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    IBCP
    Earnings call· Jun 2026(Q2 FY26)

    INDEPENDENT BANK CORP /MI/ IBCP

    Jul 23, 2026 Source

    Executive summary

    Independent Bank Corporation Q2 FY26 — Strong Loan & Deposit Growth, NIM Expansion

    Independent Bank Corporation delivered a strong second quarter, marked by significant loan and deposit growth, particularly in commercial and residential segments, alongside continued net interest margin expansion. The company successfully completed the acquisition of HCB Financial Corp. post-quarter, with integration underway, while managing an increase in non-performing loans primarily linked to a single commercial development project.

    Highlights

    5

    • Net income increased to $18.8 million ($0.90 diluted EPS) from $16.9 million ($0.81 diluted EPS) YoY.

    • Net interest margin increased 6 basis points QoQ to 3.71%.

    • Net interest income increased $1 million, or 2.2%, over Q1 FY26.

    • Net loan growth of $105.8 million, or 9.8% annualized.

    • Tangible common equity per share increased $0.86, or 14.8% annualized.

    Concerns

    3

    • Non-performing loans increased to $32.8 million, or 74 basis points of total loans, up from 64 basis points QoQ, with 2/3 related to one commercial development project.

    • Net charge-offs increased to $633,000 (3 basis points of average loans) in H1 FY26 from $442,000 (2 basis points) in H1 FY25.

    • Non-interest expense was $37.8 million, above the forecasted range of $36 million to $37 million, due to $4.4 million in merger-related expenses and $0.4 million in litigation expense.

    Guidance & targets

    4
    CategoryTargetConfidence
    Commercial Loan Portfolio Growth
    low double-digit growth
    medium materiality
    High
    Net Interest Margin Expansion
    2 to 4 basis points a quarter
    high materiality
    Medium
    HCB Merger Cost Savings Realization
    40% fully implemented and realized
    high materiality
    High
    Core Expense Run Rate
    around $37 million or high end of our range
    medium materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Business Deposits
    Increased on a linked quarter basis.
    		——$66 million increase—
    Retail Deposits
    Increased on a linked quarter basis.
    		——$15 million increase—
    Municipal Deposits
    Decreased on a linked quarter basis, primarily due to seasonality and usage of American Rescue Plan Act funds.
    		——$45 million decrease—
    Commercial Loan Portfolio
    Portfolio remains very well diversified with no significant shift over the past year.
    Mix: 67% C&IMix: 33% investment real estateLargest C&I category: Manufacturing at $194 million (8.2% of total portfolio)Largest investment real estate category: Industrial at $219 million (9.3% of total portfolio)
    		————

    Operational metrics

    50
    Net Income
    $18.8 millionup from $16.9 million in Q2 FY25
    Q2 FY26

    Reported net income for the quarter.

    Diluted EPS
    $0.90up from $0.81 in Q2 FY25
    Q2 FY26

    Reported diluted earnings per share for the quarter.

    Tangible Common Equity per Share Increase
    $0.8614.8% annualized from March 31, 2026
    Q2 FY26

    Increase in tangible common equity per share of common stock.

    Return on Average Assets
    1.37%
    Q2 FY26

    Return on average assets for the quarter.

    Return on Average Equity
    14.52%
    Q2 FY26

    Return on average equity for the quarter.

    Total Deposits Less Brokered Time Growth
    $38.2 million3.2% annualized
    Q2 FY26

    Net growth in total deposits less brokered time.

    Net Loan Growth
    $105.8 million9.8% annualized
    Q2 FY26

    Net loan growth for the quarter.

    Tangible Common Equity Ratio
    8.9%
    June 30, 2026

    Tangible common equity ratio at quarter-end.

    Quarterly Dividend per Share
    $0.28
    Q2 FY26

    Quarterly dividend on common stock paid May 14, 2026.

    Total Deposits
    $4.9 billionincreased $100 million from start of year
    June 30, 2026

    Total deposits at quarter-end.

    Brokered Deposits Reduction
    $18 million
    Q2 FY26

    Reduction in brokered deposits.

    Total Cost of Funds
    1.53%decreased 1 basis point QoQ
    Q2 FY26

    Total cost of funds for the quarter.

    Residential Loan Growth
    $92.6 million16% annualized
    Q2 FY26

    Residential loan generation for the quarter.

    Residential Mortgage Loan Portfolio Increase
    $12.9 million
    Q2 FY26

    Increase in residential mortgage loan portfolio for the quarter.

    Consumer Installment Loan Portfolio Increase
    $0.2 million
    Q2 FY26

    Increase in consumer installment loan portfolio for the quarter.

    Year-to-Date Loan Growth
    $138 million
    YTD Q2 FY26

    Total loan growth year-to-date.

    Year-to-Date Commercial Loan Growth
    $146 million13% annualized growth
    YTD Q2 FY26

    Commercial loan growth year-to-date.

    Commercial Bankers Added Year-to-Date
    8
    YTD Q2 FY26

    Experienced commercial bankers added year-to-date.

    Total Commercial Bankers
    53
    Q2 FY26

    Total number of commercial bankers.

    Net Commercial Bankers Added Year-over-Year
    6
    YoY Q2 FY26

    Net experienced commercial bankers added compared to a year ago.

    Commercial Loan Production Mix (C&I)
    58%
    H1 FY26

    Mix of C&I lending in commercial loan production.

    Commercial Loan Production Mix (Investment Real Estate)
    42%
    H1 FY26

    Mix of investment real estate in commercial loan production.

    Non-Performing Loans
    $32.8 million
    Q2 FY26

    Total non-performing loans at quarter-end.

    Past Due Loans
    $5.6 milliondown from $8.2 million in Q1 FY26
    Q2 FY26

    Total past due loans at quarter-end.

    Average Interest Earning Assets
    $5.33 billioncompared to $5.11 billion in Q2 FY25 and $5.23 billion in Q1 FY26
    Q2 FY26

    Average interest earning assets for the quarter.

    Assets Repricing in 1 Month
    37.9%
    Q2 FY26

    Percentage of assets repricing within one month.

    Assets Repricing in Next 12 Months
    49.4%
    Q2 FY26

    Percentage of assets repricing within the next 12 months.

    Non-Interest Income
    $15.3 millioncompared to $11.3 million in Q2 FY25 and $12 million in Q1 FY26
    Q2 FY26

    Total non-interest income for the quarter.

    Net Gains on Mortgage Loans
    $1.7 millioncompared to $1.6 million in Q2 FY25
    Q2 FY26

    Net gains on mortgage loans for the quarter.

    Mortgage Loan Servicing Net Gain
    $2.5 millioncompared to a gain of $0.5 million in Q2 FY25
    Q2 FY26

    Net gain from mortgage loan servicing for the quarter.

    Mortgage Loan Servicing Gain Due to Price
    $1.8 million
    Q2 FY26

    Gain due to price change in mortgage loan servicing.

    Mortgage Loan Servicing Loss Due to Price
    $2 million
    Q2 FY25

    Loss due to price change in mortgage loan servicing in the prior year period.

    Compensation and Employee Benefits Expense Increase
    $1.4 million
    Q2 FY26

    Increase primarily due to salary increases effective January 1, 2026, and higher health insurance-related costs.

    Litigation Expense
    $0.4 million
    Q2 FY26

    Accrual established for losses considered probable from outstanding litigation matters.

    Pricing Expense Increase
    $0.3 million
    Q2 FY26

    Increase due to new deposit account opening incentives.

    Merger Related Expenses
    $4.4 million
    Q2 FY26

    Expenses recorded in relation to the HCB Financial Corp. acquisition.

    Full Year Loan Growth Outlook (Original)
    4.5% to 5.5%
    FY26

    Original outlook for full year loan growth provided in January.

    Net Interest Income Growth over 2025
    7.4%within forecasted range of 7% to 8%
    Q2 FY26

    Net interest income growth compared to 2025.

    Consecutive Quarters of Increasing Net Interest Income
    12
    Q2 FY26

    Number of consecutive quarters with increasing net interest income.

    Non-Interest Income Outlook (Original)
    $11.3 million to $12.3 million
    Q2 FY26

    Original forecasted range for non-interest income.

    Mortgage Loan Origination Sales
    $97.1 million
    Q2 FY26

    Mortgage loan origination sales for the quarter.

    Mortgage Loan Origination Gains
    $1.3 million
    Q2 FY26

    Mortgage loan origination gains for the quarter.

    Gain on Equity Securities
    $1.6 million
    Q2 FY26

    Related to the exchange of Visa B2 shares to Visa Class C shares.

    Non-Interest Expense Outlook (Original)
    $36 million to $37 million
    Q2 FY26

    Original forecasted range for non-interest expense.

    Effective Income Tax Rate
    17.2%
    Q2 FY26

    Effective income tax rate for the quarter.

    Shares of Common Stock Repurchased
    0
    Q2 FY26

    No shares repurchased in the second quarter or first 6 months of 2026.

    Commercial Loan Portfolio Growth (Q&A)
    $93 million
    Q2 FY26

    Growth of the commercial portfolio for the quarter, as stated in Q&A.

    Commercial New Origination Rate
    6.41%
    Q2 FY26

    Average new origination rate for commercial loans.

    Commercial Portfolio Yield
    6.06%
    Q2 FY26

    Yield on the commercial loan portfolio.

    Earning Asset Expansion (Commercial Loans)
    $97 million
    Q2 FY26

    Earning asset expansion centered in commercial loans.

    Industry KPIs

    11
    MetricValueDetails
    Loans$105.8 millionUSD
    Deposits$4.9 billionUSD
    Rotce ROE14.52%%
    Cet1 ratio8.9%%
    Capital returns$0.28USD per share
    Allowance reservesappropriately reserved
    Net interest income$3.3 millionUSD
    Net interest margin3.71%%
    Net charge offs npls$32.8 millionUSD
    Total operating expenses$37.8 millionUSD
    Provision for credit losses$2.7 millionUSD

    Product announcements

    1
    ProductTypeDetails
    Regional President Roles (Commercial Banking)launch

    Deals & partnerships

    1
    HCB Financial Corp.Acquisition of a financial corporation to strengthen presence in complementary markets.

    Acquisition completed on July 1, 2026. Integration work is underway with a targeted system conversion of November 9.

    Risks & headwinds

    4
    Non-performing loans from commercial development project

    $32.8 million (74 bps of total loans), with approximately 2/3 related to one commercial development exposure

    Mitigation: Appropriately reserved for any loss exposure; working through legal process, but timeline is unpredictable.

    Increased net charge-offsH1 FY26

    $633,000 (3 bps of average loans) in H1 FY26, compared to $442,000 (2 bps) in H1 FY25

    Litigation expenseQ2 FY26

    $0.4 million accrual

    Mitigation: Accrual established for probable losses.

    Elevated loan and collection expensesQ2 FY26

    Running higher

    Mitigation: Hopeful to reduce as the one credit moves through the process.

    What to watch in Q3 FY26

    5

    HCB Financial Corp. Integration & Cost Savings

    Early 2027
    CurrentIntegration underway, system conversion targeted for November 9
    Target40% cost savings fully implemented and realized

    Why it matters

    Successful integration and realization of cost synergies are key to future profitability and operational efficiency.

    our team is focused on achieving that number very early in '27 at the latest.

    Q&A highlights

    6

    Analyst asked for clarification on the core expense run rate for the balance of the year, excluding merger costs, given Q2 was above guidance.

    Gavin Mohr clarified that core expenses were around $37 million, with $400,000 in litigation and $400,000 in incentive accrual catch-up being part of core, plus elevated advertising for deposit promotions. He expects the run rate to be around $37 million or the high end of their range going forward. Brad Kessel added that loan and collection expenses are also running higher due to one credit.

    “I get back to that, you know, around $37 million or high end of our range going forward.”

    asked by Brendan Nosal · answered by Gavin Mohr

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 Performance Highlights

    Independent Bank reported Q2 FY26 net income of $18.8 million ($0.90 diluted EPS), up from $16.9 million ($0.81 diluted EPS) YoY. Key metrics included a 3.71% net interest margin (up 6 bps QoQ), a $1 million (2.2%) increase in net interest income QoQ, and a 14.8% annualized increase in tangible common equity per share. Return on average assets and equity were 1.37% and 14.52%, respectively.

    02

    Loan and Deposit Growth

    The bank achieved net loan growth of $105.8 million (9.8% annualized), driven by strong commercial loan growth of $92.6 million (16% annualized) and residential loan growth of $12.9 million. Total deposits reached $4.9 billion, an increase of $100 million from the start of the year, with net growth in total deposits less brokered time of $38.2 million (3.2% annualized). Business deposits increased by $66 million QoQ, and retail deposits by $15 million QoQ.

    03

    Asset Quality and Credit Metrics

    Non-performing loans increased slightly to $32.8 million (74 bps of total loans), with approximately two-thirds related to one commercial development project, for which the bank is appropriately reserved. Net charge-offs for H1 FY26 were $633,000 (3 bps of average loans), up from $442,000 (2 bps) in H1 FY25. Past due loans decreased to $5.6 million (13 bps) from $8.2 million (19 bps) QoQ.

    04

    HCB Financial Corp. Acquisition and Integration

    The acquisition of HCB Financial Corp. was completed on July 1, 2026, with system conversion targeted for November 9. The company expects to realize 40% cost savings from the merger by early 2027. This acquisition is anticipated to strengthen the bank's presence in complementary markets and enhance customer service.

    05

    Expense Management and Outlook

    Non-interest expense totaled $37.8 million, exceeding the forecasted range of $36 million to $37 million due to $4.4 million in merger-related expenses and $0.4 million in litigation expense. Compensation and employee benefits increased $1.4 million. The core expense run rate is expected to be around $37 million going forward⏳, including certain accruals and advertising.

    06

    Strategic Initiatives and Recognition

    Independent Bank was named Michigan's Best-In-State Bank by Forbes for the fourth consecutive year. The company also created two new regional president roles within its commercial banking structure to reinforce local leadership and relationship-based growth. Additionally, Independent Bank was honored as a top 10 SBA lender in Michigan for fiscal year 2025.

    AI-generated summary of the company’s earnings call. Not investment advice.