IONIA — Independent Bank Corp.’s net income from continuing operations dropped significantly in the first quarter to $4.3 million, or 19 cents per diluted share, from first quarter 2006 net income from operations of $13.1 million, or 56 cents per diluted share. Similarly, the bank’s net income for first quarter 2007 dropped to $4.7 million, or 20 cents per diluted share, from the $12.3 million, or 53 cents per share, reported for the first quarter of 2006.
The company attributed the decline in net income from continuing operations to a combination of factors, including a decrease in net interest income; a substantially higher provision for loan losses; a goodwill impairment charge of $300,000 related to the company’s 1998 acquisition of First Home Financial; as well as $400,000 in expenses related to Independent’s acquisition of 10 TCF Bank branches during the quarter.
Also factoring into the decline is $2.8 million of other income related to the settlement of litigation involving the former owners of Mepco Finance Corp. In January, Mepco, a wholly-owned subsidiary of Independent Bank Corp., sold substantially all of its assets related to the insurance premium finance business to Premium Financing Specialists Inc.
“Our lower, first-quarter 2007 earnings reflect the asset quality challenges that we have encountered over the past few quarters, as well as the continuing impact of the difficult interest rate environment and tough competitive and economic conditions in our state,” said President and CEO Michael Magee.
Magee noted that despite the current interest rate environment, Independent Bank’s first quarter net interest margin was unchanged from the fourth quarter of 2006. He said the company expects that the recent TCF branch acquisition will lead to future improvements in the company’s net interest margin for the balance of this year.
“Based upon these developments, we are optimistic that the adverse impact of the flat-yield curve on our net interest margin has subsided,” Magee said.
As a result of actual first quarter earnings, lower loan growth and higher credit cost expectations than what the company originally anticipated, Independent reduced its full-year, 2007 earnings estimate from a range of $1.70 to $1.82 per diluted share to a range of $1.20 to $1.40 per diluted share.