and by $80,000, or 5.0% for the three and six months ended June 30, 2005, respectively, as compared to the same periods in 2004. Loan originations decreased in 2005 as compared to the prior year due in part to the harsh weather that lasted well into spring and mortgage market conditions. The balance of the mortgage servicing asset is $3.0 million and loans serviced amounted to $363.1 million as of June 30, 2005.

     Gain on sale of securities totaled $273,000 in the second quarter of 2005, there was no gain on sale of securities in the second quarter of 2004. For the six months ended June 30, 2005 the gain on sale of securities totaled $616,000 a decrease of $381,000, or 38.2% compared to the six months ended June 30, 2004.

     Bank owned life insurance income decreased $114,000, or 19.4% and $73,000, or 7.5%, for the three and six months ended June 30, 2005, respectively, driven by a lower market yield on these assets and increased death benefit expenses due to the aging of the insured pool. Other non-interest income increased by $75,000, or 10.5%, and decreased by $393,000, or 21.1%, respectively, for the three and six months ended June 30, 2005, as compared to the same period in 2004. The decrease in the six month comparison is primarily due to decreases in commercial loan prepayment fees.

     Non-Interest Expense Non-interest expense increased by $1.4 million, or 7.7%, and by $2.3 million, or 6.0% for the three and six months ended June 30, 2005, respectively, as compared to the same periods in the prior year.

     Salaries and employee benefits increased by $2.2 million, or 21.9%, and by $3.0 million, or 14.4% for the three and six months ended June 30, 2005, respectively, as compared to the same periods in the prior year. Salaries increased by $896,000, or 11.5%, and by $1.3 million, or 8.4%, respectively, for the three and six months ended June 30, 2005, compared to the same periods in 2004 as a result of employee’s annual merit increases and select additions to staff to support strategic initiatives, two de novo branches, and the Falmouth Bancorp, Inc. acquisition. Accruals for incentive compensation increased by $1.0 million and $1.2 million for the three months and six months ended June 30, 2005, respectively, as compared to the same periods last year due to improved operating performance.

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     Occupancy and equipment related expense increased by $388,000 or 17.6%, and by $695,000, or 15.5% for the three and six months ended June 30, 2005, respectively, compared to the same periods in the prior year. The increase in this expense is primarily driven by facilities rent associated with the Falmouth Bancorp, Inc. acquisition, lease buy out expense, and two de novo branches and increased depreciation expense related to a new phone system installed in 2004. Also, contributing to the increase for the six months ended June 30, 2005 as compared to the same period in 2004 is snow removal expense due to inclement weather.

     Data processing and facilities management expense decreased by $162,000, or 14.1% and $257,000, or 11.6%, for the three and six months ended June 30, 2005 as compared to the same period in 2004, respectively, as a result of a new data processing contract finalized in the latter part of 2004.

     Other non-interest expenses decreased by $746,000, or 14.0%, and by $959,000, or 9.6%, for the three and six months ended June 30, 2005, respectively, as compared to the same periods in the prior year. The decrease in other non-interest expenses for the year is primarily attributable to decreases in telephone expense of $321,000 resulting from implementation of a new lower cost phone system (which also resulted in the additional depreciation expense noted above), lower consultant fees of $534,000 associated with commercial loan process improvement and data warehousing studies, and the timing of advertising campaigns of $377,000.

     Income Taxes For the quarters ending June 30, 2005 and June 30, 2004, the Company recorded combined federal and state income tax provisions of $3.6 million and $3.2 million, respectively. These provisions reflect effective income tax rates of 30.8% and 32.4% for the quarters ending June 30, 2005 and June 30, 2004, respectively. During the second quarter of 2004, the Company announced that one of its subsidiaries (a Community Development Entity, or “CDE”) had been awarded $30.0 million in tax credit allocation authority under the New Markets Tax Credit Program of the United States Department of Treasury. During the third quarter of 2004, the Bank invested $5.0 million in the CDE providing it with the capital necessary to begin assisting qualified businesses in low-income communities throughout its market area. During the fourth quarter of 2004 the Bank invested an additional $10.0 million in the Community Development Entity. Based upon the Bank’s $15.0 million investment, it will be eligible to receive tax credits over a seven year period totaling 39% of its investment, or $5.85 million. The Company began recognizing the benefit of these tax credits in 2004. During 2005, the Company will recognize a total of $750,000 related to the $15.0 million of investments made in 2004. During the second quarter of 2005, the Company determined that it was more than likely that it would make an additional $15.0 million investment into the Community Development Entity. The Company will be eligible to receive tax credits on this investment similar to the aforementioned investments into the Community Development Entity. The Company began recognizing the associated tax credit of $750,000 for the expected investment for the 2005 year in the second quarter of 2005 for a total tax credit recognition of $1.5 million during 2005.

     Minority Interest Minority interest expense was zero for the quarters ending June 30, 2005 and June 30, 2004, respectively, and zero and $1.1 million for the six months ended June 30, 2005 and 2004, respectively. (See Note 3 to the Condensed Notes to Unaudited Consolidated Financial Statements within Item 1 hereof).

     Return on Average Assets and Equity The annualized consolidated returns on average equity and average assets for the three months ended June 30, 2005 were 14.85% and

37

1.07%, respectively, compared to 15.00% and 1.01% reported for the same period last year, respectively. For the six months ended June 30, 2005, annualized consolidated returns on average equity and average assets were 14.86% and 1.07%, respectively, compared to 15.08% and 1.05%, for the six months ended June 30, 2004.

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, brokered certificates of deposits, 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 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 up to or down to a specified rate of interest. The assets relating to the notional principal amount are not actually exchanged.

     At June 30, 2005 the Company had swaps, designated as “cash flow” hedges, with total notional values of $135.0 million. The purpose of these swaps is to hedge the variability in the cash outflows of LIBOR based borrowings attributable to changes in interest rates. Under these swap agreements the Company pays a fixed rate of interest of 3.65% on $50 million of the notional value through November 2006, 2.49% on $25 million notional value through January 2007, 4.06% on $35 million of the notional value through January 2010, and 4.13% on

38

$25.0 million of the notional value through May 2009, and all receive a 3 month LIBOR rate of interest. These swaps had a positive fair value of $524,000 at June 30, 2005. The Company also has a $100 million, 4.00%, 3-month LIBOR interest rate cap with an effective date of January 31, 2005 and a maturity date of January 31, 2008. The interest rate cap will pay the Company should 3-month LIBOR exceed 4.00% on a rate reset date during the effective period of the cap. At June 30, 2005 the interest rate cap had a fair value of $797,000. At December 31, 2004 the Company had swaps with a total notional value of $75.0 million. These swaps had a positive fair value of $142,000 at December 31, 2004. All changes in the fair value of the interest rate swaps and caps are recorded, net of tax, through equity as other comprehensive income.

     To improve the Company’s asset sensitivity, the Company sold interest rate swaps hedged against loans during the year ending December 31, 2002 resulting in total deferred gains of $7.1 million. The deferred gain is classified in other comprehensive income, net of tax, as a component of equity. The interest rate swaps sold had total notional amounts of $225.0 million. These swaps were accounted for as cash flow hedges, and therefore, the deferred gains are amortized into interest income over the remaining life of the hedged item, which range between two and five years. At June 30, 2005, there are $1.4 million gross, or $831,000, net of tax, of such deferred gains included in other comprehensive income.

     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. At June 30, 2005 the Company had residential mortgage loan commitments with a fair value of $348,000 and forward sales agreements with a fair value of ($75,000). At December 31, 2004 the Company had residential mortgage loan commitments with a fair value of $148,000 and forward sales agreements with a fair value of ($47,000). Changes in these fair values of $69,000, and ($241,000) for the quarters ending June 30, 2005, and June 30, 2004, respectively, 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 and thus is only 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.

39

     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%.

     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 8 — Interest Rate Sensitivity

	200 Basis			200 Basis
	Point			Point
	Rate			Rate
	Increase			Decrease
June 30, 2005		-1.41	%		-1.19	%
June 30, 2004		-2.78	%		+0.90%	(1)

(1) Due to the low interest rate environment prevailing in the second quarter of 2004 the Company assumed a 100 basis point decrease in rates.

     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

40

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.

     The most significant factors affecting market risk exposure of the Company’s net interest income during the first six months of 2005 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 changes in U.S. benchmark interest rates and (iv) the level of rates paid on deposit accounts.

     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, money market accounts and certificates of deposit. Deposit levels are greatly influenced by interest rates, economic conditions, and competitive factors. For an alternative source of funding to borrowings the Bank will occasionally purchase brokered certificates of deposits. At June 30, 2005, the bank had $4.0 million of brokered certificates of deposits outstanding. The Bank has also established repurchase agreement lines, with major brokerage firms as potential sources of liquidity. At June 30, 2005 the Company had $25.0 million outstanding under these lines. In addition to agreements with brokers, the Bank also had customer repurchase agreements outstanding amounting to $62.0 million at June 30, 2005. As a member of the Federal Home Loan Bank, the Bank has access to approximately $714.9 million of borrowing capacity. On June 30, 2005 the Bank had $460.8 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. It’s commitments and debt service requirement, at June 30, 2005 consist of junior subordinated debentures, including accrued interest, issued to two unconsolidated subsidiaries, $25.8 million to Independent Capital Trust III and $25.8 million to Independent Capital Trust IV, in connection with the issuance of 8.625% Capital Securities due in 2031 and 8.375% Capital Securities due in 2032, respectively. The Parent 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 is directly reimbursed by the Bank for virtually all such expenses.

     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, 2005, the Company’s liquidity position was within 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

41

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, 2005 the Company had a Tier 1 risk-based capital ratio of 10.33% and total risk-based capital ratio 11.58%. The Bank had a Tier 1 risk-based capital ratio of 10.02% and a total risk-based capital ratio of 11.27% as of the same date.

     A minimum requirement of 4.0% Tier 1 leverage capital is also mandated. On June 30, 2005, the Company and the Bank had Tier 1 leverage capital ratios of 7.29% and 7.06%, respectively.

     In June, the Company’s Board of Directors declared a cash dividend of $0.15 per share, a 7.1% increase from June 30, 2004, to stockholders of record as of the close of business on June 27, 2005. This dividend was paid on July 8, 2005. On an annualized basis, the dividend payout ratio amounted to 27.63% 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, 2005:

Table 9 - Contractual Obligations, Commitments and Off-Balance Sheet Financial Instruments by Maturity
(Unaudited - Dollars in Thousands)

	Payments Due - By Period
			Less than		One to		Three to		After
Contractual Obligations	Total		One Year		Three Years		Five Years		Five Years
FHLB advances	$	460,784	$	253,251	$	25,000	$	10,402	$	172,131
Junior subordinated debentures		51,546		—		—		—		51,546
Lease obligations		13,042		2,470		3,616		2,590		4,366
Data processing and Core systems		20,326		5,306		10,380		4,640		—
Other vendor contracts		2,949		1,523		1,400		26		—
Retirement benefit obligations (1)		28,004		1,379		1,591		599		24,435
Other
Treasury tax & loan notes		3,047		3,047		—		—		—
Securities sold under repurchase agreements		25,000		—		—		25,000		—
Customer repurchase agreements		61,976		61,976		—		—		—
Total Contractual Cash Obligations	$	666,674	$	328,952	$	41,987	$	43,257	$	252,478

(1) Retirement benefit obligations include expected contributions to the Company’s pension plan, post retirement benefit plan, and supplemental executive retirement plans. Expected contributions for the pension plan have been included only through plan year July 1, 2005 — June 30, 2006. 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 plans include obligations that are payable over the life of the participants.

	Amount of Commitment Expiring - By Period
Off-Balance Sheet			Less than		One to		Three to		After
Financial Instruments	Total		One Year		Three Years		Five Years		Five Years
Lines of credit	$	262,516	$	36,374	$	—	$	—	$	226,142
Standby letters of credit		7,997		7,997		—		—		—
Other loan commitments		244,562		222,689		14,224		6,456		1,193
Forward commitments to sell loans		35,276		35,276		—		—		—
Interest rate swaps — notional value		135,000		—		75,000		60,000		—
Total Commitments	$	685,351	$	302,336	$	89,224	$	66,456	$	227,335

Note: The Company also purchased for $1.1 million a $100.0 million notional value interest rate cap for which the Company has no further bligation nor commitment.

42

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 that have materially affected, or are, reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     The Bank is the plaintiff in the pending federal court case 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 case arises from a 1991 License Agreement (the “Agreement”) between the Bank and Computer Associates International, Inc. (“CA”) for an integrated system of banking software products.

     In July 1995 the Bank filed a Complaint against CA in the federal court in Boston which asserted claims for breach of the Agreement, breach of express warranty, breach of the implied covenant of good faith and fair dealing, fraud, and for unfair and deceptive practices in violation of section 11 of Chapter 93A of the Massachusetts General Laws (the “93A Claim”). The Bank is seeking damages of at least $1.23 million from CA. If the Bank prevails on the 93A Claim, it shall be entitled to recover its attorney fees and costs and may also recover double or triple damages. CA asserted a Counterclaim against the Bank for breach of the Agreement. CA seeks to recover damages of at least $1.1 million from the Bank. The party which prevails in the case may also recover some amount of interest on the amount which the court awards to it.

     The non-jury trial of the case was conducted in January 2001. The trial concluded with post-trial submissions to and argument before the Court in February 2001. In September 2002

43

the court, in response to a joint inquiry from counsel for the Bank and counsel for CA, indicated that the judge is “actively working” on the case and anticipated, at that time, rendering a decision sometime in the fall of 2002. The court, however, has not yet rendered a decision.

     The Company has considered the potential impact of this case, and all cases pending in the normal course of business, when preparing its financial statements. While the trial court decision may affect the Company’s operating results for the quarter in which the decision is rendered in either a favorable or unfavorable manner, the final outcome of this case will not likely have any material, long-term impact on the Company’s financial condition.

     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 the Company to be immaterial to the Company’s financial condition and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds — None

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 21, 2005. Information regarding each Director who was elected at that Meeting, and information regarding each other Director whose term of office as a Director continued after that Meeting, is incorporated by reference from pages 10 to 16 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 — To re-elect Alfred L. Donovan, E. Winthrop Hall, Robert D. Sullivan, and Brian S. Tedeschi to serve as Class III directors:

Proposal
1. Re-elect Class III directors	FOR		WITHHELD
Alfred L. Donovan		13,475,809		513,795
E. Winthrop Hall		12,741,909		1,247,695
Robert D. Sullivan		13,218,593		771,011
Brian S. Tedeschi		12,493,150		1,496,454

Proposal 2 - To ratify the selection of KPMG LLP as the independent registered public accounting firm of Independent Bank Corp. for 2005:

FOR	13,889,185
AGAINST	47,330
ABSTAIN	53,089
NO VOTE	0

Proposal 3 — To approve the 2005 Independent Bank Corp. Employee Stock Plan:

FOR	10,254,219
AGAINST	1,574,704
ABSTAIN	156,004
NO VOTE	2,004,677

Proposal 4 — To approve Restated Articles of Organization for Independent Bank Corp., consisting of the following proposals;

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Proposal 4A. — To approve provisions relating to unlimited voting rights for Common Stock and the right to receive the net assets of Independent Bank Corp. upon liquidation or similar event:

FOR	11,480,823
AGAINST	439,386
ABSTAIN	64,718
NO VOTE	2,004,677

Proposal 4B. — To approve elimination of provisions relating to Series A Preferred Stock:

FOR	11,521,151
AGAINST	379,724
ABSTAIN	84,052
NO VOTE	2,004,677

Proposal 4C. — To approve provisions allowing proposals at shareholder meetings that are not otherwise specified in the notice of such meetings:

FOR	11,476,161
AGAINST	454,434
ABSTAIN	54,332
NO VOTE	2,004,677

Proposal 4D. — To approve the elimination of provisions relating to “Acquiring Entities”:

FOR	11,442,001
AGAINST	459,530
ABSTAIN	83,396
NO VOTE	2,004,677

Proposal 4E. — To approve a provision relating to a mandatory retirement age for directors:

FOR	9,616,117
AGAINST	2,304,560
ABSTAIN	64,250
NO VOTE	2,004,677

Proposal 4F. — To approve provisions relating to removal of directors by the board for cause:

FOR	9,890,713
AGAINST	2,040,610
ABSTAIN	53,604
NO VOTE	2,004,677

Proposal 4G. — To approve provisions relating to indemnification of directors and officers:

FOR	11,733,143
AGAINST	191,935
ABSTAIN	59,849
NO VOTE	2,004,677

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     There were four items of business before the annual shareholder meeting: (1) The election of four Class III Directors; (2) Ratifying the selection of KPMG LLP as the Company’s independent registered public accounting firm; (3) Approval of the 2005 Independent Bank Corp. Employee Stock Plan; and, (4) Approval of Restated Articles of Organization for Independent Bank Corp., comprised of seven separate proposals 4A to 4G. There were 15,351,186 shares of the Company’s common stock outstanding as of the Record Date for the annual shareholders meeting, and approximately 91% of those shares were represented at the meeting in person or by proxy.

     The four current Class III Directors, Alfred L. Donovan, E. Winthrop Hall, Robert D. Sullivan, and Brian S. Tedeschi were all reelected, with each receiving “FOR” votes from at least approximately 91% of the shares present at the meeting, more than the required plurality of shares present.

     Shareholders also ratified the selection of KPMG LLP as the Company’s independent registered public accounting firm, with at least approximately 99% of the shares present at the meeting voting “FOR” ratifying the auditor, more than the required majority of shares present.

     Shareholders also approved the 2005 Independent Bank Corp. Employee Stock Plan, with at least approximately 73% of the shares present at the meeting voting “FOR” the stock plan, more than the required majority of shares present.

     Approval of Restated Articles of Organization for Independent Bank Corp., comprised of seven separate proposals 4A to 4G, required the approval of at least two-thirds of the issued and outstanding common stock as of the Record Date. Proposals 4A, 4B, 4C, 4D, and 4G pertained, respectively, to: unlimited voting rights for common stock (4A); the elimination of Series A Preferred stock (4B); shareholder proposals for shareholder meetings (4C); the elimination of provisions relating to “Acquiring Entities” (4D); and, the indemnification of directors and officers (4G). Shareholders approved Proposals 4A, 4B, 4C, 4D, and 4G, with at least approximately 74% of issued and outstanding shares as of the Record Date voting “FOR” each of them, more than the required two-thirds of issued and outstanding shares as of the Record Date.

     Proposals 4E and 4F pertained, respectively, to: shareholder ratification of mandatory Director retirement at age 72; and, the ability of the Board to remove Directors “for cause.” At least approximately 63% of issued and outstanding shares as of the Record Date voted “FOR” Proposal 4E, and, at least approximately 64% of issued and outstanding shares as of the Record Date voted “FOR” Proposal 4F. Shareholder approval, therefore, was not obtained for Proposals 4E and 4F because both fell short of the required two-thirds issued and outstanding shares level.

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Item 5. Other Information – None

Item 6. Exhibits

Exhibits

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 8.625% Junior Subordinated Debentures issued Independent Capital Trust III, incorporated by reference to the Form 8-K filed by the Company on April 18, 2002.
4.4	Form of Certificate of 8.625% Junior Subordinated Debenture (included as Exhibit A to Exhibit 4.3).
4.5	Amended and Restated Declaration of Trust for Independent Capital Trust III, 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 III (included as Exhibit D to Exhibit 4.5).
4.7	Preferred Securities Guarantee Agreement of Independent Capital Trust III, incorporated by reference to the Form 8-K filed by the Company on April 18, 2002.
4.8	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.
4.9	Form of Certificate of 8.375% Junior Subordinated Debenture (included as Exhibit A to Exhibit 4.8).
4.10	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.
4.11	Form of Preferred Security Certificate for Independent Capital Trust IV (included as Exhibit D to Exhibit 4.10).
4.12	Preferred Securities Guarantee Agreement of Independent Capital Trust IV,

47

No.	Exhibit
	incorporated by reference to the Form 8-K filed by the Company on April 18, 2002.
10.1	Amended and Restated Independent Bank Corp. 1987 Incentive Stock Option Plan (“Stock Option 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, 1994.
10.2	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.
10.3	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.
10.4	Independent Bank Corp. 2005 Employee Stock Plan incorporated by reference to Form S-8 filed by the Company on July 28, 2005.
10.5	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).
10.6	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.
10.7	Master Securities Repurchase Agreement, incorporated by reference to Form S-1 Registration Statement filed by the Company on September 18, 1992.
10.8	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 file on April 14, 2005.
10.9	Revised employment agreement between Raymond Fuerschbach, Edward F. Jankowski, Ferdinand T. Kelley, Jane Lundquist, Edward Seksay and Denis 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
10.10	Revised Change of Control Agreements between Amy A. Geogan and Anthony A. Paciulli and the Company and Rockland dated December 6, 2004 are filed as an exhibit under the Form 8-K filed on December 9, 2004.
10.11	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, Amy A. Geogan, Edward F. Jankowski, Ferdinand T. Kelley, Jane L. Lundquist, Anthony A. Paculli,

48

No.	Exhibit
	Edward H. Seksay and Denis K. Sheahan dated December 9, 2004 is filed as an exhibit under the Form 8-K filed on December 15, 2004.
10.12	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. (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.) It is filed as an exhibit under 2004 Form 10-K filed on March 4, 2005.
10.13	Independent Bank Corp and Rockland Trust Company Executive Officer Performance Incentive Plan (Management contract under Item 601 (10)(iii)(A) is filed herewith. (PLEASE NOTE: Portions of this Plan, and its schedules, have been omitted pursuant to a request for confidential treatment sent on May 3, 2005 to the Securities and Exchange Commission. The locations where material has been omitted are indicated by the following notation: “{****}”. The entire Plan, in unredacted form, has been filed separately with the Commission with the request for confidential treatment.) It is filed as an exhibit under Form 10-Q for the quarter ended March 31, 2005, filed on May 3, 2005.
10.14	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.
31.1	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.*
31.2	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.*
32.1	Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act.+
32.2	Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.+

*	Filed herewith
+	Furnished herewith

49

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 2, 2005	/s/ Christopher Oddleifson
	Christopher Oddleifson
	President and
	Chief Executive Officer
Date: August 2, 2005	/s/ Denis K. Sheahan
	Denis K. Sheahan
	Chief Financial Officer
	and Treasurer
	(Principal Financial and
	Principal Accounting Officer)

INDEPENDENT BANK CORP.
(registrant)

50

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
OF 2002

I, Christopher Oddleifson, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Independent Bank Corp.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the periodic report is being prepared;
(b)	Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

51

(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2005

/s/Christopher Oddleifson

      Christopher Oddleifson
      Chief Executive Officer

52

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
OF 2002

I, Denis K. Sheahan, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Independent Bank Corp.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the periodic report is being prepared;
(b)	Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external

53

	purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2005

/s/Denis K. Sheahan

     Denis K. Sheahan
     Chief Financial Officer

54

EX-32.1

Exhibit 32.1

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Independent Bank Corp. (the “Company”) on Form 10-Q for the quarter ending June 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the undersigned’s best knowledge and belief:

     (a) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and

     (b) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated this 2nd day of August 2005.

Independent Bank Corp.

(“Company”)

/s/Christopher Oddleifson

Christopher Oddleifson

Chief Executive Officer

     A signed original of this written statement required by Section 906 has been provided to Independent Bank Corp. and will be retained by Independent Bank Corp. and furnished to the Securities and Exchange Commission or its staff upon request.

55

EX-32.2

Exhibit 32.2

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Independent Bank Corp. (the “Company”) on Form 10-Q for the quarter ending June 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the undersigned’s best knowledge and belief:

     (a) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and

     (b) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated this 2nd day of August 2005.

Independent Bank Corp.

(“Company”)

/s/Denis K. Sheahan

Denis K. Sheahan

Chief Financial Officer

     A signed original of this written statement required by Section 906 has been provided to Independent Bank Corp. and will be retained by Independent Bank Corp. and furnished to the Securities and Exchange Commission or its staff upon request.

56