Independent Bank Corporation (IBCP) Earnings

Management highlights

### Overall Financial Performance - Q2 2026 net income of $18.8 million (90 cents diluted EPS) increased from $16.9 million (81 cents diluted EPS) in Q2 2025 - Net interest margin expanded 6 basis points quarter-over-quarter to 3.71%, marking the 12th consecutive quarter of net interest income growth - Return on average assets was 1.37% and return on average equity was 14.52% for the quarter - Tangible common equity per share increased 86 cents (14.8% annualized) from March 31, 2026, with a tangible common equity ratio of 8.9% at quarter-end - Net growth in total deposits less brokered time was $38.2 million (3.2% annualized), and total deposits grew $100 million year-to-date - A 28 cent per share quarterly common dividend was paid in May 2026 ### Strategic & Operational Updates - Completed the acquisition of HCB Financial Corp on July 1, 2026, with system conversion targeted for November 9, 2026; integration work is currently underway - Named Michigan's Best In-State Bank by Forbes for 2026, marking the fourth consecutive year and sixth overall recognition of the bank - Created two new regional president roles within the commercial banking division to align with organizational growth, strengthen local leadership, and support consistent strategic execution; Kyle Johns and Daniel Plummer will fill these new roles - Honored as a top 10 SBA lender by the SBA Michigan District Office for fiscal year 2025, reflecting the bank's ongoing support for Michigan small businesses ### Credit Quality Update - Total non-performing loans were $32.8 million, or 74 basis points of total loans, a slight increase from 64 basis points at March 31, 2026; approximately two-thirds of non-performing exposure comes from a single previously disclosed commercial development project, for which the bank is appropriately reserved - Past due loans fell to 13 basis points from 19 basis points quarter-over-quarter, totaling $5.6 million at quarter-end - Net charge-offs totaled 633,000 (3 basis points of average loans) for the first half of 2026, compared to 442,000 (2 basis points) in the first half of 2025 ### Balance Sheet & Interest Rate Risk Position - Reduced sensitivity to interest rate declines via $50 million notional interest rate floor purchases and termination of $50 million pay-fixed swaps - 37.9% of assets reprice within one month, and 49.4% reprice within the next 12 months; the bank's interest rate position is well balanced for +/- 100 basis point rate changes, with modest exposure to larger rate declines and upside benefit from larger rate increases

Guidance

- Management reaffirms expectations for low double-digit commercial loan portfolio growth for full-year 2026, supported by a strong current pipeline and ongoing market share opportunities from regional bank competitors - Q2 2026 net interest income growth of 7.4% year-over-year fell within the original 7% to 8% forecast range; management expects net interest margin to continue grinding gradually higher, with 2 to 4 basis points of expansion per quarter over the next 12 months being a reasonable outcome - Core non-interest expense run rate for remaining quarters of 2026 is expected to land around $37 million, at the high end of the original quarterly guidance range after accounting for one-time items in Q2 2026 - All cost savings from the HCB Financial acquisition are expected to be fully implemented and realized by early 2027, following the November 2026 system conversion - Q2 2026 provision for credit losses of $2.7 million came in at the high end of the original forecast range, and non-interest income and non-interest expense both came in above their original forecast ranges due to one-time gains and merger/litigation costs

Segment performance

For the second quarter of 2026, the overall net income of Independent Bank Corporation was $18.8 million, or 90 cents per diluted share, compared to $16.9 million or 81 cents per diluted share in the year-ago quarter. Net interest income increased $3.3 million year-over-year, with a net interest margin of 3.71%, up 13 basis points from Q2 2025 and 6 basis points from Q1 2026. Average interest-earning assets totaled $5.33 billion, up from $5.11 billion in Q2 2025. Total deposits reached $4.9 billion as of June 30, 2026, with a deposit mix of 47% retail, 40% commercial, and 13% municipal. Non-interest income was $15.3 million, compared to $11.3 million in Q2 2025 and $12 million in Q1 2026. Non-interest expense totaled $37.8 million, compared to $33.8 million in the year-ago quarter and $38.3 million in the prior linked quarter. Total loans saw net growth of $105.8 million (9.8% annualized) in Q2 2026: commercial loans grew by $92.6 million (16% annualized), residential mortgage loans grew by $12.9 million, and consumer installment loans grew by just $0.2 million. The commercial loan portfolio has a mix of 67% C&I and 33% investment real estate; the largest C&I concentration is manufacturing at $194 million (8.2% of total loans), and the largest investment real estate concentration is industrial properties at $219 million (9.3% of total loans).

Risks & headwinds

- There is one large non-performing commercial development loan that accounts for approximately two-thirds of total non-performing exposure; resolution of this exposure is tied to a slow-moving legal process, and associated loan and collection expenses are currently elevated - Continued competitive pressure in commercial lending exists, though management notes that competition is consistent with historical levels and the bank has maintained stable lending spreads - The bank faces aggregate probable loss exposure from outstanding litigation matters, resulting in a $0.4 million litigation expense accrual in Q2 2026 - Economic and interest rate volatility create uncertainty, though the bank maintains a well-balanced interest rate risk position for moderate rate movements and strong capital and liquidity to weather changing conditions

Analyst Q&A

• Q: Core non-interest expense came in above the guidance range in Q2 2026. What is the expected core expense run rate for the rest of 2026?

  A: The overrun was driven by one-time items: $400,000 in litigation accrual, $400,000 in incentive accrual catch-up, and temporary elevated advertising costs for a completed deposit promotion. Elevated collection costs are also tied to the single large non-performing credit, which should decline as the issue is resolved. Excluding these temporary items, the core quarterly non-interest expense run rate will sit around $37 million, at the high end of the original guidance range going forward.

• Q: Is the opportunity to remix the balance sheet toward higher-yielding commercial loans exhausted after this year, or will margin expansion continue?

  A: While the existing commercial loan book is already approaching current market pricing due to its short duration, the lower-yielding securities and mortgage portfolios still have room for redeployment into the strong commercial pipeline. With the current shape of the yield curve being favorable, ongoing gradual margin expansion of 2 to 4 basis points per quarter over the next 12 months is a reasonable outcome, after the 6 basis point expansion seen in Q2.

• Q: What is the cadence of cost savings from the recently completed HCB Financial acquisition?

  A: Most cost savings will be realized after the planned November 9, 2026 system conversion, as the banks will operate as separate entities until that date. The full 40% of projected cost savings will be fully implemented and realized by early 2027.

• Q: Have commercial market yields peaked, and how does the bank balance profitability and market share growth? How is the current commercial loan pipeline looking?

  A: Pricing is stable, with healthy but consistent industry competition; the bank has held its ground on lending spreads, with no expectation of spread growth or meaningful spread compression. The pipeline remains strong, comparable in size to last year, and even after strong Q2 growth, no activity was pulled forward from the second half. Third quarter production is expected to be slightly softer due to typical summer vacation seasonality, with a stronger fourth quarter following historical patterns.