Independent Bank Corporation · NASDAQ:IBCP
Independent Bank — Q3 2018 Earnings Presentation
25 slides from Independent Bank's earnings presentation, Oct 25, 2018
Slide 1: Conference Call, October 25, 2018
INDEPENDENT BANK CONFERENCE CALL October 25, 2018 | 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 3Q’18 2Q’18 1Q’18 4Q’17 3Q’17 Diluted EPS (1) $ 0.49 $ 0.36 $ 0.42 $ 0.08 $ 0.32 Income before taxes $ 14,846 $ 10,884 $ 11,199 $ 11,231 $ 10,018 Net income (1) $ 11,925 $ 8,817 $ 9,161 $ 1,711 $ 6,859 Return on average assets (1) 1.46% 1.12% 1.34% 0.25% 1.01% Return on
Slide 5: 3Q 2018 Financial Highlights
5 3Q 2018 Financial Highlights Income StatementNet income of $11.9 million, or $0.49 per diluted share. Return on average assets of 1.46% and return on average equity of 13.83%Net interest income of $29.7 million, up $6.8 million, or 29.6%, from the year ago quarter.Merger related expenses of $0.1 m
Slide 6: YTD Financial Summary
6 YTD Financial Summary 9ME 9/30/18 9ME 9/30/17 9ME 9/30/16 9ME 9/30/15 Net interest income $ 82,613 $ 65,870 $ 59,391 $ 55,633 Income before taxes $ 36,929 $ 27,207 $ 24,458 $ 21,129 Net income $ 29,903 $ 18,764 $ 16,911 $ 14,447 Diluted EPS $ 1.27 $ 0.87 $ 0.78 $ 0.62 Return on average assets, ann
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: Our Markets – Regional
Our Markets – Regional Region Cities Branches 9/30/18Portfolio Loans(1) % ofLoans(1) 9/30/18Deposits(3) % of Deposits(3) 9/30/17 Portfolio Loans(2) 9/30/17 Deposits(3) East / “Thumb” Bay City / Saginaw 23 $ 414 17% $ 779 32% $ 365 $ 759 West Grand Rapids / Ionia 21 765 31% 720 29% 647 684 Central La
Slide 9: Low Cost Deposit Franchise Focused on Core Deposit Growth
9 Low Cost Deposit Franchise Focused on Core Deposit Growth Deposit Highlights$2.80 billion in total deposits at 9/30/18.Substantially all core funding.$2.14 billion of non-maturity deposit accounts (76.6% of total deposits).Total deposits increased $46.7 million, or 2.1%, since 9/30/17 (excluding b
Slide 10: Diversified Loan Portfolio Focused on High Quality Growth
Diversified Loan PortfolioFocused on High Quality Growth Lending Highlights18 consecutive quarters of net loan growth.$2.604 billion in total loans at 9/30/18 (including $41.3 million of loans held for sale).3Q 2018 lending results include:Commercial loans net growth of $5.1 million, or 1.8% annuali
Slide 11: Strong Capital Position Focused on Shareholder Return
11 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 12: Net Interest Margin/Income
12 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 2.5% in 3Q’18 vs. 2Q’18 due primar
Slide 13: Net Interest Income and Net Interest Margin Details
13 Net Interest Income and Net Interest Margin Details Summary3Q’18 net interest income of $29.697 million, up $0.717 million from 2Q’18. The linked quarter increase was due to a $1.326 million increase in interest income and fees on loans and a $0.023 million increase in interest income on securiti
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 $11.8 million in 3Q’18.3Q’18 total non-interest income represents approximately 28.5% of total revenue (net interest income and non-interest income).Service charges on deposits declined by $0.3 million, or 3.2%, YT
Slide 16: Non-interest Expense Highlights
16 Non-interest Expense Highlights3Q’18 non-interest expenses totaled $26.7 million (an increase from 3Q’17 and a decrease from 2Q’18).3Q’18 compensation and benefits increased by $2.6 million over 3Q’17 due primarily to increases in salaries, performance based compensation, payroll taxes and health
Slide 17: Investment Securities Portfolio Highlights
17 Investment Securities Portfolio HighlightsHigh quality, liquid, diverse portfolio with relatively short duration.Fair value of $437.5 million(1) at 9/30/18.Net unrealized loss of $6.8 million at 9/30/18 (representing 1.53% of amortized cost).65% 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 Credit Cost Summary Note: Dollars all in millions. Provision for Loan Losses Loan Net Charge-Offs/Recoveries Allowance for Loan Losses
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 $6.0 million at 9/30/18.A majority of our TDRs are performing under their modified terms but remain in TDR status for the life of the loan
Slide 22: Acquisition of TCSB Bancorp, Inc. Status Update
22 Acquisition of TCSB Bancorp, Inc.Status Update Category Comments Loans TCSB total loans on April 1, 2018 were $301.8 million (including $1.3 million of loans held for sale). Non PCI (purchase credit impaired) portfolio loans totaled $297.0 million with an estimated fair value of $291.3 million (a
Slide 23: YTD 2018 Actual Performance vs. Original Outlook
23 YTD 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 quarter
Slide 24: Strategic Initiatives
24 Strategic Initiatives Balance SheetGenerate quality loan growth with continued focus on commercial and consumer installment lending as well as salable and portfolio mortgage loans.Remain slightly asset sensitive and positioned to benefit from higher interest rates (short duration investment portf
Slide 25: Q&A and Closing Remarks
25 Q&A and Closing Remarks Question and Answer SessionClosing RemarksThank you for attending !NASDAQ: IBCP