[Management View]
Independent Bank Corporation emphasized strategic growth in Southeast Michigan, with the addition of three experienced commercial bankers. Management highlighted strong municipal deposit growth, stable net interest margins, and strategic asset repricing to enhance yields. The bank remains focused on relationship-driven client growth amidst competitive funding markets.

[Outlook]
Management anticipates stable net interest margins through year-end 2025, with tailwinds expected in 2026 from asset repricing. The bank plans to leverage market dislocation opportunities for talent acquisition and commercial banking relationships. Expense management remains a priority, with ongoing technology-driven efficiencies.

[Financial Performance]
Net interest margin remained stable, with a 6-basis-point increase in funding costs attributed to deposit mix changes and higher-rate tier deposits. Securities and fixed-rate loans repricing in the next 12 months are expected to provide a 120-basis-point yield pickup. Credit deterioration was limited to one nonaccrual relationship, with the overall portfolio described as clean and adequately reserved.

[Q&A Highlights]
Question 1: Can you provide details on the three new commercial banking hires in Southeast Michigan?
Answer: The three hires have a minimum of 15 years of experience, with two exceeding 20 years. All are based in Southeast Michigan, a strategic growth area for the bank. Two hires came from large regional institutions, and one from a smaller regional bank.

Question 2: What opportunities exist from market dislocation in Michigan, particularly for client growth and banker recruitment?
Answer: Management sees ongoing opportunities to attract talent from larger organizations seeking a community banking culture. Market consolidation is expected to provide further opportunities for strategic commercial banking relationships.

Question 3: How competitive is the funding environment in your markets, and what impact do you anticipate from potential Fed cuts?
Answer: The funding environment is highly competitive. The bank focuses on comprehensive relationships to grow both sides of the balance sheet. A 6-basis-point increase in funding costs was driven by deposit mix changes and municipal tax collections. Management expects stable margins despite forecasted Fed cuts.

Question 4: Can you elaborate on margin stability and asset repricing for 2026?
Answer: Margin stability is expected through year-end 2025, with benefits from remixing and repricing lower-yielding assets in 2026. Approximately $138 million in securities at a 3% yield and $438 million in fixed-rate loans (exit rate 5.59%) will reprice, providing a 120-basis-point yield pickup.

Question 5: What details can you share about the investment real estate commercial relationship that moved to nonaccrual?
Answer: The portfolio has been clean for many quarters, and management feels adequately reserved on the exposure. They are working with the borrower and remain optimistic about resolving the situation.

Question 6: Are there signs of credit weakness in Michigan or specific industries?
Answer: Management sees no systemic credit weakness. The watch list remains low by historical standards, and borrower payment performance is stable. The Michigan economy, including the automotive sector, is characterized as stable.

Question 7: Can you provide insights into expense management and expectations for 2026?
Answer: Expense management has been effective, with technology-driven efficiencies and lower incentive compensation payouts contributing to reduced costs. Budgeting for 2026 is ongoing, with a focus on containing technology spend and leveraging attrition for efficiency gains.

Question 8: What is the spot rate on interest-bearing deposits as of September 30?
Answer: The spot rate on total interest-bearing deposits was 2.17% as of September 30.

[Sentiment Analysis]
Analysts maintained a constructive tone, focusing on strategic growth and financial stability. Management conveyed confidence in margin stability, credit quality, and the Michigan economy, while acknowledging competitive pressures in funding markets.

[Quarterly Comparison]
| Key Metrics | Q3 2025 | Q2 2025 | YoY Change |
|----------------------------|-----------------|-----------------|------------------|
| Net Interest Margin | Stable | Stable | - |
| Funding Costs (bps) | +6 | +4 | +2 |
| Total Loans ($ billion) | 4.2 | 4.1 | +2.4% |
| Interest-Bearing Deposit Rate (%) | 2.17 | 2.11 | +0.06 |

[Risks and Concerns]
1. Competitive funding environment may pressure margins.
2. Economic slowdown and job growth weakening could impact credit quality.
3. Automotive industry turmoil, particularly in EV supply chains, poses localized risks.

[Final Takeaway]
Independent Bank Corporation demonstrated resilience in Q3 2025, with stable margins, strong deposit growth, and strategic hires in Southeast Michigan. Management remains optimistic about asset repricing benefits in 2026 and the stability of the Michigan economy. While competitive funding markets and economic uncertainties pose challenges, the bank's diversified loan portfolio and proactive credit monitoring provide a solid foundation for sustained growth.