Independent Bank Corporation · NASDAQ:IBCP
Independent Bank — Q2 2020 Earnings Presentation
27 slides from Independent Bank's earnings presentation, Jul 28, 2020
Slide 1: Q2 Earnings Conference Call – July 28, 2020
Q2 EARNINGSIndependent Bank CorporationConference Call – July 28, 2020
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 OfficerRobert N. Shuster, Executive Vice President and Chief Financial OfficerQuestion and Answer session.Closing Remarks.Note: This presentation is available at www.IndependentBank.com in the Investor Relations area under
Slide 4: COVID-19 Response: Supporting Employees, Clients & Communities
COVID-19 ResponseSupporting Employees, Clients & Communities 4 Employees Clients & Communities Work from home. Providing the technology, culture, and operational infrastructure for the workforce to work remotely as needed.Granting additional sick and vacation time. Our bank branch lobbies opened bac
Slide 5: Historical Financial Data
Historical Financial Data 5 Excluding the impact of the $5.96 million remeasurement of net deferred tax assets in 2017, net income is $26.440 million, ROA is 1.00%; and ROE is 10.10%.
Slide 6: 2Q 2020 Financial Highlights
2Q 2020 Financial Highlights Income StatementPre-tax, pre-provision income was $23.5 million in the second quarter of 2020 compared to $14.1 million in the second quarter of 2019.Net income of $14.8 million, or $0.67 per diluted share compared to $10.7 million, or $0.46 per diluted share for the yea
Slide 7: Our Michigan Markets
Our Michigan Markets 7 Source: S&P Global Market Intelligence and Company documents. Map does not include loan production offices. Deposit market share data based on FDIC Summary of Deposits Annual Survey as of June 30, 2019.Note: Loan and deposit balances exclude the loans and deposits (such as bro
Slide 8: Select Economic Statistics
Select Economic Statistics Unemployment Trends (%) Total Employees (Thousands) Regional Average Home Sales Price (Thousands) Annualized Home Sales (Thousands) Increasing unemployment rates due to COVID-19 Strong job growth prior to COVID-19 Stable prices in key markets Slowing Michigan home sales 8
Slide 9: Low Cost Deposit Franchise Focused on Core Deposit Growth
Low Cost Deposit Franchise Focused on Core Deposit Growth 9 Substantially core funding – $3.0 billion of non-maturity deposit accounts (85.9% of total deposits).Total deposits increased $506.6 million since 12/31/19 (excluding brokered) with non-interest bearing up $266.3 million, savings and intere
Slide 10: Diversified Loan Portfolio
Diversified Loan PortfolioFocused on High Quality Growth 10 Lending Highlights Note: Portfolio loans exclude loans HFS. Portfolio loan changes in 2Q’20:Commercial – increased $181.4 million. PPP loan balances totaled $259.4 million at June 30, 2020.Mortgage – decreased $28.3 million due to portfolio
Slide 11: COVID-19 Programs to Date
COVID-19 Programs to Date 11 Payroll Protection Program Loan Forbearances (1) Denotes that an application has been accepted by the SBA and that PPP funds are reserved for that application. The tables to the left reflect the status in each of these programs as of June 30, 2020.Loan Forbearances:Forbe
Slide 12: Loan Portfolio Concentrations by Industry
Loan Portfolio Concentrations by Industry Percentage concentrations are based on the entire commercial portfolio of $1.363 billion. Loans by Industry as a % of Total Commercial Loans ($ in millions) Investor RE by Collateral Type as a % of Total Commercial Loans ($ in millions) $933 million, or 68.5
Slide 13: Investment Securities Portfolio
Investment Securities Portfolio 13 Highlights High quality, liquid, diverse portfolio with relatively short duration.Fair value of $856.3 million, an increase of $262.0 million in 2Q’20.Net unrealized gain of $14.3 million, representing 1.7% of amortized cost.Portfolio ratings: 65% AAA rated (or bac
Slide 14: Strong Capital Position
Strong Capital Position 14 Source: S&P Global Market Intelligence and Company documents.Note: Company closed acquisition of TCSB Bancorp, Inc. in Q2 ‘18. TCE / TA (%) Leverage Ratio (%) CET1 Ratio (%) Total RBC Ratio (%) IBCP Target 8.50% - 9.50 % Capital retention to support (i) organic growth and
Slide 15: Net Interest Margin/Income
HighlightsInterest rate sensitivity profile of the loan and securities portfolios, in combination with a low cost core deposit base, positions us as slightly asset sensitive.Net interest income increased $0.3 million, or 0.9%, in 2Q’20 vs. 1Q’20 due primarily to a $308.7 million increase in average
Slide 16: Linked Quarter Analysis
Linked Quarter Analysis 16 Q2’20 NIM Changes Linked Quarter Average Balances and FTE Rates Yield on average interest-earning assets declined 56 basis points.Commercial loans: 77 basis point drop due primarily to lower variable rates and new loans being added at lower rate. PPP loans average balance
Slide 17: Strong Non-interest Income
Strong Non-interest Income 17 Diverse sources of non-interest income – representing 40.1% of revenue in 2Q’20.COVID-19 has adversely impacted service charges on deposits. In addition, we have suspended certain electronic banking fees due to the enhanced need for customers to access this channel.Mort
Slide 18: Focus on Improved Efficiency
Focus on Improved Efficiency 18 Source: Company documents. Non-interest Expense ($M) Highlights Efficiency Ratio (4 quarter rolling average) Continued focus on expense control and driving positive operating leverage. 2Q’20 non-interest expense included $0.42 million of branch closure costs and $0.35
Slide 19: 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 20: Classified Assets and New Default Trends
Classified Assets and New Default Trends Note: Dollars all in millions. Total Classified Assets Commercial Loan New Defaults Total Loan New Defaults Retail Loan New Defaults 20
Slide 21: Troubled Debt Restructurings (TDRs)
Troubled Debt Restructurings (TDRs) TDR HighlightsWorking with client base to maximize sustainable performance.The specific reserves allocated to TDRs totaled $6.7 million at 6/30/20.A majority of our TDRs are performing under their modified terms but remain in TDR status for the life of the loan.92
Slide 22: Credit Cost Summary
Note: Dollars all in millions. Provision for Loan Losses Loan Net Charge-Offs/Recoveries Allowance for Loan Losses Credit Cost Summary 22
Slide 23: Incurred Loss Model vs CECL
Incurred Loss Model vs CECL 23 Incurred vs. CECL ($ in Thousands) 6/30/20 “As If” ACL and percent of loans calculated at midpoint of incremental range with additional $9.0 million at Day 1 and $8.7 million at Q2’20. % Loans 0.96% 1.20% 1.51%(1) “As-if CECL” Illustrative Only Incurred Loss Build We d
Slide 24: CECL (ASU 2016-13) Update
CECL (ASU 2016-13) Update Description of Task / Action Step Date Status / Notes 1. Full transition of Excel based incurred allowance for loan losses (ALLL) model into a third-party software solution. 1Q’19 Parallel runs completed in 2018 and full transition in 1Q’19. 2. Select CECL calculation metho
Slide 25: 2Q 2020 Outlook Update
2Q 2020 Outlook Update Category Outlook Lending Continued growthIBCP goal of mid- single digit (approximately 7%) overall loan growth in 2020, primarily supported by increases in commercial loans, mortgage loans and consumer loans. Expect much of this growth to occur in the last three quarters of 20
Slide 26: Strategic Initiatives
Strategic Initiatives 26 Improve net interest income via balanced loan growth, disciplined risk adjusted loan pricing and active management of deposit pricing. Innovative and targeted customer acquisition, retention and cross sales strategies leveraging data analytics, inside sales staff, and intra-
Slide 27: Q&A and Closing Remarks
Q&A and Closing Remarks Question and Answer SessionClosing RemarksThank you for attending!NASDAQ: IBCP 27