IBCP - Earnings call transcript Q3 2021 | Independent Bank Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the Independent Bank Corporation Third Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Brad Kessel, President and Chief Executive Officer. Please go ahead.

Brad Kessel

to welcome and morning, today's call. Good for call and you XXXX joining Company's us conference Corporation's results. Bank Independent webcast quarter for third Thank to the discuss Chief Brad Officer. President am and I Kessel, Executive Gavin Mohr, EVP, Rahn, And joining Banking. me EVP Chief and Commercial Financial and Joel Officer; is

historical of the presentation, If begin we copy specifically independentbank.com. you by a I have very be note with forward-looking call statements. to question-and-answer the does issued yet today's I on Slide not strong Page a continue to will the direct by then would pleased at of performance cautionary for results high press and Before information like generating remarks, another our closing X team, remarks. anyone us already access followed quarter. call, can good The you the today's release important by results. agenda the session core a our X to of our regarding include website, Company's for provides today, level prepared of it summary

people to in strategies execute our technology. of on investing continue We and

loan the net we saw good across-the-board stabilization of PPP. growth of During our net third margin and net interest interest in quarter, income, growth,

to and at County is the Our commercial one new commercial second robust, customers. new addition Fueling as of the Macomb via many be in through opening two both as Ottawa well of quarters. in highest Deposit pipeline its this level some of was existing offices, continues the gathering growth loan in customers County. production

interchange are continue revenue. solid, generating in growth card gains our be strategies In mortgage to addition, good and

assets. for net low at watch the credit's and X.X% quarter. past nonearning not be very On the asset Commercial front, quality more the of and a pleased portfolio dues of with level could recoveries I

XXXX. and many the our these have of and XXXX forward about there momentum and are While excited markets end continuing trends we challenges in through into the ahead, uncertainties look are we to

$X.X well loan origination Turning as of volume common of $XXX.X income versus included return Page total loans diluted quarter X.X% equity or of XX, X. million the during loans XXXX net portfolio $XX.X loan share million diluted in to XX.X%, on quarter nonperforming reported income by as prior the gains continued in in share metrics, share as or income per average Corporation net $XX.X million year million level third net per dividend $XX asset quarter; per annualized; and of of the and of a mortgage X.X% stock Independent nonperforming the of on Bank annualized assets finally, over net X.X% growth low $X.XX on interest recoveries Net XXXX. The increase an $X.X August XXXX. third million. period. of highlights respectively, of mortgage Net quality and and of strong million in or the loans and on evidenced assets; $X.XX payment $X.XX

our in million loan deposits of growth annualized. or in Michigan XX.X%, and deposit growth and the Net X of a X.X% $XXX.X of and ended million $XX.X gains the per $X.XX or annualized; income Net provides income average billion. respectively. of per Company $X.XX assets September XX, in compared first loan Annualized on and for net volume diluted XX.X% and million $XX.X Page our good for of average loans mortgage equity portfolio loans of snapshot net X.XX% on to and the share period. XXXX months income total XXXX, the or million months mortgage origination nine increases of share earnings and prior net metrics Highlights million per of XX.X% of XX.XX%, diluted of respectively. nine $XX.X reported in For return $XXX.X diluted year include: $X.XX share net or markets.

Turning improvement average state the the rate seeing the of to Overall, Michigan. for statistics unemployment display we of continued we X.X%. are below for X.X%, economic in national slightly Page key Michigan, X, several now at

XXX,XXX many we compared markets to having including a have as wages shortages fewer in increase our employed Labor workers of noticeable impact hours. segments pre-COVID. business in are in an today However, reductions and economy, our in operating

as in record negatively levels constraining home addition, sales. In the are average as in the an On also of in overall our this impacting as markets inventory funds. provide volume to deposit X, many chain home in composition for at cost continues increased portfolio. sale Regional growth of continued overall shortages of supply to a our climb We're stimulus lows result working manage levels of businesses many customers. deposit and well our our continue prices Extensive couple reflecting many our the of Page to charts government we base of markets. effectively are

digital Turning few to the transformation. Bank's Page relating we XX, have -- to Independent highlights our a

good our few presentation we in growth Joel Joel? portfolio. loan ONE Rahn seeing this our Wallet platform. comments bank to Treasury like would on over share conversion, our turn utilization whole to of quarter to the Following are I and At second ONE rates time, a

Joel Rahn

On Brad. Page portfolio. of Thanks, our we billion XX, $X.X update an provide loan

third the quarter, balances by For commercial decreased million. $XX.X

the XX% balances which a the by capital working was commercial seeing our increase activity, in PPP $XX commercial quarter. We're third gradual for increased quarter. excluding in usage, line However, million

prior this from continues up it's to lag the While average. quarters, historical

growth the pipeline very we solid quarter. loan in strong, commercial fourth is Our and commercial expect

by increased million, by $XX.X mortgage $XX.X residential Our increased and million. balances installment balances

pipeline, Page down which at higher earning or forecast. continue we our to higher-yielding believe our loans XXXX. track from we are remain loans the end to of and September original XX, from to rotation Our we of levels, investments loan our grow lower-yielding to XX, and of to the ability on peak an X.X% net of On mortgage declined have million update $X about loans, PPP, to at total modifications, asset while display continues strength, accelerate optimistic

provide XX, on of Protection we Page to administration Program. an SBA's bank's the Paycheck update Moving the

had balances $X.X in in XX, unaccreted September million and outstanding million of net fees. $XX.X XXXX, As we

We months. to six interest next the these three be fees to most expect accreted income of the in in

concentrations XX, of Page portfolio. our to the we billion commercial Moving loan $X.X displayed

You'll note portfolio of variety -- X%. XX% medical, XX.X%. XX% of of is at the is portfolio excuse concentrations estate, largest being the which million real with comprised remaining C&I $XX a is or The that manufacturing largest at concentration me, of of million comprised the million the largest or or is the categories, majority $XXX of and the $XXX commercial office, which retail or at of X.X%;

Our portfolio in very is nature. granular

to time, portfolio capital, a very Gavin up for this the held quality indicate through And I'd the over to share turn comments presentation on credit financials, metrics like credit our XXXX. well pandemic. few to has outlook at Our this and investments,

Gavin Mohr

I'm everyone. XX interest increased Page presentation. Thanks, $X.X starting Joel, at income of million from the and Net good our year-ago morning, period.

XX the compared assets analysis basis quarter quarter the Our were X.XX% in quarter the second in period in quarter down tax of net detailed XXXX $X.XX increase which linked-quarter the on to XX prior and net $X.X deeper billion XXXX. Average was of $X.XX second contains from some have and up quarter comments billion third I billion interest Page a and year the of year-ago in interest interest will third more margin. income a XXXX, in of interest-earning this the during of XX from equivalent was net the XXXX. more points the margin moment. points basis topic

in 'XX decline by margin points increase available basis quarter sale on third point, in X funding factors: point. XX of three was in of Our interest securities a and basis of basis net positively accretion increase for yield X impacted PPP cost

interest and of outlook will We on the in 'XX income the comment net margin more specifically for the interest net for our presentation. later remainder

XXXX to and the million million XXXX. the $XX Page income on Noninterest compared year-ago $XX.X $XX.X Moving of quarter the as million in XX. quarter to quarter in second in of totaled third

loan quarter to on Third profit remain of $X.X loan loans well of million as applications the sale The quarter mortgage due in pipeline margins. gains 'XX. quarter decreases refinancing these slowed loan third compared mortgage although in mortgage was in loan net 'XX. 'XX lower decrease in $XX.X as totaled gains sales to in and third the Mortgage volume applications solid, the million

a to loan Positively diluted mortgage decrease income per or the after-tax mortgage a in due purchase value capitalized million downs due million to 'XX. $X.X in rights servicing third be pay a market $X.XX on was share gain million increase to volume continues the due fair Our strong. $X.X to of quarter and $X.X servicing noninterest impacting price loan

of XX, year expense the detailed increased year, $XX.X XXXX as quarter our the As on Performance-based 'XX. and of $X.X to year-ago in overtime $XX.X $X.X to million the in accrual at million quarter quarter the compared processing third to to the increased due a compared Compensation of to were XXXX. quarter data second million effective Page million quarter in new due $XX.X of in prior and start totaled the compensation the hiring ranges third the lenders the catch-up conversion. of million decreased higher that related noninterest

of quarter third million $X.X XXXX conversion-related The of expenses. included

assets highlight XX.X% on new were nonperforming We nonperforming loan for totaled September our in data, $X.X the and were Page and real quality portfolio presentation. new outlook later there assets at noninterest defaults assets. Page on on XXXX. expenses to the September well at with to total commercial $X.X XXXX, continues asset $XX.X Loans additional would no being Page million delinquent XX million XX, ended XXXX. of in months to XXXX. some June XX or decreased September XX XX portfolio first information data nonperforming defaults XX, other September provides Total have more XX, that these loans assets XXXX. provides loans, XX, comments loan I our early-stage perform including million XXXX. XX.XX% information This to million at current provides $X.X XX, XX of TDR on at estate, delinquencies. of compared nine days unclassified

an provided This September credit quarter XXXX. of Moving that on loan in 'XX provision outlook XXXX. quarter of for X.XX% third our the the the our in million XX, update acquired XX. of increases we $X.X quarter Bank second in City a XX ratio to and recorded our million year in or losses losses outlook of is for and allowance year-ago of excluding actual the January compared how to see at during a State XXXX of to million the million XXXX. $XX.X to to The $X.X Traverse loans loans. credit the PPP Page $X performance portfolio expense for credit compared totaled loans remaining the original when of Page provision We X.XX%

XXXX outlook in $XX.X low commercial million Our a annualized. loan loans third 'XX. decrease were loans of estimated in million by digits. decline Growth offset installment single in the third X.X% in quarter a and quarter in balances of or PPP in to $XX.X mortgage the growth the due Loans increased loan

at grew first nine range. our rate annualized loans portfolio forecasted XX.X% Excluding during total XXXX, PPP above loans, months of the

the XXXX, first interest months of forecast. X.X% over by our which During is nine than net XXXX, income increased higher

the basis Higher-than-anticipated deposit that the nine margin lower-yielding decline deployed net XXXX first of forecast. of for largely the than than these lower However, a interest points the XXXX months was investment is margin our net primary reason XX full for which been securities year variances. into steeper X.XX%, growth has interest is

of range The credit million. full provision a off. drivers XX a factors and charged $XX losses third allocations third third basis of would trends although recoveries XX below in quarter primary 'XX forecasted year to XXXX on to an pipeline $XX.X our is credit XXXX. average our credit provision increase of to were our in the range for points mortgage of subjective of solid, total for of This Noninterest provision refinance loans below persist, adjustment of quarter forecasted anticipate be activity down year decrease compared million portfolio The credit full quarter based to was Current of income in that our losses loans. of the XXXX. for losses previously million. forecasted in to The totaled will decrease $X.X 'XX be slowed loan $XX million we the provision for range in continues credit the

target fall range. employee will exceed expense in additional to adjustments in in the processing quarterly the contract we price, our within data was negative we costs conversion-related value fourth generally $XX.X incurring noninterest to noninterest million Noninterest expect related the have quarter, $XX.X expenses quarter outside XXXX. Excluding targeted to processing expense the MSR forecasted expect third conversion do due of would income been and core Increases range the through $XX.X to million primary data We system categories to caused and compensation benefits, to that that range. were year-end. continue million

tax XXXX, the nine This of part higher-than-expected third and to months income tax income. was respectively, for XX.X% of of quarter due forecast. Our effective than levels and our rate a first lower interest XX.X% is in bit

of the remarks. would at back first XXX,XXX XXXX. average the to of to nine $XX.XX cost Lastly, purchased months And the prepared concludes call an shares Brad. like I Company turn my over That in now

Brad Kessel

XX Thanks, Gavin. displays this initiatives. we point high-level up strategic open view like now at would to a questions. And in of Slide our the key it call, for

Operator

[Operator will Please Piper Brendan Sandler. We first Instructions] begin ahead. Our Nosal now question-and-answer the with session. comes from go question

Brendan Nosal

Maybe on kind off clearly of revenues. just than stronger little been sought year-to-date, start comes expense to bit running the base, higher with but a that had

bottom you How trying do have those winning end normalizing as pressures mounting some line. industry-wide reserve ahead kind to out space folks some the expense and in higher think this the of headwinds? for terms counter move eventually to of these from flex Just overall much level bank of releases into the of PPP, mortgage of

Gavin Mohr

Brandon. Thanks, Gavin. This Yes. is

are for we currently high running third quarter. the So,

rate, there. we've brought on some look at areas -- detail up. but the team do our the we As compensation of I'll expanded We've longer-term Brad it, a And strategically. the compensation we little different in about is let piece talk run piece have flexibility more

that volume, I And we've detail, the will accrual transaction the some ultimately, up. pickup off. bigger, as at expense gets to then bank takes seen If is volumes. expense, will investment. look a that an real grow. had this in if that just I interchange run at our start quarter processing so the it data of look so And more But We catch-up Brandon,

out. side. the to $XXX,XXX level we -- So is in out, me. due income part then too, the the $XXX,XXX, I And in the And would quarter, increasing increase about or that commitments on the the cost offset an point that's unfunded nice of excuse saw about commitments for

as So, I think positive that's a well. actually

continue still to running here we out in conversion. iron heavy are We overtime as the

hiring think it I said, being as that see market, aware, we wane. That We'll challenge. a you're be can anticipate. will see that this in

that So turnover. through fill course positions may we of dependent be as just normal the

do you talk Brad, about... to So want any more

Brad Kessel

are side commercial -- feel that's good team. we This on to And little the -- XX Yes, the and joined quarter, a County, long-term to one investment our very we County. that's Year-to-date, recruiting added for our the and East past Brendan, have team, think over our more Ottawa on Gavin, who's about in support. think Independent second And loan five sales in headcount are XX, I the our helpful the and we another side of new just for shareholders Michigan -- Bank front. state opened state a that's the offices, up we hopefully that, look are clarity of and as a our share. production we just which on of grow West of two office in and market side Macomb we good

movement the lower-yielding of into the loans. commercial so, or transfer higher-yielding And efforts think assets will earning securities towards our that accelerate contribute to we from

I and to earlier number in be forecasting needs early Brendan. for stages equal. probably But so the we're mark, to closer clarity being noninterest But all longer-term little XXXX, on, a trending the -- things expense think you of hopefully, just $XX gives $XX that probably So there. million million the

Brendan Nosal

fantastic color. That's Yes.

margin. the And elsewhere think given and rate kind gears margin comments a underlying seen quarters there. if the base and of with which pressure to pressures. out of some liquidity for has win now, turning been stable the thank pretty two So of the I exacerbated just the we've strip for is Maybe switching core kind PPP, here both noise of you you that

you do given core you think there curious, So rates? we benefit, line higher that hopefully, the level, hold deposit pressure perhaps only is can margin near-term of on of Or in just down until near to the that are points? the short-term costs bit XX term, kind at basis get a

Gavin Mohr

share This too. is Brad can then first, Gavin. I'll and go

good of today really I was points X%. around That where so the basis quarter. margin, came, from prior the three it So feel up PPP, about net

So portfolio. of bit in we've lift seen a securities the little

little up back So we've bit. rates seen a

that just continue rotate to have continue pickup lows. to attempt or liquidity if ultimately, think us if cash a get nice going But into the to I rotate favors to we're can there, Brendan. deploy we So to we

pretty I expected So margin the I the yes, think good a to place in pretty think And we're stable for today. be year-end.

Brad Kessel

there's Very hey, two today. a or good, where we're it's put the to at and maybe but basis another cost pressure agree. And of going side, continue on to room point I to lot look and not on move

Operator

DelMonte KBW. Next question from with Please go Damon ahead. is

Matt Rank

regards first Damon. XXX,XXX to left Matt you the My less in little with have is shares than for pinch-hitting authorization. question, just This Rank the buyback, a

get to that? thoughts going your wanted Just on forward

Brad Kessel

the be at of roughly shares. Board guided we're that. We beyond we -- It's three share half we function that of well million doing, could that what Through to for capital level something buying had been else do X.X approved start the current us year, I out. think total Well, the uses. price year, in But our and a of levels, had quarters, we'd trading about course, unless to of, you shakes probably thought expect alternative we've continue pace.

So...

Matt Rank

one question. just Great. And Okay. then follow-up

On And how reserve a still of the related level factors? to do COVID have reserve the target reserve, much is ex-PPP? you

Brad Kessel

So great question.

and a quite for a targeted I still And subjective. high-risk bit ACL think that COVID-related we've so, the and forbearances no, there have in I COVID don't necessarily. do got industries,

I a loan growth, quarter, and so, of today course, quite of my we check too. -- this And here bit last when notes had

the of portion to points. quarter. second reserve XX subjective were We XX end basis the is points down of the at today So basis our

down XX% the subjective million little total of $XX from So that's reserves or $XX.X or under is as of reserve. the $XX.X second million, million COVID XX% a the and combined quarter. today And incremental for

some So that there's in Matt, And still a gives color. dollars hopefully, you there. little

Operator

next from [Operator go Navas Instructions] is Manuel Please The question D.A. ahead. Davidson. with

Russell Gunther

Russell there? are Gunther. any on add growth. bit LPOs you and what to our how LPOs the I they're Can helping already little color ask want just possible a loan I'm in about of for kind the the And about future? expectations more further

Brad Kessel

adding we're I've bit I I to on going have offices line, a question. quarter, actually Joel existing we're now get just little little second now the that back up place. the let some had the and service on I'll since pretty the And is we going bit. we success team levels to assets try earning this the in So, -- Rahn point, to there. first anything, great on if going quarter. really comment We've [Manuel], set to got see I'm about Joel been locations early -- talk to think full markets. in branch But these two at And a moving deposit could that

do some little want So before contributed some we've offices. you bit to year-to-date? how Joel, comment momentum got team production about But and the success to the to full-serve the moving and they've a of much

Joel Rahn

Brad, with And opened had top These with just of strategy bootstrapping would add to a be on our residential ultimately in initiative those our we Sure. I side. the was overview all starting the that both ability two just into were turn of geographies. to locations kind locations, -- expanding physically. really that in the of very the when And like the agree, commercial with long production of desired you very what talent-led and that. those door you're just way, of in sort And kind talent provided it's some mortgage I bring much Yes. two an we offices our that terms to that new want full-service loan

we've getting is additions In quickly, into contribute new terms very which of very without new much yes, our always detail, too nice. seen production,

got say, realize getting LPOs, -- term. from I on an of But that temper were that You it's are would some others collectively here got moments the just $XX third is to that's that And which we lift. -- making -- long our expense certainly, the ago. here in we was for contribution probably commenting helped to investment a few pressure to the we're and that it fantastic. of the rough new And from in two immediate quarter, numbers, million contribute

Russell Gunther

specifically? you a gone new Is great. how of little these the -- out many that bit to offices two adds laid earlier have That's

Joel Rahn

of vast The revenue majority the producers.

the So eight were Brad were production those XX. There new two talked of loan about to offices. that attributable

Russell Gunther

Okay.

with shifting rates doing that's of bit the What like pretty a little pipeline in do it, well. expectations? yield kind you loan Just have

Joel Rahn

Gavin, You at I'll you want me can stab in. it, and take to take that? guys then fill and a Brad

Brad Kessel

Sure.

Joel Rahn

we're earning no assets. all it's good, for are pressure. institutions fighting. that But question There's There's certainly looking

that So want think not I misrepresent there's I done job say, so commercial And don't team. we've pressure, for intense we're nice of a to fighting and but far, our yield. in

that very the to here similar the So, few recently quarters. our past been we've think what is I doing expectation in with pipeline

Brad Kessel

good, Joel. Very

Russell Gunther

on or helpful. slow the that. appreciate of sensitivities that That's I question levels with TCE getting, that -- buyback. Are would kind there your Last great pace any all? you're growth at price and also

Brad Kessel

lows, the we growth and/or we targeted capital that a media pace X.X for X.X. And deck and our to from range of quarter-to-quarter, we're TCE Slowing below outlined actually of today. Gavin, in to -- sort relative

X.XX. think I

Gavin Mohr

X.XX.

Brad Kessel

X.XX.

I the in some with system. also yes, balance to inflated is the excess the sheet feel liquidity So like degree

we're to it's our we've I as -- the activity indicator probably, past, say a it's in at, the think what is can where about but you talked quarterly -- of pretty trading going good again, So, and forward. fair expect

Operator

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

Brad Kessel

team. each thank Board management our In and of of our member thank would I own each to independent. I way, in toward their Each member, the want his our to like goal her customers of our be associates. I and also part continue do for our be leadership. being to closing, to job so support continues guiding common or their senior of to team proud Directors of by done our

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

Operator

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

disconnect. now may You

Independent Bank (IBCP) 26 Oct 212021 Q3 Earnings call transcript