Independent Bank (US:IBCP)2023-05-05 15:32Financial Performance - Net income for the first quarter of 2023 was $13.0 million, down from $18.0 million in the same period of 2022, primarily due to a decrease in non-interest income and an increase in the provision for credit losses [175]. - Net interest income increased by $5.4 million, or 16.5%, to $38.4 million in Q1 2023, driven by a $204.0 million increase in average interest-earning assets [178]. - The net interest margin for Q1 2023 was 3.33%, up from 3.00% in Q1 2022, reflecting a 151 basis point increase in interest income as a percentage of average interest-earning assets [185]. - Non-interest income decreased to $10.6 million in Q1 2023 from $18.9 million in Q1 2022, with significant declines in mortgage loan servicing and net gains on assets [188]. - The provision for credit losses on loans was a credit of $0.8 million in Q1 2023, compared to a credit of $1.6 million in Q1 2022, reflecting changes in the allowance for credit losses [186]. - The provision for credit losses on held-to-maturity securities was an expense of $2.99 million in Q1 2023 due to a loss on a $3.0 million corporate security that defaulted [187]. - Income tax expense for Q1 2023 was $2.9 million, down from $4.1 million in Q1 2022, due to a decrease in pretax income [204]. Asset Quality - Average non-accrual loans decreased to $3.7 million in Q1 2023 from $5.0 million in Q1 2022, indicating improved asset quality [181]. - Non-performing loans totaled $3.89 million at March 31, 2023, slightly up from $3.72 million at December 31, 2022, maintaining a stable non-performing loans ratio of 0.11% [222]. - The Allowance for Credit Losses (ACL) decreased by $1.9 million to $50.6 million at March 31, 2023, from $52.4 million at December 31, 2022, representing 1.44% of total Portfolio Loans [227]. Loan and Deposit Activity - Mortgage loans originated in Q1 2023 totaled $113.0 million, a decrease of 58% from $270.2 million in Q1 2022 [189]. - Mortgage loans sold in Q1 2023 were $106.8 million, down 52% from $221.7 million in Q1 2022 [189]. - Total loans increased to $3.51 billion at March 31, 2023, compared to $3.47 billion at December 31, 2022, with notable increases in residential first mortgages and other loans [220]. - Deposits rose by $165.7 million to $4.54 billion at March 31, 2023, attributed to seasonal cash management needs and increased brokered deposits [208]. - Deposits grew to $4.54 billion at March 31, 2023, from $4.38 billion at December 31, 2022, driven by increases in reciprocal deposits and time deposits [230]. - The average deposit account size increased to $19,630 at March 31, 2023, compared to $16,330 at December 31, 2022 [232]. - The company had $696.8 million of time deposits maturing in the next 12 months, with a historical trend of renewal by customers [238]. Liquidity and Capital Resources - The company maintains strong liquidity and capital resources despite recent industry disruptions, with no significant impact on its deposit base [170]. - The company utilized approximately $1.02 billion in wholesale funding sources, accounting for 22.2% of total funding as of March 31, 2023 [234]. - As of March 31, 2023, the company had unused credit lines with the FHLB and FRB of approximately $930.1 million and $502.7 million, respectively [237]. - The company had approximately $928.5 million in fair value of unpledged securities AFS and HTM, which could provide an estimated additional borrowing capacity of approximately $854.9 million [237]. - Common shareholders' equity increased to $367.7 million at March 31, 2023, from $347.6 million at December 31, 2022, primarily due to a $12.0 million decrease in accumulated other comprehensive loss [246]. - The company’s total capitalization increased to $446.2 million at March 31, 2023, from $426.0 million at December 31, 2022 [243]. Interest Rate and Market Conditions - The company experienced a 475 basis point increase in the federal funds rate since March 2022, impacting net interest income and margin [180]. - At March 31, 2023, the company’s interest rate risk profile indicated exposure to rising rates, largely unchanged from December 31, 2022 [252]. - The company entered into $19.5 million of interest rate swaps during the first three months of 2023, generating $0.4 million in fee income [235]. Regulatory and Market Risks - Recent bank failures, including Silicon Valley Bank and Signature Bank, have created liquidity risks and concerns within the financial services industry [275]. - The closures of these banks have led to decreased confidence among depositors and investors, causing volatility and disruption in capital markets [275]. - Potential liquidity pressures, reduced net interest margins, and increased credit losses may adversely impact the company's financial condition and results of operations [276]. - The market price and volatility of the company's common stock may be negatively affected by recent developments in the financial services industry [276]. - Government responses to bank failures may lead to increased deposit insurance premiums or special assessments, impacting profitability [276]. - The importance of maintaining diversified funding sources has been highlighted due to recent market conditions [275]. - Changes to laws or regulations governing banks may arise from recent bank failures, potentially affecting the company's business [276]. Operational Efficiency - Non-interest expense decreased by $0.5 million to $31.0 million in Q1 2023 compared to Q1 2022 [197]. - Compensation and employee benefits expenses decreased by $0.8 million in Q1 2023 compared to the same period in 2022 [199]. - The company has developed contingency funding plans to stress test liquidity needs arising from adverse changes in financial metrics [239]. - The company did not repurchase any shares during the first three months of 2023 under its authorized share repurchase plan [247]. - As of March 31, 2023, the company's disclosure controls and procedures were evaluated as effective by the CEO and CFO [272]. - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2023, that materially affected the reporting [273].