Independent Bank (NASDAQ:IBCP) reported higher first-quarter 2026 earnings, pointing to modest net interest margin expansion, growth in core deposits and commercial loans, and what management described as continued sound credit quality.
First-quarter results and key balance sheet trends
President and CEO Brad Kessel said the company posted first-quarter 2026 net income of $16.9 million, or $0.81 per diluted share, up from $15.6 million, or $0.74 per diluted share, in the prior-year period.
- Net interest margin of 3.65%, up three basis points from the fourth quarter of 2025
- Net interest income increase of $500,000, or 1.1%, versus the fourth quarter of 2025
- Increase in tangible common equity per share of $0.33, or 5.9% annualized, from Dec. 31, 2025
- Return on average assets of 1.24% and return on average equity of 13.43%
- Core deposit growth (total deposits less brokered time deposits) of $80.4 million, or 6.9% annualized, from year-end 2025
- Loan growth of $31.8 million, or 3% annualized, from year-end 2025
Kessel also noted a tangible common equity ratio of 8.7% and said the company paid a quarterly common dividend of $0.28 per share on Feb. 13, 2026.
Deposits, funding costs, and competitive environment
Kessel said deposits totaled $4.9 billion at March 31, 2026, an increase of $80.4 million from year-end 2025. The increase came across non-interest-bearing, savings, interest-bearing checking, and reciprocal deposits, offset by “a small decline in time deposits,” he said.
On a linked-quarter basis, business deposits increased by $94 million and retail deposits increased by $28 million, offset by a $42 million decline in municipal deposits that Kessel attributed “primarily due to seasonality.” Management described the deposit base as 47% retail, 38% commercial, and 15% municipal.
For funding costs, Kessel said the total cost of funds decreased 13 basis points to 1.54% in the first quarter.
During the Q&A, Kessel described deposit competition in Michigan as “very competitive,” citing “a heavy field of credit unions” and noting that pricing can vary based on competitors’ balance sheet profiles. He added that the bank’s deposit focus remains centered on operating accounts tied to commercial and municipal relationships.
Loan growth and credit quality metrics
Executive Vice President and Head of Commercial Banking Joel Rahn said the company opened 2026 with $32 million of loan growth, or 3% annualized. He said commercial loan growth was approximately $54 million for the quarter, or 9.9% annualized, while residential mortgage and consumer installment portfolios declined by $4.5 million and $17.5 million, respectively.
Rahn said the bank continues to invest in commercial banking talent, adding two experienced commercial bankers in West Michigan during the quarter and bringing the total to 50 bankers across eight commercial loan teams statewide. Compared with a year ago, he said the bank has added a net five experienced commercial bankers.
Looking ahead, Rahn said that “based on a strong pipeline,” management believes it will “continue low double-digit growth” in the commercial loan portfolio in 2026. He also said the bank is seeing market share opportunities from regional banks “in both talent and customer acquisition,” along with “steady organic growth from existing customers.”
Rahn outlined commercial production mix during the quarter as 57% C&I and 43% investment real estate, while the overall commercial portfolio mix stood at 68% C&I and 32% investment real estate. He said concentrations have not shifted significantly over the past year and described the portfolio as “very well diversified,” with manufacturing the largest C&I segment at $191 million (8.4% of the total portfolio) and industrial the largest investment real estate concentration at $212 million (8.8%).
On credit, Rahn said total non-performing loans were $27.5 million, or 64 basis points of total loans, up slightly from 54 basis points at Dec. 31, 2023. He noted that $20 million of the total relates to “one commercial development exposure” discussed in previous quarters, and said the bank continues to work through the project and is “appropriately reserved for any loss exposure.” Past due loans were $8.2 million, or 19 basis points, “basically unchanged” from Dec. 31, 2023; Rahn added that $4 million of delinquency was tied to a commercial loan renewal completed after quarter end. He also said net charge-offs were $266,000, or two basis points of average loans, compared with $68,000, or one basis point, in the first quarter of 2025.
Margin drivers, fee income, and expense items
Chief Financial Officer Gavin Mohr said net interest income increased $3.2 million from the year-ago period, and that the tax-equivalent net interest margin was 3.65% versus 3.49% a year earlier and up three basis points from the fourth quarter of 2025. He said average interest-earning assets were $5.21 billion, compared with $5.09 billion in the year-ago quarter and $5.16 billion in the fourth quarter.
Mohr said the linked-quarter increase in net interest margin benefited from a change in interest-bearing liability mix (plus 1 basis point) and lower funding costs (plus 10 basis points), offset by earning asset mix and yield (minus 6 basis points) and interest charged off on a commercial loan (minus 2 basis points).
In the Q&A, Mohr said the bank’s previously provided margin forecast “holds” even if the expected rate cuts embedded in earlier assumptions do not occur, adding it would not change the outlook “measurably.”
Mohr said noninterest income totaled $12 million, compared with $10.4 million in the prior-year quarter and $12 million in the fourth quarter of 2025. Net gains on mortgage loans were $1.3 million, down from $2.3 million in the first quarter of 2025, which Mohr attributed to “lower profit margins” partially offset by higher loan sale volume. Mortgage loan servicing net was a gain of $1.6 million versus a loss of $0.6 million in the year-ago quarter. Mohr said the servicing change due to price was a gain of $0.9 million ($0.04 per diluted share after tax), versus a loss of $1.5 million ($0.06 per diluted share after tax) a year ago. He also said servicing revenue declined versus the prior year due to the sale of about $930 million of mortgage servicing rights on Jan. 31, 2025.
Noninterest expense was $38.3 million, compared with $34.3 million a year ago and $36.1 million in the fourth quarter. Mohr said compensation expense increased $1.4 million due to salary increases that were “predominantly effective on January 1, 2026.” He also cited $1.5 million of litigation expense tied to an accrual for losses considered probable across “all of our outstanding litigation matters in aggregate,” as well as higher advertising expense due to “retroactive new deposit account opening incentives.” The company recorded $0.3 million of merger-related expenses, and Mohr said nonrecurring noninterest expense items totaled about $1.9 million in the quarter.
During the Q&A, Kessel said management remains comfortable with a $36 million to $37 million expense run rate when excluding deal-related and nonrecurring items.
Outlook and merger-related comments
Mohr reviewed how first-quarter performance compared with the company’s previously issued 2026 outlook. He said full-year loan growth was forecast at 4.5% to 5.5%, while first-quarter loans rose $31.8 million, or 3% annualized, “below our forecasted range,” driven by commercial growth offset by declines in mortgage installment loans. Net interest income was up 7.3% over 2025, which Mohr said was within the company’s 7% to 8% forecast range. He said the provision for credit losses was a $0.4 million expense, below the forecast range.
Mohr said noninterest income of $12 million was within the company’s first-quarter forecast range of $11.3 million to $12.3 million. He also said first-quarter noninterest expense was above the forecast range of $36 million to $37 million due to nonrecurring litigation and deposit incentive costs. The effective tax rate was 16.6%, and Mohr said there were no share repurchases in the quarter.
Management also discussed the company’s recently announced merger with HCB Financial Corp. Kessel said the deal is expected to “provide enhanced shareholder value,” and in response to a question on cost savings cadence, he said it was announced as “50% phased in year one and fully phased in year two,” clarifying that year one reflects “50% of half a year.”
Asked about deploying liquidity coming from the HCB deal, Mohr said the company was “not ready to give direction specifically on that,” adding that the first preference would be to deploy funds “through the commercial bank,” followed by considering other asset classes by yield, potential reduction in wholesale funding, and possible securities purchases, while noting those items remain “very much in the analysis phase.”
On macro and geopolitical uncertainty, Kessel said the bank has not yet seen a direct impact on customers and continues to monitor conditions. He added that a recent rescore of the retail portfolio showed solid credit scores with limited changes in score bands. Rahn said the potential economic impact will depend on how long conflicts persist and whether they prolong high energy prices, adding that the bank has not seen a meaningful slowdown yet and that business owner confidence remains “relatively high.”
About Independent Bank (NASDAQ:IBCP)
Independent Bank Corporation (NASDAQ: IBCP) is a bank holding company headquartered in Grand Rapids, Michigan. Through its primary subsidiary, Independent Bank, the company offers a full range of commercial and personal banking services designed to meet the needs of individuals, small businesses and corporate clients. The company’s offerings span traditional branch-based banking as well as digital and mobile platforms.
Independent Bank provides deposit products such as checking and savings accounts, money market accounts and certificates of deposit.
