First Quarter Highlights
Highlights for the first quarter of 2025 include:
- Increase in net interest income of $0.8 million (or 1.9% ) over the fourth quarter of 2024;
- Increase in tangible book value per share of $2.43 (13.2%) from March 31, 2024;
- Net growth in core deposits of $9.1 million (or 0.8% annualized) from December 31, 2024;
- Net growth in loans of $33.9 million (or 3.4% annualized) from December 31, 2024; and
- The payment of a 26 cent per share dividend on common stock on February 14, 2025.
William B. ("Brad”) Kessel, the President and Chief Executive Officer of Independent Bank Corporation, commented: "I am proud of our team and very pleased to see us continue our positive trends with our first quarter 2025 results. Overall loans increased 3.4% (annualized), while core deposits are up 0.8% (annualized). We were able to generate net interest income growth on both a linked quarter basis and on a year over year quarterly basis and produce four basis points in margin expansion. 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. These fundamentals continue to drive positive growth in tangible book value per share (13.2%) compared to the prior year quarter. Our credit metrics continue to be very good, with a low level of watch credits, 14 basis points of non-performing assets to total assets, and 0.01% net charge-offs for the quarter to average loans annualized. The allowance for credit losses, factoring in the recent market uncertainty, was 1.47% of total loans. We are staying in close contact with our client base during this volatile period and keeping abreast of what they are experiencing and how they are adjusting if needed. Based on a robust commercial loan pipeline, the past record of our core group of professionals and the ongoing strategic initiative to add talented bankers to our team, we continue to be focused on what we can control and optimistic on the long-term future of the IBC franchise.”
Significant items impacting comparable first quarter 2025 and 2024 results include the following:
- Changes in the fair value due to price of capitalized mortgage loan servicing rights (the "MSR Changes”) of $(1.5) million ($(0.06) per diluted share, after taxes) for the three-month period ended March 31, 2025, as compared to $1.3 million ($0.05 per diluted share, after taxes) for the three-months ended March 31, 2024.
The Company's net interest income totaled $43.7 million during the first quarter of 2025, an increase of $3.5 million, or 8.7% from the year-ago period, and an increase of $0.8 million, or 1.9%, from the fourth quarter of 2024. The Company's tax equivalent net interest income as a percent of average interest-earning assets (the "net interest margin”) was 3.49% during the first quarter of 2025, compared to 3.30% in the year-ago period, and 3.45% in the fourth quarter of 2024. The year-over-year and linked quarterly increase in net interest income was due to an increase in average interest-earning assets and the net interest margin. Average interest-earning assets were $5.08 billion in the first quarter of 2025, compared to $4.91 billion in the year ago quarter and $5.01 billion in the fourth quarter of 2024.
Non-interest income totaled $10.4 million for the first quarter of 2025, compared to $12.6 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 first quarters of 2025 and 2024 were approximately $2.3 million and $1.4 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 an increase in the volume of mortgage loans sold.
Mortgage loan servicing, net, generated income (expense) of $(0.6) million and $2.7 million in the first quarters of 2025 and 2024, 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 as well as a decline in servicing revenue. The decline in servicing revenue is attributed to the sale of approximately $931 million of mortgage servicing rights on January 31, 2025. Capitalized mortgage loan servicing rights totaled $32.2 million and $46.8 million at March 31, 2025 and December 31, 2024, respectively. The decline during the first quarter was primarily attributed to aforementioned mortgage servicing right sale. This transaction was executed in part to reduce the amount of exposure the bank had to rate variances that may impact the mortgage servicing right asset valuation in future periods. While the magnitude of fair value adjustments would also be expected to decrease, those adjustments are dependent upon factors that are harder to predict.
Mortgage loan servicing, net activity is summarized in the following table:
| Three months ended | |||||||
| 3/31/2025 | 3/31/2024 | ||||||
| (In thousands) | |||||||
| Mortgage loan servicing, net: | |||||||
| Revenue, net | $ | 1,882 | $ | 2,219 | |||
| Fair value change due to price | (1,533 | ) | 1,265 | ||||
| Fair value change due to pay-downs | (891 | ) | (759 | ) | |||
| Loss on sale of originated servicing rights | (94 | ) | - | ||||
| Total | $ | (636 | ) | $ | 2,725 | ||
The Company recorded income tax expense of $3.5 million in the first quarter of 2025. This compares to an income tax expense of $3.8 million in the first quarter of 2024. The change in income tax expense principally reflects changes in pre-tax earnings in 2025 relative to 2024.
Asset Quality
A breakdown of non-performing loans by loan type is as follows (1):
| 3/31/2025 | 12/31/2024 | 3/31/2024 | |||||||||
| Loan Type | (Dollars in thousands) | ||||||||||
| Commercial | $ | 127 | $ | 54 | $ | 25 | |||||
| Mortgage | 8,080 | 7,005 | 4,620 | ||||||||
| Installment | 819 | 733 | 710 | ||||||||
| Sub total | 9,026 | 7,792 | 5,355 | ||||||||
| Less - government guaranteed loans | 1,940 | 1,790 | 1,665 | ||||||||
| Total non-performing loans | $ | 7,086 | $ | 6,002 | $ | 3,690 | |||||
| Ratio of non-performing loans to total portfolio loans | 0.17 | % | 0.15 | % | 0.10 | % | |||||
| Ratio of non-performing assets to total assets | 0.14 | % | 0.13 | % | 0.09 | % | |||||
| Ratio of allowance for credit losses to total non-performing loans | 847.23 | % | 989.32 | % | 1526.10 | % | |||||
The provision for credit losses was an expense of $0.72 million and $0.74 million in the first quarters of 2025 and 2024, respectively. We recorded loan net charge offs of $0.07 million and $0.22 million in the first quarters of 2025 and 2024, respectively. At March 31, 2025, the allowance for credit losses for loans totaled $60.0 million, or 1.47% of total portfolio loans compared to $59.4 million, or 1.47% of total portfolio loans at December 31, 2024.
Balance Sheet, Capital and Liquidity
Total assets were $5.33 billion at March 31, 2025, a decrease of $9.7 million from December 31, 2024. Loans, excluding loans held for sale, were $4.07 billion at March 31, 2025, compared to $4.04 billion at December 31, 2024. Deposits totaled $4.63 billion at March 31, 2025, a decrease of $20.2 million from December 31, 2024. This decrease is primarily due to decreases in non-interest bearing deposits and brokered time deposits that were partially offset by increases in savings and interest-bearing checking, reciprocal and time deposits.
Cash and cash equivalents totaled $128.1 million at March 31, 2025, versus $119.9 million at December 31, 2024. Securities available for sale ("AFS”) totaled $529.7 million at March 31, 2025, versus $559.2 million at December 31, 2024.
Total shareholders' equity was $467.3 million at March 31, 2025, or 8.77% of total assets compared to $454.7 million or 8.52% at December 31, 2024. Tangible common equity totaled $437.6 million at March 31, 2025, or $20.87 per share compared to $424.9 million or $20.33 per share at December 31, 2024. 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 | 3/31/2025 | 12/31/2024 | Well
Capitalized Minimum | |||||
| Tier 1 capital to average total assets | 9.56 | % | 9.58 | % | 5.00 | % | ||
| Tier 1 common equity to risk-weighted assets | 11.93 | % | 11.74 | % | 6.50 | % | ||
| Tier 1 capital to risk-weighted assets | 11.93 | % | 11.74 | % | 8.00 | % | ||
| Total capital to risk-weighted assets | 13.19 | % | 12.99 | % | 10.00 | % | ||
Share Repurchase Plan
On December 17, 2024, the Board of Directors of the Company authorized the 2025 share repurchase plan. Under the terms of the 2025 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, 2025. During the three month period ended March 31, 2025, there were 1,093 shares of common stock repurchased, for an aggregate purchase price of $0.03 million. Subsequent to quarter end, from April 3, 2025 through April 22, 2025, there were 249,482 additional shares of common stock repurchased, for an aggregate purchase price of $7.2 million.
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, April 24, 2025.
To participate in the live conference call, please dial 1-833-470-1428 (Access Code # 706949). 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/106805636.
A playback of the call can be accessed by dialing 1-866-813-9403 (Access Code # 746507). The replay will be available through May 1, 2025.
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 Statements
This 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, 2024 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 SUBSIDIARIES Consolidated Statements of Financial Condition | ||||||||
| March 31, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| (In thousands, except share amounts) | ||||||||
| Assets | ||||||||
| Cash and due from banks | $ | 60,566 | $ | 56,984 | ||||
| Interest bearing deposits | 67,579 | 62,898 | ||||||
| Cash and Cash Equivalents | 128,145 | 119,882 | ||||||
| Securities available for sale | 529,676 | 559,182 | ||||||
| Securities held to maturity (fair value of $302,579 at March 31, 2025 and $301,860 at December 31, 2024) | 336,928 | 339,436 | ||||||
| Federal Home Loan Bank and Federal Reserve Bank stock, at cost | 15,587 | 16,099 | ||||||
| Loans held for sale, carried at fair value | 9,514 | 7,643 | ||||||
| Loans | ||||||||
| Commercial | 1,992,187 | 1,937,364 | ||||||
| Mortgage | 1,512,807 | 1,516,726 | ||||||
| Installment | 567,697 | 584,735 | ||||||
| Total Loans | 4,072,691 | 4,038,825 | ||||||
| Allowance for credit losses | (60,035 | ) | (59,379 | ) | ||||
| Net Loans | 4,012,656 | 3,979,446 | ||||||
| Other real estate and repossessed assets, net | 413 | 938 | ||||||
| Property and equipment, net | 37,369 | 37,492 | ||||||
| Bank-owned life insurance | 53,721 | 53,855 | ||||||
| Capitalized mortgage loan servicing rights, carried at fair value | 32,171 | 46,796 | ||||||
| Other intangibles | 1,366 | 1,488 | ||||||
| Goodwill | 28,300 | 28,300 | ||||||
| Accrued income and other assets | 142,582 | 147,547 | ||||||
| Total Assets | $ | 5,328,428 | $ | 5,338,104 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Deposits | ||||||||
| Non-interest bearing | $ | 989,928 | $ | 1,013,647 | ||||
| Savings and interest-bearing checking | 2,017,800 | 1,995,314 | ||||||
| Reciprocal | 910,526 | 907,031 | ||||||
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