Independent Bank Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the Independent Bank Corporation Reports 2024 First Quarter Results. All lines have been placed on mute during a presentation portion of the call with an opportunity for question and answer at the end. If you'd like to ask a question, please press star followed by one on your telephone keypad. I would now like to hand this conference call over to our host, Brad Kessel, President and CEO. Please go ahead.

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 2024 results. I am Brad Kessel, President and Chief Executive Officer, and joining me is Gavin Moore, Executive Vice President 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 today, you can access it at the company's website, independentbank.com. The agenda for today's call will include prepared remarks, followed by a question and answer session, and then closing remarks. Independent Bank Corporation reported first quarter 2024 net income of $16 million or $0.76 per diluted share versus net income of $13 million or $0.61 per diluted share in the prior year period. I am very pleased with our first quarter 2024 results, driving organic growth on both sides of the balance sheet with loans up 5.3%, and core deposits up 9%. We were able to generate net interest margin expansion increase into 3.30% from 3.26% on a linked quarter basis and net interest income growth on both a linked quarter basis and a year-over-year quarterly basis. Expenses continue to be well managed. Our credit metrics continue to be very good with watch credits and non-performing assets near historic lows. These fundamentals drove good growth in both our earnings per share, 23% increase, and tangible book value per share, a 16% increase compared to the prior year quarter. Our performance ratios for the quarter included a return on average assets of 1.24% and return on average equity of 15.95%. Leveraging our team's proven success in the integration of dynamic new professionals, we are optimistic about continuing these positive growth trends for the balance of this year and into 2025. Total deposits as of March 31, 2024, were $4.58 billion. Overall, core deposits increased $95.7 million, or 9% annualized during the first quarter of 2024. On a linked quarter basis, retail deposits increased by $23.5 million, business deposits increased by $25.4 million, and municipal deposits also increased by $46.9 million. Our existing customer base continues to exhibit a remix out of non-interest-bearing and or lower-yielding deposit products into higher-yielding product offerings, but the remix pace has slowed. Additionally, our sales team continues to bring in new relationships well below our wholesale cost of funds. 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 increased by two basis points to 2.01%. Through the first quarter of 2024, the cumulative cycle beta for our cost of funds is 37.3%. At this time, I'd like to turn the presentation over to Joel Rahn to share a few comments on the success we're having in growing our loan portfolios and provide an update on our credit metrics.

Thanks, Brad, and good morning, everyone. On page seven, we share an update on our $3.8 billion loan portfolio and quarterly activity. Total loans increased by $49 million in the first quarter, representing 5.3% annualized growth. The strongest segment continues to be commercial lending, which grew by $55 million. We also realized growth in our mortgage business, with that portfolio growing by $4.6 million for the quarter. Our installment portfolio decreased by $11.1 million with softness in demand, but also a result of a strategic decision to pull back in that segment. As noted in the material, in each portfolio, yield on new production is significantly higher than the respective portfolio yield. The commercial portfolio continues to be our highest yielding portfolio with a yield of 6.83%. We continue to see a return on our strategic expansion of our commercial banking team. The experienced talent that we continue to add has been a strong contributor to our commercial growth, which on an annualized basis was 13% in the first quarter, consistent with the pace of growth experienced in 2023. Based upon a solid commercial pipeline, we see continued growth opportunity while maintaining our discipline credit standards. Page 8 provides additional detail on our commercial loan portfolio. As I've pointed out in prior quarters, CNI lending continues to be our primary focus, representing 68% of the portfolio. Manufacturing continues to be the largest concentration within the CNI segment, comprising approximately 10% or $174 million. The remaining 32% of the portfolio is comprised of investment real estate, with the largest concentration being industrial at 7.9% or $140 million. It's worth noting that our exposure to the office segment stands at $89 million for 5% of our commercial portfolio at quarter end. Our office exposure consists primarily of suburban, low-rise office space, with medical comprising 25% of our overall office exposure. The average loan size is $1.2 million, which points to the granularity of this segment of our portfolio. For additional insight into our office exposure, I refer you to page 25 of the appendix to this presentation. Key credit quality metrics and trends are outlined on page nine. Overall credit quality continues to be excellent. Total non-performing loans were 3.7 million or approximately 10 basis points of total loans at quarter end, which is a slight decrease from 12-31-23. Past due loans totaled 7.1 million or 19 basis points up slightly from year end 23. 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.