Independent Bank Corporation · NASDAQ:IBCP
Independent Bank — IPO Roadshow (August 2013)
36 slides from Independent Bank's IPO roadshow presentation, Aug 19, 2013
Slide 1: Independent Bank Corporation Follow-on Offering of Common Stock $86,000,000
* Independent Bank CorporationFollow-on Offering of Common Stock$86,000,000 August 2013 Issuer Free Writing ProspectusFiled Pursuant to Rule 433Registration Statement No. 333-190513August 19, 2013
Slide 2: Cautionary Note Regarding Forward-Looking Statements
* Cautionary Note Regarding Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements of goals, intentions, and expectations as to future trends, plans, events, or results of Indep
Slide 3: Transaction Overview
* Transaction Overview Issuer: Independent Bank Corporation Ticker / Exchange: IBCP / NASDAQ Closing Price (8/16/13): $7.94 Type of Offering: Follow-on Public Offering Type of Security: Common Stock Transaction Size: $86 million Over-Allotment Option: 15% Use of Proceeds: To redeem the Series B Conv
Slide 4: Investment Thesis
* Investment Thesis Compelling absolute and relative valuation with potential for upside as the stock trades to a more normalized valuationResults-oriented management team as evidenced by improved earnings and credit metricsExcellent, low cost core deposit base drives a strong net interest marginOrg
Slide 5: Offering Rationale
* Offering Rationale Simplifies capital structure with TARP exitImproves capitalization to fund organic growthBetter positioned to take advantage of consolidation opportunities Note: The ratio of tangible common equity, or TCE, to tangible assets, or TA, is a non-GAAP-based financial measure. In ord
Slide 6: Overview of Independent Bank Corporation
* Overview of Independent Bank Corporation Headquartered in Ionia, MICelebrating 149 years71 offices across Michigan's Lower Peninsula 4th largest bank headquartered in Michigan (by assets)Single state-chartered bank subsidiary (Independent Bank)$2.1 billion in total assets$1.8 billion in total depo
Slide 7: Experienced Management Team
* Experienced Management Team New leadership team in place since 2007 has successfully managed through the credit cycle Age Years in Banking Industry Years with IBCP Experience Brad KesselPresident & CEO 48 26 years (1) 19 years Mr. Kessel was appointed President effective April 1, 2011, and appoint
Slide 8: Core Banking Markets
* Core Banking Markets West Central Southeast East / “Thumb” Significant market presence and opportunity to gain market share in the attractive growth markets of western and central MichiganWhile unemployment is trending favorably throughout the state, western and central Michigan have generally rem
Slide 9: Michigan Economy Continues to Stabilize
Unemployment Trends (%) Median Home Sales Price (Thousands) Total Employees Michigan (Thousands) Median Home Sales Price by Region (Thousands) Michigan EconomyContinues to Stabilize * Sources: Bureau of Labor Statistics, Homepricetrend.com and Realtor.org. Michigan has closed the unemployment gap St
Slide 10: Statewide Low Cost Deposit Franchise
* Cost of Deposits (%) Deposit Composition – Q2’13 ($ in Millions) Statewide Low Cost Deposit FranchiseFocused on Core Deposit Growth Deposit Highlights $1.82 billion total depositsSubstantially all core funding$1.40 billion of transaction accounts (77% of total deposits)Cost of deposits of 0.32%Ove
Slide 11: Diversified Loan Portfolio
* Diversified Loan PortfolioFocused on High Quality Growth Lending Highlights $1.4 billion total loansCurrent loan origination efforts focus on:High quality, profitable commercial loan segments;Residential mortgage loans eligible for sale in the secondary market; andConsumer installment loansStrengt
Slide 12: Commercial Banking Business Model, Philosophy & Structure
* Commercial BankingBusiness Model, Philosophy & Structure Experienced, relationship-focused lending team with average experience of over 19 years. Total of 21 lenders and three loan group managersAverage loan size of $217,000; $300,000 is longer term targetAverage relationship size of $350,000; $50
Slide 13: Customer Service Focused Community Banking Model
* We operate a Customer Service Focused, Community Banking model through 71 banking offices across the lower peninsula of MichiganOur service culture, called the Eagle Experience, is supported by our internal guiding principal: “Impress Every Customer Every Day, Every Time”We have been awarded the J
Slide 14: Positive Earnings Trends
* Positive Earnings Trends Six consecutive quarters of positive net incomePotential earnings upside to be driven by: Redemption of higher cost trust preferred securitiesContinued lower credit costsLower FDIC expenseBranch rationalization savingsRedeployment of resources across the bankUtilization of
Slide 15: Fundamental Operations
* Fundamental Operations Pre-tax, Pre-Provision Earnings ($ in Thousands) Longer term pre-tax, pre-provision ROA target of 1.50%+
Slide 16: Strong and Stable Net Interest Margin
* Strong and Stable Net Interest Margin Diversification of the loan and securities portfolio, in combination with a low cost deposit base, positions us to benefit from a rising rate environmentQ2’13 net interest margin is in the top 15% of all Midwest banks with assets between $1 and $5 billion (1)N
Slide 17: Focus on Reducing Non-interest Expense
* Focus on Reducing Non-interest Expense Non-interest Expense (1) ($ in Millions) Expense Reduction Focus Internal group focus on improving the our efficiency ratio to 60% - 65% over time through both reduction in non-interest expense and increased revenuesExpense reductions focused on five major co
Slide 18: Strong Non-Interest Income Generation
* Strong Non-Interest Income Generation YTD Non-interest Income Breakout ($M) Non-interest Income Trends Diverse sources of non-interest incomeNon-interest income represents approximately 40% of total revenueRanks in the top 15% among Midwest banks with assets between $1 billion and $5 billion in no
Slide 19: Strong Pro Forma Capital Levels
* Strong Pro Forma Capital Levels Note: The ratio of tangible common equity, or TCE, to tangible assets, or TA, is a non-GAAP-based financial measure. In order to calculate tangible common equity and tangible assets, the Company’s management subtracts intangible assets from both common equity and as
Slide 20: Steady Credit Quality Improvement
* Steady Credit Quality Improvement Non-performing Loans ($ in Millions) ORE / ORA ($ in Millions) 30-89 Days Delinquent ($ in Millions) Non-performing Assets ($ in Millions) Note: Non-performing loans and non-performing assets exclude troubled debt restructurings. 28% decrease from Q113, 39% YTD 25
Slide 21: Improving Credit Costs
* Improving Credit Costs * Provision ($ in Millions) Net Charge-Offs ($ in Millions) Allowance ($ in Millions)
Slide 22: Troubled Debt Restructurings (TDRs)
* Troubled Debt Restructurings (TDRs)Over 90% of TDRs are Current TDRs ($M) % Current Working with client base to maximize sustainable performanceThe specific reserves allocated to TDRs totaled $13.0 million at June 30, 2013A majority of our TDRs are performing under their modified terms but remain
Slide 23: TDR Segmentation
* TDR Segmentation (1) Commercial TDRs by Type (6/30/13) Retail TDRs by Type (6/30/13) Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.
Slide 24: Investment Securities Portfolio
* Investment Securities Portfolio Total Investments: $354MNet Unrealized Loss: $1.7M Investment Portfolio Highlights High quality, liquid, diverse portfolio with short durationOver 74% of the portfolio is AAA rated6.2 year average weighted life with a weighted average yield of 1.64%Over 62% of the p
Slide 25: Investment Summary
* Investment Summary Compelling absolute and relative valuation with potential for upside as the stock trades to a more normalized valuationResults oriented management team as evidenced by improved earnings and improved credit metricsExcellent, low cost core deposit base drives a strong net interest
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Slide 27: Historical Financial Performance
* Historical Financial Performance ROAA (%) ROACE (%) Diluted Earnings per Share Total Assets ($ in Billions) * In the second quarter of 2013, earnings included a $57.6 million positive income effect due to the reversal of substantially all of our deferred tax assets. Indicated financials are adjust
Slide 28: Regional Market Summary
* Medium sized urban, commercial focused marketThere are 11,833 total businesses in this region’s footprintThere are 95,795 households in this region’s footprintThe average household income in this region is $51,361, which is below the State of Michigan average of $58,514The estimated 5 year commerc
Slide 29: Ionia / West Michigan / Rural Market Summary
* Ionia / West Michigan / Rural Market Summary Market Information IB Position in Market Geographic Footprint Market Strategy Small sized rural, commercial focused marketThere are 4,225 total businesses in this region’s footprintThere are 31,633 households in this region’s footprintThe average househ
Slide 30: Lansing Market Summary
* Lansing Market Summary Market Information IB Position in Market Geographic Footprint Market Strategy Small sized urban/rural, commercial focused marketThere are 13,169 total businesses in this region’s footprintThere are 138,278 households in this region’s footprintThe average household income in
Slide 31: Bay City, Saginaw, Midland Market Summary
* Bay City, Saginaw, Midland Market Summary Market Information IB Position in Market Geographic Footprint Market Strategy Medium sized urban, commercial focused marketThere are 10,474 total businesses in this region’s footprintThere are 98,565 households in this region’s footprintThe average househo
Slide 32: "Thumb" Market Summary
* “Thumb” Market Summary Market Information IB Position in Market Geographic Footprint Market Strategy Small sized rural, commercial focused marketThere are 6,818 total businesses in this region’s footprintThere are 41,616 households in this region’s footprintThe average household income in this reg
Slide 33: Southeast Michigan Market Summary
* Southeast Michigan Market Summary Market Information IB Position in Market Geographic Footprint Market Strategy Large sized urban, commercial focused marketThere are 12,353 total businesses in this region’s footprintThere are 80,140 households in this region’s footprintThe average household income
Slide 34: Overview of the Detroit Bankruptcy and Our Exposure
* Overview of the Detroit Bankruptcy and Our Exposure What Happened:On July 18, 2013, the city of Detroit filed for Chapter 9 bankruptcy protection, marking the largest ever Chapter 9 filing in historyDetroit’s debts are estimated to be in the $18-$20 billion range consisting of over 100,000 credito
Slide 35: Mepco Update
* Mepco Update Mepco Finance Corporation ("Mepco") is a wholly-owned subsidiary that acquires payment plans for vehicle service contracts from marketersMepco incurred charge-offs after its largest counterparty experienced financial difficulties and ultimately filed for bankruptcy on 3/1/2010As of Ju
Slide 36: Classified Assets and New Default Trends
* Down 20% from Q113, 30% YTD Classified Assets and New Default Trends Total Classified Assets ($ in Millions) Commercial New Defaults ($ in Millions) Total New Defaults ($ in Millions) Retail New Defaults ($ in Millions)