Independent Bank (US:IBCP)2022-04-26 18:52Financial Data and Key Metrics Changes - Independent Bank Corporation reported a net income of $18 million or $0.84 per diluted share for Q1 2022, down from $22 million or $1 per diluted share in the prior-year period, primarily due to a decrease in non-interest income and an increase in non-interest expense [9] - Net interest income increased by 9% compared to Q1 2021, with a return on average assets of 1.54% and a return on average equity of 19.38% [10][22] - The provision for credit losses recorded a credit of $1.6 million in Q1 2022, compared to a provision credit of $0.5 million in the year-ago quarter [31] Business Line Data and Key Metrics Changes - The commercial segment of the loan portfolio grew by $54 million in Q1 2022, with an annualized growth rate of 21% over the past six months [14][15] - Residential mortgage balances increased by $30.4 million, and the consumer installment loan portfolio grew by $14.6 million [16] - Non-interest income totaled $18.9 million in Q1 2022, down from $26.4 million in the year-ago quarter, primarily due to a decrease in mortgage loan sales volume [26] Market Data and Key Metrics Changes - The unemployment rate in Michigan improved to 4.7%, slightly above the national average of 3.8%, with labor shortages impacting various segments of the economy [12] - Regional average home prices continued to climb, with inventory levels at record lows negatively affecting home sales volume [12] Company Strategy and Development Direction - The company aims to generate a diversified revenue stream through commercial banking, mortgage banking, and consumer banking, with significant investments in talent and technology [8][40] - The company plans to close four additional branch locations, expecting annual cost savings of $1.5 million, reducing the branch network to 58 locations [11] Management's Comments on Operating Environment and Future Outlook - Management noted that the current operating environment presents numerous challenges but also opportunities, expressing optimism about growth momentum in their markets [41] - The company expects strong commercial growth in Q2 2022 based on a solid pipeline, although they remain cautious about potential slowdowns later in the year [62] Other Important Information - The company purchased 59,002 shares at an average cost of $23.46 in Q1 2022 [38] - The effective income tax rate for Q1 2022 was 18.6%, at the lower end of the forecast [37] Q&A Session Summary Question: Dynamics driving mortgage compression quarter-over-quarter - The fair value mark was primarily impacted by a saleable construction portfolio, with longer completion timelines affecting market value [48] Question: Accrual for compensation reflecting potential revenue benefits - The company confirmed that they are accruing at a level that reflects potential revenue benefits from a higher short-term interest rate environment [50] Question: Loan growth performance and outlook for the year - Management indicated strong growth in the first quarter, with a good mix of new and existing customers, but acknowledged the difficulty in predicting the second half of the year [62] Question: Pricing competition on lending and deposit sides - There is significant pricing pressure on lending yields, while deposit competition has not yet intensified [63][64] Question: Updated thoughts on share repurchases for the year - The decision to continue share repurchases will depend on trading levels, growth capital needs, and overall capital levels [57] Question: Impact of fair value market compression on tangible common equity - The company is monitoring the situation closely but does not expect it to significantly impact regulatory capital [71]