Independent Bank's Q4 2024: Navigating Contradictions in Lending Outlook and Margin Expansion

Strong Financial Performance and Loan Growth:
- Independent Bank Corporation reported net income of $18.5 million, up from $13.7 million in the prior year, and an annualized loan portfolio growth rate of 10%, with a 24% growth in the commercial loan portfolio.
- The growth was driven by balanced growth in both loans and deposits, strong fundamentals, strategic initiatives, and a robust commercial loan pipeline.

Net Interest Margin Expansion and Interest Rate Risk Management:
- The bank achieved a healthy net interest margin of 3.45%, with total cost of funds decreasing by 18 basis points to 1.92%.
- This improvement was due to a decrease in funding costs and strategic management of interest rate risk, including the addition of floors to protect against rate declines.

Deposit Management and Competition:
- Total core deposits decreased $43 million in Q4 but increased $206 million for the full year, with retail deposits increasing while business and municipal deposits declined.
- The bank's ability to remix lower-yielding deposits into higher-yielding products, along with competitive pricing strategies, helped manage cost of funds in a competitive environment.

Credit Quality and Risk Management:
- The bank maintained excellent credit quality, with non-performing loans at 15 basis points of total loans and net charge-offs at 2 basis points of average loans for the year.
- Strong credit standards and the diversification of the loan portfolio contributed to these strong credit metrics.

Dividend Increase and Financial Outlook:
- The Board of Directors approved an 8% increase in the quarterly dividend, marking the 12th consecutive annual increase.
- The bank's confidence in maintaining growth trends is based on a robust commercial loan pipeline, strategic investments, and a strong regulatory capital position.