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Independent Bank Corporation Reports 2021 Second Quarter Results
Source: Nasdaq GlobeNewswire / 29 Jul 2021 07:59:00 America/New_York
GRAND RAPIDS, Mich., July 29, 2021 (GLOBE NEWSWIRE) -- Independent Bank Corporation (NASDAQ: IBCP) reported second quarter 2021 net income of $12.4 million, or $0.56 per diluted share, versus net income of $14.8 million, or $0.67 per diluted share, in the prior-year period. For the six months ended June 30, 2021, the Company reported net income of $34.4 million, or $1.56 per diluted share, compared to net income of $19.6 million, or $0.88 per diluted share, in the prior-year period. The decline in second quarter 2021 earnings as compared to 2020 primarily reflects a decrease in non-interest income and an increase in non-interest expense that were partially offset by an increase in net interest income and decreases in the provision for credit losses and income tax expense. The increase in year-to-date 2021 earnings as compared to 2020 primarily reflects increases in net interest income and non-interest income and a decrease in the provision for credit losses that were partially offset by increases in non-interest expense and income tax expense.
Highlights for the second quarter of 2021 include:
- Annualized return on average assets and on average equity of 1.12% and 12.78%, respectively;
- An increase in net interest income of 3.1% over the second quarter of 2020;
- Net gains on mortgage loans of $9.1 million and total mortgage loan origination volume of $473.7 million;
- Net growth in portfolio loans of $30.3 million (or 4.4% annualized);
- Continued strong asset quality metrics as evidenced by net loan recoveries during the quarter as well as a low level of non-performing loans and non-performing assets; and
- The payment of a 21 cent per share dividend on common stock on May 14, 2021.
Highlights for the first six months of 2021 include:
- Increases in net income and diluted earnings per share of 75.8% and 77.3%, respectively;
- Annualized return on average assets and on average equity of 1.60% and 18.06%, respectively;
- Net gains on mortgage loans of $21.9 million and total mortgage loan origination volume of $982.7 million;
- Net growth in portfolio loans of $80.9 million (or 6.0% annualized);
- Net growth in deposits of $225.1 million (or 12.5% annualized).
Significant items impacting comparable quarterly and year to date 2021 and 2020 results include the following:
- Changes in the fair value due to price of capitalized mortgage loan servicing rights (the “MSR Changes”) of a negative $2.4 million ($0.09 per diluted share, after taxes) and a positive $2.2 million ($0.08 per diluted share, after taxes) for the three- and six-months ended June 30, 2021, respectively, as compared to a negative $2.9 million ($0.10 per diluted share, after taxes) and a negative $8.9 million ($0.31 per diluted share, after taxes) for the three- and six-months ended June 30, 2020, respectively.
William B. (“Brad”) Kessel, the President and Chief Executive Officer of Independent Bank Corporation, commented: “We are pleased to report a solid financial performance for the second quarter and first six months of 2021. Economic activity and business conditions have improved in our markets. Earning asset growth, including portfolio loans, has resulted in an increase in net interest income in 2021 compared to the year ago period. Mortgage loan origination activity continues to be strong. Asset quality metrics have been exceptional in 2021. Our ratio of non-performing assets to total assets declined to 0.12% at June 30, 2021, and COVID related loan forbearance balances decreased by 40.5% during the first six months of 2021, which represents only 0.5% of our total loans at June 30, 2021.”
Kessel added: “During the second quarter of 2021, we also completed our conversion to a new modern core platform with flexible application processing interfaces (APIs). This change now allows faster integration with new technology, real-time processing capabilities, and better access to our data and decision management using that data. Initial feedback from our customer base includes much excitement about ONE Wallet, our new mobile and online platform for consumer and business clients. This platform provides customers with the ability to open new accounts and apply for loans online, along with enhanced transfer, bill pay, and self-service capabilities. In addition, ONE Wallet+ enables our customers to monitor all of their finances in one location and provides budgeting and spending analytical tools. ONE Wallet+ has experienced a very strong adoption rate.”
Kessel concluded: “As we look ahead to the balance of 2021 and beyond, we are mindful that although economic conditions have improved, challenges from the pandemic remain. However, we are confident of our continued ability to effectively respond to these challenges and remain optimistic about our future.”
Operating Results
The Company’s net interest income totaled $31.4 million during the second quarter of 2021, an increase of $0.9 million, or 3.1% from the year-ago period, and up $1.1 million, or 3.7%, from the first quarter of 2021. The Company’s tax equivalent net interest income as a percent of average interest-earning assets (the “net interest margin”) was 3.02% during the second quarter of 2021, compared to 3.36% in the year-ago period, and 3.05% in the first quarter of 2021. The year-over-year quarterly increase in net interest income was 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 $4.22 billion in the second quarter of 2021, compared to $3.66 billion in the year ago quarter and $4.05 billion in the first quarter of 2021.
For the first six months of 2021, net interest income totaled $61.7 million, an increase of $1.0 million, or 1.7% from the first half of 2020. The Company’s net interest margin for the first six months of 2021 was 3.04% compared to 3.49% in 2020. The increase in net interest income for the first six months of 2021 compared to 2020 was also due to an increase in average interest-earning assets that was partially offset by a decline in the net interest margin.
Due principally to the economic impact of COVID-19, the Federal Reserve has taken a variety of actions to stimulate the economy, including significantly lowering short-term interest rates. These lower interest rates combined with a higher allocation to lower yielding securities available for sale has placed continued pressure on the Company’s net interest margin.
In addition, commercial loan balances, interest income and yields have been impacted by Paycheck Protection Program (“PPP”) lending activity. PPP lending activity is summarized in the following tables:
PPP – Round 1 At or for the three months ended 6/30/2021 3/31/2021 6/30/2020 # (000’s) # (000’s) # (000’s) Loans outstanding at period end 298 $ 42,315 698 $ 105,934 2,012 $ 259,351 Average loans outstanding - 78,747 - 136,206 - 191,061 Cumulative forgiveness applications submitted 1,882 231,715 1,477 183,346 - - Cumulative forgiveness applications approved 1,870 229,429 1,354 158,046 - - Net fees accreted into interest income - 981 - 1,853 - 977 Net unaccreted fees at period end - 381 - 1,362 - 7,736 Average loan yield - 5.98 % - 6.43 % - 3.05 % Note: PPP – Round 1 loan activity began in the second quarter of 2020.
PPP – Round 2 At or for the three months ended 6/30/2021 3/31/2021 # (000’s) # (000’s) Loans outstanding at period end 1,409 $ 129,573 1,250 $ 128,240 Average loans outstanding - 133,239 - 72,011 Cumulative forgiveness applications submitted 166 8,843 - - Cumulative forgiveness applications approved 164 8,828 - - Net fees accreted into interest income - 832 - 229 Net unaccreted fees at period end - 5,429 - 5,454 Average loan yield - 3.50 % - 2.25 % Note: PPP – Round 2 loan activity began in the first quarter of 2021.
Non-interest income totaled $14.8 million and $41.2 million, respectively, for the second quarter and first six months of 2021, compared to $20.4 million and $31.4 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 in the second quarters of 2021 and 2020, were approximately $9.1 million and $17.6 million, respectively. For the first six months of 2021, net gains on mortgage loans totaled $21.9 million compared to $26.5 million in 2020. The decrease in net gains on mortgage loans was primarily due to a decline in mortgage loan sales volume in 2021, lower profit margins on mortgage loan sales, and fair value adjustments on the mortgage loan pipeline.
Mortgage loan servicing, net, generated a loss of $2.0 million and a loss of $3.0 million in the second quarters of 2021 and 2020, respectively. For the first six months of 2021 and 2020, mortgage loan servicing, net, generated income of $3.2 million and a loss of $8.3 million, respectively. The significant variances in mortgage loan servicing, net are primarily due to changes in the fair value of capitalized mortgage loan servicing rights associated with changes in mortgage loan interest rates and expected future prepayment levels. Mortgage loan servicing, net activity is summarized in the following table:
Three Months Ended Six Months Ended 6/30/2021 6/30/2020 6/30/2021 6/30/2020 Mortgage loan servicing, net: (Dollars in thousands) Revenue, net $ 1,876 $ 1,646 $ 3,786 $ 3,319 Fair value change due to price (2,426 ) (2,921 ) 2,214 (8,852 ) Fair value change due to pay-downs (1,412 ) (1,747 ) (2,795 ) (2,789 ) Total $ (1,962 ) $ (3,022 ) $ 3,205 $ (8,322 ) Net gain on securities available for sale totaled zero and $1.4 million in second quarter and first six months of 2021, respectively, compared to zero and $0.3 million in the prior year second quarter and first six months, respectively. The increased gain that occurred in the first quarter of 2021 was related to the divestiture of a group of mortgage backed securities.
Non-interest expenses totaled $32.5 million in the second quarter of 2021, compared to $27.3 million in the year-ago period. For the first six months of 2021, non-interest expenses totaled $62.6 million versus $56.1 million in 2020. These year-over-year increases in non-interest expense are primarily due to increases in compensation and employee benefits, data processing, interchange and conversion related expenses. The increase in compensation and employee benefits in 2021 is due to several factors, including, wage increases that were generally effective at the start of the year, increased overtime primarily associated with a data processing conversion, a higher accrual for incentive compensation (due to expected actual performance compared to targets), higher payroll taxes due to the increase in compensation and higher health care insurance costs (these costs during the first six months of 2020 were unusually low due to the various COVID related lock-downs). In addition, the second quarter and first six months of 2021 included $1.1 million and $1.4 million, respectively, of expenses related to the Company’s core data processing conversion (this conversion was completed in May 2021) compared to $0.3 million and $0.4 million, respectively, in the comparable periods in 2020. The second quarter and first six months of 2020 also included $0.4 million of expenses (primarily write-downs of fixed assets and leases) related to the closures of six bank branch offices that were completed in the third quarter of 2020.
The Company recorded an income tax expense of $2.7 million and $7.8 million in the second quarter and first six months of 2021, respectively. This compares to an income tax expense of $3.5 million and $4.5 million in the second quarter and first six months of 2020, respectively. The changes in income tax expense principally reflect changes in pre-tax earnings in 2021 relative to 2020.
Asset Quality
A breakdown of loan forbearance totals by loan type is as follows:
Loan Type 6/30/2021 3/31/2021 % change vs. prior quarter # $ (000’s) % of
portfolio# $ (000's) % of
portfolio# $ Commercial - $ - 0.0 % - $ - 0.0 % none none Mortgage 82 12,416 1.2 % 111 15,263 1.5 % (26.1 )% (18.7 )% Installment 18 327 0.1 % 32 537 0.1 % (43.8 )% (39.1 )% Total 100 $ 12,743 0.5 % 143 $ 15,800 0.6 % (30.1 )% (19.3 )% Loans serviced for others 150 $ 20,231 0.6 % 205 $ 26,975 0.9 % (26.8 )% (25.0 )% Note: The % of portfolio is based on the dollar amount of forbearances to the total for the loan portfolio segment.
A breakdown of non-performing loans(1) by loan type is as follows:
Loan Type 6/30/2021 12/31/2020 6/30/2020 (Dollars in thousands) Commercial $ 242 $ 1,440 $ 4,886 Mortgage 4,941 6,353 7,455 Installment 362 519 602 Subtotal 5,545 8,312 12,943 Less – government guaranteed loans 427 439 604 Total non-performing loans $ 5,118 $ 7,873 $ 12,339 Ratio of non-performing loans to total portfolio loans 0.18 % 0.29 % 0.43 % Ratio of non-performing assets to total assets 0.12 % 0.21 % 0.34 % Ratio of the allowance for credit losses to non-performing loans 897.34 % 450.01 % 279.60 % (1) Excludes loans that are classified as “troubled debt restructured” that are still performing.
Non-performing loans decreased $2.8 million from December 31, 2020, as all loan categories have declined, reflecting improving economic conditions and the Company’s collection efforts.
The provision for credit losses was a credit of $1.4 million and an expense of $5.2 million in the second quarters of 2021 and 2020, respectively. The provision for credit losses was a credit of $1.9 million and an expense of $11.9 million in the first six months of 2021 and 2020, respectively. The quarterly and year-to-date decreases in the provision for credit losses in 2021 compared to 2020, were primarily the result of a decline in the balance of loans individually evaluated in the allowance for credit losses, slightly lower reserve allocations (reflecting an improvement in economic forecasts, particularly for lower unemployment levels) for pooled loans evaluated in the allowance for credit losses and a decrease in the adjustment to allocations based on subjective factors. In particular, the higher year-to-date provision for credit losses in 2020 included an $8.7 million (or 98.2%) increase in the qualitative/subjective portion of the allowance for credit losses. That increase in 2020 principally reflected the unique challenges and prevailing economic uncertainty resulting from the COVID-19 pandemic and the potential impact on the loan portfolio.
The Company recorded loan net recoveries of $0.6 million and loan net charge-offs of $3.2 million in the second quarters of 2021 and 2020, respectively. For the first six months of 2021 and 2020, the Company recorded loan net recoveries of $0.7 million and loan net charge-offs of $3.6 million, respectively.
The allowance for credit losses totaled $45.9 million at June 30, 2021 compared to $35.4 million at December 31, 2020. The increase from December 31, 2020 is attributed to the adoption of Financial Accounting Standards Board Accounting Standards Update 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“CECL”) on January 1, 2021. The impact of the adoption of CECL was an increase in the allowance for credit losses of $11.7 million. At June 30, 2021, the allowance for credit losses equaled 1.63% of total portfolio loans (1.73% when excluding PPP loans) under CECL, compared to 1.30% of total portfolio loans (1.38% when excluding PPP loans) at December 31, 2020, under the probable incurred loss methodology.
Balance Sheet, Liquidity and Capital
Total assets were $4.46 billion at June 30, 2021, an increase of $257.3 million from December 31, 2020. Loans, excluding loans held for sale, were $2.81 billion at June 30, 2021, compared to $2.73 billion at December 31, 2020. Deposits totaled $3.86 billion at June 30, 2021, an increase of $225.1 million from December 31, 2020. This increase is primarily due to growth in non-interest bearing, savings and interest-bearing checking and reciprocal deposit account balances.
Cash and cash equivalents totaled $69.3 million at June 30, 2021, compared to $118.7 million at December 31, 2020. Securities available for sale totaled $1.33 billion at June 30, 2021, compared to $1.07 billion at December 31, 2020. The significant increase in securities available for sale is due to the deployment of funds generated from the growth in deposits.
Total shareholders’ equity was $396.0 million at June 30, 2021, or 8.88% of total assets. Tangible common equity totaled $363.9 million at June 30, 2021, or $16.82 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 6/30/2021 12/31/2020 Well Capitalized Minimum Tier 1 capital to average total assets 8.69 % 8.81 % 5.00 % Tier 1 common equity to risk-weighted assets 12.46 % 12.81 % 6.50 % Tier 1 capital to risk-weighted assets 12.46 % 12.81 % 8.00 % Total capital to risk-weighted assets 13.71 % 14.06 % 10.00 % Share Repurchase Plan
On December 18, 2020, the Board of Directors of the Company authorized the 2021 share repurchase plan. Under the terms of the 2021 share repurchase plan, the Company is authorized to purchase up to 1,100,000 shares, or approximately 5% of its outstanding common stock. The repurchase plan is authorized to last through December 31, 2021. For the first six months of 2021, the Company has repurchased 344,005 shares at a weighted average price of $21.18 per share.
Earnings Conference Call
Brad Kessel, President and CEO and Gavin A. Mohr, CFO will review the quarterly results in a conference call for investors and analysts beginning at 12:00 pm ET on Thursday, July 29, 2021.
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 site/URL: https://services.choruscall.com/links/ibcp210729.html.
A playback of the call can be accessed by dialing 1-877-344-7529 (Conference ID # 10158604). The replay will be available through August 5, 2021.
About Independent Bank Corporation
Independent Bank Corporation (NASDAQ: IBCP) is a Michigan-based bank holding company with total assets of approximately $4.5 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 press release 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.
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES Consolidated Statements of Financial Condition June 30, December 31, 2021 2020 (unaudited) (In thousands, except share amounts) Assets Cash and due from banks $ 46,242 $ 56,006 Interest bearing deposits 23,012 62,699 Cash and Cash Equivalents 69,254 118,705 Securities available for sale 1,330,660 1,072,159 Federal Home Loan Bank and Federal Reserve Bank stock, at cost 18,427 18,427 Loans held for sale, carried at fair value 59,752 92,434 Loans Commercial 1,244,547 1,242,415 Mortgage 1,045,108 1,015,926 Installment 524,904 475,337 Total Loans 2,814,559 2,733,678 Allowance for credit losses (1) (45,926 ) (35,429 ) Net Loans 2,768,633 2,698,249 Other real estate and repossessed assets 296 766 Property and equipment, net 36,507 36,127 Bank-owned life insurance 55,446 55,180 Capitalized mortgage loan servicing rights, carried at fair value 22,431 16,904 Other intangibles 3,821 4,306 Goodwill 28,300 28,300 Accrued income and other assets 67,745 62,456 Total Assets $ 4,461,272 $ 4,204,013 Liabilities and Shareholders' Equity Deposits Non-interest bearing $ 1,298,282 $ 1,153,473 Savings and interest-bearing checking 1,699,463 1,526,465 Reciprocal 589,493 556,185 Time 272,305 287,402 Brokered time 2,923 113,830 Total Deposits 3,862,466 3,637,355 Other borrowings 30,005 30,012 Subordinated debt 39,319 39,281 Subordinated debentures 39,558 39,524 Accrued expenses and other liabilities 93,950 68,319 Total Liabilities 4,065,298 3,814,491 Shareholders’ Equity Preferred stock, no par value, 200,000 shares authorized; none issued or outstanding - - Common stock, no par value, 500,000,000 shares authorized; issued and outstanding: 21,632,912 shares at June 30, 2021 and 21,853,800 shares at December 31, 2020 332,457 339,353 Retained earnings 55,101 40,145 Accumulated other comprehensive income 8,416 10,024 Total Shareholders’ Equity 395,974 389,522 Total Liabilities and Shareholders’ Equity $ 4,461,272 $ 4,204,013 (1) Beginning January 1, 2021, calculation is based on CECL methodology. Prior to January 1, 2021, calculation was based on the probable incurred loss methodology.
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, 2021 2021 2020 2021 2020 (unaudited) Interest Income (In thousands, except per share amounts) Interest and fees on loans $ 28,091 $ 28,105 $ 29,863 $ 56,196 $ 61,627 Interest on securities available for sale Taxable 3,656 2,796 2,847 6,452 5,906 Tax-exempt 1,544 1,384 793 2,928 1,183 Other investments 208 217 251 425 617 Total Interest Income 33,499 32,502 33,754 66,001 69,333 Interest Expense Deposits 1,142 1,256 2,388 2,398 7,088 Other borrowings and subordinated debt and debentures 964 962 904 1,926 1,592 Total Interest Expense 2,106 2,218 3,292 4,324 8,680 Net Interest Income 31,393 30,284 30,462 61,677 60,653 Provision for credit losses (1) (1,425 ) (474 ) 5,188 (1,899 ) 11,909 Net Interest Income After Provision for Credit Losses 32,818 30,758 25,274 63,576 48,744 Non-interest Income Interchange income 3,453 3,049 2,526 6,502 4,983 Service charges on deposit accounts 2,318 1,916 1,623 4,234 4,214 Net gains on assets Mortgage loans 9,091 12,828 17,642 21,919 26,482 Securities available for sale - 1,416 - 1,416 253 Mortgage loan servicing, net (1,962 ) 5,167 (3,022 ) 3,205 (8,322 ) Other 1,871 2,030 1,598 3,901 3,761 Total Non-interest Income 14,771 26,406 20,367 41,177 31,371 Non-interest Expense Compensation and employee benefits 19,883 18,522 16,279 38,405 32,788 Data processing 2,576 2,374 1,590 4,950 3,945 Occupancy, net 2,153 2,343 2,159 4,496 4,619 Interchange expense 1,201 948 726 2,149 1,585 Furniture, fixtures and equipment 1,034 1,003 1,090 2,037 2,126 Communications 777 881 800 1,658 1,603 Loan and collection 859 759 756 1,618 1,561 Conversion related expenses 1,143 218 346 1,361 402 Legal and professional 522 499 468 1,021 861 Advertising 164 489 364 653 1,047 FDIC deposit insurance 307 330 430 637 800 Correspondent bank service fees 115 100 94 215 193 Branch closure costs - - 417 - 417 Net (gains) losses on other real estate and repossessed assets 6 (180 ) (9 ) (174 ) 100 Other 1,796 1,735 1,836 3,531 4,018 Total Non-interest Expense 32,536 30,021 27,346 62,557 56,065 Income Before Income Tax 15,053 27,143 18,295 42,196 24,050 Income tax expense 2,665 5,106 3,523 7,771 4,468 Net Income $ 12,388 $ 22,037 $ 14,772 $ 34,425 $ 19,582 Net Income Per Common Share Basic $ 0.57 $ 1.01 $ 0.67 $ 1.58 $ 0.89 Diluted $ 0.56 $ 1.00 $ 0.67 $ 1.56 $ 0.88 (1) Beginning January 1, 2021, calculation is based on CECL methodology. Prior to January 1, 2021, calculation was based on the probable incurred loss methodology.
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Selected Financial DataJune 30, March 31, December 31, September 30, June 30, 2021 2021 2020 2020 2020 (unaudited) (Dollars in thousands except per share data) Three Months Ended Net interest income $ 31,393 $ 30,284 $ 30,993 $ 31,966 $ 30,462 Provision for credit losses (1) (1,425 ) (474 ) (421 ) 975 5,188 Non-interest income 14,771 26,406 22,363 27,011 20,367 Non-interest expense 32,536 30,021 32,707 33,641 27,346 Income before income tax 15,053 27,143 21,070 24,361 18,295 Income tax expense 2,665 5,106 4,084 4,777 3,523 Net income $ 12,388 $ 22,037 $ 16,986 $ 19,584 $ 14,772 Basic earnings per share $ 0.57 $ 1.01 $ 0.78 $ 0.90 $ 0.67 Diluted earnings per share 0.56 1.00 0.77 0.89 0.67 Cash dividend per share 0.21 0.21 0.20 0.20 0.20 Average shares outstanding 21,749,654 21,825,937 21,866,326 21,881,562 21,890,761 Average diluted shares outstanding 21,966,829 22,058,503 22,112,829 22,114,692 22,113,187 Performance Ratios Return on average assets 1.12 % 2.10 % 1.61 % 1.90 % 1.54 % Return on average equity 12.78 23.51 17.82 21.36 17.39 Efficiency ratio (2) 69.24 53.48 60.59 56.36 53.07 As a Percent of Average Interest-Earning Assets (2) Interest income 3.22 % 3.27 % 3.57 % 3.62 % 3.72 % Interest expense 0.20 0.22 0.45 0.31 0.36 Net interest income 3.02 3.05 3.12 3.31 3.36 Average Balances Loans $ 2,859,544 $ 2,834,012 $ 2,876,795 $ 2,925,872 $ 2,913,857 Securities available for sale 1,274,556 1,093,618 1,009,578 891,975 660,126 Total earning assets 4,223,570 4,047,952 3,984,080 3,887,455 3,659,614 Total assets 4,434,760 4,254,294 4,195,546 4,102,318 3,868,408 Deposits 3,879,715 3,698,811 3,632,758 3,559,070 3,303,302 Interest bearing liabilities 2,674,425 2,589,102 2,574,306 2,532,481 2,402,361 Shareholders' equity 388,780 380,111 379,232 364,714 341,606 End of Period Capital Tangible common equity ratio 8.21 % 8.08 % 8.56 % 8.23 % 8.03 % Average equity to average assets 8.77 8.93 9.04 8.89 8.83 Common shareholders' equity per share of common stock $ 18.30 $ 17.79 $ 17.82 $ 17.05 $ 16.23 Tangible common equity per share of common stock 16.82 16.30 16.33 15.55 14.72 Total shares outstanding 21,632,912 21,773,734 21,853,800 21,885,368 21,880,183 Selected Balances Loans $ 2,814,559 $ 2,784,224 $ 2,733,678 $ 2,855,479 $ 2,866,663 Securities available for sale 1,330,660 1,247,280 1,072,159 985,050 856,280 Total earning assets 4,246,410 4,209,017 3,979,397 3,962,824 3,833,523 Total assets 4,461,272 4,426,440 4,204,013 4,168,944 4,043,315 Deposits 3,862,466 3,858,575 3,637,355 3,597,745 3,485,125 Interest bearing liabilities 2,633,747 2,626,280 2,553,418 2,515,185 2,456,193 Shareholders' equity 395,974 387,329 389,522 373,092 355,123 (1) Beginning January 1, 2021, calculation is based on CECL methodology. Prior to January 1, 2021, calculation was based on the probable incurred loss methodology.
(2) 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 Six Months Ended June 30, June 30, 2021 2020 2021 2020 (Dollars in thousands) Net Interest Margin, Fully Taxable Equivalent ("FTE") Net interest income $ 31,393 $ 30,462 $ 61,677 $ 60,653 Add: taxable equivalent adjustment 478 223 882 344 Net interest income - taxable equivalent $ 31,871 $ 30,685 $ 62,559 $ 60,997 Net interest margin (GAAP) (1) 2.98 % 3.34 % 3.00 % 3.47 % Net interest margin (FTE) (1) 3.02 % 3.36 % 3.04 % 3.49 % (1) Annualized.
Tangible Common Equity Ratio June 30, March 31, December 31, September 30, June 30, 2021 2021 2020 2020 2020 (Dollars in thousands) Common shareholders' equity $ 395,974 $ 387,329 $ 389,522 $ 373,092 $ 355,123 Less: Goodwill 28,300 28,300 28,300 28,300 28,300 Other intangibles 3,821 4,063 4,306 4,561 4,816 Tangible common equity $ 363,853 $ 354,966 $ 356,916 $ 340,231 $ 322,007 Total assets $ 4,461,272 $ 4,426,440 $ 4,204,013 $ 4,168,944 $ 4,043,315 Less: Goodwill 28,300 28,300 28,300 28,300 28,300 Other intangibles 3,821 4,063 4,306 4,561 4,816 Tangible assets $ 4,429,151 $ 4,394,077 $ 4,171,407 $ 4,136,083 $ 4,010,199 Common equity ratio 8.88 % 8.75 % 9.27 % 8.95 % 8.78 % Tangible common equity ratio 8.21 % 8.08 % 8.56 % 8.23 % 8.03 % Tangible Common Equity per Share of Common Stock: Common shareholders' equity $ 395,974 $ 387,329 $ 389,522 $ 373,092 $ 355,123 Tangible common equity $ 363,853 $ 354,966 $ 356,916 $ 340,231 $ 322,007 Shares of common stock outstanding (in thousands) 21,633 21,774 21,854 21,885 21,880 Common shareholders' equity per share of common stock $ 18.30 $ 17.79 $ 17.82 $ 17.05 $ 16.23 Tangible common equity per share of common stock $ 16.82 $ 16.30 $ 16.33 $ 15.55 $ 14.72 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.
Contact: William B. Kessel, President and CEO, 616.447.3933
Gavin A. Mohr, Chief Financial Officer, 616.447.3929