IBCP - Earnings call transcript Q4 2017 | Independent Bank Corporation

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Operator

Good day, and welcome to the Independent Bank Corporation Fourth Quarter 2017 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Brad Kessel. Please go ahead.

Brad Kessel

Good morning, thank you for joining Independent Bank Corporation's conference call and webcast to discuss the company's 2017 fourth quarter and full year results. President Shuster, Executive Chief Executive Kessel, me and Financial Brad Rob is Vice am and Officer Chief joining Officer. I President and

$X.XX to agenda X important begin you cautionary you company's as note fourth or of $X.X will share with along, or we then of today's includes statements prior and it presentation. period. tax the closing have net deferred press income $X.XX my release of a Before The XXXX The follow $X.XX share quarter or on If versus to forward-looking Page today, remarks. million income net a does per call, well a as fourth tax Slide to $X the website begin per asset our on diluted To of Independent information the responsibility at copy $X.X XXXX revaluation. by per the quarter the net of today's we regarding Page of due diluted million share include X, is can direct diluted our already will I it not income reported by access year followed call million additional X prepared for in www.independentbank.com. issued remarks presentation. Today session expense question-and-answer anyone

our $X.X Excluding expense, to adjusted XXXX $X.XX quarter or million was per diluted income this diluted per or one-time This of income $X.XX share. million favorably third $X net $X.X net share. compares our million

XX.XX%. a return return quarter XXXX of a and assets the on of fourth for income equity X.XX% net of adjusted Our on produced

expenses. to is quarterly of continued investments our direct a in higher lower while earnings growth and Our of out result on controlling per loans share yielding a rotate into yielding sequential year-over-year and basis earnings execution

of ago million. or of strong $X.X loan the quarter. During XX.X% from year interest represents quarter the This activity increase produced $XX.X net fourth origination a XXXX, income million

organic Independent XX.X% continued time XXth million quality the good balance continue nonperforming asset and for This see of growth to growth $XX.X our on consecutive quarter reductions remaining both produce to Portfolio of At sheet Our in or loan low very represents while annualized. by in improvement team continues we sensitive. dues asset grew sides assets. the metrics past Bank. with same loans

share $XX.XX in Our in improved moving Reflecting year the earnings or of core a XX, with XX, income share million strong per and the up with corporate share our balances stock tangible of growth City X.X%. we solid very an $XX.X per forward Bancorp, well State tax acquire to January levels, our working Bank. of capital funding Traverse together. quarter quarterly organic announced in dividend per To teams share rate complement with federal at XXXX. December parent XXXX, both reduced effective common At quarterly XX% on consideration increase cash management year-over-year $X.XX TCSB growth combined February the the to the checking from book growth TCSB XXXX of for company same XX, ago. we agreement X, The one December $XX.XX value well is grew to integration our per as our in as XXXX savings announced

$X.XX $X.XX net XXXX. in million ended the million year income This per or of net diluted the $XX.X income per $XX.X to reported or share For diluted December of XX, share. XXXX company compares

that equity. in growth $X.XX a a $XX.X in million on return revaluation share, Excluding net and increase or average net assets, income goals largest XX.X% ended related the a $X were loans points net is ROE the per our earnings the X% to better ago. or low to per deferred full-year six on basis XX.X% million in our to fact XXXX we the a better or the several bank the we Michigan. we one-time six share. important income, Bank XX% On Today years points was portfolio compares achieved adjusted charge-offs. basis results with headquartered earnings diluted asset, tax Independent established previous years' and this to net return expense were per Very X% ROA basis adjusted This in the of favorably recoveries. XX.X% fourth The

is network urban rural, markets. combination branch Our and of suburban a

with in months Grosse Point have Arbor, XX expanded Brighton, we Ann Dearborn office Southeast addition new last in presence market Traverse in to the offices the our in Michigan. a City, Over loan Michigan and loan opening

the Columbus are offices as Ohio mortgage of mergers. multiple Akron team added entered our banking a result marketplace to experienced in Ohio. also in disruption loan market We and with staffed associated bank with loan suburb the of offices opening We These professionals.

Our in conditions TCSB economic our The Northwest announced acquisition five includes of in service branch continue full market. locations Michigan to be favorable. the generally markets

our X.X% summary Southeast unemployment contains and deposits The Page of rates. Michigan's very positive a from was have suburban urban residential rate U.S. Accordingly Independent X.X% growth in outlook occupancy listing X.X%. one strength markets. retail witnessing November rate construction. more into than low Our good trend new Common many lower of lines in potential. and commercial, an real ago markets are office sheet loan translated that XXXX, gathering in and to At balance the year and times, region. unemployment deposit of loans by to positive by economic rising XXXX November continues come a themes shortage X.X% markets and continues above in conditions our evidenced and historically also of our our Michigan positive labor and Bank. and values be we increase real estate origination growth home for level, industrial, of commercial The Michigan West and favorable a X high skilled is housing. greatest exhibit record estate the results

December funds. decrease of the total exception increased Page the seen Michigan since principally deposits our CDs. of transaction Michigan X.X% seen we million the XXXX. to cost of with due and year-over-year higher as some billion market seen markets intentional a each is loan our quarter in have municipal excluding Independent's $X.XX of where $XX.X We deposit growth or deposits Southeast $X.X runoff XX, XX% in This slight four at one billion were Total accounts. same or when year brokered total comprised deposits on ago XX have

We are pressure markets our the pricing on sector. public seeing funds particularly in some limited the in front deposit

basis deposits of points low be at basis cost did quarter. Our this but to past XX points three increase continues relatively

also closely on rates of effects actively We managing as limiting and our monitoring to the core base. rising while retain are so deposit

held XX, at billion large sale XXXX. December net million increased to team loans growth quarter generated annualized for several payoffs. $XX The Page X.X% As during seen on despite $X.XX the or XX, loans commercial including of

when commercial The commercial and new diverse installment good quarter very lenders pipeline be of slowdown expect in desk is net million industrial to or were originations loan loan ago. the real originations continue quarter, line first a same however XXXX. not we the to one balances This good and Our for consumer and for generated down this last size, industry X.X% in to annual commercial do quarter is unusual estate. granular and the quarter mix indirect at continue comparing and business seasonal solid between The consumer annualized. into by year $X.X

quarter we during the of million XXXX. originated $XXX $XXX team mortgage million sold fourth and Our

For and we $XXX $XXX XXXX and to as all originated we million $XXX sold million. million $XXX originated million, of sold compared XXXX when

some seasonal equity. look For our solid, for on quarter a pipeline information mortgage on the however fourth grew XXXX. XX% do as provides is fourth million we quarter and or capital, for we first return assets by of the well rolling $XX.X slowdown average portfolio mortgage quarter annualized. on XX our The Page return as in

at or performance better are next ROA targets X.XX% of ROE. XX% better level or Our at

are at totaled compared X.X% ago. to tangible equity We X.XX% equity one December as year XXXX common tangible Tangible range X.X% to X.X%. targeting XX, assets of common and between

the Our a Directors plan for stock. for XX, plan authorized plan company new X% to the XXXX. this to dividend through XXXX. return December consistent share be capital share through and of to continues last share of the repurchase authorized to is a terms plan back The Board and plan plan. of up loan repurchase of the month is payout capital Earlier Under common company authorized outstanding to buy organic the repurchase growth retain its

For time, Rob? credit a share would repurchase this all to At the turn management's I for any to financials, presentation over we outlook shares. not of on XXXX did like XXXX. quality and our Rob Shuster few to comments

Rob Shuster

starting good and our focus in I Brad I interest will morning of so presentation. remarks, during net our Brad, interest am on margin. at Page income net his discussed everyone. our increase the Thanks XX

on points topic were of in year Average net one decrease from year from to quarter million balance quarter to summarize basis XX that I and in X.XX% moment. income. partially some an to on lot was average $X.X analysis and during by Our of $X.XX interest-earning the slide on of There a by XXXX is tax interest-bearing in ago primarily a mew in moved more of and cost interest-bearing linked-quarter color equivalent billion on yield yields detailed as five in period a one income details checking accounts originations recoveries on loan in basis a Page fees new of net million have were net but point up originations third borrowings The increase average loans weighted to provide five cost basis was $XX.X loan interest by growth. the a and to X.XX% average We little comments decline in up the margin points, in and portfolios quarter the to years. XXXX assets net commercial 'XX rate to weighted is totaled basis follows; points nonaccrual a by X.X was growth previously loans key from XQ quarter contains average 'XX. interest 'XX. third other various $X.XX average was quarter a quarter which due of of interest XX XQ ago offset billion will interest more down fourth sequential loans on the X.XX% quarterly point XXXX. margin increase increased data fourth XXXX. detailed X.XX% on was more 'XX the of A sequential and fourth CDs up compared $XXX.X this or liabilities of renewal interest of renewed in $X.XX few points in billion XQ with the this fixed this charged-off versus are savings brokered reduced an XQ XXXX duration fund and the our overall interest moved slide. on million and XX% The in rate X.XX% and X.X%. the on basis loan of quarterly which primarily average A basis from on variable in loan that utilized due in rate. weighted basis of The XX% estimated

New loan X.XX average $XX.X with weighted a of weighted yield years. totaled X.XX% originations of and duration million an average consumer estimated

which XX% includes was approved and Finally, rate amount $XXX.X with new totaled was variable or rather average of the X.XX% home The for loan years. portfolio million weighted weighted figure was rate duration equity XX% interest mortgage lines average origination drawn. than amount originations an new the rate. full fixed estimated X.XX of This adjustable

more We in presentation. the income on in net will for interest later outlook specifically comment our XXXX

quarter the Page to ago in as and compared $XX.X million in the $XX.X totaled Moving income of XXXX, the fourth of on $XX.X XXXX. million quarter in quarter third to million XX, year noninterest

and operations and increased a results. value price a servicing paydowns its but to or XX fair $XXX,XXX to We to the income increased slightly $X.X loan X.XX% which results capitalized loans by and positive rates as release Net was our the million to in small per loan out gains fair term quarter due mortgage to change share loan XXXX in the banking on a most mortgage mortgage a a and in of due resulting charges seven XQ of include our $XXX,XXX due The core largely volume core value mortgage income in increase. part fair the we year-over-year an breaks of parts. that negative recovery impacted X.XX% after-tax was basis treasury only mortgage 'XX. value mortgage component diluted of our price being and on impairment basis. due change on volume into text a points variability a as sales loan profit paydowns. view earnings revenue as being the increased in year-over-year noninterest of The during of Our fourth adversely quarterly 'XX comparative XQ part XQ fair loan offset servicing rate longer to $X.XX We basis positive decrease rates. due due changed value not caused recorded fair included bit The previously this servicing quarterly 'XX our of a as price. competitive view increased adjustment on The year to from value change originations margin, sales mortgage the pressures table

XQ increase litigation of year the Page this incentive million true-up fourth totaled benefits. quarter due million quarter. expense. included compensation offset on plan. noninterest accrual This of and to XQ in variance expense year our was was the was compensation to year-over-year increased This XQ XX, our detailed XX% and partially as $XX.X About under decrease Performance-based because 'XX. $XX.X $X.X our an As of $XX.X XXXX in of million ago million versus in increase $X.X by a million in compared 'XX ago the in by primarily quarter, management 'XX

nine For we of on basis. first accruing an about at year of the and months we the XXX% target overall ended the about target have at level been year

excludes of For the earnings $X.XX component, the tax deferred asset the share impact of Directors the which revaluation. per used Board

delinquencies. securities of fourth XX, continued ratio were $XX.X XX.X% was overview XX to loans total about assets XX loans, The Nonperforming compared rate maturities variable less. quarter to 'XX. XX.X% declined loan XXXX, million delinquencies commercial decreased funds the from as $X.X average and XQ XXXX nonperforming Our XX, the in of just other of or approximately available of investments the fixed of years. and at nonperforming support provides of million efficiency Page much and and loan data to 'XX million improve Page runoff of December or quarter during portfolio portfolio portfolio by Investment nonperforming the $X.X XXXX. estate, by X.XX%. portfolio an early-stage December were assets on XX% utilized and mortgage in consumer XXXX, assets delinquencies real portion the estate estimated of rate day decreased years were in growth. Total duration during X.X loan million the decreased sale fourth of other real XXXX is were for is to $X.X and at X.XX% XX-to-XX X.XXX% provides in our five XQ

Page $X.X of million to provision ago for of XX compared 'XX a million XQ Moving expense recorded on loan quarter. a in to year we $X.X losses provision in the

additional board million As improved in million losses just provision the we including net quarter. at totaled Thus XX recorded driver portfolio loan unclassified outlined, in loans December asset allowance loan The 'XX. metrics $XX.X for the defaults XXXX. some data growth new provides X.XX% was $X.X of of expense across loan information the or quality recoveries this Page and XX XQ quality loan on asset assets. of

portfolio outlook 'XX. of a This XQ our of portfolio XX XX million current $XX.X these loans to well But now decline with at final quarter. asset is initial look represents for our TDR Page actual during better at XXXX $X.X totaled report the in XX.X% take that tax let's of the original enough our million perform we for of excluding XX, deferred December very our only original income in XXXX. provides loans New revaluation than XXXX. fourth that XXXX, XX year we January believe these XX.X% additional XXXX. related Overall XXXX. when card continues during Page the our performance during being expense million were million the was XXXX. XX, about outlook our loan Page performing at performance outlook. on actual that to compare $X.X defaults provided XXXX tax We back December to and $X a information our

acquisition in We loan add once have double State interest Overall our categories low Traverse Bank to income. our to between XXXX standalone complete. we strong broken the expect growth without down we this in increase various net expect fuel expectations what digit and City is

noninterest asset expenses XXXX. expense excluding comparable income expect quality and merger are City and Traverse State noninterest to levels Bank related steady that in excluding metrics We

XX% concludes an the now That over Finally, to income effective XX%. back like and between my expect to and I prepared we would turn tax call remarks rate Brad.

Brad Kessel

we deposits, summary, quality asset report and growth pleased and In performance XXXX continued in to loans with Rob. are the metrics. solid Thanks quarter significant fourth core year growth of and earnings, in for excellent full pretax

ahead we to continue in invest in our look our As we people. markets will and

per strength, strong with practices, on and and We growth value, performance sheet sound are focused high profitability management share earnings, driving quality risk balance levels.

on to open up five last years. the we like for call generated continue to for momentum would At build We this questions. a point, the positive now

Operator

ahead. [Operator Instructions] comes DelMonte Our Damon Please first go from with KBW. question

Damon DelMonte

So once on my the the us are of transaction does of to a behind update the steps be deal could integrate to first and give you the question guys ready just little the these close? timing scenes maybe you taking closing some of

Brad Kessel

start Sure well. on are schedule. Damon. working would The integration the teams I two off is very To say

roster point good this point of are and where fit the where targeted I in going assumption to terms And save coming this and that's are forward. the a many the a end on-site June-ish and of We the the quarter we by targeting in quarter on transaction team our - members [ph] at. conversion about their know team followed our the people in that had closing We fulfilling timeframe. made feel pretty they a on-site the letting at them in at of commitment first second cost of system's [rating] multiple the of we occasions on

initial already to an or statement we probably today we've that. amendment today later will have have either So registration filed and S-X our

and anything fill to well going know I here. And want Rob you don’t else so if things are very

Rob Shuster

Only looking effective we’re thing the the of I'd date add April to is for be actually merger. X

at really then second said, June not would a quarter mid have quarter to purchase accounting it date basis on the addition first City we have and are expect noninterest numbers what go the you full on period and impact see of XX our Page on our State the entries to And expectations would of So the Bank. done. kind all conversion look Brad as Traverse by if quarter initial get forward a outlook you the with expenses,

Damon DelMonte

with here the little held just Rob as Probably go dynamics Could question either of about some bit talk way margin quarter-over-quarter. on we could to the quite you the for that respect well a in into influence XXXX? margin

Rob Shuster

Well XXXX. in interest perspective we the income But rising a be modeling rate loans a slightly basis, as for really I deposit deposit and from deposits. would net upward be deposit remain still kind up funds everyone now there is two pretty costs retail rates. investment as start seeing securities. and to then sources. the expect And been in see or you still stable as more rates as think continued the on - anticipate has Brad had the sensitive a mentioned so with thing certainly we focused bit rates higher but area larger of we remix during public and a limited One occur on up overall than see on of less management come what the would interest would corporate an slightly we'd on three from greater to in in other we’re certainly XXXX of movement potential margin two might increases Brad treasury a mentioned expect amount movement really overall our maybe is There pressure when there to to in well in tack right some that

Damon DelMonte

you, Got okay.

Rob Shuster

or I’d a of TE other the small lower margin stable. is relatively adjustment overall the one little the tax down say that the would But because is come rate so. But yield mention I a maybe is a going to basis thing bit point but pretty

Damon DelMonte

know loan you're do loans, going loan referenced you like do about areas. again of loans - only overall side. feel And in Is talk commercial little out you of because I but consumer so of to regards Could your the XX% you’re IBCP more to origination to expanded the a coming the most platform growth, which you where then from be mortgage calling portfolioing here with loans, growth. XX% for you or growth commercial bit three mortgage in see those to it it the get going

Bob Shuster

have to I driver. think a commercial objective balance as that can to we as and is try be our get with much we’d certainly like significant

probably origination to on into from shift on made continue a that we of bit see on origination side very period we we mentioned because a two, in just volume is to call have standalone salable some more is I the and well little as last it that we've But that XXXX more of lending although and quarter's our to quite A) may strong construction do one think to Brad the time I the expect and of expect this was portfolio still referenced volume markets of a programmatic changes there try lack aspect mortgage of inventory. think volume. where

still of lending seeing the all portfolio. loans strong remain at are they the the those and time period think we're in construction I during phase So least construction in

side. but to we balances as then trying little side again on commercial as mortgage consumer side bit and particularly the can much So the get more a probably the from

Operator

Scott Our next question & Scattergood. ahead. go Boenning Beury Please comes with from

Scott Beury

any growth now? you're that any guess industry of I characteristic So geographically terms in on you marketplace terms follow-up of idea to the opportunities the have and or right just in seeing commercial Do that.

Brad Kessel

continuing. that I strongest terms Michigan. to markets think and us for that up going XX,XXX the foresee of Southeast just foot And in be West are Well, we commercial Michigan would two

between as we're go running we’re with. C&I followed which XX/XX We're the very also manufacturing a and an closer And my think industry it's we to mix you largest by and and diverse target I through diverse. probably concentration XX-XX housing have a is got senior probably CRE fine fact just very the said portfolio mix by there. our In I in we but it’s maybe terms pretty of actually in concentration comments,

Scott Beury

is guess I the TCP a I increase the info think side. on of lending slide on bit the then there on kind

Looking or your the any during provide deposit the process XXs, you was or funding what up just is kind thought expectations the still color broker quarter kind are funding the there XXXX? and if on of at could I of loan in curious your dynamics ramping for

Rob Shuster

XX as with Well that what of million with area we're brokered the replace rates we a was than declined the in and bid those funds during we as the we mentioned relationship time to relationship really and during particular had the they Brad deposits municipality on large one down brokered were that had could CDs. we funds XXXX market. deposits CD find the XXXX just obtain about year particular higher course during and by We those of able

of funding FHLB rotated out a into bit just some market. that municipal little wholesale to little and we that CDs support rotation we added of in And one really of to growth. addition So relationship advances bit large the brokered CD then loan brokered a

get CDs derivatives we The sub and as fixed the to well we us of market the time. And swaps least at could brokered of of the funding we like thing one brokered the lengthen interest pay XX the in CDs million brokered the duration during LIBOR the we at CDs. reasons work present course the for XX other XXXX rate where caps and of is of about million did did use

well of some to on trying So they derivatives longer and was interest the they wanted do we what a those funding to the we've duration duration perspective, derivatives we lineup to wanted it add we're work some sensitive assets with because really to funding. the particularly rate stay added order longer in from purpose on well mortgage side, side

So see they loan continue of CDs deposit growth. to because outstrip XXXX to increase is would likely CDs over have course I to growth expect in the brokered the non-brokered and well operate some there us to

Scott Beury

pricing aggressive And then are kind to really that you in competitors public follow-up funds who the are speaking seeing just that, getting generally on are deposits? the of that one

Brad Kessel

the at large unions, we've I Scott guess The changes but active Rob typically in jump top we they’re week-to-week, lines. regionals so. I can first, weekly follow-up shop of more credit you look - the in across product at rate rate at a seen can chart

Rob Shuster

other the one mutual that on in. public of sector various can seeing Probably funds that funds are types the you municipalities invest is

they have moved those of would backed by securities rates XXXX. government the fair up over amount course be So a largely and

go year, year half So today. the wasn't that now nearly competition seeing if and ago you back we’re a money the there from funds

on would those So be treasury side. management sources primary of the competition the

Operator

question-and-answer This remarks. any Brad to turn like over conference our the to back session. I for concludes would closing Kessel

Brad Kessel

I would like for to a of on thank day. your Have us today's and each Independent Bank joining you Corporation for interest great in call.

Operator

attending is you for today's conference The presentation. concluded. now Thank

You may disconnect. now

Independent Bank (IBCP) 30 Jan 182017 Q4 Earnings call transcript