Independent Bank Corporation Reports 2024 Third Quarter Results
Third Quarter Highlights
Highlights for the third quarter of 2024 include:
Increases in net interest income of $0.5 million (or 4.9% annualized) from June 30, 2024;
An increase in tangible book value per share of $3.69 (22.3%) over the third quarter of 2023;
Net growth in core deposits of $100.1 million (or 8.9% annualized) from June 30, 2024;
Net growth in loans of $90.4 million (or 9.3% annualized) from June 30, 2024; and
The payment of a 24 cent per share dividend on common stock on August 15, 2024.
GRAND RAPIDS, Mich., Oct. 24, 2024 (GLOBE NEWSWIRE) -- Independent Bank Corporation (NASDAQ:IBCP) reported third quarter 2024 net income of $13.8 million, or $0.65 per diluted share, versus net income of $17.5 million, or $0.83 per diluted share, in the prior-year period.
William B. ("Brad") Kessel, the President and Chief Executive Officer of Independent Bank Corporation, commented: "I am proud of our team and very pleased with our third quarter 2024 results, driving organic growth on both sides of the balance sheet. Overall loans increased 9.3% (annualized), while core deposits are up 8.9% (annualized). We were able to generate net interest income growth on both a linked quarter basis and on a year over year quarterly basis. We believe that our expenses continue to be well managed, and we continue to see improved operational scale from strategic investments we have made in recent years. Our credit metrics continue to be excellent, with watch credits and non-performing assets near historic lows. These fundamentals continue to drive good growth in tangible book value per share (22%) compared to the prior year quarter. Based on a robust commercial loan pipeline, the past record of our core group of professionals and the on-going strategic initiative to add talented bankers to our team, we are optimistic about continuing these growth trends for the remainder of the year and into 2025."
Significant items impacting comparable third quarter 2024 and 2023 results include the following:
Changes in the fair value due to price of capitalized mortgage loan servicing rights (the "MSR Changes") of $(4.2) million ($(0.16) per diluted share, after taxes) for the three-month period ended September 30, 2024, as compared to $1.6 million ($0.06 per diluted share, after taxes) for the three-months ended September 30, 2023.
Operating Results
The Company's net interest income totaled $41.9 million during the third quarter of 2024, an increase of $2.4 million, or 6.2% from the year-ago period, and an increase of $0.5 million, or 1.2%, from the second quarter of 2024. The Company's tax equivalent net interest income as a percent of average interest-earning assets (the "net interest margin") was 3.37% during the third quarter of 2024, compared to 3.23% in the year-ago period, and 3.40% in the second quarter of 2024. The year-over-year quarterly increase in net interest income was due to an increase in average interest-earning assets and the net interest margin. The increase in net interest income compared to the linked quarter was due to an increase in average interest earning assets that was partially offset by a decrease in the net interest margin. Average interest-earning assets were $4.99 billion in the third quarter of 2024, compared to $4.89 billion in the year ago quarter and $4.89 billion in the second quarter of 2024.
Non-interest income totaled $9.5 million for the third quarter of 2024, compared to $15.6 million in the comparable prior year period. This change was primarily due to variances in mortgage banking related revenues.
Net gains on mortgage loans in the third quarters of 2024 and 2023, were approximately $2.2 million and $2.1 million, respectively. The comparative quarterly increase in net gains on mortgage loans was primarily due to an increase in both gain on sale margin on mortgage loans sold and a increase in the volume of mortgage loans sold.
Mortgage loan servicing, net, generated income (expense) of $(3.1) million and $2.7 million in the third quarters of 2024 and 2023, respectively. The significant variance in mortgage loan servicing, net is primarily due to changes in the fair value of capitalized mortgage loan servicing rights associated with changes in interest rates and the associated expected future prepayment levels and expected float rates. Mortgage loan servicing, net activity is summarized in the following table:
Three months ended
Nine months ended
9/30/2024
9/30/2023
9/30/2024
9/30/2023
(In thousands)
Mortgage loan servicing, net:
Revenue, net
$
2,248
$
2,197
$
6,681
$
6,612
Fair value change due to price
(4,155
)
1,556
(1,979
)
3,364
Fair value change due to pay-downs
(1,223
)
(1,085
)
(3,016
)
(2,908
)
Total
$
(3,130
)
$
2,668
$
1,686
$
7,068
Non-interest expenses totaled $32.6 million in the third quarter of 2024, compared to $32.0 million in the year-ago period.
The Company recorded income tax expense of $3.5 million in the third quarter of 2024. This compares to an income tax expense of $4.1 million in the third quarter of 2023. The changes in income tax expense principally reflect changes in pre-tax earnings in 2024 relative to 2023.
Asset Quality
A breakdown of non-performing loans by loan type is as follows:
9/30/2024
12/31/2023
9/30/2023
Loan Type
(Dollars in thousands)
Commercial
$
59
$
28
$
31
Mortgage
6,525
6,425
6,137
Installment
666
970
801
Sub total
7,250
7,423
6,969
Less - government guaranteed loans
2,102
2,191
2,254
Total non-performing loans
$
5,148
$
5,232
$
4,715
Ratio of non-performing loans to total portfolio loans
0.13
%
0.14
%
0.13
%
Ratio of non-performing assets to total assets
0.11
%
0.11
%
0.10
%
Ratio of allowance for credit losses to total non-performing loans
1115.85
%
1044.69
%
1176.99
%
The provision for credit losses was an expense of $1.49 million and $1.35 million in the third quarters of 2024 and 2023, respectively. We recorded loan net charge offs (recoveries) of $0.31 million and $(0.18) million in the third quarters of 2024 and 2023, respectively. At September 30, 2024, the allowance for credit losses for loans totaled $57.4 million, or 1.46% of total portfolio loans compared to $54.7 million, or 1.44% of total portfolio loans at December 31, 2023.
Balance Sheet, Capital and Liquidity
Total assets were $5.26 billion at September 30, 2024, a decrease of $4.5 million from December 31, 2023. Loans, excluding loans held for sale, were $3.94 billion at September 30, 2024, compared to $3.79 billion at December 31, 2023. Deposits totaled $4.63 billion at September 30, 2024, an increase of $4.0 million from December 31, 2023. This increase is primarily due to increases in savings and interest-bearing checking, reciprocal and time deposits that were partially offset by a decrease in non-interest bearings deposits and brokered time deposits.
Cash and cash equivalents totaled $121.6 million at September 30, 2024, versus $169.8 million at December 31, 2023. Securities available for sale ("AFS") totaled $589.0 million at September 30, 2024, versus $679.4 million at December 31, 2023.
Total shareholders' equity was $452.4 million at September 30, 2024, or 8.60% of total assets compared to $404.4 million or 7.68% at December 31, 2023. Tangible common equity totaled $422.5 million at September 30, 2024, or $20.22 per share compared to $374.1 million or $17.96 per share at December 31, 2023. The increase in shareholder equity as well as tangible common equity are primarily the result of earnings retention and a decrease in accumulated other comprehensive loss.
The Company's wholly owned subsidiary, Independent Bank, remains significantly above "well capitalized" for regulatory purposes with the following ratios:
Regulatory Capital Ratios
9/30/2024
12/31/2023
WellCapitalizedMinimum
Tier 1 capital to average total assets
9.36
%
8.80
%
5.00
%
Tier 1 common equity to risk-weighted assets
11.74
%
11.21
%
6.50
%
Tier 1 capital to risk-weighted assets
11.74
%
11.21
%
8.00
%
Total capital to risk-weighted assets
13.00
%
12.46
%
10.00
%
At September 30, 2024, in addition to liquidity available from our normal operating, funding, and investing activities, we had unused credit lines with the FHLB and FRB of approximately $1.11 billion and $471.7 million, respectively. We also had approximately $771.3 million in fair value of unpledged securities AFS and HTM at September 30, 2024 which could be pledged for an estimated additional borrowing capacity at the FHLB and FRB of approximately $718.0 million.
Share Repurchase Plan
On December 19, 2023, the Board of Directors of the Company authorized the 2024 share repurchase plan. Under the terms of the 2024 share repurchase plan, the Company is authorized to purchase up to 1,100,000 shares, or approximately 5% of its then outstanding common stock. The repurchase plan is authorized to last through December 31, 2024. The Company did not repurchase any shares of common stock during the first nine months of 2024.
Earnings Conference Call
Brad Kessel, President and CEO, Gavin Mohr, CFO and Joel Rahn, EVP, Commercial Banking will review the quarterly results in a conference call for investors and analysts beginning at 11:00 am ET on Thursday, October 24, 2024.
To participate in the live conference call, please dial 1-833-470-1428 (Access Code # 957797). Also, the conference call will be accessible through an audio webcast with user-controlled slides via the following site/URL: https://events.q4inc.com/attendee/824908063.
A playback of the call can be accessed by dialing 1-866-813-9403 (Access Code # 159381). The replay will be available through October 31, 2024.
About Independent Bank Corporation
Independent Bank Corporation (NASDAQ:IBCP) is a Michigan-based bank holding company with total assets of approximately $5.3 billion. Founded as First National Bank of Ionia in 1864, Independent Bank Corporation operates a branch network across Michigan's Lower Peninsula through one state-chartered bank subsidiary. This subsidiary (Independent Bank) provides a full range of financial services, including commercial banking, mortgage lending, consumer banking, investments and insurance. Independent Bank Corporation is committed to providing exceptional personal service and value to its customers, stockholders and the communities it serves.
For more information, please visit our Web site at: IndependentBank.com.
Forward-Looking StatementsThis presentation contains forward-looking statements, which are any statements or information that are not historical facts. These forward-looking statements include statements about our anticipated future revenue and expenses and our future plans and prospects.
Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. For example, deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding to us, lead to a tightening of credit, and increase stock price volatility. Our results could also be adversely affected by changes in interest rates; increases in unemployment rates; deterioration in the credit quality of our loan portfolios or in the value of the collateral securing those loans; deterioration in the value of our investment securities; legal and regulatory developments; changes in customer behavior and preferences; breaches in data security; and management's ability to effectively manage the multitude of risks facing our business. Key risk factors that could affect our future results are described in more detail in our Annual Report on Form 10-K for the year ended December 31, 2023 and the other reports we file with the SEC, including under the heading "Risk Factors." Investors should not place undue reliance on forward-looking statements as a prediction of our future results.
Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.
INDEPENDENT BANK CORPORATION AND SUBSIDIARIESConsolidated Statements of Financial Condition
September 30, 2024
December 31, 2023
(Unaudited)
(In thousands, except shareamounts)
Assets
Cash and due from banks
$
61,503
$
68,208
Interest bearing deposits
60,057
101,573
Cash and Cash Equivalents
121,560
169,781
Securities available for sale
588,950
679,350
Securities held to maturity (fair value of $314,638 at September 30, 2024 and $318,606 at December 31, 2023)
343,362
353,988
Federal Home Loan Bank and Federal Reserve Bank stock, at cost
16,099
16,821
Loans held for sale, carried at fair value
14,029
12,063
Loans
Commercial
1,825,247
1,679,731
Mortgage
1,511,400
1,485,872
Installment
605,640
625,298
Total Loans
3,942,287
3,790,901
Allowance for credit losses
(57,444
)
(54,658
)
Net Loans
3,884,843
3,736,243
Other real estate and repossessed assets, net
781
569
Property and equipment, net
35,250
35,523
Bank-owned life insurance
54,017
54,341
Capitalized mortgage loan servicing rights, carried at fair value
40,204
42,243
Other intangibles
1,617
2,004
Goodwill
28,300
28,300
Accrued income and other assets
130,256
132,500
Total Assets
$
5,259,268
$
5,263,726
Liabilities and Shareholders' Equity
Deposits
Non-interest bearing
$
1,023,739
$
1,076,093
Savings and interest-bearing checking
1,947,571
1,905,701
Reciprocal
995,469
832,020
Time
620,446
524,325
Brokered time
39,650
284,740
Total Deposits
4,626,875
4,622,879
Other borrowings
—
50,026
Subordinated debt
39,567
39,510
Subordinated debentures
39,779
39,728
Accrued expenses and other liabilities
100,678
107,134
Total Liabilities
4,806,899
4,859,277
Shareholders' Equity
Preferred stock, no par value, 200,000 shares authorized; none issued or outstanding
—
—
Common stock, no par value, 500,000,000 shares authorized; issued and outstanding: 20,893,800 shares at September 30, 2024 and 20,835,633 shares at December 31, 2023
318,216
317,483
Retained earnings
192,405
159,108
Accumulated other comprehensive loss
(58,252
)
(72,142
)
Total Shareholders' Equity
452,369
404,449
Total Liabilities and Shareholders' Equity
$
5,259,268
$
5,263,726
INDEPENDENT BANK CORPORATION AND SUBSIDIARIESConsolidated Statements of Operations
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
2024
2024
2023
2024
2023
(Unaudited)
(In thousands, except per share amounts)
Interest Income
Interest and fees on loans
$
58,410
$
56,786
$
51,419
$
170,239
$
143,392
Interest on securities
Taxable
4,502
4,713
5,865
14,466
17,668
Tax-exempt
3,404
3,400
3,409
10,195
9,775
Other investments
2,018
1,439
1,739
4,898
3,481
Total Interest Income
68,334
66,338
62,432
199,798
174,316
Interest Expense
Deposits
24,462
22,876
20,743
70,148
51,964
Other borrowings and subordinated debt and debentures
2,018
2,116
2,262
