Independent Bank Corporation · NASDAQ:IBCP
Independent Bank — Q4 2018 Earnings Presentation
26 slides from Independent Bank's earnings presentation, Jan 29, 2019
Slide 1: Independent Bank Fourth Quarter Conference Call
INDEPENDENT BANK FOURTH CONFERENCE CALL January 29, 2019 | Proudly serving our customers since 1864.
Slide 2: Cautionary Note Regarding Forward-Looking Statements
2 Cautionary Note Regarding Forward-Looking Statements This presentation may contain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Any statements that are not historical facts, including statements about our expectations, beliefs, plans
Slide 3: Agenda
3 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 und
Slide 4: Quarterly Financial Summary
4 Quarterly Financial Summary 4Q’18 3Q’18 2Q’18 1Q’18 4Q’17 Diluted EPS (1) $ 0.41 $ 0.49 $ 0.36 $ 0.42 $ 0.08 Income before taxes $ 12,204 $ 14,846 $ 10,884 $ 11,199 $ 11,231 Net income (1) $ 9,936 $ 11,925 $ 8,817 $ 9,161 $ 1,711 Return on average assets (1) 1.18% 1.46% 1.12% 1.34% 0.25% Return on
Slide 5: 4Q 2018 Financial Highlights
5 4Q 2018 Financial Highlights Income StatementNet income of $9.9 million, or $0.41 per diluted share. Return on average assets of 1.18% and return on average equity of 11.43%Net interest income of $30.7 million, up $7.4 million, or 31.5%, from the year ago quarter.Merger related expenses of $0.1 mi
Slide 6: YTD Financial Summary
6 YTD Financial Summary YE 12/31/18 YE 12/31/17 YE 12/31/16 YE 12/31/15 Net interest income $ 113,282 $ 89,186 $ 79,641 $ 74,986 Income before taxes $ 49,133 $ 38,438 $ 32,901 $ 29,380 Net income(1) $ 39,839 $ 20,475 $ 22,766 $ 20,017 Diluted EPS(1) $ 1.68 $ 0.95 $ 1.05 $ 0.86 Return on average asse
Slide 7: Our Michigan Markets
7 Our Michigan Markets Independent Bank branches – 68 (including 5 former TCSB branches) TCSB branches acquired 4/1/2018. Since 2012, substantial changes have been implemented to streamline and optimize our branch delivery network.Significant market presence and opportunity to gain market share in a
Slide 8: Select Economic Statistics
8 Select Economic Statistics Unemployment Trends (%) Total Employees (Thousands) Regional Average Home Sales Price (Thousands) Annualized Home Sales (Thousands) Continued low unemployment rates Job growth continues Rising prices in key markets Slowing Michigan home sales
Slide 9: Our Markets – Regional
Our Markets – Regional Region Cities Branches 12/31/18Portfolio Loans(1) % ofLoans(1) 12/31/18Deposits(3) % of Deposits(3) 12/31/17 Portfolio Loans(2) 12/31/17 Deposits(3) East / “Thumb” Bay City / Saginaw 23 $ 411 17% $ 780 32% $ 356 $ 763 West Grand Rapids / Ionia 21 775 31% 716 30% 677 709 Centra
Slide 10: Low Cost Deposit Franchise Focused on Core Deposit Growth
10 Low Cost Deposit Franchise Focused on Core Deposit Growth Deposit Highlights$2.91 billion in total deposits at 12/31/18.Substantially all core funding.$2.20 billion of non-maturity deposit accounts (75.4% of total deposits).Total deposits increased $130.0 million, or 5.8%, since 12/31/17 (excludi
Slide 11: Diversified Loan Portfolio Focused on High Quality Growth
Diversified Loan PortfolioFocused on High Quality Growth Lending Highlights19 consecutive quarters of net loan growth.$2.669 billion in total loans at 12/31/18 (including $86.2 million of loans held for sale).4Q 2018 lending results include:Commercial loans net growth of $32.4 million, or 11.6% annu
Slide 12: Strong Capital Position Focused on Shareholder Return
12 Strong Capital PositionFocused on Shareholder Return HighlightsPrudent capital management. Target TCE ratio – 8.50% to 9.50%. Priorities are: (A) capital retention to support (1) organic growth and (2) acquisitions; and (B) return of capital through (1) strong and consistent dividend and (2) shar
Slide 13: Net Interest Margin/Income
13 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 to slightly benefit from a rising interest rate environment.Net interest income increased 3.3% in 4Q’18 vs. 3Q’18 due primar
Slide 14: Net Interest Income and Net Interest Margin Details
14 Net Interest Income and Net Interest Margin Details Summary4Q’18 net interest income of $30.669 million, up $0.972 million from 3Q’18. The linked quarter increase was due to a $1.838 million increase in interest income and fees on loans and a $0.131 million increase in interest income on securiti
Slide 15: Cost of Funds Analysis
15 Cost of Funds AnalysisFocused on Balancing Deposit Retention and Funding Costs Note: COF is average quarterly cost of funds; EFF is monthly average effective federal funds rate for the quarter; and Spot FF is the spot federal funds rate. Historical IBCP Cost of Funds vs. the Federal Funds Rate No
Slide 16: Non-interest Income Highlights
16 Non-interest Income HighlightsDiverse sources of non-interest income which totaled $9.0 million in 4Q’18.4Q’18 total non-interest income represents approximately 22.6% of total revenue (net interest income and non-interest income).Full year service charges on deposits declined by $0.4 million, or
Slide 17: Non-interest Expense Highlights
17 Non-interest Expense Highlights4Q’18 non-interest expenses totaled $26.8 million (an increase from 4Q’17 and from 3Q’18).4Q’18 compensation and benefits increased by $1.6 million over 4Q’17 due primarily to increases in salaries, payroll taxes and health insurance costs. The increase in salaries
Slide 18: Investment Securities Portfolio
18 Investment Securities Portfolio HighlightsHigh quality, liquid, diverse portfolio with relatively short duration.Fair value of $428.5 million(1) at 12/31/18.Net unrealized loss of $5.3 million at 12/31/18 (representing 1.22% of amortized cost).65% of the portfolio is AAA rated (or backed by the U
Slide 19: Credit Quality Summary
19 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) O
Slide 20: Credit Cost Summary
20 Credit Cost Summary Note: Dollars all in millions. Provision for Loan Losses Loan Net Charge-Offs/Recoveries Allowance for Loan Losses
Slide 21: Classified Assets and New Default Trends
21 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
Slide 22: Troubled Debt Restructurings (TDRs)
22 Troubled Debt Restructurings (TDRs) TDR HighlightsWorking with client base to maximize sustainable performance.The specific reserves allocated to TDRs totaled $5.6 million at 12/31/18.A majority of our TDRs are performing under their modified terms but remain in TDR status for the life of the loa
Slide 23: Final 2018 Actual Performance vs. Original Outlook
23 Final 2018 Actual Performance vs. Original Outlook Category Outlook Lending Continued growthIBCP only goal of 15 to 18% overall loan growth in 2018, primarily supported by increases in commercial loans, mortgage loans and consumer loans. Expect much of this growth to occur in the last three quart
Slide 24: 2019 Initial Outlook
24 2019 Initial Outlook Category Outlook Lending Continued growthIBCP goal of high single digit (8% to 9%) overall loan growth in 2019, 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 2019. Thi
Slide 25: Strategic Initiatives
25 Strategic Initiatives Growth1. Improve net interest income via balanced loan growth, disciplined risk adjusted loan pricing and active management of deposit pricing. 2. Innovative and targeted customer acquisition, retention and cross sales strategies leveraging data analytics, inside sales staff
Slide 26: Q&A and Closing Remarks
26 Q&A and Closing Remarks Question and Answer SessionClosing RemarksThank you for attending !NASDAQ: IBCP