Independent Bank Corporation Q4 FY2025 earnings call

• Highlights include net interest income increase, net interest margin expansion, strong loan growth, and increased non-interest income.
• Credit quality metrics remain positive with watch credits and nonperforming assets below historic averages.
• Added experienced commercial bankers in 2025, with a net of five bankers added, and expects similar net additions in 2026.
• Repurchased shares and executed a tax credit transfer agreement during Q4 2025 to reduce tax obligations and enhance EPS.
• Loan portfolio saw commercial portfolio growth at $276 million or 14.2% for the year, with $88 million quarterly growth in Q4 2025.

Independent Bank Corporation reported fourth quarter 2025 net income of $18.6 million or $0.89 per diluted share, versus $18.5 million or $0.87 per diluted share in the prior year. For the year ended 12/31/2025, net income was $68.5 million or $3.27 per diluted share compared to $66.8 million or $3.16 per diluted share in 2024. Net interest income increased by $1 million (2.2% over 2025) with a net interest margin of 3.62%, up 8 basis points linked quarter. Net growth in loans was $78 million or 7.4% annualized. Total deposits were $4.8 billion at 12/31/2025, an increase of $107.6 million from 2024, with deposit composition at 47% retail, 37% commercial, and 16% municipal.

• Loan growth: Anticipates mid-single-digit range, targeting 4.5%-5.5% full-year growth.
• Net interest income: Forecasts 7-8% growth over 2025, with net interest margin expansion of 5-7 bps in Q1 2026 and 3-5 bps quarterly thereafter.
• Noninterest income: Estimates range of $11.3 million to $12.3 million quarterly, total up 3-4% vs 2025.
• Noninterest expense: Quarterly range $36 million to $37 million, total 5-6% higher than 2025.
• Income tax: Effective rate ~17% assuming statutory federal corporate income tax rate unchanged in 2026.
• Share repurchases: Board authorized ~5% repurchase in 2026, not modeled in guidance.

• Credit risk: Nonperforming loans slightly up to $23.1 million or 54 basis points of total loans, past due loans up to $7.8 million or 18 basis points, but reserved for exposure.
• Interest rate risk: Sensitivity to rate changes, with non-maturity deposit modeling impact on sensitivity.
• Market risk: Potential M&A dislocation in Michigan market affecting market opportunities.

Q: Good morning, everyone. Hope you are doing well. Let me just start off here kind of on your market outlook here in Michigan. Can you just kick it off by offering your latest thoughts on the opportunity set you are seeing, particularly in Southeast Michigan given the M&A dislocation? And I guess, if you added five commercial bankers in 2025, like, what would the ambition set look like for banker ads in '26?

A: Well, I will take it. And Brendan, this is Joel. Good question. I would think in terms of our talent acquisition expectation, it is similar. We will have some departures with retirements, etcetera, that we have to cover. But I think a net add of four to five bankers this year would be reasonable to expect. And in terms of opportunity in Southeast Michigan, we do think there will be opportunity there. It is just beginning. And so typically, the account side window opens first and can be some time before the customer feels the impact. But we are watching it closely and feel that it will be accretive for us.

Q: Hey. Good morning, Hope everybody is doing well today, and thanks for taking my questions here. First one, just on the margin and the guidance provided around that. Gavin, just wondering if you could kind of walk through the cadence again for kind of what you expect here in the first quarter and then the forthcoming quarters after that? And then what were some of the drivers behind that, for a rising margin?

A: Yeah. So, we are looking at five to seven basis points of expansion in Q1, and then Q2, '3, and four, we are forecasting three to five basis points of expansion each quarter. And that gets you to the overall forecast of, you know, 18 to 23 basis points on a year-over-year, full-year basis. What is going on there is a couple of things. One, just the benefit of we have two rate cuts in the forecast of March and August. We feel really good about our ability to see that 40% plus beta on the repricing down of deposits. The yield curve shape right now in terms of the forward yield curve is beneficial. The mid the five to seven point of the curve is actually drifting a little bit higher. So we are getting some more slope in that respect. And then also, it is the continued repricing of below-market assets as we go into 2026. Does that make sense, Damon?

Q: Hey, guys. Good morning. Thanks for taking the questions. Gavin, just going back to the margin discussion, could you update us just in terms of how much cash flow you have come off the bond portfolio each quarter and what the magnitude of or the amount of loans that you have that are repricing higher and what that amount looks like in terms of that yield pickup?

A: Yeah. Give me one sec. So the bonds, the run for the run rate for 2026 is $120 million. And I think it is fair. You could model that as pro forma to the or split it up equally per quarter. On the loan side, let me get through my notes here. Maybe to ask another question while you dig that up, Gavin. Do Great.

Q: Hey, morning, guys. Gavin, just following up on the securities portfolio. You said runoff of roughly $120 million. Does that all I mean, are you looking to reinvest any into the securities portfolio at this time? Or I think looking at my prior notes, I think you said sort of targeting securities portfolio, you know, 12 to 15% of assets. Is that still sort of the thought process?

A: That is, John. And we I do not think we will get through 2026, without doing any securities purchases.