Independent Bank Corporation Q3 FY2025 earnings call

• Company mission is to inspire financial independence, with vision of confident financial approach and core values of courage, drive, integrity, etc.
• Net income for Q3 2025 was $17.5 million ($0.84 per diluted share) vs $13.8 million ($0.65) prior year. Loan balances grew at 3.2% annualized, deposits increased, net interest income up for ninth consecutive quarter.
• Core deposits increased $148.2 million in Q3 2025, with business and municipal deposits growing, retail slightly down.
• Commercial loan portfolio grew $57 million in Q3, total loans up $33.9 million. Strategic investment in commercial banking talent added 3 new hires, team now 50 bankers statewide.
• Credit quality: Nonperforming assets up to 0.38% due to one commercial relationship, but net charge-offs at historically low levels, allowance for credit at 1.49% of total loans.

Deposits: Total deposits as of September 30, 2025, were $4.9 billion. Core deposits increased $148.2 million in the third quarter of 2025. Business deposits grew by $67.5 million, municipal deposits by $82.5 million, offset by a small decrease in retail deposits. Deposit composition: 46% retail, 37% commercial, 17% municipal. Loans: Loan balances grew at an annualized rate of 3.2%. Commercial loan portfolio increased $57 million in the third quarter, total loans up $33.9 million. Year-to-date commercial loan growth was $188 million (12.9% annualized). C&I lending comprises 70% of the commercial portfolio. Net Interest Income: Increased sequentially and year-over-year, ninth consecutive quarter of increase. Net interest margin had a small linked quarter decline due to sub debt redemption, but stable when adjusting for that event. Noninterest Income: Totaled $11.9 million in Q3 2025 vs $9.5 million year ago. Mortgage loan gains decreased, but mortgage loan servicing net had a positive impact. Expenses: Noninterest expense was $34.1 million in Q3 2025, below forecasted range, with efficiency ratio at 58.86%.

• Loan growth: Outlook estimated mid single digits, loans increased $33.9 million (3.2% annualized) in Q3, year-to-date growth 5.3% annualized.
• Net interest margin: Anticipated to be stable even with Fed cuts, benefits from remixing lower-yielding assets. Repricing of securities ($138 million at 3%) and fixed-rate loans ($438 million repricing in next year) expected to provide margin tailwinds.
• Expenses: Noninterest expense below forecasted range in Q3, budget for 2026 in progress with focus on technology spend and incentive compensation.

• Credit risk: One investment real estate commercial relationship migrated to nonaccrual, but bank feels adequately reserved and is working with the borrower.
• Market risk: Impact of Fed rate cuts on funding costs and margin, with funding costs having a small uptick in Q3.

Q: Brendan Nosal asks about commercial banking hires, specifically area of expertise, markets, and institutions they came from.

A: Joel Rahn states the three hires are very experienced, 2 over 20 years in commercial banking, in Southeast Michigan, 2 from large regional and 1 from small regional.

Q: Brendan Nosal asks about market dislocation and banker opportunities.

A: Joel Rahn says the recipe of being an attractive culture for bankers from larger organizations has worked, with ongoing opportunity for talent and relationships due to market consolidation.

Q: Brendan Nosal asks about funding costs and Fed cuts.

A: Gavin Mohr mentions deposit growth in municipal and commercial, and margin impact of funding mix.

Q: Nathan Race asks about margin and sub debt impact.

A: Gavin Mohr says margin was impacted by sub debt and liquidity, but expects margin to be stable, with securities and fixed-rate loans repricing to provide pickup.

Q: Nathan Race asks about credit exposure of the investment real estate commercial relationship.

A: Brad Kessel says the portfolio is clean, bank is reserved and working with the borrower.

Q: Peter Winter asks about credit weakness in commercial borrowers.

A: Joel Rahn says customer base performance is solid, watch list is low, and Michigan economy is stable.

Q: Peter Winter asks about expense management and 2026 expense growth.

A: Gavin Mohr talks about incentive compensation being lower than last year and focus on technology spend for 2026 budget.

Q: Peter Winter asks about spot rate on interest-bearing deposits.

A: Gavin Mohr provides spot rate info as of 9/30