Q1 2025 Independent Bank Corp Earnings Call
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Speaker Change: Hello, everyone and welcome to the Independent Bank Corporation reports 2025 first quarter results. My name is and I will be your coordinator today. If you would like to ask a question. Please press star followed by one on your telephone keypad. If you change your mind. Please press star.
Ezra: Hello everyone and welcome to the Independent Bank Corporation Report 2025 First Quarter Results.
Ezra: My name is Ezra and I will be your coordinator today. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2.
Speaker Change: Put it by two I will now hand, you over to Brad Kessel, President and C. O to begin. Please go ahead.
Ezra: I will now hand you over to Brad Kessel, President and CEO to begin. Please go ahead.
Speaker Change: 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 first quarter 2025 results and Brad Kessel, President and Chief Executive Officer, and joining me is Gavin Moore, EVP and Chief Financial Officer.
Brad 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 first quarter 2025 results.
Brad Kessel: I'm Brad Kessel, President and Chief Executive Officer, and joining me is Gavin Mohr, EVP and Chief Financial Officer, and Joel Rahn, Executive Vice President, Commercial Banking. Before we begin today's call, I would like to direct you to the important information on page two of our presentation, specifically the cautionary note regarding forward-looking statements. If anyone does not already have a copy of the press release issued by us this morning, you can access it at the company's website, independentbank.com.
Ron: Ron Executive Vice President commercial banking.
Ron: Before we begin today's call I would like to direct you to the important information on page two of our presentation specifically the cautionary note regarding forward looking statements. If anyone does not already have a copy of the press release issued by US. This morning, you can access it at the company's website at independent Bank Dot com.
Brad Kessel: The agenda for today's call will include prepared remarks, followed by a question and answer session, and then closing remarks.
Ron: The agenda for today's call will include prepared remarks, followed by a question and answer session and then closing remarks.
Ron: Yeah.
Brad Kessel: I am pleased to report on our strong first quarter results as we advance our mission of inspiring financial independence today with tomorrow in mind.
Ron: I am pleased to report on our strong first quarter results as we advance our mission of inspiring financial independence today with tomorrow in mind, our vision as a future where people approach their finances with confidence clarity and the determination to succeed our core values of courage drive integrity.
Brad Kessel: Our vision is a future where people approach their finances with confidence, clarity, and a determination to succeed. Our core values of courage, drive, integrity, people-focused, and teamwork are the blueprint our employees live by.
Ron: People focused and teamwork.
Blueprint our employees live by we strive to be Michigan's most people focused bank.
Brad Kessel: We strive to be Michigan's most people-focused bank.
Brad Kessel: Today, Independent Bank Corporation reported first quarter 2025 net income of $15.6 million, or $0.74 per diluted share, versus net income of $16 million, or $0.76 per diluted share in the prior year period. I am proud of our team and very pleased to see us continue our positive trend. Overall loans increased 3.4% annualized while core deposits are up 0.8% annualized. We were able to generate net interest income growth on both a linked quarter basis and on a year-over-year quarterly basis and produce four basis points in margin expansion. We believe that our expenses continue to be well managed, and we continue to see improved operational scale from strategic investments we have made in recent quarters, recent years.
Speaker Change: Today Independent Bank Corp reported first quarter 2025, net income of $15 $6 million or <unk> 74 per diluted share versus net income of $16 million or <unk> 76 per diluted share in the prior year period.
Ron: I am proud of our team and very pleased to see US continue our positive trends over.
Ron: Overall loans increased three 4% annualized while core deposits are up 8%, 8% annualized.
Ron: We were able to generate net interest income growth on both a linked quarter basis and on a year over year quarterly basis.
Ron: And produce four basis points in margin expansion.
Ron: We believe that our expenses continue to be well managed and we continue to see improved operational scale from strategic investments. We have made in recent quarters recent years.
Ron: These fundamentals continue to drive positive growth in tangible book value per share 13, 2% compared to the prior year quarter.
Brad Kessel: These fundamentals continue to drive positive growth and tangible book value per share, 13.2% compared to the prior year quarter. Our credit metrics continue to be very good with a low level of watch credits. 14 basis points of non-performing assets to total assets, and one basis point in net charge-offs for the quarter to average loans annualized. The allowance for credit losses factoring in recent market uncertainty was 1.47% of total loans.
Ron: Our credit metrics continue to be very good with a low level of watch credits.
Ron: 14 basis points of nonperforming assets to total assets and one basis point of net charge offs for the quarter to average loans annualized.
Ron: The allowance for credit losses factoring in recent market uncertainty.
Ron: It was one 7% of total loans.
Brad Kessel: We are staying in close contact with our client base during this volatile period and keeping abreast of what they are experiencing and how they are adjusting if needed. We continue to be focused on what we can control and optimistic on the long term future of the IDC franchise.
Ron: We are staying in close contact with our client base. During this volatile period and keeping abreast of what they are experiencing and how they are adjusting if needed.
Ron: We continue to be focused on what we can control and optimistic on the long term future of the IDC franchise.
Brad Kessel: Moving to page 5 of our presentation, total deposits at March 31, 2025 were $4.63 billion. Overall core deposits increased $9.1 million during the first quarter. On a linked quarter basis, retail deposits increased by $34.2 million. business deposits declined by $44 million, and municipal deposits increased by $18.9 million. Our customer base continues to exhibit a remix out of non-interest bearing and or lower yielding deposit products into our higher yielding product offerings, but the remix pace has slowed. Additionally, our sales team continues to bring in new relationships, well below wholesale, well below our wholesale cost of funds.
Ron: Moving to page five of our presentation total deposits at March 31, 2025 were $4 six 3 billion.
Ron: Overall core deposits increased $9 $1 million during the first quarter.
Ron: On a linked quarter basis retail deposits increased by $34 2 million.
Ron: Business deposits declined by $44 million and municipal deposits increased by $18 9 million.
Ron: Our customer base continues to exhibit a remix out of noninterest bearing and our lower yielding deposit products into our higher yielding product offerings.
Ron: Remax pace has slowed.
Ron: Additionally, our sales team continues to bring a new relationships well below wholesale well below our wholesale cost of funds.
Ron: 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 the fed effective rate.
Brad Kessel: 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 the Fed Effective Rate. For the quarter, our total cost of funds decreased by 12 basis points to 1.80%.
Ron: For the quarter, our total cost of funds decreased by 12 basis points to 180%.
Joel Rahn: At this time, I'd like to turn the presentation over to Joel Rahn to share a few comments on the success we are having in growing our loan portfolios and provide an update on our credit metrics. Yeah, thank you, Brad.
Speaker Change: At this time I would like to turn the presentation over to Joel Ron to share a few comments on the success, we are having in growing our loan portfolios and provide an update on our credit metrics. Yes. Thank you Brad and good morning, everyone on page seven we share an update on the loan activity for the quarter.
Joel Rahn: And good morning, everyone. On page seven, we share an update on the loan activity for the quarter. We had solid, we had solid loan growth to start the year. As Brad said, total loans grew $34 million, representing a 3.4% annualized rate. Commercial loan generation was strong with $54.8 million of Q1 growth for an 11% annualized rate.
Speaker Change: We have solid we had solid loan growth to start the year as Brad said total loans grew $34 million, representing a three 4% annualized rate.
Speaker Change: <unk> loan generation was strong with $54 8 million of Q1 growth for an 11% annualized rate.
Joel Rahn: Our residential mortgage portfolio realized a slight decline of $3.9 million, while our installment loan portfolio declined $17 million in the first quarter. Our continued strategic investment in commercial banking talent continues to supplement our We added three experienced commercial bankers in the first quarter, bringing our team to 47 bankers across our statewide footprint. As noted in previous quarters, our new loan production in each segment continues to come on at yields well above the respective portfolio yield. Within the commercial loan activity, the mix of C&I lending versus investment real estate for the quarter was 59% and 41% respectively.
Speaker Change: Our residential mortgage portfolio realized a slight decline of $3 9 million, while our installment loan portfolio declined $17 million in the first quarter.
Speaker Change: Our continued strategic investment in commercial banking talent continues to supplement our growth.
Speaker Change: We added three experienced commercial bankers in the first quarter, bringing our team 47 bankers across our footprint.
Speaker Change: As noted in previous quarters, our new loan production in each segment continues to come on at yields well above the respective portfolio yield.
Speaker Change: Within the commercial loan activity in the mix of C&I lending versus investment real estate for the quarter was 59% and 41% respectively.
Joel Rahn: While our commercial pipeline is solid, it is softer than a year ago, as we're seeing some cautiousness by business owners regarding business Page 8 provides detail on our commercial loan portfolio. There's not been any significant shift in our portfolio concentrations, with the portfolio remaining very well determined. Our largest segment of the C&I category is manufacturing. at 9.2% of the total portfolio. It's worth noting that within the manufacturing segment is 134 million, or 6.7% of our portfolio, of automotive industry exposure that we're monitoring closely for any tariff-related issues.
Speaker Change: While our commercial pipeline is solid it is softer than a year ago MRC as we're seeing some cautiousness by business owners regarding business expansion.
Speaker Change: Page eight provides detail on our commercial loan portfolio.
Speaker Change: Theres not been any significant shift in our portfolio concentrations with the portfolio remaining very well diversified.
Speaker Change: Our largest segment of the C&I categories manufacturing at nine 2% of the total portfolio.
Speaker Change: It's worth noting that within the manufacturing segment is 134 million or six 7% of our portfolio of automotive industry exposure that we're monitoring closely for any tariff related impact.
Speaker Change: As Brad noted credit quality metrics and trends are outlined on page nine and they continue to be excellent.
Joel Rahn: As Brad noted, credit quality metrics and trends are outlined on page 9 and they continue to be excellent. Total non-performing loans were 7.1 million or 17 basis points of total loans at quarter end, up slightly from 15 basis points at year-end 24. Past due loans totaled $3.9 million, or 10 basis points, down slightly from 17 basis points at year-end 2024.
Speaker Change: Total nonperforming loans were $7 1 million or 17 basis points of total loans at quarter end up slightly from 15 basis points at year end 'twenty four.
Speaker Change: Past due loans totaled $3 9 million or 10 basis points down slightly from 17 basis points at year end 2024.
Joel Rahn: It's not reflected on the slide, but it's worth noting that our net charge-offs were $68,000, or one basis point of average loans on an annualized basis for the quarter.
Speaker Change: It's not reflected on the slide, but it's worth noting that our net charge offs were $68000 or one basis point of average loans on an annualized basis for the quarter.
Gavin Mohr: At this time, I'd like to turn the presentation over to Gavin for his comments, including the outlook for the remainder of the year. Thanks, Joel.
Speaker Change: At this time I would like to turn the presentation over to Gavin for his comments, including the outlook for the remainder of the year. Thanks, Joel and good morning, everyone I'm starting on page 10 of our presentation.
Gavin Mohr: Good morning, everyone. I'm starting on page 10 of our presentation. Page 10 highlights our strong regulatory capital position. Turning to page 11, net interest income increased $3.5 million from the a year ago period. Our tax equivalent net interest margin was 3.49% during the first quarter of 2025, compared to 3.30% in the first quarter of 2024, and up four basis points from the fourth quarter of 2024. Average interest earning assets were $5.08 billion in the first quarter of 2024 compared to $4.91 billion in the year ago quarter and $5.01 billion in the fourth quarter of 2024.
Page 10 highlights our strong regulatory capital position.
Speaker Change: Turning to page 11, net interest income increased $3 $5 million from the year ago period, our tax equivalent net interest margin was 349% during the first quarter 2025 compared to 330% in the first quarter of 2024 and up four basis points from the fourth quarter of 2024.
Speaker Change: Average interest, earning assets were $5.08 billion in the first quarter of 2024 compared to $4 $91 billion in the year ago quarter and $5.01 billion in the fourth quarter of 2024.
Gavin Mohr: Page 12 contains a more detailed analysis of the late quarter increase in net interest income and the net interest margin. On a late quarter basis, our first quarter 25 net interest margin was positively impacted by two factors. Decrease in funding costs benefited 18 basis points, and the change in earning assets mix benefited three basis points. These are partially offset by a decrease in the yield on earning assets of 12 basis points and a change in funding mix of five basis points.
Speaker Change: Page 12 contains a more detailed analysis of the linked quarter increase in net interest income and the net interest margin on a linked quarter basis. Our first quarter 25, net interest margin was positively impacted by two factors a decrease in funding cost benefit at 18 basis points in the chain and a change in earning assets.
Speaker Change: Mix benefited three basis points.
Speaker Change: These were partially offset by a decrease in the yield on earning assets of 12 basis points and a change in funding mix of five basis points.
Speaker Change: On page 13, we provide details on the institution's interest rate risk position. The comparative stimulation analysis for the first quarter of 'twenty five in fourth quarter 'twenty four calculates the change in net interest income over the next 12 months under five rate scenarios, all scenarios assume a static balance sheet.
Gavin Mohr: On page 13, we provide details on the institution's interest rate risk position.
Gavin Mohr: The comparative simulation analysis for the first quarter of 25 and fourth quarter of 24 calculates the change in net interest income over the next 12 months under five rate scenarios. All scenarios assume a static balance. The base rate scenario applies the spot yield curve from the valuation date. The shock scenario is considered immediate, permanent, and parallel rate change. The base case model of NII is modestly higher during the quarter as asset yields were augmented by a shift in asset mix and with strong loan growth largely funded by runoff of lower yielding retail loans in the investment portfolio.
Speaker Change: The base rate scenario applies the spot yield curve from the valuation date, the shock scenarios consider immediate permanent in 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 with strong loan growth largely funded by run off of lower yielding retail loans and the investment.
Speaker Change: Portfolio NII sensitivity position, so slightly more exposure to declining rates due to faster asset repricing during the quarter, we had growth in variable rate commercial loans and HELOC currently 35, 5% of assets reprice in one month and 47, 4% reprice in the next 12 months.
Gavin Mohr: The NII sensitivity position shows slightly more exposure to declining rates due to faster asset repricing. During the quarter, we had growth in variable rate commercial loans and HELOCs. Currently, 35.5% of assets reprice in one month and 47.4% reprice in the next 12 months.
Speaker Change: <unk>.
Speaker Change: Moving on to page 14, noninterest income totaled $10 $4 million in the first quarter 2025, as compared to $12 $6 million in the year ago quarter, and $19 $1 million in the fourth quarter of 2020 for first quarter 'twenty five net gains on mortgage loans totaled $2 $3 million compared to $1.
Gavin Mohr: Moving on to page 14, non-interest income totaled $10.4 million in the first quarter of 2025, as compared to $12.6 million in the year-ago quarter, and $19.1 million in the fourth quarter of 2024. First quarter, 25 net gains on mortgage loans totaled $2.3 million, compared to $1.4 million in the first quarter of 2024. The increase is due to higher profit margins and higher volume of loan sales.
Speaker Change: $4 million in the first quarter of 'twenty for the increase is due to higher profit margins and higher volume of loan sales negatively impacting noninterest income was $6 million loss on mortgage loan servicing net this comprised of $1 5 million or <unk> <unk> per diluted share after tax loss due to change in <unk>.
Gavin Mohr: Negatively impacting non-interest income was $0.6 million loss on mortgage loan servicing net, this comprised of $1.5 million or $0.06 per diluted share after tax loss due to change in price, $0.9 million decrease due to paydowns, and a $1 million or $0.1 million loss on sale of originated mortgage servicing rights. That was partially offset by a $1.9 million of servicing revenue in the first quarter of 2025. The decline in servicing revenue compared to the prior year quarter is attributed to the sale of approximately $931 million of mortgage servicing rights on January 31st of 2025.
Speaker Change: Rice, <unk> 9 million decrease due to pay downs, and a $1 million or <unk>.
Speaker Change: $1 million loss on sale of originated mortgage servicing rights that was partially offset by a $1 9 million.
Speaker Change: $1 of servicing revenue in the first quarter of 'twenty five the.
Speaker Change: The decline in servicing revenue compared to the prior year quarters attributed to the sale of approximately $931 million of mortgage servicing rights on January 31 2025.
Gavin Mohr: Detailed on page 15, our non-interest expense totaled $34.3 million in the first quarter of 2025 as compared to $32.2 million in the year ago quarter and $37 million in the fourth quarter of 2024. Compensation expense decreased $0.4 million primarily due to lower health benefits related costs and higher deferred loan origination costs due to higher commercial and mortgage loan production. Data processing costs increased $0.4 million from the prior year period primarily due to core to data processor and annual asset growth and CPI related cost increases as well as annual increases in other software solutions.
Speaker Change: The detailed on page 15, our noninterest expense totaled $34 $3 million in the first quarter of 2025 as compared to $32 2 million in the year ago quarter and $37 million in the fourth quarter of 2024.
Speaker Change: Compensation expense decreased <unk> 4 million.
Speaker Change: Primarily due to lower health benefits related cost and higher deferred loan origination costs due to higher commercial and mortgage loan production data.
Speaker Change: <unk> costs increased <unk> 4 million.
Speaker Change: From the prior year period, primarily due to court a data processor and annual asset growth in CPI related cost increases as well as annual increases and other software solutions.
Speaker Change: Other noninterest expense.
Gavin Mohr: other non-interest expenses. increased $0.5 million primarily due to costs associated with the MSR sale referenced earlier.
Speaker Change: <unk> increased $5 million, primarily due to costs associated with the MSR sale referenced earlier.
Speaker Change: Page 16 is our update for 2025 outlook to see how our actual performance during the fourth quarter compared to the original outlook that we provided in January 2024.
Gavin Mohr: Page 16 is our update for 2025 Outlook to see how our actual performance during the fourth quarter compared to the original Outlook that we provided in January 2024. Our Outlook estimated loan growth in the mid-single digits. Loans increased $33.9 million in the first quarter of 2025, or 3.4% annualized, which is below our forecasted range.
Speaker Change: Outlook estimated loan growth in the mid single digits loans increased $33 $9 million in the first quarter of 2025, or three 4% annualized which is below our forecasted range commercial had loan growth, while mortgage loans and installment loans decreased in the first quarter first quarter 2025 net interest.
Gavin Mohr: Commercial had loan growth while mortgage loans and installment loans decreased in the first quarter. First quarter 2025, net interest income increased by 8.7% over 2024, which is within our forecast of high single-digit growth. The net interest margin was 3.49% for the current quarter and $3.30 for the prior year quarter. And it was up four basis points on a linked quarter basis. First quarter 25 provision for credit losses was an expense of $0.7 million, which was below our forecasted range.
Speaker Change: Income increased by eight 7% over 2024, which is within our forecast.
Speaker Change: High single digit growth the net interest margin was 349% for the current quarter and $3 30 for the prior year quarter.
Speaker Change: And it was up four basis points on a linked quarter basis.
Speaker Change: First quarter 'twenty five provision for credit losses was an expensive.
Speaker Change: $7 million, which was below our forecasted range.
Speaker Change: Moving on to page 17.
Gavin Mohr: Moving on to page 17. Non-interest income totaled $10.4 million in the first quarter of 2025, which was lower than our forecasted range of $11 million to $12 million in the first quarter. First quarter 25 mortgage loan origination sales and gains totaled $107.8 million, $82.6 million, and $2.3 million, respectively.
Speaker Change: Noninterest income totaled $10 $4 million in the first quarter of 'twenty, five which was lower than our forecasted range of $11 million to $12 million in the first quarter.
Speaker Change: First quarter 25 mortgage loan origination sales and gains totaled $107 8 million $82 6 million and $2 $3 million, respectively mortgage loan servicing that generated a loss of <unk> 6 million in the first quarter 25, which is below our forecasted target noninterest expense was $34.
Gavin Mohr: Mortgage loan servicing net generated a loss of $0.6 million in the first quarter of 25, which is below our forecasted target. Non-interest expense was $34.3 million in the first quarter, slightly lower than our forecasted range of $34.5 to $35.5 million.
Speaker Change: $3 million in the first quarter slightly lower than our forecasted range of 34, 5% to $35 $5 million. Our effective income tax rate was 18, 5% for the first quarter of 2025 lastly.
Gavin Mohr: Our effective income tax rate was 18.5% for the first quarter of 2025.
Gavin Mohr: Lastly, there were 1,093 shares of common stock repurchased for an aggregate purchase price of $0.03 million in the first quarter.
There were 1093 shares of common stock repurchased for an aggregate purchase price of 0.0 3 million in the first quarter.
Gavin Mohr: After quarter end from April 3rd, 2025 through April 22nd, 2025, there were 249,482 additional shares of common stock repurchased for an aggregate purchase price of $7.2 million.
Speaker Change: After quarter end from April 3rd 2025 through April 20, <unk> two.
Speaker Change: 2025, there were 249482 additional shares of common stock repurchased for an aggregate purchase price of $7 2 million.
Brad Kessel: That concludes my prepared remarks and I would now like to turn the call back over to Brad. Thanks, Kevin. 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 Kessel: That concludes my prepared remarks, and I would now like to turn the call back over to Brad.
Brad Kessel: Thanks, Kevin we've built a strong community bank franchise, which.
Brad Kessel: Which positions us well to effectively manage through a variety of economic environments and continue delivering strong and consistent results for our shareholders.
Brad Kessel: As we move through 2025, our focus will be continuing to invest in our team, leveraging our technology and supporting our communities.
Brad Kessel: As we move through 2025, our focus will be continuing to invest in our team leveraging our technology and supporting our communities.
Brad Kessel: Earlier today, we launched our new website. This redesigned site is faster, easier to navigate, and more helpful for every visitor. It's built to reflect who we are, a people-first bank that makes things simple and accessible.
Brad Kessel: Earlier today, we launched our new website. This redesign site is faster easier to navigate and more helpful. For every visitor it's built to reflect who we are a people first bank that makes things simple and accessible at this point, we'd now like to open up the call for questions.
Ezra: 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.
Brad Kessel: Okay.
Speaker Change: 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're going to base. It on mute locally and if you change your mind or your question has already been answered. Please press star followed by two.
Ezra: Please ensure your device is unmuted locally. And if you change your mind, or your question has already been answered, please press star followed by two.
Brad Kessel: Okay.
Brad Kessel: Okay.
Speaker Change: Our first question comes from Brendan Nosal with hub group Brendan Your line is now open. Please go ahead.
Brendan Nosal: Our first question comes from Brendan Nosal with Hovda Group.
Brendan Nosal: Brendan, your line is now open, please go ahead. Day. Good morning, folks. Hope you're doing well. Morning.
Brendan Nosal: Hey, good morning folks have been doing well.
Speaker Change: Good morning, maybe just to start off here at a super high level, obviously, a really nice showing start to the year and I know that you don't typically update the guidance provided the start of the year, but I'm just kind of curious as you sit here today you look at our guidance three months ago, where do you think you could potentially outperform given that strong start.
Brendan Nosal: Maybe just to start off here at a super high level, obviously a really nice strong start to the year.
Gavin Mohr: And I know that you don't typically update the guidance that you provide at the start of the year, but I'm just kind of curious, as you sit here today, you know, you look at that guidance from three months ago, where do you think you could potentially outperform? Yeah, I probably start, Brendan, with the provision. There, given that where we we came out of the gate. I think there's probably opportunity depending on where the... what happens within the next few months with on the deposit side. If we would see some rate cuts, we may be able to pick up a little bit there.
Speaker Change: Yes.
Brendan Nosal: I'd, probably start Brennan with <unk>.
Speaker Change: The provision.
Speaker Change: Given where we came out.
The gate.
Speaker Change: I think theres, probably opportunity depending on where the.
Speaker Change: What happens within the <unk>.
Speaker Change: Next few months.
Speaker Change: With.
Speaker Change: The.
Speaker Change: On the deposit side, if we would see some rate cuts we may be able to.
Speaker Change: Pick up a little bit there, but overall I think we're really.
Gavin Mohr: But overall, I think we're really on plan and out of the gate as we expected.
Speaker Change: On plan.
Speaker Change: And out of the gate as we expected, yes I agree.
Brad Kessel: Yeah, I agree, Gavin. I think we've rerun a couple different scenarios and Gavin probably can speak to those a little more. But, you know, We get no... change in the Fed rate for the balance of the year. And then alternatively, as the market, I believe, is now pricing in about four cuts between now and year end, we feel a balance sheet's pretty in kicking off earnings that are consistent in both those scenarios.
Speaker Change: I think.
Speaker Change: We have rerun a couple of different scenarios and Gavin probably can speak to those a little.
Speaker Change: More but.
Speaker Change: If.
Speaker Change: We get no.
Speaker Change: Change in the fed rate for the balance of the year.
Speaker Change: And then alternatively as the market I believe that now.
Speaker Change: Pricing in about four cuts between now and year end.
Speaker Change: We feel our balance sheets.
Speaker Change: And kicking off earnings that are consistent.
Speaker Change: In both those scenarios.
Speaker Change: Yes.
Gavin Mohr: Yeah, I mean, for I give a little more detailed Brad statement. So in by design, we've continually tried to work volatility out of the out of the income statement. And so we're really indifferent to the the Fed flat or today or no, no rate changes or the Fed cuts 100. It's our modeling if you if you isolate the balance sheet, it's a couple hundred thousand dollars and then Okay, I appreciate the color there.
Speaker Change: A little more detail Brad statements. So.
Speaker Change: And by design, we have continually tried to work volatility out of the out of the income statement and so we're really indifferent to the fed flat or today or note note rate changes or the fed cuts 100, it's our modeling if you if you isolate the balance sheet.
Speaker Change: Couple of hundred thousand dollars of NII.
Speaker Change: Yes, yes, okay I appreciate the color there.
Gavin Mohr: Maybe turning to something a little more specific, just looking at mortgage banking gain on sale within fee income, really, really strong quarter there seem to certainly buck the seasonal trend, you know, seemingly thanks to a really strong gain on sale margin for the quarter. I'm just kind of curious where you see that fee line running over the next Yeah, you know, hey, the margin we continue to target that 250. And we've we've been intentionally working to get a few few extra basis points wherever we can. So I think we're on trend, I think the overall question is going to be production, it's still very supply side constrained.
Speaker Change: Maybe turning to something a little more specific.
Speaker Change: Just looking at mortgage banking gain on sale within fee income.
Speaker Change: Really really strong quarter, there seem just certainly.
Speaker Change: This seasonal trend seemingly thanks to a really strong gain on sale margin for the quarter I'm, just kind of curious where you see that fee line running over the next few quarters.
Speaker Change: Yes.
Speaker Change: The margin, we continue to target that $2 50.
Speaker Change: And we've been intentionally working too to get.
Speaker Change: A few extra basis points wherever we can.
Speaker Change: I think we're on trend I think the overall question is going to be production, it's still very supply side constraint and so.
Brendan Nosal: And so, you know, I think out of the gate, we feel good about the first quarter. We'll just have to see how the how the summer develops. Okay, fantastic.
Speaker Change: I think out of the gate, we feel good about the first quarter.
Speaker Change: We just have to see how that how the summer develops.
Speaker Change: Okay fantastic. Thank you for taking the questions.
Brendan Nosal: Thank you for taking the question.
Brendan Nosal: Thanks Brendan.
Speaker Change: Our next question comes from Peter Winter with D. A Davidson Peter Your line is now open. Please go ahead.
Peter Winter: Our next question comes from Peter Winter with DA Davidson. Peter, your line is now open, please go ahead.
Peter Winter: Good morning. I was wondering, could you guys talk what the conversations are like with the clients, just given all the uncertainty? And I realize it's early, but are you starting to see any stress from your borrowers? You mentioned you're watching the automotive portfolio more closely.
Peter Winter: Good morning, I was wondering could you guys talk what what the conversations are like with the clients just given all the certain certainty uncertainty and I realize it's early but are you starting to see any stress from your borrowers you mentioned youre watching the automotive portfolio more close.
Speaker Change: Asleep.
Speaker Change: Yeah.
Speaker Change: Yes, Peter.
Brad Kessel: Yeah, Peter, I'd like to have Joel comment on that. Earlier in the week, we had our board meeting, and Joel gave a nice presentation to our full board on some reporting that the team's been compiling in their conversations with our customer base. So, Joel, maybe give some of the highlights there.
Speaker Change: I would like to have.
Speaker Change: Yes.
Speaker Change: Joel comment on that earlier in the week, we had our.
Speaker Change: Our board meeting and.
Speaker Change: Joe gave a nice presentation to our full board on some reporting that the team's been.
Speaker Change: Filing in their conversations with their customer base. So Joe maybe given some of the highlights there yes sure now its a good question and a difficult one to answer but in terms of where its going and so there is a lot of uncertainty as we all know.
Joel Rahn: Yeah, sure. No, it's a good question and a difficult one to answer, but in terms of where it's going, so there is a lot of uncertainty, as we all know, and we focus primarily on the automotive industry within our portfolio, which, as I said, in my comments. It's a pretty small piece of the overall pie, about 6.5% of our portfolio in automotive exposure.
Speaker Change: Yes, and we focus primarily on the automotive industry with our within our portfolio, which as I said in my comments.
Speaker Change: Pretty small piece of the overall pie of about six 5% of our portfolio.
Speaker Change: Automotive exposure so.
Joel Rahn: So it's really a blessing to have a well-diversified portfolio. But what we're hearing, the business owners certainly are watching it, trying to figure this out, trying to figure out what the potential impacts are. We're not seeing any tangible impact yet today, because many of the tariffs aren't even implemented yet. Anecdotally, we're hearing from a couple of stamping customers that steel supply is getting harder to come by, because the OEMs and the large tier ones have been purchasing up any excess domestic steel inventory in trying to get ahead of the tariff game. So, I mean, that's probably the most tangible piece of feedback that we heard from one of our stamping customers.
Speaker Change: Yes.
Speaker Change: There will be a blessing to have a well diversified portfolio.
Speaker Change: But what we're hearing is the business owner certainly are watching it trying to figure this out trying to figure out what the potential impacts are we're not seeing any.
Speaker Change: Tangible impact yet today.
Speaker Change: Because.
Speaker Change: Many of the tariffs aren't even implemented yet.
Speaker Change: Anecdotally we're hearing.
Speaker Change: From a couple of stamping customers that steel supply is getting harder to come by because the Oems and the large tier ones have been.
Speaker Change: Purchasing up the kind of any excess domestic steel inventory and trying to get ahead of the tariff game.
Speaker Change: So I mean, that's probably the most tangible piece of feedback that we heard.
Speaker Change: From one of our stamping customers, but again everyone's looking forward trying to read the tea leaves, but really no new immediate impact yet.
Peter Winter: But again, everyone's looking forward, trying to read the tea leaves, but there's really no immediate impact yet. All right. Helpful.
Speaker Change: Got it.
Speaker Change: Hello.
Speaker Change: <unk>.
Peter Winter: Credit quality is excellent. You have more reserves, I guess, than you know what to do with. I mean, $60 million reserves against $7.5 million non-performing assets and net charge-offs. They've averaged one or two basis points over the last eight quarters.
Speaker Change: Credit quality is excellent.
Speaker Change: You have.
Speaker Change: More reserves I guess.
Speaker Change: No what to do with I mean $60 million reserves against seven 5 million nonperforming assets and net.
Speaker Change: Charge offs <unk>.
Speaker Change: Average, one or two basis points over the last eight quarters.
Brad Kessel: Do you think there's a need to continue to build reserves, even if the economy gets worse, just given the really strong credit trends?
Speaker Change: Do you think there is a need to continue to build reserves, even if the economy gets worse just given the.
Speaker Change: Really strong credit trends.
Speaker Change: Yes, I guess.
Brad Kessel: Yeah, I guess I'll take first stab at that. And then Gavin maybe follow up. So today we're at 1.47% total loans. It's $60 million. Of that, it is, I think we have 20% is subjective. We added a little bit to the subjective here in Q1, just with with the uncertainty, I was probably a million and a half dollars, million, million two. And, you know, hey, we have a very detailed model that we utilize for CECL, and, you know, you probably could attribute maybe the higher reserve level as a function of the mortgage portfolio that we carry that has a longer duration to it, but we feel good about the reserve levels.
Speaker Change: I'll take first stab at that and then maybe follow ups. So today, we're at 147% to total loans.
Speaker Change: $60 million.
Speaker Change: All of that.
Speaker Change: As I think we have 20%.
Speaker Change: Is subjective.
Speaker Change: And.
Speaker Change: We added.
Speaker Change: A little bit to the subjective here in Q1, just with with the uncertainty.
Speaker Change: And the one 1 million and a half dollars plus $2 million.
Speaker Change: Two.
Speaker Change: And hey, we.
Speaker Change: Have a.
Speaker Change: Very detailed model that we utilize.
Speaker Change: For seasonal and.
Speaker Change: You probably could attribute maybe the.
Speaker Change: The higher reserve level as a function of.
Speaker Change: The mortgage portfolio that we carry that has a longer duration to it but.
Speaker Change: We feel good about the reserve levels.
Brad Kessel: that we have today, and the overall performance of the portfolio. As we move through the year, right now I'm thinking that the provisioning will be directly attributed to the loan growth that we experience. So that's sort of what the outlook looks like there.
Speaker Change: That we have today.
Speaker Change: Sure.
Speaker Change: And the overall performance of the portfolio as we move through the.
Speaker Change: For the year.
Speaker Change: Right now.
Speaker Change: Thinking that the provisioning will be directly attributed to the loan growth.
Speaker Change: <unk>.
Speaker Change: That we experience so.
Speaker Change: That's sort of what the.
Speaker Change: The outlook looks like there.
Gavin Mohr: Gavin, anything to add? No. Well. Got it.
Speaker Change: No well said.
Speaker Change: Got it.
Peter Winter: And if I could just ask one more question, just on buybacks, you didn't buy back any stock last year. You do have the buyback announcement at the start of the year, and the guidance really wasn't you weren't modeling any stock buyback. So my mind, I feel like it's good to see you're in the market. Is the plan to continue to be in the market? And do you have like a certain price level or if it's dependent on loan demand that determines if you're going to buy back stock?
Speaker Change: And if I could just ask one more question just on buybacks.
Speaker Change: You didn't buyback any stock last year, you do have the buyback.
Speaker Change: Announcements at the start of the year and the guidance really wasn't you werent modeling any stock buybacks. So my mind I feel like it's good to see Youre in the market is.
Speaker Change: Plan to continue to be in the market and do you have like a certain price level.
Speaker Change: Or is it dependent on loan demand that determines if youre going to buy back stock.
Peter Winter: Yes, Peter.
Brad Kessel: Yeah, Peter. First off, great question. You know, the share repurchases is one component to the overall capital management of the company. You know, we're looking at obviously a consistent upward trending payout on the dividend. We're looking at what's happening with needs to support organic growth of the company. And then, of course, share repurchases where it where it makes sense. And in consideration of everything else. You know, we had the pretty good pullback in the stock that was essentially consistent with what happened with other public traded banks and community banks. We had in place a 10B51 filing going into the blackout period, and we were able to then do some repurchases as the tariffs were announced.
Peter Winter: First off great question.
Peter Winter: The share repurchases is one component to the overall capital.
Peter Winter: Management.
Peter Winter: Of the company.
Peter Winter: We're looking at obviously.
Peter Winter: Yeah.
Peter Winter: A consistent upward trend in payout on the dividend.
Peter Winter: We're looking at what's happening with needs to support.
Peter Winter: Organic growth of the company.
Peter Winter: And then of course.
Peter Winter: Share repurchases.
Peter Winter: Where it where it makes sense and in consideration of everything else.
Peter Winter: We had pretty good.
Peter Winter: Pullback in the stock.
Peter Winter: Essentially consistent with what happened with other publicly traded bank.
Peter Winter: Banks and community banks.
Peter Winter: We had in place a <unk> one filing.
Peter Winter: Going into the blackout period.
Peter Winter: We were able to then.
Peter Winter: Do some repurchases as the tariffs were.
Gavin Mohr: As we go forward, you know, we're going to continue to look at all the various needs, and we may or may not be back in the market. I think we've shared publicly before that one of the parameters that we try to meet is being within a three-year earnback of any dilution that's incurred as a result of It's a tangible book as a result of buying back shares. So I think you'll just see us, you know, be consistent with our historical trending there.
Peter Winter: As we go forward, we're going to continue to look at.
Peter Winter: All the various needs in.
Peter Winter: We may or may not be back in the market I think we've shared publicly before that.
Peter Winter: One of the parameters that we.
Peter Winter: We try to immediate as being within a three year earn back of any dilution.
Peter Winter: That's incurred as a result of.
Peter Winter: Tangible book as a result of buying back shares. So I think you'll just see us.
Peter Winter: It will be consistent with our historical trends.
Peter Winter: Trending there anything to that game.
Gavin Mohr: Anything to add, Gavin? Great.
Peter Winter: No.
Peter Winter: That's great. Thanks for taking my questions.
Peter Winter: Thanks for taking the questions.
Damon Delmonte: Thank you. Our next question comes from Damon DelMonte with KBW.
Peter Winter: Thank you.
Speaker Change: Our next question comes from Damon Delmonte with K B W. David Your line is now open. Please go ahead.
Damon Delmonte: Damon, your line is now open, please go ahead. Hey, good morning, guys. Hope everybody's doing well. And thanks for taking my my questions here.
Damon Delmonte: Hey, Good morning, guys hope everybody is doing well and thanks for taking my questions here.
Damon Delmonte: Um, so first question on the outlook for loan growth. Do you feel that kind of just general uncertainties are kind of given some borrowers pause? And that if we do, you know, strike some agreements on the tariff front, that you could see kind of like a pent up demand and growth really accelerate in the coming quarters?
Damon Delmonte: So first question on the outlook for loan growth do you feel that.
Damon Delmonte: Kind of just general uncertainty there kind of given some borrowers pause in that.
Damon Delmonte: If we do see.
Damon Delmonte: Strike some agreements on the tariff front that you could see kind of like a pent up demand and growth really accelerate in the coming quarters.
Joel Ron: Hey, Brendan it's Joel.
Joel Rahn: Hey Brendan, this is Joel. It's hard to say, but I think that's kind of the way I'm looking at it. I think it's common sense that if you're a business owner right now, we're seeing some activity, don't get me wrong, and some replacement of equipment, that sort of thing. But in terms of significant expansion, plant additions, those are few and far between right now. I do think they're just kind of waiting for some clarity from an economic front, which way we're headed. But I think there's, absent the news headlines, coming into the year, we all felt really good about the economy and felt we were kind of status quo, and automotive industry was pretty stable.
Brendan Nosal: It's hard to say, but I think that that's kind of the way I'm looking at it I think is common sense.
Joel Ron: If you're a business owner right now.
Brendan Nosal: We're seeing some activity you don't get me wrong.
Brendan Nosal: And some some replacement of equipment that sort of thing but in terms of.
Brendan Nosal: Significant expansion.
Brendan Nosal: Plant.
Brendan Nosal: <unk>.
Brendan Nosal: Those are few and far between right now and people are.
Brendan Nosal: I do think Theyre, just kind of waiting for some clarity on.
Brendan Nosal: From an economic front, where we're headed.
Brendan Nosal: And.
Brendan Nosal: But I think there is absent that the news headlines coming into the year. We all felt really good about the economy and felt we were kind of status quo.
Brendan Nosal: Automotive industry was was pretty stable.
Brendan Nosal: Little shift with EV transition going on but.
Joel Rahn: A little shift with EV transition going on, but our customers were dealing with that. So I do think that there could be some pent-up demand on the back side of this if the news calms down.
Brendan Nosal: But our customers were dealing with that and so I do think that.
Brendan Nosal: There could be some.
Brendan Nosal: Some pent up demand on the back side of this if the news calms down.
Brendan Nosal: Okay, great. Thanks, and then just kind of curious.
Damon Delmonte: Okay, great.
Damon Delmonte: Thanks.
Brad Kessel: And then I'm just kind of curious, you know, along the topics of capital management. Just kind of wonder what your thoughts are on M&A, if that would be something you guys would consider to, you know, kind of take advantage of opportunities across your footprint. Yeah, Damon, I, you know, all right, when you look, yeah, I mean, when you when you look back at our history, the last acquisition we made was in 2018. And that was Traverse City State Bank. And that has worked out terrific for our company. And and. You know, I think we continue to try to build a franchise that would be viewed as a good partner for other community banks.
Brendan Nosal: Uh huh.
Peter Winter: Topic of capital management, just kind of winter, where your thoughts are on M&A.
Peter Winter: That would be something you guys would consider too.
Kind of take advantage of.
Peter Winter: Opportunities across your footprint.
Peter Winter: Yes.
Peter Winter: Yes.
Peter Winter: Alright, when you look.
Peter Winter: Yes.
Peter Winter: You look back at our history the last.
Peter Winter: Acquisition, we made was in 2018.
Peter Winter: And that was traverse city state Bank and.
Peter Winter: That has worked out terrific for our company.
Peter Winter: And.
Peter Winter: I think we continue to try to build a franchise that.
Peter Winter: It would be viewed as a good partner.
Peter Winter: For other community banks and.
Brad Kessel: And, you know, we've shared in the past about, you know, some of the technology investments that we're making. I mentioned earlier on today's call the investment that we made in our website and its redesign and really making it much more interactive with chat and Zoom video and a bunch of additional features. So, I think we'd be a good partner and, you know, we would welcome conversations there.
Peter Winter: We've shared.
Peter Winter: In the past.
Peter Winter: Some of the.
Peter Winter: Technology investments that we're making.
Peter Winter: I mentioned earlier on today's call the investment that we made in <unk>.
Peter Winter: And our website.
Peter Winter: And its redesign and really making it.
Peter Winter: Much more interactive with with chat and zoom video and.
Peter Winter: Bunch of additional features so.
Peter Winter: I think we'd be a good partner and.
Peter Winter: We.
Peter Winter: We would welcome conversations there thanks.
Damon Delmonte: Thanks, Damon. Great Brad, appreciate the color there.
Peter Winter: Thanks Damon.
Speaker Change: Great I appreciate the color there thats all that I had thank you very much.
Damon Delmonte: That's all that I had. Thank you very much.
Nathan: Our next question comes from Nathan race with Piper Sandler Nathan Your line is now open. Please go ahead Sir.
Nathan Race: Our next question comes from Nathan Race, with Piper Sandler. Nathan, your line is now open, please go ahead.
Nathan: Yeah, Hi, guys. Good morning, Thanks for taking the questions.
Nathan Race: Yeah.
Nathan Race: Hi, guys. Good morning. Thanks for taking the question. Maybe Gavin, for you, on deposit costs, you know, they came down nice in the quarter, you know, just curious, you know, as long as the Fed remains on hold, presumably through the second quarter, how much, you know, additional deposit cost leverage you think you have just based on kind of competition, the footprint and just kind of what you're seeing in terms of deposit pricing today that's coming in? Yeah, good question. I'm not going to have an exact dollar figure or percentage figure for it, but I would say that clearly the deposit downward leverage is not what it was, right?
Speaker Change: Maybe Kevin what do you.
Nathan: Deposit costs.
Speaker Change: They came down nicely in the quarter, just curious as long as the fed remains on hold presumably through the second quarter, how much additional deposit cost levers. You think you have just based on kind of competition the footprint and just kind of what youre seeing in terms of.
Nathan: Deposit pricing today, that's coming in.
Nathan: Yes, good question I'm not going to have an exact.
Nathan: Dollar figure or percentage figure for you, but I would say that clearly the the.
Nathan: <unk> deposit.
Nathan: <unk> leverage is not what it was right longer we're here and it's really going to be dependent on the market.
Gavin Mohr: The longer we're here and it's really going to be dependent on the market. We continue to try to find a basis point here, there, wherever we can. But there's plenty of competition where we operate. And so I think, I give you this for a reference point, the maturing CD book versus kind of where they're coming on in terms of the specials we have. It's about five basis points better right now, maturing versus new. So kind of give you an indication of where the pricing's at. It really has, I think, leveled off. But the other big key to this is going to be, for us, is going to be the mix.
Nathan: We continue to we continue to try to find a basis point here or there wherever we can.
Nathan: But.
Nathan: Theres plenty of competition.
Nathan: Where we operate in.
Nathan: So I think.
Nathan: I gave you this for.
Nathan: Reference point.
Nathan: The the maturing CD book.
Nathan: Versus kind of where they are coming on in terms of the specials. We have it's about five basis points better right now.
Nathan: Maturing versus new so kind of give you an indication of.
Nathan: Where were the pricing at it really has.
Nathan: Leveled off but the other big key to this is going to force is going to be the mix. So.
Gavin Mohr: So how we're funding the bank. Right.
Nathan: How we're how we're funding the bank.
Gavin Mohr: And along those lines, Gavin, can you remind us how much cash flow you have coming off the bond book in terms of kind of what your fixed rate loan repricing looks like over the next few quarters as well? Yeah, the bond books got about 100 million projected yet to come off this year. And then on the loan repricing, so we had commercial new origination going on at $697 for the quarter versus a portfolio of $655. Mortgage new production was $702 versus $485. An installment was 752 verse 503. And in terms of the 42% of commercial loans that are fixed, how much of that is kind of repricing over the next few quarters?
Speaker Change: And along those lines, Kevin can you remind us how much cash flow coming off the bond book in terms of kind of what's your.
Nathan: Fixed rate loans repricing looks like over the next few quarters as well.
Kevin: Yes, the bond books got about $100 million projected yet to come off this year and then on the loan repricing. So we had commercial new origination going on at $6 97 for the quarter versus a portfolio.
Nathan: <unk> is $6 55.
Nathan: Mortgage new production was 702 versus $4 85.
Nathan: And installment was 752 versus $5 three.
Nathan: Alright.
Nathan: And in terms of the 42%.
Nathan: Commercial loans that are fixed how much of that is kind of repricing over the next few quarters.
Nathan: The fixed pipeline.
Gavin Mohr: I don't have that offhand. Let me take a look and I can come back to this group with our cash flow. gotcha.
Nathan: Have that off hand.
Nathan: Let me.
Nathan: Let me take a look and I can come back to the to this group with.
Nathan: Our cash flow.
Nathan: Okay.
Nathan: Gotcha.
Gavin Mohr: And then, you know, within the income outside mortgage, you know, are you seeing any other kind of opportunities to drive growth, whether it's within treasury management, or other areas of the bank with some of the technology upgrades that you that you've done recently, that can maybe drive, you know, some upside to kind of the guidance. was laid out in January. Yeah, I, you know, I think that You know, I'm looking at. Our deck, slide 14, and our fee income has been pretty consistent, and probably the wild card there to some degree is just what happens with mortgage gains as we go forward.
Nathan: And then within fee income mortgage.
Speaker Change: Have you seen any other kind of opportunities to drive growth, whether it's with insurance management or other areas of the bank with some of the technology upgrades that you've done recently that could maybe drive some upside to the guidance.
Nathan: As laid out in January.
Nathan: Yes.
Nathan: I think that.
Nathan: And I'm looking at.
Our deck slide 14 and.
Nathan: Our fee income has been.
Nathan: Pretty consistent.
Nathan: Probably the wildcard.
Nathan: They are to some degree is just what happens with mortgage gains as we go forward.
Gavin Mohr: And I think there may be upside potential there, more than what we've guided. Otherwise, I think the components are fairly constant.
Nathan: And I think there's there may be upside potential there.
Nathan: More than what we.
Nathan: We've guided but.
Nathan: Otherwise I think.
Nathan: The components are fairly constant.
Nathan: Okay I appreciate the color thanks, guys.
Nathan Race: Okay, I appreciate all the color. Thanks, guys. Thank you very much.
Nathan: Thank you.
Nathan: Thank you very much. We currently have no further questions. So I'll now hand back to Brad for any closing remarks.
Brad Kessel: We currently have no further questions, so I will now hand back to Brad for any closing remarks. Thanks, Ezra. In closing, I'd like to thank our board of directors and our senior management for their support and leadership. I also want to thank all our associates. I continue to be so proud of the job being done by each member of our team. Each team member in his or her own way continues to do their part toward our common goal of guiding our customers to be independent. Finally, I'd like to thank each of you for your interest in Independent Bank Corporation and for joining us on today's call.
Brad Kessel: Thanks Ezra.
Brad Kessel: In closing I'd like to thank our board of directors and our senior management for their support and leadership I also want to thank all our associates continue to be so proud of the job being done by each member of our team.
Each team member in his or her own way continues to do their part toward our common goal of guiding our customers to be independent finally, I'd like to thank each of you for your interest in independent Bank Corporation and for joining us on today's call.
Brad Kessel: Have a great day.
Have a great day.
Brad Kessel: Okay.
Ezra: Thank you very much, Brad, and thank you, Gavin and Joel, for being here. Today's speakers, we appreciate all the insight. Thank you, everyone, for joining.
Speaker Change: Very much Brad and thank you Kevin to four bank today's speakers. We appreciate the insights thank.
Brad Kessel: Thank you everyone for joining you may now disconnect your lines.
Ezra: You may now disconnect your line.
Brad Kessel: Okay.
Brad Kessel: [music].
Brad Kessel: Yes.
Brad Kessel: [music].