Shares of Independent Bank Corp. fell sharply Thursday after the Ionia, Mich., company announced it was slashing its second-quarter dividend, because it needs capital to shore up its loan-loss reserves.
The $3 billion-asset Independent said it would pay a dividend of a penny a share, versus a first-quarter dividend of 11 cents.
In a press release, Michael M. Magee, Independent's president and chief executive officer, called the decision to cut the dividend "very difficult," but said that doing so would "better position the company to weather the difficult economic and credit environment."
Independent said it has no intention of raising money through the capital markets or discontinuing quarterly payments on its trust-preferred securities.
By late Thursday shares of Independent had declined nearly 7% from Wednesday's close, to $3.89.
Independent said it expects to report a profit of 9 cents to 12 cents per share for this quarter. It earned a penny a share in the first quarter.
It also said it expected to report a 15% increase in its loan-loss provision, to $13 million, along with nonperforming assets in the range of $130 million to $145 million, versus the $102 million it reported at the end of the first quarter.
