Q1 2026 Independent Bank Corp Earnings Call

April 23, 2026

Speaker #1: Good day and thank you for standing by . Welcome to the independent Bank Corporation . First quarter 2026 Earnings Conference Call . At this time , all participants are in a listen only mode After the speakers presentation , there will be a question and answer session to ask a question .

Operator: Good day, and thank you for standing by. Welcome to the Independent Bank Corporation Q1 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brad Kessel, President and CEO. Sir, please go ahead.

Speaker #1: During this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again.

Speaker #1: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brad Kessel, President and CEO.

Speaker #1: Sir , please go ahead

Speaker #2: 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 .

Brad Kessel: 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 Q1 2026. I am Brad Kessel, President and Chief Executive Officer, and joining me this morning is Gavin A. Mohr, Executive Vice President and our Chief Financial Officer, as well as Joel Rahn, Executive Vice President and Head of Commercial Banking for Independent. Before we begin today's call, I would like to direct you to 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 our website, independentbank.com.

Brad Kessel: 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 Q1 2026. I am Brad Kessel, President and Chief Executive Officer, and joining me this morning is Gavin Mohr, Executive Vice President and our Chief Financial Officer, as well as Joel Rahn, Executive Vice President and Head of Commercial Banking for Independent. Before we begin today's call, I would like to direct you to 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 our website, independentbank.com.

Speaker #2: For the first quarter of 2026 . I am Brad Kessel , president and Chief Executive Officer And joining me this morning is Gavin Mohr Executive Vice President and our Chief Financial Officer , as well as Joel Rahn Executive Vice president and Head of Commercial banking for independent Before we begin today's call , I would like to direct you to important information on page two of our presentation .

Speaker #2: 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 our website , INDEPENDENT BANK CORP /MI/ .

Speaker #2: The agenda for today's call will include prepared remarks , followed by a question and answer session , and then closing remarks Independent bank Corporation reported first quarter 2026 net income of $16.9 million , or $0.81 per diluted share , versus net income of $15.6 million , or seven .

Brad Kessel: The agenda for today's call will include prepared remarks, followed by a question and answer session, and then closing remarks. Independent Bank Corporation reported Q1 2026 net income of $16.9 million, or $0.81 per diluted share, versus net income of $15.6 million or $0.74 per diluted share in the prior year period. Highlights for our first quarter include a net interest margin of 3.65%, which is a 3 basis point increase on a linked quarter basis, an increase in net interest income of $500,000, or 1.1% over Q4 2025, an increase in tangible common equity per share of common stock at $0.33 or 5.9% annualized from 31 December 2025, a return on average assets and return on average equity of 1.24% and 13.43%, respectively, net growth in total deposits, less brokered time deposits of $80.4 million or 6.9% annualized from 31 December 2025.

Speaker #2: $0.74 per diluted share , in the prior year period Highlights for our first quarter include a net interest margin of 3.65% , which is a three basis point increase on a linked quarter basis , an increase in net interest income of $500,000 , or 1.1% , over the fourth quarter of 20 2025 .

Speaker #2: An increase in tangible common equity per share of common stock at $0.33 , or 5.9% , annualized , from December 31st , 2025 .

Speaker #2: A return on average assets and return on average equity of 1.24% and 13.43%, respectively. Net growth in total deposits plus brokered time deposits of $80.4 million.

Speaker #2: Or 6.9% annualized , from December 31st , 2025 . Net growth in loans of $31.8 million , or 3% annualized from December 31st , 2025 .

Brad Kessel: Net growth in loans of $31.8 million or 3% annualized from 31 December 2025. An increase in tangible common equity ratio to 8.7%. Finally, the payment of a 28 cents per share quarterly dividend on our common stock on 13 February 2026. Our Q1 results reflect the strength of our core fundamentals, including growth in net interest income, expansion in net interest margin, and continued growth in both loans and core deposits. Our balance sheet growth remained disciplined with $80.4 million in core deposit growth and just under $32 million in total loan growth, including $53.8 million or 9.9% annualized in commercial loans, reflecting continued execution of our strategic plan. Credit quality remains sound. While geopolitical uncertainty has increased, we have not seen a direct impact on our customers yet, and we continue to monitor conditions closely.

Speaker #2: An increase in tangible common common equity ratio to 8.7% . And finally , the payment of a $0.28 per share quarterly dividend on our common stock on February 13th of 2026 .

Speaker #2: Our first quarter results reflect the strength of our core fundamentals, including growth in net interest income expansion and net interest margin. Continued growth in both loans and core deposits.

Speaker #2: Our balance sheet growth remained disciplined with 80.4 million in core deposit growth and just under 32 million in total loan growth , including 53.8 million , or 9.9% annualized in commercial loans , reflecting continued execution of our strategic plan Credit quality remains sound , while geopolitical uncertainty has increased , we have not seen a direct impact on our customers yet , and we to monitor conditions closely Profitability remains strong again with a return on average assets of 1.24% and return on average equity of 13.343% .

Brad Kessel: Profitability remains strong again with a return on average assets of 1.24% and return on average equity of 13.43%. We remain encouraged by our momentum and are optimistic about our opportunities and confident in the benefits of our recently announced merger with HCB Financial Corp., which will provide enhanced shareholder value. Moving to page five of our presentation, deposits total $4.9 billion at 31 March 2026, an increase of $80.4 million from year-end. This growth occurred in non-interest-bearing, savings, and interest-bearing checking, and reciprocal, offset by a small decline in time deposits. On a linked quarter basis, business deposits increased by $94 million. Retail deposits increased by $28 million. These were offset by a $42 million decrease in municipal deposits, primarily due to seasonality. The deposit base is comprised of 47% retail, 38% commercial, and 15% municipal.

Speaker #2: We remain encouraged by our momentum in our optimistic about our opportunities and confident in the benefits of our recently announced merger with HCB .

Speaker #2: Financial Corp , which will provide enhanced shareholder value Moving to page five of our presentation , deposits totaled $4.9 billion at March 31st , 2026 , an increase of $80.4 million from year end .

Speaker #2: This growth occurred in non-interest bearing , saving and interest bearing checking and reciprocal , offset by a small decline in time deposits on a linked quarter basis .

Speaker #2: Business deposits increased by $94 million; retail deposits increased by $28 million. These were offset by a $42 million decrease in municipal deposits, primarily due to seasonality.

Speaker #2: The deposit base is comprised of 47% retail , 38% commercial and 15% municipal On page six , we've included in our presentation a historical view of cost of funds as compared to the Fed Fund .

Brad Kessel: On page six, we've included in our presentation a historical view of cost of funds as compared to the Fed fund spot rate and Fed effective rate. For Q1, our total cost of funds decreased by 13 basis points to 1.54%. 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, as well as a brief update on our credit metrics.

Speaker #2: Spot rate and fed effective rate for the first quarter . Our total cost of funds decreased by 13 basis points to 1.54% . 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 , as well as a brief update on our credit metrics .

Speaker #2: Yeah .

Joel Rahn: Yeah. Well, thank you, Brad, and good morning, everyone. On page seven, we share an update on loan activity for the quarter. We started the year with loan growth of $32 million or 3% on an annualized basis. Commercial loan generation was solid with approximately $54 million of quarterly growth or 9.9% annualized. During the quarter, our residential mortgage and consumer installment loan portfolios declined by $4.5 million and $17.5 million, respectively. Our strategic investment in commercial banking talent continues to supplement our loan growth. During Q1, we added two experienced commercial bankers in West Michigan, bringing our total to 50 bankers comprising eight commercial loan teams across our statewide footprint. Compared to a year ago, we've added a net of five experienced commercial bankers to our team.

Speaker #3: Well , thank you , Brad , and good morning everyone . On page seven , we share an update on loan activity for the quarter .

Speaker #3: We started the year with loan growth of $32 million, or 3% on an annualized basis. Commercial loan generation was solid, with approximately $54 million of quarterly growth, or 9.9% annualized.

Speaker #3: During the quarter . Our residential mortgage and consumer installment loan portfolios declined by four and a half , and 17.5 million , respectively Our strategic investment and commercial banking talent continues to supplement our loan growth .

Speaker #3: During the first quarter , we added two experienced commercial bankers in West Michigan , bringing our total to 50 bankers comprising eight commercial loan teams across our statewide footprint compared to a year ago .

Speaker #3: We've added a net of five experienced commercial bankers to our team. Looking ahead, based on a strong pipeline, we believe we will continue low double-digit growth of our commercial loan portfolio in 2026.

Joel Rahn: Looking ahead, based on a strong pipeline, we believe we will continue low double-digit growth of our commercial loan portfolio in 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 activity for the quarter, the mix of C&I lending versus investment real estate was 57% and 43%, respectively. For our commercial portfolio, our mix is 68% C&I and 32% 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.

Speaker #3: We continue to see market share opportunities from regional banks in both talent customer acquisition , and are seeing steady organic growth from existing customers Looking at the commercial loan production activity for the quarter , the mix of CNI lending versus investment real estate was 57% and 43% , respectively And for our commercial portfolio , our mix is 68% CNI and 32% investment .

Speaker #3: Real estate Page Eight provides detail on our commercial loan portfolio concentrations. There have not been any significant shifts in our portfolio over the past year, with the portfolio remaining very well diversified.

Speaker #3: Our largest segment of the CNI category is manufacturing at 191 million , or 8.4% of the total portfolio in the investment real estate segment of the portfolio , the largest concentration is industrial at 212 million , or 8.8% .

Joel Rahn: Our largest segment of the C&I category is manufacturing, at $191 million or 8.4% of the total portfolio. In the investment real estate segment of the portfolio, the largest concentration is industrial at $212 million or 8.8%. We outline key credit quality metrics and trends on page nine. We continue to demonstrate strong credit quality. Total non-performing loans were $27.5 million or 64 basis points of total loans at quarter end, up slightly from 54 basis points at 31 December 2023. It's worth noting that $20 million of this total is one commercial development exposure that we discussed in previous quarters. We continue to work through the challenges of this particular project and are appropriately reserved for any loss exposure. Past due loans totaled $8.2 million or 19 basis points, basically unchanged from 31 December 2023.

Speaker #3: We outlined key credit quality metrics and trends on page nine . We continue to demonstrate strong credit quality Total nonperforming loans were 27.5 million , or 64 basis points of total loans at quarter end , up slightly from 54 basis points at 1231 .

Speaker #3: It's worth noting that 20 million of this total is one commercial development exposure that we discussed in previous quarters . We continue to work through the challenges of this particular project and our appropriately reserved for any loss exposure .

Speaker #3: Past due loans totaled 8.2 million or 19 basis points , basically unchanged from 1231 25 . It's worth noting that 4 million of total delinquency was one commercial loan that was in process of renewal and was completed after quarter end .

Joel Rahn: It's worth noting that $4 million of total delinquency was one commercial loan that was in process of renewal and was completed after quarter end. It's not reflected on this slide, but also worth noting that we realized net charge-offs of $266,000 or two basis points of average loans for the quarter. This compares to $68,000 or one basis point in Q1 of 2025. At this time, I'd like to turn the presentation over to Gavin for his comments, including the outlook for the remainder of 2026.

Speaker #3: It's not reflected on this slide , but also worth noting that we realized net charge offs of 266,000 or 2 basis points of average loans for the quarter .

Speaker #3: This compares to $68,000, or 1 basis point, in Q1 of 2025. At this time, I'd like to turn the presentation over to Gavin for his comments, including the outlook for the remainder of 2026.

Speaker #2: Thanks , Joel .

Gavin A. Mohr: Thanks, Joel, and good morning, everyone. I'm starting at page 10 of our presentation. Page 10 highlights our strong regulatory capital position. Turning to page 11, net interest income increased $3.2 million from the year ago period. Our tax equivalent net interest margin was 3.65% during Q1 2026, compared to 3.49% in Q1 2025, and up three basis points from Q4 2025. Average interest earning assets were $5.21 billion in Q1 2026, compared to $5.09 billion in the year ago quarter and $5.16 billion in Q4 2025. Page 12 contains a more detailed analysis of the linked quarter increase in net interest income and the net interest margin. On a linked quarter basis, our Q1 2026 net interest margin was positively impacted by two factors.

Gavin Mohr: Thanks, Joel, and good morning, everyone. I'm starting at page 10 of our presentation. Page 10 highlights our strong regulatory capital position. Turning to page 11, net interest income increased $3.2 million from the year ago period. Our tax equivalent net interest margin was 3.65% during Q1 2026, compared to 3.49% in Q1 2025, and up three basis points from Q4 2025. Average interest earning assets were $5.21 billion in Q1 2026, compared to $5.09 billion in the year ago quarter and $5.16 billion in Q4 2025. Page 12 contains a more detailed analysis of the linked quarter increase in net interest income and the net interest margin. On a linked quarter basis, our Q1 2026 net interest margin was positively impacted by two factors.

Speaker #4: And good morning, everyone. I am starting at page ten of our presentation. Page ten highlights our strong regulatory capital position. Turning to page eleven.

Speaker #4: Net interest income increased $3.2 million from the year ago period . Our tax equivalent net interest margin was 3.65% during the first quarter of 2026 , compared to 3.49% in the first quarter of 2025 , and up three basis points from the fourth quarter of 2025 .

Speaker #4: Average interest earning assets were $5.21 billion in the first quarter of 2026, compared to $5.09 billion in the year-ago quarter and $5.16 billion in the fourth quarter of 2025.

Speaker #4: Page 12 contains a more detailed analysis of the linked-quarter increase in net interest income, and the net interest margin on a linked-quarter basis.

Speaker #4: Our first quarter 2026 net interest margin was positively impacted by two factors the change in interest bearing liability mix added one basis point and a decrease in funding costs .

Gavin A. Mohr: The change in interest-bearing liability mix added 1 basis point and a decrease in funding cost added 10 basis points. These were offset by a change in earning asset mix and yield of 6 basis points and interest charged off on a commercial loan of 2 basis points. On page 13, we provide details on the institution's interest rate risk position. The comparative simulation analysis for Q1 2026 and Q4 2025 calculates the change in NII over the next 12 months under 5 rate scenarios. All scenarios assume a static balance sheet. The base rate scenario applies a spot yield curve from the valuation date. The shock scenarios consider immediate, permanent, and parallel rate changes. The base case modeled NII is slightly higher during the quarter due to $70 million of earning asset growth and 1 basis point of modeled margin expansion.

Gavin Mohr: The change in interest-bearing liability mix added 1 basis point and a decrease in funding cost added 10 basis points. These were offset by a change in earning asset mix and yield of 6 basis points and interest charged off on a commercial loan of 2 basis points. On page 13, we provide details on the institution's interest rate risk position. The comparative simulation analysis for Q1 2026 and Q4 2025 calculates the change in NII over the next 12 months under 5 rate scenarios. All scenarios assume a static balance sheet. The base rate scenario applies a spot yield curve from the valuation date. The shock scenarios consider immediate, permanent, and parallel rate changes. The base case modeled NII is slightly higher during the quarter due to $70 million of earning asset growth and 1 basis point of modeled margin expansion.

Speaker #4: Added ten basis points These were . These were offset by a change in earning asset mix and yield of six basis points , and interest charged off on a commercial loan of two basis points On page 13 , we provide details on the institution's interest rate risk position .

Speaker #4: The comparative simulation analysis for first quarter 2026 and fourth quarter 2025 calculates the change in net interest income over the next 12 months .

Speaker #4: Under five rate scenarios All scenarios assume a static balance sheet . The base rate scenario applies , the spot yield curve from the valuation date .

Speaker #4: The shock scenarios consider immediate , permanent and parallel rate changes . The base case modelled NII is slightly higher during the quarter due to $70 million of earning asset growth and one basis point of modeled margin expansion , earning asset expansion was centered in commercial loans of 54 million and overnight liquidity , up 40 million run off and lower yielding investments and consumer loans helped fund earning asset growth , asset and liability yields were stable during the quarter , with asset yields up two basis points and liability costs one basis point higher .

Gavin A. Mohr: Earning assets expansion was centered in commercial loans of $54 million and overnight liquidity of $40 million. Runoff in lower-yielding investments and consumer loans helped fund earning assets growth. Asset and liability yields were stable during the quarter, with asset yields up two basis points and liability costs one basis point higher. The NII sensitivity to lower rates declined modestly, while the benefit to higher rates remained largely unchanged. Reduced exposure to lower rates is due to $75 million of notional floor purchases and the termination of $87 million of short-term pay-fixed swaps, and a slight shortening in the maturity structure of time deposits. The overall position is closely matched for smaller rate changes of ±100 basis points. The bank has modest exposure to large rate declines and benefits from larger rate increases.

Gavin Mohr: Earning assets expansion was centered in commercial loans of $54 million and overnight liquidity of $40 million. Runoff in lower-yielding investments and consumer loans helped fund earning assets growth. Asset and liability yields were stable during the quarter, with asset yields up two basis points and liability costs one basis point higher. The NII sensitivity to lower rates declined modestly, while the benefit to higher rates remained largely unchanged. Reduced exposure to lower rates is due to $75 million of notional floor purchases and the termination of $87 million of short-term pay-fixed swaps, and a slight shortening in the maturity structure of time deposits. The overall position is closely matched for smaller rate changes of ±100 basis points. The bank has modest exposure to large rate declines and benefits from larger rate increases.

Speaker #4: The NII sensitivity to lower rates declined declined modestly , while the benefit to higher rates remained largely unchanged . Reduced exposure to lower rates is due to 75 million of notional floor purchases , and the termination of 87 million of short term pay fixed swaps and a slight shortening in the maturity structure of time deposits .

Speaker #4: The overall position is closely closely matched for smaller rate changes of plus or -100 basis points . The bank has modest exposure to large rate declines and benefits from larger rate increases .

Speaker #4: Currently , 38.2% of assets reprice in one month and 49.3% reprice in the next 12 months , moving on to page 14 . Non-interest income totaled $12 million in the first quarter of 2026 , compared to $10.4 million in the year ago quarter , and $12 million in the fourth quarter of 2025 .

Gavin A. Mohr: Currently, 38.2% of assets reprice in one month and 49.3% reprice in the next 12 months. Moving on to page 14. Non-interest income totaled $12 million in Q1 2026, compared to $10.4 million in the year ago quarter and $12 million in Q4 2025. Q1 2026 net gains on mortgage loans totaled $1.3 million, compared to $2.3 million in Q1 2025. The decrease is due to lower profit margins. It was partially offset by a higher volume of loan sales. Mortgage loan servicing net was a gain of $1.6 million in Q1 2026, compared to a loss of $0.6 million in the prior year quarter.

Gavin Mohr: Currently, 38.2% of assets reprice in one month and 49.3% reprice in the next 12 months. Moving on to page 14. Non-interest income totaled $12 million in Q1 2026, compared to $10.4 million in the year ago quarter and $12 million in Q4 2025. Q1 2026 net gains on mortgage loans totaled $1.3 million, compared to $2.3 million in Q1 2025. The decrease is due to lower profit margins. It was partially offset by a higher volume of loan sales. Mortgage loan servicing net was a gain of $1.6 million in Q1 2026, compared to a loss of $0.6 million in the prior year quarter.

Speaker #4: First quarter 2026 net gains on mortgage loans totaled $1.3 million , compared to $2.3 million in the first quarter of 2025 . The decrease is due to lower profit margins .

Speaker #4: It was partially offset by a higher volume of loan sales , mortgage loan servicing , net was a gain of $1.6 million in the first quarter of 2026 , compared to a loss of $0.6 million in the prior year quarter .

Speaker #4: The change , due to price was a gain of 0.9 million , or $0.04 per diluted share , after tax in the first quarter of 2026 , compared to a loss of 1.5 million , or $0.06 per diluted share , after tax in the prior year quarter .

Gavin A. Mohr: The change due to price was a gain of $0.9 million or $0.04 per diluted share after tax in Q1 2026, compared to a loss of $1.5 million or $0.06 per diluted share after tax in the prior year quarter. The decline in servicing revenue compared to the prior year quarter is attributed to the sale of approximately $930 million of mortgage servicing rights on 31 January 2025. As detailed on page 15, our non-interest expense totaled $38.3 million in Q1 2026 as compared to $34.3 million in the year ago quarter and $36.1 million in Q4 2025.

Gavin Mohr: The change due to price was a gain of $0.9 million or $0.04 per diluted share after tax in Q1 2026, compared to a loss of $1.5 million or $0.06 per diluted share after tax in the prior year quarter. The decline in servicing revenue compared to the prior year quarter is attributed to the sale of approximately $930 million of mortgage servicing rights on 31 January 2025. As detailed on page 15, our non-interest expense totaled $38.3 million in Q1 2026 as compared to $34.3 million in the year ago quarter and $36.1 million in Q4 2025.

Speaker #4: The decline in servicing revenue compared to the prior year quarter is attributed to the sale of approximately $930 million of mortgage servicing rights on January 31st , 2025 .

Speaker #4: As detailed on page 15 , our non-interest expense totaled $38.3 million in the first quarter of 2026 , as compared to $34.3 million in the year ago quarter , and $36.1 million in the fourth quarter of 2025 .

Speaker #4: Compensation expense increased 1.4 million , primarily due to salary increases that were predominantly effective on January 1st , 2026 , litigation expense was $1.5 million in the quarter , attributed to an accrual established for losses .

Gavin A. Mohr: Compensation expense increased $1.4 million, primarily due to salary increases that were predominantly effective on January 1, 2026. Litigation expense was $1.5 million in the quarter, attributed to an accrual established for losses we consider probable as a result of all of our outstanding litigation matters in aggregate. Advertising expense increased $0.3 million in Q1 2026 compared to prior year quarter, primarily due to retroactive new deposit account opening incentives attributed to accounts opened in prior periods. We recorded merger-related expenses of $0.3 million in Q1 2026. Non-recurring non-interest expense items totaled approximately $1.9 million in Q1 2026. Turning to page 16 is our update for our 2026 outlook to see how our actual performance during Q1 compared to the original outlook that we provided in January of this year.

Gavin Mohr: Compensation expense increased $1.4 million, primarily due to salary increases that were predominantly effective on January 1, 2026. Litigation expense was $1.5 million in the quarter, attributed to an accrual established for losses we consider probable as a result of all of our outstanding litigation matters in aggregate. Advertising expense increased $0.3 million in Q1 2026 compared to prior year quarter, primarily due to retroactive new deposit account opening incentives attributed to accounts opened in prior periods. We recorded merger-related expenses of $0.3 million in Q1 2026. Non-recurring non-interest expense items totaled approximately $1.9 million in Q1 2026. Turning to page 16 is our update for our 2026 outlook to see how our actual performance during Q1 compared to the original outlook that we provided in January of this year.

Speaker #4: We consider probable as a result of all of our outstanding litigation matters . In aggregate advertising expense increased $0.3 million in the first quarter of 2026 , compared to prior year quarter , primarily due to a retroactive new deposit account .

Speaker #4: Opening incentives attributed to accounts opened in prior periods . We recorded merger expense , merger related expenses of 0.3 million in the first quarter of 2026 .

Speaker #4: Non-recurring non-interest expense items totaled approximately 1.9 million in the first quarter of 2026 . Turning to page 16 is our update for 2026 outlook to see how our actual performance during the first quarter compared to the original outlook that we provided in January of this year , our outlook estimated full year loan growth of four and a half to 5.5% .

Gavin A. Mohr: Our outlook estimated full year loan growth of 4.5% to 5.5%. Loans increased $31.8 million in Q1 2026, or 3% annualized, which is below our forecasted range. Commercial loans increased $53.8 million in Q1, while mortgage installment loans decreased. Q1 2026 net interest income increased 7.3% over 2025, which is within our forecasted range of 7% to 8%. The net interest margin was 3.65% for the quarter and 3.49% for the prior year quarter, and up three basis points from a linked quarter basis. The Q1 2026 provision for credit losses was an expense of $0.4 million, which was below our forecasted range. Moving on to page 17. Noninterest income totaled $12 million in Q1 2026, which was within our forecasted range of $11.3 million to $12.3 million in Q1.

Gavin Mohr: Our outlook estimated full year loan growth of 4.5% to 5.5%. Loans increased $31.8 million in Q1 2026, or 3% annualized, which is below our forecasted range. Commercial loans increased $53.8 million in Q1, while mortgage installment loans decreased. Q1 2026 net interest income increased 7.3% over 2025, which is within our forecasted range of 7% to 8%. The net interest margin was 3.65% for the quarter and 3.49% for the prior year quarter, and up three basis points from a linked quarter basis. The Q1 2026 provision for credit losses was an expense of $0.4 million, which was below our forecasted range. Moving on to page 17. Noninterest income totaled $12 million in Q1 2026, which was within our forecasted range of $11.3 million to $12.3 million in Q1.

Speaker #4: Loans increased $31.8 million in the first quarter of 2026, or 3% annualized, which is below our forecasted range. Commercial loans increased $53.8 million in the first quarter, while mortgage installment loans decreased in the first quarter of 2026.

Speaker #4: Net interest income increased 7.3% over 2025 , which is which is within our forecasted range of 7 to 8% . The net interest margin was 3.65% for the quarter and 3.49% for the prior year quarter , and up three basis points from our linked quarter basis .

Speaker #4: The first quarter of 2026 . Provision for credit losses was an expense of $0.4 million , which was below our forecasted range Moving on to page 17 .

Speaker #4: Non-interest income totaled $12 million in the first quarter of 2026 , which was within our forecasted range of 11.3 million to $12.3 million in the first quarter .

Speaker #4: First quarter 26 mortgage loan origination sales and gains totaled 130.6 million , 84.1 million and 1.3 million , respectively . Mortgage loan servicing , that generated a gain of 1.6 million in the first quarter of 26 , which is above our forecasted range .

Gavin A. Mohr: Q1 2026 mortgage loan origination sales and gains totaled $130.6 million, $84.1 million, and $1.3 million respectively. Mortgage loan servicing net generated gain of $1.6 million in Q1 2026, which is above our forecasted range. Non-interest expense was $38.3 million in the first quarter, above our forecasted range of $36 to $37 million. Non-recurring expense items included $1.5 million accrual in litigation expense and $0.4 million in retroactive new deposit account opening incentives attributed to accounts opened in prior periods. Our effective income tax rate was 16.6% for Q1 2026. Lastly, there were no shares of common stock repurchased in Q1 2026. That concludes my prepared remarks, and I would now like to turn the call back over to Brad.

Gavin Mohr: Q1 2026 mortgage loan origination sales and gains totaled $130.6 million, $84.1 million, and $1.3 million respectively. Mortgage loan servicing net generated gain of $1.6 million in Q1 2026, which is above our forecasted range. Non-interest expense was $38.3 million in the first quarter, above our forecasted range of $36 to $37 million. Non-recurring expense items included $1.5 million accrual in litigation expense and $0.4 million in retroactive new deposit account opening incentives attributed to accounts opened in prior periods. Our effective income tax rate was 16.6% for Q1 2026. Lastly, there were no shares of common stock repurchased in Q1 2026. That concludes my prepared remarks, and I would now like to turn the call back over to Brad.

Speaker #4: Non-interest expense was 38.3 million in the first quarter above our forecasted range of 36 to $37 million . Non-recurring expense items included 1.5 million accrual in litigation expense and $0.4 million in retroactive new deposit account opening incentives attributed to accounts opened in prior periods Our effective income tax rate was 16.6% for the first quarter of 2026 .

Speaker #4: Lastly , there were no shares of common stock repurchased in the first quarter of 2026 . That concludes my prepared remarks , and I would now like to turn the call back over to Brad .

Speaker #2: Thanks, Gavin. We've built a strong community bank franchise, which positions us well to effectively manage through a variety of economic environments and continue delivering strong and consistent results for our shareholders.

Brad Kessel: Thanks, Gavin. We've built a strong community bank franchise, which positions us well to effectively manage through a variety of economic environments and continue delivering strong and consistent results for our shareholders. As we move through 2026, our focus will be continuing to invest in our team, investing in and leveraging our technology while striving to be Michigan's most people-focused bank. At this point, we'd now like to open up the call for questions.

Speaker #2: As we move through 2026 , our focus will be continuing to invest in our team , investing in and leveraging our technology while striving to be Michigan's .

Speaker #2: Most people focused bank . At this point , we'd now like to open up the call for questions

Speaker #1: Thank you . As a reminder to ask a question , please press star one on your telephone and wait for your name to be announced .

Operator: Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. One moment while we compile our Q&A roster. Our first question is going to come from the line of Brendan Nosal with Hovde Group. Your line is open. Please go ahead.

Speaker #1: To withdraw your question , please press star one one again . One moment . While we compile our Q&A roster Our first question is going to come from the line of Brendan Brandon Nozzle with Hostgroup .

Speaker #1: Your line is open . Please go ahead .

Speaker #5: Hey , good morning everybody . Hope you're doing well . Good morning . Good morning . Maybe just starting off here on the net interest margin .

Brendan Nosal: Hey, good morning, everybody. Hope you're doing well.

Brad Kessel: Morning.

Gavin A. Mohr: Morning.

Gavin Mohr: Morning.

Brendan Nosal: Maybe just starting off here on the net interest margin. I think when you offered your initial margin outlook for 2026 a couple of months back, you embedded two rate cuts in that outlook. Just kind of curious, if we don't get any rate cuts over the course of this year, does that change the margin calculus versus your initial outlook one way or the other?

Speaker #5: I think when you offered your initial margin outlook for 26 a couple of months back , you embedded two rate cuts in that outlook .

Speaker #5: Just kind of curious if we don't get any rate cuts over the course of this year , does that change the margin calculus versus your initial outlook one way or the other ?

Speaker #4: Not not measurably . Brandon . That that forecast holds

Gavin A. Mohr: Not measurably, Brendan. That forecast holds.

Gavin Mohr: Not measurably, Brendan. That forecast holds.

Speaker #5: Okay . Great . Maybe , you know , digging deeper on the deposit cost side of things , just kind of curious what the competitive environment for core funding is like across your markets .

Brendan Nosal: Okay, great. Maybe digging deeper on the deposit cost side of things. Just kind of curious what the competitive environment for core funding is like across your markets. I'm asking because I'm getting very different answers to this question based on market to market across the Midwest. I would love to hear what you're seeing across Michigan.

Speaker #5: And , and I'm asking because I'm getting very different answers to this question based on market to market across the Midwest . So I would love to hear what you're seeing across Michigan

Speaker #2: Well , Brandon , I think it's continues to be very competitive in the Michigan markets . You know , we've got a heavy field of credit unions .

Brad Kessel: Brendan, I think it continues to be very competitive in the Michigan markets. We've got a heavy field of credit unions, so I think oftentimes they can lead the pack. I think it oftentimes depends if you look at each competitor and sort of their balance sheet profile, you can sort of see who's maybe fighting a little bit harder with higher pricing than others. Our focus continues to be led by that commercial effort. Our goal is to have the operating accounts for our business clients and then also for our municipal clients. We continue to hold, retain, but add to that portfolio and so I'm really pleased with that. It is competitive, no doubt.

Speaker #2: So I think oftentimes they they can lead the pack . They're . But I think , you know , it oftentimes depends . If you look at the .

Speaker #2: Competitor and sort of their balance sheet profile , you can sort of see who maybe fighting a little bit higher , harder with higher pricing than others You know , our focus continues to to be , you know , led by that , that commercial effort and , you know , our goal is to have the operating accounts for for our business clients .

Speaker #2: And then also for our municipal clients . And we continue to hold , retain , but add to that portfolio and , and so I'm really pleased with that .

Speaker #2: But it is , it is competitive . No doubt .

Speaker #5: Okay , okay , good . I'm going to try and sneak one more in here . You know , the world is changed geopolitically quite a lot over the past three months .

Brendan Nosal: Okay, good. I'm just going to try and sneak one more in here. The world has changed geopolitically quite a lot over the past three months, and there could be knock-on impacts to the domestic economy. I guess, when you look at the outlook you provided for 2026, are there any areas where you're feeling either better or worse today versus when we last spoke three months ago?

Speaker #5: And there could be knock on impacts to the domestic economy . So I guess , you know , when you look at the outlook , you provided for 2026 , are there any areas where you're feeling either better or worse today versus when we last spoke three months ago

Brad Kessel: I think, and I'll let Joel jump in here too, but I think we continue to be very optimistic about how we expect 2026 to unfold. One of the things that we do at Independent is rescore the entire retail portfolio for their credit scores twice a year. We recently got the results from that rescore, and I continue to be very pleased in seeing very solid scores for the portfolio. Not a lot of change in the various bands. Of course, we lend predominantly up in that 750-plus FICO area or at least north of 700, and those bands continue to be strong. I'll let Joel maybe comment a little bit on the commercial side.

Speaker #2: You know , I think I'll let Joel jump in here too . But I think we continue to be very optimistic about how we expect 2026 to unfold .

Speaker #2: One of the things that we do at independent is Rescore the entire retail portfolio for their credit scores , twice a year , and , and we recently got the results from that risk score .

Speaker #2: And I , I continue to be very pleased in seeing , you know , very solid scores for the portfolio , not a lot of change in the various bands , you know , of course , we lend predominantly up in that , you know , 750 plus Fico area , you know , at least north of 700 .

Speaker #2: And in those bands, continue to, to, to be strong. So I'll let Joel maybe comment a little bit on the commercial side.

Speaker #3: Yeah , I it , it just , it's so much is dependent on how long the conflict lasts and what it does to prolong high energy prices .

Joel Rahn: Yeah. It's so much depends on how long the conflict lasts and what it does to prolong the high energy prices, and it's probably the same thing I said maybe a quarter ago. The duration of this, the high energy prices, could be a drag on the economy, and to state the obvious. If that happens, you could see loan growth muted, I suppose. We've not seen that yet. Business owner confidence is still unchanged, relatively high. We have businesses that are making the decision to expand and construct new facilities, et cetera, despite the news headlines of the day. Only time will tell if that's a smart move on their part or not, but it's such a fluid environment, Brendan, so we're just watching it carefully and we'll react accordingly.

Speaker #3: And it's probably the same thing . I said , maybe , you know , a quarter ago , it , it's just . Yeah , the duration of , this , the high energy prices could , could be a drag on the economy .

Speaker #3: And to state the obvious . And if that happens , you could see loan growth muted . I suppose . But we've not seen that yet .

Speaker #3: And business owner confidence is still unchanged, relatively high. So we have businesses that are making the decision to expand and construct new facilities, etc.

Speaker #3: Despite the news headlines of the day, the only time will tell if that's a smart move on their part or not.

Speaker #3: But it's just it's such a fluid environment . Brandon . So we're just watching it carefully and we'll react accordingly .

Speaker #5: Yeah . Okay . Perfect . Thanks for the thoughtful commentary

Brendan Nosal: Yeah. Okay, perfect. Thanks for the thoughtful commentary.

Speaker #1: Thank you . And one moment for our next question Our next question is going to come from the line of Adam Kroll with Piper Sandler .

Operator: Thank you. One moment for our next question. Our next question is going to come from the line of Adam Kroll with Piper Sandler. Your line is open. Please go ahead.

Speaker #1: Your line is open . Please go ahead

Speaker #6: Hi . Good morning . I'm on for the race and thanks for taking my questions .

Adam Kroll: Hi. Good morning. I'm on for Nathan Race, and thanks for taking my questions.

Speaker #4: Good morning .

Brad Kessel: Good morning.

Speaker #3: Good morning .

Joel Rahn: Good morning.

Speaker #6: Yeah . So maybe a question on expenses . You know , I know there was some one time items that kind of drove them higher in the first quarter .

Adam Kroll: Yeah. Maybe a question on expenses. I know there were some one-time items that kind of drove them higher in Q1. If I strip those out, I get to a core number around $36.4 million. I guess, do you still feel comfortable with the $36 to $37 million run rate guide excluding the deal, or do you expect those to trend higher?

Speaker #6: But if I strip those out , I get to core number around 36.4 million . So I guess . Do you still feel comfortable with the the 36 to 37 million run rate guide , excluding the deal , or do you expect those to trend higher ?

Speaker #4: No , no . We feel good about that . Excluding the deal and the non-recurring

Brad Kessel: No, we feel good about that excluding the deal and the non-recurring.

Speaker #6: Got it . And then , you know , how should we think about the cadence of cost savings associated with the deal .

Adam Kroll: Got it. How should we think about the cadence of cost savings associated with the deal?

Speaker #4: Yeah . So it was announced 50% phased in in year one and fully phased in in year two . And just to point out , that's that's 50% of half a year

Brad Kessel: Yeah. It was announced 50% phased in in year one and fully phased in in year two. Just to point out, that's 50% of half a year.

Adam Kroll: Got it. Maybe a last one for me is just, Gavin, I was wondering if you could provide us with some updated thoughts on how you're thinking about deploying some of the excess liquidity brought over from the HCB deal?

Speaker #6: Got it . And maybe a last one for me is just Gavin wondering if you could provide us with some updated thoughts on , you know , how you're thinking about deploying some of the excess liquidity over from the HCB deal ?

Speaker #4: Yeah , we're not gonna we're not ready to give direction specifically on that . Adam . I would say that is we think about how the , the , the banks together .

Brad Kessel: Yeah. We're not ready to give direction specifically on that, Adam. I would say that as we think about how the banks come together, clearly our first choice would be to deploy it through the commercial bank. And then from there, we would just move down asset classes in terms of yield. We're going to have opportunity to address maybe wholesale funding if we don't have a pipeline to absorb it, as well as potential securities purchases. That's still all very much in the analysis phase.

Gavin Mohr: Yeah. We're not ready to give direction specifically on that, Adam. I would say that as we think about how the banks come together, clearly our first choice would be to deploy it through the commercial bank. And then from there, we would just move down asset classes in terms of yield. We're going to have opportunity to address maybe wholesale funding if we don't have a pipeline to absorb it, as well as potential securities purchases. That's still all very much in the analysis phase.

Speaker #4: Clearly , our first choice would be to deploy it through the commercial commercial bank and then from there , we would just move down asset classes in terms of yield , we're going to have opportunity , you know , to , to address maybe wholesale funding .

Speaker #4: If we if we don't have a pipeline to , to absorb it as well as potential securities purchases , but that's , that's still all very much in the analysis phase

Speaker #6: Got it . Thanks for taking my questions .

Adam Kroll: Got it. Thanks for taking my questions.

Speaker #4: Thank you .

Brad Kessel: Thank you.

Speaker #1: Thank you . And as a reminder , if you would like to ask a question , please press star one one on your telephone I'm showing no further questions at this time , and I would like to turn the conference back over to Brad Kessel for any further remarks .

Operator: Thank you. As a reminder, if you would like to ask a question, please press *11 on your telephone. I'm showing no further questions at this time, and I would like to turn the conference back over to Brad Kessel for any further remarks.

Speaker #2: In closing, I'd like to thank our board of directors and our senior management for their support and leadership. I also want to thank all of our associates.

Brad Kessel: In closing, I'd like to thank our board of directors and our senior management for their support and leadership. I also want to thank all of our associates. I continue to be so proud of the job being done by each member of our team. Each team member in his or her own way continues to do their part towards our common goal of guiding customers to be independent. Finally, I'd like to thank each of you for your interest in Independent Bank Corporation and for joining us on today's call. Have a great day.

Speaker #2: I continue to be so proud of the job being done by each member of our team . Each team member and his or her own way continues to do their part , part towards our common goal of guiding customers to be independent .

Speaker #2: Finally , I'd like to thank each of you for your interest in independent Bank Corporation and for joining us on today's call . Have a great day .

Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

Q1 2026 Independent Bank Corp Earnings Call

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