Independents Net Income Drops 63M

October 30, 2007
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IONIA — Independent Bank Corp. reported third quarter net income of $3.7 million, or 16 cents per diluted share, down from net income of $10 million, or 43 cents per share in the same quarter the year before.

Return on average equity and return of average assets in the third quarter were 5.93 percent and 0.45 percent, respectively, compared with 14.33 percent and 1.09 percent in 2006

The company attributed the year-over-year decline in third-quarter income primarily to an increase in the provision for loan losses and higher non-interest expenses. The provision for loan losses was $20.7 million in the third quarter, compared with $4.5 million in the prior year’s third quarter.

The increase in non-performing loans since year-end 2006 is principally due to an increase in non-performing commercial loans and real estate mortgage loans, primarily because of the addition of several large credits with real estate developers becoming past due in the first nine months of this year. 

“In response to this trend, our management team has implemented a new organizational structure designed to improve loan monitoring and enhance our portfolio management function,” said President and CEO Michael M. Magee. “These management and monitoring functions include the implementation of an enhanced quarterly credit quality review, the creation of a special assets group and increased oversight by our credit officers on a real-time basis.”

Higher non-interest expenses in the third quarter included $600,000 of one-time costs related to Independent’s bank charter consolidation following acquisition of 10 TCF National Bank branches in March.

Magee said the bank charter consolidation in the just-passed quarter was a “significant” accomplishment” that positions the company to achieve improved cost savings, operating efficiency and strategic growth over the long term.

“While efforts to improve credit quality remain a top priority, economic conditions throughout Michigan remain sluggish, particularly within the residential housing market where real estate values and end-market demand have further softened,” Magee said.

Total assets were $3.26 billion at Sept. 30, down slightly from $3.43 billion at Dec. 31, 2006. Excluding loans held for sale, total loans were $2.51 billion at Sept. 30, versus $2.48 billion at the end of last year. Deposits totaled $2.73 billion at Sept. 30, up $122.5 million from Dec. 31, 2006      

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