Sign in

You're signed outSign in or to get full access.

IB

INDEPENDENT BANK CORP /MI/ (IBCP)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered net income of $18.5M and diluted EPS of $0.87, up from $13.7M and $0.65 in the prior-year quarter; net interest margin expanded to 3.45% (+8 bps q/q; +19 bps y/y) on improved funding costs and asset mix .
  • Loans grew $96.5M (+9.7% annualized q/q), led by commercial (+$112.1M), while asset quality remained strong (NPLs/loans 0.15%; NPAs/assets 0.13%) .
  • Non-interest income surged to $19.1M, aided by a $7.8M gain in mortgage servicing (including a $6.5M favorable MSR price mark); management executed an LOI to sell ~$971M MSRs to reduce future volatility .
  • 2025 outlook guides to 5–6% loan growth, 20–25 bps NIM expansion vs 2024, non-interest expense rising to $34.5–$35.5M per quarter, and ~19% effective tax rate; the Board raised the quarterly dividend to $0.26 (+8%) and re-authorized up to 5% share repurchases (not modeled) .

What Went Well and What Went Wrong

What Went Well

  • Net interest income increased $1.0M q/q to $42.9M as NIM expanded to 3.45%, driven by lower cost of funds and mix shift; ROAA/ROAE were 1.39%/16.31% .
  • Commercial loan production was robust (Q4 growth +$112.1M), with new originations above portfolio yields; management highlighted a strong pipeline and ongoing banker additions .
  • Asset quality metrics remained exceptional: NPLs/loans 0.15% and NPAs/assets 0.13%; net charge-offs were de minimis (2 bps of average loans for 2024) .
  • “Our credit metrics remain outstanding, with watch credits and non-performing assets near historic lows” — CEO Brad Kessel .

What Went Wrong

  • Non-interest expenses rose to $37.0M (above forecast), driven by higher performance-based compensation (+$2.7M y/y), salary adjustments, and data processing inflation/new solutions .
  • Mortgage banking gain on sale margins remained pressured (Q4 net gains $1.7M vs $2.0M y/y), with profits offset by higher volumes rather than margin expansion .
  • Deposit remix continued toward higher-yielding products amid competitive pricing, though management is stepping down rates as market conditions permit .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Net Interest Income ($USD Millions)$41.346 $41.854 $42.851
Non-interest Income ($USD Millions)$15.172 $9.508 $19.121
Net Income ($USD Millions)$18.528 $13.810 $18.461
Diluted EPS ($USD)$0.88 $0.65 $0.87
Net Interest Margin (FTE, %)3.40% 3.37% 3.45%
Efficiency Ratio (%)61.49% 62.82% 59.09%
ROAA (%)1.44% 1.04% 1.39%
ROAE (%)17.98% 12.54% 16.31%

Segment breakdowns and KPIs:

  • Deposit composition (Q4 2024):

    • Non-interest bearing: 22%
    • Savings & interest-bearing checking: 43%
    • Reciprocal: 19%
    • Time: 13%
    • Brokered: 2%
    • Customer mix: Retail 47.3%, Commercial 36.4%, Municipal 16.2%

  • Loan mix (Q4 2024):

    • Commercial 48%; Mortgage 37%; Installment 14%; Held for Sale 0%
KPI (End of Period)Q2 2024Q3 2024Q4 2024
Total Loans ($USD Millions)$3,851.889 $3,942.287 $4,038.825
Total Deposits ($USD Millions)$4,614.328 $4,626.875 $4,654.088
NPAs / Total Assets (%)0.10% 0.11% 0.13%
NPLs / Total Loans (%)0.12% 0.13% 0.15%
ACL / Total Loans (%)1.46% 1.46% 1.47%
TCE / TA (%)7.63% 8.08% 8.00%

Notes:

  • Q4 non-interest income included mortgage servicing, net of $7.8M (price mark +$6.519M; revenue net $2.233M; pay-downs -$0.991M) .
  • Liquidity and funding strong: available sources equaled ~195% of uninsured deposits; loan-to-deposit ratio ~86.8% .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Loan GrowthFY2024Mid-single digit (~6–8%) ——
Loan GrowthFY2025—5–6% (commercial +9–10%; mortgage +2–3%; installment -2–3%) Maintained/Refined lower band
Net Interest Margin vs prior yearFY2024+10–15 bps vs 2023 ——
Net Interest Margin vs prior yearFY2025—+20–25 bps vs 2024 Raised
Provision Expense (% avg loans)FY20240.15–0.25% ——
Provision Expense (% avg loans)FY2025—0.15–0.20% Lowered
Non-interest Income (quarterly)FY2024$11.5–$13.0M per quarter ——
Non-interest Income (quarterly)FY2025—Q1/Q2: $11.0–$12.0M; Q3/Q4: $12.0–$13.0M; full-year down ~14–14.5% vs 2024 Lowered (front half; full-year)
Non-interest Expense (quarterly)FY2024$32.5–$33.5M ——
Non-interest Expense (quarterly)FY2025—$34.5–$35.5M; full-year +3–4% vs 2024 Raised
Effective Tax RateFY2024~20% ——
Effective Tax RateFY2025—~19% Lowered
Share Repurchase AuthorizationFY2024Up to ~5% (not utilized) ——
Share Repurchase AuthorizationFY2025—Up to ~5% (not modeled to execute) Maintained
Quarterly DividendFY2024$0.24 per share ——
Quarterly DividendFY2025—$0.26 per share (payable Feb 14, 2025) Raised

Earnings Call Themes & Trends

TopicQ2 2024 (Previous Mentions)Q3 2024 (Previous Mentions)Q4 2024 (Current Period)Trend
Margin trajectoryNIM 3.40%; linked-qtr expansion from 3.30% NIM 3.37%; slight q/q compression NIM 3.45%; guidance for +20–25 bps in 2025; margin cadence “ratable” Improving
Loan growthLoans +1.2% annualized; commercial payoffs muted net growth Loans +9.3% annualized q/q Loans +9.7% annualized; commercial +$112.1M; continued banker adds Accelerating H2
MSR fair value+$0.911M price mark in Q2 -$4.155M price mark in Q3 +$6.519M price mark; LOI to sell ~$971M servicing to reduce volatility Volatile, mitigation planned
Deposit pricing competition——Competitive specials persist; rates stepping down with market; cost of funds decreased q/q Easing CoF; competition ongoing
Capital & shareholder returnsTCE 7.63%; dividend $0.24 TCE 8.08%; dividend $0.24 TCE 8.00%; dividend raised to $0.26; 5% repurchase authorization (not modeled) Strengthening capital; dividend up
CRE office exposure——Disclosed: $82M (~4.3% of commercial), 78% suburban, 20% medical; avg loan $1.3M Transparent; manageable exposure

Management Commentary

  • Brad Kessel (CEO): “Our credit metrics remain outstanding with watch credits and nonperforming assets near historic lows… Looking ahead to 2025, we remain optimistic about sustaining these growth trends” .
  • Joel Rahn (EVP Commercial): “Commercial loan generation was very strong with $112.1 million of Q4 growth… our new loan production continues to come on at yields well above the respective portfolio yield” .
  • Gavin Mohr (CFO): “On a linked quarter basis, our fourth quarter net interest margin was positively impacted by… a decrease in funding costs of 17 bps… partially offset by a decrease in the yield on earning assets of 16 bps” .
  • Strategy: Investments in talent and technology; digital marketing, fintech partnerships (Blend, Numerated), branch optimization, process automation to drive growth and efficiency .

Q&A Highlights

  • Banker additions: Management expects “another handful of good banker additions” in 2025, leveraging disruption/M&A opportunities in the market .
  • Margin cadence: NIM expansion expected to be “ratable” through 2025; if no Fed cuts, NIM impact is only 3–5 bps lower vs guidance (i.e., ~18–22 bps vs ~20–25 bps) .
  • Loan growth timing: Q1 typically softer seasonally; underlying production is expected to be relatively even across the year .
  • Repricing runway: ~35.7% of assets reprice in 1 month and ~46.9% within 12 months, including ~$120M securities runoff, supporting NII sensitivity profile .
  • Deposits: Core deposit growth targeted ~3% in 2025; total deposits +1.5–2% with measured pricing adjustments amid ongoing competition .

Estimates Context

  • S&P Global consensus estimates (EPS, revenue, EBITDA, and targets) were unavailable at the time due to data access limits. As a result, direct comparisons to Wall Street consensus cannot be provided in this recap. Where relevant, management’s outlook and actuals have been benchmarked against prior periods and internal guidance ranges instead [GetEstimates error].

Key Takeaways for Investors

  • Margin expansion is the central 2025 thesis: guided +20–25 bps vs 2024 driven by declining liability costs, while asset yields modestly ease; cadence expected to be steady through the year .
  • Commercial-led loan growth (5–6% FY25) backed by experienced banker recruitment and a healthy pipeline; new originations carry yields above portfolio rates, supporting NII growth .
  • Asset quality remains a differentiator (NPLs/loans 0.15%; NPAs/assets 0.13%; low NCOs), limiting credit cost drag even as the allowance is maintained at ~1.47% of loans .
  • Mortgage servicing gains drove Q4 non-interest income; LOI to sell ~$971M MSRs should dampen future earnings volatility from MSR fair value swings .
  • Expense discipline is in focus after Q4 overshoot; FY25 non-interest expenses guided higher ($34.5–$35.5M/quarter) as the bank invests in growth and technology .
  • Capital and shareholder returns are strengthening: TCE/TA ~8.0%, dividend raised to $0.26 (+8%), repurchase authorization up to 5% (not modeled to be used) .
  • Near-term catalysts: confirmation of NIM trajectory, sustained commercial loan growth, moderation in expense growth, and execution of MSR sale; watch deposit pricing dynamics and Fed path for sensitivity .