GlobeNewswire Inc | Jan 27, 2022 07:59AM EST

January 27, 2022

GRAND RAPIDS, Mich., Jan. 27, 2022 (GLOBE NEWSWIRE) -- Independent Bank Corporation (NASDAQ: IBCP) reported fourth quarter 2021 net income of $12.5 million, or $0.58 per diluted share, versus net income of $17.0 million, or $0.77 per diluted share, in the prior-year period. For the year ended December 31, 2021, the Company reported net income of $62.9 million, or $2.88 per diluted share, compared to net income of $56.2 million, or $2.53 per diluted share, in 2020. The increase in full year 2021 net income as compared to 2020 primarily reflects an increase in net interest income and a decrease in provision for credit losses that were partially offset by a decrease in non-interest income and an increase in non-interest expense and income tax expense.

Fourth quarter 2021 highlights include:

-- An increase in net interest income of 10.6% over the fourth quarter of 2020; -- Net gains on mortgage loans of $5.6 million and total mortgage loan origination volume of $424.6 million; -- Deposit net growth of $105.0 million (or 10.4% annualized); -- Continued strong asset quality metrics as evidenced by low loan charge-offs during the quarter as well as a low level of non-performing loans and non-performing assets; and -- The payment of a 21 cent per share dividend on common stock on November 15, 2021.

Full year 2021 highlights include:

-- Increases in net income and diluted earnings per share of 12.0% and 13.8%, respectively, compared to 2020; -- Return on average assets and return on average equity of 1.41% and 16.13%, respectively; -- Net gains on mortgage loans of $35.9 million and total mortgage loan origination volume of $1.9 billion; -- Net growth in portfolio loans of $171.4 million (or 6.3%); -- Deposit net growth of $479.7 million (or 13.2 %); -- Paid $0.84 in dividends which was a 5.0% increase compared to 2020; and -- Tangible common equity per share increased by 6.1% to $17.33 from $16.33.

William B. (Brad) Kessel, the President and Chief Executive Officer of Independent Bank Corporation, commented: I am very pleased with the high level of performance by our team generating strong core results for yet another quarter and the full year 2021. We continue to execute on our strategies of investing in people and technology. During the fourth quarter we saw good growth in net interest income, stabilization of our net interest margin and across the board loan growth, net of PPP. Our commercial pipeline is at its highest level in many quarters. Deposit gathering continues to be robust both via existing customers as well as through the addition of new customers. In addition, while mortgage gains have tapered down they continue to be solid and our card strategies are generating positive growth in interchange revenue. On the asset quality front, I could not be more pleased, with our net recoveries for the full year, as well as commercial watch credits at 3.10% of the portfolio, and a very low level of past due loans. We are excited about the momentum we have in our markets and look forward to continuing these trends into 2022.

Significant items impacting comparable quarterly and year to date 2021 and 2020 results include the following:

-- Changes in the fair value due to price of capitalized mortgage loan servicing rights (the MSR Changes) of a positive $0.6 million ($0.02 per diluted share, after taxes) and $3.4 million ($0.12 per diluted share, after taxes) for the three-months and full-year ended December 31, 2021, respectively, as compared to a negative $0.9 million ($0.03 per diluted share, after taxes) and a negative $10.8 million ($0.39 per diluted share, after taxes) for the three-months and full year ended December 31, 2020 respectively.

Operating Results

The Companys net interest income totaled $34.3 million during the fourth quarter of 2021, an increase of $3.3 million, or 10.6% from the year-ago period, and up $0.5 million, or 1.4%, from the third quarter of 2021. The Companys tax equivalent net interest income as a percent of average interest-earning assets (the net interest margin) was 3.13% during the fourth quarter of 2021, compared to 3.12% in the year-ago period, and 3.18% in the third quarter of 2021. The year-over-year quarterly increase in net interest income is due to an increase in average interest-earning assets and the net interest margin. Average interest-earning assets were $4.43 billion in the fourth quarter of 2021, compared to $3.98 billion in the year ago quarter and $4.30 billion in the third quarter of 2021.

For the full year 2021, net interest income totaled $129.8 million, an increase of $6.2 million, or 5.0% from 2020. The Companys net interest margin for the full year of 2021 was 3.10% compared to 3.34% in 2020. The increase in net interest income for the full year of 2021 compared to 2020 is due to an increase in average interest-earning assets that was partially offset by a decline in the net interest margin.

Due to the economic impact of COVID-19, the Federal Reserve has taken a variety of actions to stimulate the economy, including significantly lowering short-term interest rates. These actions have placed continued pressure on the Companys net interest margin.

In addition, commercial loan balances, interest income and yields have been impacted by Paycheck Protection Program (PPP) lending activity. PPP lending activity is summarized in the following tables:

PPP ? Round 1At or for the 12/31/2021 9/30/2021 12/31/2020three months ended # (000?s) # (000?s) # (000?s)Loans outstanding 6 $ 197 20 $ 1,262 1,483 $ 169,782 at period endAverage loans 774 - 2,699 220,214 outstandingCumulativeforgiveness 2,124 261,088 2,085 260,015 808 122,962 applicationssubmittedCumulativeforgiveness 2,122 261,047 2,082 259,613 755 91,972 applicationsapprovedNet fees accretedinto interest - - 381 3,250 incomeNet unaccreted - - 3,216 fees at period endAverage loan yield - - 11.51 % 6.91 %

Note: PPP Round 1 loan activity began in the second quarter of 2020.

PPP ? Round 2At or for the three 12/31/2021 9/30/2021 3/31/2021months ended # (000?s) # (000?s) # (000?s)Loans outstanding 180 $ 26,167 806 $ 88,888 1,250 $ 128,240 at period endAverage loans 58,895 - 110,276 - 72,011 outstandingCumulativeforgiveness 1,401 115,568 831 51,370 - - applicationssubmittedCumulativeforgiveness 1,372 109,405 810 50,535 - - applicationsapprovedNet fees accretedinto interest 2,372 - 2,249 - 229 incomeNet unaccreted fees 806 - 3,178 - 5,454 at period endAverage loan yield 17.11 % - 9.17 % - 2.25 %

Note: PPP Round 2 loan activity began in the first quarter of 2021.

Non-interest income totaled $15.8 million and $76.6 million, respectively, for the fourth quarter and full year 2021, compared to $22.4 million and $80.7 million in the respective comparable year ago periods. These changes were primarily due to variances in mortgage banking related revenues (net gains on mortgage loans and mortgage loan servicing, net).

Net gains on mortgage loans in the fourth quarters of 2021 and 2020, were approximately $5.6 million and $15.9 million, respectively. For full year 2021, net gains on mortgage loans totaled $35.9 million compared to $62.6 million in 2020. The decrease in net gains on mortgage loans in 2021 was primarily due to a decrease in mortgage loan sales volume, as well as a decrease in profit margins on mortgage loan sales and fair value adjustments on the mortgage loan pipeline.

Mortgage loan servicing, net, generated a gain of $1.3 million and a loss of $0.4 million in the fourth quarters of 2021 and 2020, respectively. For full year 2021 and 2020, mortgage loan servicing, net, generated a gain of $5.7 million and loss of $9.4 million, 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. Mortgage loan servicing, net activity is summarized in the following table:

Three Months Ended Twelve Months Ended 12/31/2021 12/31/2020 12/31/2021 12/31/2020 Mortgage loan servicing, (Dollars in thousands)net:Revenue, net $ 2,044 $ 1,812 $ 7,853 $ 6,874 Fair value change due to 567 (892 ) 3,380 (10,833 )priceFair value change due to (1,342 ) (1,304 ) (5,488 ) (5,391 )pay-downsTotal $ 1,269 $ (384 ) $ 5,745 $ (9,350 )

Net gain(loss) on securities available for sale totaled $(0.01) million and $1.41 million in fourth quarter and full year 2021, respectively, compared to 0.01 million and $0.27 million in the prior year fourth quarter and full year, respectively. The increase in gain during the full year of 2021 was related to the divestiture of a group of mortgage backed securities in the first quarter of 2021.

Non-interest expenses totaled $34.0 million in the fourth quarter of 2021, compared to $32.7 million in the year-ago period. For full year 2021, non-interest expenses totaled $131.0 million versus $122.4 million in 2020. These year-over-year increases in non-interest expense are primarily due to increases in compensation and employee benefits (for the year to date period), data processing, interchange, costs(recoveries) related to the reserve for unfunded lending commitments and other expenses. The increase in compensation and employee benefits in 2021 is due to several factors, including, wage increases that were generally effective at the start of the year, an increase in lending personnel, increased overtime primarily associated with a data processing conversion, higher payroll taxes due to the increase in compensation and higher health care insurance costs (these costs during 2020 were unusually low due to the various COVID related lock-downs). The increase in data processing costs is primarily due to new software and technology product and service additions. The increase in interchange expense is due primarily to changes in transaction volume and transaction channel mix. The increase in expense related to the reserve for unfunded lending commitments is due to higher committed unfunded balances.

The Company recorded an income tax expense of $3.0 million and $14.4 million in the fourth quarter and full-year 2021, respectively. This compares to an income tax expense of $4.1 million and $13.3 million in the fourth quarter and full-year 2020, respectively. The changes in income tax expense primarily reflect changes in pre-tax earnings in 2021 relative to 2020.

Asset Quality

A breakdown of loan forbearance totals by loan type is as follows:

12/31/2021 9/30/2021 % change vs. prior quarter % of % ofLoan Type portfolio portfolio # $ (000?s) # $ (000's) # $Commercial - $ - 0.0% - $ - 0.0% none noneMortgage 22 2,278 0.2% 39 5,901 0.5% (43.6)% (61.4)%Installment 1 55 0.0% 7 109 0.0% (85.7)% (49.5)%Total 23 $ 2,333 0.1% 46 $ 6,010 0.2% (50.0)% (61.2)% Loans serviced 46 $ 5,163 0.2% 64 $ 7,986 0.3% (28.1)% (35.3)%for others

Note: The % of portfolio is based on the dollar amount of forbearances to the total for the loan portfolio segment.

A breakdown of non-performing loans(1) by loan type is as follows:

Loan Type 12/31/2021 12/31/2020 12/31/2019 (Dollars in thousands)Commercial $ 62 $ 1,440 $ 1,377 Mortgage 4,914 6,353 7,996 Installment 569 519 805 Subtotal 5,545 8,312 10,178 Less ? government guaranteed loans 435 439 646 Total non-performing loans $ 5,110 $ 7,873 $ 9,532 Ratio of non-performing loans to total portfolio 0.18 % 0.29 % 0.35 %loansRatio of non-performing assets to total assets 0.11 % 0.21 % 0.32 %Ratio of the allowance for loan losses to 924.70 % 450.01 % 274.32 %non-performing loans

(1)Excludes loans that are classified as troubled debt restructured that are still performing.

Non-performing loans have decreased $2.8 million from December 31, 2020, due primarily to a decrease in non-performing commercial loans and mortgage loans.

The provision for credit losses was an expense of $0.6 million and a credit of $0.4 million in the fourth quarters of 2021 and 2020, respectively. The provision for credit losses was a credit of $1.9 million and an expense of $12.5 million in the full year of 2021 and 2020, respectively. The year-to-date decreases in the provision for credit losses in 2021 compared to 2020, were primarily the result of a decline in the adjustment to allocations based on subjective factors and the specific reserve allocations, with an increase in recoveries of loans previously charged off. In particular, the higher full year provision for credit losses in 2020 included an $11.2 million (or 128.2%) increase in the qualitative/subjective portion of the allowance for credit losses. That increase in 2020 principally reflected the unique challenges and prevailing economic uncertainty resulting from the COVID-19 pandemic and the potential impact on the loan portfolio.

The Company recorded loan net charge offs of $0.2 million and loan net recoveries of $0.1 million in the fourth quarters of 2021 and 2020, respectively. Full year 2021 and 2020, the Company recorded loan net recoveries of $2.0 million and loan net charge-offs of $3.2 million, respectively.

The allowance for credit losses totaled $47.3 million at December 31, 2021 compared to $35.4 million at December 31, 2020. The increase from December 31, 2020 is attributed to the adoption of Financial Accounting Standards Board Accounting Standards Update 2016-13, Financial Instruments Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (CECL) on January 1, 2021. The impact of the adoption of CECL was an increase in the allowance for credit losses of $11.7 million. At December 31, 2021, the allowance for credit losses equaled 1.63% of total portfolio loans (1.64% when excluding PPP loans) under CECL, compared to 1.30% of total portfolio loans (1.38% when excluding PPP loans) at December 31, 2020, under the probable incurred loss methodology.

Balance Sheet, Liquidity and Capital

Total assets were $4.70 billion at December 31, 2021, an increase of $500.7 million from December 31, 2020. Loans, excluding loans held for sale, were $2.91 billion at December 31, 2021, compared to $2.73 billion at December 31, 2020. Deposits totaled $4.12 billion at December 31, 2021, an increase of $479.7 million from December 31, 2020. This increase is primarily due to growth in non-interest bearing, savings and interest-bearing checking and reciprocal and time deposit account balances.

Cash and cash equivalents totaled $109.5 million at December 31, 2021, versus $118.7 million at December 31, 2020. Securities available for sale totaled $1.41 billion at December 31, 2021, versus $1.07 billion at December 31, 2020. The significant increase in securities available for sale is due to the deployment of funds generated from the growth in deposits.

Total shareholders equity was $398.5 million at December 31, 2021, or 8.47% of total assets. Tangible common equity totaled $366.8 million at December 31, 2021, or $17.33 per share. The Companys wholly owned subsidiary, Independent Bank, remains significantly above well capitalized for regulatory purposes with the following ratios:

Regulatory Capital Ratios 12/31/ 12/31/ Well Capitalized 2021 2020 MinimumTier 1 capital to average total assets 8.57% 8.81% 5.00%Tier 1 common equity to risk-weighted 11.80% 12.81% 6.50%assetsTier 1 capital to risk-weighted assets 11.80% 12.81% 8.00%Total capital to risk-weighted assets 13.05% 14.06% 10.00%

Share Repurchase Plan

On December 17, 2021, the Board of Directors of the Company authorized the 2021 share repurchase plan. Under the terms of the 2021 share repurchase plan, the Company is authorized to purchase up to 1,100,000 shares, or approximately 5% of its outstanding common stock. The repurchase plan is authorized to last through December 31, 2022. For the full year 2021, the Company repurchased 814,910 shares at a weighted average price of $21.19 per share.

Earnings Conference Call

Brad Kessel, President and CEO, Gavin A. Mohr, CFO and Joel Rahn, EVP-Commercial Banking will review the quarterly results in a conference call for investors and analysts beginning at 11:00 am ET on Thursday, January 27, 2022.

To participate in the live conference call, please dial 1-866-200-8394. Also the conference call will be accessible through an audio webcast with user-controlled slides via the following site/URL: https://services.choruscall.com/links/ibcp220127.html.

A playback of the call can be accessed by dialing 1-877-344-7529 (Conference ID # 8699212). The replay will be available through February 3, 2022.

About Independent Bank Corporation

Independent Bank Corporation (NASDAQ: IBCP) is a Michigan-based bank holding company with total assets of approximately $4.7 billion. Founded as First National Bank of Ionia in 1864, Independent Bank Corporation operates a branch network across Michigan's Lower Peninsula through one state-chartered bank subsidiary. This subsidiary (Independent Bank) provides a full range of financial services, including commercial banking, mortgage lending, investments and insurance. Independent Bank Corporation is committed to providing exceptional personal service and value to its customers, stockholders and the communities it serves.

For more information, please visit our Web site at: IndependentBank.com.

Forward-Looking Statements

This press release contains forward-looking statements about Independent Bank Corporation. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of Independent Bank Corporation. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. The COVID-19 pandemic is adversely affecting Independent Bank Corporation, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect Independent Bank Corporations revenues and the values of its assets and liabilities, reduce the availability of funding from certain financial institutions, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices could affect Independent Bank Corporation in substantial and unpredictable ways. Independent Bank Corporations results could also be adversely affected by changes in interest rates; further increases in unemployment rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and non-banks; changes in the level of tariffs and other trade policies of the United States and its global trading partners; changes in customer behavior and preferences; breaches in data security; failures to safeguard personal information; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and managements ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk.

Certain risks and important factors that could affect Independent Bank Corporation's future results are identified in its Annual Report on Form 10-K for the year ended December 31, 2020 and other reports filed with the SEC, including among other things under the heading Risk Factors in such Annual Report on Form 10-K. Any forward-looking statement speaks only as of the date on which it is made, and Independent Bank Corporation undertakes no obligation to update any forward-looking statement, whether to reflect events or circumstances, after the date on which the statement is made, to reflect new information or the occurrence of unanticipated events, or otherwise.

Contact:William B. Kessel, President and CEO, 616.447.3933Gavin A. Mohr, Chief Financial Officer, 616.447.3929

INDEPENDENT BANK CORPORATION AND SUBSIDIARIESConsolidated Statements of Financial Condition December 31, 2021 2020 (unaudited) (In thousands, except share amounts)AssetsCash and due from banks $ 51,069 $ 56,006 Interest bearing deposits 58,404 62,699 Cash and Cash Equivalents 109,473 118,705 Securities available for sale 1,412,830 1,072,159 Federal Home Loan Bank and Federal Reserve Bank 18,427 18,427 stock, at costLoans held for sale, carried at fair value 55,470 92,434 Loans held for sale, carried at lower of cost 34,811 - or fair valueLoans Commercial 1,203,581 1,242,415 Mortgage 1,139,659 1,015,926 Installment 561,805 475,337 Total Loans 2,905,045 2,733,678 Allowance for credit losses ^(1) (47,252 ) (35,429 )Net Loans 2,857,793 2,698,249 Other real estate and repossessed assets 245 766 Property and equipment, net 36,404 36,127 Bank-owned life insurance 55,279 55,180 Capitalized mortgage loan servicing rights, 26,232 16,904 carried at fair valueOther intangibles 3,336 4,306 Goodwill 28,300 28,300 Accrued income and other assets 66,140 62,456 Total Assets $ 4,704,740 $ 4,204,013 Liabilities and Shareholders' EquityDeposits Non-interest bearing $ 1,321,601 $ 1,153,473 Savings and interest-bearing checking 1,897,487 1,526,465 Reciprocal 586,626 556,185 Time 308,438 287,402 Brokered time 2,938 113,830 Total Deposits 4,117,090 3,637,355 Other borrowings 30,009 30,012 Subordinated debt 39,357 39,281 Subordinated debentures 39,592 39,524 Accrued expenses and other liabilities 80,208 68,319 Total Liabilities 4,306,256 3,814,491 Shareholders? Equity Preferred stock, no par value, 200,000 shares - - authorized; none issued or outstandingCommon stock, no par value, 500,000,000 shares authorized; issued and outstanding:21,171,036 shares at December 31, 2021 and 323,401 339,353 21,853,800 shares at December 31, 2020Retained earnings 74,582 40,145 Accumulated other comprehensive income 501 10,024 Total Shareholders? Equity 398,484 389,522 Total Liabilities and Shareholders? $ 4,704,740 $ 4,204,013 Equity

(1) Beginning January 1, 2021, calculation is based on CECL methodology. Priorto January 1, 2021, calculation was basedon the probable incurred lossmethodology.

INDEPENDENT BANK CORPORATION AND SUBSIDIARIESConsolidated Statements of Operations Three Months Ended Twelve Months Ended December 31, September 30, December 31, December 31, 2021 2021 2020 2021 2020 (unaudited)Interest Income (In thousands, except per share amounts)Interest and $ 30,316 $ 30,132 $ 31,139 $ 116,644 $ 123,159 fees on loansInterest onsecurities available for saleTaxable 4,114 3,922 3,299 14,488 12,655 Tax-exempt 1,577 1,597 789 6,102 2,926 Other 217 204 235 846 1,089 investmentsTotal 36,224 35,855 35,462 138,080 139,829 Interest IncomeInterest Expense Deposits 977 1,090 3,516 4,465 12,666 Otherborrowings and 962 962 953 3,850 3,551 subordinated debtand debenturesTotal 1,939 2,052 4,469 8,315 16,217 Interest ExpenseNet 34,285 33,803 30,993 129,765 123,612 Interest IncomeProvision for 630 (659 ) (421 ) (1,928 ) 12,463 credit losses ^(1)NetInterest Income 33,655 34,462 31,414 131,693 111,149 After Provisionfor Credit LossesNon-interest IncomeInterchange 3,306 4,237 2,819 14,045 11,230 incomeServicecharges on deposit 2,992 2,944 2,218 10,170 8,517 accountsNet gains (losses) on assetsMortgage 5,600 8,361 15,873 35,880 62,560 loansSecurities (10 ) 5 14 1,411 267 available for saleMortgage loan 1,269 1,271 (384 ) 5,745 (9,350 )servicing, netOther 2,614 2,877 1,823 9,392 7,521 TotalNon-interest 15,771 19,695 22,363 76,643 80,745 IncomeNon-interest ExpenseCompensationand employee 19,905 21,659 20,039 79,969 74,781 benefitsData 2,851 3,022 2,374 10,823 8,534 processingOccupancy, net 2,216 2,082 2,120 8,794 8,938 Interchange 1,083 1,202 926 4,434 3,342 expenseFurniture,fixtures and 1,060 1,075 964 4,172 4,089 equipmentLoan and 819 735 708 3,172 3,037 collectionCommunications 739 683 785 3,080 3,194 Legal and 534 513 600 2,068 2,027 professionalAdvertising 599 666 594 1,918 2,230 Conversion 191 275 1,541 1,827 2,586 related expensesFDIC deposit 413 346 385 1,396 1,596 insuranceCosts(recoveries)related to 844 369 (8 ) 1,207 263 unfunded lendingcommitmentsBranch closure - - - - 417 costsNet (gains)losses on other (28 ) (28 ) (82 ) (230 ) 64 real estate andrepossessed assetsOther 2,728 1,913 1,761 8,393 7,315 TotalNon-interest 33,954 34,512 32,707 131,023 122,413 ExpenseIncome 15,472 19,645 21,070 77,313 69,481 Before Income TaxIncome tax expense 2,964 3,683 4,084 14,418 13,329 Net $ 12,508 $ 15,962 $ 16,986 $ 62,895 $ 56,152 IncomeNet Income Per Common ShareBasic $ 0.59 $ 0.74 $ 0.78 $ 2.91 $ 2.56 Diluted $ 0.58 $ 0.73 $ 0.77 $ 2.88 $ 2.53 (1) Beginning January 1, 2021, calculation is based on CECL methodology. Priorto January 1, 2021, calculation was basedon the probable incurred lossmethodology.

INDEPENDENT BANK CORPORATION AND SUBSIDIARIESSelected Financial Data December 31, September 30, June 30, March 31, December 31, 2021 2021 2021 2021 2020 (unaudited) (Dollars in thousands except per share data)Three Months Ended Net interest income $ 34,285 $ 33,803 $ 31,393 $ 30,284 $ 30,993 Provision for credit 630 (659 ) (1,425 ) (474 ) (421 )losses ^(1)Non-interest income 15,771 19,695 14,771 26,406 22,363 Non-interest 33,954 34,512 32,536 30,021 32,707 expenseIncome 15,472 19,645 15,053 27,143 21,070 before income taxIncome tax expense 2,964 3,683 2,665 5,106 4,084 Net $ 12,508 $ 15,962 $ 12,388 $ 22,037 $ 16,986 income Basic earnings per $ 0.59 $ 0.74 $ 0.57 $ 1.01 $ 0.78 shareDiluted earnings 0.58 0.73 0.56 1.00 0.77 per shareCash dividend per 0.21 0.21 0.21 0.21 0.20 share Average shares 21,256,367 21,515,669 21,749,654 21,825,937 21,866,326 outstandingAverage diluted 21,473,963 21,726,346 21,966,829 22,058,503 22,112,829 shares outstanding Performance Ratios Return on 1.07 % 1.40 % 1.12 % 2.10 % 1.61 %average assetsReturn on 12.61 15.93 12.78 23.51 17.82 average equityEfficiency ratio ^(2) 66.68 63.47 69.24 53.48 60.59 As a Percent of Average Interest-Earning Assets^ (2)Interest income 3.30 % 3.37 % 3.22 % 3.27 % 3.57 %Interest 0.17 0.19 0.20 0.22 0.45 expenseNet interest 3.13 3.18 3.02 3.05 3.12 income Average Balances Loans $ 2,957,985 $ 2,903,700 $ 2,859,544 $ 2,834,012 $ 2,876,795 Securities 1,367,038 1,317,382 1,274,556 1,093,618 1,009,578 available for saleTotal earning 4,433,400 4,296,662 4,223,570 4,047,952 3,984,080 assetsTotal assets 4,654,491 4,513,774 4,434,760 4,254,294 4,195,546 Deposits 4,069,901 3,934,937 3,879,715 3,698,811 3,632,758 Interest 2,863,057 2,740,444 2,674,425 2,589,102 2,574,306 bearing liabilitiesShareholders' 393,477 397,542 388,780 380,111 379,232 equity End of Period Capital Tangible common 7.85 % 8.02 % 8.21 % 8.08 % 8.56 %equity ratioAverage equity 8.45 8.81 8.77 8.93 9.04 to average assetsCommon shareholders' equity per shareof common $ 18.82 $ 18.76 $ 18.30 $ 17.79 $ 17.82 stockTangible common equity per shareof common 17.33 17.27 16.82 16.30 16.33 stockTotal shares 21,171,036 21,321,092 21,632,912 21,773,734 21,853,800 outstanding Selected Balances Loans $ 2,905,045 $ 2,883,978 $ 2,814,559 $ 2,784,224 $ 2,733,678 Securities 1,412,830 1,348,378 1,330,660 1,247,280 1,072,159 available for saleTotal earning 4,484,987 4,405,189 4,246,410 4,209,017 3,979,397 assetsTotal assets 4,704,740 4,622,340 4,461,272 4,426,440 4,204,013 Deposits 4,117,090 4,012,068 3,862,466 3,858,575 3,637,355 Interest 2,865,090 2,784,554 2,633,747 2,626,280 2,553,418 bearing liabilitiesShareholders' 398,484 400,031 395,974 387,329 389,522 equity (1) Beginning January 1, 2021, calculation is based on CECL methodology. Priorto January 1, 2021, calculation was basedon the probable incurred lossmethodology.(2) Presented on a fully tax equivalent basis assuming a marginal tax rate of 21%.

Reconciliation of Non-GAAP Financial MeasuresIndependent Bank Corporation

Independent Bank Corporation believes non-GAAP measures are meaningful because they reflect adjustments commonly made by management, investors, regulators and analysts to evaluate the adequacy of common equity and performance trends. Tangible common equity is used by the Company to measure the quality of capital.

Reconciliationof Non-GAAP FinancialMeasures Three Months Ended Twelve Months Ended December 31, December 31, 2021 2020 2021 2020 (Dollars in thousands) Net InterestMargin, Fully TaxableEquivalent ("FTE") Net interest $ 34,285 $ 30,993 $ 129,765 $ 123,612 incomeAdd: taxableequivalent 492 221 1,866 823 adjustmentNet interestincome - taxable $ 34,777 $ 31,214 $ 131,631 $ 124,435 equivalentNet interestmargin (GAAP) ^ 3.08 % 3.10 % 3.06 % 3.32 %(1)Net interestmargin (FTE) ^ 3.13 % 3.12 % 3.10 % 3.34 %(1) (1) Annualized for threemonths ended December 31, 2021 and 2020.

Reconciliation of Non-GAAP Financial Measures (continued)Independent Bank Corporation Tangible Common Equity Ratio December 31, September 30, June 30, March 31, December 31, 2021 2021 2021 2021 2020 (Dollars in thousands)Commonshareholders' $ 398,484 $ 400,031 $ 395,974 $ 387,329 $ 389,522 equityLess: Goodwill 28,300 28,300 28,300 28,300 28,300 Other 3,336 3,579 3,821 4,063 4,306 intangiblesTangible common $ 366,848 $ 368,152 $ 363,853 $ 354,966 $ 356,916 equity Total assets $ 4,704,740 $ 4,622,340 $ 4,461,272 $ 4,426,440 $ 4,204,013 Less: Goodwill 28,300 28,300 28,300 28,300 28,300 Other 3,336 3,579 3,821 4,063 4,306 intangiblesTangible assets $ 4,673,104 $ 4,590,461 $ 4,429,151 $ 4,394,077 $ 4,171,407 Common equity 8.47 % 8.65 % 8.88 % 8.75 % 9.27 %ratioTangible common 7.85 % 8.02 % 8.21 % 8.08 % 8.56 %equity ratio Tangible Common Equity per Share of Common Stock: Commonshareholders' $ 398,484 $ 400,031 $ 395,974 $ 387,329 $ 389,522 equityTangible common $ 366,848 $ 368,152 $ 363,853 $ 354,966 $ 356,916 equityShares of common stockoutstanding 21,171 21,321 21,633 21,774 21,854 (in thousands) Commonshareholders' equity per shareof common $ 18.82 $ 18.76 $ 18.30 $ 17.79 $ 17.82 stockTangible common equity per shareof common $ 17.33 $ 17.27 $ 16.82 $ 16.30 $ 16.33 stock

The tangible common equity ratio removes the effect of goodwill and other intangible assets from capital and total assets. Tangible common equity per share of common stock removes the effect of goodwill and other intangible assets from common shareholders equity per share of common stock.