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INDEPENDENT BANK CORP (INDB)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 showed solid linked‑quarter improvement: GAAP net income rose to $51.1M ($1.20 diluted EPS) and operating EPS was $1.25, driven by higher revenues and sharply lower provisioning; core NIM held at 3.37% while reported NIM dipped 5 bps given sub‑debt costs .
  • Credit metrics improved materially: nonperforming loans fell to $56.2M (0.39% of loans) from $89.5M, net charge‑offs dropped to $6.5M from $40.9M, and provision declined to $7.2M from $15.0M .
  • Balance sheet growth and mix were constructive: deposits +$217.7M (1.4%), C&I loans +$105.0M (3.4%), period‑end borrowings –$100.4M; cost of deposits fell 2 bps to 1.54% .
  • Strategic catalysts: $150M share repurchase authorization and July 1 completion of Enterprise Bancorp acquisition; management guided combined Q3 margin to mid‑3.60% with 20–25 bps purchase accounting lift, a potential stock driver .
  • Versus Wall Street: S&P Global consensus Primary EPS 1.21* vs actual 1.25* (beat); Revenue consensus $178.24M* vs actual $174.60M* (miss on SPGI “revenue” definition; company reported total revenue $181.8M) [GetEstimates; S&P Global] .

What Went Well and What Went Wrong

What Went Well

  • Core NIM stable at 3.37% despite full quarter impact of March sub‑debt; reported NIM 3.37% supported by asset repricing, lower deposit costs, and FHLB payoff . CEO: “We are pleased with our second quarter results and the momentum…heading into the third quarter” .
  • Marked credit improvement: NPLs –$33.3M QoQ to 0.39% of loans; two large office NPAs resolved; provision halved; delinquencies fell to 0.20% .
  • Funding and capital: deposits +$217.7M; total borrowings –$100.4M; TBVPS rose $0.99 to $48.80; CET1 14.70%; announced $150M buyback . CFO: Q3 margin “mid 3.60%” driven by purchase accounting and asset repricing .

What Went Wrong

  • Reported NIM down 5 bps QoQ due to sub‑debt drag; overall funding cost +6 bps to 1.73% (borrowings cost impact) .
  • Noninterest expense +$2.9M QoQ (merger costs, fraud losses, director equity grants); loan‑level derivative income –94% QoQ on weaker customer swap demand .
  • Credit not “out of the woods”: management remains cautious on office exposures; criticized/classified balances ticked up and one syndicated office loan remains modified/non‑accrual near‑term .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Total Revenue ($M)$170.256 $178.044 $181.804
Net Interest Income ($M)$137.926 $145.505 $147.496
Noninterest Income ($M)$32.330 $32.539 $34.308
Provision for Credit Losses ($M)$4.250 $15.000 $7.200
GAAP Net Income ($M)$51.330 $44.424 $51.101
Diluted EPS (GAAP)$1.21 $1.04 $1.20
Operating EPS (Non‑GAAP)$1.21 $1.06 $1.25
Net Interest Margin (FTE, %)3.25% 3.42% 3.37%
Efficiency Ratio (GAAP, %)58.51% 59.47% 59.84%
ROAA (GAAP, %)1.07% 0.93% 1.04%
ROACE (GAAP, %)7.10% 5.94% 6.68%
Net Charge‑offs ($M)$0.339 $40.892 $6.519

Segment / Balance Sheet Breakdown (Ending Balances)

Loans ($000s)Jun 30 2024Mar 31 2025Jun 30 2025
Commercial & Industrial3,009,469 3,110,432 3,215,480
Commercial Real Estate6,745,088 6,651,475 6,525,438
Commercial Construction786,743 796,162 798,808
Small Business269,270 289,148 300,543
Total Commercial10,810,570 10,847,217 10,840,269
Residential Real Estate2,439,646 2,465,731 2,489,166
Home Equity – First504,403 484,384 479,641
Home Equity – Subordinate612,404 659,582 688,456
Total Consumer Real Estate3,556,453 3,609,697 3,657,263
Other Consumer33,919 35,055 36,296
Total Loans14,400,942 14,491,969 14,533,828
Deposits ($000s)Jun 30 2024Mar 31 2025Jun 30 2025
Noninterest DDA4,418,891 4,409,878 4,525,907
Savings & Interest Checking5,241,154 5,279,549 5,279,280
Money Market3,058,109 3,277,078 3,368,354
Time CDs2,691,433 2,709,512 2,720,199
Total Deposits15,409,587 15,676,017 15,893,740

Key KPIs

KPIQ2 2024Q1 2025Q2 2025
NPL / Gross Loans (%)0.40% 0.62% 0.39%
Delinquent Loans / Total Loans (%)0.37% 0.47% 0.20%
ACL / Total Loans (%)1.05% 0.99% 1.00%
Cost of Total Deposits (%)1.65% 1.56% 1.54%
CET1 Capital Ratio (%)14.40% 14.52% 14.70%
TCE / TA (%)10.42% 10.78% 10.92%
Tangible BVPS ($)$45.19 $47.81 $48.80
Book Value per Share ($)$68.74 $71.19 $72.13
Gross Loans / Total Deposits (%)93.45% 92.45% 91.44%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Stand‑alone NIM trajectoryFY 2025+3–4 bps per quarter expansion from core Q4’24; ~15 bps FY uplift (stand‑alone) Reaffirm stand‑alone +3–4 bps/quarter, but sub‑debt drag ~11 bps in Q2; core held at 3.37% Maintained with sub‑debt caveat
Combined NIM (post‑Enterprise)Q3 2025N/AMid‑3.60% with +20–25 bps purchase accounting lift; both INDB & EBTC +4–6 bps standalone New (raised outlook vs stand‑alone)
Deposits (combined)Q3 2025Low‑mid single‑digit (stand‑alone, FY) Flat to slightly down on combined basis due to acquired portfolio churn Lower near‑term vs prior
Loans (combined)Q3 2025Low single‑digit increase (stand‑alone, FY) Low single‑digit increase (combined) Maintained
Noninterest IncomeQ3 2025Mid single‑digit increase (FY stand‑alone) Low single‑digit increase (combined) Lower near‑term
Noninterest ExpenseQ3 2025Mid single‑digit increase (FY stand‑alone, excl. M&A) INDB stand‑alone flat to low single‑digit; modest EBTC cost saves start, full ~30% in 2026 Lower near‑term vs FY
Tax rateQ3 2025~23% FY ~23% Q3 Maintained
Capital actions2025–2026Prior buybacks in 2024; Q1’25 dividend +4% New $150M buyback auth. through Jul 16, 2026 New program

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Net interest margin pathReaffirm 3–4 bps/qtr expansion stand‑alone in 2025; core NIM 3.31% Q4 Core NIM steady at 3.37%; Q3 combined margin mid‑3.60% with PA lift Improving trajectory (post‑deal)
Deposits/costsCost of deposits 1.65% Q4; avg deposits +0.7% Cost of deposits 1.54%; balances +$218M; mix stable, noninterest DDA 28.5% Slight tailwind
Credit/office CREPlan to resolve large NPAs; caution on office cycle NPLs down 35% QoQ; still cautious, not “out of the woods”; syndicated office loan modified, remains non‑accrual Improving but cautious
Technology/AI initiativesPlanned core FIS upgrade by May 2026; platform efficiency/API benefits Core conversion for Enterprise Oct 2025; bank‑wide core conversion May 2026 Execution progressing
Tariffs/macro uncertaintyClients “wait‑and‑see”; tariff impacts uncertain Management reiterates uncertainty from tariffs, cautious customer posture Persistent headwind
Wealth/IMGAUA $7.0B Q4; stable revenue AUA +3.7% QoQ to $7.4B; investment mgmt revenue +1.4% QoQ Strengthening

Management Commentary

  • CEO: “We are pleased with our second quarter results and the momentum of our franchise heading into the third quarter…We closed the Enterprise Bancorp acquisition…focused on completing the core operating conversion in October 2025.” .
  • CFO: “Reported and core net interest margin was 3.37%…higher than our previous guidance as we saw a slightly higher asset repricing benefit…deposit pricing [reduction]…repayment of FHLB borrowings…” .
  • Strategic focus: reducing CRE concentration to ~290% by year‑end 2027 via amortization/payoffs and potential loan sales; expanding C&I with specialized verticals to drive deposit/fee growth .

Q&A Highlights

  • Loan origination yields: commercial closings “high sixes” (6.70–6.80%), consumer “mid‑sixes”; competitive landscape intense across C&I and CRE .
  • Credit outlook: management not ready to declare “worst behind” broadly; constructive sponsor behavior and guarantees support modifications/extensions on key office loans .
  • Funding/NIM mechanics: paid down $100M FHLB at 4.75% on April 30; June spot margin 3.40% .
  • Enterprise deal metrics: day‑one TBV dilution now ~8–9% (better than initial sub‑10%); purchase accounting NIM lift ~25 bps (lower than prior ~28 bps given rate‑mark contraction); full cost saves (~30% of EBTC expense base) in 2026 .
  • Capital: pro forma CET1 expected mid‑12% range (~12.5%) post‑deal under current CECL treatment .

Estimates Context

Metric (S&P Global)Q2 2025 ConsensusQ2 2025 Actual
Primary EPS Consensus Mean ($)1.21*1.25*
Revenue Consensus Mean ($M)178.24*174.60*
  • Company reported diluted EPS (GAAP) was $1.20 and operating diluted EPS was $1.25 in Q2 2025 . Company “total revenue” (NII + noninterest income) was $181.8M; SPGI “Revenue” may be defined differently, hence the apparent miss vs SPGI despite reported revenue growth .
  • Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Credit momentum is a clear positive: rapid NPL reduction, sharply lower charge‑offs and provision, and better delinquency metrics reduce tail‑risk and support multiple re‑rating .
  • Margin outlook inflects higher post‑Enterprise: mid‑3.60% combined NIM with 20–25 bps purchase accounting lift in Q3 should drive PPNR growth despite modest deposit attrition risks .
  • Funding strength and capital actions (buyback, FHLB repayment) provide flexibility to balance growth and shareholder returns; TBVPS continues to compound .
  • C&I expansion and wealth AUA growth diversify earnings away from transactional CRE, aligning with regulators and improving fee contribution over time .
  • Watch items: reported NIM still sensitive to sub‑debt drag and long‑end rates; office CRE remains a work‑through (constructive sponsor behavior but timeline uncertain) .
  • Near‑term trading catalysts: buyback deployment, Q3 margin realization (purchase accounting lift), and additional NPA resolutions; medium‑term thesis hinges on core conversion efficiencies and full EBTC cost‑save capture in 2026 .