Independent Bank Corp. Q3 FY2025 earnings call

Enterprise Integration

• George Duncan and other senior Enterprise executives remain involved, providing invaluable insights. Integration went extremely well with great collaboration between teams. Colleagues have noted the different and better practices from Enterprise that are being adopted.

Business Lines

• Commercial banking retained almost 100% client-facing personnel with negligible customer loss; Enterprise bankers' originations up 27% year-over-year. Retail banking retained all branches and employees, with strategic methodologies from Enterprise to be incorporated. Deposit retention at Enterprise better than expected excluding brokered funds. Wealth management AUA grew to $9.2 billion.

Financials

• NIM improved to 3.62%, driven by loan and securities cash flow repricing, payoff of acquired debt, purchase discount accretion on securities, and loan accretion. Organic demand deposit growth 5% annualized, cost of deposits 1.58%. CRE concentration at 295% post-Enterprise acquisition, with plan to exit additional transactional CRE.

The PPNR return on average assets was 1.7% on an operating basis, and the operating return on average tangible common equity improved 283 basis points to 13.2%. Wealth management AUA grew to $9.2 billion in the third quarter, inclusive of the $1.4 billion acquired from Enterprise. There was strong C&I loan growth, with Enterprise Bankers' originations 27% higher than the prior year period. Organic demand deposit growth was 5% annualized in the third quarter, with DDAs representing 28% of overall deposits. Commercial real estate loan balances declined organically at a 6.7% annualized rate, and the CRE concentration landed at 295% post-Enterprise acquisition.

Fourth-Quarter

• Anticipates low single-digit percentage loan and deposit growth off September balances. Asset quality provision highly driven by individual commercial credits. Net interest margin expected 4-6 basis points expansion (adjusted, excluding loan accretion volatility). Non-interest income flat to low single-digit increase. Non-interest expense core expenses excluding merger and one-time costs to decrease ~$2 million. Core system upgrade in May '26 expected to have ~$5 million one-time costs in next couple quarters.

• Uncertainty from government shutdown, tariffs, etc. affecting clients. Office credit resolution still ongoing with some criticized loans maturing. Loan accretion results can be lumpy due to prepayments, individual loan payoffs, and repricing events.

Q: Could you quantify C&I loan growth and talk about the pipeline?

A: C&I growth driven by lower middle market focus, hiring for middle market and specialty businesses. Pipelines are pretty healthy, somewhat stable with past levels.

Q: Where is loan pricing?

A: On spread basis, looking to get above 200 basis points on C&I, around low sixes given current rates.

Q: Thoughts on office credit resolution?

A: Feel better than six months ago, resolved several larger problems, still work to do but seeing positive resolutions with sponsors.

Q: Guidance on margin expansion?

A: Anticipate 4-6 basis points of expansion on adjusted basis, excluding loan accretion volatility. Loan accretion results can be volatile but expect move north in future quarters.

Q: Expenses and one-time charges?

A: One-time charges expected to be ~$8-10 million in fourth quarter. Core expenses excluding merger and one-time costs to decrease ~$2 million.