Damon Delmonte • Keefe, Bruyette & Woods (KBW)

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CFO Keene Turner stated that while there are some near-term pressures, he expects net interest income dollars to grow and the margin to be stable to growing over the next four quarters, absent any rate cuts. CEO James Lally expressed confidence that loan growth would accelerate from 4% to a 5-7% annualized rate in the back half of the year, driven by pent-up demand and increased economic certainty.

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CFO and COO Keene Turner projected a potential 5 basis point sequential step-down in NIM for Q2 due to sub-debt repricing, but expects a stable margin thereafter, even with 75 basis points of Fed cuts. He anticipates no major shifts in the core expense run-rate, aside from transaction costs. He confirmed the acquired branches are modeled to have an efficiency ratio in the 52% to 54% range.

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Executive James Lally affirmed that a mid-single-digit loan growth rate is "very achievable" for 2025, noting that market opportunities could even push it slightly higher. He also confirmed that all associates were safe from the wildfires with no collateral issues. CFO & COO Keene Turner addressed the reserve, stating they are comfortable with the current level (1.34% of unguaranteed loans) given its pessimistic weighting and do not expect it to move dramatically.

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CFO & COO Keene Turner projected the NIM would remain above 4% in Q4 before drifting into the high 3% range during 2025, assuming five additional rate cuts. He revised the tax credit income outlook, noting it would likely fall short of the $9-$10 million target due to SOFR movements. Turner also stated the company will prudently maintain its ACL, with provisioning being a function of loan growth rather than releasing reserves.

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CEO Charles Reeves stated that he expects the provision expense to normalize in the back half of the year and that a charge-off for the large non-accrual loan will likely be taken in Q3. He also noted that securities portfolio cash flows are being redeployed into loans and guided for a full-year effective tax rate of around 22%.

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Chief Credit Officer Gary Sims explained that the bank proactively used stressed economic scenarios to maintain its reserve coverage at 1.25% and expects to keep it in the mid-1.20s range. He also noted that while 2025 looks stable for the ag portfolio, there is concern about the impact of tariffs on 2026. Executive Barry Ray clarified that expenses are expected to ramp up slightly from Q1 levels through the rest of the year.

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Chief Credit Officer Gary Sims identified office and senior living as continued pressure points but noted operational improvements in the latter and affirmed the reserve is adequate for planned resolutions. CEO Charles Reeves stated the bank will continue its organic growth strategy by investing in talent and infrastructure, with a geographic focus on the Twin Cities, Denver, and Iowa Metro markets, while also preparing for potential M&A.

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Chief Credit Officer Gary Sims attributed the NPA decline to successful resolution efforts, including the payoff of a large, long-term agricultural credit. He noted a decrease in classified assets but an increase in criticized assets due to two specific C&I downgrades. Sims expects the reserve to remain in the mid-to-high 1.20s range. EVP and CFO Barry Ray observed that competitors have been aggressive with deposit pricing, with some front-running the Fed cut, and expects deposit betas on the way down to be similar to the ~40% seen on the way up.

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CEO Denis Sheahan attributed the C&I growth to increased customer confidence and strategic hiring of lending talent. CFO David Rosato added that the growth was broad-based across all C&I verticals. Rosato projected a 'flattish' core NIM for the second half of 2025, noting that the competitive deposit environment has intensified. He also clarified that Rabbi Trust income is directly impacted by equity market performance, with positive markets leading to higher income.

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CFO David Rosato responded that while further expense savings in 2025 are possible, a clearer picture will be available in January after the budget process is complete. On capital, Rosato confirmed the company has excess capacity, views its stock as a good value for buybacks, and is actively discussing a potential securities restructuring. He also noted that the high cash balance will be used to fund a maturing deposit, seasonal outflows, organic loan growth, and potentially modest securities purchases.

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EVP & CFO Nick Anderson provided a Q3 NIM guidance of static to up four basis points, citing strong loan and CD repricing opportunities. He also noted that a 25 basis point Fed cut could add 2-3 basis points to the margin. President & CEO Todd Gipple added that the next securitization is targeted for Q1 2026 with a floor of $350 million, and that the wealth management business is expected to maintain double-digit growth.

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Executive Larry Helling addressed the swap fee outlook, noting that while the pipeline is robust, higher long-term rates could be a headwind and the first quarter is typically lighter. Executive Todd Gipple explained that the Q1 NIM guidance of static to up 5 basis points already includes the 4 basis point negative impact from expiring caps. He anticipates further modest NIM expansion through 2025, driven by deposit beta performance and dependent on the steepening of the yield curve.

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Chief Commercial Banking Officer Lynn Kerber stated that commercial loan growth is primarily driven by expanding relationships with existing customers. CEO Thomas Prame confirmed the CD portfolio is homogenous with a short duration, so no large repricing events are anticipated. He added that expense control is due to diligent, business-as-usual management across the organization rather than a specific named initiative.

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Executive Thomas Prame explained that the elevated Q4 expenses, tied to strategic internal projects, would be evenly distributed between salary/benefits and third-party professional services. Lynn Kerber, EVP and Chief Commercial Banking Officer, stated she does not foresee a significant directional change in the reserve level, citing the portfolio mix shift away from higher-loss indirect auto loans and the strong performance and net recoveries in the commercial portfolio.

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President & Secretary Kevin Comps explained the custodial deposit agreement was negotiated directly, aligning with the IPO strategy to diversify funding away from wholesale sources. He noted the floating rate is slightly better than brokered CDs and reduces both wholesale funding concentration and FDIC insurance premiums. EVP & CFO Brad Howes affirmed that the company's capital plan supports the forecasted growth, with strong organic capital generation from earnings expected to be sufficient. Kevin Comps added that the loan participation program could be leveraged further if needed.

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EVP & CFO Charles Christmas confirmed the current expense guidance does not include any significant costs related to the core conversion for the rest of the year. He explained the fee income guidance reflects a normalization from an exceptionally strong Q2 in swaps and mortgage banking, not a negative outlook. He projected the acquisition would likely close in the back half of Q4 2025, pending regulatory approvals.

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EVP and CFO Chuck Christmas explained that the 2025 provision expense is expected to be driven primarily by loan growth, with a stable economic outlook and low net charge-offs anticipated. President and CEO Ray Reitsma described the mortgage pipeline as 'seasonally strong.' Christmas clarified the lower Q4 tax rate was due to year-end true-ups, mainly related to successful low-income housing and historical tax credit activities, which are expected to continue benefiting the bank's profitability.

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EVP and CFO Chuck Christmas confirmed that forecasting higher securities and cash is correct, noting the securities portfolio is growing by about $10 million per month. He stated that NII could actually increase, as balance sheet growth can have a positive impact on net income dollars despite compressing the margin percentage. He also provided specifics on repricing opportunities, including $150 million in fixed-rate loans maturing in 2025. President and CEO Raymond Reitsma added that mortgage activity increased with the fall rate drop, offsetting normal seasonality and suggesting a stronger-than-typical fourth quarter.

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Chairman & CEO Edward Handy confirmed strong Q2 loan growth was driven by the commercial portfolio and noted the pipeline grew substantially to nearly $145 million, supporting low single-digit growth guidance for the year. He characterized borrower sentiment as "optimistic but careful." SEVP, CFO & Treasurer Ronald Ohsberg commented on derivative income, stating that the strong Q2 result was transactional and likely to return to more normalized levels rather than being repeated.

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President & CEO Joseph Turner stated that the loan market remains highly competitive, and he does not anticipate a significant change in origination volume from the first half of the year. He added that loan payoffs are inherently "lumpy" and difficult to predict. On expenses, CFO Rex Copeland projected that costs would remain "fairly consistent," with potential for minor increases from technology and compensation adjustments, but nothing dramatic.

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CFO Rex Copeland clarified that the ~$2 million quarterly benefit from the terminated swap will cease at the beginning of Q4 2025. CEO Joseph Turner stated that the company expects to remain active with its share repurchase program, contingent on price and share availability. Regarding expenses, Turner confirmed that aside from a non-recurring benefit in Q1, the expense run rate should remain relatively stable with no major planned expenditures.

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CEO Joseph Turner stated that he feels the current reserve ratios are "pretty good" and does not anticipate a significant "bleed out" in coming quarters. CFO Rex Copeland added that the reserve level will also be influenced by future loan growth. On loan growth, Turner suggested that the year-to-date growth trend would be the best indicator for the full year, avoiding specific forward-looking guidance.

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EVP of Commercial Banking Joel Rahn concurred that there is likely pent-up demand for business expansion loans that could materialize if economic uncertainty subsides. President and CEO William Kessel affirmed the company's interest in M&A, stating that technology investments and the successful 2018 acquisition of Traverse City State Bank have positioned IBCP to be a good partner for other community banks.

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President & CEO Simon Griffiths confirmed the loan growth forecast does not factor in any significant runoff, citing a similar credit philosophy and strong portfolio at Northway. Regarding provisioning, Griffiths stated that the Q1 reserve build was a conservative move due to macroeconomic uncertainty and that the bank would continue to take a thoughtful approach, potentially adding more reserves in Q2 depending on the economic outlook.

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President and CEO Simon Griffiths clarified that the low single-digit loan growth guidance is for organic growth on a standalone basis. EVP and CFO Michael Archer reiterated post-closing actions, including paying down $45 million in FHLB borrowings and selling approximately $55 million of Northway's bond securities to optimize the balance sheet. Archer also confirmed a pro forma earning asset base around $6.5 billion is a reasonable estimate.

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CFO Michael Archer explained the C&I loan decrease was due to a few large, non-recurring pay-downs and confirmed a core expense run rate of approximately $28.2 million. CEO Simon Griffiths highlighted strong residential and commercial loan pipelines ($72M and $124M, respectively) supporting year-end momentum, while noting ongoing franchise investments are self-funded within the current expense base.

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