Independent Bank (NASDAQ:INDB) used its fourth-quarter earnings call to highlight progress following its Enterprise acquisition and to outline 2026 targets centered on margin expansion, disciplined expense management, and continued capital return. President and CEO Jeff Tengel said the company’s results reflect “ongoing progress towards restoring Rockland Trust’s historically strong performance,” pointing to continued net interest margin (NIM) expansion, strong C&I loan growth, stable credit costs, and realized cost savings tied to the acquisition.
Fourth-quarter profitability and one-time items
CFO Mark Ruggiero reported fourth-quarter 2025 GAAP net income of $75.3 million and diluted EPS of $1.52, translating to a 1.20% return on assets, 8.38% return on average common equity, and 12.77% return on average tangible common equity. Excluding $12.3 million of merger-and-acquisition expenses and related tax impacts, adjusted operating net income was $84.4 million, or $1.70 diluted EPS, with an adjusted return on assets of 1.34%.
Enterprise integration: retention and deposit stability
Tengel said the bank closed and integrated Enterprise during 2025 and emphasized personnel and customer retention. On the commercial side, he said the bank retained “almost 100% of client-facing personnel” and experienced “negligible customer loss,” adding that Enterprise loan production and pipeline remained strong through the integration period.
On the retail side, Tengel said the bank did not close any Enterprise branches and retained all branch employees (excluding ICS and municipal deposits). All acquired branches exceeded a 95% deposit retention target, and about 60% had stable to increasing deposit balances. In the fourth quarter, the company opened 271 business relationships and 837 new consumer relationships in the acquired branches, according to management.
Within investment management, Tengel said the company retained almost all targeted employees and characterized the cultural integration as “excellent.”
Loan growth mix, deposits, and margin expansion
Management described an ongoing shift in the loan portfolio toward C&I. Tengel said C&I loans increased 9% organically in 2025 and represented 25% of total loans at year-end, up from 22% at the end of 2024. He added that commercial real estate (CRE) balances were down 3.6% organically from year-end 2024, with the company’s CRE concentration at 289% at year-end. Total commercial loans closed were $789 million in the fourth quarter, with $454 million of fundings; management said 52% of fourth-quarter fundings were C&I.
Ruggiero provided additional loan and deposit detail, stating that quarterly commercial growth was “driven entirely by C&I,” which increased 7% annualized for the quarter and more than 9% organically for the year. He said this focus helped drive an almost 50% increase in new commercial deposit generation in 2025 versus the prior year.
On consumer real estate, Ruggiero said balances were relatively flat, with increased mortgage production sitting at year-end in held-for-sale, which he said “bodes well for mortgage banking income momentum heading into 2026.” He also cited growth in wealth management secured consumer lines of credit tied to an initiative to build a stronger premier banking offering.
Deposit balances declined 0.8% on a period-end basis in the quarter, which management attributed largely to seasonal business deposit activity related to year-end bonuses, distributions, and tax payments. However, Ruggiero said average deposits grew across consumer and business lines, with 3.6% annualized growth in average core deposits, while the company allowed some attrition in its highest-rate time deposits.
Net interest income increased $9.1 million to $212.5 million in the quarter. The reported NIM rose 15 basis points to 3.77%, while the adjusted margin (excluding purchase loan accretion and other one-time items) increased 10 basis points to 3.64%. Ruggiero attributed the improvement primarily to deposit costs, noting total deposit cost fell 12 basis points to 1.46% and reflecting what he described as an approximately 30% beta on the quarter-over-quarter decline in Fed funds. Loan yields were described as relatively flat excluding purchase loan accretion, while securities yields continued to expand due to repricing.
Credit trends and office portfolio updates
Credit metrics were described as stable. Ruggiero said non-performing assets were $85.7 million, or 0.45% of total loans. Net charge-offs were $5.3 million in the quarter, including $4 million tied to a C&I relationship that had been fully reserved in the prior quarter. Provision for loan losses was $4.75 million, and criticized and classified levels decreased 8.9% during the quarter.
During Q&A, management addressed changes within the office portfolio disclosures. Ruggiero said the primary driver of higher non-performing assets versus the prior quarter was a single loan that moved into the first-quarter 2026 maturity bucket: an $18.1 million classified balance. He said the loan had been extended on a short-term basis and had a purchase-and-sale agreement in process. While an appraisal suggested sufficient valuation protection, management said the purchase-and-sale process implied a small loss, and the company reserved about $2 million in the fourth quarter, expecting resolution early in 2026.
Management also discussed a $9.9 million criticized participated office-related deal where an appraisal indicated valuation pressure. Ruggiero said the property was cash flowing and current, and the sponsor was seeking to refinance or sell; management expected an extension and hoped to exit without loss in 2026.
Expenses, technology investments, and 2026 outlook
On expenses, Ruggiero said fourth-quarter operating expenses were $142 million, up 3.7% from the prior quarter, driven by what he described as large one-time or outsized items, including higher incentive compensation, consulting tied to a planned 2026 core system upgrade, an equity securities valuation swing, an FDIC insurance premium assessment update, and snow removal expense. He said management pegged “core expenses plus full cost saves from Enterprise” at around $136 million per quarter.
Management said it plans to maintain a “hold-the-line” approach on staffing and invest prudently in technology, including a core systems conversion now scheduled for October 2026. On AI, Tengel said the bank is implementing centralized governance to focus on a small number of use cases aimed at back-office efficiency (including fraud review, processing, and BSA/AML). Ruggiero said the effort includes “three dedicated individuals” in 2026, with future investment dependent on demonstrated benefits and offsets elsewhere in expenses.
For 2026, management set two fourth-quarter profitability targets: 1.4% return on average assets and 15% return on average tangible capital. Guidance included:
- Loan growth: mid-single-digit growth in C&I; low single-digit growth in combined CRE and construction; flat to low single-digit growth in total consumer (with more mortgage volume expected to be sold versus 2025).
- Deposits: low- to mid-single-digit growth in total core deposits; time deposits relatively flat to slightly lower.
- Margin: assumes two Federal Reserve rate cuts and a neutral impact on margin; with purchase loan accretion of 10 basis points, management estimated NIM of 3.85%–3.90% by the fourth quarter of 2026.
- Non-interest income: low single-digit percentage growth off the annualized second-half 2025 run-rate.
- Expenses: $550–$555 million in full-year operating expenses plus $4–$5 million of one-time costs for the core system upgrade.
- Tax rate: 23.50%–24% for full-year 2026.
On capital, management said levels remain above internal targets and reiterated plans to return excess capital to shareholders. Ruggiero reported tangible book value increased $1.04 in the quarter to $47.55 at year-end. The company repurchased about 548,000 shares for $37.5 million in the quarter at a weighted average price of $68.39, and Tengel said capital return through buybacks would continue “in a prudent manner” through 2026. Management shared long-term capital targets of approximately 11.75%–12% CET1 and 8.75%–9% tangible capital.
Asked about M&A, Tengel said the company is “really not focused on M&A at the moment,” citing priorities including organic growth, expense oversight, and executing the core conversion. He added that while bank M&A is not a focus, the company would consider an RIA acquisition at the right price as part of building wealth management, given lower systems-conversion risk.
About Independent Bank (NASDAQ:INDB)
Independent Bank Group, Inc (NASDAQ:INDB) is a bank holding company headquartered in McKinney, Texas, that provides a range of financial services through its wholly owned subsidiary, Independent Bank. Tracing its roots to the late 19th century, the company has grown from a single community bank into a regional financial institution serving individuals, small businesses and commercial clients. Independent Bank Group became a bank holding company in 1983 and expanded its footprint through organic growth and strategic acquisitions.
The company’s primary business activities encompass retail and commercial banking, including deposit products, consumer and business lending and credit services.
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