Independent Bank Corporation · NASDAQ:IBCP
Independent Bank — Q1 2019 Earnings Presentation
25 slides from Independent Bank's earnings presentation, Apr 22, 2019
Slide 1: Independent Bank Q1 Earnings
INDEPENDENT BANK Q7 Earnings
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 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: Quarterly Financial Summary
Quarterly Financial Summary 1Q’19 4Q’18 3Q’18 2Q’18 1Q’18 Diluted EPS $ 0.39 $ 0.41 $ 0.49 $ 0.36 $ 0.42 Income before taxes $ 11,548 $ 12,204 $ 14,846 $ 10,884 $ 11,199 Net income $ 9,381 $ 9,936 $ 11,925 $ 8,817 $ 9,161 Return on average assets 1.13% 1.18% 1.46% 1.12% 1.34% Return on average equit
Slide 5: 1Q 2019 Financial Highlights
1Q 2019 Financial Highlights Income StatementNet income of $9.4 million, or $0.39 per diluted share. Return on average assets of 1.13% and return on average equity of 11.14%. These ratios increase to 1.34% and 13.20%, respectively, when excluding the after tax impact of the decline in the fair value
Slide 6: Our Michigan Markets
Our Michigan Markets Independent Bank branches – 68 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 attractive Michigan markets.Acquisition of Traverse City State Bank on
Slide 7: Select Economic Statistics
7 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 8: Our Markets – Regional
Our Markets – Regional Region Cities Branches 3/31/19Portfolio Loans(1) % ofLoans(1) 3/31/19Deposits(3) % of Deposits(3) 3/31/18 Portfolio Loans(2) 3/31/18 Deposits(3) East / “Thumb” Bay City / Saginaw 23 $ 415 17% $ 788 33% $ 360 $ 773 West Grand Rapids / Ionia 21 790 31% 731 30% 688 713 Central La
Slide 9: Low Cost Deposit Franchise Focused on Core Deposit Growth
Low Cost Deposit Franchise Focused on Core Deposit Growth Deposit Highlights$2.93 billion in total deposits at 3/31/19.Substantially core funding.$2.28 billion of non-maturity deposit accounts (77.6% of total deposits).Total deposits increased $153.0 million, or 6.6%, since 3/31/18 (excluding broker
Slide 10: Diversified Loan Portfolio Focused on High Quality Growth
Diversified Loan PortfolioFocused on High Quality Growth Lending Highlights20 consecutive quarters of net loan growth.$2.662 billion in total loans at 3/31/19 (including $43.1 million of loans held for sale).1Q 2019 lending results include:Commercial loans net growth of $23.9 million, or 8.5% annual
Slide 11: Strong Capital Position Focused on Shareholder Return
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) share r
Slide 12: Interest Rate Sensitivity Highlights
12 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 decreased 1.4% in 1Q’19 vs. 4Q’18 due primarily to two less days in the
Slide 13: Net Interest Income and Net Interest Margin Details
Net Interest Income and Net Interest Margin Details Summary1Q’19 net interest income of $30.243 million was down $0.426 million from 4Q’18. The linked quarter decrease was due to a $0.157 million decrease in interest income and fees on loans and a $0.641 million increase in interest expense on depos
Slide 14: Cost of Funds Analysis
14 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 15: Non-interest Income Highlights
15 Non-interest Income HighlightsDiverse sources of non-interest income which totaled $10.0 million in 1Q’19.1Q’19 total non-interest income represents approximately 24.8% of total revenue (net interest income and non-interest income).Service charges on deposits declined by $0.3 million, or 9.1%, in
Slide 16: Non-interest Expense Highlights
16 Non-interest Expense Highlights1Q’19 non-interest expenses totaled $28.0 million (an increase from 1Q’18 and from 4Q’18).High end of the projected range for non-interest expenses was $27.5 million. The two negative variances from this projection in 1Q’19 were compensation and benefits ($0.4 milli
Slide 17: Investment Securities Portfolio
17 Investment Securities Portfolio HighlightsHigh quality, liquid, diverse portfolio with relatively short duration.Fair value of $462.0 million(1) at 3/31/19.Net unrealized loss of $0.1 million at 3/31/19 (representing 0.02% of amortized cost).70% of the portfolio is AAA rated (or backed by the U.S
Slide 18: Credit Quality Summary
18 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 19: Credit Cost Summary
19 Note: Dollars all in millions. Provision for Loan Losses Loan Net Charge-Offs/Recoveries Allowance for Loan Losses Credit Cost Summary
Slide 20: Classified Assets and New Default Trends
20 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 21: Troubled Debt Restructurings (TDRs)
21 Troubled Debt Restructurings (TDRs) TDR HighlightsWorking with client base to maximize sustainable performance.The specific reserves allocated to TDRs totaled $5.2 million at 3/31/19.A majority of our TDRs are performing under their modified terms but remain in TDR status for the life of the loan
Slide 22: CECL (ASU 2016-13) Countdown
CECL (ASU 2016-13) Countdown 22 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
Slide 23: 2019 Actual Performance vs. Original Outlook
2019 Actual Performance vs. Original 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
Slide 24: Strategic Initiatives
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, a
Slide 25: Q&A and Closing Remarks
Q&A and Closing Remarks Question and Answer SessionClosing RemarksThank you for attending !NASDAQ: IBCP 25