IBCP - Earnings call 3 2023 | Independent Bank Corporation

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Operator

Hello all, and welcome to Independent Bank Corporation's Third Quarter 2023 Earnings Call. My name is Olivia, and I'll be your operator today. [Operator Instructions] I'll now hand you over to your host, Brad Kessel, to begin. 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 for Officer; and I Executive Rahn, Executive Executive President Kessel, of Joel President me Commercial President and Banking Vice Financial am Mohr, is Chief and and Vice Gavin Independent. Brad Officer, Chief .

Anyone our you who regarding information on important Before today's I call, the have note already we not cautionary would X does to presentation, of a begin forward-looking the statements. like to direct specifically, Page copy at today, session of question-and-answer company's the by for prepared issued The press include today's a by and independentbank.com. release then you remarks us can call followed will closing access it remarks. website, agenda the

quarter million quarter of third period. prior versus net XXXX Bank The to $X.XX a million decrease share diluted the results a net expense, income by in Corporation or offset compared third per income tax diluted the for of $XX.X of increase a partially an net decrease $XX.X year increase per or noninterest in expense. reported income primarily income XXXX in $X.XX share Independent losses, and provision the to interest in and credit as in in noninterest decrease is income due XXXX

months of positive $X.XX diluted quarter and compared impacting servicing results September XX, included third respectively, per XX, period the XXXX mortgage XX.XX% to of for ended as as For X million or per September The XXXX. annualized return X.XX% ended generated for share of value X.XX% XX.XX% comparable on XXXX. quarter diluted million or we $X.X the in in due the tax fair the tax on the third changes quarter price $X.X X-month our return item after to share 'XX $X.XX after an rights. compared XXXX, equity the average assets third average and of and most to

commercial and This expense management third relationship to the banking Capitalizing loans robust results the treasury and clients, positive quarter sheet leading we asset with momentum our client-centric proposition annualized stable a despite solid Our loan the balance a continued bank a quarter, and new in growth, current service. we growth of with expertise disciplined double-digit due high-quality financial success growth seasonality, industry fourth solutions, quality. achieving team as pipeline solid value gained deposits relationships to led its management margin, healthy expecting lower strong we have environment, interest operating appreciate in with on net opportunities. in

XX%, With portfolios. the growth support our the we ongoing loan capacity to to loan-to-deposit ratio at of have believe our we continue

a We just XX% granular very have portfolio our deposits with of deposit uninsured.

a and on we in securities. level capacity high $X.X have In borrowing borrowing of liquidity addition, with billion access secured available unpledged

well. to annualized our XX.X% Overall, or third at deposits million X.X% Total $XXX.X $X.X or September quarter base continues annualized the $XXX.X deposit million XX up and were perform year-to-date. billion, during

of period, as opportunities. some advantage of this rate interest funding During the remixing take customers level of have X-month we seen spread our

million interest-bearing base, up the $XX.X up million deposits past see third by X.X% remixing deposits declining continuing and with $XX.X are quarter, some of savings significantly million, are during deposit This million. checking while quarter. $XX.X slowed million, deposits $XXX.X down are deposits reciprocal to the pace time are noninterest-bearing or the and $XXX.X annualized noninterest-bearing up deposits $XXX.X brokered while Our down million are time

to fund Fed of in included view the have as our of for and compared rate historical funds effective We rate spot a Fed the presentation our cost quarter.

the quarter, for XX.X%. X.XX%. the on now Joel to over few credit portfolios comments having in of of we and success provide time, like to At would Through presentation cumulative cycle our update our the the metrics. total by beta funds at an turn to I basis this funds on XX to Our are increased Rahn cost cost loan our third growing points is a share

Joel Rahn

on where Brad. start in loan our third well-diversified $XXX Thanks, provide update growing commercial Page increased lending was $XX quarter, million. million in portfolio. by an quarter I'll Total loans on the X, -- strongest we segment was the

We also our realized growth portfolio mortgage business $XX that with by in million. growing

in portfolio $XX experienced installment we area. in a have strategically as Our decline that million the back pulled quarter

commercial experienced quarter. see the past on that the annualized on our basis we've which XX.X% return talent added contributor expansion months banking continue to investment our our XX has through to . The the strategic and growth, a commercial We an was strong of over third team. been the

based forward, disciplined our continued solid pipeline maintaining growth opportunity upon position, a and credit while see liquidity strong Looking standards. we

Page loan X commercial our detail on portfolio. provides

with at remaining $XXX commercial of I've comprised indicated primary concentrations prior portfolio largest $XXX being of $XXX to worth the continues segment continues at in quarters, office that commercial portfolio our within portfolio. exposure million representing lending of or As It's XX.X% the be C&I is XX% segment, XX% our quarter retail the to our of stands or X.X% The to or real end. focus, segment and Manufacturing the at estate be approximately million $XX noting or comprising X% industrial the million. X.X%. largest million the C&I at

of very our low-rise XX% overall of office consists particular exposure. office continues of portfolio and well. exposure segment space This suburban, to Medical our Our comprises office primarily perform

key Page end. delinquent total to additional For provides refer of you continues $X.X X/XX, which days X.XX% or quarter overview into at presentation. at quality or loans appendix XX million I million totaled last is of $X.X consistent our with end. Loans of X/XX. X an were be loans Overall this credit quality insight metrics at quarter the nonperforming exposure, credit Total to office XX excellent. to X.X%

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

Gavin Mohr

regulatory linked Net our position. income capital and the Joel, year decreased stable the from highlights Page starting ago period. at million ratios everyone. morning, All Page $X.X strong Thanks, capital good presentation. interest our quarter. were of XX am I XX from

and the in to Our of quarter margin quarter a $X.XX analysis detailed interest $X.XX of were of X.XX% and assets decrease billion the . Average third billion XXXX quarter the XXXX. and $X.XX quarter was more basis contains XXXX. quarter interest-earning year the XXXX in net the billion second quarter tax equivalent from the compared ago interest linked income margin. third in net down XX second XXXX point in third the during X the to X.XX% of in net quarter of Page interest compared of

on increase net of a third basis a quarter and On our interest by in positively of was and XX loans in investments basis, yield XXXX quarter change impacted points margin X and linked increase earning factors: asset were were X basis of mix costs basis changes increases points offset basis to due by in funding that mix. points XX X funding points. an These in

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

improvement the The asset along due with investments XX% 'XX loans in forecasted decline a mix primarily from higher reprice month interest increase of 'XX rates. the in declining assets reprice is net a second in rate slight rates X the XX quarter in and rate in during of rising compared an exposure to the XX.X% base Currently, income an Sensitivity is the the largely third to in to with larger in next increase increases. quarter with months. quarter from modestly benefit unchanged and

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

servicing per totaled mortgage that's compared capitalized sales pay -- million offset $X.XX income. increased $X.X income adjustments, $X.X loan of impacting or quarter was fair the servicing This that million share is is fair noninterest million gains diluted $X.X loans the mortgage Third third million by of $X.X price comprised to million decrease XXXX. quarter million of profit loan The were to tax in a due of partially value 'XX decrease mortgage of mortgage revenue and 'XX. rights by after to primarily in positively due due downs third to increase and of $X.X the margins lower partially in value $X.X net on quarter offset volume loans

the quarter the XXXX. increased of in on totaled in Page our that decreased and as origination in million year third expense of year second quarter mortgage the to the Compensation million XX, million $XX.X compared of as quarter $XX.X detailed that of quarter $XX origination and noninterest ago at volume. of to prior the million compared XXXX costs As to on $X.X due a start the quarter level third effective year deferred were lower was XXXX the in raises compensation direct loan

the costs primarily incentives to the period, coordinated due Data in and decrease CPI-related processors, volume lending in $X.X hourly process-related due in compared to period attributed lower to lending million and salary due lending million loan incentive cost solution decline prior as related mortgage primarily annual year-to-date $X.X and by decreased well to year increased software as to cost compensation lower quarter. payout a from growth employees to prior well deferrals expected for increases, Performance-based mortgage mortgage processing new net a lower XXXX. asset as mortgage of purchase compensation as third

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

forecasted decreased installment third in loans the estimated had digits, third double which is low $XXX.X range. or slightly annualized, the growth XXXX XX.X% outlook in the quarter while of quarter our Our mortgage and loan in positive above of loans 'XX. million growth, Commercial increased

which Third than quarter our growth. X.X% XXXX single-digit of over net forecast by interest income XXXX, lower decreased high is

margin X.XX% was net for the and The prior current year quarter. for the quarter X.XX% interest

quarter 'XX third The below forecast. was net our income original interest

and a was million X.XX% or of 'XX loan annualized, XXXX The of decrease mortgages. speeds, in losses result for jumbo $X.X primarily the growth expense primarily third the related credit was provision prepayment expense third to an provision quarter quarter

expense to our provision lower quarter third 'XX the forecasted loans range. related of was than The in

third on our Moving million totaled Noninterest quarter, $XX of $XX.X million. Page the higher than $XX to income was million which XX. range in to forecasted

range forecasted mortgage servicing of quarter to third $XXX.X and 'XX. $XX quarterly. million the within sales income in gains and targeted 'XX of loan $XX originations, million, generated in expense $X loan Noninterest quarter $XXX.X third that million quarter the respectively. our million of Third million totaled million Mortgage $XX.X million, $X.X was

tax third Our for little a income our higher which was XX% XXXX, tax rate effective of the quarter forecast. of than

repurchased of I would average to like were $XX.XX. in repurchased shares $XX.XX. of quarter Brad. my average turn shares remarks, at call an of price price XX,XXX and at 'XX share have third back Lastly, over prepared concludes an Year-to-date, the That been the XXX,XXX now to share

William Kessel

Thanks, attributable delivering directly is Gavin. talented making after quarter-over-quarter has These focus time their year been company year strong and which easy. in personalized our team, results, to service our communities investing our on for banking some

again and comprise Small XXXX. recognition in financial of us Sandler's being Our XX nice banks of results Piper one named Class once All-Star that thrifts gained

to strong lower-yielding our proud of assets with doing will continue this intend finish team, communities. XXXX on investments we Our investing loans. technology In higher-yielding be team very of in and earning out our is continuing supporting recognition. of our our so, into rotation focus We leveraging the to

to bank, continue manage excited our noninterest consistent of our strong which as We've commercial our value leading us we shareholders. economic delivering strong to while are a and continue for Accordingly, well grow built have trends. cost offered results of a and positions proposition we expenses. base we controlling through effectively environments to growth opportunities continue our variety strong With the franchise, we and managing the funds a can believe deposit our about

now to the like At we this open point, questions. call for would up

Operator

today first Hovde Eric from Our question comes of Instructions] [Operator Group. Zwick

Erik Zwick

your to pipeline but I a wanted still and quarter comments start growth due to likely the I to be on, to the first bit first fourth -- slower about guess, little start very is kind wanted seasonality, strong. of loan

a the from pick start of you beginning the the product I to year. just pipeline, again you're that add today a of Wondering, type to So well? in next where in towards kind if maybe expect as of commentary up and seeing could little industry strength mix

Joel Rahn

Joel. is This Yes.

fourth the it we head solid pipeline, still the is long. as And of be pipeline into quarter. commercial to On tends very course, pretty

the point any primary really is again, year. I in part of growth a that We're next one can't is stronger. into diverse It early C&I, really So mix. that pretty is us seeing will take area our focus. to

seeing that our And seen We've good opportunity the we interestingly relationships bankers of had in medical-related enough, are in long-term that's community. again and opportunities. those space, because have

some real estate, has for And us a primarily select been now. right commercial industrial focus

some would point additional . color my be just So vantage that from

Erik Zwick

appreciate you then you've the pulled that. mentioned And strategically from portfolio. back I installment

Just uncertain curious, a you're thinking how kind areas? you're better that outlook? you kind cautionary commentary that of could if about just of add seeing of Or to it just additional is portfolio is bit stance maybe curious other a opportunities Or due just in economic today. there

William Kessel

question. great Yes. Eric, a that's

twofold. it's think I

for really our banking is, I we our demand think number markets. commercial continued excited about in the team one are

so that with it. that yields, we like asset and risk go And class, the -- profile the

And goes direction. capital just we so our allocation. that had prioritize in one think to that's I It

also, I piece think we're There's watching just declining. -- savings its cognizant think the of what's that's closely happening savings the the And consumer. so level -- I with their is being consumer. a driving written aspect, second consumer slowdown the second in the itself, about lot

our of then historically a marine on And third, out and of direct branches which is consumer out I'd are indirect side driven and more say RV production, then our And we installment RV. little is our area cautious the it. channel, of

strong pretty the pandemic. up a during was there think I run

closely. helps. Hopefully, are we values that watching those so collateral And

Erik Zwick

X last And me. X helpful. for Very

improvements guess, Just areas some efficiencies optimize list target about at channels additional up the delivery the slide XX, figure had looking of a then #X and -- and control. what has as expenses, -- at expenses of I mentioned you cost about you for thinking and have put you on exist of, bottom process commentary for Slide kind opportunities

biggest of keep the kind over improvement And of to even kind just in mind just generally what time? or target we opportunities about think for I'm So kind control? a expenses under additional have as targeting ratio you the curious 'XX, into looking are do of efficiency

William Kessel

of a So trending year. that XXs, we off, with XXs the but the it to very positively now another I'd through we positive question. our pleased I'm on the from high over ratio year basis, after And First really great the we're and just X-quarter efficiency think taken time, reduce that. continue say and really both we've in XXs,

continue first in just foremost, which and And connected. interrelated technologies all I core would our different XXXX. that's and point with conversion, to of May to we see opportunities pulled we switch efficiencies And to the the

so optimize and point back then we at towards I to would And the continue I in footprint over to opportunities there's ways And room. our there. branch look think

opportunities in the machines, the recycle We of see and we underway well whole footprint. are use teller significant which throughout

do do we we we have continue of couple How serve so better? about touches, do how do are I get examples. there really to And -- for with smarter? better And customer? is room us think get how the improve. a excited to I'm those less area every So just is we charged obviously, How

Operator

[Operator from Instructions] next KBW. of Our DelMonte Damon question comes

Matthew Renck

you local is think in today. first for drive DelMonte. business? it the economy any on if from to was, your This hope UAW doing And provision filling Matt suffer? I everybody impacts Renck are higher potential Damon do question strike good there is could the My start

William Kessel

hey, base, speaking it. with for can the to an start give I with in Joel, you've side And think, team our and want So off Michigan our update -- I let's us there. with and the commercial our And been it's in footprint. to Matt, thanks customer call. obviously, we're But

Joel Rahn

Yes.

big Of course, long unknown lasts. strike how the the is

So the in qualifier. big we that with impacted. would be been But that's we've have contact customers that regular the directly

a really it's of small and portfolio, portfolio. our our in our customer Fortunately, pretty percentage base

today of to in fixed $XX have X.X% perspective. from So million customers that about our the about portfolio just we've total put got impact would outstandings at in so that strike, direct or

. And well to real talking not weekly customers again, automotive not our heavy basis. we're on supply. -- those is we're So in we're diversified, portfolio very and a

to these the far, So -- be strike lay forced impact point, it as continues they But at on, Tier would even it drag affect is X off. people suppliers, to phenomenal. some the and will

So we seen have not that yet.

William Kessel

base -- with I Matt, one me. customer would from consumer the you what you count hand then minimally can Yes. we've the of, work in just then strike than had to terms I continues, add you Yes, And just would on add hey, carry inquiries if the portfolio, over and just less

to our and this impacted it's point. performance up very meaningfully So been metrics not small has

Matthew Renck

Okay. you next point is end strike it, your there Great. reaches this And through the time through starts. it but when share that's It Is mind, the a midway in the for know, year. is in like year, if I trouble don't can that's of

If you could share that?

Joel Rahn

initially personal I down mean, to If our going XX in That's month mean, at which base, to I to it's general to to hard we back it to ripple longer drags than to quantify. days. into -- very supply X for that, within on was When of provide our really be just strike, opinion I the when production. we're mid-September, talked weeks. was it start customers the the had to a affect it would will next if end But start on my the consensus fine XX front the affect soon,

the XX strike later, just is but the we're So here I hoping resolved all think in to next than days. it's sooner that rather XX

Matthew Renck

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

down that portfolio, you targeted or to you earning securities of percentage have work a to us, you do the on want remind Just assets could maintain?

Gavin Mohr

Yes.

broader -- we move to down bank. the profile we of XX% ratio the to the would be will we'll XX% as just based on that and liquidity target, evaluate So

Operator

the questions further at this time. call on no have We

the So for I'll back Brad, to turn closing call you, remarks. over

William Kessel

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

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

Operator

Thank concludes This joining. call. for you today's

disconnect concludes call. today's for lines. This now may you your Thank You joining.

You may now disconnect.

Independent Bank (IBCP) 24 Oct 232023 Q3 Earnings call transcript