8-K
INDEPENDENT BANK CORP /MI/ (IBCP)
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: April 27, 2023
INDEPENDENT BANK CORPORATION
(Exact name of registrant as specified in its charter)
| Michigan | 0-7818 | 38-2032782 | |||
|---|---|---|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | 4200 East Beltline<br><br>Grand Rapids, Michigan | 49525 | |
| --- | --- | ||||
| (Address of principal executive office) | (Zip Code) |
Registrant’s telephone number,
including area code:
(616) 527-5820
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common stock, no par value | IBCP | NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02. Results of Operations and Financial Condition
On April 27, 2023, Independent Bank Corporation issued a press release announcing its financial results for the quarter ended March 31, 2023. A copy of the press release is attached as Exhibit 99.1. Attached Exhibit 99.2 contains supplemental data to that press release and attached Exhibit 99.3 contains a slide presentation for our earnings conference call.
The information in this Form 8-K and the attached Exhibits shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits
Exhibits.
| 99.1 | Press release dated April 27, 2023. |
|---|---|
| 99.2 | Supplemental data to the Registrant’s press release dated April 27, 2023. |
| 99.3 | Earnings conference call presentation. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| INDEPENDENT BANK CORPORATION | |||
|---|---|---|---|
| (Registrant) | |||
| Date | 4/27/2023 | By | s/Gavin A. Mohr |
| Gavin A. Mohr, Principal Financial Officer |
3
Document
Exhibit 99.1
NEWS RELEASE
Independent Bank Corporation
4200 East Beltline
Grand Rapids, MI 49525
616.527.5820
| For Release: | Immediately |
|---|---|
| Contact: | William B. Kessel, President and CEO, 616.447.3933<br><br>Gavin A. Mohr, Chief Financial Officer, 616.447.3929 |
INDEPENDENT BANK CORPORATION REPORTS 2023 FIRST QUARTER RESULTS
First Quarter Highlights
Highlights for the first quarter of 2023 include:
•Deposit growth of $93.1 million (excluding brokered time deposits) or 9.1% annualized;
•An increase in net interest income of 16.5% over the first quarter of 2022;
•An increase in book value and tangible book value per share of $0.90;
•Net growth in loans of $44.5 million (or 5.2% annualized); and
•The payment of a 23 cent per share dividend on common stock on February 24, 2023.
GRAND RAPIDS, Mich., April 27, 2023 - Independent Bank Corporation (NASDAQ: IBCP) reported first quarter 2023 net income of $13.0 million, or $0.61 per diluted share, versus net income of $18.0 million, or $0.84 per diluted share, in the prior-year period.
William B. (“Brad”) Kessel, the President and Chief Executive Officer of Independent Bank Corporation, commented: “Our deposit base has remained stable throughout the recent troubles experienced in the banking industry, and we have been able to remain focused on serving the needs of our customers and bringing in new relationships to the bank. As a result, I am pleased to report another quarter of strong financial results. We grew total loans by $44.5 million (5.2% annualized) while maintaining a low level of past dues. Importantly, we generated core deposit growth of $93.1 million (9.1% annualized) in the first quarter of 2023. Additionally, I am pleased with our team’s continued focus on efficiency and expense management. Independent Bank’s operating strategy remains unchanged as we continue to add talented bankers to the commercial banking team to assist in our goal of achieving a greater market share across our footprint. We have a granular deposit base, with approximately 22.6% of deposits uninsured and a high level of available liquidity with $2.4 billion in secured borrowing access and borrowing capacity on unpledged securities.”
Significant items impacting comparable first quarter 2023 and 2022 results include the following:
•Changes in the fair value due to price of capitalized mortgage loan servicing rights (the “MSR Changes”) of $(0.6) million ($(0.02) per diluted share, after taxes) for the three-month period ended March 31, 2023, as compared to $8.5 million ($0.31 per diluted share, after taxes) for the three-months ended March 31, 2022.
•The provision for credit losses on loans was a credit of $0.8 million ($0.03 per diluted share, after taxes) in the first quarter ended March 31, 2023, as compared to a credit of $1.6 million ($0.06 per diluted share, after taxes) in the first quarter ended March 31, 2022.
•The provision for credit losses on securities held to maturity (“HTM”) was an expense of $3.0 million ($0.11 per diluted share, after taxes) in the first quarter ended March 31, 2023, as compared to a provision of zero in the first quarter ended March 31, 2022.
Operating Results
The Company’s net interest income totaled $38.4 million during the first quarter of 2023, an increase of $5.4 million, or 16.5% from the year-ago period, and down $2.2 million, or 5.3%, from the fourth quarter of 2022. The Company’s tax equivalent net interest income as a percent of average interest-earning assets (the “net interest margin”) was 3.33% during the first quarter of 2023, compared to 3.00% in the year-ago period, and 3.52% in the fourth quarter of 2022. The year-over-year quarterly increase in net interest income was due to an increase in average interest-earning assets as well as an increase in the net interest margin. The decrease in net interest income compared to the linked quarter was due to a decrease in net interest margin that was partially offset by an increase in average interest-earning assets. Average interest-earning assets were $4.70 billion in the first quarter of 2023, compared to $4.49 billion in the year ago quarter and $4.64 billion in the fourth quarter of 2022.
Non-interest income totaled $10.6 million for the first quarter of 2023, compared to $18.9 million in the comparable prior year period. These changes were primarily due to variances in mortgage banking related revenues and a loss on securities available for sale.
Net gains on mortgage loans in the first quarters of 2023 and 2022, were approximately $1.3 million and $0.8 million, respectively. The increase in net gains on mortgage loans was primarily due to a increase in the gain on sale margin on mortgage loan sold that was partially offset by a decrease in the volume of mortgage loans sold.
Mortgage loan servicing, net, generated income of $0.7 million and $9.6 million in the first quarters of 2023 and 2022, respectively. The significant variance in mortgage loan servicing, net is primarily due to changes in the fair value of capitalized mortgage loan servicing rights associated with changes in mortgage loan interest rates and expected future prepayment levels. Mortgage loan servicing, net activity is summarized in the following table:
| Three months ended | |||||
|---|---|---|---|---|---|
| 3/31/2023 | 3/31/2022 | ||||
| (In thousands) | |||||
| Mortgage loan servicing, net: | |||||
| Revenue, net | $ | 2,222 | $ | 2,083 | |
| Fair value change due to price | (635) | 8,452 | |||
| Fair value change due to pay-downs | (861) | (894) | |||
| Total | $ | 726 | $ | 9,641 |
Non-interest expenses totaled $31.0 million in the first quarter of 2023, compared to $31.5 million in the year-ago period. This decrease is due in part to declines in compensation and employee benefits and occupancy, net, that were partially offset by increases in data processing and FDIC insurance expense. The decrease in compensation and employee benefits is primarily related to lower performance based compensation. The decrease in occupancy primarily relates to lower costs due to a reduction in snow removal expenses, a reduction in Covid-19 related expenses as well as generally lower number of properties maintained. The increase in data processing is generally attributed to the prior year including certain one-time credits from our data processing provider and an increase in cost due annual asset growth and CPI increases. The increase in FDIC deposit insurance is primarily attributed to a new two basis point increase in deposit insurance rate effective for us on January 1, 2023.
The Company recorded income tax expense of $2.9 million in the first quarter of 2023. This compares to an income tax expense of $4.1 million in the first quarter of 2022. The changes in income tax expense principally reflect changes in pre-tax earnings in 2023 relative to 2022.
Asset Quality
A breakdown of non-performing loans by loan type is as follows:
| 3/31/2023 | 12/31/2022 | 3/31/2022 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Loan Type | (Dollars in thousands) | ||||||||
| Commercial | $ | 36 | $ | 38 | $ | 59 | |||
| Mortgage | 5,536 | 4,745 | 5,166 | ||||||
| Installment | 644 | 598 | 668 | ||||||
| Sub total | 6,216 | 5,381 | 5,893 | ||||||
| Less - government guaranteed loans | 2,330 | 1,660 | 859 | ||||||
| Total non-performing loans | $ | 3,886 | $ | 3,721 | $ | 5,034 | |||
| Ratio of non-performing loans to total portfolio loans | 0.11 | % | 0.11 | % | 0.17 | % | |||
| Ratio of non-performing assets to total assets | 0.09 | % | 0.08 | % | 0.11 | % | |||
| Ratio of allowance for credit losses to total non-performing loans | 1300.82 | % | 1409.16 | % | 906.38 | % |
The provision for credit losses on loans was a credit of $0.8 million and $1.6 million in the first quarters of 2023 and 2022, respectively. The quarterly change in the provision for credit losses in 2023 compared to 2022, was primarily the result of a a decrease in the pooled loan reserve that was partially offset by a net change in subjective loan allocations. We recorded loan net charge offs of $1.1 million and $0.1 million in the first quarters of 2023 and 2022, respectively. At March 31, 2023, the allowance for credit losses for loans totaled $50.6 million, or 1.44% of total portfolio loans compared to $52.4 million, or 1.51% of total portfolio loans at December 31, 2022. The quarterly increase in the provision for credit losses for securities HTM in 2023 compared to 2022, was the result of a loss incurred on a $3.0 million subordinated debt security that defaulted during the quarter.
Balance Sheet, Capital and Liquidity
Total assets were $5.14 billion at March 31, 2023, an increase of $139.1 million from December 31, 2022. Loans, excluding loans held for sale, were $3.51 billion at March 31, 2023, compared to $3.47 billion at December 31, 2022. Deposits totaled $4.54 billion at March 31, 2023, an increase of $165.7 million from December 31, 2022. This increase is primarily due to growth in savings and interest-bearing checking, reciprocal, time and brokered time deposit account balances that were partially offset by a decrease in non-interest bearing deposit account balances.
Cash and cash equivalents totaled $227.0 million at March 31, 2023, versus $74.4 million at December 31, 2022. Securities available for sale (“AFS”) totaled $767.5 million at March 31, 2023, versus $779.3 million at December 31, 2022.
Total shareholders’ equity was $367.7 million at March 31, 2023, or 7.16% of total assets compared to $347.6 million or 6.95% at December 31, 2022. Tangible common equity totaled $337.0 million at March 31, 2023, or $15.94 per share compared to $316.7 million or $15.04 per share at December 31, 2022. The increase in shareholder equity as well as tangible common equity are primarily the result of a decrease in accumulated other comprehensive loss related to unrealized losses on securities available for sale due to a decrease in interest rates as well as earnings retention.
The Company’s wholly owned subsidiary, Independent Bank, remains significantly above “well capitalized” for regulatory purposes with the following ratios:
| Regulatory Capital Ratios | 3/31/2023 | 12/31/2022 | Well<br>Capitalized<br>Minimum | |||
|---|---|---|---|---|---|---|
| Tier 1 capital to average total assets | 8.61 | % | 8.56 | % | 5.00 | % |
| Tier 1 common equity to risk-weighted assets | 11.15 | % | 10.97 | % | 6.50 | % |
| Tier 1 capital to risk-weighted assets | 11.15 | % | 10.97 | % | 8.00 | % |
| Total capital to risk-weighted assets | 12.40 | % | 12.22 | % | 10.00 | % |
At March 31, 2023, in addition to liquidity available from our normal operating, funding, and investing activities, we had unused credit lines with the FHLB and FRB of approximately $930.1 million and $502.7 million, respectively. We also had
approximately $928.5 million in fair value of unpledged securities AFS and HTM at March 31, 2023 which could be pledged for an estimated additional borrowing capacity at the FHLB and FRB of approximately $854.9 million.
Share Repurchase Plan
On December 20, 2022, the Board of Directors of the Company authorized the 2023 share repurchase plan. Under the terms of the 2023 share repurchase plan, the Company is authorized to purchase up to 1,100,000 shares, or approximately 5% of its then outstanding common stock. The repurchase plan is authorized to last through December 31, 2023. During the first quarter of 2023, the Company did not repurchase any shares.
Earnings Conference Call
Brad Kessel, President and CEO, Gavin Mohr, CFO and Joel Rahn, EVP – Commercial Banking will review the quarterly results in a conference call for investors and analysts beginning at 11:00 am ET on Thursday, April 27, 2023.
To participate in the live conference call, please dial 1-833-470-1428 (Access Code # 892703). Also, the conference call will be accessible through an audio webcast with user-controlled slides via the following site/URL: https://events.q4inc.com/attendee/755279071.
A playback of the call can be accessed by dialing 1-866-813-9403 (Access Code # 373785). The replay will be available through May 4, 2023.
About Independent Bank Corporation
Independent Bank Corporation (NASDAQ: IBCP) is a Michigan-based bank holding company with total assets of approximately $5.1 billion. Founded as First National Bank of Ionia in 1864, Independent Bank Corporation operates a branch network across Michigan's Lower Peninsula through one state-chartered bank subsidiary. This subsidiary (Independent Bank) provides a full range of financial services, including commercial banking, mortgage lending, consumer banking, investments and insurance. Independent Bank Corporation is committed to providing exceptional personal service and value to its customers, stockholders and the communities it serves.
For more information, please visit our Web site at: IndependentBank.com.
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 plans and prospects.
Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. For example, deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding to us, lead to a tightening of credit, and increase stock price volatility. Our results could also be adversely affected by changes in interest rates; increases in unemployment rates; deterioration in the credit quality of our loan portfolios or in the value of the collateral securing those loans; deterioration in the value of our investment securities; legal and regulatory developments; changes in customer behavior and preferences; breaches in data security; and management’s ability to effectively manage the multitude of risks facing our business. Key risk factors that could affect our future results are described in more detail in our Annual Report on Form 10-K for the year ended December 31, 2022 and the other reports we file with the SEC, including under the heading “Risk Factors.” Investors should not place undue reliance on forward-looking statements as a prediction of our future results.
Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
| March 31, 2023 | December 31, 2022 | |||
|---|---|---|---|---|
| (Unaudited) | ||||
| (In thousands, except share<br>amounts) | ||||
| Assets | ||||
| Cash and due from banks | $ | 47,823 | $ | 70,180 |
| Interest bearing deposits | 179,196 | 4,191 | ||
| Cash and Cash Equivalents | 227,019 | 74,371 | ||
| Securities available for sale | 767,526 | 779,347 | ||
| Securities held to maturity (fair value of $339,337 at March 31, 2023 and $335,418 at December 31, 2022) | 369,577 | 374,818 | ||
| Federal Home Loan Bank and Federal Reserve Bank stock, at cost | 17,653 | 17,653 | ||
| Loans held for sale, carried at fair value | 16,935 | 26,518 | ||
| Loans held for sale, carried at lower of cost or fair value | — | 20,367 | ||
| Loans | ||||
| Commercial | 1,471,293 | 1,466,853 | ||
| Mortgage | 1,408,229 | 1,368,409 | ||
| Installment | 630,287 | 630,090 | ||
| Total Loans | 3,509,809 | 3,465,352 | ||
| Allowance for credit losses | (50,550) | (52,435) | ||
| Net Loans | 3,459,259 | 3,412,917 | ||
| Other real estate and repossessed assets, net | 499 | 455 | ||
| Property and equipment, net | 35,764 | 35,893 | ||
| Bank-owned life insurance | 55,314 | 55,204 | ||
| Capitalized mortgage loan servicing rights, carried at fair value | 41,923 | 42,489 | ||
| Other intangibles | 2,415 | 2,551 | ||
| Goodwill | 28,300 | 28,300 | ||
| Accrued income and other assets | 116,750 | 128,904 | ||
| Total Assets | $ | 5,138,934 | $ | 4,999,787 |
| Liabilities and Shareholders' Equity | ||||
| Deposits | ||||
| Non-interest bearing | $ | 1,192,396 | $ | 1,269,759 |
| Savings and interest-bearing checking | 1,975,098 | 1,973,308 | ||
| Reciprocal | 685,458 | 602,575 | ||
| Time | 407,267 | 321,492 | ||
| Brokered time | 284,530 | 211,935 | ||
| Total Deposits | 4,544,749 | 4,379,069 | ||
| Other borrowings | 50,029 | 86,006 | ||
| Subordinated debt | 39,452 | 39,433 | ||
| Subordinated debentures | 39,677 | 39,660 | ||
| Accrued expenses and other liabilities | 97,313 | 108,023 | ||
| Total Liabilities | 4,771,220 | 4,652,191 | ||
| Shareholders’ Equity | ||||
| Preferred stock, no par value, 200,000 shares authorized; none issued or outstanding | — | — | ||
| Common stock, no par value, 500,000,000 shares authorized; issued and outstanding: 21,138,303 shares at March 31, 2023 and 21,063,971 shares at December 31, 2022 | 321,026 | 320,991 | ||
| Retained earnings | 127,499 | 119,368 | ||
| Accumulated other comprehensive loss | (80,811) | (92,763) | ||
| Total Shareholders’ Equity | 367,714 | 347,596 | ||
| Total Liabilities and Shareholders’ Equity | $ | 5,138,934 | $ | 4,999,787 |
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| March 31,<br>2023 | December 31,<br>2022 | March 31,<br>2022 | ||||
| (Unaudited) | ||||||
| Interest Income | (In thousands, except per share amounts) | |||||
| Interest and fees on loans | $ | 44,294 | $ | 42,093 | $ | 28,418 |
| Interest on securities | ||||||
| Taxable | 5,884 | 5,845 | 4,552 | |||
| Tax-exempt | 3,083 | 2,807 | 1,554 | |||
| Other investments | 675 | 233 | 217 | |||
| Total Interest Income | 53,936 | 50,978 | 34,741 | |||
| Interest Expense | ||||||
| Deposits | 13,760 | 8,543 | 767 | |||
| Other borrowings and subordinated debt and debentures | 1,735 | 1,833 | 973 | |||
| Total Interest Expense | 15,495 | 10,376 | 1,740 | |||
| Net Interest Income | 38,441 | 40,602 | 33,001 | |||
| Provision for credit losses | 2,160 | 1,390 | (1,573) | |||
| Net Interest Income After Provision for Credit Losses | 36,281 | 39,212 | 34,574 | |||
| Non-interest Income | ||||||
| Interchange income | 3,205 | 3,402 | 3,082 | |||
| Service charges on deposit accounts | 2,857 | 3,153 | 2,957 | |||
| Net gains (losses) on assets | ||||||
| Mortgage loans | 1,256 | 1,486 | 835 | |||
| Securities available for sale | (222) | — | 70 | |||
| Mortgage loan servicing, net | 726 | 687 | 9,641 | |||
| Other | 2,729 | 2,740 | 2,363 | |||
| Total Non-interest Income | 10,551 | 11,468 | 18,948 | |||
| Non-interest Expense | ||||||
| Compensation and employee benefits | 19,339 | 20,394 | 20,130 | |||
| Data processing | 2,991 | 2,670 | 2,216 | |||
| Occupancy, net | 2,159 | 2,225 | 2,543 | |||
| Interchange expense | 1,049 | 1,042 | 1,011 | |||
| Furniture, fixtures and equipment | 926 | 933 | 1,045 | |||
| FDIC deposit insurance | 783 | 572 | 522 | |||
| Legal and professional | 607 | 588 | 493 | |||
| Loan and collection | 578 | 679 | 559 | |||
| Advertising | 495 | 489 | 680 | |||
| Recoveries related to unfunded lending commitments | (475) | (77) | (355) | |||
| Communications | 668 | 629 | 757 | |||
| Other | 1,837 | 1,947 | 1,849 | |||
| Total Non-interest Expense | 30,957 | 32,091 | 31,450 | |||
| Income Before Income Tax | 15,875 | 18,589 | 22,072 | |||
| Income tax expense | 2,884 | 3,503 | 4,105 | |||
| Net Income | $ | 12,991 | $ | 15,086 | $ | 17,967 |
| Net Income Per Common Share | ||||||
| Basic | $ | 0.62 | $ | 0.72 | $ | 0.85 |
| Diluted | $ | 0.61 | $ | 0.71 | $ | 0.84 |
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Selected Financial Data
| March 31,<br>2023 | December 31,<br>2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited) | |||||||||||||||
| (Dollars in thousands except per share data) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| Net interest income | $ | 38,441 | $ | 40,602 | $ | 39,897 | $ | 36,061 | $ | 33,001 | |||||
| Provision for credit losses | 2,160 | 1,390 | 3,145 | 2,379 | (1,573) | ||||||||||
| Non-interest income | 10,551 | 11,468 | 16,861 | 14,632 | 18,948 | ||||||||||
| Non-interest expense | 30,957 | 32,091 | 32,366 | 32,434 | 31,450 | ||||||||||
| Income before income tax | 15,875 | 18,589 | 21,247 | 15,880 | 22,072 | ||||||||||
| Income tax expense | 2,884 | 3,503 | 3,950 | 2,879 | 4,105 | ||||||||||
| Net income | $ | 12,991 | $ | 15,086 | $ | 17,297 | $ | 13,001 | $ | 17,967 | |||||
| Basic earnings per share | $ | 0.62 | $ | 0.72 | $ | 0.82 | $ | 0.62 | $ | 0.85 | |||||
| Diluted earnings per share | 0.61 | 0.71 | 0.81 | 0.61 | 0.84 | ||||||||||
| Cash dividend per share | 0.23 | 0.22 | 0.22 | 0.22 | 0.22 | ||||||||||
| Average shares outstanding | 21,103,831 | 21,064,556 | 21,057,673 | 21,070,266 | 21,191,860 | ||||||||||
| Average diluted shares outstanding | 21,296,980 | 21,266,876 | 21,251,933 | 21,266,476 | 21,398,128 | ||||||||||
| Performance Ratios | |||||||||||||||
| Return on average assets | 1.06 | % | 1.21 | % | 1.40 | % | 1.10 | % | 1.54 | % | |||||
| Return on average equity | 14.77 | 17.94 | 20.48 | 15.68 | 19.38 | ||||||||||
| Efficiency ratio (1) | 62.07 | 60.82 | 56.26 | 62.50 | 59.62 | ||||||||||
| As a Percent of Average Interest-Earning Assets (1) | |||||||||||||||
| Interest income | 4.67 | % | 4.41 | % | 3.92 | % | 3.47 | % | 3.16 | % | |||||
| Interest expense | 1.34 | 0.89 | 0.43 | 0.21 | 0.16 | ||||||||||
| Net interest income | 3.33 | 3.52 | 3.49 | 3.26 | 3.00 | ||||||||||
| Average Balances | |||||||||||||||
| Loans | $ | 3,494,169 | $ | 3,449,944 | $ | 3,360,621 | $ | 3,145,095 | $ | 2,980,098 | |||||
| Securities | 1,146,075 | 1,164,809 | 1,226,203 | 1,312,934 | 1,407,225 | ||||||||||
| Total earning assets | 4,696,786 | 4,637,475 | 4,610,307 | 4,493,714 | 4,492,757 | ||||||||||
| Total assets | 4,988,440 | 4,934,859 | 4,884,841 | 4,758,960 | 4,721,205 | ||||||||||
| Deposits | 4,417,106 | 4,350,748 | 4,326,958 | 4,221,047 | 4,158,528 | ||||||||||
| Interest bearing liabilities | 3,304,868 | 3,159,374 | 3,075,210 | 3,005,103 | 2,950,337 | ||||||||||
| Shareholders' equity | 356,720 | 333,610 | 335,120 | 332,610 | 376,010 |
(1)Presented on a fully tax equivalent basis assuming a marginal tax rate of 21%.
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Selected Financial Data (continued)
| March 31,<br>2023 | December 31,<br>2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited) | |||||||||||||||
| (Dollars in thousands except per share data) | |||||||||||||||
| End of Period | |||||||||||||||
| Capital | |||||||||||||||
| Tangible common equity ratio | 6.60 | % | 6.37 | % | 6.15 | % | 6.26 | % | 6.85 | % | |||||
| Tangible common equity ratio excluding accumulated other comprehensive loss | 7.95 | 7.98 | 7.86 | 7.78 | 7.80 | ||||||||||
| Average equity to average assets | 7.15 | 6.76 | 6.86 | 6.99 | 7.96 | ||||||||||
| Total capital to risk-weighted assets (2) | 13.80 | 13.62 | 13.58 | 13.64 | 14.81 | ||||||||||
| Tier 1 capital to risk-weighted assets (2) | 11.53 | 11.36 | 11.29 | 11.33 | 11.82 | ||||||||||
| Common equity tier 1 capital to risk-weighted assets (2) | 10.56 | 10.38 | 10.29 | 10.30 | 10.73 | ||||||||||
| Tier 1 capital to average assets (2) | 8.92 | 8.86 | 8.77 | 8.74 | 8.81 | ||||||||||
| Common shareholders' equity per share of common stock | $ | 17.40 | $ | 16.50 | $ | 15.78 | $ | 15.73 | $ | 16.79 | |||||
| Tangible common equity per share of common stock | 15.94 | 15.04 | 14.30 | 14.25 | 15.31 | ||||||||||
| Total shares outstanding | 21,138,303 | 21,063,971 | 21,063,954 | 21,049,218 | 21,168,230 | ||||||||||
| Selected Balances | |||||||||||||||
| Loans | $ | 3,509,809 | $ | 3,465,352 | $ | 3,409,858 | $ | 3,258,850 | $ | 3,004,065 | |||||
| Securities | 1,137,103 | 1,154,165 | 1,183,701 | 1,241,312 | 1,400,137 | ||||||||||
| Total earning assets | 4,860,696 | 4,688,246 | 4,633,876 | 4,552,185 | 4,514,590 | ||||||||||
| Total assets | 5,138,934 | 4,999,787 | 4,931,377 | 4,826,209 | 4,761,983 | ||||||||||
| Deposits | 4,544,749 | 4,379,069 | 4,327,028 | 4,290,574 | 4,205,498 | ||||||||||
| Interest bearing liabilities | 3,481,511 | 3,274,409 | 3,116,027 | 3,037,278 | 2,996,112 | ||||||||||
| Shareholders' equity | 367,714 | 347,596 | 332,308 | 331,134 | 355,449 |
(2)March 31, 2023 are Preliminary.
Reconciliation of Non-GAAP Financial Measures
Independent Bank Corporation
Independent Bank Corporation believes non-GAAP measures are meaningful because they reflect adjustments commonly made by management, investors, regulators and analysts to evaluate the adequacy of common equity and performance trends. Tangible common equity is used by the Company to measure the quality of capital.
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 | $ | 33,483 | |||
| Net interest margin (GAAP) (1) | 3.29 | % | 2.96 | % | |||
| Net interest margin (FTE) (1) | 3.33 | % | 3.00 | % |
(1)Annualized.
Tangible Common Equity Ratio
| March 31,<br>2023 | December 31,<br>2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | |||||||||||||||
| Common shareholders' equity | $ | 367,714 | $ | 347,596 | $ | 332,308 | $ | 331,134 | $ | 355,449 | |||||
| Less: | |||||||||||||||
| Goodwill | 28,300 | 28,300 | 28,300 | 28,300 | 28,300 | ||||||||||
| Other intangibles | 2,415 | 2,551 | 2,697 | 2,871 | 3,104 | ||||||||||
| Tangible common equity | 336,999 | 316,745 | 301,311 | 299,963 | 324,045 | ||||||||||
| Addition: | |||||||||||||||
| Accumulated other comprehensive loss for regulatory purposes | 75,013 | 86,966 | 91,248 | 79,206 | 48,617 | ||||||||||
| Tangible common equity excluding other comprehensive loss adjustments | $ | 412,012 | $ | 403,711 | $ | 392,559 | $ | 379,169 | $ | 372,662 | |||||
| Total assets | $ | 5,138,934 | $ | 4,999,787 | $ | 4,931,377 | $ | 4,826,209 | $ | 4,761,983 | |||||
| Less: | |||||||||||||||
| Goodwill | 28,300 | 28,300 | 28,300 | 28,300 | 28,300 | ||||||||||
| Other intangibles | 2,415 | 2,551 | 2,697 | 2,871 | 3,104 | ||||||||||
| Tangible assets | 5,108,219 | 4,968,936 | 4,900,380 | 4,795,038 | 4,730,579 | ||||||||||
| Addition: | |||||||||||||||
| Net unrealized losses on available for sale securities and derivatives, net of tax | 75,013 | 86,966 | 91,248 | 79,206 | 48,617 | ||||||||||
| Tangible assets excluding other comprehensive loss adjustments | $ | 5,183,232 | $ | 5,055,902 | $ | 4,991,628 | $ | 4,874,244 | $ | 4,779,196 | |||||
| Common equity ratio | 7.16 | % | 6.95 | % | 6.74 | % | 6.86 | % | 7.46 | % | |||||
| Tangible common equity ratio | 6.60 | % | 6.37 | % | 6.15 | % | 6.26 | % | 6.85 | % | |||||
| Tangible common equity ratio excluding other comprehensive loss | 7.95 | % | 7.98 | % | 7.86 | % | 7.78 | % | 7.80 | % | |||||
| Tangible Common Equity per Share of Common Stock: | |||||||||||||||
| Common shareholders' equity | $ | 367,714 | $ | 347,596 | $ | 332,308 | $ | 331,134 | $ | 355,449 | |||||
| Tangible common equity | $ | 336,999 | $ | 316,745 | $ | 301,311 | $ | 299,963 | $ | 324,045 | |||||
| Shares of common stock outstanding (in thousands) | 21,138 | 21,064 | 21,064 | 21,049 | 21,168 | ||||||||||
| Common shareholders' equity per share of common stock | $ | 17.40 | $ | 16.50 | $ | 15.78 | $ | 15.73 | $ | 16.79 | |||||
| Tangible common equity per share of common stock | $ | 15.94 | $ | 15.04 | $ | 14.30 | $ | 14.25 | $ | 15.31 |
The tangible common equity ratio removes the effect of goodwill and other intangible assets from capital and total assets. Tangible common equity per share of common stock removes the effect of goodwill and other intangible assets from common shareholders’ equity per share of common stock.
9
Document
Exhibit 99.2
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Supplemental Data
Non-performing assets
| March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | |||||||||||||||
| Non-accrual loans | $ | 6,216 | $ | 5,381 | $ | 5,307 | $ | 5,859 | $ | 5,893 | |||||
| Loans 90 days or more past due and still accruing interest | — | — | — | — | — | ||||||||||
| Subtotal | 6,216 | 5,381 | 5,307 | 5,859 | 5,893 | ||||||||||
| Less: Government guaranteed loans | 2,330 | 1,660 | 1,491 | 1,360 | 859 | ||||||||||
| Total non-performing loans | 3,886 | 3,721 | 3,816 | 4,499 | 5,034 | ||||||||||
| Other real estate and repossessed assets | 499 | 455 | 348 | 508 | 438 | ||||||||||
| Total non-performing assets | $ | 4,385 | $ | 4,176 | $ | 4,164 | $ | 5,007 | $ | 5,472 | |||||
| As a percent of Portfolio Loans | |||||||||||||||
| Non-performing loans | 0.11 | % | 0.11 | % | 0.11 | % | 0.14 | % | 0.17 | % | |||||
| Allowance for credit losses | 1.44 | 1.51 | 1.50 | 1.47 | 1.52 | ||||||||||
| Non-performing assets to total assets | 0.09 | 0.08 | 0.08 | 0.10 | 0.11 | ||||||||||
| Allowance for credit losses as a percent of non-performing loans | 1,300.82 | 1,409.16 | 1,340.20 | 1,064.30 | 906.38 |
Allowance for credit losses
| Three months ended March 31, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||||||||||
| Loans | Securities | Unfunded<br>Commitments | Loans | Securities | Unfunded<br>Commitments | |||||||||
| (Dollars in thousands) | ||||||||||||||
| Balance at beginning of period | $ | 52,435 | $ | 168 | $ | 5,080 | $ | 47,252 | $ | — | $ | 4,481 | ||
| Additions (deductions) | ||||||||||||||
| Provision for credit losses | (832) | 2,992 | — | (1,573) | — | — | ||||||||
| Recoveries credited to allowance | 578 | — | — | 621 | — | — | ||||||||
| Assets charged against the allowance | (1,631) | (3,000) | — | (673) | — | — | ||||||||
| Additions included in non-interest expense | — | — | (475) | — | — | (355) | ||||||||
| Balance at end of period | $ | 50,550 | $ | 160 | $ | 4,605 | $ | 45,627 | $ | — | $ | 4,126 | ||
| Net loans charged (recovered) against the allowance to average Portfolio Loans | 0.12 | % | 0.01 | % | ||||||||||
| 1 | ||||||||||||||
| --- |
Capitalization
| March 31, 2023 | December 31, 2022 | |||
|---|---|---|---|---|
| (In thousands) | ||||
| Subordinated debt | $ | 39,452 | $ | 39,433 |
| Subordinated debentures | 39,677 | 39,660 | ||
| Amount not qualifying as regulatory capital | (676) | (657) | ||
| Amount qualifying as regulatory capital | 78,453 | 78,436 | ||
| Shareholders’ equity | ||||
| Common stock | 321,026 | 320,991 | ||
| Retained earnings | 127,499 | 119,368 | ||
| Accumulated other comprehensive income (loss) | (80,811) | (92,763) | ||
| Total shareholders’ equity | 367,714 | 347,596 | ||
| Total capitalization | $ | 446,167 | $ | 426,032 |
Non-Interest Income
| Three months ended | ||||||
|---|---|---|---|---|---|---|
| March 31, 2023 | December 31, 2022 | March 31, 2022 | ||||
| (In thousands) | ||||||
| Interchange income | $ | 3,205 | $ | 3,402 | $ | 3,082 |
| Service charges on deposit accounts | 2,857 | 3,153 | 2,957 | |||
| Net gains (losses) on assets | ||||||
| Mortgage loans | 1,256 | 1,486 | 835 | |||
| Securities | (222) | — | 70 | |||
| Mortgage loan servicing, net | 726 | 687 | 9,641 | |||
| Investment and insurance commissions | 827 | 728 | 738 | |||
| Bank owned life insurance | 111 | 58 | 138 | |||
| Other | 1,791 | 1,954 | 1,487 | |||
| Total non-interest income | $ | 10,551 | $ | 11,468 | $ | 18,948 |
Capitalized Mortgage Loan Servicing Rights
| Three months ended March 31, | |||||
|---|---|---|---|---|---|
| 2023 | 2022 | ||||
| (In thousands) | |||||
| Balance at beginning of period | $ | 42,489 | $ | 26,232 | |
| Originated servicing rights capitalized | 930 | 2,143 | |||
| Change in fair value | (1,496) | 7,558 | |||
| Balance at end of period | $ | 41,923 | $ | 35,933 | |
| 2 | |||||
| --- |
Mortgage Loan Activity
| Three months ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March 31, 2023 | December 31, 2022 | March 31, 2022 | |||||||
| (Dollars in thousands) | |||||||||
| Mortgage loans originated | $ | 113,021 | $ | 138,889 | $ | 270,194 | |||
| Mortgage loans sold | 106,846 | 80,584 | 221,725 | ||||||
| Net gains on mortgage loans | 1,256 | 1,486 | 835 | ||||||
| Net gains as a percent of mortgage loans sold ("Loan Sales Margin") | 1.18 | % | 1.84 | % | 0.38 | % | |||
| Fair value adjustments included in the Loan Sales Margin | 1.20 | % | 0.19 | % | (1.87) | % |
Non-Interest Expense
| Three months ended | ||||||
|---|---|---|---|---|---|---|
| March 31, 2023 | December 31, 2022 | March 31, 2022 | ||||
| (In thousands) | ||||||
| Compensation | $ | 13,269 | $ | 12,728 | $ | 12,435 |
| Performance-based compensation | 2,245 | 4,147 | 3,662 | |||
| Payroll taxes and employee benefits | 3,825 | 3,519 | 4,033 | |||
| Compensation and employee benefits | 19,339 | 20,394 | 20,130 | |||
| Data processing | 2,991 | 2,670 | 2,216 | |||
| Occupancy, net | 2,159 | 2,225 | 2,543 | |||
| Interchange expense | 1,049 | 1,042 | 1,011 | |||
| Furniture, fixtures and equipment | 926 | 933 | 1,045 | |||
| FDIC deposit insurance | 783 | 572 | 522 | |||
| Communications | 668 | 629 | 757 | |||
| Legal and professional | 607 | 588 | 493 | |||
| Loan and collection | 578 | 679 | 559 | |||
| Advertising | 495 | 489 | 680 | |||
| Amortization of intangible assets | 137 | 146 | 232 | |||
| Supplies | 106 | 125 | 123 | |||
| Correspondent bank service fees | 63 | 67 | 77 | |||
| Provision for loss reimbursement on sold loans | 10 | — | 33 | |||
| Net gains on other real estate and repossessed assets | (46) | — | (55) | |||
| Recoveries related to unfunded lending commitments | (475) | (77) | (355) | |||
| Other | 1,567 | 1,609 | 1,439 | |||
| Total non-interest expense | $ | 30,957 | $ | 32,091 | $ | 31,450 |
| 3 | ||||||
| --- |
Average Balances and Tax Equivalent Rates
| Three Months Ended March 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||||||||
| Average<br>Balance | Interest | Rate (2) | Average<br>Balance | Interest | Rate (2) | |||||||
| (Dollars in thousands) | ||||||||||||
| Assets | ||||||||||||
| Taxable loans | $ | 3,487,539 | $ | 44,234 | 5.12 | % | $ | 2,971,566 | $ | 28,340 | 3.85 | % |
| Tax-exempt loans (1) | 6,630 | 76 | 4.65 | 8,532 | 99 | 4.71 | ||||||
| Taxable securities | 822,572 | 5,884 | 2.86 | 1,080,252 | 4,552 | 1.69 | ||||||
| Tax-exempt securities (1) | 323,503 | 3,506 | 4.34 | 326,973 | 2,015 | 2.47 | ||||||
| Interest bearing cash | 38,889 | 464 | 4.84 | 87,317 | 37 | 0.17 | ||||||
| Other investments | 17,653 | 211 | 4.85 | 18,117 | 180 | 4.03 | ||||||
| Interest Earning Assets | 4,696,786 | 54,375 | 4.67 | 4,492,757 | 35,223 | 3.16 | ||||||
| Cash and due from banks | 60,442 | 58,676 | ||||||||||
| Other assets, net | 231,212 | 169,772 | ||||||||||
| Total Assets | $ | 4,988,440 | $ | 4,721,205 | ||||||||
| Liabilities | ||||||||||||
| Savings and interest-bearing checking | 2,535,045 | 8,857 | 1.42 | 2,503,014 | 641 | 0.10 | ||||||
| Time deposits | 657,686 | 4,903 | 3.02 | 338,354 | 126 | 0.15 | ||||||
| Other borrowings | 112,137 | 1,735 | 6.27 | 108,969 | 973 | 3.62 | ||||||
| Interest Bearing Liabilities | 3,304,868 | 15,495 | 1.90 | % | 2,950,337 | 1,740 | 0.24 | |||||
| Non-interest bearing deposits | 1,224,375 | 1,317,160 | ||||||||||
| Other liabilities | 102,477 | 77,698 | ||||||||||
| Shareholders’ equity | $ | 356,720 | $ | 376,010 | ||||||||
| Total liabilities and shareholders’ equity | $ | 4,988,440 | $ | 4,721,205 | ||||||||
| Net Interest Income | $ | 38,880 | $ | 33,483 | ||||||||
| Net Interest Income as a Percent of Average Interest Earning Assets | 3.33 | % | 3.00 | % | ||||||||
| (1) | Interest on tax-exempt loans and securities is presented on a fully tax equivalent basis assuming a marginal tax rate of 21%. | |||||||||||
| --- | --- | |||||||||||
| (2) | Annualized | |||||||||||
| 4 | ||||||||||||
| --- |
Commercial Loan Portfolio Analysis as of March 31, 2023
| Total Commercial Loans | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Watch Credits | Percent of Loan Category in Watch Credit | |||||||||
| Loan Category | All Loans | Performing | Non-accrual | Total | ||||||
| (Dollars in thousands) | ||||||||||
| Land | $ | 11,583 | $ | 26 | $ | — | $ | 26 | 0.2 | % |
| Land Development | 15,019 | — | — | — | — | |||||
| Construction | 89,060 | — | — | — | — | |||||
| Income Producing | 498,500 | 2,474 | — | 2,474 | 0.5 | |||||
| Owner Occupied | 428,849 | 16,173 | — | 16,173 | 3.8 | |||||
| Total Commercial Real Estate Loans | $ | 1,043,011 | $ | 18,673 | $ | — | $ | 18,673 | 1.8 | |
| Other Commercial Loans | $ | 428,282 | $ | 8,370 | 36 | $ | 8,406 | 2.0 | ||
| Total non-performing commercial loans | $ | 36 |
Commercial Loan Portfolio Analysis as of December 31, 2022
| Total Commercial Loans | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Watch Credits | Percent of Loan Category in Watch Credit | |||||||||||
| Loan Category | All Loans | Performing | Non-accrual | Total | ||||||||
| (Dollars in thousands) | ||||||||||||
| Land | $ | 9,285 | $ | 180 | $ | — | $ | 180 | 1.9 | % | ||
| Land Development | 16,220 | — | — | — | — | |||||||
| Construction | 114,277 | — | — | — | — | |||||||
| Income Producing | 469,696 | 6,177 | — | 6,177 | 1.3 | |||||||
| Owner Occupied | 426,404 | 16,525 | — | 16,525 | 3.9 | |||||||
| Total Commercial Real Estate Loans | $ | 1,035,882 | $ | 22,882 | $ | — | $ | 22,882 | 2.2 | |||
| Other Commercial Loans | $ | 430,971 | $ | 9,157 | 38 | $ | 9,195 | 2.1 | ||||
| Total non-performing commercial loans | $ | 38 | 5 | |||||||||
| --- |
ibcp20231qearningsdeck-f
Independent Bank Corporation Earnings Call First Quarter 2023 April 27, 2023 (NASDAQ: IBCP)
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 plans and prospects. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. For example, deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding to us, lead to a tightening of credit, and increase stock price volatility. Our results could also be adversely affected by changes in interest rates; increases in unemployment rates; deterioration in the credit quality of our loan portfolios or in the value of the collateral securing those loans; deterioration in the value of our investment securities; legal and regulatory developments; changes in customer behavior and preferences; breaches in data security; and management’s ability to effectively manage the multitude of risks facing our business. Key risk factors that could affect our future results are described in more detail in our Annual Report on Form 10-K for the year ended December 31, 2022 and the other reports we file with the SEC, including under the heading “Risk Factors.” Investors should not place undue reliance on forward-looking statements as a prediction of our future results. Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. 2
Agenda 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 available at www.IndependentBank.com in the Investor Relations area under the “Presentations” tab. 3
1Q23 Overview 4 1Q23 Earnings Stable Deposit Base During Recent Turmoil in Banking Industry Continued Loan Growth and Healthy Asset Quality Additional Progress on Strategic Initiatives • 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 • Pre-tax, pre-provision income of $18.0 million • 16% increase in net interest income from 1Q22 due to balance sheet growth and higher net interest margin • Strong profitability results in 6.0% increase in tangible book value per share from end of prior quarter • Strength of client relationships evident in March with only one meaningful deposit outflow (government agency client) • Total deposits increased during 1Q23 • While deposit base was stable, cash balances were increased and short-term brokered deposits added as part of prudent approach to risk management • Total loans increased 5.1% annualized while maintaining conservative approach to new loan production • Largest increase in mortgage loans, which provide attractive risk-adjusted yields in current environment • Asset quality remained exceptional with NPAs/Total Assets at 0.09% and low level of NCOs in the quarter, [with delinquencies in installment portfolio remaining stable and at low levels] • All capital ratios increased during 1Q23 with TCE ratio increasing 23 basis points from prior quarter • Balance sheet liquidity remains high with loan-to-deposit ratio declining to 77% • Continued to attract highly productive bankers to commercial banking team during 1Q23 that will contribute to further gains in market share throughout our footprint
Strong Liquidity Position 5 Note: Portfolio loans exclude loans HFS. 1Q 2023 Current On-balance sheet Excess reserves at the Fed 179.2$ Unpledged AFS Securities 767.5$ Total On-balance sheet 946.7$ On balance sheet liquidity to total deposits 21% Available Sources of Liquidity Unused FHLB & FRB (including BTFP) 1,432.8$ Borrow capacity on unpledged bonds 855.0$ Total Available Sources 2,287.8$ Sources of Liquidity to total deposits 50% Sources of Liquidity 148% 87% 80% 80% 98% 232% 219% 203% 218% 237% 0% 50% 100% 150% 200% 250% 1Q22 2Q22 3Q22 4Q22 1Q23 On-balance sheet / Uninsured Deposits Available Sources / Uninsured Deposits Liquidity / Uninsured Deposits Significant liquidity position to manage the current environment. Total available liquidity significantly exceeds (237%) estimated uninsured deposit balances. Increased on-balance sheet liquidity in March with short term brokered deposits. Established access and tested the BTFP, no borrowings at 3/31/23. Attractive loan to deposit ratio of 77.2%. Uninsured deposit to total deposits of approximately 22.6%, excluding brokered time deposits.
Low Cost Deposit Franchise Focused on Core Deposit Growth 6 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 increased $165.7 million (15.3% annualized) since 12/31/22 with non-interest bearing down $77.4 million, savings and interest- bearing checking up $1.8 million, reciprocal up $82.9 million, time up $85.8 million and brokered time up $72.6 million. Deposits by Customer Type: − Retail – 51.4% − Commercial – 34.7% − Municipal – 13.9% Deposit Composition – 3/31/23 Deposit Highlights Michigan Deposit Market Share $4.5B Core Deposits: 84.8% Cost of Deposits (%)/Total Deposits ($B) Note: Core deposits defined as total deposits less maturity deposits. Source: S&P Global deposit market share data based on FDIC Summary of Deposits Annual Survey as of June 30, 2022. Rank 2022 Institution Deposits in Market ($M) Mkt. Share (%) 1 JPMorgan Chase & Co. 69,955 26.4% 2 Huntington Bancshares Inc. 36,160 13.7% 3 Comerica Inc. 33,063 12.5% 4 Bank of America Corp. 30,306 11.5% 5 The PNC Financial Services Group Inc. 21,228 8.0% 6 Fifth Third Bancorp 16,829 6.4% 7 New York Community Bancorp Inc. 13,896 5.3% 8 Citizens Financial Group Inc. 6,830 2.6% 9 Independent Bank Corp. 4,359 1.6% 10 Mercantile Bank Corp. 2,528 1.0% Data: S&P Global Total for Institutions in Market $264,589
Granular Deposit Base 7 Deposit Metrics Note: Uninsured deposit calculation is an approximation. Average deposit account balance of approximately $19,628. Average deposit balance excluding reciprocal deposit of $16,534. Average Commercial deposit balance of $85,524. Average public funds deposit balance of $446,707. Average retail deposit balance of $11,160 10 largest deposit accounts total $296.8 million or 6.53% of total deposits. $184.9 million in ICS with FDIC coverage. 100 largest deposit accounts total $835.9 million or 18.4% of total deposits. $462.6 million in ICS with FDIC coverage. Net deposit account growth of 1,629 in 1Q’23. Uninsured Deposit Trend Uninsured Deposit by Segment – 3/31/23 $3,216 $3,297 $3,300 $3,403 $3,580 $989 $994 $1,027 $976 $965 $4,205 $4,291 $4,327 $4,379 $4,545 1Q22 2Q22 3Q22 4Q22 1Q23 Insured Deposits Uninsured Deposits 76% 21%24% 77% 23% 76% 24% 78% 22% 79% $1,981 $934 $381 $241 $506 $218 Consumer Commercial Public Funds Insured Deposits Uninsured Deposits 64% 36% 89% 11% 65% 35%
Historic IBC Cost of Funds (excluding sub debt) vs. the Federal Funds Rate 8 Cumulative Cycle Beta = 24.1% 0.25% 0.27% 0.27% 0.28% 0.33% 0.36% 0.42% 0.51% 0.60% 0.73% 0.82% 0.85% 0.85% 0.74% 0.63% 0.30% 0.23% 0.39% 0.14% 0.12% 0.11% 0.10% 0.10% 0.12% 0.33% 0.79% 1.25% 0.50% 0.75% 1.00% 1.25% 1.25% 1.50% 1.75% 2.00% 2.25% 2.50% 2.50% 2.50% 2.00% 1.75% 0.25% 25 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.50% 1.75% 3.25% 4.50% 5.00% 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000 5,000,000 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18 Jan-19 May-19 Sep-19 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 Jan-22 May-22 Sep-22 Jan-23 Historical IBCP Cost of Funds vs. the Federal Funds Rate (left axis) with Deposit Balances (right axis) IB COF Fed Funds Spot Fed Effective Total Deposits
Diversified Loan Portfolio Focused on High Quality Growth 9 Lending Highlights Note: Portfolio loans exclude loans HFS. Portfolio loan changes in 1Q’23: − Commercial – increased $4.4 million. − Average new origination yield of 7.13%. − Mortgage – increased $39.8 million. − Average new origination yield of 5.99%. − Installment – increased $0.2 million. − Average new origination yield of 7.00%. Mortgage loan portfolio weighted average FICO of 753 and average balance of $175,916. Installment weighted average FICO of 758 and average balance of $25,462. Commercial loan rate mix: − 50% fixed / 50% variable. − Indices – 64% tied to Prime, 1% tied to a US Treasury rate and 35% tied to SOFR. Mortgage loan (including HECL) rate mix: − 65% fixed / 35% adjustable or variable. − 24% tied to Prime, 29% tied to LIBOR, 12% tied to a US Treasury rate and 35% tied to SOFR. Loan Composition – 3/31/23 $3.5B Yield on Loans (%)/Total Portfolio Loans ($B) Commercial 42% Mortgage 40% Installment 18% Held for Sale 0% $2.7 $2.8 $2.8 $2.9 $2.9 $3.0 $3.3 $3.4 $3.4 $3.5 4.31% 4.01% 3.95% 4.13% 4.08% 3.82% 4.01% 4.39% 4.90% 5.07% Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 3Q'22 4Q'22 1Q'23 Total Portfolio Loans Yield on Loans
Loans by Industry as a % of Total Commercial Loans ($ in millions) Investor RE by Collateral Type as a % of Total Commercial Loans ($ in millions) 10 Concentrations within $1.47B Commercial Loan Portfolio 10 Note: $950 million, or 64.6% of the commercial loan portfolio is C&I or owner occupied, while $ 521 million, or 35.4% is investment real estate. The percentage concentrations are based on the entire commercial portfolio of $1.471 billion as of March 31, 2023
CRE – Office Metrics 11 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. 23% 77% CRE - Office Fixed vs. Variable Variable Fixed $7.5 $71.0 Geographic Location (millions) Urban Suburban $- $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000 Maturing 2023 Maturing 2024 Maturing 2025 Maturing 2026 & After Maturing Exposure
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) ORE/ORA ($ in Millions)Non-performing Loans ($ in Millions) 30 to 89 Days Delinquent ($ in Millions) 12 $13.4 $8.2 $8.6 $9.5 $7.9 $5.1 $5.0 $4.5 $3.8 $3.7 $3.9 0.4% 0.3% 0.3% 0.3% 0.2% 0.2% 0.2% 0.1% 0.1% 0.1% 0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 0.9% $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 2016 2017 2018 2019 2020 2021 Q1 Q2 Q3 Q4'22 Q1 Non-performing Loans (NPLs) NPLs / Total Loans 1.1% $5.0 $1.6 $1.3 $1.9 $0.8 $0.2 $0.4 $0.5 $0.3 $0.5 $0.5 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 2016 2017 2018 2019 2020 2021 Q1 Q2 Q3 Q4'22 Q1 $5.3 $4.8 $4.4 $7.2 $13.2 $2.3 $2.7 $3.7 $2.3 $3.1 $1.9 0.3% 0.2% 0.2% 0.3% 0.5% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 2016 2017 2018 2019 2020 2021 Q1 Q2 Q3 Q4'22 Q1 30-89 Days PD 30-89 Days PD / Loans $18.4 $9.8 $9.9 $11.4 $8.6 $5.3 $5.4 $5.0 $4.2 $4.2 $4.4 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 $18.0 $20.0 2016 2017 2018 2019 2020 2021 Q1 Q2 Q3 Q4'22 Q1 Non-performing Loans 90+ Days PD ORE/ORA
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 investment grade by KBRA − 6.4% rated investment grade by Egan-Jones − 5.4% are non-rated 29.1% 11.0% 23.7% 33.5% 2.7% Asset Size of Issuer – Financial Institutions GSIB > 100B 10 - 100B 1 - 10B <1B $28.7 $43.3 $2.0 Seniority (millions) Senior Subordinated TruPS
Strong Capital Position 14 TCE / TA (%) Leverage Ratio (%) CET1 Ratio (%) Total RBC Ratio (%) Strong Capital Position • Long-term capital Priorities: Capital retention to support organic growth, acquisitions and return of capital through strong and consistent dividends and share repurchases. • Well capitalized in all regulatory capital measurements. • Tangible common equity ratio excluding the impact of unrealized losses on securities AFS and HTM is 7.95% 7.9 6.9 6.3 6.2 6.4 6.6 0 5 10 15 2021 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 8.8 8.8 8.7 8.8 8.9 8.9 0 5 10 15 2021 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 11.1 10.7 10.3 10.3 10.4 10.6 0 5 10 15 2021 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 14.7 14.2 13.7 13.5 13.6 13.8 0 2 4 6 8 10 12 14 16 18 20 2021 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23
Highlights Net interest income decreased $2.2 million in 1Q’23 vs. 4Q’22 due to a decrease in the net interest margin that was partially offset by an increase in average earnings assets. Net interest margin was 3.33% during the first quarter of 2023, compared to 3.00% in the year-ago quarter and 3.52% in the fourth quarter of 2022. Yields, NIM and Cost of Funds (%) Net Interest Income ($ in Millions) Net Interest Margin/Income 15 3.57 3.27 3.22 3.37 3.30 3.16 3.47 3.92 4.41 4.67 3.12 3.05 3.02 3.18 3.13 3.00 3.26 3.49 3.52 3.33 0.09 0.08 0.07 0.08 0.08 0.12 0.77 2.18 3.65 4.38 0.39 0.14 0.12 0.11 0.10 0.10 0.12 0.45 0.92 1.39 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Earning Asset Yield Net Interest Margin (FTE) Average Effective FF Yield Cost of Funds $31.0 $30.3 $31.4 $33.8 $34.3 $33.0 $36.1 $39.9 $40.6 $38.4 $25.0 $27.0 $29.0 $31.0 $33.0 $35.0 $37.0 $39.0 $41.0 $43.0 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23
Linked Quarter Analysis 16 1Q’23 NIM Changes Linked Quarter Average Balances and FTE Rates Q4'22 3.52% Increase in investment yield and change in earning asset mix 0.05% Change in loan yield and mix 0.20% Change in funding mix -0.06% Increase in funding costs -0.38% Q1'23 3.33% 1Q23 4Q22 Change Avg Bal Inc/Exp Yield Avg Bal Inc/Exp Yield Avg Bal Inc/Exp Yield ($ in thousands) Cash $38,889 $464 4.84% $5,069 $48 3.76% $33,820 $416 1.08% Investments 1,163,728 9,601 3.30% 1,182,462 9,271 3.14% (18,734) 330 0.16% Commercial loans 1,457,221 22,667 6.31% 1,420,148 20,837 5.82% 37,073 1,830 0.49% Mortgage loans 1,409,819 15,139 4.30% 1,392,198 14,499 4.17% 17,621 640 0.13% Consumer loans 627,129 6,504 4.21% 637,598 6,776 4.22% (10,469) (272) -0.01% Earning assets $4,696,786 $54,375 4.67% $4,637,475 $51,431 4.41% $59,311 $2,944 0.26% Nonmaturity deposits $2,535,045 $8,857 1.42% $2,519,294 $6,046 0.95% $15,751 2,811 0.47% CDARS deposits 55,878 442 3.21% 34,442 160 1.84% 21,436 282 1.37% Retail Time deposits 360,980 1,935 2.17% 303,103 891 1.17% 57,877 1,044 1.00% Brokered deposits 240,828 2,526 4.25% 165,536 1,446 3.47% 75,292 1,080 0.78% Bank borrowings 33,028 366 4.49% 57,925 553 3.79% (24,897) (187) 0.70% IBC debt 79,109 1,369 7.02% 79,074 1,280 6.42% 35 89 0.60% Cost of funds $3,304,868 $15,495 1.90% $3,159,374 $10,376 1.30% $145,494 $5,119 0.60% Free funds $1,391,918 $1,478,101 ($86,183) Net interest income $38,880 $41,055 ($2,175) Net interest margin 3.33% 3.52% -0.19%
• The decrease in the base case modeled NII is due to an adverse shift in the funding mix and higher than modeled betas on interest bearing deposits during the quarter. These changes were partially offset by earning asset growth and a favorable change in earning asset composition. • The NII sensitivity profile is largely unchanged during the quarter as the adverse sensitivity impact from changes in the deposit mix were offset by additional hedging and term funding transactions. • Base-rate is a static balance sheet applying the spot yield curve from the valuation date. • Stable core funding base. Transaction accounts fund 40.2% of assets and other non-maturity deposits fund another 21.4% of assets. Moderate wholesale funding of just 8.1% of assets. • 30.9% of assets reprice in 1 month and 43.9% reprice in the next 12 months. • Continually evaluating strategies to manage NII through hedging as well as product pricing and structure. 17Interest Rate Risk Management Changes in Net Interest Income Simulation analyses calculate the change in net interest income over the next twelve months, under immediate parallel shifts in interest rates, based upon a static statement of financial condition, which includes derivative instruments, and does not consider loan fees. -200 -100 Base-rate +100 +200 Net Interest Income 158,416$ 161,330$ 162,997$ 162,593$ 161,153$ Change from Base -2.81% -1.02% - -0.25% -1.13% -200 -100 Base-rate +100 +200 Net Interest Income 163,958$ 166,618$ 167,349$ 166,977$ 165,771$ Change from Base -2.03% -0.44% - -0.22% -0.94% (Dollars in 000's) March 31, 2023 December 31, 2022 (Dollars in 000's)
Strong Non-interest Income 18 The $8.9 million comparative quarterly decrease in mortgage loan servicing; net is primarily attributed to changes in the fair value of capitalized mortgage loan servicing rights associated with changes in mortgage loan interest rates and expected future prepayment levels. Mortgage banking: − $1.3 million in net gains on mortgage loans in 1Q’23 vs. $0.8 million in the year ago quarter. The increase is primarily due to increased profit margins and fair value adjustments that were partially offset by lower mortgage loan sales volume. − $113.3 million in mortgage loan originations in 1Q’23 vs. $270.2 million in 1Q’22 and $138.9 million in 4Q’22. − 1Q’23 mortgage loan servicing includes a $0.6 million ($0.02 per diluted share, after tax) decrease in fair value adjustment due to price compared to an increase of $8.5 million ($0.31 per diluted share, after tax) in the year ago quarter. Source: Company documents. $10.6M 2023 YTD Non-interest Income (thousands) Non-interest Income Trends ($M) Highlights Interchange income, $3,205 Service Chg Dep, $2,857 Gain (Loss)- Mortgage Sale, $1,256 Gain (Loss)- Securities, $(222) Mortgage loan servicing, net, $726 Investment and insurance commissions, $827 Bank owned life insurance, $111 Other income, $1,791 $22.4 $26.4 $14.8 $19.7 $15.8 $18.9 $14.6 $16.9 $11.5 $10.5 41.9% 46.6% 32.0% 36.8% 30.3% 35.4% 27.6% 27.3% 18.4%16.4% 0.0 10.0 20.0 30.0 40.0 50.0 $- $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Non-interest Income Non-interest Inc/Operating Rev (%)
Focus on Improved Efficiency 19 Source: Company documents. Non-interest Expense ($M) Highlights Efficiency Ratio (4 quarter rolling average) 1Q’23 efficiency ratio of 62.1%. Compensation and employee benefits expense of $19.3 million, an decrease of $0.8 million from the prior year quarter. Compensation (salaries and wages) increased $0.8 million due to raises that were generally effective at the start of the year, a decreased level of compensation that was deferred in the fourth quarter of 2022 as direct origination costs (lower mortgage loan origination volume). $1.4 million decrease in performance based compensation expense accrual. Payroll taxes and employee benefits decreased $0.2 million primarily due to lower payroll taxes. Data processing costs increased by $0.8 million primarily due to a credit in the prior year quarter related to certain expenses that had been previously paid and expensed and an increase in expense related to asset growth. Opportunities exist to gain additional efficiencies as we continue to optimize our delivery channels. $32.7 $30.0 $32.5 $34.5 $34.0 $31.5 $32.4 $32.4 $32.1 $31.0 $- $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Compensation and Benefits Loan and Collection Occupancy Data Processing FDIC Insurance Other Total 55.9% 59.9% 61.7% 63.2% 64.8% 63.1% 61.3% 59.8% 60.4% Q1'21 Q2'21 Q3'21 Q4'21 1Q'22 2Q'22 3Q'22 4Q'22 1Q'23
2023 Outlook 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 2023. This growth forecast also assumes a stable Michigan economy. 1Q’23 Update: Total portfolio loans increased $44.5 million (5.2% annualized) in 1Q’23 which is lower than our forecasted range. Commercial, mortgage and installment loans had positive growth in the first quarter. Loan growth was negatively impacted by higher than anticipated loan payoffs. Net Interest Income Growth driven primarily by higher average earning assets IBCP goal of high single digit (7%-9%) growth is primarily supported by an increase in earning assets and a favorable shift in the earning asset base. Expect the net interest margin (NIM) to be stable to slightly higher (0.05% - 0.10%) in 2023 compared to full-year 2022. Primary driver is an increase in earing asset yield. The forecast assumes a 0.50% Fed rate increase in February, a 0.25% increase in March and a 0.25% decrease in September and December in the federal funds rate while long-term interest rates decline slightly over year-end 2022 levels. 1Q’23 Update: 1Q’23 net interest income was $5.4 million (16.5%) higher than the prior year quarter. The net interest margin was 3.33% for the quarter, up 0.33% from the prior year quarter and down 0.19% from the linked quarter. The 16.5% increase in net interest income is due to an increase in average interest-earning assets as well as an increase in net interest margin. Provision for Credit Losses Steady asset quality metrics Very difficult area to forecast. Future provision levels under CECL will be particularly sensitive to loan growth and mix, projected economic conditions, watch credit levels and loan default volumes. The allowance as a percentage of total loans was at 1.51% at 12/31/22. A full year 202. provision (expense) for credit losses of approximately 0.25% to 0.35% of average total portfolio loans would not be unreasonable. 1Q’23 Update: The provision for credit losses was an expense of $2.2 million (0.25% annualized) The 1Q’23 provision expense was the result of an increase in provision for credit losses for securities HTM due to a $3.0 million loss incurred on a subordinated debt security during the quarter. The provision expense related to loans was a credit in 1Q’23 which is lower than our forecasted range. Non-interest Income IBCP forecasted 2023 quarterly range of $11 million to $13 million with the total for the year down 20% to 25% from 2022 actual of $61.9 million Expect mortgage loan origination volumes in 2023 to be down by approximately 20%, a decline in mortgage loan servicing net of approximately 80%, interchange income in 2023 to increase approximately 2.0% to 3.0% as compared to 2022 and service charges on deposits to be collectively comparable to 2022 (a decline in NSF fees to be largely offset by an increase in treasury management related service charges). 1Q’23 Update: : Non-interest income totaled $10.6 million in 1Q’23, which was below the forecasted range. 1Q’23 mortgage loan originations, sales and gains totaled $113.0 million, $106.9 million and $1.3 million, respectively. Mortgage loan servicing generated a gain of $0.7 million in 1Q’23. The $0.2 million loss on securities available for sale was related to the divesture of a credit impaired corporate security. Non-interest Expenses IBCP forecasted 2023 quarterly range of $32.0 million to $33.5 million with the total for the year up 1.5% to 2.5% from the 2022 actual of $128.3 million. The primary driver is an increase in data processing and FDIC deposit insurance premiums. 1Q’23 Update: : Total non-interest expense was $31.0 million in the first quarter of 2023, which is below our forecasted range. The comparative quarterly decrease is primarily due to declines in compensation and employee benefits and occupancy, net, that were partially offset by increases in data processing and FDIC insurance expense. The decrease in compensation and employee benefits is primarily related to lower performance based compensation. Income Taxes Approximately an 18.8% effective income tax rate in 2023. This assumes a 21% statutory federal corporate income tax rate during 2023. 1Q’23 Update: Actual effective income tax rate of 18.2% for the 1Q’23. Share Repurchases 2023 share repurchase authorization at approximately 5% (1.1 million) of outstanding shares. Share repurchases will be dependent on capital levels, capital allocation options and share price trends. We are not modeling any share repurchases in 2023. 1Q’23 Update: No shares were repurchased in the first quarter of 2023. 20
Strategic Initiatives 21 • Organic growth through servicing businesses and consumers in our Markets in an inclusive way to include straight forward marketing, improved brand awareness and enhanced outreach efforts that foster strong customer relationships and engagement. • Improve net interest income via balanced loan growth, disciplined risk adjusted loan pricing and active management of deposit pricing. • Add new customers and grow revenue by leveraging new LPO’s and talented sales staff & outbound calling efforts. • Leverage data analytics for innovative targeted customer acquisitions, retention and cross sales strategies, inside sales efforts and referrals with strategic business unit partners. • Supplement our organic growth initiatives via selective and opportunistic bank acquisitions and branch acquisitions. Growth • Enhance process improvement expertise, enabling all business lines and departments to streamline/automate operating processes and workflows. • Leverage technology, capitalizing upon core conversion new capabilities, streamline and improve bank processes. • Leverage virtual capabilities to make more effective meetings, training and customer engagement. • Optimize branch delivery channel including assessing existing locations, new locations, service hours, staffing, & workflow and leveraging our existing technology. • Expand Digital Branch (call center) services. Process Improvement & Cost Controls • Sustain and enhance a constructive culture, supported by a highly engaged workforce that embraces and encourages a diverse, equitable, inclusive and flexible work environment. • Retain and attract top talent. • Align learning and development initiatives in support of bank priorities and employees’ continued growth. • Demonstrate that we are committed to the well-being of our team members who ensure our success. This entails recognizing and rewarding contributions, developing new talent via internships, providing coaching and development, and planning for succession and new opportunities. Talent Management • Produce strong and consistent earnings and capital levels. • Maintain good credit quality aided by strong proactive asset quality monitoring and problem resolution. • Practice sound risk management with effective reporting to include fair banking and scenario planning. • Actively manage and monitor liquidity and interest rate risk. • Promote strong, independent & collaborative risk management, utilizing three layers of defense (business unit, risk management and internal audit). • Ensure effective operational controls with special emphasis on cyber security, fraud prevention, core system conversion and regulatory compliance. • Maintain effective relationships with regulators & other outside oversight parties. Provide effective ESG (Environmental, Social and Governance) disclosures for investors and other interested parties. Risk Management
Q&A and Closing Remarks Question and Answer Session Closing Remarks Thank you for attending! NASDAQ: IBCP 22
Appendix 23 Additional Financial Data and Non-GAAP Reconciliations
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 $3,259 $3,410 $3,465 $3,510 Deposits $3,037 $3,637 $4,117 $4,379 $4,205 $4,291 $4,327 $4,379 $4,545 Tangible Common Equity $317 $357 $367 $317 $324 $300 $301 $317 $317 Profitability: Pre-Tax, Pre-Provision Income $58.6 $81.9 $75.4 $83.7 $20.5 $18.3 $24.4 $19.9 $18.0 Pre-Tax, Pre-Prov / Avg. Assets 1.70% 2.08% 1.62% 1.74% 1.76% 1.56% 1.98% 1.61% 1.43% Net Income (1) $46.4 $56.2 $62.9 $63.8 $18.0 $13.0 $17.3 $15.1 $13.0 Diluted EPS $2.00 $2.53 $2.88 $3.00 $0.84 $0.61 $0.81 $0.71 $0.61 Return on Average Assets (1) 1.35% 1.43% 1.41% 1.32% 1.54% 1.10% 1.40% 1.21% 1.06% Return on Average Equity (1) 13.6% 15.7% 16.1% 18.5% 19.4% 15.7% 20.5% 17.9% 14.8% Net Interest Margin (FTE) 3.80% 3.34% 3.10% 3.32% 3.00% 3.26% 3.49% 3.52% 3.33% Efficiency Ratio 64.9% 59.2% 62.9% 59.4% 59.6% 62.5% 56.3% 60.8% 62.1% Asset Quality: NPAs / Assets 0.32% 0.21% 0.11% 0.08% 0.11% 0.10% 0.08% 0.08% 0.09% NPAs / Loans + OREO 0.42% 0.32% 0.18% 0.12% 0.17% 0.14% 0.12% 0.12% 0.12% ACL / Total Portfolio Loans 0.96% 1.30% 1.63% 1.51% 1.52% 1.47% 1.50% 1.51% 1.44% NCOs / Avg. Loans (0.02%) 0.11% (0.07%) 0.00% 0.01% 0.00% 0.00% 0.00% 0.12% Capital Ratios: TCE Ratio 9.0% 8.6% 7.9% 6.4% 6.9% 6.3% 6.2% 6.4% 6.6% Leverage Ratio 10.1% 9.2% 8.8% 8.8% 8.8% 8.7% 8.8% 8.8% 8.9% Tier 1 Capital Ratio 12.7% 13.3% 12.1% 11.4% 11.8% 11.4% 11.3% 11.4% 11.5% Total Capital Ratio 13.7% 16.0% 14.5% 13.7% 14.2% 13.6% 13.5% 13.7% 13.8%
25Non-GAAP to GAAP Reconciliation March 31, December 31, September 30, June 30, March 31, 2022 2021 2020 2019 2023 2022 2022 2022 2022 Net interest income $ 149,561 $ 129,765 $ 123,612 $ 122,581 $ 38,441 $ 40,602 $ 39,897 $ 36,061 $ 33,001 Non-interest income 61,909 76,643 80,745 47,736 10,551 11,468 16,861 14,632 18,948 Non-interest expense 128,341 131,023 122,413 111,733 30,957 32,091 32,366 32,434 31,450 Pre-Tax, Pre-Provision Income 83,129 75,385 81,944 58,584 18,035 19,979 24,392 18,259 20,499 Provision for credit losses 5,341 (1,928) 12,463 824 2,160 1,390 3,145 2,379 (1,573) Income tax expense 14,437 14,418 13,329 11,325 2,884 3,503 3,950 2,879 4,105 Net income $ 63,351 $ 62,895 $ 56,152 $ 46,435 $ 12,991 $ 15,086 $ 17,297 $ 13,001 $ 17,967 Average total assets 4,825,723$ 4,465,577$ 3,933,655$ 3,440,232$ 4,988,440$ 4,934,859$ 4,884,841$ 4,758,960$ 4,721,205$ Performance Ratios Return on average assets 1.31% 1.41% 1.43% 1.35% 1.03% 1.21% 1.40% 1.10% 1.54% Pre-tax, Provision return on average assets 1.72% 1.69% 2.08% 1.70% 1.43% 1.61% 1.98% 1.54% 1.76% Year Ended December 31, Quarter Ended (Dollars in thousands)
26 Reconciliation of Non-GAAP Financial Measures 2023 2022 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$ 33,483$ Net interest margin (GAAP) (1) 3.29% 2.96% Net interest margin (FTE) (1) 3.33% 3.00% (1) Annualized. Three Months Ended March 31, (Dollars in thousands)
27 Reconciliation of Non-GAAP Financial Measures (continued) Independent Bank Corporation Tangible Common Equity Ratio March 31, December 31, September 30, June 30, March 31, 2022 2021 2020 2019 2023 2022 2022 2022 2022 Common shareholders' equity 347,596$ 398,484$ 389,522$ 350,169$ 367,714$ 347,596$ 332,308$ 331,134$ 355,449$ Less: Goodwill 28,300 28,300 28,300 28,300 28,300 28,300 28,300 28,300 28,300 Other intangibles 2,551 3,336 4,306 5,326 2,415 2,551 2,697 2,871 3,104 Tangible common equity 316,745$ 366,848$ 356,916$ 316,543$ 336,999$ 316,745$ 301,311$ 299,963$ 324,045$ Total assets $ 4,999,787 $ 4,704,740 $ 4,204,013 $ 3,564,694 $ 5,138,934 $ 4,999,787 $ 4,931,377 $ 4,826,209 $ 4,761,983 Less: Goodwill 28,300 28,300 28,300 28,300 28,300 28,300 28,300 28,300 28,300 Other intangibles 2,551 3,336 4,306 5,326 2,415 2,551 2,697 2,871 3,104 Tangible assets $ 4,968,936 $ 4,673,104 $ 4,171,407 $ 3,531,068 $ 5,108,219 $ 4,968,936 $ 4,900,380 $ 4,795,038 $ 4,730,579 Common equity ratio 6.95% 8.47% 9.27% 9.82% 7.16% 6.95% 6.74% 6.86% 7.46% Tangible common equity ratio 6.37% 7.85% 8.56% 8.96% 6.60% 6.37% 6.15% 6.26% 6.85% Year Ended December 31, Quarter Ended (Dollars in thousands)