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Published in Finance

Independent Bank Q1 earnings dip with slower mortgage activity

BY Tuesday, April 26, 2022 06:09pm

GRAND RAPIDS — Independent Bank Corp. has recorded lower earnings so far this year as mortgage originations and refinancings slowed.

The Grand Rapids-based Independent Bank (Nasdaq: IBCP) today reported $17.9 million in net income for the first quarter, or 84 cents per diluted share. That compares with $22 million, or $1 per diluted share, in the first three months of 2021.

Brad Kessel

President and CEO Brad Kessel attributed the reduced earnings to lower non-interest income as mortgage lending eased amid higher interest rates. The bank also saw lower gains from the sale of mortgage loans.

Independent Bank did record $99 million in net loan growth during the first quarter for an annualized 13.8-percent growth rate. Loans totaled $3 billion at the end of the quarter.

“While the current operating environment contains numerous challenges and much uncertainty, it also provides many opportunities. We are excited about the momentum we have in our markets and look forward to continuing these growth trends for the remainder of 2022 and beyond,” Kessel said in a conference call with analysts to discuss quarterly results.

Independent Bank’s commercial lending grew by $54 million to end the first quarter at $1.25 billion. The bank’s commercial lending in the past six months grew at a 21-percent annualized rate and “based on a strong pipeline, we expect strong commercial growth in the second quarter of 2022 as well,” as businesses finance expansions even amid economic uncertainty, high inflation and rising interest rates, said Joel Rahn, executive vice president of commercial banking.

“We’re not seeing signs of pullback yet. But certainly we’re following the economic conditions closely. It’s difficult to say what the second half of the year will look like. Right now we don’t see a slowing up, but the world’s changing rapidly to deal with the economic news,” Rahn said.

Independent Bank expects the Federal Reserve to implement multiple interest rate increases “through 2022 and into 2023,” Kessel said.

“This recent increase in rates has slowed our mortgage refinance origination volume and decreased this quarter’s net gains on mortgage loan sales. However, we have also structured our mortgage business to have an emphasis on supporting home purchase requests. And these volumes continue to be at solid levels,” he said.

Independent Bank has 62 offices in the Lower Peninsula with $4.79 billion in total assets, plus six loan offices in Michigan and two in Ohio. The bank plans to open a new full-service branch in Holland in the third quarter while closing offices in Kent, Oakland, Lapeer and Saginaw counties during the second quarter as “part of our ongoing branch optimization reviews,” Kessel said. The branch closings will generate $1.5 million in combined annual cost savings, he said.

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