Q4 2024 Independent Bank Corp Earnings Call
Operator: A notable 10% annualized growth rate in our loan portfolio for the fourth quarter of 2024. driven by an impressive 24% annualized growth rate in our commercial loan portfolio. This strong performance enabled us to achieve a $1 million increase in net interest income for the length quarter. contributing to a healthy net interest margin of 3.45%. Our credit metrics remain outstanding with watch credits and non-performing assets.
Our loan portfolio for the fourth quarter of 2024.
Driven by an impressive 24% annualized growth rate and our commercial loan portfolio.
This strong performance enabled us to achieve a $1 million increase in net interest income for the linked quarter.
Tribute into a healthy net interest margin of 3.45%.
Our credit metrics, our credit metrics remain outstanding with watch credits in nonperforming assets.
Operator: Near Historic Lowe's.
Near historic lows.
Brad: I am incredibly proud of our team's dedication and efforts throughout 2024, which translated into exceptional full-year results. We achieved balanced growth on both sides of the balance. with total loan growth of 7% and core deposit growth of 5%. For the year, we delivered a return on average assets of 1.27%, a return on average equity of 15.66%. Earnings per share growth of 13% and 13% growth in tangible book value per share. Looking ahead to 2025, we remain optimistic about sustaining these growth trends. Our confidence is bolstered by a robust commercial loan pipeline, the proven track record of our core team of professionals, and our ongoing strategic initiatives to invest in talent and technology.
I am incredibly incredibly proud of our team's dedication and efforts throughout 2024, which translated into exceptional full year results.
We achieved balanced growth on both sides of the balance sheet.
With total loan growth of 7% and core deposit growth of 5%.
For the year, we delivered a return on average assets of one 7% a return on average equity of $15 six 6%.
Earnings per share growth of 13%.
And 13% growth in tangible book value per share.
Looking ahead to 2025, we remain optimistic about sustaining these growth trends.
Our confidence is bolstered by our robust commercial loan pipeline.
The proven track record of our core team of professionals and our ongoing strategic initiatives to invest in talent and technology.
Brad: It is this optimism about our future that moved our board of directors earlier this month to approve an 8% increase in our quarterly dividend, marking the 12th consecutive annual increase for our shareholders. Moving to page five of our presentation, total deposits as of December 31, 2024 were $4.7 billion. Overall Core Deposits decreased $43 million during the fourth quarter of 24, but we're up $206 million for the full year. On a linked quarter basis, retail deposits increased by $52 million. Business deposits declined by $67 million, and municipal deposits declined by $24 million. Our existing customer base continues to exhibit a remix out of non-interest bearing and or lower yielding deposit products into our higher yielding product office.
It is this optimism about our future that moved our board of directors earlier this month to approve an 8% increase in our quarterly dividend, marking the 12th consecutive annual increase for our shareholders.
Moving to page five of our presentation total deposits as of December 31, 2024 were $4 7 billion.
Overall core deposits.
Decreased $43 million during the fourth quarter of 'twenty four.
We're up $206 million for the full year.
On a linked quarter basis retail deposits increased by $52 million.
Business deposits declined by $67 million in municipal deposits declined by $24 million.
Our existing customer base continues to exhibit a remix out of noninterest bearing and our lower yielding deposit products into our higher yielding product offerings.
Brad: But the remix pace continues to slow. Additionally, our sales team continues to bring in new relationships well below our wholesale cost of production.
With the remix pace continues to slow.
Additionally, our sales team continues to bring in new relationships well below our wholesale cost of funds.
Operator: On page 6, we have included in our presentation a historical view of our cost of funds as compared to the Fed Fund Spot Rate and Fed Effective Rate. For the quarter, our total cost of funds decreased by 18 basis points to 1.92%.
On page six we have included in our presentation, a historical view of our cost of funds as compared to the fed funds spot rate and fed effective rate for the quarter. Our total cost of funds decreased by 18 basis points to one point, 92%.
Brad: At this time, I'd like to turn the presentation over to Joel Rahn to share a few comments on the success we were having in growing our loan portfolios and provide an update on our credit metrics. Thanks, Brad. And good morning, everyone.
At this time I'd like to turn the presentation over to Joel run to share a few comments on the success, we were having in growing our loan portfolios and provide an update on our credit metrics.
Joel Run: Thanks, Brad and good morning, everyone on page seven we share an update on loan activity for the quarter.
Joel Rahn: On page seven, we share an update on loan activity for the quarter. We have strong loan generation to end the year as our strategy of adding experienced bankers to our team continues to supplement our growth. For the quarter, total loans grew by $96.5 million, or a 9.7% annualized rate. Commercial loan generation was very strong, with $112.1 million of Q4 growth, followed by $5.3 million of mortgage. Our installment loan portfolio declined $20.9 million in the quarter, primarily due to seasonality. As noted in the material, our new loan production continues to come on at yields well above the respective portfolio yield.
Joel Run: We had strong loan generation to end the year as our strategy of adding experienced bankers to our team continues to supplement our growth for.
Joel Run: For the quarter total loans grew by $96 5 million or a nine 7% annualized rate.
Joel Run: Loan generation was very strong with $112 1 million in Q4 growth.
Joel Run: Solid by $5 3 million of mortgage growth.
Joel Run: Installment loan portfolio declined $29 million in the quarter, primarily due to seasonality.
Joel Run: As noted in the material our new loan production continues to come on at yields well above the respective portfolio yield.
Joel Rahn: For the year, we realized $248 million of loan growth, representing a 6.5% increase. The commercial portfolio grew $257 million or 15% for the year. Our mortgage portfolio increased $31 million, while our installment portfolio declined $40 million due to softer consumer demand and strategic pricing decisions. Within the commercial loan activity, the mix of C&I lending versus investment real estate was 64% and 36% respectively, and 37% came from new customers to the bank.
Joel Run: For the year, we realized $248 million of loan growth, representing a six 5% increase.
Joel Run: The commercial portfolio grew $257 million or 15% for the year.
Joel Run: Our mortgage portfolio increased $31 million, while our installment portfolio declined $40 million due to softer consumer demand and strategic pricing discipline.
Joel Run: Within the commercial loan activity the mix of C&I lending versus investment real estate was 64% and 36% respectively.
37% came from new customers to the bank.
Joel Rahn: Based upon a solid commercial pipeline, we see continued growth opportunity in 2025 while maintaining our discipline credit standard.
Joel Run: Based upon our solid commercial pipeline, we see continued growth opportunity in 2025, while maintaining our disciplined credit standards.
Joel Rahn: Page 8 provides additional detail on our commercial loan portfolio. By design, it remains very well diversified, with the mix not changing appreciably over the course of 2020. It's worth noting that our exposure to the office segment stands at 82 million or 4.3% of our commercial portfolio at quarter end. And our office exposure consists primarily of suburban, low-rise office space with medical comprising 20% of our overall office exposure. The average loan size is $1.3 million, which points to the granularity of the segment of the portfolio.
Joel Run: Page eight provides additional detail on our commercial loan portfolio by design. It remains very well diversified with the mix not changing appreciably over the course of 2024.
Joel Run: It's worth noting that our exposure to the office segment stands at $82 million or four 3% of our commercial portfolio at quarter end.
Joel Run: And our office exposure consists primarily of suburban low rise office space with medical comprising 20% of our overall office exposure.
Joel Run: Average loan size is $1 3 million, which points to the granularity of the segment of the portfolio.
Joel Rahn: For additional insight into office exposure, I refer you to page 25 of the appendix to this presentation.
Joel Run: For additional insight into office exposure I refer you to page 25 of the appendix to this presentation.
Joel Rahn: Key credit quality metrics and trends are outlined on page 9. Overall, credit quality continues to be excellent, as Brad commented earlier. Total non-performing loans were $6 million, or approximately 15 basis points of total loans at quarter end, up just slightly from 13 basis points at 930. Past due loans totaled $7 million, or 17 basis points, again, up slightly from 12 basis points at $9 million. It's not reflected on the slide, but worth noting that our net charge offs were two basis points of average loan.
Joel Run: Key credit quality metrics and trends are outlined on page nine.
Joel Run: Overall credit quality continues to be excellent as Brad commented earlier.
Joel Run: Total nonperforming loans were $6 million or approximately 15 basis points of total loans at quarter end up just slightly from 13 basis points at 930.
Joel Run: Past due loans totaled $7 million or 17 basis points again up slightly from 12 basis points at 930.
It is not reflected on this slide but worth noting that our net charge offs were two basis points of average loans for the year.
Gavin: At this time, I'd like to turn the presentation over to Gavin for his comments, including the outlook for the remainder, I should say, for 2025. Gavin? Thanks, Joel. Good morning, everyone. I'm starting at page 10 of our presentation. Page 10 highlights our strong regulatory capital position. Turning to page 11, net interest income increased $2.7 million from the year-ago period. Our tax equivalent net interest margin was 3.45% during the fourth quarter of 2024, compared to 3.26% in the fourth quarter of 2023, and up eight basis points from the third quarter of 2024. Average interest earning assets were $5.01 billion in the first quarter of 2024, compared to $4.93 billion in the year-ago quarter, and $4.99 billion in the third quarter of 2024.
Joel Run: At this time I would like to turn the presentation over to Gavin for his comments, including the outlook for the remainder.
Speaker Change: I should say for 2025, Kevin.
Gavin: Thanks, Joel and good morning, everyone I am starting at page 10 of our presentation.
Page 10 highlights our strong regulatory capital position.
Gavin: Turning to page 11, net interest income increased $2 $7 million from the year ago period, our tax equivalent net interest margin was 345% during the fourth quarter of 2024 compared to $3 two 6% in the fourth quarter of 2023 and up eight basis points from the third quarter of 2024.
Gavin: <unk> <unk>.
Gavin: Average interest, earning assets were $5.01 billion in the first quarter of 2024 compared to $4 $93 billion in the year ago quarter, and $4 $99 billion in the third quarter of 2024.
Gavin: Page 12 contains a more detailed analysis of the link quarter increase in net interest income and in the net interest margin. On a link quarter basis, our fourth quarter, 24 net interest margin was positively impacted by three factors. A decrease in funding costs of 17 basis points, change in earning asset mix positive 4 basis points, and change in earning and interest bearing liability mix added 3 basis points. These were partially offset by a decrease in the yield on earning assets of 16 basis points. On page 13, we provide details on the institution's interest rate risk position.
Gavin: Page 12 contains a more detailed analysis of the linked quarter increase in net interest income.
Gavin: And the net interest margin on a linked quarter basis, our fourth quarter 24, net interest margin was positively impacted by three factors. The decrease in funding costs of 17 basis points change in earning asset mix positive four basis points in change and Ernie and interest bearing liability mix.
Gavin: Added three basis points.
Gavin: These were partially offset by a decrease in the yield on earning assets of 16 basis points.
Gavin: On page 13, we provide details on the institution's interest rigorous position the comparative simulation analysis for fourth quarter 'twenty four in third quarter 2004 calculates the change in net interest income over the next 12 months under five rate scenarios, all scenarios assume a static balance sheet.
Gavin: The comparative simulation analysis for fourth quarter 24 and third quarter 24 calculates the change in net interest income over the next 12 months under five rate scenarios. All scenarios assume a static balance sheet. The base rate scenario applies the spot yield curve from the valuation date. The shock scenarios consider immediate, permanent, and parallel rate changes. The base case model NII is modestly higher during the quarter as asset yields were augmented by a shift in asset mix and deposit betas were slightly higher than expected. The NII sensitivity position shows less exposure to declining rates due to a slower asset repricing.
Gavin: The base rate scenario applies the spot yield curve from the valuation date, the shock scenarios consider immediate permanent and parallel rate changes the base case model. The NII is modestly higher during the quarter as asset yields were augmented by a shift in asset mix and deposit betas were slightly higher than expected.
Gavin: The NII sensitivity position shows less exposure to declining rates due to a slower asset repricing during the quarter. The bank added $50 million in floors sensitivity of the existing fours four portfolio increases the fed lowered rates by 50 basis points. Additionally, NII for a larger rate declines benefit.
Gavin: During the quarter, the bank added $50 million in floors. Sensitivity of the existing floors for portfolio increases, the Fed lowered rates by 50 basis points. Additionally, NII for larger rate declines benefited from loans with embedded floors and reduced call risk on mortgages due to higher term rates. Currently, 35.7% of assets repriced in one month and 46.9% repriced in the next 12 months.
Gavin: From loans with embedded floors and reduce call risk on mortgages due to higher term rates currently 35, 47% of assets re price in one month and 46, 9% reprice in the next 12 months.
Gavin: Moving on to page 14. Non-interest income totaled $19.1 million in the fourth quarter of 2024, compared to $9.1 million in the year-ago quarter and $9.5 million in the third quarter of 2024. Fourth quarter 2024 net gains on mortgage loans totaled $1.7 million, compared to $2 million in the fourth quarter of 2023. The decreases due to lower profit margins that was partially offset by a higher volume of loan sales. positively impacting non-interest income with $7.8 million gain on mortgage loan servicing net. This is comprised of $6.5 million or $0.24 per diluted share after tax gain due to change in price and $2.2 million of revenue that was partially offset by $1 million decrease due to paydowns in the fourth quarter of 2024.
Gavin: Moving on to page 14, noninterest income totaled $19 $1 million in the fourth quarter of 2024 compared to $9 $1 million in the year ago quarter, and $9 $5 million in the third quarter.
Gavin: 2020 for fourth quarter 24, net gains on mortgage loans totaled $1 $7 million compared to $2 million in the fourth quarter 'twenty three the decreases due to lower profit margins that was partially offset by a higher volume of loan sales.
Gavin: Also impacting noninterest income was $7 $8 million gain on mortgage loan servicing net this is comprised of $6 5 million or <unk> 24 per diluted share after tax gain due to change in price and $2 $2 million of revenue that was partially offset by $1 million decrease due to paydowns in the fourth quarter.
Gavin: <unk> 44.
Gavin: In early December, the company executed a letter of intent to sell approximately $971 million, or 27 percent, of the mortgage servicing rights to a third party. This sale will represent approximately $13.5 million, or 27 percent, of the total capitalized mortgage servicing right asset. There was no financial impact in the fourth quarter of 2014 related to this transaction. The intention of this sale is to lower the potential earnings volatility rate related to this asset in future periods. As detailed on page 15, our non-interest expense totaled $37 million in the fourth quarter of 2024, as compared to $31.9 million in the year-ago quarter and $32.6 million in the third quarter of 2024.
Gavin: In early December the company executed a letter of intent to sell approximately $971 million or 27% of the mortgage servicing rights to a third party. This sale will represent approximately $13 5 million or 27% of the total capitalized mortgage servicing right.
Gavin: Asset there was no financial impact in the fourth quarter 24 related to this transaction the attention of the sales to lower the potential earnings volatility.
Gavin: <unk> to this asset in future periods.
Gavin: As detailed on page 15, our noninterest expense totaled $37 million in the fourth.
Gavin: <unk> fourth quarter of 2024, as compared to $31 9 million in the year ago quarter, and $32 $6 million in the third quarter of 2024.
Gavin: Compensation expense increased $8 million, or $0.8 million, primarily due to salary increases related to adjustments made at the beginning of the year, as well as additions to the commercial banking team. Performance-based compensation increased $2.7 million due primarily to higher expected incentive compensation payout for salaried and hourly employees. Data processing costs increased by $0.8 million from the prior year period, primarily due to core data processor annual asset growth and CPI-related cost increases, as well as new solutions implemented during this time frame. Payroll taxes and employee benefits increased $0.3 million, primarily due to higher healthcare-related costs.
Gavin: Compensation expense increased $8 million or $8 million, primarily due to salary increases related to adjustments made at the beginning of the year as well as additions to the commercial banking team.
Gavin: Performance based compensation increased to $47 million due primarily to higher expected incentive compensation payout for salary salaried and hourly employees.
Gavin: Data processing cost increased by <unk> 8 million from the prior year period, primarily due to core data processor annual asset growth in CPI related cost increases as well as new solutions implemented during this timeframe.
Gavin: Eyeroll taxes, and employee benefits increased $3 million, primarily due to higher healthcare related costs.
Gavin: Page 16 is an update for our 2024 Outlook to see our actual performance during the fourth quarter compared to the original Outlook we provided in January 2024. Our Outlook estimated loan growth in the mid-single digits. Loans increased $96.5 million in the fourth quarter of 2024, or 9.7% annualized, which is above the forecasted range. Commercial and mortgage loans had growth, while installment loans decreased in the fourth quarter of 2024. Four-year loan growth totaled $247.9 million, or 6.5%, which is within our forecasted range. Fourth quarter of 2024, net interest income increased by 6.8% over 2023, which is within our forecast of mid-single-digit growth.
Gavin: Page 16 is our is an update for 2024 outlook to see our actual performance during the fourth quarter compared to the original outlook. We provided in January of 2024, our outlook estimated loan growth in the mid single digits loans increased $96 $5 million in the fourth.
Gavin: <unk> 24, or nine 7% annualized which is above the forecasted range commercial and mortgage loans had growth while installment loans decrease in the fourth quarter 'twenty for full year loan growth totaled $247 9 million or six 5%, which is within our forecasted range.
Gavin: Fourth quarter 2024, net interest income increased by six 8% over 2023, which was within our forecast of mid single digit growth. The net interest margin was 345% for the current quarter and three to $3 two 6% for the prior year quarter and up eight basis points.
Gavin: The net interest margin was 3.45% for the current quarter and 3.26% for the prior year quarter, and up 8 basis points from a linked quarter of 2024. Our full year 2024 net interest margin was 3.38% compared to 3.26% in 2023. The 12 basis point annual increase was within our forecasted range. The fourth quarter 2024 provision for credit losses was an expense of $2.2 million. The full year 2024 provision was 4.5 million or 14 basis points annualized of average loans, which was below our forecasted range. Moving on to page 17, non-interest income totaled $19.1 million in the fourth quarter of 2024, which was higher than our forecasted range of $11.5 to $13 million.
Gavin: From a linked quarter of 2020 for full year 2024, net interest margin was 338% compared to $3 two 6% in 2023, the 12 basis point increase annual increase was within our forecasted range.
Gavin: <unk> fourth quarter 2020 for provision for credit losses was an expense of $2 $2 million. The full year 2020 for provision was $454 5 million or <unk>.
Gavin: Basis points annualized of average loans, which was below our forecasted range.
Gavin: Moving on to page 17, noninterest income totaled $19 $1 million in the fourth quarter of 24, which was higher than our forecasted range of 11, 5% to $13 million fourth quarter 2024, more mortgage loan originations sales and gains totaled $134 1 million or 100.
Gavin: Fourth quarter 2024 mortgage loan originations, sales and gains totaled $134.1 million, $106.2 million, and $1.7 million respectively. Mortgage loan servicing net generated a gain of $7.8 million in the fourth quarter of 2024. Full year 2024 non-interest income totaled $56.4 million, an increase of 11.2 percent, which is higher than our forecasted range. Non-interest expense was $37 million in the fourth quarter, higher than our forecasted range of $32 to $33.5 million. For full year 2024, non-interest expense increased 6.3 percent, which was higher than the forecasted range provided in January. Our effective income tax rate of 18.9 percent and 19.6 percent for the fourth quarter of 2024 and full year 2024, respectively.
Gavin: $6 2 million and $1 7 million, respectively mortgage loan servicing that generated a gain of $7 8 million in the third and fourth quarter 2024.
Gavin: Full year 2020 for noninterest income totaled $56.
Gavin: $4 million, an increase of 11, 2%, which is higher than our forecasted range.
Gavin: Noninterest expense was $37 million in the fourth quarter higher than our forecasted range of 32 to $33 $5 million.
Gavin: For full year 2020 for noninterest expense increased six 3%, which was higher than the forecasted range provided in January our effective income tax rate of 18, 9% or 19, 6% for the fourth quarter of 'twenty, four and full year 2024, respectively.
Operator: Lastly, there were no shares repurchased in the fourth quarter or for whole year 2024.
Gavin: Lastly, there were no shares repurchased in the fourth quarter or for full year 2024.
Gavin: Turning to page 18, this will summarize our initial outlook for 2025. The first column is loan growth. We anticipate loan growth in the mid-single-digit range and are targeting four-year growth rate of 5% to 6%. We expect to see growth in commercial and mortgage loans, with installment loans declining. This outlook assumes a stable Michigan economy. Next is interest income, where we are forecasting a growth rate of 8% to 9% over full year 2024. We expect the net interest margin to increase 20 to 25 basis points in 2025 compared to full year 2024, primarily due to decreasing yields on interest bearing liabilities that is partially offset by a decrease in earning asset yields.
Gavin: Turning to page 18, this will summarize our initial outlook for 2025, the first column as loan growth, we anticipate loan growth in the mid single digit range and are targeting full year growth rate of 5% to 6%, we expect to see growth in commercial and mortgage loans with installment loans declining.
Gavin: This outlook assumes a stable mission, Michigan economy.
Gavin: Next is interest income, where we are forecasting a growth rate of 8% to 9% over full year 2024, we expect the net interest margin to increase 20% to 25 basis points.
Gavin: In 2025 compared to full year 2024, primarily due to decreasing yields on interest bearing liabilities.
Gavin: Partially offset by a decrease in earning asset yields. This forecast assumes a 25 basis point cut in March and August while long term interest rates increased slightly from year end 2024 levels.
Gavin: This forecast assumes a 25 basis point cut in March and August while long-term interest rates increase slightly from year-end 2024 levels. A full year 2025 provision expense for the allowance for credit losses of approximately 0.15 to 0.25 of average portfolio loans would not be unreasonable. Related to non-interest income, we estimate a range of $11 million to $12 million in the first and second quarter, followed by a range of $12 to $13 million in the third and fourth quarter of 2025. We estimate total for the year to decrease 14% as compared to 2024. We expect mortgage loan origination volumes and net gains on sales to be similar to 2024.
Our full year 2025 provision expense for the allowance for credit losses of approximately <unk>.
Gavin: One five to two five of average portfolio loans would not be unreasonable.
Gavin: Related to noninterest income, we estimate a range of 11 million to $12 million in the first and second quarter, followed by a range of $12 million to $13 million in the third and fourth quarter of 2025.
Gavin: We estimate total for the year to decreased 14% as compared to 2024, we expect mortgage loan origination volumes and net gains on sales to be similar to the 2024.
Gavin: Our outlook for non-interest expense is a quarterly range of $34.5 million to $35.5 million, with a total for the year 3% to 4% higher than the 2024 actuals. The primary driver is an increase in compensation and employee benefits, data processing, and occupancy. Our outlook for income taxes is an effective rate of approximately 19 percent, assuming the statutory federal corporate income tax rate does not change during 2025. Lastly, the Board of Directors authorized share repurchase of approximately 5 percent for 2025. Currently, we're not modeling any share repurchase in the year 2025.
Gavin: Our outlook for noninterest expense as a quarterly range of $34 5 million to $35 $5 million with a total for the year.
Gavin: 3% to 4% higher than the 2024 actuals. The primary driver is the an increase in compensation and employee benefits data processing and occupancy.
Gavin: Our outlook for income taxes at an effective rate of approximately <unk> 19 per se and assuming the statutory federal corporate income tax rate has not changed during 2025 Lastly, the board of directors authorized share repurchase of approximately 5%.
Gavin: For 2025.
Gavin: Currently we're not modeling any share repurchase in the year 2025 that concludes my prepared remarks, I would like to now turn the call back over to Brad.
Operator: That concludes my prepared remarks.
Brad: I would like to now turn the call back over to Brad. Thanks, Gavin. I'm very pleased with another solid quarter for 2024. And it is very much in line with the strong results which our company has been delivering quarter over quarter year after year for some time. This success is directly attributable to our talented team, their focus on connecting with customers, investing in our communities, and Making Banking Easy. We built a strong community bank franchise which positions us well to effectively manage for a variety of economic environments and continue delivering strong and consistent results for our shareholders.
Brad: Thanks, Kevin I'm very pleased with another solid quarter for 2024 and it is very much in line with the strong results, which our company has been delivering.
Brad: Over quarter year after year for some time.
Brad: This success is directly attributable to our talented team their focus on connecting with customers investing in our communities.
Brad: And making banking easier.
Brad: We've built a strong community bank franchise, which positions us well to effectively manage through a variety of economic environments and continue delivering strong and consistent results for our shareholders.
Brad: As we move into 2025, our focus will be continuing to invest in our team, leveraging our technology, and supporting our communities. In doing so, we will continue the rotation of our earning assets out of lower yielding investments and into higher yielding loans. With the strong value proposition offered as a large community commercial bank, we believe we can continue to grow our customer base while managing our cost of funds and controlling our non interest expenses.
Brad: As we move into 2025, our focus will be continuing to invest in our team.
Brad: Leveraging our technology and supporting our communities and doing so we will continue the rotation of our earning assets out of lower yielding investments and into higher yielding loans.
Brad: With the strong value proposition offered as a large community commercial bank. We believe we can continue to grow our customer base, while managing our cost of funds and controlling our non interest expenses. Accordingly, we are very excited about our future.
Brad: Accordingly, we are very excited about our future.
Operator: At this point, we would now like to open up the call for questions. Thank you very much. If you would like to ask a question, please press star followed by one on your telephone keypad now. Please ensure your device is unmuted locally. If you change your mind or your question has already been answered, please press star followed by two.
Brad: At this point, we would now like to open up the call for questions.
Brad: Thank you very much if you would like to ask a question. Please press star followed by one on your telephone keypad now. Please ensure you have devices on mute. Okay. If you change your mind on your question has already been answered. Please press star followed by two.
Adam Roll: First question comes from Adam Roll with Piper Sandler. Adam, your line is now open. Please go ahead.
Speaker Change: Alright, great question.
Speaker Change: From Dan Farrell with Piper Sandler Your line is now open. Please go ahead.
Adam Carroll: Hi, this is Adam Carroll, I'm your next speaker, it's good morning, and thank you for taking the time to join us today. Good morning, Adam. We're having trouble hearing you breaking up. Yeah. Sorry, Adam, could you double check your line? as you are breaking up. Adam, can you hear us? Sorry, Adam, your line is breaking up.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thanks for taking my question.
Speaker Change: Good morning, Adam we're having trouble hearing you are breaking up.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: And then could you just double check your line.
Speaker Change: You are breaking up.
Speaker Change: Hi can you hear me.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Sorry, Adam your line is breaking up.
Operator: We will have to move on to the next question.
Speaker Change: We will have to move on to the next question.
Brendan Nosal: The next question comes from Brendan Nosal with Hovda Group. Brendan, your line is now open. Please go ahead. Hey, good morning folks. Can you hear me? Yes. Good morning, Brendan. Fantastic. Anyway, good morning. Sorry, I was having some phone issues earlier. Maybe to start off on the lending outlook for 2025, you've had a lot of success in recent years in adding commercial bankers to your platform. Just wondering how you view opportunities for continued banker ads across 25, especially given disruption, M&A disruption in your markets and how that might factor into your strong commercial loan growth.
Speaker Change: Next question comes from Brendan Nosal with that group.
Brendan Nosal: Brendan Your line is now open. Please go ahead.
Brendan Nosal: Hey, good morning folks can you hear me.
Speaker Change: Yes, yes.
Brendan Nosal: Good morning Brendan.
Speaker Change: Fantastic.
Brendan Nosal: Hey, good morning, sorry, I was having some phone issues earlier wanted to make sure you can hear me.
Brendan Nosal: Maybe to start off on the lending outlook for 2025, you've.
Speaker Change: <unk> had a lot of success in recent years, adding commercial bankers to your platform I'm just wondering how you view opportunities for continued anchored ads.
25, especially given disruption M&A disruption in your markets and how that might factor into your strong commercial loan growth guidance for the year. Thanks.
Brad: Yeah, sure. Let me I'll take first shot. And then I'd like maybe Joel to jump in a little bit. And, you know, we've really had the green light in recruiting now for quarter after quarter, year after year, and not necessarily adding teams, but just individuals. And I think the pace that we've displayed in recent history, we would like to continue. And I do think that there continues to be disruption in the marketplace, maybe different entities, but definitely opportunity. And so, Joel, maybe jump in. Yeah, you summed it up really well, Brad. I don't have a lot to add.
Joel Run: Yeah sure let me I'll take first shot and then maybe Joel jump in a little bit and.
Joel Run: We really have the green light and recruiting.
Joel Run: Now for quarter after quarter year after year end.
Joel Run: <unk>.
Speaker Change: Certainly, adding teams put just individuals and I think the pace.
Joel Run: We've.
Joel Run: Displayed in recent history.
Joel Run: We would like to continue.
Joel Run: And <unk>.
Joel Run: And I do think that.
Joel Run:
Joel Run: There continues to be disruption in the marketplace, maybe maybe different entities, but.
Joel Run: Definitely opportunity and so Joel maybe jump in and yes.
Speaker Change: You summed it up really well for Ed I don't have a lot to add I would agree that.
Joel Rahn: I would agree that... We want to just continue the momentum. We think the pace at which we've been adding talent is realistic. To us, that means probably another handful of good banker additions this year. And we're already one in that column for the start of the year. So we added an experienced banker here earlier this month. And we'll continue to, as Brad said, It's not just simply the M&A disruption, but that certainly helps to create opportunities to talk to people that want to join a solid community bank organization. So we'll just continue that focus as we go.
Speaker Change: We want to continue the momentum we think the pace at which we've been adding talent.
Speaker Change: Is realistic to us that means probably another handful of good banker additions this year.
Speaker Change: And we're already one one in that column for the start of the year. So we added an experienced banker here.
Speaker Change: Earlier this month and.
Speaker Change: And we will continue to as Brad said.
Speaker Change: So it's not just simply the M&A disruption, but that certainly helps to create opportunities to talk to people who want to join a solid community Bank organization.
Speaker Change: So we will just continue that focus as we move through the year Brent.
Gavin: Okay, well, thank you very much for the color there. Maybe one more for me. Just looking at the margin outlook for the year, I mean, the full year guidance implies quite a bit of expansion, not only for the full year, but kind of across 2025 as we move through the year. Can you just offer some color on how you expect the cadence for expansion to play out across the year? Like, is it roundable throughout the year? And then kind of where you see the margin exiting 2025 based on that full year? Yeah, this is this is Gavin.
Speaker Change: Okay, well, thank you very much for the color there.
Speaker Change: Maybe one more for me just looking at the margin outlook for the year. The full year guidance implies quite a bit of expansion not only for the full year, but I kind of across 2025 as we move through the year can you just offer some color on how you expect the cadence for expansion to play out across the year is it ratable throughout the year.
Speaker Change: And then kind of where you see the margin exiting 2025 based on that full year outlook. Thank you.
Gavin: Yes. This is this is gavin.
Gavin: It is, I think Radible is a fair label, Brendan. And then, again, we wouldn't as we as we put in the deck, we're expecting four year expansion in the 2025 base point range over, over where we're currently, where we finished up for 2424.
Speaker Change: It is I think ratable is fair.
Speaker Change: Fair.
Speaker Change: Sure.
Speaker Change: Label, Brendan and then again.
Speaker Change: We put in the deck, we're expecting full year expansion in 2025 basis point range.
Speaker Change: Over over where we're currently where we finished up for 'twenty four 'twenty four so.
Operator: So Well, thank you for taking the question.
Speaker Change: Okay.
Okay, great well, thank you for taking the questions I appreciate it.
Speaker Change: Thanks.
Matt Renck: Our next question comes from Damon DelMonte with KBW. Damon, your line is now open. Please go ahead. Hey, everybody, this is Matt Renck filling in for Damon DelMonte. Hope everybody's doing well. Um, my first question just on the, uh, hi, everybody. Uh, just as a follow-up to the, to the loan growth question, um, just given the momentum you guys have in commercial from the years past, should we expect? More even growth profile throughout the year, or will it be more similar to this one where it kind of dips back down and strengthens towards the year end?
Speaker Change: Our next question comes from Damon Delmonte with K B W. Damon Your line is now open. Please go ahead.
Speaker Change: Hey, everybody. This is Matt ranked filling in for Dave and del Monte Hope everybody is doing well.
Speaker Change: Hi, My first question just on the.
Speaker Change: Hi, everybody.
Speaker Change: As a follow up to the loan growth question.
Speaker Change: Just given the momentum you guys have in commercial from the years past should we expect.
Speaker Change: More even growth profile throughout the year or it will be more similar to this one where it kind of dips back down and strengthened towards the year end.
Joel Rahn: You know, this is Joel. It's always difficult to predict exactly, you know, the timing of things booking, but, you know, first quarter generally is a little bit softer. And so I would not be surprised to see the, you know, the early part of the year being that way that that is pretty much true to to history. So, but I think it comes across pretty evenly throughout the year. This past year, we had a very unusual second quarter where we just happened to have a number of large payoffs, companies sold, some real estate projects that sold.
Speaker Change: This is Joe.
Speaker Change: It's always difficult to predict exactly the timing of.
Speaker Change: Things booking but.
Speaker Change: First quarter generally is a little bit softer.
Speaker Change: And so I would not be surprised to see that the early part of the year being that way.
Speaker Change: That is pretty much true to to history.
Speaker Change: So, but I think it comes across pretty evenly throughout the year last last this past year, we had a very unusual second quarter, where we just have a net.
Speaker Change: Have a number of large payoffs companies sold some real estate projects that sold.
Joel Rahn: So the second quarter this year was extraordinary. And yet, if you dig beneath the numbers and look at our production, it was pretty smooth throughout the year. So I don't think there's a ton of difference one quarter to the next.
Speaker Change: Second quarter. This year was extraordinary and yet if you dig beneath the numbers and look at our production it was pretty smooth throughout the year. So I don't think there is a.
Speaker Change: Tun a difference one quarter to the next.
Gavin: Okay, got it. Thank you. And then just following up on margin, the forecast assumes two cuts. Just assuming we get no cuts this next year, do you think asset yields can still, you know, outpace liability costs to give you expansion, just maybe not to to the same degrees? That how we should think about it? Yeah, so I'll just give you the number, if the Fed didn't cut, everything else held the same. in the yield curve, asset mix, liability mix as we've budgeted, it's a three to five basis point decline in margin. Okay, got it, thank you.
Speaker Change: Okay got it. Thank you and then just following up on margin the forecast assumes two cuts.
Speaker Change: Just assuming we get no cuts. This next year do you think asset yields can still outpace liability cost to give you expansion just maybe not to.
Speaker Change: So the same degrees that how we should think about it.
Speaker Change: So I'll just give you the number.
Speaker Change: If the fed didnt caught everything else held the same.
Speaker Change: And the yield curve asset mix liability mix as we budgeted.
Speaker Change: It is.
Speaker Change: It's a three to five basis point decline in margin.
Speaker Change: Okay got it thank you.
Speaker Change: Yep.
Matt Renck: I'll step back. Thank you.
Speaker Change: I'll step back now.
Speaker Change: Thank you just as a reminder, if you would like to ask a question. Please press star.
Operator: Just as a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad now.
Speaker Change: By one on your telephone keypad now.
Adam Kroll: Our next question comes from Nathan Grace with Piper Sandler. Nathan, your line is now open. Please go ahead. Hi, this is Adam Kroll, on for Nathan Race, can you guys hear me okay? Yes, we can hear you clearly. I started about that earlier. So I guess just a question, piggybacking on the margin, is could you guys remind me how much you have in fixed rate loans repricing over the next year? fixtures. So the portfolio is about. So 35, I'll give you the asset base, so 35.7% of total assets repriced in one month. 47% reprice in the next 12 months.
Speaker Change: Our next question comes from Nathan race with Piper Sandler Nathan Your line is now open. Please go ahead.
Speaker Change: Hi, This is Alan crawl on for Nathan race can you guys hear me okay.
Speaker Change: Yes, we can hear a clear warning.
Speaker Change: Sorry about that earlier.
Speaker Change: So I guess just.
Speaker Change: Just a question piggybacking on the margin is could you guys remind me how much you have in fixed rate loans repricing over the next year.
Speaker Change: The extreme so the portfolio.
Speaker Change: Yes.
Speaker Change: Is about.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: So 35, I'll give you the asset base. So 35, 7% of total assets reprice in one month and 47% reprice in the next 12 months.
Gavin: Now that does include $120 million of securities runoff. Okay, I appreciate that.
Speaker Change: Now that does include a $120 million.
Speaker Change: Of Securities run off.
Speaker Change: Yes.
Speaker Change: Okay I appreciate that.
Gavin: And then kind of going off of that... How are you guys planning to fund that mid-single-digit loan growth guide? And just kind of what expectations do you have for deposit growth baked into there? Yeah, so the positive growth for the year on a core basis, we're targeting that around 3%. That's going to be a little less than what we saw for 2024, but total deposits will only be enough, about 1.5 to 2%. Okay, I appreciate the color there. And then last one for me is just, were you focusing in terms of deposit pricing competition within your area?
Speaker Change: And then kind of going off of that.
Speaker Change: How are you guys planning to fund that mid <unk> mid single digit loan growth guide and just kind of what expectations do you have for deposit growth baked into that.
Speaker Change: Yes, so deposit growth.
Speaker Change: For the year on a core basis, we're targeting that that around 3%.
Speaker Change: That's going to be a little less than what we saw for 2024, but total total deposits.
Speaker Change: Only being up about 152%.
Speaker Change: Okay I appreciate the color there.
Speaker Change: And then last one from me is just.
Speaker Change: Or are you focusing in terms of deposit pricing competition within your area and I guess, how has that evolved over maybe the past 90 days or so.
Gavin: And I guess how has that evolved over maybe the past 90 days or so? Yeah, there's still plenty of competition out there. We have been able to, and you can see it on the deck, it's page six. I've been really pleased with our ability to make some adjustments as they've been lowered, the Fed has lowered short-term rates. That being said, there's some, because of the market and the competition, there is some lag there. But overall, rates have stepped down, but there is no shortage of one-off specials in our markets that are being offered. Got it.
Speaker Change: Yes.
Speaker Change: Still plenty of competition out there.
We have been able to and you can see it on.
Speaker Change: On the deck.
Speaker Change: Page six.
Speaker Change: I've been really pleased with our ability to make some adjustments as the.
Speaker Change: They've lowered the fed has lowered short term rates.
Speaker Change: That being said there is some because of the market and the competition there is.
Speaker Change: There are some there is some lag there.
Speaker Change: But.
Speaker Change: Overall.
Speaker Change: Rates have stepped down.
Speaker Change: There is no shortage of one off specials in our markets.
Speaker Change: That are being offered.
Speaker Change: Got it thanks for taking my questions I'll step back now.
Adam Kroll: Thanks for taking my questions. I'll stop back now.
Operator: Thank you.
Speaker Change: Thank you.
Speaker Change: Yeah.
Brendan Nosal: Our next question comes from Brendan Nosal with Hovde Group. Brendan, your line is now open, please go ahead. Hey, just to follow up on the margin commentary with no cuts, you said a 3 to 5 basis point decline in the margin. That's versus the current outlook, not versus 2024 margin, correct? Yeah, thanks for clarifying that. That's right, Brendan. got it okay so instead of 20 to 25 it would be you know 18 to 22 something like that right yes yeah perfect It's fantastic.
Brendan Nosal: Our next question comes from Brendan Nosal with hub group Brendan Your line is now open. Please go ahead.
Brendan Nosal: Hey, just a follow up on the.
Brendan Nosal: The margin commentary with no cuts.
Brendan Nosal: You said three to five basis point decline in the margin that's versus the current outlook numbers is 2024 margin correct.
Brendan Nosal: Yes, thanks for clarifying that Brendan.
Brendan Nosal: Brendan.
Brendan Nosal: Got it okay. So instead of 20 to $25 80.
Brendan Nosal: 18% to 22% or something like that right.
Brendan Nosal: Yes, yes perfect.
Speaker Change: Fantastic Okay. Thanks for taking the follow up I appreciate it.
Brendan Nosal: OK, thanks for taking the follow-up.
Operator: Thank you very much, everyone.
Speaker Change: Thank you very much everyone that concludes the questions and answer this.
Brad: That concludes the questions and answers session. I will now hand back over to Brad for any closing remarks. Thanks, Ezra. In closing, I would like to thank our board of directors and our senior management for their support and leadership. I also want to thank all of our associates. I continue to be so proud of the job being done each day by each member of our team. Each team member in his or her own way continues to do their part toward a common goal of guiding our customers to be independent. Finally, I would like to thank each of you for your interest in Independent Bank Corporation and for joining us on today's call.
Question I will now hand back over to Brad for any closing remarks.
Brad: Thanks Ezra.
Speaker Change: In closing I would like to thank our board of directors and our senior management for their support and leadership I also want to thank all of our associates I continue to be so proud of the job being done each day by each member of our team each team member in his or her own way continues to do their part toward a common goal of guiding our customers to be in.
Speaker Change: Finally, I would like to thank each of you for your interest in independent Bank Corporation and for joining us on today's call.
Operator: Have a great day. Thank you very much, Brad. And thank you to all the speakers who have joined us today.
Speaker Change: Have a great day.
Speaker Change: Okay.
Speaker Change: Thank you very much Brad and thank you to all the speakers who have joined US today that concludes today's call. You may now disconnect your lines.
Operator: That concludes today's call. You may now disconnect your line.
Speaker Change: Yeah.
[music].
Speaker Change: Yes.
Speaker Change: Yeah.