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| EX-99.1 - EXHIBIT 99.1 - INDEPENDENT BANK CORP /MI/ | brhc10023526_ex99-1.htm |
| EX-99.2 - EXHIBIT 99.2 - INDEPENDENT BANK CORP /MI/ | brhc10023526_ex99-2.htm |
| 8-K - 8-K - INDEPENDENT BANK CORP /MI/ | brhc10023526_8k.htm |
Exhibit 99.3
Independent Bank Corporation (IBCP) Earnings CallFirst Quarter 2021April 27, 2021
Cautionary note regarding forward-looking statements This presentation contains forward-looking
statements about Independent Bank Corporation. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and
assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of Independent Bank Corporation.
Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. The COVID-19 pandemic is adversely affecting Independent Bank Corporation, its
customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in
general business and economic conditions or turbulence in domestic or global financial markets could adversely affect Independent Bank Corporation’s revenues and the values of its assets and liabilities, reduce the availability of funding from
certain financial institutions, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices could affect Independent Bank Corporation in substantial and
unpredictable ways. Independent Bank Corporation’s results could also be adversely affected by changes in interest rates; further increases in unemployment rates; deterioration in the credit quality of its loan portfolios or in the value of the
collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and non-banks; changes in the level of tariffs and other trade
policies of the United States and its global trading partners; changes in customer behavior and preferences; breaches in data security; failures to safeguard personal information; effects of mergers and acquisitions and related integration;
effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk. Certain
risks and important factors that could affect Independent Bank Corporation's future results are identified in its Annual Report on Form 10-K for the year ended December 31, 2020 and other reports filed with the SEC, including among other things
under the heading “Risk Factors” in such Annual Report on Form 10-K. Any forward-looking statement speaks only as of the date on which it is made, and Independent Bank Corporation undertakes no obligation to update any forward-looking
statement, whether to reflect events or circumstances after the date on which the statement is made, to reflect new information or the occurrence of unanticipated events, or otherwise. 2
Agenda Formal Remarks.William B. (Brad) Kessel, President and Chief Executive OfficerGavin A. Mohr,
Executive Vice President and Chief Financial OfficerQuestion and Answer session.Closing Remarks.Note: This presentation is available at www.IndependentBank.com in the Investor Relations area under the “Presentations” tab. 3
COVID-19 ResponseSupporting Employees, Clients & Communities 4 Employees Clients &
Communities Work from home. Providing the technology, culture, and operational infrastructure for the workforce to work remotely as needed.Granting additional sick and vacation time. Complying with applicable Michigan requirements (MI Safe
Start Plan, etc.).Performing additional routine and on-demand sanitization of facilities using enhanced methods. Pro-actively reaching out to our business customers to understand needs. Supporting local businesses. Closed over $375 million in
SBA Payroll Protection Program (PPP) loans. Working with business and consumer customers on temporary payment relief. When it became apparent that the Coronavirus (COVID-19) pandemic could pose a threat to our people and business, we activated
our Business Continuity and Crisis Communication Core Teams to take early and decisive action
Historical Financial Data 5 Year Ended December 31, Quarter Ended, ($M except
per share data) 2017 2018 2019 2020 3/31/20 6/30/20 9/30/20 12/31/20 3/31/21 Balance Sheet: Total Assets $2,789 $3,353 $3,565 $4,204 $3,632 $4,043
$4,169 $4,204 $4,426 Portfolio Loans $2,019 $2,583 $2,725 $2,734 $2,718 $2,867 $2,855 $2,734 $2,784 Deposits $2,401 $2,913 $3,037 $3,637 $3,084 $3,485 $3,598 $3,637 $3,859 Tangible Common
Equity $263 $304 $317 $357 $302 $322 $340 $357 $355 Profitability: Pre-Tax, Pre-Provision Income $39.6 $50.6 $58.6 $81.9 $12.5 $23.5 $25.3 $20.6 $26.7 Pre-Tax, Pre-Prov /
Avg. Assets 1.50% 1.62% 1.70% 2.08% 1.41% 2.44% 2.46% 1.98% 2.54% Net Income(1) $20.5 $39.8 $46.4 $56.2 $4.8 $14.8 $19.6 $17.0 $22.0 Return on Average
Assets(1) 0.77% 1.27% 1.35% 1.43% 0.54% 1.54% 1.90% 1.61% 2.10% Return on Average Equity(1) 7.8% 12.4% 13.6% 15.7% 5.5% 17.4% 21.4% 17.8% 23.5% Net Interest Margin
(FTE) 3.65% 3.88% 3.80% 3.34% 3.63% 3.36% 3.31% 3.12% 3.05% Efficiency Ratio 69.2% 67.2% 64.9% 59.2% 69.3% 53.1% 56.4% 60.6% 53.5% Asset Quality: NPAs /
Assets 0.35% 0.29% 0.32% 0.21% 0.50% 0.34% 0.28% 0.21% 0.17% NPAs / Loans + OREO 0.49% 0.38% 0.42% 0.32% 0.67% 0.48% 0.41% 0.32% 0.27% Reserves / Total Portfolio
Loans 1.12% 0.96% 0.96% 1.30% 1.20% 1.20% 1.25% 1.30% 1.68% NCOs / Avg. Loans (0.06%) (0.03%) (0.02%) 0.11% 0.06% 0.45% (0.04%) (0.02%) (0.01%) Capital Ratios: TCE
Ratio 9.4% 9.2% 9.0% 8.6% 8.4% 8.0% 8.2% 8.6% 8.1% Leverage Ratio 10.6% 10.5% 10.1% 9.2% 9.6% 9.1% 9.0% 9.2% 9.3% Tier 1 Capital Ratio 14.0% 13.3% 12.7% 13.3% 12.2% 12.6% 13.0% 13.3% 13.2% Total
Capital Ratio 15.2% 14.3% 13.7% 16.0% 13.4% 15.3% 15.6% 16.0% 15.8%
1Q 2021 Financial Highlights Income StatementPre-tax, pre-provision income was $26.7 million in the
first quarter of 2021 compared to $12.5 million in the first quarter of 2020.Net income of $22.0 million, or $1.00 per diluted share compared to $4.8 million, or $0.21 per diluted share for the year ago quarter.Net interest income of $30.3
million, compared to $30.2 million, for the year ago quarter.Mortgage loan originations of $509.0 million, also, $377.4 million in mortgage loans sold with $12.8 million in net gains on mortgage loans compared to $8.8 million in net gains from
the year ago quarter. Mortgage servicing rights change (the “MSR Change”) due to price of $4.6 million ($0.17 per diluted share, after taxes) compared to a negative $5.9 million ($0.21 per diluted share, after taxes) in the first quarter of
2020. Provision for loan loss credit of $0.5 million compared to an expense of $6.7 million in the first quarter of 2020. Balance Sheet/CapitalSecurities available for sale increased by $175.1 million.Total portfolio loans increased by $50.5
million.Total deposits grew by $221.2 million.Paid a 21 cent per share cash dividend on common stock on February 16, 2021. 6
Our Michigan Markets 7 Source: S&P Global Market Intelligence and Company documents. Map does not
include loan production offices. Deposit market share data based on FDIC Summary of Deposits Annual Survey as of June 30, 2020.Note: Loan and deposit balances exclude the loans and deposits (such as brokered deposits) that are not clearly
allocable to a certain market region. Loans specifically exclude: $155 million of Ohio mortgage loans, $50 million of resort loans and $15 million of purchased mortgage loans. 94 96 75 69 Michigan’s premier
community bank. #1 deposit market share amongst Michigan banks < $10B in assets and #9 deposit market share overall. Top 10 market share in 20 of 23 counties of operation – with opportunity to gain market share in attractive Michigan
markets.Low cost and stable deposit base in East/”Thumb” and Central regions utilized to fund loan growth in the West and Southeast regions (higher growth & more metropolitan).Eight bank branches were closed (two on June 26, 2020 and six on
July 31, 2020). The closures by region were: 3 in the East/”Thumb”, 2 in the Central and 1 each in the West, Northwest and Southeast. New full service bank branch opened in Brighton, Michigan in 4Q’20.7 Loan Production Offices (LPOs), including
5 throughout Michigan and 2 in Ohio (residential mortgage lending only). Branches (62) East / “Thumb”Branches: 20Deposits: $954MLoans: $193M SoutheastBranches: 8Deposits: $474MLoans: $740M CentralBranches: 10Deposits: $463MLoans:
$186M WestBranches: 20Deposits: $1,018MLoans: $941M NorthwestBranches: 4Deposits: $264MLoans: $259M
Select Economic Statistics 8 Unemployment Trends (%) Total Employees (Thousands) Regional Average
Home Sales Price (Thousands) Annualized Home Sales (Thousands) Elevated unemployment rates due to COVID-19 As of Feb ‘21 Stable prices in key markets Strong job growth prior to COVID-19 Slowing Michigan home sales Select Economic
Statistics
Low Cost Deposit Franchise Focused on Core Deposit Growth 9 Substantially core funding – $3.6
billion of non-maturity deposit accounts (92.8% of total deposits).Total deposits increased $221.2 million (6.1%) since 12/31/20 with non-interest bearing up $148.4 million, savings and interest- bearing checking up $143.6 million, reciprocal
up $52.5 million and time down $12.4 million.Deposits by Customer Type:Retail – 51.9%Commercial – 34.4%Municipal – 13.7% Deposit Composition – 3/31/21 Deposit Highlights Michigan Deposit Market Share $3.9B Core Deposits: 92.8% Cost of
Deposits (%)/Total Deposits ($B) Note: Core deposits defined as total deposits less maturity deposits.
Diversified Loan PortfolioFocused on High Quality Growth 10 Lending Highlights Note: Portfolio loans
exclude loans HFS. Portfolio loan changes in 1Q’21:Commercial – increased $58.8 million. PPP loan balances increased $64.4 million and totaled $234.2 million at March 31, 2021.Mortgage – decreased $15.9 million due to portfolio
pay-downs.Installment – increased $7.7 million.Mortgage loan portfolio weighted average FICO and LTV of 749 and 71%, respectively and average balance of $195,000.Installment weighted average FICO of 759 and average balance of $21,000.Commercial
loan rate mix:62% fixed / 38% variable.Indices – 59% tied to Prime, 38% tied to LIBOR and 3% tied to a US Treasury rate.Mortgage loan (including HECL) rate mix: 54% fixed / 46% adjustable or variable. Indices – 20% tied to Prime, 59% tied to
LIBOR , 19% tied to a US Treasury rate and 2% tied to SOFR Loan Composition – 3/31/21 $2.9B Yield on Loans (%)/Total Portfolio Loans ($B)
COVID-19 Programs – Loan Forbearances 11 Highlights Loan Forbearances The table above reflects the
status of loan forbearances for the last four quarters. The percent of the loan portfolio is based on loan dollars.Loan Forbearances:Forbearance period is generally three months for mortgage and installment loans and three or six months for
commercial loans. Retail (mortgage and installment) loan forbearances are primarily principal & interest deferrals.Commercial loan forbearances are primarily principal deferrals only.Forbearance requests peaked in early June 2020 and have
since significantly abated. 3/31/2021 12/31/2020 9/30/2020 6/30/2020 Current % Change from 6/30 Loan Type # $ (000’s) % of portfolio # $ (000’s) % of portfolio # $ (000’s) % of portfolio # $ (000's) % of
portfolio # $ Commercial 0 $0 0.00% 2 $163 0.02% 17 $25,105 1.90% 386 $210,486 15.40% -100.0% -100.0% Mortgage 111 15,263 1.53% 134 19,830 1.95% 197 32,091 3.10% 388 81,212 7.80% -71.4% -81.2%
Installment 32 537 0.11% 48 1,412 0.30% 97 2,631 0.50% 280 7,459 1.60% -88.6% -92.8% Total 143 $15,800 0.62% 184 $21,405 0.83% 311 $59,827 2.10% 1,054 $299,157
10.40% -86.4% -94.7% Loans serviced for others 205 $26,975 0.88% 288 $42,897 1.44% 416 $66,279 2.30% 773 $114,839 4.2% -73.5% -76.5%
COVID-19 Programs – Paycheck Protection Program (“PPP”) 12 Highlights PPP Loan Portfolio The table
above reflects the status of PPP loans as of December 31, and March 31, 2021 for Round 1 and Round 2 respectively.Paycheck Protection Program:Forgiveness applications began to be submitted to the SBA in August 2020. SBA generally has 90 days to
process forgiveness applications.Forgiveness application approvals and payments from the SBA began to be received in October 2020.Expect the remaining unaccreted fees at March 31, 2021 to be accreted into interest income in the next 12
months. PPP – Round 1 PPP – Round 2 Description 12/31/2020 3/31/2021 3/31/2021 # ($ in 000’s) # ($ in 000’s) # ($ in 000’s) Loans outstanding at quarter-end 1,483 169,782 698 105,934
1,250 128,240 Average loans outstanding for the quarter n/a 220,214 n/a 137,833 n/a 68,626 Forgiveness applications submitted to the SBA 808 122,962 1,477 183,346 n/a n/a Forgiveness applications processed and approved by
the SBA 755 91,972 1,354 158,046 n/a n/a Net fees accreted into interest income during the quarter n/a 3,251 n/a 1,853 n/a 219 Unaccreted fees remaining at quarter-end n/a 3,216 n/a 1,362 n/a 5,454 Average loan yield
for the quarter n/a 6.91% n/a 6.43% n/a 2.21%
Loans by Industry as a % of Total Commercial Loans ($ in millions)C&I and Owner Occupied Real Estate
= 67.8% of Commercial Loan Portfolio Investor RE by Collateral Type as a % of Total Commercial Loans ($ in millions)Investment Real Estate = 32.2% of the Commercial Loan Portfolio 13 Commercial Loan Portfolio Concentrations 13
Investment Securities Portfolio 14 Highlights High quality, liquid, diverse portfolio with relatively
short duration.Fair value of $1.25 billion, an increase of $175.4 million in 1Q’21.Net unrealized gain of $7.9 million, representing 0.64% of amortized cost.Portfolio ratings: 72% AAA rated (or backed by the U.S. Government); 14% AA rated; 5% A
rated; 5% BAA rated and 3% unrated.3.38 year estimated average duration with a weighted average yield of 1.96% (with TE gross up).Approximately 25.20% of the portfolio is variable rate. $1.2B Investment Portfolio by Type
(3/31/21) Investment Securities Activity – 1Q’21 Total repayments include $1.73 million of repayments on Treasury/Agency securities not shown in the table. Agency MBS, CMO & CMBS Municipal/Govern-ment Asset-backed Private Label
Mortgage Corp. Total (Dollars in 000’s) Purchases (at cost) $188,933 $136,525 $20,746 $3,000 $24,661 $373,866 Repayments
(a) 48,457 8,412 46,553 2,804 1,676 109,636 Sales 76,763 -- -- -- -- 76,763 Purchases in 1Q’21 Yield (TE) 1.44% 2.25% 0.83% 1.11% 1.41% 1.70% Duration 4.85% 7.37% 0.46% 6.21% 4.47% 5.52%
Strong Capital Position 15 Source: S&P Global Market Intelligence and Company documents.Note:
Company closed acquisition of TCSB Bancorp, Inc. in Q2 ‘18. TCE / TA (%) Leverage Ratio (%) CET1 Ratio (%) Total RBC Ratio (%) IBCP Target 8.50% - 9.50 % Capital retention to support (i) organic growth and (ii) acquisitions; and
Return of capital through (i) strong and consistent dividend and (ii) share repurchases Long-Term Capital Priorities: Strong Capital Position
HighlightsInterest rate sensitivity profile of the loan and securities portfolios, in combination with a
low cost core deposit base, positions us as slightly asset sensitive.Net interest income decreased $0.7 million, or 2.3%, in 1Q’21 vs. 4Q’20 due primarily to a $3.0 million decrease in interest income that was partially offset by a $2.3 million
decrease in interest expense on deposits. Net interest margin was 3.05% during the first quarter of 2021, compared to 3.63% in the year-ago quarter and 3.12% in the fourth quarter of 2020. Yields, NIM and Cost of Funds (%) Net Interest Income
($ in Millions) Net Interest Margin/Income 16
Linked Quarter Analysis 17 1Q’21 NIM Changes Linked Quarter Average Balances and FTE Rates Yield on
average interest-earning assets declined 30 basis points.Yield on PPP round 1 loans decreased 48 basis points due to a decline in fee accretion. Commercial loan yields net of PPP declined 34 basis points compared to the prior quarter. A
combination of change in mix and lower yields on new volume loans is the primary driver. Continued growth in liquid assets combined with declining investment yields negatively impacted the net interest margin by 7 basis points (IBD growth 2
bps, investment growth 4 bps, investment yield 1 bps) in Q1’21.Funding costs decreased by 7 basis points (funding cost 0.03%, deferred hedge loss 0.04%) in Q1’21. 1Q’21 Highlights Q4'20 3.12% Decline in cost of funds 0.07% Discount
accretion on commercial loans -0.02% Accelerated amortization of loss on derivatives 0.16% Decline in earning asset yields (growth and mix) -0.29% Q1'21 3.05%
Strong Non-interest Income 18 Diverse sources of non-interest income – representing 46.6% of operating
revenue in 1Q’21.1Q’21 interchange income of $3.0 million compared to $2.5 million in the prior year quarter. This increase is due to an increase in transaction volume. COVID-19 has adversely impacted service charges on deposits. In addition,
we have suspended certain electronic banking fees due to the enhanced need for customers to access this channel.Mortgage banking: $12.8 million in net gains on mortgage loans in 1Q’21 vs. $8.8 million in the year ago quarter. A combination of
higher sales volumes and stronger profit margins led to this increase.$509.0 million in mortgage loan originations in 1Q’21 vs. $311.1 million in 1Q’20 and $502.5 million in 4Q’20.1Q’21 mortgage loan servicing includes a $4.6 million ($0.17 per
diluted share, after tax) increase in fair value adjustment due to price compared to a dcrease of $5.9 million ($0.21 per diluted share, after tax) in the year ago quarter. Source: Company documents. $26.4M 2021 1Q’21 Non-interest
Income (millions) Non-interest Income Trends ($M) Highlights
Focus on Improved Efficiency 19 Source: Company documents. Non-interest Expense ($M) Highlights
Efficiency Ratio (4 quarter rolling average) Continued focus on expense control and driving positive operating leverage. Compensation and employee benefits expense of $18.5 million compared to $16.5 in the prior year quarter. $1.3 million
increase in incentive compensation accrual due to an increase in expected payout levels compared to Q1’20. $0.2 million gain on sale of ORE/ORA certain retail properties.1Q’21 non-interest expense included $0.22 million of conversion related
expenses (associated with core data processing conversion that is in process).Opportunities exist to gain additional efficiencies as we continue to optimize our delivery channels.
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) 20
Classified Assets and New Default Trends Note: Dollars all in millions. Total Classified
Assets Commercial Loan New Defaults Total Loan New Defaults Retail Loan New Defaults 21
Troubled Debt Restructurings (TDRs) TDR HighlightsWorking with client base to maximize sustainable
performance.The specific reserves allocated to TDRs totaled $4.6 million at 3/31/21.A majority of our TDRs are performing under their modified terms but remain in TDR status for the life of the loan.93.3% of TDRs are current as of
3/31/21.Commercial TDR Statistics:23 loans with $6.1 million book balance.82.2% performing.WAR of 5.26% (accruing loans).Well seasoned portfolio; 96% of accruing loans are not only performing but have been for over a year since
modification.Retail TDR Statistics:431 loans with $36.1 million book balance.96.0% performing.WAR of 4.27% (accruing loans).Well seasoned portfolio; over 92% of accruing loans are not only performing but have been for over a year since
modification. TDRs ($ in Millions) 93% of TDRs are Current 22
Note: Dollars all in millions. Provision for Credit Losses Loan Net Charge-Offs/Recoveries
Allowance for Credit Losses Credit Cost Summary 23
Adoption of CECL 24 Adopted CECL on January 1, 2021 as allowed under the CARES Act extension. CECL day
1 adjustment to the ACL of $11.7 million which was within our disclosed range of $10.5 million to $12.5.Reserve for unfunded lending commitments increased $1.5 million.Retained earnings decreased $10.3 million. Allowance for credit losses (ACL)
totaled $46.8 million at March 31, 2021. 1.68% of total portfolio loans 1.83% of total portfolio loans net of PPP loansQ1’21 provision for credit losses was a credit of $0.5 million.CECL Model Details:Discounted cash flow model with fourteen
loan segments.Probability of default and loss given default based on long-term average for commercial loans and regression for mortgage and installment loans.Regression uses one year forecast / with immediate reversion to mean driven primarily
by unemployment.Unemployment data: median of Bloomberg survey: 6.3% Q1, falls to 5.1% at the end of the one year forecast.Q factors: economic shock, forbearance activity, and loans in high risk industries. Provision for Credit Losses
Detail Highlights
2021 Outlook Update Category Outlook Lending Continued growthLoan payoffs related to the Paycheck
Protection Program will make loan growth challenging in 2021. IBCP goal of low (1%) single digit overall loan growth (5% - 7% excluding PPP impact), primarily supported by increases in commercial loans, mortgage loans and consumer loans. This
growth forecast also assumes an improving Michigan economy.Q1 Update: Total loans increased $50.5 million (1.85%) in Q1’21. PPP round two loan production of $128.2 million is primarily responsible for the increase in total loans. PPP round one
loans decreased $63.8 million due to loan forgiveness from the SBA. Commercial loans net of PPP production was a decrease of $5.6 million. Net Interest Income Growth driven primarily by higher average earning assetsIBCP goal of approximately
0.5% increase in net interest income (NII) over 2020. Expect the net interest margin (NIM) to trend lower (0.10% - 0.15%) in 2021 compared to full-year 2020. Primary driver is a reduction in earing asset yield. The forecast assumes no changes
in the target federal funds rate in 2021 and long-term interest rates up very slightly over year end 2020 levels. Q1 Update: 1Q’21 net interest income was $0.1 million (0.31%) higher than the prior year quarter. The net interest margin was
3.05% for the quarter down 0.07% from the linked quarter and 0.58% from the prior year quarter. This primary driver of the decrease in the net interest margin is a higher allocation to lower yielding assets (mix), lower yields on new volume
loans, lower yields on securities and slower accretion of PPP fees. Provision for Credit Losses Steady asset quality metricsVery 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 1.30% at 12/31/20. The initial (effective 1/1/20210) CECL adjustment is now expected to be approximately $10.5
million to $12.5 million. This CECL adjustment is still subject to certain final review procedures that will be completed in 1Q’21. A full year 2021 provision (expense) for credit losses of approximately 0.25% to 0.35% of average total
portfolio loans would not be unreasonable.Q1 Update: The impact from our CECL adoption was an increase to our beginning of the year allowance for credit losses of $11.7 million which was within our disclosed range of $10.5 million to 12.5
million. The provision for credit losses was a credit of $0.5 million in the first quarter. If credit quality trends persist it is likely the full year provision for the ACL will be below our forecasted range of 0.25% to 0.35% of average total
portfolio loans. Non-interest Income IBCP forecasted 2021 quarterly range of $13 million to $16 million with the total for the year down 30% to 35% from 2020 actual of $80.7 millionExpect mortgage loan origination volumes in 2021 to be down
by approximately 30%. Expect overall mortgage banking revenues (gain on sale and mortgage loan servicing) to decline in 2020 due to lower volume as well as margin on loans sold. Expect service charges on deposits and interchange income in 2021
to be collectively comparable to 2020 (i.e. a decline in servicing charges on deposits due to lower NSF fees to be largely offset by an increase in interchange income). Q1 Update: Non-interest income totaled $26.4 million in Q1’21. Mortgage
loan production as well as net gain on sale of mortgages was stronger than forecasted. Mortgage loans servicing added $5.2 million in non-interest income in Q1’21. The mortgage loan pipeline continues to be strong although refinance activity is
slowing down. Non-interest Expenses IBCP forecasted 2021 quarterly range of $28.5 to $29.5 million with the total for the year down (4%-6%) from the 2020 actual of $122.4 million.Expect total compensation and employee benefits to be lower in
2021 compared to 2020 due primarily to a reduction in incentive compensation. Most other categories of non-interest expense expected to have small (1% to 2%) increases.Q1 Update: Total non-interest expense was $30.0 million in the first
quarter, outside our $28.5 to $29.5 million targeted quarterly range. An increase in the accrual for incentive based compensation due to a higher than anticipated payout level is the primary driver of the increase in expense. Non-interest
expense net of compensation and employee benefits is down $0.7 million from the prior year quarter. Income Taxes Approximately a 20% effective income tax rate in 2021. This assumes a 21% statutory federal corporate income tax rate during
2021. Q1 Update: Q1’21 actual effective income tax rate of 18.8%. Share Repurchases 2021 share repurchase authorization at approximately 5% of outstanding shares. Expect total share repurchases in 2021 at the mid-point of this
authorization.Q1 Update: The company repurchased 180,667 at an average price of $19.93 in 1Q’21. 25
Strategic Initiatives 26 Serve consumers and businesses in our markets in an inclusive way with
straight forward marketing and outreach efforts and fostering relationships and strong customer 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 through outbound calling.Add new customers and grow revenue through the addition of new talented sales professionals in our existing markets. 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.Successfully complete 2021 core
conversion, capitalizing upon opportunity to 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 services.Build/enhance dashboard reporting and business intelligence. Process Improvement & Cost
Controls Create and maintain an engaged workforce through a culture and environment that promotes diversity, equity, inclusion and professional development. Empower and support our team members to serve our customers. 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. Risk Management
Q&A and Closing Remarks Question and Answer SessionClosing RemarksThank you for attending!NASDAQ:
IBCP 27