Independent Bank Corp.

Good day and welcome to the Independent Bancorp first quarter 2025 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. 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. We undertake no obligation to publicly update any such statements. In addition, some of our discussion 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. Finally, please also note that this event is being recorded. I would now like to turn the conference over to Jeff Tangle, Chief Executive Officer. Please go ahead.

Thank you, and good evening, and thanks for joining us today. I'm accompanied this evening by CFO and Head of Consumer Lending, Mark Ruggiero. On a core operating basis, results for the first quarter were reflective of solid pre-provisioned net revenue growth offset by higher credit costs. PPNR growth was driven by net interest margin improvement, solid fee revenue results, and well-controlled expenses. Operating leverage was positive on both a linked quarter and year-over-year basis. Our PPNR ROAA was 1.52% on an operating basis, and our tangible book value improved 1.8% from the fourth quarter to and 7.8% from the year-ago quarter. Nonwithstanding the operating results I just mentioned, credit costs for the first quarter were elevated as we continued to move through the resolution of several previously identified problem loans. We signaled last quarter that we expected our largest NPL to be resolved in the second quarter. It is still on track to do so. We had one other large NPL we thought would be resolved in the first quarter which has slipped into the second quarter. Finally, as we signaled during our year-end earnings call, we have one large problem loan that moved to non-performing status in the first quarter. Mark will go into more detail during his comments, but we have not seen any material increase in our problem loans and feel that we have identified the significant stress loans and have a detailed action plan for each one of them. From a business perspective, clearly the combined impact of tariffs and other potential federal government actions has increased economic uncertainty. While it is too early to tell what the impact of the tariffs will be, or what the tariffs are for that matter, most of the clients I've spoken to are taking a wait-and-see approach. The lack of certainty is causing them to pause any significant expansion or growth initiatives at the moment as they assess the economic landscape. Despite the noise, we made solid progress on several of our key strategic priorities in the first quarter. We continued to reduce our commercial real estate concentration. C&I and small business loans were up 2.1% and 2.6% respectively in the first quarter. Conversely, CRE and construction loan balances were down 1.2% due to normal amortization, the intentional reduction of transactional pre-business, and charge-offs. As we have said in the past, we will continue to reduce transactional Cree business and free up capacity to support our legacy commercial real estate relationships. Mark will provide more detail later on about our successful $300 million sub-debt raise, but that's going to lead to an expected pro forma Cree concentration slightly north of 300% inclusive of the impact of the enterprise acquisition. Continuing the shift towards CNI, over the past year, we've added seven CNI bankers, increasing its total to 31, reflecting the desirability of our platform and the award-winning culture of Rockland Trust. In addition, two recent hires include a highly respected and very experienced individual as our regional manager for middle market CNI and specialty banking, and an experienced international banker to lead our efforts in FX and trade finance. We expect both to make an immediate contribution. We continue to prepare for the closing of our pending acquisition of Enterprise. We expect the transaction will close in the third quarter of the year. The more time we spend with the Enterprise team, the more convinced we become about the strategic and financial merits of the deal. Importantly, a vast majority of customer-facing Enterprise employees have accepted offers to remain with Rockland Trust post-close, including 32 of Enterprise Bank's 33 commercial bankers who will remain post-close. Preparation for our core FIS processing platform upgrade, scheduled for May of 26, is ongoing. 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. We prudently grew deposits in the first quarter, which has been a historical strength of ours. Non-time deposits were up 2.8% year-over-year and 3.2% from the fourth quarter. In the first quarter, the cost of deposits was 1.56%, highlighting the immense value of our deposit franchise. Mark will provide additional color on our deposits in a few minutes. Finally, our wealth management business continues to be a key value driver. We grew our AUA by nearly 1% in the first quarter to $7 billion. Organic growth for net positive flows totaled $41 million in the quarter. IMG had positive returns in the first quarter despite the fact that the S&P 500 was down over 4%. Total investment management revenues increased 4% from the fourth quarter and nearly 13% from the first quarter of 24. 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. Enterprise Bank Corp will add approximately $1.5 billion in AUA to our platform and offer additional cross-sell opportunities with our broader product offerings. Underscoring every measure of success, There's 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 a top place to work in Massachusetts by the Boston Globe for the 16th consecutive year. In addition, Rockland Trust was recently ranked number two in New England in the 2025 J.D. Power Retail Banking Satisfaction Study for the second straight year, underscoring our exceptional customer service. We were also named Best Bank in the Northeast by Greenwich for overall satisfaction and likelihood to recommend. We remain confident about our abilities to navigate a volatile interest rate and economic environment. In times of uncertainty, we are fortunate to have an envious deposit franchise, a strong liquidity position, and a robust capital base. We will continue to focus on those actions we have control over and look to capitalize on our historical strengths which include a skilled and experienced management team, attractive markets, strong brand recognition, operating scale, a broad consumer, commercial, and wealth customer base, and an energized and engaged workforce. In short, I believe we're 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.

Thank you, Jeff. I will now take us through the earnings presentation deck that was included in our 8K filing and is available on our website in today's investor portal. Starting on slide three of the deck, 2025 first quarter gap net income was $44.4 million, and diluted earnings per share was $1.04, resulting in a 0.93% return on assets, a 5.94% return on average common equity, and an 8.85% return on average tangible common equity. Excluding 1.2 million of merger and acquisition expenses and their related tax benefit, the adjusted operating net income for the quarter was 45.3 million, or $1.06 diluted EPS, representing a 0.94% return on assets, a 6.05% return on average common equity, and a 9.01% return on average tangible common equity. The results are driven largely by strong core fundamentals, which were in line with expectations, with elevated provision for loan loss impacted by a few credits that I'll cover in detail shortly. In addition, as Jeff mentioned, tangible book value per share increased by 85 cents during the quarter, reflecting solid earnings retention and a 47 cent benefit from other comprehensive income. Turn to slide four, highlighting a key component of our core fundamentals. Deposit activity was very positive for the first quarter, which as a reminder, has historically been subject to some level of seasonality, which typically challenges growth in the first quarter. Despite that, average deposits increased modestly, while period end balances increased by $370 million, or 2.4% for the quarter. With non-maturity consumer... Pardon me, this is the operator.