Independent Bank (INDB)

Regional banking company Independent Bank (NASDAQ:INDB) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 39.1% year on year to $243.7 million. Its GAAP profit of $0.69 per share was significantly above analysts’ consensus estimates.

Company Overview

Tracing its roots back to 1907 and serving as a financial cornerstone in New England for over a century, Independent Bank Corp. (NASDAQ:INDB) operates as the holding company for Rockland Trust, providing banking, investment, and financial services across Eastern Massachusetts and Rhode Island.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Independent Bank competes with other regional banks operating in Massachusetts and Rhode Island, including Eastern Bankshares (NASDAQ: EBC), Berkshire Hills Bancorp (NYSE: BHLB), and Webster Financial (NYSE: WBS), as well as larger national institutions like Bank of America (NYSE: BAC) and JPMorgan Chase (NYSE: JPM).

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Luckily, Independent Bank’s revenue grew at an impressive 9.6% compounded annual growth rate over the last five years. Its growth beat the average banking company and shows its offerings resonate with customers.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Independent Bank’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 1.6% over the last two years was well below its five-year trend. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Independent Bank’s year-on-year revenue growth of 39.1% was wonderful, and its $243.7 million of revenue was in line with Wall Street’s estimates.

Net interest income made up 81.7% of the company’s total revenue during the last five years, meaning Independent Bank barely relies on non-interest income to drive its overall growth.

Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.

The underlying profitability of top-line growth determines the actual bottom-line impact. Banking institutions measure this dynamic using the efficiency ratio, which is calculated by dividing non-interest expenses like personnel, facilities, technology, and marketing by total revenue.

Markets understand that a bank’s expense base depends on its revenue mix and what mostly drives share price performance is the change in this ratio, rather than its absolute value. It’s somewhat counterintuitive, but a lower efficiency ratio is better.

Over the last five years, Independent Bank’s efficiency ratio has increased by 5.8 percentage points, going from 59.5% to 61.1%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

Independent Bank’s efficiency ratio came in at 66% this quarter, beating analysts’ expectations by 1,901 basis points (100 basis points = 1 percentage point). This result was 8.7 percentage points worse than the same quarter last year.

For the next 12 months, Wall Street expects Independent Bank to rein in some of its expenses as it anticipates an efficiency ratio of 52.8%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Independent Bank’s flat EPS over the last five years was below its 9.6% annualized revenue growth. However, its efficiency ratio actually improved during this time, telling us that non-fundamental factors such as taxes affected its ultimate earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Independent Bank, its two-year annual EPS declines of 16.2% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.

In Q3, Independent Bank reported EPS of $0.69, down from $1.01 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Independent Bank’s full-year EPS of $4.11 to grow 69.4%.

Banks profit by intermediating between depositors and borrowers, making them fundamentally balance sheet-driven enterprises. Market participants emphasize balance sheet quality and sustained book value growth when evaluating these institutions.

When analyzing banks, tangible book value per share (TBVPS) takes precedence over many other metrics. This measure isolates genuine per-share value by removing intangible assets of debatable liquidation worth. On the other hand, EPS is often distorted by mergers and flexible loan loss accounting. TBVPS provides clearer performance insights.

Independent Bank’s TBVPS grew at a decent 5.8% annual clip over the last five years. However, TBVPS growth has recently decelerated a bit to 4.6% annual growth over the last two years (from $42.60 to $46.63 per share).

Over the next 12 months, Consensus estimates call for Independent Bank’s TBVPS to grow by 4.6% to $48.79, paltry growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Independent Bank has averaged a Tier 1 capital ratio of 14.3%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, Independent Bank has averaged an ROE of 7.4%, uninspiring for a company operating in a sector where the average shakes out around 7.5%.

It was good to see Independent Bank beat analysts’ EPS expectations this quarter. We were also excited its net interest income outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this quarter featured some important positives. The stock remained flat at $65 immediately after reporting.

Updated: December 3, 2025 at 11:40 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Independent Bank isn’t a terrible business, but it doesn’t pass our bar. To kick things off, its revenue growth was mediocre over the last five years. And while its estimated net interest income growth for the next 12 months is great, the downside is its weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders. On top of that, its mediocre ROE lags the market and is a headwind for its stock price.

Independent Bank’s P/B ratio based on the next 12 months is 1x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $82.75 on the company (compared to the current share price of $74.03).