Independent Bank Corporation · NASDAQ:IBCP
Independent Bank — Q2 2008 Earnings Presentation
37 slides from Independent Bank's earnings presentation, Jul 22, 2008
Slide 1: Independent Bank Corporation 2nd Quarter 2008 Earnings Conference Call
Independent Bank Corporation 2nd Quarter 2008 Earnings Conference Call - July 23, 2008
Slide 2: Overview of 2nd Quarter 2008 Results
Overview of 2nd Quarter 2008 Results Michael M. Magee, President and Chief Executive Officer 2
Slide 3: Safe Harbor Statement
Safe Harbor Statement This presentation may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include expressions such as "expects," "intends," "believes" and "should" which are necessarily statements of
Slide 4: Financial Overview
Financial Overview 2Q 08 1Q 08 2Q 07 Income from continuing operations (millions) $3.3 $0.3 $0.1 EPS - continuing operations $0.15 $0.01 $0.00 ROA - continuing operations 0.42% 0.04% 0.01% ROE - continuing operations 5.58% 0.56% 0.17% Total assets (billions) at period end $3.24 $3.25 $3.26 Stockhold
Slide 5: 2Q:08 - High-Level Overview
2Q:08 - High-Level Overview 5 Strategic Initiatives Dividend reduced further and balance sheet deleveraging initiated to boost regulatory capital ratios Efforts to improve credit quality remain our top priority- focused on loan monitoring + portfolio management function + resolution of non-performin
Slide 6: 2nd Quarter 2008 Financial Review
2nd Quarter 2008 Financial Review Robert N. Shuster, Executive Vice President and CFO 6
Slide 7: 2nd Quarter 2008 Recap
2nd Quarter 2008 Recap 7 Positive Factors Strong growth in net interest income and the net interest margin on both a year-over-year and sequential quarterly basis. Certain categories of non-interest income remain strong. Balance sheet generally remains structured to benefit from relatively low short
Slide 8: 2nd Quarter 2008 Recap - Continued
2nd Quarter 2008 Recap - Continued 8 A few moving parts Securities gains - $0.02 per share MSR impairment recovery - $0.03 per share ORE write-down/losses - $(0.04) per share Litigation settlement/accrual - $(0.01) a share Loan loss provision and loan and collection expenses remain elevated
Slide 9: FAS Fair Value Elections
FAS 159 Fair Value Elections 9 Elected FV accounting for a portfolio of preferred stocks and loans held for sale effective 1/1/08 Although FV accounting can add earnings volatility, now we get two way accounting as compared to one-way OTI. OTI very challenging to assess on "equity" type securities.
Slide 10: Tax Equivalent Net Interest Margin
Tax Equivalent Net Interest Margin 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 Yield on Earning Assets 0.0762 0.076 0.0769 0.0774 0.077 0.0775 0.0765 0.0737 0.0715 Cost of Funds 0.0309 0.0334 0.0347 0.0351 0.0343 0.0344 0.0343 0.0307 0.0247 Net Interest Margin 0.0453 0.0426 0.0423 0.0423 0
Slide 11: TE Net Interest Income
TE Net Interest Income 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 Net Interest Income 33293 31568 31514 31209 32068 31881 31521 31785 34539 11
Slide 12: Shift from Brokered CD's to Lower Cost Funding
Shift from Brokered CD's to Lower Cost Funding 12/31/2006 3/31/2007 6/30/2007 9/30/2007 12/31/2007 3/31/2008 6/30/2008 Net Interest Income 1055 882 813 705 516 248 113 12
Slide 13: Non-Interest Income
Non-Interest Income Category ($ in 000's) 2Q08 1Q08 2Q07 Total non-interest income $14,137 $9,492 $12,773 Service charges - deposits 6,164 5,647 6,380 VISA check card income 1,495 1,371 1,292 Gain (loss) on securities 837 (2,163) 128 Net gains - mortgage loan sales 1,141 1,867 1,238 Mortgage loan se
Slide 14: Non-Interest Expense
Non-Interest Expense Category ($ in 000's) 2Q08 1Q08 2Q07 Total non-interest expense $31,191 $30,251 $29,801 Compensation & employee benefits 13,808 14,184 14,784 Occupancy 2,813 3,114 2,735 Advertising 1,168 1,100 1,341 Loan and collection 2,031 1,856 1,221 Loss on ORE and ORA 1,560 106 68 14
Slide 15: Provision for Loan Losses
Provision for Loan Losses 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 Provison for Loan Losses 2511 4484 7963 8139 14893 10735 9393 11316 12352 15
Slide 16: Asset Quality Measures - Non-Performing Loans
Asset Quality Measures - Non-Performing Loans Non-performing loans by loan type ($ in 000's) 6/30/08 3/31/08 12/31/07 Commercial $ 74,438 $ 72,068 $48,945 Mortgage 30,575 24,824 23,147 Consumer 3,897 3,427 3,435 Finance receivables 2,494 1,867 1,722 Total $111,404 $102,186 $77,249 As a % of total lo
Slide 17: Allowance for Loan Losses Allocation
Allowance for Loan Losses Allocation ($ in 000's) 6/30/08 3/31/08 12/31/07 Specific loan allocations $15,907 $16,166 $10,713 Adversely rated loans 10,305 9,753 10,804 Historical losses 14,905 14,512 14,668 Other factors/subjective 9,987 9,480 9,109 Total $51,104 $49,911 $45,294 As a % of portfolio l
Slide 18: Asset Quality Measures - Net Loan Charge-Offs
Asset Quality Measures - Net Loan Charge-Offs Net loan charge-offs by loan type ($ in 000's) 2Q08 1Q08 4Q07 3Q07 Commercial $8,403 $3,498 $2,637 $3,893 Mortgage 2,238 2,124 2,739 1,819 Consumer 498 982 964 560 Overdrafts 160 149 333 362 Finance receivables 0 13 46 14 Total $11,299 $6,766 $6,719 $6,6
Slide 19: Balance Sheet Overview
Balance Sheet Overview 12/31/2003 12/31/2004 12/31/2005 12/31/2006 12/31/2007 3/31/2008 6/30/2008 Loans 1.58 2.09 2.37 2.48 2.55 2.54 2.57 Total assets 2.36 3.09 3.36 3.43 3.28 3.25 3.24 Deposits 1.62 2.06 2.47 2.6 2.51 2.25 2.08 19
Slide 20: IBCP - Strategic/Financial Initiatives July 2008
IBCP - Strategic/Financial Initiatives 20 July 2008 IBCP cash dividend reduced to $0.01 per share (about $230,000 per quarter). 2Q '08 EPS exceeded the reduced cash dividend. Parent company liquidity - $11.2 million in cash at 6/30/08. Our bank subsidiary remains "well capitalized." Parent company t
Slide 21: 2nd Quarter 2008 Credit Review
2nd Quarter 2008 Credit Review Stefanie M. Kimball, Executive Vice President and Chief Lending Officer 21
Slide 22: Commercial Lending Highlights Second Quarter, 2008
Commercial Lending Highlights Second Quarter, 2008 Strategic shift in target loan types, coupled with tighter underwriting criteria implemented in mid-2007 provide more diversified and higher quality new loans. Inflow of new watch loans continues to slow. Delinquency levels improve. Nonaccruals comp
Slide 23: Total Commercial Loan Balances Increased Slightly in Second Quarter of 2008
Total Commercial Loan Balances Increased Slightly in Second Quarter of 2008 23
Slide 24: Strategic Shift Towards C&I and Away From Certain CRE Segments
Strategic Shift Towards C&I and Away From Certain CRE Segments Commenced in Mid 2007 24
Slide 25: High risk CRE categories represent a relatively small proportion of the portfolio
High risk CRE categories represent a relatively small proportion of the total portfolio and already have a high percentage in the watch category 25
Slide 26: Growth in the Overall Level of Watch Credits Continued to Slow
Growth in the Overall Level of Watch Credits Continued to Slow in the Second Quarter 2008 26
Slide 27: Commercial 30+ Delinquency Improves in the 2nd Quarter 2008
Commercial 30+ Delinquency Improves in the 2nd Quarter 2008 27
Slide 28: Commercial Non-Accruals Continued to Rise in the 2nd Quarter of 2008
Commercial Non-Accruals Continued to Rise in the 2nd Quarter of 2008 28
Slide 29: Composition of Nonaccrual Loans
Composition of Nonaccrual Loans 52% of Nonaccrual loans in Land, Land Development and Construction Average write-down to Nonaccrual: 32% Granularity of Commercial Nonaccruals: 29
Slide 30: Commercial Loan Net Charge-Offs Increased in the 2nd Quarter of 2008
Commercial Loan Net Charge-Offs Increased in the 2nd Quarter of 2008 30
Slide 31: Retail Lending Highlights Second Quarter, 2008
Retail Lending Highlights Second Quarter, 2008 Tighter underwriting criteria was implemented in 2007 which is providing higher quality new loans. The 30+ delinquency rate for the mortgage portfolio improved in the 2nd quarter while consumer delinquencies increased. Bankruptcies have stayed fairly st
Slide 32: Total Retail Loan Balances Decreased Slightly in 2nd Quarter of 2008
Total Retail Loan Balances Decreased Slightly in 2nd Quarter of 2008 32
Slide 33: Retail - Day Delinquency in the 2nd Quarter
Retail 30 - 89 Day Delinquency in the 2nd Quarter 33
Slide 34: Retail Non-Performing Assets Continued to Rise in the 2nd Quarter
Retail Non-Performing Assets Continued to Rise in the 2nd Quarter 34
Slide 35: Total Retail Charge-Offs for 2nd Quarter of 2008 Declined
Total Retail Charge-Offs for 2nd Quarter of 2008 Declined from Levels Experienced in 4th Quarter 2007 35
Slide 36: Q & A
Q & A Michael M. Magee Jr. President and Chief Executive Officer Robert N. Shuster Executive Vice President and Chief Financial Officer Stefanie M. Kimball Executive Vice President and Chief Lending Officer 36
Slide 37: Thank you for participating in the conference call.
Thank you for participating in the conference call. 37