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INDEPENDENT BANK CORP (INDB)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 GAAP EPS was $1.18 on net income of $50.0M; operating EPS was $1.21, driven by higher net interest income, a lower provision, and a reduced tax rate (20.49%) versus Q3 .
  • Net interest margin expanded 4 bps to 3.33% (core 3.31%) as funding costs declined; total revenue was $176.9M (NII $144.7M, noninterest income $32.2M) .
  • Asset quality was stable: NPLs 0.70% of loans, net charge-offs 0.03% of average loans annualized; provision fell to $7.5M from $19.5M in Q3, aided by specific reserve actions on identified office exposures .
  • 2025 guidance (ex-Enterprise) calls for low-to-mid single-digit loan/deposit growth, ~15 bps NIM expansion over 2024 Q4 core (3–4 bps/quarter), lower provisions than 2024, mid-single-digit growth in fees and core expenses, ~23% tax rate; one-time ~$3M core conversion costs expected in 2025 .
  • Catalysts: margin expansion trajectory and expected resolution of large office credits (short sales pending), plus the strategic/financial merits of the Enterprise Bancorp acquisition and a 4% dividend increase in March 2025 (post-quarter) and a $0.57 dividend paid Jan 6, 2025 (declared Dec 12) .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expanded to 3.33% (core 3.31%); management sees continued expansion from fixed-rate asset repricing and favorable deposit dynamics (20% non-time deposit beta, 80% time deposit beta) .
  • Asset quality stabilized: NPL/loans 0.70% (down from 0.73% in Q3), net charge-offs 0.03% (down from 0.18% in Q3), with provision reduced to $7.5M from $19.5M .
  • Strategic progress: 10 new C&I bankers hired; owner-occupied CRE reclassified to C&I to better reflect risk; entering Enterprise Bancorp deal to deepen markets; core system upgrade planned for May 2026 (“meaningful upgrade” enabling efficiencies and better API integration) .

What Went Wrong

  • Efficiency ratio worsened to 60.18% (from 57.31% in Q3) on higher noninterest expenses ($106.4M), including M&A expense ($1.9M), consulting, unrealized equity losses, and check fraud losses; occupancy had a $550K one-time lease termination cost .
  • Noninterest income declined 4% linked-qtr to $32.2M on lower loan-level derivatives and unrealized equity gains; AUA fell 1.8% to $7.0B on December market pullback .
  • Delinquencies rose to 0.60% of loans (from 0.33% in Q3), driven by a $30M syndicated downtown Boston office loan hitting early-stage delinquency at maturity (no specific reserve yet; appraisal pending in Q1 2025) .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Total Revenue ($M)$177.163 $175.252 $176.852
Net Interest Income ($M)$145.096 $141.703 $144.661
Noninterest Income ($M)$32.067 $33.549 $32.191
Diluted EPS ($)$1.26 $1.01 $1.18
Operating EPS ($)$1.26 $1.01 $1.21
Net Interest Margin (%)3.38% 3.29% 3.33%
Efficiency Ratio (%)56.87% 57.31% 60.18%
ROA (%)1.13% 0.88% 1.02%
ROAE (%)7.51% 5.75% 6.64%
Provision for Credit Losses ($M)$5.5 $19.5 $7.5

Segment/Portfolio Breakdown (Period-End Loans, $M):

CategoryQ3 2024Q4 2024
Commercial & Industrial$2,946.6 $3,047.7
Commercial Real Estate$6,793.3 $6,756.7
Commercial Construction$742.0 $782.1
Small Business$270.0 $281.8
Total Commercial$10,751.9 $10,868.2
Residential Real Estate$2,441.9 $2,460.6
Home Equity – First$498.2 $490.1
Home Equity – Subordinate$632.2 $650.1
Other Consumer$36.6 $39.4
Total Loans$14,360.8 $14,508.4

Key KPIs:

KPIQ3 2024Q4 2024
Cost of Total Deposits (%)1.74% 1.65%
Core Deposits / Total Deposits (%)81.7% 81.7%
Noninterest-bearing / Total Deposits (%)29.3% 28.7%
NPLs / Loans (%)0.73% 0.70%
Net Charge-offs / Avg Loans (annualized)0.18% 0.03%
CET1 Capital Ratio (%)14.57% 14.64%
TCE / TA (%)10.75% 10.86%
TBVPS ($)$46.57 $46.96
Tax Rate (%)22.35% 20.49%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Loans growthFY 2025Not previously providedLow to mid-single digit % increase New
Deposits growthFY 2025Not previously providedLow to mid-single digit % increase New
Net Interest MarginFY 2025Not previously provided~+15 bps from Q4’24 core, ~3–4 bps per quarter New
Provision for Credit LossesFY 2025Not previously providedLower than 2024; driven by growth/credit migration New
Noninterest IncomeFY 2025Not previously providedMid-single digit % increase New
Core Noninterest Expense (ex-M&A)FY 2025Not previously providedMid-single digit % increase New
One-time Core Conversion CostsFY 2025Not previously provided~$3M non-capitalized in 2025 New
Tax RateFY 2025Not previously provided~23% New
DividendQ4 2024Not applicable$0.57 per share, payable Jan 6, 2025 Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Net Interest Margin trajectoryQ2 NIM 3.25% with expansion; disciplined growth and deposit generation . Q3 NIM 3.29%; margin expansion from higher loan yields and securities deployment .NIM 3.33% (core 3.31%); roadmap shows ~12–15 bps annual expansion; near-term lift from CD repricing .Improving, with guided quarterly expansion .
Deposits & betasQ2: strong deposit growth; cost 1.65% . Q3: average deposits +2.2% QoQ; cost 1.74% .Average deposits +0.7%; cost down to 1.65%; ~20% non-time beta, ~80% time deposit beta .Stabilizing costs; favorable beta dynamics .
CRE Office exposureQ2: stable NPA, minimal charge-offs . Q3: provision up to $19.5M on one office loan; NPL/loans rose to 0.73% .NPL/loans 0.70%; two large office loans pending short sales with increased specific reserves; $30M syndicated Boston office loan in early delinquency; resolutions expected 1H25 .Active resolution underway; directional improvement contingent on short sales .
Technology initiativesNo notable prior disclosure.Core FIS platform upgrade planned (May 2026) to enhance efficiency/API capabilities and treasury/cash management; streamline branch-to-back-office workflows .New strategic upgrade initiative .
M&A (Enterprise Bancorp)Not applicable in Q2/Q3.Announced Dec 9; strategic/financial merits reiterated; branch visits completed; pro forma metrics outlined in deck .Integration planning progressing .
Wealth managementQ3 AUA hit record $7.2B; fee growth .AUA $7.0B after Dec pullback; net flows about -$20M; revenue steady .Stable franchise with modest headwind from markets .

Management Commentary

  • “Solid fourth quarter results driven by net interest margin improvement, stable credit trends and double-digit annualized growth in our C&I and small business loan segments.” – CEO Jeffrey Tengel .
  • “We reclassified owner-occupied CRE loans to C&I… more accurately reflects the purpose and risk… consistent with industry standards and regulatory guidance.” – CEO .
  • “We entered into an agreement to acquire Enterprise Bancorp… franchises fit together like 2 puzzle pieces… even more convinced about the strategic and financial merits.” – CEO .
  • “Upgrade our core FIS processing platform… will improve technology infrastructure, enhance efficiency and support future growth… convert in May of 2026.” – CEO .
  • “Net interest margin improved by 4 bps… drivers should remain intact… CD repricing provides near-term lift; longer-term fixed asset repricing drives 12–15 bps annual expansion.” – CFO Mark Ruggiero .

Q&A Highlights

  • Loan growth outlook: Mid-single-digit 2025 growth underpinned more by recent banker hires than broad demand; taking share in cautious macro .
  • New loan yields vs runoff: New volumes mid-6% to ~7% given recent rate uptick; runoff in low-to-mid 5% range, supporting spread capture assumptions .
  • Office delinquencies: $30M syndicated Boston office loan drove delinquency uptick; no specific reserve yet, appraisal expected Q1 2025; other office loans proceeding toward note/short sales with added reserves .
  • Core upgrade benefits: Better efficiencies, improved API/product capability, stronger treasury and branch/back-office workflow integration .
  • NIM cadence: Expect a few bps of margin lift in 1H25 from CD repricing; full 12–15 bps expansion realized over ~12 months .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 were unavailable at the time of analysis due to data access limits; as a result, we cannot provide a quantified beat/miss versus Street for EPS or revenue. Values retrieved from S&P Global would appear here if accessible.
  • Management characterized results as “largely in line with expectations,” highlighting modest NIM expansion offset by outsized expenses .

Key Takeaways for Investors

  • Margin momentum is in place: NIM rose to 3.33% in Q4 and management guides ~+15 bps over 2025 from Q4’24 core, implying sequential expansion through the year .
  • Credit stabilization coupled with identified office resolutions should reduce provision needs versus 2024; NPLs/loans at 0.70% and NCOs 0.03% in Q4 support this view .
  • Deposit franchise remains a strength: average balances grew and cost of deposits fell to 1.65%, with favorable betas positioning for additional funding cost relief if rates decline .
  • Expense normalization expected: Q4 included non-core costs (M&A, consulting, unrealized equity losses, fraud losses, lease termination); 2025 core expenses guided to mid-single-digit growth, with ~$3M one-time core conversion spend .
  • Strategic catalysts: Enterprise Bancorp acquisition adds density and scale; core systems upgrade should enhance efficiency and product delivery; both support medium-term profitability and operating leverage .
  • Capital remains robust (CET1 14.64%, TCE/TA 10.86%; TBVPS $46.96), supporting dividends and growth; the $0.57 dividend declared in Dec reflects ongoing return of capital .
  • Near-term trading: Focus on progress resolving named office credits and realized NIM expansion; medium-term thesis benefits from deposit mix, asset repricing, and synergy capture post-Enterprise .

Appendix: Additional Q4 2024 Details

  • Revenue composition: NII $144.7M, noninterest income $32.2M; fee drivers included higher deposit fees offset by lower swap income and equity security marks; AUA $7.0B .
  • Operating metrics: ROA 1.02%, ROAE 6.64%, ROATCE 9.96%; operating ROA 1.05%, operating ROAE 6.82%, operating ROATCE 10.23% .
  • Balance sheet: Total assets $19.37B; loans $14.51B; deposits $15.31B; securities 14.0% of assets; CET1 14.64%; TCE/TA 10.86% .