Independent Bank Corporation · NASDAQ:IBCP
Independent Bank — Q1 2020 Earnings Presentation
27 slides from Independent Bank's earnings presentation, Apr 30, 2020
Slide 1: Q1 Earnings Conference Call – April 30, 2020
Q1 EARNINGSConference Call – April 30, 2020
Slide 2: Cautionary note regarding forward-looking statements
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
Agenda Formal Remarks.William B. (Brad) Kessel, President and Chief Executive OfficerStephen A. Erickson, 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: 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 neededGranting additional sick and vacation time Closing our branch lobbies, transact
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: 1Q 2020 Financial Highlights
1Q 2020 Financial Highlights Income StatementPre-tax, pre-provision income was $12.5 million in the first quarter of 2020 compared to $12.2 million in the first quarter of 2019 ($18.4 million vs $14.4 million excluding the MSR Change for the same respective periods);Net income of $4.8 million, or $0
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 31, 2019.Note: Loan and deposit balances exclude the loans and deposits that are not
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 – $2.6 billion of non-maturity deposit accounts (83.3% of total deposits)Total deposits increased $81.8 million, or 2.9%, since 12/31/19 (excluding brokered) with non-interest bearing up $22.9 million, interest be
Slide 10: Diversified Loan Portfolio Focused on High Quality Growth
Diversified Loan PortfolioFocused on High Quality Growth 10 Lending Highlights Note: Portfolio loans exclude loans HFS. Portfolio loan changes in 1Q’20Commercial – increased $14.9 million or 5.1% annualizedMortgage – decreased $28.9 million or 10.6% annualized (includes a securitization and a sale t
Slide 11: COVID-19 Programs to Date
COVID-19 Programs to Date 11 Paycheck Protection Program Loan Forbearances $ in thousands. The tables to the left reflect our status in each of these programs through April 17th.Loan Forbearances:Forbearance period three months for mortgage and installment loans, three or six for commercial. Retail
Slide 12: Loan Portfolio Concentrations by Industry
Loan Portfolio Concentrations by Industry 12 Percentage concentrations are based on the entire commercial portfolio of $1,182 million. $483M $698M Loans by Industry as a % of Total Commercial Loans ($ in millions) Investor RE by Collateral Type as a % of Total Commercial Loans ($ in millions) $698 m
Slide 13: Investment Securities Portfolio
Investment Securities Portfolio 13 Highlights High quality, liquid, diverse portfolio with relatively short duration.Fair value of $594.3 million, an increase of $75.9 million in 1Q’20.Net unrealized gain of $3.4 million, representing 0.6% of amortized cost.72% of the portfolio is AAA rated (or back
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 decreased $0.5 million, or 1.7%, in 1Q’20 vs. 4Q’19 due primarily to a seven basis point decline in the ne
Slide 16: Linked Quarter Analysis
Linked Quarter Analysis 16 Q1’20 NIM Progression Linked Quarter Avg. Balances and FTE Rates Asset yields drove NIM decline of 14 bps.Commercial: 26 basis point drop; portfolio 49% variable rate with reset frequency of monthly or less.Mortgage: 7 basis point drop primarily due to refinance activity.A
Slide 17: Strong Non-interest Income
Strong Non-interest Income 17 Diverse sources of non-interest income – representing 26.8% of revenue Continued strong performance in service charges on deposits and interchangeMortgage banking: $8.8 million in net gains on mortgage loans in 1Q’20 vs $3.6 million in the year ago quarter$311.1 million
Slide 18: Focus on Expense Control
Focus on Expense Control 18 Source: Company documents. Non-interest Expense ($M) Highlights Efficiency Ratio (4 quarter rolling avg) Continued focus on expense control and driving positive operating leverage. MSR Change in value due to price of negative $5.9 million reduced mortgage loan servicing i
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 $5.2 million at 3/31/20.A majority of our TDRs are performing under their modified terms but remain in TDR status for the life of the loan.93
Slide 22: Credit Cost Summary
Note: Dollars all in millions. Provision for Loan Losses Loan Net Charge-Offs/Recoveries Allowance for Loan Losses Credit Cost Summary 22
Slide 23: Incurred Loss Model vs CECL
Incurred Loss Model vs CECL 23 Incurred vs. CECL ($ in Thousands) 3/31 “As If” ACL and percent of loans calculated at midpoint of incremental range with additional $9.0 million at Day 1 and $11.0 million at Q1’20. % Loans 0.96% 1.20% 1.60%(1) “As-if CECL” Illustrative Only Incurred Loss Build We del
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: 1Q 2020 Outlook Update
1Q 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