Independent Bank : 3Q'23 Earnings Conference Call Presentation

Earnings Call: Third Quarter 2023

October 24, 2023

(NASDAQ: IBCP)

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Cautionary note regarding forward-looking statements

This presentation contains forward-looking statements, which are any statements or information that are not historical facts. These forward-looking statements include statements about our anticipated future revenue and expenses and our future plans and prospects.

Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. For example, deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding to us, lead to a tightening of credit, and increase stock price volatility. Our results could also be adversely affected by changes in interest rates; increases in unemployment rates; deterioration in the credit quality of our loan portfolios or in the value of the collateral securing those loans; deterioration in the value of our investment securities; legal and regulatory developments; changes in customer behavior and preferences; breaches in data security; and management's ability to effectively manage the multitude of risks facing our business. Key risk factors that could affect our future results are described in more detail in our Annual Report on Form 10-K for the year ended December 31, 2022 and the other reports we file with the SEC, including under the heading "Risk Factors." Investors should not place undue reliance on forward-looking statements as a prediction of our future results.

Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.

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Agenda

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• Formal Remarks
• • William B. (Brad) Kessel
    President and Chief Executive Officer
  • Gavin A. Mohr
    Executive Vice President and Chief Financial Officer
  • Joel Rahn
    Executive Vice President - Commercial Banking
• Question and Answer session
• Closing Remarks

Note:

This presentation is available at www.IndependentBank.comin the Investor Relations area under the "Presentations" tab.

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3Q23 Overview

3Q'23 Earnings

Strong Balance Sheet

Supports Continued

Loan Growth

• Net income of $17.5 million, or $0.83 per diluted share, compared to $17.3 million, or $0.81 per diluted share, in 3Q22
• Pre-tax,pre-provision income of $23.0 million, an increase of 7% from $21.5 million in 2Q23
• Increases in both net interest income and non-interest income compared to 2Q23
• Strong profitability and prudent balance sheet management results in further growth in tangible book value per share
• Total deposits increased at a 10.5% annualized rate
• Total loans increased 12% annualized while maintaining disciplined approach to new loan production
• New loan production largely focused on new commercial clients that bring deposits to the bank
• Asset quality remained exceptional with NPAs/Total Assets at 0.10% and net recoveries in the quarter

Positive Trends in

Key Metrics

Healthy Capital & Liquidity Positions

• Continued rotation into higher yielding assets helped to offset an increase in deposit costs and keep net interest margin relatively stable at 3.25% compared to 3.26% in 2Q'23.
• Disciplined expense control results in efficiency ratio improving to 57.5% from 59.3% in 3Q23
• ROAA improved to 1.34% from 1.18% in prior quarter, while ROAE improved to 18.7% from 16.3%
• Total Capital Ratio of 13.6%
• Strong capital position enabled company to be opportunistic and repurchase 88,401 shares at an average price per share of $19.15.
• Balance sheet liquidity remains high with loan-to-deposit ratio of 82%

Low-Cost Deposit Franchise

Focused on Core Deposit Growth

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•	Substantial core funding -
	$3.87 billion of non-maturity
	deposit accounts (84.4% of
	total deposits).
•	Core deposit increase of $112.6

Deposit Composition 9/30/23

Brokered 5%

Time

10% Non-interest

Bearing

25%

Reciprocal

17% $4.6B

Savings and Interest-

bearing Checking

42%

Core Deposits: 84.4%

Cost of Deposits (%)/Total Deposits ($B)

	Total Deposits			Cost Of Deposits	$4.5	$4.6
$3.90.12%	$4.10.11%	$4.10.09%	0.07%$4.2	0.11%	0.33%$4.3	0.78%$4.4	$4.5
1.26%	1.57%	1.80 %
				$4.3

Q2'21

Q3'21

Q4'21

Q1'22

Q2'22

Q3'22

Q4'22

Q1'23

Q2'23

Q3'23

million (10.5% annualized) in

3Q'23.

• Total deposits increased $206.5

million (6.3% annualized) since

12/31/22 with non-interest

bearing down $128.1 million,

savings and interest- bearing

checking down $43.4 million,

reciprocal up $197.3 million,

time up $156.4 million and

brokered time up $24.3 million.

• Deposits by Customer Type:

− Retail - 48.3%

− Commercial - 35.3%

− Municipal - 16.4%

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Historic IBC Cost of Funds (excluding sub debt)

vs. the Federal Funds Rate (with Deposit Balances)

	6.0%																													5,000,000
	5.5%		Cumulative Cycle Beta = 32.6%																			4,500,000
	5.0%																													4,000,000	thousands)in($BalancesDeposit
RateFundsFederal	4.5%	0.27%	0.27%	0.28%	0.33%	0.36%	0.42%	0.51%	0.60%	0.73%	0.82%	0.85%	0.85%	0.74%	0.63%	0.30%	0.23%	0.39%	0.14%	0.12%	0.11%	0.10%	0.10%	0.12%	0.33%	0.79%	1.25%	1.57%	1.80%
3,500,000
	4.0%
	3.5%																													3,000,000
	3.0%																													2,500,000
	2.5%																													2,000,000
	2.0%																													1,500,000
	1.5%
																													1,000,000
	1.0%
	0.5%																													500,000
	0.0%	Dec-16	Mar-17	Jun-17	Sep-17	Dec-17	Mar-18	Jun-18	Sep-18	Dec-18	Mar-19	Jun-19	Sep-19	Dec-19	Mar-20	Jun-20	Sep-20	Dec-20	Mar-21	Jun-21	Sep-21	Dec-21	Mar-22	Jun-22	Sep-22	Dec-22	Mar-23	Jun-23	Sep-23	0
						IB COF				Fed Funds Spot			Fed Effective				Total Deposits

Diversified Loan Portfolio

Focused on High Quality Growth

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• Portfolio loan changes in 3Q'23:

− Commercial - increased $88.0

million.

…Average new origination yield of

7.52% vs a 6.72% portfolio yield.

− Mortgage - increased $34.5 million.

…Average new origination yield of

7.17% vs a 4.57% portfolio yield.

Loan Composition 9/30/23

Held for Sale 0%

Commercial

43%

Installment

17%

$3.7B

Mortgage

39%

Yield on Loans (%)/

Total Portfolio Loans ($B)

3.95%	4.13%	4.08%	3.82%	4.01%	4.39%	4.90%	5.07%	5.36%	5.53%
				$3.3	$3.4	$3.4	$3.5	$3.6	$3.7
	$2.9	$2.9	$3.0
$2.8

Q2'21	Q3'21	Q4'21	Q1'22	Q2'22	3Q'22	4Q'22	1Q'23	2Q'23	3Q'23
			Total Portfolio Loans			Yield on Loans

− Installment - decreased $12.1

million.

…Average new origination yield of

8.23% vs a 5.40% portfolio yield.

• Mortgage loan portfolio weighted

average FICO of 754 and average

balance of $181,980.

• Installment weighted average FICO of

758 and average balance of $26,052.

• Commercial loan rate mix:

− 49% fixed / 51% variable.

− Indices - 56% tied to Prime, 1%

tied to a US Treasury rate and 43%

tied to SOFR.

• Mortgage loan (including HELOC) rate

mix:

− 62% fixed / 38% adjustable or

variable.

− 22% tied to Prime, 10% tied to a US

Note: Portfolio loans exclude loans HFS.

Treasury rate and 69% tied to

SOFR.

Concentrations within $1.6B Commercial Loan Portfolio

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Loans by Industry as a %

of Total Commercial Loans ($ in millions)

Investor RE by Collateral Type as a %

of Total Commercial Loans ($ in millions)

Manufacturing

Construction

Health Care and Social

Assistance

Retail

Hotel and Accomodations

Real Estate Rental and Leasing

Transportation

Other Services (except Public

Administration)

Wholesale

Professional, Scientific, and

Technical Services Arts, Entertainment, and

Recreation

Food Service

Finance and Insurance

Assisted Living

	$30	$73	9%
		$149
$35
$40
$40
			9%
$40	$1.03B	$147
3%
$43
3%			6%
$51
3%			$99
$54	4%		6%
	5%
	$71	$90
		$73

1.75%, Land,	0.68%, Special
Vacant Land and
Purpose, $10
Development, $27
2.50%, 1-4 Family,
$38	10.18%,
	Commercial
	Industrial, $157
3.23%, Multifamily,
$50

$592MM

5.23%, Construction, $80

8.87%, Retail, $136

6.08%, Office, $93

Note: $1.03 billion, or 63.6% of the commercial loan portfolio is C&I or owner occupied, while $592 million, or 36.4% is investment real estate. The percentage concentrations are based on the entire commercial portfolio of $1.63 billion as of September 30, 2023

Credit Quality Summary

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9

Non-performing Loans ($ in Millions)

$16.0	$13.4
$14.0
$12.0				$9.5
$10.0		$8.2	$8.6
		$7.9
$8.0
$6.0		0.4%				$5.1		$3.9	$4.0	$4.7
					$3.7
$4.0			0.3%	0.3%	0.3%
					0.2%
$2.0
						0.1%	0.1%	0.1%	0.1%
$-
	2016	2017	2018	2019	2020	2021	2022	Q1'23	Q2'23	Q3'23
			Non-performing Loans (NPLs)	NPLs / Total Loans

	ORE/ORA ($ in Millions)
0.9%	$6.0
	$5.0
0.7%	$5.0
0.5%	$4.0
	$3.0
0.3%	$2.0	$1.6		$1.9
	$1.3
0.1%	$1.0				$0.8		$0.5	$0.5	$0.7	$0.4
					$0.2
-0.1%	$-
	2016	2017	2018	2019	2020	2021	2022	Q1'23	Q2'23	Q3'23

30 to 89 Days Delinquent ($ in Millions)	Non-performing Assets ($ in Millions)

$14.0					$13.2
$12.0
$10.0
$8.0				$7.2
$6.0	$5.3	$4.8	$4.4		0.5%				$4.4	$4.9
	0.3%		0.3%
$4.0	0.2%	0.2%		$2.3	$3.1
				$1.9
				0.1%	0.1%	0.1%
						0.1%
$2.0						0.1%
$-
	2016	2017	2018	2019	2020	2021	2022	Q1'23	Q2'23	Q3'23
			30-89 Days PD		30-89 Days PD / Total Loans

1.4%	$20.0	$5.0
1.2%	$15.0
1.0%
				$1.9
			$1.6
0.8%			$1.3		$0.8
$10.0
0.6%							$0.2				0.4
0.4%		$13.4					$0.5	$0.5	$0.7
$5.0			$9.0	$9.5
		$8.2	$7.9
0.2%				$5.1				5.2
						$3.7	$3.9	$4.0
0.0%
$-
		2016	2017	2018	2019	2020	2021	2022	Q1'23	Q2'23	Q3'23
				Non-performing	Loans 90+ Days PD	ORE/ORA

Note 1: Non-performing loans and non-performing assets exclude troubled debt restructurings that are performing.

Note 2: 12/31/16 30 to 89 days delinquent data excludes $1.63 million of payment plan receivables that were held for sale.

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Strong Capital Position

TCE / TA (%)		Leverage Ratio (%)

• Long-termcapital Priorities: Capital retention to support organic growth, acquisitions and return of capital through strong and consistent dividends and share repurchases.

6.3		6.2	6.4	6.6	6.7	6.7

Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23

8.7	8.8	8.9	8.9	8.9	8.9
Q2'22	Q3'22	Q4'22	Q1'23	Q2'23	Q3'23

• Well capitalized in all regulatory capital measurements.
• Tangible common equity ratio

CET1 Ratio (%)

	excluding the impact of
Total RBC Ratio (%)	unrealized losses on securities
AFS and HTM is 8.2%

10.3	10.3	10.4	10.6	10.4	10.4	13.7	13.5	13.6	13.8	13.6	13.6
Q2'22	Q3'22	Q4'22	Q1'23	Q2'23	Q3'23	Q2'22	Q3'22	Q4'22	Q1'23	Q2'23	Q3'23