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Independent Bank Corporation Reports 2018 Second Quarter Results

Company Release - 7/26/2018 7:59 AM ET

GRAND RAPIDS, Mich., July 26, 2018 (GLOBE NEWSWIRE) -- Independent Bank Corporation (NASDAQ:IBCP) reported second quarter 2018 net income of $8.8 million, or $0.36 per diluted share, versus net income of $5.9 million, or $0.27 per diluted share, in the prior-year period.  For the six months ended June 30, 2018, the Company reported net income of $18.0 million, or $0.78 per diluted share, compared to net income of $11.9 million, or $0.55 per diluted share, in the prior-year period.  The increases in second quarter and year to date 2018 earnings as compared to 2017 primarily reflect increases in net interest income and in non-interest income and a decrease in income tax expense that were partially offset by increases in the provision for loan losses and in non-interest expense.

Significant items impacting comparable quarterly and year to date 2018 and 2017 results include the following:

  • The acquisition of TCSB Bancorp, Inc. (“TCSB”), and its subsidiary, Traverse City State Bank, on Apr. 1, 2018 (the “Merger”) 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 $3.1 million ($0.10 per diluted share, after taxes) and $3.3 million ($0.11 per diluted share, after taxes) for the three- and six-months ended June 30, 2018, respectively.
  • Positive changes in the fair value due to price of capitalized mortgage loan servicing rights of $0.5 million ($0.02 per diluted share, after taxes) and $2.0 million ($0.07 per diluted share, after taxes) for the three- and six-months ended June 30, 2018, respectively, as compared to negative changes of $0.6 million ($0.02 per diluted share, after taxes) and $0.5 million ($0.02 per diluted share, after taxes) for the three- and six-months ended June 30, 2017, respectively.
  • The passage of the "Tax Cuts and Jobs Act" which, among other things, reduced the federal corporate income tax rate to 21% (from 35%) effective January 1, 2018.

Second quarter 2018 highlights include:

  • Year-over-year increases in net income and diluted earnings per share of 48.7% and 33.3%, respectively;
  • A year-over-year increase in quarterly net interest income of $7.5 million, or 34.8%;
  • Total portfolio loan net growth of $101.4 million, or 19.6% annualized, excluding $294.5 million of TCSB loans acquired in the Merger;
  • Continued strong asset quality metrics; and
  • The payment of a 15 cent per share dividend on common stock on May 15, 2018.

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.  Excluding the impact of Merger related expenses and the positive fair value change in the price of our capitalized mortgage loan servicing rights, our second quarter 2018 results exceeded our expectations.  The favorable impact of the TCSB acquisition combined with strong loan origination activity led to significant loan growth and increased net interest income.  We successfully completed the TCSB data processing conversions in June 2018, and are on-track to realize our projected cost savings of approximately $0.9 million per quarter beginning in the third quarter of this year.  As we look ahead to the remainder of 2018 and beyond, we are focused on building on the momentum generated in the first half of 2018.”

Operating Results

The Company’s net interest income totaled $29.0 million during the second quarter of 2018, an increase of $7.5 million, or 34.8% from the year-ago period, and up $5.0 million, or 21.1%, from the first quarter of 2018.  The Company’s tax equivalent net interest income as a percent of average interest-earning assets (the “net interest margin”) was 3.93% during the second quarter of 2018, compared to 3.60% in the year-ago period, and 3.71% in the first quarter of 2018.  The year-over-year quarterly increase in net interest income is due to increases in both average interest-earning assets and in the net interest margin.  Average interest-earning assets were $2.96 billion in the second quarter of 2018, compared to $2.42 billion in the year ago quarter and $2.61 billion in the first quarter of 2018.  Second quarter 2018 interest income on loans includes $0.6 million of accretion of the discount recorded on the TCSB loans acquired in the Merger.  The total discount initially recorded on the TCSB loans acquired in the Merger was $6.5 million (or approximately 2.2% of the total TCSB loans acquired in the Merger).  

For the first six months of 2018, net interest income totaled $52.9 million, an increase of $10.0 million, or 23.2% from the first half of 2017.  The Company’s net interest margin for the first six months of 2018 was 3.83% compared to 3.65% in 2017.  The increase in net interest income for the first six months of 2018 is due to increases in both average interest-earning assets and in the net interest margin.

Non-interest income totaled $12.3 million and $24.0 million, respectively, for the second quarter and first six months of 2018, compared to $10.4 million and $20.8 million in the respective comparable year ago periods.  These increases were primarily due to growth in mortgage loan servicing income, net.

The Company adopted Financial Accounting Standards Board Accounting Standards Update 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”) on Jan. 1, 2018, using the modified retrospective approach.  Although ASU 2014-09 did not have any impact on Jan. 1, 2018 shareholders’ equity or 2018 net income, it did result in some classification changes in non-interest income and non-interest expense as compared to the prior year period.  Specifically, in the second quarter and first six months of 2018, interchange income and interchange expense each increased by $0.4 million and $0.7 million, respectively, due to classification changes under ASU 2014-09.  
                                                                                                                                
Net gains on mortgage loans were approximately $3.3 million in both the second quarters of 2018 and 2017.  For the first six months of 2018, net gains on mortgage loans totaled $5.8 million compared to $5.9 million in 2017.  An increase in mortgage loan sales volume in 2018 was offset by margin compression due principally to competitive factors.

Mortgage loan servicing, net, generated income of $1.2 million and a loss of $0.2 million in the second quarters of 2018 and 2017, respectively. For the first six months of 2018, mortgage loan servicing, net, generated income of $3.5 million as compared to income of $0.7 million in 2017. This activity is summarized in the following table:

   
   Three Months Ended  Six Months Ended
   6/30/2018 6/30/2017 6/30/2018 6/30/2017 
Mortgage loan servicing, net: (Dollars in thousands)  
  Revenue, net$    1,372 $    1,073 $    2,564 $    2,162 
  Fair value change due to price   518  (648)   1,976  (503)
  Fair value change due to pay-downs (655) (583) (1,084) (992)
Total$  1,235 $  (158)$    3,456 $    667 
             

Non-interest expenses totaled $29.8 million in the second quarter of 2018, compared to $22.8 million in the year-ago period.  For the first six months of 2018, non-interest expenses totaled $53.9 million versus $46.3 million in 2017.  These year-over-year increases in non-interest expense are primarily due to the TCSB acquisition (including the aforementioned Merger related expenses) as well as higher performance based compensation and health insurance costs. 

The Company recorded an income tax expense of $2.1 million and $4.1 million in the second quarter and first six months of 2018, respectively.  This compares to an income tax expense of $2.7 million and $5.3 million in the second quarter and first six months of 2017, respectively.  The decline in income tax expense is primarily due to a reduction in the statutory federal corporate income tax rate to 21% (from 35%) that became effective on Jan. 1, 2018.

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 June 30, 2018 were 0.04% for commercial loans and 0.42% 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  6/30/2018 12/31/2017 6/30/2017 
 (Dollars in thousands)
Commercial$  2,889 $  646 $  754 
Consumer/installment 671  543  754 
Mortgage 5,522  6,995  7,034 
  Total$  9,082 $8,184 $  8,542 
Ratio of non-performing loans to total portfolio loans 0.37% 0.41% 0.47%
Ratio of non-performing assets to total assets 0.33% 0.35% 0.41%
Ratio of the allowance for loan losses to non-performing loans 258.80%   275.99% 241.00%
          
  1. Excludes loans that are classified as “troubled debt restructured” that are still performing.

Non-performing loans have increased $0.9 million from Dec. 31, 2017.  This increase primarily reflects a rise in non-performing commercial loans.  ORE and repossessed assets totaled $1.7 million at June 30, 2018, compared to $1.6 million at Dec. 31, 2017. 

The provision for loan losses was an expense of $0.7 million and $0.6 million in the second quarters of 2018 and 2017, respectively.  The provision for loan losses was an expense of $1.0 million and $0.2 million in the first six months of 2018 and 2017, 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 charge-offs of $0.2 million and $0.04 million in the second quarters of 2018 and 2017, respectively.  For the first six months of 2018 and 2017, the Company recorded loan net charge-offs of $0.05 million and loan net recoveries of $0.1 million, respectively.  At June 30, 2018, the allowance for loan losses totaled $23.5 million, or 0.95% of total portfolio loans, compared to $22.6 million, or 1.12% of total portfolio loans, at Dec. 31, 2017.

Balance Sheet, Liquidity and Capital

Total assets were $3.23 billion at June 30, 2018, an increase of $445.2 million from Dec. 31, 2017, primarily reflecting the impact of the Merger as well as loan growth.  Loans, excluding loans held for sale, were $2.47 billion at June 30, 2018, compared to $2.02 billion at Dec. 31, 2017. 

Deposits totaled $2.78 billion at June 30, 2018, an increase of $380.0 million from Dec. 31, 2017.  The increase in deposits is primarily due to the Merger and growth in brokered time deposits. 

Cash and cash equivalents totaled $58.7 million at June 30, 2018, versus $54.7 million at Dec. 31, 2017. Securities available for sale totaled $450.6 million at June 30, 2018, compared to $522.9 million at Dec. 31, 2017.

The Company recorded $29.0 million of goodwill, a core deposit intangible (“CDI”) of $5.8 million and discounts of $6.5 million, $0.4 million and $1.5 million on loans, time deposits and borrowings (including subordinated debentures), respectively, related to the Merger.  These adjustments reflect the preliminary valuation of the assets acquired and liabilities assumed in the Merger.  The goodwill will be periodically tested for impairment, and the CDI will be amortized over a ten year period ($0.2 million of amortization for this CDI was recorded in the second quarter of 2018).  The discounts will be accreted based on the lives of the related assets or liabilities.

Total shareholders’ equity was $337.1 million at June 30, 2018, or 10.42% of total assets.  Tangible common equity totaled $301.1 million at June 30, 2018, or $12.47 per share.  The Company’s wholly owned subsidiary, Independent Bank, remains significantly above “well capitalized” for regulatory purposes with the following ratios:

    
Regulatory Capital Ratios6/30/201812/31/2017Well
Capitalized
Minimum
       
Tier 1 capital to average total assets 9.93%  9.78%5.00%
Tier 1 common equity to risk-weighted assets12.53%12.95%6.50%
Tier 1 capital to risk-weighted assets12.53%12.95%8.00%
Total capital to risk-weighted assets13.52%14.10%10.00%
       

Share Repurchase Plan

As previously announced, on Jan. 22, 2018, the Board of Directors of the Company authorized a share repurchase plan.  Under the terms of the 2018 share repurchase plan, the Company is authorized to buy back up to 5% of its outstanding common stock.    The repurchase plan is authorized to last through Dec. 31, 2018.  Thus far in 2018, the Company has not repurchased any shares.

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, July 26, 2018.

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/URL:  https://services.choruscall.com/links/ibcp180726.html.

A playback of the call can be accessed by dialing 1-877-344-7529 (Conference ID # 10121685). The replay will be available through Aug. 2, 2018.

About Independent Bank Corporation

Independent Bank Corporation (NASDAQ:IBCP) is a Michigan-based bank holding company with total assets of approximately $3.2 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.

In addition, factors that may cause actual results to differ from expectations regarding the April 1, 2018 acquisition of TCSB Bancorp, Inc. include, but are not limited to, the reaction to the transaction of the companies’ customers, employees and counterparties; customer disintermediation; inflation; expected synergies, cost savings and other financial benefits of the transaction might not be realized within the expected timeframes or might be less than projected; credit and interest rate risks associated with the parties' respective businesses, customers, borrowings, repayment, investment, and deposit practices; general economic conditions, either nationally or in the market areas in which the parties operate or anticipate doing business, are less favorable than expected; new regulatory or legal requirements or obligations; and other risks.

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, 2017 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,
   2018   2017 
  (unaudited)
  (In thousands, except share
  amounts)
Assets
Cash and due from banks  $  36,433  $  36,994 
Interest bearing deposits     22,278     17,744 
  Cash and Cash Equivalents    58,711     54,738 
Interest bearing deposits - time    2,478     2,739 
Equity securities at fair value    336     - 
Trading securities    -     455 
Securities available for sale     450,593     522,925 
Federal Home Loan Bank and Federal Reserve Bank stock, at cost     16,321     15,543 
Loans held for sale, carried at fair value     50,915     39,436 
Loans held for sale, carried at lower of cost or fair value    13,216     -  
Loans    
  Commercial     1,106,987     853,260 
  Mortgage     988,622     849,530 
  Installment     371,708     316,027 
  Total Loans     2,467,317     2,018,817 
  Allowance for loan losses     (23,504)    (22,587)
  Net Loans     2,443,813     1,996,230 
Other real estate and repossessed assets    1,689     1,643 
Property and equipment, net     39,660     39,149 
Bank-owned life insurance     54,573     54,572 
Deferred tax assets, net    11,426     15,089 
Capitalized mortgage loan servicing rights    21,848     15,699 
Goodwill    29,012     -  
Other intangibles     7,004     1,586 
Accrued income and other assets     32,927     29,551 
  Total Assets  $  3,234,522  $  2,789,355 
     
Liabilities and Shareholders' Equity
Deposits    
  Non-interest bearing  $  871,959  $  768,333 
  Savings and interest-bearing checking    1,226,492     1,064,391 
  Reciprocal    66,540     50,979 
  Time    389,118     374,872 
  Brokered time    226,407     141,959 
  Total Deposits     2,780,516     2,400,534 
Other borrowings     40,584     54,600 
Subordinated debentures     39,354     35,569 
Accrued expenses and other liabilities     36,985     33,719 
  Total Liabilities     2,897,439     2,524,422 
     
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:     
  24,143,044 shares at June 30, 2018 and 21,333,869 shares at December 31, 2017    389,195     324,986 
  Accumulated deficit    (42,898)    (54,054)
  Accumulated other comprehensive loss    (9,214)    (5,999)
  Total Shareholders’ Equity     337,083     264,933 
  Total Liabilities and Shareholders’ Equity  $  3,234,522  $  2,789,355 
     


 
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
           
  Three Months Ended Six Months Ended
  June 30, March 31, June 30, June 30,
   2018   2018   2017   2018   2017 
  (unaudited)
Interest Income (In thousands, except per share amounts)
  Interest and fees on loans  $  29,674  $  23,353  $  19,949  $  53,027  $  39,807 
  Interest on securities           
  Taxable     2,720     2,635   2,781     5,355     5,535 
  Tax-exempt     444     479   511     923     966 
  Other investments     265     330   292     595     604 
  Total Interest Income     33,103   26,797   23,533     59,900   46,912 
Interest Expense          
  Deposits     3,209     2,287   1,478     5,496     2,921 
  Other borrowings and subordinated debentures    914     574   563     1,488     1,033 
  Total Interest Expense     4,123   2,861   2,041     6,984   3,954 
  Net Interest Income     28,980   23,936   21,492     52,916   42,958 
Provision for loan losses     650   315   583     965     224 
  Net Interest Income After Provision for Loan Losses     28,330   23,621   20,909     51,951   42,734 
Non-interest Income          
  Service charges on deposit accounts     3,095     2,905   3,175     6,000     6,184 
  Interchange income     2,504     2,246   2,005     4,750     3,927 
  Net gains (losses) on assets          
  Mortgage loans     3,255     2,571   3,344     5,826     5,915 
  Securities     9     (173)  (34)    (164)    (7)
  Mortgage loan servicing, net     1,235     2,221   (158)    3,456     667 
  Other    2,217     1,943   2,114     4,160     4,099 
  Total Non-interest Income   12,315   11,713   10,446   24,028   20,785 
Non-interest Expense          
  Compensation and employee benefits     15,869     14,468   13,380     30,337   27,527 
  Occupancy, net     2,170     2,264   1,920     4,434   4,062 
  Data processing    2,251     1,878   1,937     4,129   3,874 
  Merger related expenses    3,082     174     -     3,256     - 
  Furniture, fixtures and equipment     1,019     967   1,005     1,986   1,982 
  Communications    704     680   678     1,384   1,361 
  Loan and collection    692     677   670     1,369     1,083 
  Interchange expense    661     598   292     1,259     575 
  Advertising    543     441   519     984   1,025 
  Legal and professional    456     378   389     834   826 
  FDIC deposit insurance    250     230   202     480   400 
  Credit card and bank service fees    106     96   136     202   327 
  Net (gains) losses on other real estate and           
  repossessed assets    (4)    (290)  91     (294)  102 
  Other    1,962     1,574   1,542     3,536   3,186 
  Total Non-interest Expense     29,761   24,135   22,761     53,896   46,330 
  Income Before Income Tax    10,884   11,199   8,594     22,083   17,189 
Income tax expense     2,067   2,038   2,663     4,105     5,284 
  Net Income $  8,817  $  9,161  $  5,931  $  17,978  $  11,905 
Net Income Per Common Share          
  Basic $  0.37  $  0.43  $  0.28  $  0.79  $  0.56 
  Diluted $  0.36  $  0.42  $  0.27  $  0.78  $  0.55 
           

 

 
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Selected Financial Data
           
 June 30, March 31, December 31, September 30, June 30, 
  2018  2018  2017  2017  2017 
 (unaudited) 
 (Dollars in thousands except per share data)
Three Months Ended          
  Net interest income$  28,980 $  23,936 $  23,316 $  22,912 $  21,492 
  Provision for loan losses   650    315    393    582    583 
  Non-interest income   12,315    11,713    11,444    10,304    10,446 
  Non-interest expense   29,761    24,135    23,136    22,616    22,761 
  Income before income tax   10,884    11,199    11,231    10,018    8,594 
  Income tax expense   2,067    2,038    9,520    3,159    2,663 
  Net income $  8,817 $  9,161 $  1,711 $  6,859 $  5,931 
           
  Basic earnings per share$  0.37 $  0.43 $  0.08 $  0.32 $  0.28 
  Diluted earnings per share   0.36    0.42    0.08    0.32    0.27 
  Cash dividend per share   0.15    0.15    0.12    0.10    0.10 
           
  Average shares outstanding   24,109,322    21,364,708    21,332,053    21,334,247    21,331,363 
  Average diluted shares outstanding   24,509,963    21,674,375    21,661,133    21,651,963    21,646,941 
           
  Performance Ratios          
  Return on average assets   1.12%   1.34%   0.25%   1.01%   0.92%
  Return on average common equity   10.57    14.04    2.51    10.27    9.15 
  Efficiency ratio (1)   71.14    66.72    66.14    67.38    70.29 
           
  As a Percent of Average Interest-Earning Assets (1)         
  Interest income   4.49%   4.15%   4.07%   4.05%   3.94%
  Interest expense   0.56    0.44    0.42    0.39    0.34 
  Net interest income   3.93    3.71    3.65    3.66    3.60 
           
  Average Balances          
  Loans$  2,449,056 $  2,062,847 $  2,006,207 $  1,911,635 $  1,782,953 
  Securities available for sale   470,427    500,599    532,202    565,546    592,594 
  Total earning assets   2,963,982    2,611,890    2,574,779    2,522,060    2,423,283 
  Total assets   3,168,196    2,776,986    2,742,761    2,697,362    2,598,605 
  Deposits   2,701,362    2,417,906    2,340,593    2,315,806    2,239,605 
  Interest bearing liabilities   1,946,287    1,724,153    1,680,917    1,664,734    1,595,984 
  Shareholders' equity   334,626    264,584    270,099    265,074    260,095 
           
End of Period          
  Capital          
  Tangible common equity ratio   9.41%   9.54%   9.45%   9.67%   9.79%
  Average equity to average assets   10.56    9.53    9.85    9.83    10.01 
  Tangible common equity per share           
  of common stock$  12.47 $  12.46 $  12.34 $  12.47 $  12.22 
  Total shares outstanding   24,143,044    21,374,816    21,333,869    21,332,317    21,334,740 
           
  Selected Balances          
  Loans$  2,467,317 $  2,071,435 $  2,018,817 $  1,937,094 $  1,811,677 
  Securities available for sale   450,593    489,119    522,925    548,865    583,725 
  Total earning assets   3,023,454    2,625,534    2,617,204    2,568,554    2,486,518 
  Total assets   3,234,522    2,793,119    2,789,355    2,753,446    2,665,367 
  Deposits   2,780,516    2,430,401    2,400,534    2,343,761    2,246,219 
  Interest bearing liabilities   1,988,495    1,719,771    1,722,370    1,701,624    1,646,599 
  Shareholders' equity   337,083    267,917    264,933    267,710    262,453 
           
(1)  Presented on a fully tax equivalent basis assuming a marginal tax rate of 21% in 2018 and 35% in 2017.   
    

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, 
  2018   2017   2018   2017  
 (Dollars in thousands) 
 Net Interest Margin, Fully Taxable         
  Equivalent ("FTE")         
         
Net interest income$  28,980  $  21,492  $  52,916  $  42,958  
  Add:  taxable equivalent adjustment    132     288     261     549  
Net interest income - taxable equivalent$  29,112  $  21,780  $  53,177  $  43,507  
Net interest margin (GAAP) (1) 3.92%  3.56%  3.81%  3.61% 
Net interest margin (FTE) (1) 3.93%  3.60%  3.83%  3.65% 
 
(1) Annualized     

 

       
 Tangible Common Equity Ratio          
 June 30, March 31, December 31, September 30, June 30, 
  2018   2018   2017   2017   2017  
                     
 (Dollars in thousands) 
Common shareholders' equity$  337,083  $  267,917  $  264,933  $  267,710  $  262,453  
Less:          
  Goodwill   29,012     -     -     -     -  
  Other intangibles 7,004   1,500   1,586   1,673   1,759  
Tangible common equity$  301,067  $  266,417  $  263,347  $  266,037  $  260,694  
           
Total assets$  3,234,522  $  2,793,119  $  2,789,355  $  2,753,446  $  2,665,367  
Less:          
  Goodwill   29,012     -      -      -      -   
  Other intangibles   7,004     1,500     1,586     1,673     1,759  
Tangible assets$  3,198,506  $  2,791,619  $  2,787,769  $  2,751,773  $  2,663,608  
           
Common equity ratio 10.42%  9.59%  9.50%  9.72%  9.85% 
Tangible common equity ratio 9.41%  9.54%  9.45%  9.67%  9.79% 
           
           
 Tangible Common Equity per Share of Common Stock:  
 
Common shareholders' equity$  337,083  $  267,917  $  264,933  $  267,710  $  262,453  
Tangible common equity$  301,067  $  266,417  $  263,347  $  266,037  $  260,694  
Shares of common stock                    
  outstanding (in thousands) 24,143   21,375   21,334   21,332   21,335  
                     
Common shareholders' equity per share 
  of common stock$  13.96  $  12.53  $  12.42  $  12.55  $  12.30  
Tangible common equity per share                     
  of common stock$  12.47  $  12.46  $  12.34  $  12.47  $  12.22  
 

The tangible common equity ratio removes the effect of intangible assets from capital and total assets.  Tangible common equity per share of common stock removes the effect of intangible assets from common shareholders’ equity per share of common stock.

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

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Source: Independent Bank Corporation