Independent Bank Corporation

Thank you for standing by. Welcome to the Independent Bank Corporation second quarter 2026 earnings call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised, today's conference is being recorded. I would now like to hand the conference over to your speaker today, President and CEO Brad Kessel. 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 results for the second quarter of 2026. I'm Brad Kessel, President and Chief Executive Officer. Joining me is Gavin Mohr, Executive Vice President and our Chief Financial Officer, and Joel Rahn, Executive Vice President and Head of Commercial Banking. Before we begin today's call, I'd like to direct you to important information on page two of our presentations. 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, Independent Bank Corporation reported second quarter 2026 net income of $18.8 million or 90 cents per diluted share. versus net income of $16.9 million or 81 cents per diluted share in the prior year period. Highlights for the second quarter of 2026 include a net interest margin of 3.71%, six basis point increase from the linked quarter, an increase in net interest income of $1 million or 2.2% over the first quarter of 2026, an increase in tangible common equity per share of common stock of 86 cents or 14.8% annualized for March 31st, 2026. A return on average assets and a return on average equity of 1.37% and 14.52% respectively for the quarter ended June 30th, 2026. Net growth in total deposits less brokered time of $38.2 million or 3.2% annualized. Net loan growth of 105.8 million or 9.8% annualized. An increase in tangible common equity to 8.9% at June 30th, 2026. And the payment of our 28 cent per share quarterly dividend common stock on May 14th of 2026. Our second 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-focused deposit franchise. We saw broad-based momentum across the business, with core customer activity supporting loan growth, core deposit growth, improving earning asset yields, and continued capital generation. Just as important, we achieved these results while maintaining strong asset quality, prudent liquidity, and capital levels that 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 on July 1 of 2026. Integration work is underway with a targeted system conversion of November 9th. We continue to believe the combination strengthens our presence in complementary markets and enhances our ability to serve customers, employees, communities, and our shareholders over the long term. A few other highlights during the second quarter included independent bank being named Michigan's best in-state bank by Forbes for 2026. Independent Bank is the only bank in Michigan that has been recognized by Forbes four years in a row. This also marks our sixth time overall that Independent has received this prestigious recognition. During the quarter, we announced the creation of two new regional president roles within our commercial banking structure, reinforcing our commitment to strong local leadership, relationship-based growth, and continued service to customers and communities across Michigan. This new leadership structure reflects our intentional alignment of markets, teams, and strategic priorities as the organization continues to grow. In their new roles, Kyle Johns and Daniel Plummer will lead market level relationship development, strengthen community engagement, foster collaboration across business lines, and help ensure consistent execution of our strategic goals. I'm also proud to share that Independent Bank remains a top lender and resource for small business owners and entrepreneurs with our experienced lending team available to help eligible business access financing through the U.S. Small Business Administration loan programs. As a member of the SBA's Preferred Lenders Program, Independent Bank has delegated authority to process and approve eligible SBA loan requests in-house, helping streamline the financing process for borrowers. Independent Bank was recently honored by the SBA Michigan District Office as a top 10 lender for its outstanding contributions and support of Michigan's small business community during fiscal year 2025. Moving to page five of our presentation, deposits total $4.9 billion at June 30th, 2026, an increase of $100 million from the start of the year. This growth occurred in non-interest-bearing, saving and interest-bearing, checking, and reciprocal deposits, offset by small decline in time deposits and an $18 million reduction in broker deposits. On a linked quarter basis, business deposits increased by $66 million, retail deposits increased by $15 million, offset by a $45 million decrease in municipal deposits, primarily due to seasonality and usage of American Rescue Plan Act funds. The deposit base is comprised of 47% retail, 40% commercial, and 13% municipal. On page six, we have included in our presentation a historical view of our cost of funds as compared to the Fed funds spot rate and Fed effective rate. For the quarter, our total cost of funds decreased by one basis point to 1.53%. 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 in growing our loan portfolios and provide an update on our credit metrics. Joel?

Yeah, thanks, Brad. Good morning, everyone. Page seven summarizes our loan activity for this quarter. We experienced strong second quarter loan growth of 105 million or 9.8% annualized. Commercial loan generation was very strong with 92.6 million of quarterly growth or 16% annualized. During the quarter, our residential mortgage and consumer installment loan portfolios increased 12.9 million and 0.2 million respectively. Year to date, we've grown loans 138 million led by strong commercial loan growth of 146 million, representing 13% annualized growth. Our strategic investment in commercial banking talent continues to supplement our loan growth. Year to date, we've added eight experienced commercial bankers, bringing our total to 53 bankers, comprising eight commercial loan teams across our statewide footprint. Compared to a year ago, we've added a net of six experienced commercial bankers. Looking ahead, based on a strong pipeline, we believe we will continue low double-digit growth of our commercial loan portfolio for 2026. We continue to see market share opportunities from regional banks in both talent and customer acquisition and are seeing steady organic growth from existing customers. Looking at the commercial loan production for the first half of the year, The mix of C&I lending versus investment real estate was 58% and 42% respectively. And for our commercial portfolio, the mix is 67% C&I and 33% investment real estate. Page 8 provides detail on our commercial loan portfolio concentrations, and there hasn't been any significant shift in our portfolio over the past year, with the portfolio remaining very well diversified. Our largest segment of the CNI category continues to be manufacturing at $194 million or 8.2% of the total portfolio. In the investment real estate segment of the portfolio, the largest concentration is industrial at $219 million or 9.3%. We outline key credit quality metrics on page 9. Overall, we continue to demonstrate, as Brad said, strong credit quality. Total non-performing loans were 32.8 million, or 74 basis points of total loans at quarter end, up slightly from 64 basis points at 630, or excuse me, at 331. It's worth noting that approximately two-thirds of the total is one commercial development exposure that we've discussed in prior quarters. We continue to work through the challenges of this particular project and are appropriately reserved for any loss exposure. Past due loans totaled 5.6 million or 13 basis points down from 8.2 million or 19 basis points at 3.31. It's not reflected on this slide, but also worth noting that we realized net charge-offs of 633,000 or three basis points of average loans in the first two quarters of the year. This compares to 442,000 or two basis points in the first half of 2025. This time, I'd like to turn the presentation over to Gavin for his comments, including the outlook for the remainder of 2026.