Independent Bank Corporation · NASDAQ:IBCP
Independent Bank — Q3 2019 Earnings Presentation
26 slides from Independent Bank's earnings presentation, Oct 24, 2019
Slide 1: Independent Bank Q3 Earnings
INDEPENDENT BANK Q3 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 OfficerIntroduction of Stephen A. Erickson (incoming CFO)Question and Answer session.Closing Remarks.Note: This presentation is available at www.Indepe
Slide 4: Quarterly Financial Summary
Quarterly Financial Summary 3Q’19 2Q’19 1Q’19 4Q’18 3Q’18 Diluted EPS $ 0.55 $ 0.46 $ 0.39 $ 0.41 $ 0.49 Income before taxes $ 15,570 $ 13,417 $ 11,548 $ 12,204 $ 14,846 Net income $ 12,445 $ 10,730 $ 9,381 $ 9,936 $ 11,925 Return on average assets 1.42% 1.27% 1.13% 1.18% 1.46% Return on average equ
Slide 5: 3Q 2019 Financial Highlights
3Q 2019 Financial Highlights Income StatementNet income of $12.4 million, or $0.55 per diluted share. Return on average assets of 1.42% and return on average equity of 14.64%. These ratios increase to 1.58% and 16.34%, respectively, when excluding the after tax impact of the decline in the fair valu
Slide 6: Year to Date Financial Summary
Year to Date Financial Summary 9ME 9/30/19 9ME 9/30/18 9ME 9/30/17 Diluted EPS $ 1.40 $ 1.27 $ 0.87 Dividends paid $ 0.54 $ 0.45 $ 0.30 Net interest income $ 91,871 $ 82,613 $ 65,870 Provision for loan losses $ 1,045 $ 912 $ 806 Income before taxes $ 40,535 $ 36,929 $ 27,207 Net income $ 32,556 $ 29
Slide 7: Our Michigan Markets
Our Michigan Markets Independent Bank branches – 68 Most recent Forbes “Best in Banks and Credit Unions” Survey (published in June 2019) ranked Independent Bank first in the State of Michigan in customer satisfaction.Independent Bank received the Mastercard Community Institutions Innovation Award fo
Slide 8: Select Economic Statistics
8 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 9: Our Markets – Regional
Our Markets – Regional Region Cities Branches 9/30/19Portfolio Loans(1) % ofLoans(1) 9/30/19Deposits(3) % of Deposits(3) 9/30/18 Portfolio Loans(2) 9/30/18 Deposits(3) East / “Thumb” Bay City / Saginaw 23 $ 453 17% $ 770 27% $ 414 $ 779 West Grand Rapids / Ionia 21 844 32% 726 26% 765 719 Central La
Slide 10: Low Cost Deposit Franchise Focused on Core Deposit Growth
Low Cost Deposit Franchise Focused on Core Deposit Growth Deposit Highlights$3.05 billion in total deposits at 9/30/19.Substantially core funding.$2.43 billion of non-maturity deposit accounts (79.6% of total deposits).Total deposits increased $262.0 million, or 10.1%, since 9/30/18 (excluding broke
Slide 11: Diversified Loan Portfolio Focused on High Quality Growth
Diversified Loan PortfolioFocused on High Quality Growth Lending Highlights22 consecutive quarters of net loan growth.$2.846 billion in total loans at 9/30/19 (including $124.0 million of loans held for sale).3Q 2019 lending results include:Commercial loans net growth of $13.0 million, or 4.4% annua
Slide 12: 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 13: Interest rate sensitivity highlights
13 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 0.4% in 3Q’19 vs. 2Q’19 due primarily to a $109.4 million inc
Slide 14: Net Interest Income and Net Interest Margin Details
Net Interest Income and Net Interest Margin Details Summary3Q’19 net interest income of $30.872 million was up $0.116 million from 2Q’19. The linked quarter increase was due to a $0.390 million increase in interest income and fees on loans that was partially offset by a $0.152 million decrease in in
Slide 15: Cost of Funds Analysis
15 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 16: Non-interest Income Highlights
16 Non-interest Income HighlightsDiverse sources of non-interest income which totaled $12.3 million in 3Q’19.3Q’19 total non-interest income represents approximately 28.4% of total revenue (net interest income and non-interest income).Service charges on deposits declined by $0.3 million, or 8.9%, in
Slide 17: Non-interest Expense Highlights
17 Non-interest Expense Highlights3Q’19 non-interest expenses of $27.8 million (an increase from 3Q’18 and from 2Q’19) were slightly above the projected range for non-interest expenses of $27.0 to $27.5 million. 3Q’19 compensation and benefits increased by $0.5 million over 3Q’18 due primarily to an
Slide 18: Investment Securities Portfolio Highlights
18 Investment Securities Portfolio HighlightsHigh quality, liquid, diverse portfolio with relatively short duration.Fair value of $440.1 million(1) at 9/30/19.Net unrealized gain of $5.4 million at 9/30/19 (representing 1.23% of amortized cost).73% of the portfolio is AAA rated (or backed by the U.S
Slide 19: Credit Quality Summary
19 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 20: Credit Cost Summary
20 Note: Dollars all in millions. Provision for Loan Losses Loan Net Charge-Offs/Recoveries Allowance for Loan Losses Credit Cost Summary
Slide 21: Classified Assets and New Default Trends
21 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 22: Troubled Debt Restructurings (TDRs)
22 Troubled Debt Restructurings (TDRs) TDR HighlightsWorking with client base to maximize sustainable performance.The specific reserves allocated to TDRs totaled $5.1 million at 9/30/19.A majority of our TDRs are performing under their modified terms but remain in TDR status for the life of the loan
Slide 23: CECL (ASU 2016-13) Countdown
CECL (ASU 2016-13) Countdown 23 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 24: 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 25: 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 26: Q&A and Closing Remarks
Q&A and Closing Remarks Question and Answer SessionClosing RemarksThank you for attending !NASDAQ: IBCP 26