Independent Bank Corporation Reports 2009 Third Quarter Results
IONIA, Mich., Oct. 26 /PRNewswire-FirstCall/ --
- 2009 third quarter net loss applicable to common stock of $17.8 million ($0.74 per share), with results impacted by:
- Provision for loan losses of $22.3 million
- $8.7 million charge to accrue for estimated losses from vehicle service contract counterparties related to the Company's payment plan business
- Loan and collection costs of $3.6 million
- Loss on other real estate and repossessed assets of $2.0 million
- Pre-tax, pre-provision core operating earnings remain strong and improved in 2009 over 2008
- Net interest margin of 5.15%, which is among the best in the banking industry
- Both non-performing loans and non-performing assets declined sequentially for the second consecutive quarter
- Capital raising initiatives announced, including deferral of interest and dividend payments on trust preferred securities and preferred stock, and suspension of dividend payments on common stock, all effective as of Nov. 1, 2009
- Company remains "well capitalized" for regulatory purposes
Independent Bank Corporation (Nasdaq: IBCP) reported a third quarter 2009 net loss applicable to common stock of $17.8 million, or $0.74 per share, versus a net loss of $5.3 million, or $0.23 per share, in the prior-year period. The net loss applicable to common stock for the nine months ended Sept. 30, 2009 was $43.7 million, or $1.84 per share, compared to a net loss of $1.6 million, or $0.07 per share, in the prior-year nine-month period.
Michael M. Magee, President and CEO of Independent Bank Corporation, commented: "The continued difficult Michigan economic environment had a significant impact on our financial results, leading to our reported loss for the quarter. However, we remain encouraged by our pre-tax, pre-provision core operating earnings, which rose more than 7% when compared with the year-ago quarter and remains comparable to our results last quarter. Maintaining a high performance level on core earnings and a strong net interest margin while continuing to make gains in productivity and cost control should provide us with the base we need for improved performance as we emerge from the current economic downturn."
The Company's tax equivalent net interest income totaled $35.8 million during the third quarter of 2009, an increase of $0.8 million, or 2.2% from the year-ago period, and a decrease of $0.4 million, or 1.0% from the second quarter of 2009. The Company's tax equivalent net interest income as a percent of average interest-earning assets (the "net interest margin") was 5.15% during the third quarter of 2009, compared to 4.76% in the year-ago period, and 5.21% in the second quarter of 2009. Average interest-earning assets declined to $2.76 billion in the third quarter of 2009, compared to $2.93 billion in the year-ago quarter and $2.78 billion in the second quarter of 2009. This year-over-year decline in average interest-earning assets primarily reflects a decrease in both investment securities and loans.
Service charges on deposits and VISA check card interchange income totaled $6.4 million and $1.5 million, respectively, in the third quarter of 2009, remaining essentially unchanged from the comparable period in 2008.
Securities net gains totaled $0.1 million in the third quarter of 2009, versus net losses of $6.7 million in the comparable period in 2008. The third quarter 2009 securities net gains were primarily due to the sale of municipal securities, while third quarter 2008 securities net losses included a decline in the fair value of trading securities of $7.7 million and other than temporary impairment charges of $0.1 million on securities available for sale. The decline in the fair value of trading securities related principally to the Company's holdings of Fannie Mae and Freddie Mac preferred stock. Partially offsetting these losses, the Company generated $1.1 million of gains in 2008 related to the sale of $48.4 million of municipal securities.
Gains on the sale of mortgage loans were $2.3 million in the third quarter of 2009, compared to $1.0 million in the year-ago quarter. The growth in gains relates primarily to an increase in loan sales and commitments to originate mortgage loans that are held for sale. This was principally due to a rise in refinancing activity resulting from generally lower mortgage loan interest rates in 2009. The increased refinancing volumes also led to a 69.7% increase in title insurance fees, to $0.5 million, on a year-over-year basis.
Mortgage loan servicing generated a loss of $0.5 million in the third quarter of 2009, versus income of $0.3 million in the year-ago period. This change was due to an increase in impairment charges ($0.8 million in the third quarter of 2009 versus $0.3 million in the year-ago quarter) as well as a $0.4 million increase in the amortization of capitalized mortgage loan servicing rights. The impairment charges primarily reflect lower mortgage loan interest rates at the end of the third quarter of 2009, resulting in higher estimated future prepayment rates. Capitalized mortgage loan servicing rights totaled $14.3 million at Sept. 30, 2009 compared to $12.0 million at Dec. 31, 2008. The Company services approximately $1.72 billion in mortgage loans for others on which servicing rights have been capitalized.
Non-interest expenses totaled $43.6 million in the third quarter of 2009, compared to $30.7 million in the year-ago period. The rise in non-interest expenses was primarily due to $8.7 million in estimated losses related to vehicle service contract counterparties at the Company's Mepco Finance Corporation ("Mepco") business unit and increases in loan and collection expenses (up $1.6 million), losses on other real estate and repossessed assets (up $1.5 million) and FDIC insurance (up $1.5 million). The increases in loan and collection costs and losses on other real estate and repossessed assets resulted primarily from the elevated level of non-performing assets and lower residential housing prices.
Third quarter 2009 non-interest expenses include an $8.7 million charge related to Mepco's business of servicing payment plans for vehicle service contracts. These payment plans (which are classified as finance receivables in the Company's Consolidated Statements of Financial Condition) permit a consumer to purchase a vehicle service contract or product warranty by making installment payments, generally for a term of 12 to 24 months, to the sellers of those contracts or product warranties (one of the "counterparties"). Mepco purchases these payment plans from these counterparties on a recourse basis. When consumers stop making payments or exercise their right to voluntarily cancel the contract, the remaining unpaid balance of the payment plan is recouped by Mepco from the counterparties that sold the vehicle service contract or product warranty and provided the coverage. Payment defaults and voluntary cancellations have increased significantly during 2009, reflecting both weak economic conditions and adverse publicity impacting the vehicle service contract industry. When counterparties do not honor their contractual obligations to Mepco to repay advanced funds, we recognize estimated losses. Mepco vigorously pursues collection (including commencing legal action) of funds due to it under its various contracts with counterparties. During September 2009, we identified a counterparty that is experiencing particularly severe financial difficulties and have accrued for estimated potential losses related to that relationship.
Compensation and employee benefit costs declined by $0.2 million, or 1.4%, in the third quarter of 2009 compared to the year-ago period. This decline was due primarily to the elimination of any accruals for bonuses and the elimination of any contribution to the employee stock ownership plan. These compensation cost reductions were partially offset by additional staff added during 2009 to manage non-performing assets and loan collections.
Pre-Tax, Pre-Provision Core Operating Earnings
The Company is presenting pre-tax, pre-provision core operating earnings in this release for purposes of additional analysis of operating results. Pre-tax, pre-provision core operating earnings, as defined by management, represents the Company's income (loss) excluding: income tax expense (benefit), the provision for loan losses, securities gains or losses, and any impairment charges (including goodwill, losses on other real estate or repossessed assets, and fair-value adjustments) or elevated loan and collection costs caused by this economic cycle.
The following table reconciles pre-tax, pre-provision core operating earnings to consolidated net income (loss) presented in accordance with U.S. generally accepted accounting principles ("GAAP"). Pre-tax, pre-provision core operating earnings is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income (loss) under GAAP. Pre-tax, pre-provision core operating earnings has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. However, the Company believes presenting pre-tax, pre-provision core operating earnings provides investors with the ability to gain a further understanding of its underlying operating trends separate from the direct effects of any impairment charges, credit issues, fair value adjustments, securities gains or losses, and challenges inherent in the real estate downturn and other economic cycle issues, and displays a consistent core operating earnings trend before the impact of these challenges. The credit quality section of this release already isolates the challenges and issues related to the credit quality of the Company's loan portfolio and the impact on its results as reflected in the provision for loan losses.
Pre-Tax, Pre-Provision Core Operating Earnings ---------------------------------------------- Quarter Ended 9/30/09 6/30/09 9/30/08 ------- ------- ------- (in thousands) Net income (loss) $(16,714) $(5,161) $(5,326) Income tax expense (benefit) (1,088) (959) (5,723) Provision for loan losses 22,285 25,593 19,788 Estimated losses vehicle service contract counterparty risk 8,713 2,215 -- Securities (gains) losses (121) (4,230) 6,711 Impairment charge (recovery) on mortgage servicing rights 809 (2,965) 348 Losses on other real estate and repossessed assets 1,958 1,939 425 Elevated loan and collection costs (1) 2,378 1,977 758 ----- ----- --- Pre-Tax, Pre-Provision Core Operating Earnings $18,220 $18,409 $16,981 ------- ------- ------- (1) Represents the excess amount over a "normalized" level of $1.25 million quarterly.
TARP Capital Purchase Program
On Dec. 12, 2008, the Company issued 72,000 shares of its preferred stock and 3,461,538 warrants to purchase the Company's common stock (at a strike price of $3.12 per share) to the U.S. Treasury in return for $72.0 million under the Capital Purchase Program ("CPP"). Of the total proceeds, initially $68.4 million was allocated to the preferred stock and $3.6 million was allocated to the warrants (included in capital surplus) based on the relative fair value of each.
In the approximately 290-day period (ending Sept. 30, 2009) since the receipt of the CPP funds, the Company has made $804.4 million of loans. This loan volume includes: $241.7 million of commercial loans (of which $122.5 million were renewals of existing loans), $522.1 million of mortgage loans (of which $262.5 million were refinances of existing loans) and $40.6 million of consumer installment loans (excluding finance receivables). Further, the CPP funds have allowed the Company to continue actively pursuing mortgage loan modifications and work-outs in lieu of foreclosure for those mortgage loan customers experiencing financial difficulty.
Commenting on asset quality, CEO Magee noted: "We are pleased to see positive progress on asset quality despite the challenges of operating in a very difficult economy. Although our provision for loan losses remained elevated in the third quarter, it is important to note that it declined by nearly 13% from the second quarter, continuing the positive trend we have seen so far in 2009. In addition, our team continues to make strong efforts to manage our loan portfolio, which has resulted in a decline in our 30-to-89 day delinquency rates in our commercial and mortgage loan portfolios at the end of the third quarter. In addition, total non-performing loans and assets both declined at September 30, 2009 when compared to the end of the first and second quarters."
A breakdown of non-performing loans by loan type is as follows:
Loan Type 9/30/2009 12/31/2008 9/30/2008 --------- ---------- --------- (Dollars in Millions) Commercial $56.8 $78.1 $74.2 Consumer/installment 8.4 4.9 3.9 Mortgage 49.3 38.9 33.9 Finance receivables 3.0 3.4 2.6 --- --- --- Total $117.5 $125.3 $114.6 ------ ------ ------ Ratio of non-performing loans to total portfolio loans 4.92% 5.09% 4.58% ---- ---- ---- Ratio of non-performing assets to total assets 5.07% 4.91% 4.29% ---- ---- ---- Ratio of the allowance for loan losses to non-performing loans 62.75% 46.22% 47.01% ----- ----- -----
Non-performing loans have declined since year-end 2008 as an increase in non-performing mortgage loans and consumer loans was more than offset by a decline in non-performing commercial loans. The decline in non-performing commercial loans is primarily due to net charge-offs and the payoff or other disposition of non-performing credits during the first nine months of 2009. Non-performing commercial loans largely reflect real estate-secured credit delinquencies caused primarily by cash flow difficulties encountered by real estate developers in Michigan as they confront a significant decline in sales. Since the end of 2006, the land, land development, and construction components of the Company's commercial loan portfolio have declined by over 60% and now total $95.3 million at Sept. 30, 2009, representing just 3.2% of total assets. The elevated level of non-performing residential mortgage loans is primarily due to a rise in delinquencies and foreclosures reflecting both weak economic conditions and soft residential real estate values in many parts of Michigan. Other real estate and repossessed assets totaled $32.9 million at Sept. 30, 2009, compared to $20.0 million at both Dec. 31, 2008 and Sept. 30, 2008.
The provision for loan losses was $22.3 million and $19.8 million in the third quarters of 2009 and 2008, 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 mix, levels of non-performing and classified loans, and loan net charge-offs. Loan net charge-offs were $14.0 million (2.27% annualized of average loans) in the third quarter of 2009, compared to $17.4 million (2.69% annualized of average loans) in the third quarter of 2008. The third quarter 2009 loan net charge-offs were divided among the following categories: commercial loans, $7.5 million; consumer loans, $1.6 million (including $0.2 million of deposit overdrafts); and mortgage loans, $4.9 million. The commercial loan and mortgage loan net charge-offs in the third quarter of 2009 primarily reflect write-downs to expected liquidation values for real estate or other collateral securing the loans. At Sept. 30, 2009, the allowance for loan losses totaled $73.7 million, or 3.09% of portfolio loans, compared to $57.9 million, or 2.35% of portfolio loans, at Dec. 31, 2008.
Balance Sheet, Liquidity and Capital
Total assets were $2.96 billion at Sept. 30, 2009, essentially unchanged from Dec. 31, 2008. Loans, excluding loans held for sale, were $2.39 billion at Sept. 30, 2009, compared to $2.46 billion at Dec. 31, 2008. Deposits totaled $2.49 billion at Sept. 30, 2009, an increase of $419.4 million from Dec. 31, 2008. The growth in deposits primarily reflects increases in savings and interest-bearing checking accounts and in brokered certificates of deposit. The Company's liquidity position remains sound, with approximately $854 million of unused borrowing capacity at Sept. 30, 2009.
Stockholders' equity totaled $159.9 million at Sept. 30, 2009, or 5.40% of total assets. The Company remains "well capitalized" for regulatory purposes with the following ratios:
Well Regulatory 9/30/2009 Capitalized Capital Ratio (estimate) 12/31/2008 9/30/2008 Minimum -------------- ---------- ---------- --------- ------------ Tier 1 capital to average assets 6.99% 8.61% 7.42% 5.00% Tier 1 capital to risk-weighted assets 9.00% 11.04% 9.56% 6.00% Total capital to risk-weighted assets 11.64% 13.05% 11.29% 10.00%
With regard to the outlook for the remainder 2009, CEO Magee concluded: "While we continue to work through the challenges of the difficult economy in the markets we serve, we are taking steps to solidify our financial position and ensure the long-term future success of Independent Bank. The first of these steps involves the suspension or deferral of the dividends or interest payments on our common stock, preferred stock and trust preferred securities effective November 1, 2009. In addition, we intend to convene a special meeting of shareholders by the end of this year to consider amending our articles of incorporation to increase the number of authorized shares of common stock. These actions are expected to provide us with the flexibility we need to enhance our capital position and work through to the ultimate recovery in the Michigan economy."
Deferral of Interest and Dividend Payments on Trust Preferred Securities and Preferred Stock
The Company announced that effective Nov. 1, 2009, it has elected to defer regularly scheduled quarterly interest payments on its junior subordinated debentures (the "Debentures") and quarterly dividend payments on its Series A Preferred Stock (the "Preferred Stock"). The Debentures are owned by IBC Capital Finance II, III and IV and Midwest Guaranty Trust I (the "Trusts") and were funded by the Trusts' issuance of trust preferred securities ("Debt Securities"). The Preferred Stock was issued to the U.S. Treasury under the TARP CPP. The total estimated annual interest and dividends that would be payable on the Debentures (and the underlying Debt Securities) and the Preferred Stock, if not deferred, is approximately $9.0 million based on current interest rates.
The terms of the Debentures and trust indentures (the "Indentures") allow for the Company to defer payment of interest on the Debt Securities at any time or from time to time for up to 20 consecutive quarters provided no event of default (as defined in the Indentures) has occurred and is continuing. The Company is not in default with respect to the Indentures, and the deferral of interest does not constitute an event of default under the Indentures. While the Company defers the payment of interest, it will continue to accrue the interest expense owed at the applicable interest rate. Upon the expiration of the deferral, all accrued and unpaid interest is due and payable.
So long as any shares of Preferred Stock remain outstanding, unless all accrued and unpaid dividends for all prior dividend periods have been paid or are contemporaneously declared and paid in full, (a) no dividend whatsoever may be paid or declared on the Company's common stock or other junior stock, other than a dividend payable solely in common stock and other than certain dividends or distributions of rights in connection with a shareholders' rights plan; and (b) neither the Company nor its subsidiaries may purchase, redeem or otherwise acquire for consideration any shares of its common stock or other junior stock unless the Company has paid in full all accrued dividends on the Preferred Stock for all prior dividend periods, other than purchases, redemptions or other acquisitions of the Company's common stock or other junior stock in connection with the administration of its employee benefit plans in the ordinary course of business and consistent with past practice; pursuant to a publicly announced repurchase plan up to the increase in diluted shares outstanding resulting from the grant, vesting or exercise of equity-based compensation; any dividends or distributions of rights or junior stock in connection with any shareholders' rights plan, redemptions or repurchases of rights pursuant to any shareholders' rights plan; acquisition of record ownership of common stock or other junior stock or parity stock for the beneficial ownership of any other person who is not the Company or one of its subsidiaries, including as trustee or custodian; and the exchange or conversion of common stock or other junior stock for or into other junior stock or of parity stock for or into other parity stock or junior stock but only to the extent that such acquisition is required pursuant to binding contractual agreements entered into before Dec. 12, 2008 or any subsequent agreement for the accelerated exercise, settlement or exchange thereof for common stock.
During the deferral period on the Debentures and Preferred Stock, the Company may not declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock. Suspension of the common stock dividend will conserve an additional $1.0 million on an annualized basis. The Company will pay its previously announced and declared common stock dividend of one cent per share on Oct. 30, 2009 but all future dividends will be suspended so long as interest and dividend payments on the Debentures and Preferred Stock are being deferred.
Other Capital Raising Initiatives
Like many financial institutions across the United States, the Company has been impacted by deteriorating economic conditions. The Michigan economy, in particular, has been and continues to show stress, including such factors as the highest unemployment rate in the nation and a declining population. As a result, the Company believes that additional capital may be necessary to maintain and strengthen its balance sheet to withstand the effects of ongoing economic stress and uncertainty over the coming months and years. Consequently, the Company is exploring several initiatives to bolster capital and strengthen its balance sheet. The Company's intention is to develop and have ready multiple capital raising alternatives that will ensure that it continues to exceed the regulatory designation of well-capitalized. The Company has engaged the investment banking firm of Stifel, Nicolaus & Company, Incorporated to assist in this strategic process.
In order to maintain these alternatives, the Company will seek shareholder approval to increase its authorized shares of common stock. Accordingly, the Company plans to file a preliminary proxy statement announcing a special shareholders meeting tentatively scheduled for Dec. 18, 2009 in Ionia, Mich. The Company expects that this proxy statement will include the following proposals: (i) an amendment to its Articles of Incorporation to increase the number of authorized common shares from 60 million to 500 million; and (ii) an underwater stock option exchange program (which will exclude named executive officers and directors).
Michael M. Magee, President and Chief Executive Officer, Robert N. Shuster, Chief Financial Officer, Stefanie M. Kimball, Chief Lending Officer, and William B. Kessel, Chief Operations Officer, will review third quarter 2009 results in a conference call for investors and analysts beginning at 10:00 a.m. ET on Tuesday, Oct. 27, 2009.
To participate in the live conference call, please dial 1-800-860-2442. The call can also be accessed (listen-only mode) via the "Investor Relations" section of the Company's Web site at IndependentBank.com. A playback of the call can be accessed by dialing 1-877-344-7529 (Replay Passcode # 434099). The replay will be available through Nov. 4, 2009.
In addition, a Power Point presentation associated with the third quarter 2009 conference call will be available on the Company's Web site at IndependentBank.com in the "Investor Relations" section under the "Presentations" tab beginning on Monday, Oct. 26, 2009.
About Independent Bank Corporation
Independent Bank Corporation (Nasdaq: IBCP) is a Michigan-based bank holding company with total assets of approximately $3 billion. Founded as Third National Bank of Ionia in 1864, Independent Bank Corporation now operates over 100 offices 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 title services. 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
Any statements in this news release that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as "expect," "believe," "intend," "estimate," "project," "may" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are predicated on management's beliefs and assumptions based on information known to Independent Bank Corporation's management as of the date of this news release and do not purport to speak as of any other date. Forward-looking statements may include descriptions of plans and objectives of Independent Bank Corporation's management for future or past operations, products or services, and forecasts of the Company's revenue, earnings or other measures of economic performance, including statements of profitability, business segments and subsidiaries, and estimates of credit quality trends. Such statements reflect the view of Independent Bank Corporation's management as of this date with respect to future events and are not guarantees of future performance, involve assumptions and are subject to substantial risks and uncertainties, such as the changes in Independent Bank Corporation's plans, objectives, expectations and intentions. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, the Company's actual results could differ materially from those discussed. Factors that could cause or contribute to such differences are changes in interest rates, changes in the accounting treatment of any particular item, the results of regulatory examinations, changes in industries where the Company has a concentration of loans, changes in the level of fee income, changes in general economic conditions and related credit and market conditions, and the impact of regulatory responses to any of the foregoing. Forward-looking statements speak only as of the date they are made. Independent Bank Corporation does not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. For any forward-looking statements made in this news release or in any documents, Independent Bank Corporation claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES Consolidated Statements of Financial Condition September 30, December 31, 2009 2008 ---- ---- (unaudited) ---------- Assets (in thousands) Cash and due from banks $182,405 $57,705 Trading securities 90 1,929 Securities available for sale 184,004 215,412 Federal Home Loan Bank and Federal Reserve Bank stock, at cost 27,855 28,063 Loans held for sale, carried at fair value 23,980 27,603 Loans Commercial 863,556 976,391 Mortgage 770,297 839,496 Installment 318,185 356,806 Finance receivables 435,191 286,836 ------- ------- Total Loans 2,387,229 2,459,529 Allowance for loan losses (73,710) (57,900) ------- ------- Net Loans 2,313,519 2,401,629 Other real estate and repossessed assets 32,923 19,998 Property and equipment, net 73,355 73,318 Bank owned life insurance 46,041 44,896 Goodwill 16,734 16,734 Other intangibles 10,783 12,190 Capitalized mortgage loan servicing rights 14,334 11,966 Accrued income and other assets 37,605 44,802 ------ ------ Total Assets $2,963,628 $2,956,245 ========== ========== Liabilities and Shareholders' Equity Deposits Non-interest bearing $316,281 $308,041 Savings and NOW 1,085,557 907,187 Retail time 554,475 668,968 Brokered time 529,521 182,283 ------- ------- Total Deposits 2,485,834 2,066,479 Federal funds purchased 750 Other borrowings 162,341 541,986 Subordinated debentures 92,888 92,888 Financed premiums payable 30,159 26,636 Accrued expenses and other liabilities 32,465 32,629 ------ ------ Total Liabilities 2,803,687 2,761,368 --------- --------- Shareholders' Equity Preferred stock, Series A, no par value, $1,000 liquidation preference per share-200,000 shares authorized; 72,000 shares issued and outstanding at September 30, 2009 and December 31, 2008 68,982 68,456 Common stock, $1.00 par value-60,000,000 shares authorized; issued and outstanding: 24,029,125 shares at September 30, 2009 and 23,013,980 shares at December 31, 2008 23,832 22,791 Capital surplus 201,360 200,687 Retained earnings (accumulated deficit) (118,268) (73,849) Accumulated other comprehensive loss (15,965) (23,208) ------- ------- Total Shareholders' Equity 159,941 194,877 ------- ------- Total Liabilities and Shareholders' Equity $2,963,628 $2,956,245 ========== ========== INDEPENDENT BANK CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2009 2009 2008 2009 2008 ---- ---- ---- ---- ---- (unaudited) ---------- (in thousands) Interest Income Interest and fees on loans $45,290 $45,224 $46,427 $134,915 $141,303 Interest on securities Taxable 1,475 1,705 2,078 4,913 6,558 Tax-exempt 841 976 1,652 2,924 5,998 Other investments 299 239 466 862 1,185 --- --- --- --- ----- Total Interest Income 47,905 48,144 50,623 143,614 155,044 ------ ------ ------ ------- ------- Interest Expense Deposits 9,109 8,811 9,577 26,468 36,980 Other borrowings 3,537 3,814 7,099 12,021 20,511 ----- ----- ----- ------ ------ Total Interest Expense 12,646 12,625 16,676 38,489 57,491 ------ ------ ------ ------ ------ Net Interest Income 35,259 35,519 33,947 105,125 97,553 Provision for loan losses 22,285 25,593 19,788 77,916 43,456 ------ ------ ------ ------ ------ Net Interest Income After Provision for Loan Losses 12,974 9,926 14,159 27,209 54,097 ------ ----- ------ ------ ------ Non-interest Income Service charges on deposit accounts 6,384 6,321 6,416 18,212 18,227 Net gains (losses) on assets Mortgage loans 2,257 3,262 969 8,800 3,977 Securities 121 4,230 (6,711) 3,770 (8,037) VISA check card interchange income 1,480 1,500 1,468 4,395 4,334 Mortgage loan servicing (496) 2,349 340 1,011 1,545 Title insurance fees 521 732 307 1,862 1,108 Other income 2,514 2,617 2,659 7,320 7,923 ----- ----- ----- ----- ----- Total Non- interest Income 12,781 21,011 5,448 45,370 29,077 ------ ------ ----- ------ ------ Non-interest Expense Compensation and employee benefits 13,823 13,328 14,023 39,728 42,015 Vehicle service contract counterparty risk 8,713 2,215 11,728 Loan and collection 3,628 3,227 2,008 10,893 5,895 Occupancy, net 2,602 2,560 2,871 8,210 8,798 Data processing 2,146 2,010 1,760 6,252 5,197 Deposit insurance 1,729 2,755 275 5,670 1,526 Furniture, fixtures and equipment 1,727 1,848 1,662 5,424 5,304 Loss on other real estate and repossessed assets 1,958 1,939 425 5,158 2,091 Credit card and bank service fees 1,722 1,668 1,273 4,854 3,493 Advertising 1,335 1,421 1,575 4,198 3,843 Other expenses 4,174 4,086 4,784 12,690 13,936 ----- ----- ----- ------ ------ Total Non- interest Expense 43,557 37,057 30,656 114,805 92,098 ------ ------ ------ ------- ------ Income (Loss) Before Income Tax (17,802) (6,120) (11,049) (42,226) (8,924) Income tax expense (benefit) (1,088) (959) (5,723) (1,754) (7,285) ------ ---- ------ ------ ------ Net Income (Loss) $(16,714) $(5,161) $(5,326) $(40,472) $(1,639) ======== ======= ======= ======== ======= Preferred dividends 1,075 1,075 3,225 ----- ----- ----- Net Income (Loss) Applicable to Common Stock $(17,789) $(6,236) $(5,326) $(43,697) $(1,639) ======== ======= ======= ======== ======= INDEPENDENT BANK CORPORATION AND SUBSIDIARIES Selected Financial Data Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2009 2009 2008 2009 2008 ---- ---- ---- ---- ---- (unaudited) ---------- Per Common Share Data (A) Net Income (Loss) Per Common Share Basic (B) $(.74) $(.26) $(.23) $(1.84) $(.07) Diluted (C) (.74) (.26) (.23) (1.84) (.07) Cash dividends declared .01 .01 .01 .03 .13 Selected Ratios (annualized) (A) As a Percent of Average Interest- Earning Assets Tax equivalent interest income 6.97% 7.04% 7.02% 7.03% 7.18% Interest expense 1.82 1.83 2.26 1.86 2.60 Tax equivalent net interest income 5.15 5.21 4.76 5.17 4.58 Net Income (Loss) to Average common equity (67.40)% (22.98)% (8.97)% (51.44)% (0.91)% Average assets (2.37) (0.83) (0.66) (1.96) (0.07) Average Shares Basic (B) 24,029,540 24,029,942 23,014,263 23,811,195 22,974,685 Diluted (C) 24,102,489 24,102,482 23,073,979 23,880,695 23,049,469 (A) For the three- and nine-month periods ended September 30, 2009 and the three-month period ended June 30, 2009, these amounts are calculated using net loss applicable to common stock. (B) Average shares of common stock for basic net income per share include shares issued and outstanding during the period and participating share awards. (C) Average shares of common stock for diluted net income per share include shares to be issued upon exercise of stock options and stock units for deferred compensation plan for non-employee directors. For any period in which a loss is recorded, the assumed exercise of stock options, and stock units for deferred compensation plan for non-employee directors would have an anti-dilutive impact on the loss per share and thus are ignored in the diluted per share calculation.
SOURCE Independent Bank Corporation