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INDEPENDENT BANK CORP /MI/ (IBCP)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered clean profitability and margin expansion: net income $16.9M, diluted EPS $0.81; net interest margin (FTE) rose 9 bps QoQ to 3.58% as funding costs eased and asset yields/mix improved .
  • Revenue/EPS outperformed S&P Global consensus: EPS beat by ~2.3% and revenue by ~13.9% versus estimates; core drivers were higher NII and solid mortgage sale gains, partially offset by lower servicing income; results should support estimate revisions higher. Values retrieved from S&P Global.*
  • Credit quality remains exceptional (NPLs 0.20% of loans; NPAs 0.16% of assets; net charge-offs 0.02% annualized), with ACL steady at 1.47% of loans; commercial loan growth strong at 15.3% annualized .
  • Guidance framework intact: mid-single-digit loan growth FY25, NIM up 20–25 bps YoY, provision ~0.15–0.20% of average loans; Q2 tracked at/above plan on loan growth and NIM, with non-interest expense below the guided range and mortgage servicing nets modestly below target .
  • Potential stock catalysts: continued margin “grind higher,” durable credit metrics, active but price-sensitive buybacks, and dividend continuity (declared $0.26 payable Aug 15, 2025) .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and NII growth: NIM (FTE) increased to 3.58% (+9 bps QoQ); NII rose $0.9M QoQ and $3.3M YoY. CFO quantified the contributors: -3 bps funding costs, +6 bps earning asset yield/mix, +1 bp prepayment fee (offset -1 bp funding mix) .
  • Strong commercial-led loan growth: total loans +$91.7M QoQ (9.0% annualized), with commercial +$75.9M (15.3% annualized); management highlighted new banker additions and a robust pipeline .
  • Pristine credit and capital: NPAs/Assets 0.16%, NCOs 0.02% annualized; bank remains well above “well-capitalized” thresholds; TCE per share rose to $21.23 (10.8% YoY) .

Quotes:

  • “We generated net interest income growth… producing nine basis points of margin expansion from the prior quarter.” — CEO Brad Kessel .
  • “Asset quality remained exceptional with NPAs/Total Assets at 0.16% and NCO of 0.02%… Efficiency ratio of 59.67%.” — Earnings deck .

What Went Wrong

  • Mortgage servicing income headwind: servicing net fell versus prior year ($0.5M in Q2’25 vs $2.1M in Q2’24) due to fair value changes and lower revenue after selling ~$931M MSRs in Jan; MSR fair value price change was a $(0.2)M drag in Q2 .
  • Core deposits seasonality: core deposits decreased $15.7M (1.4% annualized) in Q2; management noted deposit cost reductions have largely plateaued absent rate cuts .
  • Fee dynamics competitive: mortgage gain-on-sale margin came in lower than anticipated given competitive market, GSE premium pullback, and higher origination cost review; visibility remains cautious near term .

Financial Results

Core P&L and Margin Trends

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Net Interest Income ($M)$41.35 $42.85 $43.69 $44.62
Non-interest Income ($M)$15.17 $19.12 $10.42 $11.33
Operating Revenue ($M) (NII + Non-int)$56.52 $61.97 $54.11 $55.94
Diluted EPS ($)$0.88 $0.87 $0.74 $0.81
Net Interest Margin (FTE, %)3.40 3.45 3.49 3.58
Efficiency Ratio (%)61.49 59.09 62.20 59.67
Net Income ($M)$18.53 $18.46 $15.59 $16.88

Notes: Operating revenue is computed as NII + Non-interest income using reported figures.

Balance Sheet and Credit KPIs

KPIQ2 2024Q4 2024Q1 2025Q2 2025
Total Loans ($B) (EOP)$3.852 $4.039 $4.073 $4.164
Total Deposits ($B) (EOP)$4.614 $4.654 $4.634 $4.659
NPAs / Total Assets (%)0.10 0.13 0.14 0.16
NPLs / Loans (%)0.12 0.15 0.17 0.20
Net Charge-offs / Avg Loans (annualized, %)0.01 0.01 0.01 0.02
ACL / Loans (%)1.46 1.47 1.47 1.47
ROAA (%)1.44 1.39 1.18 1.27
ROAE (%)17.98 16.31 13.71 14.66

S&P Global Consensus vs Actuals (Operating Revenue and EPS)

MetricQ1 2025 Estimate*Q1 2025 Actual*Q2 2025 Estimate*Q2 2025 Actual*
EPS ($)0.700.740.7920.82
Revenue ($M)46.2553.3947.7854.44
# EPS Estimates5—5—
# Revenue Estimates4—4—

Values retrieved from S&P Global.*
Company-reported diluted EPS for Q2 2025 was $0.81, which may differ from SPGI’s “Primary EPS/normalized” actual .

Segment/Composition (Illustrative)

CompositionQ2 2025
Loan Mix: Commercial / Mortgage / Installment (%)50 / 37 / 14
Deposits by Type: Non-int / Savings & Interest / Reciprocal / Time / Brokered (%)22 / 43 / 20 / 13 / 3

Guidance Changes

MetricPeriodPrevious Guidance (Jan 2025)Current Update (Q2 2025)Change
Loan GrowthFY 2025Mid-single digit overall; Commercial +9–10%; Mortgage +2–3%; Installment -2–3% Q2: +$91.7M QoQ (9.0% annualized); Commercial +$75.9M (15.3% annualized); Mortgage +$15.6M (4.1%); Installment +$0.2M Tracking above range in Q2
NIM (FTE)FY 2025+20–25 bps YoY vs FY24; primary driver lower yield on interest-bearing liabilities Q2 NIM 3.58% vs 3.40% YoY; +9 bps QoQ; “grind higher” expected if Fed holds On track
Provision for Credit LossesFY 2025~0.15–0.20% of avg loans Q2 provision $1.5M; steady metrics In range
Non-interest IncomeQuarterlyQ1/Q2: $11–12M; Q3/Q4: $12–13M; FY down 14–14.5% vs 2024 Q2: $11.3M (within range); mortgage servicing net +$0.5M (below target) Maintained; slight shortfall in servicing net
Non-interest ExpenseQuarterly$34.5–$35.5M per quarter Q2: $33.8M (below range) Better than guided
Effective Tax RateFY 2025~19% Q2: 18.4% Slightly lower
Share Repurchases2025 AuthorizationUp to 1.1M shares (5%); not modeling repurchases in 2025 Q2 repurchased 251,183 shares ($7.32M); buybacks price-sensitive; limited if stock stays in current range Executed opportunistically
DividendQuarterlyGuided consistency in return of capitalDeclared $0.26 per share payable Aug 15, 2025 Maintained/increased vs 2024

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Margin trajectoryNIM up 8 bps QoQ in Q4; up 4 bps in Q1; drivers: funding costs down; asset mix shift NIM 3.58% (+9 bps QoQ); CFO expects “grind higher” if Fed holds; modest sensitivity to cuts Improving, resilient
Deposit costsDecrease in Q4/Q1; noted remix slowing Plateauing absent rate cuts; CDs repricing flat vs new issuance Stabilizing
Loan growth pipelineRobust; commercial led; added bankers Strong commercial growth; added 3 bankers; new Kalamazoo office Accelerating
Credit qualityNPAs/NPLs low; NCOs ~1–2 bps NPAs 0.16%; NCOs 0.02%; slight uptick in past dues; still “excellent” Strong, stable
Mortgage banking/servicingQ1 servicing net -$0.6M; MSR sale completed Jan Q2 servicing net +$0.5M; competitive GOS margins; GSE premium pullback Mixed; headwinds easing
AI/technology initiativesWebsite redesign in Q1 AI chat; AI in call center and loan processing; improving service/efficiency Scaling digital
Regulatory/macroWatching tariffs/automotive; diversified exposure Automotive exposure $157M; impact nominal; regulatory review ongoing Monitoring, benign
Competitive landscape/CRELarge banks cautious on CRE; community banks gaining share Opportunities from CMBS maturities (medical office); balanced portfolio (70% C&I / 30% IRE) Favorable niches
Capital allocation/M&ADividend up; selective M&A openness Buybacks price-sensitive; organic-first, opportunistic acquisitions Disciplined

Management Commentary

  • “These fundamentals drove positive growth in tangible common equity per share… along with very healthy performance returns: ROAA 1.27% and ROAE 14.66%.” — CEO Brad Kessel .
  • “Change in earning asset yield/mix contributed 6 bps… decrease in funding costs contributed 3 bps… loan prepayment fee 1 bp; partially offset by funding mix -1 bp.” — CFO Gavin Moore on NIM bridge .
  • “We added three experienced commercial bankers… launched a new loan production office in Kalamazoo… we believe we will continue low double digit growth of our commercial loan portfolio.” — EVP Joel Rahn .
  • “AI chat function… several dozen AI use cases… identify next best product opportunities… reduce time in loan processing/underwriting.” — CEO on tech adoption .

Q&A Highlights

  • Margin outlook: With 1–2 cuts, minimal impact; absent cuts, margin can continue to “grind higher,” subject to funding pressures and mix .
  • Deposit costs: Plateauing; maturing CDs and new issuance near same levels; further reductions unlikely without rate cuts .
  • Mortgage fees: Gain-on-sale margins pressured by competition, GSE premium pullback, and higher origination cost review; volume held up .
  • Buybacks and capital: Modeled like M&A with earn-back discipline; limited near term at current price ranges; ongoing capacity to adjust as capital builds .
  • Market landscape: Opportunities in medical office via CMBS maturities; large regionals cautious on CRE; community bank positioning effective .

Estimates Context

  • Q2 2025 vs consensus: EPS $0.82 actual vs $0.792 estimate (beat); revenue $54.44M actual vs $47.78M estimate (beat). Values retrieved from S&P Global.*
  • Q1 2025 vs consensus: EPS $0.74 actual vs $0.70 estimate; revenue $53.39M vs $46.25M (beats). Values retrieved from S&P Global.*
  • FY 2025 EPS consensus $3.325 with 4 estimates; target price consensus $35.2 (5 estimates). Values retrieved from S&P Global.*

Note: Company-reported diluted EPS for Q2 2025 was $0.81; SPGI “Primary/normalized” EPS may differ from GAAP diluted EPS .

Key Takeaways for Investors

  • Margin expansion is structurally supported by asset yields/mix and easing funding costs; expect incremental NIM gains if the Fed holds rates; resilience even with modest cuts .
  • Commercial growth is robust and diversified, aided by banker hires and pipeline strength; expect continued low double-digit commercial growth into 2H25 .
  • Credit remains a differentiator: exceptionally low NPAs/NCOs, ample reserves (ACL 1.47%); minimal sensitivity observed to automotive/tariff headlines to date .
  • Fee income mixed: mortgage sale volumes solid, but gain-on-sale margin headwinds from competitive dynamics and GSE premium changes; servicing nets stabilizing post MSR sale .
  • Operating leverage improving: efficiency ratio back below 60%; non-interest expenses tracking better than plan; technology investments (AI) should enhance service and productivity .
  • Capital return balanced: dividend continuity ($0.26/sh declared); buybacks opportunistic and price-disciplined; selective M&A optionality, organic-first strategy .
  • Near-term trading: Positive setup on beats, margin momentum, and pristine credit; watch deposit mix/cost plateau and mortgage fee dynamics for volatility; medium-term thesis centers on scalable NIM, disciplined growth, and strong risk posture.

Additional Q2 2025 Press Releases

  • Quarterly cash dividend of $0.26 per share declared; payable Aug 15, 2025 to holders of record Aug 5, 2025 .
Citations:
Core results, margins, P&L and KPIs: **[39311_0000039311-25-000083_ibcp-20250724ex991.htm:5]** **[39311_0000039311-25-000083_ibcp-20250724ex991.htm:6]** **[39311_0000039311-25-000083_ibcp-20250724ex991.htm:7]** **[39311_0000039311-25-000083_ibcp-20250724ex991.htm:1]** **[39311_0000039311-25-000083_ibcp-20250724ex991.htm:2]** **[39311_0000039311-25-000083_ibcp-20250724ex991.htm:8]**
Loan/deposit EOP and composition: **[39311_0000039311-25-000083_ibcp-20250724ex991.htm:7]** **[39311_0000039311-25-000083_ibcp20252qearningsdeck-f.htm:2]**
Q1/Q4 prior period data: **[39311_9708740cf605478fb4a8f07ce72874d8_6]** **[39311_9708740cf605478fb4a8f07ce72874d8_7]** **[39311_9708740cf605478fb4a8f07ce72874d8_8]** **[39311_27b4d970e6d44425a308a413485260bc_9]** **[39311_27b4d970e6d44425a308a413485260bc_10]** **[39311_27b4d970e6d44425a308a413485260bc_11]** **[39311_27b4d970e6d44425a308a413485260bc_12]** **[39311_27b4d970e6d44425a308a413485260bc_13]**
Guidance framework and quarterly updates: **[39311_0000039311-25-000083_ibcp20252qearningsdeck-f.htm:6]** **[39311_0000039311-25-000083_ibcp20252qearningsdeck-f.htm:7]**
Call commentary & Q&A: **[0000039311_2295177_3]** **[0000039311_2295177_6]** **[0000039311_2295177_8]** **[0000039311_2295177_9]**
Dividend declaration: **[39311_97702b52f93c4d38912a0e3fc8601aa1_0]**

Values retrieved from S&P Global.*