Good morning and welcome to the Independent Bank Corporation Fourth Quarter 2018 Earnings Conference Call. All participants are in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Brad Kessel, President and CEO. Please go ahead sir..

Good morning. Thank you for joining Independent Bank Corporation's conference call and webcast to discuss the company's 2018 fourth quarter and full year results. I am Brad Kessel, President and Chief Executive Officer. And joining me is Rob Shuster, Executive Vice President and Chief Financial Officer.

Before we begin today’s call, it is my responsibility to direct you to the important information on page two regarding the cautionary note for forward-looking statements. If anyone does not already have a copy of the press release issued by Independent today, you can access it at the company’s website, www.independentbank.com.

The agenda for today’s call will include prepared remarks, followed by a question-and-answer session, and then closing remarks. To follow along, I will begin with slide five of our presentation. I am very pleased with our company's fourth quarter and full year 2018 results.

We continue to execute on our operating plan, delivering strong growth in core earnings, growth in our core funding, and growth in loans while maintaining excellent asset quality and effectively managing our capital.

We are reporting fourth quarter 2018 net income of $9.9 million or $0.41 per diluted share versus net income of $1.7 million or $0.08 per diluted share in the prior year period. This quarter's results include a decrease in the fair value due to price of our capitalized mortgage loan servicing rights of $2.4 million or $0.08 per diluted share.

The increase in fourth quarter earnings as compared to 2017, reflects a $7.4 million increase in net interest income and a $7.3 million decrease in income tax expense that were partially offset by a $2.5 million decrease in non-interest income, a $200,000 increase in the provision for loan losses and a $3.7 million increase in our non-interest expense.

For the fourth quarter of 2018, our return on average assets and return on average equity were 1.2% and 11.4%, respectively. When excluding the after-tax impact of the negative fair value change due to price, these ratios improved to 1.4% for ROA and 13.6% for ROE, respectively.

During the fourth quarter, we grew portfolio loans by $19.9 million or 3% annualized. This represents the 19th consecutive quarter of loan growth. This 3% loan growth is net of $41.5 million of mortgage loans we transferred to loans held for sale.

This transaction aligns well with our ongoing efforts to manage our interest rate risk and liquidity profile, as well as to maintain a diversified loan mix, not to mention taking advantage of lower market interest rates at the end of 2018. On the funding side, during the fourth quarter total deposits were up $115 million or 16.3% annualized.

Excluding broker deposits the growth rate was 7.9% annualized. Some of our recent deposit gathering success has been a function of the automation of our DDA Suite product. Previously these funds moved of balance sheet into interest-bearing money marketed funds with a third party.

Today for these same customers, we can offer competitive rates along with FDIC insurance and maintain the funds on balance sheet. As it relates to capital the company paid a $0.15 per share dividend on November 15 2018. Also during the fourth quarter of 2018 the company repurchased 587,969 shares of our stock at an average price of $21.57 per share.

Turning to Slide Six in our presentation, for the year ended December 31, 2018 the company reported net income of $39.8 million or $1.68 per diluted share. This compares to net income of $20.5 million or $0.95 per diluted share in 2017.

This represents an increase of $19.4 million or 95% in net income and $0.73 or 77% increase in diluted earnings per share. Our return on average assets and return on average equity for the year ended December 31, 2018 improved to 1.27% and 12.38% respectively.

The favorable impact of the Traverse City State Bank acquisition combined with strong loan origination activity led to meaningful loan growth and increased net interest income.

Net income and diluted earnings per share have increased significantly in 2018 as we have gained a greater operating leverage and efficiency, as well as benefiting from a reduced corporate income tax rate.

We are optimistic about our future and recently announced a 20% increase in our quarterly common stock cash dividend to $0.18 per share to be paid on February 15, 2019. Slide Seven of our presentation provides a good view of our footprint.

Turning to Slide Eight, Michigan business conditions continue to be favorable with low unemployment, good job growth, affordable housing and continued good demand for commercial real estate. At December of 2018 Michigan unemployment rate at 4% is lower than one year ago of 4.7% and 0.1% above the U.S. unemployment rate of 3.9%.

Regionally, Grand Rapids unemployment is at 2.5%, Lansing is at 3.1% and Detroit, Lavonia and Dearborn is at 4.2%. Michigan's workforce is 4.463 million workers strong and overall employment is up slightly from one year ago. In regards to housing the Michigan real estate market can be characterized as affordable with a continued shortage of inventory.

The average sales price of a home in Michigan is $184,000 and Michigan's year-over-year average sales price is up 8.6%. The continuation of the positive economic trends can be seen in our regional portfolios shown on page 9.

Our two strongest growth regions are the Grand Rapids region, up $98 million in loan balances in south our Southeast Michigan region up $90 million in loan balances. Our Traverse City team has produced solid growth 5% annualized since the acquisition. We've also seen very good year-over-year deposit growth in most of our regions.

The next couple of slides cover our balance sheet. Turning to page 10, we provide a couple of charts reflecting the attractive composition of our deposit base as well as the continued growth in this portfolio in six of the last eight quarters, while working to effectively manage our overall cost of funds.

Independent has $2.9 billion in total deposits of which 75% are non-maturity deposit accounts. When comparing fourth quarter 2018 to the same quarter one year ago, we increased total deposits by $130 million, or 5.8%. This excludes brokered deposits and $254 million of non-brokered deposits acquired in the TCSB merger.

Our total cost of deposits is up 12 basis points on a linked quarter basis and is up 35 basis points when comparing to the same quarter one year ago. Our cumulative deposit cost beta for the period of quarter one 2017 to quarter four 2018 is 28.3% and our cumulative deposit cost beta over the last four quarters is 34.3%.

Similar charts are also reflected on page 11, but in this case we are displaying a balanced mix of our loan portfolios. We continue to target a diversified loan mix with the largest portfolio being our commercial book of business. At December 31, our loan mix included 43% commercial, 39% mortgage, 15% installment and 3% held for sale.

Total loans outstanding now aggregate to $2.67 billion. The commercial portfolio, our largest book of business grew by $32.4 million, or 11.6% annualized during the quarter.

Consumer installment loans were up slightly for the quarter and portfolio mortgage loans declined by $13.6 million as a result of the reclassification of $41.5 million of portfolio mortgage loans to held for sale.

In terms of capital management, our capital levels continue to be strong with tangible common equity moving from 9.51% at December 31, 2018 to 9.17% at December 31, 2018. This is well within our targeted TCE range of 8.5% to 9.5%.

On January 21, the Board of Directors increased the cash dividend by 20% and declaring a quarterly cash dividend and common stock of $0.18 per share, payable on February 15, 2019. Our Board of Directors approved a 2019 share repurchase plan for up to 5% of outstanding common shares.

Through the 25 -- through January 25, under this new plan, 43,768 shares had been repurchased at an average price of $21.67 per share.

At this time, I would like to turn the presentation over to Rob Shuster to share a few comments on our financials, credit quality, a review of our final 2018 results versus our original outlook and then management's initial outlook for 2019..

Thanks Brad and good morning everyone. I am starting at page 13 of our presentation. Brad discussed the increase on our net interest income during his remarks, so I will focus on our net interest margin.

Our tax equivalent net interest margin was 3.93% during the fourth quarter of 2018 which is up 28 basis points from the year-ago period and up two basis points from the third quarter of 2018. I will have some more detailed comments on this topic in a moment.

Average interest-earning assets were $3.12 billion in the fourth quarter of 2018 compared to $2.57 billion in the year-ago quarter and $3.04 billion in the third quarter of 2018. This significant year-over-year increase reflects both the Traverse City State Bank merger and organic loan growth.

Page 14 contains a more detailed analysis of the linked quarter increase in net interest income. There's a lot of data on this slide, but to summarize a few key points, the linked quarter net interest margin again increased by two basis points.

This was primarily due to a $346000 increase in net recoveries of interest on previously charged off or non-accrual loans. Fourth quarter 2018 discount accretion of $423000 on the TCSB acquired loan portfolio was down $185000 from the $608000 we recorded in 3Q 2018.

This discount accretion increased the net interest margin by 5.4 basis points and 7.9 basis points in 4Q 2018 and 3Q 2018 respectively. We'll comment more specifically on our outlook for net interest income for 2019 later in the presentation.

Page 15 compares our quarterly average cost of funds which is annualized interest expense divided by average earning assets to the monthly average effective federal funds rate during the quarter and the spot federal funds rate during the quarter.

You can see the relatively low cumulative beta of 8.6% for the first 81 basis points of movement in the effective federal funds rate from Q3 2015 to Q2 2017. And the increase in the cumulative beta 30.7% for the next 127 basis points of movement in the effective federal funds rate from Q2 2017 to Q4 2018. Moving onto Page 16.

Non-interest income totaled $9 million in the fourth quarter of 2018 as compared to $11.4 million in the year-ago quarter and $11.8 million in the third quarter of 2018.

Our mortgage banking operations, net gains on mortgage loans and mortgage loan servicing caused most of the quarterly comparative year-over-year and linked quarter variability in non-interest income.

We have a table in the text of our earnings release that breaks out mortgage loan servicing into its component parts, net revenue fair value change due to price and fair value change due to pay-downs.

Fair value change due to price, which we view is not being a part of core results as Brad mentioned was a negative $2.4 million or $0.078 per diluted share after-tax in the fourth quarter of 2018 compared to a positive $356,000 or $0.011 per diluted share in the fourth quarter of 2017.

Net gains on mortgage loans declined on both a year-over-year and linked quarter basis. Unique to the fourth quarter of 2018 is a $248,000 loss that we recorded on a pending sale of $41.5 million of portfolio mortgage loans. The sale is expected to settle by January 31, 2019.

In addition, we have generally seen competitive pricing pressure throughout 2018 when compared to 2017, which has reduced profitability margins. The year-over-year increases in interchange income and interchange expense were primarily due to the implementation of ASU 2014-09 as described in the text of our earnings release.

As detailed on Page 17, our non-interest expenses totaled $26.8 million in the fourth quarter of 2018 as compared to $23.1 million in the year-ago quarter and $26.7 million in the third quarter of 2018.

This year-over-year quarterly increase was primarily, in compensation and benefits, occupancy, data processing, furniture fixtures and equipment, communications, interchange expense, as I mentioned earlier, advertising and the amortization of intangible assets. Much of the increases reflect the impact of the TCSB merger.

In addition, healthcare costs increased by nearly $450,000 on a quarterly year-over-year basis due to an increase in actual and estimated incurred, but not reported claims. We have a self-insured health insurance plan with an individual stop-loss limit. And unfortunately, we have had elevated claims in 2018 as compared to recent years.

Investment securities available for sale decreased by $9 million during the fourth quarter of 2018. Page 18 provides an overview of our investments at December 31, 2018. Page 18 provides an overview of our investments at December 31, 2018.

Approximately 29% of the portfolio is variable rate and much of the fixed rate portion of the portfolio is in maturities, or average lives of five years or less. The estimated average duration of the portfolio is about 2.97 years, with a weighted average tax equivalent yield of 3.11%, which is up 10 basis points from September 30.

Page 19 provides data on non-performing loans, other real estate, non-performing assets and early-stage delinquencies. Total non-performing assets were $10.3 million or 0.31% of total assets at December 31, 2018. This was slightly lower than the September 30, 2018 level.

At December 31, 2018, 30 to 89 day commercial loan delinquencies were just 0.03% and mortgage and consumer loan delinquencies were 0.29%. Moving onto page 20. We recorded a provision for loan losses of $591,000 in the fourth quarter 2018 compared to an expense of $393,000 in the year-ago quarter.

We had modest loan net charge-offs of $104,000 in 4Q, 2018. The allowance for loan losses totaled $24.9 million or 0.96% of portfolio loans and 1.06% of originated loans at December 31, 2018. Page 21 provides some additional asset quality data including information on new loan defaults and unclassified assets.

New loan defaults were $3.8 million in 4Q, 2018. Page 22 provides information on our TDR portfolio that totaled $56 million at December 31, 2018, a decline of $3.3 million during the fourth quarter. This portfolio continues to perform very well with nearly 95% of these loans performing and 93.2% of these loans being current at December 31, 2018.

Page 23 is our final update for 2018 where we compare our actual performance during the year to the original outlook that we provided back in January 2018. Overall, we believe that our actual performance during 2018 was better than our original outlook. The various components of our 2018 performance are outlined on this slide.

Finally, page 24 is our initial outlook for 2019. We are projecting portfolio loan growth of approximately 8% to 9% for 2019. The moderation from 2018 actual portfolio loan growth was primarily in the mortgage loan category due principally to a higher percentage of loans projected to be originated for sale.

We are expecting non-brokered deposit balances to grow 3% to 4% in 2019. Any funding gap in earning asset growth is expected to be largely filled with brokered deposits. We expect 2019 net interest income to grow 10% to 11%, reflecting a full year with the TCSB merger in the aforementioned portfolio loan growth.

Our forecast assumes, one, 25 basis point increase in the target federal funds rate in June 2019 and a relatively stable net interest margin throughout the year. Therefore, the projected increase in net interest income is principally due to earning asset growth. Credit is extremely difficult to project.

However, we do expect asset quality metrics to generally be stable in 2019. A provision level at about 20 basis points of average portfolio loans would not be unreasonable for 2019 modeling purposes.

Although mortgage banking related revenues could create quarterly volatility and the first quarter of every year is typically our slowest for non-interest income, we would generally expect a range of $11 million to $12 million per quarter in actual non-interest income in 2019.

We are projecting non-interest expense of $27 million to $27.5 million per quarter in 2019. When factoring out merger-related expenses and gain on the sale of other real estate, the projected 2019 level of non-interest expenses is about 2% higher than 2018. Finally, we expect an effective income tax rate of about 20% in 2019.

That concludes my prepared remarks and I would now like to turn the call back over to Brad..

Thanks, Rob. 2018 was a very successful year for us as we had very good growth both organically and in adding Traverse City State Bank associates and customer base. This growth enabled us to improve our operating leverage. We met or exceeded our company targets.

Our updated return on asset and return on equity targets are 1.3% or better on ROA and 13.0% or better respectively on ROE respectively. We continue to pride ourselves on investing in our communities and providing exceptional customer service.

Along those lines this past year, we were very pleased to be named one of the best in-state banks by Forbes Magazine coming in as the best bank headquartered in Michigan. In wrapping up our prepared remarks, we have listed our strategic initiatives on slide 25 of the presentation. We have four areas of focus.

The first area is growth principally through organic means, leveraging our sales associates as well as attracting new sales associates to our team. Organic growth can be supplemented with selective and opportunistic bank acquisitions and branch acquisitions. Our second area of focus is in process improvement and cost controls.

We have identified an initial dozen technology/digital banking projects that will advance our digital offering, reduce costs and assist us in better leveraging technology, so as to make it easier to bank with us and easier for our associates to service our customers. Our third area of focus is in talent management.

Over the last several years, we have made a number of changes to recruit, retain and develop the best team in the marketplace. We will continue to advance this area of focus. Finally, effective risk management is critical to delivering sustained high performance for our shareholders. At this point, we would now like to open up the call for questions..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Brendan Nosal of Sandler O'Neill & Partners..

Hey good morning guys.

How are you?.

Very good Brendan. Thank you..

Good. Just starting of here on the net interest margin outlook. If you back out the accretion income, it looks like the core margin was around 3.88% for the quarter. I know that your outlook for the coming year assumes one more mid-year rate hike.

But could you just walk through your expectations for the core NIM as we move through 2019 if the Fed doesn't hike rates any further?.

If the Fed doesn't hike rates any further, it's roughly about a $300,000 in change impact reduction in the margin. So, that's what that mid-year 25 basis point change in our forecast results in terms of dollar. So, it wouldn't have a material impact on either the margin or on net interest income..

Got it. Okay, that's helpful. And then moving over to the outlook for gain on sale revenues. It seems like the outlook is in-line year versus 2018 which assume some pickup in margins.

Can you just walk through your expectations for gain on sale margins to improve? Is it just excess capacity coming out of the industry or are you seeing something else?.

I would say we're seeing a little bit more rational pricing here as we've moved into 2019. So, I'm I guess guardedly optimistic that margins are going to be -- even now it's going to be primarily a purchase market and we don't expect a significant refinance volume. I'm guardedly optimistic that margins are going to be a bit better.

I would say 2018 was a bit of a transitional year. And so you saw a little bit more I think pricing competition. But we feel that 2019 is going to be a little bit better than where we were in 2018..

Got it. Okay. And then last one for me and then I will step back. Yesterday, there was obviously a sizable MOE announcement in the State of Michigan yesterday.

Any early thoughts on what opportunities could arise for you guys at such a large combination in your markets if any?.

Sure Brendan. Well, today Chemical Bank would be one of our largest competitors if you were to try -- draw a one mile radius around our branch locations -- our 68 locations, we actually cross paths with them about in 25 markets. So they're a significant competitor.

And what we've experienced in prior significant mergers in our markets, going back to last couple of years, it does create quite a bit of disruption and opportunities for the other banks in the marketplace, including ourselves, both from a customer acquisition side as well as potential talent acquisition side.

So, I think there is an opportunity and time will tell to see how it all plays out..

All right. Fantastic. Thanks for taking my questions..

Thank you..

The next question comes from Kevin Reevey of D.A. Davidson..

Good morning..

Good morning, Kevin..

First question, I was wondering, if you could give us some more color on how your various deposit growth initiatives are coming along. I know you've got treasury management services as a focus. You talked a little bit early about digital in your retail and checking I was looking for a little more color here..

Sure, Kevin. So I'm very pleased with the job that our team has done this past year in growing the core deposit base. We've had very nice growth. It's been a team effort. That – this side of the balance sheet is not a new focus. It's been a year-after-year focus for us.

And in fact, you will see in our annual proxy statement, we'll list our annual corporate goals for the company in deposit growth has and will continue to be a category for our company and the goal – company goals. You know, it's always been a focus of getting the checking account, whether it be at the consumer level, or the commercial level.

And if I look at the – on the commercial side, first, we've had some very excellent new relationships brought into the bank this past year. And I'm very pleased to see that, with that we've been successful in bringing in their core checking accounts.

And then alongside with that, we've done a nice job then going out and working with the owner on his or her personal checking and the employee base and capturing success there. In fact, recently one of our offices here in West Michigan for a new commercial customer was successful in opening up about 30 new health savings accounts.

And so it's that type of just teamwork and basic blocking and tackling along with we've been very successful in the mortgage origination front and seeking to capture the personal checking account in that situation, whenever possible. And I'm very pleased with the penetration level that we've had there.

And then finally, our treasury management team and as I outlined in our prepared remarks has – continued to knock on doors of the public funds sector and large commercial sector and has had a lot of success particularly with this reciprocal DDA account where previously we were sweeping these funds of balance sheet into a third-party account.

And now we're able to sweep those actually, but keep them on balance sheet for – and pay a very competitive interest rate albeit still lower than what we would have to pay in – at a wholesale level. And then at the same time, provide some FDIC insurance along with it. So those are a handful of what's worked well for us.

And Rob, I don't know if I've left anything out there..

No I think that covers it..

And then earlier you talked about the low unemployment rates particularly in Grand Rapids and Lansing and meanwhile that's good it can always be a double-edged sword.

Are your business customers feeling any negative repercussions as a result of such a low unemployment rate in those two markets?.

That's a great question. And I think that -- a couple of thoughts. One is a lot of business growth today can in fact take place with investment and technology. And so its fewer workers are needed and so they're able to grow their businesses with technology.

The other thing is I've been impressed with the resiliency and the innovativeness in terms of okay, we will hire workers and we're going to train you. So they're just adding programs or investing in employees and they're getting it done.

So while it probably has somewhat held back some growth, I think the markets are dealing with it and moving forward..

And then lastly, since we're on the subject of hiring, you talked about in your prepared remarks hiring sales associates to help drive your business growth.

What's the competitive market like for sales associates? And what are you guys going to attract as well as retain talent in that area?.

Great question. And so over the last several years, we've been very successful in adding new talent to our team. And when I go back to 2016 where we really bulked up on our mortgage origination efforts and added over 15 -- I am sorry 50 associates on the mortgage side. And then this past year, we've been successful in adding on the commercial side.

And I think it starts with -- on the recruiting side it's an ongoing effort. It's not -- you pick it up and put it down, pick it up put it down. It just needs to be ongoing.

And we work real hard in our culture at Independent Bank to create a favorable work culture and a culture of accountability and a culture of being focused on the customer a culture of teamwork.

And as you bring people in from the outside to that culture and then they share what they're seeing and actually how positive it is that word gets out in the marketplace. So that's been a large part of it. I'd say also with the low law and employment, we've had to increase wages at the hourly level in 2018.

We also for the first time instituted an annual incentive bonus for our hourly employees. So that was looked upon favorably.

And then finally there's -- you've some terrific technology that over the last year and in this coming year that we have put in place to make the experience for our -- first of all the recruiting experience, a very efficient process, but then also the on-boarding process to make that a very positive experience for new hires.

And so all those efforts combined I think are helping us to be successful in the talent wars..

Appreciate the color. Thanks for taking my questions..

Thanks, Kevin..

And next we have a question from Damon DelMonte of KBW..

Hey, good morning, guys.

How's is it going today?.

Good, Damon.

How are you?.

Very well. Thanks. Just a quick follow-up on the loan growth.

Could you just talk a little bit more about the drivers of your expected loan growth in the commercial channels? And geographically where it's in the footprint you think you have the best opportunity for growth?.

Sure. I will take first shot at that. And you know as you've seen quarter-over-quarter and here now we're in 19 consecutive quarters of loan growth. It's been pretty balanced. I'd say this past year we were real strong in mortgage portfolio growth, although we've seen that sort of taper back here. And somewhat intentionally here the tail end of the year.

But we think the -- we've got very solid pipelines today in the commercial side. I like where the pipeline stands today versus at the end of the third quarter and also where it stands today versus one year ago at this time. So we think that Southeast Michigan will continue to be a strong market for us as will the West Michigan market.

And we think -- we're also hearing very positive things albeit as we get into the December-January timeframe, the indirect originations for us somewhat slowed down as does the mortgage side. So we'll see a little bit of softness here over year end.

But that should pick up near the end of the first quarter, and we should get some momentum into the second quarter.

So Rob anything to add there?.

No, I think you covered it. I think that the growth is going to be broad-based and the reason as I mentioned in my comments, we actually grew 13% plus in 2018 and the reason for the outlook being more in the 8% to 9% range is largely because of the mortgage side and the originations in higher percentage of them being held for sale.

The rest of it with commercial and consumer I think it's just going to be more of what we've been doing. Although I think on the commercial side as Brad said we look at the pipelines and feel like that we're well set up to have a good year in 2019.

But on the consumer side, we continue to have a very strong offering in the RV marine power support arena. And we think that market will be solid again in 2019..

Okay. That’s great. I appreciate the color on that.

And then I guess just a broader base question, what are your thoughts on M&A at this point? Now that you have a completed and pretty much integrated, do you guys have an appetite to do more transactions?.

I would say our primary focus is on organic growth. I think that M&A side of things is somewhat opportunistic. You have to have a buyer and a seller and you have to have some alignment of pricing expectations and you have to have alignment of culture and strategy etcetera.

So we never build our models and our forecasts assuming there is going to be that type of opportunity. I mean having said that, I think we would be open to looking at different things. But I think our primary focus is to continue to gain operating leverage through growth in earning assets.

It's sort of a simple formula, but we think it's very effective when you combine that with share repurchases and a strong dividend then it does create, we think solid returns for the shareholders..

Okay. All right. All my other questions have been asked and answered. So thank you very much..

Thank you..

And the next question comes from John Rodis of FIG Partners..

Good morning guys..

Good morning John..

Rob just on the -- I think on the -- Rob or Brad I think you said on the share buyback, I think you said you bought 44,000 shares so far in January.

How should we sort of think about buyback activity going forward, given the stock has rebounded some? Is it more opportunistic going forward or do you expect to be more active?.

I think it's probably more opportunistic, I think as we go -- I think we have a model we run that works off of a tangible book dilution earn back timeframe and probably the most sensitive input to that is projected earnings in the future.

And - so we just feel like hey if there is opportunities out there at certain prices and you could see kind of where we bought at, with what we've done to-date. I'm not saying that's a complete reflection of the kind of levels.

But we certainly view at those levels that it meets our economic criteria and it's certainly accretive to earnings per share growth. So I think we'll just sort of may be not have quite the velocity we had in the fourth quarter and it'll be more somewhat dependent on kind of what happens in the marketplace.

Brad, I don't know if you want to add anything there?.

I agree..

No. That makes sense. Thanks, Rob.

And then one other question, Rob, just on the balance sheet, the securities portfolio, should we still expect some sort of continued run-off there like we saw in the fourth quarter?.

Yes. There is about $9 million of run-off. We're kind of -- we kind of feel just for liquidity purposes, we have to retain investments at a certain level. So, I mean, there may be a bit of run-off, but I don't think it will be significant. I think will try to maintain a level at $400 million or so.

And again, that's more out of liquidity management than anything else..

Okay. Make sense. Thanks, guys..

And this concludes our question-and-answer session. I would like to turn the conference back over to Brad Kessel for any closing remarks..

We would like to thank each of you for your interest in Independent Bank Corporation and for joining us on today's call. We wish everybody a great day..

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..