インディペンデント・バンク・コーポレーション（IBCP）2026年第3四半期決算説明会：純利ざや（NIM）拡大、商業融資が増加

インディペンデント・バンク・コーポレーション（IBCP）の2026年第3四半期決算説明会では、商業貸出の加速、純金利マージン（NIM）の拡大、およびハイ・ポイント・コミュニティ・バンクの統合が主な議題となりました。信用力は概ね安定して推移したものの、一部の事業者向け貸出先の影響により、不良債権および貸倒引当金費用が増加しました。

主なポイント

• 2026年第3四半期の純利益は1,790万ドル（希薄化後1株当たり0.80ドル）となり、前年同期の1,750万ドル（希薄化後1株当たり0.84ドル）から増加しました。税引後の合併費用270万ドルを除く調整後純利益は2,060万ドル（希薄化後1株当たり0.92ドル）でした。
• ハイ・ポイントを除くオーガニックな貸出金は、年率10.5%増に相当する1億1,660万ドル増加しました。商業貸出は約1億2,400万ドル増加し、年率換算で21%近い伸びに相当します。
• 資金利益（純金利収入）は前四半期比で740万ドル増（15.4%増）、前年同期比で21.8%増となりました。課税等価ベースの純金利マージンは前四半期比で11ベーシスポイント（bp）上昇の3.82%となり、買収会計によるアクレション調整前では3.76%と、5bp上昇しました。
• 預金残高は計55億ドルに達しました。ハイ・ポイント分を除く預金は1億1,580万ドル増加（年率9.4%増）し、預金コスト全体はわずか2bp上昇の1.55%にとどまりました。
• 不良債権は3,920万ドル（総貸出残高の0.80%）に増加し、第2四半期末の0.74%から上昇しました。経営陣によると、残高の大部分は3件の商業貸出が占めており、より広範な要注意先リストの水準は安定して推移しているとのことです。
• ハイ・ポイントのシステム移行は11月9日に予定されています。経営陣は第4四半期に約300万ドルの追加の合併およびシステム移行費用が発生すると見込んでおり、コスト削減効果の大部分は2027年の経費ランレートに反映される見通しです。

主要財務データ

事業および業績動向

商業貸出がオーガニックな成長の主な牽引役となりました。9月30日までの実行額は、商業・産業向け貸出（C&I）と投資用不動産向け貸出で二分されました。ハイ・ポイントの商業貸出ポートフォリオ（2億8,000万ドル）を含めた後の商業貸出ポートフォリオの構成割合は、C&Iが66%、投資用不動産が34%となりました。

インディペンデント・バンクは当四半期に実績のある商業バンカーを3名、年初来で11名採用し、8チームで計55名体制としました。経営陣によると、四半期終盤の強力な貸出実行を受けて案件パイプラインは6月30日時点から減少したものの、市場の流動化・混乱がシェア拡大の好機を生み出し続けているとのことです。

預金基盤は引き続き流動性預金に偏重した構成を維持しています。流動性預金は47億7,000万ドルに達し、総預金の86.4%を占めました。ハイ・ポイントから獲得した流動性により、その他の借入金を第2四半期末の1億2,700万ドルから400万ドルへと削減することができました。ブローカー預金は50万ドルにとどまりました。

資産のリプライシング（金利改定）が引き続きマージン上昇のドライバーとなっています。加重平均利回り4.74%の固定金利貸出および有価証券約7億3,700万ドルが、今後6四半期にわたり満期を迎えるか金利改定される予定です。新規の商業貸出および住宅ローン実行利回りは6.5%を超えて推移しています。

住宅ローンの新規実行額と売却額はそれぞれ1億3,600万ドル、1億230万ドルとなりました。住宅ローン売却益の純額は100万ドルで、住宅ローン・サービシング権利（MSR）による利益は410万ドルでした。経営陣は、四半期終盤の金利上昇が申込み件数の減少をもたらし、評価替えに負の影響を与えたと指摘しました。

経営陣の見通し（ガイダンス）

マクロ経済レベルでのショックがない限り、経営陣は純金利マージンの緩やかな拡大が続くと引き続き予想しています。以前説明された四半期あたり約2〜4bpの拡大というレンジは変更されておらず、現在の金利環境はレンジの上限を支える可能性があります。

第4四半期について、経営陣は資産のリプライシングと9月の米連邦準備制度理事会（FRB）による利上げがマージンを下支えする一方、預金獲得競争に伴う金利上昇により一部相殺されると見込んでいます。同社は、金利サイクルを通じて資金調達コストのベータ値を35%〜40%に抑えることを目標としています。

商業貸出の増加率は、2027年にかけて10%台前半を維持する見込みです。現在、買収したハイ・ポイントの貸出ポートフォリオからの意図的な削減や大幅な顧客離脱は予想していません。

残る約300万ドルの合併・移行費用は、主に2026年第4四半期に発生する見込みです。統合期間中に両行とも全人員を維持したため、コスト削減の進捗は当初モデルよりも遅れています。経営陣は、削減効果の大部分が2027年の経費ランレートに反映されると予想しています。

貸倒引当金繰入額は、貸出の伸びと与信格付けの推移に連動して推移する見込みです。年初来の引当金費用は、年率換算で平均貸出残高の約0.23%でした。また、金利が高止まりした場合、住宅ローンの実行額は減少する可能性が高いと経営陣は述べています。

リスクおよび注視事項

不良債権は3,920万ドルに増加し、そのうち約3,000万ドルが商業貸出に関連するものでした。商業不良債権の約3分の2は、以前説明された開発プロジェクト向け与信に関連するものです。

ウォーターフロントの大型分譲マンション向け大口与信は、引き続き破産手続き中です。残高は約3,000万ドルで、そのうち約800万ドルは米農務省（USDA）の保証を受けているため、実質的なリスク露出額は約2,100万ドルとなっています。経営陣によると、借入人による再建計画の提出期限は12月31日までとなっており、銀行としては潜在的損失に対して適切な引当金を計上しているとのことです。

これとは別の商業貸出1件が当四半期中に無利息貸出へ移行し、破産手続き中で主にキャッシュフロー依存型であったため、大半に引当金が設定されました。経営陣は、要注意先全体の比率が横ばいであることを挙げ、この増加はポートフォリオ全体に及ぶ構造的な問題を示すものではないと述べています。

預金の金利競争が資産利回り上昇によるメリットの一部を相殺する可能性があります。また、住宅ローン需要も高金利に対する感応度が高い状態が続いており、買収会計によるアクレション調整は貸出金の期限前返済状況によって変動する可能性があります。

アナリスト質疑応答の主なポイント

• 信用力：経営陣は、不良債権残高の大部分について、広範な質の低下ではなく主に3件の商業貸出に起因するものと説明しました。2026年最初の9か月間の貸倒償却額（純額）は84万7,000ドルで、平均貸出残高に対する年率換算で3bpでした。
• マージンの軌道：経営陣は、四半期ごとに緩やかな拡大が続くとの見通しを維持しました。買収会計によるアクレションは第3四半期のマージンに6bp貢献し、収益資産利回りの上昇は5bp貢献しました。
• ハイ・ポイントの統合：システム移行は予定通り11月9日に実施される予定です。経営陣は2026年のコスト削減が当初のスケジュールより遅れていることを認めたものの、この買収取引による約40%のコスト削減という全体の目標は維持しています。
• オーガニックな拡大：インディペンデント・バンクは、特に大手金融機関からの商業バンカーの採用を継続する計画です。経営陣は、将来のM&Aの機会に対してもオープンな姿勢を維持しつつも、オーガニックな成長が同社の主な成長エンジンであると説明しました。
• 資本配分：経営陣の優先事項は、オーガニックな成長の支援、安定的かつ増配傾向にある配当の維持、バリュエーションに基づく自社株買いの検討、および潜在的な買収機会に備えた余力の維持です。

決算説明会全文文字起こし

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good day, and thank you for standing by. Welcome to the Independent Bank Corporation Third Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Brad Kessel, President and CEO.

William Kessel

Good morning, and welcome to today's call. Thank you for joining us for Independent Bank Corporation's conference call and webcast to discuss the company's results for the third quarter of 2026. The I am Brad Kessel, President and Chief Executive Officer, and joining me is Gavin Moore, Executive Vice President and Chief Financial Officer; and Joel Rahn, Executive Vice President, Head of Commercial Banking.

Before we begin today's call, I'd like to direct you to the important information on Page 2 of our presentation, specifically, the cautionary note regarding forward-looking statements. If anyone does not already have a copy of the press release issued by us today, you can access it at the company's website, independentbank.com.

The agenda for today's call will include prepared remarks, followed by a question-and-answer session and then closing remarks. Earlier this morning, the Independent Bank Corporation reported third quarter 2026 net income of $17.9 million or $0.80 per diluted share versus net income of $17.5 million or $0.84 per diluted share in the prior year period. Excluding $2.7 million of after-tax merger-related expenses, adjusted net income was $20.6 million or $0.92 per diluted share.

Highlights for the third quarter of 2026 include net loan growth of $116.6 million or 10.5% annualized from June 30, 2026 that excludes the loans of High Point Community Bank. Net growth in total deposits of $115.8 million or 9.4% annualized from the second quarter also excluding High Point deposits. A tax Global had net interest margin of 3.82%, an 11 basis point increase from the linked quarter or 3.76% and up 5 basis points, excluding purchase accounting accretion.

Another highlight was an increase in net interest income of $7.4 million or 15.4% over the second quarter. This is our 13th consecutive quarter of net interest income growth. Our pretax pre-provision net revenue was $26.3 million, up 13.5% from the prior year quarter. A return on average assets and return on average equity of 1.14% and 12.7%, respectively or 1.32% and 14.08%, excluding merger-related expenses. A tangible common equity ratio of 8.2% as of September 30, 2026 and also a highlight of the payment of our $0.28 per share quarterly dividend in common stock on August 14 of 2026.

Our third quarter performance demonstrates the strength of Independent Bank's community banking model and the continued benefits of disciplined balance sheet management, relationship-based lending and a stable locally post deposit franchise. We saw strong organic momentum with commercial loan growth of nearly 21% annualized solid deposit growth from our business and municipal customers and improved earning asset yields.

Net charge-offs remained very low and our liquidity and capital levels position us well in the current operating environment. The quarter also reinforced the value of our strategy, serving attractive Michigan markets through local decision-making, deep customer relationships and consistent credit discipline. We believe that approach continues to differentiate Independent Bank and supports durable performance through changing rate and economic cycles. We were pleased to complete our acquisition of HCB Financial Corp., the parent company of High Point Community Bank on July 1, 2026. And this quarter reflects our first results as a combined company.

Integration work is well underway, and we remain on track for the High Point system conversion on November 9. We continue to believe the combination strengthens our presence in complementary markets and enhances our ability to serve customers, employees, communities and the shareholders and our shareholders over the long term. A few other highlights during the third quarter, we celebrated the grand opening number new Grand Rapids headquarters, and we transitioned the broker-dealer partner of our wealth management business to Raymond James.

Moving to Page 5 of our presentation. Deposits totaled $5.5 billion at September 30, 2026, an increase of $659.3 million from the second quarter, which includes $543.5 million of PiePoint deposits. Excluding High Point, deposits grew $115.8 million or 9% annualized. Nonmaturity deposits totaled $4.77 billion, or 86.4% of total deposits and increased $571.4 million during the quarter, which includes High Point.

With the liquidity High Point brought, we paid down other borrowings, which declined to just $4 million from $127 million at June 30, 2026. Brokered deposits are just $0.5 million at the end of the third quarter. The deposit base is comprised of 46% retail, 39% commercial and 15% initially. On Page 6, we included in our presentation a historical view of our cost of funds as compared to the Fed fund spot rate and effective rate.

For the quarter, our total cost of deposits increased by just 2 basis points to 1.55% primarily reflecting modestly higher time deposit costs, while our cost of savings and interest-bearing checking accounts were unchanged at 1.6%. At this time, I'd like to turn the presentation over to Joel Ron to share a few comments on our loan growth and provide an update on our credit metrics.

Joel Rahn

Thanks, Brad, and good morning, everyone. Page 7 summarizes our loan activity for the quarter. Loans increased $483.1 million in the quarter, including the addition of the High Point loan portfolio. Excluding High Point, commercial loan generation was very strong as with [ $123 ] million of quarterly growth earning to 21% annually. We continued our strategic investment in commercial banking talent to supplement our loan growth, adding 3 experienced bankers in the quarter. Year-to-date, we've added 11 experienced commercial bankers bringing our total to 55 bankers comprising 8 commercial loan teams across our statewide footprint.

Compared to a year ago, we've added a net of 9 experienced commercial bankers to the team. Looking forward, our pipeline remains strong, but given the significant production late in Q3, it's down from where it was at 6/30; However, we feel that we can continue to grow our loan portfolio at a low double-digit rate as market disruption is creating market share opportunity for us.

Looking at commercial loan production through 9/30 and -- the mix of C&I lending versus investment real estate has been split evenly. And for our commercial portfolio, the mix is 66% C&I and 34% investment real estate including the addition of the $280 million High Point commercial loan portfolio. Page 8 provides detail on our commercial loan portfolio concentrations, which remained consistent with prior quarters. Our largest segment of the C&I category continues to be manufacturing at $222 million or 8% of the total portfolio.

In the investment real estate segment of the portfolio, the largest concentration is industrial at $257 million or 9.3%. We outlined key credit quality metrics and trends on Page 9. Overall, we continue to demonstrate strong credit quality. However, we have experienced an increase in our nonperforming loan category. Total nonperforming loans were $39.2 million or 80 basis points of total loans at quarter end up slightly from 74 basis points at 6:30. It's worth noting that $30 million of this total is commercial and 2/3 of the commercial nonperforming loans continues to be on commercial development exposure that we've discussed in previous quarters.

We continue to work through the challenges of this particular project and our appropriately reserve for any loss exposure. Past due loans totaled $6.1 million or 12 basis points, consistent with $630. it's not reflected on this slide, but worth noting that we've realized net charge-offs of $847,000 or 3 basis points of average loans on an annualized basis in the first 3 quarters of the year. This compares to $1.2 million or 4 basis points through Q3 of 2025.

At this time, I'd like to turn the presentation over to Gavin for his comments, including the outlook for the remainder of [indiscernible] .

Gavin Mohr

Thanks, Joel, and good morning, everyone. I'm starting on Page 10 of our presentation. Page 10 highlights our strong rotor capital position. The change in capital ratios on a linked quarter basis is primarily due to the acquisition of ATB Financial Corp. on July 1, 2026. And -- at September 30, 2026, our consolidated Tier 1 leverage ratio was 9.9%. Our common equity Tier 1 ratio is 11.1 and our total risk-based capital ratio is 13.1%. Our tangible common equity ratio was 8.2% or 9.2%, excluding accumulated other comprehensive loss.

Tangible book value per share was $23.10 compared to $24.24 at June 30, primarily reflecting $39.1 million of goodwill and other intangibles recorded in the acquisition. Turning to Page 11. Net interest income increased $9.9 million or 21.8% from the year ago period and $7.4 million from the second quarter. Our tax equivalent net interest margin was 3.82% during the third quarter of 2026 compared to 3.54% in the third quarter of 2025 and up 11 basis points from the second quarter of 2026, excluding purchase accounting accretion, our margin was 3.76%, up 5 basis points from the linked quarter.

Average interest-earning assets were $5.82 billion in the third quarter of 2026, compared to $5.16 billion in the year ago quarter and $5.22 billion in the second quarter of 2026. High Point added approximately $557 million of average earning assets. Page 12 contains a more detailed analysis of the linked quarter increase in net interest income and the net interest margin. Our linked quarter -- on a linked-quarter basis, our third quarter net interest margin was positively impacted by 3 factors: purchase accounting discount accretion added 6 basis points, an increase in earning asset yield added 5 basis points and the change in the earning asset mix added 2 basis points.

These were partially offset by an interest charge-off on a commercial loan equated to 1 basis point and higher funding costs that equated to 1 basis point I would note that the accretion this quarter was $932,000 on loans and securities. Page 13 is a new slide that shows the contractual cash flows from our fixed rate loans and securities over the next 6 quarters. Over that period, approximately $737 million of loans and securities are scheduled to mature or reprice at a weighted average yield of 4.74% that includes $197 million of securities at 2.84% and $539 million in loans at 5.44% with new commercial and mortgage loan production coming in at yields above 6.5%, this repricing provides a meaningful tailwind to our asset yields.

On Page 14, we provide details on the institution's interest rate risk position, the comparative simulation analysis for the second -- for the third quarter, 26% in the second quarter of '26 calculates a change in net interest income over the next 12 months under 5 rate scenarios. All scenarios assume a static balance sheet. The base rate scenario applies the spot yield curve from the valuation date, the shock scenarios consider immediate permanent parallel rate changes. Base case modeled net interest income increased to $233.8 million from $204.2 million at June 30, with $23.3 million of the increase attributable to High Point along with improvement in the model margin.

Our position remains modestly asset-sensitive. A 100 basis point increase in rates would increase net interest income by 1.97%, while a 100 basis point decline would reduce it by 0.64%. We continue to manage exposure to lower rates through $50 million notional for purchases and the termination of a $25 million pay fixed swap. Currently, 37% of assets repriced in 1 month and 48.5% reprice in the next 12 months. Moving on to Page 15. Noninterest income totaled $15.8 million in the third quarter of 2026 compared to $11.9 million in the year ago quarter and $15.3 million in the second quarter 2026.

Third quarter 26 net gains on mortgage loans totaled $1 million compared to $1.5 million in the prior year quarter. The decrease is primarily due to unfavorable fair value adjustments, reflecting higher interest rates at quarter end, including a mark on a construction to permanent loans transferred to our portfolio. Mortgage on servicing net was a gain of $4.1 million in third quarter '26 compared to a gain of $0.1 million in the prior year quarter. The change due to price was a gain of $3.4 million or $0.12 per diluted share after tax in the third quarter of '26 compared to a loss of $0.6 million or $0.02 per diluted share after tax in the prior year quarter.

As detailed on Page 16, our noninterest expense totaled $44.8 million in the third quarter of 2026 compared to $34.1 million in the year ago quarter and $37.8 million in the second quarter of 2026. The increase reflects the addition of High Point's operating expenses and $3.5 million of merger-related expenses. Compensation employee benefits increased $3.4 million from the prior year quarter, primarily due to the addition of High Point staff and salary increases effective January 1, 2026 as well as higher performance-based compensation. This was partially offset by lower health insurance costs.

Data processing expense increased $1 million and amortization of intangible assets was $0.9 million compared to $0.1 million in the second quarter, reflecting the core deposit intangible recorded in the High Point acquisition. Our efficiency ratio was 61.3%. Turning to Page 17. This is our update for our 2026 outlook, showing our actual performance during the third quarter compared to the original outlook we provided in January 2026. As a reminder, that outlook did not include High Point. Our outlook estimates full year loan growth of 4.5% to 5.5%, excluding High Point, loans increased $116.6 million in the third quarter or 10.5% annualized, which is above our forecasted range.

Commercial loans increased $124.1 million, and mortgage loans increased $1.1 million, while installment loans decreased [indiscernible] million. Third quarter 2026 net interest income increased by 21.8% over 2025 or 8.7%, excluding Hyon, which is above our forecasted range of 7% to 8% and I would highlight that this is our 13th consecutive quarter of increasing net interest income. The net interest margin was 3.82% for the current quarter and 3.54% from the prior year quarter and up 11 basis points from the linked quarter.

The third quarter 2026 provision for credit losses was an expense of $4.8 million or approximately 0.4% of loans annualized, which was above our forecasted range of 0.2% to 0.25%. That's primarily due to a specific reserve on the 1 commercial relationship Joel discussed. The initial allowance on the acquired High Point loans was established through the purchase accounting rather than through the provision. Moving on to Page 18. Noninterest income totaled $15.8 million in third quarter 2026 or $15.2 million, excluding High Point, which is above our forecasted range of $11.3 million to $12.3 million.

Third quarter 2026 mortgage loan originations, sales and gains totaled $136 million, $102.3 million and $1 million, respectively. Mortgage loan servicing net generated a gain of $4.1 million in 2026 -- third quarter of 2026, which is above our forecasted target. Noninterest expense was $44.8 million in the third quarter, including $3.5 million in merger-related costs. Excluding High Point, our merger-related costs, noninterest expense was $37.3 million, slightly above our forecasted range of $36 million to $37 million.

Our effective income tax rate was 17% for the third quarter of 2026. Additionally, we repurchased 119425 shares of common stock for $4.2 million during the first 9 months of 2026. This was related to the liquidation of a high point Community Bank's ESOP program. Looking to the fourth quarter, we expect our net interest margin to continue to benefit from asset repricing in the September Fed rate increase that partially offset by competitive deposit pricing. Following November 9 conversion, we expect to begin to realize the cost savings from the High Point combination with savings largely reflected in our 2027 expense run rate.

We expect remaining merger and conversion-related expenses or approximately $3 million, primarily realized in the fourth quarter of 2026. We continue to expect our provision for credit losses to track loan growth and credit migration. Year-to-date provision is about 0.23% of average loans annualized, which is within our forecasted range. That concludes my prepared remarks. I would now like to turn the call back over to Brad.

William Kessel

Thanks, Gavin. We've built a strong community bank franchise, which positions us well to effectively manage through a variety of economic environments and continue delivering strong and consistent results for our shareholders. As we move through the remainder of 2026, our focus will be continuing to invest in our team, investing in and leveraging our technology and completing the successful integration in November 9 conversion of Five Point Community Bank while always working to be Michigan's most people focused bank.

At this point, we'd now like to turn the line over to the operator to open up the call for questions.

Operator

[Operator Instructions] And our first question comes from Brandon Nasal at Homeday Group.

質疑応答

Brendan Nosal

All -- maybe starting off here on asset quality. Can you just update us on that large nonperforming waterfront condo nonaccrual in Western Michigan. Just kind of remind us what the balance is where you are in the elution process and where reserves specific reserves stand on the credit?

Joel Rahn

Yes. The frustratingly, the balances are still the same as they were prior quarter. It is still wrapped up in the bankruptcy court and the borrower has until 12/31 to file their plan of reorganization. And that total credit is right around $30 million but then you net out about approximately -- these are round numbers. We have about $8 million that is backed with government guarantees USDA. So it's net exposure on that is about $21 million. And I don't think that we specifically disclosed the amount that we have reserved, but we feel like we're fully reserved for any potential loss exposure there. .

Brendan Nosal

Okay. Maybe just kind of keeping on theme of credit. I look at problem assets, I think you're up for like 10 quarters in a row. And then granted like the increases have been small. You closed the deal this quarter and then there's kind of that large chunky 1 that's in that balance as well. But just kind of given the trend over the past 2.5 years, is there a point at which you kind of look at that and say the work to book a little bit or kind of change how you think about kind of the commercial underwriting process? Or is this just kind of normal churn in your view?

Joel Rahn

And that's a very fair question. It's -- we all got very used to and like when we had no nonaccrual assets. So I do think that we're -- as we've migrated up, we look hard at our own portfolio constantly. And I feel very confident to say there's no systemic issue here. We have 4 credits that the biggest 1 that we just discussed, excuse me, 3 credits that are really driving that. And 1 that we added this quarter is included in that -- and so I won't disclose particular details about that one, but the 1 that we added this quarter, we basically fully reserve from a very conservative standpoint basically reserve the entire loan amount because it involved bankruptcy. And it was primarily a cash flow-related loan. .

We still think there's reason to be optimistic that the borrower will come out of that hard but yet to be determined, and we have to err on the side of caution with our reserves. So that's what we did this quarter. So we're just watching very closely. Economically, though, we don't see a lot of signs of stress in the portfolio. Our overall watch list percentages are very flat, which is a good sign. So it's not that we continue to migrate a lot of things into the watch category. It's just been a migration of those few credits within the watch category to nonaccrual.

Operator

Our next question comes from Adam Kroll from Piper Sandler. .

Unknown Analyst

I'm on for Nate Race Yes. So maybe a question for Gavin to start. Really appreciate the slide in the deck with the loan security repricing data and obviously some tailwinds still to come there. But would just be curious how you're thinking about the margin trajectory from here, particularly as you continue to remix the loan portfolio in the commercial and maybe just unpack how you're thinking about deposit betas through the hiking cycle.

Gavin Mohr

Yes,. So starting with kind of the margin I am not have any change to what we've communicated in prior quarters in terms of the margin and the continual grind higher, all else assuming there's no macro level shock in the system. So we've provided that slide for -- to give you guys more clarity into what's driving that momentum. So I anticipate the coming quarters to the trend to continue in terms of margin expansion. In terms of beta, we think about beta, if we can manage in that 35 to 40 percent range through the cycle. Adam, we'd be really happy, and that's where we're really targeting. .

Adam Kroll

And Gavin, that's on a total deposit beta or interest-bearing?

Gavin Mohr

Yes, cost of funds, yes. .

Adam Kroll

Okay. Got it. And then I believe the conversions targeted for early November. So maybe, Gavin, just curious if you could update us on operating expense expectations for the fourth quarter and maybe just the cadence of cost saves there and as you head into '27?

Gavin Mohr

Yes. So the fourth quarter will close on November ninth that weekend will convert the organization. But much of the expense will run through December, 1 of the things here, Adam, that we -- the cost saves have not come as fast as I had originally modeled because we've chosen to run the banks fully staffed in terms of support through this period between July 1 and November 9 for just because we believe that's the right thing to do for customers and for the execution of the overall integration.

So the fourth quarter, I think you'll see, as I mentioned, we're estimating about $3 million of additional merger-related costs coming in the fourth quarter. And then we'll provide there following the fourth quarter 2027 forecast, and that will -- that run rate will include the fully loaded HCB normalized expense. So I don't have a number for you today. We're in the process of second round of the '27 budget, but it gives you kind of timing.

William Kessel

Yes, we had in the original pro forma of about 40% cost saves like we're we are targeting for that...

Gavin Mohr

Yes, it's just we had communicated we would get 50% in '26 for half a year. We're not quite there. We're not there. So -- but yes . .

Adam Kroll

Got it. I appreciate all the color there. And then last 1 for me. A question for Brad. I know you're probably still focused on the integration, but I would appreciate to hear your thoughts on potential for additional M&A and any additional opportunities you're seeing across your footprint?

William Kessel

Yes. Like you said, we're focused on what's right in front of us. I'm very optimistic about how well this has gone up to this point and how well it will go through conversion weekend. And part of my outcomes there is for the bank to have a good reputation in being a good partner as we go forward. And so I do believe there will be other opportunities. Having said that, as we've said, quarter after quarter, year after year, the primary growth vehicle for Independent Bank will be organic growth.

And that's worked out really, really well for us. Each 1 of these individual talent additions, I would call it sort of a mini merger, if you will, and that's worked out really well for us. So that will be the path for us.

Operator

Our next question comes from Damon DelMonte from KBW.

Damon Del Monte

Everybody is doing well, First question is on loan growth. Just curious, do you guys have any expectations of like attrition or targeted exits on some of the acquired credits, which could kind of dampen the growth outlook in the next couple of quarters?

Joel Rahn

No. High Point has a really solid loan portfolio and their underwriting and their risk appetite mirrors ours. So no, nothing that we're looking at to say that we're not comfortable with or want to migrate out of. It's very straightforward and blends in very well with our portfolio, Dan.

Damon Del Monte

Great. Joel, can you just remind us kind of your overall outlook for growth, just kind of given the pipelines and some of the investments that you made?

Joel Rahn

Yes, I think we said at the beginning of the year, we want to grow at a low double-digit rate on the commercial side. We're doing that, and I fully expect that we can continue to do that into '27.

Damon Del Monte

Okay. Great. And then I guess 1 for Gavin here. As far as the projected fair value accretion in the coming quarters, I think this quarter -- I think you noted it was like $900,000-ish or so. I think that's a little higher than we had been modeling. So do you have a kind of a schedule of what you expect over the coming quarters?

Gavin Mohr

Yes. So -- great question. That was based -- that was an estimate, Damon, based off of the modeling from the third-party fair value valuation. So it all connects. But -- next quarter, we will see, at the loan level detail what the accretion is. I think it's reasonable. But as you know, that will that can -- that will move up and down just based on prepayment fees. So it's in the ballpark.

Damon Del Monte

Okay. Okay. Great. And then, I guess, lastly on fee income. Obviously, the mortgage market remains pretty challenging right now. Just kind of curious how the pipelines are heading into the end of the year and if you'd expect a similar level to what you saw in the third quarter? Or do you think the combo of seasonality and the challenging market would kind of take that number down?

Gavin Mohr

Yes. So production app-wise, we did see a slowdown late in the quarter just due to the sharp increase, specifically when the conforming went over 7% apps pulled back I want to make -- there's a lot going on this quarter. The fee income area was -- did come -- was a miss. But when I look at the margin, what we're modeling is margin, gain on sale. The margin was strong where we were the where the gains on mortgages got hit was in the fair value marks.

And so we had some loans that were originated salable ended up on our portfolio. That mark was about $300,000 negative and working against the gain on sale. So just to say there are some things going on there. But overall, when we think about going forward, if rates stay elevated, production will come down, yes.

Operator

And our next question comes from Peter Winter from D.A. Davidson.

Peter Winter

You guys have had a lot of success recruiting bankers. I'm just wondering, can you talk about the recruitment pipeline?

Joel Rahn

We continue to recruit, Peter, and still feel there's opportunity out there for us, primarily with talent coming from the larger organizations. And so we continue to be active and we're having ongoing conversations. .

Peter Winter

Got it. And then, Gavin, you talked about that continued expansion on the margin grinding higher. Last quarter, you talked about maybe 2 to 4 basis points per quarter over the next 12 months. I'm just wondering if that outlook changed at all, maybe a little bit more towards the higher end, just given the rate environment is different?

Gavin Mohr

Yes. I think that certainly is a benefit, Peter, I think that forecast is though is still very reasonable and maybe it does move us to the higher end, but I wouldn't change the range today.

Peter Winter

Got it. And then just my last question. You had the decline in capital ratios from the acquisition, but they're still strong. Just curious, Brad, what your thoughts on buying back stock. You had the buyback this quarter, but that was more for the high points ESOP. Just thoughts on buybacks.

William Kessel

I would say is when we think about capital, number 1 is supporting the organic growth number two, having a consistent and upward trend in dividend. Number 3 would be considering for share repurchases. But a lot of that depends on items 1 and 2 and also where we're trading at. And then number four, of course, adding the capability of some other merger opportunity became available.

So those -- that priority list remains the same. And I would say -- when I look at where we are today, the current markets and where we see it going forward, I am very optimistic about the direction for IBC. So yes, I think we're in a good spot.

Operator

This concludes the question-and-answer session. I would now like to turn it back to Brad Kessel for closing remarks.

William Kessel

In closing, I'd like to thank our Board of Directors and our senior management for their support and leadership. I also want to thank all our associates, and I want to continue to welcome our new colleagues from High Point Community Bank. We continue to be so proud of the job being done by each member of our team. Each team member in his or her own way continues to do their part towards our common goal of guiding our customers to be independent. Finally, I'd like to thank each of you for your interest in IBC and for joining us on today's call. Have a great day.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.