Independent Bank Corporation (IBCP) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The company showed strong loan growth and net interest income, with positive guidance for 2026. Despite lower non-interest income, the overall financial health is stable, with increased tangible common equity and a consistent dividend. The Q&A highlighted optimism in market outlook and strategic flexibility. While there were some concerns about consumer loan shrinkage and vague management responses, the overall sentiment leans positive, especially with planned margin expansion and strategic focus on commercial banking.
Key Financial Performance
Net Income (Q4 2025) $18.6 million or $0.89 per diluted share, compared to $18.5 million or $0.87 per diluted share in Q4 2024. The slight increase is attributed to improved net interest income and operational efficiencies.
Net Income (Full Year 2025) $68.5 million or $3.27 per diluted share, compared to $66.8 million or $3.16 per diluted share in 2024. The increase is due to higher net interest income and strong loan growth.
Net Interest Income (Q4 2025) Increased by $1 million (2.2%) over Q3 2025, with a net interest margin of 3.62%, up 8 basis points from the previous quarter. This was driven by changes in interest-bearing liability mix and decreased funding costs.
Loan Growth (Q4 2025) $78 million or 7.4% annualized growth from September 30, 2025. For the full year, loans increased by $237 million or 5.9%, led by a 14.2% growth in the commercial portfolio.
Deposit Growth (Q4 2025) $57.5 million or 4.8% annualized growth from September 30, 2025. Total deposits increased by $107.6 million year-over-year, driven by growth in savings and interest-bearing checking accounts.
Tangible Common Equity Ratio Increased to 8.65%, reflecting improved financial stability and shareholder returns.
Dividend Payment $0.26 per share dividend paid on November 14, 2025, with a dividend payout ratio of 32% for the year.
Non-Interest Income (Q4 2025) $12 million, compared to $19.1 million in Q4 2024. The decline is primarily due to the sale of $931 million of mortgage servicing rights earlier in 2025.
Non-Interest Expense (Q4 2025) $36.1 million, compared to $37 million in Q4 2024. The decrease is attributed to lower performance-based compensation and medical-related costs.
Credit Quality Metrics Non-performing loans were $23.1 million (54 basis points of total loans), up slightly from 48 basis points in Q3 2025. Past due loans totaled $7.8 million (18 basis points), up from 12 basis points in Q3 2025. Net charge-offs were $1.6 million for the year, compared to $0.9 million in 2024.
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Operating Highlights
Commercial Loan Growth: The commercial loan portfolio grew by $276 million or 14.2% in 2025, with $88 million in quarterly growth during Q4 2025. The company anticipates continued low double-digit growth in 2026.
Deposit Growth: Deposits increased by $107.6 million in 2025, with business deposits up $20.4 million and retail deposits up $64.1 million in Q4 2025. The deposit base is diversified across retail (47%), commercial (37%), and municipal (16%).
Net Interest Income and Margin: Net interest income increased by $3.5 million year-over-year, with a net interest margin of 3.62% in Q4 2025, up 8 basis points from Q3 2025.
Credit Quality: Non-performing loans were $23.1 million or 54 basis points of total loans at year-end 2025, with past due loans at $7.8 million or 18 basis points. Net charge-offs were $1.6 million for the year.
Cost Management: Non-interest expense totaled $36.1 million in Q4 2025, down from $37 million in the prior year. Compensation expenses decreased due to lower performance-based compensation and medical costs.
Talent Acquisition: The company added 5 experienced bankers in 2025, including one in Metro Detroit, to support commercial loan growth. The team now includes 49 bankers across 8 commercial loan teams.
Share Repurchases: 407,113 shares were repurchased in 2025 for $12.4 million. The Board authorized additional share repurchases of approximately 5% in 2026.
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Risk or Challenges
Non-performing loans: Total non-performing loans were $23.1 million or 54 basis points of total loans at quarter end, up from 48 basis points at 9/30. A significant portion ($16.5 million) is tied to one commercial development project with ongoing challenges.
Past due loans: Past due loans increased to $7.8 million or 18 basis points, up from 12 basis points at 9/30.
Net charge-offs: Net charge-offs increased to $1.6 million or 4 basis points of average loans for the year, compared to $0.9 million or 2 basis points in 2024.
Mortgage loan servicing revenue: Revenue from mortgage loan servicing declined significantly due to the sale of approximately $931 million of mortgage servicing rights earlier in the year.
Interest rate sensitivity: The bank has increased exposure to larger rate declines (minus 300 and 400 basis points), which could negatively impact net interest income.
Provision expense for credit losses: The 2026 outlook includes a provision expense for allowance for credit losses of approximately 20 to 25 basis points of average portfolio loans, indicating potential credit quality concerns.
Non-interest expense: Non-interest expenses are expected to increase by 5% to 6% in 2026, driven by higher compensation, employee benefits, data processing, and loan and collections costs.
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Guidance & Outlook
Loan Growth: Anticipate mid-single-digit growth, targeting 4.5% to 5.5% for the full year 2026. Growth expected in commercial loans, with mortgage loans remaining flat and installment loans declining. Assumes a stable Michigan economy.
Net Interest Income: Forecasted growth of 7% to 8% over full year 2025. Net interest margin expected to expand by 5 to 7 basis points in Q1 2026, with successive quarterly increases of 3 to 5 basis points. Assumes 0.25% rate cuts in March and August 2026, with slight increases in long-term interest rates.
Provision Expense for Credit Losses: Full year 2026 provision expense expected to be approximately 20 to 25 basis points of average portfolio loans.
Non-Interest Income: Estimated quarterly range of $11.3 million to $12.3 million, with a full year increase of 3% to 4% compared to 2025. Mortgage loan origination volumes expected to decrease by 6% to 7%, and net gain on sale to decline by 14% to 16% compared to 2025.
Non-Interest Expense: Quarterly range expected to be $36 million to $37 million, with a full year increase of 5% to 6% compared to 2025. Primary drivers include increases in compensation and employee benefits, data processing, loan and collections, and occupancy costs.
Income Taxes: Effective tax rate projected to be approximately 17%, assuming no changes to the statutory federal corporate income tax rate in 2026.
Share Repurchases: Board authorized share repurchases of approximately 5% in 2026, though no repurchases are currently modeled for the year.
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Shareholder Return Plan
Dividend Payment: A $0.26 per share dividend in common stock was paid on November 14, 2025.
Dividend Payout Ratio: The dividend payout ratio was 32% for the year 2025.
Share Repurchase: 407,113 shares of common stock were repurchased for an aggregate purchase price of $12.4 million in the year 2025.
Share Repurchase Authorization for 2026: The Board of Directors authorized share repurchases of approximately 5% in 2026, but no share repurchases are currently modeled for 2026.
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Key Q&A
Q:What is the market outlook in Southeast Michigan, particularly given the M&A dislocation?
A:Joel Rahn stated that there is opportunity in Southeast Michigan, particularly in talent acquisition. He expects a net addition of 4 to 5 bankers this year, despite some retirements. The impact on customers will take time, but the outlook is positive.
Q:Why is the loan growth outlook for 2026 projected at 5% at the midpoint, lower than the typical high single-digit growth?
A:William Kessel explained that the shift in the balance sheet and strategic emphasis on commercial banking has led to double-digit growth in commercial loans. However, there is shrinkage in the consumer portfolio, particularly in the RV lending channel, which has reduced overall growth to mid-single digits.
Q:What is the outlook for funding loan growth through securities cash flows in 2026?
A:Gavin Mohr stated that $120 million of securities runoff is forecasted for 2026, which will fund loan growth. The asset mix will continue to be adjusted throughout the year.
Q:What is the guidance for margin expansion in 2026, and what are the drivers behind it?
A:Gavin Mohr provided guidance of 5 to 7 basis points of expansion in Q1 and 3 to 5 basis points in subsequent quarters, totaling 18 to 23 basis points for the year. Drivers include rate cuts in March and August, a 40% beta on deposit repricing, and a favorable yield curve.
Q:What is the company's approach to capital management, including buybacks and M&A?
A:Gavin Mohr emphasized the flexibility provided by the strong capital position, with a focus on stable and growing dividends. Share repurchases will be considered when prices are favorable. William Kessel added that M&A is not a requirement but could be pursued if it aligns strategically and adds to EPS without diluting shareholders.
Q:What is the cash flow from the bond portfolio and the repricing of loans in 2026?
A:Gavin Mohr stated that the bond portfolio will have a $120 million runoff in 2026, split equally per quarter. Loan repricing will average $105 million per quarter at an exit rate of 5.50%.
Q:What is the outlook for charge-offs and provisions in 2026?
A:Joel Rahn and Gavin Mohr indicated that charge-offs are expected to remain similar to recent years, primarily driven by consumer loans. The provision is guided at 20 to 25 basis points, mainly due to loan growth.
Q:What is the plan for the securities portfolio in 2026 and beyond?
A:Gavin Mohr stated that no securities purchases are planned for 2026, with the portfolio expected to bottom out in 2027. The target remains 12% to 14% of total assets.
Q:Would the company consider adding a team of lenders instead of individual bankers?
A:William Kessel and Joel Rahn expressed openness to adding a team of lenders, though it is rare. Historically, the company has focused on adding individual bankers, which has been successful.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the potential timing or specifics of M&A activities, as well as the exact month in 2027 when securities purchases might resume. Additionally, there was some vagueness in the discussion of loan repricing details and charge-off expectations.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bank Instructions
Deposits increase
Detroit banker
EVP Head
Executive VP
Fed asset
Funding deposit
Highlights increase
Income tax
Instructions today
Lending
NIM
Page income
asset yield
commercial
compensation
credit transfer
dividend
equity ratio
gain share
increase interest
interest liability
liquidity
margin expansion
mix CI
mix basis
point interest
portfolio concentration
portfolio investment
project
return
share repurchase
stock
tax credit
tax expense
transfer agreement
IBCP Transcript
Independent Bank Corporation (IBCP) Q4 2025 Earnings Call Transcript
Positive1-22
The company showed strong loan growth and net interest income, with positive guidance for 2026. Despite lower non-interest income, the overall financial health is stable, with increased tangible common equity and a consistent dividend. The Q&A highlighted optimism in market outlook and strategic flexibility. While there were some concerns about consumer loan shrinkage and vague management responses, the overall sentiment leans positive, especially with planned margin expansion and strategic focus on commercial banking.
Independent Bank Corporation (IBCP) Q3 2025 Earnings Call Transcript
Positive10-28
The company's earnings call reveals strong financial performance, with notable growth in loan portfolios and profitability metrics like ROA and ROE. Despite a slight rise in nonperforming assets, the bank maintains a strong credit reserve and effective expense management. The Q&A highlights strategic growth in commercial banking and a stable margin outlook, even with potential Fed rate cuts. While management was vague about certain risks, the positive guidance and growth opportunities suggest a likely stock price increase in the coming weeks.
Independent Bank Corporation (IBCP) Q2 2025 Earnings Conference Call Transcript
Unknown7-24
The earnings call summary presents a mixed picture: strong ROA and ROE, stable credit metrics, and opportunities in certain markets offset by a decline in non-interest income and plateauing deposit costs. The Q&A reveals limited growth potential in deposit costs and buybacks, with management providing vague guidance on some key areas. Despite some positive aspects, such as strong regional markets and AI technology implementation, the lack of clear guidance on certain financial metrics and competitive pressures suggest a neutral sentiment towards the stock price movement.
Independent Bank Corporation (IBCP) Q1 2025 Earnings Call Transcript
Unknown4-24
The earnings call reflects a mixed sentiment. Financial performance shows some positive aspects such as net interest income growth and dividend increase, but also highlights concerns like decreased net income and non-interest income. The Q&A section reveals cautious optimism, with management confident in reserves but acknowledging competitive pressures and economic challenges. The shareholder return plan is slightly positive with share repurchases. Given these factors, the overall sentiment is neutral, with no strong catalysts for significant stock price movement in either direction over the next two weeks.
IBCP Slides
IBCP Report
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