INDEPENDENT BANK CORP Q3 FY2024 earnings call

• Performance Inflection: Q3 performance showed margins improving, deposits growing, and one large commercial real estate loan moved to non-performing status. - Strategic Priorities: Actively managing commercial real estate exposure, reorienting balance sheet to C&I, growing deposits, Wealth Management business growing AUA to $7.2 billion, and maintaining disciplined credit underwriting. - M&A and Buybacks: Assessing M&A opportunities, evaluating stock buyback based on excess capital and market conditions.

Deposits: Period end deposit balances increased slightly; average deposits grew 2.2% (almost 9% annualized) for the quarter, with strong growth in non-interest-bearing business checking accounts and core households growing 1%. Loans: Total loans decreased $40 million (0.3%) for the quarter; commercial loan balances reduced due to payoff activity, commercial pipeline up 9% linked quarter, C&I activity increased but utilization low; consumer side had home equity growth and mortgage closings up. Wealth Management: AUA reached a record $7.2 billion in Q3. Asset Quality: A large $54.6 million office loan moved to non-performing status with a $22.4 million specific reserve set up; a $5.9 million C&I credit was charged off; adversely related loans declined. Net Interest Margin: Improved 4 basis points to 3.29% in Q3. Non-Interest Income: Increased due to deposit-related fees and interchange; AUA at $7.2 billion. Expenses: Slight increase, including outsized items like a valuation adjustment and debit card processing credit.

• Loan and Deposit Growth: Anticipates low single-digit percentage increases for Q4; full-year loan growth in low single-digit range and full-year deposit growth in low to mid-single-digit range. - Net Interest Margin: Anticipates slight contraction or 0-5 basis points in near term due to deposit repricing lag; long-term margin expansion expected with Fed cuts. - Asset Quality: Charge-offs centered on existing reserves; provision expense based on emerging credit trends. - Non-Interest Income: Reaffirms low single-digit percentage increase for full-year 2024, flat Q4 vs Q3. - Non-Interest Expense: Reaffirms low single-digit percentage increases for full-year 2024 and Q4 vs Q3. - Tax Rate: Expected to be around 22% in Q4.

• Commercial Real Estate Loan Stress: Large office loan maturing in 2025 with uncertainty, reserve set up, and need for sponsor commitment. - Syndicated Loan Complexity: Syndicated $30 million loan downgraded due to tenant loss, requiring bank group agreement on extension. - Office Portfolio Uncertainty: Occupancy decline and debt service coverage pressure for the $30 million loan, and ongoing uncertainty with other office loans.

Q: Steve Moss inquired about the $30 million classified loan workout, borrower cooperation, and reserve color.

A: Jeff mentioned the syndicated loan's complexity with TBD extension and lack of tenant, and Mark discussed reserve levels including the large $22 million specific reserve.

Q: Steve Moss asked about the $54.6 million loan's borrower cooperation and reserve color.

A: Jeff stated the borrower isn't cooperating and they're exploring loan sale/foreclosure options.

Q: Mark Fitzgibbon asked about office portfolio reserves, home equity/utilization rates, C&I utilization, acquisition probability, and buybacks.

A: Mark talked about reserve levels, home equity/utilization at ~35% and C&I at ~28%, acquisition possibility, and buyback discussion.

Q: Laurie Hunsicker inquired about office loan details, $54.6 million provision, maturities, and lab exposure.

A: Jeff and Mark discussed office loan occupancy decline, provision amount, maturity details, and lab exposure.

Q: Christopher O'Connell asked about office criticize/classified maturities, margin trajectory, and NIM timeline.

A: Mark discussed criticize/classified loans, margin expansion potential, and NIM timing based on Fed cuts and CD repricing.