Independent Bank Corp. Q2 FY2025 earnings call

• Closed the Enterprise transaction on July 1, sold large NPAs, signed new headquarters lease. - Better-than-expected NIM performance, solid C&I loan growth, strong deposit growth, lower credit costs (offset by higher expenses and CRE runoff). - Reduced nonperforming assets, but some office loans didn't resolve. - Work to reduce CRE concentration, goal to get to 290% by year-end 2027. - Defined segments for growth: Community Banking, Middle Market/Specialty, Investment CRE. - Closed Enterprise acquisition, similar business model, no branch closures. - Core conversion from Horizon to IBS scheduled for May 2026. - Prudently grew deposits, cost of deposits low. - Wealth Management AUA grew 4%, investment management revenues up.

The company has several product segments. The Community Banking segment is composed of generalist relationship managers marketing to C&I and CRE customers, with average loan size over $1 million and C&I customers typically with revenues between $5 million and $50 million. The Middle Market and Specialty Business segment includes two groups: one focused on Massachusetts C&I companies with revenues $50 million to $500 million with higher credit holds ($10 million to $35 million). The Investment CRE Portfolio segment focuses on investment CRE professionals with loan size typically greater than $10 million. Wealth Management saw AUA grow 4% in Q2 2025 to $7.4 billion. Deposits had core deposit growth with period-end balances up $218 million, non-time deposits up 3.6% YOY and 1.6% Q/Q, cost of deposits 1.54%. Loans: Total loans modestly increased, C&I loans up 3.4%, CRE and construction loans down 1.7%. Asset quality: Nonperforming loans decreased to $56.2 million, but some office loans had issues with resolutions falling through.

• Third quarter margin anticipated to be in the mid-360s range. - Tangible book dilution initially anticipated 8%-9%, improved due to rate marks. - Pro forma CET1 ratio expected in the mid-12% range, around 12.5%. - Net interest margin driven by asset repricing, deposit costs stable. - Tax rate expected to be in the 23% range for Q3.

• CRE challenges: Some office loans didn't resolve as expected, CRE portfolio runoff. - Economic uncertainty: Impact of tariffs and federal actions unclear, customers cautious. - Competitive pressures: Deposits facing competitive pressures. - Credit risks: Some loans moved to special mention bucket, need to work through challenges.

Q: Where were new loan originations during the quarter? And can you speak to competitive dynamics and loan pricing?

A: New loan originations were broad-based across segments. Competitive landscape is a challenge with many banks interested in growing C&I portfolio; some banks tiptoeing back into commercial real estate. On yield, commercial closings in Q2 in high 6s, consumer book mid-6s.

Q: Your small business lending continues to be a bright spot. Why has it been successful and will it continue?

A: It's an extension of core business, long-time Rockland Trust bankers well-known in market, centralized underwriting unit enables quick loan turnarounds. Expect it to continue.

Q: Third quarter margin is anticipated in mid-360s. With Fed cuts, how will NIM be affected?

A: Positioned well on short end of curve; would neutralize asset downward pressure and move on deposits to negate impact; longer end of curve elevated driving margin expansion.

Q: You made a large loan modification. Can you share details?

A: Refers to large syndicated downtown Boston loan, restructured into note A, note B structure with full payment deferral through July 2026, no additional loss recognized, loan to stay nonperforming near term.

Q: Office loan criticized, loan loss provisions?

A: Some loans migrated to special mention bucket, but sponsors working constructively, paths for resolution; in some cases, sponsors putting money in, productive dialogue; some have guarantees.

Q: Deposit paydown, spot margin?

A: $100 million FHLB borrowing paid off on April 30 at 4.75% rate; spot margin for June was 3.40%.

Q: Appetite for M&A?

A: Not a priority now, just closed Enterprise, have conversion in October, focused on organic growth and reducing office exposure, no immediate focus on M&A.