Independent Bank Corporation · NASDAQ:IBCP
Independent Bank — Q2 2022 Earnings Presentation
30 slides from Independent Bank's earnings presentation, Jul 26, 2022
Slide 1: Independent Bank Corporation Earnings Call Second Quarter 2022
Independent Bank Corporation Earnings Call Second Quarter 2022 July 26, 2022 (NASDAQ: IBCP)
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 Officer Gavin A. Mohr, Executive Vice President and Chief Financial Officer Joel Rahn, Executive Vice President – Commercial Banking Question and Answer session. Closing Remarks. Note: This presentation is available at ww
Slide 4: Historical Quarterly Financial Data
Historical Quarterly Financial Data 4 Year Ended December 31, Quarter Ended, ($M except per share data) 2018 2019 2020 2021 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 Balance Sheet: Total Assets $3,353 $3,565 $4,204 $4,705 $4,461 $4,622 $4,705 $4,762 $4,826 Portfolio Loans $2,583 $2,725 $2,734 $2,905
Slide 5: 2Q 2022 Financial Highlights
2Q 2022 Financial Highlights Income Statement Pre-tax, pre-provision income of $18.3 million compared to $13.6 million in the year ago quarter. Net income of $13.0 million, or $0.61 per diluted share compared to $12.4 million, or $0.56 per diluted share in the year ago quarter. Net interest income o
Slide 6: Year-to-date 2022 Financial Highlights
Year-to-date 2022 Financial Highlights Income Statement Net income and diluted earnings per share of $31.0 million and $1.45, respectively, for the first six months of 2022. Annualized return on average assets and on average equity of 1.32% and 17.63%, respectively, for the first six months of 2022.
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, 2021. Note: Loan and deposit balances exclude the loans and deposits (such as br
Slide 8: Select Economic Statistics
Select Economic Statistics 8 Unemployment Trends (%) Total Employees (Thousands) Regional Average Home Sales Price (Thousands) Annualized Home Sales (Thousands) Select Economic Statistics Unemployment rates returning to normal levels Stable prices in key markets Strong job growth continues Stabilizi
Slide 9: Low Cost Deposit Franchise Focused on Core Deposit Growth
Low Cost Deposit Franchise Focused on Core Deposit Growth 9 Substantially core funding – $3.93 billion of non-maturity deposit accounts (91.7% of total deposits). Total deposits increased $173.5 million (8.5%) since 12/31/21 with non-interest bearing up $36.2 million, savings and interest- bearing c
Slide 10: Historic IBC Cost of Funds vs. the Federal Funds Rate
Historic IBC Cost of Funds (excluding sub debt) vs. the Federal Funds Rate 10
Slide 11: Digital Transformation: IB ONE Wallet
11 11 All functionality within online banking can be done in the new IB ONE Wallet app. Customers can reset their own passwords in the app. Instantly transfer funds to other IB customers. IB Card Controls allows you to turn your debit card on or off, restrict transactions by category or dollar amoun
Slide 12: Diversified Loan Portfolio Focused on High Quality Growth
Diversified Loan PortfolioFocused on High Quality Growth 12 Lending Highlights Note: Portfolio loans exclude loans HFS. Portfolio loan changes in 2Q’22: Commercial – increased $71.6 million (excluding PPP increased $77.3 million). PPP loan balances decreased $5.7 million and totaled $0.3 million at
Slide 13: Commercial Loan Portfolio Concentrations
Loans by Industry as a % of Total Commercial Loans ($ in millions) Investor RE by Collateral Type as a % of Total Commercial Loans ($ in millions) 13 Commercial Loan Portfolio Concentrations 13 Note: $857 million, or 64.5% of the commercial loan portfolio is C&I or owner occupied, while $472 million
Slide 14: Investment Securities Portfolio
Investment Securities Portfolio 14 Highlights High quality, liquid, diverse portfolio with moderate duration. On April 1, 2022 approximately $391.6 million in securities available-for-sale was transferred to held-to-maturity. Sold $66.4 million of securities to facilitate an asset rotation into high
Slide 15: Strong Capital Position
Strong Capital Position 15 TCE / TA (%) Leverage Ratio (%) CET1 Ratio (%) Total RBC Ratio (%) Strong Capital Position Long-term capital Priorities: Capital retention to support organic growth, acquisitions and return of capital through strong and consistent dividends and share repurchases. Well capi
Slide 16: Net Interest Margin/Income
Highlights Net interest income increased $3.1 million in 2Q’22 vs.1Q’22 due primarily to an increase in average earning assets and an increase in the net interest margin. Net interest margin was 3.26% during the second quarter of 2022, compared to 3.02% in the year-ago quarter and 3.00% in the first
Slide 17: Linked Quarter Analysis
Linked Quarter Analysis 17 2Q’22 NIM Changes Linked Quarter Average Balances and FTE Rates 2Q22 1Q22 Change Avg Bal Inc/Exp Yield Avg Bal Inc/Exp Yield Avg Bal Inc/Exp Yield ($ in thousands) Cash $18,032 $29 0.65% $87,317 $37 0.17% ($69,285) ($8) 0.47% Investments 1,330,587 7,343 2.21% 1,425,342 6,7
Slide 18: Interest Rate Risk Management
The increase in the base case modeled NII is due to rate increases during the quarter, lower betas on interest bearing deposits than modeled and earning asset growth. The shift in sensitivity is due to a combination of faster liability repricing due to slightly higher deposit betas and slower asset
Slide 19: Strong Non-interest Income
Strong Non-interest Income 19 Diverse sources of non-interest income, representing 27.6% of operating revenue in 2Q’22. 2Q’22 other income of $2.3 million compared to $1.1 million in the prior year quarter. This increase was primarily due to a gain on sale of a bank owned property $0.3 million loss
Slide 20: Focus on Improved Efficiency
Focus on Improved Efficiency 20 Source: Company documents. Non-interest Expense ($M) Highlights Efficiency Ratio (4 quarter rolling average) 2Q’22 efficiency ratio of 62.5%. Compensation and employee benefits expense of $19.9 million, unchanged from the prior year quarter. Compensation (salaries and
Slide 21: 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 22: 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 22
Slide 23: Troubled Debt Restructurings (TDRs)
Troubled Debt Restructurings (TDRs) TDR Highlights Working with client base to maximize sustainable performance. The specific reserves allocated to TDRs totaled $331m 6/30/22. A majority of our TDRs are performing under their modified terms but remain in TDR status for the life of the loan. 96.1% of
Slide 24: Credit Cost Summary
Note: Dollars all in millions. Adopted CECL on 1/1/21, the day one adjustment to the ACL was $11.7 million. Provision for Credit Losses Loan Net Charge-Offs/Recoveries Allowance for Credit Losses Credit Cost Summary 24
Slide 25: 2022 Outlook Update
2022 Outlook Update Category Outlook Lending Continued growth IBCP goal of low double digit (approximately 10%) overall loan growth is based on increases in commercial loans, mortgage loans and consumer loans. Expect much of this growth to occur in the last three quarters of 2022. This growth foreca
Slide 26: Strategic Initiatives
Strategic Initiatives 26 Organic growth through servicing businesses and consumers in our Markets in an inclusive way to include straight forward marketing, improved brand awareness and enhanced outreach efforts that foster strong customer relationships and engagement. Improve net interest income vi
Slide 27: Q&A and Closing Remarks
Q&A and Closing Remarks Question and Answer Session Closing Remarks Thank you for attending! NASDAQ: IBCP 27
Slide 28: Non-GAAP to GAAP Reconciliation
28 Non-GAAP to GAAP Reconciliation
Slide 29: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 (Dollars in thousands) Net Interest Margin, Fully Taxable Equivalent ("FTE") Net interest income $ 36,061 $ 31,393 $ 69,062 $ 61,677 Add: taxable equivalent adjustment 481 A478 963
Slide 30: Reconciliation of Non-GAAP Financial Measures (continued)
Reconciliation of Non-GAAP Financial Measures (continued) Independent Bank Corporation Tangible Common Equity Ratio Year Ended December 31, Quarter Ended June30, March 31, December 31, September 30, June 30, 2021 2020 2019 2018 2022 2022 2021 2021 2021 @ollars in thousands) Common shareholders’ equi