Independent Bank Corporation

Hello everyone and welcome to the Independent Bank Corporation reports 2024 third quarter results. My name is Ezra 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 now. If you change your mind, please press star followed by two. I will now hand you over to your host, Brad Kessel, President and CEO to begin. Brad, please go ahead.

Thanks, Ezra. 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 third quarter 2024 results. I am Brad Kessel, President and Chief Executive Officer, and joining me is Gavin Moore, Executive Vice President and our Chief Financial Officer, and Mr. Joel Rahn, Executive Vice President, Head of Commercial Banking. Before we begin today's call, I'd 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 third quarter 2024 net income of $13.8 million or $0.65 per diluted share versus net income of $17.5 million or $0.83 per diluted share in the prior year period. I am proud of our team and very pleased with our third quarter 2024 results, driving organic growth on both sides of the balance sheet. Overall loans increased 9.3% annualized. while core deposits are up 8.9% annualized. We were able to generate net interest income growth on both a linked quarter basis and a year-over-year quarterly basis. 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 years. Our credit metrics continue to be excellent with watch credits and non-performing assets near historic lows. These fundamentals continue to drive very strong growth in tangible bulk value per share, 22%, in fact, compared to the prior year quarter. Based on a robust commercial pipeline, the past record of our core group of professionals, and the ongoing strategic initiatives to add talented bankers to our team, we are optimistic about continuing these growth trends for the remainder of 2024 and into 2025. On page five, total deposits as of September 30th, 2024 were 4.6 billion. Overall core deposits increased $100 million during the third quarter of 2024. On a linked quarter basis, retail deposits declined by 21.3 million, business deposits increased by 16.7 million, and our municipal deposits increased by $105.2 million for the quarter. 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 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 eight basis points to 2.10%. At this time, I'd like to turn the presentation over to Joel Ron to share a few comments on the continued success we are having in our growing our loan portfolios and to provide an update on our credit metrics.

Yeah, thanks, Brad, and good morning, everyone. On page seven, we share an update on loan activity for the quarter. Total loans increased $90 million in the third quarter, as Brad said, representing 9.3% annualized growth. We had a strong quarter of commercial loan activity with that portfolio increasing $93 million. Our mortgage portfolio grew $10 million, while our installment loan portfolio declined by $12.5 million. Within the commercial loan activity, the mix of C&I lending versus investment real estate was approximately 60%, 40%. with overall 35% coming from new customers to the bank. For the year, despite significant headwinds from unscheduled payoffs in the second quarter, our commercial portfolio has grown $145 million, representing an 11.5% annualized growth rate. Based upon a solid commercial pipeline, we see continued growth opportunity in the fourth quarter while maintaining our disciplined credit standards. 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 6.78%. Page 8 provides additional detail on our commercial loan portfolio. As pointed out in prior quarters, C&I lending continues to be our primary focus, representing 67% of the portfolio. Manufacturing continues to be the largest concentration within the C&I segment, comprising approximately 9% or $172 million. The remaining 33% of the portfolio is comprised of investment real estate, with the largest concentration being industrial at 8% or $153 million. It's worth noting that our exposure to the office segment stands at $86 million, or 4.7% of the commercial portfolio at quarter end. Our office exposure consists primarily of suburban low rise office space with medical comprising 19% of overall office exposure. The average loan size is 1.3 million, which points to the granularity of that segment of our portfolio. For additional insight on our office exposure, I refer you to page 25 of the of the appendix to this presentation. Key credit quality metrics and trends are outlined on page 9. Overall, credit quality continues to be excellent as Brad remarked just a second ago. Total non-performing loans were 5.1 million or approximately 13 basis points of total loans at quarter end consistent with June 30. Past due loans totaled 4.8 million or 12 basis points similar to June 30. While not reflected on our slide, our commercial watch list remains low at 3.3% of the total portfolio although up slightly from June 30th. 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.