Independent Bank Corporation

Good day, and thank you for standing by. Welcome to the Independent Bank Corporation fourth quarter 2025 earnings call. At this time, all participants are on listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand as raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is pre-recorded. I would like to hand the conference over to your first speaker today, Brad Kessel, President and Chief Executive Officer. Please go ahead.

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 fourth quarter and full year 2025 results. 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, EVP, Head of Commercial Banking. Before we begin today's call, I would like to direct you to the important information on page two 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 question and answer session, and then closing remarks. I'm pleased to report on our fourth quarter and full year 2025 results as we advance our mission of inspiring financial independence today with tomorrow in mind. Our vision is a future where people approach their finances with confidence, clarity, and the determination to succeed. Our core values of courage, drive, integrity, People-focused and teamwork are the blueprint our employees live by. We strive to be Michigan's most people-focused bank. Independent Bank Corporation reported fourth quarter 2025 net income of $18.6 million, or 89 cents per diluted share, versus net income of $18.5 million, or 87 cents per diluted share, in the prior year period. For the year ended December 31, 2025, the company reported net income of $68.5 million, or $3.27 per diluted share, compared to net income of $66.8 million, or $3.16 per diluted share in 2024. Highlights for the fourth quarter of 2025 include an increase in net interest income of $1 million. That's 2.2% over the third quarter of 2025. A net interest margin of 3.62%. That's eight basis points up on a linked quarter basis. A return on average assets and a return on average equity of 1.35% and 14.75% respectively. Net growth in loans of $78 million or 7.4% annualized. That's from September 30th, 2025. Net growth in total deposits, less brokered deposits, of $57.5 million, or 4.8% annualized. An increase in tangible common equity ratio to 8.65%, and the payment of a 26-cent per share dividend in common stock on November 14, 2025. Our fourth quarter performance marked the culmination of another remarkable year with our organization excelling on all fundamentals. Over the past year, we increased tangible book value by 13.3% and delivered near record earnings. Meanwhile, our dividend payout ratio was 32% for the year as we continued to recognize the value of returns for our shareholders. During the fourth quarter, we realized continued net interest margin expansion, strong loan growth, and increased non-interest income. In addition, our credit quality metrics remain positive with watch credits and non-performing assets below historic averages. In anticipation of continued strong earnings, we repurchased shares and executed a tax credit transfer agreement during the fourth quarter, which is expected to reduce tax obligations and enhance earnings per share. Looking ahead to 2026, our confidence is bolstered by a robust commercial loan pipeline, and our ongoing strategic initiative to attract and integrate talented bankers into our organization. Moving to page five of our presentation, deposits totaled $4.8 billion at December 31, 2025, an increase of $107.6 million from December 31, 2024. This increase is primarily due to growth in savings and interest-bearing checking, reciprocal, and time balances that were partially offset by decreases in non-interest-bearing and brokered time deposits. On a linked quarter basis, business deposits increased by $20.4 million, retail deposits increased by $64.1 million, offset by a $28.6 million decrease in municipal deposits. The deposit base is comprised of 47% retail, 37% commercial, and 16% municipal. All three portfolios are up on a year-over-year basis. On page six, we have included in our presentation a historical view of our cost of funds as compared to the Fed fund spot rate and the Fed effective rate. For the quarter, our total cost of funds decreased by 15 basis points to 1.67%. At this time, I'd like to turn the presentation over to Joel Rahn to share a few comments on the success we're having and growing our loan portfolios, and provide an update on our credit metrics.

Thank you, Brad, and good morning, everyone. On page 7, we share an update of loan activity for the quarter. We continue to experience solid loan growth in the fourth quarter, with total loans growing by $78 million, or 7.4% annualized, as Brad just referenced. For the year, we increased our loan portfolio $237 million, or 5.9%. Our commercial portfolio led the way with $276 million or 14.2% growth. Commercial loan generation continued its strong trend in Q4 with $88 million in quarterly growth or 16% annualized. Our residential mortgage portfolio grew by $7.2 million, and our installment loan portfolio decreased $17 million for the quarter. Our strategic investment in commercial banking talent continues to supplement our loan growth. During the fourth quarter, we added an experienced banker in Metro Detroit, and in total, we have 49 bankers comprising eight commercial loan teams across our statewide footprint. During the year, we added a net of five experienced bankers to the team. Looking ahead, we believe we will continue low double-digit growth of our commercial loan portfolio in 2026. Our pipeline remains solid, comparable to January of 25. We continue to see market opportunities from regional banks in both talent and customer acquisition. They're seeing steady organic growth from existing customers. Looking at the commercial loan production activity on a year-to-date basis, the mix of C&I lending versus investment real estate was 57% and 43% respectively. And for our commercial portfolio, our mix is 67% C&I and 33% investment real estate. Page 8. provides detail on our commercial loan portfolio concentrations. There's not been any significant shift in our portfolio over the past year, with the portfolio remaining very well diversified. Our largest segment of the C&I category is manufacturing at $183 million, or 8.3% of the portfolio. In the investment real estate segment of the portfolio, the largest concentration is industrial at $202 million, or 8.8%. We outlined key credit quality metrics and trends on page nine. We continue to demonstrate strong credit quality. Total non-performing loans were 23.1 million or 54 basis points of total loans at quarter end, up slightly from 48 basis points at 930. It's worth noting that 16.5 million of this total is one commercial development exposure that we discussed last quarter. We continue to work through the challenges of this particular project and are appropriately reserved for any loss exposure. Past due loans totaled 7.8 million or 18 basis points, up slightly from 12 basis points at 9.30. It's not reflected on the slide, but worth noting that we realized net charge-offs of 1.6 million or four basis points of average loans for the year. This compares to 0.9 million or two basis points in 2025. or 2024, excuse me. At this time, I would like to turn the presentation over to Gavin for his comments, including the outlook for 2026.