Independent Bank Corporation · NASDAQ:IBCP
Independent Bank — Q4 2024 Earnings Presentation
30 slides from Independent Bank's earnings presentation, Jan 23, 2025
Slide 1: Earnings Call: Fourth Quarter 2024
Earnings Call: Fourth Quarter 2024 January 23, 2025 (NASDAQ: IBCP)
Slide 2: Cautionary note regarding forward-looking statements
2 Cautionary note regarding forward-looking statements This presentation contains forward-looking statements, which are any statements or information that are not historical facts. These forward-looking statements include statements about our anticipated future revenue and expenses and our future pl
Slide 3: Agenda
3 Agenda • Formal Remarks − William B. (Brad) Kessel President and Chief Executive Officer − Gavin A. Mohr Executive Vice President and Chief Financial Officer − Joel F. Rahn Executive Vice President – Commercial Banking • Question and Answer session • Closing Remarks Note: This presentation is avai
Slide 4: 4Q'24 Overview
4 4Q'24 Overview • Net income of $18.5 million, or $0.87 per diluted share • Increase in net interest income of $2.7 million over the prior year quarter and $1.0 million over the third quarter of 2024 • Strong profitability and prudent balance sheet management results in further growth in tangible b
Slide 5: Low-Cost Deposit Franchise
5 Low-Cost Deposit Franchise • Substantial core funding – $3.92 billion of non-maturity deposit Focused on Core Deposit Growth accounts (84.1% of total deposits). • Core deposit decrease of $42.9 Deposit Composition million (3.7% annualized) in 12/31/24 Cost of Deposits (%)/Total Deposits ($B) 4Q'24
Slide 6: Deposit Balances and Cost of Funds vs. Federal Funds Rate
6 Historic IBC Cost of Funds (excluding sub debt) vs. the Federal Funds Rate (with Deposit Balances) Account Type Cut Cycle Beta Sav & Int-bearing chking 27.2% Reciprocal 72.8% Deposit Balances ($ in thousands) Time 30.4% 6.0% Total int-bearing Dep (excl brokered) 43.6% 5,000,000 5.5% Total COF IBC
Slide 7: Diversified Loan Portfolio Focused on High Quality Growth
7 • Portfolio loan changes in 4Q'24: Diversified Loan Portfolio − Commercial – increased $112.1 million. Focused on High Quality Growth …Average new origination yield of 7.00% vs a 6.53% portfolio yield. − Mortgage – increased $5.3 million. …Average new origination yield of 6.92% vs a 4.80% portfoli
Slide 8: Concentrations within $1.94B Commercial Loan Portfolio
8 Concentrations within $1.94B Commercial Loan Portfolio C&I or Owner Occupied Loans by Industry as a % Investor RE by Collateral Type as a % of Total Commercial Loans ($ in millions) of Total Commercial Loans ($ in millions) 1.35%, Land, 0.78%, Special Manufacturing Vacant Land and Purpose, $15 Con
Slide 9: Credit Quality Summary
9 Credit Quality Summary Non-performing Loans ($ in Millions) ORE/ORA ($ in Millions) $10.0 $9.5 0.9% $2.0 $1.9 $8.6 $9.0 $7.9 0.8% $8.0 0.7% $7.0 $6.0 $1.5 $1.3 0.6% $6.0 $5.1 $5.2 $5.1 $1.1 0.5% 0.3% 0.3% 0.3% $5.0 $4.5 $0.9 $0.9 $3.7 $3.7 0.4% $1.0 $0.8 $0.8 0.2% $4.0 $0.6 0.3% $0.5 0.1% 0.1% 0.1
Slide 10: Strong Capital Position
10 Strong Capital Position • Long-term capital Priorities: Capital retention to support organic growth, acquisitions TCE / TA (%) Leverage Ratio (%) and return of capital through strong and consistent dividends and share repurchases. 9.3 9.6 9.6 9.9 8.9 9.0 7.4 7.6 8.1 8.0 • Well capitalized in all
Slide 11: Interest Margin/Income
11 Net Interest Margin/Income • Net interest income was $42.9 million in 4Q'24 compared to $40.1 million in the prior year Yields, NIM and Cost of Funds (%) quarter. The change is due to 6 4.99 5.26 5.33 5.33 5.33 5.16 an increase in average earning 4.66 5 4.38 assets and the net interest 3.49 3.65
Slide 12: Linked Quarter Analysis
12 Linked Quarter Analysis 4Q'24 NIM Changes Linked Quarter Average Balances and FTE Rates ($ in thousands) 4Q24 3Q24 Change 3Q'24 3.37% Avg Bal Inc/Exp Yield Avg Bal Inc/Exp Yield Avg Bal Inc/Exp Yield Cash $84,733 $1,019 4.78% $126,039 $1,717 5.42% ($41,306) ($698) -0.64% Decrease in Earning Asset
Slide 13: Interest Rate Risk Management
13 • The base case modeled NII is modestly higher during the quarter as asset yields Interest Rate Risk Management were augmented by a shift in asset mix and deposit betas were slightly higher than expected. These benefits were partially offset by an adverse shift in funding mix. Changes in Net Inte
Slide 14: Strong Non-interest Income
14 • The $10.2 million comparative quarterly decrease in mortgage Strong Non-interest Income loan servicing, net is primarily attributed to changes in the fair value of capitalized mortgage loan servicing rights associated 4Q'24 Non-interest Income Non-interest Income Trends with changes in mortgage
Slide 15: Focus on Improved Efficiency
15 • 4Q'24 efficiency ratio of 59.1%. Focus on Improved Efficiency • Compensation and employee benefits expense of $22.9 million, an increase of $3.8 million from the prior year quarter. • $2.7 million increase in Non-interest Expense ($M) Efficiency Ratio (4 quarter rolling average) performance-bas
Slide 16: Outlook for 2024
16 Outlook for 2024 NET INTEREST INCOME PROVISION FOR LENDING Growth driven primarily by CREDIT LOSSES Continued growth higher average earning assets Steady asset quality metrics Outlook • IBCP forecast of mid-single digit • The forecast assumes 0.25% Fed rate cuts in • Very difficult area to foreca
Slide 17: Outlook for 2024
17 Outlook for 2024 NON-INTEREST NON-INTEREST INCOME SHARE INCOME EXPENSES TAXES REPURCHASES Outlook • IBCP forecasts 2024 quarterly range of • IBCP forecasts 2024 quarterly range of • Approximately a 20% • 2024 share repurchase for 2024 $11.5M to $13.0M with the total for the $32.5M to $33.5M with
Slide 18: Outlook for 2025
18 Outlook for 2025 NET INTEREST INCOME PROVISION FOR LENDING Growth driven primarily by CREDIT LOSSES Continued growth higher average earning assets Steady asset quality metrics Outlook • IBCP forecast of mid-single digit • The forecast assumes 0.25% Fed rate cuts in • Very difficult area to foreca
Slide 19: Outlook for 2025
19 Outlook for 2025 NON-INTEREST NON-INTEREST INCOME SHARE INCOME EXPENSES TAXES REPURCHASES Outlook • Q1/Q2 quarterly 2025 forecasted range of • IBCP forecasts 2024 quarterly range of • Approximately a 19% • 2025 share repurchase for 2025 $11.0M to $12.0M and Q3/Q4 forecast of $34.5M to $35.5M with
Slide 20: Strategic Initiatives
20 Strategic Initiatives GROWTH PROCESS IMPROVEMENT & COST CONTROLS • Outside Sales - Relationship banking focus thru consistent calling on • Process Automation – leverage core investments + Fintech prospects and COI’s. partnerships: (Blend) mortgage; (Numerated) Commercial; • Inside Service/Sales –
Slide 21: Question and Answer Session Closing Remarks
21 Question and Answer Session Closing Remarks Thank you for attending NASDAQ: IBCP
Slide 22: Appendix
22 Appendix Additional Financial Data and Non-GAAP Reconciliations
Slide 23: Historical Financial Data
23 Historical Financial Data here Year Ended December 31, Quarter Ended, ($M except per share data) 2021 2022 2023 2024 12/31/23 3/31/24 6/30/24 9/30/24 12/31/24 Balance Sheet: Total Assets $4,705 $5,000 $5,264 $5,338 $5,264 $5,231 $5,278 $5,259 $5,338 Portfolio Loans $2,905 $3,465 $3,791 $4,039 $3,
Slide 24: Historic Financial Performance
24 Historic Financial Performance Year Ended December 31, ($M except per share data) 2019 2020 2021 2022 2023 2024 5 Year CAGR Balance Sheet: Total Assets $3,565 $4,204 $4,705 $5,000 $5,264 $5,338 8.4% Portfolio Loans $2,725 $2,734 $2,905 $3,465 $3,791 $4,039 8.2% Deposits $3,037 $3,637 $4,117 $4,37
Slide 25: Strong Liquidity Position
25 Strong Liquidity Position • Significant liquidity position to manage the current Sources of Liquidity 4Q 2024 environment. Current On-balance sheet Excess reserves at the Fed $ 62.9 • Total available liquidity Sources Unpledged AFS Securities $ 553.2 significantly exceeds (195%) Total On-balance
Slide 26: Granular Deposit Base
26 • Average deposit account balance Granular Deposit Base of approximately $21,905. • Average deposit balance $4,654 excluding reciprocal deposit of $4,488 $4,586 $4,623 $4,582 $4,614 $4,627 $17,231. $918 $1,011 $962 $977 $978 $1,057 $1,060 • Average Commercial deposit balance of $102,170. Uninsure
Slide 27: CRE - Office Metrics
27 CRE – Office Metrics • 19.7% of portfolio is medical office buildings. • 78% of portfolio is in suburban geographies. Geographic CRE - Office Maturing Location (millions) Fixed vs. Variable Exposure (millions) • 80.5% of CRE – Office mature after 2026. Urban Variable $48.5 • Average loan size of
Slide 28: Non-GAAP to GAAP Reconciliation
28 Non-GAAP to GAAP Reconciliation Year Ended December 31, Quarter Ended September December December 31, 30, June 30, March 31, 31, 2024 2023 2022 2021 2024 2024 2024 2024 2023 (Dollars in thousands) Net interest income $166,248 $156,329 $149,561 $129,765 $42,851 $41,854 $41,346 $40,197 $40,111 Non-
Slide 29: Reconciliation of Non-GAAP Financial Measures
29 Reconciliation of Non-GAAP Financial Measures Three Months Ended Twelve Months Ended December 31, December 31, 2024 2023 2024 2023 Net Interest Margin, Fully Taxable Equivalent ("FTE") Net interest income $ 42,851 $ 40,111 $ 166,248 $ 156,329 Add: taxable equivalent adjustment 389 178 902 900 Net
Slide 30: Reconciliation of Non-GAAP Financial Measures (continued)
30 Reconciliation of Non-GAAP Financial Measures (continued) Year Ended December 31, Quarter Ended December 31, September 30, June 30, March 31, December 31, 2024 2023 2022 2021 2024 2024 2024 2024 2023 (Dollars in thousands) Common shareholders' equity $ 454,686 $ 404,449 $ 347,596 $ 398,484 $ 454,