IBCP - Earnings call transcript Q1 2024 | Independent Bank Corporation

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Independent Bank Corporation Reports 2024 First Quarter Results. [Operator Instructions].

I would now like to hand this conference call over to our host, Brad Kessel, President and CEO. Please go ahead.

William 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 first Thank to the discuss me Chief Brad Chief and Banking. and Vice Officer; President am Executive Officer; Mohr, and Rahn, of I and Vice Kessel, Financial joining President is Joel President Gavin Executive Executive Commercial

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

remarks. include remarks, call agenda a today's The closing followed prepared for question-and-answer will by then session and

basis first net XXXX first $X.XX or period. prior growth both the million with linked-quarter quarterly from Corporation share X%. I interest net and loans up and XXXX deposits pleased diluted generate per am core Bank the of to our organic $X.XX linked diluted net income income quarter $XX Independent able versus very year results, basis. on income a share a driving We're expansion sheet in or of reported growth a quarter on increasing interest to margin balance X.XX% on up X.XX% both X.X% of sides $XX per year-over-year million and quarter with basis net

well managed. be Expenses to continue

compared XX% prior fundamentals tangible nonperforming our good ] the value both continue increase quarter. near growth crack tricks very share, These year XX% share, with a book -- credits Our be drove per and earnings increase per assets [ to good watch historic lows. to and in

and team's balance the optimistic return growth return professionals, success trends the assets are quarter of new we for year proven for X.XX% our in XXXX. about of equity on ratios positive into continuing and average XX.XX%. integration the dynamic this a Leveraging performance of Our on average of included these

annualized of first increased Total of billion. by $XX.X retail On were also Business by core XXXX. as during increased $XX.X increased deposits the XX, March XXXX, basis, $X.XX Overall, million. and by deposits X% increased quarter municipal deposits linked-quarter million. $XX.X deposits deposits or million $XX.X million a

base a pace remix out higher-yielding customer product to deposit and/or but slowed. remix continues products existing lower-yielding Our non-interest-bearing exhibit offerings, of the has into

new Additionally, wholesale below in cost team to funds. bring relationships our our sales continues of well

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

X our XX.X%. funds is points the total to by quarter, cost our the quarter first X.XX%. of beta cost basis increased cumulative funds Through the of XXXX, For cycle for of

loan turn share and this to At our and update our a over like on we're presentation time, portfolios the I'd few to growing success the an having provide metrics. credit Rahn on comments to Joel

Joel Rahn

lending, quarter, Thanks, by we segment and on an the update million. grew growth. in our to Brad, first $X.X million increased and loans $XX commercial annualized portfolio by morning, everyone. good continues loan which activity. share Total On quarterly representing strongest Page be The billion X.X% X, $XX

business growth growing by for in with quarter. mortgage million also realized We $X.X our that the portfolio

pull $XX.X installment decision but that also strategic a by demand back with of Our in softness a million decreased portfolio segment. to result in

yield highest our respective new portfolio portfolio [ is yield. ] the be production to yielding As portfolio a with of The X.XX%. each commercial significantly than yield material, noted higher on in portfolio, yield in the

standards. growth, team. our we talent on The commercial We which to our strategic opportunity consistent that of has been pipeline, we experienced growth banking disciplined upon while solid an a strong quarter, experienced continue in XXXX. continue see was contributor with credit growth of add XX% see to Based the basis commercial continued expansion the to pace a a return annualized maintaining on commercial in our our first

detail additional commercial provides portfolio. on X loan Page our

to largest focus, The approximately lending or million. out, C&I C&I prior $XXX with largest within be our remaining quarters, segment investment to the primary real be being is or the concentration in million. representing XX% pointed portfolio. the estate industrial XX% $XXX XX% I've comprising portfolio comprised X.X% concentration As continues of Manufacturing of continues the of the at

that commercial at stands office X% portfolio our our It's at segment worth noting quarter of million exposure or the $XX end. to

office granularity XX% is low-rise of office size comprising of Our overall points consists space our to million, segment of with our the this average loan portfolio. primarily office exposure of exposure. suburban, The $X.X medical which

our appendix the to additional refer office into insight I you to this presentation. of exposure, For Page XX

basis continues Key slight 'XX. decrease were from from points, quality XX/XX/XX. quality metrics Page X. XX is credit million loans basis Total of excellent. at which to total Overall, on year-end nonperforming and loans slightly or due quarter credit million a XX trends $X.X points totaled or up be end $X.X outlined loans approximately are Past

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

Gavin Mohr

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

X Average first of was and interest quarter the quarter tax billion compared during compared quarter Our interest-earning and in fourth quarter the first XXXX from points X.XX% quarter margin were ago of $X.XX of billion to net in in the 'XX in X.X% XXXX. billion $X.XX $X.X the the quarter XXXX. up basis of of first fourth XXXX to year the assets equivalent

income detailed by of points. were on impacted first increase the was and change of On change basis These linked of offset an of quarter asset yield funding interest points. linked contains basis quarter points, a basis partially net investments mix the analysis cost points, in more quarter basis, earning increase XX loans net basis of in X and interest in mix in net factors: our X in margin. funding by X increases margin X interest increase X a 'XX Page positively

net income simulation On fourth Page interest of a XX, for we the 'XX quarter first the applies interest parallel in growth rate All months base quarter of next of increase income spot balance consider scenarios. scenarios the first position, immediate rate the of the permanent primarily securities. quarter analysis in loans. an ] shift comparative in changes shock yield with interest centered the asset curve 'XX the risk due in static to a on scenario net compared The under X and loans and fourth quarter sheet. forecasted the to rate [ variable commercial date. was in The assume mix provide scenarios change loan to is calculates XX details over institution's 'XX the The increase base in and rate 'XX rate a a decline from rate valuation the in

modeled term XX.X% rates modest X exposure assets rates with larger lending quarter increased asset decreasing modestly is rate during the months. Sensitivity the products. during yields in next a reprice increases. fixed to quarter increase to Additionally, in month and repriced in Currently rate of rising for XX the the related largely unchanged XX%

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

that increased First to offset The 'XX. compared loan first margins $X.X the of to the quarter This or $X.X servicing on to decrease quarter increase income was in revenue, mortgage price of million of mortgage were million of primarily comprised in is a due million 'XX impacting million due diluted in that per by lower $X.X net. sales. catalyzed XXXX. $X.X volume quarter loan net $X.X gains million partially paydowns gain due was was on is of of Positively by first rights offset servicing share mortgage after-tax profit to $X.X loans change gain loan million partially noninterest $X.XX

increased XX, in Page quarter expense the million million our increases million the salary the $XX.X noninterest compared effective of incentive the employees in ago XXXX As year to in due of of quarter detailed at quarter for hourly first higher beginning $X.X totaled compensation and XXXX. and $XX fourth million in $XX.X salary compensation expected to as payout the Performance-based year. on primarily

primarily the data purchase growth of increases annual period, a $X.X processor asset the as software. from lending new costs well to Data cost as year million increased core processing by CPI-related and prior due solutions

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

the X.X% in mortgage growth the increased million loan is XXXX annualized, forecasted growth below of single decreased Commercial quarter. and in estimated our the first $XX.X outlook loans Our some first while had quarter digits. middle positive range. Loans in which

prior interest net which XXXX, our quarter up income the for growth. and quarter. the by than quarter, First from quarter margin was linked for The mid-single-digit over XXXX interest forecast but year increased was X.XX% net points the is current of lower X.X% X basis X.X%

The for expense first below quarter $X.X range. credit XXXX losses was provision million of forecasted our in an

'XX offset maturity. credit to The partially by securities that provision on a result quarter of on expense fairly loans was provision was expenses first held a provision

income million $XX range within million of our 'XX was to of on Moving the forecasted $XX.X which totaled Page million. XX. to $XX.X Noninterest in quarter first

of First gain first quarter in Mortgage loan respectively. $XX.X and of servicing a originations million million gains XXXX $X.X net quarter million, sales totaled generated $XX million, and loan $X.X the XXXX.

$XX.X quarter, below our million range Noninterest million. $XX.X in expense to $XX.X first forecasted was million the of

income rate XX.X% of forecast. of tax was lower original XXXX effective Our our quarter first than the for

XXXX. were no first in shares of the repurchased quarter Lastly, there

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

William Kessel

very attributable for line been talented and with year connecting with pleased customers, after directly with investing is results quarter-over-quarter, very time. their in to success communities I'm This our some company Gavin. we making easy. Thanks, in our started and year the our banking much is delivering team XXXX it strong how on has focus which

our franchise which to strong well of us bank consistent and manage shareholders. continue strong positions We've and delivering built variety for economic a a community results environments through effectively

will As we rotation our XXXX, loans. so, to we our communities. of our investments doing in the supporting of of move continuing leveraging serving into forward Michigan, in team, XXXth out continue focus our lower-yielding be the and In our earning invest in higher-yielding year will communities assets technology our

expenses. With our can Accordingly, proposition to controlling while our grow continue bank, we a large and we the funds noninterest strong of excited customer our commercial managing future. cost we our believe about as are value community base offered

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

Operator

[Operator Instructions].

of Nosal of our the question Hovde first from Group. So Brendan comes line

Brendan Nosal

] how off where thoughts hope you independent arise. meaningful but week. doing might might folks. preliminary any start woods it's if to There you're well. pretty those a Hey, dislocation [ the talent you're was days, like I last and on a early on to impacted I announcement Maybe in not here. that be know transaction capitalize opportunities

William Kessel

competitor good for County a our been always market, us ] in markets. we McDow here in [ in question. as related sale their County Ottawa opportunity and an great Brendan, view Kent and

acquisition. So customer we both acquisition a opportunity the within think markets, M&A an of talent it's disruption. really continuation And it's Independent and Bank for

a franchise. And is so the event we're very for viewing event our positive

Brendan Nosal

to Maybe continue for All right quarter. margin, over right. move the That's color. in the turning helpful to direction another

Just -- track that is updates early you the kind you if better out on based you the year, performing of any in still to say. or on or margin you're laid have the there or curious worse what guidance but

Gavin Mohr

Brendan, Yes, Gavin. this is

forecasted. from leave right at Yes. that. we're think I on I it we've what track just

Brendan Nosal

you. Thank Perfect. Yes.

Operator

question of DelMonte of next line The KBW. from Damon is the

Damon Del Monte

doing guys I X of hope well. are The you're you well. doing both

Just a margin. quick the follow-up on

some that comment. margin you stabilized? year rate balance could of some portions you of your are react? what expect the the on should some have that? asset more and Do funding in of Gavin, the you reach would feel follow-up side be of side thoughts cuts leverage asset-sensitive the in on the margin given to kind quick on half the sheet, step margin the your there kind of keep with how Or a and back Just the

Gavin Mohr

We Yes, David, we I guidance do built come into some January our would have cuts to that back that. gave. rate

-- back have repricing don't the pricing how leverage deposit that know side. we'll So on I much half, within

the XX we Fed forecast gave to August did a XX increase think the and Mark. October. May and of June, have -- cuts big that's was in question, the in I rate NIM But

Damon Del Monte

Okay.

that's cuts. So X

Okay.

on guide. full the growth Okay. end Great. And was growth the quarter then the on the of the with regards loan of first year kind low to

driven look of next the X% good And few for C&I growth you side year. feel that by for that well? out you is X% If the primarily to being the still quarters, kind over as

Joel Rahn

comparable cautious as our well to is where Joel. pipeline And in as is opportunity looking I very I is the well add on we're of we're where talent. the track, last obviously Yes, we're that we're certain feel we hit year. I side notable. would solid, how loans seeing also right our -- we this to plan be. right there think to most real comments, I positioned some my on we part said And were like And estate plan. still C&I segments to yes, we're being in making office still But, as positioned that continue yes,

-- some marketplace capitalizing first really throughout on positions to added in footprint in of our the quarter, continue we it We in the commercial some the us disruption state all and well. bankers

Damon Del Monte

reserve credit trends as look for very you growth and look now. remain Okay. loan loan where And Great. And at you is kind then the strong. lastly, the the at loss of prospects

that that maintain cushion bit? let it's level? do think that down Do feel a where points. need there's you enough Or you to feel of XXX I basis drift little kind that you you

William Kessel

do That's feels little we're come landing that we bit. soft like If it that the heading a may great down we into, realize see question. a

think in ] subject. reserve help I today a the total got a we've of in [ quarter is the

some think, released could soft that, landing. I And with of a be

thinking, we're of well, So Damon. sort that's,

is provisioning going by driven loan growth. future really, be So to

Damon Del Monte

it. Got

for Okay. Thanks. that now. I Great. That's have all

Operator

Instructions]. Group. now of a have Brendan question Hovde We follow-up go from ahead. [Operator Nosal Please

Brendan Nosal

the Just the me, few it's considering performing especially hit rate one the [ into of of a to dead cuts start any the margin, baked horse not past ] at guide X on year. more the how quarters. over you say, beat let's that But we the for

at impacts of how curious that impact know that point, rate kind curious that outlook. how neutral I you're margin might this margin? fairly but Just the

Gavin Mohr

the the deposit I mark It'd -- keep moderately. question beneficial be But just again, back coming remixing. is the to

you better stay -- little seeing rates flat, if a So what we trend margin. that currently in would if be and continues, off we're

Brendan Nosal

That's helpful. again. Thanks Perfect. Perfect.

Operator

of The John Janney. next of line Rodis question comes from the

John Rodis

down. on Question any just and as going flows to and continue maybe talk cash you for trend Gavin assume reinvest decide portfolio. to it's just How you should about to forward? as security the -- I can But whether far going

Gavin Mohr

Yes.

we securities of $XXX this the repurchases we of able amortization, no top, We to a breakeven loss. pull be about -- forward. reinvestment in will start that the $XXX for at quarter were $XX earn-back will projection of cash small We quarter, $XXX,XXX million million, by the from So year flow first so million -- assuming sold that some a book. year-end the be is to or into loss on

a said, being that to XX%. is like think So I what we're total for portfolio targeting around asset

you flows the reallocating some anticipate when at cash So will the portfolio. the look size, into capital securities and it time before current we current be

John Rodis

have the roughly? year, forward flows pulled Gavin, you $XX cash Okay. in this flows million sale. Do million And first said some $XXX you then you with quarter the year, next what and are cash

Gavin Mohr

Yes, it's around $XXX million.

John Rodis

Pretty similar.

Gavin Mohr

Yes, similar period. XX-month the it's for

Joel Rahn

Okay.

years without that to few a of couple get or XX% you correct? area, reinvesting, down to it mean, So a will years take I

Gavin Mohr

That's correct, John. Yes.

John Rodis

to little higher deposit remain then if -- reinvest sense? that that securities would to the bit rates? pretty assume were you if a loan And portfolio decide growth Does slow, solid makes at I in growth is

Gavin Mohr

Yes, absolutely.

have we than liquidity mean capital. What that be I and an loan -- excellent account our loan So growth. would option would Yes. for greater

Operator

CEO, and hand As to questions over additional this there Independent Bank closing remarks. the Corporation's time, for no Brad waiting I'd to like conference President back are at Kessel

William Kessel

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

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

Operator

gentlemen, and Ladies today's for joining. call. Thank this concludes you

disconnect may lines. your now You

Independent Bank (IBCP) 25 Apr 242024 Q1 Earnings call transcript