Independent Bank Corporation · NASDAQ:IBCP
Independent Bank — Q1 2023 Earnings Presentation
27 slides from Independent Bank's earnings presentation, Apr 27, 2023
Slide 1: Independent Bank Corporation Earnings Call First Quarter 2023
Independent Bank Corporation Earnings Call First Quarter 2023 April 27, 2023 (NASDAQ: IBCP)
Slide 2: Cautionary note regarding forward-looking statements
Cautionary note regarding forward-looking statements 2 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
Agenda 3 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 a
Slide 4: 1Q23 Overview
1Q23 Overview 4 • Net income of $13.0 million, or $0.61 per diluted share, compared to $15.1 million, or $0.71 per diluted share, in 1Q22 1Q23 Earnings • Pre-tax, pre-provision income of $18.0 million • 16% increase in net interest income from 1Q22 due to balance sheet growth and higher net interest
Slide 5: Strong Liquidity Position
Strong Liquidity Position 5 Sources of Liquidity 1Q 2023 Significant liquidity position to manage Current On-balance sheet the current environment. Excess reserves at the Fed $ 179.2 Unpledged AFS Securities $ 767.5 Total On-balance sheet $ 946.7 Total available liquidity significantly On balanc
Slide 6: Low Cost Deposit Franchise
Low Cost Deposit Franchise 6 Focused on Core Deposit Growth Deposit Composition – 3/31/23 Deposit Highlights Substantial core funding – $3.85 billion of non-maturity deposit accounts (84.8% of total deposits). Core deposit growth of $93.1 million (9.1% annualized) in 1Q’23. Total deposits incr
Slide 7: Granular Deposit Base
Granular Deposit Base 7 Uninsured Deposit Trend Deposit Metrics $4,205 $4,291 $4,327 $4,379 $4,545 Average deposit account balance of $965 approximately $19,628. $989 24% $994 $1,027 $976 22% 21% 23% 24% Average deposit balance excluding reciprocal deposit of $16,534. $3,216 76% $3,297 77% $3,30
Slide 8: Historic IBC Cost of Funds vs. the Federal Funds Rate
Historic IBC Cost of Funds (excluding sub debt) vs. the Federal 8 Funds Rate Historical IBCP Cost of Funds vs. the Federal Funds Rate (left axis) Cumulative Cycle Beta = 24.1% with Deposit Balances (right axis) 6.00% 5,000,000 5.50% 4,500,000 5.00% 5.00% 4.50% 4,000,000 4.50% 3,500,000 4.00% 3.25% 3
Slide 9: Diversified Loan Portfolio
Diversified Loan Portfolio 9 Focused on High Quality Growth Loan Composition – 3/31/23 Lending Highlights Portfolio loan changes in 1Q’23: Held for Sale − Commercial – increased $4.4 million. 0% − Average new origination yield of Commercial 7.13%. 42% − Mortgage – increased $39.8 million. Installm
Slide 10: Concentrations within $1.47B Commercial Loan Portfolio
Concentrations within $1.47B Commercial Loan Portfolio 10 10 Loans by Industry as a % of Total Commercial Loans Investor RE by Collateral Type as a % of Total ($ in millions) Commercial Loans ($ in millions) Note: $950 million, or 64.6% of the commercial loan portfolio is C&I or owner occupied, whil
Slide 11: CRE – Office Metrics
CRE – Office Metrics 11 Geographic Location (millions) $7.5 28% of portfolio is medical office buildings. 90% of portfolio are located in suburban geographies. 73.0% of CRE – Office mature after 2025. Average loan size of $1.2 million. $71.0 Urban Suburban Maturing Exposure CRE - Office Fixe
Slide 12: Credit Quality Summary
Credit Quality Summary 12 Non-performing Loans ($ in Millions) ORE/ORA ($ in Millions) $6.0 $16.0 0.9% $5.0 $13.4 $5.0 $14.0 0.8% $12.0 0.7% $4.0 1.1% $9.5 0.6% $10.0 $8.2 $8.6 $7.9 0.5% $3.0 $8.0 0.4% $1.9 $6.0 $5.1 $5.0 $1.6 0.4% $4.5 0.3% $2.0 $3.8 $3.7 $3.9 $1.3 $4.0 0.3% 0.3% 0.2% $0.8 0.3% $1.
Slide 13: Corporate Securities
Corporate Securities 13 − $135.0 million portfolio of corporate securities. 45.6% of this portfolio is managed by a third party investment manager. − $74.0 million of corporate securities are related to financial institutions. − 44.2% are rated investment grade by Moody’s or S&P − 43.9% are rated in
Slide 14: Strong Capital Position
Strong Capital Position 14 Strong Capital Position TCE / TA (%) Leverage Ratio (%) • Long-term capital Priorities: 15 15 Capital retention to support organic growth, acquisitions 10 10 8.8 8.8 8.7 8.8 8.9 8.9 and return of capital through 7.9 6.9 6.3 6.2 6.4 6.6 strong and consistent 5 dividends and
Slide 15: Net Interest Margin/Income Highlights
Net Interest Margin/Income 15 Yields, NIM and Cost of Funds (%) 5.00 4.50 4.41 4.67 Highlights 3.92 4.38 4.00 3.57 3.47 3.37 3.30 3.65 3.27 3.22 3.16 3.50 3.00 3.12 3.18 3.13 3.26 3.49 3.52 3.33 Net interest income 2.50 3.05 3.02 3.00 2.00 2.18 decreased $2.2 million in 1.50 1.39 1Q’23 vs. 4Q’22 d
Slide 16: Linked Quarter Analysis
Linked Quarter Analysis 16 1Q’23 NIM Changes Q4'22 3.52% Increase in investment yield and change in earning asset mix 0.05% Change in loan yield and mix 0.20% Change in funding mix -0.06% Increase in funding costs -0.38% Q1'23 3.33% Linked Quarter Average Balances and FTE Rates 1Q23 4Q22 Change Avg
Slide 17: Interest Rate Risk Management
Interest Rate Risk Management 17 • The decrease in the base case modeled NII is due to an adverse shift in the funding mix and higher than modeled betas on interest Changes in Net Interest Income bearing deposits during the quarter. These changes were partially offset by earning asset growth and a f
Slide 18: Strong Non-interest Income
Strong Non-interest Income 18 2023 YTD Non-interest Income (thousands) Highlights Other income, Bank owned $1,791 Interchange The $8.9 million comparative quarterly decrease in life insurance, income, $3,205 mortgage loan servicing; net is primarily attributed to $111 changes in the fair value of
Slide 19: Focus on Improved Efficiency
Focus on Improved Efficiency 19 Non-interest Expense ($M) Highlights 1Q’23 efficiency ratio of 62.1%. Compensation and employee benefits expense of $19.3 million, an $35.0 $34.5 $34.0 decrease of $0.8 million from the prior year quarter. $32.7 $32.5 $32.4 $32.4 $32.1 Compensation (salaries and
Slide 20: 2023 Outlook
2023 Outlook 20 Category Outlook Lending Continued growth IBCP goal of low double digit (approximately 10%-12%) overall loan growth is based on increases in commercial loans and mortgage loans with installment loans remaining flat. Expect much of this growth to occur in the last three quarters of 20
Slide 21: Strategic Initiatives
Strategic Initiatives 21 Growth Process Improvement & Cost Controls • Organic growth through servicing businesses and consumers in our Markets in an inclusive way to include straight forward marketing, improved brand awareness • Enhance process improvement expertise, enabling all business lines and
Slide 22: Q&A and Closing Remarks
Q&A and Closing Remarks 22 Question and Answer Session Closing Remarks Thank you for attending! NASDAQ: IBCP
Slide 23: Appendix: Additional Financial Data and Non-GAAP Reconciliations
Appendix 23 Additional Financial Data and Non-GAAP Reconciliations
Slide 24: Historical Financial Data
Historical Financial Data 24 Year Ended December 31, Quarter Ended, ($M except per share data) 2019 2020 2021 2022 3/31/22 6/30/22 9/30/22 12/31/22 3/31/23 Balance Sheet: Total Assets $3,565 $4,204 $4,705 $5,000 $4,762 $4,826 $4,931 $5,000 $5,139 Portfolio Loans $2,725 $2,734 $2,905 $3,465 $3,004 $3
Slide 25: Non-GAAP to GAAP Reconciliation
Non-GAAP to GAAP Reconciliation 25 Year Ended December 31, Quarter Ended March 31, December 31, September 30, June 30, March 31, 2022 2021 2020 2019 2023 2022 2022 2022 2022 (Dollars in thousands) Net interest income $ 149,561 $ 129,765 $ 123,612 $ 122,581 $ 38,441 $ 40,602 $ 39,897 $ 36,061 $ 33,00
Slide 26: Reconciliation of Non-GAAP Financial Measures
26 Reconciliation of Non-GAAP Financial Measures Three Months Ended March 31, 2023 2022 (Dollars in thousands) Net Interest Margin, Fully Taxable Equivalent ("FTE") Net interest income $ 38,441 $ 33,001 Add: taxable equivalent adjustment 439 482 Net interest income - taxable equivalent $ 38,880 $ 33
Slide 27: Reconciliation of Non-GAAP Financial Measures (continued)
27 Reconciliation of Non-GAAP Financial Measures (continued) Independent Bank Corporation Tangible Common Equity Ratio Year Ended December 31, Quarter Ended March 31, December 31, September 30, June 30, March 31, 2022 2021 2020 2019 2023 2022 2022 2022 2022 (Dollars in thousands) Common shareholders