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CST: 12/11/2019 10:08:51   

Independent Bank Corporation Reports 2019 Third Quarter Results

19 Days ago

GRAND RAPIDS, Mich., Oct. 24, 2019 (GLOBE NEWSWIRE) -- Independent Bank Corporation (NASDAQ: IBCP) reported third quarter 2019 net income of $12.4 million, or $0.55 per diluted share, versus net income of $11.9 million, or $0.49 per diluted share, in the prior-year period.  For the nine months ended Sept. 30, 2019, the Company reported net income of $32.6 million, or $1.40 per diluted share, compared to net income of $29.9 million, or $1.27 per diluted share, in the prior-year period.  The increases in third quarter and year to date 2019 earnings as compared to 2018 primarily reflect an increase in net interest income that was partially offset by increases in non-interest expense and income tax expense, and for the year-to-date period, a decline in non-interest income.

Significant items impacting comparable quarterly and year to date 2019 and 2018 results include the following:

  • Changes in the fair value due to price of capitalized mortgage loan servicing rights (the “MSR Changes”) of a negative $2.2 million ($0.08 per diluted share, after taxes) and a negative $7.0 million ($0.24 per diluted share, after taxes) for the three- and nine-months ended Sept. 30, 2019, respectively, as compared to positive MSR Changes of $0.6 million ($0.02 per diluted share, after taxes) and $2.6 million ($0.09 per diluted share, after taxes) for the three- and nine-months ended Sept. 30, 2018, respectively.
  • A reduction in non-interest expense of $0.3 million ($0.01 per diluted share, after taxes) for the three- and nine-months ended Sept. 30, 2019 related to the Company’s use of its Federal Deposit Insurance Corporation (“FDIC”) Small Bank Assessment Credit (the “Assessment Credit”).  After the application of the Assessment Credit against the Company’s June 30, 2019 FDIC deposit insurance expense billing, approximately $0.4 million of Assessment Credit remains available to offset future expense.
  • The acquisition of TCSB Bancorp, Inc. (“TCSB”), and its subsidiary, Traverse City State Bank, on Apr. 1, 2018 (referred to as the “Merger” or “TCSB Acquisition”) and the associated data processing systems conversions in June 2018.  The total assets, loans and deposits acquired in the Merger were approximately $342.8 million, $295.8 million (including $1.3 million of loans held for sale) and $287.7 million, respectively.
  • Merger related expenses of $0.1 million ($0.003 per diluted share, after taxes) and $3.4 million ($0.11 per diluted share, after taxes) for the three- and nine-months ended Sept. 30, 2018, respectively.

Third quarter 2019 highlights include:

  • Annualized return on average assets and return on average equity of 1.42% and 14.64%, respectively (these ratios increase to 1.58% and 16.34%, respectively, when excluding the after tax impact of the MSR Changes and the Assessment Credit);
  • Year-over-year increases in net income and diluted earnings per share of  4.4% and 12.2%, respectively;
  • A year-over-year increase in quarterly net interest income of $1.2 million, or 4.0%;
  • Total portfolio loan net growth of $15.9 million, or 2.3% annualized (the annualized growth rate increases to 7.7% when excluding the impact of $36.6 million of portfolio mortgage loans moved to held for sale as of Sept. 30, 2019);
  • Continued strong asset quality metrics; and
  • The payment of an 18 cent per share dividend on common stock on Aug. 15, 2019.

William B. (“Brad”) Kessel, the President and Chief Executive Officer of Independent Bank Corporation, commented: “We are pleased to report another quarter of solid financial performance.  This performance reflects strong mortgage banking revenues, favorable asset quality metrics, and continued loan growth. Excluding the after-tax impacts of the MSR Changes, Assessment Credit and the Merger related expenses, net income and diluted earnings per share increased by 20.5% and 29.8%, respectively, in the third quarter of 2019 as compared to the third quarter of 2018.  As we look ahead to the last quarter of 2019 and beyond, we are focused on building on the momentum generated in the first nine months of the year.”

Operating Results

The Company’s net interest income totaled $30.9 million during the third quarter of 2019, an increase of $1.2 million, or 4.0% from the year-ago period, and up $0.1 million, or 0.4%, from the second quarter of 2019.  The Company’s tax equivalent net interest income as a percent of average interest-earning assets (the “net interest margin”) was 3.76% during the third quarter of 2019, compared to 3.91% in the year-ago period, and 3.87% in the second quarter of 2019.  The year-over-year quarterly increase in net interest income is due to an increase in average interest-earning assets that was partially offset by a decline in the net interest margin.  Average interest-earning assets were $3.29 billion in the third quarter of 2019, compared to $3.04 billion in the year ago quarter and $3.19 billion in the second quarter of 2019.  Third quarter 2019 and 2018 interest income on loans includes $0.4 million and $0.6 million, respectively, of accretion of the discount recorded on the TCSB loans acquired in the Merger. 

For the first nine months of 2019, net interest income totaled $91.9 million, an increase of $9.3 million, or 11.2% from the first nine months of 2018.  The Company’s net interest margin for the first nine months of 2019 was 3.83% compared to 3.86% in 2018.  The increase in net interest income for the first nine months of 2019 is due an increase in average interest-earning assets that was partially offset by a decline in the net interest margin.

The decline in the net interest margin in 2019 as compared to 2018 primarily reflects the impact of lower market interest rates and a flattening of the yield curve.

Non-interest income totaled $12.3 million and $32.1 million, respectively, for the third quarter and first nine months of 2019, compared to $11.8 million and $35.9 million in the respective comparable year ago periods.  These changes were primarily due to variances in mortgage banking related revenues (net gains on mortgage loans and mortgage loan servicing, net).
                                                                                                                                
Net gains on mortgage loans were $5.7 million and $2.7 million in the third quarters of 2019 and 2018, respectively.  For the first nine months of 2019, net gains on mortgage loans totaled $13.6 million compared to $8.6 million in 2018.  These increases were primarily due to higher mortgage loan origination and sales volumes in 2019 reflecting lower market interest rates, which have increased mortgage loan refinance activity.

Mortgage loan servicing, net, generated a loss of $1.6 million and income of $1.2 million in the third quarters of 2019 and 2018, respectively. For the first nine months of 2019, mortgage loan servicing, net, generated a loss of $4.7 million as compared to income of $4.7 million in 2018. This activity is summarized in the following table:

    Three Months Ended   Nine Months Ended
    9/30/2019 9/30/2018 9/30/2019 9/30/2018
Mortgage loan servicing, net:   (Dollars in thousands)  
Revenue, net $ 1,583   $ 1,410   $ 4,574   $ 3,974  
Fair value change due to price      (2,163 )     610       (7,036 )     2,586  
Fair value change due to pay-downs   (982 )   (808 )   (2,222 )   (1,892 )
Total $(1,562 ) $ 1,212   $(4,684 ) $ 4,668  

Non-interest expenses totaled $27.8 million in the third quarter of 2019, compared to $26.7 million in the year-ago period.  For the first nine months of 2019, non-interest expenses totaled $82.4 million compared to $80.6 million in 2018.  These year-over-year increases in non-interest expense are primarily due to higher compensation, health insurance, data processing and interchange costs as well as lower gains on other real estate and repossessed assets. 

The Company recorded an income tax expense of $3.1 million and $8.0 million in the third quarter and first nine months of 2019, respectively.  This compares to an income tax expense of $2.9 million and $7.0 million in the third quarter and first nine months of 2018, respectively.  The increase in income tax expense is primarily due to higher pre-tax earnings in 2019.

Asset Quality

Commenting on asset quality, President and CEO Kessel added: “Non-performing loans and assets as well as loan net charge-offs remain at low levels.  In addition, thirty- to eighty-nine day delinquency rates at Sept. 30, 2019 were 0.04% for commercial loans and 0.35% for mortgage and consumer loans.  These early stage delinquency rates continue to be well-managed.”

A breakdown of non-performing loans(1) by loan type is as follows:

Loan Type   9/30/2019 12/31/2018 9/30/2018
  (Dollars in thousands)
Commercial $   834   $ 2,220   $   2,782  
Consumer/installment   935     781     756  
Mortgage   5,355     6,033     5,805  
Total non-accrual loans   7,124     9,034     9,343  
Less – government guaranteed loans   475     460     279  
Total non-performing loans $   6,649   $ 8,574   $   9,064  
Ratio of non-performing loans to total portfolio loans   0.24 %   0.33 %   0.35 %
Ratio of non-performing assets to total assets   0.24 %   0.29 %   0.32 %
Ratio of the allowance for loan losses to non-performing loans   393.26 %     290.27 %   269.21 %

(1) Excludes loans that are classified as “troubled debt restructured” that are still performing.

Non-performing loans have decreased $1.9 million from Dec. 31, 2018.  This decrease principally reflects declines in non-performing commercial and mortgage loans due primarily to pay-downs, charge-offs and transfers to other real estate.  Other real estate and repossessed assets totaled $1.8 million at Sept. 30, 2019, compared to $1.3 million at Dec. 31, 2018.  This increase is primarily due to the addition of a $0.6 million commercial office building located in Grand Rapids during the second quarter of 2019. 

The provision for loan losses was a credit of $0.3 million and $0.1 million in the third quarters of 2019 and 2018, respectively.  The provision for loan losses was an expense of $1.0 million and $0.9 million in the first nine months of 2019 and 2018, respectively. The level of the provision for loan losses in each period reflects the Company’s overall assessment of the allowance for loan losses, taking into consideration factors such as loan growth, loan mix, levels of non-performing and classified loans and loan net charge-offs.  The Company recorded loan net recoveries of $0.5 million and $1.0 million in the third quarters of 2019 and 2018, respectively.  For the first nine months of 2019 and 2018, the Company recorded loan net recoveries of $0.2 million and $0.9 million, respectively.  At Sept. 30, 2019, the allowance for loan losses totaled $26.1 million, or 0.96% of total portfolio loans, compared to $24.9 million, or 0.96% of total portfolio loans, at Dec. 31, 2018. Excluding the remaining TCSB acquired loan balances, the allowance for loan losses was equal to 1.02% and 1.06% of portfolio loans at Sept. 30, 2019 and Dec. 31, 2018, respectively.

Balance Sheet, Liquidity and Capital

Total assets were $3.55 billion at Sept. 30, 2019, an increase of $197.6 million from Dec. 31, 2018, primarily reflecting loan growth.  Loans, excluding loans held for sale, were $2.72 billion at Sept. 30, 2019, compared to $2.58 billion at Dec. 31, 2018.  During the third quarter of 2019, approximately $36.6 million of portfolio mortgage loans were transferred to held for sale and were valued at the lower of cost or fair value at Sept. 30, 2019.  The Company expects to securitize/sell these loans on a non-recourse basis in Oct. 2019 and record a gain of approximately $1.1 million upon the completion of this transaction. 

Deposits totaled $3.05 billion at Sept. 30, 2019, an increase of $138.9 million from Dec. 31, 2018.  The increase in deposits is primarily due to growth in reciprocal deposits that was partially offset by a decline in brokered time deposits. 

Cash and cash equivalents totaled $82.4 million at Sept. 30, 2019, versus $70.2 million at Dec. 31, 2018. Securities available for sale totaled $439.6 million at Sept. 30, 2019, compared to $427.9 million at Dec. 31, 2018.

Total shareholders’ equity was $340.2 million at Sept. 30, 2019, or 9.58% of total assets.  Tangible common equity totaled $306.3 million at Sept. 30, 2019, or $13.63 per share.  The Company’s wholly owned subsidiary, Independent Bank, remains significantly above “well capitalized” for regulatory purposes with the following ratios:

Regulatory Capital Ratios  9/30/2019  12/31/2018 Well Capitalized Minimum
Tier 1 capital to average total assets   9.43 %   9.44 % 5.00 %
Tier 1 common equity to risk-weighted assets 11.75 % 11.94 % 6.50 %
Tier 1 capital to risk-weighted assets 11.75 % 11.94 % 8.00 %
Total capital to risk-weighted assets 12.76 % 12.94 % 10.00 %

Share Repurchase Plan

As previously announced, on Dec. 18, 2018, the Board of Directors of the Company authorized a 2019 share repurchase plan.  Under the terms of the original 2019 share repurchase plan, the Company was authorized to buy back up to 5% of its outstanding common stock.  On June 18, 2019, the Board of Directors of the Company supplemented the 2019 share repurchase plan and authorized the repurchase of up to 300,000 additional common shares. The 2019 share repurchase plan is authorized to last through Dec. 31, 2019. During the first nine months of 2019, the Company repurchased 1,204,688 shares at a weighted average purchase price of $21.82 per share (including 25,000 shares at a weighted average purchase price of $20.09 per share in the third quarter of 2019).

Earnings Conference Call
Brad Kessel, President and CEO, and Rob Shuster, CFO, will review the quarterly results in a conference call for investors and analysts beginning at 11:00 am ET on Thursday, Oct. 24, 2019.

To participate in the live conference call, please dial 1-866-200-8394. Also the conference call will be accessible through an audio webcast with user-controlled slides via the following event site: https://services.choruscall.com/links/ibcp191024.html.

 

A playback of the call can be accessed by dialing 1-877-344-7529 (Conference ID # 10134896). The replay will be available through Oct. 31, 2019.

About Independent Bank Corporation

Independent Bank Corporation (NASDAQ: IBCP) is a Michigan-based bank holding company with total assets of approximately $3.6 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, 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 release may contain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Any statements that are not historical facts, including statements about our expectations, beliefs, plans, strategies, predictions, forecasts, objectives, or assumptions of future events or performance, may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipates,” “believes,” “expects,” “can,” “could,” “may,” “predicts,” “potential,” “opportunity,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “seeks,” “intends” and similar words or phrases. Accordingly, these statements involve estimates, known and unknown risks, assumptions, and uncertainties that could cause actual strategies, actions, or results to differ materially from those expressed in them, and are not guarantees  of timing, future results, events, or performance. Because forward-looking statements are necessarily only estimates of future strategies, actions, or results, based on management’s current expectations, assumptions, and estimates on the date hereof, there can be no assurance that actual strategies, actions or results will not differ materially from expectations. Therefore, readers are cautioned not to place undue reliance on such statements.  Factors that could cause or contribute to such differences are changes in general economic, political or industry conditions; changes in monetary and fiscal policies, including the interest rate policies of the Federal Reserve Board; volatility and disruptions in capital and credit markets; the interdependence of financial service companies; changes in regulation or oversight; unfavorable developments concerning credit quality; any future acquisitions or divestitures; the effects of more stringent capital or liquidity requirements; declines or other changes in the businesses or industries of Independent Bank Corporation's customers; the implementation of Independent Bank Corporation's strategies and business models; Independent Bank Corporation's ability to utilize technology to efficiently and effectively develop, market and deliver new products and services; operational difficulties, failure of technology infrastructure or information security incidents; changes in the financial markets, including fluctuations in interest rates and their impact on deposit pricing; competitive product and pricing pressures among financial institutions within Independent Bank Corporation's markets; changes in customer behavior; management's ability to maintain and expand customer relationships; management's ability to retain key officers and employees; the impact of legal and regulatory proceedings or determinations; the effectiveness of methods of reducing risk exposures; the effects of terrorist activities and other hostilities; the effects of catastrophic events; changes in accounting standards and the critical nature of Independent Bank Corporation's accounting policies.

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, 2018 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.

Contact: William B. Kessel, President and CEO, 616.447.3933
  Robert N. Shuster, Chief Financial Officer, 616.522.1765

 

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES  
Consolidated Statements of Financial Condition  
    September 30, December 31,
      2019       2018    
                   
    (unaudited)  
    (In thousands, except share  
    amounts)  
Assets  
Cash and due from banks   $ 38,662     $ 23,350    
Interest bearing deposits     43,755       46,894    
  Cash and Cash Equivalents     82,417       70,244    
Interest bearing deposits - time     499       595    
Equity securities at fair value     -       393    
Securities available for sale     439,592       427,926    
Federal Home Loan Bank and Federal Reserve Bank stock, at cost     18,359       18,359    
Loans held for sale, carried at fair value     87,358       44,753    
Loans held for sale, carried at lower of cost or fair value     36,622       41,471    
Loans          
Commercial     1,189,017       1,144,481    
Mortgage     1,070,035       1,042,890    
Installment     463,394       395,149    
  Total Loans     2,722,446       2,582,520    
Allowance for loan losses     (26,148 )     (24,888 )  
  Net Loans     2,696,298       2,557,632    
Other real estate and repossessed assets     1,789       1,299    
Property and equipment, net     37,424       38,777    
Bank-owned life insurance     55,412       55,068    
Deferred tax assets, net     2,773       5,779    
Capitalized mortgage loan servicing rights     16,906       21,400    
Other intangibles     5,598       6,415    
Goodwill     28,300       28,300    
Accrued income and other assets     41,490       34,870    
  Total Assets   $ 3,550,837     $ 3,353,281    
           
Liabilities and Shareholders' Equity  
Deposits          
Non-interest bearing   $ 883,138     $ 879,549    
Savings and interest-bearing checking     1,178,695       1,194,865    
Reciprocal     416,200       182,072    
Time     374,579       385,981    
Brokered time     199,700       270,961    
  Total Deposits     3,052,312       2,913,428    
Other borrowings     63,974       25,700    
Subordinated debentures     39,439       39,388    
Accrued expenses and other liabilities     54,867       35,771    
  Total Liabilities     3,210,592       3,014,287    
           
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:          
22,480,748 shares at September 30, 2019 and 23,579,725 shares at December 31, 2018     351,839       377,372    
Accumulated deficit     (8,221 )     (28,270 )  
Accumulated other comprehensive loss     (3,373 )     (10,108 )  
  Total Shareholders’ Equity     340,245       338,994    
  Total Liabilities and Shareholders’ Equity   $ 3,550,837     $ 3,353,281    
           


INDEPENDENT BANK CORPORATION AND SUBSIDIARIES  
Consolidated Statements of Operations  
                       
    Three Months Ended   Nine Months Ended  
    September 30, June 30,   September 30, September 30,  
      2019       2019       2018       2019       2018    
                                           
    (unaudited)  
Interest Income   (In thousands, except per share amounts)  
Interest and fees on loans   $ 34,226     $ 33,836     $ 31,000     $ 100,743     $ 84,027    
Interest on securities                      
Taxable     2,771       3,034       2,737       8,811       8,092    
Tax-exempt     319       324       412       1,017       1,335    
Other investments     495       379       303       1,449       898    
  Total Interest Income     37,811       37,573       34,452       112,020       94,352    
Interest Expense                      
Deposits     6,236       6,021       3,976       17,938       9,472    
Other borrowings and subordinated debentures     703       796       779       2,211       2,267    
  Total Interest Expense     6,939       6,817       4,755       20,149       11,739    
  Net Interest Income     30,872       30,756       29,697       91,871       82,613    
Provision for loan losses     (271 )     652       (53 )     1,045       912    
  Net Interest Income After Provision for Loan Losses     31,143       30,104       29,750       90,826       81,701    
Non-interest Income                      
Service charges on deposit accounts     2,883       2,800       3,166       8,323       9,166    
Interchange income     2,785       2,604       2,486       7,744       7,236    
Net gains (losses) on assets                      
Mortgage loans     5,677       4,302       2,745       13,590       8,571    
Securities     -       -       93       304       (71 )  
Mortgage loan servicing, net     (1,562 )     (1,907 )     1,212       (4,684 )     4,668    
Other     2,492       2,106       2,134       6,862       6,294    
  Total Non-interest Income     12,275       9,905       11,836       32,139       35,864    
Non-interest Expense                      
Compensation and employee benefits     16,673       15,931       16,169       48,955       46,506    
Occupancy, net     2,161       2,131       2,233       6,797       6,667    
Data processing     2,282       2,171       2,051       6,597       6,180    
Furniture, fixtures and equipment     1,023       1,006       1,043       3,058       3,029    
Interchange expense     891       753       715       2,332       1,974    
Communications     733       717       727       2,219       2,111    
Loan and collection     714       628       531       1,976       1,900    
Advertising     636       627       594       1,935       1,578    
Legal and professional     541       371       477       1,281       1,311    
FDIC deposit insurance     13       342       270       723       750    
Credit card and bank service fees     100       97       108       300       310    
Net (gains) losses on other real estate                      
and repossessed assets     52       (198 )     (325 )     (27 )     (619 )  
Merger related expenses     -       -       98       -       3,354    
Other     2,029       2,016       2,049       6,284       5,585    
  Total Non-interest Expense     27,848       26,592       26,740       82,430       80,636    
  Income Before Income Tax     15,570       13,417       14,846       40,535       36,929    
Income tax expense     3,125       2,687       2,921       7,979       7,026    
  Net Income   $ 12,445     $ 10,730     $ 11,925     $ 32,556     $ 29,903    
Net Income Per Common Share                      
Basic   $ 0.55     $ 0.47     $ 0.49     $ 1.41     $ 1.29    
Diluted   $ 0.55     $ 0.46     $ 0.49     $ 1.40     $ 1.27    

 

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Selected Financial Data
                     
  September 30,
  June 30,   March 31,   December 31,
  September 30,  
    2019       2019       2019       2018       2018    
                                         
  (unaudited)  
     
  (Dollars in thousands except per share data)
Three Months Ended                    
Net interest income $ 30,872     $ 30,756     $ 30,243     $ 30,669     $ 29,697    
Provision for loan losses   (271 )     652       664       591       (53 )  
Non-interest income   12,275       9,905       9,959       8,951       11,836    
Non-interest expense   27,848       26,592       27,990       26,825       26,740    
Income before income tax   15,570       13,417       11,548       12,204       14,846    
Income tax expense   3,125       2,687       2,167       2,268       2,921    
Net income $ 12,445     $ 10,730     $ 9,381     $ 9,936     $ 11,925    
                     
Basic earnings per share $ 0.55     $ 0.47     $ 0.40     $ 0.41     $ 0.49    
Diluted earnings per share   0.55       0.46       0.39       0.41       0.49    
Cash dividend per share   0.18       0.18       0.18       0.15       0.15    
                     
Average shares outstanding   22,486,041       23,035,526       23,588,313       23,988,810       24,148,768    
Average diluted shares outstanding   22,769,572       23,313,346       23,884,744       24,339,782       24,514,814    
                     
  Performance Ratios                    
  Return on average assets   1.42   %   1.27   %   1.13   %   1.18   %   1.46   %
  Return on average common equity   14.64       12.72       11.14       11.43       13.83    
Efficiency ratio (1)   63.76       64.57       69.27       67.11       63.63    
                     
As a Percent of Average Interest-Earning Assets (1)                  
  Interest income   4.60   %   4.73   %   4.70   %   4.66   %   4.53   %
  Interest expense   0.84       0.86       0.82       0.73       0.62    
  Net interest income   3.76       3.87       3.88       3.93       3.91    
                     
  Average Balances                    
  Loans $ 2,786,544     $ 2,699,648     $ 2,621,871     $ 2,627,614     $ 2,550,302    
  Securities available for sale   423,255       441,523       446,734       433,903       442,949    
  Total earning assets   3,285,081       3,191,264       3,152,177       3,121,640       3,038,221    
  Total assets   3,483,296       3,388,398       3,357,003       3,327,002       3,247,603    
  Deposits   3,023,334       2,929,885       2,909,096       2,873,889       2,789,969    
  Interest bearing liabilities   2,219,133       2,155,660       2,115,549       2,058,720       1,986,905    
  Shareholders' equity   337,162       338,254       341,592       344,779       341,998    
                     
End of Period                    
  Capital                    
  Tangible common equity ratio   8.71   %   8.72   %   9.26   %   9.17   %   9.51   %
  Average equity to average assets   9.68       9.98       10.18       10.36       10.53    
  Tangible common equity per share                    
  of common stock $ 13.63     $ 13.19     $ 13.17     $ 12.90     $ 12.84    
  Total shares outstanding   22,480,748       22,498,776       23,560,179       23,579,725       24,150,341    
                     
  Selected Balances                    
  Loans $ 2,722,446     $ 2,706,526     $ 2,618,795     $ 2,582,520     $ 2,562,578    
  Securities available for sale   439,592       430,305       461,531       427,926       436,957    
  Total earning assets   3,348,631       3,239,247       3,180,655       3,162,911       3,078,083    
  Total assets   3,550,837       3,438,302       3,383,606       3,353,281       3,297,124    
  Deposits   3,052,312       2,978,885       2,934,225       2,913,428       2,798,643    
  Interest bearing liabilities   2,272,587       2,194,970       2,141,083       2,098,967       2,036,770    
  Shareholders' equity   340,245       330,846       344,726       338,994       345,204    
                     
(1) Presented on a fully tax equivalent basis assuming a marginal tax rate of 21%.          

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   Nine Months Ended      
  September 30,   September 30,      
    2019       2018       2019       2018        
                                     
  (Dollars in thousands)      
Net Interest Margin, Fully Taxable                                    
  Equivalent ("FTE")                                    
                                     
Net interest income $ 30,872     $ 29,697     $ 91,871     $ 82,613        
  Add: taxable equivalent adjustment   100       123       319       384        
Net interest income - taxable equivalent $ 30,972     $ 29,820     $ 92,190     $ 82,997        
Net interest margin (GAAP) (1)   3.74 %     3.88 %     3.82 %     3.84 %      
Net interest margin (FTE) (1)   3.76 %     3.91 %     3.83 %     3.86 %      
                     
(1) Annualized.                    
                     
Tangible Common Equity Ratio                    
  September 30,   June 30,   March 31,   December 31,   September 30,  
    2019       2019       2019       2018       2018    
                                         
  (Dollars in thousands)  
Common shareholders' equity $ 340,245     $ 330,846     $ 344,726     $ 338,994     $ 345,204    
Less:                    
  Goodwill   28,300       28,300       28,300       28,300       28,300    
  Other intangibles   5,598       5,870       6,143       6,415       6,709    
Tangible common equity $ 306,347     $ 296,676     $ 310,283     $ 304,279     $ 310,195    
                     
Total assets $ 3,550,837     $ 3,438,302     $ 3,383,606     $ 3,353,281     $ 3,297,124    
Less:                    
  Goodwill   28,300       28,300       28,300       28,300       28,300    
  Other intangibles   5,598       5,870       6,143       6,415       6,709    
Tangible assets $ 3,516,939     $ 3,404,132     $ 3,349,163     $ 3,318,566     $ 3,262,115    
                     
Common equity ratio   9.58 %     9.62 %     10.19 %     10.11 %     10.47 %  
Tangible common equity ratio   8.71 %     8.72 %     9.26 %     9.17 %     9.51 %  
                     
Tangible Common Equity per Share of Common Stock:              
                     
Common shareholders' equity $ 340,245     $ 330,846     $ 344,726     $ 338,994     $ 345,204    
Tangible common equity $ 306,347     $ 296,676     $ 310,283     $ 304,279     $ 310,195    
Shares of common stock                    
outstanding (in thousands)   22,481       22,499       23,560       23,580       24,150    
                     
Common shareholders' equity per share                    
of common stock $ 15.13     $ 14.70     $ 14.63     $ 14.38     $ 14.29    
Tangible common equity per share                    
of common stock $ 13.63     $ 13.19     $ 13.17     $ 12.90     $ 12.84    
                     

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.

 

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