Independent Bank (IBCP) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Highlights and Executive Commentary This section highlights Q2 2025 financial results, CEO commentary, and key strategic achievements Summary of Key Financial Results Independent Bank Corporation reported a decrease in net income and diluted earnings per share for the second quarter of 2025 compared to the prior-year period | Metric | Q2 2025 ($ millions) | Q2 2024 ($ millions) | | :------------------ | :------------------- | :------------------- | | Net Income | $16.9 | $18.5 | | Diluted EPS | $0.81 | $0.88 | CEO Commentary and Strategic Overview The CEO highlighted positive trends including annualized loan growth of 9.0%, net interest income growth, and a nine basis point margin expansion. The company maintained strong credit metrics and improved operational scale through strategic investments, driving growth in tangible common equity per share and healthy performance returns - Overall loans increased by 9.0% (annualized), while core deposits were down by 1.4% (annualized) due to seasonality[2] - Generated net interest income growth on both a linked quarter and year-over-year quarterly basis, producing nine basis points of margin expansion from the prior quarter[2] - Tangible common equity per share of common stock grew by 10.8% compared to the prior year quarter[2] Q2 2025 Performance Returns | Metric | Value | | :------------------------- | :------ | | Return on Average Assets | 1.27% | | Return on Average Equity | 14.66% | - Credit metrics remain strong with low levels of watch credits, 16 basis points of non-performing assets to total assets, and 0.02% net charge-offs to average loans (annualized)[2] Specific Second Quarter 2025 Achievements The company achieved a $0.9 million increase in net interest income over Q1 2025, a $0.36 increase in tangible common equity per share, nine basis points of net interest margin expansion, $91.7 million in net loan growth, and paid a $0.26 per share common stock dividend - Net interest income increased by $0.9 million (2.1%) over the first quarter of 2025[3] - Tangible common equity per share of common stock increased by $0.36 (6.9% annualized) from March 31, 2025[3] - Net interest margin expanded by nine basis points compared to March 31, 2025[3] - Net growth in loans of $91.7 million (9.0% annualized) from March 31, 2025[3] - A dividend of 26 cents per share on common stock was paid on May 15, 2025[3] Operating Results Analysis This section analyzes Q2 2025 operating results, covering net interest income, non-interest income, expenses, and income tax Net Interest Income and Margin Net interest income increased year-over-year and linked quarter, driven by an increase in average interest-earning assets and a higher net interest margin. The net interest margin expanded to 3.58% in Q2 2025 Net Interest Income and Margin Trends | Metric | Q2 2025 ($ millions) | Q1 2025 ($ millions) | Q2 2024 ($ millions) | | :----------------------------------------- | :------------------- | :------------------- | :------------------- | | Net Interest Income | $44.6 | $43.7 | $41.3 | | YoY Change (Q2 2025 vs Q2 2024) | +$3.3 (7.9%) | | | | QoQ Change (Q2 2025 vs Q1 2025) | +$0.9 (2.1%) | | | | Net Interest Margin (tax equivalent) | 3.58% | 3.49% | 3.40% | | Average Interest-Earning Assets | $5.04 billion | $5.08 billion | $4.89 billion | Non-Interest Income Total non-interest income decreased significantly in Q2 2025 compared to the prior year, primarily due to the absence of a gain on equity securities recorded in Q2 2024 and variances in mortgage banking related revenues Total Non-Interest Income | Period | Amount ($ millions) | | :------ | :------------------ | | Q2 2025 | $11.3 | | Q2 2024 | $15.2 | - The change was primarily due to a $2.7 million gain on equity securities at fair value in the prior year quarter, which was not present in Q2 2025[5][8] Net Gains on Mortgage Loans Net gains on mortgage loans increased in Q2 2025 compared to Q2 2024, driven by both an increase in gain on sale margin and higher volume of mortgage loans sold Net Gains on Mortgage Loans | Period | Amount ($ millions) | | :------ | :------------------ | | Q2 2025 | ~$1.6 | | Q2 2024 | ~$1.3 | Mortgage Loan Servicing, Net Mortgage loan servicing, net, saw a significant decrease in income in Q2 2025 compared to Q2 2024, primarily due to changes in the fair value of capitalized mortgage loan servicing rights (MSRs) and a decline in servicing revenue following the sale of approximately $931 million of MSRs in January 2025 Mortgage Loan Servicing, Net Income | Period | Amount ($ millions) | | :------ | :------------------ | | Q2 2025 | $0.5 | | Q2 2024 | $2.1 | - The variance is primarily due to changes in the fair value of capitalized MSRs and a decline in servicing revenue attributed to the sale of approximately $931 million of MSRs on January 31, 2025[7] Mortgage Loan Servicing, Net Activity (in thousands) | Metric | Three months ended 6/30/2025 ($ thousands) | Three months ended 6/30/2024 ($ thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | Revenue, net | $1,649 | $2,214 | | Fair value change due to price | $(219) | $911 | | Fair value change due to pay-downs | $(862) | $(1,034) | | Loss on sale of originated servicing rights | $(78) | — | | Total | $490 | $2,091 | Non-Interest Expense Total non-interest expenses remained relatively stable, with a slight increase in Q2 2025 compared to the prior-year period Total Non-Interest Expense | Period | Amount ($ millions) | | :------ | :------------------ | | Q2 2025 | $33.8 | | Q2 2024 | $33.3 | Income Tax Expense Income tax expense decreased in Q2 2025 compared to Q2 2024, reflecting changes in pre-tax earnings Income Tax Expense | Period | Amount ($ millions) | | :------ | :------------------ | | Q2 2025 | $3.8 | | Q2 2024 | $4.6 | Asset Quality The company's asset quality metrics show an increase in non-performing loans and a higher provision for credit losses in Q2 2025 compared to the prior year, while the allowance for credit losses remained stable as a percentage of total portfolio loans Non-Performing Loans by Type (in thousands) | Loan Type | 6/30/2025 ($ thousands) | 12/31/2024 ($ thousands) | 6/30/2024 ($ thousands) | | :------------------------ | :---------------------- | :----------------------- | :---------------------- | | Commercial | $— | $54 | $312 | | Mortgage | $9,620 | $7,005 | $4,819 | | Installment | $833 | $733 | $843 | | Total Non-Performing Loans | $8,204 | $6,002 | $4,485 | Asset Quality Ratios | Ratio | 6/30/2025 | 12/31/2024 | 6/30/2024 | | :---------------------------------------- | :-------- | :--------- | :-------- | | Non-performing loans to total portfolio loans | 0.20% | 0.15% | 0.12% | | Non-performing assets to total assets | 0.16% | 0.13% | 0.10% | | Allowance for credit losses to total non-performing loans | 745.45% | 989.32% | 1253.98% | Credit Loss Metrics | Metric | Q2 2025 ($ millions) | Q2 2024 ($ millions) | | :------------------------------ | :------------------- | :------------------- | | Provision for credit losses | $1.50 | $0.02 | | Loan net charge-offs | $0.37 | $0.09 | | Allowance for credit losses (period end) | $61.2 (1.47% of total loans) | N/A (1.47% of total loans at 12/31/2024) | Balance Sheet, Capital and Liquidity Total assets increased to $5.42 billion at June 30, 2025, driven by growth in loans. Deposits saw a slight increase, primarily from reciprocal and brokered time deposits offsetting decreases in other deposit categories. Shareholders' equity and tangible common equity also increased, mainly due to earnings retention. The bank remains significantly above 'well capitalized' regulatory minimums and maintains substantial liquidity Key Balance Sheet Items (in millions) | Metric | 6/30/2025 ($ millions) | 12/31/2024 ($ millions) | | :-------------------------- | :--------------------- | :---------------------- | | Total Assets | $5,418.5 | $5,338.1 | | Loans (excluding HFS) | $4,164.4 | $4,038.8 | | Deposits | $4,659.4 | $4,654.1 | | Cash and Cash Equivalents | $146.2 | $119.9 | | Securities Available for Sale | $509.5 | $559.2 | | Total Shareholders' Equity | $469.3 | $454.7 | | Tangible Common Equity | $439.7 | $424.9 | - The increase in deposits is primarily due to increases in reciprocal and brokered time deposits, partially offset by decreases in non-interest bearing, savings, interest-bearing checking, and time deposits[14] Regulatory Capital Ratios | Regulatory Capital Ratios | 6/30/2025 | 12/31/2024 | Well Capitalized Minimum | | :---------------------------------- | :-------- | :--------- | :----------------------- | | Tier 1 capital to average total assets | 9.79% | 9.58% | 5.00% | | Common equity tier 1 capital to risk-weighted assets | 11.90% | 11.74% | 6.50% | | Tier 1 capital to risk-weighted assets | 11.90% | 11.74% | 8.00% | | Total capital to risk-weighted assets | 13.15% | 12.99% | 10.00% | - The company had unused credit lines with the FHLB and FRB of approximately $1.02 billion and $484.6 million, respectively, at June 30, 2025[16] - Approximately $486.0 million in fair value of unpledged securities AFS and HTM were available, which could be pledged for an estimated additional borrowing capacity of $455.9 million[16] Share Repurchase Plan The Board of Directors authorized a 2025 share repurchase plan to buy back up to 1,100,000 shares (approximately 5% of outstanding common stock) through December 31, 2025. During the first half of 2025, 252,276 shares were repurchased for an aggregate price of $7.36 million - The 2025 share repurchase plan authorizes the company to purchase up to 1,100,000 shares, or approximately 5% of its then outstanding common stock, through December 31, 2025[17] - During the six months ended June 30, 2025, 252,276 shares of common stock were repurchased for an aggregate purchase price of $7.36 million[17] Company Information and Forward-Looking Statements This section details the earnings call, company overview, and forward-looking statements disclaimer Earnings Conference Call Details Independent Bank Corporation scheduled an earnings conference call for investors and analysts on Thursday, July 24, 2025, at 11:00 am ET to review quarterly results, with dial-in and webcast options available - A conference call for investors and analysts was scheduled for Thursday, July 24, 2025, at 11:00 am ET[18] - Participants can join via dial-in (1-833-470-1428, Access Code 493553) or an audio webcast (https://events.q4inc.com/attendee/394984135)[18](index=18&type=chunk) - A replay of the call is accessible by dialing 1-866-813-9403 (Access Code 372693) through July 31, 2025[19] About Independent Bank Corporation Independent Bank Corporation (NASDAQ: IBCP) is a Michigan-based bank holding company with approximately $5.4 billion in total assets. Founded in 1864, it operates a branch network across Michigan's Lower Peninsula, offering a full range of financial services including commercial, mortgage, consumer banking, investments, and insurance - Independent Bank Corporation (NASDAQ: IBCP) is a Michigan-based bank holding company with total assets of approximately $5.4 billion[20] - Founded as First National Bank of Ionia in 1864, it operates a branch network across Michigan's Lower Peninsula through its subsidiary, Independent Bank[20] - The subsidiary provides a full range of financial services, including commercial banking, mortgage lending, consumer banking, investments, and insurance[20] Forward-Looking Statements Disclaimer The report contains forward-looking statements regarding future revenue, expenses, plans, and prospects, which are subject to inherent risks and uncertainties. Factors such as economic conditions, interest rates, credit quality, regulatory changes, and data security could cause actual results to differ materially. Investors are cautioned not to place undue reliance on these statements, and the company undertakes no obligation to update them - This presentation contains forward-looking statements about anticipated future revenue, expenses, plans, and prospects, which are not historical facts[22] - These statements involve inherent risks and uncertainties, and important factors such as economic conditions, interest rates, credit quality, regulatory developments, and data security could cause actual results to differ materially[23][24] - Investors should not place undue reliance on forward-looking statements, and the company undertakes no obligation to update them[24][25] Consolidated Financial Statements This section presents the consolidated balance sheet and income statement for the reported periods Consolidated Statements of Financial Condition The consolidated balance sheet shows an increase in total assets and loans from December 31, 2024, to June 30, 2025. Deposits also slightly increased, while securities available for sale decreased. Shareholders' equity grew during the period Consolidated Statements of Financial Condition (in thousands) | Item | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :----------------------------------------- | :-------------------------- | :------------------------------ | | Assets: | | | | Cash and Cash Equivalents | $146,159 | $119,882 | | Securities available for sale | $509,511 | $559,182 | | Total Loans | $4,164,367 | $4,038,825 | | Allowance for credit losses | $(61,157) | $(59,379) | | Net Loans | $4,103,210 | $3,979,446 | | Capitalized mortgage loan servicing rights | $32,053 | $46,796 | | Total Assets | $5,418,519 | $5,338,104 | | Liabilities: | | | | Total Deposits | $4,659,359 | $4,654,088 | | Other borrowings | $102,008 | $45,009 | | Total Liabilities | $4,949,269 | $4,883,418 | | Shareholders' Equity: | | | | Total Shareholders' Equity | $469,250 | $454,686 | Consolidated Statements of Operations The consolidated income statement shows an increase in net interest income for Q2 2025 compared to Q2 2024, but a decrease in net income due to lower non-interest income (primarily from the absence of a gain on equity securities) and a higher provision for credit losses Consolidated Statements of Operations (in thousands, except per share amounts) | Item | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total Interest Income | $66,878 | $66,338 | $133,022 | $131,464 | | Total Interest Expense | $22,263 | $24,992 | $44,722 | $49,921 | | Net Interest Income | $44,615 | $41,346 | $88,300 | $81,543 | | Provision for credit losses | $1,500 | $19 | $2,221 | $763 | | Total Non-interest Income | $11,325 | $15,172 | $21,749 | $27,733 | | Total Non-interest Expense | $33,762 | $33,333 | $68,024 | $65,526 | | Income Before Income Tax | $20,678 | $23,166 | $39,804 | $42,987 | | Income tax expense | $3,801 | $4,638 | $7,337 | $8,468 | | Net Income | $16,877 | $18,528 | $32,467 | $34,519 | | Diluted Net Income Per Common Share | $0.81 | $0.88 | $1.54 | $1.64 | Selected Financial Data The selected financial data provides a quarterly overview of key performance indicators, including net interest income, net income, EPS, dividends, and various ratios. It also details average and end-of-period balances for loans, securities, total assets, deposits, and capital metrics, illustrating trends over the past five quarters Quarterly Income Statement Highlights (in thousands, except per share data) | Metric | June 30, 2025 ($ thousands) | March 31, 2025 ($ thousands) | December 31, 2024 ($ thousands) | September 30, 2024 ($ thousands) | June 30, 2024 ($ thousands) | | :---------------------- | :-------------------------- | :--------------------------- | :------------------------------ | :------------------------------- | :-------------------------- | | Net interest income | $44,615 | $43,685 | $42,851 | $41,854 | $41,346 | | Provision for credit losses | $1,500 | $721 | $2,217 | $1,488 | $19 | | Non-interest income | $11,325 | $10,424 | $19,121 | $9,508 | $15,172 | | Non-interest expense | $33,762 | $34,262 | $36,987 | $32,583 | $33,333 | | Net income | $16,877 | $15,590 | $18,461 | $13,810 | $18,528 | | Diluted earnings per share | $0.81 | $0.74 | $0.87 | $0.65 | $0.88 | | Cash dividend per share | $0.26 | $0.26 | $0.24 | $0.24 | $0.24 | Performance Ratios | Ratio | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Return on average assets | 1.27% | 1.18% | 1.39% | 1.04% | 1.44% | | Return on average equity | 14.66% | 13.71% | 16.31% | 12.54% | 17.98% | | Efficiency ratio | 59.67% | 62.20% | 59.09% | 62.82% | 61.49% | | Net interest income (FTE) | 3.58% | 3.49% | 3.45% | 3.37% | 3.40% | End of Period Selected Balances (in thousands) | Item | June 30, 2025 ($ thousands) | March 31, 2025 ($ thousands) | December 31, 2024 ($ thousands) | September 30, 2024 ($ thousands) | June 30, 2024 ($ thousands) | | :------------------------ | :-------------------------- | :--------------------------- | :------------------------------ | :------------------------------- | :-------------------------- | | Loans | $4,164,367 | $4,072,691 | $4,038,825 | $3,942,287 | $3,851,889 | | Total assets | $5,418,519 | $5,328,428 | $5,338,104 | $5,259,268 | $5,277,500 | | Deposits | $4,659,359 | $4,633,931 | $4,654,088 | $4,626,875 | $4,614,328 | | Shareholders' equity | $469,250 | $467,277 | $454,686 | $452,369 | $430,459 | | Tangible common equity per share of common stock | $21.23 | $20.87 | $20.33 | $20.22 | $19.16 | Reconciliation of Non-GAAP Financial Measures This section reconciles non-GAAP financial measures, such as FTE net interest margin and tangible common equity Net Interest Margin, Fully Taxable Equivalent ("FTE") The reconciliation adjusts GAAP net interest income to a fully taxable equivalent basis, showing an FTE net interest margin of 3.58% for Q2 2025, an increase from 3.40% in Q2 2024 Net Interest Margin, Fully Taxable Equivalent (in thousands) | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net interest income | $44,615 | $41,346 | $88,300 | $81,543 | | Add: taxable equivalent adjustment | $444 | $175 | $896 | $355 | | Net interest income - taxable equivalent | $45,059 | $41,521 | $89,196 | $81,898 | | Net interest margin (GAAP) | 3.55% | 3.39% | 3.50% | 3.33% | | Net interest margin (FTE) | 3.58% | 3.40% | 3.54% | 3.35% | Tangible Common Equity Ratio The tangible common equity ratio, a non-GAAP measure, removes the effect of goodwill and other intangible assets from capital and total assets to provide a clearer view of capital quality. At June 30, 2025, the tangible common equity ratio was 8.16%, showing an increase from 8.00% at December 31, 2024 Tangible Common Equity Reconciliation (in thousands) | Item | June 30, 2025 ($ thousands) | March 31, 2025 ($ thousands) | December 31, 2024 ($ thousands) | September 30, 2024 ($ thousands) | June 30, 2024 ($ thousands) | | :----------------------------------------- | :-------------------------- | :--------------------------- | :------------------------------ | :------------------------------- | :-------------------------- | | Common shareholders' equity | $469,250 | $467,277 | $454,686 | $452,369 | $430,459 | | Less: Goodwill | $28,300 | $28,300 | $28,300 | $28,300 | $28,300 | | Less: Other intangibles | $1,244 | $1,366 | $1,488 | $1,617 | $1,746 | | Tangible common equity | $439,706 | $437,611 | $424,898 | $422,452 | $400,413 | | Total assets | $5,418,519 | $5,328,428 | $5,338,104 | $5,259,268 | $5,277,500 | | Less: Goodwill | $28,300 | $28,300 | $28,300 | $28,300 | $28,300 | | Less: Other intangibles | $1,244 | $1,366 | $1,488 | $1,617 | $1,746 | | Tangible assets | $5,388,975 | $5,298,762 | $5,308,316 | $5,229,351 | $5,247,454 | | Tangible common equity ratio | 8.16% | 8.26% | 8.00% | 8.08% | 7.63% | | Tangible common equity per share of common stock | $21.23 | $20.87 | $20.33 | $20.22 | $19.16 |