2023 ANNUAL REPORT
Performance Graph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30
Selected Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . .
32
Management’s Annual Report on Internal Control Over Financial Reporting (PCAOB ID 173) . . . . . .
52
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53
Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
56
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
61
Quarterly Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
29
PERFORMANCE GRAPH
The graph below compares the total returns (assuming reinvestment of dividends) of Independent Bank
Corporation common stock, the NASDAQ Composite Index and the NASDAQ Bank Stock Index. The graph
assumes $100 invested in Independent Bank Corporation common stock (returns based on stock prices per the
NASDAQ) and each of the indices on December 31, 2018, and the reinvestment of all dividends during the periods
presented. The performance shown on the graph is not necessarily indicative of future performance.
Independent Bank Corporation
Index
12/31/18
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
Period Ending
Independent Bank Corporation . . . . . . . . . . . . . . . . . . $100.00 $111.40 $ 95.49 $128.15 $133.58 $152.25
236.17
NASDAQ Composite. . . . . . . . . . . . . . . . . . . . . . . . . .
149.56
NASDAQ Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
198.10
119.62
163.28
135.89
100.00
100.00
136.69
137.18
242.03
164.26
30
SELECTED CONSOLIDATED FINANCIAL DATA
SUMMARY OF OPERATIONS
2023
Year Ended December 31,
2021
(Dollars in thousands, except per share amounts)
2020
2022
2019
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 239,677 $ 169,008 $ 138,080 $ 139,829 $ 148,928
26,347
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . .
122,581
Net interest income . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses(1) . . . . . . . . . . . . . . . . .
824
Net gains (losses) on securities available for
8,315
129,765
(1,928)
19,447
149,561
5,341
83,348
156,329
6,210
16,217
123,612
12,463
sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-interest income . . . . . . . . . . . . . . . . . .
Non-interest expense. . . . . . . . . . . . . . . . . . . . . . .
Income before income tax . . . . . . . . . . . . . . . .
Income tax expense. . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $
(222)
50,898
127,119
73,676
14,609
59,067 $
(275)
62,184
128,341
77,788
14,437
63,351 $
1,411
75,232
131,023
77,313
14,418
62,895 $
267
80,478
122,413
69,481
13,329
56,152 $
307
47,429
111,733
57,760
11,325
46,435
PER COMMON SHARE DATA
Net income per common share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared and paid . . . . . . . . . . . .
Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.82 $
2.79
0.92
19.41
3.00 $
2.97
0.88
16.50
2.91 $
2.88
0.84
18.82
2.56 $
2.53
0.80
17.82
2.03
2.00
0.72
15.58
SELECTED BALANCES
Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,263,726 $4,999,787 $4,704,740 $4,204,013 $3,564,694
2,725,023
3,790,901
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses(1) . . . . . . . . . . . . . . . .
26,148
54,658
3,036,727
4,622,879
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
350,169
404,449
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . .
88,646
50,026
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . .
39,510
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . .
—
39,456
39,728
Subordinated debentures . . . . . . . . . . . . . . . . . . . .
3,465,352
52,435
4,379,069
347,596
86,006
39,433
39,660
2,733,678
35,429
3,637,355
389,522
30,012
39,281
39,524
2,905,045
47,252
4,117,090
398,484
30,009
39,357
39,592
SELECTED RATIOS
Net interest income to average interest earning
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.26%
3.32%
3.10%
3.34%
3.80%
Net income to
Average shareholders’ equity . . . . . . . . . . . . . .
Average assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Average shareholders’ equity to average assets . .
Tier 1 capital to average assets . . . . . . . . . . . . . .
Non-performing loans to Portfolio Loans . . . . . .
16.04
1.15
7.20
9.03
0.14
18.41
1.31
7.13
8.86
0.11
16.13
1.41
8.73
8.79
0.18
15.68
1.43
9.10
9.15
0.29
13.63
1.35
9.90
10.11
0.35
(1)
Beginning January 1, 2021, calculation is based on CECL methodology. Prior to January 1, 2021, calculation was based on the probable
incurred loss methodology.
31
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Disclaimer Regarding Forward-Looking Statements. Statements in this report that are not statements of historical fact,
including statements that include terms such as ‘‘will,’’ ‘‘may,’’ ‘‘should,’’ ‘‘believe,’’ ‘‘expect,’’ ‘‘forecast,’’ ‘‘anticipate,’’
‘‘estimate,’’ ‘‘project,’’ ‘‘intend,’’ ‘‘likely,’’ ‘‘optimistic’’ and ‘‘plan’’ and statements about future or projected financial and
operating results, plans, projections, objectives, expectations, and intentions, are forward-looking statements. Forward-
looking statements include, but are not limited to, descriptions of plans and objectives for future operations, products or
services; projections of our future revenue, earnings or other measures of economic performance; forecasts of credit losses
and other asset quality trends; statements about our business and growth strategies; and expectations about economic and
market conditions and trends. These forward-looking statements express our current expectations, forecasts of future
events, or long-term goals. They are based on assumptions, estimates, and forecasts that, although believed to be
reasonable, may turn out to be incorrect. Actual results could differ materially from those discussed in the forward-looking
statements for a variety of reasons, including:
•
•
•
•
•
•
•
•
economic, market, operational, liquidity, credit, and interest rate risks associated with our business;
economic conditions generally and in the financial services industry, particularly economic conditions
within Michigan and the regional and local real estate markets in which our bank operates;
the failure of assumptions underlying the establishment of, and provisions made to, our allowance for credit
losses;
increased competition in the financial services industry, either nationally or regionally;
our ability to achieve loan and deposit growth;
volatility and direction of market interest rates;
the continued services of our management team; and
implementation of new legislation, which may have significant effects on us and the financial services industry.
This list provides examples of factors that could affect the results described by forward-looking statements
contained in this report, but the list is not intended to be all-inclusive. The risk factors disclosed in Part I – Item 1A
of our Annual Report on Form 10-K for the year ended December 31, 2023, as updated by any new or modified risk
factors disclosed in Part II – Item 1A of any subsequently filed Quarterly Report on Form 10-Q, include the primary
risks our management believes could materially affect the results described by forward-looking statements in this
report. However, those risks are not the only risks we face. Our results of operations, cash flows, financial position,
and prospects could also be materially and adversely affected by additional factors that are not presently known to
us, that we currently consider to be immaterial, or that develop after the date of this report. We cannot assure you
that our future results will meet expectations. While we believe the forward-looking statements in this report are
reasonable, you should not place undue reliance on any forward-looking statement. In addition, these statements
speak only as of the date made. We do not undertake, and expressly disclaim, any obligation to update or alter any
statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.
Introduction. The following section presents additional information to assess the financial condition and results
of operations of Independent Bank Corporation (‘‘IBCP’’), its wholly-owned bank, Independent Bank (the ‘‘Bank’’),
and their subsidiaries. This section should be read in conjunction with the consolidated financial statements and the
supplemental financial data contained elsewhere in this annual report. We also encourage you to read our Annual
Report on Form 10-K filed with the U.S. Securities and Exchange Commission (‘‘SEC’’). That report includes a list
of risk factors that you should consider in connection with any decision to buy or sell our securities.
Overview. We provide banking services to customers located primarily in Michigan’s Lower Peninsula and also
have one mortgage loan production facility in Ohio (Fairlawn). As a result, our success depends to a great extent upon
the economic conditions in Michigan’s Lower Peninsula.
Significant Developments. As explained in more detail under Item 1A – ‘‘Risk Factors’’ – the closures of several
banks in 2023 have impacted the financial services industry. These events have caused banks to reexamine their
funding sources and liquidity risks and in some cases have caused deposit holders to reevaluate their banking
relationships. As addressed below, we believe these events have caused little to no impact on our deposit base, aside
from the mix and pricing of deposits, and that our liquidity and funding and capital resources remain strong. In the
32
wake of these events, initiatives taken with our customer base included discussing how these events unfolded,
reinforcing our current capital and liquidity positions and education to maximize FDIC insurance coverage.
(See ‘‘Deposits and borrowings’’ and ‘‘Liquidity and capital resources’’).
Pressures from various global and national macroeconomic conditions,
including heightened inflation,
uncertainty regarding future interest rates, foreign currency exchange rate fluctuations, recent adverse weather
conditions, escalating tensions in the Middle East, the continuation of the Russia-Ukraine war, and potential
governmental responses to these events, continue to create significant economic uncertainty.
The extent to which these pressures may impact our business, results of operations, asset valuations, financial
condition, and customers will depend on future developments, which continue to be highly uncertain and difficult to
predict. Material adverse impacts may include all or a combination of valuation impairments on our intangible assets,
securities available for sale (‘‘AFS’’), securities held to maturity (‘‘HTM’’), loans, capitalized mortgage loan
servicing rights or deferred tax assets.
It is against this backdrop that we discuss our results of operations and financial condition in 2023 as compared
to earlier periods.
Summary. We recorded net income of $59.1 million, or $2.79 per diluted share, in 2023, net income of $63.4 million,
or $2.97 per diluted share, in 2022, and net income of $62.9 million, or $2.88 per diluted share, in 2021.
RESULTS OF OPERATIONS
KEY PERFORMANCE RATIOS
Year Ended December 31,
2021
2022
2023
Net income to
Average shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per common share
16.04% 18.41% 16.13%
1.31
1.15
1.41
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2.82
2.79
$ 3.00
2.97
$ 2.91
2.88
Net interest income. Net interest income is the most important source of our earnings and thus is critical in
evaluating our results of operations. Changes in our net interest income are primarily influenced by our level of
interest-earning assets and the income or yield that we earn on those assets and the manner and cost of funding our
interest-earning assets. Certain macro-economic factors can also influence our net interest income such as the level
and direction of interest rates, the difference between short-term and long-term interest rates (the steepness of the
yield curve) and the general strength of the economies in which we are doing business. Finally, risk management
plays an important role in our level of net interest income. The ineffective management of credit risk and interest-rate
risk in particular can adversely impact our net interest income.
Net interest income totaled $156.3 million during 2023, compared to $149.6 million and $129.8 million during
2022 and 2021, respectively. The increase in net interest income in 2023 compared to 2022 primarily reflects a
$262.0 million increase in average interest-earning assets that was partially offset by a six basis point decrease in our
tax equivalent net interest income as a percent of average interest-earning assets (the ‘‘net interest margin’’).
The increase in net interest income in 2022 compared to 2021 primarily reflects a $307.5 million increase in
average interest-earning assets and a 22 basis point increase in our net interest margin.
The increase in average interest-earning assets during 2023 primarily reflects growth in commercial, mortgage and
installment loans funded primarily by an increase in deposits and a decrease in securities AFS and securities HTM.
The six basis point decrease in the net interest margin during 2023 as compared to 2022 primarily reflects
130 basis point increase in interest expense as a percent of average interest-earning assets which was partially offset
by a 124 basis point increase in interest income as a percent of average interest-earning assets. These increases are
primarily attributed to the 450 basis point increase in the federal funds rate since June of 2022. Our net interest margin
has been negatively impacted by changes in funding mix (such as shifting from non-interest bearing deposits to
interest-bearing deposits and an increase in time deposits) as well as higher deposit pricing sensitivity to the increases
in interest rates discussed above. See Asset/liability management.
33
2023, 2022 and 2021 interest income on loans includes $0.2 million, $0.3 million and $0.8 million, respectively,
of accretion of the discount recorded on loans acquired in connection with our acquisition of Traverse City State Bank
(‘‘TCSB’’) in 2018.
Interest and fees on loans include zero, $0.8 million and $8.9 million in 2023, 2022 and 2021, respectively, of
accretion of net loan fees on Payroll Protection Program (‘‘PPP’’) loans. Unaccreted net loan fees on PPP loans
remaining were zero at December 31, 2023 and 2022, respectively.
Our net interest income is also impacted by our level of non-accrual loans. Average non-accrual loans totaled
$4.8 million, $4.4 million and $6.2 million in 2023, 2022 and 2021, respectively.
AVERAGE BALANCES AND RATES
2023
2022
2021
Average
Balance
Interest
Rate
Average
Balance
Interest
Rate
Average
Balance
Interest
Rate
(Dollars in thousands)
ASSETS
Taxable loans . . . . . . . . . . . . .
Tax-exempt loans(1) . . . . . . . . .
Taxable securities . . . . . . . . . .
Tax-exempt securities(1) . . . . . .
Interest bearing cash . . . . . . . .
Other investments . . . . . . . . . .
$3,624,406
6,855
771,121
317,553
83,587
17,557
$197,462
333
23,314
14,039
4,416
1,013
5.45% $3,227,803
7,771
4.86
945,665
3.02
331,322
4.42
28,773
5.28
17,768
5.77
$138,765
370
20,676
10,191
142
742
4.30% $2,881,950
7,240
4.76
915,701
2.19
348,346
3.08
79,915
0.49
18,427
4.18
$116,358
362
14,488
7,892
112
734
4.04%
5.00
1.58
2.27
0.14
3.98
Interest earning assets . . . . .
4,821,079
240,577
4.99
4,559,102
170,886
3.75
4,251,579
139,946
3.30
Cash and due from banks. . . . .
Other assets, net . . . . . . . . . . .
58,473
236,072
Total assets . . . . . . . . . . . .
$5,115,624
LIABILITIES
Savings and interest-bearing
checking . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . .
Other borrowings . . . . . . . . . .
$2,564,097
785,684
128,945
Interest bearing liabilities . . .
3,478,726
Non-interest bearing deposits . .
Other liabilities . . . . . . . . . . . .
Shareholders’ equity . . . . . . . .
1,164,816
103,721
368,361
Total liabilities and
shareholders’ equity. . . . .
$5,115,624
44,728
30,347
8,273
83,348
1.74
3.86
6.42
2.40
59,507
207,114
$4,825,723
$2,526,296
399,987
121,871
3,048,154
1,338,736
94,638
344,195
$4,825,723
10,278
3,873
5,296
19,447
0.41
0.97
4.35
0.64
56,474
157,524
$4,465,577
$2,282,607
326,081
108,884
2,717,572
1,288,276
69,694
390,035
$4,465,577
2,693
1,772
3,850
8,315
0.12
0.54
3.54
0.31
Net interest income . . . . . . .
$157,229
$151,439
$131,631
Net interest income as a
percent of average
interest earning assets . . .
3.26%
3.32%
3.10%
(1)
Interest on tax-exempt loans and securities is presented on a fully tax equivalent basis assuming a marginal tax rate of 21%.
34
RECONCILIATION OF NET INTEREST MARGIN, FULLY TAXABLE EQUIVALENT (‘‘FTE’’)
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: taxable equivalent adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income - taxable equivalent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$156,329
900
$157,229
$149,561
1,878
$151,439
$129,765
1,866
$131,631
Net interest margin (GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest margin (FTE) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.24%
3.26%
3.28%
3.32%
3.05%
3.10%
2023
Year Ended December 31,
2022
(Dollars in thousands)
2021
CHANGE IN NET INTEREST INCOME
Increase (decrease) in interest income(1)
2023 compared to 2022
Rate
Volume
2022 compared to 2021
Rate
Net
Net
(In thousands)
Volume
Taxable loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,485 $40,212 $58,697 $14,551 $ 7,856 $22,407
Tax-exempt loans(2) . . . . . . . . . . . . . . . . . . . . . . . . .
8
6,188
Taxable securities. . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax-exempt securities(2) . . . . . . . . . . . . . . . . . . . . . .
2,299
30
Interest bearing cash . . . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . .
8
30,940
Total interest income . . . . . . . . . . . . . . . . . . . . . .
(44)
(4,291)
(440)
702
(9)
14,403
25
488
(403)
(108)
(27)
14,526
(37)
2,638
3,848
4,274
271
69,691
(17)
5,700
2,702
138
35
16,414
7
6,929
4,288
3,572
280
55,288
Increase (decrease) in interest expense(1)
Savings and interest bearing checking . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest expense . . . . . . . . . . . . . . . . . . . . .
7,585
156
2,101
6,458
1,446
323
11,132
6,937
Net interest income . . . . . . . . . . . . . . . . . . . . . $ 7,466 $ (1,676) $ 5,790 $13,241 $ 6,567 $19,808
34,450
26,474
2,977
63,901
34,294
20,016
2,654
56,964
7,268
1,628
951
9,847
317
473
495
1,285
(1)
The change in interest due to changes in both balance and rate has been allocated to change due to balance and change due to rate in
proportion to the relationship of the absolute dollar amounts of change in each.
(2)
Interest on tax-exempt loans and securities is presented on a fully tax equivalent basis assuming a marginal tax rate of 21%.
COMPOSITION OF AVERAGE INTEREST EARNING ASSETS AND INTEREST BEARING LIABILITIES
Year Ended December 31,
2021
2022
2023
As a percent of average interest earning assets
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest earning assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average interest earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
75.3% 71.0% 68.0%
29.0
24.7
100.0% 100.0% 100.0%
32.0
Savings and interest-bearing checking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average interest bearing liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53.2% 55.4% 53.7%
8.8
16.3
2.7
2.7
72.2% 66.9% 64.0%
7.7
2.6
Earning asset ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Free-funds ratio(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
94.2% 94.5% 95.2%
33.1
27.8
36.1
(1) Average interest earning assets less average interest bearing liabilities.
35
losses (the ‘‘ACL’’) taking into consideration factors such as loan growth,
Provision for credit losses. The provision for credit losses was an expense of $6.2 million in 2023, an expense
of $5.3 million in 2022, and a credit of $1.9 million in 2021. The provision reflects our assessment of the allowance
for credit
levels of
non-performing and classified loans, economic conditions and loan net charge-offs. While we use relevant
information to recognize losses on loans and securities HTM, additional provisions for related losses may be
necessary based on changes in economic conditions, customer circumstances and other credit risk factors.
The increase in the provision for credit losses in 2023 compared to 2022 was primarily due to a loss incurred on a
$3.0 million corporate security HTM (Signature Bank) that defaulted and was fully charged off during the
first quarter that was partially offset by a decline in loan growth rate. The higher provision for credit losses in
2022 compared to 2021 was primarily due to new credit loss allocations in the commercial and retail loan portfolios
primarily due to loan growth and a decrease in gross recoveries of previously charged-off commercial and retail loans
as well as an increase in the adjustment to allocations based on subjective factors. See ‘‘Portfolio Loans and asset
quality’’ for a discussion of the various components of the ACL and their impact on the provision for credit losses
in 2023 and note #19 to the Consolidated Financial Statements included within this report for a discussion on industry
concentrations.
loan mix,
Non-interest income. Non-interest income is a significant element in assessing our results of operations. Non-interest
income totaled $50.7 million during 2023 compared to $61.9 million and $76.6 million during 2022 and 2021, respectively.
NON-INTEREST INCOME
2023
Year Ended December 31,
2022
(In thousands)
2021
Interchange income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service charges on deposit accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gains (losses) on assets
Mortgage loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities available for sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage loan servicing, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment and insurance commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank owned life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13,996
12,361
$13,955
12,288
$14,045
10,170
7,436
(222)
4,626
3,456
474
8,549
6,431
(275)
18,773
2,898
360
7,479
35,880
1,411
5,745
2,603
567
6,222
Total non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$50,676
$61,909
$76,643
Service charges on deposit accounts totaled $12.4 million in 2023, as compared to $12.3 million in 2022 and
$10.2 million during 2021. The increases in 2023 and 2022 relative to the respective prior year were primarily due
to an increase in non-sufficient funds occurrences (and related fees).
We realized net gains of $7.4 million on mortgage loans during 2023, compared to $6.4 million and
$35.9 million during 2022 and 2021, respectively. As reflected in the table below, the sale of mortgage loans
decreased significantly from both 2022 and 2021. Mortgage loan activity is summarized as follows:
MORTGAGE LOAN ACTIVITY
2023
Year Ended December 31,
2022
(Dollars in thousands)
2021
Mortgage loans originated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $554,461 $935,807 $1,861,060
Mortgage loans sold(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,254,638
Net gains on mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35,880
Net gains as a percent of mortgage loans sold (‘‘Loan Sales Margin’’) . . . . . . .
Fair value adjustments included in the Loan Sales Margin . . . . . . . . . . . . . . . . .
602,797
6,431
1.07%
(1.12)
407,613
7,436
1.82%
0.62
2.86%
(0.52)
(1)
2023 includes the sale of $56.7 million of portfolio residential fixed rate and adjustable rate mortgage loans. 2022 includes the sale of
$63.0 million of portfolio residential fixed rate and adjustable rate mortgage loans. 2021 includes the sale of $9.6 million of portfolio
residential fixed rate mortgage loans.
36
Mortgage loans originated decreased in both 2023 as compared to 2022 and 2022 as compared to 2021 as higher
mortgage loan interest rates in each respective year reduced mortgage loan refinance activity and in 2022 also
reduced purchase money activity. Mortgage loans sold decreased in each of these years due primarily to lower loan
origination volume.
The volume of loans sold is dependent upon our ability to originate mortgage loans as well as the demand for
fixed-rate obligations and other loans that we choose to not put into portfolio because of our established interest-rate
risk parameters. (See ‘‘Portfolio Loans and asset quality.’’) Net gains on mortgage loans are also dependent upon
economic and competitive factors as well as our ability to effectively manage exposure to changes in interest rates
and thus can often be a volatile part of our overall revenues.
Net gains on mortgage loans increased in 2023 as compared to 2022 primarily due to the increase in the Loan
Sales Margin due to the impact of fair value adjustments on certain unhedged construction loans during the 2023 as
a result of the significant increase in interest rates during that period. Net gains on mortgage loans decreased in 2022
as compared to 2021 primarily due to the decline in loan sale volume and a decrease in the Loan Sales Margin.
We generated net gains (losses) on securities of $(0.22) million, $(0.28) million and $1.41 million in 2023, 2022
and 2021, respectively. These net gains (losses) were due to the sales of securities as outlined in the table below.
We recorded no credit related charges in 2023, 2022 or 2021 for securities AFS. See ‘‘Securities’’ below and note #3
to the Condensed Consolidated Financial Statements.
GAINS AND LOSSES ON SECURITIES
Year Ended December 31,
Proceeds
Losses
Gains
(In thousands)
Net
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
278 $ — $222 $ (222)
(275)
1,411
164
1,475
439
64
70,523
85,371
Mortgage loan servicing, net, generated income of $4.6 million in 2023 compared to income of $18.8 million
and $5.7 million in 2022 and 2021 respectively. The significant variances in mortgage loan servicing, net are
primarily due to changes in the fair value of capitalized mortgage loan servicing rights associated with changes in
mortgage loan interest rates and expected future prepayment levels and expected float rates. Mortgage loan servicing,
net activity is summarized in the following table:
MORTGAGE LOAN SERVICING ACTIVITY
Mortgage loan servicing:
Revenue, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value change due to price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value change due to pay-downs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8,828
(280)
(3,922)
$ 8,577
14,272
(4,076)
$ 7,853
3,380
(5,488)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,626
$18,773
$ 5,745
2023
2022
(In thousands)
2021
Activity related to capitalized mortgage loan servicing rights is as follows:
CAPITALIZED MORTGAGE LOAN SERVICING RIGHTS
Balance at January 1, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Originated servicing rights capitalized. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$42,489
3,956
(4,202)
$26,232
6,061
10,196
$16,904
11,436
(2,108)
Balance at December 31, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$42,243
$42,489
$26,232
2023
2022
(In thousands)
2021
37
At December 31, 2023, we were servicing approximately $3.5 billion in mortgage loans for others on which
servicing rights have been capitalized. This servicing portfolio had a weighted average coupon rate of 3.89% and a
weighted average service fee of approximately 0.26 basis points. Remaining capitalized mortgage loan servicing
rights at December 31, 2023 totaled $42.2 million, representing approximately 1.19 basis points on the related
amount of mortgage loans serviced for others.
Investment and insurance commissions totaled $3.5 million in 2023 as compared to $2.9 million and
$2.6 million in 2022 and 2021. The increase in revenue in 2023 as compared to 2022 and 2021 was primarily due
to higher sales volume and an increase in fee based revenue.
We earned $0.5 million, $0.4 million and $0.6 million in 2023, 2022 and 2021, respectively, on our separate
account bank owned life insurance principally as a result of increases in the cash surrender value. Our separate
account is primarily invested in agency mortgage-backed securities and managed by a fixed income investment
manager. The crediting rate (on which the earnings are based) reflects the performance of the separate account. The
total cash surrender value of our bank owned life insurance was $54.3 million and $55.2 million at December 31,
2023 and 2022, respectively. The changes in earnings in each year is due to changes in the crediting rate.
Other non-interest income totaled $8.5 million, $7.5 million and $6.2 million in 2023, 2022 and 2021,
respectively. Other non-interest income increased in 2023 as compared to 2022 due to an increase in fees related to
interest rate swaps for commercial loan customers (due to a higher level of these transactions during 2023), an
increase in ATM fees, an increase in merchant credit card related income and an increase in income from bank owned
life insurance (due to a higher crediting rate during 2023) that were partially offset by lower gains on the sale of bank
owned properties. The increase in 2022 as compared to 2021 is due primarily to the gain on the sale of two bank
owned properties of $1.1 million.
Non-interest expense. Non-interest expense is an important component of our results of operations. We strive to
efficiently manage our cost structure.
Non-interest expense totaled $127.1 million in 2023, $128.3 million in 2022, and $131.0 million in 2021.
Decreases in performance-based compensation, occupancy, net, communications and loan and collection that were
partially offset by increases in compensation, payroll taxes and employee benefits, data processing, FDIC deposit
insurance and other expense are primarily responsible for the decrease in 2023 compared to 2022. Decreases in data
processing, interchange expense, loan and collection, costs related to unfunded lending commitments, conversion
related expenses and other expenses are primarily responsible for the decrease in 2022 compared to 2021.
The components of non-interest expense are as follows:
NON-INTEREST EXPENSE
2023
Year ended December 31,
2022
(In thousands)
2021
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance-based compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payroll taxes and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$52,502
11,064
15,399
$50,535
15,875
14,597
$44,226
19,800
15,943
Compensation and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Data processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interchange expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FDIC deposit insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal and professional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan and collection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs related to unfunded lending commitments. . . . . . . . . . . . . . . . . . . . . . . . . .
78,965
11,862
7,908
4,332
3,756
3,005
2,406
2,208
2,174
2,165
547
501
424
81,007
10,183
8,907
4,242
4,007
2,142
2,871
2,133
2,657
2,074
785
556
599
79,969
10,823
8,794
4,434
4,172
1,396
3,080
2,068
3,172
1,918
970
611
1,207
38
2023
Year ended December 31,
2022
(In thousands)
2021
Correspondent bank service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loss reimbursement on sold loans . . . . . . . . . . . . . . . . . . . . . . . . . .
Conversion related expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (gains) losses on other real estate and repossessed assets . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
233
20
—
19
6,594
299
57
50
(214)
5,986
382
133
1,827
(230)
6,297
Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$127,119
$128,341
$131,023
Compensation expense, which is primarily salaries, totaled $52.5 million, $50.5 million and $44.2 million in
2023, 2022 and 2021, respectively. The comparative increase in 2023 to 2022 is primarily due to salary increases that
were predominantly effective on January 1, 2023. The comparative increase in 2022 to 2021 is primarily due to salary
increases that were predominantly effective on January 1, 2022, and a decreased level of compensation that was
deferred as direct origination costs due to lower mortgage loan origination volume.
Performance-based compensation expense totaled $11.1 million, $15.9 million and $19.8 million in 2023,
2022 and 2021, respectively. The decrease in 2023 as compared to 2022 was due to actual performance relative to
the established incentive plan targets. The decrease in 2022 as compared to 2021 was due to actual performance
relative to the established incentive plan targets as well a decrease in mortgage lending related incentives attributed
to the decline in mortgage lending volume.
We maintain performance-based compensation plans. In addition to commissions and cash incentive awards,
such plans include an ESOP and a long-term equity based incentive plan. Total compensation expense recognized for
grants pursuant to our long-term incentive plan was $1.9 million, $1.8 million and $1.6 million in 2023, 2022 and
2021, respectively. In each of those three years, we granted both restricted stock and performance share awards under
the plan.
Payroll taxes and employee benefits expense totaled $15.4 million, $14.6 million and $15.9 million in 2023,
2022 and 2021, respectively. The increase in 2023 compared to 2022 is primarily due to higher employee medical
insurance costs that were partially offset by a decrease in payroll taxes (reflecting lower performance-based
compensation costs). The decrease in 2022 compared to 2021 is due to decreases in payroll taxes (reflecting lower
performance-based compensation costs), our 401(k) plan match and other indirect costs related to mortgage lending.
Data processing expenses totaled $11.9 million, $10.2 million, and $10.8 million in 2023, 2022 and 2021,
respectively. The increase in 2023 compared to 2022 is primarily due to annual asset based and consumer price index
based cost increases. The decrease in 2022 compared to 2021 is primarily due to lower debit card production costs,
lower net mortgage processing costs (lower volume) and a refund of previously expensed charges from our former
core data processing provider.
Occupancy, net totaled $7.9 million, $8.9 million, and $8.8 million in 2023, 2022 and 2021, respectively.
The decrease in 2023 compared to 2022 is due in part to lower seasonal related maintenance costs and Covid-19
related protocol expenses.
FDIC deposit insurance expense totaled $3.0 million, $2.1 million, and $1.4 million in 2023, 2022 and 2021,
respectively. FDIC deposit insurance expense increased in 2023 compared to 2022 due primarily to a two basis point
increase in the assessment rate beginning in the first quarter of 2023 charged to all banks to increase the likelihood
that the reserve ratio of the deposit insurance fund reaches its statutory minimum. FDIC deposit insurance expense
increased in 2022 compared to 2021 due primarily to an increase in the assessment rate.
Communications totaled $2.4 million, $2.9 million, and $3.1 million in 2023, 2022 and 2021, respectively.
The decrease in 2023 compared to 2022 is primarily due to lower telephony and networking related costs as well as
lower customer statement mailing costs.
Loan and collection expenses reflect costs related to new lending activity as well as the management and
collection of non-performing loans and other problem credits. These expenses totaled $2.2 million, $2.7 million and
$3.2 million in 2023, 2022 and 2021, respectively. These costs decreased in 2023 and 2022 due in part to recoveries
of previously expensed amounts and an overall lower level of non performing loans and assets.
39
The changes in costs related to unfunded lending commitments are primarily impacted by changes in the
amounts of such commitments to originate Portfolio Loans as well as (for commercial loan commitments) the grade
(pursuant to our loan rating system) of such commitments. Costs related to unfunded lending commitments totaled
$0.4 million, $0.6 million, and $1.2 million in 2023, 2022 and 2021, respectively. The decreases in each comparative
year are due primarily to decreases in the amount of newly originated unfunded lending commitments.
Other non-interest expenses totaled $6.6 million, $6.0 million, and $6.3 million in 2023, 2022 and 2021,
respectively. The increase in other expense in 2023 compared to 2022 primarily represents higher Michigan
Corporate Income Tax expense as the result of an increase in tax base and an increase in travel and entertainment
expenses. The decrease in 2022 compared to 2021 primarily represents lower Michigan Corporate Income Tax
expense as the result of a decrease in tax base, a branch write-down and certain one-time contract termination costs
expensed in the prior year.
Income tax expense. We recorded an income tax expense of $14.61 million, $14.44 million and $14.42 million
in 2023, 2022 and 2021, respectively. Our actual federal income tax expense is different than the amount computed
by applying our statutory federal income tax rate to our pre-tax income primarily due to tax-exempt interest income,
share based compensation and tax-exempt income from the increase in the cash surrender value on life insurance.
We assess whether a valuation allowance should be established against our deferred tax asset, net (‘‘DTA’’)
based on the consideration of all available evidence using a ‘‘more likely than not’’ standard. The ultimate realization
of this asset is primarily based on generating future income. We concluded at December 31, 2023 and 2022 that the
realization of substantially all of our DTA continues to be more likely than not. See note #13 to the Consolidated
Financial Statements included within this report for more information.
FINANCIAL CONDITION
Summary. Our total assets increased to $5.26 billion at December 31, 2023, compared to $5.00 billion at
December 31, 2022, primarily due to growth in commercial loans and mortgage loans and interest bearing cash
balances. Loans, excluding loans held for sale (‘‘Portfolio Loans’’), totaled $3.79 billion and $3.47 billion at
December 31, 2023 and December 31, 2022, respectively. Commercial and mortgage loans increased by
$212.9 million and $117.5 million, respectively.
Deposits totaled $4.62 billion at December 31, 2023, compared to $4.38 billion at December 31, 2022. The
$243.8 million increase in deposits is primarily due to growth in reciprocal deposits, time deposits and brokered time
deposits that was partially offset by a decline in non-interest bearing deposits and savings and interest bearing
checking deposits.
Securities. We maintain diversified securities portfolios, which include obligations of U.S. government-
sponsored agencies, securities issued by states and political subdivisions, residential and commercial mortgage-
backed securities, asset-backed securities, corporate securities and trust preferred securities. We regularly evaluate
asset/liability management needs and attempt to maintain a portfolio structure that provides sufficient liquidity and
cash flow.
We believe that the unrealized losses on securities AFS are temporary in nature and are expected to be recovered
within a reasonable time period. We believe that we have the ability to hold securities with unrealized losses to
maturity or until such time as the unrealized losses reverse. (See ‘‘Asset/liability management’’).
On April 1, 2022, we transferred certain securities AFS with an amortized cost and unrealized loss at the date
of transfer of $418.1 million and $26.5 million, respectively to securities held to maturity (‘‘HTM’’). The transfer was
made at fair value, with the unrealized loss becoming part of the purchase discount which will be accreted over the
remaining life of the securities. The other comprehensive loss component is separated from the remaining securities
AFS and is accreted over the remaining life of the securities transferred. Based upon our liquidity and capital
resources (as explained in more detail below under ‘‘Liquidity and capital resources’’), we believe that we have the
ability and intent to hold these securities until they mature, at which time we would receive full value for these
securities.
40
SECURITIES AFS
Securities AFS
Amortized
Cost
Unrealized
Gains
Losses
(In thousands)
Fair
Value
December 31, 2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$744,050
866,363
$464
329
$65,164
87,345
$679,350
779,347
SECURITIES HTM
Carrying
Value
Transferred
Unrealized
Loss(1)
ACL
Amortized
Cost
(In thousands)
Unrealized
Gains
Losses
Fair Value
Securities HTM
December 31, 2023 . . . . . . . . . . . . . . . . . . $353,988
374,818
December 31, 2022 . . . . . . . . . . . . . . . . . .
$19,503
23,066
$157 $373,648 $868 $55,910 $318,606
335,418
11
168
398,052
62,645
(1)
Represents the remaining unrealized loss to be accreted on securities that were transferred from AFS to HTM on April 1, 2022.
Securities AFS in unrealized loss positions are evaluated quarterly for impairment related to credit losses.
For securities AFS in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than
not that we will be required to sell the security before recovery of its amortized cost basis. If either of the criteria
regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through
income. For securities AFS that do not meet this criteria, we evaluate whether the decline in fair value has resulted
from credit losses or other factors. In making this assessment, we consider the extent to which fair value is less than
amortized cost, adverse conditions specifically related to the security and the issuer and the impact of changes in
market interest rates on the market value of the security, among other factors. If this assessment indicates that a credit
loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized
cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost
basis for the security, a credit loss exists and an ACL is recorded, limited to the amount that the fair value of the
security is less than its amortized cost basis. Any impairment that has not been recorded through an ACL is
recognized in other comprehensive income (loss), net of applicable taxes. No ACL for securities AFS was needed at
December 31, 2023. See note #3 to the Consolidated Financial Statements included within this report for further
discussion.
For securities HTM an ACL is maintained at a level which represents our best estimate of expected credit losses.
This ACL is a contra asset valuation account that is deducted from the carrying amount of securities HTM to present
the net amount expected to be collected. Securities HTM are charged off against the ACL when deemed uncollectible.
Adjustments to the ACL are reported in our Consolidated Statements of Operations in provision for credit loss. We
measure expected credit losses on securities HTM on a collective basis by major security type with each type sharing
similar risk characteristics and consider historical credit loss information. With regard to U.S. Government-sponsored
agency and mortgage-backed securities (residential and commercial), all
these securities are issued by a
U.S. government-sponsored entity and have an implicit or explicit government guarantee; therefore, no allowance for
credit losses has been recorded for these securities. With regard to obligations of states and political subdivisions,
private label-mortgage-backed, corporate and trust preferred securities HTM, we consider (1) issuer bond ratings,
(2) historical loss rates for given bond ratings, (3) the financial condition of the issuer, and (4) whether issuers
continue to make timely principal and interest payments under the contractual terms of the securities. During the
first quarter of 2023, one corporate security (Signature Bank) defaulted resulting in a $3.0 million provision for credit
losses and a corresponding full charge-off during that period. Despite this lone security loss, the long-term historical
loss rates associated with securities having similar grades as those in our portfolio have been insignificant. See
note #3 to the Consolidated Financial Statements included within this report for further discussion.
Portfolio Loans and asset quality. In addition to the communities served by our Bank branch and loan
production office network, our principal lending markets also include nearby communities and metropolitan areas.
Subject to established underwriting criteria, we also may participate in commercial lending transactions with certain
non-affiliated banks and make whole loan purchases from other financial institutions.
41
The senior management and board of directors of our Bank retain authority and responsibility for credit
decisions and we have adopted uniform underwriting standards. Our loan committee structure and the loan review
process attempt to provide requisite controls and promote compliance with such established underwriting standards.
However, there can be no assurance that our lending procedures and the use of uniform underwriting standards will
prevent us from incurring significant credit losses in our lending activities.
We generally retain loans that may be profitably funded within established risk parameters. (See ‘‘Asset/liability
management.’’) As a result, we may hold adjustable-rate conventional and fixed rate jumbo mortgage loans as
Portfolio Loans, while 15- and 30-year fixed-rate non-jumbo mortgage loans are generally sold to mitigate exposure
to changes in interest rates. (See ‘‘Non-interest income.’’) The retention of newly originated fixed rate jumbo
mortgage loans has declined relative to the prior year as the growth in mortgage loans during 2023 has primarily been
attributed to the origination of adjustable-rate mortgage loans as well as the continued advances on legacy fixed rate
construction mortgage loans. (See ‘‘Asset/liability management’’).
LOAN PORTFOLIO SEGMENTS
The following table summarizes each loan portfolio segment by (1) scheduled repayments and (2) predetermined
(fixed) interest rate and/or adjustable (variable) interest rate at December 31, 2023:
Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after one but within five years . . . . . . . . . . . . . . . . . . .
Due after five but within 15 years . . . . . . . . . . . . . . . . . . . .
Due after 15 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial
Mortgage
Installment
Total
(In thousands)
$ 147,799
398,335
1,111,577
22,020
$1,679,731
$
178
2,332
116,576
1,366,786
$1,485,872
$ 1,678
58,302
411,930
153,388
$625,298
$ 149,655
458,969
1,640,083
1,542,194
$3,790,901
$ 828,489
851,242
$1,679,731
$ 915,429
570,443
$1,485,872
$620,370
4,928
$625,298
$2,364,288
1,426,613
$3,790,901
In 2023, we sold $56.7 million of portfolio residential fixed and adjustable rate mortgage loans. In 2022, we sold
$63.0 million of portfolio residential fixed and adjustable rate mortgage loans servicing retained. In addition, in the fourth
quarter of 2022 we reclassified $20.4 million (fair value of $20.4 million) of portfolio mortgage loans to held for sale.
These loans were sold to another financial institution on a servicing retained basis during the first quarter of 2023. During
2021, we sold $9.6 million of portfolio residential fixed rate mortgage loans servicing retained. In addition, in the fourth
quarter of 2021 we reclassified $34.8 million (fair value of $34.8 million) of portfolio mortgage loans to held for sale.
These loans were sold to other financial institutions on a servicing retained basis during the first quarter of 2022. These
loan sale transactions were done primarily for asset/liability management purposes.
LOAN PORTFOLIO COMPOSITION
December 31,
2023
2022
(In thousands)
Real estate(1)
Residential first mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential home equity and other junior mortgages . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and land development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Agricultural . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,248,911
157,006
241,715
1,036,590
619,374
483,129
4,176
$3,790,901
$1,081,359
138,944
319,157
874,019
624,047
423,055
4,771
$3,465,352
(1)
(2)
Includes both residential and non-residential commercial loans secured by real estate.
Includes loans secured by multi-family residential and non-farm, non-residential property.
42
NON-PERFORMING ASSETS
2023
December 31,
2022
(Dollars in thousands)
2021
Non-accrual loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans 90 days or more past due and still accruing interest. . . . . . . . . . . . . . .
$ 6,991
432
$ 5,381
—
$ 5,545
—
Sub total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Government guaranteed loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-performing loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other real estate and repossessed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,423
2,191
5,232
569
5,381
1,660
3,721
455
5,545
435
5,110
245
Total non-performing assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
5,801
$ 4,176
$ 5,355
As a percent of Portfolio Loans
Non-accrual loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-performing loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-performing assets to total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACL as a percent of non-accrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACL as a percent of non-performing loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.18%
0.14
1.44
0.11
781.83
1044.69
0.16%
0.11
1.51
0.08
974.45
1409.16
0.19%
0.18
1.63
0.11
852.16
924.70
Non-performing loans totaled $5.2 million, $3.7 million and $5.1 million at December 31, 2023, 2022 and 2021,
respectively. The increase in 2023 compared to 2022 was primarily due to a $1.1 million increase in the residential
mortgage loan portfolio segment. Our collection and resolution efforts have generally resulted in a stable trend in
non-performing loans. The decrease in non-performing loans in 2022 as compared to 2021 was primarily due to a
$1.4 million decrease in the residential mortgage loan portfolio segment which was primarily attributed to loan
payoffs and pay downs.
Other real estate (‘‘ORE’’) and repossessed assets totaled $0.6 million at December 31, 2023, compared to
$0.5 million at December 31, 2022.
The ACL as a percent of non-accrual and non-performing loans decreased during 2023 due primarily to an
increase in non-accrual and non-performing loans partially offset by an increase in the ACL related to pooled analysis
of loans while the increase in 2022 was due primarily to an increase in the ACL related to specific allocations and
pooled analysis of loans as well as a decrease in non-accrual and non-performing loans.
We will place a loan that is 90 days or more past due on non-accrual, unless we believe the loan is both well
secured and in the process of collection. Accordingly, we have determined that the collection of the accrued and
unpaid interest on any loans that are 90 days or more past due and still accruing interest is probable.
ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES
Specific allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pooled analysis allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional allocations based on subjective factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2023
2022
(In thousands)
$ 1,292
40,944
12,422
$54,658
$ 2,078
37,662
12,695
$52,435
Some loans will not be repaid in full. Therefore, an ACL is maintained at a level which represents our best
estimate of expected credit losses. Our ACL is comprised of three principal elements: (i) specific analysis of
individual loans identified during the review of the loan portfolio, (ii) pooled analysis of loans with similar risk
characteristics based on historical experience, adjusted for current conditions, reasonable and supportable forecasts,
43
and expected prepayments, and (iii) additional allowances based on subjective factors, including local and general
economic business factors and trends, portfolio concentrations and changes in the size and/or the general terms of the
loan portfolios. See notes #1 and #4 to the Consolidated Financial Statements included within this report for further
discussion on the ACL.
While we use relevant information to recognize losses on loans, additional provisions for related losses may be
necessary based on changes in economic conditions, customer circumstances and other credit risk factors.
The ACL increased $2.2 million to $54.7 million at December 31, 2023 from $52.4 million at December 21,
2022 and was equal to 1.44% of total Portfolio Loans at December 31, 2023.
Two of the three components of the ACL outlined above decreased since December 21, 2022 while one
increased. The ACL related to pooled analysis of loans increased $3.3 million due primarily to loan growth in 2023.
The ACL related to specific loans decreased $0.8 million due primarily to an $8.1 million decrease in the amount of
such loans while the ACL related to subjective factors declined $0.3 million.
During 2022 two of the three components of the ACL increased since December 21, 2021. The ACL related to
specific loans increased $0.9 million due primarily to a $5.2 million increase in the amount of such loans and the ACL
related to pooled analysis of loans increased $4.3 million due primarily to loan growth in 2022. The ACL related to
subjective factors was relatively unchanged during 2022.
ALLOWANCE FOR CREDIT LOSSES ON LOANS, SECURITIES HTM AND UNFUNDED
COMMITMENTS
Loans
Securities HTM
(In thousands)
Unfunded
Commitments
December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$35,429
$ —
$1,805
Additions (deductions)
Impact of adoption of CECL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Initial allowance on loans purchased with credit deterioration . . . . . .
Recoveries credited to the ACL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charges against the ACL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions included in non-interest expense . . . . . . . . . . . . . . . . . . . . .
11,574
(1,928)
134
4,477
(2,434)
—
December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47,252
Additions (deductions)
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries credited to the ACL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charges against the ACL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions included in non-interest expense . . . . . . . . . . . . . . . . . . . . .
5,173
2,496
(2,486)
—
December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52,435
Additions (deductions)
—
—
—
—
—
—
—
168
—
—
—
168
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries credited to the ACL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charges against the ACL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions included in non-interest expense . . . . . . . . . . . . . . . . . . . . .
3,221
2,798
(3,796)
—
2,989
—
(3,000)
—
1,469
—
—
—
1,207
4,481
—
—
—
599
5,080
—
—
—
424
December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$54,658
$
157
$5,504
44
RATIO OF NET CHARGE-OFFS TO AVERAGE LOANS OUTSTANDING
Commercial
Mortgage
(Dollars in thousands)
Installment
Total
2023
Loans charged against (recoveries credited to) the ACL . . .
Average Portfolio Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loans charged off against (credited to) the ACL to
523
$
1,537,920
(198) $
$
1,436,527
673
637,180
$
998
3,611,627
average Portfolio Loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.03%
(0.01)%
0.11%
0.03%
2022
Loans charged against (recoveries credited to) the ACL . . .
Average Portfolio Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loans charged off against (credited to) the ACL to
(453) $
$
1,323,840
(365) $
808
616,854
$
(10)
3,198,222
1,257,528
average Portfolio Loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.03)%
(0.03)%
0.13%
—%
2021
Loans charged against (recoveries credited to) the ACL . . .
Average Portfolio Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loans charged off against (credited to) the ACL to
(2,607) $
$
1,241,961
(471) $ 1,035
521,089
1,056,245
$
(2,043)
2,819,295
average Portfolio Loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.21)%
(0.04)%
0.20%
(0.07)%
In 2023, we recorded loan net charge offs of $1.00 million compared to loan net recoveries of $0.01 million in
2022 and loan net recoveries of $2.04 million in 2021. The net charge offs in 2023 primarily reflect modest losses
in the commercial and installment loan portfolios. The net recoveries in 2022 and 2021 primarily reflect reduced
levels of non-performing loans, improvement in collateral liquidation values and ongoing collection efforts on
previously charged-off loans.
Deposits and borrowings. Historically, the loyalty of our customer base has allowed us to price deposits
competitively, contributing to a net interest margin that compares favorably to our peers. However, we still face a
significant amount of competition for deposits within many of the markets served by our branch network, which
limits our ability to materially increase deposits without adversely impacting the weighted-average cost of core
deposits.
To attract new core deposits, we have implemented various account acquisition strategies as well as branch staff
sales training. Account acquisition initiatives have historically generated increases in customer relationships. Over the
past several years, we have also expanded our treasury management products and services for commercial businesses
and municipalities or other governmental units and have also increased our sales calling efforts in order to attract
additional deposit relationships from these sectors. We view long-term core deposit growth as an important objective.
Core deposits generally provide a more stable and lower cost source of funds than alternative sources such as
short-term borrowings. (See ‘‘Liquidity and capital resources.’’)
Deposits
respectively.
totaled $4.62 billion and $4.38 billion at December 31, 2023 and 2022,
The $243.8 million increase in deposits during 2023 is due to growth in reciprocal deposits, time deposits and
brokered time deposits that were partially offset by decreases in non-interest bearing and savings and interest-bearing
checking deposits. Reciprocal deposits totaled $832.0 million and $602.6 million at December 31, 2023 and 2022,
respectively. These deposits represent demand, money market and time deposits from our customers that have been
placed through the IntraFi Network. This service allows our customers to access multi-million dollar FDIC deposit
insurance on deposit balances greater than the standard FDIC insurance maximum.
45
We cannot be sure that we will be able to maintain our current level of core deposits. In particular, those deposits
that are uninsured may be susceptible to outflow. A reduction in core deposits would likely increase our need to rely
on wholesale funding sources. Data relating to our deposit portfolios (excluding brokered time) follows:
Uninsured deposits(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uninsured deposits as a percentage of deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average deposit account size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance of top 100 largest depositors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance of top 100 depositors as a percentage of deposits . . . . . . . . . . . . . . . . . . . . . .
December 31,
2023
2022
(Dollars in thousands)
$961,974
22.2%
20.38
$
$890,289
20.5%
$975,938
23.4%
$ 19.33
$752,924
18.1%
(1)
These amounts exclude intercompany related deposits of $51.2 million and $55.2 million respectively. Uninsured deposits reported in our
Call Report at December 31, 2023 and December 31, 2022 totaled $1,013.2 million and $1,031.2 million, respectively.
We have also implemented strategies that incorporate using federal funds purchased, other borrowings and
Brokered CDs to fund a portion of our interest-earning assets. The use of such alternate sources of funds supplements
our core deposits and is also a part of our asset/liability management efforts. Other borrowings, comprised primarily
of borrowings from the Federal Reserve Bank (‘‘FRB’’) and advances from the Federal Home Loan Bank
(the ‘‘FHLB’’), totaled $50.0 million and $86.0 million at December 31, 2023 and 2022.
As described above, we utilize wholesale funding,
including federal funds purchased, FRB and FHLB
borrowings and Brokered CDs to augment our core deposits and fund a portion of our assets. At December 31, 2023,
our use of such wholesale funding sources (including reciprocal deposits) amounted to approximately $1.17 billion,
or 25.0% of total funding (deposits and total borrowings, excluding subordinated debt and debentures). Because
wholesale funding sources are affected by general market conditions, the availability of such funding may be
dependent on the confidence these sources have in our financial condition and operations. The continued availability
to us of these funding sources is not certain, and Brokered CDs may be difficult for us to retain or replace at attractive
rates as they mature. Our liquidity may be constrained if we are unable to renew our wholesale funding sources or
if adequate financing is not available in the future at acceptable rates of interest or at all. Our financial performance
could also be affected if we are unable to maintain our access to funding sources or if we are required to rely more
heavily on more expensive funding sources. In such case, our net interest income and results of operations could be
adversely affected.
We have historically employed derivative financial instruments to manage our exposure to changes in interest
rates. During 2023, 2022 and 2021, we entered into $134.6 million, $94.2 million and $79.0 million (original
aggregate notional amounts), respectively, of interest rate swaps with commercial loan customers, which were offset
with interest rate swaps that the Bank entered into with a broker-dealer. We recorded $2.05 million, $1.42 million and
$0.81 million of fee income related to these transactions during 2023, 2022 and 2021, respectively. We entered into
$175.0 million, $41.0 million, and $106.9 million (notional amounts) of certain derivative financial instruments
(pay fixed interest rate swap and interest rate cap agreements) to hedge the fair value of certain loans and/or
municipal bond securities in 2023, 2022 and 2021, respectively. We also entered into $150.0 million (notional
amount) of interest rate floor agreements to manage the variability in future expected cash flows of certain
commercial loans during 2023.
Liquidity and capital resources. Liquidity risk is the risk of being unable to timely meet obligations as they come
due at a reasonable funding cost or without incurring unacceptable losses. Our liquidity management involves the
measurement and monitoring of a variety of sources and uses of funds. Our Consolidated Statements of Cash Flows
categorize these sources and uses into operating, investing and financing activities. We primarily focus our liquidity
management on maintaining adequate levels of liquid assets (primarily funds on deposit with the FRB and certain
securities AFS) as well as developing access to a variety of borrowing sources to supplement our deposit gathering
activities and provide funds for purchasing securities available for sale or originating Portfolio Loans as well as to
be able to respond to unforeseen liquidity needs.
Our primary sources of funds include our deposit base, secured advances from the FHLB and FRB, federal funds
purchased borrowing facilities with other banks, and access to the capital markets (for Brokered CDs).
At December 31 2023, in addition to liquidity available from our normal operating, funding and investing activities
46
we had unused credit lines with the FHLB and FRB of approximately $1,014.4 million and $515.4 million,
respectively. We also had approximately $813.8 million in fair value of unpledged securities AFS and HTM at
December 31, 2023, which could be pledged for an estimated additional borrowing capacity at the FHLB and FRB
of approximately $754.6 million.
TIME DEPOSITS(1)
The following table summarizes time deposits in amounts less than $250,000 and in amounts of $250,000 or
more, by time remaining until maturity at December 31, 2023:
Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over three through six months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over six months through one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$365,228
236,409
113,205
26,661
$102,526
47,147
24,261
2,634
$467,754
283,556
137,466
29,295
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$741,503
$176,568
$918,071
Less than
$250,000
Greater than
$250,000
(In thousands)
Total
(1)
Includes time deposits, brokered time deposits and reciprocal time deposits
At December 31, 2023, we had $888.8 million of time deposits (see note #8 to the Consolidated Financial
Statements) that mature in the next 12 months. Historically, a majority of these maturing time deposits are renewed
by our customers. Additionally, $3.70 billion of our deposits at December 31, 2023, were in account types from which
the customer could withdraw the funds on demand. Changes in the balances of deposits that can be withdrawn upon
demand are usually predictable and the total balances of these accounts have generally grown or have been stable
over time as a result of our marketing and promotional activities. However, there can be no assurance that historical
patterns of renewing time deposits or overall growth or stability in deposits will continue in the future.
We have developed contingency funding plans that stress test our liquidity needs that may arise from certain
events such as an adverse change in our financial metrics (for example, credit quality or regulatory capital ratios).
Our liquidity management also includes periodic monitoring that measures quick assets (defined generally as highly
liquid or short-term assets) to total assets, short-term liability dependence and basic surplus (defined as quick assets
less volatile liabilities to total assets). Policy limits have been established for our various liquidity measurements and
are monitored on a quarterly basis. In addition, we also prepare cash flow forecasts that include a variety of different
scenarios.
We believe that we currently have adequate liquidity at our Bank because of our cash and cash equivalents, our
portfolio of securities AFS, our access to secured advances from the FHLB and FRB, and our ability to issue
Brokered CDs.
We also believe that
the parent company (including time deposits) of
approximately $46.5 million as of December 31, 2023, provides sufficient liquidity resources at the parent company
to meet operating expenses, to make interest payments on the subordinated debt and debentures, and, along with
dividends from the Bank, to pay projected cash dividends on our common stock.
the available cash on hand at
In the normal course of business we enter into certain contractual obligations. Such obligations include
requirements to make future payments on debt and lease arrangements, contractual commitments for capital
expenditures, and service contracts.
Effective management of capital resources is critical to our mission to create value for our shareholders.
In addition to common stock, our capital structure also currently includes subordinated debt and cumulative trust
preferred securities.
47
CAPITALIZATION
December 31,
2023
2022
(In thousands)
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount not qualifying as regulatory capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 39,510
39,728
(734)
$ 39,433
39,660
(657)
Amount qualifying as regulatory capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
78,504
78,436
Shareholders’ equity
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
317,483
159,108
(72,142)
404,449
320,991
119,368
(92,763)
347,596
Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$482,953
$426,032
In May 2020, we issued $40.0 million of fixed to floating subordinated notes with a ten year maturity and a
five year call option. The initial coupon rate is 5.95% fixed for five years and then floats at the Secured Overnight
Financing Rate (‘‘SOFR’’) plus 5.825%. These notes are presented in the Consolidated Statement of Financial
Condition under the caption ‘‘Subordinated debt’’ and the December 31, 2023 and 2022 balance of $39.5 million and
$39.4 million, respectively, is net of remaining unamortized deferred issuance costs of $0.5 million at those same
dates, that are being amortized through the maturity date into interest expense on other borrowings and subordinated
debt and debentures in our Consolidated Statement of Operations.
We currently have four special purpose entities with $39.7 million of outstanding cumulative trust preferred
securities. These special purpose entities issued common securities and provided cash to our parent company that in
turn issued subordinated debentures to these special purpose entities equal to the trust preferred securities and
common securities. The subordinated debentures represent the sole asset of the special purpose entities. The common
securities and subordinated debentures are included in our Consolidated Statements of Financial Condition.
The FRB has issued rules regarding trust preferred securities as a component of the Tier 1 capital of bank holding
companies. The aggregate amount of trust preferred securities (and certain other capital elements) are limited to 25 percent
of Tier 1 capital elements, net of goodwill (net of any associated deferred tax liability). The amount of trust preferred
securities and certain other elements in excess of the limit can be included in Tier 2 capital, subject to restrictions. At the
parent company, all of these securities qualified as Tier 1 capital at December 31, 2023 and 2022.
Common shareholders’ equity increased to $404.4 million at December 31, 2023 from $347.6 million at
December 31, 2022, due primarily to earnings retention and the change in our accumulated other comprehensive
income (due primarily to a change in the fair value of securities AFS). Our tangible common equity (‘‘TCE’’) totaled
$374.1 million and $316.7 million, respectively, at those same dates. Our ratio of TCE to tangible assets was 7.15%
and 6.37% at December 31, 2023 and 2022, respectively. TCE and the ratio of TCE to tangible assets are non-GAAP
measures. TCE represents total common equity less goodwill and other intangible assets.
In December 2023, our Board of Directors authorized the 2024 share repurchase plan. Under the terms of the
2024 share repurchase plan, we are authorized to buy back up to 1,100,000 shares, or approximately 5%, of our
outstanding common stock. This repurchase plan commenced on January 1, 2024, and is expected to last through
December 31, 2024.
In December 2022, our Board of Directors authorized the 2023 share repurchase plan. Under the original terms
of the share repurchase plan, we were authorized to buy back 1,100,000 shares, or approximately 5% of our
outstanding common stock. The share repurchase plan expired on December 31, 2023. We repurchased
298,601 shares during 2023 at an average cost of $17.27 per share.
We currently pay a quarterly cash dividend on our common stock. The annual total dividends paid were $0.92,
$0.88 and $0.84 per share for 2023, 2022 and 2021, respectively. We currently favor a dividend payout ratio between
30% and 50% of net income.
48
As of December 31, 2023 and 2022, our Bank (and holding company) continued to meet the requirements to
be considered ‘‘well-capitalized’’ under federal regulatory standards (also see note #20 to the Consolidated
Financial Statements).
Asset/liability management. Interest-rate risk is created by differences in the cash flow characteristics of our
assets and liabilities. Options embedded in certain financial instruments, including caps on adjustable-rate loans as
well as borrowers’ rights to prepay fixed-rate loans, also create interest-rate risk.
Our asset/liability management efforts identify and evaluate opportunities to structure our assets and liabilities in a
manner that is consistent with our mission to maintain profitable financial leverage within established risk parameters.
We evaluate various opportunities and alternate asset/liability management strategies carefully and consider the likely
impact on our risk profile as well as the anticipated contribution to earnings. The marginal cost of funds is a principal
consideration in the implementation of our asset/liability management strategies, but such evaluations further consider
interest-rate and liquidity risk as well as other pertinent factors. We have established parameters for interest-rate risk. We
regularly monitor our interest-rate risk and report at least quarterly to our board of directors.
We employ simulation analyses to monitor our interest-rate risk profile and evaluate potential changes in our net
interest income and market value of portfolio equity that result from changes in interest rates. The purpose of these
simulations is to identify sources of interest-rate risk inherent in our Consolidated Statements of Financial Condition.
The simulations do not anticipate any actions that we might initiate in response to changes in interest rates and,
accordingly, the simulations do not provide a reliable forecast of anticipated results. The simulations are predicated
on immediate, permanent and parallel shifts in interest rates and generally assume that current loan and deposit
pricing relationships remain constant. The simulations further incorporate assumptions relating to changes in
customer behavior, including changes in prepayment rates on certain assets and liabilities. At December 31, 2023,
both our interest rate risk profile as measured by our short term earnings simulation and our longer term interest rate
risk measure based on changes in economic value indicates exposure to rising rates. These measures have increased
modestly from December 31, 2022 as an adverse impact of changes in our deposit mix were largely offset by a
favorable impact of additional hedging and term funding transactions. In addition, at December 31, 2023 our
simulation base-rate scenario for market value of portfolio equity declined from December 31, 2022 due primarily
to the changes in our funding mix. We are carefully monitoring the change in our funding mix as well as the
composition of our earning assets and the impact of potential future changes in interest rates on our changes in market
value of portfolio equity and changes in net interest income. As a result, we may add some longer-term borrowings,
may utilize derivatives (interest rate swaps, interest rate caps and interest rate floors) to manage interest rate risk and
may continue to sell some fixed rate jumbo and other portfolio mortgage loans in the future.
49
CHANGES IN MARKET VALUE OF PORTFOLIO EQUITY, NET INTEREST INCOME AND NET
INTEREST MARGIN
Change in Interest Rates
Market
Value of
Portfolio
Equity(1)
Percent
Change
Net
Percent
Interest
Income(2)
Change
(Dollars in thousands)
Net Interest
Margin(3)
Percent
Change
December 31, 2023
200 basis point rise . . . . . . . . . . . . . . . . . . . . . .
100 basis point rise . . . . . . . . . . . . . . . . . . . . . .
Base-rate scenario. . . . . . . . . . . . . . . . . . . . . . . .
100 basis point decline. . . . . . . . . . . . . . . . . . . .
200 basis point decline. . . . . . . . . . . . . . . . . . . .
December 31, 2022
200 basis point rise . . . . . . . . . . . . . . . . . . . . . .
100 basis point rise . . . . . . . . . . . . . . . . . . . . . .
Base-rate scenario. . . . . . . . . . . . . . . . . . . . . . . .
100 basis point decline. . . . . . . . . . . . . . . . . . . .
200 basis point decline. . . . . . . . . . . . . . . . . . . .
$447,600
494,500
541,200
582,800
603,200
$457,800
500,700
544,100
586,400
608,800
(8.63)
(17.29)% $166,000
168,300
— 169,500
169,000
167,800
7.69
11.46
(7.98)
(15.86)% $165,800
167,000
— 167,300
166,600
164,000
7.77
11.89
(2.06)% 3.30%
(0.71)
—
(0.29)
(1.00)
3.35
3.38
3.36
3.34
(0.90)% 3.46%
(0.18)
—
(0.42)
(1.97)
3.49
3.49
3.48
3.42
(2.37)%
(0.89)
—
(0.59)
(1.18)
(0.86)%
—
—
(0.29)
(2.01)
(1)
(2)
(3)
Simulation analyses calculate the change in the net present value of our assets and liabilities, including debt and related financial derivative
instruments, under parallel shifts in interest rates by discounting the estimated future cash flows using a market-based discount rate. Cash
flow estimates incorporate anticipated changes in prepayment speeds and other embedded options.
Simulation analyses calculate the change in net interest income under immediate parallel shifts in interest rates over the next twelve months,
based upon a static Consolidated Statement of Financial Condition, which includes debt and related financial derivative instruments, and
do not consider loan fees or loan origination costs.
Simulation analyses calculate the change in tax equivalent net interest income as a percent of average interest-earning assets (the ‘‘net
interest margin’’) under immediate parallel shifts in interest rates over the next twelve months, based upon a static statement of financial
condition, which includes debt and related financial derivative instruments, and do not consider loan fees or loan origination costs.
Accounting Standards Update. See note #1 to the Consolidated Financial Statements included elsewhere in this report
for details on recently issued accounting pronouncements and their impact on our consolidated financial statements.
FAIR VALUATION OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board (‘‘FASB’’) Accounting Standards Codification (‘‘ASC’’) topic 820 -
‘‘Fair Value Measurements and Disclosures’’ (‘‘FASB ASC topic 820’’) defines fair value as the exchange price that
would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants on the measurement date.
We utilize fair value measurements to record fair value adjustments to certain financial instruments and to
determine fair value disclosures. FASB ASC topic 820 differentiates between those assets and liabilities required to
be carried at fair value at every reporting period (‘‘recurring’’) and those assets and liabilities that are only required
to be adjusted to fair value under certain circumstances (‘‘nonrecurring’’). Securities AFS, loans held for sale, carried
at fair value, derivatives and capitalized mortgage loan servicing rights are financial instruments recorded at fair
value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other financial
assets on a nonrecurring basis, such as loans held for investment and certain other assets. These nonrecurring fair
value adjustments typically involve application of lower of cost or fair value accounting or write-downs of individual
assets. See note #21 to the Consolidated Financial Statements for a complete discussion on our use of fair valuation
of financial instruments and the related measurement techniques.
LITIGATION MATTERS
We are involved in various litigation matters in the ordinary course of business. At the present time, we do not
believe any of these matters will have a significant impact on our consolidated financial position or results of
operations. The aggregate amount we have accrued for losses we consider probable as a result of these litigation
matters is immaterial. However, because of the inherent uncertainty of outcomes from any litigation matter, we
50
believe it is reasonably possible we may incur losses in addition to the amounts we have accrued. At this time, we
estimate the maximum amount of additional losses that are reasonably possible is insignificant. However, because of
a number of factors, including the fact that certain of these litigation matters are still in their early stages, this
maximum amount may change in the future.
The litigation matters described in the preceding paragraph primarily include claims that have been brought
against us for damages, but do not include litigation matters where we seek to collect amounts owed to us by
third parties (such as litigation initiated to collect delinquent loans). These excluded, collection-related matters may
involve claims or counterclaims by the opposing party or parties, but we have excluded such matters from the
disclosure contained in the preceding paragraph in all cases where we believe the possibility of us paying damages
to any opposing party is remote.
CRITICAL ACCOUNTING POLICIES
Our accounting and reporting policies are in accordance with accounting principles generally accepted in the
United States of America and conform to general practices within the banking industry. Accounting and reporting
policies for the ACL and capitalized mortgage loan servicing rights are deemed critical since they involve the use of
estimates and require significant management judgments. Application of assumptions different than those that we
have used could result in material changes in our financial position or results of operations.
Our methodology for determining the ACL and related provision for credit losses is described above in
‘‘Portfolio Loans and asset quality.’’ In particular, this area of accounting requires a significant amount of judgment
because a multitude of factors can influence the ultimate collection of a loan or other type of credit. It is extremely
difficult to precisely measure the amount of expected credit losses in our loan portfolio. We use a rigorous process
to attempt to accurately quantify the necessary ACL and related provision for credit losses, but there can be no
assurance that our modeling process will successfully identify all of the expected credit losses in our loan portfolio.
As a result, we could record future provisions for credit losses that may be significantly different than the levels that
we recorded in prior periods. See also notes #1 and #4 to the Consolidated Financial Statements included within this
report for further discussion on CECL.
At December 31, 2023 and 2022, we had approximately $42.2 million and $42.5 million, respectively, of
mortgage loan servicing rights capitalized on our Consolidated Statements of Financial Condition. The fair value of
our mortgage loan servicing rights has been determined based on a valuation model used by an independent
third party. There are several critical assumptions involved in establishing the value of this asset including estimated
future prepayment speeds on the underlying mortgage loans, the interest rate used to discount the net cash flows from
the mortgage loan servicing, the estimated amount of ancillary income that will be received in the future (such as late
fees) and the estimated cost to service the mortgage loans. We believe the assumptions that we utilize in our valuation
are reasonable based upon accepted industry practices for valuing mortgage loan servicing rights and represent
neither the most conservative or aggressive assumptions.
51
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
The management of Independent Bank Corporation is responsible for establishing and maintaining adequate
internal control over financial reporting. Our internal control system was designed to provide reasonable assurance
to us and the board of directors regarding the preparation and fair presentation of published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation.
We assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In
making this assessment, we used the criteria established in the 2013 Internal Control — Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment,
management has concluded that as of December 31, 2023, the Company’s internal control over financial reporting
was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles.
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2023,
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Our independent registered public accounting firm has issued an audit report on the effectiveness of the Company’s
internal control over financial reporting as of December 31, 2023. Their report immediately follows our report.
William B. Kessel
President and
Chief Executive Officer
Independent Bank Corporation
March 8, 2024
Gavin A. Mohr
Executive Vice President
and Chief Financial Officer
52
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and the Board of Directors of Independent Bank Corporation
Grand Rapids, Michigan
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of financial condition of Independent Bank
Corporation (the ‘‘Corporation’’) as of December 31, 2023 and 2022, the related consolidated statements of
operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three-year
period ended December 31, 2023, and the related notes (collectively referred to as the ‘‘financial statements’’). We
also have audited the Corporation’s internal control over financial reporting as of December 31, 2023, based on
criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of the Corporation as of December 31, 2023 and 2022, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 2023 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the Corporation maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in
Internal Control – Integrated Framework: (2013) issued by COSO.
Change in Accounting Principle
As discussed in Note 1 to the financial statements, the Corporation has changed its method of accounting for
credit losses effective January 1, 2021 due to the adoption of Financial Accounting Standards Board (‘‘FASB’’)
Accounting Standards Codification No. 326, Financial Instruments - Credit Losses (‘‘ASC 326’’). The Corporation
adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not
adjusted and continue to be reported in accordance with previously applicable generally accepted accounting
principles. Certain aspects of the application of the new credit loss standard are communicated as a critical audit
matter below.
Basis for Opinions
The Corporation’s management is responsible for these financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Corporation’s financial statements and an opinion on the Corporation’s
internal control over financial reporting based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (‘‘PCAOB’’) and are required to be independent with
respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was
maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A corporation’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
53
accordance with generally accepted accounting principles. A corporation’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the corporation; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the corporation are being made only
in accordance with authorizations of management and directors of the corporation; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
corporation’s assets that could have a material effect on the financial statements.
Because of its inherent
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
limitations,
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the audit committee and
that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved
our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does
not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Allowance for Credit Losses (ACL) for loans – Subjective Factors
Refer to Notes 1 and 4 to the Consolidated Financial Statements.
On January 1, 2021 (‘‘adoption date’’), the Corporation adopted ASU 2016-13, Financial Instruments – Credit
Losses (Topic 326) under a modified retrospective approach, which required the Corporation to estimate expected
credit losses for its financial assets carried at amortized cost utilizing the current expected credit loss (‘‘CECL’’)
methodology. The ACL under the CECL methodology is a significant estimate recorded within the Corporation’s
financial statements with a reported balance for loans of $54.7 million as of December 31, 2023. The ACL model for
loans consists of three components: 1) the specific analysis of individually evaluated loans; 2) pooled analysis of
loans with similar risk characteristics based on historical experience using a discounted cash flow model, adjusted
for current conditions, reasonable and supportable forecasts and expected prepayments; and 3) additional allowances
based on subjective factors.
The subjective factors include consideration of the following: local and general economic business factors and
trends, portfolio concentrations and changes in the size, and/or the general terms of the overall loan portfolio. Due
to the significant judgment applied by management to determine the effect of the subjective factors, we identified the
effect of the subjective factors on the ACL for loans as a critical audit matter as it involved a high degree of auditor
judgment and required significant audit effort, including the need to involve more experienced audit personnel.
The primary procedures we performed to address this critical audit matter included:
•
Testing the effectiveness of controls over the subjective factors used in the ACL calculation including
controls addressing:
○ Management’s review of the reasonableness of the significant assumptions applied in the development
of the subjective factors and the relevance to the loan segment to which they are applied.
○ Mathematical accuracy of the subjective factors applied to the loan segments in the ACL calculation.
54
•
Substantively testing management’s determination of the subjective factors used in the ACL estimate,
including:
○
○
○
Testing management’s process for developing the subjective factors, which included assessing the
relevance and reliability of data used to develop the subjective factors, including evaluating their
judgments and assumptions for reasonableness. Among other procedures, our evaluation considered
evidence from internal and external sources.
Analytically evaluating the subjective factors for directional consistency, testing for reasonableness,
and obtaining evidence for significant changes.
Testing the mathematical accuracy of the subjective factors applied to the loan segments in the ACL
calculation.
We have served as the Corporation’s auditor since 2005.
South Bend, Indiana
March 8, 2024
Crowe LLP
55
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31,
2023
2022
(In thousands, except share amounts)
Assets
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities held to maturity (fair value of $318,606 at December 31, 2023 and
$335,418 at December 31, 2022) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal Home Loan Bank and Federal Reserve Bank stock, at cost . . . . . . . . . .
Loans held for sale, carried at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held for sale, carried at lower of cost or fair value . . . . . . . . . . . . . . . . . .
Loans
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Installment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other real estate and repossessed assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank-owned life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized mortgage loan servicing rights, carried at fair value . . . . . . . . . . . . .
Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued income and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits
Liabilities and Shareholders’ Equity
Non-interest bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings and interest-bearing checking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reciprocal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brokered time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
68,208
101,573
169,781
679,350
353,988
16,821
12,063
—
1,679,731
1,485,872
625,298
3,790,901
(54,658)
3,736,243
569
35,523
54,341
42,243
2,004
28,300
132,500
$5,263,726
$1,076,093
1,905,701
832,020
524,325
284,740
4,622,879
50,026
39,510
39,728
107,134
4,859,277
$
70,180
4,191
74,371
779,347
374,818
17,653
26,518
20,367
1,466,853
1,368,409
630,090
3,465,352
(52,435)
3,412,917
455
35,893
55,204
42,489
2,551
28,300
128,904
$4,999,787
$1,269,759
1,973,308
602,575
321,492
211,935
4,379,069
86,006
39,433
39,660
108,023
4,652,191
Commitments and contingent liabilities
Shareholders’ Equity
Preferred stock, no par value, 200,000 shares authorized; none issued or
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock, no par value, 500,000,000 shares authorized; issued and
outstanding: 20,835,633 shares at December 31, 2023 and 21,063,971
shares at December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities and Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
317,483
159,108
(72,142)
404,449
$5,263,726
320,991
119,368
(92,763)
347,596
$4,999,787
See accompanying notes to consolidated financial statements
56
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
2022
(In thousands, except per share amounts)
2021
2023
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on securities
$197,725
$139,057
$116,644
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax-exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,314
13,209
5,429
20,676
8,391
884
14,488
6,102
846
Total Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
239,677
169,008
138,080
INTEREST EXPENSE
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other borrowings and subordinated debt and debentures. . . . . . . . . . . . . . .
Total Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
75,075
8,273
83,348
156,329
6,210
Net Interest Income After Provision for Credit Losses . . . . . . . . . . . . . .
150,119
14,151
5,296
19,447
149,561
5,341
144,220
4,465
3,850
8,315
129,765
(1,928)
131,693
NON-INTEREST INCOME
Interchange income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service charges on deposit accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gains (losses) on assets
Mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage loan servicing, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Non-interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NON-INTEREST EXPENSE
Compensation and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Data processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interchange expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FDIC deposit insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal and professional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan and collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs related to unfunded lending commitments . . . . . . . . . . . . . . . . . . . . .
Conversion related expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,996
12,361
7,436
(222)
4,626
12,479
50,676
78,965
11,862
7,908
4,332
3,756
3,005
2,406
2,208
2,174
2,165
424
—
7,914
13,955
12,288
6,431
(275)
18,773
10,737
61,909
81,007
10,183
8,907
4,242
4,007
2,142
2,871
2,133
2,657
2,074
599
50
7,469
14,045
10,170
35,880
1,411
5,745
9,392
76,643
79,969
10,823
8,794
4,434
4,172
1,396
3,080
2,068
3,172
1,918
1,207
1,827
8,163
Total Non-interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
127,119
128,341
131,023
Income Before Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73,676
14,609
77,788
14,437
77,313
14,418
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 59,067
$ 63,351
$ 62,895
Net income per common share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
2.82
2.79
$
$
3.00
2.97
$
$
2.91
2.88
See accompanying notes to consolidated financial statements
57
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
2023
Year Ended December 31,
2022
(In thousands)
2021
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $59,067 $ 63,351 $ 62,895
Other comprehensive income (loss)
Securities available for sale
Unrealized gain (loss) arising during period . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized loss at time of transfer on securities available for sale
22,094
(95,263)
(10,644)
transferred to held to maturity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— (26,479)
—
Accretion of net unrealized losses on securities transferred to held to
maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification adjustments for (gains) losses included in earnings . . . . . . . .
3,563
222
3,413
275
—
(1,411)
Unrealized gains (losses) recognized in other comprehensive income
(loss) on securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,879
5,435
(118,054)
(24,790)
(12,055)
(2,532)
Unrealized gains (losses) recognized in other comprehensive income
(loss) on securities available for sale, net of tax . . . . . . . . . . . . . . . . . . . .
20,444
(93,264)
(9,523)
Derivative instruments
Unrealized losses arising during period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification adjustment for expense recognized in earnings . . . . . . . . . . . .
(213)
437
Unrealized gains recognized in other comprehensive income (loss) on
derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
224
47
Unrealized gains recognized in other comprehensive income (loss) on
derivative instruments, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
177
—
—
—
—
—
—
—
—
—
—
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,621
(93,264)
(9,523)
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $79,688 $ (29,913) $ 53,372
See accompanying notes to consolidated financial statements
58
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Common
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders’
Equity
(Dollars in thousands, except per share amounts)
Balances at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . .
Adoption of ASU 2016-13 . . . . . . . . . . . . . . . . . . . . . . . . . .
$339,353
$ 40,145
— (10,303)
$ 10,024
—
29,842
339,353
62,895
—
— (18,155)
—
—
(17,269)
61
10,024
—
—
—
—
$389,522
(10,303)
379,219
62,895
(18,155)
(17,269)
61
Balances at December 31, 2020, as adjusted . . . . . . . . . . . .
Net income for 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared, $0.84 per share . . . . . . . . . . . . . .
Repurchase of 814,910 shares of common stock. . . . . . . . .
Issuance of 40,350 shares of common stock . . . . . . . . . . . .
Share based compensation (issuance of 128,018 shares of
common stock) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share based compensation withholding obligation
(withholding of 36,222 shares of common stock) . . . . . .
Other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balances at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . .
Net income for 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared, $0.88 per share . . . . . . . . . . . . . .
Repurchase of 181,586 shares of common stock. . . . . . . . .
Issuance of 40,532 shares of common stock . . . . . . . . . . . .
Share based compensation (issuance of 62,114 shares of
1,947
(691)
—
—
—
—
74,582
323,401
—
63,351
— (18,565)
—
—
(4,010)
77
common stock) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,143
Share based compensation withholding obligation
(withholding of 28,125 shares of common stock) . . . . . .
Other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . .
(620)
—
—
—
—
Balances at December 31, 2022 . . . . . . . . . . . . . . . . . . . . . .
Net income for 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared, $0.92 per share . . . . . . . . . . . . . .
Repurchase of 298,601 shares of common stock. . . . . . . . .
Issuance of 28,583 shares of common stock . . . . . . . . . . . .
Share based compensation (issuance of 77,211 shares of
119,368
320,991
59,067
—
— (19,327)
—
—
(5,157)
70
—
1,947
—
(9,523)
501
—
—
—
—
—
—
(93,264)
(92,763)
—
—
—
—
(691)
(9,523)
398,484
63,351
(18,565)
(4,010)
77
2,143
(620)
(93,264)
347,596
59,067
(19,327)
(5,157)
70
common stock) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,229
Share based compensation withholding obligation
(withholding of 35,531 shares of common stock) . . . . . .
Other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . .
(650)
—
—
—
—
—
2,229
—
20,621
(650)
20,621
Balances at December 31, 2023 . . . . . . . . . . . . . . . . . . . . . .
$317,483
$159,108
$(72,142)
$404,449
See accompanying notes to consolidated financial statements
59
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2022
(In thousands)
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,067 $ 63,351 $
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH FROM
2023
2021
62,895
OPERATING ACTIVITIES
Proceeds from sales of loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disbursements for loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax (benefit) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred loan fees (costs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net depreciation, amortization of intangible assets and premiums and
accretion of discounts on securities, loans and interest bearing deposits -
time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gains on mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (gains) losses on securities available for sale. . . . . . . . . . . . . . . . . . . . . . . .
Share based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in accrued income and other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in accrued expenses and other liabilities . . . . . . . . . . . . . . .
Total Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Cash From Operating Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CASH FLOW USED IN INVESTING ACTIVITIES
Proceeds from the sale of securities available for sale . . . . . . . . . . . . . . . . . . . .
Proceeds from maturities, prepayments and calls of securities available for
sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from maturities, prepayments and calls of securities held to
maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of securities held to maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the redemption of Federal Home Loan Bank stock . . . . . . . . . .
Purchase of Federal Home Loan Bank stock . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in portfolio loans (loans originated, net of principal payments) . .
Proceeds from the sale of portfolio loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the sale of other real estate and repossessed assets . . . . . . . . . .
Proceeds from bank-owned life insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the sale of property and equipment. . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Cash Used in Investing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
356,207
(334,174)
6,210
215
1,244
549,079
(514,244)
5,341
(359)
(4,155)
1,283,741
(1,210,897)
(1,928)
1,912
(7,857)
10,019
(7,436)
222
2,229
(14,617)
(3,597)
16,522
75,589
10,827
(6,431)
275
2,143
(25,843)
14,648
31,281
94,632
12,130
(35,880)
(1,411)
1,947
(11,669)
17,171
47,259
110,154
278
70,523
85,371
122,806
167,550
375,723
22,317
21,964
— (137,550)
(2,658)
774
—
(606,069)
63,564
723
433
1,833
(5,679)
(424,592)
(1,740)
1,310
(478)
(361,609)
56,561
650
1,336
1,648
(6,024)
(162,945)
CASH FLOW FROM FINANCING ACTIVITIES
Net increase in total deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from Federal Home Loan Bank advances . . . . . . . . . . . . . . . . . . . . . .
Payments of Federal Home Loan Bank advances. . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share based compensation withholding obligation . . . . . . . . . . . . . . . . . . . . . . .
Net Cash From Financing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . . . . . . . . . .
Cash and Cash Equivalents at Beginning of Year. . . . . . . . . . . . . . . . . . . . . . . . . .
243,810
(60,980)
135,000
(110,000)
(19,327)
70
(5,157)
(650)
182,766
95,410
74,371
261,979
60,997
290,000
(295,000)
(18,565)
77
(4,010)
(620)
294,858
(35,102)
109,473
Cash and Cash Equivalents at End of Year. . . . . . . . . . . . . . . . . . . . . . . . . $ 169,781 $ 74,371 $
Cash paid during the year for
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 79,101 $ 17,657 $
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers to other real estate and repossessed assets . . . . . . . . . . . . . . . . . . . . . . .
Right of use assets obtained in exchange for lease obligations . . . . . . . . . . . . . . .
Transfer of securities available for sale to held to maturity . . . . . . . . . . . . . . . . . .
Transfer of mortgage loans to held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,040
719
791
— 391,618
— 20,367
16,100
783
865
See accompanying notes to consolidated financial statements
60
—
(824,348)
—
—
—
(205,539)
10,032
1,004
467
63
(5,837)
(563,064)
479,735
(3)
100,000
(100,000)
(18,155)
61
(17,269)
(691)
443,678
(9,232)
118,705
109,473
8,419
14,059
253
283
—
34,811
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ACCOUNTING POLICIES
The accounting and reporting policies and practices of Independent Bank Corporation and subsidiaries
(‘‘IBCP’’) conform to accounting principles generally accepted in the United States of America and prevailing
practices within the banking industry. Our critical accounting policies include the determination of the allowance for
credit losses and the valuation of capitalized mortgage loan servicing rights. We are required to make material
estimates and assumptions that are particularly susceptible to changes in the near term as we prepare the consolidated
financial statements and report amounts for each of these items. Actual results may vary from these estimates.
Our subsidiary, Independent Bank (‘‘Bank’’), transacts business in the single industry of commercial banking.
Our Bank’s activities cover traditional phases of commercial banking, including checking and savings accounts,
commercial lending, direct and indirect consumer financing and mortgage lending. Our principal markets are the rural
and suburban communities across Lower Michigan that are served by our Bank’s branches and loan production
offices as well as one loan production facility in Ohio. At December 31, 2023, 70.8% of our Bank’s loan portfolio
was secured by real estate.
PRINCIPLES OF CONSOLIDATION — The consolidated financial statements include the accounts of
Independent Bank Corporation and its subsidiaries. The income, expenses, assets and liabilities of the subsidiaries are
included in the respective accounts of the consolidated financial statements, after elimination of all intercompany
accounts and transactions.
STATEMENTS OF CASH FLOWS — For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, interest bearing deposits and federal funds sold. Generally, federal funds are
sold for one-day periods. We report net cash flows for customer loan and deposit transactions and for short-term
borrowings.
INTEREST BEARING DEPOSITS — Interest bearing deposits consist of overnight deposits with the Federal
Reserve Bank.
LOANS HELD FOR SALE — Mortgage loans originated and intended for sale in the secondary market are
carried at fair value. Fair value adjustments, as well as realized gains and losses, are recorded in current earnings.
Certain portfolio loans were reclassified to held for sale as of December 31, 2022, were carried at the lower of cost
or fair value on an aggregate loan basis and were sold during the first quarter of 2023.
OPERATING SEGMENTS — While chief decision-makers monitor the revenue streams of our various products
and services, operations are managed and financial performance is evaluated as one single unit. Discrete financial
information is not available other than on a consolidated basis for material lines of business.
CAPITALIZED MORTGAGE LOAN SERVICING RIGHTS — We account for our capitalized mortgage loan
servicing rights under the fair value method of accounting. We recognize as separate assets the rights to service mortgage
loans for others. The fair value of capitalized mortgage loan servicing rights has been determined based upon fair value
indications for similar servicing. Under the fair value method we measure capitalized mortgage loan servicing rights at fair
value at each reporting date and report changes in fair value of capitalized mortgage loan servicing rights in earnings in
the period in which the changes occur and are included in mortgage loan servicing, net in the Consolidated Statements of
Operations. The fair value of capitalized mortgage loan servicing rights are subject to significant fluctuations as a result
of changes in estimated and actual prepayment speeds and default rates and losses.
Mortgage loan servicing income is recorded for fees earned for servicing loans previously sold. The fees are
generally based on a contractual percentage of the outstanding principal and are recorded as income when earned.
Mortgage loan servicing fees, excluding fair value changes of capitalized mortgage loan servicing rights, totaled
$8.8 million, $8.6 million and $7.9 million for the years ended December 31, 2023, 2022 and 2021, respectively. Late
fees and ancillary fees related to loan servicing are not material.
TRANSFERS OF FINANCIAL ASSETS — Transfers of financial assets are accounted for as sales when control
over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets
have been isolated from us, the transferee obtains the right (free of conditions that constrain it from taking advantage
of that right) to pledge or exchange the transferred assets, and we do not maintain effective control over the
transferred assets through an agreement to repurchase them before their maturity.
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
SECURITIES — We classify our securities as equity, trading, held to maturity (‘‘HTM’’) or available for sale
(‘‘AFS’’). Equity securities are investments in certain equity stocks and are reported at fair value with realized and
unrealized gains and losses included in earnings. Trading securities are bought and held principally for the purpose
of selling them in the near term and are reported at fair value with realized and unrealized gains and losses included
in earnings. Securities HTM represent those securities for which we have the positive intent and ability to hold until
maturity and are reported at cost, adjusted for amortization of premiums and accretion of discounts computed on the
level-yield method. During 2022 we transferred certain securities AFS with an amortized cost and unrealized loss at
the date of transfer of $418.1 million and $26.5 million, respectively to HTM. See note #3 for further discussion of
this transfer. We did not have any equity securities or trading securities at December 31, 2023 and 2022. Securities
AFS represent those securities not classified as equity, trading or held to maturity and are reported at fair value with
unrealized gains and losses, net of applicable income taxes reported in other comprehensive income (loss).
Securities AFS in unrealized loss positions are evaluated quarterly for impairment related to credit losses. For
securities AFS in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not
that we will be required to sell the security before recovery of its amortized cost basis. If either of the criteria
regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through
income. For securities AFS that do not meet this criteria, we evaluate whether the decline in fair value has resulted
from credit losses or other factors. In making this assessment, we consider the extent to which fair value is less than
amortized cost, adverse conditions specifically related to the security and the issuer and the impact of changes in
market interest rates on the market value of the security, among other factors. If this assessment indicates that a credit
loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized
cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost
basis for the security, a credit loss exists and an allowance for credit losses (‘‘ACL’’) is recorded, limited to the
amount that the fair value of the security is less than its amortized cost basis. Any impairment that has not been
recorded through an ACL is recognized in other comprehensive income (loss), net of applicable taxes.
The ACL on securities HTM is a contra asset valuation account that is deducted from the carrying amount of securities
HTM to present the net amount expected to be collected. Securities HTM are charged off against the ACL when deemed
uncollectible. Adjustments to the ACL are reported in our Consolidated Statements of Operations in provision for credit
losses. We measure expected credit losses on securities HTM on a collective basis by major security type with each type
sharing similar risk characteristics and consider historical credit loss information. Accrued interest receivable on securities
HTM is excluded from the estimate of credit
losses. With regard to U.S. Government-sponsored agency and
mortgage-backed securities (residential and commercial), all these securities are issued by a U.S. government-sponsored
entity and have an implicit or explicit government guarantee; therefore, no allowance for credit losses has been recorded
for these securities. With regard to obligations of states and political subdivisions, private label-mortgage-backed, corporate
and trust preferred securities HTM, we consider (1) issuer bond ratings, (2) long-term historical loss rates for given bond
ratings, (3) the financial condition of the issuer, and (4) whether issuers continue to make timely principal and interest
payments under the contractual terms of the securities.
Gains and losses realized on the sale of securities available for sale are determined using the specific
identification method and are recognized on a trade-date basis.
FEDERAL HOME LOAN BANK (‘‘FHLB’’) STOCK — Our Bank subsidiary is a member of the FHLB system.
Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may
invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically
evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as
income in interest income-other investments on the Consolidated Statements of Operations.
FEDERAL RESERVE BANK (‘‘FRB’’) STOCK — Our Bank subsidiary is a member of its regional Federal
Reserve Bank. FRB stock is carried at cost, classified as a restricted security, and periodically evaluated for
impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income in interest
income-other investments on the Consolidated Statements of Operations.
LOAN REVENUE RECOGNITION — Interest on loans is accrued based on the principal amounts outstanding.
In general, the accrual of interest income is discontinued when a loan becomes 90 days past due for commercial loans
and installment loans and when a loan misses four consecutive payments for mortgage loans and the borrower’s
capacity to repay the loan and collateral values appear insufficient for each loan class. However, loans may be placed
62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
on non-accrual status regardless of whether or not such loans are considered past due if, in management’s opinion,
the borrower is unable to meet payment obligations as they become due or as required by regulatory provisions. All
interest accrued but not received for all loans placed on non-accrual is reversed from interest income. Payments on
such loans are generally applied to the principal balance until qualifying to be returned to accrual status. A
non-accrual loan may be restored to accrual status when interest and principal payments are current and the loan
appears otherwise collectible. Delinquency status for all classes in the commercial and installment loan portfolio
segments is based on the actual number of days past due as required by the contractual terms of the loan agreement
while delinquency status for mortgage loan portfolio segment classes is based on the number of payments past due.
Certain loan fees and direct loan origination costs are deferred and recognized as an adjustment of yield
generally over the contractual life of the related loan. Fees received in connection with loan commitments are
deferred until the loan is advanced and are then recognized generally over the contractual life of the loan as an
adjustment of yield. Fees on commitments that expire unused are recognized at expiration. Fees received for letters
of credit are recognized as revenue over the life of the commitment.
loan segment
ALLOWANCE FOR CREDIT LOSSES — Our loan portfolio is disaggregated into segments for purposes of
determining the ACL which include commercial, mortgage and installment loans. These segments are further
disaggregated into classes for purposes of monitoring and assessing credit quality based on certain risk
characteristics. Classes within the commercial
include (i) commercial and industrial and
(ii) commercial real estate. Classes within the mortgage loan segment include (i) 1-4 family owner occupied - jumbo,
(ii) 1-4 family owner occupied - non-jumbo, (iii) 1-4 family non-owner occupied (iv) 1-4 family - 2nd lien and
(v) resort lending. Classes within the installment loan segment include (i) boat lending, (ii) recreational vehicle
lending, and (iii) other. Commercial loans are subject to adverse market conditions which may impact the borrower’s
ability to make repayment on the loan or could cause a decline in the value of the collateral that secures the loan.
Mortgage and installment loans are subject to adverse employment conditions in the local economy which could
increase default rates. In addition, mortgage loans and real estate based installment loans are subject to adverse
market conditions which could cause a decline in the value of collateral that secures the loan. For an analysis of the
ACL by portfolio segment and credit quality information by class, see note #4.
We estimate the ACL based on relevant available information from both internal and external sources, including
historical loss trends, current conditions and forecasts, specific analysis of individual loans, and other relevant and
appropriate factors. The allowance process is designed to provide for expected future losses based on our reasonable
and supportable (‘‘R&S’’) forecast as of the reporting date. Our ACL process is administered by our Risk
Management group utilizing a third party software solution, with significant input and ultimate approval from our
Executive Enterprise Risk Committee. Further, we have established a current expected credit loss (‘‘CECL’’) Forecast
Committee, which includes a cross discipline structure with membership from Executive Management, Risk
Management, and Accounting, which approves ACL model assumptions each quarter. Our ACL is comprised of
three principal elements: (i) specific analysis of individual loans identified during the review of the loan portfolio,
(ii) pooled analysis of loans with similar risk characteristics based on historical experience, adjusted for current
conditions, R&S forecasts, and expected prepayments, and (iii) additional allowances based on subjective factors,
including local and general economic business factors and trends, portfolio concentrations and changes in the size
and/or the general terms of the loan portfolio.
The first ACL element (specific allocations) includes loans that do not share similar risk characteristics and are
evaluated on an individual basis. We will typically evaluate on an individual basis loans that are on nonaccrual; commercial
loans that have been modified resulting in a concession, for which the borrower is experiencing financial difficulties, and
which are considered troubled loan modifications; and severely delinquent mortgage and installment loans. When we
determine that foreclosure is probable or when repayment is expected to be provided substantially through the operation
or sale of underlying collateral, expected credit losses are based on the fair value of the collateral at the reporting date,
adjusted for estimated selling costs. For loans evaluated on an individual basis that are not determined to be collateral
dependent, a discounted cash flow analysis is performed to determine expected credit losses.
The second ACL element (pooled analysis) includes loans with similar risk characteristics, which are broken
down by segment, class, and risk metric. The Bank’s primary segments of commercial, mortgage, and installment
63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
loans are further classified by other relevant attributes, such as collateral type, lien position, occupancy status,
amortization method, and balance size. Commercial classes are additionally segmented by risk rating, and mortgage
and installment loan classes by credit score tier, which are updated at least semi-annually.
We utilize a discounted cash flow (‘‘DCF’’) model to estimate expected future losses for pooled loans. Expected
future cash flows are developed from payment schedules over the contractual term, adjusted for forecasted default
(probability of default), loss, and prepayment assumptions. We are not required to develop forecasts over the full
contractual term of the financial asset or group of financial assets. Rather, for periods beyond which we are able to
make or obtain R&S forecasts of expected credit losses, we revert to the long term average on a straight line or
immediate basis, as determined by our CECL Forecast Committee, and which may vary depending on the economic
outlook and uncertainty.
The DCF model for the mortgage and installment pooled loan segments includes using probability of default
(‘‘PD’’) assumptions that are derived through regression analysis with forecasted US unemployment levels by credit
score tier. We review a composite forecast of approximately 50 analysts as well as the Federal Open Market
Committee (‘‘FOMC’’) projections in setting the unemployment forecast for the R&S period. The current ACL
utilizes a one year R&S forecast followed by immediate reversion to the 30 year average unemployment rate. PD
assumptions for the remaining segments are based primarily on historical rates by risk metric as defaults were not
strongly correlated with any economic indicator. Loss given default (‘‘LGD’’) assumptions for the mortgage loan
segment are based on a two year forecast followed by a two year straight line reversion period to the longer term
average, while LGD rates for the remaining segments are the historical average for the entire period. Prepayment
assumptions represent average rates per segment for a period determined by the CECL Forecast Committee and as
calculated through the Bank’s Asset and Liability Management program.
Pooled reserves for the commercial loan segment are calculated using the DCF model with assumptions
generally based on historical averages by class and risk rating. Effective risk rating practices allow for strong
predictability of defaults and losses over the portfolio’s expected shorter duration, relative to mortgage and
installment loans. Our rating system is similar to those employed by state and federal banking regulators.
The third ACL element (additional allocations based on subjective factors) is based on factors that cannot be
associated with a specific credit or loan category and reflects our attempt to ensure that the overall ACL appropriately
reflects a margin for the imprecision necessarily inherent in the estimates of expected credit losses. We adjust our
quantitative model for certain qualitative factors to reflect the extent to which management expects current conditions and
R&S forecasts to differ from the conditions that existed for the period over which historical information was evaluated. The
qualitative framework reflects changes related to relevant data, such as changes in asset quality trends, portfolio growth and
composition, national and local economic factors, credit policy and administration and other factors not considered in the
base quantitative model. We utilize a survey completed by business unit management throughout the Bank, as well as
discussion with the CECL Forecast Committee to establish reserves under the qualitative framework.
On January 1, 2021 we adopted Accounting Standards Update 2016-13, ‘‘Financial Instruments — Credit Losses
(Topic 326), Measurement of Credit Losses on Financial Instruments’’ using the modified retrospective method for
all financial assets measured at amortized cost and unfunded lending commitments. Prior to January 1, 2021, the
calculation of the allowance was based on the probable incurred loss methodology.
Increases in the ACL are recorded by a provision for credit losses charged to expense. Although we periodically
allocate portions of the ACL to specific loans and loan portfolios, the entire ACL is available for losses.
We generally charge-off commercial, homogenous residential mortgage and installment loans when they are
deemed uncollectible or reach a predetermined number of days past due based on loan product, industry practice and
other factors. Collection efforts may continue and recoveries may occur after a loan is charged against the ACL.
While we use relevant information to recognize losses on loans, additional provisions for related losses may be
necessary based on changes in economic conditions, customer circumstances and other credit risk factors.
64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
PROPERTY AND EQUIPMENT — Property and equipment is stated at cost less accumulated depreciation and
amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful
lives of the related assets. Buildings are generally depreciated over a period not exceeding 39 years and equipment
is generally depreciated over periods not exceeding 7 years. Leasehold improvements are depreciated over the shorter
of their estimated useful life or lease period.
BANK OWNED LIFE INSURANCE — We have purchased a group flexible premium non-participating variable
life insurance contract on approximately 256 lives (who were salaried employees at the time we purchased the
contract) in order to recover the cost of providing certain employee benefits. Bank owned life insurance is recorded
at its cash surrender value or the amount that can be currently realized.
OTHER REAL ESTATE AND REPOSSESSED ASSETS — Other real estate at the time of acquisition is recorded
at fair value, less estimated costs to sell, which becomes the property’s new basis. Fair value is typically determined
by a third party appraisal of the property. Any write-downs at date of acquisition are charged to the ACL. Expense
incurred in maintaining other real estate and subsequent write-downs to reflect declines in value and gains or losses
on the sale of other real estate are recorded in non-interest expense in the Consolidated Statements of Operations.
Non-real estate repossessed assets are treated in a similar manner.
OTHER INTANGIBLES — Other intangible assets consist of core deposits. They are initially measured at fair
value and then are amortized on both straight-line and accelerated methods over their estimated useful lives, which
range from 10 to 15 years.
GOODWILL — Goodwill arises from business combinations and is generally determined as the excess of the
fair value of the consideration transferred over the fair value of the net assets acquired and liabilities assumed as of
the acquisition date. Goodwill acquired in a purchase business combination and determined to have an indefinite
useful life is not amortized, but tested for impairment at least annually or more frequently if events and circumstances
exists that indicate that a goodwill impairment test should be performed. We have selected December 31 as the date
to perform the annual impairment test. Goodwill is the only intangible asset with an indefinite life on our
Consolidated Statements of Financial Condition.
INCOME TAXES — We employ the asset and liability method of accounting for income taxes. This method
establishes deferred tax assets and liabilities for the temporary differences between the financial reporting basis and
the tax basis of our assets and liabilities at tax rates expected to be in effect when such amounts are realized or settled.
Under this method, the effect of a change in tax rates is recognized in the period that includes the enactment date.
The deferred tax asset is subject to a valuation allowance for that portion of the asset for which it is more likely than
not that it will not be realized.
A tax position is recognized as a benefit only if it is ‘‘more likely than not’’ that the tax position would be
sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest
amount of tax benefit that is greater than 50% likely of being realized on examination.
We recognize interest and/or penalties related to income tax matters in income tax expense in the Consolidated
Statements of Operations.
We file a consolidated federal income tax return. Intercompany tax liabilities are settled as if each subsidiary
filed a separate return.
COMMITMENTS TO EXTEND CREDIT AND RELATED FINANCIAL INSTRUMENTS — Financial
instruments may include commitments to extend credit and standby letters of credit. Financial instruments involve
varying degrees of credit and interest-rate risk in excess of amounts reflected in the Consolidated Statements of
Financial Condition. Exposure to credit risk in the event of non-performance by the counterparties to the financial
instruments for loan commitments to extend credit and letters of credit is represented by the contractual amounts of
those instruments. In general, we use a similar methodology to estimate our liability for these off-balance sheet credit
exposures as we do for our ACL. For commercial related commitments, we estimate liability using our loan rating
system and for mortgage and installment commitments we estimate liability principally upon historical loss
experience. Our estimated liability for off balance sheet commitments is included in accrued expenses and other
liabilities in our Consolidated Statements of Financial Condition and any charge or recovery is recorded in
non-interest expense – costs related to unfunded lending commitments in our Consolidated Statements of Operations.
65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
DERIVATIVE FINANCIAL INSTRUMENTS — We record derivatives on our Consolidated Statements of Financial
Condition as assets and liabilities measured at their fair value. The accounting for increases and decreases in the value of
derivatives depends upon the use of derivatives and whether the derivatives qualify for hedge accounting.
At the inception of the derivative we designate the derivative as one of three types based on our intention and
belief as to likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset
or liability or of an unrecognized firm commitment (‘‘Fair Value Hedge’’), (2) a hedge of a forecasted transaction or
the variability of cash flows to be received or paid related to a recognized asset or liability (‘‘Cash Flow Hedge’’),
or (3) an instrument with no hedging designation. For a Fair Value Hedge, the gain or loss on the derivative, as well
as the offsetting loss or gain on the hedged item, are recognized in interest income in our Consolidated Statements
of Operations. For a Cash Flow Hedge, the gain or loss on the derivative is reported in other comprehensive income
(loss) and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. For
instruments with no hedging designation, the gain or loss on the derivative is reported in earnings. These free standing
instruments primarily consist of (i) mortgage banking related derivatives and include rate-lock loan commitments to
fund mortgage loans (interest rate locks) to be sold into the secondary market and mandatory forward commitments
for the future delivery of these mortgage loans and (ii) certain pay-fixed and pay-variable interest rate swap
agreements related to commercial loan customers. The fair value of rate-lock mortgage loan commitments is based
on agency cash window loan pricing for comparable assets and the fair value of mandatory commitments to sell
mortgage loans is based on mortgage backed security pricing for comparable assets. We enter into mandatory forward
commitments for the future delivery of mortgage loans generally when interest rate locks are entered into in order
to hedge the change in interest rates resulting from our commitments to fund the loans. Changes in the fair values
of these derivatives are included in net gains on mortgage loans in the Consolidated Statements of Operations. Fair
values of the pay-fixed and pay-variable interest rate swap agreements are derived from proprietary models which
utilize current market data and are included in net interest income in the Consolidated Statements of Operations.
Net cash settlements on derivatives that qualify for hedge accounting are recorded in net interest income in the
Consolidated Statements of Operations. Net cash settlements on derivatives that do not qualify for hedge accounting
are reported in non-interest income (mortgage banking related derivatives) or net interest income (interest rate swap
agreements) in the Consolidated Statements of Operations. Cash flows on hedges are classified in the cash flow
statement the same as the cash flows of the items being hedged.
We formally document the relationship between derivatives and hedged items, as well as the risk-management
objective and the strategy for undertaking hedge transactions, at the inception of the hedging relationship. This
documentation includes linking Fair Value or Cash Flow Hedges to specific assets and liabilities on the Consolidated
Statements of Financial Condition or to specific firm commitments or forecasted transactions. We discontinue hedge
accounting when it is determined that the derivative is no longer effective in offsetting changes in the fair value or
cash flows of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no longer
probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer
appropriate or intended.
When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded in
earnings. When a Fair Value Hedge is discontinued, the hedged asset or liability is no longer adjusted for changes
in fair value and the existing basis adjustment is amortized or accreted over the remaining life of the asset or liability.
When a Cash Flow Hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to
occur, gains or losses that were accumulated in other comprehensive income (loss) are amortized into earnings over
the same periods which the hedged transactions will affect earnings.
COMPREHENSIVE INCOME (LOSS) — Comprehensive income (loss) consists of net income and unrealized
gains and losses, net of tax, on securities available for sale and derivative instruments classified as cash flow hedges.
NET INCOME PER COMMON SHARE — Basic net income per common share is computed by dividing net
income by the weighted average number of common shares outstanding during the period and participating share
awards. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are
considered participating securities for this calculation. For diluted net income per common share, net income is
divided by the weighted average number of common shares outstanding during the period plus the assumed exercise
of stock options, performance share units and stock units for a deferred compensation plan for non-employee
directors.
66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
SHARE BASED COMPENSATION — Cost is recognized for non-vested share awards issued to employees
based on the fair value of these awards at the date of grant. A simulation analysis which considers potential outcomes
for a large number of independent scenarios is utilized to estimate the fair value of performance share units and the
market price of our common stock at the date of grant is used for other non-vested share awards. Cost is recognized
over the required service period, generally defined as the vesting period. Forfeitures are recognized as they occur.
Cost is also recognized for stock issued to non-employee directors. These shares vest immediately and cost is
recognized during the period they are issued.
COMMON STOCK — At December 31, 2023, 0.1 million shares of common stock were reserved for issuance
under the dividend reinvestment plan, 0.6 million shares of common stock were reserved for issuance under our
long-term incentive plan and 0.2 million shares of common stock were reserved for issuance under our non-employee
director stock purchase plan.
RECLASSIFICATION — Certain amounts in the 2022 and 2021 consolidated financial statements have been
reclassified to conform to the 2023 presentation.
loan modification guidance in Subtopic 310-20 to all
ADOPTION OF NEW ACCOUNTING STANDARDS — In March, 2022, the Financial Accounting Standards
Board (‘‘FASB’’) issued Accounting Standards Update (‘‘ASU’’) 2022-02, ‘‘Financial Instruments – Credit Losses
(Topic 326): Troubled Debt Restructuring and Vintage Disclosures’’. This ASU eliminates the troubled debt
restructuring (‘‘TDR’’) accounting model for creditors that have already adopted Topic 326, which is commonly
referred to as the current expected credit loss (‘‘CECL’’) model. In lieu of the TDR accounting model, creditors now
will apply the general
including
modifications made for borrowers experiencing financial difficulty. Under the general loan modification guidance, a
modification is treated as a new loan only if the terms of the new loan are at least as favorable to the lender as the
terms for comparable loans to other customers with similar collection risks, and modifications to the terms of the
original loan are more than minor. If either condition is not met, the modification is accounted for as the continuation
of the old loan with any effect of the modification treated as a prospective adjustment to the loan’s effective interest
rate. In addition, this ASU requires the disclosure of gross charge-offs recorded in the current period for financing
receivables by origination year. For entities that have adopted Topic 326, ASU 2022-02 takes effect in reporting
periods beginning after December 15, 2022, with early adoption permitted. The adoption of this ASU on January 1,
2023, did not have a material impact on our Condensed Consolidated Financial Statements.
loan modifications,
In March 2020, the FASB issued ASU 2020-04, ‘‘Reference Rate Reform (Topic 848), Facilitation of the Effects
of Reference Rate Reform on Financial Reporting’’ and in December 2022 the FASB issued ASU 2022-06,
‘‘Reference Rate Reform (Topic 848), Deferral of the Sunset Date of Topic 848’’. These new ASUs provide
temporary optional expedients and exceptions to GAAP guidance on contract modifications and hedge accounting to
ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates
to alternative reference rates. Entities can elect not to apply certain modification accounting requirements to contracts
affected by reference rate reform, if certain criteria are met. Entities that make such elections would not have to
remeasure contracts at the modification date or reassess a previous accounting determination. Entities can elect
various optional expedients that would allow them to continue applying hedge accounting for hedging relationships
affected by reference rate reform, if certain criteria are met.
We formed a cross-functional project team to lead the transition from LIBOR to an adoption of reference rates
that include Secured Overnight Financing Rate (‘‘SOFR’’). We utilized the timeline guidance published by the
Alternative Reference Rates Committee to develop and achieve internal milestones during this transitional period. We
discontinued the use of new LIBOR-based loans and interest rate derivatives as of December 31, 2021, according to
regulatory guidelines. The amended guidance under Topic 848 and our ability to elect its temporary optional
expedients and exceptions are effective for us through December 31, 2024.
In March, 2023, the FASB issued ASU 2023-02, ‘‘Investments - Equity Method and Joint Ventures (Topic 323):
Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the
Emerging Issues Task Force)’’. This ASU expands the use of the proportional amortization method of accounting —
currently allowed only for investments in low-income housing tax credit (‘‘LIHTC’’) structures — to equity
investments in other tax credit structures that meet certain criteria. Common tax credit programs that investors access
via tax equity structures and that may now be eligible for application of the proportional amortization method include:
67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
new markets tax credits, historic rehabilitation tax credit programs, and renewable energy tax credit programs. This
ASU takes effect in reporting periods beginning after December 15, 2023, with early adoption permitted. We do not
expect the adoption of this this ASU to have a material impact on our Condensed Consolidated Financial Statements.
In November, 2023, the FASB issued ASU 2023-07, ‘‘Segment Reporting (Topic 323): Improvements to
Reportable Segment Disclosures’’. This ASU enhances disclosures of significant segment expenses by requiring
entities to disclose significant segment expenses regularly provided to the chief operating decision maker, extend
certain annual disclosures to interim periods, and permit more than one measure of segment profit or loss to be
reported under certain conditions. This ASU takes effect in reporting periods beginning after December 15, 2023,
with early adoption permitted. We do not expect the adoption of this ASU to have a material impact on our
Consolidated Financial Statements.
In December, 2023, the FASB issued ASU 2023-09, ‘‘Income Taxes (Topic 740): Improvements to Income Tax
Disclosures’’. This ASU modifies the rules on income tax disclosures to require entities to disclose (1) specific
categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or
benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations
(separated by federal, state and foreign). This ASU also requires entities to disclose their income tax payments to
international, federal, state and local jurisdictions, among other changes. This ASU takes effect in reporting periods
beginning after December 15, 2024, with early adoption permitted. We do not expect the adoption of this ASU to have
a material impact on our Consolidated Financial Statements.
NOTE 2 – RESTRICTIONS ON CASH AND DUE FROM BANKS
During March 2020 the FRB, in response to the COVID-19 pandemic, reduced our Bank’s reserve balance
requirements to zero. Prior to that time our Bank was required to maintain reserve balances in the form of vault cash
and balances with the FRB. The average reserve balances to be maintained during 2023 and 2022 were zero. We do
not maintain compensating balances with correspondent banks. We may also be required to maintain reserve balances
related to certain mortgage banking related derivatives not classified as hedges. These balances are held at unrelated
financial institutions and totaled $0.3 million and $0.3 million at December 31, 2023 and 2022.
68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
NOTE 3 – SECURITIES
Securities AFS consist of the following at December 31:
Amortized
Cost
Unrealized
Gains
Losses
(In thousands)
2023
U.S. agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. agency residential mortgage-backed . . . . . . . . . . . . . . . . . . . . . .
U.S. agency commercial mortgage-backed . . . . . . . . . . . . . . . . . . . . .
Private label mortgage-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other asset backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of states and political subdivisions . . . . . . . . . . . . . . . . .
Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 10,299
90,195
13,706
93,527
114,867
341,177
79,296
983
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$744,050
2022
U.S. agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. agency residential mortgage-backed . . . . . . . . . . . . . . . . . . . . . .
U.S. agency commercial mortgage-backed . . . . . . . . . . . . . . . . . . . . .
Private label mortgage-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other asset backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of states and political subdivisions . . . . . . . . . . . . . . . . .
Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 13,191
100,700
15,047
102,196
200,755
346,187
87,308
979
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$866,363
Securities HTM consist of the following at December 31:
$ 5
3
—
249
3
204
—
—
$464
$ 10
19
—
245
—
55
—
—
$329
Fair Value
$ 9,507
81,217
12,297
86,469
112,931
302,737
73,250
942
$
797
8,981
1,409
7,307
1,939
38,644
6,046
41
$65,164
$679,350
$ 1,100
10,261
1,594
8,596
6,030
50,565
9,151
48
$ 12,101
90,458
13,453
93,845
194,725
295,677
78,157
931
$87,345
$779,347
Carrying
Value
Transferred
Unrealized
Loss(1)
Amortized
Cost
ACL
(In thousands)
Unrealized
Gains
Losses
Fair Value
2023
U.S. agency. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,768
108,770
U.S. agency residential mortgage-backed . . .
4,146
U.S. agency commercial mortgage-backed . .
Private label mortgage-backed. . . . . . . . . . . .
7,302
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust preferred . . . . . . . . . . . . . . . . . . . . . . . .
161,352
45,702
948
$ 1,603
9,715
153
302
$ — $ 27,371 $ — $ 4,892 $ 22,479
94,636
3,839
6,754
— 118,485 — 23,849
460
4,299 —
—
854
7,608 —
4
6,879
803
48
33
116
4
88
168,264
46,621
780
1,000 —
18,807
7,033
15
149,545
40,368
985
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $353,988
$19,503
$157 $373,648 $868 $55,910 $318,606
2022
U.S. agency. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,634
117,650
U.S. agency residential mortgage-backed . . .
4,798
U.S. agency commercial mortgage-backed . .
7,242
Private label mortgage-backed. . . . . . . . . . . .
$ 1,839
10,845
228
416
$ — $ 29,473 $ — $ 5,066 $ 24,407
103,256
4,430
6,662
— 128,495 — 25,239
596
5,026 —
—
997
7,659 —
1
69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Carrying
Value
Transferred
Unrealized
Loss(1)
Amortized
Cost
ACL
(In thousands)
Unrealized
Gains
Losses
Fair Value
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust preferred . . . . . . . . . . . . . . . . . . . . . . . .
168,134
48,418
942
8,555
1,130
53
39
123
5
176,728
25,591
11
49,671 — 5,156
—
1,000 —
151,148
44,515
1,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $374,818
$23,066
$168 $398,052 $11 $62,645 $335,418
(1)
Represents the remaining unrealized loss to be accreted on securities that were transferred from AFS to HTM on April 1, 2022.
On April 1, 2022, we transferred certain securities AFS with an amortized cost and unrealized loss at the date
of transfer of $418.1 million and $26.5 million, respectively to HTM. The transfer was made at fair value, with the
unrealized loss becoming part of the purchase discount which will be accreted over the remaining life of the
securities. The other comprehensive loss component is separated from the remaining available for sale securities and
is accreted over the remaining life of the securities transferred. We have the ability and intent to hold these securities
until they mature, at which time we expect to receive full value for these securities.
Our investments’ gross unrealized losses and fair values for securities AFS aggregated by investment type and
length of time that individual securities have been at a continuous unrealized loss position, at December 31 follows:
Less Than Twelve Months Twelve Months or More
Unrealized
Losses
Unrealized
Losses
Fair Value
Fair Value
Total
Fair Value
Unrealized
Losses
(In thousands)
2023
U.S. agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . $
U.S. agency residential mortgage-backed . . . .
U.S. agency commercial mortgage-backed . . .
Private label mortgage-backed. . . . . . . . . . . . .
Other asset backed . . . . . . . . . . . . . . . . . . . . . .
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust preferred . . . . . . . . . . . . . . . . . . . . . . . . .
130
358
—
6,285
7,714
—
—
—
$ — $
1
—
356
88
8,453 $
80,008
12,297
79,507
97,203
797 $ 8,583 $
8,980
1,409
6,951
1,851
80,366
12,297
85,792
104,917
797
8,981
1,409
7,307
1,939
— 301,038
73,249
—
942
—
38,644
6,046
41
301,038
73,249
942
38,644
6,046
41
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,487
$
445
$652,697 $64,719 $667,184 $65,164
2022
U.S. agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,244
33,784
U.S. agency residential mortgage-backed . . . .
1,609
U.S. agency commercial mortgage-backed . . .
39,954
Private label mortgage-backed. . . . . . . . . . . . .
Other asset backed . . . . . . . . . . . . . . . . . . . . . .
110,859
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust preferred . . . . . . . . . . . . . . . . . . . . . . . . .
56,455
24,876
—
$
799
1,920
73
2,582
2,657
$ 2,587 $
54,793
11,844
53,346
83,802
301 $ 10,831 $ 1,100
10,261
88,577
1,594
13,453
8,596
93,300
6,030
194,661
8,341
1,521
6,014
3,373
10,216
1,737
—
231,705
51,293
931
40,349
7,414
48
288,160
76,169
931
50,565
9,151
48
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $275,781
$19,984
$490,301 $67,361 $766,082 $87,345
70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Securities AFS in unrealized loss positions are evaluated quarterly for impairment related to credit losses. For
securities AFS in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not
that we will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria
regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through
income. For securities AFS that do not meet this criteria, we evaluate whether the decline in fair value has resulted
from credit losses or other factors. In making this assessment, we consider the extent to which fair value is less than
amortized cost, adverse conditions specifically related to the security and the issuer and the impact of changes in
market interest rates on the market value of the security, among other factors. If this assessment indicates that a credit
loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized
cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost
basis for the security, a credit loss exists and an ACL is recorded, limited to the amount that the fair value of the
security is less than its amortized cost basis. Any impairment that has not been recorded through an ACL is
recognized in other comprehensive income (loss), net of applicable taxes. No ACL for securities AFS was needed at
December 31, 2023 and 2022. Accrued interest receivable on securities AFS totaled $4.6 million and $4.7 million at
December 31, 2023 and 2022, respectively and is excluded from the estimate of credit losses and is included in
accrued income and other assets in the Consolidated Statements of Financial Condition.
U.S. agency, U.S. agency residential mortgage-backed and U.S. agency commercial mortgage backed securities
— at December 31, 2023, we had 31 U.S. agency, 169 U.S. agency residential mortgage-backed and 11 U.S. agency
commercial mortgage-backed securities whose fair value is less than amortized cost. These securities are either
explicitly or implicitly guaranteed by the U.S. government, are highly rated by major credit rating agencies, and have
a long history of no credit losses. The unrealized losses are largely attributed to widening spreads to Treasury bonds
and/or an increase in interest rates since acquisition.
Private label mortgage backed, other asset backed and corporate securities — at December 31, 2023, we had
88 private label mortgage backed, 104 other asset backed, and 76 corporate securities whose fair value is less than
amortized cost. The unrealized losses are primarily due to credit spread widening and/or an increase in interest rates
since acquisition.
Obligations of states and political subdivisions — at December 31, 2023, we had 327 municipal securities whose
fair value is less than amortized cost. The unrealized losses are primarily due to an increase in interest rates since
acquisition.
Trust preferred securities — at December 31, 2023, we had one trust preferred security whose fair value is less
than amortized cost. This trust preferred securities is a single issue security issued by a trust subsidiary of a bank
holding company. The pricing of trust preferred securities has suffered from credit spread widening. This security is
rated by a major rating agency as investment grade.
At December 31, 2023 management does not intend to liquidate any of the securities discussed above and it is
more likely than not that we will not be required to sell these securities prior to recovery of these unrealized losses.
We recorded no credit related charges in our Consolidated Statements of Operations related to securities
available for sale during 2023, 2022, and 2021.
The ACL on securities HTM is a contra asset valuation account that is deducted from the carrying amount of
securities HTM to present the net amount expected to be collected. Securities HTM are charged off against the ACL
when deemed uncollectible. Adjustments to the ACL are reported in our Consolidated Statements of Operations in
provision for credit losses. We measure expected credit losses on securities HTM on a collective basis by major
security type with each type sharing similar risk characteristics and consider historical credit loss information.
Accrued interest receivable on securities HTM totaled $1.8 million and $1.8 million at December 31, 2023 and 2022,
respectively and is excluded from the estimate of credit losses and is included in accrued income and other assets in
the Consolidated Statements of Financial Condition. With regard to U.S. Government-sponsored agency and
mortgage-backed securities (residential and commercial), all these securities are issued by a U.S. government-
sponsored entity and have an implicit or explicit government guarantee; therefore, no allowance for credit losses has
been recorded for these securities. With regard to obligations of states and political subdivisions, private
label-mortgage-backed, corporate and trust preferred securities HTM, we consider (1) issuer bond ratings,
(2) historical loss rates for given bond ratings, (3) the financial condition of the issuer, and (4) whether issuers
71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
continue to make timely principal and interest payments under the contractual terms of the securities. Historical loss
rates associated with securities having similar grades as those in our portfolio have been insignificant. During the
first quarter of 2023, one corporate security (Signature Bank) defaulted resulting in a $3.0 million provision for credit
losses and a corresponding full charge-off. Subsequent to this security’s charge-off, a portion of its fair value had
recovered and was subsequently sold during the first quarter of 2024 for $1.1 million during which period we expect
to record that amount as a recovery to the ACL. Despite this lone security loss, the long-term historical loss rates
associated with securities having similar grades as those in our portfolio have been insignificant. Furthermore, as of
December 31, 2023 and 2022, there were no past due principal and interest payments associated with these securities.
At those same dates an allowance for credit losses of $157,000 and $168,000, respectively was recorded on non
U.S. agency securities HTM based on applying the long-term historical credit loss rate, as published by credit rating
agencies, for similarly rated securities.
On a quarterly basis, we monitor the credit quality of securities HTM through the use of credit ratings. The
carrying value of securities HTM at December 31, aggregated by credit quality follow:
Private
Label
Mortgage-
Backed
Obligations
of States
and Political
Subdivisions Corporate
(In thousands)
Trust
Preferred
Carrying
Value
Total
2023
Credit rating:
AAA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BBB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-rated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,302
—
—
—
—
—
$ 36,629
102,583
3,172
856
—
18,112
$ — $ — $ 43,931
— 102,583
10,095
—
34,769
—
1,943
—
21,983
948
—
6,923
33,913
1,943
2,923
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,302
$161,352
$45,702
$948
$215,304
2022
Credit rating:
AAA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BBB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-rated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,242
—
—
—
—
$ 32,876
110,033
3,917
1,167
20,141
$ — $ — $ 40,118
110,033
—
10,817
—
39,788
—
23,980
942
—
6,900
38,621
2,897
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,242
$168,134
$48,418
$942
$224,736
An analysis of the ACL by security HTM type for the year ended December 31, follows:
Private
Label
Mortgage-
Backed
Obligations
of States
and Political
Subdivisions Corporate
(In thousands)
Trust
Preferred
Total
2023
Balance at beginning of period. . . . . . . . . . . . . . . . . . . . .
$ 1
$39
$
123
$ 5
$
168
Additions (deductions)
Provision for credit losses. . . . . . . . . . . . . . . . . . . . .
Recoveries credited to the allowance . . . . . . . . . . . .
Securities HTM charged against the allowance . . . .
3
—
—
(6)
—
—
2,993
—
(3,000)
(1)
—
—
2,989
—
(3,000)
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4
$33
$
116
$ 4
$
157
72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Private
Label
Mortgage-
Backed
Obligations
of States
and Political
Subdivisions Corporate
(In thousands)
Trust
Preferred
Total
2022
Balance at beginning of period. . . . . . . . . . . . . . . . . . . . .
$—
Additions (deductions)
Provision for credit losses. . . . . . . . . . . . . . . . . . . . .
Recoveries credited to the allowance . . . . . . . . . . . .
Securities HTM charged against the allowance . . . .
1
—
—
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1
$—
39
—
—
$39
$ —
$—
$ —
123
—
—
5
—
—
168
—
—
$123
$ 5
$168
The amortized cost and fair value of securities AFS and securities HTM at December 31, 2023, by contractual
maturity, follow:
Maturing within one year . . . . . . . . . . . . . . . . . . . . . .
Maturing after one year but within five years . . . . . .
Maturing after five years but within ten years . . . . . .
Maturing after ten years . . . . . . . . . . . . . . . . . . . . . . .
U.S. agency residential mortgage-backed . . . . . . . . . .
U.S. agency commercial mortgage-backed. . . . . . . . .
Private label mortgage-backed . . . . . . . . . . . . . . . . . .
Other asset backed . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities AFS
Securities HTM
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
(In thousands)
$
5,471
153,786
67,713
204,785
431,755
90,195
13,706
93,527
114,867
$ 5,382
141,420
59,667
179,967
386,436
81,217
12,297
86,469
112,931
$ 4,881
55,292
99,383
83,700
243,256
118,485
4,299
7,608
—
$ 4,874
50,856
85,409
72,238
213,377
94,636
3,839
6,754
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$744,050
$679,350
$373,648
$318,606
The actual maturity may differ from the contractual maturity because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.
A summary of proceeds from the sale of securities available for sale and gains and losses for the years ended
December 31 follow:
Realized
Proceeds
Gains
Losses
(In thousands)
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
278
70,523
85,371
$ — $222
439
64
164
1,475
Securities AFS and HTM with a fair value of $103.6 million and zero at December 31, 2023 and 2022,
respectively, were pledged to secure borrowings, derivatives, public deposits and for other purposes as required by
law. There were no investment obligations of state and political subdivisions that were payable from or secured by
the same source of revenue or taxing authority that exceeded 10% of consolidated total shareholders’ equity at
December 31, 2023 or 2022.
73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
NOTE 4 – LOANS
Our loan portfolios by class at December 31 follow:
2023
2022
(In thousands)
Commercial
Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 810,145 $ 732,463
734,390
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
869,586
Total commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,679,731
1,466,853
Mortgage
1-4 family owner occupied - jumbo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1-4 family owner occupied - non-jumbo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1-4 family non-owner occupied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1-4 family - 2nd lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resort lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
859,236
301,172
173,816
116,032
35,616
752,563
285,632
183,100
105,277
41,837
Total mortgage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,485,872
1,368,409
Installment
Boat lending. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recreational vehicle lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total installment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
268,648
251,852
104,798
625,298
252,965
270,673
106,452
630,090
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,790,901
(54,658)
3,465,352
(52,435)
Net Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,736,243 $3,412,917
Loans include net deferred loan costs of $25.3 million and $26.6 million at December 31, 2023 and 2022,
respectively.
During 2023, we sold $56.7 million of portfolio residential fixed rate and adjustable rate mortgage loans
servicing retained and recognized a loss on sale of $0.14 million. During 2022, we sold $63.0 million of portfolio
residential fixed and adjustable rate mortgage loans servicing retained and recognized a gain on sale of $0.55 million.
During 2021, we sold $9.6 million of portfolio residential fixed rate mortgage loans servicing retained and recognized
a gain on sale of $0.45 million. These loan sale transactions were done primarily for asset/liability management
purposes.
An analysis of the ACL by portfolio segment for the years ended December 31 follows:
2023
Balance at beginning of period . . . . . . . . . . . . . . . . . .
Additions (deductions)
Commercial Mortgage
Installment
(In thousands)
Subjective
Allocation
Total
$13,817
$21,633
$ 4,290
$12,695
$52,435
Provision for credit losses . . . . . . . . . . . . . . . . . . . .
Recoveries credited to allowance. . . . . . . . . . . . . . .
Loans charged against the allowance. . . . . . . . . . . .
3,430
531
(1,054)
(445)
352
(154)
509
1,915
(2,588)
3,221
(273)
—
2,798
— (3,796)
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . .
$16,724
$21,386
$ 4,126
$12,422
$54,658
74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
2022
Balance at beginning of period . . . . . . . . . . . . . . . . . .
Additions (deductions)
Commercial Mortgage
Installment
(In thousands)
Subjective
Allocation
Total
$11,519
$19,221
$ 3,749
$12,763
$47,252
Provision for credit losses . . . . . . . . . . . . . . . . . . . .
Recoveries credited to allowance. . . . . . . . . . . . . . .
Loans charged against the allowance. . . . . . . . . . . .
1,845
453
—
2,047
435
(70)
1,349
1,608
(2,416)
5,173
(68)
—
2,496
— (2,486)
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . .
$13,817
$21,633
$ 4,290
$12,695
$52,435
2021
Balance at beginning of period . . . . . . . . . . . . . . . . . .
Additions (deductions)
Impact of adoption of CECL . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . .
Initial allowance on loans purchased with credit
deterioration . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries credited to allowance. . . . . . . . . . . . . . .
Loans charged against the allowance. . . . . . . . . . . .
$ 7,401
$ 6,998
$ 1,112
$19,918
$35,429
2,551
(1,135)
12,000
(266)
3,052
599
(6,029)
(1,126)
11,574
(1,928)
95
2,607
—
18
846
(375)
21
1,024
(2,059)
134
—
—
4,477
— (2,434)
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . .
$11,519
$19,221
$ 3,749
$12,763
$47,252
The allocation of the ACL by portfolio segment at December 31 follows:
2023
Allowance
for Credit
Losses
Amount
Percent
of Loans
to Total
Portfolio Loans
Allowance
for Credit
Losses
Amount
(Dollars in thousands)
2022
Percent
of Loans
to Total
Portfolio Loans
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,724
21,386
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,126
Installment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,422
Subjective allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44.3% $13,817
21,633
39.2
4,290
16.5
12,695
—
42.3%
39.5
18.2
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $54,658
100.0% $52,435
100.0%
75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Loans on non-accrual status and past due more than 90 days (‘‘Non-performing Loans’’) at December 31 follow:
Non-Accrual with
no Allowance for
Credit Loss
Non-Accrual
with an Allowance
for Credit Loss
Total
Non-
Accrual
90+ and
Still
Accruing
Total Non-
Performing
Loans
(In thousands)
2023
Commercial
Commercial and industrial(1) . . . . . . . . . . . . . .
Commercial real estate . . . . . . . . . . . . . . . . . . .
$ —
—
$
7
—
$
7
—
Mortgage
1-4 family owner occupied - jumbo. . . . . . . . .
1-4 family owner occupied - non-jumbo(2) . . .
1-4 family non-owner occupied . . . . . . . . . . . .
1-4 family - 2nd lien. . . . . . . . . . . . . . . . . . . . .
Resort lending . . . . . . . . . . . . . . . . . . . . . . . . . .
Installment
Boat lending . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recreational vehicle lending. . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
544
575
—
—
—
—
—
—
—
1,655
282
624
143
352
419
199
544
2,230
282
624
143
352
419
199
$ — $
—
—
432
—
—
—
—
—
—
7
—
544
2,662
282
624
143
352
419
199
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,119
$3,681
$4,800
$432
$5,232
Accrued interest excluded from total . . . . . . . . . .
$ —
$ —
$ — $ — $ —
2022
Commercial
Commercial and industrial(1) . . . . . . . . . . . . . .
Commercial real estate . . . . . . . . . . . . . . . . . . .
$ —
—
$
Mortgage
1-4 family owner occupied - jumbo. . . . . . . . .
1-4 family owner occupied - non-jumbo(2) . . .
1-4 family non-owner occupied . . . . . . . . . . . .
1-4 family - 2nd lien. . . . . . . . . . . . . . . . . . . . .
Resort lending . . . . . . . . . . . . . . . . . . . . . . . . . .
Installment
Boat lending . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recreational vehicle lending. . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
1,077
152
—
110
—
—
—
9
—
—
852
323
562
38
380
30
188
$
9
—
—
1,929
475
562
148
380
30
188
$ — $
9
—
—
1,929
475
562
148
380
30
188
—
—
—
—
—
—
—
—
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,339
$2,382
$3,721
$ — $3,721
Accrued interest excluded from total . . . . . . . . . .
$ —
$ —
$ — $ — $ —
(1) Non-performing commercial and industrial
loans exclude $0.021 million and $0.029 million of government guaranteed loans at
December 31, 2023 and 2022, respectively.
(2) Non-performing 1-4 family owner occupied – non jumbo loans exclude $2.170 million and $1.631 million of government guaranteed loans
at December 31, 2023 and 2022, respectively.
If non-performing loans had continued to accrue interest in accordance with their original terms, approximately
$0.3 million, $0.2 million and $0.2 million of interest income would have been recognized in each of the years ended
2023, 2022 and 2021, respectively. Interest income recorded on these loans was approximately zero during each of
the years ended 2023, 2022 and 2021.
76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
The following table provides collateral information by class of loan for collateral-dependent loans with a
specific reserve. A loan is considered to be collateral dependent when the borrower is experiencing financial difficulty
and the repayment is expected to be provided substantially through the operation or sale of collateral.
The amortized cost of collateral-dependent loans by class at December 31, follows:
Collateral Type
Real
Estate
Other
Allowance
for
Credit Losses
(In thousands)
2023
Commercial
Commercial and industrial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
565 $ 232
—
—
$ 224
—
Mortgage
1-4 family owner occupied - jumbo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1-4 family owner occupied - non-jumbo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1-4 family non-owner occupied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1-4 family - 2nd lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resort lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Installment
Boat lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recreational vehicle lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
544
2,243
211
244
143
—
—
—
—
—
—
—
—
297
303
102
—
504
178
87
51
105
107
36
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,950 $ 934
$1,292
Accrued interest excluded from total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1 $ —
2022
Commercial
Commercial and industrial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
748 $1,309
—
7,329
$ 197
1,243
Mortgage
1-4 family owner occupied - jumbo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1-4 family owner occupied - non-jumbo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1-4 family non-owner occupied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1-4 family - 2nd lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resort lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Installment
Boat lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recreational vehicle lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
1,721
233
368
148
—
—
6
—
—
—
—
—
297
30
128
—
229
29
203
14
101
11
47
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,553 $1,764
$2,074
Accrued interest excluded from total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
40 $
6
77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
An aging analysis of loans by class at December 31 follows:
Loans Past Due
30-59 days
60-89 days
90+ days
Total
Loans not
Past Due
Total
Loans
(In thousands)
$ — $ — $
$
28
—
28 $ 810,117 $ 810,145
869,586
—
869,586
2023
Commercial
Commercial and industrial . . . . . . . . . . . . .
Commercial real estate. . . . . . . . . . . . . . . .
Mortgage
1-4 family owner occupied - jumbo . . . . .
1-4 family owner occupied - non-jumbo. .
1-4 family non-owner occupied. . . . . . . . .
1-4 family - 2nd lien . . . . . . . . . . . . . . . . .
Resort lending. . . . . . . . . . . . . . . . . . . . . . .
Installment
Boat lending . . . . . . . . . . . . . . . . . . . . . . . .
Recreational vehicle lending . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
1,763
215
241
—
320
414
313
—
—
742
64
139
50
16
35
86
544
1,431
158
215
143
261
280
54
544
3,936
437
595
193
597
729
453
858,692
297,236
173,379
115,437
35,423
268,051
251,123
104,345
859,236
301,172
173,816
116,032
35,616
268,648
251,852
104,798
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,266
$1,132
$3,114
$7,512 $3,783,389 $3,790,901
Accrued interest excluded from total . . . . . .
$
31
$
17
$ — $
48 $
12,452 $
12,500
2022
Commercial
Commercial and industrial . . . . . . . . . . . . .
Commercial real estate. . . . . . . . . . . . . . . .
Mortgage
1-4 family owner occupied - jumbo . . . . .
1-4 family owner occupied - non-jumbo. .
1-4 family non-owner occupied. . . . . . . . .
1-4 family - 2nd lien . . . . . . . . . . . . . . . . .
Resort lending. . . . . . . . . . . . . . . . . . . . . . .
Installment
Boat lending . . . . . . . . . . . . . . . . . . . . . . . .
Recreational vehicle lending . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ — $ — $
—
—
1,400
61
420
54
528
639
215
—
—
521
93
107
—
14
147
46
$
38
—
38 $ 732,425 $ 732,463
734,390
—
734,390
—
869
200
47
148
295
18
123
—
2,790
354
574
202
837
804
384
752,563
282,842
182,746
104,703
41,635
252,128
269,869
106,068
752,563
285,632
183,100
105,277
41,837
252,965
270,673
106,452
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,317
$ 928
$1,738
$5,983 $3,459,369 $3,465,352
Accrued interest excluded from total . . . . . .
$
27
$
7
$ — $
34 $
9,975 $
10,009
78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
For the year ended December 31, 2023, there were no troubled loan modifications or subsequent defaults.
A loan is generally considered to be in payment default once it is 90 days contractually past due under the
modified terms for commercial loans and installment loans and when four consecutive payments are missed for
mortgage loans.
In order to determine whether a borrower is experiencing financial difficulty, we perform an evaluation of the
probability that the borrower will be in payment default on any of its debt in the foreseeable future without the
modification. This evaluation is performed under our internal underwriting policy.
Credit Quality Indicators – As part of our on-going monitoring of the credit quality of our loan portfolios, we
track certain credit quality indicators including (a) risk grade of commercial loans, (b) the level of classified
commercial loans, (c) credit scores of mortgage and installment loan borrowers, and (d) delinquency history and
non-performing loans.
For commercial loans, we use a loan rating system that is similar to those employed by state and federal banking
regulators. Loans are graded on a scale of 1 to 12. A description of the general characteristics of the ratings follows:
Rating 1 through 6: These loans are generally referred to as our ‘‘non-watch’’ commercial credits that include
very high or exceptional credit fundamentals through acceptable credit fundamentals.
Rating 7 and 8: These loans are generally referred to as our ‘‘watch’’ commercial credits. These ratings include
loans to borrowers that exhibit potential credit weakness or downward trends. If not checked or cured these trends
could weaken our asset or credit position. While potentially weak, no loss of principal or interest is envisioned with
these ratings.
Rating 9: These loans are generally referred to as our ‘‘substandard accruing’’ commercial credits. This rating
includes loans to borrowers that exhibit a well-defined weakness where payment default is probable and loss is
possible if deficiencies are not corrected. Generally, loans with this rating are considered collectible as to both
principal and interest primarily due to collateral coverage.
Rating 10 and 11: These loans are generally referred to as our ‘‘substandard - non-accrual’’ and ‘‘doubtful’’
commercial credits. These ratings include loans to borrowers with weaknesses that make collection of debt in full,
on the basis of current facts, conditions and values at best questionable and at worst improbable. All of these loans
are placed in non-accrual.
Rating 12: These loans are generally referred to as our ‘‘loss’’ commercial credits. This rating includes loans to
borrowers that are deemed incapable of repayment and are charged-off.
79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
The following tables summarize loan ratings by loan class for our commercial loan portfolio segment at
December 31:
Commercial
Term Loans Amortized Cost Basis by Origination Year
2023
2022
2021
2020
2019
(In thousands)
Prior
Revolving
Loans
Amortized
Cost Basis
Total
December 31, 2023
Commercial and industrial
Non-watch (1-6) . . . . . . . $110,472 $152,715 $ 70,081 $47,644 $ 42,576 $ 97,960 $260,634 $ 782,082
27,267
964
Watch (7-8) . . . . . . . . . . .
768
547
Substandard Accrual (9) . .
28
—
Non-Accrual (10-11). . . . .
11,938
196
—
2,580
—
—
4,173
21
—
5,239
—
—
2,277
4
28
96
—
—
Total . . . . . . . . . . . . . . $ 110,568 $ 157,954 $ 71,592 $ 50,224 $ 46,770 $100,269 $ 272,768 $ 810,145
Accrued interest excluded
from total. . . . . . . . . . . . . $
239 $
438 $
132 $
128 $
120 $
326 $
1,327 $
2,710
Current period gross charge-
offs . . . . . . . . . . . . . . . . . $
— $
— $
— $ — $
— $
69 $
25 $
94
Commercial real estate
Non-watch (1-6). . . . . . . . $ 202,576 $ 169,230 $131,428 $ 29,684 $ 78,706 $176,265 $ 73,852 $ 861,741
7,845
—
Watch (7-8) . . . . . . . . . . .
—
—
Substandard Accrual (9) . .
—
—
Non-Accrual (10-11). . . . .
2,322
—
—
5,523
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total . . . . . . . . . . . . . . $ 202,576 $ 169,230 $131,428 $ 29,684 $ 81,028 $181,788 $ 73,852 $ 869,586
Accrued interest excluded
from total. . . . . . . . . . . . . $
548 $
685 $
431 $
73 $
347 $
661 $
288 $
3,033
Current period gross charge-
offs . . . . . . . . . . . . . . . . . $
— $
— $
— $ — $
960 $
— $
— $
960
Total Commercial
Non-watch (1-6). . . . . . . . $ 313,048 $ 321,945 $201,509 $ 77,328 $121,282 $274,225 $ 334,486 $1,643,823
35,112
964
Watch (7-8) . . . . . . . . . . .
768
547
Substandard Accrual (9) . .
28
—
Non-Accrual (10-11). . . . .
11,938
196
—
5,239
—
—
2,580
—
—
6,495
21
—
7,800
4
28
96
—
—
Total . . . . . . . . . . . . . . $ 313,144 $ 327,184 $203,020 $ 79,908 $127,798 $282,057 $ 346,620 $1,679,731
Accrued interest excluded
from total. . . . . . . . . . . . . $
Current period gross charge-
offs . . . . . . . . . . . . . . . . . $
787 $
1,123 $
563 $
201 $
467 $
987 $
1,615 $
5,743
— $
— $
— $ — $
960 $
69 $
25 $
1,054
80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Commercial
Term Loans Amortized Cost Basis by Origination Year
2022
2021
2020
2019
2018
(In thousands)
Prior
Revolving
Loans
Amortized
Cost Basis
Total
December 31, 2022
Commercial and industrial
Non-watch (1-6). . . . . . . . . . $157,561 $ 89,251 $58,292 $ 45,792 $30,715 $ 95,908 $237,906 $ 715,425
15,062
781
Watch (7-8) . . . . . . . . . . . . .
1,938
68
Substandard Accrual (9). . . .
38
—
Non-Accrual (10-11) . . . . . .
4,539
971
—
1,690
388
—
4,474
402
38
2,793
—
—
680
—
—
105
109
—
Total. . . . . . . . . . . . . . . . . $158,241 $ 94,761 $59,141 $ 47,870 $30,929 $100,822 $240,699 $ 732,463
Accrued interest excluded
from total . . . . . . . . . . . . . . . $
238 $
178 $
146 $
105 $
181 $
308 $
890 $
2,046
Commercial real estate
Non-watch (1-6). . . . . . . . . . $170,238 $154,918 $38,062 $ 97,762 $56,580 $159,514 $ 42,030 $ 719,104
8,027
313
Watch (7-8) . . . . . . . . . . . . .
7,259
—
Substandard Accrual (9). . . .
—
—
Non-Accrual (10-11) . . . . . .
4,769
181
—
1,010
2,014
—
1,641
5,064
—
182
—
—
112
—
—
—
—
—
Total. . . . . . . . . . . . . . . . . $170,238 $155,100 $38,375 $102,712 $59,604 $166,219 $ 42,142 $ 734,390
Accrued interest excluded
from total . . . . . . . . . . . . . . . $
609 $
468 $
88 $
368 $
206 $
515 $
109 $
2,363
Total Commercial
Non-watch (1-6). . . . . . . . . . $327,799 $244,169 $96,354 $143,554 $87,295 $255,422 $279,936 $1,434,529
23,089
1,094
Watch (7-8) . . . . . . . . . . . . .
9,197
68
Substandard Accrual (9). . . .
38
—
Non-Accrual (10-11) . . . . . .
4,721
971
—
6,459
569
—
1,115
2,123
—
6,115
5,466
38
2,905
—
—
680
—
—
Total. . . . . . . . . . . . . . . . . $328,479 $249,861 $97,516 $150,582 $90,533 $267,041 $282,841 $1,466,853
Accrued interest excluded
from total . . . . . . . . . . . . . . . $
847 $
646 $
234 $
473 $
387 $
823 $
999 $
4,409
81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
For each of our mortgage and installment portfolio segment classes we generally monitor credit quality based
on the credit scores of the borrowers. These credit scores are generally updated semi-annually. The following tables
summarize credit scores by loan class for our mortgage and installment loan portfolio segments at December 31:
Mortgage(1)
Term Loans Amortized Cost Basis by Origination Year
2023
2022
2021
2020
(In thousands)
2019
Prior
December 31, 2023
1-4 family owner
occupied - jumbo
800 and above. . . . . . . $ 6,299 $ 30,789 $ 63,377 $ 17,672 $ 4,503 $ 8,813
14,836
750-799 . . . . . . . . . . . .
11,768
700-749 . . . . . . . . . . . .
5,881
650-699 . . . . . . . . . . . .
2,592
600-649 . . . . . . . . . . . .
—
550-599 . . . . . . . . . . . .
673
500-549 . . . . . . . . . . . .
—
Under 500 . . . . . . . . . .
—
Unknown . . . . . . . . . . .
193,587
66,597
24,648
2,486
527
—
—
—
117,454
51,991
13,804
7,815
—
544
—
—
24,288
4,738
2,142
3,198
—
—
—
—
61,986
25,170
12,949
505
1,908
923
—
—
42,726
14,965
11,274
1,638
—
—
—
—
Revolving
Loans
Amortized
Cost Basis
Total
$ 1,084
1,586
1,500
—
—
—
—
—
—
$132,537
456,463
176,729
70,698
18,234
2,435
2,140
—
—
Total. . . . . . . . . . . . . $76,902 $222,397 $351,222 $121,113 $38,869 $44,563
$ 4,170
$859,236
Accrued interest
excluded from total. . . $
329 $
669 $
785 $
299 $
107 $
156
$
30
$ 2,375
Current period gross
charge-offs. . . . . . . . . . $ — $
— $
— $
— $ — $ — $ — $
—
1-4 family owner
occupied - non-jumbo
800 and above. . . . . . . $ 2,280 $ 10,083 $ 7,780 $ 5,425 $ 2,802 $ 9,130
19,852
750-799 . . . . . . . . . . . .
20,042
700-749 . . . . . . . . . . . .
12,369
650-699 . . . . . . . . . . . .
6,415
600-649 . . . . . . . . . . . .
5,390
550-599 . . . . . . . . . . . .
4,077
500-549 . . . . . . . . . . . .
1,750
Under 500 . . . . . . . . . .
—
Unknown . . . . . . . . . . .
12,306
8,136
2,524
833
1,705
998
272
—
21,664
11,661
4,606
1,694
71
1,335
462
—
13,233
11,696
9,576
136
188
—
—
—
32,729
18,133
5,717
1,334
624
—
311
—
5,954
3,280
2,393
1,096
557
413
518
—
$ 3,029
8,462
4,482
1,500
84
65
—
—
—
$ 40,529
114,200
77,430
38,685
11,592
8,600
6,823
3,313
—
Total. . . . . . . . . . . . . $37,109 $ 68,931 $ 49,273 $ 32,199 $17,013 $79,025
$17,622
$301,172
Accrued interest
excluded from total. . . $
153 $
235 $
119 $
78 $
56 $
331
$
139
$
1,111
Current period gross
charge-offs. . . . . . . . . . $ — $
— $
— $
— $ — $
29
$ — $
29
82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Mortgage(1)
Term Loans Amortized Cost Basis by Origination Year
2023
2022
2021
2020
(In thousands)
2019
Prior
Revolving
Loans
Amortized
Cost Basis
Total
1-4 family non-owner
occupied
800 and above. . . . . . . $ 2,320
10,937
750-799 . . . . . . . . . . . .
3,904
700-749 . . . . . . . . . . . .
216
650-699 . . . . . . . . . . . .
—
600-649 . . . . . . . . . . . .
—
550-599 . . . . . . . . . . . .
—
500-549 . . . . . . . . . . . .
—
Under 500 . . . . . . . . . .
—
Unknown . . . . . . . . . . .
$ 6,026
16,635
7,013
1,879
388
61
—
—
—
$12,338
28,051
8,825
1,844
1,445
52
—
—
—
$ 3,474
11,545
4,145
2,543
—
—
—
—
—
$ 3,048 $ 6,030
13,400
6,719
3,521
1,226
873
142
137
—
6,709
667
197
75
—
—
—
—
$ 1,199
3,498
2,095
277
362
—
—
—
—
$ 34,435
90,775
33,368
10,477
3,496
986
142
137
—
Total. . . . . . . . . . . . . $17,377
$32,002
$52,555
$21,707
$10,696 $32,048
$ 7,431
$173,816
Accrued interest
excluded from total. . . $
77
$
125
$
149
$
60
$
35 $
146
$
62
$
654
Current period gross
charge-offs. . . . . . . . . . $ — $ — $ — $ — $ — $ — $ — $
—
1-4 family - 2nd lien
$
800 and above. . . . . . . $
750-799 . . . . . . . . . . . .
700-749 . . . . . . . . . . . .
650-699 . . . . . . . . . . . .
600-649 . . . . . . . . . . . .
550-599 . . . . . . . . . . . .
500-549 . . . . . . . . . . . .
Under 500 . . . . . . . . . .
Unknown . . . . . . . . . . .
537
2,260
1,895
425
51
—
—
—
—
$
156
2,879
1,243
285
107
80
—
19
—
$
703
2,359
1,464
182
97
203
12
—
—
$
389
2,341
324
519
67
—
—
—
—
159 $ 1,153
3,084
898
2,348
224
1,869
302
563
37
238
157
487
—
61
77
—
—
$ 9,817
38,277
25,849
8,945
1,886
638
331
35
—
$ 12,914
52,098
33,347
12,527
2,808
1,316
830
192
—
Total. . . . . . . . . . . . . $ 5,168
$ 4,769
$ 5,020
$ 3,640
$ 1,854 $ 9,803
$85,778
$116,032
Accrued interest
excluded from total. . . $
19
$
14
$
10
$
7
$
6 $
41
$
707
$
804
Current period gross
charge-offs. . . . . . . . . . $ — $ — $ — $ — $ — $
5
$ — $
5
83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Mortgage(1)
Term Loans Amortized Cost Basis by Origination Year
2023
2022
2021
2020
(In thousands)
2019
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Resort lending
800 and above. . . . . . . $
750-799 . . . . . . . . . . . .
700-749 . . . . . . . . . . . .
650-699 . . . . . . . . . . . .
600-649 . . . . . . . . . . . .
550-599 . . . . . . . . . . . .
500-549 . . . . . . . . . . . .
Under 500 . . . . . . . . . .
Unknown . . . . . . . . . . .
Total. . . . . . . . . . . . . $
Accrued interest
— $
41
—
—
—
—
—
—
—
41 $
— $
99 $
— $ — $ 5,643 $
817
108
—
—
—
—
—
—
910
871
—
—
—
—
—
—
858
111
316
49
—
—
—
—
179
12,649
— 5,439
— 6,219
844
—
267
—
59
—
137
—
—
—
925 $ 1,880 $ 1,334 $
179 $ 31,257 $
— $
—
—
—
—
—
—
—
—
— $
5,742
15,454
6,529
6,535
893
267
59
137
—
35,616
excluded from total. . . $
— $
4 $
3 $
4 $ — $
142 $
— $
153
Current period gross
charge-offs. . . . . . . . . . $
— $
— $
— $
— $ — $
120 $
— $
120
Total Mortgage
800 and above. . . . . . . $ 11,436 $ 47,054 $ 84,297 $ 26,960 $10,512 $ 30,769 $ 15,129 $ 226,157
728,990
750-799 . . . . . . . . . . . .
327,403
700-749 . . . . . . . . . . . .
138,922
650-699 . . . . . . . . . . . .
37,023
600-649 . . . . . . . . . . . .
13,604
550-599 . . . . . . . . . . . .
9,994
500-549 . . . . . . . . . . . .
3,779
Under 500 . . . . . . . . . .
—
Unknown . . . . . . . . . . .
246,571
89,418
31,280
5,722
853
1,347
462
—
170,514
78,488
21,685
9,644
765
544
330
—
38,028
8,909
5,034
4,406
714
413
595
—
89,036
37,886
18,851
1,454
3,613
1,921
272
—
51,823
33,926
10,722
2,332
703
331
35
—
63,821
46,316
29,859
11,640
6,768
5,438
2,085
—
69,197
32,460
21,491
1,825
188
—
—
—
Total. . . . . . . . . . . . . $136,597 $329,024 $459,950 $179,993 $68,611 $196,696 $115,001 $1,485,872
Accrued interest
excluded from total. . . $
578 $
1,047 $ 1,066 $
448 $
204 $
816 $
938 $
5,097
Current period gross
charge-offs. . . . . . . . . . $
— $
— $
— $
— $ — $
154 $
— $
154
84
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Mortgage(1)
Term Loans Amortized Cost Basis by Origination Year
2022
2021
2020
2019
(In thousands)
2018
Prior
Revolving
Loans
Amortized
Cost Basis
Total
December 31, 2022
1-4 family owner
occupied - jumbo
800 and above. . . . . . . $ 23,764 $ 54,637 $ 16,848 $ 9,211 $ 2,988 $ 6,946
16,140
750-799 . . . . . . . . . . . .
8,852
700-749 . . . . . . . . . . . .
4,020
650-699 . . . . . . . . . . . .
— 2,150
600-649 . . . . . . . . . . . .
—
550-599 . . . . . . . . . . . .
689
500-549 . . . . . . . . . . . .
—
Under 500 . . . . . . . . . .
—
Unknown . . . . . . . . . . .
189,653
91,189
20,743
1,275
1,516
—
—
—
97,269
34,158
10,905
1,712
549
—
—
—
71,555
28,701
7,216
4,534
—
561
—
—
16,091
12,666
2,554
464
—
—
—
—
1,828
2,775
4,250
469
—
—
—
$
639
683
1,536
827
—
—
—
—
—
$115,033
393,219
179,877
50,515
10,135
2,534
1,250
—
—
Total. . . . . . . . . . . . . $168,357 $359,013 $129,415 $40,986 $12,310 $38,797
$ 3,685
$752,563
Accrued interest
excluded from total. . . $
506 $
773 $
315 $
108 $
44 $
127
$
19
$ 1,892
1-4 family owner
occupied - non-jumbo
800 and above. . . . . . . $
750-799 . . . . . . . . . . . .
700-749 . . . . . . . . . . . .
650-699 . . . . . . . . . . . .
600-649 . . . . . . . . . . . .
550-599 . . . . . . . . . . ..
500-549 . . . . . . . . . . . .
Under 500 . . . . . . . . . .
Unknown . . . . . . . . . . .
8,894 $ 10,498 $ 5,558 $ 3,220 $ 2,074 $ 6,074
18,009
22,506
10,893
7,044
5,481
4,142
1,115
—
26,239
13,526
5,124
1,226
—
76
207
—
13,956
7,626
2,679
1,836
56
850
764
—
6,018
3,938
3,270
423
1,472
341
475
—
4,501
3,263
1,992
1,035
938
570
285
—
33,833
17,629
7,983
1,539
—
—
—
—
$ 1,680
9,936
3,509
983
99
132
115
—
—
$ 37,998
112,492
71,997
32,924
13,202
8,079
6,094
2,846
—
Total. . . . . . . . . . . . . $ 69,878 $ 56,896 $ 33,325 $19,157 $14,658 $75,264
$16,454
$285,632
Accrued interest
excluded from total. . . $
283 $
123 $
78 $
58 $
58 $
242
$
111
$
953
85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Mortgage(1)
Term Loans Amortized Cost Basis by Origination Year
2022
2021
2020
2019
(In thousands)
2018
Prior
Revolving
Loans
Amortized
Cost Basis
Total
1-4 family non-owner
occupied
800 and above. . . . . . .
750-799 . . . . . . . . . . . .
700-749 . . . . . . . . . . . .
650-699 . . . . . . . . . . . .
600-649 . . . . . . . . . . . .
550-599 . . . . . . . . . . . .
500-549 . . . . . . . . . . . .
Under 500 . . . . . . . . . .
Unknown . . . . . . . . . . .
$ 4,329
22,171
8,739
1,476
954
—
—
—
—
$ 9,308
36,363
12,423
2,489
139
—
—
—
—
$ 5,178
12,242
5,507
3,798
—
—
—
—
—
$ 4,147
6,103
1,335
190
107
121
—
—
—
$ 752
2,549
1,198
292
491
54
—
—
—
$ 5,842
12,257
6,825
4,350
1,475
404
402
197
—
$ 1,683
4,132
1,930
550
203
335
60
—
—
$ 31,239
95,817
37,957
13,145
3,369
914
462
197
—
Total. . . . . . . . . . . . .
$37,669
$60,722
$26,725
$12,003
$5,336
$31,752
$ 8,893
$183,100
Accrued interest
excluded from total. . .
$
106
$
161
$
69
$
36
$
21
$
108
$
57
$
558
1-4 family - 2nd lien
$
800 and above. . . . . . .
750-799 . . . . . . . . . . . .
700-749 . . . . . . . . . . . .
650-699 . . . . . . . . . . . .
600-649 . . . . . . . . . . . .
550-599 . . . . . . . . . . . .
500-549 . . . . . . . . . . . .
Under 500 . . . . . . . . . .
Unknown . . . . . . . . . . .
$
238
2,109
1,495
192
20
130
—
—
—
$
282
2,749
1,820
292
99
—
—
—
—
$
454
2,334
931
90
258
—
—
—
—
267
665
759
237
192
—
18
129
—
$ 200
333
459
275
23
132
—
3
—
$
503
3,597
2,649
1,496
974
395
418
55
—
$ 8,000
38,346
20,981
8,188
2,040
228
122
100
—
$ 9,944
50,133
29,094
10,770
3,606
885
558
287
—
Total. . . . . . . . . . . . .
$ 4,184
$ 5,242
$ 4,067
$ 2,267
$1,425
$10,087
$78,005
$105,277
Accrued interest
excluded from total. . .
$
11
$
11
$
8
$
7
$
4
$
36
$
511
$
588
Resort lending
800 and above. . . . . . .
750-799 . . . . . . . . . . . .
700-749 . . . . . . . . . . . .
650-699 . . . . . . . . . . . .
600-649 . . . . . . . . . . . .
550-599 . . . . . . . . . . . .
500-549 . . . . . . . . . . . .
Under 500 . . . . . . . . . .
Unknown . . . . . . . . . . .
$ — $
1,045
85
107
—
—
—
—
—
429
1,272
651
—
—
—
—
—
—
$ — $ — $ 268
616
—
—
—
—
—
—
—
1,211
114
53
—
—
—
—
—
183
—
—
—
—
—
—
—
$ 7,031
15,815
6,331
5,413
895
68
140
110
—
$ — $ 7,728
20,142
7,181
5,573
895
68
140
110
—
—
—
—
—
—
—
—
—
Total. . . . . . . . . . . . .
1,237
$ 2,352
$ 1,378
$
183
$ 884
$35,803
$ — $ 41,837
Accrued interest
excluded from total. . .
$
4
$
4
$
3
$ — $
3
$
111
$ — $
125
86
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Mortgage(1)
Term Loans Amortized Cost Basis by Origination Year
2022
2021
2020
2019
(In thousands)
2018
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total Mortgage
800 and above. . . . . . . $ 37,225 $ 75,154 $ 28,038 $16,845 $ 6,282 $ 26,396 $ 12,002 $ 201,942
671,803
750-799 . . . . . . . . . . . .
326,106
700-749 . . . . . . . . . . . .
112,927
650-699 . . . . . . . . . . . .
31,207
600-649 . . . . . . . . . . . .
12,480
550-599 . . . . . . . . . . . .
8,504
500-549 . . . . . . . . . . . .
3,440
Under 500 . . . . . . . . . .
—
Unknown . . . . . . . . . . .
156,427
62,106
20,663
4,225
679
—
—
—
101,298
42,879
13,836
6,628
56
1,411
764
—
256,276
119,609
28,648
2,739
1,516
76
207
—
65,818
47,163
26,172
12,538
6,348
5,791
1,477
—
53,097
27,956
10,548
2,342
695
297
100
—
29,060
18,698
6,251
1,186
1,593
359
604
—
9,827
7,695
6,809
1,549
1,593
570
288
—
Total. . . . . . . . . . . . . $281,325 $484,225 $194,910 $74,596 $34,613 $191,703 $107,037 $1,368,409
Accrued interest
excluded from total. . . $
910 $
1,072 $
473 $
209 $
130 $
624 $
698 $
4,116
(1)
Credit scores have been updated within the last twelve months.
87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
December 31, 2023
Boat lending
800 and above . . . . . . . .
750-799 . . . . . . . . . . . . .
700-749 . . . . . . . . . . . . .
650-699 . . . . . . . . . . . . .
600-649 . . . . . . . . . . . . .
550-599 . . . . . . . . . . . . .
500-549 . . . . . . . . . . . . .
Under 500 . . . . . . . . . . .
Unknown . . . . . . . . . . . .
2023
$ 6,110
34,174
15,593
3,652
281
85
—
—
—
Installment(1)
Term Loans Amortized Cost Basis by Origination Year
2020
(In thousands)
2021
2019
Prior
2022
$ 8,150
35,921
15,042
3,029
432
344
152
—
—
$ 8,250
29,665
11,859
4,277
808
229
207
—
—
$ 3,612
16,329
4,481
1,545
268
139
97
—
—
$ 4,061
13,173
4,757
1,237
171
108
—
—
—
$ 7,665
21,432
7,279
2,842
620
335
198
39
—
Total
$ 37,848
150,694
59,011
16,582
2,580
1,240
654
39
—
Total . . . . . . . . . . . . . .
$59,895
$63,070
$55,295
$26,471
$23,507
$40,410
$268,648
Accrued interest excluded
from total . . . . . . . . . . . .
Current period gross
$
216
$
154
$
132
$
63
$
58
charge-offs . . . . . . . . . . .
$ — $
53
$ — $ — $
15
$
$
91
53
$
$
714
121
Recreational vehicle
lending
800 and above . . . . . . . .
750-799 . . . . . . . . . . . . .
700-749 . . . . . . . . . . . . .
650-699 . . . . . . . . . . . . .
600-649 . . . . . . . . . . . . .
550-599 . . . . . . . . . . . . .
500-549 . . . . . . . . . . . . .
Under 500 . . . . . . . . . . .
Unknown . . . . . . . . . . . .
$ 3,168
15,677
6,481
2,524
713
90
—
—
—
$10,759
41,037
18,630
5,108
724
304
880
108
—
$11,568
39,113
20,161
6,073
1,573
973
326
106
—
$ 3,484
13,025
5,243
1,706
394
71
153
34
—
$ 3,838
8,415
3,689
936
308
249
136
70
—
$ 5,482
11,934
4,460
1,157
429
383
154
6
—
$ 38,299
129,201
58,664
17,504
4,141
2,070
1,649
324
—
Total . . . . . . . . . . . . . .
$28,653
$77,550
$79,893
$24,110
$17,641
$24,005
$251,852
Accrued interest excluded
from total . . . . . . . . . . . .
Current period gross
charge-offs . . . . . . . . . . .
$
$
112
28
$
$
201
122
$
$
189
192
$
$
56
32
$
$
44
81
$
$
53
11
$
$
655
466
88
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
2023
Installment(1)
Term Loans Amortized Cost Basis by Origination Year
2020
(In thousands)
2021
2019
Prior
2022
Other
800 and above . . . . . . . .
750-799 . . . . . . . . . . . . .
700-749 . . . . . . . . . . . . .
650-699 . . . . . . . . . . . . .
600-649 . . . . . . . . . . . . .
550-599 . . . . . . . . . . . . .
500-549 . . . . . . . . . . . . .
Under 500 . . . . . . . . . . .
Unknown . . . . . . . . . . . .
$ 1,599
11,782
16,717
12,483
515
49
98
—
649
$ 1,673
11,017
6,564
2,997
605
329
260
97
—
$ 1,633
6,600
5,013
1,494
395
294
246
65
—
$
897
3,557
2,268
627
138
35
43
14
—
$
582
1,622
1,047
266
107
53
31
57
—
$
756
4,077
3,361
1,390
410
176
72
38
—
Total
$ 7,140
38,655
34,970
19,257
2,170
936
750
271
649
Total . . . . . . . . . . . . . .
$ 43,892
$ 23,542
$ 15,740
$ 7,579
$ 3,765
$10,280
$104,798
Accrued interest excluded
from total . . . . . . . . . . . .
Current period gross
charge-offs . . . . . . . . . . .
Total installment
$
$
101
1,677
$
$
62
104
$
$
34
44
$
$
17
17
$
$
10
12
$
$
67
$
291
147
$ 2,001
800 and above . . . . . . . .
750-799 . . . . . . . . . . . . .
700-749 . . . . . . . . . . . . .
650-699 . . . . . . . . . . . . .
600-649 . . . . . . . . . . . . .
550-599 . . . . . . . . . . . . .
500-549 . . . . . . . . . . . . .
Under 500 . . . . . . . . . . .
Unknown . . . . . . . . . . . .
$ 10,877
61,633
38,791
18,659
1,509
224
98
—
649
$ 20,582
87,975
40,236
11,134
1,761
977
1,292
205
—
$ 21,451
75,378
37,033
11,844
2,776
1,496
779
171
—
$ 7,993
32,911
11,992
3,878
800
245
293
48
—
$ 8,481
23,210
9,493
2,439
586
410
167
127
—
$13,903
37,443
15,100
5,389
1,459
894
424
83
—
$ 83,287
318,550
152,645
53,343
8,891
4,246
3,053
634
649
Total . . . . . . . . . . . . . .
$132,440
$164,162
$150,928
$58,160
$44,913
$74,695
$625,298
Accrued interest excluded
from total . . . . . . . . . . . .
Current period gross
charge-offs . . . . . . . . . . .
$
$
429
1,705
$
$
417
279
$
$
355
236
$
$
136
49
$
$
112
108
$
$
211
$ 1,660
211
$ 2,588
89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
December 31, 2022
Boat lending
800 and above . . . . . . . .
750-799 . . . . . . . . . . . . .
700-749 . . . . . . . . . . . . .
650-699 . . . . . . . . . . . . .
600-649 . . . . . . . . . . . . .
550-599 . . . . . . . . . . . . .
500-549 . . . . . . . . . . . . .
Under 500 . . . . . . . . . . .
Unknown . . . . . . . . . . . .
2022
$ 7,901
44,498
15,390
3,933
661
22
277
—
—
Installment(1)
Term Loans Amortized Cost Basis by Origination Year
2019
(In thousands)
2020
2018
Prior
2021
$ 8,763
37,531
13,704
4,135
1,043
195
57
—
—
$ 4,391
20,179
7,281
1,498
149
16
62
—
—
$ 5,102
16,506
5,848
1,290
286
53
43
—
—
$ 3,612
12,814
4,357
1,032
200
203
106
26
—
$ 5,955
14,504
6,132
2,213
670
274
30
23
—
Total
$ 35,724
146,032
52,712
14,101
3,009
763
575
49
—
Total . . . . . . . . . . . . . .
$72,682
$65,428
$33,576
$29,128
$22,350
$29,801
$252,965
Accrued interest excluded
from total . . . . . . . . . . . .
Recreational vehicle
lending
800 and above . . . . . . . .
750-799 . . . . . . . . . . . . .
700-749 . . . . . . . . . . . . .
650-699 . . . . . . . . . . . . .
600-649 . . . . . . . . . . . . .
550-599 . . . . . . . . . . . . .
500-549 . . . . . . . . . . . . .
Under 500 . . . . . . . . . . .
Unknown . . . . . . . . . . . .
$
171
$
148
$
84
$
78
$
52
$
68
$
601
$ 9,327
51,555
23,143
5,013
793
107
—
—
—
$10,752
49,949
24,945
6,516
1,608
381
293
85
—
$ 4,524
16,175
7,680
1,598
374
129
111
7
—
$ 4,834
11,920
4,459
1,361
446
202
61
22
—
$ 3,416
8,990
2,279
727
232
234
59
—
—
$ 4,319
7,818
2,939
904
268
87
15
16
—
$ 37,172
146,407
65,445
16,119
3,721
1,140
539
130
—
Total . . . . . . . . . . . . . .
$89,938
$94,529
$30,598
$23,305
$15,937
$16,366
$270,673
Accrued interest excluded
from total . . . . . . . . . . . .
$
219
$
227
$
72
Other
800 and above . . . . . . . .
750-799 . . . . . . . . . . . . .
700-749 . . . . . . . . . . . . .
650-699 . . . . . . . . . . . . .
600-649 . . . . . . . . . . . . .
550-599 . . . . . . . . . . . . .
500-549 . . . . . . . . . . . . .
Under 500 . . . . . . . . . . .
Unknown . . . . . . . . . . . .
$ 1,974
15,692
9,848
22,740
711
122
67
6
701
$ 1,647
9,973
7,517
2,851
634
63
217
52
—
$ 1,449
5,521
3,404
1,051
127
170
29
22
—
$
$
58
942
3,393
1,801
593
222
54
64
28
—
$
$
38
366
1,678
999
405
147
115
19
13
—
$
$
34
$
648
731
3,612
2,653
1,286
507
118
90
28
—
$ 7,109
39,869
26,222
28,926
2,348
642
486
149
701
Total . . . . . . . . . . . . . .
$51,861
$22,954
$11,773
$ 7,097
$ 3,742
$ 9,025
$106,452
Accrued interest excluded
from total . . . . . . . . . . . .
$
84
$
48
$
25
$
19
$
10
$
49
$
235
90
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
2022
Total installment
Installment(1)
Term Loans Amortized Cost Basis by Origination Year
2019
(In thousands)
2020
2018
Prior
2021
800 and above . . . . . . . .
750-799 . . . . . . . . . . . . .
700-749 . . . . . . . . . . . . .
650-699 . . . . . . . . . . . . .
600-649 . . . . . . . . . . . . .
550-599 . . . . . . . . . . . . .
500-549 . . . . . . . . . . . . .
Under 500 . . . . . . . . . . .
Unknown . . . . . . . . . . . .
$ 19,202
111,745
48,381
31,686
2,165
251
344
6
701
$ 21,162
97,453
46,166
13,502
3,285
639
567
137
—
$10,364
41,875
18,365
4,147
650
315
202
29
—
$10,878
31,819
12,108
3,244
954
309
168
50
—
$ 7,394
23,482
7,635
2,164
579
552
184
39
—
$11,005
25,934
11,724
4,403
1,445
479
135
67
—
Total
$ 80,005
332,308
144,379
59,146
9,078
2,545
1,600
328
701
Total . . . . . . . . . . . . . .
$214,481
$182,911
$75,947
$59,530
$42,029
$55,192
$630,090
Accrued interest excluded
from total . . . . . . . . . . . .
$
474
$
423
$
181
$
155
$
100
$
151
$ 1,484
(1)
Credit scores have been updated within the last twelve months.
Mortgage loans serviced for others are not reported as assets on the Consolidated Statements of Financial
Condition. The principal balances of these loans at December 31 follow:
2023
2022
(In thousands)
Mortgage loans serviced for:
Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FHLB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,772,030
1,381,693
161,899
173,311
52,936
$1,840,221
1,375,514
169,421
72,809
35,347
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,541,869
$3,493,312
Custodial deposit accounts maintained in connection with mortgage loans serviced for others totaled
$28.6 million and $28.4 million, at December 31, 2023 and 2022, respectively.
If we do not remain well capitalized for regulatory purposes (see note #20), meet certain minimum capital levels
or certain profitability requirements or if we incur a rapid decline in net worth, we could lose our ability to sell and/or
service loans to these investors. This could impact our ability to generate net gains on mortgage loans and generate
servicing income. A forced liquidation of our servicing portfolio could also impact the value that could be recovered
on this asset. Fannie Mae has the most stringent eligibility requirements covering capital levels, profitability and
decline in net worth. Fannie Mae requires seller/servicers to be well capitalized for regulatory purposes. For the
profitability requirement, we cannot record four or more consecutive quarterly losses and experience a 30% decline
in net worth over the same period. Our net worth cannot decline by more than 25% in one quarter or more than 40%
over two consecutive quarters.
91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
An analysis of capitalized mortgage loan servicing rights for the years ended December 31 follows:
2023
2022
(In thousands)
2021
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Originated servicing rights capitalized. . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value due to price . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value due to pay downs. . . . . . . . . . . . . . . . . . . . . . . .
$
$
42,489
3,956
(280)
(3,922)
$
26,232
6,061
14,272
(4,076)
16,904
11,436
3,380
(5,488)
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
42,243
$
42,489
$
26,232
Loans sold and serviced that have had servicing rights capitalized. . . .
$3,541,869
$3,493,312
$3,323,521
Fair value of capitalized mortgage loan servicing rights was determined using an average coupon rate of 3.89%,
average servicing fee of 0.26%, average discount rate of 10.25% and an average Public Securities Association
(‘‘PSA’’) prepayment rate of 142 for December 31, 2023; and average coupon rate of 3.60%, average servicing fee
of 0.26%, average discount rate of 10.12% and an average PSA prepayment rate of 133 for December 31, 2022.
NOTE 5 – OTHER REAL ESTATE
A summary of other real estate activity for the years ended December 31 follows(1):
Balance at beginning of year, net of valuation allowance . . . . . . . . . . . . . . . . . . . . .
Loans transferred to other real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of other real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to valuation allowance charged to expense . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year, net of valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
2022
(In thousands)
2021
$ 443
783
(603)
(54)
$ 569
$ 235
719
(511)
—
$ 443
$ 738
253
(745)
(11)
$ 235
(1)
Table excludes other repossessed assets totaling zero and $0.01 million at December 31, 2023 and 2022, respectively.
We periodically review our real estate properties and establish valuation allowances on these properties if values
have declined since the date of acquisition. An analysis of our valuation allowance for other real estate follows:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions charged to expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct write-downs upon sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
2022
(In thousands)
2021
$ —
54
(54)
$ —
$ 31
—
(31)
$ —
$ 90
11
(70)
$ 31
At December 31, 2023 and 2022, the balance of other real estate includes $0.6 million and $0.4 million,
respectively of foreclosed residential real estate properties. Retail mortgage loans secured by residential real estate
properties for which formal foreclosure proceedings are in process according to local requirements totaled
$0.6 million and $0.8 million at December 31, 2023 and 2022, respectively.
Other real estate and repossessed assets totaling $0.6 million and $0.5 million at December 31, 2023 and 2022,
respectively, are presented net of the valuation allowance on the Consolidated Statements of Financial Condition.
92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
NOTE 6 – PROPERTY AND EQUIPMENT
A summary of property and equipment at December 31 follows:
2023
2022
(In thousands)
Land and land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 16,421
61,190
78,648
$ 17,435
60,708
75,770
Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
156,259
(120,736)
153,913
(118,020)
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 35,523
$ 35,893
Depreciation expense was $5.2 million, $5.3 million and $5.4 million in 2023, 2022 and 2021, respectively.
NOTE 7 – GOODWILL AND OTHER INTANGIBLES
Intangible assets, net of amortization, at December 31 follows:
2023
2022
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
(In thousands)
Amortized intangible assets - core deposits. . . . . . . . . . . . . . . . . .
$11,916
$9,912
$11,916
$9,365
Unamortized intangible assets - goodwill . . . . . . . . . . . . . . . . . . .
$28,300
$28,300
At December 31, 2023, the Bank (our reporting unit) had positive equity and elected to perform a qualitative
assessment to determine if it was more likely than not that the fair value of the Bank exceeds its carrying value,
including goodwill. The qualitative assessment indicated that it was more likely than not that the fair value of the
Bank exceeded its carrying value, resulting in no impairment.
Intangible amortization expense was $0.5 million, $0.8 million and $1.0 million during the years ended 2023,
2022 and 2021, respectively.
A summary of estimated core deposit intangible amortization at December 31, 2023, follows:
2024. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2028. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ 516
487
460
434
107
$2,004
NOTE 8 – DEPOSITS
A summary of interest expense on deposits for the years ended December 31 follows:
Savings and interest-bearing checking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reciprocal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brokered time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$24,601
23,429
13,766
13,279
$ 6,078
4,421
1,902
1,750
$2,101
764
1,507
93
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$75,075
$14,151
$4,465
2023
2022
(In thousands)
2021
93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Aggregate time deposits in denominations of $0.25 million or more amounted to $176.6 million and
$82.9 million at December 31, 2023 and 2022, respectively.
A summary of the maturity of time deposits at December 31, 2023, follows(1):
2024. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2028. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2029 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$888,776
15,105
7,779
3,399
2,984
28
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$918,071
(In thousands)
(1)
Includes time deposits, brokered time deposits and reciprocal time deposits
Reciprocal deposits represent demand, money market and time deposits from our customers that have been
placed through IntraFi Network. This service allows our customers to access multi-million dollar FDIC deposit
insurance on deposit balances greater than the standard FDIC insurance maximum.
A summary of reciprocal deposits at December 31 follows:
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$722,407
607
109,006
$554,585
1,196
46,794
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$832,020
$602,575
2023
2022
(In thousands)
NOTE 9 – OTHER BORROWINGS
A summary of other borrowings at December 31 follows:
Advances from the FHLB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FRB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
2022
(In thousands)
$50,000
—
26
$50,026
$25,000
61,000
6
$86,006
Borrowings with the FRB at December 31, 2023 and 2022 were zero and $61.0 million, respectively. Average
borrowings with the FRB during the years ended December 31, 2023, 2022 and 2021 totaled $4.5 million,
$26.4 million and zero, respectively. We had unused borrowing capacity with the FRB (subject to the FRB’s credit
requirements and policies) of $515.4 million at December 31, 2023. Collateral for FRB borrowings are certain
securities AFS, securities HTM, commercial loans and installment loans. Interest expense on borrowings with the
FRB amounted to $0.2 million, $0.8 million and zero for the years ended December 31, 2023, 2022 and 2021,
respectively.
Advances from the FHLB are secured by unencumbered qualifying mortgage and home equity loans with a
market value equal to at least 125% to 165%, respectively, of outstanding advances as well as certain securities AFS,
securities HTM and by the FHLB stock that we own. Unused borrowing capacity with the FHLB (subject to the
FHLB’s credit requirements and policies) was $1.01 billion at December 31, 2023. Interest expense on advances
amounted to $2.4 million, $0.2 million and $0.2 million for the years ended December 31, 2023, 2022 and 2021,
respectively.
94
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
As a member of the FHLB, we must own FHLB stock equal to the greater of 0.10% of total assets or 4.5% of
our outstanding advances and loans sold to the FHLB. At December 31, 2023, we were in compliance with the FHLB
stock ownership requirements.
The maturity dates, weighted average interest rates and contractually required repayments of FHLB advances
at December 31 follow:
Fixed Rate Advances
2023
2022
Amount
Rate
Amount
(Dollars in thousands)
Rate
2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total fixed rate advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
50,000
$50,000
—% $25,000
—
5.16
5.16% $25,000
4.28%
—
4.28%
Assets, consisting of securities AFS, securities HTM, FHLB stock and loans, pledged to secure other borrowings
and unused borrowing capacity totaled $2.46 billion at December 31, 2023.
NOTE 10 – SUBORDINATED DEBT AND DEBENTURES
Subordinated Debt
In May 2020, we issued $40.0 million of fixed to floating subordinated notes with a ten year maturity (May 31,
2030 maturity date) and a five year call option. The initial coupon rate is 5.95% fixed for five years and then floats
at the Secured Overnight Financing Rate (‘‘SOFR’’) plus 5.825%. These notes are presented in the Consolidated
Statement of Financial Condition under the caption ‘‘Subordinated debt’’ and the balances of $39.51 million and
$39.43 million at December 31, 2023 and 2022, respectively are net of remaining unamortized deferred issuance
costs of approximately $0.49 million and $0.57 million, respectively that are being amortized through the maturity
date into interest expense on other borrowings and subordinated debt and debentures in our Consolidated Statement
of Operations. We may redeem the notes, in whole or in part, on or after May 31, 2025, and redeem the notes at any
time in whole upon certain other events. Any redemption of the notes will be subject to prior regulatory approval to
the extent required.
Subordinated Debentures
We have formed various special purpose entities (the ‘‘trusts’’) for the purpose of issuing trust preferred
securities in either public or pooled offerings or in private placements. Independent Bank Corporation owns all of the
common stock of each trust and has issued subordinated debentures to each trust in exchange for all of the proceeds
from the issuance of the common stock and the trust preferred securities. Trust preferred securities totaling
$38.5 million and $38.4 million at December 31, 2023 and 2022, respectively, qualified as Tier 1 regulatory capital.
These trusts are not consolidated with Independent Bank Corporation and accordingly, we report the common
securities of the trusts held by us in accrued income and other assets and the subordinated debentures that we have
issued to the trusts in the liability section of our Consolidated Statements of Financial Condition.
As the result of a previous acquisition we acquired TCSB Statutory Trust I as summarized in the tables below
at a discount. The discount at acquisition totaled $1.4 million and is being amortized through its maturity date and
is included in interest expense – other borrowings and subordinated debt and debentures in the Consolidated
Statements of Operations.
95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Summary information regarding subordinated debentures as of December 31 follows:
Entity Name
Issue Date
Subordinated
Debentures
2023
Trust
Preferred
Securities
Issued
IBC Capital Finance III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . May 2007
September 2007
IBC Capital Finance IV . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Midwest Guaranty Trust I . . . . . . . . . . . . . . . . . . . . . . . . . . . November 2002
TCSB Statutory Trust I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 2005
Discount on TCSB Statutory Trust I . . . . . . . . . . . . . . . . . .
(In thousands)
$12,372
15,465
7,732
5,155
(996)
$12,000
15,000
7,500
5,000
(996)
$39,728
$38,504
Entity Name
Issue Date
Subordinated
Debentures
2022
Trust
Preferred
Securities
Issued
IBC Capital Finance III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . May 2007
September 2007
IBC Capital Finance IV . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Midwest Guaranty Trust I . . . . . . . . . . . . . . . . . . . . . . . . . . . November 2002
TCSB Statutory Trust I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 2005
Discount on TCSB Statutory Trust I . . . . . . . . . . . . . . . . . .
(In thousands)
$12,372
15,465
7,732
5,155
(1,064)
$12,000
15,000
7,500
5,000
(1,064)
$39,660
$38,436
Common
Stock
Issued
$ 372
465
232
155
—
$1,224
Common
Stock
Issued
$ 372
465
232
155
—
$1,224
Other key terms for the subordinated debentures and trust preferred securities that were outstanding at
December 31, 2023 and 2022 follow:
Entity Name
Maturity
Date
Interest Rate at
12/31/2022
Interest Rate at
12/31/2023
First Permitted
Redemption Date
IBC Capital Finance III . . . July 30, 2037
IBC Capital Finance IV . . . September 15, 2037 3 month LIBOR plus 2.85% 3 month SOFR plus 3.11% September 15, 2012
Midwest Guaranty Trust I . . November 7, 2032
TCSB Statutory Trust I. . . . March 17, 2035
3 month LIBOR plus 3.45% 3 month SOFR plus 3.71% November 7, 2007
3 month LIBOR plus 2.20% 3 month SOFR plus 2.46% March 17, 2010
3 month LIBOR plus 1.60% 3 month SOFR plus 1.86% July 30, 2012
The subordinated debentures and trust preferred securities are cumulative and have a feature that permits us to
defer distributions (payment of interest) from time to time for a period not to exceed 20 consecutive quarters. Interest
is payable quarterly on each of the subordinated debentures and trust preferred securities and no distributions were
deferred at December 31, 2023 and 2022.
We have the right to redeem the subordinated debentures and trust preferred securities (at par) in whole or in
part from time to time on or after the first permitted redemption date specified above or upon the occurrence of
specific events defined within the trust indenture agreements.
Distributions (payment of interest) on the trust preferred securities are included in interest expense – other
borrowings and subordinated debt and debentures in the Consolidated Statements of Operations.
NOTE 11 – COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, we enter into financial instruments with off-balance sheet risk to meet the
financing needs of customers or to reduce exposure to fluctuations in interest rates. These financial instruments may
include commitments to extend credit and standby letters of credit. Financial instruments involve varying degrees of
96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
credit and interest-rate risk in excess of amounts reflected in the Consolidated Statements of Financial Condition.
Exposure to credit risk in the event of non-performance by the counterparties to the financial instruments for loan
commitments to extend credit and standby letters of credit is represented by the contractual amounts of those
instruments.
A summary of financial instruments with off-balance sheet risk at December 31 follows:
2023
2022
(In thousands)
Financial instruments whose risk is represented by contract amounts
Commitments to extend credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$881,697
11,651
$811,957
8,371
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses
and generally require payment of a fee. Since commitments may expire without being drawn upon, the commitment
amounts do not represent future cash requirements. Commitments are issued subject to similar underwriting
standards, including collateral requirements, as are generally involved in the extension of credit facilities.
Standby letters of credit are written conditional commitments issued to guarantee the performance of a customer
to a third party. The credit risk involved in such transactions is essentially the same as that involved in extending loan
facilities and, accordingly, standby letters of credit are issued subject to similar underwriting standards, including
collateral requirements, as are generally involved in the extension of credit facilities. The majority of the standby
letters of credit are on-demand with no stated maturity date and have variable rates that range from 1.00% to 14.50%.
Economic
Pressures from various global and national macroeconomic conditions,
including heightened inflation,
uncertainty regarding future interest rates, foreign currency exchange rate fluctuations, recent adverse weather
conditions, escalating tensions in the Middle East, the continuation of the Russia-Ukraine war, and potential
governmental responses to these events, continue to create significant economic uncertainty.
The extent to which these pressures may impact our business, results of operations, asset valuations, financial
condition, and customers will depend on future developments, which continue to be highly uncertain and difficult to
predict. Material adverse impacts may include all or a combination of valuation impairments on our intangible assets,
securities available for sale, securities held to maturity, loans, capitalized mortgage loan servicing rights or deferred
tax assets.
We continue to closely monitor and analyze the higher risk segments within our portfolio, and senior
management is cautiously optimistic that we are positioned to continue managing the impact of the varied set of risks
and uncertainties currently impacting the global and U.S. economies. However, a high degree of uncertainty still
exists with respect to the impact of these fluid macroeconomic conditions on the future performance of our loan
portfolio and our financial results.
Litigation
We are involved in various litigation matters in the ordinary course of business. At the present time, we do not
believe any of these matters will have a significant impact on our consolidated financial position or results of
operations. The aggregate amount we have accrued for losses we consider probable as a result of these litigation
matters is immaterial. However, because of the inherent uncertainty of outcomes from any litigation matter, we
believe it is reasonably possible we may incur losses in addition to the amounts we have accrued. At this time, we
estimate the maximum amount of additional losses that are reasonably possible is insignificant. However, because of
a number of factors, including the fact that certain of these litigation matters are still in their early stages, this
maximum amount may change in the future.
The litigation matters described in the preceding paragraph primarily include claims that have been brought
against us for damages, but do not include litigation matters where we seek to collect amounts owed to us by third
parties (such as litigation initiated to collect delinquent loans). These excluded, collection-related matters may
97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
involve claims or counterclaims by the opposing party or parties, but we have excluded such matters from the
disclosure contained in the preceding paragraph in all cases where we believe the possibility of us paying damages
to any opposing party is remote.
Visa Stock
We own 12,566 shares of Visa Inc. Class B-1 common stock. At the present time, these shares can only be sold
to other Class B-1 shareholders. As a result, there has generally been limited transfer activity in private transactions
between buyers and sellers. Given the limited activity that we have become aware of and the continuing uncertainty
regarding the likelihood, ultimate timing and eventual exchange rate for Class B-1 shares into Class A shares, we
continue to carry these shares at zero, representing cost basis less impairment. However, given the current conversion
ratio of 1.5875 Class A shares for every 1 Class B-1 share and the closing price of Visa Class A shares on
February 23, 2024 of $283.60 per share, our 12,566 Class B-1 shares would have a current ‘‘value’’ of approximately
$5.7 million. Visa recently announced its intent to make an offer to exchange up to all of its outstanding shares of
Class B-1 common stock for Class B-2 common shares and Class C common shares. If conducted, this exchange offer
is expected to result in some degree of liquidity for holders of Class B-1 common shares.
NOTE 12 – SHAREHOLDERS’ EQUITY AND NET INCOME PER COMMON SHARE
Our Board of Directors authorized share repurchase plans to buy back up to 5% of our outstanding common
stock during 2023, 2022 and 2021. During 2023, 2022 and 2021 repurchases were made through open market and
negotiated transactions and totaled 298,601, 181,586 and 814,910 shares of common stock, respectively for an
aggregate purchase price of $5.2 million, $4.0 million and $17.3 million, respectively.
A reconciliation of basic and diluted net income per common share for the years ended December 31 follows:
2023
2022
(In thousands, except per share amounts)
2021
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$59,067
$63,351
$62,895
Weighted average shares outstanding(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock units for deferred compensation plan for non-employee directors . .
Effect of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance share units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,976
160
11
23
21,096
137
38
25
21,585
121
69
32
Weighted average shares outstanding for calculation of diluted
earnings per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,170
21,296
21,807
Net income per common share
Basic(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
2.82
2.79
$ 3.00
$ 2.91
$ 2.97
$ 2.88
(1)
Basic net income per common share includes weighted average common shares outstanding during the period and participating share
awards.
Weighted average stock options outstanding that were not considered in computing diluted net income per
common share because they were anti-dilutive were zero for each year ended 2023, 2022 and 2021, respectively.
98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
NOTE 13 – INCOME TAX
The composition of income tax expense for the years ended December 31 follows:
Current expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred expense (benefit). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
2022
(In thousands)
2021
$14,394
215
$14,609
$14,796
(359)
$14,437
$12,506
1,912
$14,418
A reconciliation of income tax expense to the amount computed by applying the statutory federal income tax
rate of 21% for 2023, 2022 and 2021 to the income before income tax for the years ended December 31 follows:
Statutory rate applied to income before income tax. . . . . . . . . . . . . . . . . . . . .
Tax-exempt income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Low income housing tax credit investments. . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee stock ownership plan dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank owned life insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible meals, entertainment and memberships. . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
2022
(In thousands)
2021
$15,472
(508)
(235)
(106)
(99)
(50)
77
58
$16,335
(1,475)
(134)
(97)
(140)
(144)
30
62
$16,236
(1,487)
(19)
(89)
(119)
(184)
32
48
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$14,609
$14,437
$14,418
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
deferred tax liabilities at December 31 follow:
2023
2022
(In thousands)
Deferred tax assets
Unrealized loss on securities AFS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,587 $18,274
11,011
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,843
Unrealized loss on securities HTM transferred from AFS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,909
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,880
Incentive compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,067
Reserve for unfunded lending commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,211
Lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
764
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
792
Securities premium amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
458
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
254
Loss reimbursement on sold loans reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
144
Other than temporary impairment charge on securities available for sale . . . . . . . . . . . . . . . .
128
Non accrual loan interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,478
4,095
1,387
1,174
1,156
1,074
824
814
551
259
146
121
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,666
42,735
Deferred tax liabilities
Capitalized mortgage loan servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred loan fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease right of use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase premiums, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,871
2,271
1,031
602
47
8,923
2,430
1,164
681
—
99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46
42
2023
2022
(In thousands)
Gross deferred tax liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,240
Deferred tax assets, net(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23,798 $29,495
12,868
(1)
Included in accrued income and other assets on the Consolidated Statements of Financial Position.
We assess whether a valuation allowance should be established against our deferred tax assets based on the
consideration of all available evidence using a ‘‘more likely than not’’ standard. The ultimate realization of this asset
is primarily based on generating future income. We concluded at both December 31, 2023 and 2022, that the
realization of substantially all of our deferred tax assets continues to be more likely than not.
Changes in unrecognized tax benefits for the years ended December 31 follow:
Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions based on tax positions related to the current year. . . . . . . . . . . . . . . . .
Reductions due to the statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
2022
(In thousands)
2021
$186
13
(11)
—
$188
$180
13
(7)
—
$186
$180
11
(11)
—
$180
If recognized, the entire amount of unrecognized tax benefits, net of $0.04 million of federal tax on state
benefits, would affect our effective tax rate. We do not expect the total amount of unrecognized tax benefits to
significantly increase or decrease in the next twelve months. No amounts were expensed for interest and penalties
for the years ended December 31, 2023, 2022 and 2021. No amounts were accrued for interest and penalties at
December 31, 2023, 2022 and 2021. At December 31, 2023, U.S. Federal tax years 2020 through the present remain
open to examination.
NOTE 14 – SHARE BASED COMPENSATION AND BENEFIT PLANS
We maintain share based payment plans that include a non-employee director stock purchase plan and a
long-term incentive plan that permits the issuance of share based compensation, including stock options and
non-vested share awards. The long-term incentive plan, which is shareholder approved, permits the grant of
additional share based awards for up to 0.5 million shares of common stock as of December 31, 2023. The
non-employee director stock purchase plan permits the issuance of additional share based payments for up to
0.1 million shares of common stock as of December 31, 2023. Share based awards and payments are measured at fair
value at the date of grant and are expensed over the requisite service period. Common shares issued upon exercise
of stock options come from currently authorized but unissued shares.
During 2023, 2022 and 2021 pursuant to our long-term incentive plan, we granted 0.08 million, 0.06 million and
0.09 million shares, respectively of restricted stock and 0.02 million during each year of performance stock units
(‘‘PSU’’), to certain officers. The shares of restricted stock and PSUs cliff vest after a period of three years. The
performance criteria of the PSUs granted in 2023 and 2022 is split evenly between a comparison of (i) our total
shareholder return and (ii) our return on average assets each over the three year period starting on the grant date to
these same criteria over that period to an index of our banking peers. The performance criteria of the PSUs granted
in 2021 is based on a comparison of our total shareholder return over the three year period starting on the grant date
to the same criteria over that period to an index of our banking peers.
Our directors may elect to receive all or a portion of their cash retainer fees in the form of common stock (either on
a current basis or on a deferred basis) pursuant to the non-employee director stock purchase plan referenced above. Shares
equal in value to that portion of each director’s fees that he or she has elected to receive in stock on a current basis are issued
100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
each quarter and vest immediately. Shares issued on a deferred basis are credited at the rate of 90% of the current fair value
of our common stock and vest immediately. We issued 0.02 million shares to directors pursuant to this plan during each
of the years ending 2023, 2022 and 2021 and expensed their value during those same periods.
Total compensation expense recognized for grants pursuant to our long-term incentive plan was $1.9 million,
$1.8 million and $1.6 million in 2023, 2022 and 2021, respectively. The corresponding tax benefit relating to this
expense was $0.4 million, $0.4 million, and $0.3 million during each year, respectively. Total expense recognized for
non-employee director share based payments was $0.4 million, $0.4 million, and $0.4 million for the years ending
2023, 2022 and 2021, respectively. The corresponding tax benefit relating to this expense was $0.08 million,
$0.08 million and $0.08 million in 2023, 2022 and 2021, respectively.
At December 31, 2023, the total expected compensation cost related to non-vested restricted stock and PSUs not yet
recognized was $2.4 million. The weighted-average period over which this amount will be recognized is 1.78 years.
A summary of outstanding stock option grants and related transactions follows:
Outstanding at January 1, 2023 . . . . . . . . . . . . . . . . . . . . . .
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregated
Intrinsic
Value
(In thousands)
Average
Exercise
Price
$ 8.32
6.92
Number of
Shares
40,307
—
(28,583)
—
—
Outstanding at December 31, 2023 . . . . . . . . . . . . . . . . . . .
11,724
$11.73
2.16
Vested and expected to vest at December 31, 2023 . . . . . .
Exercisable at December 31, 2023 . . . . . . . . . . . . . . . . . . . .
11,724
11,724
$11.73
$11.73
2.16
2.16
A summary of outstanding non-vested stock and related transactions follows:
Outstanding at January 1, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Shares
246,136
103,636
(61,902)
(18,637)
Outstanding at December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
269,233
Certain information regarding options exercised during the periods ending December 31 follows:
$168
$168
$168
Weighted-
Average
Grant Date
Fair Value
$22.82
22.84
22.31
23.02
$22.93
Intrinsic value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash proceeds received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit realized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
$352
$198
$ 74
2022
(In thousands)
$761
$131
$160
2021
$752
$117
$158
We maintain 401(k) and employee stock ownership plans covering substantially all of our full-time employees.
We matched 50% of employee contributions to the 401(k) plan up to a maximum of 8% of participating employees’
eligible wages for 2023, 2022 and 2021. Contributions to the employee stock ownership plan are determined annually
101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
and require approval of our Board of Directors. The maximum contribution is 6% of employees’ eligible wages.
Contributions to the employee stock ownership plan were 2% for each of 2023, 2022 and 2021. Amounts expensed
for these retirement plans were $3.1 million, $2.9 million and $3.3 million in 2023, 2022 and 2021, respectively.
Our employees participate in various performance-based compensation plans. Amounts expensed for all
incentive plans totaled $8.0 million, $12.7 million and $15.6 million in 2023, 2022 and 2021, respectively.
We also provide certain health care and life insurance programs to substantially all full-time employees.
Amounts expensed for these programs totaled $7.2 million, $6.2 million and $6.1 million in 2023, 2022 and 2021
respectively.
These insurance programs are also available to retired employees at their own expense.
NOTE 15 – OTHER NON-INTEREST INCOME
Other non-interest income for the years ended December 31 follows:
2023
2022
(In thousands)
2021
Investment and insurance commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ATM fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank owned life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,456
1,683
474
6,866
$ 2,898
1,216
360
6,263
$2,603
1,133
567
5,089
Total other non-interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,479
$10,737
$9,392
NOTE 16 – DERIVATIVE FINANCIAL INSTRUMENTS
We are required to record derivatives on our Consolidated Statements of Financial Condition as assets and
liabilities measured at their fair value. The accounting for increases and decreases in the value of derivatives depends
upon the use of derivatives and whether the derivatives qualify for hedge accounting.
Our derivative financial instruments according to the type of hedge in which they are designated at December 31
follow:
2023
Average
Maturity
(years)
(Dollars in thousands)
Notional
Amount
Fair
Value
Fair value hedge designation
Pay-fixed interest rate swap agreement - commercial . . . . . . . . . . . . . . . . . . . . . .
Pay-fixed interest rate swap agreements - securities available for sale . . . . . . . .
Pay-fixed interest rate swap agreements - installment . . . . . . . . . . . . . . . . . . . . . .
Pay-fixed interest rate swap agreements - mortgage . . . . . . . . . . . . . . . . . . . . . . .
Interest rate cap agreements - securities available for sale . . . . . . . . . . . . . . . . . .
$ 6,033
148,895
100,000
100,000
40,970
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$395,898
5.4
3.9
3.4
4.3
4.3
3.9
$
349
15,287
(1,228)
(2,131)
456
$12,733
Cash flow hedge designation
Interest rate floor agreements - commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$150,000
3.5
$ 4,221
102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
2023
Average
Maturity
(years)
(Dollars in thousands)
Notional
Amount
Fair
Value
No hedge designation
Rate-lock mortgage loan commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mandatory commitments to sell mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . .
Pay-fixed interest rate swap agreements - commercial . . . . . . . . . . . . . . . . . . . . .
Pay-variable interest rate swap agreements - commercial . . . . . . . . . . . . . . . . . . .
$ 18,081
30,442
379,012
379,012
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$806,547
0.1
0.1
5.9
5.9
5.5
$
173
(279)
7,169
(7,169)
$ (106)
2022
Average
Maturity
(years)
(Dollars in thousands)
Fair
Value
Notional
Amount
Fair value hedge designation
Pay-fixed interest rate swap agreement - commercial . . . . . . . . . . . . . . . . . . . . . . $
Pay-fixed interest rate swap agreements - securities available for sale . . . . . . . .
Pay-fixed interest rate swap agreements - installment . . . . . . . . . . . . . . . . . . . . . .
Interest rate cap agreements - securities available for sale . . . . . . . . . . . . . . . . . .
6,401
148,895
25,000
40,970
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $221,266
No hedge designation
Rate-lock mortgage loan commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,918
49,258
Mandatory commitments to sell mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . .
279,005
Pay-fixed interest rate swap agreements - commercial . . . . . . . . . . . . . . . . . . . . .
279,005
Pay-variable interest rate swap agreements - commercial . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $627,186
6.4
4.8
2.0
5.3
4.6
0.1
0.1
6.0
6.0
5.3
$
447
19,906
77
931
$ 21,361
$ (1,056)
315
17,063
(17,063)
$
(741)
We have established management objectives and strategies that include interest-rate risk parameters for
maximum fluctuations in net interest income and market value of portfolio equity. We monitor our interest rate risk
position via simulation modeling reports. The goal of our asset/liability management efforts is to maintain profitable
financial leverage within established risk parameters.
We have entered into pay-fixed interest rate swaps and caps to protect a portion of the fair value of a certain fixed
rate commercial loan and certain mortgage and installment loans (‘‘Fair Value Hedge – Portfolio Loans’’). As a result,
changes in the fair values of the pay-fixed interest rate swap and caps are expected to offset changes in the fair values
of the fixed rate portfolio loans due to fluctuations in interest rates. We record the fair values of Fair Value Hedge
– Portfolio Loans in accrued income and other assets and accrued expenses and other liabilities on our Consolidated
Statements of Financial Condition. The hedged items (a fixed rate commercial loan and certain fixed rate mortgage
and installment loans) are also recorded at fair value which offsets the adjustment to the Fair Value Hedge – Portfolio
Loans. On an ongoing basis, we adjust our Consolidated Statements of Financial Condition to reflect the then current
fair values of both the Fair Value Hedge – Portfolio Loans and the hedged items. The related gains or losses are
reported in interest income – interest and fees on loans in our Consolidated Statements of Operations. During the
second quarter of 2023 we terminated the interest rate cap that was previously hedging certain installment loans. The
remaining unrealized gain on this terminated interest cap is being amortized into earnings over the original life of the
interest rate cap.
We have entered into pay-fixed interest rate swaps and interest rate cap agreements to protect a portion of the
fair value of certain securities available for sale (‘‘Fair Value Hedge – AFS Securities’’). As a result, the change in
103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
the fair value of the pay-fixed interest rate swaps and interest rate cap agreements is expected to offset a portion of
the change in the fair value of the fixed rate securities available for sale due to fluctuations in interest rates. We record
the fair value of Fair Value Hedge – AFS Securities in accrued income and other assets and accrued expenses and
other liabilities on our Consolidated Statements of Financial Condition. The hedged items (fixed rate securities
available for sale) are also recorded at fair value which offsets the adjustment to the Fair Value Hedge – AFS
Securities. On an ongoing basis, we adjust our Consolidated Statements of Financial Condition to reflect the then
current fair value of both the Fair Value Hedge – AFS Securities and the hedged item. The related gains or losses are
reported in interest income – interest on securities – tax-exempt in our Consolidated Statements of Operations.
We have entered into interest rate floor agreements to manage the variability in future expected cash flows of
certain commercial loans (‘‘Cash Flow Hedge – Portfolio Loans’’). We record the fair value of Cash Flow Hedge –
Portfolio Loans in accrued income and other assets and accrued expenses and other liabilities on our Consolidated
Statements of Financial Condition. The changes in the fair value of Cash Flow Hedge - Portfolio Loans are recorded
in accumulated other comprehensive loss and are reclassified into the line item in our Consolidated Statements of
Operations in which the hedged items are recorded in the same period the hedged items affect earnings. It is
anticipated that as of December 31, 2023, $0.7 million will be reclassified from accumulated other comprehensive
loss on Cash Flow Hedge - Portfolio Loans into earnings as a reduction of interest and fees on loans over the next
twelve months. The maximum term of any Cash Flow Hedge - Portfolio Loans at December 31, 2023 is 4.2 years.
Certain derivative financial instruments have not been designated as hedges. The fair value of these derivative
financial instruments has been recorded on our Consolidated Statements of Financial Condition and is adjusted on
an ongoing basis to reflect their then current fair value. The changes in fair value of derivative financial instruments
not designated as hedges are recognized in earnings.
In the ordinary course of business, we enter into rate-lock mortgage loan commitments with customers
(‘‘Rate-Lock Commitments’’). These commitments expose us to interest rate risk. We also enter into mandatory
commitments to sell mortgage loans (‘‘Mandatory Commitments’’) to reduce the impact of price fluctuations of
mortgage loans held for sale and Rate-Lock Commitments. Mandatory Commitments help protect our loan sale profit
margin from fluctuations in interest rates. The changes in the fair value of Rate Lock Commitments and Mandatory
Commitments are recognized currently as part of net gains on mortgage loans in the Consolidated Statements of
Operations. We obtain market prices on Mandatory Commitments and Rate-Lock Commitments. Net gains on
mortgage loans, as well as net income, may be more volatile as a result of these derivative instruments, which are
not designated as hedges.
We have a program that allows commercial loan customers to lock in a fixed rate for a longer period of time
than we would normally offer for interest rate risk reasons. We will enter into a variable rate commercial loan and
an interest rate swap agreement with a customer and then enter into an offsetting interest rate swap agreement with
an unrelated party. The interest rate swap agreement fair values will generally move in opposite directions resulting
in little or no net
impact on our Consolidated Statements of Operations. All of the interest rate swap
agreements-commercial with no hedge designation in the table above relate to this program.
We had entered into a no hedge designation pay-variable interest rate swap agreement in an attempt to manage
the cost of certain funding liabilities. The changes in fair value of this no hedge pay-variable interest rate swap is
recorded in non-interest expense-other in our Consolidated Statements of Operations. This no hedge designation
pay-variable interest rate swap agreement matured during the third quarter of 2023.
We had purchased a swaption agreement during 2021 in an attempt to reduce the impact of price fluctuations
of certain mortgage construction loans held for sale. The swaption agreement is presented as ‘‘Interest rate swaption
agreement’’ in the table below. The swaption agreement terminated during 2022. The changes in the fair value of the
swaption agreement was recognized currently as part of net gains on mortgage loans in our Consolidated Statements
of Operations.
In prior years we had entered into certain derivative financial instruments to manage the variability in future
expected cash flows of certain debt obligations (‘‘Cash Flow Hedges’’). Cash Flow Hedges had included certain
pay-fixed interest rate swap and interest rate cap agreements. The no hedge designation ‘‘Interest rate cap
agreements’’ and ‘‘Pay-fixed interest rate swap agreements’’ in the table below had previously qualified for cash flow
hedge accounting but were classified to a no hedge designation during 2020 and any changes in fair value since the
104
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
transfers to the no hedge designation have been recognized in interest expense – other borrowings and subordinated
debt and debentures in our Consolidated Statements of Operations since that time. Also in 2020 it became probable
that the forecasted transactions being hedged by these interest rate cap agreements would not occur by the end of the
originally specified time period and all remaining unrealized losses included as a component of accumulated other
comprehensive income (loss) were reclassified into earnings at that time. The pay-fixed interest rate swaps matured
in 2021 and during 2022 we terminated $75.0 million of interest rate caps while $15.0 million matured.
In prior periods we offered to our deposit customers an equity linked time deposit product (‘‘Altitude CD’’). The
Altitude CD was a time deposit that provided the customer a guaranteed return of principal at maturity plus a potential
equity return (a written option), while we receive a like stream of funds based on the equity return (a purchased
option). The written and purchased options will generally move in opposite directions resulting in little or no net
impact on our Consolidated Statements of Operations. The written and purchased options in the table below relate
to this Altitude CD product and matured during the fourth quarter of 2021.
The following table illustrate the impact that the derivative financial instruments discussed above have on
individual line items in the Consolidated Statements of Financial Condition for the periods presented:
Fair Values of Derivative Instruments
Asset Derivatives
December 31,
Liability Derivatives
December 31,
2023
2022
2023
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
2022
Balance
Sheet
Location
Fair
Value
(In thousands)
Derivatives designated as
hedging instruments
Pay-fixed interest rate swap
agreements . . . . . . . . . . . Other assets $15,636 Other assets $20,430 Other liabilities $ 3,359 Other liabilities $ —
—
931 Other liabilities
— Other liabilities
456 Other assets
Interest rate cap agreements . Other assets
Interest rate floor
agreements . . . . . . . . . . . Other assets
4,221 Other assets
— Other liabilities
— Other liabilities
20,313
21,361
3,359
—
—
Derivatives not designated as
hedging instruments
Rate-lock mortgage loan
commitments . . . . . . . . . Other assets $
173 Other assets $ — Other liabilities $ — Other liabilities $ 1,056
Mandatory commitments to
sell mortgage loans . . . . . Other assets
— Other assets
315 Other liabilities
279 Other liabilities
—
Pay-fixed interest rate swap
agreements - commercial . Other assets
12,683 Other assets
17,567 Other liabilities
5,514 Other liabilities
504
Pay-variable interest rate
swap agreements -
commercial. . . . . . . . . . . Other assets
Total derivatives . . . . . . .
5,514 Other assets
504 Other liabilities
12,683 Other liabilities
17,567
18,370
$38,683
18,386
$39,747
18,476
$21,835
19,127
$19,127
105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
The effect of derivative financial instruments on the Consolidated Statements of Operations follows:
Location of
Gain (Loss)
Reclassified
from
Accumulated
Other
Comprehensive
Income (Loss)
into Income
(Effective
Portion)
Year Ended December 31,
Loss
Reclassified from
Accumulated Other
Comprehensive
Income (Loss) into
Income(Effective
Portion)
2023
2022
2021
(In thousands)
Gain (loss) Recognized
in Other
Comprehensive
Income (Loss)
(Effective Portion)
2023
2022
2021
Fair Value Hedges
Pay-fixed interest rate swap
agreement - commercial. .
Pay-fixed interest rate swap
agreement - securities
available for sale. . . . . .
Pay-fixed interest rate swap
agreement - installment . .
Pay-fixed interest rate swap
agreements - Mortgage . .
Interest rate cap agreements -
securities available for
sale . . . . . . . . . . . . .
$(848)
$—
$—
Interest rate cap agreements -
installment . . . . . . . . .
—
Total
. . . . . . . . . . . .
$(848)
—
$—
—
$—
Interest on
securities
available
for sale -
tax -
exempt
Interest and
fees on
loans
$(262)
$—
$—
—
$(262)
—
$—
—
$—
Location of
Gain (Loss)
Recognized
in Income
Gain (Loss)
Recognized
in Income
2023
2022
2021
Interest and
fees on loans
Interest on
securities
available for
sale - tax-
exempt
Interest and
fees on loans
Interest and
fees on loans
Interest on
securities
available for
sale - tax -
exempt
Interest and
fees on loans
$
(98) $
831 $
392
(4,619)
15,493
4,398
(1,305)
(2,131)
90
(14)
77
—
—
—
—
—
—
—
$(8,077) $ 16,401 $ 4,790
Cash Flow Hedges
Interest rate floor agreements
- commercial . . . . . . . .
No hedge designation
$ 635
$—
$— Interest expense
$(175)
$—
$—
Interest and
fees on loans
$ (175) $
— $ —
Rate-lock mortgage loan commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mandatory commitments to sell mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pay-fixed interest rate swap agreements - commercial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pay-variable interest rate swap agreements -commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swaption agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pay-variable interest rate swap agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pay-fixed interest rate swap agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate cap agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Written options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gains on
mortgage
loans
Net gains on
mortgage
loans
Interest
income
Interest
income
Net gains on
mortgage
loans
Non-interest
expense -
other
Interest
expense
Interest
expense
Interest
expense
Interest
expense
$ 1,229 $ (3,196) $(4,880)
(594)
383
873
(9,894)
22,242
4,521
9,894
(22,242)
(4,521)
—
(186)
(2)
(12)
—
—
—
—
—
—
245
—
—
—
295
30
(42)
42
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
623 $ (2,754) $(3,684)
106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
NOTE 17 – RELATED PARTY TRANSACTIONS
Certain directors and executive officers, including companies in which they are officers or have significant
ownership, were loan and deposit customers during 2023 and 2022.
A summary of loans to our directors and executive officers (which includes loans to entities in which the
individual owns a 10% or more voting interest) for the years ended December 31 follows:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New loans and advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
2022
(In thousands)
$7,742
478
(847)
$7,373
$ 6,879
1,957
(1,094)
$ 7,742
We had $1.69 million and $1.91 million in loan commitments to directors and executive officers at
December 31, 2023 and 2022, respectively. Of these commitments, $0.03 million and $0.01 million were outstanding
at December 31, 2023 and 2022, respectively, and included in the table above.
Deposits held by us for directors and executive officers totaled $2.9 million and $2.6 million at December 31,
2023 and 2022, respectively.
NOTE 18 – LEASES
We have entered into leases in the normal course of business primarily for office facilities, some of which
include renewal options and escalation clauses. Certain leases also include both lease components (fixed payments
including rent, taxes and insurance costs) and non-lease components (common area or other maintenance costs)
which are accounted for as a single lease component as we have elected the practical expedient to group lease and
non-lease components together for all leases. We have also elected not to recognize leases with original lease terms
of 12 months or less (short-term leases) on our Consolidated Statements of Financial Condition. Most of our leases
include one or more options to renew. The exercise of lease renewal options is typically at our sole discretion and
are included in our right of use (‘‘ROU’’) assets and lease liabilities if they are reasonably certain of exercise.
Leases are classified as operating or finance leases at the lease commencement date (we did not have any finance
leases as of December 31, 2023). Lease expense for operating leases and short-term leases is recognized on a
straight-line basis over the lease term. The ROU assets represent our right to use an underlying asset for the lease
term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease
liabilities are recognized at the lease commencement date based on the estimated present value of the lease payment
over the lease term.
As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the
information available at the lease commencement date in determining the present value of the lease payments.
The cost components of our operating leases follows:
Operating lease cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
2022
(In thousands)
2021
$1,436
97
94
$1,627
$1,636
78
91
$1,805
$1,672
63
64
$1,799
107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs for our
leased facilities.
Supplemental balance sheet information related to our operating leases follows:
Lease right of use asset(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liabilities(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average remaining lease term (years). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
2022
(In thousands)
$4,911
$5,114
$5,544
$5,769
6.03
2.7%
5.86
2.4%
(1)
(2)
Included in Accrued income and other assets in our Consolidated Statements of Financial Condition.
Included in Accrued expenses and other liabilities in our Consolidated Statements of Financial Condition.
Maturity analysis of our lease liabilities at December 31, 2023 based on required contractual payments follows:
2024. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2028. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2029 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total lease payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,142
1,075
903
714
685
1,041
5,560
(446)
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,114
(In thousands)
NOTE 19 – CONCENTRATIONS OF CREDIT RISK
in any activity where success depends on counterparty,
Credit risk is the risk to earnings and capital arising from an obligor’s failure to meet the terms of any contract
with our organization or otherwise failing to perform as agreed. Credit risk can occur outside of our traditional
lending activities and can exist
issuer or borrower
performance. Concentrations of credit risk (whether on- or off-balance sheet) arising from financial instruments can
exist in relation to individual borrowers or groups of borrowers, certain types of collateral, certain types of industries
or certain geographic regions. Credit risk associated with these concentrations could arise when a significant amount
of loans or other financial instruments, related by similar characteristics, are simultaneously impacted by changes in
economic or other conditions that cause their probability of repayment or other type of settlement to be adversely
affected. Our major concentrations of credit risk arise by collateral
type and by industry. The significant
concentrations by collateral type at December 31, 2023, include $1.406 billion of loans secured by residential real
estate and $241.7 million of construction and land development loans.
Additionally, within our commercial real estate and commercial and industrial loan classes, we had significant
standard industry classification concentrations in the following categories as of December 31, 2023: Lessors of
Nonresidential Real Estate ($530.9 million); Accommodation and Food Services ($146.8 million); Construction
($128.7 million); Lessors of Residential Real Estate ($123.4 million); Health Care and Social Assistance
($119.5 million); and Manufacturing ($95.5 million). A geographic concentration arises because we primarily
conduct our lending activities in the State of Michigan.
108
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
NOTE 20 – REGULATORY MATTERS
Capital guidelines adopted by federal and state regulatory agencies and restrictions imposed by law limit the
amount of cash dividends our Bank can pay to us. Under these guidelines, the amount of dividends that may be paid
in any calendar year is limited to the Bank’s current year net profits, combined with the retained net profits of the
preceding two years. Further, the Bank cannot pay a dividend at any time that it has negative undivided profits.
As of December 31, 2023, the Bank had positive undivided profits of $176.6 million. It is not our intent to have
dividends paid in amounts that would reduce the capital of our Bank to levels below those which we consider prudent
or that would not be in accordance with guidelines of regulatory authorities.
We are also subject to various regulatory capital requirements. The prompt corrective action regulations
establish quantitative measures to ensure capital adequacy and require minimum amounts and ratios of total, Tier 1,
and common equity Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets. Failure to meet
minimum capital requirements can result in certain mandatory, and possibly discretionary, actions by regulators that
could have a material effect on our consolidated financial statements. In addition, capital adequacy rules include a
common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets that applies to all supervised
financial institutions. To avoid limits on capital distributions and certain discretionary bonus payments we must meet
the minimum ratio for adequately capitalized institutions plus the buffer. Under capital adequacy guidelines, we must
meet specific capital requirements that involve quantitative measures as well as qualitative judgments by the
regulators. The most recent regulatory filings as of December 31, 2023 and 2022, have our Bank categorized as well
capitalized and exceeding the minimum ratio for adequately capitalized institutions plus the capital conservation
buffer. Management is not aware of any conditions or events that would have changed the most recent Federal
Deposit Insurance Corporation (‘‘FDIC’’) categorization.
Our actual capital amounts and ratios at December 31 follow(1):
2023
Total capital to risk-weighted assets
Consolidated. . . . . . . . . . . . . . . . . .
Independent Bank . . . . . . . . . . . . .
Tier 1 capital to risk-weighted assets
Consolidated. . . . . . . . . . . . . . . . . .
Independent Bank . . . . . . . . . . . . .
Common equity tier 1 capital to
risk-weighted assets
Consolidated. . . . . . . . . . . . . . . . . .
Independent Bank . . . . . . . . . . . . .
Tier 1 capital to average assets
Actual
Amount
Ratio
Minimum for
Adequately Capitalized
Institutions
Ratio
Amount
(Dollars in thousands)
Minimum for
Well-Capitalized
Institutions
Amount
Ratio
$573,972
521,374
13.71% $335,014
334,673
12.46
8.00%
8.00
NA
$418,341
NA
10.00%
$481,569
469,023
11.50% $251,260
251,005
11.21
6.00%
6.00
NA
$334,673
NA
8.00%
$443,065
469,023
10.58% $188,445
188,254
11.21
4.50%
4.50
NA
$271,922
NA
6.50%
NA
5.00%
Consolidated. . . . . . . . . . . . . . . . . .
Independent Bank . . . . . . . . . . . . .
$481,569
469,023
9.03% $213,227
213,180
8.80
4.00%
4.00
NA
$266,475
2022
Total capital to risk-weighted assets
Consolidated. . . . . . . . . . . . . . . . . .
Independent Bank . . . . . . . . . . . . .
Tier 1 capital to risk-weighted assets
Consolidated. . . . . . . . . . . . . . . . . .
Independent Bank . . . . . . . . . . . . .
$536,549
480,886
13.62% $315,059
314,733
12.22
8.00%
8.00
NA
$393,416
NA
10.00%
$447,299
431,685
11.36% $236,294
236,049
10.97
6.00%
6.00
NA
$314,733
NA
8.00%
109
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Actual
Amount
Ratio
Minimum for
Adequately Capitalized
Institutions
Ratio
Amount
(Dollars in thousands)
Minimum for
Well-Capitalized
Institutions
Amount
Ratio
Common equity tier 1 capital to
risk-weighted assets
Consolidated. . . . . . . . . . . . . . . . . .
Independent Bank . . . . . . . . . . . . .
Tier 1 capital to average assets
$408,863
431,685
10.38% $177,221
177,037
10.97
4.50%
4.50
NA
$255,720
Consolidated. . . . . . . . . . . . . . . . . .
Independent Bank . . . . . . . . . . . . .
$447,299
431,685
8.86% $201,875
201,820
8.56
4.00%
4.00
NA
$252,275
NA
6.50%
NA
5.00%
(1)
These ratios do not reflect a capital conservation buffer of 2.50% at December 31, 2023 and 2022.
NA - Not applicable
The components of our regulatory capital are as follows:
Consolidated
December 31,
Independent Bank
December 31,
2023
2022
2023
2022
(In thousands)
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$404,449
$347,596
$430,407
$370,418
Add (deduct)
Accumulated other comprehensive loss for regulatory
purposes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangibles . . . . . . . . . . . . . . . . . . . . . . .
CECL(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common equity tier 1 capital. . . . . . . . . . . . . . . . . . . . . . .
Qualifying trust preferred securities . . . . . . . . . . . . . . . . . . . .
Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses and allowance for unfunded
lending commitments limited to 1.25% of total risk-
weighted assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66,344
(30,304)
2,576
443,065
38,504
481,569
40,000
86,966
(30,851)
5,152
408,863
38,436
447,299
40,000
66,344
(30,304)
2,576
469,023
—
469,023
—
86,966
(30,851)
5,152
431,685
—
431,685
—
52,403
49,250
52,351
49,201
Total risk-based capital . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$573,972
$536,549
$521,374
$480,886
(1) We elected the three years CECL transition method for regulatory purposes.
NOTE 21 – FAIR VALUE DISCLOSURES
FASB ASC topic 820 defines fair value as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. FASB ASC topic 820 also establishes a fair value
hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value.
The standard describes three levels of inputs that may be used to measure fair value:
Level 1: Valuation is based upon quoted prices for identical instruments traded in active markets. Level 1
instruments include securities traded on active exchange markets, such as the New York Stock Exchange,
as well as U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets.
110
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Level 2: Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for
identical or similar instruments in markets that are not active, and model-based valuation techniques for
which all significant assumptions are observable in the market. Level 2 instruments include securities
traded in less active dealer or broker markets.
Level 3: Valuation is generated from model-based techniques that use at least one significant assumption
not observable in the market. These unobservable assumptions reflect estimates of assumptions that market
participants would use in pricing the asset or liability. Valuation techniques include use of option pricing
models, discounted cash flow models and similar techniques.
We used the following methods and significant assumptions to estimate fair value:
Securities: Where quoted market prices are available in an active market, securities are classified as Level 1 of
the valuation hierarchy. We currently do not have any Level 1 securities. If quoted market prices are not available
for the specific security, then fair values are estimated by (1) using quoted market prices of securities with similar
characteristics, (2) matrix pricing, which is a mathematical technique used widely in the industry to value debt
securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’
relationship to other benchmark quoted prices, or (3) a discounted cash flow analysis whose significant fair value
inputs can generally be verified and do not typically involve judgment by management. These securities are classified
as Level 2 of the valuation hierarchy and primarily include agency securities, private label mortgage-backed
securities, other asset backed securities, obligations of states and political subdivisions, trust preferred securities,
corporate securities and foreign government securities.
Loans held for sale: The fair value of mortgage loans held for sale, carried at fair value is based on agency cash
window loan pricing for comparable assets (recurring Level 2) and the fair value of mortgage loans held for sale
carried at the lower of cost or fair value is based on a quoted sales price (non-recurring Level 1).
Collateral dependent loans with specific loss allocations based on collateral value: From time to time, certain
collateral dependent loans will have an ACL established. When the fair value of the collateral is based on an appraised
value or when an appraised value is not available we record the collateral dependent loan as nonrecurring Level 3.
These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales
and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to
adjust for differences between the comparable sales and income data available. Such adjustments can be significant
and thus will typically result in a Level 3 classification of the inputs for determining fair value.
Other real estate: At the time of acquisition, other real estate is recorded at fair value, less estimated costs to
sell, which becomes the property’s new basis. Subsequent write-downs to reflect declines in value since the time of
acquisition may occur from time to time and are recorded in net gains on other real estate and repossessed assets,
which is part of non-interest expense - other in the Consolidated Statements of Operations. The fair value of the
property used at and subsequent to the time of acquisition is typically determined by a third party appraisal of the
property. These appraisals may utilize a single valuation approach or a combination of approaches including
comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the
independent appraisers to adjust for differences between the comparable sales and income data available. Such
adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value.
Appraisals for both collateral-dependent loans and other real estate are performed by certified general appraisers
(for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and
licenses have been reviewed and verified by us. Once received, an independent third party, or a member of our
Collateral Evaluation Department (for commercial properties), or a member of our Special Assets Group (for
residential properties) reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting
fair value in comparison with independent data sources such as recent market data or industry-wide statistics. We
compare the actual selling price of collateral that has been sold to the most recent appraised value of our properties
to determine what additional adjustment, if any, should be made to the appraisal value to arrive at fair value. For
commercial and residential properties we typically discount an appraisal to account for various factors that the
appraisal excludes in its assumptions. These additional discounts generally do not result in material adjustments to
the appraised value.
111
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Capitalized mortgage loan servicing rights: The fair value of capitalized mortgage loan servicing rights is based
on a valuation model used by an independent third party that calculates the present value of estimated net servicing
income. The valuation model incorporates assumptions that market participants would use in estimating future net
servicing income. Certain model assumptions are generally unobservable and are based upon the best information
available including data relating to our own servicing portfolio, reviews of mortgage servicing assumption and
valuation surveys and input from various mortgage servicers and, therefore, are recorded as Level 3. Management
evaluates the third party valuation for reasonableness each quarter as part of our financial reporting control processes.
Derivatives: The fair value of rate-lock mortgage loan commitments is based on agency cash window loan
pricing for comparable assets and the fair value of mandatory commitments to sell mortgage loans is based on
mortgage backed security pricing for comparable assets (recurring Level 2). The fair value of interest rate swap,
interest rate cap, interest rate floor and swaption agreements are derived from proprietary models which utilize
current market data. The significant fair value inputs can generally be observed in the market place and do not
typically involve judgment by management (recurring Level 2).
112
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Assets and liabilities measured at fair value, including financial assets for which we have elected the fair value
option, were as follows:
Fair Value Measurements Using
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Un-observable
Inputs
(Level 3)
(In thousands)
Fair Value
Measure-ments
December 31, 2023:
Measured at Fair Value on a Recurring Basis
Assets
Securities available for sale
U.S. agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. agency residential mortgage-backed . . . . . . . . . . . .
U.S. agency commercial mortgage-backed . . . . . . . . . . .
Private label mortgage-backed . . . . . . . . . . . . . . . . . . . .
Other asset backed . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of states and political subdivisions. . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held for sale, carried at fair value . . . . . . . . . . . . . .
Capitalized mortgage loan servicing rights . . . . . . . . . . . . .
Derivatives(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9,507
81,217
12,297
86,469
112,931
302,737
73,250
942
12,063
42,243
38,683
Liabilities
Derivatives(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,835
Measured at Fair Value on a Non-recurring Basis:
Assets
Collateral dependent loans(3)
Commercial
Commercial and industrial. . . . . . . . . . . . . . . . . . . . .
Mortgage
1-4 family owner occupied - non-jumbo . . . . . . . . . .
1-4 family non-owner occupied . . . . . . . . . . . . . . . . .
1-4 family - 2nd lien. . . . . . . . . . . . . . . . . . . . . . . . .
Resort lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Installment
Boat lending. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recreational vehicle lending . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
551
732
33
157
92
192
196
66
$—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$ 9,507
81,217
12,297
86,469
112,931
302,737
73,250
942
12,063
—
38,683
$ —
—
—
—
—
—
—
—
—
42,243
—
21,835
—
—
—
—
—
—
—
—
—
551
732
33
157
92
192
196
66
(1)
(2)
Included in accrued income and other assets in the Consolidated Statements of Financial Condition.
Included in accrued expenses and other liabilities in the Consolidated Statements of Financial Condition.
(3) Only includes individually evaluated loans with specific loss allocations based on collateral value.
113
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Fair Value Measurements Using
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Un-observable
Inputs
(Level 3)
(In thousands)
Fair Value
Measure-ments
December 31, 2022:
Measured at Fair Value on a Recurring Basis
Assets
Securities available for sale
U.S. agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. agency residential mortgage-backed . . . . . . . . . . . .
U.S. agency commercial mortgage-backed . . . . . . . . . . .
Private label mortgage-backed . . . . . . . . . . . . . . . . . . . .
Other asset backed . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of states and political subdivisions. . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held for sale, carried at fair value . . . . . . . . . . . . . .
Capitalized mortgage loan servicing rights . . . . . . . . . . . . .
Derivatives(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 12,101
90,458
13,453
93,845
194,725
295,677
78,157
931
26,518
42,489
39,747
$ —
—
—
—
—
—
—
—
—
—
—
$ 12,101
90,458
13,453
93,845
194,725
295,677
78,157
931
26,518
—
39,747
$ —
—
—
—
—
—
—
—
—
42,489
—
Liabilities
Derivatives(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,127
—
19,127
—
Measured at Fair Value on a Non-recurring Basis:
Assets
Loans held for sale, carried at the lower of cost or fair
value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,367
20,367
Collateral dependent loans(3)
Commercial
Commercial and industrial. . . . . . . . . . . . . . . . . . . . .
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . .
138
1,068
Mortgage
1-4 family owner occupied - non-jumbo . . . . . . . . . .
1-4 family non-owner occupied . . . . . . . . . . . . . . . . .
1-4 family - 2nd lien. . . . . . . . . . . . . . . . . . . . . . . . .
Resort lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Installment
Boat lending. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recreational vehicle lending . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
415
52
165
25
196
19
87
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
138
1,068
415
52
165
25
196
19
87
(1)
(2)
Included in accrued income and other assets in the Consolidated Statements of Financial Condition.
Included in accrued expenses and other liabilities in the Consolidated Statements of Financial Condition.
(3) Only includes individually evaluated loans with specific loss allocations based on collateral value.
114
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Changes in fair values of financial assets for which we have elected the fair value option for the years ended
December 31 were as follows:
Net Gains
(Losses)
on Assets -
Mortgage
Loans
Mortgage
Loan
Servicing, net
(In thousands)
Total
Change
in Fair
Values
Included
in Current
Period
Earnings
2023
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized mortgage loan servicing rights . . . . . . . . . . . . . . . . . . . . .
$ 2,281
—
$ —
(4,202)
$ 2,281
(4,202)
2022
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized mortgage loan servicing rights . . . . . . . . . . . . . . . . . . . . .
(3,393)
—
—
10,196
(3,393)
10,196
2021
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized mortgage loan servicing rights . . . . . . . . . . . . . . . . . . . . .
(2,805)
—
—
(2,108)
(2,805)
(2,108)
For those items measured at fair value pursuant to our election of the fair value option, interest income is
recorded within the Consolidated Statements of Operations based on the contractual amount of interest income earned
on these financial assets and dividend income is recorded based on cash dividends received.
The following represent impairment charges recognized during the years ended December 31, 2023, 2022 and
2021 relating to assets measured at fair value on a non-recurring basis:
•
Loans that are individually evaluated using the fair value of collateral for collateral dependent loans had
a carrying amount of $2.0 million, which is net of a valuation allowance of $1.3 million at December 31,
2023, and had a carrying amount of $2.2 million, which is net of a valuation allowance of $2.1 million at
December 31, 2022. An additional provision for credit losses relating to these collateral dependent loans
of $1.1 million, $1.5 million and $0.3 million was included in our results of operations for the years ending
December 31, 2023, 2022 and 2021, respectively.
A reconciliation for all assets and (liabilities) measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) for the years ended December 31 follows:
Capitalized Mortgage
Loan Servicing Rights
2022
(In thousands)
2021
2023
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$42,489
$26,232
$16,904
Total losses realized and unrealized:
Included in results of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Included in other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases, issuances, settlements, maturities and calls . . . . . . . . . . . . . . . . . . . . .
Transfers in and/or out of Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,202)
—
3,956
—
$42,243
10,196
—
6,061
—
$42,489
(2,108)
—
11,436
—
$26,232
Amount of total losses for the period included in earnings attributable to the
change in unrealized losses relating to assets and liabilities still held at
December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (4,202) $10,196
$ (2,108)
115
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
The fair value of our capitalized mortgage loan servicing rights has been determined based on a valuation model
used by an independent third party as discussed above. The significant unobservable inputs used in the fair value
measurement of the capitalized mortgage loan servicing rights are discount rate, cost to service, ancillary income,
float rate and prepayment rate. Significant changes in all five of these assumptions in isolation would result in
significant changes to the value of our capitalized mortgage loan servicing rights. Quantitative information about our
Level 3 fair value measurements measured on a recurring basis follows:
Asset
Fair Value
(In thousands)
Valuation
Technique
Unobservable
Inputs
Range
Weighted
Average
2023
Capitalized mortgage loan
servicing rights . . . . . . .
$42,243
2022
Capitalized mortgage loan
servicing rights . . . . . . .
$42,489
Present value of
net servicing
revenue
Discount rate
Cost to service
Ancillary income
Float rate
Prepayment rate
10.00% to 14.27%
$70 to $442
20 to 30
3.82%
6.56% to 26.47%
Present value of
net servicing
revenue
Discount rate
Cost to service
Ancillary income
Float rate
Prepayment rate
10.00% to 13.23%
$66 to $150
20 to 35
4.03%
7.03% to 30.40%
10.25%
$79
20
3.82%
8.50%
10.12%
$78
21
4.03%
7.97%
Quantitative information about Level 3 fair value measurements measured on a non-recurring basis follows:
Asset
Fair Value
(In thousands)
Valuation
Technique
Unobservable
Inputs
Range
Weighted
Average
2023
Collateral dependent loans
Commercial . . . . . . . . . . . . . .
$ 551
Mortgage and Installment(1) . . .
1,468
2022
Collateral dependent loans
Commercial . . . . . . . . . . . . . .
$1,206
Mortgage and Installment(1) . . .
959
Sales
comparison
approach
Sales
comparison
approach
Sales
comparison
approach
Sales
comparison
approach
Adjustment for
differences
between
comparable
sales
Adjustment for
differences
between
comparable
sales
Adjustment for
differences
between
comparable
sales
Adjustment for
differences
between
comparable
sales
(5.0)% to 6.0%
(0.4)%
(4.1) to 10.5
3.1
41.7% to 20.0%
(0.4)%
(73.3) to 65.2
(5.3)
(1)
In addition to the valuation techniques and unobservable inputs discussed above, at December 31, 2023 and 2022 certain collateral
dependent installment loans totaling approximately $0.45 million and $0.30 million are secured by collateral other than real estate. For the
majority of these loans, we apply internal discount rates to industry valuation guides.
116
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
The following table reflects the difference between the aggregate fair value and the aggregate remaining
contractual principal balance outstanding for loans held for sale for which the fair value option has been elected at
December 31:
Aggregate
Fair Value
Contractual
Principal
Difference
(In thousands)
Loans held for sale
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,063
26,518
55,470
$
(61)
(2,342)
1,051
$12,124
28,860
54,419
NOTE 22 – FAIR VALUES OF FINANCIAL INSTRUMENTS
Most of our assets and liabilities are considered financial instruments. Many of these financial instruments lack
an available trading market and it is our general practice and intent to hold the majority of our financial instruments
to maturity. Significant estimates and assumptions were used to determine the fair value of financial instruments.
These estimates are subjective in nature, involving uncertainties and matters of judgment, and therefore, fair values
may not be a precise estimate. Changes in assumptions could significantly affect the estimates.
Estimated fair values have been determined using available data and methodologies that are considered suitable
for each category of financial instrument. For instruments with adjustable interest rates which reprice frequently and
without significant credit risk, it is presumed that estimated fair values approximate the recorded book balances.
The estimated recorded book balances and fair values at December 31 follow:
Recorded
Book
Balance
Fair Value
Fair Value Using
Significant
Other
Observable
Inputs
(Level 2)
Significant
Un- observable
Inputs
(Level 3)
Quoted Prices
in Active
Markets for
Identical
Assets (Level 1)
(In thousands)
2023
Assets
Cash and due from banks . . . . . . . . . . . . . $
Interest bearing deposits. . . . . . . . . . . . . . .
Securities available for sale . . . . . . . . . . . .
Securities held to maturity . . . . . . . . . . . . .
Federal Home Loan Bank and Federal
$
68,208 $
101,573
679,350
353,988
68,208
101,573
679,350
318,606
Reserve Bank Stock . . . . . . . . . . . . . . . .
Net loans and loans held for sale . . . . . . .
Accrued interest receivable . . . . . . . . . . . .
Derivative financial instruments . . . . . . . .
16,821
3,748,306
19,044
38,683
NA
3,453,790
19,044
38,683
68,208
101,573
$
— $
—
— 679,350
— 318,606
—
—
—
—
NA
—
58
—
NA
12,063
6,486
38,683
NA
3,441,727
12,500
—
Liabilities
Deposits with no stated maturity(1) . . . . . . $3,704,808 $3,704,808
Deposits with stated maturity(1). . . . . . . . .
914,404
49,831
Other borrowings . . . . . . . . . . . . . . . . . . . .
40,352
Subordinated debt. . . . . . . . . . . . . . . . . . . .
38,103
Subordinated debentures . . . . . . . . . . . . . .
6,534
Accrued interest payable . . . . . . . . . . . . . .
21,835
Derivative financial instruments . . . . . . . .
918,071
50,026
39,510
39,728
6,534
21,835
117
$3,704,808
— $
$
— 914,404
49,831
—
40,352
—
38,103
—
6,052
482
21,835
—
—
—
—
—
—
—
—
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Recorded
Book
Balance
Fair Value
Fair Value Using
Significant
Other
Observable
Inputs
(Level 2)
Significant
Un- observable
Inputs
(Level 3)
Quoted Prices
in Active
Markets for
Identical
Assets (Level 1)
(In thousands)
2022
Assets
Cash and due from banks . . . . . . . . . . . . . $
Interest bearing deposits. . . . . . . . . . . . . . .
Securities available for sale . . . . . . . . . . . .
Securities held to maturity . . . . . . . . . . . . .
Federal Home Loan Bank and Federal
$
70,180 $
4,191
779,347
374,818
70,180
4,191
779,347
335,418
70,180
4,191
$
— $
—
— 779,347
— 335,418
—
—
—
—
Reserve Bank Stock . . . . . . . . . . . . . . . .
Net loans and loans held for sale . . . . . . .
Accrued interest receivable . . . . . . . . . . . .
Derivative financial instruments . . . . . . . .
17,653
3,459,802
16,513
39,747
NA
3,185,518
16,513
39,747
NA
20,367
1
—
NA
26,518
6,503
39,747
NA
3,138,633
10,009
—
Liabilities
Deposits with no stated maturity(1) . . . . . . $3,798,848 $3,798,848
Deposits with stated maturity(1). . . . . . . . .
573,739
86,006
Other borrowings . . . . . . . . . . . . . . . . . . . .
41,058
Subordinated debt. . . . . . . . . . . . . . . . . . . .
38,982
Subordinated debentures . . . . . . . . . . . . . .
2,287
Accrued interest payable . . . . . . . . . . . . . .
19,127
Derivative financial instruments . . . . . . . .
580,221
86,006
39,433
39,660
2,287
19,127
$3,798,848
— $
$
— 573,739
86,006
—
41,058
—
38,982
—
1,872
415
19,127
—
—
—
—
—
—
—
—
NA – Not applicable
(1) Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $723.014 million and $555.781 million at
December 31, 2023 and 2022, respectively. Deposits with a stated maturity include reciprocal deposits with a recorded book balance of
$109.006 million and $46.794 million at December 31, 2023 and 2022, respectively.
The fair values for commitments to extend credit and standby letters of credit are estimated to approximate their
aggregate book balance, which is nominal, and therefore are not disclosed.
Fair value estimates are made at a specific point in time, based on relevant market information and information
about the financial instrument. These estimates do not reflect any premium or discount that could result from offering
for sale the entire holdings of a particular financial instrument.
Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to
estimate the value of anticipated future business, the value of future earnings attributable to off-balance sheet
activities and the value of assets and liabilities that are not considered financial instruments.
Fair value estimates for deposit accounts do not include the value of the core deposit intangible asset resulting
from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market.
118
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
NOTE 23 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
A summary of changes in accumulated other comprehensive income (loss) (‘‘AOCIL’’), net of tax during the
years ended December 31 follows:
Unrealized
Gains
(Losses) on
Securities
AFS
Unrealized
Losses on
Securities
Transferred
to Securities
HTM(1)
Dispropor-
tionate
Tax Effects
from
Securities
AFS
(In thousands)
Unrealized
Gains on
Derivative
Instruments
Total
2023
Balances at beginning of period . . . . . . . . . . . . . . . . . . .
$(68,742)
$(18,223)
$(5,798)
$ — $(92,763)
Other comprehensive income (loss) before
reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from AOCIL . . . . . . . . . . . . . . .
Net current period other comprehensive income . .
17,454
175
17,629
2,815
—
2,815
—
—
—
(168)
345
177
20,101
520
20,621
Balances at end of period. . . . . . . . . . . . . . . . . . . . . . . .
$(51,113)
$(15,408)
$(5,798)
$ 177
$(72,142)
2022
Balances at beginning of period . . . . . . . . . . . . . . . . . . .
Other comprehensive loss before reclassifications . . .
Amounts reclassified from AOCIL . . . . . . . . . . . . . . .
$ 6,299
(75,258)
217
$
— $(5,798)
—
—
(18,223)
—
Net current period other comprehensive loss . . . . .
(75,041)
(18,223)
—
$ — $
—
—
—
501
(93,481)
217
(93,264)
Balances at end of period. . . . . . . . . . . . . . . . . . . . . . . .
$(68,742)
$(18,223)
$(5,798)
$ — $(92,763)
2021
Balances at beginning of period . . . . . . . . . . . . . . . . . . .
Other comprehensive loss before reclassifications . . .
Amounts reclassified from AOCIL . . . . . . . . . . . . . . .
$ 15,822
(8,408)
(1,115)
$
— $(5,798)
—
—
—
—
$ — $ 10,024
(8,408)
(1,115)
—
—
Net current period other comprehensive loss . . . . .
(9,523)
—
—
—
(9,523)
Balances at end of period. . . . . . . . . . . . . . . . . . . . . . . .
$ 6,299
$
— $(5,798)
$ — $
501
(1)
Represents the remaining unrealized loss to be accreted on securities that were transferred from AFS to HTM on April 1, 2022.
The disproportionate tax effects from securities AFS arose primarily due to tax effects of other comprehensive
income (‘‘OCI’’) in the presence of a valuation allowance against our deferred tax assets and a pretax loss from
operations. Generally, the amount of income tax expense or benefit allocated to operations is determined without
regard to the tax effects of other categories of income or loss, such as OCI. However, an exception to the general rule
is provided when, in the presence of a valuation allowance against deferred tax assets, there is a pretax loss from
operations and pretax income from other categories in the current period. In such instances, income from other
categories must offset the current loss from operations, the tax benefit of such offset being reflected in operations.
Release of material disproportionate tax effects from other comprehensive income to earnings is done by the portfolio
method whereby the effects will remain in AOCIL as long as we carry a more than inconsequential portfolio of
securities AFS.
119
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
A summary of reclassifications out of each component of AOCIL for the years ended December 31 follows:
AOCIL Component
2023
Unrealized gains (losses) on securities
available for sale
Unrealized gains on derivative instruments
2022
Unrealized gains (losses) on securities
available for sale
2021
Unrealized gains (losses) on securities
available for sale
Reclassified
From
AOCIL
(In thousands)
$ (222)
(47)
$ (175)
$ 437
92
$ 345
Affected Line Item in
Consolidated Statements of Operations
Net gains (losses) on securities available for sale
Income tax expense
Reclassifications, net of tax
Interest income
Income tax expense
Reclassifications, net of tax
$ (520)
Total reclassifications for the period, net of tax
$ (275)
(58)
$ (217)
$1,411
296
$1,115
Net gains (losses) on securities available for sale
Income tax expense
Reclassifications, net of tax
Net gains (losses) on securities available for sale
Income tax expense
Reclassifications, net of tax
120
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
NOTE 24 – INDEPENDENT BANK CORPORATION (PARENT COMPANY ONLY) FINANCIAL
INFORMATION
Presented below are condensed financial statements for our parent company.
CONDENSED STATEMENTS OF FINANCIAL CONDITION
December 31,
2023
2022
(In thousands)
ASSETS
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest bearing deposits - time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued income and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6,519
40,000
436,887
4,419
$ 10,502
40,000
376,930
6,220
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$487,825
$433,652
LIABILITIES AND SHAREHOLDERS’ EQUITY
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 39,510
39,728
3,186
405,401
$ 39,433
39,660
6,048
348,511
Total Liabilities and Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$487,825
$433,652
CONDENSED STATEMENTS OF OPERATIONS
2023
Year Ended December 31,
2022
(In thousands)
2021
OPERATING INCOME
Dividends from subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$24,000
1,317
96
25,413
$30,000
199
54
30,253
$32,000
55
33
32,088
OPERATING EXPENSES
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative and other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Before Income Tax and Equity in Undistributed Net Income of
Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Before Equity in Undistributed Net Income of Subsidiaries . . .
Equity in undistributed net income of subsidiaries. . . . . . . . . . . . . . . . . . . .
5,726
1,134
6,860
18,553
(1,215)
19,768
39,299
4,311
892
5,203
25,050
(1,108)
26,158
37,193
3,625
787
4,412
27,676
(1,048)
28,724
34,171
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$59,067
$63,351
$62,895
121
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
2023
Year Ended December 31,
2022
(In thousands)
2021
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 59,067
$ 63,351
$ 62,895
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
FROM OPERATING ACTIVITIES
Deferred income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion of discount on subordinated debt and debentures . . . . . . . . . . . .
(Increase) decrease in accrued income and other assets. . . . . . . . . . . . . . . .
Increase (decrease) in accrued expenses and other liabilities . . . . . . . . . . .
Equity in undistributed net income of subsidiaries. . . . . . . . . . . . . . . . . . . .
Total Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(56)
91
145
1,857
(2,862)
(39,299)
(40,124)
Net Cash From Operating Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,943
(110)
95
144
(6,012)
5,205
(37,193)
(37,871)
25,480
(81)
95
144
788
159
(34,171)
(33,066)
29,829
CASH FLOW USED IN INVESTING ACTIVITIES
Purchases of interest bearing deposits - time . . . . . . . . . . . . . . . . . . . . . . . .
Maturity of interest bearing deposits - time . . . . . . . . . . . . . . . . . . . . . . . . .
(80,000)
80,000
(115,000)
115,000
(160,000)
160,000
Net Cash Used In Investing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
CASH FLOW USED IN FINANCING ACTIVITIES
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . .
Share based compensation withholding obligation . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(19,327)
2,208
(650)
(5,157)
Net Cash Used In Financing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
(22,926)
Net Increase (Decrease) in Cash and Cash Equivalents. . . . . . . . . . . . . .
Cash and Cash Equivalents at Beginning of Year . . . . . . . . . . . . . . . . . . . .
(3,983)
10,502
(18,565)
2,124
(620)
(4,010)
(21,071)
4,409
6,093
(18,155)
1,913
(691)
(17,269)
(34,202)
(4,373)
10,466
Cash and Cash Equivalents at End of Year . . . . . . . . . . . . . . . . . . . . . . .
$ 6,519
$ 10,502
$
6,093
NOTE 25 – REVENUE FROM CONTRACTS WITH CUSTOMERS
We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. We derive
the majority of our revenue from financial instruments and their related contractual rights and obligations which for
the most part are excluded from the scope of this topic. These sources of revenue that are excluded from the scope
of this topic include interest income, net gains on mortgage loans, net gains (losses) on securities AFS, mortgage loan
servicing, net and bank owned life insurance and were approximately 86.8%, 84.1% and 84.6% of total revenues at
December 31, 2023, 2022 and 2021, respectively.
Material sources of revenue that are included in the scope of this topic include service charges on deposit
accounts, other deposit related income, interchange income and investment and insurance commissions and are
discussed in the following paragraphs. Generally these sources of revenue are earned at the time the service is
delivered or over the course of a monthly period and do not result in any contract asset or liability balance at any
given period end. As a result, there were no contract assets or liabilities recorded as of December 31, 2023 and 2022.
Service charges on deposit accounts and other deposit related income: Revenues are earned on depository
accounts for commercial and retail customers and include fees for transaction-based, account maintenance and
overdraft services. Transaction-based fees, which includes services such as ATM use fees, stop payment charges and
122
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
ACH fees are recognized at the time the transaction is executed as that is the time we fulfill our customer’s request.
Account maintenance fees, which includes monthly maintenance services are earned over the course of a month
representing the period over which the performance obligation is satisfied. Our obligation for overdraft services is
satisfied at the time of the overdraft.
Interchange income: Interchange income primarily includes debit card interchange and network revenues. Debit
card interchange and network revenues are earned on debit card transactions conducted through payment networks
such as MasterCard, NYCE (during 2021) and Accel. Interchange income is recognized concurrently with the
delivery of services on a daily basis. Interchange and network revenues are presented gross of interchange expenses,
which are presented separately as a component of non-interest expense.
Investment and insurance commissions: Investment and insurance commissions include fees and commissions
from asset management, custody, recordkeeping, investment advisory and other services provided to our customers.
Revenue is recognized on an accrual basis at the time the services are performed and generally based on either the
market value of the assets managed or the services provided. We have an agent relationship with a third party provider
of these services and net certain direct costs charged by the third party provider associated with providing these
services to our customers.
Net (gains) losses on other real estate and repossessed assets: We record a gain or loss from the sale of other
real estate when control of the property transfers to the buyer, which generally occurs at the time of an executed deed.
If we were to finance the sale of other real estate to the buyer, we would assess whether the buyer is committed to
perform their obligations under the contract and whether collectability of the transaction is probable. Once these
criteria are met, the other real estate asset would be derecognized and the gain or loss on sale would be recorded upon
the transfer of control of the property to the buyer. There were no other real estate properties sold during 2023,
2022 or 2021 that were financed by us.
123
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Disaggregation of our revenue sources by attribute for the years ended December 31 follow:
Service
Charges
on Deposit
Accounts
Other
Deposit
Related
Income
Investment
and
Insurance
Commissions
Total
Interchange
Income
(In thousands)
2023
Retail
Overdraft fees . . . . . . . . . . . . . . . . . . . . . . .
Account service charges. . . . . . . . . . . . . . .
ATM fees . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9,686
2,162
—
—
$ —
—
1,636
993
Business
Overdraft fees . . . . . . . . . . . . . . . . . . . . . . .
ATM fees . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interchange income . . . . . . . . . . . . . . . . . . . .
Asset management revenue . . . . . . . . . . . . . .
Transaction based revenue . . . . . . . . . . . . . . .
513
—
—
—
—
—
—
47
414
—
—
—
$ —
—
—
—
—
—
—
13,996
—
—
$ —
—
—
—
—
—
—
—
1,861
1,595
$ 9,686
2,162
1,636
993
513
47
414
13,996
1,861
1,595
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,361
$3,090
$13,996
$3,456
$32,903
Reconciliation to Consolidated Statement of Operations:
Non-interest income - other:
Other deposit related income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment and insurance commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank owned life insurance(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,090
3,456
474
5,459
$12,479
(1)
Excluded from the scope of ASC Topic 606.
124
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Service
Charges
on Deposit
Accounts
Other
Deposit
Related
Income
Investment
and
Insurance
Commissions
Total
Interchange
Income
(In thousands)
2022
Retail
Overdraft fees . . . . . . . . . . . . . . . . . . . . . . .
Account service charges. . . . . . . . . . . . . . .
ATM fees . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,090
1,626
—
—
$ —
—
1,186
972
Business
Overdraft fees . . . . . . . . . . . . . . . . . . . . . . .
ATM fees . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interchange income . . . . . . . . . . . . . . . . . . . .
Asset management revenue . . . . . . . . . . . . . .
Transaction based revenue . . . . . . . . . . . . . . .
572
—
—
—
—
—
—
29
315
—
—
—
$ —
—
—
—
—
—
—
13,955
—
—
$ —
—
—
—
—
—
—
—
1,781
1,117
$10,090
1,626
1,186
972
572
29
315
13,955
1,781
1,117
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,288
$2,502
$13,955
$2,898
$31,643
Reconciliation to Consolidated Statement of Operations:
Non-interest income - other:
Other deposit related income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment and insurance commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank owned life insurance(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,502
2,898
360
4,977
$10,737
(1)
Excluded from the scope of ASC Topic 606.
125
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
Service
Charges
on Deposit
Accounts
Other
Deposit
Related
Income
Investment
and
Insurance
Commissions
Total
Interchange
Income
(In thousands)
2021
Retail
Overdraft fees . . . . . . . . . . . . . . . . . . . . . . .
Account service charges. . . . . . . . . . . . . . .
ATM fees . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8,431
1,130
—
—
$ —
—
1,109
819
Business
Overdraft fees . . . . . . . . . . . . . . . . . . . . . . .
ATM fees . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interchange income . . . . . . . . . . . . . . . . . . . .
Asset management revenue . . . . . . . . . . . . . .
Transaction based revenue . . . . . . . . . . . . . . .
609
—
—
—
—
—
—
24
328
—
—
—
$ —
—
—
—
—
—
—
14,045
—
—
$ —
—
—
—
—
—
—
—
1,689
914
$ 8,431
1,130
1,109
819
609
24
328
14,045
1,689
914
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,170
$2,280
$14,045
$2,603
$29,098
Reconciliation to Consolidated Statement of Operations:
Non-interest income - other:
Other deposit related income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment and insurance commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank owned life insurance(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,280
2,603
567
3,942
$9,392
(1)
Excluded from the scope of ASC Topic 606.
126
QUARTERLY FINANCIAL DATA (UNAUDITED)
A summary of selected quarterly results of operations for the years ended December 31 follows:
Three Months Ended
March 31,
June 30,
September 30,
December 31,
(In thousands, except per share amounts)
2023
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$53,936
38,441
2,160
15,875
12,991
$57,948
38,350
3,317
18,202
14,790
$62,432
39,427
1,350
21,652
17,543
$65,361
40,111
(617)
17,947
13,743
Net income per common share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.62
0.61
0.70
0.70
0.84
0.83
0.66
0.65
2022
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$34,741
33,001
(1,573)
22,072
17,967
$38,364
36,061
2,379
15,880
13,001
$44,925
39,897
3,145
21,247
17,297
$50,978
40,602
1,390
18,589
15,086
Net income per common share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.85
0.84
0.62
0.61
0.82
0.81
0.72
0.71
QUARTERLY SUMMARY (UNAUDITED)
First quarter . . . . . . . . . . . . . . . . . . .
Second quarter. . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . .
Fourth quarter . . . . . . . . . . . . . . . . .
High
$24.73
19.33
21.35
26.99
Reported Sales Prices of Common Shares
2022
2023
Low
Low
Close
High
Cash Dividends
Declared
Close
2023
2022
$16.45
14.90
16.45
16.90
$17.77
16.96
18.34
26.02
$26.00
22.59
21.87
24.97
$21.87
17.87
18.38
19.00
$22.00
19.28
19.10
23.92
$0.23
0.23
0.23
0.23
$0.22
0.22
0.22
0.22
We have approximately 1,200 holders of record of our common stock. Our common stock trades on the
NASDAQ Global Select Market System under the symbol ‘‘IBCP.’’ The prices shown above are supplied by
NASDAQ and reflect the inter-dealer prices and may not include retail markups, markdowns or commissions. There
may have been transactions or quotations at higher or lower prices of which we are not aware.
In addition to limitations imposed by the provisions of the Michigan Business Corporation Act (which, among
other things, limits us from paying dividends to the extent we are insolvent), our ability to pay dividends is limited
by our ability to obtain funds from our Bank and by regulatory capital guidelines applicable to us (see note #20).
127
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