Independent Bank Reports Q3 2026 Net Income of $17.9 Million

Independent Bank (NASDAQ: IBCP ) reported third-quarter financial results on Tuesday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

Access the full call at Summary Independent Bank Corporation reported third quarter 2026 net income of $17.9 million, or $0.80 per diluted share, with adjusted net income of $20.6 million, or $0.92 per diluted share, excluding merger-related expenses. The company achieved net loan growth of $116.6 million, or 10.5% annualized, and net deposit growth of $115.8 million, or 9.4% annualized, excluding contributions from the acquisition of High Point Community Bank. Net interest margin increased to 3.82%, supported by a rise in net interest income of $7.4 million, marking 13 consecutive quarters of growth. The acquisition of HCB Financial Corp.

was completed, with integration on track and system conversion scheduled for November 9th, enhancing market presence and service capabilities. Non-performing loans rose slightly to 80 basis points of total loans, largely due to a previously discussed commercial development exposure, with appropriate reserves in place. Management remains optimistic about continued margin expansion and organic growth, supported by strategic investments in commercial banking talent and strong loan pipelines. The company expects to realize cost savings from the High Point acquisition in 2027, with merger-related expenses continuing into the fourth quarter of 2026.

Full Transcript OPERATOR Good day and thank you for standing by. Welcome to the Independent Bank Corporation third quarter 2026 earnings call. At this time all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session.

To ask a question during the session, you will need to press star 11 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Brad Kessel, President and CEO. Brad Kessel (President and CEO) Good morning and welcome to today's call. Thank you for joining us for Independent Bank Corporation's conference call and webcast to discuss the company's results for the third quarter of 2026. I am Brad Kessel, President and Chief Executive Officer, and joining me is Gavin Mohr, Executive Vice President and Chief Financial Officer, and Joel Rahn, Executive Vice President, Head of Commercial Banking.

Before we begin today's call, I'd like to direct you to the important information on page two of our presentation, specifically the cautionary note regarding forward-looking statements. If anyone does not already have a copy of the press release issued by us today, you can access it at the company's website, independentbank.com. The agenda for today's call will include prepared remarks followed by a question-and-answer session and then closing remarks.

Earlier this morning Independent Bank Corporation reported third quarter 2026 net income of $17.9 million, or $0.80 per diluted share, versus net income of $17.5 million, or $0.84 per diluted share, in the prior-year period. Excluding 2.7 million of after-tax merger-related expenses, adjusted net income was 20.6 million, or $0.92 per diluted share. Highlights for the third quarter of 2026 include net loan growth of 116.6 million, or 10.5% annualized from June 30, 2026. That excludes the loans of High Point Community Bank.

Net growth in total deposits of $115.8 million, or 9.4% annualized from the second quarter, also excluding High Point deposits. A tax-equivalent net interest margin of 3.82%, an 11 basis point increase from the linked quarter, or 3.76%—up 5 basis points excluding purchase accounting accretion. Another highlight was an increase in net interest income of $7.4 million, or 15.4% over the second quarter. This is our 13th consecutive quarter of net interest income growth.

Our pre-tax, pre-provision net revenue was 26.3 million, up 13.5% from the prior-year quarter. A return on average assets and return on average equity of 1.14% and 12.17%, respectively, or 1.32% and 14.08% excluding merger-related expenses. A tangible common equity ratio of 8.2% as of September 30, 2026. And also a highlight of the payment of our $0.28 per share quarterly dividend in common stock on August 14th of 2026.

Our third quarter performance demonstrates the strength of Independent Bank's community banking model and the continued benefits of disciplined balance sheet management, relationship-based lending, and a stable, locally focused deposit franchise. We saw strong organic momentum with commercial loan growth of nearly 21% annualized, solid deposit growth from our business and municipal customers, and improved earning asset yields. Net charge-offs remained very low, and our liquidity and capital levels position us well in the current operating environment.

The quarter also reinforced the value of our strategy—serving attractive Michigan markets through local decision-making, deep customer relationships, and consistent credit discipline. We believe that approach continues to differentiate Independent Bank and supports durable performance through changing rate and economic cycles. We were pleased to complete our acquisition of HCB Financial Corp., the parent company of High Point Community Bank, on July 1, 2026, and this quarter reflects our first results as a combined company. Integration work is well underway and we remain on track for the High Point system conversion on November 9th.

We continue to believe the combination strengthens our presence in complementary markets and enhances our ability to serve customers, employees, communities, and our shareholders over the long term. A few other highlights: during the third quarter we celebrated the grand opening of our new Grand Rapids headquarters, and we transitioned the broker-dealer partner of our wealth management business to Raymond James. Moving to page 5 of our presentation, deposits totaled $5.5 billion at September 30, 2026, an increase of 659.3 million from the second quarter, which includes 543.5 million of High Point deposits.

Excluding High Point, deposits grew 115.8 million, or 9% annualized. Non-maturity deposits totaled $4.77 billion, or 86.4% of total deposits, and increased 571.4 million during the quarter, which includes High Point. With the liquidity High Point brought, we paid down other borrowings, which declined to just $4 million from 127 million at June 30, 2026. Brokered deposits are just $0.5 million at the end of the third quarter.

The deposit base is comprised of 46% retail, 39% commercial, and 15% municipality. On page 6 we included in our presentation a historical view of our cost of funds as compared to the Fed funds spot rate and Fed effective rate. For the quarter, our total cost of deposits increased by just 2 basis points to 1.55%, primarily reflecting modestly higher time deposit costs, while our cost of savings and interest-bearing checking accounts were unchanged at 1.6%. At this time I'd like to turn the presentation over to Joel Rahn to share a few comments on our loan growth and provide an update on our credit metrics.

Joel Rahn (Senior Vice President) Thanks, Brad, and good morning everyone. Page 7 summarizes our loan activity for the quarter. Loans increased 483.1 million in the quarter, including the addition of the High Point loan portfolio. Excluding High Point, commercial loan generation was very strong, as Brad mentioned, with 123 million in quarterly growth, or nearly 21% annually.

We continued our strategic investment in commercial banking talent to supplement our loan growth, adding three experienced bankers in the quarter. Year to date we've added 11 experienced commercial bankers, bringing our total to 55 bankers comprising eight commercial loan teams across our statewide footprint. Compared to a year ago, we've added a net of nine experienced commercial bankers to the team. Looking forward, our pipeline remains strong, but given the significant production late in Q3, it's down from where it was at 6/30.

However, we feel that we can continue to grow our loan portfolio at a low double-digit rate as market disruption is creating market share opportunity for us. Looking at commercial loan production through 9/30, the mix of C&I lending versus investment real estate has been split evenly, and for our commercial portfolio the mix is 66% C&I and 34% investment real estate, including the addition of the 280 million High Point commercial loan portfolio. Page 8 provides detail on our commercial loan portfolio concentrations, which remain consistent with prior quarters.

Our largest segment of the C&I category continues to be manufacturing at 222 million, or 8% of the total portfolio. In the investment real estate segment of the portfolio, the largest concentration is industrial at 257 million, or 9.3%. We outlined key credit quality metrics and trends on page nine. Overall, we continue to demonstrate strong credit quality.

However, we have experienced an increase in our non-performing loan category. Total non-performing loans were 39.2 million, or 80 basis points of total loans at quarter end, up slightly from 74 basis points at 6/30. It's worth noting that 30 million of this total is commercial, and two-thirds of the commercial non-performing loans continues to be one commercial development exposure that we've discussed in previous quarters. We continue to work through the challenges of this particular project and are appropriately reserved for any loss exposure.

Past-due loans totaled 6.1 million, or 12 basis points, consistent with 6/30. It's not reflected on this slide, but worth noting that we realized net charge-offs of 847,000, or 3 basis points of average loans on an annualized basis in the first three quarters of the year. This compares to 1.2 million, or 4 basis points, through Q3 of 2025. At this time, I'd like to turn the presentation over to Gavin for his comments, including the outlook for the remainder of 2026.

Gavin Mohr (EVP, Chief Financial Officer) Thanks, Joel, and good morning, everyone. I'm starting on page 10 of our presentation. Page 10 highlights our strong regulatory capital position. The change in capital ratios on a linked-quarter basis is primarily due to the acquisition of HCB Financial Corp.

on July 1, 2026, and as of September 30, 2026, our consolidated Tier 1 leverage ratio is 9.9%. Our common equity Tier 1 ratio is 11.1%. Our total risk-based capital ratio is 13.1%. Our tangible common equity ratio was 8.2%, or 9.2% excluding accumulated other comprehensive loss.

Tangible book value per share was $23.10 compared to $24.24 at June 30, primarily reflecting $39.1 million of goodwill and other intangibles recorded in the acquisition. Turning to page 11, net interest income increased $9.9 million, or 21.8%, from the year-ago period and $7.4 million from the second quarter. Our tax-equivalent net interest margin was 3.82% during the third quarter of 2026 compared to 3.54% in the third quarter of 2025 and up 11 basis points from the second quarter of 2026. Excluding purchase accounting accretion, our margin was 3.76%, up 5 basis points from the linked quarter.

Average interest-earning assets were $5.82 billion in the third quarter of 2026 compared to $5.16 billion in the year-ago quarter and $5.22 billion in the second quarter of 2026. High Point added approximately $557 million of average earning assets. Page 12 contains a more detailed analysis of the linked-quarter increase in net interest income and the net interest margin. On a linked-quarter basis, our third quarter 2026 net interest margin was positively impacted as purchase accounting discount accretion added 6 basis points, an increase in earning asset yield added 5 basis points, and the change in the earning asset mix added 2 basis points.

These were partially offset by an interest charge-off on a commercial loan that equated to 1 basis point and higher funding costs that equated to 1 basis point. I would note that the accretion this quarter was $932,000 on loans and securities. Page 13 is a new slide that shows the contractual cash flows from our fixed-rate loans and securities over the next six quarters. Over that period, approximately $737 million in loans and securities are scheduled to mature or reprice at a weighted average yield of 4.74%.

That includes $197 million in securities at 2.84% and $539 million in loans at 5.44%. With new commercial and mortgage loan production coming in at yields above 6.5%, this repricing provides a meaningful tailwind to our asset yields. On page 14 we provide details on the institution's interest rate risk position. The comparative simulation analysis for 3Q26 and 2Q26 calculates a change in net interest income over the next 12 months under five rate scenarios.

All scenarios assume a static balance sheet. The base rate scenario applies the spot yield curve from the valuation date. The shock scenario is considered immediate permanent parallel rate changes. Base case modeled net interest income increased to $233.8 million from $204.2 million at June 30, with $23.3 million of the increase attributable to High Point.

Along with improvement in the modeled margin, our position remains modestly asset sensitive. A 100 basis point increase in rates would increase net interest income by 1.97%, while a 100 basis point decline would reduce it by 0.64%. We continue to manage exposure to lower rates through $50 million notional for purchases. The termination of a $25 million pay-fixed swap.

Currently, 37% of assets reprice in one month and 48.5% reprice in the next 12 months. Moving on to page 15, noninterest income totaled $15.8 million in the third quarter of 2026 compared to $11.9 million in the year-ago quarter and $15.3 million in the second quarter of 2026. Third quarter 2026 net gains on mortgage loans totaled $1 million compared to $1.5 million in the prior-year quarter. The decrease is primarily due to unfavorable fair value adjustments reflecting higher interest rates at quarter end, including a mark on construction-to-permanent loans transferred to our portfolio.

Mortgage loan servicing, net, was a gain of $4.1 million in third quarter 2026 compared to a gain of $0.1 million in the prior-year quarter. The change due to price was a gain of $3.4 million, or $0.12 per diluted share after tax, in 3Q26 compared to a loss of $0.6 million, or $0.02 per diluted share after tax, in the prior-year quarter. As detailed on page 16, our noninterest expense totaled $44.8 million in the third quarter of 2026 compared to $34.1 million in the year-ago quarter and $37.8 million in the second quarter of 2026. The increase reflects the addition of High Point's operating expenses and $3.5 million of merger-related expenses.

Compensation and employee benefits increased $3.4 million from the prior-year quarter primarily due to the addition of High Point staff and salary increases effective 1-1-2026, as well as higher performance-based compensation. This was partially offset by lower health insurance cost. Data processing expense increased $1 million and amortization of intangible assets was $0.9 million compared to $0.1 million in the second quarter, reflecting the core deposit intangible recorded in the High Point acquisition. Our efficiency ratio was 61.3%.

Turning to page 17, this is our update for our 2026 outlook, showing our actual performance during the third quarter compared to the original outlook we provided in January 2026. As a reminder, that outlook did not include High Point. Our outlook estimated full-year loan growth of 4.5% to 5.5%. Excluding High Point, loans increased $116.6 million in the third quarter, or 10.5% annualized, which is above our forecasted range.

Commercial loans increased $124.1 million and mortgage loans increased $1.1 million, while installment loans decreased $8.6 million. Third quarter 2026 net interest income increased by 21.8% over 2025, or 8.7% excluding High Point, which is above our forecasted range of 7% to 8%. I would highlight that this is our 13th consecutive quarter of increasing net interest income. The net interest margin was 3.82% for the current quarter, up from 3.54% in the prior-year quarter and up 11 basis points from the linked quarter.

The third quarter 2026 provision for credit losses was an expense of $4.8 million, or approximately 0.4% of loans annualized, which was above our forecasted range of 0.2% to 0.25%. That's primarily due to a specific reserve on the one commercial relationship Joel discussed. The initial allowance on the acquired High Point loans was established through purchase accounting rather than through the provision. Moving on to page 18, noninterest income totaled $15.8 million in third quarter 2026, or $15.2 million excluding High Point, which is above our forecasted range of $11.3 million to $12.3 million.

Third quarter 2026 mortgage loan originations, sales, and gains totaled $136 million, $102.3 million, and $1 million, respectively. Mortgage loan servicing, net, generated a gain of $4.1 million in the third quarter of 2026, which is above our forecasted target. Noninterest expense was $44.8 million in the third quarter, including $3.5 million of merger-related costs. Excluding High Point and merger-related costs, noninterest expense was $37.3 million, slightly above our forecasted range of $37 million.

Our effective income tax rate was 17% for the third quarter of 2026. Additionally, we repurchased 119,425 shares of common stock for $4.2 million during the first nine months of 2026. This was related to the liquidation of High Point Community Bank's ESOP program.