Independent Bank (INDB)

Regional banking company Independent Bank (NASDAQ:INDB) beat Wall Street’s revenue expectations in Q4 CY2025, with sales up 43.9% year on year to $253.9 million. Its non-GAAP profit of $1.70 per share was 2.8% 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).

In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees. Thankfully, Independent Bank’s 12.3% annualized revenue growth over the last five years was solid. 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 as its annualized revenue growth of 8.2% over the last two years was 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 reported magnificent year-on-year revenue growth of 43.9%, and its $253.9 million of revenue beat Wall Street’s estimates by 2.3%.

Net interest income made up 82.1% 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.

Net interest income commands greater market attention due to its reliability and consistency, whereas non-interest income is often seen as lower-quality revenue that lacks the same dependable characteristics.

Topline growth is certainly important, but the overall profitability of this growth matters for the bottom line. For banks, we look at efficiency ratio, which is non-interest expense (salaries, rent, IT, marketing, excluding interest paid out to depositors) as a percentage of total revenue.

Investors focus on efficiency ratio changes rather than absolute levels, understanding that expense structures vary by revenue mix. Counterintuitively, lower efficiency ratios indicate better performance since they represent lower costs relative to revenue.

Over the last five years, Independent Bank’s efficiency ratio has increased by 3.2 percentage points, going from 59.5% to 58.6%. 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 60.8% this quarter, falling short of analysts’ expectations by 496.5 basis points (100 basis points = 1 percentage point).

For the next 12 months, Wall Street expects Independent Bank to rein in some of its expenses as it anticipates an efficiency ratio of 51.5%.

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 EPS grew at an unimpressive 8.7% compounded annual growth rate over the last five years, lower than its 12.3% 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 growth of 1.3% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, Independent Bank reported adjusted EPS of $1.70, up from $1.21 in the same quarter last year. This print beat analysts’ estimates by 2.8%. Over the next 12 months, Wall Street expects Independent Bank’s full-year EPS of $5.56 to grow 30.7%.

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.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. EPS can become murky due to acquisition impacts or accounting flexibility around loan provisions, and TBVPS resists financial engineering manipulation.

Independent Bank’s TBVPS grew at a decent 6% annual clip over the last five years. However, TBVPS growth has recently decelerated a bit to 3.8% annual growth over the last two years (from $44.13 to $47.55 per share).

Over the next 12 months, Consensus estimates call for Independent Bank’s TBVPS to grow by 10% to $52.32, mediocre 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 14.1%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

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

It was encouraging to see Independent Bank beat analysts’ revenue expectations this quarter. We were also happy its net interest income outperformed Wall Street’s estimates. On the other hand, its EPS slightly beat. Overall, this print had some key positives. The stock remained flat at $80.61 immediately following the results.

Updated: January 22, 2026 at 5:03 PM EST

Before deciding whether to buy Independent Bank or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Independent Bank isn’t a terrible business, but it doesn’t pass our bar. Although its revenue growth was solid over the last five years and is expected to accelerate over the next 12 months, its mediocre ROE lags the market and is a headwind for its stock price. And while the company’s estimated net interest income growth for the next 12 months is great, the downside is its estimated sales for the next 12 months are weak.

Independent Bank’s P/B ratio based on the next 12 months is 1x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $83.40 on the company (compared to the current share price of $80.61).