Independent Bank Corporation reported a modest third-quarter profit increase, while diluted earnings per share fell; the Michigan lender also recorded higher credit-loss provisions and merger expenses.
An earnings release furnished to the Securities and Exchange Commission on Tuesday showed net income of $17.9 million for the quarter ended Sept. 30, up from $17.5 million a year earlier. Diluted earnings per share slipped to $0.80 from $0.84. Net interest income rose 21.8% to $55.3 million. Net interest margin reached 3.79%, compared with 3.51% a year earlier and 3.67% in the second quarter.
Highpoint Community Bank contributed through the whole quarter after Independent Bank completed its acquisition of HCB Financial Corp. on July 1. Loans grew $483.3 million, or 10.95%, with $366.7 million of the increase coming from the acquired portfolio. Excluding those loans, balances rose $116.6 million from June 30, or 10.5% on an annualized basis. Deposits increased $659.3 million, or 13.56%, including $543.5 million acquired with Highpoint. Excluding those deposits, the increase from June 30 was $115.8 million, equal to a 9.4% annualized pace.
Independent Bank credited higher net interest income to a larger average base of interest-earning assets, stronger margins and a six-basis-point lift from purchase-accounting adjustments.
The provision for credit losses totaled $4.81 million, up from $1.99 million a year earlier. The company attributed the increase to a larger specific reserve for one commercial relationship, loan growth and higher unfunded commitments. Nonperforming loans stood at $39.2 million, or 0.80% of portfolio loans, at Sept. 30, versus $20.4 million, or 0.48%, a year earlier.
Noninterest expenses increased to $44.8 million from $34.1 million a year earlier, including $3.5 million in merger-related costs. Independent Bank's adjusted calculation excluded $2.8 million in after-tax merger expenses and showed net income of $20.6 million, or $0.92 per diluted share.
“Our third quarter results reflect strong organic growth, continued margin expansion, and the first full quarter of contributions from Highpoint Community Bank,” President and CEO William B. (“Brad”) Kessel said. The bank expects to complete Highpoint’s system integration on Nov. 9.
