IBCP - Earnings call 3 2022 | Independent Bank Corporation

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Operator

Hello, and welcome to today's call. My name is Candice and I will be your moderator. [Operator Instructions] I would now like to pass the conference over to our host, Brad Kessel, President and Chief Executive Officer. Please go ahead.

William Kessel

Good morning, and welcome to today's call. us discuss Bank XXXX the joining and Conference Results. for to Webcast company's you for Corporation's Independent Call Thank Third Quarter

joining Financial Officer; I Executive Joel Rahn, Executive President Kessel, President, and President me Commercial Vice and Banking. Vice Chief am Mohr, is our and and Executive Gavin Brad Officer, Chief

If information already cautionary call, of our X the a today's begin to note we the issued Page forward-looking would like press not it website, direct company's by you specifically, on the anyone you copy of Before us independentbank.com. I at to have can regarding statements. the does important release presentation, access today,

third for per session XX%, or income income of in quarter by in call today's income and per X.X% earnings prepared $X.XX include prior $XX.X $XX a diluted quarter million agenda third increases or and and diluted of represents remarks, period. net XXXX. of share remarks. Independent question-and-answer year closing $X.XX respectively, versus net followed reported the share XXXX over The of then diluted net This share will Corporation million the per Bank

and return the annualized return and generated third we equity on respectively. an average quarter of assets average For on of X.XX% XX.XX% XXXX,

growth State results strong markets each deposits. and total net Michigan. margin successful continue -- in noninterest-bearing category a point has our third of enabled interest investment expansion This of growth growth of on well capitalizing loans business core including and us has XXXX the as to deposits, core basis on with into Our basis quarter of expansion our new $X.X quarter interest new as of throughout income, XX in in a million linked occurring to net addition net led the banking talent in the significant

quarter. for past as our loans, nonperforming loan levels recoveries as addition, very watch well assets with to net metrics credits commercial be continue quality the of good due asset In and low

business The related into growth on profitability in with of is directly our our vehicle includes energy business continued the of which increase of growth, clean state growth supply deposit investment infrastructure of lending electric attractive expansion trend the the investment entire opportunities is in Michigan. driving capitalizing Michigan and gathering industry, higher and of growth state expansion. in the and the formation in team, to onshoring increasing markets our and This franchise our chains, and team job

$XX.X ended share net to months prior For X September compared $XX.X company $X.XX of million net the income the million income of or share $X.XX XXXX, year or per reported per diluted period. diluted the XX, in

account that represents to equity pleased this of and return were X.XX% balances. X.X% very XXXX, start increased billion XX.XX% period checking, and total increase brokered respectively, of year. XX.XX% time now and last assets noninterest-bearing, deposits, compared and during interest-bearing the the $XXX.X same spread continue year. I average on on XXXX, am across deposit of For return to grow is as from average reciprocal to $X.X increase the and This the XXXX, XX, at X.XX% annualized million for able of an third some which an quarter we September

funds points in expect lagging our to Fed to an hikes, XX successful keeping cost rate been quarter. That during increased beta deposit we at been deposit while have initial this this of we funds have overall cost do the while low going generate We growth forward. said, basis our able of see past

recent funds last of prospectively, indicative not It of through we view Fed provide our most our compared what rate be may rate We the effective comments rising over of the fund cost our quarter have a see its historical the presentation cycle few rate I included and share the Joel cost a an like this in Fed to to will company time, environment. At presentation and portfolios the provide as the our to metrics. spot our of may rate of funds on during credit on update would in turn Rahn view end. we and but a hike or does from success historical good loan to growing having a are

Joel Rahn

growth. X, an led XXX Page XX.X% portfolio quarterly On Commercial by earnings in annualized Brad. $XX our which increased Thanks, the Commercial loan update $XXX continues we the trend $XXX.X our months million, has rate. third total, -- well-diversified million. This me, on representing our growth loan In X first our quarter, million grew Through portfolio, -- our strong provide portfolio. year, of excuse Commercial the portfolio of increased

expect we next growth the year, in and our low believe and fourth as moderate head double-digit of of into pace this strong, remains While supports quarter that into rate pipeline a growth XXXX. we to we

to more growth our portfolio In portfolio headwinds, higher-yielding portfolio during preserve loans. pleased rotation Overall, production origination we towards our our quarter, planned economic terms of our from loan despite residential solid the we with in $X.X seeing are portfolio to in strong very order liquidity fund limited the as the in we're and softened growth installments Consumer on new our continue $XX asset the with we to loans. as are track investment to believe lending. our Commercial mortgage activity, lending shifted million increased third quarter, that increasing by million intentionally

being volume million that $XXX X is worth at real of new year, at or or concentrations million $XXX or $XXX remaining of to to $X.X Commercial largest of is and XX% million. $XXX the concentration Real of Manufacturing Page approximately of million million Retail we Commercial focus, is C&I or X.X%. It's Turning provide months noting of investment Industrial generated XX% Estate portfolio. the the largest first portfolio. primary X.X% the billion with million detail within comprised in the $XXX representing versus Commercial or be the C&I estate. comprising C&I our the $XXX the continues X, The lending XX% portfolio XX% our segment, loan loan XX% on

is pandemic chain supply our portfolio this in well pressures. has nature, and demonstrate that the portfolio resulting design, through very held and metrics granular very up credit By the

our XX nonperforming delinquent data X.XX% real early-stage XXXX XX, XX assets excuse XXXX. estate XX or delinquencies. million $X.X total XX. million me, unchanged days assets and Total and to Page nonperforming assets nonperforming September Loans on other December of from at were provides $X.X totaled loans, September at XX, --

secured installment While there our super of due and is levels, our prime growing focus remains consumer, this as the borrowers. to reminder, of stable all is portfolio on low early-stage prime in concern a largely And about health of almost the delinquencies at portfolio loans. and comprised

I'd the presentation Gavin year. for outlook to to remainder turn over including comments, for the his time, At like this the the of

Gavin Mohr

I and morning, Joel, XX Thanks, everyone. good starting of our on presentation. Page am

capital million ago Reduction in the risk-based from regulatory ratio capital strong year our highlights interest total XX income the is the due ratio increased Net and growth. position. CETX period. asset $X.X to Page risk-weighted

Our a tax some points the topic was XX year from equivalent the net up the this on XXXX, basis XX more and X.XX% points interest XXXX. ago of in third from up basis moment. detailed during quarter period second margin I'll add comments of which is quarter

the quarter XXXX. Page second in increase interest in of a income year were the of interest assets to billion Average $X.XX quarter in ago net and margin. quarter and XX compared the the third detailed contains the more XXXX $X.XX in interest-earning in $X.X net linked billion analysis billion quarter of

were basis margin increases XXXX net basis investments was points XX Our the were change third yield partially impacted equal by increase by funding in quarter up of points. to increase basis positively XX These points. in yield an factors, loan in mix interest X cost XX on and and offset

We over net the The static interest change will assume scenarios applies on rate the in parallel All of base for comment XX the date. immediate, curve Page sheet. analysis outlook calculates valuation risk yield third next simulation our more rate scenarios the margin and for we presentation. On from balance provide XX, 'XX consider interest XXXX XXXX position. later The our the second quarter permanent a the the net in scenario shock interest and specifically months. and income of rate quarter income changes. net details for comparative The spot the interest

in betas 'XX second to The in in higher net to the in increase the base quarter forecasted 'XX increase of due resulted interest the forecasted income primarily compared which third the is quarter rates, rate, income of consisted earning interest on increase modeled than on on of lower deposits. interest-bearing deposits earning asset yields, of rate higher in the and earning yields variable outpaced asset Most increases growth. which assets,

primarily of the assets less to due betas. next due reprice to actual reprice is Secondarily, lower slower The XX.X% XX and than shift in in deposit repricing liability to previously X deposit XX.X% increases month in Currently, sensitivity slightly rates months. modeled. was

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

in quarter of as on sale XXXX million lower decreases totaled mortgage loans decrease margins gains the as well sales $X.X to Third mortgage pipeline net loan volume third was in to loan million and due gains quarter 'XX. in the in mortgage loan $X.X profit The compared

mortgage and Mortgage of mortgages. lower loan to the production mix applications have rotated a percentage slowed sale has of

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

quarter was primarily Corporate of in Page mortgage of compared of on and the XXXX. in an mortgage were a the due in quarter at Incentive to As as deferred level million due performance quarter detailed the in the totaled million and of a million $X.X decreased noninterest of 'XX. lower Compensation to decreased $XX.X effective to XX, year lending loan direct in our volume prior XXXX year, ago compensation $X cost the the origination of level in the $XX.X million lower volume, lending million third raises origination year personnel. Performance-based third on as compared $XX.X and quarter second compensation the expense the start within increase a to decrease increased compared that Plan third Compensation that to quarter 'XX quarter

expected third for $X.X expense of an related reserve unfunded XXXX the to due to of in The ratio. loss the quarter increase commitments included lending million

our more on expense will for outlook presentation. in comments noninterest the We have later

during performance how actual our XXXX the provided the XX Page original that to our third update compared XXXX. is outlook see of in quarter January to outlook our we for

of double Loans in increased quarter Our in Commercial XXXX. the of quarter mortgage loan installment all our annualized, the third million range. and to which loans outlook third in $XXX estimated the digits. forecasted growth XXXX above or XX.X% low experienced growth is

points basis by net low single-digit third over margin than for of third than forecast XXXX, interest of of XX% forecast. our net XXXX was The is XXXX quarter XX XXXX, the income growth. our margin X.XX%, than interest Third higher increased higher net original is which interest the of higher which quarter quarter

$X.X The due driver was of third losses to to of an annualized. for our provision primary above quarter full pooled loans. increase year reserve total provision increase loan the is of XXXX X.XX% credit provision X.XX% losses average This of The in the for million or forecasted in was range and of expense allocations the portfolio XXXX growth. X.XX% credit an subjective

totaled Noninterest forecasted million. quarter in 'XX, our which third $XX.X $XX was million income of to range million of $XX within the

within gains of and of primarily million, quarter on decrease XXXX in Noninterest million margin of gains sold Third sales. Mortgage price. was in lowered origination volume range positive loan and fair due million million quarter the net adjustment forecasted decreased servicing $XXX XXXX the $XX.X primarily loan per and to $X.X totaled $X.X $XX.X loans gain due mortgage expense our sales mortgage in $X.X $XXX.X million was a to million quarter $XX.X to to generated million, mortgage sales profit due a third on third million value quarter. The respectively. loan

effective tax at quarter of the of rate XX.X% XXXX for of the our third income forecast. lower end was Our

capital an our strong to Lastly, shares as but did support focused third in continued year-to-date common cost are any we we quarter loan average in purchased growth. increase XXX,XXX the ratio and on our of shares, equity purchase tangible period we XXXX, not $XX.XX preserving the for

That like to concludes and would call my turn back prepared over the remarks, to I now Brad.

William Kessel

high-level a view strategic Thanks, initiatives. quarter, share Gavin. key we our of Each

cost of expenses. fourth we the noninterest while the our investments be lower-yielding into to and mix rotation head our controlling our of of asset XXXX, As loans, growing earning deposit higher-yielding the on into of continue will out funds, focus base managing our quarter our

that long-term we we will our make continuing disciplined While expense maintained are management, also to ability we investments growth. believe profitable to enhance generate

we point, we point, for our concern demand into opportunities about to are of to up the excited conditions trends the continue a to for increasing this at and continue now at slowdown, in is growth would economic call and about we there the an potential While remainder see this Michigan, have open and questions. healthy loan XXXX. Operator, we like XXXX economic

Operator

our [Operator Instructions] first comes KBW. from question Damon So DelMonte of

Matthew Renck

Damon Matt for the then earlier is updated thoughts your Michigan? you you investments balances Renck in trending DelMonte. I environment just see to filling and This current mentioned the rate in on of wanted given deposit the where get State also

William Kessel

Yes. Sure, Matt.

We have definitely had more base. success deposit getting it's harder. I in the said, continued That It's competitive. growing think

and helped our in the investment municipal -- Municipal to C&I we of fairly investments function core treasury team. lenders our and the a over thirdly, that our service in cash of the of our have base. And federal government. Two, has with significant has from us on much continues our in consumer our Independent few coming a I platform is has number In in the in growth competitive the the think part segment a levels then balances. Wallet technology success things. ONE markets, in remain of Commercial strong years base, funds think last resulted our I One,

that's continue to think think be And lot I a going difficult. success. our going but I can we forward, been of I So more think it's it

Matthew Renck

Okay...

William Kessel

your question... second And part the of

Matthew Renck

ahead. go Sorry,

William Kessel

Stellantis Yes, General on, LG sure. has our and put about Michigan, actually within new more more billions The been And of base deck and Ford, also, here. Energy, onshoring coming vehicle investments the of investments and large customer talking clean so supply number in electric quite their industry energy seeing a experiencing large from announcements Gentex, just we then to the a a into in within all together state the our and in chain. of industry. Motors slide in dollars we're and lot There

prospects are optimistic we about So, for reasons, loan all forward. pretty those growth going

Matthew Renck

me. Okay. Great. just And then X question last for

from any current loan closer areas a forecast, economic back you're that eye there to? you've book lending are like maybe the keeping Given of on or that stepped your

William Kessel

some lending, And did of very the portfolio. We, particularly largest. a more is Commercial very back segment years, in portfolio. strong DTIs LTVs. the is tilted temper and have and And within installment having segment. a that, C&I RV to but mortgage north towards over quarter, have build the Again, of the it's we granular. worked we granular good FICO XXX the hard and Again, past -- we This portions portfolio the very

the it increase just report I earnings. we're think continues, and we're over seeing of there of that manufacturers of the period fairly short in values time. some really seen a cognizant But collateral strong we've

about the So X the feel very portfolios. all overall, that's but good we segment, maybe

Operator

of Our next Zwick question Hovde Eric from Group. comes

Erik Zwick

I loan a wonder and if maybe could of I a the just bit to growth follow-up start question.

that indicated the the out bit, also seek loans. to rotate of You've you'll coming some to lower-yielding continue and assets into going securities a

earning asset the that way the that growth the few average over you're the loan is actually growth next be about slower than So would quarters? adding right think it to likely

Gavin Mohr

statement. accurate an That's Yes.

Erik Zwick

Okay. thinking And and for the into you of range the continues a confident any feel 'XX? to for noninterest a I about end looking XQ? of stay I XX.X%; know we of was in that new to just kind you expectations of branch as the range? there closer business the guess can you maybe within be high to Do then your get targeted that thoughts within that head probably. segments expenses, stay And XQ inflation pressure a opened number at

William Kessel

Yes.

lot expense 'XX And early categories. doubt, I at a And down. our stages I process. over pretty years, job a good into done intermediate keeping budgeting is we've think the looking stages effort of of think all going the no the or we're in of expenses

guess do high We are -- And in And various levels we we can us an to at an offsets our to we that this down. reductions we but obviously, that. within where have have expecting Holland opened, inflation, increase save have as we making, are comp, been branch be to could where some look continue investments segments see through the automation volumes recyclers branches of example, overall, money. we some in but year, in have New as

but have together 'XX budget, and bit the we more I better we a guidance thereafter So we can, pull feel think on a XXXX. we'll as little give then

Erik Zwick

for Great. hand more of potential outlook for And loan in driven curious on you're XQ just keeping with capital allocation last maybe capital was today you about how well? share and hold or in the kind looking one, to back and just on conservative growth you're buy about growth thinking as to didn't whether economic any just thinking uncertain capital that and shares and repurchases I'm that environment if by be XQ.

Gavin Mohr

Yes. is And this Gavin.

So yes, loan is capital on the growth. focus

double-digit I the economic growth showing we're uncertainties, the best rates of reserved. that's would think use you're say we when are, appropriately the I capital. we believe regarding

You're going to to total reserve loans today X.XX%. at see

experiencing to loan So it versus has economic much I do with the growth more uncertainty. we're think

Operator

at time, the Brad are questions there to remarks. conference As no this closing like to over additional registered hand back for I'd

William Kessel

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

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

Operator

ahead. day Ladies and Have gentlemen, conference call. today's this a great concludes

your disconnect lines. now may You

Independent Bank (IBCP) 25 Oct 222022 Q3 Earnings call transcript