INDEPENDENT BANK CORP /MI/ [IBCP] Filings

10-Q 1 ibcp-20230630.htm 10-Q ibcp-20230630

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2023

Commission file number 0-7818


INDEPENDENT BANK CORPORATION
(Exact name of registrant as specified in its charter)


Michigan						38-2032782
(State or jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification Number)


4200 East Beltline, Grand Rapids, Michigan 49525
(Address of principal executive offices)

(616) 527-5820

(Registrant's telephone number, including area code)


NONE
Former name, address and fiscal year, if changed since last report.

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class

Trading Symbol

Name of each exchange which registered

Common stock, no par value

IBCP

The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES x NO ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, smaller reporting company or an emerging growth company.

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. Yes ¨ No ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ¨ NO x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: common stock, no par value, 20,944,217 as of August 3, 2023.

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

INDEX


		Number(s)
PART I -	Financial Information
Item 1.	Condensed Consolidated Statements of Financial Condition June 3 0 , 2023 and December 31, 2022	3
	Condensed Consolidated Statements of Operations Three- and Six-month periods ended June 3 0 , 2023 and 2022	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) Three- and Six-month periods ended June 3 0 , 2023 and 2022	5
	Condensed Consolidated Statements of Cash Flows S i x -month periods ended June 3 0 , 2023 and 2022	6
	Condensed Consolidated Statements of Shareholders' Equity Three- and Six-month periods ended June 3 0 , 2023 and 2022	7
	Notes to Interim Condensed Consolidated Financial Statements	8-62
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	63-79
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	81
Item 4.	Controls and Procedures	81

PART II -	Other Information
Item 1A	Risk Factors	82
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	82-83
Item 5.	Other Information	83
Item 6.	Exhibits	83

Index

FORWARD-LOOKING STATEMENTS

Statements in this report that are not statements of historical fact, including statements that include terms such as ‘‘will,’’ ‘‘may,’’ ‘‘should,’’ ‘‘believe,’’ ‘‘expect,’’ ‘‘forecast,’’ ‘‘anticipate,’’ ‘‘estimate,’’ ‘‘project,’’ ‘‘intend,’’ ‘‘likely,’’ ‘‘optimistic’’ and ‘‘plan’’ and statements about future or projected financial and operating results, plans, projections, objectives, expectations, and intentions, are forward-looking statements. Forward-looking statements include, but are not limited to, descriptions of plans and objectives for future operations, products or services; projections of our future revenue, earnings or other measures of economic performance; forecasts of credit losses and other asset quality trends; statements about our business and growth strategies; and expectations about economic and market conditions and trends. These forward-looking statements express our current expectations, forecasts of future events, or long-term goals. They are based on assumptions, estimates, and forecasts that, although believed to be reasonable, may turn out to be incorrect. Actual results could differ materially from those discussed in the forward-looking statements for a variety of reasons, including:

•economic, market, operational, liquidity, credit, and interest rate risks associated with our business;

•economic conditions generally and in the financial services industry, particularly economic conditions within Michigan and the regional and local real estate markets in which our bank operates;

•the failure of assumptions underlying the establishment of, and provisions made to, our allowance for credit losses;

•increased competition in the financial services industry, either nationally or regionally;

•our ability to achieve loan and deposit growth;

•volatility and direction of market interest rates;

•the continued services of our management team; and

•implementation of new legislation, which may have significant effects on us and the financial services industry.

This list provides examples of factors that could affect the results described by forward-looking statements contained in this report, but the list is not intended to be all-inclusive. The risk factors disclosed in Part I – Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, as updated by any new or modified risk factors disclosed in Part II – Item 1A of any subsequently filed Quarterly Report on Form 10-Q, include the known risks our management believes could materially affect the results described by forward-looking statements in this report. However, those risks may not be the only risks we face. Our results of operations, cash flows, financial position, and prospects could also be materially and adversely affected by additional factors that are not presently known to us that we currently consider to be immaterial, or that develop after the date of this report. We cannot assure you that our future results will meet expectations. While we believe the forward-looking statements in this report are reasonable, you should not place undue reliance on any forward-looking statement. In addition, these statements speak only as of the date made. We do not undertake, and expressly disclaim, any obligation to update or alter any statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.

Index


Part I - Item 1.			INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Condition


	June 30, 2023		December 31, 2022
	(Unaudited)
	(In thousands, except share amounts)
Assets
Cash and due from banks	$	61,225	$	70,180
Interest bearing deposits	67,967		4,191
Cash and Cash Equivalents	129,192		74,371
Securities available for sale	731,777		779,347
Securities held to maturity (fair value of $321,860 at June 30, 2023 and $335,418 at December 31, 2022 )	360,926		374,818
Federal Home Loan Bank and Federal Reserve Bank stock, at cost	18,131		17,653
Loans held for sale, carried at fair value	20,270		26,518
Loans held for sale, carried at lower of cost or fair value	—		20,367
Loans
Commercial	1,538,162		1,466,853
Mortgage	1,441,398		1,368,409
Installment	651,554		630,090
Total Loans	3,631,114		3,465,352
Allowance for credit losses	(53,964)		(52,435)
Net Loans	3,577,150		3,412,917
Other real estate and repossessed assets, net	658		455
Property and equipment, net	36,157		35,893
Bank-owned life insurance	54,507		55,204
Capitalized mortgage loan servicing rights, carried at fair value	44,427		42,489
Other intangibles	2,278		2,551
Goodwill	28,300		28,300
Accrued income and other assets	131,791		128,904
Total Assets	$	5,135,564	$	4,999,787

Liabilities and Shareholders' Equity
Deposits
Non-interest bearing	$	1,155,537	$	1,269,759
Savings and interest-bearing checking	1,929,021		1,973,308
Reciprocal	720,985		602,575
Time	431,249		321,492
Brokered time	250,844		211,935
Total Deposits	4,487,636		4,379,069
Other borrowings	90,015		86,006
Subordinated debt	39,472		39,433
Subordinated debentures	39,694		39,660
Accrued expenses and other liabilities	103,585		108,023
Total Liabilities	4,760,402		4,652,191
Commitments and contingent liabilities
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: 20,943,694 shares at June 30, 2023 and 21,063,971 shares at December 31, 2022	318,241		320,991
Retained earnings	137,431		119,368
Accumulated other comprehensive loss	(80,510)		(92,763)
Total Shareholders’ Equity	375,162		347,596
Total Liabilities and Shareholders’ Equity	$	5,135,564	$	4,999,787

See notes to interim condensed consolidated financial statements (Unaudited)

Index

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
	(Unaudited)				(Unaudited)
	(In thousands, except per share amounts)
Interest Income
Interest and fees on loans	$	47,679	$	31,454	$	91,973	$	59,872
Interest on securities
Taxable	5,919		4,950		11,803		9,502
Tax-exempt	3,283		1,746		6,366		3,300
Other investments	1,067		214		1,742		431
Total Interest Income	57,948		38,364		111,884		73,105
Interest Expense
Deposits	17,461		1,216		31,221		1,983
Other borrowings and subordinated debt and debentures	2,137		1,087		3,872		2,060
Total Interest Expense	19,598		2,303		35,093		4,043
Net Interest Income	38,350		36,061		76,791		69,062
Provision for credit losses	3,317		2,379		5,477		806
Net Interest Income After Provision for Credit Losses	35,033		33,682		71,314		68,256
Non-interest Income
Interchange income	3,355		3,422		6,560		6,504
Service charges on deposit accounts	3,134		3,096		5,991		6,053
Net gains (losses) on assets
Mortgage loans	2,120		1,253		3,376		2,088
Securities available for sale	—		(345)		(222)		(275)
Mortgage loan servicing, net	3,674		4,162		4,400		13,803
Other	3,134		3,044		5,863		5,407
Total Non-interest Income	15,417		14,632		25,968		33,580
Non-interest Expense
Compensation and employee benefits	20,602		19,882		39,941		40,012
Data processing	2,891		2,644		5,882		4,860
Occupancy, net	1,845		2,077		4,004		4,620
Interchange expense	1,054		1,262		2,103		2,273
Furniture, fixtures and equipment	929		1,042		1,855		2,087
FDIC deposit insurance	749		457		1,532		979
Communications	635		762		1,303		1,519
Loan and collection	620		647		1,198		1,206
Legal and professional	473		479		1,080		972
Advertising	431		560		926		1,240
Costs (recoveries) related to unfunded lending commitments	100		649		(375)		294
Other	1,919		1,973		3,756		3,822
Total Non-interest Expense	32,248		32,434		63,205		63,884
Income Before Income Tax	18,202		15,880		34,077		37,952
Income tax expense	3,412		2,879		6,296		6,984
Net Income	$	14,790	$	13,001	$	27,781	$	30,968
Net Income Per Common Share
Basic	$	0.70	$	0.62	$	1.32	$	1.47
Diluted	$	0.70	$	0.61	$	1.31	$	1.45

See notes to interim condensed consolidated financial statements (Unaudited)

Index

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
	(Unaudited - In thousands)

Net income	$	14,790	$	13,001	$	27,781	$	30,968
Other comprehensive income (loss)
Securities available for sale
Unrealized gains (losses) arising during period	(630)		(13,916)		13,763		(83,358)
Net unrealized loss at time of transfer on securities available for sale transferred to held to maturity	—		(26,479)		—		(26,479)
Accretion of net unrealized losses on securities transferred to held to maturity	936		1,328		1,786		1,328
Reclassification adjustments for (gains) losses included in earnings	—		345		222		275
Unrealized gains (losses) recognized in other comprehensive income (loss) on securities available for sale	306		(38,722)		15,771		(108,234)
Income tax expense (benefit)	64		(8,133)		3,312		(22,730)
Unrealized gains (losses) recognized in other comprehensive income (loss) on securities available for sale, net of tax	242		(30,589)		12,459		(85,504)
Derivative instruments
Unrealized gains (losses) arising during period	7		—		(413)		—
Reclassification adjustment for expense recognized in earnings	68		—		152		—
Unrealized gains (losses) recognized in other comprehensive income (loss) on derivative instruments	75		—		(261)		—
Income tax benefit	16		—		(55)		—
Unrealized gains (losses) recognized in other comprehensive income (loss) on derivative instruments, net of tax	59		—		(206)		—
Other comprehensive income (loss)	301		(30,589)		12,253		(85,504)
Comprehensive income (loss)	$	15,091	$	(17,588)	$	40,034	$	(54,536)

See notes to interim condensed consolidated financial statements (Unaudited)

Index

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows


	Six months ended June 30,
	2023		2022
	(Unaudited - In thousands)
Net Income	$	27,781	$	30,968
Adjustments to Reconcile Net Income to Net Cash From Operating Activities
Proceeds from sales of loans held for sale	156,178		334,838
Disbursements for loans held for sale	(146,403)		(309,085)
Provision for credit losses	5,477		806
Deferred income tax expense	1,255		2,680
Net deferred loan costs	(457)		(4,868)
Net depreciation, amortization of intangible assets and premiums and accretion of discounts on securities and loans	4,949		5,734
Net gains on mortgage loans	(3,376)		(2,088)
Net losses on securities available for sale	222		275
Share based compensation	1,046		1,054
(Increase) Decrease in accrued income and other assets	(10,159)		(10,110)
Decrease in accrued expenses and other liabilities	(3,165)		10,921
Total Adjustments	5,567		30,157
Net Cash From Operating Activities	33,348		61,125
Cash Flow Used in Investing Activities
Proceeds from the sale of securities available for sale	278		70,523
Proceeds from maturities, prepayments and calls of securities available for sale	59,513		105,288
Proceeds from maturities, prepayments and calls of securities held to maturity	12,752		10,906
Purchases of securities held to maturity	(440)		—
Purchases of securities available for sale	—		(137,550)
Purchases of Federal Home Loan Bank stock	(478)		—
Proceeds from the redemption of Federal Home Loan Bank stock	—		774
Net increase in portfolio loans (loans originated, net of principal payments)	(19

INDEPENDENT BANK CORP /MI/ [IBCP] Filings
10-Q	[2023-08-04]
10-Q	[2023-05-05]
10-K	[2023-03-03]
10-Q	[2022-11-04]
10-Q	[2022-08-05]
10-Q	[2022-05-05]
10-K	[2022-03-04]
10-Q	[2021-11-05]
10-Q	[2021-08-06]
10-Q	[2021-05-06]
10-K	[2021-03-05]
10-Q	[2020-11-05]
10-Q	[2020-08-05]
10-Q	[2020-05-05]
10-K	[2020-03-06]
10-Q	[2019-11-01]
10-Q	[2019-08-02]
10-Q	[2019-05-03]
10-K	[2019-03-07]
10-Q	[2018-11-02]
10-Q	[2018-08-03]
10-Q	[2018-05-04]
10-K	[2018-03-07]
10-Q	[2017-11-03]
10-Q	[2017-08-04]
10-Q	[2017-05-03]
10-K	[2017-03-07]
10-Q	[2016-11-03]
10-Q	[2016-08-04]
10-Q	[2016-05-04]
10-K	[2016-03-07]
10-Q	[2015-11-04]
10-Q	[2015-08-05]
10-Q	[2015-05-06]
10-K	[2015-03-06]
10-Q	[2014-11-06]
10-Q	[2014-08-05]
10-Q	[2014-05-05]
10-K	[2014-03-07]
10-Q	[2013-11-07]
S-1	[2013-08-23]
S-1	[2013-08-09]
10-Q	[2013-08-08]
10-Q	[2013-05-08]
10-K	[2013-03-13]
10-Q	[2012-11-09]
10-Q	[2012-08-09]
10-Q	[2012-05-09]
10-K	[2012-03-13]