Independent Bank (NASDAQ:IBCP) reported fourth-quarter 2025 net income of $18.6 million, or $0.89 per diluted share, compared with $18.5 million, or $0.87 per diluted share, in the prior-year period. For the full year ended Dec. 31, 2025, the company posted net income of $68.5 million, or $3.27 per diluted share, up from $66.8 million, or $3.16 per diluted share, in 2024.
President and CEO Brad Kessel said the fourth quarter capped “another remarkable year,” citing tangible book value growth of 13.3% and “near-record earnings.” He also pointed to continued net interest margin expansion, strong loan growth, higher non-interest income, and credit metrics that remained below historical averages for watch credits and non-performing assets. Kessel added that the company repurchased shares during the quarter and executed a tax credit transfer agreement intended to reduce tax obligations and enhance earnings per share.
Quarterly drivers: margin expansion, loan and deposit growth
- Net interest income: up $1.0 million, or 2.2%, from the third quarter of 2025.
- Net interest margin: 3.62%, up eight basis points from the prior quarter.
- Returns: return on average assets of 1.35% and return on average equity of 14.75%.
- Loans: net growth of $78 million, or 7.4% annualized, from Sept. 30, 2025.
- Deposits (excluding broker deposits): up $57.5 million, or 4.8% annualized, on a linked-quarter basis.
- Capital: tangible common equity ratio increased to 8.65%.
- Dividend: $0.26 per share paid on Nov. 14, 2025.
Deposits totaled $4.8 billion at year-end 2025, an increase of $107.6 million from Dec. 31, 2024. Kessel said the year-over-year increase was driven primarily by growth in savings and interest-bearing checking, reciprocal, and time balances, partially offset by declines in non-interest-bearing and brokered time deposits.
On a linked-quarter basis, business deposits increased $20.4 million and retail deposits rose $64.1 million, offset by a $28.6 million decline in municipal deposits. Management described the deposit base as 47% retail, 37% commercial, and 16% municipal. The company’s total cost of funds fell 15 basis points during the quarter to 1.67%.
Commercial lending momentum and portfolio mix
EVP and Head of Commercial Banking Joel Rahn said the company’s commercial portfolio led loan growth in 2025. Total loans grew $78 million in the fourth quarter and increased $237 million, or 5.9%, for the full year. The commercial portfolio rose $276 million, or 14.2%, in 2025, including $88 million of commercial growth in the fourth quarter (16% annualized).
Rahn said the bank has continued investing in commercial banking talent, adding an experienced Metro Detroit banker in the fourth quarter. The company now has 49 bankers across eight commercial loan teams statewide, with a net addition of five experienced bankers during 2025. Looking to 2026, Rahn said management believes it can continue “low double-digit growth” in the commercial loan portfolio, supported by a pipeline he described as comparable to January 2025. He also pointed to opportunities from regional bank disruption in both talent and customer acquisition.
Management provided details on commercial mix and concentrations:
- Commercial production mix (year-to-date): 57% C&I and 43% investment real estate.
- Commercial portfolio mix: 67% C&I and 33% investment real estate.
- Largest C&I segment: manufacturing at $183 million (8.3% of the portfolio).
- Largest investment real estate segment: industrial at $202 million (8.8%).
Credit quality: NPLs inch higher, one exposure remains notable
Rahn said credit quality remained strong, though some measures moved modestly higher from the third quarter. Total non-performing loans were $23.1 million, or 54 basis points of total loans, at quarter-end, compared to 48 basis points at Sept. 30. He noted that $16.5 million of non-performing loans related to a single commercial development exposure discussed on the prior quarter’s call, and said the bank was “appropriately reserved for any loss exposure” as it works through the project.
Past-due loans totaled $7.8 million, or 18 basis points, up from 12 basis points at Sept. 30. Management also said net charge-offs were $1.6 million, or four basis points of average loans, for the year, compared with $0.9 million, or two basis points, in 2024.
Non-interest income and expenses; tax credit transfer benefit
EVP and CFO Gavin Mohr said regulatory capital remained strong, with tangible common equity back within the bank’s targeted 8.5% to 9.5% range. Mohr also reported that the company repurchased 407,113 shares in 2025 for an aggregate price of $12.4 million.
Net interest income increased $3.5 million from the year-ago quarter. The tax-equivalent net interest margin was 3.62% in the fourth quarter of 2025, compared with 3.45% in the fourth quarter of 2024 and up eight basis points from the third quarter of 2025. Mohr attributed the linked-quarter margin improvement primarily to changes in interest-bearing liability mix and lower funding costs, offset by changes in earning asset yields and mix and a small impact from interest charged off on a commercial loan.
Non-interest income totaled $12.0 million in the fourth quarter, compared with $19.1 million in the year-ago period and $11.9 million in the third quarter. Mortgage banking results were mixed: net gains on mortgage loans were $1.4 million, down from $1.7 million a year earlier due to lower profit margins and loan sale volume. Mortgage loan servicing net was $0.9 million, down from $7.8 million in the prior-year quarter, which Mohr attributed to the sale of approximately $931 million of mortgage servicing rights on Jan. 31, 2025.
Non-interest expense was $36.1 million in the fourth quarter, compared to $37.0 million in the year-ago quarter and $34.1 million in the third quarter. Mohr cited lower performance-based compensation, medical-related costs, and payroll taxes, partially offset by higher salary expense. Data processing costs decreased year over year, helped by a reimbursement from the core provider for billing overages and other credits, offset by increases in other solutions and one-time project charges.
Income tax expense reflected a $1.8 million benefit, or $0.09 per share, tied to a tax credit transfer agreement related to the purchase of $22.9 million of energy tax credits during the three-month and full-year periods ended Dec. 31, 2025.
2026 outlook: mid-single-digit loan growth, higher NII, margin expansion
Mohr outlined the company’s initial 2026 outlook, assuming a stable Michigan economy. Key elements included:
- Loan growth: 4.5% to 5.5% for the year, with commercial growth, flat mortgage loans, and declining installment loans.
- Net interest income: expected to rise 7% to 8% versus 2025.
- Net interest margin: projected to expand 5 to 7 basis points in the first quarter, followed by 3 to 5 basis points of expansion in each subsequent quarter, driven largely by lower interest-bearing liability yields partially offset by lower earning asset yields. The forecast assumes 0.25% rate cuts in March and August 2026 and slightly higher long-term rates than year-end 2025.
- Provision expense: management said 20 to 25 basis points of average loans “would not be unreasonable.”
- Non-interest income: quarterly range of $11.3 million to $12.3 million; full-year increase of 3% to 4% versus 2025. Mortgage origination volumes are expected to decrease 6% to 7% and net gain on sale to decline 14% to 16% versus 2025.
- Non-interest expense: $36 million to $37 million per quarter; full-year increase of 5% to 6% versus 2025, driven by higher compensation and benefits, data processing, loan and collections, and occupancy.
- Effective tax rate: approximately 17%, assuming no change in the statutory federal corporate income tax rate.
- Capital actions: the board authorized share repurchases of approximately 5% in 2026, though the company said it is not currently modeling any repurchases in its 2026 outlook.
During the Q&A session, management discussed the Michigan market backdrop and balance sheet strategy. Rahn said the company expects talent opportunities in Southeast Michigan tied to regional bank disruption, noting that “the talent side window opens first” and customer impacts can follow later. He said a net addition of four to five bankers in 2026 would be a reasonable expectation, accounting for retirements.
Kessel said the company’s overall loan growth outlook reflects balance sheet mix, including expectations for some contraction in consumer loans due to lower indirect lending origination volumes, particularly in RV lending. He also said the company expects roughly $120 million of securities runoff in 2026 to help fund loan growth, and Mohr added the bank expects to get through 2026 without securities purchases, with reinvestment potentially resuming in 2027.
On M&A, Kessel said consolidation is likely to continue in Michigan and that Independent Bank would be interested “depending on the specifics,” including strategic fit, culture, and financial metrics. He emphasized that a deal would need to materially add to EPS while avoiding shareholder dilution, and said M&A is “not a requirement” for the company’s continued success.
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.
