- Key insight: Seller HCB Bancorp is flush with liquidity, offering Independent Bank Corp. plenty of capital to fuel commercial loan growth.
- Supporting data: HCB reported a sub-70% loan-to-deposit ratio at year-end 2025.
- Expert quote: "Ideally, a lot of this liquidity will flow into our commercial pipeline for funding." — Independent Chief Financial Officer Gavin Mohr
Independent Bank Corp. in Grand Rapids, Mich., has struck a deal to acquire an in-state competitor, agreeing to pay $70.2 million for the $590 million-asset HCB Bancorp in Hastings.
Independent CEO Brad Kessel said Thursday that the combination traces back to a lunch he shared in 2024 with Mark Kolanowski, his counterpart at HCB.
"We just were sort of talking about the industry and our banks," Kessel said during a conference call with analysts. "It was really out of that we agreed to stay in touch and maybe have further conversations."
Ultimately, the informal discussions turned into a formal negotiation, and the two companies agreed that Independent would pay $70.2 million in stock and cash for HCB.
Brean Capital analyst John Rodis wrote that the consideration is "somewhat higher than we would like to see," but Kessel said the HCB franchise is well worth the price.
"I'll admit, I think this is a fully priced deal, but it's worthy of a full price," he said.
The deal for HCB, the holding company for the 140-year-old Highpoint Community Bank, checks a number of key strategic boxes, according to executives at the $5.5 billion-asset Independent.
The deal moves the company into several attractive new markets in Western and Southwestern Michigan. It also offers a substantial dose of liquidity. HCB's loan-to-deposit ratio was 66% on Dec. 31, 2025, according to data from the Federal Deposit Insurance Corp.
"Ideally, a lot of this liquidity will flow into our commercial pipeline for funding,' Independent Chief Financial Officer Gavin Mohr said on the conference call.
Independent expects to close the transaction early in the third quarter. The purchase price works out to $70.19 per HCB share, or 148% of tangible book value. That figure sits slightly below the average 155% price-to-tangible-book-value ratio for the 29 bank deals announced between Jan. 1 and March 14, according to Seaport Research Partners analyst Laurie Hunsicker, who closely follows bank merger-and-acquisition activity.
Independent is projecting cost savings amounting to approximately 40% of HCB's operating expense base — which totaled $15.1 million in 2025. The buyer estimates that the deal will be 6% accretive to 2027 earnings per share.
Both Kessel and Mohr said the planned HCB acquisition is low-risk due to the seller's liquid balance sheet and strong credit quality. HCB's cumulative charge-offs since 2015 equal 33 basis points of average loans, well below the average for Michigan banks.
For Independent, the bid to purchase HCB represents its first foray into whole-bank M&A since June 2018, when it completed a $63.2 million deal to acquire the $341.8 million-asset Traverse City State Bank in Traverse City, Mich.
Independent's long sojourn from M&A wasn't due to lack of interest. Indeed, the company explored acquiring "quite a few" banks over the past seven years, Kessel said. It never got beyond kicking the tires because of "sticking to a disciplined pricing strategy or not getting comfortable with the balance sheet or the culture."
Given the relatively small size of the HCB deal, Independent has enough capital to consider additional strategic opportunities, but Kessel said it's likely to step back again in order to focus on the integration process.
"We've got a lot of time and energy invested in this and more to come … so that's going to be our focus at this point," Kessel said.
