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: October 24, 2024
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 October 24, 2024, Independent Bank Corporation issued a press release announcing its financial results for the quarter ended September 30, 2024. 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 October 24, 2024. |
|---|---|
| 99.2 | Supplemental data to the Registrant’s press release dated October 24, 2024. |
| 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 | 10/24/2024 | 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 2024 THIRD QUARTER RESULTS
Third Quarter Highlights
Highlights for the third quarter of 2024 include:
•Increases in net interest income of $0.5 million (or 4.9% annualized) from June 30, 2024;
•An increase in tangible book value per share of $3.69 (22.3%) over the third quarter of 2023;
•Net growth in core deposits of $100.1 million (or 8.9% annualized) from June 30, 2024;
•Net growth in loans of $90.4 million (or 9.3% annualized) from June 30, 2024; and
•The payment of a 24 cent per share dividend on common stock on August 15, 2024.
GRAND RAPIDS, Mich., October 24, 2024 - Independent Bank Corporation (NASDAQ: IBCP) reported third quarter 2024 net income of $13.8 million, or $0.65 per diluted share, versus net income of $17.5 million, or $0.83 per diluted share, in the prior-year period.
William B. (“Brad”) Kessel, the President and Chief Executive Officer of Independent Bank Corporation, commented: “I am proud of our team and very pleased with our third quarter 2024 results, driving organic growth on both sides of the balance sheet. Overall loans increased 9.3% (annualized), while core deposits are up 8.9% (annualized). We were able to generate net interest income growth on both a linked quarter basis and on a year over year quarterly basis. We believe that our expenses continue to be well managed, and we continue to see improved operational scale from strategic investments we have made in recent years. Our credit metrics continue to be excellent, with watch credits and non-performing assets near historic lows. These fundamentals continue to drive good growth in tangible book value per share (22%) compared to the prior year quarter. Based on a robust commercial loan pipeline, the past record of our core group of professionals and the on-going strategic initiative to add talented bankers to our team, we are optimistic about continuing these growth trends for the remainder of the year and into 2025.”
Significant items impacting comparable third quarter 2024 and 2023 results include the following:
•Changes in the fair value due to price of capitalized mortgage loan servicing rights (the “MSR Changes”) of $(4.2) million ($(0.16) per diluted share, after taxes) for the three-month period ended September 30, 2024, as compared to $1.6 million ($0.06 per diluted share, after taxes) for the three-months ended September 30, 2023.
Operating Results
The Company’s net interest income totaled $41.9 million during the third quarter of 2024, an increase of $2.4 million, or 6.2% from the year-ago period, and an increase of $0.5 million, or 1.2%, from the second quarter of 2024. The Company’s tax equivalent net interest income as a percent of average interest-earning assets (the “net interest margin”) was 3.37% during the third quarter of 2024, compared to 3.23% in the year-ago period, and 3.40% in the second quarter of 2024. The year-over-year quarterly increase in net interest income was due to an increase in average interest-earning assets and the net interest margin. The increase in net interest income compared to the linked quarter was due to an increase in average interest earning assets that was partially offset by a decrease in the net interest margin. Average interest-earning assets were $4.99 billion in the third quarter of 2024, compared to $4.89 billion in the year ago quarter and $4.89 billion in the second quarter of 2024.
Non-interest income totaled $9.5 million for the third quarter of 2024, compared to $15.6 million in the comparable prior year period. This change was primarily due to variances in mortgage banking related revenues.
Net gains on mortgage loans in the third quarters of 2024 and 2023, were approximately $2.2 million and $2.1 million, respectively. The comparative quarterly increase in net gains on mortgage loans was primarily due to an increase in both gain on sale margin on mortgage loans sold and a increase in the volume of mortgage loans sold.
Mortgage loan servicing, net, generated income (expense) of $(3.1) million and $2.7 million in the third quarters of 2024 and 2023, 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 interest rates and the associated expected future prepayment levels and expected float rates. Mortgage loan servicing, net activity is summarized in the following table:
| Three months ended | Nine months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| 9/30/2024 | 9/30/2023 | 9/30/2024 | 9/30/2023 | |||||
| (In thousands) | ||||||||
| Mortgage loan servicing, net: | ||||||||
| Revenue, net | $ | 2,248 | $ | 2,197 | $ | 6,681 | $ | 6,612 |
| Fair value change due to price | (4,155) | 1,556 | (1,979) | 3,364 | ||||
| Fair value change due to pay-downs | (1,223) | (1,085) | (3,016) | (2,908) | ||||
| Total | $ | (3,130) | $ | 2,668 | $ | 1,686 | $ | 7,068 |
Non-interest expenses totaled $32.6 million in the third quarter of 2024, compared to $32.0 million in the year-ago period.
The Company recorded income tax expense of $3.5 million in the third quarter of 2024. This compares to an income tax expense of $4.1 million in the third quarter of 2023. The changes in income tax expense principally reflect changes in pre-tax earnings in 2024 relative to 2023.
Asset Quality
A breakdown of non-performing loans by loan type is as follows:
| 9/30/2024 | 12/31/2023 | 9/30/2023 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Loan Type | (Dollars in thousands) | ||||||||
| Commercial | $ | 59 | $ | 28 | $ | 31 | |||
| Mortgage | 6,525 | 6,425 | 6,137 | ||||||
| Installment | 666 | 970 | 801 | ||||||
| Sub total | 7,250 | 7,423 | 6,969 | ||||||
| Less - government guaranteed loans | 2,102 | 2,191 | 2,254 | ||||||
| Total non-performing loans | $ | 5,148 | $ | 5,232 | $ | 4,715 | |||
| Ratio of non-performing loans to total portfolio loans | 0.13 | % | 0.14 | % | 0.13 | % | |||
| Ratio of non-performing assets to total assets | 0.11 | % | 0.11 | % | 0.10 | % | |||
| Ratio of allowance for credit losses to total non-performing loans | 1115.85 | % | 1044.69 | % | 1176.99 | % |
The provision for credit losses was an expense of $1.49 million and $1.35 million in the third quarters of 2024 and 2023, respectively. We recorded loan net charge offs (recoveries) of $0.31 million and $(0.18) million in the third quarters of 2024 and 2023, respectively. At September 30, 2024, the allowance for credit losses for loans totaled $57.4 million, or 1.46% of total portfolio loans compared to $54.7 million, or 1.44% of total portfolio loans at December 31, 2023.
Balance Sheet, Capital and Liquidity
Total assets were $5.26 billion at September 30, 2024, a decrease of $4.5 million from December 31, 2023. Loans, excluding loans held for sale, were $3.94 billion at September 30, 2024, compared to $3.79 billion at December 31, 2023. Deposits totaled $4.63 billion at September 30, 2024, an increase of $4.0 million from December 31, 2023. This increase is primarily due to increases in savings and interest-bearing checking, reciprocal and time deposits that were partially offset by a decrease in non-interest bearings deposits and brokered time deposits.
Cash and cash equivalents totaled $121.6 million at September 30, 2024, versus $169.8 million at December 31, 2023. Securities available for sale (“AFS”) totaled $589.0 million at September 30, 2024, versus $679.4 million at December 31, 2023.
Total shareholders’ equity was $452.4 million at September 30, 2024, or 8.60% of total assets compared to $404.4 million or 7.68% at December 31, 2023. Tangible common equity totaled $422.5 million at September 30, 2024, or $20.22 per share compared to $374.1 million or $17.96 per share at December 31, 2023. The increase in shareholder equity as well as tangible common equity are primarily the result of earnings retention and a decrease in accumulated other comprehensive loss.
The Company’s wholly owned subsidiary, Independent Bank, remains significantly above “well capitalized” for regulatory purposes with the following ratios:
| Regulatory Capital Ratios | 9/30/2024 | 12/31/2023 | Well<br>Capitalized<br>Minimum | |||
|---|---|---|---|---|---|---|
| Tier 1 capital to average total assets | 9.36 | % | 8.80 | % | 5.00 | % |
| Tier 1 common equity to risk-weighted assets | 11.74 | % | 11.21 | % | 6.50 | % |
| Tier 1 capital to risk-weighted assets | 11.74 | % | 11.21 | % | 8.00 | % |
| Total capital to risk-weighted assets | 13.00 | % | 12.46 | % | 10.00 | % |
At September 30, 2024, 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 $1.11 billion and $471.7 million, respectively. We also had approximately $771.3 million in fair value of unpledged securities AFS and HTM at September 30, 2024 which could be pledged for an estimated additional borrowing capacity at the FHLB and FRB of approximately $718.0 million.
Share Repurchase Plan
On December 19, 2023, the Board of Directors of the Company authorized the 2024 share repurchase plan. Under the terms of the 2024 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, 2024. The Company did not repurchase any shares of common stock during the first nine months of 2024.
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, October 24, 2024.
To participate in the live conference call, please dial 1-833-470-1428 (Access Code # 957797). 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/824908063.
A playback of the call can be accessed by dialing 1-866-813-9403 (Access Code # 159381). The replay will be available through October 31, 2024.
About Independent Bank Corporation
Independent Bank Corporation (NASDAQ: IBCP) is a Michigan-based bank holding company with total assets of approximately $5.3 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, 2023 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
| September 30, 2024 | December 31, 2023 | |||
|---|---|---|---|---|
| (Unaudited) | ||||
| (In thousands, except share<br>amounts) | ||||
| Assets | ||||
| Cash and due from banks | $ | 61,503 | $ | 68,208 |
| Interest bearing deposits | 60,057 | 101,573 | ||
| Cash and Cash Equivalents | 121,560 | 169,781 | ||
| Securities available for sale | 588,950 | 679,350 | ||
| Securities held to maturity (fair value of $314,638 at September 30, 2024 and $318,606 at December 31, 2023) | 343,362 | 353,988 | ||
| Federal Home Loan Bank and Federal Reserve Bank stock, at cost | 16,099 | 16,821 | ||
| Loans held for sale, carried at fair value | 14,029 | 12,063 | ||
| Loans | ||||
| Commercial | 1,825,247 | 1,679,731 | ||
| Mortgage | 1,511,400 | 1,485,872 | ||
| Installment | 605,640 | 625,298 | ||
| Total Loans | 3,942,287 | 3,790,901 | ||
| Allowance for credit losses | (57,444) | (54,658) | ||
| Net Loans | 3,884,843 | 3,736,243 | ||
| Other real estate and repossessed assets, net | 781 | 569 | ||
| Property and equipment, net | 35,250 | 35,523 | ||
| Bank-owned life insurance | 54,017 | 54,341 | ||
| Capitalized mortgage loan servicing rights, carried at fair value | 40,204 | 42,243 | ||
| Other intangibles | 1,617 | 2,004 | ||
| Goodwill | 28,300 | 28,300 | ||
| Accrued income and other assets | 130,256 | 132,500 | ||
| Total Assets | $ | 5,259,268 | $ | 5,263,726 |
| Liabilities and Shareholders' Equity | ||||
| Deposits | ||||
| Non-interest bearing | $ | 1,023,739 | $ | 1,076,093 |
| Savings and interest-bearing checking | 1,947,571 | 1,905,701 | ||
| Reciprocal | 995,469 | 832,020 | ||
| Time | 620,446 | 524,325 | ||
| Brokered time | 39,650 | 284,740 | ||
| Total Deposits | 4,626,875 | 4,622,879 | ||
| Other borrowings | — | 50,026 | ||
| Subordinated debt | 39,567 | 39,510 | ||
| Subordinated debentures | 39,779 | 39,728 | ||
| Accrued expenses and other liabilities | 100,678 | 107,134 | ||
| Total Liabilities | 4,806,899 | 4,859,277 | ||
| 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: 20,893,800 shares at September 30, 2024 and 20,835,633 shares at December 31, 2023 | 318,216 | 317,483 | ||
| Retained earnings | 192,405 | 159,108 | ||
| Accumulated other comprehensive loss | (58,252) | (72,142) | ||
| Total Shareholders’ Equity | 452,369 | 404,449 | ||
| Total Liabilities and Shareholders’ Equity | $ | 5,259,268 | $ | 5,263,726 |
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
| Three Months Ended | Nine Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br>2024 | June 30, 2024 | September 30,<br>2023 | September 30, | ||||||||
| 2024 | 2023 | ||||||||||
| (Unaudited) | |||||||||||
| Interest Income | (In thousands, except per share amounts) | ||||||||||
| Interest and fees on loans | $ | 58,410 | $ | 56,786 | $ | 51,419 | $ | 170,239 | $ | 143,392 | |
| Interest on securities | |||||||||||
| Taxable | 4,502 | 4,713 | 5,865 | 14,466 | 17,668 | ||||||
| Tax-exempt | 3,404 | 3,400 | 3,409 | 10,195 | 9,775 | ||||||
| Other investments | 2,018 | 1,439 | 1,739 | 4,898 | 3,481 | ||||||
| Total Interest Income | 68,334 | 66,338 | 62,432 | 199,798 | 174,316 | ||||||
| Interest Expense | |||||||||||
| Deposits | 24,462 | 22,876 | 20,743 | 70,148 | 51,964 | ||||||
| Other borrowings and subordinated debt and debentures | 2,018 | 2,116 | 2,262 | 6,253 | 6,134 | ||||||
| Total Interest Expense | 26,480 | 24,992 | 23,005 | 76,401 | 58,098 | ||||||
| Net Interest Income | 41,854 | 41,346 | 39,427 | 123,397 | 116,218 | ||||||
| Provision for credit losses | 1,488 | 19 | 1,350 | 2,251 | 6,827 | ||||||
| Net Interest Income After Provision for Credit Losses | 40,366 | 41,327 | 38,077 | 121,146 | 109,391 | ||||||
| Non-interest Income | |||||||||||
| Interchange income | 4,146 | 3,401 | 4,100 | 10,698 | 10,660 | ||||||
| Service charges on deposit accounts | 3,085 | 2,937 | 3,309 | 8,894 | 9,300 | ||||||
| Net gains (losses) on assets | |||||||||||
| Mortgage loans | 2,177 | 1,333 | 2,099 | 4,874 | 5,475 | ||||||
| Equity securities at fair value | (8) | 2,693 | — | 2,685 | — | ||||||
| Securities available for sale | (145) | — | — | (414) | (222) | ||||||
| Mortgage loan servicing, net | (3,130) | 2,091 | 2,668 | 1,686 | 7,068 | ||||||
| Other | 3,383 | 2,717 | 3,435 | 8,818 | 9,298 | ||||||
| Total Non-interest Income | 9,508 | 15,172 | 15,611 | 37,241 | 41,579 | ||||||
| Non-interest Expense | |||||||||||
| Compensation and employee benefits | 20,048 | 21,251 | 19,975 | 62,069 | 59,916 | ||||||
| Data processing | 3,379 | 3,257 | 3,071 | 9,891 | 8,953 | ||||||
| Occupancy, net | 1,893 | 1,886 | 1,971 | 5,853 | 5,975 | ||||||
| Interchange expense | 1,149 | 1,127 | 1,119 | 3,373 | 3,222 | ||||||
| Furniture, fixtures and equipment | 932 | 948 | 927 | 2,834 | 2,782 | ||||||
| FDIC deposit insurance | 664 | 695 | 677 | 2,141 | 2,209 | ||||||
| Loan and collection | 657 | 699 | 520 | 1,868 | 1,718 | ||||||
| Advertising | 581 | 788 | 360 | 1,860 | 1,286 | ||||||
| Legal and professional | 687 | 544 | 543 | 1,717 | 1,623 | ||||||
| Communications | 519 | 499 | 568 | 1,633 | 1,871 | ||||||
| Costs (recoveries) related to unfunded lending commitments | 113 | (137) | 451 | (676) | 76 | ||||||
| Other | 1,961 | 1,776 | 1,854 | 5,546 | 5,610 | ||||||
| Total Non-interest Expense | 32,583 | 33,333 | 32,036 | 98,109 | 95,241 | ||||||
| Income Before Income Tax | 17,291 | 23,166 | 21,652 | 60,278 | 55,729 | ||||||
| Income tax expense | 3,481 | 4,638 | 4,109 | 11,949 | 10,405 | ||||||
| Net Income | $ | 13,810 | $ | 18,528 | $ | 17,543 | $ | 48,329 | $ | 45,324 | |
| Net Income Per Common Share | |||||||||||
| Basic | $ | 0.66 | $ | 0.89 | $ | 0.84 | $ | 2.31 | $ | 2.16 | |
| Diluted | $ | 0.65 | $ | 0.88 | $ | 0.83 | $ | 2.29 | $ | 2.14 |
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Selected Financial Data
| September 30,<br>2024 | June 30,<br>2024 | March 31,<br>2024 | December 31,<br>2023 | September 30,<br>2023 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited) | |||||||||||||||
| (Dollars in thousands except per share data) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| Net interest income | $ | 41,854 | $ | 41,346 | $ | 40,197 | $ | 40,111 | $ | 39,427 | |||||
| Provision for credit losses | 1,488 | 19 | 744 | (617) | 1,350 | ||||||||||
| Non-interest income | 9,508 | 15,172 | 12,561 | 9,097 | 15,611 | ||||||||||
| Non-interest expense | 32,583 | 33,333 | 32,193 | 31,878 | 32,036 | ||||||||||
| Income before income tax | 17,291 | 23,166 | 19,821 | 17,947 | 21,652 | ||||||||||
| Income tax expense | 3,481 | 4,638 | 3,830 | 4,204 | 4,109 | ||||||||||
| Net income | $ | 13,810 | $ | 18,528 | $ | 15,991 | $ | 13,743 | $ | 17,543 | |||||
| Basic earnings per share | $ | 0.66 | $ | 0.89 | $ | 0.77 | $ | 0.66 | $ | 0.84 | |||||
| Diluted earnings per share | 0.65 | 0.88 | 0.76 | 0.65 | 0.83 | ||||||||||
| Cash dividend per share | 0.24 | 0.24 | 0.24 | 0.23 | 0.23 | ||||||||||
| Average shares outstanding | 20,896,019 | 20,901,741 | 20,877,067 | 20,840,680 | 20,922,431 | ||||||||||
| Average diluted shares outstanding | 21,115,273 | 21,105,387 | 21,079,607 | 21,049,030 | 21,114,445 | ||||||||||
| Performance Ratios | |||||||||||||||
| Return on average assets | 1.04 | % | 1.44 | % | 1.24 | % | 1.04 | % | 1.34 | % | |||||
| Return on average equity | 12.54 | 17.98 | 15.95 | 14.36 | 18.68 | ||||||||||
| Efficiency ratio (1) | 62.82 | 61.49 | 60.26 | 64.27 | 57.52 | ||||||||||
| As a Percent of Average Interest-Earning Assets (1) | |||||||||||||||
| Interest income | 5.48 | % | 5.45 | % | 5.34 | % | 5.29 | % | 5.10 | % | |||||
| Interest expense | 2.11 | 2.05 | 2.04 | 2.03 | 1.87 | ||||||||||
| Net interest income | 3.37 | 3.40 | 3.30 | 3.26 | 3.23 | ||||||||||
| Average Balances | |||||||||||||||
| Loans | $ | 3,909,954 | $ | 3,849,199 | $ | 3,810,526 | $ | 3,764,752 | $ | 3,694,534 | |||||
| Securities | 933,750 | 944,435 | 999,140 | 1,027,240 | 1,071,211 | ||||||||||
| Total earning assets | 4,985,842 | 4,893,367 | 4,910,669 | 4,928,697 | 4,892,208 | ||||||||||
| Total assets | 5,275,623 | 5,181,317 | 5,201,452 | 5,233,666 | 5,192,114 | ||||||||||
| Deposits | 4,616,119 | 4,531,917 | 4,561,645 | 4,612,797 | 4,577,796 | ||||||||||
| Interest bearing liabilities | 3,689,684 | 3,611,972 | 3,627,446 | 3,635,771 | 3,554,179 | ||||||||||
| Shareholders' equity | 438,077 | 414,549 | 403,225 | 379,614 | 372,667 |
(1)Presented on a fully tax equivalent basis assuming a marginal tax rate of 21%.
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Selected Financial Data (continued)
| September 30,<br>2024 | June 30,<br>2024 | March 31,<br>2024 | December 31,<br>2023 | September 30,<br>2023 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited) | |||||||||||||||
| (Dollars in thousands except per share data) | |||||||||||||||
| End of Period | |||||||||||||||
| Capital | |||||||||||||||
| Tangible common equity ratio | 8.08 | % | 7.63 | % | 7.41 | % | 7.15 | % | 6.67 | % | |||||
| Tangible common equity ratio excluding accumulated other comprehensive loss | 8.99 | 8.76 | 8.57 | 8.31 | 8.20 | ||||||||||
| Average equity to average assets | 8.30 | 8.00 | 7.75 | 7.25 | 7.18 | ||||||||||
| Total capital to risk-weighted assets (2) | 14.25 | 14.21 | 13.85 | 13.71 | 13.58 | ||||||||||
| Tier 1 capital to risk-weighted assets (2) | 12.06 | 12.01 | 11.65 | 11.50 | 11.37 | ||||||||||
| Common equity tier 1 capital to risk-weighted assets (2) | 11.16 | 11.09 | 10.73 | 10.58 | 10.44 | ||||||||||
| Tier 1 capital to average assets (2) | 9.63 | 9.59 | 9.29 | 9.03 | 8.94 | ||||||||||
| Common shareholders' equity per share of common stock | $ | 21.65 | $ | 20.60 | $ | 19.88 | $ | 19.41 | $ | 17.99 | |||||
| Tangible common equity per share of common stock | 20.22 | 19.16 | 18.44 | 17.96 | 16.53 | ||||||||||
| Total shares outstanding | 20,893,800 | 20,899,358 | 20,903,677 | 20,835,633 | 20,850,455 | ||||||||||
| Selected Balances | |||||||||||||||
| Loans | $ | 3,942,287 | $ | 3,851,889 | $ | 3,839,965 | $ | 3,790,901 | $ | 3,741,486 | |||||
| Securities | 932,312 | 936,194 | 963,577 | 1,033,338 | 1,043,540 | ||||||||||
| Total earning assets | 4,964,784 | 4,979,555 | 4,949,496 | 4,954,696 | 4,884,720 | ||||||||||
| Total assets | 5,259,268 | 5,277,500 | 5,231,255 | 5,263,726 | 5,200,018 | ||||||||||
| Deposits | 4,626,875 | 4,614,328 | 4,582,414 | 4,622,879 | 4,585,612 | ||||||||||
| Interest bearing liabilities | 3,682,482 | 3,694,025 | 3,677,060 | 3,676,050 | 3,573,187 | ||||||||||
| Shareholders' equity | 452,369 | 430,459 | 415,570 | 404,449 | 374,998 |
(2)September 30, 2024 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 September 30, | Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||
| (Dollars in thousands) | ||||||||||||
| Net Interest Margin, Fully Taxable Equivalent ("FTE") | ||||||||||||
| Net interest income | $ | 41,854 | $ | 39,427 | $ | 123,397 | $ | 116,218 | ||||
| Add: taxable equivalent adjustment | 158 | 202 | 513 | 722 | ||||||||
| Net interest income - taxable equivalent | $ | 42,012 | $ | 39,629 | $ | 123,910 | $ | 116,940 | ||||
| Net interest margin (GAAP) (1) | 3.35 | % | 3.21 | % | 3.34 | % | 3.25 | % | ||||
| Net interest margin (FTE) (1) | 3.37 | % | 3.23 | % | 3.35 | % | 3.26 | % |
(1)Annualized.
Tangible Common Equity Ratio
| September 30,<br>2024 | June 30, 2024 | March 31, 2024 | December 31, 2023 | September 30, 2023 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | |||||||||||||||
| Common shareholders' equity | $ | 452,369 | $ | 430,459 | $ | 415,570 | $ | 404,449 | $ | 374,998 | |||||
| Less: | |||||||||||||||
| Goodwill | 28,300 | 28,300 | 28,300 | 28,300 | 28,300 | ||||||||||
| Other intangibles | 1,617 | 1,746 | 1,875 | 2,004 | 2,141 | ||||||||||
| Tangible common equity | 422,452 | 400,413 | 385,395 | 374,145 | 344,557 | ||||||||||
| Addition: | |||||||||||||||
| Accumulated other comprehensive loss for regulatory purposes | 52,454 | 65,030 | 65,831 | 66,344 | 86,507 | ||||||||||
| Tangible common equity excluding other comprehensive loss adjustments | $ | 474,906 | $ | 465,443 | $ | 451,226 | $ | 440,489 | $ | 431,064 | |||||
| Total assets | $ | 5,259,268 | $ | 5,277,500 | $ | 5,231,255 | $ | 5,263,726 | $ | 5,200,018 | |||||
| Less: | |||||||||||||||
| Goodwill | 28,300 | 28,300 | 28,300 | 28,300 | 28,300 | ||||||||||
| Other intangibles | 1,617 | 1,746 | 1,875 | 2,004 | 2,141 | ||||||||||
| Tangible assets | 5,229,351 | 5,247,454 | 5,201,080 | 5,233,422 | 5,169,577 | ||||||||||
| Addition: | |||||||||||||||
| Net unrealized losses on available for sale securities and derivatives, net of tax | 52,454 | 65,030 | 65,831 | 66,344 | 86,507 | ||||||||||
| Tangible assets excluding other comprehensive loss adjustments | $ | 5,281,805 | $ | 5,312,484 | $ | 5,266,911 | $ | 5,299,766 | $ | 5,256,084 | |||||
| Common equity ratio | 8.60 | % | 8.16 | % | 7.94 | % | 7.68 | % | 7.21 | % | |||||
| Tangible common equity ratio | 8.08 | % | 7.63 | % | 7.41 | % | 7.15 | % | 6.67 | % | |||||
| Tangible common equity ratio excluding other comprehensive loss | 8.99 | % | 8.76 | % | 8.57 | % | 8.31 | % | 8.20 | % | |||||
| Tangible Common Equity per Share of Common Stock: | |||||||||||||||
| Common shareholders' equity | $ | 452,369 | $ | 430,459 | $ | 415,570 | $ | 404,449 | $ | 374,998 | |||||
| Tangible common equity | $ | 422,452 | $ | 400,413 | $ | 385,395 | $ | 374,145 | $ | 344,557 | |||||
| Shares of common stock outstanding (in thousands) | 20,894 | 20,899 | 20,904 | 20,836 | 20,850 | ||||||||||
| Common shareholders' equity per share of common stock | $ | 21.65 | $ | 20.60 | $ | 19.88 | $ | 19.41 | $ | 17.99 | |||||
| Tangible common equity per share of common stock | $ | 20.22 | $ | 19.16 | $ | 18.44 | $ | 17.96 | $ | 16.53 |
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
| September 30, 2024 | June 30, 2024 | March 31, 2024 | December 31, 2023 | September 30, 2023 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | |||||||||||||||
| Non-accrual loans | $ | 7,250 | $ | 5,974 | $ | 5,355 | $ | 6,991 | $ | 6,969 | |||||
| Loans 90 days or more past due and still accruing interest | — | — | — | 432 | — | ||||||||||
| Subtotal | 7,250 | 5,974 | 5,355 | 7,423 | 6,969 | ||||||||||
| Less: Government guaranteed loans | 2,102 | 1,489 | 1,665 | 2,191 | 2,254 | ||||||||||
| Total non-performing loans | 5,148 | 4,485 | 3,690 | 5,232 | 4,715 | ||||||||||
| Other real estate and repossessed assets | 781 | 945 | 1,059 | 569 | 443 | ||||||||||
| Total non-performing assets | $ | 5,929 | $ | 5,430 | $ | 4,749 | $ | 5,801 | $ | 5,158 | |||||
| As a percent of Portfolio Loans | |||||||||||||||
| Non-performing loans | 0.13 | % | 0.12 | % | 0.10 | % | 0.14 | % | 0.13 | % | |||||
| Allowance for credit losses | 1.46 | 1.46 | 1.47 | 1.44 | 1.48 | ||||||||||
| Non-performing assets to total assets | 0.11 | 0.10 | 0.09 | 0.11 | 0.10 | ||||||||||
| Allowance for credit losses as a percent of non-performing loans | 1,115.85 | 1,253.98 | 1,526.10 | 1,044.69 | 1,176.99 |
Allowance for credit losses
| Nine months ended September 30, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||||||||||
| Loans | Securities | Unfunded<br>Commitments | Loans | Securities | Unfunded<br>Commitments | |||||||||
| (Dollars in thousands) | ||||||||||||||
| Balance at beginning of period | $ | 54,658 | $ | 157 | $ | 5,504 | $ | 52,435 | $ | 168 | $ | 5,080 | ||
| Additions (deductions) | ||||||||||||||
| Provision for credit losses | 3,400 | (1,149) | — | 3,840 | 2,987 | — | ||||||||
| Recoveries credited to allowance | 2,106 | 1,125 | — | 2,082 | — | — | ||||||||
| Assets charged against the allowance | (2,720) | — | — | (2,862) | (3,000) | — | ||||||||
| Additions included in non-interest expense | — | — | (676) | — | — | 76 | ||||||||
| Balance at end of period | $ | 57,444 | $ | 133 | $ | 4,828 | $ | 55,495 | $ | 155 | $ | 5,156 | ||
| Net loans charged (recovered) against the allowance to average Portfolio Loans | 0.02 | % | 0.03 | % | ||||||||||
| 1 | ||||||||||||||
| --- |
Capitalization
| September 30, 2024 | December 31, 2023 | |||
|---|---|---|---|---|
| (In thousands) | ||||
| Subordinated debt | $ | 39,567 | $ | 39,510 |
| Subordinated debentures | 39,779 | 39,728 | ||
| Amount not qualifying as regulatory capital | (791) | (734) | ||
| Amount qualifying as regulatory capital | 78,555 | 78,504 | ||
| Shareholders’ equity | ||||
| Common stock | 318,216 | 317,483 | ||
| Retained earnings | 192,405 | 159,108 | ||
| Accumulated other comprehensive income (loss) | (58,252) | (72,142) | ||
| Total shareholders’ equity | 452,369 | 404,449 | ||
| Total capitalization | $ | 530,924 | $ | 482,953 |
Non-Interest Income
| Three months ended | Nine months ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2024 | June 30, 2024 | September 30, 2023 | September 30, | ||||||||
| 2024 | 2023 | ||||||||||
| (In thousands) | |||||||||||
| Interchange income | $ | 4,146 | $ | 3,401 | $ | 4,100 | $ | 10,698 | $ | 10,660 | |
| Service charges on deposit accounts | 3,085 | 2,937 | 3,309 | 8,894 | 9,300 | ||||||
| Net gains (losses) on assets | |||||||||||
| Mortgage loans | 2,177 | 1,333 | 2,099 | 4,874 | 5,475 | ||||||
| Equity securities at fair value | (8) | 2,693 | — | 2,685 | — | ||||||
| Securities | (145) | — | — | (414) | (222) | ||||||
| Mortgage loan servicing, net | (3,130) | 2,091 | 2,668 | 1,686 | 7,068 | ||||||
| Investment and insurance commissions | 882 | 838 | 875 | 2,524 | 2,446 | ||||||
| Bank owned life insurance | 197 | 188 | 124 | 566 | 333 | ||||||
| Other | 2,304 | 1,691 | 2,436 | 5,728 | 6,519 | ||||||
| Total non-interest income | $ | 9,508 | $ | 15,172 | $ | 15,611 | $ | 37,241 | $ | 41,579 |
Capitalized Mortgage Loan Servicing Rights
| Three months ended September 30, | Nine months ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||
| (In thousands) | ||||||||
| Balance at beginning of period | $ | 44,406 | $ | 44,427 | $ | 42,243 | $ | 42,489 |
| Originated servicing rights capitalized | 1,176 | 1,159 | 2,956 | 3,112 | ||||
| Change in fair value | (5,378) | 471 | (4,995) | 456 | ||||
| Balance at end of period | $ | 40,204 | $ | 46,057 | $ | 40,204 | $ | 46,057 |
| 2 | ||||||||
| --- |
Mortgage Loan Activity
| Three months ended | Nine months ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2024 | June 30, 2024 | September 30, 2023 | September 30, | |||||||||||||
| 2024 | 2023 | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| Mortgage loans originated | $ | 147,516 | $ | 142,602 | $ | 172,914 | $ | 384,112 | $ | 446,450 | ||||||
| Mortgage loans sold | 117,037 | 91,540 | 115,269 | 289,395 | 321,140 | |||||||||||
| Net gains on mortgage loans | 2,177 | 1,333 | 2,099 | 4,874 | 5,475 | |||||||||||
| Net gains as a percent of mortgage loans sold ("Loan Sales Margin") | 1.86 | % | 1.46 | % | 1.82 | % | 1.68 | % | 1.70 | % | ||||||
| Fair value adjustments included in the Loan Sales Margin | 0.46 | % | 0.14 | % | (0.32) | % | 0.30 | % | 0.60 | % |
Non-Interest Expense
| Three months ended | Nine months ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2024 | June 30, 2024 | September 30, 2023 | September 30, | ||||||||
| 2024 | 2023 | ||||||||||
| (In thousands) | |||||||||||
| Compensation | $ | 13,264 | $ | 13,390 | $ | 13,054 | $ | 39,931 | $ | 39,846 | |
| Performance-based compensation | 3,426 | 3,885 | 2,955 | 10,787 | 8,420 | ||||||
| Payroll taxes and employee benefits | 3,358 | 3,976 | 3,966 | 11,351 | 11,650 | ||||||
| Compensation and employee benefits | 20,048 | 21,251 | 19,975 | 62,069 | 59,916 | ||||||
| Data processing | 3,379 | 3,257 | 3,071 | 9,891 | 8,953 | ||||||
| Occupancy, net | 1,893 | 1,886 | 1,971 | 5,853 | 5,975 | ||||||
| Interchange expense | 1,149 | 1,127 | 1,119 | 3,373 | 3,222 | ||||||
| Furniture, fixtures and equipment | 932 | 948 | 927 | 2,834 | 2,782 | ||||||
| FDIC deposit insurance | 664 | 695 | 677 | 2,141 | 2,209 | ||||||
| Loan and collection | 657 | 699 | 520 | 1,868 | 1,718 | ||||||
| Advertising | 581 | 788 | 360 | 1,860 | 1,286 | ||||||
| Legal and professional | 687 | 544 | 543 | 1,717 | 1,623 | ||||||
| Communications | 519 | 499 | 568 | 1,633 | 1,871 | ||||||
| Taxes, licenses and fees | 347 | 436 | 225 | 891 | 659 | ||||||
| Director fees | 235 | 239 | 236 | 709 | 706 | ||||||
| Amortization of intangible assets | 129 | 129 | 136 | 387 | 410 | ||||||
| Provision for loss reimbursement on sold loans | 24 | (1) | 7 | 26 | 21 | ||||||
| Net (gains) losses on other real estate and repossessed assets | 14 | (108) | 1 | (170) | 18 | ||||||
| Costs (recoveries) related to unfunded lending commitments | 113 | (137) | 451 | (676) | 76 | ||||||
| Other | 1,212 | 1,081 | 1,249 | 3,703 | 3,796 | ||||||
| Total non-interest expense | $ | 32,583 | $ | 33,333 | $ | 32,036 | $ | 98,109 | $ | 95,241 | |
| 3 | |||||||||||
| --- |
Average Balances and Tax Equivalent Rates
| Three Months Ended September 30, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||||||||
| Average<br>Balance | Interest | Rate (2) | Average<br>Balance | Interest | Rate (2) | |||||||
| (Dollars in thousands) | ||||||||||||
| Assets | ||||||||||||
| Taxable loans | $ | 3,901,370 | $ | 58,322 | 5.96 | % | $ | 3,687,637 | $ | 51,352 | 5.54 | % |
| Tax-exempt loans (1) | 8,584 | 111 | 5.14 | 6,897 | 85 | 4.89 | ||||||
| Taxable securities | 665,974 | 4,502 | 2.70 | 800,524 | 5,865 | 2.93 | ||||||
| Tax-exempt securities (1) | 267,776 | 3,539 | 5.29 | 270,687 | 3,593 | 5.31 | ||||||
| Interest bearing cash | 126,039 | 1,717 | 5.42 | 108,389 | 1,468 | 5.37 | ||||||
| Other investments | 16,099 | 301 | 7.48 | 18,074 | 271 | 5.95 | ||||||
| Interest Earning Assets | 4,985,842 | 68,492 | 5.48 | 4,892,208 | 62,634 | 5.10 | ||||||
| Cash and due from banks | 57,211 | 61,094 | ||||||||||
| Other assets, net | 232,570 | 238,812 | ||||||||||
| Total Assets | $ | 5,275,623 | $ | 5,192,114 | ||||||||
| Liabilities | ||||||||||||
| Savings and interest-bearing checking | 2,763,558 | 15,621 | 2.25 | 2,598,170 | 12,272 | 1.87 | ||||||
| Time deposits | 804,944 | 8,841 | 4.37 | 816,810 | 8,471 | 4.11 | ||||||
| Other borrowings | 121,182 | 2,018 | 6.64 | 139,199 | 2,262 | 6.45 | ||||||
| Interest Bearing Liabilities | 3,689,684 | 26,480 | 2.86 | % | 3,554,179 | 23,005 | 2.57 | |||||
| Non-interest bearing deposits | 1,047,617 | 1,162,816 | ||||||||||
| Other liabilities | 100,245 | 102,452 | ||||||||||
| Shareholders’ equity | 438,077 | 372,667 | ||||||||||
| Total liabilities and shareholders’ equity | $ | 5,275,623 | $ | 5,192,114 | ||||||||
| Net Interest Income | $ | 42,012 | $ | 39,629 | ||||||||
| Net Interest Income as a Percent of Average Interest Earning Assets | 3.37 | % | 3.23 | % | ||||||||
| (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 | ||||||||||||
| --- |
Average Balances and Tax Equivalent Rates
| Nine Months Ended September 30, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||||||||
| Average<br>Balance | Interest | Rate | Average<br>Balance | Interest | Rate (2) | |||||||
| (Dollars in thousands) | ||||||||||||
| Assets | ||||||||||||
| Taxable loans | $ | 3,848,092 | $ | 169,974 | 5.90 | % | $ | 3,579,569 | $ | 143,203 | 5.34 | % |
| Tax-exempt loans (1) | 8,660 | 335 | 5.17 | 6,705 | 239 | 4.77 | ||||||
| Taxable securities | 691,327 | 14,466 | 2.79 | 834,924 | 17,668 | 2.82 | ||||||
| Tax-exempt securities (1) | 267,689 | 10,638 | 5.30 | 274,454 | 10,447 | 5.08 | ||||||
| Interest bearing cash | 97,941 | 3,994 | 5.45 | 71,355 | 2,769 | 5.19 | ||||||
| Other investments | 16,452 | 904 | 7.33 | 17,805 | 712 | 5.35 | ||||||
| Interest Earning Assets | 4,930,161 | 200,311 | 5.42 | 4,784,812 | 175,038 | 4.88 | ||||||
| Cash and due from banks | 54,481 | 59,163 | ||||||||||
| Other assets, net | 235,026 | 231,872 | ||||||||||
| Total Assets | $ | 5,219,668 | $ | 5,075,847 | ||||||||
| Liabilities | ||||||||||||
| Savings and interest-bearing checking | 2,690,359 | 43,178 | 2.14 | 2,550,973 | 31,644 | 1.66 | ||||||
| Time deposits | 825,984 | 26,970 | 4.37 | 745,983 | 20,320 | 3.64 | ||||||
| Other borrowings | 126,861 | 6,253 | 6.58 | 128,846 | 6,134 | 6.37 | ||||||
| Interest Bearing Liabilities | 3,643,204 | 76,401 | 2.80 | % | 3,425,802 | 58,098 | 2.27 | |||||
| Non-interest bearing deposits | 1,053,719 | 1,184,548 | ||||||||||
| Other liabilities | 104,057 | 100,929 | ||||||||||
| Shareholders’ equity | 418,688 | 364,568 | ||||||||||
| Total liabilities and shareholders’ equity | $ | 5,219,668 | $ | 5,075,847 | ||||||||
| Net Interest Income | $ | 123,910 | $ | 116,940 | ||||||||
| Net Interest Income as a Percent of Average Interest Earning Assets | 3.35 | % | 3.26 | % | ||||||||
| (1) | Interest on tax-exempt loans and securities is presented on a fully tax equivalent basis assuming a marginal tax rate of 21%. | |||||||||||
| --- | --- | |||||||||||
| 5 | ||||||||||||
| --- |
Commercial Loan Portfolio Analysis as of September 30, 2024
| Total Commercial Loans | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Watch Credits | Percent of Loan Category in Watch Credit | |||||||||
| Loan Category | All Loans | Performing | Non-accrual | Total | ||||||
| (Dollars in thousands) | ||||||||||
| Land | $ | 9,682 | $ | — | $ | — | $ | — | — | % |
| Land Development | 20,104 | — | — | — | — | |||||
| Construction | 177,038 | 15,154 | — | 15,154 | 8.6 | |||||
| Income Producing | 590,596 | 6,284 | — | 6,284 | 1.1 | |||||
| Owner Occupied | 506,734 | 13,940 | 47 | 13,987 | 2.8 | |||||
| Total Commercial Real Estate Loans | $ | 1,304,154 | $ | 35,378 | $ | 47 | $ | 35,425 | 2.7 | |
| Other Commercial Loans | $ | 521,093 | $ | 24,777 | 12 | $ | 24,789 | 4.8 | ||
| Total non-performing commercial loans | $ | 59 |
Commercial Loan Portfolio Analysis as of December 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 | $ | 10,620 | $ | 1 | $ | — | $ | 1 | 0.0 | % | ||
| Land Development | 17,966 | — | — | — | — | |||||||
| Construction | 101,178 | — | — | — | — | |||||||
| Income Producing | 625,927 | 4,177 | — | 4,177 | 0.7 | |||||||
| Owner Occupied | 449,287 | 15,165 | — | 15,165 | 3.4 | |||||||
| Total Commercial Real Estate Loans | $ | 1,204,978 | $ | 19,343 | $ | — | $ | 19,343 | 1.6 | |||
| Other Commercial Loans | $ | 474,753 | $ | 16,537 | 28 | $ | 16,565 | 3.5 | ||||
| Total non-performing commercial loans | $ | 28 | 6 | |||||||||
| --- |
ibcp20243qearningsdeck-f
Earnings Call: Third Quarter 2024 October 24, 2024 (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, 2023 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 2
• Formal Remarks − William B. (Brad) Kessel President and Chief Executive Officer − Gavin A. Mohr Executive Vice President and Chief Financial Officer − Joel F. 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. Agenda 3
3Q'24 Overview • Total loans increased 9.3% annualized while maintaining a disciplined approach to new loan production • New loan production continues to be largely focused on new commercial clients that bring deposits to the bank • Asset quality remained exceptional with NPAs/Total Assets at 0.11% and NCO of 0.00% of average loans in the quarter • Core deposit growth of $100.1 million (excluding brokered deposits) • Brokered deposit balances decreased $87.6 million • Continued rotation into higher yielding assets contributed to net interest margin of 3.37% • Achieved growth in all capital ratios for the quarter • Tangible book value per share increased 5.5% from end of prior quarter • Balance sheet liquidity remains strong with loan-to-deposit ratio of 85% • Net income of $13.8 million, or $0.65 per diluted share • Increase in net interest income of 6.2% over the prior year quarter and 4.9% over the second quarter of 2024 annualized • Strong profitability and prudent balance sheet management results in further growth in tangible book value per share Healthy Capital & Liquidity Positions Positive Trends in Key Metrics Solid Loan Growth and Strong Asset Quality 3Q'24 Earnings 4 4
$ 4 .3 $ 4 .3 $ 4 .4 $ 4 .5 $ 4 .5 $ 4 .6 $ 4 .6 $ 4 .6 $ 4 .6 $ 4 .6 0 .1 1 % 0 .3 3 % 0 .7 8 % 1 .2 6 % 1 .5 7 % 1 .8 0 % 2 .1 7 % 2 .1 9 % 2 .2 2 % 2 .2 8 % Q 2 '2 2 Q 3 '2 2 Q 4 '2 2 Q 1 '2 3 Q 2 '2 3 Q 3 '2 3 Q 4 '2 3 Q 1 '2 4 Q 2 '2 4 Q 3 '2 4 Total Deposits Cost Of Deposits Low-Cost Deposit Franchise Focused on Core Deposit Growth • Substantial core funding – $3.97 billion of non-maturity deposit accounts (85.7% of total deposits). • Core deposit increase of $100.1 million (8.9% annualized) in 3Q'24. • Time deposit increase of $34.9 (23.7% annualized) million in 3Q'24. • Total deposits increased $4.0 million (0.1%) since 12/31/23 with non-interest bearing down $52.4 million, savings and interest- bearing checking up $41.9 million, reciprocal up $163.4 million, time up $96.1 million and brokered time down $245.1 million. • Deposits by Customer Type: − Retail – 45.8% − Commercial – 37.6% − Municipal – 16.6% Deposit Composition 9/30/24 Cost of Deposits (%)/Total Deposits ($B) 5 Non-interest Bearing 22% Savings and Interest- bearing Checking 42% Reciprocal 22% Time 13% Brokered 1% Core Deposits: 85.7% $4.6B
Historic IBC Cost of Funds (excluding sub debt) vs. the Federal Funds Rate (with Deposit Balances) D e p o s it B a la n c e s ( $ i n t h o u s a n d s ) 6 F e d e ra l F u n d s R a te Account Type Cycle Beta Sav & Int-bearing chking 25.0% Reciprocal 57.7% Time 6.8% Total int-bearing Dep (excl brokered) 30.7% Total COF IBC (excl Sub Debt) 32.2% 0 .2 5 % 0 .2 7 % 0 .2 7 % 0 .2 8 % 0 .3 3 % 0 .3 6 % 0 .4 2 % 0 .5 1 % 0 .6 0 % 0 .7 3 % 0 .8 2 % 0 .8 5 % 0 .8 5 % 0 .7 4 % 0 .6 3 % 0 .3 0 % 0 .2 3 % 0 .3 9 % 0 .1 4 % 0 .1 2 % 0 .1 1 % 0 .1 0 % 0 .1 0 % 0 .1 2 % 0 .3 3 % 0 .7 9 % 1 .2 5 % 1 .5 7 % 1 .8 0 % 1 .9 9 % 2 .0 1 % 2 .0 2 % 2 .1 0 % 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 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% S e p -1 6 D e c -1 6 M a r- 1 7 J u n -1 7 S e p -1 7 D e c -1 7 M a r- 1 8 J u n -1 8 S e p -1 8 D e c -1 8 M a r- 1 9 J u n -1 9 S e p -1 9 D e c -1 9 M a r- 2 0 J u n -2 0 S e p -2 0 D e c -2 0 M a r- 2 1 J u n -2 1 S e p -2 1 D e c -2 1 M a r- 2 2 J u n -2 2 S e p -2 2 D e c -2 2 M a r- 2 3 J u n -2 3 S e p -2 3 D e c -2 3 M a r- 2 4 J u n -2 4 S e p -2 4 IBC COF Fed Funds Spot Fed Effective Total Deposits
Commercial 46% Mortgage 38% Installment 15% Held for Sale 0% $ 3 .3 $ 3 .4 $ 3 .4 $ 3 .5 $ 3 .6 $ 3 .7 $ 3 .8 $ 3 .8 $ 3 .9 $ 3 .9 4 .0 1 % 4 .3 9 % 4 .9 0 % 5 .0 7 % 5 .3 6 % 5 .5 3 % 5 .7 3 % 5 .8 0 % 5 .9 3 % 5 .9 6 % Q 2 '2 2 3 Q '2 2 4 Q '2 2 1 Q '2 3 2 Q '2 3 3 Q '2 3 4 Q '2 3 1 Q '2 4 2 Q '2 4 3 Q '2 4 Total Portfolio Loans Yield on Loans Diversified Loan Portfolio Focused on High Quality Growth • Portfolio loan changes in 3Q'24: − Commercial – increased $92.9 million. …Average new origination yield of 7.56% vs a 6.78% portfolio yield. − Mortgage – increased $10.0 million. …Average new origination yield of 6.95% vs a 4.81% portfolio yield. − Installment – decreased $12.5 million. …Average new origination yield of 8.28% vs a 5.11% portfolio yield. • Mortgage loan portfolio weighted average FICO of 750 and average balance of $185,053. • Installment weighted average FICO of 755 and average balance of $25,806. • Commercial loan rate mix: − 44% fixed / 56% variable. − Indices – 44% tied to Prime, 1% tied to a US Treasury rate and 55% tied to SOFR. • Mortgage loan (including HELOC) rate mix: − 64% fixed / 36% adjustable or variable. − 0% tied to Prime, 10% tied to a US Treasury rate and 90% tied to SOFR. Note: Portfolio loans exclude loans HFS. Loan Composition 09/30/24 Yield on Loans (%)/ Total Portfolio Loans ($B) 7 $3.9B
8.37%, Commercial Industrial, $153 6.74%, Construction, $123 6.02%, Retail, $110 4.70%, Office, $86 2.66%, Multifamily, $49 1.96%, 1-4 Family, $36 1.41%, Land, Vacant Land and Development, $26 1.07%, Special Purpose, $19 9.41% 172 8.16% 149 7.35% 134 5.93% 1085.39% 98 5.37% 98 3.72% 68 3.57% 65 2.71% 49 46 4% 43 3% 194 16% $1,224MM Manufacturing Construction Retail Health Care and Social Assistance Hotel and Accomodations Real Estate Rental and Leasing Other Services (except Public Administration) Wholesale Transportation Finance and Insurance Professional, Scientific, and Technical Services Misc Concentrations within $1.8B Commercial Loan Portfolio C&I or Owner Occupied Loans by Industry as a % of Total Commercial Loans ($ in millions) Investor RE by Collateral Type as a % of Total Commercial Loans ($ in millions) Note: $1.224 billion, or 67.1% of the commercial loan portfolio is C&I or owner occupied, while $601 million, or 32.9% is investment real estate. The percentage concentrations are based on the entire commercial portfolio of $1.83 billion as of September 30, 2024 8 $601MM
$ 8 .6 $ 9 .5 $ 7 .9 $ 5 .1 $ 3 .7 $ 5 .2 $ 5 .2 $ 3 .7 $ 4 .5 $ 5 .1 $1.3 $1.9 $0.8 $0.2 $0.5 $0.4 $0.6 $1.1 $0.9 $0.8 $- $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 2018 2019 2020 2021 2022 Q3'23 Q4'23 1Q'24 2Q'24 3Q'24 Non-performing Loans 90+ Days PD ORE/ORA $4.4 $7.2 $13.2 $2.3 $3.1 $4.9 $3.3 $7.1 $5.3 $4.8 0 .2 % 0 .3 % 0 .5 % 0 .1 % 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% $- $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 2018 2019 2020 2021 2022 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 30-89 Days PD 30-89 Days PD / Total Loans $1.3 $1.9 $0.8 $0.2 $0.5 $0.4 $0.6 $1.1 $0.9 $0.8 $- $0.5 $1.0 $1.5 $2.0 2018 2019 2020 2021 2022 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 $8.6 $9.5 $7.9 $5.1 $3.7 $4.7 $5.2 $3.7 $4.5 $5.1 0 .3 % 0 .3 % 0 .3 % 0 .2 % 0 .1 % 0 .1 % 0 .1 % 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% $- $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 $10.0 2018 2019 2020 2021 2022 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 Non-performing Loans (NPLs) NPLs / Total Loans Note 1: Non-performing loans and non-performing assets exclude troubled debt restructurings that are performing. Credit Quality Summary Non-performing Loans ($ in Millions) ORE/ORA ($ in Millions) 30 to 89 Days Delinquent ($ in Millions) Non-performing Assets ($ in Millions) 9
13.6 13.6 13.7 13.9 14.2 14.3 Q2'23 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 10.4 10.4 10.6 10.7 11.1 11.2 Q2'23 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 8.9 8.9 9.0 9.3 9.6 9.6 Q2'23 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 6.7 6.7 7.1 7.4 7.6 8.1 Q2'23 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 • 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 9.0% Strong Capital Position TCE / TA (%) Leverage Ratio (%) CET1 Ratio (%) Total RBC Ratio (%) 10
$ 3 0 .3 $ 3 1 .4 $ 3 3 .8 $ 3 4 .3 $ 3 3 .0 $ 3 6 .1 $ 3 9 .9 $ 4 0 .6 $ 3 8 .4 $ 3 8 .4 $ 3 9 .4 $ 4 0 .1 $ 4 0 .2 $ 4 1 .3 $ 4 1 .9 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 3.31 3.12 3.05 3.02 3.18 3.13 3.00 3.26 3.49 3.52 3.33 3.26 3.23 3.26 3.30 3.40 3.37 0.09 0.09 0.08 0.07 0.08 0.08 0.12 0.77 2.18 3.65 4.38 4.99 5.26 5.33 5.33 5.33 5.16 0.23 0.39 0.14 0.12 0.11 0.10 0.10 0.12 0.45 0.92 1.39 1.72 1.93 2.11 2.14 2.16 2.22 0 1 2 3 4 5 6 Q 3 '2 0 Q 4 '2 0 Q 1 '2 1 Q 2 '2 1 Q 3 '2 1 Q 4 '2 1 Q 1 '2 2 Q 2 '2 2 Q 3 '2 2 Q 4 '2 2 Q 1 '2 3 Q 2 '2 3 Q 3 '2 3 Q 4 '2 3 Q 1 '2 4 Q 2 '2 4 Q 3 '2 4 Net Interest Margin (FTE) Average Effective FF Yield Cost of Funds Net Interest Margin/Income • Net interest income was $41.9 million in 3Q'24 compared to $39.4 million in the prior year quarter. The change is due to an increase in average earning assets and the net interest margin compared to the year- ago quarter. • Net interest margin was 3.37% during the Third quarter of 2024, compared to 3.23% in the year-ago quarter and 3.40% in the second quarter of 2024. Yields, NIM and Cost of Funds (%) Net Interest Income ($ in Millions) 11
2Q'24 3.40% Increase in loan yield 0.07% Loan Fee Accretion -0.05% Change in asset mix 0.02% Increase in funding costs -0.07% 3Q'24 3.37% 3Q'24 NIM Changes Linked Quarter Average Balances and FTE Rates ($ in thousands) Linked Quarter Analysis 12 3Q24 2Q24 Change Avg Bal Inc/Exp Yield Avg Bal Inc/Exp Yield Avg Bal Inc/Exp Yield Cash $126,039 $1,717 5.42% $83,293 $1,134 5.48% $42,746 $583 -0.06% Investments 949,849 8,342 3.51% 960,875 8,569 3.57% (11,026) (227) -0.05% Commercial loans 1,776,983 31,425 7.04% 1,728,157 30,627 7.13% 48,826 798 -0.09% Mortgage loans 1,519,958 18,917 4.98% 1,505,128 18,404 4.89% 14,830 513 0.09% Consumer loans 613,013 8,091 5.28% 615,914 7,779 5.08% (2,901) 312 0.20% Earning assets $4,985,842 $68,492 5.48% $4,893,367 $66,513 5.45% $92,475 $1,979 0.03% Nonmaturity deposits $2,763,558 $15,621 2.25% $2,674,731 $14,190 2.13% $88,827 1,431 0.11% CDARS deposits 121,830 1,347 4.40% 119,547 1,312 4.41% 2,283 35 -0.02% Retail Time deposits 608,441 6,486 4.24% 575,237 5,886 4.12% 33,204 600 0.13% Brokered deposits 74,673 1,008 5.37% 112,249 1,488 5.33% (37,576) (480) 0.04% Bank borrowings 41,853 552 5.25% 50,916 655 5.17% (9,063) (103) 0.07% IBC debt 79,329 1,466 7.37% 79,292 1,461 7.41% 37 5 -0.04% Cost of funds $3,689,684 $26,480 2.86% $3,611,972 $24,992 2.78% $77,712 $1,488 0.08% Free funds $1,296,158 $1,281,395 $14,763 Net interest income $42,012 $41,521 $491 Net interest margin 3.37% 3.40% -0.03%
September 30, 2024 -200 -100 Base-rate 100 200 Net Interest Income $173,619 $174,007 $176,935 $178,535 $179,338 Change from Base -1.87% -1.65% 0.90% 1.34% June 30, 2024 -200 -100 Base-rate 100 200 Net Interest Income $172,352 $172,324 $173,917 $174,255 $173,319 Change from Base -0.90% -0.92% 0.19% -0.34% Interest Rate Risk Management • The base case modeled NII is modestly higher during the quarter as asset yields were augmented by a shift in asset mix and liability costs also benefited from shift in mix. • The NII sensitivity profile shifted to a more asset sensitive position during the quarter largely due to slightly faster repricing on commercial loans, a modest increase in mortgage loan repricing due to additional pay fixed swaps and a shift in non-maturity deposit beta assumptions. • Base-rate is a static balance sheet applying the spot yield curve from the valuation date. • Stable core funding base. Transaction accounts fund 38.1% of assets and other non-maturity deposits fund another 18.4% of assets. Low wholesale funding of just 2.3% of assets. • 35.6% of assets reprice in 1 month and 46.8% reprice in the next 12 months. • Continually evaluating strategies to manage NII through hedging as well as product pricing and structure. Changes in Net Interest Income (Dollars in 000’s) 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. 13
Interchange income $4,146 Service Chg Dep $3,085 Gain (Loss)- Mortgage Sale $2,177 Equity Securities at Fair Value $(8) Gain (Loss)- Securities $(145) Mortgage loan servicing, net $(3,130) Investment & insurance commissions $882 Bank owned life insurance $197 Other income $2,304 $ 1 6 .9 $ 1 1 .5 $ 1 0 .5 $ 1 5 .4 $ 1 5 .6 $ 9 .1 $ 1 2 .6 $ 1 5 .2 $ 9 .5 2 7 .3 % 1 8 .4 % 1 6 .4 % 1 8 .4 % 2 0 .0 % 1 2 .2 % 1 6 .2 % 1 8 .6 % 1 2 .2 % -5.0 5.0 15.0 25.0 35.0 45.0 55.0 $- $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 Q 3 '2 2 Q 4 '2 2 Q 1 '2 3 Q 2 '2 3 Q 3 '2 3 Q 4 '2 3 Q 1 '2 4 Q 2 '2 4 Q 3 '2 4 Non-interest Income Non-interest Inc/Operating Rev (%) Strong Non-interest Income • The $5.8 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: − $2.2 million in net gains on mortgage loans in 3Q'24 vs. $2.1 million in the year ago quarter. The increase is primarily due to higher profit margins on mortgage loan sales and higher loan sales volume. − $147.5 million in mortgage loan originations in 3Q'24 vs. $172.9 million in 3Q’23 and $142.6 million in 2Q'24. − 3Q'24 mortgage loan servicing includes a $4.2 million ($(0.16) per diluted share, after tax) decrease in fair value adjustment due to price compared to a increase of $1.6 million ($0.06 per diluted share, after tax) in the year ago quarter. Source: Company documents. 3Q'24 Non-interest Income (thousands) Non-interest Income Trends ($M) 14 $9.5MM
$ 3 2 .4 $ 3 2 .1 $ 3 1 .0 $ 3 2 .2 $ 3 2 .0 $ 3 1 .9 $ 3 2 .2 $ 3 3 .3 $ 3 2 .6 $- $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 Q 3 '2 2 Q 4 '2 2 Q 1 '2 3 Q 2 '2 3 Q 3 '2 3 Q 4 '2 3 Q 1 '2 4 Q 2 '2 4 Q 3 '2 4 Compensation and Benefits Loan and Collection Occupancy Data Processing FDIC Insurance Other Focus on Improved Efficiency • 3Q'24 efficiency ratio of 62.8%. • Compensation and employee benefits expense of $20.0 million, an increase of $0.1 million from the prior year quarter. • $0.5 million increase in performance-based compensation expense due to a higher expected payout level in 2024. • Payroll taxes and employee benefits decreased $0.6 million primarily due to lower healthcare related costs. • Data processing costs increased by $0.3 million primarily due to core data processor annual asset growth and CPI related cost increases as well as the purchase of a new lending solution software. • Opportunities exist to gain additional efficiencies as we continue to optimize our delivery channels. Non-interest Expense ($M) Efficiency Ratio (4 quarter rolling average) Source: Company documents. 15 6 3 .1 % 6 1 .3 % 5 9 .8 % 6 0 .4 % 5 9 .6 % 5 9 .9 % 6 0 .7 % 6 0 .3 % 6 0 .9 % 6 2 .2 % 2 Q '2 2 3 Q '2 2 4 Q '2 2 1 Q '2 3 2 Q '2 3 3 Q '2 3 4 Q '2 3 1 Q '2 4 2 Q '2 4 3 Q '2 4
Outlook for 2024 Outlook for 2024 *as of January, 2024 • IBCP forecast of mid-single digit (approximately 6%-8%) 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 first three quarters of 2024. • This growth forecast also assumes a stable Michigan economy. • The forecast assumes 0.25% Fed rate cuts in May, June, August and October in the federal funds rate while long-term interest rates decline slightly over year-end 2023 levels. • IBCP forecast of mid-single digit (6%-8%) 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 increase (0.10% - 0.15%) in 2024 compared to full-year 2023. Primary driver is an increase in earning asset yield that is partially offset by an increase in yield on interest bearing liabilities. • 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 1.44% at 12/31/23 • A full year 2024 provision (expense) for credit losses of approximately 0.15%-0.25% of average total portfolio loans would not be unreasonable. 3Q'24 Update • Total portfolio loans increased $90.4 million (9.3% annualized) in 3Q'24 which is above our forecasted range. • Commercial loans and mortgage loans increased $92.9 million (21.3% annualized) and $10.0 million (2.7% annualized), respectively. Installment loans decreased $12.5 million (-8.1% annualized) in the third quarter. • 3Q'24 net interest income was $2.4 million (6.2%) higher than the prior year quarter. The net interest margin was 3.37% for the current quarter and 3.23% for the prior year quarter and down 0.03% from the linked quarter. • The $2.4 million increase in net interest income is due to a $93.6 million increase in average earning assets and a 0.14% increase in the net interest margin. • The provision for credit losses was an expense of $1.49 million (0.15% of average loans annualized). LENDING Continued growth NET INTEREST INCOME Growth driven primarily by higher average earning assets PROVISION FOR CREDIT LOSSES Steady asset quality metrics 16
Outlook for 2024 Outlook for 2024 *as of January, 2024 • IBCP forecasts 2024 quarterly range of $11.5M to $13.0M with the total for the year down 0.5% to 1.0% from 2023 actual of $50.7M • Expect mortgage loan origination volumes in 2024 to increase by approximately 7%, a decline in mortgage loan servicing net of approximately 19%, interchange income in 2024 to increase approximately 1.5% to 2.5% as compared to 2023, service charges on deposits to be collectively comparable to 2023 and other income to decline approximately 5% comparable to 2023 actuals. • IBCP forecasts 2024 quarterly range of $32.5M to $33.5M with the total for the year up 3.5% to 4.25% from the 2023 actual of $127.1M. • The primary driver is an increase in compensation and employee benefits, data processing, loan and collection and advertising. • Approximately a 20% effective income tax rate in 2024 This assumes a 21% statutory federal corporate income tax rate during 2024. • 2024 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 2024. 3Q'24 Update • Non-interest income totaled $9.5 million in 3Q'24, which is lower than the forecasted range. • Mortgage loan servicing net, generated a loss of $3.1 million in 3Q'24. • Total non-interest expense was $32.6 million in the 3Q'24, which was within our forecasted range. • Actual effective income tax rate of 20.1% for the 3Q'24. • No shares were repurchased in the 3Q'24. NON-INTEREST INCOME NON-INTEREST EXPENSES INCOME TAXES SHARE REPURCHASES 17
Strategic Initiatives • Outside Sales - Relationship banking focus thru consistent calling on prospects and COI’s. • Inside Service/Sales – high retention + high cross sales, collaboration of strategic partners. • Digital Marketing - Leverage data insights, target strategically, elevate brand image, personalize the customer experience. • Leverage Referral Network – Fintech (ReferLive); • New Products – SMB deposit product, Business digital pmts. • Market Expansion – Through existing indirect dealer network. • Selective and opportunistic bank and branch acquisitions. • Process Automation – leverage core investments + Fintech partnerships: (Blend) mortgage; (Numerated) Commercial; • Branch Optimization - including assessing existing locations, new locations, service hours, staffing, & workflow and leveraging technology. • Promotion of Self-Serve Channels - (One Wallet, Treasury One, etc.) • Leverage Banker Capacity – including on-line appointment setting. • Leverage Middleware + API’s – expediate new technology implementation. • Optimize Office Space Utilization • Invest in our Team – competitive C&B offering, skill training, leadership development, etc. • High Employee Engagement – thru fostering a culture of purpose, opportunity, continuous learning, diversity, reward + recognition. • Promote Teamwork + Alignment across all business units. • Invest in technology - to enhance the employee experience + customer experience. • Client Service Model – well defined and applied. • Utilize three layers of defense (business unit, risk management and internal audit). Independent & collaborative approach. • Consistent earnings + maintain strong capital levels. • Proactive credit quality monitoring and problem resolution. • Manage Liquidity and IRR. • Manage Operational risk, emphasizing cyber security, fraud prevention, and regulatory compliance. • Effective relationships with regulators & other outside oversight parties. Proactive, transparent and good communication. PROCESS IMPROVEMENT & COST CONTROLS RISK MANAGEMENT GROWTH TALENT MANAGEMENT 18
Question and Answer Session Closing Remarks NASDAQ: IBCP Thank you for attending 19
Appendix Additional Financial Data and Non-GAAP Reconciliations 20
Historical Financial Data 21 here Year Ended December 31, Quarter Ended, ($M except per share data) 2020 2021 2022 2023 9/30/23 12/31/23 3/31/24 6/30/24 9/30/24 Balance Sheet: Total Assets $4,204 $4,705 $5,000 $5,264 $5,200 $5,264 $5,231 $5,278 $5,259 Portfolio Loans $2,734 $2,905 $3,465 $3,791 $3,741 $3,791 $3,840 $3,852 $3,942 Deposits $3,637 $4,117 $4,379 $4,622 $4,586 $4,622 $4,582 $4,614 $4,627 Tangible Common Equity $357 $367 $317 $374 $345 $374 $385 $400 $422 Profitability: Pre-Tax, Pre-Provision Income $81.9 $75.4 $83.7 $79.9 $23.0 $17.3 $20.6 $23.2 $18.8 Pre-Tax, Pre-Prov / Avg. Assets 2.08% 1.69% 1.72% 1.56% 1.76% 1.31% 1.59% 1.80% 1.43% Net Income(1) $56.2 $62.9 $63.8 $59.1 $17.5 $13.7 $16.0 $18.5 $13.8 Diluted EPS $2.53 $2.88 $2.97 $2.79 $0.83 $0.65 $0.76 $0.88 $0.65 Return on Average Assets(1) 1.43% 1.41% 1.32% 1.15% 1.34% 1.04% 1.24% 1.44% 1.04% Return on Average Equity(1) 15.7% 16.1% 18.5% 16.0% 18.7% 14.4% 16.0% 18.0% 12.5% Net Interest Margin (FTE) 3.34% 3.10% 3.32% 3.26% 3.25% 3.26% 3.30% 3.40% 3.37% Efficiency Ratio 59.2% 62.9% 59.4% 60.8% 57.5% 64.3% 60.3% 61.5% 62.8% Asset Quality: NPAs / Assets 0.21% 0.11% 0.08% 0.11% 0.10% 0.11% 0.09% 0.10% 0.11% NPAs / Loans + OREO 0.32% 0.18% 0.12% 0.15% 0.14% 0.15% 0.12% 0.14% 0.15% ACL / Total Portfolio Loans 1.30% 1.63% 1.51% 1.44% 1.48% 1.44% 1.47% 1.46% 1.46% NCOs / Avg. Loans 0.11% (0.07%) 0.00% 0.01% 0.00% 0.01% 0.02% 0.02% 0.00% Capital Ratios: TCE Ratio 8.6% 7.9% 6.4% 7.2% 6.7% 7.2% 7.4% 7.6% 8.1% Leverage Ratio 9.2% 8.8% 8.8% 9.0% 8.9% 9.0% 9.3% 9.6% 9.6% Tier 1 Capital Ratio 13.3% 12.1% 11.4% 11.5% 11.4% 11.5% 11.7% 12.0% 12.1% Total Capital Ratio 16.0% 14.5% 13.7% 13.7% 13.6% 13.7% 13.9% 14.2% 14.2%
Year Ended December 31, ($M except per share data) 2018 2019 2020 2021 2022 2023 5 Year CAGR Balance Sheet: Total Assets $3,353 $3,565 $4,204 $4,705 $5,000 $5,264 9.4% Portfolio Loans $2,583 $2,725 $2,734 $2,905 $3,465 $3,791 8.0% Deposits $2,913 $3,037 $3,637 $4,117 $4,379 $4,623 9.7% Tangible Common Equity $304 $317 $357 $367 $317 $374 4.2% Profitability: Pre-Tax, Pre-Provision Income $50.6 $58.6 $81.9 $75.4 $83.1 $79.9 9.6% Pre-Tax, Pre-Prov / Avg. Assets 1.62% 1.70% 2.08% 1.69% 1.72% 1.56% - Net Income $39.8 $46.4 $56.2 $62.9 $63.4 $59.1 8.2% Diluted EPS $1.68 $2.00 $2.53 $2.88 $2.97 $2.79 10.7% Return on Average Assets 1.27% 1.35% 1.43% 1.41% 1.31% 1.15% - Return on Average Equity 12.38% 13.63% 15.68% 16.13% 18.41% 16.04% - Net Interest Margin (FTE) 3.88% 3.80% 3.34% 3.10% 3.32% 3.26% - Efficiency Ratio 67.20% 64.90% 59.24% 62.87% 59.71% 60.76% - Asset Quality: NPAs / Assets 0.29% 0.32% 0.21% 0.11% 0.08% 0.11% - NPAs / Loans + OREO 0.38% 0.42% 0.32% 0.18% 0.12% 0.15% - Reserves / Total Loans 0.96% 0.96% 1.30% 1.63% 1.51% 1.44% - NCOs / Avg. Loans (0.03%) (0.02%) 0.11% (0.07%) 0.00% 0.01% - Capital Ratios: TCE Ratio 9.2% 9.0% 8.6% 7.9% 6.4% 7.2% - Leverage Ratio 10.5% 10.1% 9.2% 8.8% 8.8% 9.1% - Tier 1 Capital Ratio 13.3% 12.7% 13.3% 12.2% 11.4% 11.6% - Total Capital Ratio 14.3% 13.7% 16.0% 14.7% 13.7% 13.8% - Shareholder Value: TBV/Share $ 12.90 $ 14.08 $ 16.33 $ 17.33 $ 15.04 $ 17.96 6.8% Dividends Paid per Share $ 0.60 $ 0.72 $ 0.80 $ 0.84 $ 0.88 $ 0.92 8.9% Value of Shares Repurchased $ 12.68 $ 26.3 $ 14.2 $ 17.3 $ 4.0 $ 5.2 - 22 Historic Financial Performance
Sources of Liquidity 3Q 2024 Current On-balance sheet Excess reserves at the Fed $ 60.1 Unpledged AFS Securities $ 576.5 Total On-balance sheet $ 636.6 On balance sheet liquidity to total deposits 14% Available Sources of Liquidity Unused FHLB & FRB (including BTFP) $ 1,583.0 Borrow capacity on unpledged bonds $ 718.0 Total Available Sources $ 2,301.0 Sources of Liquidity to total deposits 50% 98% 85% 73% 79% 74% 76% 60.2% 2 3 7 % 2 4 0 % 2 2 2 % 2 3 7 % 2 3 8 % 2 2 2 % 2 1 7 .7 % 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q'24 On-balance sheet / Uninsured Deposits Available Sources / Uninsured Deposits Note: Portfolio loans exclude loans HFS. Liquidity / Uninsured Deposits Strong Liquidity Position • Significant liquidity position to manage the current environment. • Total available liquidity significantly exceeds (217%) estimated uninsured deposit balances. • Attractive loan to deposit ratio of 85.7%. • Uninsured deposit to total deposits of approximately 22.8%, excluding brokered time deposits. Sources of Liquidity 23
$1,900 $1,148 $482 $40 $224 $544 $289 $2,124 $1,692 $771 $40 Consumer Commercial Public Funds Brokered Insured Deposits Uninsured Deposits $ 3 ,5 8 0 $ 3 ,5 7 0 $ 3 ,5 7 5 $ 3 ,6 6 1 $ 3 ,6 0 5 $ 3 ,6 3 6 $ 3 ,5 7 0 $965 $918 $1,011 $962 $977 $978 $1,057 $4,545 $4,488 $4,586 $4,623 $4,582 $4,614 $4,627 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 Insured Deposits Uninsured Deposits Granular Deposit Base • Average deposit account balance of approximately $21,905. • Average deposit balance excluding reciprocal deposit of $17,231. • Average Commercial deposit balance of $102,170. • Average retail deposit balance of $11,182. • 10 largest deposit accounts total $448.9 million or 9.70% of total deposits. − $358.2 million in ICS with FDIC coverage. • 100 largest deposit accounts total $1.14 billion or 24.74% of total deposits. − $719.8 million in ICS with FDIC coverage. Note: Uninsured deposit calculation is an approximation. Uninsured Deposit by Segment (9/30/24) Uninsured Deposit Trend ($MM) 24
21% 79% $3.7 $4.0 $9.0 $69.1 M a tu ri n g 2 0 2 4 M a tu ri n g 2 0 2 5 M a tu ri n g 2 0 2 6 M a tu ri n g 2 0 2 7 & A ft e r $19 $66 CRE – Office Metrics • 19.7% of portfolio is medical office buildings. • 78% of portfolio is in suburban geographies. • 80.5% of CRE – Office mature after 2026. • Average loan size of $1.3 million. Maturing Exposure (millions) CRE - Office Fixed vs. Variable Geographic Location (millions) 25 Urban Suburban Fixed Variable
Non-GAAP to GAAP Reconciliation 26 September 30, June 30, March 31, December 31, September 30, 2023 2022 2021 2020 2024 2024 2024 2023 2023 Net interest income $156,329 $149,561 $129,765 $123,612 $41,854 $41,346 $40,197 $40,111 $39,427 Non-interest income 50,676 61,909 76,643 80,745 9,508 15,172 12,561 9,097 15,611 Non-interest expense 127,119 128,341 131,023 122,413 32,583 33,333 32,193 31,878 32,036 Pre-Tax, Pre-Provision Income 79,886 83,129 75,385 81,944 $18,779 $23,185 20,565 17,330 23,002 Provision for credit losses 6,210 5,341 (1,928) 12,463 1,488 19 744 (617) 1,350 Income tax expense 14,609 14,437 14,418 13,329 3,481 4,638 3,830 4,204 4,109 Net income $59,067 $63,351 $62,895 $56,152 $13,810 $18,528 $15,991 $13,743 $17,543 Average total assets $5,115,624 $4,825,723 $4,465,577 $3,933,655 $5,275,623 $5,181,317 $5,201,452 $5,233,666 $5,192,114 Performance Ratios Return on average assets 1.15% 1.31% 1.41% 1.43% 1.04% 1.44% 1.24% 1.04% 1.34% Pre-tax, Provision return on average assets 1.56% 1.72% 1.69% 2.08% 1.42% 1.80% 1.59% 1.31% 1.76% Year Ended December 31, Quarter Ended (Dollars in thousands)
Reconciliation of Non-GAAP Financial Measures 27 2024 2023 2024 2023 Net Interest Margin, Fully Taxable Equivalent ("FTE") Net interest income 41,854$ 39,427$ 123,397$ 116,218$ Add: taxable equivalent adjustment 158 202 513 722 Net interest income - taxable equivalent 42,012$ 39,629$ 123,910$ 116,940$ Net interest margin (GAAP) (1) 3.35% 3.21% 3.34% 3.25% Net interest margin (FTE) (1) 3.37% 3.23% 3.35% 3.26% (1) Quarter to date are annualized. Three Months Ended Nine Months Ended September 30, September 30, (Dollars in thousands)
Reconciliation of Non-GAAP Financial Measures (continued) 28 Tangible Common Equity Ratio September 30, June 30, March 31, December 31, September 30, 2023 2022 2021 2020 2024 2024 2024 2023 2023 Common shareholders' equity 404,449$ 347,596$ 398,484$ 389,522$ 452,369$ 430,459$ 415,570$ 404,449$ 374,998$ Less: Goodwill 28,300 28,300 28,300 28,300 28,300 28,300 28,300 28,300 28,300 Other intangibles 2,004 2,551 3,336 4,306 1,617 1,746 1,875 2,004 2,141 Tangible common equity 374,145$ 316,745$ 366,848$ 356,916$ 422,452$ 400,413$ 385,395$ 374,145$ 344,557$ Total assets $5,263,726 $4,999,787 $4,704,740 $4,204,013 $ 5,259,268 $5,277,500 $ 5,231,255 $ 5,263,726 $ 5,200,018 Less: Goodwill 28,300 28,300 28,300 28,300 28,300 28,300 28,300 28,300 28,300 Other intangibles 2,004 2,551 3,336 4,306 1,617 1,746 1,875 2,004 2,141 Tangible assets $5,233,422 $4,968,936 $4,673,104 $4,171,407 $ 5,229,351 $5,247,454 $ 5,201,080 $ 5,233,422 $ 5,169,577 Common equity ratio 7.68% 6.95% 8.47% 9.27% 8.60% 8.16% 7.94% 7.68% 7.21% Tangible common equity ratio 7.15% 6.37% 7.85% 8.56% 8.08% 7.63% 7.41% 7.15% 6.67% Year Ended December 31, Quarter Ended (Dollars in thousands)