IBCP - Earnings call transcript Q2 2024 | Independent Bank Corporation

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Operator

Hello all, and welcome to Independent Bank Corporation Reports 2024 Second Quarter Results. My name is Ezra, and I will be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Brad Kessel, President and CEO.

William Kessel

Good morning, and welcome to today's call. Thank you for joining us for Independent Bank Corporation's conference call and webcast to discuss the company's second quarter 2024 results. of President Mohr, Executive Officer; EVP Rahn, and Kessel, me and and Brad EVP Gavin Banking. is and Head am and Officer, Chief joining Joel I Commercial our Chief Financial

believe investments continue well a can we year-over-year include to the we call us years. versus and assets reported operational followed from does annualized. second year linked and a important of second-quarter on X.XX% paydowns, XXXX both growth net interest loans on it basis. the not XX.XX%, return The see core average a to on equity on XX.X our access million am cautionary already income then were recent driving today's direct while and X.XX made strategic presentation, X.XX forward-looking and generate we XX.X We despite income today, of I a to and regarding of from Corporation of margin information income prepared net of a We results, increased I a on X.X% like team net linked for to the average have able deposits page a sides USD would agenda Before interest balance remarks, USD in net company's to of will diluted press begin return prior annualized, and the managed, that of quarter sheet. pleased to on basis payoffs USD statements. question-and-answer increasing remarks. scale X.X% with by X.XX% the you continue respectively. both session USD website, expansion, our share expenses in have XXXX organic note million X.XX% our very you X quarter period. or are level improved be commercial Bank a proud share our by release per represents issued specifically, call, at diluted Independent of quarter If copy This of anyone quarterly growth Overall, independentbank.com. today's up or higher-than-normal closing per and

continue million these of XX.X half On million million, deposits retail bankers about lows. continuing to growth quarter we compared the assets and X.X% book for USD professionals XX%, of value fundamentals and second growth credits deposits to by record USD quarter. XX.X basis, Overall the of the in of drove increased by USD 'XX. into credit June watch tangible our share, and share core municipal and a XX, are on year billion. group metrics linked-quarter nonperforming excellent our the near business million be at with declined the These initiative deposits XXXX. Our both pipeline, trends by increased a deposits declined XXXX, prior deposits the during earnings per historic USD were XX% second Total X.XX quarter. ongoing during XX.X USD optimistic per year annualized commercial the at and or XXX.X robust team, Based to core our add talented strategic loan to good past

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

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

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

our on turn like share the portfolios loan to provide comments is cost of Rahn and over XXXX, of beta the credit total X.XX%. our on For metrics. of second in the quarter, few basis At our a growing cycle our for Joel this to funds to update increased Through an XX.X%. the funds having by to cost the presentation X I'd point cumulative success time, quarter we're

Joel Rahn

and Brad, the good quarterly second by page billion X, Total USD share loans XX activity. everyone. representing X.X On million portfolio growth. Thanks, increased of we quarter, X.X% morning, loan and an annualized our USD update in

Our mortgage portfolio million. grew our X.X by increased USD USD portfolio XX.X million, installment

in commercial realized of to was Brad commercial investment could as not activity unscheduled than due payoffs as declined offset Our real first stronger estate extraordinary of million that quarter, XX loan in approximate as to portfolio, well projects. USD worth mentioned X noting payoff sale million earlier, the various quarter. quarter loan sale the QX origination but the USD related It's business

XX half loan our of For growth. annualized X.X% the the million, commercial year, USD first representing portfolio increased

significantly Page As The the is noted in production be yield. portfolio respective our growth a portfolio, continued yielding in the a disciplined standards. the portfolio. see upon Based commercial X.XX%. portfolio higher we new solid yield loan X year portfolio commercial each yield our detail additional with half our on provides commercial opportunity pipeline, on highest credit continues than of the material, while maintaining second to in of

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

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

XX I you quality exposure, into be page to credit X. are appendix end, Overall, additional trends page slightly from consistent nonperforming with outlined XX X/XX. basis quarter For presentation. or and to or at X.X credit points million Total USD our loans refer insight totaled the down metrics quality USD XX. loans office of loans XX of to Past points, continues basis Key were March excellent. due X.X million this on approximately total

X.X% our year. At this slide, his remains for list of like watch low turn the portfolio. at While on to the the comments, commercial for of remainder Gavin commercial not the including the to time, I'd outlook the over presentation reflected

Gavin Mohr

Joel, Thanks, good starting XX morning, everyone. strong I'm Page and at presentation. capital our page highlights XX our position. of regulatory

from from year X Our the increased capital the ratios USD quarter. income period. increased interest linked Net ago million

quarter during of mix increase detailed were compared fee Our of X to accreted second X X in Average XXXX. repricing. quarter yield modeled The billion provide NII X.XX first quarter X.XX XXXX tax yield in from funding income the asset 'XX for first from comparative loans in quarter accreted quarter was asset a 'XX The over basis and parallel rate margin. quarter next basis USD scenario earning which interest offset DNI points factors. and funding asset was Change scenarios asset and X.X% our the during by X XXXX exposure a USD analysis quarter largely points. by scenarios increase of mix, continued in in benefits linked rising changes These XX basis, costs, permanent profile and to XX basis shift second up net the in an on points. is change spot partially or we change of offset shock interest Loan sensitivity net X.XX% rate simulation linked larger unchanged compared valuation billion points. points, risk of The scenarios. margin the basis the changes. quarter in interest the loan increases date. were rate net a basis plus page USD quarter equivalent XXXX to yields and basis to second XXXX. accretion to interest The interest points accreted to On to second net was X immediate institution's the points. as margin sheet. accreted the static mix XX interest-earning year resulted X rate the basis ago mix in XX, the the in repricing assets in decreased first On is unchanged and the base minus details net considered of interest by of the rate of contains X.XX the shift increase quarter second the quarter balance XXXX on positively largely position. of analysis months scenarios income case XXX the for assume more impacted liability from quarter X All billion smaller modestly. a during in under Page The quarter applies in a curve calculates base and rate in

slightly increased declined. sensitivity sensitivity while liability Asset

next reprice largely unchanged. is month to Additionally, assets months. XX rate in XX.X% XX.X% NII decline the X and repriced exposure larger Currently, of in

of on to Moving noninterest quarter USD USD income totaled million page XXXX the second and XX, to in first as year-ago XX.X the million quarter quarter the compared USD in XXXX. of million XX.X XX.X in

quarter Class of compared is quarter stock Class Second second lower common totaled million to as The our the of Visa C into X.X Gain of net equity the X.X X combination loan common due the Class mortgage million loans on Visa to gain as totaled sales. shares stock 'XX. X.X USD margin at on XXXX. exchange of USD well a is of of in consequence 'XX B Visa decreased of common value during X gains quarter million volume and USD second decrease securities This fair B profit stock. a

of carried This per of X exchange, through Positively Visa was share net. or change into the USD the A the USD pay revenue, million of to common million quarter be is second in that it gain USD X.X as stock of X.X record price, Class million in common With offset at X capitalized loan the by publicly-traded rights million Visa value X.XX USD this B due to servicing fair the common decrease a while stock, C we servicing Class X. loan downs Visa of noninterest gain completion impacting USD partially mortgage was of continues X.X stock to on comprised mortgage due Class 'XX. is will income income the diluted convertible

the the quarter compensation As the quarter due million, Performance-based XXXX compared to increased in as XX.X to XX, to this detailed higher of for XXXX. annual USD update first outlook provided hourly as ago performance year. compensation solutions USD of X.X core incentive noninterest outlook implemented Data second and payout Page by quarter the our well to new XX.X processor year in expense salary growth primarily actual original asset million USD CPI-related increased as our ago frame. XXXX USD primarily costs million during quarter in during from million page employees. for and million period X.X January USD our of expected data second see the XX compared due XX.X on processing the year this in our and totaled time we cost to increases is how

estimated loans range. Mortgage while second loan positive in in outlook X.X% increased digits. Our quarter commercial 'XX. our annualized, quarter XX.X below which forecasted loans the growth the million is or of XXXX in mid-single of decreased USD Loans growth, second installment had

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

The USD XX,XXX our forecasted losses of expense credit second for provision was range. 'XX below an quarter

second USD totaled forecasted quarter Moving XX than to income USD on to noninterest XX.X of XX.X USD the million XXXX, of higher million our which million. XX, range in is page

Second X.X a ended second in range which million expense forecasted tax USD million, USD quarter June value to at XX, generated quarter, X.X Gain Mortgage USD Visa XXXX, million. was gain after XX.X million of share million, sales quarter XX.X XX.X is loan on respectively. our USD net securities attributed X USD stock. origination million of diluted per equity common of in within the million X.XX second to fair exchange Class the or gains X.X USD USD Noninterest of million B XX.X XXX.X USD loan the quarter in second the mortgage and USD of totaled servicing 'XX.

Our effective quarter income the second 'XX rate was for of in tax line our forecast. of XX% with

shares call over turn to no quarter second XXXX. That were the like my Brad. the prepared remarks. Lastly, would there of concludes I back now in to repurchased

William Kessel

and our year directly half for after very bank franchise, banking shareholders. our it very quarter-over-quarter a talented line strong making pleased first continue results environments with for performance time. with which and is built a our strong results focus effectively is and the positions for us team, our in communities been XXXX, customers, through some of in I'm to which delivering our delivering on manage attributable much easy. with to has connecting investing community consistent We've and their This strong company economic variety success well year

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

questions. With our the our we'd like time, excited a strong commercial our believe At cost noninterest and value open controlling we to managing point about we proposition continue to funds we are customer large bank, the for of expenses. offered in can as our community this Accordingly, base grow future. call while

Operator

Brendan question is Our Instructions] [Operator Group. Nosal with Hovde first from

Brendan Nosal

off expansion [ start for. to probably than I healthy looking quite just really and interest net I the margin ] was here, was mean on stronger Maybe

move walk trends Just help pieces few the the half here? the moving as quarters from where back you of next on over we the could to year, the and margin through thoughts us

Gavin Mohr

sure. Yes,

continue the the core X So higher that we'll basis we points for the business. as some drift of accreted we we did view quarter, of fee that I have as part though accretion forecast. to anticipate to

end within The yes, that confident asset end I repricing moving we're continue well book believe up I what deposit drift up higher. we'll in think remix, to do the is that and market see to always But terms that see range it below we'll then pretty forecasted I'm we piece range. we'll rates. able provided January. the currently of that's in of in

Brendan Nosal

transaction Michigan this like end-market to M&A announced looks It activity continues in up heat morning. another with

what point, this in the [ at own activity participate in appetite renewed curious, the is kind Just ] your to state? of

William Kessel

of where a would history think Bank And -- institutions, we a it's continue not interested it has prospectively, other make but would Independent M&A. in with Brendan, I to sense, be selective partnering requirement.

not Our on is forecast X-year deal. a doing dependent

see surprised So, And not sense Michigan be more part going I'm market, to that of great. another the it and probably for be we'll that would in makes announcement us, see forward. we can and a if

Operator

open. with Damon is question next line KBW. DelMonte Our your from Damon now is

Matthew Renck

Matt is for Damon. first filling This in My loan just on was growth. question Renck

year, weigh paydowns to growth? Do should on Or the range? mentioned strong second we looking activity, just about to strong continue guys half You of origination the overall will think pipeline, payoffs but net get will forward growth? think back and how mid-single-digit you we to that

Joel Rahn

were is This feel Joel. executing that Yes. we our game plan. I really do

were about would we sell sold. number note, but we bunched we lose customer I of estate didn't had and projects were which within they XX extraordinary any And I that first million second as originations, happened, all Our payoffs quarterly a stronger in what payoffs said, the real quarter. business USD had time a slightly was was in a were the period. relationships, quarter a but than X-week of They

very just was it So unusual.

steady. at look been activity has and I our solid origination So,

been strong since Our it's mid-last year. as pipeline is

as we're right I actually We're by It's year this ahead. right to or be time slightly plan. looks on we weird, half -- growing good of expecting feel on original quarter our a year. first we'll our we like through year-end, of it's So, just the the second plan that went plan solid but get little think and original been the a half this

Matthew Renck

the to of expense any the growth expenses of the kind you you back can able you'll end offset year? any of expected the higher maintain Are kind with just Just there given pushing to growth? levers pull on range half be the do think range, of up in

William Kessel

jump Gavin, in can you and Well, too. here, I do,

is we're I we're the resources. was of given range how year I intact. the January area back in to every early our that think still at in using mean continuing look our and bank

And so, Gav, to your have anything is still that reasonable I in think it range there? different estimates.

Gavin Mohr

a -- the little I on said. catch quarter just just really the -- incentive focused was up. accrual driver for No, it's I well maybe this think more

some incentive So basis we if to million. that quarter compensation a linked X.X -- -- on a strong do was so had is that really the USD was catch-up quarter, quarter this -- and

agree Brad. I So, with

Operator

much. with very Race from is [Operator Nathan you Piper Thank question Sandler. next Instructions] Our

Nathan Race

Curious, if to margin expectations your the were maybe on you us of as September that the you XXXX, update get exit margin year? you into coming well end if of were Gavin, X if and out an maybe cut think late just Fed can about in do to cuts X to how

Gavin Mohr

Yes.

in position. think lower or pressure stable deposit So feeling cuts some would can maybe the the terms industry Fed positive. the the on is the that as in so the we're you do that profile, in a of be see of could rotation, I our terms pretty that a incentive NII, of

lose the see levels, if we're could I fairly that's tight deck, we're and we kind manage some -- loans positive of of to showing go the Additionally, new the on as But -- earnings as here profile. can inversion we also to current to we've continue don't a long-term. again, I trying think in at

So but not big, swing. overall, positive, big a

Nathan Race

there And contemplate think partial down maybe repurchases or some how maybe recognized just that guys share the guys just you additional maybe that kind some excess in road? a restructuring? curious, for securities quarter, Or share of you the with those you gains just redeploying to portfolio guys acquisitions proceeds about Visa of build the thinking capital

Gavin Mohr

Yes.

there Part was transaction the -- it. of So gates is Visa that on we conversation. it's had

month next to available shares point we're We the this become So that we only other -- won't able X/X and liquid. in X/X the of that became sold at won't until time, anticipate. we've convert actually

gains, us, see there to opportunities going we'll in at made are for management time, retain restructure forward or year-end. capital we want whether reevaluate by the what this and just then point the to decision Nathan, the book So to

Nathan Race

And think little the maybe came guess or some Levels gains. on as just XQ? a fee lower noncore towards XQ one to towards you items the adjustment, of visa items ] range [indiscernible] back, what and middle Do then maybe end around the on end lower I move range, [ in the on or one into we the came upper the maybe income. the MSR of excluding last in those be quarter Based one-time will of income the

Gavin Mohr

the the high loans. to did for sale middle. events the can say general had on what the saleable we're in but think Nathan, some on that pressure I seeing additional I unique mean, I on on up that also pressure margin. get pressure basis, some We able in effectiveness to been gain think back to put I'm the on loans tighten would the to move Then hesitant margin margin, put back that on we we've to portfolio we we some to a have, middle. quarter because that so pressure had market the there's call, working margin. I go-forward hedge

The increase, well. as would income we could there us an B other see it I if for swap be is opportunity piece think

Nathan Race

you are just perspective? see do from given today? terms that expecting the of seems provision given pickup do it maybe way half the guys Or much a Just the provide surplus the guys like to you lower, like growth reserves growth year, you for a of in just drift can exist feel that needing in back reserve the in loan in

William Kessel

to be That's great attributable that directly loan prospectively, And provisioning additional growth. I would Yes. question. our a think

little I those is think year a the at provision probably the gave guidance start -- So on of we the heavy. the

a related to expect event. a provision this had past we under so to loan us that, and credit something quarter barring growth. directly But greater what And would have I than but it's

And that the said is, ACL today have having of X.XX%. at do that, I in Now is probably think, subjective. the XX% we

the soft could materialize, if landing like lower, So feels sure to drift Nathan. continues like it it

tells head So in hopefully, sort our of it. a that long answer, on but you what's

Operator

much. very you Thank

the will team to conclude. have to hand management Brad back and questions, I We further no so

William Kessel

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

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

Operator

for Thank you much, today's This everyone, joining. very concludes call.

may disconnect now your You lines.

Independent Bank (IBCP) 25 Jul 242024 Q2 Earnings call transcript