INDEPENDENT BANK CORP /MI/ Q1 FY2026 earnings call

Highlights include strong core fundamentals with growth in net interest income, expansion in net interest margin, continued growth in loans and core deposits. Balance sheet growth was disciplined. Credit quality remained sound. Geopolitical uncertainty was monitored. Profitability was strong. Announced merger with HCB Financial Corp was expected to enhance shareholder value. Added commercial bankers in West Michigan. Commercial loan portfolio had solid growth with 54 million quarterly growth or 9.9% annualized. Retail and residential mortgage loans had declines. Credit quality metrics showed total non-performing loans at 27.5 million or 64 basis points, past due loans at 8.2 million or 19 basis points, net charge-offs at 266,000 or two basis points.

First quarter 2026 net income was $16.9 million, or 81 cents per diluted share. Net interest margin was 3.65%, a three basis point increase on a linked quarter basis. Net interest income increased $500,000 or 1.1% over the fourth quarter of 2025. Total deposits plus brokered time deposits had net growth of $80.4 million or 6.9% annualized. Loans had net growth of $31.8 million or 3% annualized. Commercial loans had $53.8 million or 9.9% annualized growth. Deposit basis was 47% retail, 38% commercial, 15% municipal.

Outlook estimated full-year loan growth of 4.5% to 5.5%. First quarter loans increased $31.8 million or 3% annualized, below forecasted range. Net interest income increased 7.3% over 2025, within forecasted range. Net interest margin was 3.65% for the quarter. Provision for credit losses was $0.4 million, below forecasted range. Non-interest income was $12 million, within forecasted range. Non-interest expense was $38.3 million, above forecasted range. Merger expense was 0.3 million. 2026 outlook included 50% cost savings phased in year one and fully phased in year two.

Geopolitical uncertainty had increased, with potential knock-on impacts to the domestic economy. Duration of geopolitical conflicts could prolong high energy prices, potentially dragging on loan growth.

Q: On net interest margin, if no rate cuts in 2026, does it change margin calculus?

A: Not measurably, forecast holds.

Q: Competitive environment for core funding in Michigan?

A: Very competitive with heavy field of credit unions, focus on commercial and municipal accounts.

Q: Geopolitical impacts on 2026 outlook?

A: Geopolitical uncertainty could mute loan growth if conflict prolongs high energy prices, but business owner confidence still high.

Q: Expenses, excluding one-time items, still comfortable with 36-37 million run rate?

A: Feel good about that excluding deal and non-recurring.

Q: Cadence of cost savings from HCB deal?

A: 50% phased in year one, fully phased in year two.

Q: Deployment of excess liquidity from HCB deal?

A: First choice to deploy through commercial bank, then other asset classes, still in analysis phase.