Independent Bank Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
January 17, 2025

There are 7 speakers on the call.

Operator

Before proceeding, please note that during this call, we will be making forward looking statements. Actual results may differ materially from these statements due to a number of factors, including those described in our earnings release and other SEC filings.

Operator

We undertake no obligation to publicly update any such statements. In addition, some of our discussions today may include references to certain non GAAP financial measures. Information about these non GAAP measures, including reconciliation to GAAP measures, may be found in our earnings release and other SEC filings. These SEC filings can be accessed via the Investor Relations section of our website. Matters relating to our pending acquisition of Enterprise Bancorp will be addressed in a registration statement on Form S-four to be filed by independent with the SEC that will include a proxy statement for a special meeting of Enterprise's shareholders to approve the proposed transaction and that will also constitute a prospectus for the independent common stock that will be issued as part of the proposed transaction.

Operator

Information regarding the persons who may, under the SEC's rules, be deemed to be participants in the solicitation of proxies from the Enterprise shareholders in connection with the proposed transaction will be set forth in the registration statement. We urge you to read the registration statement when it becomes available because it will contain important information. Finally, please also note that this event is being recorded. I would now like to turn the conference over to Jeff Tengel, CEO. Please go ahead.

Speaker 1

Thank you. Good morning and thanks for joining us today. I'm accompanied this morning by CFO and Head of Consumer Lending, Mark Ruggiero. I'm pleased to report solid 4th quarter results driven by net interest margin improvements, stable credit trends and double digit annualized growth in our C and I and small business loan segments. Importantly, our average deposits grew at an approximate 3% annualized rate.

Speaker 1

Our pre provision net revenue ROA was 1.48 on an operating basis and our tangible book value improved 1% from the 3rd quarter and 6.4% from the year ago quarter. As always, this performance reflects our team's continued commitment to developing and deepening customer relationships. Mark will elaborate on our financial results in a few minutes. As I reflect on 2024, I believe we made solid progress on several of our key strategic priorities. First, we made steady progress towards reducing our commercial real estate concentration.

Speaker 1

C and I and small business loans were up 4% 12%, respectively, in 2024. Conversely, CRE and construction loan balances were essentially flat due to normal amortization and the intentional reduction of transactional Cree business. At year end, our Cree concentration stood at 305, down 2% from the 3rd quarter. We will continue to reduce transactional CRE business and free up capacity to support our legacy commercial real estate relationships. In 2024, we hired 10 new C and I bankers, reflecting the desirability of our platform and the award winning culture of Rockland Trust.

Speaker 1

C and I loan production of approximately $785,000,000 was up 28% in 2024. Importantly, C and I loan production represented 50% of total commercial loan production in 2024, up from 40% in 2023. We also originated $81,000,000 of business banking loans, up 8% from 2023. And finally, we hired a seasoned banker to lead a newly established not for profit vertical within our commercial banking business, which should bolster both commercial loans and deposits. I would note that this quarter we reclassified owner occupied CRE loans from the CRE bucket to the C and I bucket.

Speaker 1

We believe this more accurately reflects the purpose and risk of owner occupied loans and is consistent with industry standards and regulatory guidance. The prior periods have been restated to allow for ease of comparison. 2nd, in December, we entered into an agreement to acquire Enterprise Bancorp. This transaction will add density to our existing markets while expanding the Rockland Trust franchise into Northern Mass and Southern New Hampshire. As we mentioned in December, our franchises fit together like 2 puzzle pieces.

Speaker 1

We have made in person visits to all 27 enterprise branches, all of which will remain open post close and have had numerous cross functional meetings with the enterprise team across all business units. No surprise, we've been extremely pleased with the collective outcome of these meetings, which have validated our assumption, namely that their business practices, strong focus on the customer experience and engagement of their colleagues mirrors that of Rockland Trust. We are even more convinced about the strategic and financial merits of this deal. 3rd, we finalized plans to upgrade our core FIS processing platform. The move to a new platform within the FIS ecosystem will improve our technology infrastructure, enhance efficiency and support the future growth of the bank.

Speaker 1

We plan to convert our systems in May of 2026. 4th, we prudently grew deposits, which has been a historical strength of ours. In the Q4, the cost of deposits was 1.65%, highlighting the immense value of our deposit franchise. Mark will provide additional color on our deposits in a few minutes. 5th, our wealth management business continues to be a key value driver.

Speaker 1

We grew our AUA by 7.6 percent in 2024 to $7,000,000,000 inclusive of the December market pullback. This business works seamlessly with our retail and commercial colleagues to deliver a holistic experience that resonates with our clients. The breadth of these services provides one stop shopping for our clients that includes not only investment management, but financial planning, estate planning, tax prep, insurance and business advisory services. This full suite of products is a differentiating factor for our wealth business. And lastly, I would be remiss if I did not mention our historical disciplined credit underwriting and portfolio management.

Speaker 1

Rockland Trust solid loan underwriting has consistently resulted in low loan losses through various economic cycles. Net charge offs have averaged 5 basis points over the last 10 years. While we clearly have some already identified troubled office loans, we have been proactive in monitoring and addressing these credits, many of which were originated by banks that we acquired. As we look into 2025, we remain optimistic about our abilities to navigate an uncertain interest rate environment. We will continue to focus on those actions we have control over and look to capitalize on our historical strengths.

Speaker 1

There's no magic to our value proposition. We just do community banking really well and believe our current market position represents a high level of opportunity, and we remain focused on long term value creation. A top priority in 2025 will be closing the enterprise acquisition and integrating the 2 companies. There are a lot of synergies to be captured that are not in any of our estimates. We will also continue to focus on loan portfolio diversification and prudent expense management, while we build a best in class organization.

Speaker 1

Underscoring every measure of success is a talented team of engaged, passionate and highly talented colleagues focused on making a difference for the customers and communities we serve. That is why we are proud to be named the top place to work in Massachusetts by the Boston Globe for the 16th consecutive year. In summary, we are fully equipped to deliver the consistent results the market expects with a skilled and experienced management team, ample capital, attractive markets, disciplined credit underwriting, strong brand recognition, operating scale, a broad consumer, commercial and wealth customer base and an energized and engaged workforce. In short, I believe we are well positioned to realize the benefits of the Enterprise acquisition and continue to take market share in the Northeast. On that note, I'll turn it over to Mark.

Speaker 2

Thanks, Jeff. I will now take us through the earnings presentation deck that was included in our 8 ks filing and is available on our website in today's investor portal. Starting on Slide 3 of the deck, 2024 4th quarter GAAP net income was $50,000,000 and diluted EPS was $1.18 resulting in a 1.02% return on assets, a 6.64% return on average common equity and a 9.96% return on average tangible common equity. Excluding $1,900,000 of merger and acquisition expenses and their related tax benefit, the adjusted operating net income for the quarter was $51,400,000 representing a 1.05% return on assets, a 6.82% return on average common equity and a 10.23% return on average tangible common equity. The results are largely in line with expectations, highlighted by modest margin expansion, offset by some level of outsized expenses that I'll provide additional color on in a bit.

Speaker 2

Tangible book value per share increased by $0.39 during the quarter, reflecting solid earnings retention, offset by a negative $0.30 impact from other comprehensive unrealized losses. And as Jeff mentioned, tangible book value per share increased $2.83 for the full calendar year despite the approximately $31,000,000 of share buyback activity earlier in the year. Turning to Slide 4, the deposit story continues to be a positive one as average balances increased by $109,000,000 or 0.7 percent for the quarter, while the period end balance decline of $135,000,000 reflects typical seasonal outflows within our business and municipal segments. The overall mix of deposits remains stable with non interest bearing DDA comprising 28.7% of total deposits at year end. Fueling the positive deposit momentum, core households experienced net growth for the quarter with total net growth of 2.8% for the full year.

Speaker 2

In addition, as we have highlighted over the last few quarters, this deposit stabilization provides a clear path for us to be able to reduce the cost of deposits in conjunction with the Q4 and any future Federal Reserve rate cuts. Moving to Slide 5, I'll quickly note that these balances reflect the owner occupied commercial real estate reclass that Jeff just alluded to earlier. Regarding activity for the quarter, advances in the construction book and solid closings in C and I drove a healthy net increase in total commercial balances, while small business regained strong growth after a fairly muted prior quarter. The approved commercial pipeline prior quarter. The approved commercial pipeline sits at $259,000,000 as of December 31.

Speaker 2

On the consumer side, both residential mortgage and home equity balances were up nicely in the quarter as we continue to see consistent demand across the footprint in both products. Shifting gears to asset quality on Slides 67, I'll highlight some of the key developments for the quarter. In summary, total non performing loans remained relatively stable at $101,500,000 or 0.70 percent of total loans as of year end. Notable developments on the largest non performing loans as detailed here on Slide 6 are as follows. The $53,800,000 office loan remains in workout status with resolution expected from a short sale of the underlying collateral.

Speaker 2

There is a signed offer pending with the offer price serving as the basis for the increase in the specific reserve of $3,900,000 to a total of $26,300,000 As the process is still in the early stages, we are anticipating resolution to occur in the Q2 of 2025. The 2nd loan on the list, an $11,700,000 office loan is also anticipated to be resolved via a short sale of the property. This too has a pending offer with the office price serving as the basis for an increase in the specific reserve on that loan of $2,200,000 during the quarter. We are hopeful for a 2025 Q1 resolution on this loan. And 3rd, the equipment rental C and I loan remain unchanged in balances as of December 31.

Speaker 2

But on a positive front, a $6,000,000 partial pay down was received subsequent to year end as a result of collateral sales under the bankruptcy proceedings. Ultimate resolution of the remaining $5,800,000 in outstandings will be determined by additional collateral sales. As noted on slide 7, these loans along with the modest loan growth noted earlier drove the $7,500,000 in provision for loan loss for the quarter, increasing the allowance as a percentage of loans to 1.17% as of year end. Jumping to slide 9 and a deeper dive on office exposure, we highlight that the total criticized and classified office loans remain virtually unchanged from the prior quarter. We already touched upon the 2 largest non performing office loans, while one other notable update would be in regards to the $30,000,000 syndicated loan that reached maturity in the Q4.

Speaker 2

For this loan, the borrower is receiving new tenant interest for some of the recently vacated space, as well as renewing some existing leases, which will all be incorporated in a new appraisal expected to be finalized and presented to the bank group during the Q1. With the potential modification and or ultimate resolution still unknown, no impact on balances or specific reserve was warranted in the quarter. In terms of office loan maturities for calendar year 2025, the vast majority and number of units are pass rated and performing without any known issues, with the status of the large first quarter non performing loan already discussed. Switching gears to Slide 11, we highlight the net interest margin improved by 4 basis points in the 4th quarter to 3.33 percent and improved 2 basis points on a core basis when excluding outsized benefit from interest recoveries on payoffs and purchase accounting accretion. The drivers of the 4th quarter margin performance should remain intact as we think about the environment going forward.

Speaker 2

Along those lines, we have added Slide 12 to provide additional detail on the company's expectations regarding the overall interest rate risk profile. To summarize, the bank has approximately 21% of its loan portfolio net of hedge positions that are tied to the short end of the curve and would reprice consistent with any future Fed reserve rate moves. Similarly, we estimate an approximate 20% deposit beta on our overall non time related deposits and an approximate 80% beta on time deposits, the effective timing of which would be in line with the future maturities of that book. Lastly, we currently have low levels of cash and borrowings that are tied to the short end of the curve. From a fixed rate repricing perspective, we project that the cash flows on our securities and loan books will reprice into a longer term rate curve that will drive yield spread increases on those cash flows of approximately 250 and 125 basis points respectively based on the current yield curve.

Speaker 2

The estimated impact of these moving pieces is reflected here on this slide and serves as the basis for the margin guidance that I'll share with the rest of the full year 2025 guidance shortly. Moving to Slide 13, non interest income decreased in the 4th quarter, driven primarily by reduced loan level derivative swap income and reduced unrealized gains on equity securities. Overall wealth management income stayed relatively consistent with the prior quarter as the market correction in December challenged revenue growth with overall assets under management ending the year at $7,000,000,000 Total expenses increased during the quarter, though partially impacted by a couple of large non recurring items, including a $550,000 one time expense for final resolution on a lease termination of an exited East Boston branch as well as $764,000 of unrealized losses on equity securities and the aforementioned $1,900,000 of merger and acquisition expenses. And lastly, for the tax rate, the tax rate for the quarter was approximately 20.5 percent, down from prior quarters as a result of additional tax credit investments made during the quarter, as well as the statutory release of a $1,200,000 uncertain tax position in conjunction with the 2023 tax return filing during the quarter.

Speaker 2

In closing out my comments, I'll turn to Slide 17 for full year 2025 guidance. As Jeff mentioned, we will keep you apprised of any new developments related to the closing of Enterprise Bancorp as that process develops. For now, we reaffirm the high level results as presented at announcement with the caveat being the uncertainty for fair value adjustment impact depending on the rate environment at closing. The rest of the guidance I'll provide now relates to Independent Bancorp as a standalone entity. In terms of loan and deposit growth, we anticipate low to mid single digit percentage increases for the full year.

Speaker 2

Regarding the net interest margin, as I laid out earlier, we believe the repricing of fixed rate assets will drive approximately 12 to 15 basis points of margin expansion over the course of the year, meaning approximately 3 to 4 basis points of expansion each quarter. Given the overall profile of the balance sheet, any additional Federal Reserve cuts are expected to have a neutral to slightly modest benefit on the overall margin forecast for the year. Regarding asset quality, we anticipate resolution of the larger non performing assets already discussed with minimal impact on provision levels as the expected loss on those loans has already been recognized. As we have been saying through the entire year, we will still expect to see some more bumps along the way. But given our view of the portfolio today, we would expect provision levels to come down from 2024 results and be driven by loan growth and any negative credit migration that's not already identified.

Speaker 2

Regarding non interest income, we expect a mid single digit percentage increase for full year 2025 versus 2024. And for non interest expense, we would suggest core expenses excluding M and A to increase at a mid single digit pace as well. As we work through integration with enterprise, we are also committed to moving forward with a significant core system upgrade, which Jeff just mentioned earlier. The upgrade will likely be effective in the first half of twenty twenty six with no material impact on the future expense run rate. However, we anticipate one time expenses in 2025 in the $3,000,000 range related to non capitalized implementation costs and we will highlight that spend separately throughout the year.

Speaker 2

Lastly, the tax rate for the full year is expected to be around 23%. And with that, we will now open it up for questions.

Operator

We will now begin the question and answer session. The first question comes from Steve Moss with Raymond James. Please go ahead.

Speaker 3

Hey, guys. Good morning. Hey, Steve. Good morning. Maybe just starting off with the loan growth outlook for 2025 here, it feels like a little bit of step up with including mid single digits for the upcoming year.

Speaker 3

Jeff, I know you mentioned at the beginning of the call highlighting a number of hires. Just kind of curious, have you seen an improvement in loan demand here in the last couple of months? Or is this more just the hires you highlighted in terms of expectations?

Speaker 1

On balance, I think it's more the people that we've hired. The customer sentiment we get is still kind of cautiously optimistic, but I wouldn't characterize it as being we're seeing like any kind of robust economic activity. So I would characterize it more as some of the people that we're hiring and taking share.

Speaker 3

Okay, great. And then in terms of the margin outlook here, I guess the details in the deck really were helpful. But I just was curious with regard to the reference rates you guys put for loans and securities. I'm assuming you're referring to the treasury curve. So you're thinking in terms of new loans coming on, they're coming on around a 6% rate.

Speaker 3

Am I reading that correctly?

Speaker 2

No. 4th quarter, Steve, we experienced probably mid-6s. Certainly with the tick up here in the last few weeks, there's the potential that we see new volumes coming on around 7%. But we are seeing the weighted average coupon of what's rolling off in the low to mid-5s in any given quarter. So that's sort of the basis for the 125 basis point spread that we referenced in the material.

Speaker 3

Okay, great. Appreciate that. And then just one last one for me. In terms of the $49,000,000 in past dues in office, just curious is the one of those I'm assuming is the $30,000,000 substandard that you guys gave the update on. And is there just a is there another loan within that past due bucket there?

Speaker 2

Yes, there is that's right. The $30,000,000 is the largest. There's another $7,000,000 office loan that we actually highlighted earlier in 2024 that at one point was subject to a note sale that deal had fallen through. We believe there's another opportunity for a note sale here that is pending. And then there is also, I believe an $11,000,000 in negotiations right now of a short sale, and that's the loan we took an additional $2,200,000 reserve during the quarter on.

Speaker 2

So it's primarily 3 loans, that make up the majority of that.

Speaker 1

Most of which we've talked about.

Speaker 2

That's right.

Speaker 3

Okay, perfect. Well, I really appreciate all the color and nice quarter. Thanks guys.

Speaker 1

Thank you. Thank you.

Operator

The next question comes from Mark Fitzgibbon with Piper Sandler. Please go ahead.

Speaker 3

Hey, guys. Happy Friday. Hi, Mark. Happy Friday.

Speaker 4

Mark, just to be clear that the uptick in delinquencies was the $11,000,000 past due. Is that correct?

Speaker 2

No. So there's a lot of moving pieces. The uptick in delinquencies this quarter is the syndicated downtown Boston loan for $30,000,000 So that reached maturity in the Q4, and obviously is now an early stage delinquency without a modification at this point.

Speaker 4

Okay, fair enough. And then just sort of at a high level, another bank in New England did a call this morning and they said they see the inflection point in credit quality being sort of mid-twenty 25. I'm curious if you guys would agree with that?

Speaker 1

It's kind of hard to say. It does feel like it's getting a little bit better, but these things are each loan is so unique. So if we were talking if we were seeking broadly, I would say I wouldn't necessarily argue with that. I'm not here to call the pivot point, but I wouldn't necessarily disagree per se. But it is because especially with some of the legacy eSpots and Savings loans we have that are sizable, I'll feel a lot better answering that question if we get a number of these note sales and short sales accomplished in the next quarter or 2 and are on the other side of that.

Speaker 4

Okay. And then I guess I was curious your thoughts around reclassifying owner occupied commercial real estate to C and I, I guess I'm curious what if any benefit do you sort of get from that other than the optics of it?

Speaker 1

Well, I mean, as long as I've been doing this, I've always thought of owner occupied CRE as C and I because your ultimate repayment is coming from typically a company that's making something or distributing something. And it's a much different risk and a much different asset class than kind of investor commercial real estate. And so just even internally in our reporting, I think it helps orient you to what kind of risk we're taking on the balance sheet and what the composition of the balance sheet is. And then as it gets reflected externally, I'm assuming that the investment community is smart enough to know that when we break out the difference between owner occupied and non owner occupied that they can do the math, but I guess we're just doing it for them in some respects. But I do think it's the right way to profile it.

Speaker 1

If you think about what goes into the CRE concentration that the regulators measure, owner occupied CRE is not included in that measure. So it's just trying to be consistent across the entire portfolio as to how we view the risk.

Speaker 4

Okay. And then lastly on the Wealth business, I guess I was curious if you could share with us what client flows look like in the quarter versus the impact from market appreciation?

Speaker 2

Sure, Mark. We saw about $20,000,000 or so of net outflows for the quarter. As new originations have been strong, but slowed down a little bit in the last couple of quarters. Market for the quarter, we still saw net market appreciation, but the flows have been fairly neutral the last couple of quarters.

Speaker 4

Thank you.

Speaker 2

Welcome.

Operator

Welcome. The next question comes from Laurie Hunsicker with F. C. Cor Research. Please go ahead.

Speaker 5

Hi, thanks. Good morning. Just wondered, Mark, if we could start with your spot margin here. Thanks.

Speaker 2

Sure. So December, spot margin was 3.33% on a core basis.

Speaker 5

Okay, great. And then just going back to that 30,000,000 net, there are no specific reserves on that at the moment, correct?

Speaker 3

Correct.

Speaker 5

Okay. And then the new appraisal comes this quarter. Just want to make sure I got that correct?

Speaker 1

Yes, that's our expectation.

Speaker 5

Okay. And then, as of last quarter, I had in my notes that was 77% occupied. Do you have an updated occupancy number on that right now?

Speaker 2

Yes. So we think with the potential for a new tenant coming in to vacate some of the partially vacated space from a larger loss of a tenant that would get back to around 80% in the near term.

Speaker 1

And the other thing to keep in mind here, Laurie, is some of the new tenants are still burning through a free rent period, which impacts some of the near term cash flows.

Speaker 5

Got it. Yes. And along those lines, I have the debt service sitting at about 1.0. Do you have an update on that or?

Speaker 1

I think if again, some of it is when you say debt service, is it IO or are we talking about amortization, which is obviously some of the things we're talking to the client about now that if it's IO at their current occupancy, I think they're positive cash flow.

Speaker 5

Got it. Okay. Got it. As always, thank you for all the color on your office. Just wanted to shift over last question on expenses.

Speaker 5

Mark and I appreciate the expense guide, but can you help us think about the mid single digit growth, what number you're specifically using? I'm looking at core non interest expense at about $404,700,000 I don't know if that's a good number. And then, yes, is that the right number to use or is there a different number?

Speaker 2

No, that's the right number. Yes. Off that quarter.

Speaker 5

Okay. And then the other expense line just looking linked quarter, going from $22,500,000 to $26,800,000 I know you had some things in there like the life insurance adjustment last quarter and the credit on the debit processing, etcetera. But can you just maybe high level step us through the difference in those two buckets just so that we have an apples to apples on a core comparison there?

Speaker 2

Sure. So, yes, I know one of the items I noted in the prepared comments was some of the noise we get on the equity securities. So just to reiterate it, we look at that on a quarter to quarter basis. So if we see unrealized gains for the full quarter, we'll report that as non interest income for that quarter. If there's unrealized losses net for the quarter, that will flow through as a non interest expense.

Speaker 2

So in the Q4, we had net unrealized losses to the tune of about $800,000 So that's obviously a volatile number impacting the 4th quarter. We had some outsized consulting related expenses in the Q4, some projects that just timing wise had trailed into the Q4. So consulting though we typically have a run rate in every given quarter that was up about $700,000 or $800,000 quarter over quarter. We did see a bit more check fraud losses in the 4th quarter. One instance in particular, like we've heard with other banks as well, there's some issue with, treasurer's checks, believe it or not, that are getting put back to banks.

Speaker 2

So we conservatively took that loss now as we continue to research and negotiate to see if we get a recovery on that. So we had some outsized check losses in the Q4 as well. And how much? The treasurer check situation is about $350,000 but we had some other check losses as well during the quarter of $200,000 or $300,000 outsized.

Speaker 5

Okay.

Speaker 2

I think those

Speaker 1

are the biggest

Speaker 2

components, Laurie, off the top of my head.

Speaker 5

Okay, great. That's helpful. I'll leave it there. Thanks so much.

Speaker 1

Okay. Thank you.

Operator

Our next question comes from Christopher O'Connell with KBW. Please go ahead.

Speaker 3

Hey, good morning, Jeff. Good morning, Mark.

Speaker 5

Hey,

Speaker 6

Chris. Just wanted to see if you can provide any details on the core conversion set for next year and just how significant of an upgrade is it for you guys? What are do you see as the largest benefits and does it allow you to expand into any kind of new verticals or anything like that?

Speaker 1

Yes. So the platform we're on right now, just to put it in context, we're the largest bank on it and the average size bank on the platform we're on right now is around $1,000,000,000 or $2,000,000,000 So we've really outgrown it. The platform we're migrating to would be very consistent with a number of our peers and in some companies much larger than ours, 2, 3, 4 times as big as we are. So it really it's one, it's way more efficient and so it will create some efficiencies. 2, it will enable us to have greater product capability because it's much easier to plug APIs into this platform and it's just a more it's a platform that's more consistent with the size and complexity that we are, can handle multi bank loans, whereas the platform we're on right now struggles to do that a bit.

Speaker 1

So it's a meaningful upgrade. It's something that we spent a lot of time looking at to make sure it was something we thought we should do. And ultimately, we came to the conclusion that if we were going to continue to grow and to service our customers the way that we want to and the way that they expect to be serviced, we really needed a platform that would enable us to do that.

Speaker 2

I would just add, Chris, a couple of specifics to areas that we're really good at where technology can only make us better. I would suggest cash management and our wire function right now could certainly use an upgrade and this new platform provides meaningful efficiencies and treasury management capabilities. And then a second area, we have a lot of activity through the branches. It's one of our strongest core differentiators. But right now that's a bit manual and inefficient in terms of getting some of the branch related activity and communications to the back office functions.

Speaker 2

So this would streamline communication, case management, customer relationship type notes between the front lines and the back office, which for a bank like us is very valuable.

Speaker 6

Great. Appreciate the color. And then is there any update, I guess, on the sub debt timing related to the deal?

Speaker 2

No specific update quite yet on that, but we are still planning to look to execute here when we believe we'll get Brett's best pricing and certainty of execution. As I noted at announcement time, we're not going to necessarily try and time the market perfectly here to line it up right before we plan to close. We'll be working with our partners to, like I say, assess the market and look to execute when we think the timing is right. So if that means it's a couple of months before the close, we're okay with that.

Speaker 6

Great. And then as it relates to the deal, we've seen a number of competitors with recently announced deals coming in at a little bit of a faster pace than they have perhaps over the past 2 or 3 years. So far, I know it's early in the process. Have you seen any change in tone or in discussions or your relationship with the regulators so far with this deal?

Speaker 1

Yes. So far, I would say no. But we had a really good relationship coming into prior to making the announcement. But we haven't heard anything that has given us pause and nor have we heard anything from regulators that would suggest it's going to be an expedited approval. So we're going to continue to plan the way we always would and we'll react to the approval process as it unfolds.

Speaker 6

Great. Thank you. And then on Slide 12, I just wanted to clarify on the longer term fixed rate repricing for the loans and securities, you have the annualized margin impact of the 12 to 15 basis points. Is that longer term as in maturing over the next year, 2 years or is that the entire back book for the loans

Speaker 1

and securities?

Speaker 2

Yes. That's a good question. That's essentially a 1 year outlook meaning, call it a basis point a month of what we expect to reprice over the next year. So point in time a year from now is where we'd see sort of the full 12 to 15 basis points baked into the margin.

Speaker 6

Okay, great. That's helpful. And then based on the rest of the details on that side, kind of the short term net 1 to 2 basis points and what we've already seen come through with 100 basis points of Fed cuts. And then on the prior slide you had a good detail on kind of the time to deposit maturities which are heavily weighted towards 1 in 2Q 'twenty five. Do you expect to see more of an outsized margin pickup in the Q1 or the first and second quarter of the year?

Speaker 2

Yes. Certainly, the CD repricing dynamic, I think would drive what we're reflecting on this slide, which is potentially a couple of basis points over the next quarter or 2 that you would not necessarily maybe get in the second half of the year, where maybe the CD repricing dynamic is not as beneficial. So I think the core deposit and loan movements will essentially offset each other. And as you're highlighting, the CD repricing would give us that net lift of a few basis points in the first half of the year. And then if there are no other cuts, I think that short end of the curve impact essentially becomes a moot point and it's the longer term repricing that drives the margin expansion.

Speaker 3

Great. Thanks for taking my questions.

Speaker 2

No problem.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Jeff Tengel for any closing remarks.

Speaker 1

Thanks and appreciate everybody's interest in Rockland Trust and INDB. Have a great day.

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Key Takeaways

  • The company delivered a 3.33% net interest margin in Q4, saw average deposits grow at a ~3% annualized rate, achieved a 1.48% pre-provision net revenue ROA, and grew tangible book value 6.4% year-over-year.
  • Management reduced commercial real estate concentration to 30.5% while expanding C&I loans by 4% and small business loans by 12% in 2024, with C&I production rising 28% to $785 million and now representing half of total commercial originations.
  • They announced the acquisition of Enterprise Bancorp to extend their footprint into Northern Massachusetts and Southern New Hampshire, with all 27 branches to remain open post-close and strong cultural alignment confirmed.
  • A core system upgrade to a next-generation FIS platform is planned for May 2026 to improve technology infrastructure, boost operational efficiency, and support future growth in cash management and treasury services.
  • For 2025, the bank forecasts low-mid single-digit loan and deposit growth, 12–15 basis points of net interest margin expansion, mid single-digit non-interest income and expense increases, and expects minimal provision impact from anticipated NPA resolutions.
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Earnings Conference Call
Independent Bank Q4 2024
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