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 March 31, 2006
Commission File Number: 1-9047

Independent Bank Corp.

(Exact name of registrant as specified in its charter)

Massachusetts	04-2870273
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

288 Union Street, Rockland, Massachusetts 02370
(Address of principal executive offices, including zip code)

(781) 878-6100
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ     No   o

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

Large Accelerated Filer   o Accelerated Filer   þ Non-accelerated Filer   o

     Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).

Yes o    No þ

     As of May 1, 2006, there were 15,065,524 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
March 31, 2006 and December 31, 2005
Consolidated Statements of Income (unaudited) -	4
Three months ended March 31, 2006 and 2005
Consolidated Statements of Stockholders’ Equity (unaudited) -	5
Three months ended March 31, 2006 and for the year ended December 31, 2005
Consolidated Statements of Cash Flows (unaudited) -	6
Three months ended March 31, 2006 and 2005
Condensed Notes to Consolidated Financial Statements (unaudited) - March 31, 2006
Note 1 — Basis of Presentation	7
Note 2 — Stock-Based Compensation	7
Note 3 — Recent Accounting Developments	14
Note 4 — Earnings Per Share	16
Note 5 — Common Stock Repurchase Program	16
Note 6 — Employee Benefits	17
Note 7 — Repurchase Agreements	17
Note 8 — Comprehensive Income (Loss)	18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Table 1 — Summary of Delinquency Information	26
Table 2 — Nonperforming Assets / Loans	27
Table 3 — Summary of Changes in the Allowance for Loan Losses	29
Table 4 — Summary of Allocation of the Allowance for Loan Losses	30
Table 5 — Average Balance, Interest Earned/Paid & Average Yields - Three months ended March 31, 2006 and 2005	34
Table 6 — Volume Rate Analysis	36
Table 7 — New Markets Tax Credit Recognition Schedule	38
Table 8 — Interest Rate Derivatives	40
Table 9 — Interest Rate Sensitivity	42
Table 10 — Contractual Obligations, Commitments and Off-Balance Sheet Financial Instruments by Maturity	44
Item 3. Quantitative and Qualitative Disclosures About Market Risk	44
Item 4. Controls and Procedures	44
PART II. OTHER INFORMATION	45
Item 1. Legal Proceedings	45
Item 1A. Risk Factors	46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3. Defaults Upon Senior Securities	46
Item 4. Submission of Matters to a Vote of Security Holders	46
Item 5. Other Information	46
Item 6. Exhibits	46
Signatures	50
EX-10.14 Executive Officer 2006 Incentive Plan
EX-10.16 Stock Option Agreement for Non-Employee Director
EX-10.17 Restricted Stock Agreement for Non-Employee Director
EX-31.1 Section 302 Certification of CEO
EX-31.2 Section 302 Certification of CFO
EX-32.1 Section 906 Certification of CEO
EX-32.2 Section 906 Certification of CFO

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PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

INDEPENDENT BANK CORP.

CONSOLIDATED BALANCE SHEETS
(Unaudited — Dollars in Thousands, Except Share and Per Share Amounts)

	March 31,			December 31,
	2006			2005
ASSETS
CASH AND DUE FROM BANKS	$	59,011		$	66,289
FEDERAL FUNDS SOLD AND SHORT TERM INVESTMENTS		12,000			63,662
SECURITIES
TRADING ASSETS		1,598			1,557
SECURITIES AVAILABLE FOR SALE		523,315			581,516
SECURITIES HELD TO MATURITY (fair value $105,721 and $106,730)		103,818			104,268
FEDERAL HOME LOAN BANK STOCK		29,287			29,287
TOTAL SECURITIES		658,018			716,628
LOANS
COMMERCIAL AND INDUSTRIAL		163,024			155,081
COMMERCIAL REAL ESTATE		681,025			683,240
COMMERCIAL CONSTRUCTION		139,557			140,643
BUSINESS BANKING		54,188			51,373
RESIDENTIAL REAL ESTATE		419,732			428,343
RESIDENTIAL CONSTRUCTION		7,460			8,316
RESIDENTIAL LOANS HELD FOR SALE		8,831			5,021
CONSUMER — HOME EQUITY		262,931			251,852
CONSUMER — AUTO		251,025			263,179
CONSUMER — OTHER		52,819			53,760
TOTAL LOANS		2,040,592			2,040,808
LESS: ALLOWANCE FOR LOAN LOSSES		(26,746	)		(26,639	)
NET LOANS		2,013,846			2,014,169
BANK PREMISES AND EQUIPMENT, NET		36,955			37,431
GOODWILL		55,078			55,078
CORE DEPOSIT INTANGIBLES		1,700			1,780
MORTGAGE SERVICING RIGHTS		2,801			2,892
BANK OWNED LIFE INSURANCE		44,069			44,762
OTHER ASSETS		40,505			38,994
TOTAL ASSETS	$	2,923,983		$	3,041,685
LIABILITIES AND STOCKHOLDERS’ EQUITY
DEPOSITS
DEMAND DEPOSITS	$	485,283		$	511,920
SAVINGS AND INTEREST CHECKING ACCOUNTS		576,126			613,840
MONEY MARKET		532,007			550,677
TIME CERTIFICATES OF DEPOSIT OVER $100,000		167,696			167,242
OTHER TIME CERTIFICATES OF DEPOSIT		358,551			361,815
TOTAL DEPOSITS		2,119,663			2,205,494
FEDERAL HOME LOAN BANK BORROWINGS		392,448			417,477
FEDERAL FUNDS PURCHASED AND ASSETS SOLD UNDER REPURCHASE AGREEMENTS		112,484			113,335
JUNIOR SUBORDINATED DEBENTURES		51,546			51,546
TREASURY TAX AND LOAN NOTES		225			5,452
TOTAL BORROWINGS		556,703			587,810
OTHER LIABILITIES		20,610			20,229
TOTAL LIABILITIES	$	2,696,976		$	2,813,533
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: 15,256,974 Shares at March 31, 2006 and 15,402,391 Shares at December 31, 2005		153			154
SHARES HELD IN RABBI TRUST AT COST 166,273 Shares at March 31, 2006 and 170,488 Shares at December 31, 2005		(1,623	)		(1,577	)
DEFERRED COMPENSATION OBLIGATION		1,623			1,577
ADDITIONAL PAID IN CAPITAL		59,856			59,700
RETAINED EARNINGS		175,792			175,284
ACCUMULATED OTHER COMPREHENSIVE (LOSS), NET OF TAX		(8,794	)		(6,986	)
TOTAL STOCKHOLDERS’ EQUITY		227,007			228,152
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,923,983		$	3,041,685

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

3

INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited — Dollars in Thousands, Except Share and Per Share Data)

	THREE MONTHS ENDED
	March 31,
	2006			2005
INTEREST INCOME
Interest on Loans	$	32,703		$	28,128
Taxable Interest and Dividends on Securities		7,228			8,153
Non-taxable Interest and Dividends on Securities		670			665
Interest on Federal Funds Sold and Short-Term Investments		100			30
Total Interest Income		40,701			36,976
INTEREST EXPENSE
Interest on Deposits		8,460			5,254
Interest on Borrowings		5,935			5,854
Total Interest Expense		14,395			11,108
Net Interest Income		26,306			25,868
PROVISION FOR LOAN LOSSES		750			930
Net Interest Income After Provision For Loan Losses		25,556			24,938
NON-INTEREST INCOME
Service Charges on Deposit Accounts		3,418			2,972
Investment Management Services Income		1,355			1,238
Mortgage Banking Income		818			928
BOLI Income		1,743			424
Net (Loss)/Gain on Sales of Securities		(1,769	)		343
Other Non-Interest Income		769			682
Total Non-Interest Income		6,334			6,587
NON-INTEREST EXPENSE
Salaries and Employee Benefits		11,864			11,792
Occupancy and Equipment Expenses		2,713			2,595
Data Processing and Facilities Management		1,060			962
Other Non-Interest Expense		4,747			4,441
Total Non-Interest Expense		20,384			19,790
INCOME BEFORE INCOME TAXES		11,506			11,735
PROVISION FOR INCOME TAXES		3,602			3,821
NET INCOME	$	7,904		$	7,914
BASIC EARNINGS PER SHARE	$	0.52		$	0.52
DILUTED EARNINGS PER SHARE	$	0.51		$	0.51
Weighted average common shares (Basic)		15,343,807			15,347,540
Common stock equivalents		153,624			164,680
Weighted average common shares (Diluted)		15,497,431			15,512,220

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)

														ACCUMULATED
				SHARES			DEFERRED		ADDITIONAL					OTHER
	COMMON			HELD IN			COMPENSATION		PAID-IN		RETAINED			COMPREHENSIVE
	STOCK			RABBI TRUST			OBLIGATION		CAPITAL		EARNINGS			INCOME/(LOSS)			TOTAL
BALANCE DECEMBER 31, 2004	$	153			($1,428	)	$	1,428	$	59,415	$	150,241		$	934		$	210,743
Net Income												33,205						33,205
Cash Dividends Declared ($0.60 per share)												(9,233	)					(9,233	)
Proceeds From Exercise of Stock Options		1										1,071						1,072
Tax Benefit on Stock Option Exercise										282								282
Stock-Based Compensation										3								3
Change in Fair Value of Derivatives During Period, Net of Tax, and Realized Gains															870			870
Deferred Compensation Obligation					(149	)		149										—
Change in Unrealized Gain on Securities Available For Sale, Net of Tax and Realized Gains															(8,790	)		(8,790	)
BALANCE DECEMBER 31, 2005	$	154			($1,577	)	$	1,577	$	59,700	$	175,284			($6,986	)	$	228,152
Net Income												7,904						7,904
Cash Dividends Declared ($0.16 per share)												(2,451	)					(2,451	)
Purchase of Common Stock		(2	)									(5,777	)					(5,779	)
Proceeds From Exercise of Stock Options		1										832						833
Tax Benefit on Stock Option Exercise										136								136
Stock-Based Compensation										20								20
Change in Fair Value of Derivatives During Period, Net of Tax, and Realized Gains															838			838
Deferred Compensation Obligation					(46	)		46										—
Change in Unrealized Gain on Securities Available For Sale, Net of Tax and Realized Gains															(2,646	)		(2,646	)
BALANCE MARCH 31, 2006	$	153			($1,623	)	$	1,623	$	59,856	$	175,792			($8,794	)	$	227,007

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

5

INDEPENDENT BANK CORP.

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

	THREE MONTHS ENDED
	MARCH 31,
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	7,904		$	7,914
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED FROM OPERATING ACTIVITIES:
Depreciation and amortization		1,463			1,471
Provision for loan losses		750			930
Deferred income tax (expense) benefit		(1,036	)		(3,741	)
Loans originated for resale		(34,923	)		(42,676	)
Proceeds from mortgage loan sales		31,334			47,523
Proceeds from Bank Owned Life Insurance		(1,316	)		—
Gain on sale of mortgages		(221	)		(389	)
Loss/(Gain) on sale of investments		1,769			(343	)
Gain recorded from mortgage servicing rights, net of amortization		91			13
Stock based compensation expense		20			—
Tax benefit from stock option exercises		—			(50	)
Changes in assets and liabilities:
Decrease in other assets		3,951			2,096
Increase in other liabilities		242			1,745
TOTAL ADJUSTMENTS		2,124			6,579
NET CASH PROVIDED FROM OPERATING ACTIVITIES		10,028			14,493
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and principal repayments of Securities Held to Maturity		411			626
Proceeds from maturities and principal repayments and sales of Securities Available For Sale		51,954			78,380
Purchase of Securities Available For Sale		—			(96,796	)
Net decrease (increase) in Loans		3,383			(43,079	)
Investment in Bank Premises and Equipment		(656	)		(1,180	)
NET CASH PROVIDED FROM (USED IN) INVESTING ACTIVITIES		55,092			(62,049	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in Time Deposits		(2,810	)		62,556
Net (decrease) increase in Other Deposits		(83,021	)		16,123
Net decrease in Federal Funds Purchased and Assets Sold Under Repurchase Agreements		(851	)		(1,685	)
Net decrease in Federal Home Loan Bank Borrowings		(25,029	)		(21,358	)
Net decrease in Treasury Tax and Loan Notes		(5,227	)		(2,797	)
Proceeds from exercise of stock options		833			532
Tax benefit from stock option exercises		136			—
Payments for purchase of common stock		(5,779	)		—
Dividends paid		(2,312	)		(2,146	)
NET CASH (USED IN) PROVIDED FROM FINANCING ACTIVITIES		(124,060	)		51,225
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(58,940	)		3,669
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD		129,951			65,696
CASH AND CASH EQUIVALENTS AS OF MARCH 31,	$	71,011		$	69,365
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the three months for:
Interest on deposits and borrowings	$	14,140		$	9,392
Income taxes		717			1,195
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Change in fair value of derivatives, net of tax and realized gains		838			1,026
Change in fair value of securities available for sale, net of tax and realized gains		(2,646	)		(7,373	)

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

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CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BASIS OF PRESENTATION

     Independent Bank Corp. (the “Company”) is a state chartered, federally registered bank holding company headquartered in Rockland, Massachusetts incorporated in 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: three Massachusetts securities corporations, RTC Securities Corp. I, RTC Securities Corp. X, and Taunton Avenue Securities Corp.; Taunton Avenue Inc.; Rockland Trust Community Development LLC (“RTC CDE I”) and Rockland Trust Community Development Corporation II (“RTC CDE II”). Taunton Avenue Inc. was formed in May 2003 to hold loans, industrial development bonds and other assets. RTC CDE I and RTC CDE II were formed in August 2003 and August 2005, respectively, to make loans and to provide financial assistance to qualified businesses and individuals in low-income communities in accordance with the U.S. Treasury’s New Markets Tax Credit Program criteria. All material intercompany balances and transactions have been eliminated in consolidation. When necessary, certain amounts in prior year financial statements have been reclassified to conform to the current 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 ended March 31, 2006 are not necessarily indicative of the results that may be expected for the year ended December 31, 2006 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, 2005 filed with the Securities and Exchange Commission.

NOTE 2 — STOCK-BASED COMPENSATION

     The Company has four stock-based 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 Plan (“The 2005 Plan”). All four plans were approved by the Company’s Board of Directors and shareholders.

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     The following table presents the amount of cumulatively granted options and restricted stock awards, net of cancellations, through March 31, 2006.

	Authorized			Authorized					Cumulative
	Stock			Restricted					Granted, Net
	Option Awards			Stock Awards			Total		of Cancellations
1987 Plan		800,000			N/A			800,000		586,813
1996 Plan		300,000			N/A			300,000		209,000
1997 Plan		1,100,000			N/A			1,100,000		1,076,572
2005 Plan		(1	)		(1	)		800,000		140,950

(1) The Company may award up to a total of 800,000 shares as stock options or restricted stock awards.

     At March 31, 2006, there were no shares available for grant under either the 1987 Plan or the 1996 Plan due to their expiration. Under the 2005 Plan, the 1997 Plan, and the 1996 Plan the option exercise price equals the fair market value on the date of grant. All options granted under the 1997 Plan prior to December 15, 2005 vested between six months and two years of the date of grant and have ten-year contractual terms. All options granted on December 15, 2005 under either the 2005 Plan or the 1997 Plan vested immediately and have seven-year contractual terms. Options granted under all plans expire between 2006 and 2015. The Company issues shares for option exercises and restricted stock issuances from its pool of authorized but unissued shares.

     On July 1, 2004 Chapter 156D of the Massachusetts General Laws, a statute known as the Massachusetts Business Corporation Act, took effect. Chapter 156D applies to Massachusetts corporations, such as the Company, as of its effective date. One provision of Chapter 156D is designed to eliminate the concept of “treasury stock” and provides, in pertinent part, that shares that a Massachusetts company reacquires after July 1, 2004 will be treated as authorized but unissued shares. The Company has, based upon this change in Massachusetts law, retroactively converted its existing treasury stock to authorized but unissued shares from December 31, 2005 back to July 1, 2004 and accounted for this change, in the aggregate amount of $2.6 million, as a reduction in the Company’s common stock (at par value) and retained earnings. There was no impact to total equity. At December 31, 2004 the Company had 124,488 shares at a cost of $1.9 million previously classified as treasury stock.

     On December 15, 2005, the Company’s Board of Directors voted to accelerate the vesting of certain unvested “out-of-the-money” stock options awarded to employees pursuant to the 1997 Plan so that they immediately vested as of December 15, 2005. No other changes were made to the terms and conditions of the stock options affected by the Board vote. The Board vote approved the acceleration and immediate vesting of all unvested options with an exercise price of $31.44 or greater per share. As a consequence of the Board vote, options to purchase 135,549 shares of the Company’s common stock became exercisable immediately. The average of the high price and low price at which the Company’s common stock traded on December 15, 2005, the date of the Board vote, was $28.895 per share. The Company estimates that, as a result of this accelerated vesting, approximately $710,000 of 2006 non-cash compensation expense and $8,000 of 2007 non-cash compensation expense were

8

eliminated that would otherwise have been recognized in the Company’s earnings in accordance with SFAS 123R.

     Also on December 15, 2005, the Company granted 11,450 restricted stock awards to employees from the 2005 Plan. These awards vest evenly over a five-year period assuming continued employment with the Company and the holders of these awards participate fully in the rewards of stock ownership of the Company, including voting and dividend rights. The employees are not required to pay any consideration to the Company for the restricted stock awards. The Company measured the fair value of the shares based on the average of the high price and low price at which the Company’s common stock traded on the date of the grant.

     Prior to January 1, 2006, the Company accounted for its stock-based plans under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related Interpretations, as permitted by Statement of Financial Accounting Standard No. 123, Accounting for Stock-Based Compensation (“SFAS 123”). No compensation cost was recognized for stock options in the Consolidated Statement of Income for the periods ended on or prior to December 31, 2005, as options granted under those plans had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant. However, there was compensation expense recorded in the year ended December 31, 2005 related to restricted stock awards in accordance with APB 25 in the amount of approximately $3,000 before tax.

     Effective January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123 (revised 2004), Share-Based Payment (“SFAS 123R”) for all share-based payments (See discussion which follows in Recent Accounting Developments), using the modified-prospective transition method. Under this transition method, compensation cost recognized in the quarter ended March 31, 2006 includes: (1) compensation expense recognized over the requisite service period for all share-based awards granted prior to, but not yet fully vested, as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (2) compensation cost for all share-based awards granted on or subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R, of which the Company has none to date. In accordance with the modified prospective transition method, the Company’s Consolidated Financial Statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123R. Upon adoption of SFAS 123R, the Company elected to retain its method of valuation for share-based awards granted using the Black-Scholes option-pricing model which was also previously used for the Company’s pro forma information required under SFAS 123. The Company is recognizing compensation expense for its awards on a straight-line basis over the requisite service period for the entire award (straight-line attribution method), ensuring that the amount of compensation cost recognized at any date at least equals the portion of the grant-date fair value of the award that is vested at that time.

     The total compensation expense before tax recognized in earnings by the Company in the quarter ended March 31, 2006 was approximately $20,000. The portion of this expense related to restricted stock awards was approximately $14,000. The recognition of compensation expense for these types of awards did not change as a result of adopting SFAS 123R on January 1, 2006. However, as a result of adopting SFAS 123R, the Company was required to recognize additional stock-based compensation expense in the quarter ended March 31, 2006 related to stock option awards in the amount of approximately $6,000. This

9

additional $6,000 pre-tax expense had no impact on the Company’s basic and diluted earnings per share for the quarter ended March 31, 2006.

     As required, prior to the adoption of SFAS 123R, the Company presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the Consolidated Statement of Cash Flows. SFAS 123R requires the cash flows resulting from the tax benefits from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. Therefore, the Company had $136,000 of excess tax benefits classified as a financing cash inflow during the quarter ended March 31, 2006.

     Cash received from stock option exercises for the quarter ended March 31, 2006, was approximately $833,000. The actual tax benefit realized for the tax deductions from option exercises under all plans totaled $136,000 and $50,000, respectively, for the quarters ended March 31, 2006 and 2005. No cash was used by the Company to settle equity instruments granted under share-based compensation arrangements during the quarter ended March 31, 2006.

     For purposes of pro forma disclosures for periods prior to January 1, 2006, the estimated fair value of the stock options is amortized to expense over the vesting period of the options. The Company’s net income and earnings per share for the quarter ended March 31, 2005, had the Company elected to recognize compensation expense for the granting of options under SFAS 123 using the Black-Scholes option pricing model, would have been reduced to the following pro forma amounts:

Three Months Ended March 31,		2005
Net Income:
	As Reported (000’s)	$	7,914
Add: Total stock-based employee compensation expense included in reported net income, net of tax		$	0
Less: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of tax		($	183	)
	Pro Forma (000’s)	$	7,731
Basic EPS:
	As Reported	$	0.52
	Pro Forma	$	0.50
Diluted EPS:
	As Reported	$	0.51
	Pro Forma	$	0.50

     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 assumptions used for grants under the 2005 Plan, the 1997 Plan and the 1996 Plan.

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     Expected volatility is based on the standard deviation of the historical volatility of the weekly adjusted closing price of the Company’s shares for a period equivalent to the expected life of the option.

     The expected life represents the period of time that the option is expected to be outstanding, taking into account the contractual term, historical exercise/forfeiture behavior, and the vesting period, if any.

     Expected dividend yield is an annualized rate calculated using the most recent dividend payment at time of grant and the Company’s average trailing twelve-month daily stock price.

     The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period equivalent to the expected life of the option.

     In addition, as SFAS 123R requires that the stock-based compensation expense recognized in earnings be based on the amount of awards ultimately expected to vest, a forfeiture assumption should be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Prior to the adoption of SFAS 123R, the Company was not estimating forfeitures, but was rather adjusting pro forma compensation cost as actual forfeitures occurred, as permitted by SFAS 123. There is no cumulative effect of a change in accounting principle recognized in income at the time of adoption of SFAS 123R as the stock-based compensation expense recognized in income prior to adoption was immaterial and therefore the adjustment to reflect estimated forfeitures related to this expense was immaterial. Stock-based compensation expense recognized in the first quarter of 2006 has been reduced for annualized estimated forfeitures of 5% for both restricted stock and stock option awards. Forfeitures were estimated based on historical experience.

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		2005 Plan			1997 Plan			1996 Plan
Expected Volatility	March 31, 2006		N/A			N/A			N/A
	Fiscal Year 2005		25	%(1)		25	%(1)		—
			—			26	%(2)		27	%(3)
Expected Lives	March 31, 2006		N/A			N/A			N/A
	Fiscal Year 2005	3.5 years (1)			3.5 years(1)				—
			—		3.5-4 years(2)			4.5 years(3)
Expected Dividend Yields	March 31, 2006		N/A			N/A			N/A
	Fiscal Year 2005		2.04	%(1)		2.04	%(1)		—
			—			1.91%-1.95	%(2)		2.21	%(3)
Risk Free Interest Rate	March 31, 2006		N/A			N/A			N/A
	Fiscal Year 2005		4.38	%(1)		4.38	%(1)		—
			—			3.53%-3.80	%(2)		3.93	%(3)

(1)	On December 15, 2005, 137,000 options were granted from the 2005 Plan and 45,500 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 15, 2005.
(2)	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 were determined on January 13, 2005. On September 1, 2005, 500 options were granted from the 1997 Plan to a Vice President of the Company. The risk free rate, expected dividend yield, expected life and expected volatility for this grant was determined on September 1, 2005.
(3)	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 was determined on April 26, 2005.

     A summary of the status of the Company’s 2005 Plan, 1997 Plan, 1996 Plan, and 1987 Plan for the quarter ended March 31, 2006 is presented in the table below:

				2006
				Weighted		Wtd Avg.		Aggregate
				Average		Remaining		Intrinsic
				Exercise		Contractual		Value
Options	Shares			Price ($)		Term (years)		($000)
Balance, January 1		950,390		$	25.67		—		—
Granted		—		$	—		—		—
Exercised		(47,883	)	$	17.40		—		—
Forfeited		(30,202	)	$	31.77		—		—
Expired		—		$	—		—		—
Balance, March 31		872,305		$	25.92		6.6	$	5,451
Options Exercisable at March 31		868,639		$	25.91		6.6	$	5,439
Weighted average grant date fair value of options granted				$	—
Total intrinsic value of share options exercised								$	427

     The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the average of the high price and low price at which the Company’s common stock traded on March 31, 2006 of $31.74, which would have been received by the option

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holders had all option holders exercised their options as of that date. The weighted average grant date fair value of options granted in the quarter ended March 31, 2005 was $6.72, and the total intrinsic value of share options exercised in that quarter was $121,000.

     During the first quarter of 2006, no options were granted under the 1996 Non-employee Directors’ Stock Option Plan. At March 31, 2006, a total of 89,000 options at a weighted average exercise price of $19.83 were outstanding under that plan, all of which were exercisable.

     A summary of the status of the Company’s nonvested shares as of March 31, 2006 and changes during the quarter then ended is presented in the table below:

	Nonvested Awards Issued Under the Plans
	Stock Options					Restricted Stock Awards
				Weighted				Weighted
				Average				Average
				Grant Date				Grant Date
	Awards			Fair Value		Awards		Fair Value
Nonvested at January 1, 2006		37,849		$	6.64		11,450	$	28.90
Granted		—		$	—		—	$	—
Vested		(32,367	)	$	6.73		—	$	—
Forfeited		(1,816	)	$	6.73		—	$	—
Nonvested at March 31, 2006		3,666		$	5.84		11,450	$	28.90

     At March 31, 2006, there was $8,000 of total unrecognized compensation cost related to nonvested stock options granted under all plans. That cost is expected to be recognized over a weighted-average remaining period of 0.4 years. At March 31, 2006, there was $268,000 of total unrecognized compensation cost related to nonvested restricted stock awards granted under all plans, which includes an estimation of forfeitures. That cost is expected to be recognized over a weighted-average remaining period of 2.7 years. The total fair value of stock options that vested during the quarters ended March 31, 2006 and 2005 was $218,000 and $431,000, respectively. There were no restricted stock awards that vested during the quarter ended March 31, 2006.

     The Company maintains a Dividend Reinvestment and Stock Purchase Plan. Under the terms of the plan, stockholders may elect to have cash dividends reinvested in newly issued shares of common stock at a 5% discount from the market price on the date of the dividend payment. Stockholders also have the option of purchasing additional new shares, at the full market price, up to the aggregate amount of dividends payable to the stockholder during the calendar year.

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NOTE 3 — RECENT ACCOUNTING DEVELOPMENTS

     FASB Staff Position (“FSP”) FAS 123R-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards” In November 2005, the FASB issued FSP FAS 123R-3. This FSP provides a simplified, elective transition alternative to (1) calculating the beginning balance of the pool of excess tax benefits available to absorb tax deficiencies subsequent to the adoption of SFAS 123R (“APIC Pool”) and (2) determining the subsequent impact on the APIC Pool from the tax benefits of awards that are fully vested and outstanding upon the adoption of SFAS 123R. An entity shall follow either the transition guidance described in this FSP or the transition guidance described in SFAS 123R paragraph 81. An entity that adopted SFAS 123R using the modified prospective or modified retrospective application may make a one-time election to adopt the transition method described in this FSP. An entity may take up to one year from the later of its initial adoption of SFAS 123R or the effective date of this FSP to make this one-time election. The Company has not yet determined the transition method that will be applied in calculating the APIC pool after adopting SFAS 123R.

     FASB Staff Position (“FSP”) FAS 123R-4, “Classification of Options and Similar Instruments Issued as Employee Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent Event” In February 2006, the FASB issued FSP FAS 123R-4. This FSP addresses the classification of options and similar instruments issued as employee compensation that allow for cash settlement upon the occurrence of a contingent event. The guidance in this FSP amends certain paragraphs of SFAS 123R, which required that options or similar instruments be classified as liabilities if the entity could be required under any circumstances to settle the option or similar instrument by transferring cash or other assets. These paragraphs are amended such that a cash settlement feature that can be exercised only upon the occurrence of a contingent event that is outside the employee’s control does not meet the condition in those paragraphs of SFAS 123R until it becomes probable that the event will occur. This FSP was to be applied upon initial adoption of SFAS 123R. An entity that adopted SFAS 123R prior to the issuance of this FSP (such as the Company) is to apply the guidance in the first reporting period beginning after FSP FAS 123R-4 was made available. If in applying SFAS 123R an entity treated options or similar instruments that allow for cash settlement upon the occurrence of a contingent event in a manner consistent with the guidance in this FSP (such as the Company), then that entity would not be required to retrospectively apply the guidance in this FSP to prior periods. The adoption of FSP FAS 123R-4 did not have a material impact on the Company’s financial position or results of operations because the Company treated options that allow for cash settlement upon the occurrence of a contingent event in a manner consistent with the guidance in this FSP upon adoption of SFAS 123R.

     FASB Staff Position (“FSP”) SOP 94-6-1, “Terms of Loan Products That May Give Rise to a Concentration of Credit Risk” In December 2005, the FASB issued FSP SOP 94-6-1. This FSP was issued in response to inquiries from constituents and discussions with the SEC staff and regulators of financial institutions to address the circumstances in which the terms of loan products give rise to a concentration of credit risk as that term is used in SFAS No. 107 “Disclosures about Fair Value of Financial Instruments”, and what disclosures apply to entities who deal with loan products whose terms may give rise to a concentration of credit risk. An entity shall provide the disclosures required by SFAS No. 107 for either an individual loan product type or a group of loan products with similar features that are determined to

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represent a concentration of credit risk in accordance with the guidance of SOP 94-6-1 for all periods presented in financial statements. This SOP is effective for interim and annual periods ending after December 19, 2005. The adoption of FSP SOP 94-6-1 did not have a material impact on the Company’s financial position or results of operations.

     SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140” In February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS 155. SFAS 155 amends SFAS 133 “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”) and SFAS 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (“SFAS 140”). This Statement permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; clarifies which interest- and principal-only strips are not subject to SFAS 133; requires an evaluation of interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and amends SFAS 140 to eliminate the prohibition on a qualifying special purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This SFAS is effective for all financial instruments acquired or issued after the beginning of an entity’s fiscal year that begins after September 15, 2006. As this standard is effective for the Company beginning on January 1, 2007, if the Company were to acquire or issue financial instruments subsequent to that date the guidance in FAS 155 would be applied.

     SFAS No. 156, “Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140” In March 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS 156. SFAS 156 amends SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. This Statement requires an entity to recognize a servicing asset or servicing liability when it undertakes an obligation to service a financial asset in certain situations; requires separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable; permits an entity to choose between an amortization or fair value measurement method for each class of separately recognized servicing assets and servicing liabilities; at initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights; requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities. SFAS 156 is to be adopted as of the beginning of an entity’s fiscal year that begins after September 15, 2006, with earlier adoption permitted, provided the entity has not yet issued financial statements for any period of that fiscal year. The effective date of this Statement is the date an entity adopts the requirements of this Statement. An entity should apply the requirements for recognition and initial measurement of servicing assets and servicing liabilities prospectively to all transactions after the effective date. The Company does not believe that the adoption of SFAS 156 will have a material impact on the Company’s financial position.

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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.

     Earnings per share consisted of the following components for the three months ended March 31, 2006 and 2005:

For the Three Months Ended March 31,	Net Income
	2006		2005
	(Dollars in Thousands)
Net Income	$	7,904	$	7,914

	Weighted Average
	Shares
	2006		2005
Basic EPS		15,343,807		15,347,540
Effect of dilutive securities		153,624		164,680
Diluted EPS		15,497,431		15,512,220

	Net Income
	Per Share
	2006		2005
Basic EPS	$	0.52	$	0.52
Effect of dilutive securities	$	0.01	$	0.01
Diluted EPS	$	0.51	$	0.51

     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 months ended March 31, 2006, there were 313,315 shares excluded from the calculation of diluted earnings per share. For the three months ended March 31, 2005, there were 329,948 shares excluded from the calculation of diluted earnings per share.

NOTE 5- COMMON STOCK REPURCHASE PROGRAM

     On January 19, 2006 the Company’s Board of Directors approved a common stock repurchase program. Under the program, the Company is authorized to repurchase up to 800,000 shares, or approximately 5% of the Company’s outstanding common stock. The Company placed no deadline on the repurchase program, but expects to make open market or privately negotiated purchases from time to time. The timing and amount of stock repurchases will depend upon market conditions, securities law limitations, and other corporate considerations. The repurchase program may be modified, suspended, or terminated by the Board of Directors at any time. As of March 31, 2006, 193,300 shares of stock have been repurchased. Additional information about the repurchase program is set forth in Part II, Item 2 of this Form 10-Q.

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NOTE 6- EMPLOYEE BENEFITS

POST RETIREMENT BENEFITS AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS

     The following table illustrates the status of the post-retirement benefit plan and supplemental executive retirement plans (“SERPs”) as of March 31, for the periods presented:

Components of Net Periodic Benefit Cost
	Post Retirement Benefits				SERPs
			Three months ended March 31,
	2006		2005		2006			2005
			(Unaudited - Dollars in Thousands)
Service cost	$	23	$	23	$	50		$	44
Interest cost		18		18		34			32
Amortization of transition obligation		8		9		—			—
Amortization of prior service cost		3		3		10			12
Recognized net actuarial (gain)/loss		—		—		(1	)		—
Net periodic benefit cost	$	52	$	53	$	93		$	88

     The Company previously disclosed in its financial statements for the fiscal year ended December 31, 2005 that it expected to contribute $60,000 to its post retirement benefit plan and $112,000 to its SERPs in 2006 and presently anticipates making these contributions. For the three months ended March 31, 2006, $28,000 and $32,000 of contributions have been made to the post retirement benefit plan and the SERPs, respectively.

     Not included in the above summary are the components of net periodic benefit cost for the noncontributory defined benefit pension plan administered by Pentegra (“the Fund”). The Fund does not segregate the assets or liabilities of all participating employers and, accordingly, disclosure of accumulated vested and non-vested benefits is not possible. The pension plan year is July 1st through June 30th. The Company anticipates that contributions paid in 2006 to the defined benefit pension plan related to the 2006-2007 plan year will be $3.2 million, Contributions for the 2005-2006 plan years were all paid in 2005. Pension expense was $2.4 million for the year 2005 and is expected to be $3.2 million for the full year 2006 of which $749,000 has been recognized during the three months ended March 31, 2006 .

NOTE 7 — REPURCHASE AGREEMENTS

     Both wholesale and retail repurchase agreements are collateralized by mortgage-backed securities and U.S. Government obligations. At March 31, 2006, the Company had $25.0 million securities of repurchase agreements outstanding with third party brokers and $87.5 million of customer repurchase agreements outstanding. The related securities are included in the securities available for sale.

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NOTE 8 — COMPREHENSIVE INCOME (LOSS)

     Information on the Company’s comprehensive income (loss), presented net of taxes, is set forth below for the three months ended March 31, 2006 and 2005 .

	(Unaudited - Dollars in Thousands)
	FOR THE THREE
	MONTHS ENDED
	MARCH 31,
	2006			2005
Net Income	$	7,904		$	7,914
Other Comprehensive (Loss) Income, Net of Tax:
Increase in unrealized losses on securities available for sale, net of tax of $2,280 and $4,308 for the three months ended March 31, 2006 and 2005, respectively		(3,778	)		(7,156	)
Less: reclassification adjustment for realized losses/(gains) included in net earnings, net of tax of $637 and $125 for the three months ended March 31, 2006 and 2005, respectively		1,132			(217	)
Net change in unrealized losses on securities available for sale, net of tax of $1,643 and $4,433 for the three months ending March 31, 2006 and 2005, respectively		(2,646	)		(7,373	)
Increase in fair value of derivatives, net of tax of $784 and $842 for the three months ending March 31, 2006 and 2005, respectively		1,082			1,162
Less: reclassification of realized gains on derivatives, net of tax of $177 and $99 for the three months ending March 31, 2006 and 2005, respectively		(244	)		(136	)
Net change in fair value of derivatives, net of tax of $607 and $743 for the three months ending March 31, 2006 and 2005, respectively		838			1,026
Other Comprehensive Loss, Net of Tax:		(1,808	)		(6,347	)
Comprehensive Income	$	6,096		$	1,567

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, 2005, 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, 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.

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     These forward-looking statements, implicitly and explicitly, include the assumptions underlying the statements and other information with respect to the Company’s beliefs, plans, objectives, goals, expectations, anticipations, estimates, intentions, financial condition, results of operations, future performance and business, including the Company’s expectations and estimates with respect to the Company’s revenues, expenses, earnings, return on equity, return on assets, efficiency ratio, asset quality and other financial data and capital and performance ratios.

     Although the Company believes that the expectations reflected in the Company’s forward-looking statements are reasonable, these statements involve risks and uncertainties that are subject to change based on various important factors (some of which are beyond the Company’s control). The following factors, among others, could cause the Company’s financial performance to differ materially from the Company’s goals, plans, objectives, intentions, expectations and other forward-looking statements:

• a weakening in the strength of the United States economy in general and the strength of the regional and local economies within the New England region and Massachusetts which could result in a deterioration of credit quality, a change in the allowance for loan losses or a reduced demand for the Company’s credit or fee-based products and services;

• adverse changes in the local real estate market, as most of the Company’s loans are concentrated in southeastern Massachusetts and Cape Cod and a substantial portion of these loans have real estate as collateral, could result in a deterioration of credit quality and an increase in the allowance for loan losses;

• the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System could affect the Company’s business environment or affect the Company’s operations;

• the effects of, any changes in, and any failure by the Company to comply with tax laws generally and requirements of the federal New Markets Tax Credit program in particular could adversely affect the Company’s tax provision and its financial results;

• 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 and the increase in non-banks providing financial services;

• 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;

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• 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 earnings of $7.9 million for the quarter ended March 31, 2006, a decrease of 0.1%, from the same period last year.

     Management continues to focus on earning asset growth in the commercial lending and home equity lending segments, while placing less emphasis on indirect auto, portfolio residential lending and the securities portfolio. While this strategy has slowed balance sheet and earnings growth, management believes it is prudent in the current interest rate environment. Emphasis on the securities portfolio has decreased on both a relative basis (as a percent of earning assets) as well as on an actual basis, reflecting the current flat yield curve (defined below) environment which management believes not to be conducive to growing the securities portfolio. Management has de-emphasized auto loan originations because management believes that there is currently a poor return on characteristics of certain segments of that business. As a result of Management’s disciplined approach to quality asset generation, earning asset growth is expected to be flat in 2006.

     The following graph depicts the historical U.S. Treasury yield curve as of March 31, for the years 2004 – 2006.

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     A yield curve is a graphic line chart that shows interest rates at a specific point for all securities having equal risk, but different maturity dates. ¹ A flat yield curve is one in which there is little difference between short-term and long-term rates for bonds of the same credit quality. When short- and long-term bonds are offering equivalent yields, there is usually little benefit in holding the longer-term instruments — that is, the investor does not gain any excess compensation for the risks associated with holding longer-term securities. For example, a flat yield curve on U.S. Treasury Securities would be one in which the yield on a two-year bond is 5% and the yield on a 30-year bond is 5.1%. ²

1	The Free Dictionary.com
2	Investopedia.com

     The following graph presents the decline in the Company’s securities portfolio throughout 2005 into 2006:

21

     Total deposits of $2.1 billion at March 31, 2006 decreased $85.8 million, or 3.9%, compared to December 31, 2005 and decreased $19.3 million, or 0.9%, from the same period last year. Management believes that seasonality, as well as competition for deposits, are the major factors contributing to the decreased deposit balances.

     The following graph presents the Company’s historical demand deposit balances at the dates indicated:

     The Company remains committed to deposit generation, with careful management of deposit pricing and selective deposit promotion, in an effort to control the Company’s cost of funds.

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     While changes in the prevailing interest rate environment (see Historical U.S. Treasury Yield Curve graph above) have and will continue to have an impact on the Company’s earnings, management strives to mitigate volatility in net interest income resulting from changes in benchmark interest rates by adjustable rate asset generation, effective liability management, and utilization of off-balance sheet interest rate derivatives. (For a discussion of interest rate derivatives and interest rate sensitivity see the Asset/Liability Management section and Market Risk section and Table 8– “Interest Rate Sensitivity” within the Market Risk section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations hereof.)

     Net interest margin for the quarter ended March 31, 2006 was 3.88% compared to 3.84% for the quarter ended March 31, 2005. For the remainder of 2006, assuming a similar interest rate environment, the Company expects the net interest margin to gradually expand back into the mid to high 3.90’s, with deposit pricing and a lower securities portfolio being the key determinants. Management will continue to focus on rationally priced deposit generation and targeted high-value loan growth. Competition for deposit generation in the Company’s footprint is expected to remain strong.

     Asset quality continues to be a highlight for the Company. Non-performing assets at March 31, 2006 were $4.6 million, or 0.16%, of total assets, as compared to $3.3 million, or 0.11%, of total assets at December 31, 2005. Net charge-offs for the quarter were $643,000, or 13 basis points of average loans on an annualized basis compared to $622,000 or 13 basis points of average loans on an annualized basis at March 31, 2005. Loan delinquency improved to 50 basis points at March 31, 2006, as compared to the 81 basis points recorded at year-end 2005.

     The following graph depicts the Company’s non-performing assets to total assets at the periods indicated:

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        Some of the Company’s other highlights for the first three months of 2006 included:

o Opening a new commercial banking office in New Bedford, MA staffed by two new seasoned bankers from that market,

o Hiring two additional seasoned commercial bankers in other markets, which in total increases the Company’s total staff of commercial bankers by 10%, as well as strengthened our mortgage banking business with the hiring of two new experienced mortgage loan originators,

o Continued disciplined capital management

o Repurchased approximately 200,000 (1.2%) common shares as part of the previously announced stock buy-back program, and plan on repurchasing a total of 5% of the Company’s outstanding stock, or 800,000 shares in total.

o Management announced that it anticipates refinancing its Trust Preferred Securities in the latter part of 2006, saving approximately $1.0 million in interest expense, on an annualized basis, beginning in 2007.

o Announcing a 7% increase in the quarterly dividend to $0.16 per share.

     Management continues to focus on creating long-term shareholder value, through prudent capital management, a disciplined approach to asset generation and deposit pricing, a commitment to superior customer service, and targeted expansion, such as the opening of the new commercial lending office in New Bedford, MA.

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FINANCIAL POSITION

     Loan Portfolio Total loans decreased by $216,000, or 0.01%, during the three months ended March 31, 2006. The decreases were mainly in residential loans which decreased by $5.7 million, or 1.3%, commercial real estate and construction lending which decreased by $3.3, or 0.4% and the consumer-auto loan portfolio which decreased by $12.2 million, or 4.6%, as this segment of the loan portfolio has been de-emphasized due to narrowing spreads. Partially offsetting these decreases are increases in the consumer-home equity portfolio of $11.1 million, or 4.4% and increases in the commercial and industrial portfolio which increased by $7.9 million, or 5.1%.

     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 determine the reasons for delinquency and the prospects for payment. Any subsequent actions taken to resolve the delinquency will depend upon the nature of the loan and the length of time that the loan has been delinquent. The borrower’s needs are considered as much as reasonably possible without jeopardizing the Bank’s position. A late charge is usually assessed on loans upon expiration of the grace period.

     On loans secured by one-to-four family owner-occupied properties, the Bank attempts to work out an alternative payment schedule with the borrower in order to avoid foreclosure action. If such efforts do not result in a satisfactory arrangement, the loan is referred to legal counsel to initiate foreclosure proceedings. At any time prior to a sale of the property at foreclosure, the Bank may and will terminate foreclosure proceedings if the borrower is able to work out a satisfactory payment plan. On loans secured by commercial real estate or other business assets, the Bank similarly seeks to reach a satisfactory payment plan so as to avoid foreclosure or liquidation.

     The following table sets forth a summary of certain delinquency information as of the dates indicated:

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Table 1 — Summary of Delinquency Information

	At March 31, 2006								At December 31, 2005
	60-89 days				90 days or more				60-89 days				90 days or more
	Number		Principal		Number		Principal		Number		Principal		Number		Principal
	of Loans		Balance		of Loans		Balance		of Loans		Balance		of Loans		Balance
	(Unaudited - Dollars in Thousands)
Commercial and Industrial		1	$	48		4	$	276		2	$	24		4	$	209
Commercial Real Estate		1		630		4		2,913		3		2,892		2		288
Commercial Construction		—		—		—		—		—		—		—		—
Business Banking		1		33		3		57		5		97		3		47
Residential Real Estate		1		48		1		332		4		1,337		2		373
Residential Construction		—		—		—		—		—		—		—		—
Consumer — Home Equity		—		—		2		32		—		—		—		—
Consumer — Auto		51		392		53		437		65		597		61		572
Consumer — Other		8		5		20		68		18		112		17		110
Total		63	$	1,156		87	$	4,115		97	$	5,059		89	$	1,599

     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 and all previously accrued and uncollected interest is reversed against current income. A loan remains on nonaccrual status until it becomes current with respect to principal and interest (and in certain instances remains current for up to three months), when the loan is liquidated, or when the loan is determined to be uncollectible and it is charged-off against the allowance for loan losses.

     Nonperforming Assets Nonperforming assets are comprised of nonperforming loans, nonperforming securities and Other Real Estate Owned (“OREO”). Nonperforming loans consist of loans that are more than 90 days past due but still accruing interest and nonaccrual loans. OREO includes properties held by the Bank as a result of foreclosure or by acceptance of a deed in lieu of foreclosure. As of March 31, 2006, nonperforming assets totaled $4.6 million, an increase of $1.3 million, or 38.6%, compared to December 31, 2005. Nonperforming assets represented 0.16% of total assets for the three months ended March 31, 2006 and 0.11% for the year ending December 31, 2005. The Bank had one property held as OREO for the period ending March 31, 2006 and for the period ending December 31, 2005 which was valued at one dollar.

     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 $370,000 $509,000 and $557,000 for the periods ending March 31, 2006, December 31, 2005, and March 31, 2005, 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
	March 31,			December 31,			March 31,
	2006			2005			2005
Loans past due 90 days or more but still accruing
Consumer — Home Equity	$	33		$	—		$	49
Consumer — Auto		130			165			56
Consumer — Other		104			62			113
Total	$	267		$	227		$	218
Loans accounted for on a nonaccrual basis (1)
Commercial and Industrial	$	324		$	245		$	201
Business Banking		57			47			62
Commercial Real Estate		2,913			313			653
Residential Real Estate		684			1,876			1,016
Consumer — Auto		369			509			557
Consumer — Other		13			122			74
Total	$	4,360		$	3,112		$	2,563
Total nonperforming loans	$	4,627		$	3,339		$	2,781
Other real estate owned	$	—		$	—		$	—
Total nonperforming assets	$	4,627		$	3,339		$	2,781
Restructured loans	$	—		$	377		$	406
Nonperforming loans as a percent of gross loans		0.23	%		0.16	%		0.14	%
Nonperforming assets as a percent of total assets		0.16	%		0.11	%		0.09	%

     (1) There were no restructured nonaccruing loans at March 31, 2006, December 31, 2005 and March 31, 2005.

     In the course of resolving nonperforming loans, the Bank may choose to restructure the contractual terms of certain commercial and real estate loans. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status. It is the Bank’s policy to maintain restructured loans on nonaccrual status for approximately six months before management considers its return to accrual status. At March 31, 2006 and 2005, the Bank had zero and $406,000, respectively, of restructured loans.

     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. At both March 31, 2006 and December 31, 2005, the Bank had nine potential problem loan relationships, respectively, which are not included in nonperforming loans with an outstanding balance of $27.5 million and $30.3 million, respectively. At March 31, 2006, problem loans continued to perform and the Company’s management actively monitors these loans to minimize any possible adverse impact to the Bank.

     Real estate acquired by the Bank through foreclosure proceedings or the acceptance of a deed in lieu of foreclosure is classified as OREO. When property is acquired, it is recorded at the lesser of the loan’s remaining principal balance or the estimated fair value of the property acquired, less estimated costs to sell. Any loan balance in excess of the estimated

27

fair value less estimated cost to sell on the date of transfer is charged to the allowance for loan losses on that date. All costs incurred thereafter in maintaining the property, as well as subsequent declines in fair value are charged to non-interest expense.

     Interest income that would have been recognized for both the three months ended March 31, 2006, and 2005, if nonperforming loans at the respective dates had been performing in accordance with their original terms approximated $66,000. The actual amount of interest that was collected on these nonaccrual and restructured loans during each of those periods and included in interest income was approximately $39,000 and $31,000, 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 March 31, 2006, impaired loans include all commercial real estate loans and commercial and industrial loans on nonaccrual status and restructured loans and certain potential problem loans for which a collateral deficit exists and a specific allocation of allowance for loan losses has been assigned. Total impaired loans at March 31, 2006 and December 31, 2005 were $3.2 million and $935,000, 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 nonperforming loans, changes in economic conditions, or for other reasons. Various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses.

     The allowance for loan losses is maintained at a level that management considers adequate to provide for probable loan losses based upon evaluation of known and inherent risks in the loan portfolio. The allowance is increased by provisions for loan losses and by recoveries of loans previously charged-off and reduced by loans charged-off.

     As of March 31, 2006, the allowance for loan losses totaled $26.7 million, or 1.31%, of total loans as compared to $26.6 million, or 1.31%, of total loans at December 31, 2005. Based on the analyses described herein, management believes that the level of the allowance for loan losses at March 31, 2006 is adequate.

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     The following table summarizes changes in the allowance for loan losses and other selected loan data for the periods presented:

Table 3 — Summary of Changes in the Allowance for Loan Losses

	Quarter to Date
	March 31,			December 31,			September 30,			June 30,			March 31,
	2006			2005			2005			2005			2005
	(Unaudited - Dollars in Thousands)
Average loans	$	2,042,984		$	2,028,820		$	2,004,389		$	1,983,148		$	1,932,768
Allowance for loan losses, beginning of period	$	26,639		$	26,455		$	26,050		$	25,505		$	25,197
Charged-off loans:
Commercial and Industrial		141			—			120			—			—
Business Banking		48			111			196			48			151
Commercial Real Estate		—			—			—			—			—
Residential Real Estate		—			—			—			—			—
Commercial Construction		—			—			—			—			—
Residential Construction		—			—			—			—			—
Consumer — Home Equity		—			—			—			—			—
Consumer — Auto		454			592			333			421			426
Consumer — Other		249			327			285			283			181
Total charged-off loans		892			1,030			934			752			758
Recoveries on loans previously charged-off:
Commercial and Industrial		49			14			15			51			6
Business Banking		—			1			2			9			2
Commercial Real Estate		—			—			127			—			—
Residential Real Estate		—			—			—			—			—
Commercial Construction		—			—			—			—			—
Residential Construction		—			—			—			—			—
Consumer — Home Equity		—			—			—			—			20
Consumer — Auto		151			88			91			105			65
Consumer — Other		49			41			34			27			43
Total recoveries		249			144			269			192			136
Net loans charged-off		643			886			665			560			622
Addition due to acquisition		—			—			—			—			—
Provision for loan losses		750			1,070			1,070			1,105			930
Total allowance for loan losses, end of period	$	26,746		$	26,639		$	26,455		$	26,050		$	25,505
Net loans charged-off as a percent of average total loans		0.03	%		0.04	%		0.03	%		0.03	%		0.03	%
Total allowance for loan losses as a percent of total loans		1.31	%		1.31	%		1.31	%		1.30	%		1.31	%
Total allowance for loan losses as a percent of nonperforming loans		578.04	%		797.81	%		1,074.53	%		1,241.07	%		917.12	%
Net loans charged-off as a percent of allowance for loan losses		2.40	%		3.33	%		2.51	%		2.15	%		2.44	%
Recoveries as a percent of charge-offs		27.91	%		13.98	%		28.80	%		25.53	%		17.94	%

     The allowance for loan losses is allocated to various loan categories as part of the Bank’s process of evaluating its adequacy. The amount of allowance allocated to these loan categories was $24.1 million at March 31, 2006, compared to $24.1 million at December 31, 2005. The distribution of allowances allocated among the various loan categories as of March

29

31, 2006 was categorically similar to the distribution as of December 31, 2005. Increases or decreases in the amounts allocated to each category, as compared to those shown as of December 31, 2005, 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.

     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 MARCH 31,					AT DECEMBER 31,
	2006					2005
			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	$	3,149		8.0	%	$	3,134		7.6	%
Business Banking		1,255		2.7	%		1,193		2.5	%
Commercial Real Estate		11,568		33.3	%		11,554		33.5	%
Real Estate Construction		3,413		7.2	%		3,474		7.3	%
Real Estate Residential		630		21.0	%		650		21.2	%
Consumer — Home Equity		788		12.9	%		755		12.4	%
Consumer — Auto		2,509		12.3	%		2,629		12.9	%
Consumer — Other		748		2.6	%		757		2.6	%
Imprecision Allowance		2,686	NA				2,493	NA
Total Allowance for Loan Losses	$	26,746		100.0	%	$	26,639		100.0	%

     Allocated 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 section. Individual loans within the commercial and industrial, commercial real estate and real estate construction loan portfolio sections are assigned internal risk ratings to group them with other loans possessing similar risk characteristics. The level of allowance allocable to each group of risk-rated loans is then determined by management applying a loss factor that estimates the amount of probable loss inherent in each category. The assigned loss factor for each risk rating is a formula-based assessment of historical loss data, portfolio characteristics, economic trends, overall market conditions, past experience and management’s analysis of considerations of probable loan loss based on these factors.

     Allocations for business banking, residential real estate and other consumer loan categories are principally determined by applying loss factors that represent management’s estimate of probable or expected losses inherent in those categories. In each section, inherent losses are estimated, based on a formula-based assessment of historical loss data, portfolio characteristics, economic trends, overall market conditions, past loan loss experience and management’s considerations of probable loan loss based on these factors.

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     The other method used to allocate allowances for loan losses entails the assignment of allowance amounts to individual loans on the basis of loan impairment. Certain loans are evaluated individually and are judged to be impaired when management believes it is probable that the Bank will not collect all of the contractual interest and principal payments as scheduled in the loan agreement. Under this method, loans are selected for evaluation based upon a change in internal risk rating, occurrence of delinquency, loan classification or non-accrual 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) the present value of anticipated future cash flows or on the loan’s observable fair market value or (b) the fair value of collateral if the loan is collateral dependent. Loans with a specific allowance and the amount of such allowance totaled $3.2 million and $228,000, respectively, at March 31, 2006 and $558,000 and $1,000, respectively, at December 31, 2005.

     A portion of the allowance for loan losses is not allocated to any specific section 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 reflecting the uncertainty of future economic conditions within the Bank’s market area. The amount of this measurement imprecision allocation was $2.7 million and $2.5 million at March 31, 2006 and December 31, 2005, respectively.

     Inflationary concerns resulting from higher energy and commodity prices, potential downward pressure on housing prices, fluctuating interest rates, and changes in the level of employment are just some of the drivers that could impact local and regional economic growth and the banking environment in the near term. Unforeseen changes in the economy can impact the risk characteristics of the Bank’s loan portfolio. As such, management maintains the imprecision allowance based on its analysis of regional and local economic conditions.

     As of March 31, 2006, the allowance for loan losses totaled $26.7 million as compared to $26.6 million at December 31, 2005. Based on the processes described above, management believes that the level of the allowance for possible loan losses at March 31, 2006 is adequate.

31

     Goodwill and Core Deposit Intangibles Goodwill and Core Deposit Intangibles (“CDI”) decreased $80,000, or 0.1%, to $56.8 million at March 31, 2006 from December 31, 2005, resulting from the normal amortization of the CDI.

     Securities Securities decreased by $58.6 million, or 8.2%, during the three months ended March 31, 2006. This resulted mainly from the sale of $31.4 million in lower coupon securities for the three months ended March 31, 2006 and the decision not to reinvest pay-downs on the securities portfolio in the current rate environment. The ratio of securities to total assets as of March 31, 2006 is 22.5%.

     Deposits Total deposits of $2.1 billion at March 31, 2006 decreased $85.8 million, or 3.9%, compared to December 31, 2005. The Company experienced a decrease in core deposits of $83.0 million, or 5.0%. Time deposits decreased by $2.8 million, or 0.5%. Management believes that seasonality as well as intense competition for deposits are the major factors contributing to the decreased deposit balances.

     Borrowings Total borrowings decreased $31.1 million, or 5.3%, to $556.7 million at March 31, 2006 from December 31, 2005.

     Stockholders’ Equity Stockholders’ equity as of March 31, 2006 totaled $227.0 million, as compared to $228.2 million at December 31, 2005. This amount increased due to net income of $7.9 million, stock option exercise proceeds of $0.8 million, and the net change in the fair value of derivatives of $0.8 million. These increases were offset by stock repurchases of $5.8 million, dividends declared of $2.5 million and a net increase in unrealized losses on securities of $2.6 million.

     Equity to Assets Ratio The ratio of equity to assets was 7.8% at March 31, 2006 and 7.5% at December 31, 2005.

RESULTS OF OPERATIONS

     Summary of Results of Operations The Company reported net income of $7.9 million, a $10,000, or 0.1% decrease, for the first quarter of 2006 as compared with the first quarter of 2005. Diluted earnings per share were $0.51 for the three months ended March 31, 2006, the same amount recorded in the first quarter of 2005.

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 first quarter of 2006 increased $449,000, or 1.7%, to $26.8 million, as compared to the first quarter of 2005. The Company’s net interest margin was 3.88% for the quarter ended March 31, 2006 compared to 3.84% for the quarter ended March 31, 2005. The Company’s interest rate spread (the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities) was 3.39% for the first quarter of 2006, 7 basis points less than the comparable period in the prior year.

32

     The following table presents the Company’s average balances, net interest income, interest rate spread, and net interest margin for the three months ending March 31, 2006 and March 31, 2005. For purposes of the table and the following discussion, income from interest-earning assets and net interest income are presented on a fully-taxable equivalent basis by adjusting income and yields earned on tax-exempt interest received on loans to qualifying borrowers and on certain of the Company’s securities to make them equivalent to income and yields on fully-taxable investments, assuming a federal income tax rate of 35%.

33

Table 5 — Average Balance, Interest Earned/Paid & Average Yields
(Unaudited — Dollars in Thousands)

			INTEREST							INTEREST
	AVERAGE		EARNED/		AVERAGE			AVERAGE		EARNED/		AVERAGE
	BALANCE		PAID		YIELD/RATE			BALANCE		PAID		YIELD/RATE
FOR THE THREE MONTHS ENDED MARCH 31,	2006		2006		2006			2005		2005		2005
Interest-earning Assets:
Federal Funds Sold and Short Term Investments	$	9,856	$	100		4.06	%	$	4,885	$	30		2.46	%
Securities:
Trading Assets		1,555		12		3.09	%		1,571		12		3.06	%
Taxable Investment Securities		640,048		7,216		4.51	%		739,914		8,142		4.40	%
Non-taxable Investment Securities (1)		61,538		1,031		6.70	%		62,656		1,022		6.52	%
Total Securities:		703,141		8,259		4.70	%		804,141		9,176		4.56	%
Loans (1)		2,042,984		32,797		6.42	%		1,932,768		28,214		5.84	%
Total Interest-Earning Assets	$	2,755,981	$	41,156		5.97	%	$	2,741,794	$	37,420		5.46	%
Cash and Due from Banks		61,022							61,613
Other Assets		150,329							140,558
Total Assets	$	2,967,332						$	2,943,965
Interest-bearing Liabilities:
Deposits:
Savings and Interest Checking Accounts	$	573,944	$	933		0.65	%	$	598,734	$	658		0.44	%
Money Market		545,491		3,322		2.44	%		499,468		1,830		1.47	%
Time Deposits		537,454		4,205		3.13	%		497,328		2,766		2.22	%
Total interest-bearing deposits:		1,656,889		8,460		2.04	%		1,595,530		5,254		1.32	%
Borrowings:
Federal Home Loan Bank Borrowings	$	416,084	$	4,165		4.00	%	$	508,971	$	4,538		3.57	%
Federal Funds Purchased and Assets Sold Under Repurchase Agreement		107,249		636		2.37	%		64,729		194		1.20	%
Junior Subordinated Debentures		51,546		1,118		8.68	%		51,546		1,117		8.67	%
Treasury Tax and Loan Notes		1,442		16		4.44	%		2,016		5		0.99	%
Total borrowings:		576,321		5,935		4.12	%		627,262		5,854		3.73	%
Total Interest-Bearing Liabilities	$	2,233,210	$	14,395		2.58	%	$	2,222,792	$	11,108		2.00	%
Demand Deposits		485,997							491,093
Other Liabilities		17,948							17,203
Total Liabilities		2,737,155							2,731,088
Stockholders’ Equity		230,177							212,877
Total Liabilities and Stockholders’ Equity	$	2,967,332						$	2,943,965
Net Interest Income			$	26,761						$	26,312
Interest Rate Spread (2)						3.39	%						3.46	%
Net Interest Margin (2)						3.88	%						3.84	%
Supplemental Information:
Total Deposits, including Demand Deposits	$	2,142,886	$	8,460				$	2,086,623	$	5,254
Cost of Total Deposits						1.58	%						1.01	%
Total Funding Liabilities, including Demand Deposits	$	2,719,207	$	14,395				$	2,713,885	$	11,108
Cost of Total Funding Liabilities						2.12	%						1.64	%

(1)	The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $455 and $444 for the three months ended March 31, 2006 and 2005, 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.

     The increase in net interest income for the first quarter of 2006 compared to the first 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 $4.6 million, or 16.2%.

34

     Average loan balances for the three months ending March 31, 2006 have grown by $110.2 million from the comparative period with the yield on loans also increasing by 58 basis points from 5.84% to 6.42% primarily variable rate loans but also to a lesser extent prepayment penalties moved to interest income and fixed rate loans repricing. The average balance on securities decreased $101.0 million compared to March 31, 2005 with the yield on securities increasing by 14 basis points from 4.56% to 4.70% Partially offsetting the increase in interest income was an increase in interest expense of $3.3 million resulting from an increase in the total cost of funds of 48 basis points from 1.64% to 2.12%, driven primarily by the increase in deposit rates.

     Average loan balances for the three months ending March 31, 2005 grew by $329.9 million from the comparative period in 2004 with the yield on loans also increasing by 1 basis point from 5.83% to 5.84%. Contributing to the increase balances 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.

     On an average basis, securities increased to $804.1 million at March 31, 2005 from $705.7 million at March 31, 2004 while the yield on securities decreased 9 basis points from 4.65% to 4.56%. Interest expense increased by $3.5 million and the total cost of funds increased by 27 basis points from 1.37% to 1.64%.

     The following table presents certain information on a fully tax-equivalent basis regarding changes in the Company’s interest income and interest expense for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to: (1) changes in rate (change in rate multiplied by old volume), (2) changes in volume (change in volume multiplied by old rate), and (3) changes in volume/rate (change in volume multiplied by change in rate).

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Table 6 — Volume Rate Analysis

	Three Months Ended March 31,												Three Months Ended March 31,
	2006 Compared to 2005												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	$	20		$	30		$	20		$	70		$	(1	)	$	—		$	31		$	30
Securities:
Taxable securities		200			(1,099	)		(27	)		(926	)		(23	)		1,132			(4	)		1,105
Non-taxable securities (1)		27			(18	)		—			9			(59	)		(72	)		4			(127	)
Trading assets		—			—			—			—			(2	)		—			—			(2	)
Total Securities:		227			(1,117	)		(27	)		(917	)		(84	)		1,060			—			976
Loans (1) (2)		2,814			1,609			160			4,583			41			4,808			8			4,857
Total	$	3,061		$	522		$	153		$	3,736		$	(44	)	$	5,868		$	39		$	5,863
Expense of interest-bearing liabilities:
Deposits:
Savings and Interest Checking accounts	$	315		$	(27	)	$	(13	)	$	275		$	(115	)	$	103		$	(17	)	$	(29	)
Money Market		1,211			169			112			1,492			273			389			99			761
Time deposits		1,125			223			91			1,439			70			152			4			226
Total interest-bearing deposits:		2,651			365			190			3,206			228			644			86			958
Borrowings:
Federal Home Loan Bank borrowings	$	557		$	(828	)	$	(102	)	$	(373	)	$	278		$	944		$	82		$	1,304
Federal funds purchased and assets sold under repurchase agreements		190			127			125			442			37			46			18			101
Junior Subordinated Debentures		1			—			—			1			—			1,081			24			1,105
Treasury tax and loan notes		17			(1	)		(5	)		11			6			(2	)		(3	)		1
Total borrowings:		765			(702	)		18			81			321			2,069			121			2,511
Total	$	3,416		$	(337	)	$	208		$	3,287		$	549		$	2,713		$	207		$	3,469
Change in net interest income	$	(355	)	$	859		$	(55	)	$	449		$	(593	)	$	3,155		$	(168	)	$	2,394

(1) The total amount of adjustment to present income and yield on a fully tax-equivalent basis is $455 and $444 for the three months ended March 31, 2006 and 2005, respectively. (2) Loans include portfolio loans, loans held for sale and nonperforming loans; however unpaid interest on nonaccrual loans has not been included for purposes of determining interest income.

     Provision For Loan Losses The provision for loan losses represents the charge to expense that is required to maintain an adequate level of allowance for loan losses. Management’s periodic evaluation of the adequacy of the allowance considers past loan loss experience, known and inherent risks in the loan portfolio, adverse situations which may affect the borrowers’ ability to repay, the estimated value of the underlying collateral, if any, and current 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 decreased to $750,000 for the three months ended March 31, 2006 compared with $930,000 for the three months ended March 31, 2005. Provision for loan losses for the quarter covered net charge-offs by 1.2 times. The ratio of the allowance for loan losses to total loans was 1.31% as of March 31, 2006. For the quarter ended March 31, 2006, net loan charge-offs totaled $643,000, a decrease of $243,000 from the quarter ended December 31, 2005. The allowance for loan losses at March 31, 2006 was 578.04% of nonperforming loans, as compared to 797.81% at December 31, 2005 year-end.

     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

36

portfolios is conducted on an ongoing basis. This managerial evaluation is reviewed periodically by a third-party loan review consultant. As adjustments are identified, they are reported in the earnings of the period in which they become known.

     Non-Interest Income Non-interest income decreased by $253,000, or 3.8%, during the three months ended March 31, 2006 respectively, as compared to the same period in the prior year.

     Service charges on deposit accounts increased by $446,000, or 15.0%, for the three months ended March 31, 2006, as compared to the same period in 2005, reflecting increased revenue on overdrafts and debit card service charges. Investment management services income increased by $117,000, or 9.5%, for the three months ended March 31, 2006, compared to the same period last year due to growth in managed assets. Assets under administration increased by $136.8 million, or 24.3%, from the same period last year to $699.4 million.

     Mortgage banking income decreased by $110,000, or 11.9%, for the three months ended March 31, 2006, as compared to the same period in 2005 as a result of a decline in mortgage sales. The balance of the mortgage servicing asset was $2.8 million and loans serviced amounted to $327.1 million as of March 31, 2006.

     Bank owned life insurance (“BOLI”) income increased $1.3 million for the three months ended March 31, 2006, as compared to the same period ended March 31, 2005. This increase is due to tax exempt BOLI death benefit proceeds, realized during the quarter which amounted to $1.3 million. This amount is classified as an operating cash flow in the Company’s Consolidated Statement of Cash Flows. Other non-interest income increased by $87,000, or 12.8% for the three months ended March 31, 2006 as compared to the same period in 2005. The increase is primarily due to changes in fair value of trading assets.

     Security sale losses totaled $1.8 million in the first quarter of 2006, a decrease of $2.1 million, compared to $343,000 security sale gain realized in the first quarter of 2005. The loss of $1.8 million is associated with the sale of $31.4 million of lower coupon available for sale securities.

     Non-Interest Expense Non-interest expense increased by $594,000, or 3.0%, for the three months ended March 31, 2006 as compared to the same period in the prior year.

     Salaries and employee benefits increased by $72,000, or 0.6%, for the three months ended March 31, 2006, as compared to the same period in the prior year. The increase from the comparative quarter is largely the result of increases in pension expense partially offset by lower incentive compensation accruals. The Company has also effectively managed staffing levels, which has served to slow the growth of employee related expense.

     Occupancy and equipment related expense increased by $118,000, or 4.6%, for the three months ended March 31, 2006 as compared to the same periods in the prior year. The increase in this expense is driven by timing of equipment maintenance and repairs.

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     Data processing and facilities management expense increased $98,000, or 10.2%, for the three months ended March 31, 2006 compared to the same period in 2005, largely as a result of contractual increases.

     Other non-interest expenses increased by $306,000, or 6.9%, for the three months ended March 31, 2006, as compared to the same period in the prior year. The increase is primarily attributable to increases in debit card and ATM processing of $140,000, partially attributable to increased transaction volume and new fraud detection services, recruitment expense of $89,000 associated with the hiring of new experienced commercial lenders (four in total), and an increase in education and training expense of $83,000.

     Income Taxes For the quarters ending March 31, 2006 and March 31, 2005, the Company recorded combined federal and state income tax provisions of $3.6 million and $3.8 million, respectively. These provisions reflect effective income tax rates of 31.3% and 32.6% for the quarters ending March 31, 2006 and March 31, 2005, 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 million in tax credit allocation authority under the New Markets Tax Credit Program of the United States Department of Treasury. In both 2004 and 2005, the Bank invested $15.0 million in the CDE providing it with the capital necessary to begin assisting qualified businesses in low-income communities throughout its market area. Based upon the Bank’s total $30 million investment, it is eligible to receive tax credits over an eight year period totaling 39% of its investment, or $11.7 million. The Company has begun recognizing the benefit of these tax credits by reducing the provision of income taxes by $750,000 and $1.5 million during 2004 and 2005, respectively. For the quarter ending March 31, 2006, the Company has recognized a tax benefit of $375,000. The following table details the expected tax credit recognition by year based upon the two $15 million investments made in 2004 and 2005.

Table 7 — New Markets Tax Credit Recognition Schedule
(Dollars in Thousands)

Investment			2004		2005		2006		2007		2008		2009		2010		2011		Total
2004	$	15M	$	750	$	750	$	750	$	900	$	900	$	900	$	900	$	—	$	5,850
2005	$	15M		—	$	750	$	750	$	750	$	900	$	900	$	900	$	900	$	5,850
Total	$	30M	$	750	$	1,500	$	1,500	$	1,650	$	1,800	$	1,800	$	1,800	$	900	$	11,700

     The tax effects of all income and expense transactions are recognized by the Company in each year’s consolidated statements of income regardless of the year in which the transactions are reported for income tax purposes.

     Return on Average Assets and Equity The annualized consolidated returns on average equity and average assets for the three months ended March 31, 2006 were 13.74% and 1.07%, respectively, compared to 14.87% and 1.08% reported for the same period last year, respectively.

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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, whose members are comprised of the Bank’s senior management, develops procedures consistent with policies established by the Board of Directors, which monitor and coordinate the Bank’s interest rate sensitivity and the sources, uses, and pricing of funds. Interest rate sensitivity refers to the Bank’s exposure to fluctuations in interest rates and its effect on earnings. If assets and liabilities do not re-price simultaneously and in equal volume, the potential for interest rate exposure exists. It is management’s objective to maintain stability in the growth of net interest income through the maintenance of an appropriate mix of interest-earning assets and interest-bearing liabilities and, when necessary, within prudent limits, through the use of off-balance sheet hedging instruments such as interest rate swaps, floors and caps. The Committee employs simulation analyses in an attempt to quantify, evaluate, and manage the impact of changes in interest rates on the Bank’s net interest income. In addition, the Bank engages an independent consultant to render advice with respect to asset and liability management strategy.

     The Bank is careful to increase deposits without adversely impacting the weighted average cost of those funds. Accordingly, management has implemented funding strategies that include FHLB advances and repurchase agreement lines. These non-deposit funds are also viewed as a contingent source of liquidity and, when profitable lending and investment opportunities exist, access to such funds provides a means to leverage the balance sheet.

     From time to time, the Bank has utilized interest rate swap agreements and interest rates caps and floors as hedging instruments against interest rate risk. An interest rate swap is an agreement whereby one party agrees to pay a floating rate of interest on a notional principal amount in exchange for receiving a fixed rate of interest on the same notional amount for a predetermined period of time from a second party. Interest rate caps and floors are agreements whereby one party agrees to pay a floating rate of interest on a notional principal amount for a predetermined period of time to a second party if certain market interest rate thresholds are realized. The assets relating to the notional principal amount are not actually exchanged.

     At March 31, 2006 and December 31, 2005 the Company had interest rate swaps, designated as “cash flow” hedges. The purpose of these swaps is to hedge the variability in the cash outflows of LIBOR-based borrowings attributable to changes in interest rates. The table below shows interest rate derivatives the Company held as of March 31, 2006 and December 31, 2005:

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Table 8 — Interest Rate Derivatives

As of March 31, 2006
						Receive				Pay Fixed
	Notional		Trade	Effective	Maturity	(Variable)	Current Rate			Swap Rate/			Market Value
	Amount		Date	Date	Date	Index	Received			Cap Strike Rate			at March 31, 2006
Interest Rate Swaps
	$	25,000,000	20-Sep-02	21-Nov-03	21-Nov-06	3 Month LIBOR		4.77	%		3.65	%	$	231,353
	$	25,000,000	16-Jan-04	21-Jan-04	21-Jan-07	3 Month LIBOR		4.61	%		2.49	%	$	532,837
	$	35,000,000	18-Jan-05	20-Jan-05	20-Jan-10	3 Month LIBOR		4.60	%		4.06	%	$	1,346,438
	$	25,000,000	16-Feb-06	29-Dec-06	29-Dec-16	3 Month LIBOR		N/A			5.04	%	$	500,022
	$	25,000,000	16-Feb-06	29-Dec-06	29-Dec-16	3 Month LIBOR		N/A			5.04	%	$	500,022
Total	$	135,000,000								Total			$	3,110,672
Interest Rate Caps
	$	100,000,000	27-Jan-05	31-Jan-05	31-Jan-08	3 Month LIBOR		4.69	%		4.00	%	$	2,087,871
Grand Total	$	235,000,000								Grand Total			$	5,198,543

As of December 31, 2005
						Receive				Pay Fixed
	Notional		Trade	Effective	Maturity	(Variable)	Current Rate			Swap Rate/			Market Value
	Amount		Date	Date	Date	Index	Received			Cap Strike Rate			at December 31, 2005
Interest Rate Swaps
	$	25,000,000	20-Sep-02	21-Nov-03	21-Nov-06	3 Month LIBOR		4.37	%		3.65	%	$	236,726
	$	25,000,000	20-Sep-02	21-Nov-03	21-Nov-06	3 Month LIBOR		4.37	%		3.65	%	$	236,506
	$	25,000,000	16-Jan-04	21-Jan-04	21-Jan-07	3 Month LIBOR		4.18	%		2.49	%	$	587,862
	$	35,000,000	18-Jan-05	20-Jan-05	20-Jan-10	3 Month LIBOR		4.17	%		4.06	%	$	905,485
Total	$	110,000,000								Total			$	1,966,579
Interest Rate Caps
	$	100,000,000	27-Jan-05	31-Jan-05	31-Jan-08	3 Month LIBOR		4.26	%		4.00	%	$	1,655,184
Grand Total	$	210,000,000								Grand Total			$	3,621,763

     During February 2006, the Company entered into two forward-starting swaps, each with a $25.0 million notional amount. These swaps have an effective date of December 29, 2006. It is the intent of the Company at this time that both Independent Capital Trusts III and IV will exercise the option to call their Trust Preferred Securities on or soon after the first callable dates of December 31, 2006 and April 30, 2007, respectively. It is also the intent, of the Company to replace the outstanding Trust Preferred Securities by issuing new Trust Preferred Securities at variable interest rates based on LIBOR plus a spread through to-be formed Capital Trusts. The Company is utilizing the forward-starting swaps to hedge itself against interest rate risk until the issuance of the new Trust Preferred Securities, and will then be hedging itself against the changes in interest rates over the life of the new Trust Preferred Securities.

     During January 2006, the Company sold an interest rate swap that was hedging $25.0 million of 3 month LIBOR revolving FHLB borrowings with a maturity date of November 21, 2006 in connection with the Company’s decision not to re-enter into these borrowings. A gain of approximately $237,000 was recognized during the three months ending March 31, 2006 against the interest expense on FHLB borrowings.

     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 March 31, 2006 the Company had residential mortgage loan commitments with a fair value of $166,000 and forward sales agreements with a fair value of $69,000. At December 31, 2005 the Company had residential mortgage loan commitments with a fair value

40

of $108,000 and forward sales agreements with a fair value of ($22,000). Changes in these fair values of $102,000 for the three months ended March 31, 2006 and 2005, 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.

     The Company quantifies its interest-rate exposures using net interest income simulation models, as well as simpler gap analysis, and Economic Value of Equity (EVE) analysis. Key assumptions in these simulation analyses relate to behavior of interest rates and behavior of the Company’s deposit and loan customers. The most material assumptions relate to the prepayment of mortgage assets (including mortgage loans and mortgage-backed securities) and the life and sensitivity of nonmaturity deposits (e.g. DDA, NOW, savings and money market). The risk of prepayment tends to increase when interest rates fall. Since future prepayment behavior of loan customers is uncertain, the resultant interest rate sensitivity of loan assets cannot be determined exactly.

     To mitigate these uncertainties, the Company gives careful attention to its assumptions. In the case of prepayment of mortgage assets, assumptions are derived from published dealer median prepayment estimates for comparable mortgage loans.

     The Company manages the interest-rate risk inherent in its mortgage banking operations by entering into forward sales contracts. An increase in market interest rates between the time the Company commits to terms on a loan and the time the Company ultimately sells the loan in the secondary market will have the effect of reducing the gain (or increasing the loss) the Company records on the sale. The Company attempts to mitigate this risk by entering into forward sales commitments in amounts sufficient to cover all closed loans and a majority of rate-locked loan commitments.

     The Company’s policy on interest-rate risk simulation specifies that if interest rates were to shift gradually up or down 200 basis points, estimated net interest income for the subsequent 12 months should decline by less than 6.0%.

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     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 9 — Interest Rate Sensitivity

	200 Basis Point		200 Basis Point
	Rate Increase		Rate Decrease
March 31, 2006		(1.64%)		(0.42%)
March 31, 2005		(2.23%)		(0.20%)

     The results implied in the above table indicate estimated changes in simulated net interest income for the subsequent 12 months assuming a gradual shift up or down in market rates of 200 basis points across the entire yield curve. It should be emphasized, however, that the results are dependent on material assumptions such as those discussed above. For instance, asymmetrical rate behavior can have a material impact on the simulation results. If competition for deposits forced the Company to raise rates on those liabilities quicker than is assumed in the simulation analysis without a corresponding increase in asset yields net interest income may be negatively impacted. Alternatively, if the Company is able to lag increases in deposit rates as loans re-price upward net interest income would be positively impacted.

     The most significant factors affecting market risk exposure of the Company’s net interest income during the first quarter of 2006 were (i) changes in the composition and prepayment speeds of mortgage assets and loans, (ii) the shape of the U.S. Government securities and interest rate swap yield curve, (iii) the level of U.S. prime interest rates, and (iv) the level of rates paid on deposit accounts.

     The Company’s earnings are not directly and materially impacted by movements in foreign currency rates or commodity prices. Movements in equity prices may have an indirect but modest impact on earnings by affecting the volume of activity or the amount of fees from investment-related business lines.

     Liquidity Liquidity, as it pertains to the Company, is the ability to generate adequate amounts of cash in the most economical way for the institution to meet its ongoing obligations to pay deposit withdrawals and to fund loan commitments. The Company’s primary sources of funds are deposits, borrowings, and the amortization, prepayment and maturities of loans and securities.

     The Bank utilizes its extensive branch network to access retail customers who provide a stable base of in-market core deposits. These funds are principally comprised of demand deposits, interest checking accounts, savings accounts, and money market accounts. Deposit levels are greatly influenced by interest rates, economic conditions, and competitive factors. The Bank has also established repurchase agreements with major brokerage firms as potential

42

sources of liquidity. At March 31, 2006, the Company had $25.0 million outstanding of such repurchase agreements. In addition to agreements with brokers, the Bank also had customer repurchase agreements outstanding amounting to $87.5 million at March 31, 2006. As a member of the Federal Home Loan Bank, the Bank has access to approximately $661.2 million of borrowing capacity. On March 31, 2006, the Bank had $392.4 million outstanding in FHLB borrowings.

     The Company, as a separately incorporated bank holding company, has no significant operations other than serving as the sole stockholder of the Bank. Its commitments and debt service requirement, at March 31, 2006, consist of junior subordinated debentures, including accrued interest, issued to two unconsolidated entities, $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’s only obligations relate to its reporting obligations under the Securities and Exchange Act of 1934, as amended and related expenses as a publicly traded company. The Company funds virtually all expenses through dividends paid by the Bank.

     The Company actively manages its liquidity position under the direction of the Asset/Liability Management Committee. Periodic review under prescribed policies and procedures is intended to ensure that the Company will maintain adequate levels of available funds. At March 31, 2006, the Company’s liquidity position was well above policy guidelines. Management believes that the Bank has adequate liquidity available to respond to current and anticipated liquidity demands.

     Capital Resources and Dividends The Federal Reserve Board, the Federal Deposit Insurance Corporation, and other regulatory agencies have established capital guidelines for banks and bank holding companies. Risk-based capital guidelines issued by the federal 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 March 31, 2006 the Company had a Tier 1 risk-based capital ratio of 10.91% and total risk-based capital ratio 12.16%. The Bank had a Tier 1 risk-based capital ratio of 10.26% and a total risk-based capital ratio of 11.51% as of the same date.

     A minimum requirement of 4.0% Tier 1 leverage capital is also mandated. On March 31, 2006, the Company and the Bank had Tier 1 leverage capital ratios of 7.86% and 7.38%, respectively.

     On March 16, 2006, the Company’s Board of Directors declared a cash dividend of $0.16 per share, a 6.7% increase from March 31 2005, to stockholders of record as of the close of business on March 27, 2006. This dividend was paid on April 7, 2006. On an annualized basis, the dividend payout ratio amounted to 29.4% 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 March 31, 2006:

43

Table 10 — Contractual Obligations, Commitments and Off-Balance Sheet Financial Instruments by Maturity
(Unaudited — Dollars in Thousands)

	Payments Due - By Period
			Less than		One to		Four to		After
Contractual Obligations	Total		One Year		Three Years		Five Years		Five Years
FHLB advances (1)	$	392,448	$	185,120	$	35,207	$	122,006	$	50,115
Junior subordinated debentures		51,546		—		—		—		51,546
Lease obligations		13,026		2,434		3,735		2,630		4,227
Data processing and core systems		16,042		5,711		7,585		2,746		—
Other vendor contracts		1,756		1,201		555		—		—
Retirement benefit obligations (2)		29,515		1,793		2,021		595		25,106
Other Treasury tax & loan notes		225		225		—		—		—
Securities sold under repurchase agreements		25,000		—		—		25,000		—
Customer repurchase agreements		87,484		87,484		—		—		—
Total contractual cash obligations	$	617,042	$	283,968	$	49,103	$	152,977	$	130,994

	Amount of Commitment Expiring - By Period
Off-Balance Sheet			Less than		One to		Four to		After
Financial Instruments	Total		One Year		Three Years		Five Years		Five Years
Lines of credit	$	290,474	$	38,801	$	—	$	—	$	251,673
Standby letters of credit		8,261		8,261		—		—		—
Other loan commitments		248,885		218,372		23,128		6,659		726
Forward commitments to sell loans		23,180		23,180		—		—		—
Interest rate swaps — notional value (1) (3)		135,000		50,000		—		35,000		50,000
Interest rate caps — notional value (1) (4)		100,000		—		100,000		—		—
Total Commitments	$	805,800	$	338,614	$	123,128	$	41,659	$	302,399

(1)	The Company has hedged short-term borrowings.
(2)	Retirement benefit obligations include expected contributions to the Company’s pension plan, post retirement plan, and supplemental executive retirement plans. Expected contributions for the pension plan have been included only through plan year July 1, 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 retirement plans include obligations that are payable over the life of the participants.
(3)	Interest rate swaps on borrowings (Rockland Trust Company pays fixed, receives variable).
(4)	Interest rate cap on borrowings (4.00% 3-month LIBOR strike rate).

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

44

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 first quarter of 2006 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 Company expects that the federal judge presiding over the pending 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, will issue a final trial court decision, in the form of Findings Of Fact and Conclusions Of Law, sometime soon. 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 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 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. On March 29, 2006 the court indicated that it anticipates rendering a decision in approximately “three weeks.” 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 court’s decision in the CA case 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 us to be immaterial to our financial condition and results of operations.

45

Item 1A. Risk Factors

          Our 2005 Annual Report on form 10-K in Item 1A. “Risk Factors” includes a detailed discussion of our risk factors, which are incorporated herein by reference.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) — (b) Not applicable.

(c) The following table sets forth information with respect to any purchase made by or on behalf of Independent Bank Corp. or any “affiliated purchaser,” as defined in 204.10b-18(a)(3) under the Securities Exchange Act of 1934, of shares of Independent Bank Corp. common stock during the indicated periods:

	Issuer Purchases of Equity Securities
					Total number of shares		Maximum number of
			Weighted		purchased as part of		shares that may yet be
	Total number of		Average price paid		publicly announced plans		purchased under the
Period	shares purchased		per share		or programs		plans or programs (1)
January 1st - 31st, 2006		43,700	$	29.56		43,700		756,300
February 1st - 28th, 2006		81,500	$	29.42		81,500		674,800
March 1st - 31st, 2006		68,100	$	30.67		68,100		606,700
Total		193,300	$	29.90		193,300		606,700

(1) On January 19, 2006, the Company announced a common stock repurchase program to repurchase up to 800,000 shares. The Company placed no deadline on the repurchase program. There were no shares purchased other than through a publicly announced plan or program.

Item 3. Defaults Upon Senior Securities – None

Item 4. Submission of Matters to a Vote of Security Holders — None

Item 5. Other Information – None

Item 6. Exhibits

	Exhibits Index
No.	Exhibit
3.(i)	Restated Articles of Organization, as amended as of February 10, 2005, incorporated by reference to the Company’s Form 8-K filed on May 18, 2005.
3.(ii)	Amended and Restated Bylaws of the Company, as amended as of February 10, 2005, incorporated by reference to the Company’s Form 8-K filed on May 18, 2005.

46

	Exhibits Index
No.	Exhibit
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 to 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, 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.

47

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

48

	Exhibits Index
No.	Exhibit
	Sheahan pursuant to option agreements dated December 15, 2005. The form of option agreements used for these awards were filed as exhibits under the Form 8-K filed on December 20, 2005.
10.14	Independent Bank Corp. and Rockland Trust Company Executive Officer Performance Incentive Plan (the “2006 Executive Incentive Plan”) (Management contract under Item 601 (10)(iii)(A) is filed herewith. (PLEASE NOTE: Portions of the 2006 Executive Incentive Plan, and its exhibits and attachments, have been omitted pursuant to a request for confidential treatment sent on May 9, 2006 to the Securities and Exchange Commission. The locations where material has been omitted are indicated by the following notation: “{****}”. The entire 2006 Executive Incentive Plan, in unredacted form, has been filed separately with the Commission with the request for confidential treatment.)
10.15	Independent Bank Corp. 2006 Non-Employee Director Stock Plan incorporated by reference to Form S-8 filed by the Company on April 17, 2006.
10.16	Independent Bank Corp. Stock Option Agreement for Non-Employee Director is filed herewith.*
10.17	Independent Bank Corp. Restricted Stock Agreement for Non-Employee Director is filed herewith.*
31.1	Section 302 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.*
31.2	Section 302 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.*
32.1	Section 906 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.+
32.2	Section 906 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.+

*	Filed herewith
+	Furnished herewith

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: May 3, 2006	/s/ Christopher Oddleifson
	Christopher Oddleifson President and Chief Executive Officer
Date: May 3, 2006	/s/ Denis K. Sheahan
	Denis K. Sheahan Chief Financial Officer
	and Treasurer (Principal Financial and
	Principal Accounting Officer)

INDEPENDENT BANK CORP.
(registrant)

50

EX-10.14

Exhibit 10.14

“CONFIDENTIAL TREATMENT”

PLEASE NOTE: The only portions of this Plan for which the Applicant seeks confidential treatment are the financial performance criteria set forth in Schedule 3, Schedule 3A, and Schedule 3B, which have been omitted from the public filing and are indicated as follows: “{****}”.

INDEPENDENT BANK CORP.
AND ROCKLAND TRUST COMPANY
EXECUTIVE OFFICER PERFORMANCE INCENTIVE PLAN

Plan Approval, Plan Year, and Defined Terms

     This Independent Bank Corp. And Rockland Trust Company Executive Officer Performance Incentive Plan (the “Plan”) has been approved by the Board on February 16, 2006, based upon the recommendation of the Compensation Committee, for use in the 2006 calendar year.

Capitalized terms used in this Plan are defined as set forth below in Section 5.

SECTION 1: PURPOSE

     This Plan has been created to provide salaried Executive Officers of the Holding Company and the Bank who are not entitled to sales commissions with a cash incentive program designed to motivate them to perform to their full potential and thereby assist the Holding Company and the Bank in achieving financial success. The financial success of the Holding Company and the Bank shall be determined by comparing the financial results of the Holding Company with specific financial performance goals approved by the Board, based upon the recommendation of the Compensation Committee.

     A diagram depicting the process and computation used to determine a Participant’s Award, which is more fully described below, is attached hereto as Schedule 1.

SECTION 2: AWARDS

     Awards to Participants will be determined, and paid, as follows:

a. Participants. The persons eligible to receive Awards will consist of the Executive Officers. Any Executive Officers who are paid sales commissions are not eligible to participate in this Plan. Executive Officers will be eligible to participate in this Plan upon their first date of employment. Executive Officers with less than one year of service will receive a prorated award based on length of service. Newly elected Executive Officers will participate in this Plan upon election to Executive Officer status.

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“CONFIDENTIAL TREATMENT”

b. Award Determination. The Award for the CEO will be derived from the product of the CEO’s Target Award multiplied by the Bank Performance Factor. The Award for all Participants other than the CEO will be derived from the product of the Participant’s Target Award multiplied by the Bank Performance Adjustment Factor and multiplied by the Individual Performance Adjustment Factor. The Award payable to any Participant, therefore, may be less than or more than the Participant’s Target Award, depending upon whether, or the extent to which, Bank Performance Goals and — if applicable — individual Performance Goals and Objectives for the Plan Year have been achieved.

c. Target Awards. Target Awards will be established by the Board for each Participant. The tiers of percentages used to determine Target Awards for Executive Officers for the Plan Year is attached hereto as Schedule 2.

d. Bank Performance Goals. Bank Performance Goals will be established by the Board as soon as practical. The Bank Performance Goals for the Plan Year are attached hereto as Schedule 3. In general, Bank Performance Goals will measure the Holding Company’s financial performance and also, when appropriate, the achievement of specified strategic goals and/or operational objectives.

e. Bank Performance Adjustment Factor. The Bank Performance Adjustment Factor may be adjusted upward or downward within the parameters set forth on Schedule 3 based upon the performance of the Holding Company as to a given performance criteria set forth in the Bank Performance Goals. The range of the Bank Performance Adjustment Factor for the CEO with respect to the Earnings Per Share Measure is set forth on Schedule 3A. The range of the Bank Performance Adjustment Factor for all Participants other than the CEO with respect to the Earnings Per Share Measure is set forth on Schedule 3B. The range of the Bank Performance Adjustment Factor set forth on Schedule 3A and Schedule 3B, however, is subject to a 75% reduction if the threshold set forth on Schedule 3 for either the Return On Average Equity Measure or the Return On Average Assets Measure is not met.

f. Individual Performance Adjustment Factor. The Individual Performance Adjustment Factor will not be applicable to the CEO. For all Participants other than the CEO, the Individual Performance Adjustment Factor may be adjusted upward or downward within the parameters set forth on Schedule 4 based upon an evaluation of their achievement of individual Performance Goals and Objectives for the Plan Year.

g. Payment of Awards. Awards will be paid, in cash, as soon as practicable after the close of the Plan Year. No Award will be payable to any Participant who is not an Employee on the last day of the Plan Year except that if, during the last eight months of the year, the Participant takes normal retirement (as defined in the Bank’s principal retirement program), dies, or is involuntarily terminated other than for Cause, the Participant may be entitled to a prorated Award as and to the

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“CONFIDENTIAL TREATMENT”

extent determined by the Board. If a Participant is on disability for more than four months of the Plan Year, the Participant will be entitled to a prorated Award. If disability lasts four months or less, there will be no reduction in the amount of the Award. Participants who resign voluntarily after the end of the year, but before Award payments are made, will be eligible for an Award as and to the extent determined by the Board. Participants who leave after the end of the Plan Year with an overall rating of “1” or “2” on their Employee Performance Appraisal for the Plan Year will not be eligible for an Award. In the event of a Change of Control, the funds accrued by the Bank to the date of the Change of Control will, subject to the approval of the Board, be awarded to the Participants according to the terms of this Plan.

SECTION 3: ADMINISTRATION

     This Plan will be administered by the Board, based upon the recommendations of the Compensation Committee. All determinations regarding the achievement of any Bank Performance Goals, the achievement of a Participant’s individual Performance Goals and Objectives, and the amount of any individual Award will be made by the Board, in its sole and absolute discretion, based upon the recommendations of the Compensation Committee. Notwithstanding any other provision of this Plan to the contrary, the Board reserves the right, in its sole and absolute discretion, to: make adjustments to the Bank Performance Adjustment Factor within the parameters set forth on Schedule 3 based upon either one-time, non-recurring, or extraordinary events or any other reason that the Board deems appropriate; increase the Award for the CEO up to a maximum of 1.25 times the amount that would be called for by the product of the CEO’s Target Award multiplied by the Bank Performance Adjustment Factor; and, to reduce, including a reduction to zero, any Award to a Participant otherwise payable under this Plan.

a. Authority. The Board will have authority (i) to exercise all of the powers granted under this Plan, (ii) to construe, interpret and implement this Plan and any related document, (iii) to prescribe, amend and rescind rules relating to this Plan, (iv) to make all determinations necessary or advisable in administering this Plan, and (v) to correct any defect, supply any omission and reconcile any inconsistency in this Plan. The Board shall also have such other and further specified duties, powers, authority, and discretion as are elsewhere expressly set forth in this Plan or as may be conferred upon the Board by necessary implication.

b. Determinations Final. The actions and determinations of the Board on all matters relating to the Plan and any Awards will be final and conclusive, except to the extent otherwise provided by law.

c. Liability. The Board will not be liable for any action taken or determination made in good faith with respect to this Plan or any Award hereunder, and the Holding Company and the Bank will indemnify and hold the Board harmless with respect to any actions taken or decisions made in good faith under this Plan.

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“CONFIDENTIAL TREATMENT”

d. Awards. The Board will have authority to determine, among other things, the Executive Officers to whom, and the time or times at which, Awards will be made and the requisite conditions thereof.

SECTION 4: MISCELLANEOUS

a. Nonassignability. No Award will be assignable or transferable (including pursuant to a pledge or security interest) other than by will or by laws of descent and distribution.

b. Withholding Taxes. Whenever payments under this Plan are to be made, the Bank may withhold therefrom an amount sufficient to satisfy any applicable governmental withholding tax requirements related thereto.

c. Amendment or Termination of this Plan. The Board may from time to time suspend or discontinue this Plan or revise, amend, or terminate this Plan.

d. Non-Uniform Determinations. The Board’s determinations under this Plan need not be uniform and may be made selectively among persons who receive, or are eligible to receive, Awards under this Plan, whether or not such persons are similarly situated. Without limiting the generality of the foregoing, the Board will be entitled, among other things, to make non-uniform and selective determinations and to establish non-uniform and selective Target Awards. Any non-uniform determinations known at the time this Plan was approved are set forth on Schedule 5.

e. Other Payments or Awards. Nothing contained in this Plan will be deemed in any way to limit or restrict the Holding Company, the Bank, or the Board, from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.

f. Payments to Other Persons. If payments are legally required to be made to any person other than the person to whom any amount is available under this Plan, payments will be made accordingly. Any such payment will be a complete discharge of the liability of the Holding Company, the Bank, and/or the Board.

g. Unfunded Plan. This is an unfunded Plan. No provision of this Plan will require the Holding Company or the Bank, for the purpose of satisfying any obligations under this Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor will the Holding Company or the Bank maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants will have no rights under this Plan other than as unsecured general creditors of the Holding Company and the Bank, except that insofar as they may have become entitled to payment of

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“CONFIDENTIAL TREATMENT”

	additional compensation by performance of services, they will have the same rights as other employees under generally applicable law.
h.	Limits of Liability. Neither the Holding Company, the Bank, the Board, nor any other person participating in any determination of any question under this Plan, or in the interpretation, administration or application of this Plan, will have any liability to any party for any action taken or not taken in good faith under this Plan.

i. Rights of Employees. Nothing contained in this Plan will confer upon any Employee or Participant any right to continue in the employ or other service of the Holding Company or the Bank or constitute any contract or limit in any way the right of the Holding Company or the Bank to change such person’s compensation or other benefits or to terminate the employment or other service of such person with or without Cause.

j. Section Headings. The section headings contained herein are for the purposes of convenience only, and in the event of any conflict, the text of this Plan, rather than the section headings, will control.

k. Invalidity. If any term or provision contained herein will to any extent be invalid or unenforceable, such term or provision will be reformed so that it is valid, and such invalidity or unenforceability will not affect any other provision or part hereof.

l. Applicable Law. The Plan will be governed by the laws of the Commonwealth of Massachusetts without regard to the conflict of law principles thereof.

SECTION 5: DEFINITIONS

	The following terms, as used herein, will have the meaning specified:
a.	“Award” means a cash incentive payment made to a Participant pursuant to this Plan.
b.	“Bank” means Rockland Trust Company.
c.	“Bank Performance Goals” means the criteria set forth on Schedule 3 that have been selected to measure the Holding Company’s financial performance and also, when appropriate, the achievement of specified strategic goals and/or operational objectives.
d.	“Bank Performance Adjustment Factor” means a factor determined by the level of performance against the criteria set forth in the Bank Performance Goals.

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“CONFIDENTIAL TREATMENT”

e. “Board” means the Board of Directors of the Holding Company, as it may be comprised from time to time.

f. “Cause” means (i) a felony conviction of a Participant; (ii) the commission by a participant of an act of fraud or embezzlement against the Bank or the Holding Company; (iii) willful misconduct or gross negligence materially detrimental to the Holding Company or the Bank; (iv) the Participant’s continued failure to implement reasonable requests or directions after thirty (30) days written notice to the Participant; (v) the Participant’s wrongful dissemination or use of confidential or proprietary information; (vi) the intentional and/or habitual neglect by the Participant of his or her duties to the Holding Company or the Bank; or (vii) a breach of the Code of Ethics for the Holding Company and the Bank; (viii) any other reasons consistent with the Holding Company’s and/or the Bank’s policies and procedures regarding dismissals as they are adopted and implemented from time to time.

g. “Change of Control” means that, prior to any payout under this Plan (a) any “person” (as such term is defined in Section 13 (d) of the Securities Exchange Act of 1934, as amended) is or becomes the beneficial owner, directly or indirectly, of either (i) a majority of the outstanding common stock of the Holding Company or the Bank, or (ii) securities of either the Holding Company or the Bank representing a majority of the combined voting power of the then outstanding voting securities of either the Holding Company or the Bank, respectively, or (b) during any period of two consecutive years following the date of this Plan, individuals who at the beginning of any such two year period constitute the Board of Directors of the Holding Company cease, at any time after the beginning of such period, for any reason to constitute a majority of the Board, unless the election of each new director was nominated or approved by at least two thirds of the directors of the Board then still in office who were either directors at the beginning of such two year period or whose election or whose nomination for election was previously so approved.

h. “CEO” shall mean the Chief Executive Officer of the Holding Company and of the Bank.

i. “Compensation Committee” means the Joint Compensation Committee of the Boards of Directors of the Holding Company and the Bank.

j. “Executive Officer” means the CEO and any other person who has been identified as an Executive Officer of the Holding Company and/or the Bank in filings with the Securities Exchange Commission.

k. “Holding Company” means Independent Bank Corp.

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“CONFIDENTIAL TREATMENT”

l. “Individual Performance Adjustment Factor” means a factor (or factors) that will, when multiplied by a Participant’s Target Award and the Bank Performance Adjustment Factor, determine the amount of a Participant’s Award.

m. “Participant” means an Executive Officer selected to participate in this Plan whose cash compensation (other than salary) is not superseded by an individual employment agreement or other incentive plan. If any employee is governed by an individual employment agreement, such employee may be a Participant in the Plan to the extent the terms of such agreement does not supersede this Plan. Employees who are paid sales commissions are not eligible to participate in this Plan.

n. “Plan” means this Independent Bank Corp. And Rockland Trust Company Executive Officer Performance Incentive Plan.

o. “Plan Year” shall mean the calendar year for which this Plan has been approved.

p. “Target Award” means the Participant’s base salary on November 1^st of the Plan Year, multiplied by the target percentage established for that Participant.

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“CONFIDENTIAL TREATMENT”
SCHEDULE 1

The Individual Performance Adjustment Factor is not applicable to the CEO.

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“CONFIDENTIAL TREATMENT”

SCHEDULE 2

PERCENTAGE TIERS USED TO DETERMINE
TARGET AWARDS FOR EXECUTIVE OFFICERS

President/CEO	45	%
EVP – Commercial Loan	30	%
EVP –Retail & Marketing	30	%
Treasurer/Chief Financial Officer	30	%
Director Of Human Resources	20	%
General Counsel	20	%
Managing. Dir Residential Mortgage	20	%
Chief Technology & Operations Officer	20	%

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“CONFIDENTIAL TREATMENT”

SCHEDULE 3

BANK PERFORMANCE GOALS AND

BANK PERFORMANCE ADJUSTMENT FACTORS

		Bank Performance Goals & Bank
		Performance Adjustment Factors
Measure		Threshold			Target			Maximum
Holding Company Earnings	Performance Level		{****}			{****}			{****}
Per Share According To	Adjustment: All but CEO		50	%		100	%		125	%
Generally Accepted Accounting Principles	Adjustment: CEO		25	%		100	%		200	%
Holding Company Return On	Performance Level		{****}		Not Applicable
Average Equity*	Adjustment		75	%
Holding Company Return On	Performance Level		{****}
Average Assets*	Adjustment		75	%

Consistent with this Plan, the Board reserves the right to adjust
any Awards by considering factors including – but not limited to –
compliance and credit quality

^* The greatest adjustment is a reduction to 75% of the Bank Performance if one or both of the Thresholds is missed.

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“CONFIDENTIAL TREATMENT”

SCHEDULE 3A

BANK PERFORMANCE ADJUSTMENT FACTORS
FOR CEO AT SPECIFIED LEVELS OF EPS ATTAINMENT

			CEO
			Bank
	EPS		Performance			Increment
Threshold		{****}		25	%		4.16	%
		{****}		29	%		4.16	%
		{****}		38	%		4.16	%
		{****}		46	%		4.16	%
		{****}		54	%		4.16	%
		{****}		62	%		4.695	%
		{****}		72	%		4.695	%
		{****}		81	%		4.695	%
		{****}		91	%		4.695	%
		{****}		95	%		4.695	%
Target		{****}		100	%		0.0	%
		{****}		114	%		14	%
		{****}		129	%		14	%
		{****}		143	%		14	%
		{****}		157	%		14	%
		{****}		172	%		14	%
		{****}		186	%		14	%
Maximum		{****}		200	%		14	%

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“CONFIDENTIAL TREATMENT”

SCHEDULE 3B

BANK PERFORMANCE ADJUSTMENT FACTORS
FOR PARTICIPANTS OTHER THAN CEO
AT SPECIFIED LEVELS OF EPS ATTAINMENT

Threshold	{****}	50.0	%
	{****}	52.8	%
	{****}	58.3	%
	{****}	63.9	%
	{****}	69.4	%
	{****}	75.0	%
	{****}	81.2	%
	{****}	87.5	%
	{****}	93.7	%
	{****}	96.9	%
Target	{****}	100.0	%
	{****}	103.6	%
	{****}	107.1	%
	{****}	110.7	%
	{****}	114.3	%
	{****}	117.9	%
	{****}	121.4	%
Maximum	{****}	125.0	%

Page 12 of 14

“CONFIDENTIAL TREATMENT”

SCHEDULE 4

INDIVIDUAL PERFORMANCE ADJUSTMENT FACTORS

	Individual Performance
Individual Goals and Objectives for Plan Year	Adjustment Factor
Does Not Meet Most		0.0
Meets Most	0.6 – 0.8
Fully Meets All or all the most important	0.8 – 1.05
Exceeds Most or most meaningful	1.05 – 1.30
Exceeds All or performs beyond objectives	1.30 – 1.70

An Executive Officer’s achievement of individual performance Goals and Objectives will be measured at his/her broadest level of individual responsibility, based upon the “Goals for Next Year” section of his/her performance appraisal for the Plan Year. The evaluation as to achievement of individual performance Goals and Objectives will be based on the Board’s judgment of the Executive Officer’s performance on results goals only, not overall performance rating. The Board may adjust an Executive Officer’s entire Award downward if non-goals aspects of performance (e.g., values) assessed with the Bank’s Employee Performance Appraisal are considered less than acceptable. Awards, however, may not be increased for performance at or better than acceptable levels on non-goals aspects of performance.

Page 13 of 14

SCHEDULE 5

NON-UNIFORM DETERMINATIONS FOR 2006

No non-uniform determinations have yet been made for 2006

Page 14 of 14

EX-10.16

Exhibit 10.16

INDEPENDENT BANK CORP. STOCK OPTION AGREEMENT
FOR NON-EMPLOYEE DIRECTOR

Notification and Acceptance of Stock Option

     The Independent Bank Corp. 2006 Non-Employee Director Stock Plan (the “Plan”) permits the granting of Stock Options to directors who are not also employees of Independent Bank Corp. (the “Company”). The Company is pleased to grant you the following Stock Option in accordance with the Plan:

Effective Date of Stock Option Agreement	April 18, 2006
Non-Employee Director Name and Residential Address:	«Name___Address»
Number of shares of common stock that may be purchased under this Stock Option:	5,000 shares of the Company’s common stock, unless adjusted in accordance with the Option Agreement.
Type of Stock Option	Non-Qualified Stock Option
Purchase Price	$32.23 per share
Term	Seven years from date of grant, unless earlier terminated in accordance with this Option Agreement.
Vesting Schedule	One-third of the Options are immediately vested and fully exercisable, one-third of the Options shall be vested and fully exercisable on January 2, 2007 and one-third of the Options shall be vested and fully exercisable on January 2, 2008, unless earlier accelerated in accordance with this Option Agreement.

This Stock Option is subject to the terms and conditions of the Stock Option Agreement set forth below (the “Agreement”). By signing you both accept this Stock Option and acknowledge that you have read, understand, and accept the terms and conditions of the Agreement set forth below.

     Signed as a Massachusetts instrument under seal as of the Effective Date:

INDEPENDENT BANK CORP.	NON-EMPLOYEE DIRECTOR
Christopher Oddleifson	«Name»
President and Chief Executive Officer

Stock Option Agreement

     The Company agrees to grant to the non-employee director named above (the “Non-Employee Director”) the right and option (the “Option”) to purchase all or any part of the number of shares of its common stock, $.01 par value (hereinafter called the “Common Stock”) for the price and during the period set forth above, subject to the terms and conditions of the Plan and this Agreement, as follows:

     Section 1. Investment Purpose. The Non-Employee Director agrees and acknowledges that this Option has been acquired for the purpose of investment and not with a view to or for sale in connection with any distribution thereof.

     Section 2. Payment of Purchase Price.

          (a) Method of Payment. Payment of the purchase price for shares purchased upon exercise of this Option shall be made (i) by delivery to the Company of cash or check to the order of the Company in an amount equal to the purchase price of shares, (ii) by delivery to the Company of shares of Common Stock already owned by the Non-Employee Director having a fair market value as of the date of exercise equal to the aggregate purchase price of the shares as to which this Option shall be exercised, or (iii) any combination of such methods of payment.

          (b) Valuation of Shares Tendered in Payment of Purchase Price. For purposes hereof, the fair market value of any shares of Common Stock which may be delivered to the Company in exercise of this Option shall be determined in accordance with the terms of the Plan.

          (c) Delivery of Shares Tendered in Payment of Purchase Price. If the Non-Employee Director exercises this Option by delivery of shares of Common Stock, the certificate or certificates representing the shares of Common Stock to be delivered shall be duly executed for transfer in blank by the Non-Employee Director or shall be accompanied by a stock power duly executed in blank suitable for purposes of transferring such shares to the Company. Fractional shares of Common Stock or a written authorization which would result in the issuance of fractional shares of Common Stock will not be accepted in payment of the purchase price of shares acquired upon exercise of this Option.

          (d) Restrictions on Use of Common Stock. Notwithstanding anything to the contrary contained in this Agreement, no shares of Common Stock may be tendered in payment of the purchase price of shares purchased upon exercise of this Option if the shares so tendered were acquired within six months prior to the date of such tender (for purposes hereof, shares of Common Stock shall be deemed to have been held by an Non-Employee Director for six months if such shares were issued to such Non-Employee Director upon exercise of an Option granted to the Non-Employee Director by the Company and the period from the date of the grant of the Option pursuant to which such shares were acquired until the delivery date of such shares of Common Stock pursuant hereto is at least six months).

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     Section 3. Non-transferability. Notwithstanding anything contained in the Plan to the contrary, the Option shall not be transferable otherwise than (i) pursuant to a qualified domestic relations order (as such term is defined in Rule 16b-3), (ii) by will or the laws of intestacy or (iii) to any member of the Non-Employee Director’s Family (as such term is defined in the Plan), and the Option may be exercised, during the lifetime of the Non-Employee Director, only by him/her. More particularly (but without limiting the generality of the foregoing), the Option may not be assigned, transferred (except as provided above), pledged, or hypothecated in any way, shall not be assignable by operation of law and shall not be subject to execution, attachment, or similar process. Any attempted assignment, transfer, pledge, hypothecation, or other disposition of the Option contrary to the provisions hereof, and the levy of any execution, attachment or similar process upon the Option shall be null and void and without effect.

     Section 4. Termination of Non-Employee Director Status.

          (a) General. If the Non-Employee Director ceases to be a director of the Company or Rockland Trust Company (“Rockland”) for any reason other than removal from the Board for cause, any outstanding Option shall be exercisable by the Non-Employee Director (whether or not exercisable by the Non-Employee Director immediately prior to ceasing to be a director of the Company or Rockland) at any time prior to the expiration date of the Option or within three years after the date the Non-Employee Director ceases to be a director of the Company or Rockland, whichever is the shorter period. Following the death or permanent and total disability (as such term is defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”) or any successor thereto) of the Non-Employee Director during service as a director of the Company or Rockland, any outstanding Option held by the Non-Employee Director at the time of death or permanent and total disability (whether or not exercisable by the Non-Employee Director immediately prior to death or permanent and total disability) shall be exercisable by the person entitled to do so under the Non-Employee Director’s will or, if the Non-Employee Director shall fail to make testamentary disposition of the Option, shall die intestate or shall become permanently and totally disabled, by the Non-Employee Director’s legal representative at any time prior to the expiration date of the Option or within three years after the Non-Employee Director’s death or permanent and total disability, whichever is the shorter period.

          (b) Removal for Cause. If during the Non-Employee Director’s term of office as a director of the Company or Rockland the Non-Employee Director is removed from the Board for cause, any outstanding Option held by the Non-Employee Director which is not exercisable by the Non-Employee Director immediately prior to such removal shall terminate as of the date of such removal, and any outstanding Option held by the Non-Employee Director which is exercisable by the Non-Employee Director immediately prior to such removal shall be exercisable at any time prior to the expiration date of the Option or within three months after the date of such removal, whichever is the shorter period. If the Non-Employee Director dies or becomes permanently and totally disabled, during the period when any outstanding Options remain exercisable after ceasing to be director of the Company due to a removal for cause, any outstanding Option shall be exercisable by the person entitled to do so under the will of the Non-Employee Director or, if the Non-Employee Director shall fail to make testamentary disposition

3

of the Option, shall die intestate or shall become permanently and totally disabled, by the Non-Employee Director’s legal representative at any time prior to the expiration date of the Option or within one year after the Non-Employee Director’s date of death or permanent and total disability, whichever is the shorter period.

     Section 5. Change of Control.

          (a) In the event of a “Change of Control” or a liquidation of the Company, Options shall immediately vest and shall become fully exercisable and shall remain exercisable for a period of three (3) months after such Change of Control.

          (b) A “Change of Control” shall be deemed to have occurred if (i) any “person” (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) is or becomes the beneficial owner, directly or indirectly, of either (x) a majority of the outstanding Common Stock or the common stock of Rockland, or (y) securities of either the Company or Rockland representing a majority of the combined voting power of the then outstanding voting securities of either the Company or Rockland, respectively; or (ii) the Company or Rockland consolidates or merges with any other person or sells all or substantially all of its assets to a person not at such time owning a majority of the outstanding Common Stock or (iii) individuals who currently constitute the Board cease for any reason to constitute a majority of the Board, unless the election of each new director was nominated or approved by the shareholders of the Company at their regularly scheduled annual meeting or was approved by at least two thirds of the directors of the Board currently in office.

     Section 6. Adjustments. If, through or as a result of any merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar transaction, (i) the outstanding shares of Common Stock are increased, decreased or exchanged for a different number or kind of shares or other securities of the Company, or (ii) additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Common Stock or other securities, an appropriate and proportionate adjustment may be made in (x) the maximum number and kind of shares reserved for issuance under the Plan, (y) the number and kind of shares or other securities subject to any then outstanding Options under the Plan, and (z) the price for each share subject to any then outstanding Options under the Plan, without changing the aggregate purchase price as to which such Options remain exercisable. Any adjustments or substitutions under this Section 6 shall be made by the Board, whose determination as to such adjustments or substitutions, if any, shall be final, binding and conclusive. No fractional shares will be issued under the Plan on account of any such adjustments or substitutions.

     Section 7. Method of Exercising Option. Subject to the terms and conditions of this Agreement, the Option may be exercised by written notice to the Company, at 288 Union Street, Rockland, Massachusetts 02370. Such notice shall state the election to exercise the Option and the number of shares in respect to which it is being exercised, and shall be signed by the person or persons so exercising the Option. At that time, this Agreement shall be turned in to the

4

Company for action by the Company to reduce the number of shares to which it applies. Such notice shall either: (a) be accompanied by payment of the full purchase price of such shares, in which event the Company shall deliver a certificate or certificates representing such shares as soon as practicable after the notice shall be received or (b) fix a date (which shall be a business day not less than five nor more than ten business days from the date such notice shall be received by the Company) for the payment of the full purchase price of such shares against delivery of a certificate or certificates representing such shares. Payment of such purchase price shall, in either case, be made in the manner provided above. The certificate or certificates for the shares as to which Option shall have been so exercised shall be registered in the name of the person or persons so exercising the Option, (or, if the Option shall be exercised by the Non-Employee Director and if the Non-Employee Director and another person jointly, with the right of survivorship) and shall be delivered as provided above to or upon the written order of the person or persons exercising the Option. In the event the Option shall be exercised, pursuant to this Agreement, by any person or persons other than the Non-Employee Director, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise the Option.

     Section 8. General. The Company shall at all times during the term of the Option reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of this Agreement, shall pay all original issue taxes with respect to the issue of shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith, and will from time to time use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Company, shall be applicable thereof.

     Section 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.

5

EX-10.17

Exhibit 10.17

INDEPENDENT BANK CORP. RESTRICTED STOCK AGREEMENT
FOR NON-EMPLOYEE DIRECTOR

Notification and Acceptance of Restricted Stock Award

     The Independent Bank Corp. 2006 Non-Employee Director Stock Plan (the “Plan”) permits the granting of Restricted Stock Awards to directors who are not also employees of Independent Bank Corp. (the “Company”). The Company is pleased to grant you the following Restricted Stock Award in accordance with the Plan:

Effective Date of Restricted Stock Agreement:	April 18, 2006
Non-Employee Director Name and Residential Address:	«Name___Address»
Number of shares of common stock granted in this Restricted Stock Award:	400 shares of the Company’s common stock.
Vesting Period and Schedule:	The shares granted pursuant to this Agreement will vest in five years on April 18, 2011, or such earlier date upon which you cease to be a Director of the Company or Rockland Trust Company for any reason other than removal from the Board for cause.

This Restricted Stock Award is subject to the terms and conditions of the Restricted Stock Agreement set forth below (the “Agreement”). By signing you both accept this Restricted Stock Award and acknowledge that you have read, understand, and accept the terms and conditions of the Agreement set forth below.

     Signed as a Massachusetts instrument under seal as of the Effective Date:

INDEPENDENT BANK CORP.	NON-EMPLOYEE DIRECTOR
Christopher Oddleifson	«Name»
President and Chief Executive Officer Its duly authorized representative

Restricted Stock Agreement

     The Company agrees to issue to the non-employee director named above (the “Non-Employee Director”) the number of shares of the Company’s common stock (collectively, the “Restricted Shares”) set forth above subject to the terms and conditions of the Plan and this Agreement, as follows:

     Section 1. Issuance of Restricted Shares to Non-Employee Director.

          (a) Consideration. The Non-Employee Director shall not be required to pay any consideration to the Company for the Restricted Shares.

          (b) Issuance of Shares. After receiving a signed original of this Agreement back from the Non-Employee Director the Company shall act with reasonable speed to either cause to be issued a certificate or certificates for the Restricted Shares, which certificate or certificates shall be registered in the name of the Non-Employee Director (or in the names of Non-Employee Director and the Non-Employee Director’s spouse as community property or as joint tenants with right of survivorship), or shall direct the Company’s transfer agent to make entries in its records for the Restricted Shares that are equivalent to issuance of a certificate or certificates to the Non-Employee Director. The Company shall cause the Restricted Shares to be deposited in escrow in accordance with this Agreement. The issuance of the Restricted Shares shall occur at the offices of the Company or at such other place and time as the parties hereto may agree.

          (c) Plan and Defined Terms. The issuance of the Restricted Shares pursuant to this Agreement is in all respects subject to the terms, conditions, and definitions of the Plan, all of which are hereby incorporated herein by reference. The Non-Employee Director accepts the Restricted Shares subject to all the terms and provisions of the Plan and agrees that all decisions under and interpretations of the Plan by the Board of Directors (or a Committee of the Board of Directors, if applicable) shall be final, binding, and conclusive upon the Non-Employee Director and his or her permitted heirs, executors, administrators, successors and assigns. Capitalized defined terms used herein shall have the meanings assigned to them in the Plan, unless such terms are otherwise specifically defined in this Agreement.

Section 2. Vesting Period and Acceleration

          (a) Vesting Period. The Restricted Shares shall vest at the end of the following period: the lesser of (i) the fifth anniversary of the date on which the Restricted Shares were granted or (ii) the date on which the Non-Employee Director ceases to be a director of the Company or Rockland Trust Company (“Rockland”) for any reason other than removal from the Board for cause (the “Vesting Period”)

          (b) Accelerated Vesting. If during the Vesting Period the Non-Employee Director ceases to be a director of the Company or Rockland for any reason other than removal from the Board for cause, the Restricted Shares shall immediately and fully vest in the Non-Employee Director or his/her heirs.

2

          (c) Accelerated Vesting In The Event of A Change In Control. The Restricted Shares shall immediately and fully vest in the event of a “Change of Control” or a liquidation of the Company during the Vesting Period. A “Change of Control” shall be deemed to have occurred if (i) any “person” (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) is or becomes the beneficial owner, directly or indirectly, of either (x) a majority of the outstanding common stock of the Company or Rockland, or (y) securities of either the Company or Rockland representing a majority of the combined voting power of the then outstanding voting securities of either the Company or Rockland, respectively; or (ii) the Company or Rockland consolidates or merges with any other person or sells all or substantially all of its assets to a person not at such time owning a majority of the outstanding voting stock of the Company or (iii) individuals who currently constitute the Board cease for any reason to constitute a majority of the Board, unless the election of each new director was nominated or approved by the shareholders of the Company at their regularly scheduled annual meeting or was approved by at least two thirds of the directors of the Board currently in office.

          (d) Termination of Vesting Upon Removal from the Board for Cause. If the Non-Employee Director is removed from the Board for cause during the Vesting Period, the Company may exercise its Repurchase Right (as such term is defined below) during the ninety (90) day period following the date on which the Non-Employee Director was removed from the Board for cause with respect to any Restricted Shares that have not yet vested.

     Section 3. No Transfer or Assignment of Restricted Shares. The Non-Employee Director shall not, without the prior written consent of the Company (which may be withheld in the Company’s sole and absolute discretion), sell, dispose of, assign, encumber, pledge, gift or otherwise transfer any of the Restricted Shares prior to vesting, other than (a) pursuant to a qualified domestic relations order (as defined in SEC Rule 16b-3), (b) by will or the laws of intestacy or (c) to any member of the Non-Employee Director’s Family (as such term is defined in the Plan).

     Section 4. Repurchase Right.

          (a) Scope of Repurchase Right. All of the Restricted Shares shall, prior to the time when they have vested, be subject to repurchase by the Company pursuant to this Agreement (the “Repurchase Right”).

          (b) Removal from the Board for Cause as Condition Precedent To Exercise of Repurchase Right. The Company may exercise its Repurchase Right with respect to any Restricted Shares that have not yet vested only during the 90-day period following the date on which the Non-Employee Director was removed from the Board for cause.

          (c) Lapse of Repurchase Right. The Repurchase Right shall exist only with respect to the unvested Restricted Shares and shall lapse in accordance with the vesting schedule.

3

          (d) Repurchase Price. If the Non-Employee Director is removed from the Board for cause, the Company may repurchase from the Non-Employee Director any of the unvested Restricted Shares for the aggregate price of One Dollar ($1.00) (the “Repurchase Price”).

          (e) Exercise of Repurchase Right. The Company may exercise its Repurchase Right only by timely written notice to the Non-Employee Director. The notice shall set forth the date on which the repurchase is to be effected, which shall not be more than thirty (30) days after the date of the notice. The certificate(s) representing the Restricted Shares to be repurchased shall, prior to the close of business on the date specified for the repurchase, be delivered to the Company properly endorsed for transfer free and clear of any encumbrances, restrictions, liens or security interests thereon, except for the restrictions set forth in this Agreement and under applicable securities laws. The Company shall, concurrently with the receipt of such certificate(s), pay to the Non-Employee Director the Repurchase Price. Payment shall be made in cash or cash equivalents or by canceling indebtedness of the Non-Employee Director to the Company. The Repurchase Right shall terminate with respect to any Restricted Shares for which it has not been timely exercised.

          (f) Escrow. Upon issuance, the certificate(s) for the Restricted Shares shall be deposited by the Non-Employee Director with the Company, the Company’s stock transfer agent, and/or the Company’s other agent, together with a stock power endorsed in blank to be held in escrow in accordance with the provisions of this Agreement for the Vesting Period. Alternatively, if actual certificates for the Restricted Shares are not issued the Company shall direct its stock transfer agent to make entries in its records for the Restricted Shares to reflect that they are being held in escrow for the Vesting Period All regular cash dividends on Restricted Shares shall be paid directly to the Non-Employee Director and shall not be held in escrow during the Vesting Period. Unvested Restricted Shares, however, may not be enrolled in the Company’s Automatic Dividend Reinvestment and Common Stock Purchase Plan. The Non-Employee Director may exercise all voting rights on the Restricted Shares while they are held in escrow during the Vesting Period. The Restricted Shares shall be (i) surrendered to the Company for repurchase and cancellation upon the Company’s timely exercise of its Repurchase Right or (ii) released to the Non-Employee Director once the Vesting Period has lapsed and they are no longer Restricted Shares.

     Section 5. Miscellaneous Provisions.

          (a) No Retention Rights. Nothing in this Agreement or in the Plan shall confer upon the Non-Employee Director any right to continue to serve as a director of the Company or any of its direct or indirect subsidiaries. Nothing in this Agreement or in the Plan shall interfere with or otherwise restrict the rights of the Company or any of its subsidiaries to remove the Non-Employee Director from the Board of the Company or any of its direct or indirect subsidiaries.

          (b) Notice. Any notice required by the terms of this Agreement shall be given in writing and shall be deemed effective upon (i) personal delivery, (ii) deposit with a nationally recognized overnight courier or (iii) deposit with the United States Postal Service, by registered

4

or certified mail, with postage and fees prepaid. Notice shall be addressed to the Company at 288 Union Street, Rockland, Massachusetts 02370 or at its then principal executive office address if different, with simultaneous copies to the President and General Counsel of the Company, and to the Non-Employee Director at the residential address set forth above or to the residential address that the Non-Employee Director has most recently provided to the Company in writing if different.

          (c) Entire Agreement. This Agreement, together with the Plan, constitutes the entire understanding between the parties hereto with regard to the subject matter hereof, and supersedes any other agreements, representations, or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof.

          (d) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts without regard to its choice of law principles.

          (e) Termination of Rights as Stockholder. If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Restricted Shares to be repurchased, then after such time the Non-Employee Director shall no longer have any rights as a holder of such Restricted Shares (other than the right to receive payment of such consideration in accordance with this Agreement). Any such Restricted Shares shall be deemed to have been purchased in accordance with the applicable provisions of this Agreement, whether or not the actual certificate(s) for the Restricted Shares have been delivered.

          (f) Remedies. The Non-Employee Director agrees that the Company will be irreparably damaged if this Agreement is not specifically enforced. Upon a breach or threatened breach of the terms, covenants, or conditions of this Agreement by the Non-Employee Director, the Company shall, in addition to all other remedies available, be entitled to a temporary or permanent injunction or other equitable relief against the Non-Employee Director, without showing any actual damage, and/or a decree for specific enforcement in accordance with the provisions hereof.

          (g) Severability. If any provision of this Agreement is found unenforceable or illegal, the remainder of this Agreement shall remain in full force and effect.

          (h) Amendments; Waivers. This Agreement may only be amended or modified in a writing signed by the Non-Employee Director and the Company. No party shall be deemed to waive any rights hereunder unless the waiver is in writing and signed by the party waiving rights. A waiver in writing on or more occasions shall not be deemed to be a waiver for any future occasions.

          (i) Counterparts. This Agreement may be executed in counterparts, including counterparts by telecopier, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument.

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          (j) Section 83(b) Tax Election. The acquisition of the Restricted Shares may have adverse tax consequences for the Non-Employee Director that may be avoided or mitigated by the Non-Employee Director’s filing of an election under Section 83(b) of the Code. Under Section 83 of the Code, the fair market value of the Restricted Shares on the date that any Forfeiture Restrictions applicable to the Restricted Shares lapse will be reportable as ordinary income of the Non-Employee Director. The term “Forfeiture Restrictions” means, for purposes of this Agreement, either the lapse of the Vesting Period and the Company’s exercise of its Repurchase Right. The Non-Employee Director may elect under Section 83(b) of the Code to be taxed as of the Effective Date, rather than when and as such Restricted Shares cease to be subject to Forfeiture Restrictions. A Section 83(b) election must be filed with the Internal Revenue Service within thirty (30) days after the Effective Date.

     The form for making a Section 83(b) election is attached hereto. The Non-Employee Director understands that a failure to make a Section 83(b) election within the thirty (30) day period will result in the recognition of ordinary income when the Forfeiture Restrictions lapse.

     The Non-Employee Director should consult with his or her tax advisor to determine the tax consequences of acquiring the Restricted Shares and the potential advantages and potential disadvantages of filing the Section 83(b) election. The Non-Employee Director acknowledges that it is his or her sole responsibility, and not that of the Company or any of its subsidiaries, to file a timely election under Section 83(b).

6

SECTION 83(b) ELECTION

     This statement is being made under Section 83(b) of the Internal Revenue Code of 1986, as amended, pursuant to Treasury Regulations Section 1.83-2.

(1)	The taxpayer is:
	Name: Address: Taxpayer Ident. No.:
(2)	The property with respect to which the election is being made is                     shares of the common stock of Independent Bank Corp.
(3)	The property was transferred to the taxpayer on                      .
(4)	The taxable year for which the election is being made is the calendar year                     .
(5)	The property is subject to a repurchase right pursuant to which the issuer has the right to acquire the property if for any reason taxpayer’s service with the issuer terminates. The issuer’s repurchase right will lapse over a five year period.
(6)	The fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is $                      per share.
(7)	The amount paid for the property is $0 per share.
(8)	A copy of this statement was furnished to Independent Bank Corp. for whom taxpayer rendered the services underlying the transfer of property.
(9)	This statement is executed on                      .

  Spouse (if any)   Taxpayer

This election must be filed with the Internal Revenue Service Center with which taxpayer files his or her Federal income tax returns and must be made within 30 days after the date of the purchase. This filing should be made by registered or certified mail, return receipt requested. Non-Employee Director must furnish a copy of the completed form to the Company. The Non-Employee Director must retain two copies of the completed form for filing with his or her Federal and state tax returns for the current tax year and an additional copy for his or her records.

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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;

(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: May 3, 2006

/s/Christopher Oddleifson

Christopher Oddleifson
Chief Executive Officer

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

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: May 3, 2006

/s/Denis K. Sheahan

Denis K. Sheahan
Chief Financial Officer

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 March 31, 2006, 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 3^rd day of May 2006.

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.

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 March 31, 2006 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 3^rd day of May 2006.

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.