Key Highlights

  • Net income was USD 17.9 million, or USD 0.80 per diluted share, against USD 17.5 million, or USD 0.84.
  • Net interest income rose 15.4% from the second quarter to USD 55.3 million, and net interest margin reached 3.79%.
  • Loans grew USD 483.3 million in the quarter, of which USD 366.7 million came from the Highpoint Community Bank acquisition.
  • Adjusted net income was USD 20.6 million, or USD 0.92 per diluted share, excluding merger-related expenses of USD 2.8 million.

First Full Quarter With Highpoint

Independent Bank (NASDAQ:IBCP), the Grand Rapids, Michigan parent of Independent Bank, reported third-quarter net income of USD 17.9 million on Tuesday, or USD 0.80 per diluted share, against USD 17.5 million and USD 0.84 a year earlier. The per-share figure reflects shares issued in the July 1 acquisition of HCB Financial Corp., the parent of Highpoint Community Bank. Excluding USD 2.8 million of after-tax merger-related expenses, adjusted net income was USD 20.6 million, or USD 0.92 per share.

Return on average assets was 1.14% and return on average equity 12.17%. Pre-tax income was USD 21.5 million against USD 22.7 million in the second quarter and USD 21.2 million a year earlier, while pre-tax, pre-provision net revenue rose to USD 26.3 million from USD 25.4 million.

Chief Executive Brad Kessel said the quarter reflected organic growth, margin expansion and the first full quarter of Highpoint contributions. He said the Highpoint system conversion is scheduled for November.

Margin, Loans and Deposits

Net interest income was USD 55.3 million, up USD 7.4 million from the second quarter and 21.8% from a year earlier. Net interest margin widened 12 basis points to 3.79%, or 3.82% on a tax-equivalent basis, against 3.51% a year earlier. Excluding purchase accounting accretion, which added about six basis points, the margin was 3.76%.

Excluding Highpoint, loans grew USD 116.6 million, or 10.5% annualized, with commercial loans growing 20.9% annualized. Total loans grew 10.95% in the quarter to USD 4.90 billion. Deposits grew USD 659.3 million to USD 5.52 billion, of which USD 543.5 million came from Highpoint and USD 115.8 million, or 9.4% annualized, was organic.

Noninterest income was USD 15.8 million against USD 11.9 million a year earlier, helped by mortgage loan servicing income of USD 4.1 million. Noninterest expense was USD 44.8 million against USD 37.8 million in the second quarter, on Highpoint compensation, merger expenses, data processing and intangible amortization.

Credit and Capital

The provision for credit losses was USD 4.81 million against USD 2.72 million, reflecting loan growth, acquired unfunded commitments and a higher specific reserve on one commercial relationship. Net charge-offs were USD 0.21 million. The allowance was USD 73.7 million, or 1.51% of loans.

Non-performing loans were USD 39.2 million, or 0.80% of loans, against 0.74% in June and 0.48% a year earlier, as four commercial relationships moved to non-accrual status. Shareholders' equity was USD 577.3 million, or 9.22% of assets, and tangible common equity per share was USD 23.10 against USD 24.24 in June, reflecting USD 39.1 million of goodwill and intangibles from the acquisition. The company paid a dividend of USD 0.28 per share on Aug. 14.

Bank Markers to Follow

Tracking points include net interest margin against 3.79% as purchase accounting accretion fades, non-performing loans relative to 0.80% of loans, and noninterest expense after merger costs.

Further items are the November Highpoint system conversion, commercial loan growth against 20.9% annualized, and tangible common equity per share relative to USD 23.10.