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Independent Bank Corporation Reports 2019 Third Quarter Results

Company Release - 10/24/2019 7:59 AM ET

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
   9/30/20199/30/20189/30/20199/30/2018
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  9/30/201912/31/20189/30/2018
 (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 12/31/2018Well Capitalized Minimum
Tier 1 capital to average total assets  9.43%  9.44%5.00%
Tier 1 common equity to risk-weighted assets11.75%11.94%6.50%
Tier 1 capital to risk-weighted assets11.75%11.94%8.00%
Total capital to risk-weighted assets12.76%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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Source: Independent Bank Corporation

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