Independent Bank Corporation · NASDAQ:IBCP
Independent Bank — Q4 2022 Earnings Presentation
24 slides from Independent Bank's earnings presentation, Jan 26, 2023
Slide 1: Independent Bank Corporation Earnings Call Fourth Quarter 2022
Independent Bank Corporation Earnings Call Fourth Quarter 2022 January 26, 2023 (NASDAQ: IBCP)
Slide 2: Cautionary note regarding forward-looking statements
Cautionary note regarding forward-looking statements This presentation contains forward-looking statements about Independent Bank Corporation. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the
Slide 3: Agenda
Agenda Formal Remarks. – William B. (Brad) Kessel, President and Chief Executive Officer – Gavin A. Mohr, Executive Vice President and Chief Financial Officer – Joel Rahn, Executive Vice President – Commercial Banking Question and Answer session. Closing Remarks. Note: This presentation is ava
Slide 4: 4Q22 Overview
4Q22 Overview 4 4Q22 Earnings • Net income of $15.1 million, or $0.71 per diluted share, compared to $12.5 million, or $0.58 per diluted share, in 4Q21 • Pre-tax, pre-provision income of $20.0 million, an increase of 24% from $16.1 million in 4Q21 • Growth in net interest income offset lower net gai
Slide 5: Low Cost Deposit Franchise Focused on Core Deposit Growth
Low Cost Deposit Franchise Focused on Core Deposit Growth 5 Substantial core funding – $3.85 billion of non-maturity deposit accounts (87.8% of total deposits). Total deposits increased $262.0 million (6.4%) since 12/31/21 with non-interest bearing down $51.8 million, savings and interest- beari
Slide 6: Historic IBC Cost of Funds vs. the Federal Funds Rate
Historic IBC Cost of Funds (excluding sub debt) vs. the Federal Funds Rate 6 Cumulative Cycle Beta = 16.2%
Slide 7: Diversified Loan Portfolio Focused on High Quality Growth
Diversified Loan Portfolio Focused on High Quality Growth 7 Lending Highlights Note: Portfolio loans exclude loans HFS. Portfolio loan changes in 4Q’22: − Commercial – increased $58.6 million. − Average new origination yield of 6.39%. − Mortgage – increased $13.5 million. − Average new origination
Slide 8: Concentrations within Commercial Loan Portfolio
Loans by Industry as a % of Total Commercial Loans ($ in millions) Investor RE by Collateral Type as a % of Total Commercial Loans ($ in millions) 8 Concentrations within $1.47B Commercial Loan Portfolio 8 Note: $937 million, or 63.9% of the commercial loan portfolio is C&I or owner occupied, while
Slide 9: Credit Quality Summary
Credit Quality Summary Note 1: Non-performing loans and non-performing assets exclude troubled debt restructurings that are performing. Note 2: 12/31/16 30 to 89 days delinquent data excludes $1.63 million of payment plan receivables that were held for sale. Non-performing Assets ($ in Millions) ORE
Slide 10: Strong Capital Position
Strong Capital Position 10 TCE / TA (%) Leverage Ratio (%) CET1 Ratio (%) Total RBC Ratio (%) Strong Capital Position • Long-term capital Priorities: Capital retention to support organic growth, acquisitions and return of capital through strong and consistent dividends and share repurchases. • Well
Slide 11: Net Interest Margin/Income Highlights
Highlights Net interest income increased $0.7 million in 4Q’22 vs. 3Q’22 due to an increase in average earning assets and an increase in the net interest margin. Net interest margin was 3.52% during the fourth quarter of 2022, compared to 3.13% in the year-ago quarter and 3.49% in the third quar
Slide 12: Linked Quarter Analysis
Linked Quarter Analysis 12 4Q’22 NIM Changes Linked Quarter Average Balances and FTE Rates 4Q22 3Q22 Change Avg Bal Inc/Exp Yield Avg Bal Inc/Exp Yield Avg Bal Inc/Exp Yield ($ in thousands) Cash $5,069 $48 3.76% $5,830 $28 1.91% ($761) $20 1.85% Investments 1,182,462 9,271 3.14% 1,243,856 8,248 2.6
Slide 13: Interest Rate Sensitivity and Net Interest Income Modeling
• The decrease in the base case modeled NII is due to an adverse shift in the funding mix and higher than modeled betas on interest bearing deposits during the quarter. These changes were partially offset by earning asset growth and a favorable change in earning asset composition. • There was a mode
Slide 14: Strong Non-interest Income
Strong Non-interest Income 14 Diverse sources of non-interest income, representing 18.4% of operating revenue in 4Q’22. The $0.2 million comparative quarterly increase in service charges on deposit accounts is primarily attributed to fees related to Treasury Management. Mortgage banking: − $1.
Slide 15: Focus on Improved Efficiency
Focus on Improved Efficiency 15 Source: Company documents. Non-interest Expense ($M) Highlights Efficiency Ratio (4 quarter rolling average) 4Q’22 efficiency ratio of 60.8%. Compensation and employee benefits expense of $20.4 million, an increase of $0.5 million from the prior year quarter. Co
Slide 16: 2022 Outlook Update
2022 Outlook Update Category Outlook Lending Continued growth IBCP goal of low double digit (approximately 10%) overall loan growth is based on increases in commercial loans, mortgage loans and consumer loans. Expect much of this growth to occur in the last three quarters of 2022. This growth foreca
Slide 17: 2023 Outlook
2023 Outlook Category Outlook Lending Continued growth IBCP goal of low double digit (approximately 10%-12%) overall loan growth is based on increases in commercial loans and mortgage loans with installment loans remaining flat. Expect much of this growth to occur in the last three quarters of 2023.
Slide 18: Strategic Initiatives
Strategic Initiatives 18 • Organic growth through servicing businesses and consumers in our Markets in an inclusive way to include straight forward marketing, improved brand awareness and enhanced outreach efforts that foster strong customer relationships and engagement. • Improve net interest incom
Slide 19: Q&A and Closing Remarks
Q&A and Closing Remarks Question and Answer Session Closing Remarks Thank you for attending! NASDAQ: IBCP 19
Slide 20: Appendix: Additional Financial Data and Non-GAAP Reconciliations
Appendix 20 Additional Financial Data and Non-GAAP Reconciliations
Slide 21: Historical Financial Data
Historical Financial Data 21 Year Ended December 31, ($M except per share data) 2017 2018 2019 2020 2021 2022 5 Year CAGR Balance Sheet: Total Assets $2,789 $3,353 $3,565 $4,204 $4,705 $5,000 12.4% Portfolio Loans $2,019 $2,583 $2,725 $2,734 $2,905 $3,465 11.4% Deposits $2,401 $2,913 $3,037 $3,637 $
Slide 22: Non-GAAP to GAAP Reconciliation
22Non-GAAP to GAAP Reconciliation December 31, September 30, June 30, March 31, December 31, 2022 2021 2020 2019 2022 2022 2022 2022 2021 Net interest income $ 149,561 $ 129,765 $ 123,612 $ 122,581 $ 40,602 $ 39,897 $ 36,061 $ 33,001 $ 34,285 Non-interest income 61,909 76,643 80,745 47,736 11,468 16
Slide 23: Reconciliation of Non-GAAP Financial Measures
23 Reconciliation of Non-GAAP Financial Measures 2022 2021 2022 2021 Net Interest Margin, Fully Taxable Equivalent ("FTE") Net interest income 40,602$ 34,285$ 149,561$ 129,765$ Add: taxable equivalent adjustment 453 492 1,878 1,866 Net interest income - taxable equivalent 41,055$ 34,777$ 151,439$ 13
Slide 24: Reconciliation of Non-GAAP Financial Measures (continued)
24 Reconciliation of Non-GAAP Financial Measures (continued) Independent Bank Corporation Tangible Common Equity Ratio December 31, September 30, June 30, March 31, December 31, 2022 2021 2020 2019 2022 2022 2022 2022 2021 Common shareholders' equity 347,596$ 398,484$ 389,522$ 350,169$ 347,596$ 332,