Independent Bank Corporation · NASDAQ:IBCP
Independent Bank — Q4 2020 Earnings Presentation
29 slides from Independent Bank's earnings presentation, Jan 28, 2021
Slide 1: Q4 Earnings Conference Call – January 28, 2021
Q4 EARNINGS Independent Bank Corporation (IBCP) Conference Call – January 28, 2021
Slide 2: Cautionary note regarding forward-looking statements
Cautionary note regarding forward-looking statements 2 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 t
Slide 3: Agenda
Agenda 3 Formal Remarks. – William B. (Brad) Kessel, President and Chief Executive Officer – Gavin A. Mohr, Executive Vice President and Chief Financial Officer Question and Answer session. Closing Remarks. Note: This presentation is available at www.IndependentBank.com in the Investor Relatio
Slide 4: COVID-19 Response: Supporting Employees, Clients & Communities
COVID-19 Response 4 Supporting Employees, Clients & Communities When it became apparent that the Coronavirus (COVID-19) pandemic could pose a threat to our people and business, we activated our Business Continuity and Crisis Communication Core Teams to take early and decisive action Employees Client
Slide 5: Historical Quarterly Results
Historical Quarterly Results 5 Quarter Ended, ($M except per share data) 12/31/19 3/31/20 6/30/20 9/30/20 12/31/20 Balance Sheet: Total Assets $3,565 $3,632 $4,043 $4,169 $4,204 Portfolio Loans $2,725 $2,718 $2,867 $2,855 $2,734 Deposits $3,037 $3,084 $3,485 $3,598 $3,637 Tangible Common Equity $317
Slide 6: 4Q 2020 Financial Highlights
4Q 2020 Financial Highlights 6 Income Statement • Pre-tax, pre-provision income was $20.6 million in the fourth quarter of 2020 compared to $17.0 million in the fourth quarter of 2019. • Net income of $17.0 million, or $0.77 per diluted share compared to $13.9 million, or $0.61 per diluted share for
Slide 7: Historical Annual Results
Historical Annual Results 7 Year Ended December 31, ($M except per share data) 2016 2017 2018 2019 2020 5 Year CAGR Balance Sheet: Total Assets $2,549 $2,789 $3,353 $3,565 $4,204 10.5% Portfolio Loans $1,608 $2,019 $2,583 $2,725 $2,734 11.2% Deposits $2,226 $2,401 $2,913 $3,037 $3,637 10.3% Tangible
Slide 8: Our Michigan Markets
Our Michigan Markets 8 Michigan’s premier community bank. #1 deposit market share amongst Michigan banks < $10B in assets and #10 deposit market share Northwest Branches (61) Branches: 4 overall. Deposits: $289M Loans: $300M Top 10 market share in 20 of 23 counties of operation – with opportunit
Slide 9: Select Economic Statistics
Select Economic Statistics 9 Unemployment Trends (%) Regional Average Home Sales Price (Thousands) $300 Stable prices in 24.0% 262 22.0% key markets $250 20.0% Elevated unemployment 18.0% 192 rates due to COVID-19 $200 16.0% 14.0% $150 12.0% 10.0% $100 As of Nov ‘20 6.9% 80 8.0% 6.0% $50 4.0% 6.7% 2
Slide 10: Low Cost Deposit Franchise
Low Cost Deposit Franchise 10 Focused on Core Deposit Growth Deposit Composition – 12/31/20 Deposit Highlights Substantially core funding – $3.2 billion of non-maturity deposit accounts (89.0% of total deposits). Total deposits increased $600.6 million (19.8%) since 12/31/19 with non-interest be
Slide 11: Diversified Loan Portfolio
Diversified Loan Portfolio 11 Focused on High Quality Growth Loan Composition – 12/31/20 Lending Highlights Portfolio loan changes in 4Q’20: − Commercial – decreased $109.4 million. PPP loan balances decreased $91.4 million and totaled $169.8 million at December 31, 2020. − Mortgage – decreased $8
Slide 12: COVID-19 Programs – Loan Forbearances
COVID-19 Programs – Loan Forbearances 12 Loan Forbearances Current % Change 12/31/2020 9/30/2020 6/30/2020 from 6/30 % of % of % of Loan Type # $ (000’s) # $ (000’s) # $ (000's) # $ portfolio portfolio portfolio Commercial 2 $163 0.01% 17 $25,105 1.90% 386 $210,486 15.40% -99.5% -99.9% Mortgage 134
Slide 13: COVID-19 Programs – Paycheck Protection Program
COVID-19 Programs – Paycheck Protection Program (“PPP”) 13 PPP Loan Portfolio 12/31/20 9/30/20 Description # ($ in 000’s) # ($ in 000’s) Loans outstanding at quarter-end 1483 $ 169,782 2,117 $ 261,182 Average loans outstanding for the quarter n/a 220,214 n/a 261,543 Forgiveness applications submitte
Slide 14: Commercial Loan Portfolio Concentrations
Commercial Loan Portfolio Concentrations 14 Loan Loans by Industry as a %Portfolio Concentrations of Total Commercial Loans byInvestor IndustryRE by Collateral Type as a % of Total ($ in millions) Commercial Loans ($ in millions) $830 million, or 66.9% of the commercial loan portfolio is C&I or owne
Slide 15: Investment Securities Portfolio
Investment Securities Portfolio 15 Investment Portfolio by Type (12/31/20) Highlights High quality, liquid, diverse portfolio with relatively short duration. Fair value of $1.07 billion, an increase of $87.1 million in 4Q’20. $1.1B Net unrealized gain of $20.0 million, representing 1.90% of am
Slide 16: Strong Capital Position
Strong Capital Position 16 Long-Term Strong Capital Capital Priorities: Position a) Capital retention to support (i) organic growth and (ii) acquisitions; and b) Return of capital through (i) strong and consistent dividend and (ii) share repurchases TCE / TA (%) Leverage Ratio (%) 15 15 IBCP Target
Slide 17: Net Interest Margin/Income
Net Interest Margin/Income 17 Yields, NIM and Cost of Funds (%) Highlights 5.00 4.53 4.66 4.70 4.73 4.60 4.44 4.28 4.50 Interest rate sensitivity profile of the loan 4.00 3.72 3.62 3.57 and securities portfolios, in combination 3.50 3.91 3.93 3.88 3.87 3.00 3.76 3.70 3.63 with a low cost core depo
Slide 18: Linked Quarter Analysis
Linked Quarter Analysis 18 4Q’20 NIM Changes 4Q’20 Highlights Q3'20 3.31% Yield on average interest-earning assets declined 5 basis points. Decline in cost of funds 0.02% − Earning asset growth was primarily in investments where the overall yield declined by 39 basis points due to elevated Acceler
Slide 19: Strong Non-interest Income
Strong Non-interest Income 19 2020 YTD Non-interest Income (millions) Highlights Interchange $11.2M Diverse sources of non-interest income – Service Charges on representing 41.9% of operating revenue in 4Q’20. Deposits $8.5M Other $4.6M COVID-19 has adversely impacted service charges on deposits
Slide 20: Focus on Improved Efficiency
Focus on Improved Efficiency 20 Non-interest Expense ($M) Highlights Continued focus on expense control and driving positive operating leverage. $35.0 $33.6 $32.7 4Q’20 performance based compensation was $5.5 million compared to $4.3 million in 4Q’19 due primarily $29.3 $28.7 to an increase in t
Slide 21: Credit Quality Summary
Credit Quality Summary 21 Non-performing Loans ($ in Millions) ORE/ORA ($ in Millions) 30 to 89 Days Delinquent ($ in Millions) Non-performing Assets ($ in Millions) Note 1: Non-performing loans and non-performing assets exclude troubled debt restructurings that are performing. Note 2: 12/31/16 30 t
Slide 22: Classified Assets and New Default Trends
Classified Assets and New Default Trends 22 Total Classified Assets Commercial Loan New Defaults Total Loan New Defaults Retail Loan New Defaults Note: Dollars all in millions.
Slide 23: Troubled Debt Restructurings (TDRs)
Troubled Debt Restructurings (TDRs) 23 87% of TDRs are Current TDRs ($ in Millions) TDR Highlights Working with client base to maximize sustainable performance. The specific reserves allocated to TDRs totaled $4.8 million at 12/31/20. A majority of our TDRs are performing under their modified
Slide 24: Credit Cost Summary
Credit Cost Summary 24 Provision for Loan Losses Loan Net Charge-Offs/Recoveries Allowance for Loan Losses Note: Dollars all in millions.
Slide 25: Incurred Loss Model vs CECL
Incurred Loss Model vs CECL 25 We delayed adopting CECL under the CARES Act: Allocation of Incurred ALLL − Increased visibility into the economic (local, regional, national) impact of the COVID-19 pandemic. Sept. 30, Dec. 31, − Unemployment forecast sources exhibiting wide disparity. 2020 2020 Cha
Slide 26: 2020 Outlook Update
2020 Outlook Update 26 Category Outlook Lending Continued growth IBCP 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 2
Slide 27: 2021 Outlook Update
2021 Outlook Update 27 Category Outlook Lending Continued growth Loan payoffs related to the Paycheck Protection Program will make loan growth challenging in 2021. IBCP goal of low (1%) single digit overall loan growth (5% - 7% excluding PPP impact), primarily supported by increases in commercial lo
Slide 28: Strategic Initiatives
Strategic Initiatives 28 Growth Process Improvement & Cost Controls • Improve net interest income via balanced loan growth, disciplined • Completion of core data processing provider contract. risk adjusted loan pricing and active management of deposit pricing. • On-going branch optimization: includi
Slide 29: Question and Answer Session, Closing Remarks
Q&A and Closing Remarks 29 Question and Answer Session Closing Remarks Thank you for attending! NASDAQ: IBCP