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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

For the Fiscal year ended December 31, 2002

or

For the transition period from                                      to                                     

Commission file number 1-9047

INDEPENDENT BANK CORP.
(Exact name of registrant as specified in its charter)

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

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to section 12(g) of the Act:

        Indicate by check mark whether, the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ý        No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

        As of January 31, 2002, the aggregate market value of the 12,471,452 shares of Common Stock of the Registrant issued and outstanding on such date, excluding 2,017,401 shares held by all directors and executive officers of the Registrant as group, was $280,981,803. This figure is based on the closing sale price of $22.53 per share on January 31, 2002, as reported in The Wall Street Journal on February 1, 2002.

        Number of shares of Common Stock outstanding as of January 31, 2003: 14,488,853

DOCUMENTS INCORPORATED BY REFERENCE

        List hereunder the following documents incorporated by reference and the Part of Form 10-K into which the document is incorporated:

(1)

Portions of the Registrant's Annual Report to Stockholders for the fiscal year ended December 31, 2002 are incorporated into Part II, Items 5-8 of this Form 10-K.

(2)

Portions of the Registrant's definitive proxy statement for its 2003 Annual Meeting of Stockholders are incorporated into Part III, Items 10-13 of this Form 10-K.

INDEPENDENT BANK CORP.
2002 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

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Forward-Looking Information

        This report on Form 10-K may contain certain forward-looking statements, including without limitation, statements regarding (i) the level of allowance for loan loss, (ii) the rate of delinquencies and amounts of charge-offs and (iii) the rates of loan growth. Moreover, the Company may from time to time, in both written reports and oral statements by Company management, express its expectations regarding future performance of the Company. These forward-looking statements are inherently uncertain and actual results may differ from Company expectations. The following factors which, among others, could impact current and future performance include but are not limited to: (i) adverse changes in asset quality and resulting credit risk-related losses and expenses; (ii) adverse changes in the economy of the New England region, (iii) adverse changes in the local real estate market, as most of the Company's loans are concentrated in southeastern Massachusetts and a substantial portion of these loans have real estate as collateral; (iv) fluctuations in market rates and prices which can negatively affect the net interest margin, asset valuations and expense expectations; and (v) changes in regulatory requirements of federal and state agencies applicable to banks and bank holding companies, such as the Company and Rockland, which could have a materially adverse effect on the Company's future operating results. When relying on forward- looking statements to make decisions with respect to the Company, investors and others are cautioned to consider these and other risks and uncertainties.

PART I.

Item 1.    Business

General

        Independent Bank Corp. (the "Company") is a state chartered, federally registered bank holding company headquartered in Rockland, Massachusetts and was incorporated in 1992. The Company is the sole stockholder of Rockland Trust Company ("Rockland" or the "Bank"), a Massachusetts trust company chartered in 1907. The Company is a community-oriented commercial bank. The community banking business, the Company's only reportable operating segment, consists of commercial banking, retail banking and investment management services and is managed as a single strategic unit. The community banking business derives its revenues from a wide range of banking services, including lending activities, acceptance of demand, savings and time deposits, trust and investment management services, and mortgage banking income. Rockland offers a full range of community banking services through its network of 52 banking offices (including 49 full service branches), seven commercial lending centers, three investment management offices and three mortgage banking centers, all of which are located in the Plymouth, Norfolk, Barnstable and Bristol Counties of southeastern Massachusetts. At December 31, 2002, the Company had total assets of $2.3 billion, total deposits of $1.7 billion, stockholders' equity of $161.2 million, and 753 full-time equivalent employees.

Lending Activities

        The Bank's gross loan portfolio (loans before allowance for loan losses) amounted to $1.4 billion on December 31, 2002 or 62.6% of total assets on that date. The Bank classifies loans as commercial, real estate, or consumer. Commercial loans consist primarily of loans to businesses for working capital and other business-related purposes and floor plan financing. Real estate loans are comprised of commercial mortgages that are secured by non-residential properties, residential mortgages that are secured primarily by owner-occupied residences and mortgages for the construction of commercial and residential properties. Consumer loans consist primarily of installment obligations, the majority of which are automobile loans and home equity loans.

        The Bank's borrowers consist of small-to-medium sized businesses and retail customers. The Bank's market area is generally comprised of the Plymouth, Norfolk, Barnstable and Bristol Counties located in southeastern Massachusetts. Substantially all of the Bank's commercial and consumer loan portfolios consist of loans made to residents of and businesses located in southeastern Massachusetts. The majority of the real estate loans in the Bank's loan portfolio are secured by properties located within this market area.

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        Interest rates charged on loans may be fixed or variable and vary with the degree of risk, loan term, underwriting and servicing costs, loan amount and the extent of other banking relationships maintained with customers. Rates are further subject to competitive pressures, the current interest rate environment, availability of funds and government regulations.

        The Bank's principal earning assets are its loans. Although the Bank judges its borrowers to be creditworthy, the risk of deterioration in borrowers' abilities to repay their loans in accordance with their existing loan agreements is inherent in any lending function. Participating as a lender in the credit markets requires a strict monitoring process to minimize credit risk. This process requires substantial analysis of the loan application, an evaluation of the customer's capacity to repay according to the loan's contractual terms, and an objective determination of the value of the collateral. The Bank also utilizes the services of an independent third-party consulting firm to provide loan review services, which consist of a variety of monitoring techniques performed after a loan becomes part of the Bank's portfolio.

        The Bank's Controlled Asset Department is responsible for the management and resolution of nonperforming assets. In the course of resolving nonperforming loans, the Bank may choose to restructure certain contractual provisions. In order to facilitate the disposition of other real estate owned (OREO), the Bank may finance the purchase of such properties at market rates, if the borrower qualifies under the Bank's standard underwriting guidelines.

        Origination of Loans    Commercial loan applications are obtained through existing customers, solicitation by Bank loan officers, referrals from current or past customers, or walk-in customers. Commercial real estate loan applications are obtained primarily from previous borrowers, direct contacts with the Bank, or referrals. Applications for residential real estate loans and all types of consumer loans are taken at all of the Bank's full-service branch offices. Residential real estate loan applications primarily result from referrals by real estate brokers, homebuilders, and existing or walk-in customers. The Bank also maintains a staff of field originators who solicit and refer residential real estate loan applications to the Bank. These employees are compensated on a commission basis and provide convenient origination services during banking and non-banking hours. Consumer loan applications are directly obtained through existing or walk-in customers who have been made aware of the Bank's consumer loan services through advertising and other media, as well as indirectly through a network of automobile, recreational vehicle and boat dealers.

        Commercial loans, commercial real estate loans, and construction loans may be approved by commercial loan officers up to their individually assigned lending limits, which are established and modified periodically by management, with ratification by the Board of Directors, to reflect the officer's expertise and experience. Any of those types of loans which are in excess of a commercial loan officer's assigned lending authority must be approved by various levels of authority within the Commercial Lending Division, depending on the loan amount, up to and including the Senior Loan Committee and, ultimately, the Executive Committee of the Board of Directors.

        In accordance with governing banking statutes, Rockland is permitted, with certain exceptions, to make loans and commitments to any one borrower, including related entities, in the aggregate amount of not more than 20% of the Bank's stockholders' equity, or $41.1 million at December 31, 2002. Notwithstanding the foregoing, the Bank has established a more restrictive limit of not more than 75% of the Bank's legal lending limit, or $30.8 million at December 31, 2002, which may only be exceeded with the approval of the Board of Directors. There were no borrowers whose total indebtedness in aggregate exceeded $30.8 million as of December 31, 2002.

        Sale of Loans    The Bank's residential real estate loans are generally originated in compliance with terms, conditions and documentation which permit the sale of such loans to the Federal Home Loan Mortgage Corporation ("FHLMC"), the Federal National Mortgage Association ("FNMA"), the Government National Mortgage Association ("GNMA"), and other investors in the secondary market. Loan sales in the secondary market provide funds for additional lending and other banking activities. The Bank generally retains the servicing on the loans sold. As part of its asset/liability management strategy, the Bank may retain a portion of the adjustable and fixed rate residential real estate loan originations for its portfolio. During 2002, the Bank originated $332.0 million in residential real estate loans of which $141.3 million was retained in its portfolio, and comprised primarily of adjustable rate loans.

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        Commercial Loans    The Bank offers secured and unsecured commercial loans for business purposes, including issuing letters of credit. At December 31, 2002, $151.6 million, or 10.6% of the Bank's gross loan portfolio consisted of commercial loans. Commercial loans generated 6.8%, 7.8%, and 10.2% of total interest income for the fiscal years ending 2002, 2001 and 2000, respectively.

        Commercial loans may be structured as term loans or as revolving lines of credit. Commercial term loans generally have a repayment schedule of five years or less and, although the Bank occasionally originates some commercial term loans with interest rates which float in relation to the Rockland Base rate, the majority of commercial term loans have fixed rates of interest. The majority of commercial term loans are collateralized by equipment, machinery or other corporate assets. In addition, the Bank generally obtains personal guarantees from the principals of the borrower for virtually all of its commercial loans.

        Collateral for commercial revolving lines of credit may consist of accounts receivable, inventory or both, as well as other corporate assets. Commercial revolving lines of credit generally are reviewed on an annual basis and usually require substantial repayment of principal during the course of a year. The vast majority of these revolving lines of credit have variable rates of interest.

        The Bank's standby letters of credit generally are secured, have terms of not more than one year, and are reviewed for renewal. At December 31, 2002, the Bank had $8.1 million of standby letters of credit.

        The Bank also provides automobile and, to a lesser extent, boat and other vehicle floor plan financing. Floor plan loans are secured by the automobiles, boats, or other vehicles, which constitute the dealer's inventory. Upon the sale of a floor plan unit, the proceeds of the sale are applied to reduce the loan balance. In the event a unit financed under a floor plan line of credit remains in the dealer's inventory for an extended period, the Bank requires the dealer to pay-down the outstanding balance associated with such unit. Bank personnel make unannounced periodic inspections of each dealer to review the value and condition of the underlying collateral.

        Real Estate Loans    The Bank's real estate loans consist of loans secured by commercial properties, loans secured by one-to-four family residential properties, and construction loans. As of December 31, 2002, the Bank's loan portfolio included $511.1 million in commercial real estate loans, $281.5 million in residential real estate loans and $59.4 million in construction loans. Real estate loans generated an aggregate of 40.4%, 38.6%, and 36.7% of total interest income for the fiscal years ending December 31, 2002, 2001 and 2000, respectively.

        A significant portion of the Bank's commercial real estate portfolio consists of loans secured by owner occupied commercial and industrial buildings and warehouses. Commercial construction loans, which includes loans to finance the development of residential projects, are included in the commercial real estate portfolio. As such, a number of commercial real estate loans are primarily secured by residential development tracts but, to a much greater extent, they are secured by owner-occupied commercial and industrial buildings and warehouses. Commercial real estate loans also include multi-family residential loans that are primarily secured by apartment buildings and, to a much lesser extent, condominiums. The Bank has a very modest portfolio of loans secured by special purpose properties, such as hotels, motels, or restaurants.

        Although terms vary, commercial real estate loans generally have maturities of five years or less, amortization periods of 20 years, and interest rates that either float in accordance with a designated index or have fixed rates of interest. It is also the Bank's policy to obtain personal guarantees from the principals of the borrower on commercial real estate loans and to obtain financial statements at least annually from all commercial and multi-family borrowers.

        Commercial real estate lending entails additional risks as compared to residential real estate lending. Commercial real estate loans typically involve larger loan balances to single borrowers or groups of related borrowers. Development of commercial real estate projects also may be subject to numerous land use and environmental issues. The payment experience on such loans is typically dependent on the successful operation of the real estate project, which can be significantly impacted by supply and demand conditions in the market for commercial and retail space.

        Rockland originates both fixed-rate and adjustable-rate residential real estate loans. The Bank will lend up to 100% of the lesser of the appraised value of the residential property securing the loan or the purchase price, and

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generally requires borrowers to obtain private mortgage insurance when the amount of the loan exceeds 80% of the value of the property. The rates of these loans are typically competitive with market rates. The Bank's residential real estate loans are generally originated only under terms, conditions and documentation, which permit sale in the secondary market.

        The Bank generally requires title insurance protecting the priority of its mortgage lien, as well as fire, extended coverage casualty and flood insurance when necessary in order to protect the properties securing its residential and other real estate loans. Independent appraisers appraise properties securing all of the Bank's first mortgage real estate loans.

        Construction loans are intended to finance the construction of residential and commercial properties, including loans for the acquisition and development of land or rehabilitation of existing homes. Construction loans generally have terms of six months, but not more than two years. They usually do not provide for amortization of the loan balance during the term. The majority of the Bank's commercial construction loans have floating rates of interest based upon the Rockland Base rate or the Prime Rate published daily in the Wall Street Journal.

        A significant portion of the Bank's construction lending is related to one-to-four family residential development within the Bank's market area. The Bank typically has focused its construction lending on relatively small projects and has developed and maintains a relationship with a significant number of homebuilders in the Plymouth, Norfolk, Barnstable and Bristol Counties of southeastern Massachusetts.

        Construction loans are generally considered to present a higher degree of risk than permanent real estate loans. A borrower's ability to complete construction may be affected by a variety of factors such as adverse changes in interest rates and the borrower's ability to control costs and adhere to time schedules. The latter will depend upon the borrower's management capabilities, and may also be affected by strikes, adverse weather and other conditions beyond the borrower's control.

        Consumer Loans    The Bank makes loans for a wide variety of personal and consumer needs. Consumer loans primarily consist of installment loans, home equity loans, cash reserve loans and small business lines. As of December 31, 2002, $428.1 million, or 29.9%, of the Bank's gross loan portfolio consisted of consumer loans. Consumer loans generated 21.0%, 23.0% and 25.3% of total interest income for the fiscal years ending December 31, 2002, 2001, and 2000, respectively.

        The Bank's installment loans consist primarily of automobile loans. A substantial portion of the Bank's automobile loans are originated indirectly by a network of approximately 120 new and used automobile dealers located within the Bank's market area. Although employees of the dealer take applications for such loans, the loans are made pursuant to Rockland's underwriting standards using Rockland's documentation, and a Rockland loan officer must approve all indirect loans. In addition to indirect automobile lending, the Bank also originates automobile loans directly.

        The maximum term for the Bank's automobile loans is 72 months for a new car loan and 66 months with respect to a used car loan. Loans on new and used automobiles are generally made without recourse to the dealer. The Bank requires all borrowers to maintain automobile insurance, including full collision, fire and theft, with a maximum allowable deductible and with the Bank listed as loss payee. Some purchases from used car dealers are under a repurchase agreement. The dealer is required to pay off the loan (in return for the vehicle) as long as the bank picks up the vehicle and returns it to the dealer within 180 days of the most recent delinquency payment. In addition, in order to mitigate the adverse effect on interest income caused by prepayments, all dealers are required to maintain a reserve, of up to 3% of the outstanding balance of the indirect loans originated by them. Reserve option "A" allows the Bank to be rebated on a pro-rata basis in the event of prepayment prior to maturity. Reserve option "B" allows the dealer to share the reserve with the Bank, split 75/25, however for the Bank's receipt of 25%, no rebates are applied to the account after 90 days from the loan origination date.

        The Bank's consumer loans also include home equity, unsecured loans and loans secured by deposit accounts, loans to purchase motorcycles, recreational vehicles, motor homes, boats, or mobile homes. The Bank generally will

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lend up to 100% of the purchase price of vehicles other than automobiles with terms of up to three years for motorcycles and up to fifteen years for recreational vehicles.

        Home equity loans may be made as a term loan or under a revolving line of credit secured by a first or second mortgage on the borrower's residence. The Bank will originate home equity loans in an amount up to 80% of the appraised value or, without appraisal, up to 80% of the tax assessed value, reduced for any loans outstanding secured by such collateral.

        Cash reserve loans are made pursuant to previously approved unsecured cash reserve lines of credit. The rate on these loans is tied to the prime rate.

Investment Activities

        The Bank's securities portfolio consists of equity securities held for the purpose of funding Rabbi Trust obligations, U.S. Government and U.S. Government Agency obligations, state, county and municipal securities, mortgage-backed securities, Federal Home Loan Bank ("FHLB") stock, and corporate debt securities. Most of these securities are investment grade debt obligations with average lives of five years and less. U.S. Government and U.S. Government agency securities entail a lesser degree of risk than loans made by the Bank by virtue of the guarantees that back them, require less capital under risk-based capital rules than non-insured or non-guaranteed mortgage loans, are more liquid than individual mortgage loans, and may be used to collateralize borrowings or other obligations of the Bank. The Bank views its securities portfolio as a source of income and liquidity. Interest and principal payments generated from securities provide a source of liquidity to fund loans and meet short-term cash needs. The Bank's securities portfolio is managed in accordance with the Rockland Trust Company Investment Policy adopted by the Board of Directors. The Chief Executive Officer or the Chief Financial Officer may make investments with the approval of one additional member of the Asset/Liability Management Committee, subject to limits on the type, size and quality of all investments, which are specified in the Investment Policy. The Bank's Asset/Liability Management Committee, or its designee, is required to evaluate any proposed purchase from the standpoint of overall diversification of the portfolio. At December 31, 2002, investments totaled $669.0 million. Total investments generated interest and dividends on securities of 29.7%, 29.6%, and 27.2% of total interest income for the fiscal years ended 2002, 2001 and 2000, respectively.

Sources of Funds

        Deposits    Deposits obtained through Rockland's branch banking network have traditionally been the principal source of the Bank's funds for use in lending and for other general business purposes. The Bank has built a stable base of in-market core deposits from the residents of and businesses located in southeastern Massachusetts, including Cape Cod. Rockland offers a range of demand deposits, interest checking, money market accounts, savings accounts and time certificates of deposit. Interest rates on deposits are based on factors that include loan demand, deposit maturities, alternative costs of funds, and interest rates offered by competing financial institutions in the Bank's market area. The Bank believes it has been able to attract and maintain satisfactory levels of deposits based on the level of service it provides to its customers, the convenience of its banking locations, and its interest rates that are generally competitive with those of competing financial institutions. As of December 31, 2002, total deposits were $1.7 billion, 6.8% higher than the prior year-end.

        Rockland's branch locations are supplemented by the Bank's Internet Banking services as well as automated teller machine ("ATM") cards and debit cards which may be used to conduct various banking transactions at ATMs maintained at each of the Bank's full-service offices and seven additional remote ATM locations. The ATM cards and debit cards also allow customer's access to the "NYCE" regional ATM network, as well as the "Cirrus" nationwide ATM network. In addition, Rockland has joined the "SUM" network, which allows access to over 2,500 surcharge-free ATM's throughout New England. Most importantly for our customers, the City of Boston has approximately 100 SUM ATM locations. These networks provide the Bank's customers access to their accounts through ATMs located throughout Massachusetts, the United States, and the world. The debit card also can be used at any place that accepts MasterCard worldwide.

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        Borrowings    Borrowings consist of short-term and intermediate-term obligations. Short-term borrowings can consist of FHLB advances, federal funds purchased, treasury tax and loan notes and assets sold under repurchase agreements. In a repurchase agreement transaction, the Bank will generally sell a security agreeing to repurchase either the same or a substantially identical security on a specified later date at a price slightly greater than the original sales price. The difference in the sale price and purchase price is the cost of the proceeds. The securities underlying the agreements are delivered to the dealer who arranges the transactions as security for the repurchase obligation. Payments on such borrowings are interest only until the scheduled repurchase date, which generally occurs within a period of 30 days or less. Repurchase agreements represent a non-deposit funding source for the Bank. However, the Bank is subject to the risk that the lender may default at maturity and not return the collateral. In order to minimize this potential risk, the Bank only deals with established investment brokerage firms when entering into these transactions. On December 31, 2002 the Bank had no repurchase agreements with investment brokerage firms. In addition to these agreements, the Bank has entered into similar agreements with its customers. At December 31, 2002 the Bank had $57.4 million of customer repurchase agreements outstanding.

        In July 1994, Rockland became a member of the FHLB of Boston. Among the many advantages of this membership, this affiliation provides the Bank with access to short-to-medium term borrowing capacity. At December 31, 2002, the Bank had $297.6 million outstanding in FHLB borrowings with initial maturities ranging from 1 day to 10 years. In addition, the Bank has a $5 million line of credit with the FHLB.

Investment Management

        The Rockland Trust Investment Management Group offers a variety of services, including assistance with investments, estate planning, custody services, employee benefit plans, and tax planning, which are provided primarily to individuals and small businesses located in southeastern Massachusetts and Cape Cod. In addition, the Bank acts as executor or administrator of estates and as trustee for various types of trusts.

        Accounts maintained by the Rockland Trust Investment Management Group consist of "managed" and "non-managed" accounts. "Managed accounts" are those accounts for which Rockland has responsibility for administration and investment management and/or investment advice. "Non-managed" accounts are those accounts for which Rockland acts as a custodian. The Bank receives fees dependent upon the level and type of service(s) provided. Total trust assets at December 31, 2002 were $433.8 million.

        The administration of trust and fiduciary accounts is monitored by the Trust Committee of the Bank's Board of Directors. The Trust Committee has delegated administrative responsibilities to three committees, one for investments, one for administration, and one for operations, all of which are comprised of Investment Management Group officers who meet not less than monthly.

        In 1999, the Bank entered into an agreement with Independent Financial Market Group (IFMG), a Sun Life Financial Company for the sale of mutual fund shares, unit investment trust shares, interests in direct participation programs, similar non-insurance investment products, and general securities brokerage services. IFMG Securities Incorporated has placed their registered representatives on-site to sell these services to our customer base.

Regulation

        General    The Company is registered as a bank holding company under the Bank Holding Company Act of 1956 ("BHCA"), as amended, and as such is subject to regulation by the Board of Governors of the Federal Reserve System ("Federal Reserve"). Rockland is subject to regulation and examination by the Commissioner of Banks of the Commonwealth of Massachusetts (the "Commissioner") and the Federal Deposit Insurance Corporation ("FDIC"). The majority of Rockland's deposit accounts are insured to the maximum extent permitted by law by the Bank Insurance Fund ("BIF") which is administered by the FDIC. In 1994, the Bank purchased the deposits of three branches of a failed savings and loan association from the Resolution Trust Corporation. These deposits are insured to the maximum extent permitted by law by the Savings Association Insurance Fund ("SAIF"). The laws and regulations governing the Company and Rockland generally have been promulgated to protect depositors and not for the purpose of protecting stockholders.

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        BHCA (The Bank Holding Company Act)    BHCA prohibits a bank holding company from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any bank, or increasing such ownership or control of any bank, without prior approval of the Federal Reserve. The BHCA also prohibits a bank holding company from, with certain exceptions, acquiring more than 5% of the voting shares of any company that is not a bank and from engaging in any business other than banking or managing or controlling banks.

        Under the BHCA, the Federal Reserve is authorized to approve the ownership of shares by a bank holding company in any company, the activities of which the Federal Reserve has determined to be so closely related to banking or to managing or controlling banks as to be a proper incident thereto. The Federal Reserve has, by regulation, determined that certain activities are closely related to banking within the meaning of the BHCA. These activities include, but are not limited to, operating a mortgage company, finance company, credit card company, factoring company, trust company or savings association; performing certain data processing operations; providing certain securities brokerage services; acting as an investment or financial adviser; acting as an insurance agent for certain types of credit-related insurance; engaging in insurance underwriting under certain limited circumstances; leasing personal property on a full-payout, non-operating basis; providing tax planning and preparation services; operating a collection agency and a credit bureau; providing consumer financial counseling and providing certain courier services. The Federal Reserve also has determined that certain other activities, including real estate brokerage and syndication, land development, property management and, except under limited circumstances, underwriting of life insurance not related to credit transactions, are not closely related to banking and are not a proper incident thereto.

        Interstate Banking    Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Banking Act"), bank holding companies may acquire banks in states other than their home state without regard to the permissibility of such acquisitions under state law, but subject to any state requirement that the bank has been organized and operating for a minimum period of time, not to exceed five years, and the requirement that the bank holding company, after the proposed acquisition, controls no more than 10 percent of the total amount of deposits of insured depository institutions in the United States and no more than 30 percent or such lesser or greater amount set by state law of such deposits in that state.

        Pursuant to Massachusetts law, no approval to acquire a banking institution, acquire additional shares in an institution, acquire substantially all the assets of a banking institution or merge or consolidate with another bank holding company may be given if the bank being acquired has been in existence for a period less than three years or, as a result, the bank holding company would control, in excess of 30%, of the total deposits of all state and federally chartered banks in Massachusetts, unless waived by the Commissioner. With the prior written approval of the Commissioner, Massachusetts also permits the establishment of de novo branches in Massachusetts to the fullest extent permitted by the Interstate Banking Act, provided the laws of the home state of such out-of-state bank expressly authorize, under conditions no more restrictive than those of Massachusetts, Massachusetts banks to establish and operate de novo branches in such state.

        Capital Requirements    The Federal Reserve has adopted capital adequacy guidelines pursuant to which it assesses the adequacy of capital in examining and supervising a bank holding company and in analyzing applications to it under the BHCA. The Federal Reserve's capital adequacy guidelines which generally require bank holding companies to maintain total capital equal to 8% of total risk-adjusted assets, with at least one-half of that amount consisting of Tier 1, or core, capital and up to one-half of that amount consisting of Tier 2, or supplementary, capital. Tier 1 capital for bank holding companies generally consists of the sum of common stockholders' equity and perpetual preferred stock (subject in the case of the latter to limitations on the kind and amount of such stocks which may be included as Tier 1 capital), less net unrealized gains on available for sale securities and on cash flow hedges, and goodwill and other intangible assets required to be deducted from capital. Tier 2 capital generally consists of perpetual preferred stock which is not eligible to be included as Tier 1 capital; hybrid capital instruments such as perpetual debt and mandatory convertible debt securities, and term subordinated debt and intermediate-term preferred stock; and, subject to limitations, the allowance for loan losses. Assets are adjusted under the risk-based guidelines to take into account different risk characteristics, with the categories ranging from 0% (requiring no additional capital) for assets such as cash to 100% for the majority of assets which are typically held by a bank holding

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company, including commercial real estate loans, commercial loans and consumer loans. Single family residential first mortgage loans which are not 90 days or more past due or nonperforming and which have been made in accordance with prudent underwriting standards are assigned a 50% level in the risk-weighting system, as are certain privately-issued mortgage-backed securities representing indirect ownership of such loans and certain multi-family housing loans. Off-balance sheet items also are adjusted to take into account certain risk characteristics.

        In addition to the risk-based capital requirements, the Federal Reserve requires bank holding companies to maintain a minimum leverage capital ratio of Tier 1 capital to total assets of 3.0%. Total assets for this purpose do not include goodwill and any other intangible assets or investments that the Federal Reserve determines should be deducted from Tier 1 capital. The Federal Reserve has announced that the 3.0% Tier 1 leverage capital ratio requirement is the minimum for the top-rated bank holding companies without any supervisory, financial or operational weaknesses or deficiencies or those which are not experiencing or anticipating significant growth. Other bank holding companies (including the Company) are expected to maintain Tier 1 leverage capital ratios of at least 4.0% to 5.0% or more, depending on their overall condition.

        The Company currently is in compliance with the above-described regulatory capital requirements. At December 31, 2002, the Company had Tier 1 capital and total capital equal to 10.37% and 11.68% of total risk-adjusted assets, respectively, and Tier 1 leverage capital equal to 7.10% of total assets. As of such date, Rockland complied with the applicable federal regulatory capital requirements, with Tier 1 capital and total capital equal to 10.09% and 11.35% of total risk-adjusted assets, respectively, and Tier 1 leverage capital equal to 6.91% of total assets.

        The FDIC has promulgated regulations and adopted a statement of policy regarding the capital adequacy of state-chartered banks, which, like Rockland, are not members of the Federal Reserve System. These requirements are substantially similar to those adopted by the Federal Reserve regarding bank holding companies, as described above. The FDIC's capital regulations establish a minimum 3.0% Tier 1 leverage capital to total assets requirement for the most highly-rated state-chartered, non-member banks, with an additional cushion of at least 100 to 200 basis points for all other state-chartered, non-member banks, which effectively will increase the minimum Tier 1 leverage capital ratio for such banks to 4.0% or 5.0% or more. Under the FDIC's regulations, the highest-rated banks are those that the FDIC determines are not anticipating or experiencing significant growth and have well diversified risk, including no undue interest rate risk exposure, excellent asset quality, high liquidity, good earnings and in general which are considered strong banking organizations, rated composite 1 under the Uniform Financial Institutions Rating System.

        Each federal banking agency has broad powers to implement a system of prompt corrective action to resolve problems of institutions, which it regulates, which are not adequately capitalized. A bank shall be deemed to be (i) "well capitalized" if it has total risk-based capital ratio of 10.0% or more, has a Tier 1 risk-based capital ratio of 6.0% or more, has a Tier 1 leverage capital ratio of 5.0% or more and is not subject to any written capital order or directive; (ii) "adequately capitalized" if it has a total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio of 4.0% or more, a Tier 1 leverage capital ratio of 4.0% or more (3.0% under certain circumstances) and does not meet the definition of "well capitalized"; (iii) "undercapitalized" if it has a total risk-based capital ratio that is less than 8.0%, or a Tier 1 risk-based capital ratio that is less than 4.0% or a Tier 1 leverage capital ratio of less than 4.0% (3.0% under certain circumstances); (iv) "significantly undercapitalized" if it has a total risk-based capital ratio that is less than 6.0%, or a Tier 1 risk-based capital ratio that is less than 3.0%, or a Tier 1 leverage capital ratio that is less than 3.0%; and (v) "critically undercapitalized" if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%. As of December 31, 2002 Rockland was deemed a "well-capitalized institution" for this purpose.

        Commitments to Affiliated Institutions    Under Federal Reserve policy, the Company is expected to act as a source of financial strength to Rockland and to commit resources to support Rockland in circumstances when it might not do so absent such policy.

        Limitations on Acquisitions of Common Stock    The federal Change in Bank Control Act ("CBCA") prohibits a person or group of persons from acquiring "control" of a bank holding company or bank unless the appropriate federal bank regulator has been given 60 days prior written notice of such proposed acquisition and within that time period such regulator has not issued a notice disapproving the proposed acquisition or extending for up to another

10

30 days the period during which such a disapproval may be issued. The acquisition of 25% or more of any class of voting securities constitutes the acquisition of control under the CBCA. In addition, under a rebuttal presumption established under the CBCA regulations, the acquisition of 10% or more of a class of voting stock of a bank holding company or a FDIC insured bank, with a class of securities registered under or subject to the requirements of Section 12 of the Securities Exchange Act of 1934 would, under the circumstances set forth in the presumption, constitute the acquisition of control.

        Any "company" would be required to obtain the approval of the Federal Reserve under the BHCA before acquiring 25% (5% in the case of an acquirer that is a bank holding company) or more of the outstanding common stock of, or such lesser number of shares as constitute control over, the Company. Such approval would be contingent upon, among other things, the acquirer registering as a bank holding company, divesting all impermissible holdings and ceasing any activities not permissible for a bank holding company. The Company owns no voting stock in any banking institution other than Rockland.

        Deposit Insurance Premiums—Rockland    Rockland currently pays deposit insurance premiums to the FDIC based on a single, uniform assessment rate established by the FDIC for all BIF-member institutions. The assessment rates range from 0% to 0.27%. Under the FDIC's risk-based assessment system, institutions are assigned to one of three capital groups which assignment is based solely on the level of an institution's capital—"well capitalized", "adequately capitalized," and "undercapitalized"—which are defined in the same manner as the regulations establishing the prompt corrective action system under the Federal Deposit Insurance Act ("FDIA"). Rockland is presently "well capitalized" and as a result, Rockland is currently not subject to any FDIC premium obligation.

        Community Reinvestment Act ("CRA")—Rockland    Pursuant to the Community Reinvestment Act ("CRA") and similar provisions of Massachusetts' law, regulatory authorities review the performance of the Company and Rockland in meeting the credit needs of the communities served by Rockland. The applicable regulatory authorities consider compliance with this law in connection with applications for, among other things, approval of branches, branch relocations, engaging in certain new financial activities under the Gramm-Leach-Bliley Act of 1999, as discussed below, and acquisitions of banks and bank holding companies. The FDIC and the Massachusetts Division of Banks have assigned the Bank a CRA rating of satisfactory as of the latest examination.

        Bank Secrecy Act    The Bank Secrecy Act requires financial institutions to keep records and file reports that are determined to have a high degree of usefulness in criminal, tax and regulatory matters, and to implement counter-money laundering programs and compliance procedures.

        Securities and Exchange Commission Availability of Filings on Company Web Site    Under the Securities Exchange Act of 1934 Sections 13 and 15(d), periodic and current reports must be filed with the Securities and Exchange Commission ("SEC"). The Company electronically files the following reports with the SEC: Form 10-K (Annual Report), Form 10-Q (Quarterly Report), Form 11-K (Annual Report for Employees' Stock Purchase and Savings Plans), Form 8-K (Report of Unscheduled Material Events), Form S-3 and 8-A (Registration Statements), and Form DEF 14A (Proxy Statement). The Company may file additional forms. The SEC maintains an Internet site, www.sec.gov, in which all forms filed electronically may be accessed. Additionally, all forms filed with the SEC and additional shareholder information is available free of charge on the Company's website: www.rocklandtrust.com.

        USA Patriot Act of 2001    In October 2001, the USA Patriot Act of 2001 was enacted in response to the terrorist attacks in New York, Pennsylvania and Washington D.C. which occurred on September 11, 2001. The Patriot Act is intended to strengthen U.S. law enforcement's and the intelligence communities' abilities to work cohesively to combat terrorism on a variety of fronts. The potential impact of the Patriot Act on financial institutions of all kinds is significant and wide ranging. The Patriot Act contains sweeping anti-money laundering and financial transparency laws and imposes various regulations, including standards for verifying client identification at account opening, and rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering.

11

        Financial Services Modernization Legislation    In November 1999, the Gramm-Leach-Bliley Act of 1999, or the GLB, was enacted. The GLB repeals provisions of the Glass-Steagall Act which restricted the affiliation of Federal Reserve member banks with firms "engaged principally" in specified securities activities, and which restricted officer, director or employee interlocks between a member bank and any company or person "primarily engaged" in specified securities activities.

        In addition, the GLB also contains provisions that expressly preempt any state law restricting the establishment of financial affiliations, primarily related to insurance. The general effect of the law is to establish a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms and other financial service providers by revising and expanding the Bank Holding Company Act framework to permit a holding company to engage in a full range of financial activities through a new entity known as a "financial holding company." "Financial activities" is broadly defined to include not only banking, insurance and securities activities, but also merchant banking and additional activities that the Federal Reserve Board, in consultation with the Secretary of the Treasury, determines to be financial in nature, incidental to such financial activities or complementary activities that do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.

        The GLB also permits national banks to engage in expanded activities through the formation of financial subsidiaries. A national bank may have a subsidiary engaged in any activity authorized for national banks directly or any financial activity, except for insurance underwriting, insurance investments, real estate investment or development, or merchant banking, which may only be conducted through a subsidiary of a financial holding company. Financial activities include all activities permitted under new sections of the Bank Holding Company Act or permitted by regulation.

        To the extent that the GLB permits banks, securities firms and insurance companies to affiliate, the financial services industry may experience further consolidation. The GLB is intended to grant to community banks certain powers as a matter of right that larger institutions have accumulated on an ad hoc basis and which unitary savings and loan holding companies already possess. Nevertheless, the GLB may have the result of increasing the amount of competition that the Company faces from larger institutions and other types of companies offering financial products, many of which may have substantially more financial resources than the Company has.

        Sarbanes-Oxley Act of 2002    On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002, or the SOA. The stated goals of the SOA are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.

        The SOA is the most far-reaching U.S. securities legislation enacted in some time. The SOA generally applies to all companies, both U.S. and non-U.S., that file or are required to file periodic reports with the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, or the Exchange Act. Given the extensive SEC role in implementing rules relating to many of the SOA's new requirements, the final scope of these requirements remains to be determined.

        The SOA includes very specific additional disclosure requirements and new corporate governance rules, requires the SEC and securities exchanges to adopt extensive additional disclosure, corporate governance and other related rules and mandates further studies of certain issues by the SEC and the Comptroller General. The SOA represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate law, such as the relationship between a board of directors and management and between a board of directors and its committees.

        The SOA addresses, among other matters:

•

audit committees for all reporting companies;



•

certification of financial statements by the chief executive officer and the chief financial officer;

12

•

the forfeiture of bonuses or other incentive-based compensation and profits from the sale of an issuer's securities by directors and senior officers in the twelve month period following initial publication of any financial statements that later require restatement;



•

a prohibition on insider trading during pension plan black out periods;



•

disclosure of off-balance sheet transactions;



•

a prohibition on personal loans to directors and officers; expedited filing requirements for Forms 4's;



•

disclosure of a code of ethics and filing a Form 8-K for a change or waiver of such code;



•

"real time" filing of periodic reports;



•

the formation of a public accounting oversight board;



•

auditor independence; and



•

various increased criminal penalties for violations of securities laws.

        The SOA contains provisions which became effective upon enactment on July 30, 2002 and provisions which will become effective from within 30 days to one year from enactment. The SEC has been delegated the task of enacting rules to implement various provisions with respect to, among other matters, disclosure in periodic filings pursuant to the Exchange Act.

        Regulation W    Transactions between a bank and its "affiliates" are quantitatively and qualitatively restricted under the Federal Reserve Act. The Federal Deposit Insurance Act applies Sections 23A and 23B to insured nonmember banks in the same manner and to the same extent as if they were members of the Federal Reserve System. The Federal Reserve Board has also recently issued Regulation W, which codifies prior regulations under Sections 23A and 23B of the Federal Reserve Act and interpretative guidance with respect to affiliate transactions. Regulation W incorporates the exemption from the affiliate transaction rules but expands the exemption to cover the purchase of any type of loan or extension of credit from an affiliate. Affiliates of a bank include, among other entities, the bank's holding company and companies that are under common control with the bank. The Company is considered to be an affiliate of the Bank. In general, subject to certain specified exemptions, a bank or its subsidiaries are limited in their ability to engage in "covered transactions" with affiliates:

•

to an amount equal to 10% of the bank's capital and surplus, in the case of covered transactions with any one affiliate; and



•

to an amount equal to 20% of the bank's capital and surplus, in the case of covered transactions with all affiliates.

        In addition, a bank and its subsidiaries may engage in covered transactions and other specified transactions only on terms and under circumstances that are substantially the same, or at least as favorable to the bank or its subsidiary, as those prevailing at the time for comparable transactions with nonaffiliated companies. A "covered transaction" includes:

•

a loan or extension of credit to an affiliate;



•

a purchase of, or an investment in, securities issued by an affiliate;



•

a purchase of assets from an affiliate, with some exceptions;



•

the acceptance of securities issued by an affiliate as collateral for a loan or extension of credit to any party; and



•

the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate.

In addition, under Regulation W:

•

a bank and its subsidiaries may not purchase a low-quality asset from an affiliate;

13

•

covered transactions and other specified transactions between a bank or its subsidiaries and an affiliate must be on terms and conditions that are consistent with safe and sound banking practices; and



•

with some exceptions, each loan or extension of credit by a bank to an affiliate must be secured by collateral with a market value ranging from 100% to 130%, depending on the type of collateral, of the amount of the loan or extension of credit.

        Regulation W generally excludes all non-bank and non-savings association subsidiaries of banks from treatment as affiliates, except to the extent that the Federal Reserve Board decides to treat these subsidiaries as affiliates.

        Concurrently with the adoption of Regulation W, the Federal Reserve Board has proposed a regulation which would further limit the amount of loans that could be purchased by a bank from an affiliate to not more than 100% of the bank's capital and surplus. Comments on the proposed rule were due by January 13, 2003.

        Miscellaneous    Rockland is subject to certain restrictions on loans to the Company, on investments in the stock or securities thereof, on the taking of such stock or securities as collateral for loans to any borrower, and on the issuance of a guarantee or letter of credit on behalf of the Company. Rockland also is subject to certain restrictions on most types of transactions with the Company, requiring that the terms of such transactions be substantially equivalent to terms of similar transactions with non-affiliated firms. In addition under state law, there are certain conditions for and restrictions on the distribution of dividends to the Company by Rockland.

        The regulating information referenced briefly summarizes certain material statutes and regulations affecting the Company and the Bank and is qualified in its entirety by reference to the particular statutory and regulatory provisions.

Statistical Disclosure by Bank Holding Companies

        The following information, included under Items 6, 7, and 8 of this report are incorporated by reference herein.

        Note 8, "Borrowings" within Notes to the Consolidated Financial Statements which includes information regarding short-term borrowings and is included in Item 8.

        For additional information regarding our business and operations, see Selected Financial Data in Item 6 hereof, Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 hereof and the Consolidated Financial Statements in Item 8 hereof.

Item 2.    Properties

        At December 31, 2002, the Bank conducted its business from its headquarters and main office at 288 Union Street, Rockland, Massachusetts and fifty-one other branch locations throughout Barnstable, Bristol, Norfolk and Plymouth Counties of southeastern Massachusetts and Cape Cod. In addition to its main office, the Bank owns seventeen of its branches and leases the remaining thirty-four offices. Of the branch offices which are leased by the Bank, seven have remaining lease terms, including options renewable at the Bank's option, of five years or less; eight have remaining lease terms of greater than five years and less than ten years; and nineteen have remaining lease terms of ten years or more. The Bank's aggregate rental expense under such leases was $2.1 million in 2002. In May 2002, the Bank opened a new branch at 100 Belmont Street, Brockton, Massachusetts. The Bank also consolidated two Commercial Lending Centers from 34 School Street and 942 West Chestnut Street, Brockton, Massachusetts into this new location. The Bank also relocated the 34 School Street, Brockton branch into a newly renovated section of the building. The branch space is much smaller than the former location and will be much more efficient. In July 2002, the Bank signed a long-term ground lease to construct a new branch in Mashpee. This new location will replace the existing Mashpee branch. The new location is in a much more visible area on busy Route 28 and it is anticipated that this branch will open in the spring of 2003. In July 2002, the Bank opened a standalone ATM at the busy intersection of Routes 6A & 134 in East Dennis, Massachusetts. In July 2002, the Bank signed a lease for office space in Cranston, Rhode Island to open a mortgage and consumer lending office. The Bank received permission to conduct business in Rhode Island from the State of Rhode Island's Division of Banking in December 2002. The Bank is expected to

14

commence Rhode Island operations during 2003. Certain of the Bank's branch offices are leased from companies with whom directors of the company are affiliated, see Item 13 hereof. At December 31, 2002, the net book values of the property and leasehold improvements of the offices of the Bank amounted to $25.1 million. The Bank's properties that are not leased are owned free and clear of any mortgages. The Bank believes that all of its properties are well maintained and are suitable for their respective present needs and operations. For additional information regarding the Bank's lease obligations, see Note 6 and Note 15 to the Consolidated Financial Statements, included in Item 8 hereof.

Item 3.    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. Under Massachusetts's law, interest will be computed at a 12% rate on any damages which the Bank recovers, either from the date of breach or the date on which the case was filed. 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, plus interest at a rate as high as 24% pursuant to the Agreement.

        The non-jury trial of the case was conducted in January 2001. The trial concluded with post-trial submissions to and argument before the Court in February 2001. In September 2002 the court, in response to a joint inquiry from counsel for the Bank and counsel for CA, indicated that the judge is "actively working" on the case and anticipated, at that time, rendering a decision sometime in the fall of 2002. The court, however, has not yet rendered a decision.

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

Item 4.    Submission of Matters to a Vote of Security Holders

        There were no matters submitted to a vote of our security holders in the fourth quarter of 2002.

15

PART II

Item 5.    Market for Independent Bank Corp.'s Common Equity and Related Stockholders' Matters

        Independent Bank Corp.'s common stock trades on the NASDAQ National Market under the symbol INDB. The Company declared cash dividends of $0.48 per share in 2002 and $0.44 per share in 2001. The ratio of dividends paid to earnings in 2002 and 2001 was 27.6% and 28.6%, respectively.

        Payment of dividends by the Company on its common stock is subject to various regulatory restrictions and guidelines. Since substantially all of the funds available for the payment of dividends are derived from the Bank, future dividends will depend on the earnings of the Bank, its financial condition, its need for funds, applicable governmental policies and regulations, and other such matters as the Board of Directors deem appropriate. Management believes that the Bank will continue to generate adequate earnings to continue to pay dividends on a quarterly basis.

        The following schedule summarizes the price range of common stock and the cash dividends paid for the fiscal years ended 2002 and 2001.

Table 1—Price Range of Common Stock

        As of December 31, 2002 there were 14,461,481 shares of common stock outstanding which were held by approximately 4,200 holders of record. The closing price of the Company's stock on December 31, 2002 was $22.80. Such number of record holders does not reflect the number of persons or entities holding stock in nominee name through banks, brokerage firms and other nominees.

16

Item 6.    Selected Consolidated Financial and Other Data

        The selected consolidated financial and other data of the Company set forth below does not purport to be complete and should be read in conjunction with, and is qualified in its entirety by, the more detailed information, including the Consolidated Financial Statements and related notes, appearing elsewhere herein.

(1)

Calculated by dividing total stockholders' equity by the net outstanding shares as of the end of each period.

(2)

Calculated by dividing stockholders' equity less goodwill by the net outstanding shares as of the end of each period.

(3)

Calculated using net income which exludes the write-off of trust preferred issuance costs.

(4)

Including credit quality discount.

17

        See Item 8. Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note (1) Summary of Significant Accounting Policies, Goodwill and Note (10) Goodwill and Intangible Assets, for information related to the Company's acquisitions and adoption of Statement of Financial Accounting Standards ("SFAS") No. 147 "Acquisitions of Certain Financial Institutions", which affects the comparability of the information reflected in the selected financial data.

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

        The condensed financial review which follows presents management's discussion and analysis of the consolidated financial condition and operating results of the Company and its subsidiaries Rockland, Capital Trust III and Capital Trust IV. Independent Capital Trust III and Independent Capital Trust IV each have issued trust preferred securities to the public. The Company also had two other subsidiaries which were Independent Capital Trust I and II, each of which also issued trust preferred securities to the public, and were liquidated earlier this year upon redemption of their trust preferred securities. The Bank's subsidiaries consist of two Massachusetts securities corporations; RTC Securities Corp. I and RTC Securities Corp. X, as well as South Shore Holdings, Ltd. ("South Shore Holdings"), a holding company for Rockland Preferred Capital Corporation, a Massachusetts Real Estate Investment Trust ("the REIT"). The following should be read in conjunction with the Consolidated Financial Statements and related notes thereto.

        Independent Bank Corp. is a one-bank holding company whose primary asset is its investment in Rockland. Rockland is a state-chartered commercial bank, which operates 52 retail branches, seven commercial lending centers, three investment management offices and three mortgage banking centers, all of which are located in the Plymouth, Barnstable, Norfolk and Bristol counties of southeastern Massachusetts and Cape Cod. The Bank's primary source of income is from providing loans to individuals and small-to-medium-sized businesses in its market area. Independent Capital Trust III and Independent Capital Trust IV were formed for the purposes of issuing trust preferred securities and investing the proceeds of these securities in junior subordinated debentures issued by the Company.

Forward-Looking Information

        This report on Form 10-K may contain certain forward-looking statements, including without limitation, statements regarding (i) the level of allowance for loan loss, (ii) the rate of delinquencies and amounts of charge-offs and (iii) the rates of loan growth. Moreover, the Company may from time to time, in both written reports and oral statements by Company management, express its expectations regarding future performance of the Company. These forward-looking statements are inherently uncertain and actual results may differ from Company expectations. The following factors which, among others, could impact current and future performance include but are not limited to: (i) adverse changes in asset quality and resulting credit risk-related losses and expenses; (ii) adverse changes in the economy of the New England region, (iii) adverse changes in the local real estate market, as most of the Company's loans are concentrated in southeastern Massachusetts and a substantial portion of these loans have real estate as collateral; (iv) fluctuations in market rates and prices which can negatively affect the net interest margin, asset valuations and expense expectations; and (v) changes in regulatory requirements of federal and state agencies applicable to banks and bank holding companies, such as the Company and Rockland, which could have a materially adverse effect on the Company's future operating results. When relying on forward-looking statements to make decisions with respect to the Company, investors and others are cautioned to consider these and other risks and uncertainties.

Critical Accounting Policies

        Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. We believe that our

18

most critical accounting policies upon which our financial condition depends, and which involve the most complex or subjective decisions or assessments are as follows:

        Allowance for Loan Losses:    Arriving at an appropriate level of allowance for loan losses involves a high degree of judgment. The Company's allowance for loan losses provides for probable losses based upon evaluations of known, and inherent risks in the loan portfolio. Management uses historical information to assess the adequacy of the allowance for loan losses as well as the prevailing business environment; as it is affected by changing economic conditions and various external factors, which may impact the portfolio in ways currently unforeseen. The allowance is increased by provisions for loan losses and by recoveries of loans previously charged-off and reduced by loans charged-off. For a full discussion of the Company's methodology of assessing the adequacy of the allowance for loan losses, see Management's Discussion and Analysis of Financial Condition and Results of Operation.

        Income Taxes:    The Company accounts for income taxes by deferring income taxes based on estimated future tax effects of differences between the tax and book basis of assets and liabilities considering the provisions of enacted tax laws. These differences result in deferred tax assets and liabilities, which are included in the Company's consolidated balance sheets. The Company must also assess the likelihood that any deferred tax assets will be recovered from future taxable income and establish a valuation allowance for those assets determined to not likely be recoverable. Management judgment is required in determining the amount and timing of recognition of the resulting deferred tax assets and liabilities, including projections of future taxable income. Although the Company has determined a valuation allowance is not required for all deferred tax assets, there is no guarantee that these assets are recognizable.

        Valuation of Goodwill/Intangible Assets and Analysis for Impairment:    Independent Bank Corp. in part has increased its market share through the acquisition of entire financial institutions accounted for under the business combinations method of accounting, as well as from the purchase of financial institution's branches (not the entire institution). For acquisitions under the purchase method and the acquisition of financial institution branches, the Company is required to record assets acquired and liabilities assumed at their fair value which is an estimate determined by the use of internal or other valuation techniques. These valuation estimates result in goodwill and other intangible assets. Goodwill is subject to ongoing periodic impairment tests and is evaluated using various fair value techniques including multiples of price/equity and price/earnings ratios.

Overview

        The Company's total assets increased by $86.2 million, or 3.9%, from year-end 2001 to a total of $2.3 billion as of December 31, 2002. Investment securities decreased by $51.2 million, or 7.1%, to $669.0 million at December 31, 2002 from $720.2 million a year earlier. Loans increased by $132.7 million, or 10.2%, during the year ended December 31, 2002. At December 31, 2002 deposits of $1.7 billion were $107.1 million, or 6.8%, higher than the prior year-end. Core deposits increased $173.0 million, or 16.6%, and time deposits decreased $65.9 million, or 12.2%.

        For the year ended December 31, 2002, the Company recorded net income of $25.1 million, an increase of 13.7% from 2001. The 2002 results reflect a 10.4% increase in net interest income, a 9.8% increase in non-interest income, and an increase of 10.6% in non-interest expenses. Diluted earnings per share increased by 5.2% to $1.61 for the year ended December 31, 2002 versus $1.53 for the same period in 2001.

        The Company reported a 30.7% increase in net operating earnings to $27.6 million as compared to the prior year. Diluted earnings per share on an operating basis increased by 29.5% to $1.89 for the year ended December 31, 2002 versus $1.46 for the same period in 2001.

        The Company adopted SFAS No. 142, "Goodwill and Other Intangibles", as of January 1, 2002. Upon adoption, the Company ceased amortization of goodwill, as defined at that time, of $0.8 million. In September 2002, the Company adopted, and retroactively applied to January 1, 2002, SFAS No. 147, "Acquisitions of Certain Financial Institutions." Upon adoption, the previously defined by accounting guidance, balance of unidentifiable intangibles was reclassified to goodwill effective January 1, 2002. All 2002 unidentifiable intangible asset amortization expense recorded through September 30, 2002 was reversed and all future amortization was halted. The restated goodwill balance is $36.2 million. As a result of the adoption of SFAS No.142 and SFAS No.147, the Company did not record

19

any goodwill amortization expense in 2002 as compared to $2.8 million recorded in 2001. Goodwill amortization is reported as a component of non-interest expense.

        The Company summarizes the financial results for the twelve months and three months ended December 31, 2002 and December 31, 2001 on both an operating basis (which excludes the impact of the trust preferred issuance costs write-off, net of tax, of $1.5 million in the first half of 2002, a $2.5 million, net of tax, impairment charge on WorldCom Inc. bonds in the second quarter 2002, and securities gains of $928,000, net of tax, in 2001) and on an actual basis. These results are as follows:

Table 2—Reconcilement of Net Operating Earnings 2002 vs. 2001

(1)

Excludes trust preferred issuance costs write-off.

(2)

Reflects the restatement during the six months ended June 30, 2002 for the nonamortization of goodwill in accordance with SFAS No. 147.

(3)

Write-off charged directly to equity and is deducted from net income to calculate EPS.

Financial Position

        Loan Portfolio    At December 31, 2002, the Bank's loan portfolio amounted to $1.4 billion, an increase of $132.7 million, or 10.2%, from year-end 2001. This increase was primarily in adjustable rate real estate related loans which increased $114.5 million, or 91.5% compared to the prior year.

        Commercial and Industrial loans increased $304,000, or 0.2%. Commercial real estate loans increased $48.1 million, or 10.4%, the increase being primarily attributable to loans with variable rates of interest. Residential

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mortgage loans increased $52.3 million, or 22.8%. While the Bank sells the majority of its residential real estate loan production, the Bank will retain for its portfolio most adjustable rate and, on a selective basis, certain fixed rate residential mortgages. During 2002, the Bank originated $332.0 million in residential real estate loans of which $141.3 million was retained in its portfolio. Real estate construction increased $12.2 million, or 25.8%, the increase being primarily attributable to loans with variable rates of interest. Consumer loans increased by $19.8 million, or 4.9% compared to prior year and was primarily attributable to an increase in outstanding prime based home equity lines of credit.

        In accordance with governing banking statutes, Rockland is permitted, with certain exceptions, to make loans and commitments to any one borrower, including related entities, in the aggregate amount of not more than 20% of the Bank's stockholders' equity, or $41.1 million at December 31, 2002. Notwithstanding the foregoing, the Bank has established a more restrictive limit of not more than 75% of the Bank's legal lending limit, or $30.8 million at December 31, 2002, which may only be exceeded with the approval of the Board of Directors. There were no borrowers whose total indebtedness in aggregate exceeded $30.8 million as of December 31, 2002.

        The following table sets forth information concerning the composition of the Bank's loan portfolio by loan type at the dates indicated.

Table 3—Loan Portfolio Composition

        At December 31, 2002, $151.6 million, or 10.6%, of the Bank's gross loan portfolio consisted of commercial and industrial loans, compared to $151.3 million, or 11.6%, at December 31, 2001. The Bank's commercial revolving lines of credit generally are for the purpose of providing working capital to borrowers and may be secured or unsecured. At December 31, 2002, the Bank had $63.2 million outstanding under commercial revolving lines of credit compared to $59.9 million at December 31, 2001 and $124.4 million of unused commitments under such lines at December 31, 2002 compared to $91.1 million in the prior year. As of December 31, 2002, the Bank had $8.1 million in outstanding commitments pursuant to standby letters of credit compared to $8.3 million at December 31, 2001. Floor plan loans, which are included in commercial and industrial loans, and are secured by the automobiles, boats, or other vehicles constituting the dealer's inventory, amounted to $18.0 million as of December 31, 2002 compared to $14.4 million in the prior year.

        Real estate loans totaling $852.0 million comprised 59.5% of gross loans at December 31, 2002, as compared to $739.4 million or 56.9% of gross loan portfolio at December 31, 2001. The Bank's real estate loan portfolio included $511.1 million in commercial real estate loans at December 31, 2002. This category has reflected increases over the last year of $48.1 million, or 10.4%. Residential real estate loans which were, $281.5 million at year-end 2002, increased $52.3 million, or 22.8%, in 2002. While the Bank sells the majority of its residential real estate loan

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production, $141.3 million of residential mortgages, primarily with adjustable rates, were retained in the Bank's loan portfolio during 2002. During 2002, the Bank sold $179.4 million of the current production of residential mortgages as part of its overall asset/liability management. Real estate construction loans of $59.4 million increased by $12.2 million, or 25.8%, over the prior year, of which $10.3 million, or 17.3%, of total construction loans at December 31, 2002, were for the development of one-to-four family residential lots or the construction of one-to-four family residences compared to $7.5 million, or 15.9%, of total construction loans for the prior year period.

        Consumer loans primarily consist of closed-end installment loans, cash reserve loans, and home equity loans. As of December 31, 2002, $428.1 million, or 29.9%, of the Bank's gross loan portfolio, consisted of consumer loans compared to $408.3 million, or 31.5%, of the Bank's gross loans at December 31, 2001. The Bank's installment loans consist primarily of automobile loans, which amounted to $265.0 million and $267.7 million, at December 31, 2002 and 2001, respectively. Consumer installment loans of $323.5 million, decreased $770,000, or 0.2%, in 2002. As of December 31, 2002 and 2001, automobile loans of $265.0 million represented 61.9% and $267.7 million represented 65.6%, respectively, of the Bank's consumer loan portfolio. Indirect automobile loans accounted for approximately 80% of the Bank's total installment loan originations during 2002 and 2001, respectively. As of December 31, 2002, installment loans other than automobile loans amounted to $58.5 million compared to $56.6 million as of December 31, 2001. These loans were constituted largely by fixed home equity loans as well as loans secured by recreational vehicles, motor homes, boats, mobile homes, and motorcycles.

        Other consumer loans have consisted primarily of cash reserve loans, home equity lines and small business lines. The balances of other consumer loans increased $20.6 million to $104.6 million, or 24.5%, in 2002 compared to $84.0 million, in 2001.

        Cash reserve loans are designed to afford the Bank's customers overdraft protection. Cash reserve loans are made pursuant to previously approved unsecured cash reserve lines of credit. The rate on these loans is subject to change due to market conditions. As of December 31, 2002 and 2001, $20.6 million had been committed to but was unused under cash reserve lines of credit.

        Home equity loans may be made as a term loan or under a revolving line of credit secured by a first or second mortgage on the borrower's residence. As of December 31, 2002, there were $82.3 million in unused commitments under revolving home equity lines of credit compared to $62.5 million at December 31, 2001.

        The following table sets forth the scheduled contractual amortization of the Bank's loan portfolio at December 31, 2002. Loans having no schedule of repayments or no stated maturity are reported as due in one year or less. The following table also sets forth the rate structure of loans scheduled to mature after one year.

Table 4—Scheduled Contractual Loan Amortization At December 31, 2002

        As of December 31, 2002, $756,000 of loans scheduled to mature within one year were nonperforming.

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        Generally, the actual maturity of loans is substantially less than their contractual maturity due to prepayments and, in the case of real estate loans, due-on-sale clauses, which generally gives the Bank the right to declare a loan immediately due and payable in the event that, among other things, the borrower sells the property subject to the mortgage and the loan is not repaid. The average life of real estate loans tends to increase when current real estate loan rates are higher than rates on mortgages in the portfolio and, conversely, tends to decrease when rates on mortgages in the portfolio are higher than current real estate loan rates. Under the latter scenario, the weighted average yield on the portfolio tends to decrease as higher yielding loans are repaid or refinanced at lower rates. Due to the fact that the Bank may, consistent with industry practice, "roll over" a significant portion of commercial and commercial real estate loans at or immediately prior to their maturity by renewing the loans on substantially similar or revised terms, the principal repayments actually received by the Bank are anticipated to be significantly less than the amounts contractually due in any particular period. In addition, a loan, or a portion of a loan, may not be repaid due to the borrower's inability to satisfy the contractual obligations of the loan.

        The principal balance of loans serviced by the Bank for investors amounted to $353.6 million at December 31, 2002 and $291.1 million at December 31, 2001. Under its mortgage servicing arrangements, the Bank generally continues to collect payments on loans, to inspect the mortgaged property, to make insurance and tax advances on behalf of borrowers and to otherwise service the loans and receives a fee for performing these services. Net servicing fee income amounted to $1.3 million and $923,000 for the years ended December 31, 2002 and 2001, respectively. The Bank also sells certain loans and does not retain servicing. During 2002 and 2001 the Bank originated and sold $6.7 million and $10.2 million of loans along with the servicing rights, respectively. The servicing release premium on sold loans was approximately $73,000 in 2002 and $145,000 in 2001. Loan origination fees that relate to loans sold by the Bank are recognized as a component of mortgage banking income at the time of the loan sale. Under its sales agreements, the Bank pays the purchaser of mortgage loans a specified yield on the loans sold. The difference, after payment of any guarantee fee, is retained by the Bank and recognized as fee income over the life of the loan. In addition, loans may be sold at a premium or a discount with any resulting gain or loss recognized at the time of sale. As of December 31, 2002 and 2001, the Bank's loan-servicing asset was $2.0 million and $1.5 million, respectively. Amortization including impairment of the loan-servicing asset (included in net servicing fee income above) was $1.0 million for both the years ending December 31, 2002 and 2001 and $400,000 for the year ending 2000.

        Asset Quality    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, when the loan is liquidated, or when the loan is determined to be uncollectible and is charged-off against the allowance for loan losses.

        Nonperforming assets 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 December 31, 2002, nonperforming assets totaled $3.1 million, an increase of $62,000, or 2.1%, from the prior year-end. Nonperforming assets represented 0.13% of total assets for the year ending December 31, 2002 and 0.14% for the year ending December 31, 2001. There was no OREO or nonperforming securities for the periods ended December 31, 2002 and December 31, 2001.

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

Table 5—Nonperforming Assets

(1)

There were no restructured, nonaccruing loans at December 31, 2002, 1999 and 1998. In 2001 and 2000 there were $0.1 million and $0.2 million, respectively, of restructured, nonaccruing loans.

        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 December 31, 2002, the Bank had $497,000 of restructured loans. At December 31, 2002, the Bank had four potential problem loans not included in nonperforming loans with an outstanding balance of $3.5 million.

        Real estate acquired by the Bank through foreclosure proceedings or the acceptance of a deed in lieu of foreclosure is classified as OREO. When property is acquired, it is recorded at the lesser of the loan's remaining principal balance or the estimated fair value of the property acquired, less estimated costs to sell. Any loan balance in excess of the estimated fair value less estimated cost to sell on the date of transfer is charged to the allowance for loan losses on that date. All costs incurred thereafter in maintaining the property, as well as subsequent declines in fair value are charged to non-interest expense.

        Gross interest income that would have been recognized for the years ended December 31, 2002, 2001 and 2000, if nonperforming loans at the respective dates had been performing in accordance with their original terms approximated $227,000, $280,000, and $325,000, respectively. The actual amount of interest that was collected on these loans during each of those periods and included in interest income was approximately $42,000, $62,000, and $68,000, respectively.

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        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 December 31, 2002, impaired loans include all commercial real estate loans and commercial and industrial loans on nonaccrual status. Total impaired loans at December 31, 2002 and 2001 were $2.1 million and $1.7 million, respectively.

        Allowance for Loan Losses    While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on increases in 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. Federal Reserve regulators examined the Company in the first quarter of 2002 and the Bank was most recently examined by the Federal Deposit Insurance Corporation, "FDIC", in the fourth quarter of 2001. No additional provision for loan losses was required as a result of these examinations.

        The allowance for loan losses is maintained at a level that management considers adequate to provide for potential loan losses based upon evaluation of known and inherent risks in the loan portfolio. The allowance is increased by provisions for loan losses and by recoveries of loans previously charged-off and reduced by loans charged-off. In 2000, the Bank established a separate "credit quality discount" as a reduction of the loan balances acquired from FleetBoston Financial. This credit quality discount represents inherent losses in the acquired loan portfolio. The level of credit quality discount was $0.5 million at December 31, 2002 and $0.8 million at December 31, 2001.

        Including the credit quality discount, the total allowances for loan losses was $21.9 million at December 31, 2002, compared to $19.0 million at December 31, 2001.

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

Table 6—Summary of Changes in the Allowance for Loan Losses