Independent Bank Corp. Q1 FY2026 earnings call

First quarter results reflect progress in organic growth, expense management, and capital optimization. NIM improved 13 basis points from the fourth quarter, with adjusted NIM excluding loan accretion income up 8 basis points. Expenses excluding M&A charges were down 1.5% from the fourth quarter,受益于企业交易的成本节约影响,部分被季节性较高的员工和占用成本抵消. $94 million of capital was returned to shareholders in the first quarter, including repurchase of 802,000 shares for $63 million. Tangible book value rose to $47.86 and quarterly dividend was increased by 8.5%. Work underway to transition core operating platform from Horizon to IBS, scheduled for October 2026. Established Office of Digital Innovation and governance framework around AI activities. Loan and deposit growth muted due to Iran war, rate volatility, and inflation, but loan portfolios not stressed. Wealth management business is a key fee income driver. Focus on accelerating organic growth, reducing CREE office portfolio, and prudent capital management.

Commercial loans: Total commercial loans declined by $50 million from the fourth quarter. Excluding the impact of the $39 million decrease in the dealer floor plan business (which is being exited), C&I loans rose at a healthy 7% annualized basis. Commercial real estate: The office portfolio contributed $56 million of the $94 million drop in commercial real estate balances for the quarter. CREE concentration now stands at 283%. $179 million of relationship-based CREE loans were funded and $290 million of CREE commitments were added in the first quarter. Wealth management: AUA were essentially flat at $9.2 billion. Revenues grew at an 11% annual rate driven by higher asset base fee revenue and insurance commissions.

Reaffirms two primary profitability targets for fourth quarter of 2026: return on average assets of 1.40% and return on average tangible capital of 15%. Updates construction loan full year estimates to flat to low single digit percentage increases. Other loan and deposit estimates unchanged. Increases net interest margin estimate for fourth quarter of 2026 to be in the range of 3.90% to 3.95%, still assuming 10 basis point impact from purchased accounting accretion.

Pricing competition, especially on deposit side, with some customer funds leaving for unmatched rates. Macro-economic uncertainty impacting loan demand, e.g., in multifamily asset class. Intense competition in commercial real estate market, including low and high ends, and uncertainty around rent control. Challenges in office portfolio, identifiable but manageable. Potential increased pressure on consumer side.

Q: Justin Crowley asked about the reason for adjusting loan growth guidance and borrowers' response to macro volatility.

A: On CREE side, competitive commercial real estate market and prospect of rent control in Eastern Massachusetts multifamily projects causing market slowdown. Borrowers' caution, but not no activity at all.

Q: David Conrad asked about capital, buyback and Basel III proposal impact.

A: CT1 level around 12.9%, looking to keep capital relatively flat, considering funding and CREE concentration. Rough modeling shows about 7%-8% reduction in risk-weighted assets from Basel III proposal.

Q: Steve Moss asked about loan pipeline, loan yields, securities cash flows.

A: Commercial loans at low 6% range, consumer mortgage yields lower, securities portfolio likely to stay relatively flat.

Q: Lori Hunsaker asked about office credit, dealer floor plan loan, expenses.

A: Office loan details including charge-off and payoff, dealer floor plan loan runoff and reason for exiting, expense details including core system conversion, FICA, etc.

Q: Matthew Breeze asked about deposit cost, NIM guidance, commercial real estate transactional balance, rent control, AI impact.

A: Deposit cost competition, NIM trajectory, transactional commercial real estate balance estimate, views on rent control, initial AI impacts on expenses and revenues.

Q: Jared Shaw asked about securities accretion, CD beta, deposit strategy.

A: Securities accretion details not easily quantifiable, views on CD beta and deposit strategy in competitive market