Independent Bank Q4 2024 Earnings Report

Calix EPS Results

• Actual EPS: $0.87
• Consensus EPS: $0.77
• Beat/Miss: Beat by +$0.10
• One Year Ago EPS: N/A

Calix Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $48.94 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Calix Announcement Details

• Quarter: Q4 2024
• Date: 1/23/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, January 23, 2025
• Conference Call Time: 11:00AM ET

Calix (NYSE:CALX), together with its subsidiaries, engages in the provision of cloud and software platforms, and systems and services in the United States, rest of Americas, Europe, the Middle East, Africa, and the Asia Pacific. Its cloud and software platforms, and systems and services enable broadband service providers (BSPs) to provide a range of services. The company provides Calix Cloud platform, a role-based analytics platform comprising Calix Engagement Cloud, Calix Service Cloud, and Calix Operations Cloud, which are configurable to display role-based insights and enable BSPs to anticipate and target new revenue-generating services and applications through mobile application, such as CommandIQ for residents and CommandWorx for businesses; Calix Intelligent Access EDGE, an access network solution for automated and intelligent networks; and Calix Revenue EDGE, a premises solution for subscriber managed services. It also offers SmartLife managed services, including SmartHome managed services and applications to enhance, operate and secure the connected experience of subscribers in their home; SmartTown managed services that reimagine community Wi-Fi as a ubiquitous, secure, and managed experience across a BSP's footprint; and SmartBiz managed services that address the business networking and productivity needs of business owners with an all-in-one managed service. In addition, the company provides Wi-Fi systems under GigaSpire and GigaPro brands to be ready for deployment as a complete subscriber experience solution for BSP's residential and business subscribers. It offers its products through its direct sales force and resellers. The company was incorporated in 1999 and is headquartered in San Jose, California.

Independent Bank Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Hello, everyone, and welcome to the Independent Bank Corporation Reports 2024 4th Quarter Results. My name is Ezra, and I will be your coordinator today. I will now hand you over to Brad Kessel, President and CEO to begin.

[Operator]

Please go ahead.

[Brad Kessel, President and Chief Executive Officer at Independent Bank]

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 Q4 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 and Head of our Commercial Banking. Before we begin today's call, I would like to direct you to the important information on Page 2 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.

[Brad Kessel, President and Chief Executive Officer at Independent Bank]

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 4th quarter 2024 net income of $18,500,000 or $0.87 per diluted share versus net income of $13,700,000 or $0.65 per diluted share in the prior year period. For the year ended December 31, 2024, the company reported net income of $66,800,000 or $3.16 per diluted share compared to net income of $59,100,000 or $2.79 per diluted share in 2023. Our 4th quarter performance marked the culmination of another remarkable year with our organization excelling on the fundamentals. I am especially pleased to report a notable 10% annualized growth rate in our loan portfolio for the Q4 of 2024, driven by an impressive 24% annualized growth rate in our commercial loan portfolio.

[Brad Kessel, President and Chief Executive Officer at Independent Bank]

This strong performance enabled us to achieve a $1,000,000 increase in net interest income for the linked quarter, contributing to a healthy net interest margin of 3.45%. Our credit metrics remain outstanding with watch credits in non performing assets near historic lows. 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 sheet, 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.

[Brad Kessel, President and Chief Executive Officer at Independent Bank]

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. 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 5 of our presentation, total deposits as of December 31, 2024 were $4,700,000,000 Overall core deposits decreased $43,000,000 during the Q4 of 'twenty four, but were up $206,000,000 for the full year. On a linked quarter basis, retail deposits increased by $52,000,000 business deposits declined by $67,000,000 and municipal deposits declined by $24,000,000 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 continues to slow.

[Brad Kessel, President and Chief Executive Officer at Independent Bank]

Additionally, our sales team continues to bring in new relationships well below our wholesale cost of funds. 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%. At this time, I'd like to turn the presentation over to Joel Ron to share a few comments on the success we over to Joel Ron to share a few comments on the success we're having in growing our loan portfolios and provide an update on our credit metrics.

[Joel Rahn, Executive Vice President and Head of Commercial Banking at Independent Bank]

Thanks, Brad, and good morning, everyone. On Page 7, we share an update on loan activity for the quarter. 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 the quarter, total loans grew by $96,500,000 or a 9.7 percent annualized rate. Commercial loan generation was very strong with $112,100,000 of Q4 growth followed by $5,300,000 of mortgage growth.

[Joel Rahn, Executive Vice President and Head of Commercial Banking at Independent Bank]

Our installment loan portfolio declined $20,900,000 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. For the year, we realized $248,000,000 of loan growth, representing a 6.5% increase. The commercial portfolio grew $257,000,000 or 15 percent for the year. Our mortgage portfolio increased $31,000,000 while our installment portfolio declined $40,000,000 due to softer consumer demand and strategic pricing discipline.

[Joel Rahn, Executive Vice President and Head of Commercial Banking at Independent Bank]

Within the commercial loan activity, the mix of C and I lending versus investment real estate was 64% 36% respectively, and 37% came from new customers to the bank. Based upon a solid commercial pipeline, we see continued growth opportunity in 2025, while maintaining our disciplined credit standards. 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 2024. It's worth noting that our exposure to the office segment stands at 82,000,000 or 4.3 percent 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.

[Joel Rahn, Executive Vice President and Head of Commercial Banking at Independent Bank]

The average loan size is $1,300,000 which points to the granularity of the segment of the portfolio. For additional insight into office exposure, I refer you to page 25 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 commented earlier. Total non performing loans were $6,000,000 or approximately 15 basis points of total loans at quarter end, up just slightly from 13 basis points at ninethirty.

[Joel Rahn, Executive Vice President and Head of Commercial Banking at Independent Bank]

Past due loans totaled 7,000,000 or 17 basis points, again up slightly from 12 basis points at ninethirty. It's not reflected on this slide, but worth noting that our net charge offs were 2 basis points of average loans for the year. 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?

[Gavin Mohr, EVP & CFO at Independent Bank]

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 $2,700,000 from the year ago period.

[Gavin Mohr, EVP & CFO at Independent Bank]

Our tax equivalent net interest margin was 3.45% during the Q4 of 2024 compared to 3.26% in the Q4 of 2023 and up 8 basis points from the Q3 of 2024. Average interest earning assets were $5,010,000,000 in the Q1 of 2024 compared to $4,930,000,000 in the year ago quarter and $4,990,000,000 in the Q3 of 2024. Page 12 contains a more detailed analysis of the linked quarter increase in net interest income and in the net interest margin. On a linked quarter basis, our Q4 2024 net interest margin was positively impacted by 3 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.

[Gavin Mohr, EVP & CFO at Independent Bank]

On Page 13, we provide details on the institution's interest rigorous position. The comparative simulation analysis for Q4 2024 and Q3 2024 calculates the change in net interest income over the next 12 months under 5 rate scenarios. All scenarios assume a static balance sheet. The base rate scenario applies the spot yield curve from the valuation date. The shock scenario is considered immediate, permanent and parallel rate changes.

[Gavin Mohr, EVP & CFO at Independent Bank]

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. During the quarter, the bank added $50,000,000 in floors. Sensitivity of the existing floors floor portfolio increased as 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.

[Gavin Mohr, EVP & CFO at Independent Bank]

Currently, 35.7% of assets repriced in 1 month and 46.9 percent repriced in the next 12 months. Moving on to Page 14, non interest income totaled $19,100,000 in the Q4 of 2024 compared to $9,100,000 in the year ago quarter and $9,500,000 in the Q3 of 2024. Q4 'twenty four net gains on mortgage loans totaled $1,700,000 compared to $2,000,000 in the Q4 of 2023. The decrease is due to lower profit margins that was partially offset by a higher volume of loan sales. Positively impacting non interest income was $7,800,000 gain on mortgage loan servicing net.

[Gavin Mohr, EVP & CFO at Independent Bank]

This is comprised of $6,500,000 or $0.24 per diluted share after tax gain due to change in price and $2,200,000 of revenue that was partially offset by $1,000,000 decrease due to pay downs in the Q4 of 2024. In early December, the company executed a letter of intent to sell approximately $971,000,000 or 27 percent of the mortgage servicing rights to a third party. This sale will represent approximately $13,500,000 or 27 percent of the total capitalized mortgage servicing right asset. There was no financial impact in the Q4 of 2024 related to this transaction. The intention of this sale is to lower the potential earnings volatility rate related to this asset in future periods.

[Gavin Mohr, EVP & CFO at Independent Bank]

As detailed on Page 15, our non interest expense totaled $37,000,000 in the Q4 of 2024 as compared to $31,900,000 in the year ago quarter and $32,600,000 in the Q3 of 2024. Compensation expense increased $800,000 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 $2,700,000 due primarily to higher expected incentive compensation payout for salaried and hourly employees. Data processing costs increased by $800,000 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 timeframe. Payroll taxes and employee benefits increased $300,000 primarily due to higher healthcare related costs.

[Gavin Mohr, EVP & CFO at Independent Bank]

Page 16 is an update for our 2024 outlook to see how our actual performance during the Q4 compared to the original outlook we provided in January 2024. Our outlook estimated loan growth in the mid single digits. Loans increased $96,500,000 in the Q4 of 'twenty four or 9.7 percent annualized, which is above the forecasted range. Commercial and mortgage loans had growth while installment loans decreased in the Q4 of 2024. Full year loan growth totaled $247,900,000 or 6.5 percent, which is within our forecasted range.

[Gavin Mohr, EVP & CFO at Independent Bank]

Q4 2024 net interest income increased by 6.8% over 2023, which is within our forecast of mid single digit growth. The net interest margin was 3.45% for the current quarter and 3.26 percent for the prior year quarter and up 8 basis points from a linked quarter of 2024. Full year 2024 net interest margin was 3.38% compared to 3.26 percent in 2023. The 12 basis point annual increase was within our forecasted range. The Q4 2024 provision for credit losses was an expense of $2,200,000 The full year 2024 provision was $4,500,000 or 14 basis points annualized of average loans, which was below our forecasted range.

[Gavin Mohr, EVP & CFO at Independent Bank]

Moving on to Page 17, non interest income totaled $19,100,000 in the Q4 of 2024, which was higher than our forecasted range of $11,500,000 to $13,000,000 4th quarter 2024 mortgage loan originations, sales and gains totaled $134,100,000 $106,200,000 $1,700,000 respectively. Mortgage loan servicing net generated a gain of $7,800,000 in the Q4 of 2024. Full year 2024 non interest income totaled $56,400,000 an increase of 11.2 percent, which is higher than our forecasted range. Non interest expense was $37,000,000 in the 4th quarter, higher than our forecasted range of $32,000,000 to $33,500,000 For full year 2024, non interest expense increased 6.3%, which was higher than the forecasted range provided in January. Our effective income tax rate of 18.9% or and 19.6% for the Q4 of 2024 and full year 2024 respectively.

[Gavin Mohr, EVP & CFO at Independent Bank]

Lastly, there were no shares repurchased in the Q4 or for full year 2024. 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 full year growth rate of 5% to 6%. We expect to see growth in commercial and mortgage loans with installment loans declining.

[Gavin Mohr, EVP & CFO at Independent Bank]

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 basis points 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. This forecast assumes a 25 basis point cut in March August, while long term interest rates increased 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.

[Gavin Mohr, EVP & CFO at Independent Bank]

Related to non interest income, we estimate a range of $11,000,000 to $12,000,000 in the 1st and second quarter, followed by a range of $12,000,000 to $13,000,000 in the 3rd Q4 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 the 2024. Our outlook for non interest expense is a quarterly range of $34,500,000 to $35,500,000 with a total for the year 3% to 4% higher than 2024 actuals. The primary driver is the increase in compensation and employee benefits, data processing and occupancy.

[Gavin Mohr, EVP & CFO at Independent Bank]

Our outlook for income taxes is at an effective rate of approximately 19%, 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. That concludes my prepared remarks. I would like to now turn the call back over to Brad.

[Brad Kessel, President and Chief Executive Officer at Independent Bank]

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. They're focused on connecting with customers, investing in our communities and making banking easy. We've 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 Kessel, President and Chief Executive Officer at Independent Bank]

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. Accordingly, we are very excited about our future. At this point, we would now like to open up the call for questions.

[Operator]

Thank you very much. Our first question comes from Adam Rules with Piper Sandler. Adam, your line is now open. Please go ahead.

[Gavin Mohr, EVP & CFO at Independent Bank]

Good morning, Adam. We're having trouble hearing you breaking up.

[Operator]

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. We will have to move on to the next question. Next question comes from Brendan Nozzle with Hovde Group.

[Operator]

Brendan, your line is now open. Please go ahead.

[Brendan Nosal, Director, Equity Research at Hovde Group]

Hey, good morning folks. Can you hear me?

[Brad Kessel, President and Chief Executive Officer at Independent Bank]

Yes. Good morning, Brendan.

[Brendan Nosal, Director, Equity Research at Hovde Group]

Fantastic. Good morning. Sorry, I was having some phone issues earlier. I wanted to make sure you could hear me. Maybe to start off on the lending outlook for 2025.

[Brendan Nosal, Director, Equity Research at Hovde Group]

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 adds across 25, especially given disruption M and A disruption in your markets and how that might factor into your strong commercial loan growth guidance for the year? Thanks.

[Brad Kessel, President and Chief Executive Officer at Independent Bank]

Yes, sure. Let me I'll take first shot and then I'd like maybe Joel to jump in a little bit. And 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.

[Brad Kessel, President and Chief Executive Officer at Independent Bank]

And so Joel, maybe jump in and

[Joel Rahn, Executive Vice President and Head of Commercial Banking at Independent Bank]

Yes. You summed it up really well, Brad. I don't have a lot to add. I would agree that we want to just continue the momentum. We think the pace at which we've been adding talent is realistic.

[Joel Rahn, Executive Vice President and Head of Commercial Banking at Independent Bank]

To us that means probably another handful of good banker additions this year. And we're already 1 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 and A disruption, but that certainly helps to create opportunities to talk to people who want to join a solid community bank organization. So we'll just continue that focus as we move through the year, Brendan.

[Brendan Nosal, Director, Equity Research at Hovde Group]

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?

[Brendan Nosal, Director, Equity Research at Hovde Group]

Like is it ratable throughout the year? And then kind of where you see the margin exiting 2025 based on that full year outlook? Thank you.

[Gavin Mohr, EVP & CFO at Independent Bank]

Yes, this is Gavin. It is I think ratable is a fair label, Brendan. And then again, we wouldn't as we put in the deck, we're expecting full year expansion in the 20 basis points to 25 basis point range over where we're currently where we finished up for 2024. So

[Brendan Nosal, Director, Equity Research at Hovde Group]

Okay, great. Well, thank you

[Brendan Nosal, Director, Equity Research at Hovde Group]

for taking the questions. Appreciate it.

[Gavin Mohr, EVP & CFO at Independent Bank]

Thanks.

[Operator]

Our next question comes from Damon DelMonte with KBW. Damon, your line is now open. Please go ahead.

[Matt Renk, Analyst at Keefe, Bruyette & Woods (KBW)]

Hey, everybody. This is Matt Renk filling in for Damon DelMonte. Hope everybody is doing well.

[Brad Kessel, President and Chief Executive Officer at Independent Bank]

Hi, Matt.

[Matt Renk, Analyst at Keefe, Bruyette & Woods (KBW)]

My first question just on the hi, everybody.

[Matt Renk, Analyst at Keefe, Bruyette & Woods (KBW)]

Just as a follow-up to the loan growth question, 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 year end?

[Joel Rahn, Executive Vice President and Head of Commercial Banking at Independent Bank]

This is Joel. It's always difficult to predict exactly the timing of things booking. But Q1 generally is a little bit softer. And so I would not be surprised to see the early part of the year being that way. That is pretty much true to history.

[Joel Rahn, Executive Vice President and Head of Commercial Banking at Independent Bank]

So but I think it comes across pretty evenly throughout the year. Last this past year, we had a very unusual Q2 where we just happened to have a number of large payoffs. Companies sold, some real estate projects that sold. So the Q2 this year was extraordinary. And yet if you dig beneath the numbers and look at our production, it was pretty smooth throughout the year.

[Joel Rahn, Executive Vice President and Head of Commercial Banking at Independent Bank]

So I don't think there's a ton of difference 1 quarter to the next.

[Matt Renk, Analyst at Keefe, Bruyette & Woods (KBW)]

Okay. Got it. Thank you. And then just following up on margin. The forecast assumes 2 cuts.

[Matt Renk, Analyst at Keefe, Bruyette & Woods (KBW)]

Just assuming we get no cuts this next year, do you think asset yields can still outpace liability costs to give you expansion, just maybe not to the same degree? Is that how we should think about it?

[Gavin Mohr, EVP & CFO at Independent Bank]

Yes. 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 3 to 5 basis point decline in margin.

[Matt Renk, Analyst at Keefe, Bruyette & Woods (KBW)]

Okay, got it. Thank you.

[Gavin Mohr, EVP & CFO at Independent Bank]

Yes.

[Matt Renk, Analyst at Keefe, Bruyette & Woods (KBW)]

I'll step back now.

[Operator]

Thank you. Our next question comes from Nathan Grace with Piper Sandler. Nathan, your line is now open. Please go ahead.

[Adam Kroll, Equity Research Associate at Piper Sandler Companies]

Hi. This is Adam Kroll on for Nathan Race. Can you guys hear me okay?

[Brad Kessel, President and Chief Executive Officer at Independent Bank]

Yes, Adam. We can hear you clearly.

[Adam Kroll, Equity Research Associate at Piper Sandler Companies]

Sorry 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?

[Gavin Mohr, EVP & CFO at Independent Bank]

Fixed rate. So the portfolio

[Gavin Mohr, EVP & CFO at Independent Bank]

is about I don't have it. Let me get

[Gavin Mohr, EVP & CFO at Independent Bank]

So 35, I'll give you the asset base. So 35.7% of total assets repriced in 1 month and 47% repriced in the next 12 months. Now that does include $120,000,000 of securities runoff.

[Adam Kroll, Equity Research Associate at Piper Sandler Companies]

Okay. I appreciate that. 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?

[Gavin Mohr, EVP & CFO at Independent Bank]

Yes. So deposit 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 only be enough about 1.5%, 2%.

[Adam Kroll, Equity Research Associate at Piper Sandler Companies]

Okay. I appreciate the color there. And then last one for me is just what 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 Mohr, EVP & CFO at Independent Bank]

Yes, there's still plenty of competition out there. We have been able to and you can see it on the deck, it's Page 6. I've been really pleased with our ability to make some adjustments as they've 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

[Gavin Mohr, EVP & CFO at Independent Bank]

overall

[Gavin Mohr, EVP & CFO at Independent Bank]

rates have stepped down, but there is no shortage of 1 off specials in our markets that are being offered.

[Adam Kroll, Equity Research Associate at Piper Sandler Companies]

Got it. Thanks for taking my questions. I'll step back now.

[Gavin Mohr, EVP & CFO at Independent Bank]

Thank you.

[Operator]

Our next question comes from Brendan Nossel with Hovde Group. Brendan, your line is now open. Please go ahead.

[Brendan Nosal, Director, Equity Research at Hovde Group]

Hey, just a 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?

[Gavin Mohr, EVP & CFO at Independent Bank]

Yes. Thanks for clarifying that. That's right, Brendan. Yes.

[Brendan Nosal, Director, Equity Research at Hovde Group]

Got it. Okay. So instead of 20% to 25%, it would be 18% to 22%, something like that, right?

[Gavin Mohr, EVP & CFO at Independent Bank]

Yes. Yes. Perfect.

[Brendan Nosal, Director, Equity Research at Hovde Group]

Fantastic. Okay. Thanks for taking the follow-up. Much appreciated.

[Operator]

Thank you very much everyone. That concludes the questions and answers session. I will now hand back over to Brad for any closing remarks.

[Brad Kessel, President and Chief Executive Officer at Independent Bank]

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.

[Brad Kessel, President and Chief Executive Officer at Independent Bank]

Finally, I would like to thank each of you for your interest in Independent Bank Corporation and for joining us on today's call. Have a great day.

[Operator]

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.

Participants

Executives

• Brad Kessel, President and Chief Executive Officer
• Joel Rahn, Executive Vice President and Head of Commercial Banking
• Gavin Mohr, EVP & CFO

Analysts

• Brendan Nosal, Director, Equity Research at Hovde Group
• Matt Renk, Analyst at Keefe, Bruyette & Woods (KBW)
• Adam Kroll, Equity Research Associate at Piper Sandler Companies