GlobeNewswire Inc | Jul 28, 2020 07:59AM EDT

July 28, 2020

GRAND RAPIDS, Mich., July 28, 2020 (GLOBE NEWSWIRE) -- Independent Bank Corporation (NASDAQ: IBCP) reported second quarter 2020 net income of $14.8 million, or $0.67 per diluted share, versus net income of $10.7 million, or $0.46 per diluted share, in the prior-year period. For the six months ended June 30, 2020, the Company reported net income of $19.6 million, or $0.88 per diluted share, compared to net income of $20.1 million, or $0.85 per diluted share, in the prior-year period. The increase in second quarter 2020 earnings as compared to 2019 primarily reflects an increase in non-interest income that was partially offset by a decline in net interest income and increases in the provision for loan losses, non-interest expense and income tax expense. The slight decline in year-to-date 2020 earnings as compared to 2019 primarily reflects a decline in net interest income and increases in the provision for loan losses and non-interest expense that were partially offset by an increase in non-interest income and a decrease in income tax expense.

Before discussing the 2020 financial results in greater detail, the following is an update on the impact to our organization of the COVID-19 pandemic, which continues to cause significant hardship for many of our customers and communities in a variety of ways. That is especially true for those who have been infected by the virus and suffered through the health issues that it has caused. Our thoughts are with those who have been directly impacted, and we also extend our appreciation to those who have aided and supported them.

The Company continues to respond to the challenges of the current environment. Our response was initially formulated during the month of February 2020 as we prepared our infrastructure to allow the majority of our associates to work remotely. In March 2020 we activated our Business Continuity Plan to protect our customers, employees and business. We will continue to take the necessary steps to serve our communities while doing our part to minimize the spread of COVID-19. The following is a brief description of our current initiatives:

-- Customer Safety and Service Levels From mid-March to mid-June we limited our branch lobbies to appointment only and kept drive-through windows open. In mid-June our bank branch lobbies fully reopened. With the ability to use drive through service, ATMs or our electronic banking solutions there was minimal disruption to customers. In addition, our flexible operating network allowed us to efficiently redeploy our associates, as necessary, to high volume areas to fulfill customer requests into our call center, requests for consumer and commercial loan payment relief and mortgage financing requests.

-- Employee Safety For employees that are in our bank branches servicing our customers, we have expanded sick and vacation time. All non-branch employees either have the option or are required to work remotely. We currently have approximately 40% of our total staff working remotely every day. We have installed customer friendly shields throughout our delivery network and have implemented a variety of other protective processes to put both customers and staff at ease. We continue to comply with the Governor of Michigans Safe at Home executive orders and MI Safe Start Plan as they apply to our business. -- Loan Forbearances We have forbearance programs in place to proactively work with our customers who have experienced financial difficulty due to the COVID-19 pandemic. As of June 30, 2020 we had active forbearance agreements with 259 commercial customers with $210.5 million in loans, 668 retail (mortgage and installment loan) customers with $88.7 million in loans, and 773 customers with $114.8 million within our mortgage loans sold and serviced for others. These dollar amounts represent 15.4%, 5.9% and 4.2% of the related total loan portfolio balances. As of July 23, 2020 the active forbearance agreements had changed as follows: 260 commercial customers with $211.8 million in loans, 524 retail customers with $71.0 million in loans, and 639 customers with $98.2 million within our mortgage loans sold and serviced for others. The level of these loans are down after peaking in mid-June 2020, as many customers economic situations have improved, allowing them to pay their loans current. The forbearance terms are flexible enough to meet the specific needs of each customer, while protecting the safety and soundness of the Company.

-- U.S. Small Business Administration (SBA) Payroll Protection Program (PPP) Our response, and focus on this vital program, shows our commitment to the communities we serve. We built an effective process to manage the high volume of applications that we received and processed. Customer demand for this program was extraordinary. As of June 30, 2020, we had 2,012 PPP loans outstanding with a total balance of $259.4 million. The average balance of PPP loans in the second quarter of 2020 was $191.1 million with an average yield of 3.05% (including the accretion of approximately $1.0 million of net fees). The PPP loan portfolio reduced the average yield on interest-earning assets by an estimated 0.04% in the second quarter of 2020. At June 30, 2020, there was $7.7 million of remaining unaccreted net fees related to PPP loans. These net fees are expected to be accreted into interest income over the next 20 months and the pace of such accretion will depend on payment activity (including loan forgiveness) within the PPP loan portfolio. The PPP has been extended to August 8, 2020. We have received approximately 35 forgiveness applications that will be submitted once the SBA Forgiveness portal is activated.

-- Federal Reserve Main Street Lending Program (MSLP) We submitted an application and were approved as a MSLP lender. This program is designed to support small and medium-sized businesses that were in sound financial condition before the COVID-19 pandemic. U.S. businesses may be eligible for MSLP loans if they meet either of the following conditions: (1) the business has 15,000 employees or fewer; or (2) the business had 2019 revenues of $5 billion or less. As of July 14, 2020 we had received three loan applications under the MSLP.

Significant items impacting comparable quarterly and year to date 2020 and 2019 results include the following:

-- Changes in the fair value due to price of capitalized mortgage loan servicing rights (the MSR Changes) of a negative $2.9 million ($0.10 per diluted share, after taxes) and a negative $8.9 million ($0.31 per diluted share, after taxes) for the three- and six-months ended June 30, 2020, respectively, as compared to a negative $2.7 million ($0.09 per diluted share, after taxes) and a negative $4.9 million ($0.16 per diluted share, after taxes) for the three- and six-months ended June 30, 2019, respectively. -- Approximately $0.76 million ($0.03 per diluted share, after taxes) and $0.82 million ($0.03 per diluted share, after taxes) of expenses related to a pending data processing conversion and bank branch closures (as described further below under Operating Results) for the three- and six-months ended June 30, 2020, respectively

Second quarter 2020 highlights include:

-- Increases in net income and diluted earnings per share of 37.7% and 45.7%, respectively, compared to 2019; -- Return on average assets and return on average equity of 1.54% and 17.39%, respectively; -- Net gains on mortgage loans of $17.6 million (up 310.1% over 2019) and total mortgage loan origination volume of $470.6 million; -- Total portfolio loan net growth of $148.5 million; -- Deposit net growth of $401.6 million; -- The issuance of $40.0 million of subordinated debt in May 2020; -- Continued strong asset quality metrics; and -- The payment of a 20 cent per share dividend on common stock on May 15, 2020.

William B. (Brad) Kessel, the President and Chief Executive Officer of Independent Bank Corporation, commented: We are pleased to report a very strong financial performance in the second quarter of 2020 despite the many challenges brought on by the COVID-19 pandemic. Our associates did an amazing job during the quarter! We closed nearly one-half billion dollars of mortgage loans, helping our customers buy new homes or refinance existing mortgage loans. We closed over $250 million of PPP loans, helping our customers keep their employees on the payroll and their businesses operating. We actively administered over 1,700 loan forbearance plans to help our business and retail customers who have been adversely impacted by the COVID-19 pandemic. We continued to effectively operate our Business Continuity Plan to safely serve our customers and protect our employees. Finally, we maintained solid asset quality metrics during the second quarter of 2020. As we look ahead to the last half of 2020 and beyond, we are mindful of the ongoing challenges from the COVID-19 pandemic, but we are confident of our continued ability to effectively respond to these challenges and remain optimistic about our future.

Operating Results

The Companys net interest income totaled $30.5 million during the second quarter of 2020, a decrease of $0.3 million, or 1.0% from the year-ago period, but up $0.3 million, or 0.9%, from the first quarter of 2020. The Companys tax equivalent net interest income as a percent of average interest-earning assets (the net interest margin) was 3.36% during the second quarter of 2020, compared to 3.87% in the year-ago period, and 3.63% in the first quarter of 2020. The year-over-year quarterly decrease in net interest income is due to a decline in the net interest margin that was partially offset by an increase in average interest-earning assets. Average interest-earning assets were $3.66 billion in the second quarter of 2020, compared to $3.19 billion in the year ago quarter and $3.35 billion in the first quarter of 2020.

For the first six months of 2020, net interest income totaled $60.7 million, a decrease of $0.3 million, or 0.6% from the first half of 2019. The Companys net interest margin for the first six months of 2020 was 3.49% compared to 3.88% in 2019. The decrease in net interest income for the first six months of 2020 compared to 2019 is also due to a decline in the net interest margin that was partially offset by an increase in average interest-earning assets.

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.

Non-interest income totaled $20.4 million and $31.4 million, respectively, for the second quarter and first six months of 2020, compared to $9.9 million and $19.9 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 second quarters of 2020 and 2019, were approximately $17.6 million and $4.3 million, respectively. For the first six months of 2020, net gains on mortgage loans totaled $26.5 million compared to $7.9 million in 2019. The increase in net gains on mortgage loans was primarily due to an increase in mortgage loan sales volume in 2020, improved profit margins on mortgage loan sales, and fair value adjustments on the mortgage loan pipeline.

Mortgage loan servicing, net, generated a loss of $3.0 million and $1.9 million in the second quarters of 2020 and 2019, respectively. For the first six months of 2020 and 2019, mortgage loan servicing, net, generated a loss of $8.3 million and $3.1 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 Six Months Ended 6/30/ 6/30/2019 6/30/2020 6/30/2019 2020Mortgage loan servicing, (Dollars in thousands)net:Revenue, net $ $ $ $ 1,646 1,515 3,319 2,991Fair value change due to ) ) ) )price (2,921 (2,670 (8,852 (4,873Fair value change due to (1,747 ) (752 ) (2,789 ) (1,240 )pay-downsTotal $ (3,022 ) $ (1,907 ) $ (8,322 ) $ (3,122 )

Non-interest expenses totaled $27.3 million in the second quarter of 2020, compared to $26.6 million in the year-ago period. For the first six months of 2020, non-interest expenses totaled $56.1 million versus $54.6 million in 2019. These year-over-year increases in non-interest expense are primarily due to increases in compensation, loan and collection expense and legal and professional fees. The increase in compensation is due in part to $0.4 million in bonuses paid during the second quarter of 2020 to front-line personnel due to their extraordinary efforts during the COVID-19 pandemic. In addition, the second quarter of 2020 includes $0.3 million of expenses related to the Companys core data processing conversion that is in process (this conversion is expected to be completed in April 2021) and $0.4 million of expenses (primarily write-downs of fixed assets and leases) related to the closures of six bank branch offices that are expected to occur on July 31, 2020.

The Company recorded an income tax expense of $3.5 million and $4.5 million in the second quarter and first six months of 2020, respectively. This compares to an income tax expense of $2.7 million and $4.9 million in the second quarter and first six months of 2019, respectively. The changes in income tax expense reflect changes in pre-tax earnings in 2020 relative to 2019.

Asset Quality

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

Loan Type 6/30/ 12/31/ 6/30/2019 2020 2019 (Dollars in thousands)Commercial $ 4,886 $ 1,377 $ 900 Consumer/installment 602 805 901 Mortgage 7,455 7,996 5,997 Subtotal 12,943 10,178 7,798 Less ? government guaranteed loans 604 646 436 Total non-performing loans $ 12,339 $ 9,532 $ 7,362 Ratio of non-performing loans to total 0.43% 0.35% 0.27% portfolio loansRatio of non-performing assets to total 0.34% 0.32% 0.27% assetsRatio of the allowance for loan losses to 279.60% 351.85% non-performing loans 274.32%

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

Non-performing loans have increased $2.8 million from December 31, 2019 due primarily to an increase in non-performing commercial loans. This increase principally reflects one specific loan relationship. This loan relationship was in watch credit status at December 31, 2019, moved into non-accrual in the first quarter of 2020 and was charged down by $4.0 million in the second quarter of 2020, to a remaining balance of $2.9 million. Approximately $2.6 million of this remaining loan balance was paid on July 21, 2020 from the auction of assets securing the loan and $0.3 million is fully reserved with collection efforts continuing. Other real estate and repossessed assets totaled $1.6 million at June 30, 2020, compared to $1.9 million at December 31, 2019.

The provision for loan losses was an expense of $5.2 million and $0.7 million in the second quarters of 2020 and 2019, respectively. The provision for loan losses was an expense of $11.9 million and $1.3 million in the first six months of 2020 and 2019, respectively. The level of the provision for loan losses in each period reflects the Companys overall assessment of the allowance for loan losses, taking into consideration factors such as loan growth, loan mix, levels of non-performing and classified loans and loan net charge-offs. In addition, the higher year-to-date provision for loan losses includes an $8.7 million (or 98.2%) increase in the qualitative/subjective portion of the allowance for loan losses. This increase principally reflects the unique challenges and economic uncertainty resulting from the COVID-19 pandemic and the potential impact on the loan portfolio. The Company recorded loan net charge-offs of $3.183 million and $0.003 million in the second quarters of 2020 and 2019, respectively. For the first six months of 2020 and 2019, the Company recorded loan net charge-offs of $3.557 million and $0.301 million, respectively. At June 30, 2020, the allowance for loan losses totaled $34.5 million, or 1.20% of total portfolio loans, compared to $26.1 million, or 0.96% of total portfolio loans, at December 31, 2019. Excluding PPP loans and the remaining Traverse City State Bank acquired loan balances, the allowance for loan losses was equal to 1.38% of portfolio loans at June 30, 2020.

Balance Sheet, Liquidity and Capital

Total assets were $4.04 billion at June 30, 2020, an increase of $478.6 million from December 31, 2019. Loans, excluding loans held for sale, were $2.87 billion at June 30, 2020, compared to $2.73 billion at December 31, 2019. Deposits totaled $3.49 billion at June 30, 2020, an increase of $448.4 million from December 31, 2019. This increase is primarily due to growth in non-interest bearing checking, savings and interest-bearing checking and reciprocal deposit account balances.

Cash and cash equivalents totaled $55.8 million at June 30, 2020, versus $65.3 million at December 31, 2019. Securities available for sale totaled $856.3 million at June 30, 2020, versus $518.4 million at December 31, 2019. The significant increase in securities available for sale is due to the deployment of funds generated from the growth in deposits.

In May 2020, the Company issued $40.0 million of subordinated notes with a ten year maturity, a five year call option and an initial coupon interest rate (fixed for the first five years) of 5.95%.

Total shareholders equity was $355.1 million at June 30, 2020, or 8.78% of total assets. Tangible common equity totaled $322.0 million at June 30, 2020, or $14.72 per share. The Companys wholly owned subsidiary, Independent Bank, remains significantly above well capitalized for regulatory purposes with the following ratios:

Regulatory Capital Ratios 6/30/ 12/31/ Well Capitalized 2020 2019 Minimum

Tier 1 capital to average total assets % 9.49 % 5.00 % 8.76Tier 1 common equity to 12.07 % 11.96 % 6.50 %risk-weighted assetsTier 1 capital to risk-weighted assets 12.07 % 11.96 % 8.00 %Total capital to risk-weighted assets 13.32 % 12.96 % 10.00 %

Share Repurchase Plan

As previously announced, on December 17, 2019, the Board of Directors of the Company authorized the 2020 share repurchase plan. Under the terms of the 2020 share repurchase plan, the Company is authorized to buy back up to 1,120,000 shares, or approximately 5% of its outstanding common stock. The repurchase plan is authorized to last through December 31, 2020. During the first quarter of 2020, the Company repurchased 678,929 shares at a weighted average price of $20.30 per share. Due primarily to the economic uncertainty brought on by the COVID-19 pandemic, share repurchase activity ceased on March 16, 2020, and is on hold at this time.

Earnings Conference CallBrad Kessel, President and CEO and Rob Shuster, CFO will review the quarterly results in a conference call for investors and analysts beginning at 11:00 am ET on Tuesday, July 28, 2020.

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 event site/URL: https://services.choruscall.com/links/ibcp200728.html.



A playback of the call can be accessed by dialing 1-877-344-7529 (Conference ID # 10145927). The replay will be available through August 4, 2020.

About Independent Bank Corporation

Independent Bank Corporation (NASDAQ: IBCP) is a Michigan-based bank holding company with total assets of approximately $4.0 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, 2019 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.

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES Consolidated Statements of Financial Condition June 30, December 31, 2020 2019 (unaudited) (In thousands, except share amounts) Assets Cash and due from banks $ 47,369 $ 53,295 Interest bearing deposits 8,447 12,009 Cash and Cash Equivalents 55,816 65,304 Interest bearing deposits - time - 350 Securities available for sale 856,280 518,400 Federal Home Loan Bank and Federal Reserve 18,427 18,359 Bank stock, at costLoans held for sale, carried at fair value 83,706 69,800 Loans Commercial 1,362,956 1,166,695 Mortgage 1,041,684 1,098,911 Installment 462,023 459,417 Total Loans 2,866,663 2,725,023 Allowance for loan losses (34,500 ) (26,148 ) Net Loans 2,832,163 2,698,875 Other real estate and repossessed assets 1,569 1,865 Property and equipment, net 36,962 38,411 Bank-owned life insurance 55,300 55,710 Deferred tax assets, net 2,483 2,072 Capitalized mortgage loan servicing rights 13,773 19,171 Other intangibles 4,816 5,326 Goodwill 28,300 28,300 Accrued income and other assets 53,720 42,751 Total Assets $ 4,043,315 $ 3,564,694 Liabilities and Shareholders' Equity Deposits Non-interest bearing $ 1,118,424 $ 852,076 Savings and interest-bearing checking 1,375,523 1,186,745 Reciprocal 535,398 431,027 Time 323,993 376,877 Brokered time 131,787 190,002 Total Deposits 3,485,125 3,036,727 Other borrowings 50,002 88,646 Subordinated debt 39,283 - Subordinated debentures 39,490 39,456 Accrued expenses and other liabilities 74,292 49,696 Total Liabilities 3,688,192 3,214,525 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:21,880,183 shares at June 30, 2020 and 338,989 352,344 22,481,643 shares at December 31, 2019Retained earnings 12,338 1,611 Accumulated other comprehensive income (loss) 3,796 (3,786 ) Total Shareholders? Equity 355,123 350,169 Total Liabilities and Shareholders? Equity $ 4,043,315 $ 3,564,694

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, 2020 2020 2019 2020 2019 (unaudited) Interest (In thousands, except per share amounts) IncomeInterest and $ 29,863 $ 31,764 $ 33,836 $ 61,627 $ 66,517 fees on loansInterest onsecurities available forsaleTaxable 2,847 3,059 3,034 5,906 6,040 Tax-exempt 793 390 324 1,183 698 Other 251 366 379 617 954 investments TotalInterest 33,754 35,579 37,573 69,333 74,209 IncomeInterest ExpenseDeposits 2,388 4,700 6,021 7,088 11,702 Otherborrowings andsubordinated 904 688 796 1,592 1,508 debt anddebentures TotalInterest 3,292 5,388 6,817 8,680 13,210 Expense NetInterest 30,462 30,191 30,756 60,653 60,999 IncomeProvision for 5,188 6,721 652 11,909 1,316 loan losses NetInterestIncome After 25,274 23,470 30,104 48,744 59,683 Provision forLoan LossesNon-interest IncomeServicecharges on 1,623 2,591 2,800 4,214 5,440 depositaccountsInterchange 2,526 2,457 2,604 4,983 4,959 incomeNet gains on assetsMortgage loans 17,642 8,840 4,302 26,482 7,913 Securitiesavailable for - 253 - 253 304 saleMortgage loan (3,022 ) (5,300 ) (1,907 ) (8,322 ) (3,122 ) servicing, netOther 1,598 2,163 2,106 3,761 4,370 TotalNon-interest 20,367 11,004 9,905 31,371 19,864 IncomeNon-interest ExpenseCompensationand employee 16,279 16,509 15,931 32,788 32,282 benefitsOccupancy, net 2,159 2,460 2,131 4,619 4,636 Data 1,590 2,355 2,171 3,945 4,315 processingFurniture,fixtures and 1,090 1,036 1,006 2,126 2,035 equipmentCommunications 800 803 717 1,603 1,486 Interchange 726 859 753 1,585 1,441 expenseLoan and 756 805 628 1,561 1,262 collectionAdvertising 364 683 627 1,047 1,299 Legal and 468 393 371 861 740 professionalFDIC deposit 430 370 342 800 710 insuranceBranch closure 417 - - 417 - costsConversionrelated 346 56 - 402 - expensesCredit cardand bank 94 99 97 193 200 service feesNet (gains)losses onother real (9 ) 109 (198 ) 100 (79 ) estate andrepossessedassetsOther 1,836 2,182 2,016 4,018 4,255 TotalNon-interest 27,346 28,719 26,592 56,065 54,582 Expense IncomeBefore Income 18,295 5,755 13,417 24,050 24,965 TaxIncome tax 3,523 945 2,687 4,468 4,854 expense Net Income $ 14,772 $ 4,810 $ 10,730 $ 19,582 $ 20,111 Net Income Per Common ShareBasic $ 0.67 $ 0.22 $ 0.47 $ 0.89 $ 0.86 Diluted $ 0.67 $ 0.21 $ 0.46 $ 0.88 $ 0.85

INDEPENDENT BANK CORPORATION AND SUBSIDIARIESSelected Financial Data June 30, March 31, December 31, September 30, June 30, 2020 2020 2019 2019 2019 (unaudited) (Dollars in thousands except per share data)Three Months EndedNet interest $ 30,462 $ 30,191 $ 30,710 $ 30,872 $ 30,756 incomeProvision for 5,188 6,721 (221 ) (271 ) 652 loan lossesNon-interest 20,367 11,004 15,597 12,275 9,905 incomeNon-interest 27,346 28,719 29,303 27,848 26,592 expenseIncome before 18,295 5,755 17,225 15,570 13,417 income taxIncome tax 3,523 945 3,346 3,125 2,687 expenseNet income $ 14,772 $ 4,810 $ 13,879 $ 12,445 $ 10,730 Basicearnings per $ 0.67 $ 0.22 $ 0.62 $ 0.55 $ 0.47 shareDilutedearnings per 0.67 0.21 0.61 0.55 0.46 shareCash dividend 0.20 0.20 0.18 0.18 0.18 per share Averageshares 21,890,761 22,271,412 22,481,551 22,486,041 23,035,526 outstandingAveragediluted 22,113,187 22,529,370 22,776,908 22,769,572 23,313,346 sharesoutstanding Performance RatiosReturn onaverage 1.54 % 0.54 % 1.56 % 1.42 % 1.27 %assetsReturn onaverage 17.39 5.54 15.92 14.64 12.72 equityEfficiency 53.07 69.32 62.56 63.76 64.57 ratio ^(1) As a Percent of AverageInterest-Earning Assets^ (1)Interest 3.72 % 4.28 % 4.44 % 4.60 % 4.73 %incomeInterest 0.36 0.65 0.74 0.84 0.86 expenseNet interest 3.36 3.63 3.70 3.76 3.87 income Average BalancesLoans $ 2,913,857 $ 2,766,770 $ 2,776,037 $ 2,786,544 $ 2,699,648 Securitiesavailable for 660,126 527,395 488,016 423,255 441,523 saleTotal earning 3,659,614 3,350,948 3,320,828 3,285,081 3,191,264 assetsTotal assets 3,868,408 3,565,829 3,529,744 3,483,296 3,388,398 Deposits 3,303,302 3,066,298 3,040,099 3,023,334 2,929,885 Interestbearing 2,402,361 2,309,995 2,251,928 2,219,133 2,155,660 liabilitiesShareholders' 341,606 348,963 345,910 337,162 338,254 equity End of Period Capital Tangiblecommon equity 8.03 % 8.40 8.96 % 8.71 % 8.72 %ratioAverageequity to 8.83 9.79 9.80 9.68 9.98 averageassetsTangiblecommon equity per shareof common $ 14.72 $ 13.81 $ 14.08 $ 13.63 $ 13.19 stockTotal shares 21,880,183 21,892,001 22,481,643 22,480,748 22,498,776 outstanding Selected BalancesLoans $ 2,866,663 $ 2,718,115 $ 2,725,023 $ 2,722,446 $ 2,706,526 Securitiesavailable for 856,280 594,284 518,400 439,592 430,305 saleTotal earning 3,833,523 3,416,845 3,343,941 3,348,631 3,239,247 assetsTotal assets 4,043,315 3,632,387 3,564,694 3,550,837 3,438,302 Deposits 3,485,125 3,083,564 3,036,727 3,052,312 2,978,885 Interestbearing 2,456,193 2,350,056 2,312,753 2,272,587 2,194,970 liabilitiesShareholders' 355,123 335,618 350,169 340,245 330,846 equity (1) 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.

Reconciliation ofNon-GAAP Financial Measures Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (Dollars in thousands)Net InterestMargin, Fully TaxableEquivalent ("FTE") Net interest income $ 30,462 $ 30,756 $ 60,653 $ 60,999 Add: taxableequivalent 223 102 344 219 adjustmentNet interest income- taxable $ 30,685 $ 30,858 $ 60,997 $ 61,218 equivalentNet interest margin 3.34% 3.86% 3.47% 3.86% (GAAP) ^(1)Net interest margin 3.36% 3.87% 3.49% 3.88% (FTE) ^(1) Adjusted Net Income before tax Income before $ 18,295 $ 13,417 $ 24,050 $ 24,965 income taxProvision for loan 5,188 652 11,909 1,316 lossesPre-tax,pre-provision $ 23,483 $ 14,069 $ 35,959 $ 26,281 income (1) Annualized.

Reconciliation of Non-GAAP Financial Measures (continued)IndependentBank Corporation TangibleCommon Equity Ratio June 30, March 31, December 31, September 30, June 30, 2020 2020 2019 2019 2019 (Dollars in thousands) Commonshareholders' $ 355,123 $ 335,618 $ 350,169 $ 340,245 $ 330,846 equityLess: Goodwill 28,300 28,300 28,300 28,300 28,300 Other 4,816 5,071 5,326 5,598 5,870 intangiblesTangible $ 322,007 $ 302,247 $ 316,543 $ 306,347 $ 296,676 common equity Total assets $ 4,043,315 $ 3,632,387 $ 3,564,694 $ 3,550,837 $ 3,438,302 Less: Goodwill 28,300 28,300 28,300 28,300 28,300 Other 4,816 5,071 5,326 5,598 5,870 intangiblesTangible $ 4,010,199 $ 3,599,016 $ 3,531,068 $ 3,516,939 $ 3,404,132 assets Common equity 8.78 % 9.24 % 9.82 % 9.58 % 9.62 % ratioTangiblecommon equity 8.03 % 8.40 % 8.96 % 8.71 % 8.72 % ratio Tangible Common Equity per Share of Common Stock: Commonshareholders' $ 355,123 $ 335,618 $ 350,169 $ 340,245 $ 330,846 equityTangible $ 322,007 $ 302,247 $ 316,543 $ 306,347 $ 296,676 common equityShares of common stockoutstanding 21,880 21,892 22,482 22,481 22,499 (in thousands) Commonshareholders' equity pershareof common $ 16.23 $ 15.33 $ 15.58 $ 15.13 $ 14.70 stockTangiblecommon equity per shareof common $ 14.72 $ 13.81 $ 14.08 $ 13.63 $ 13.19 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.

Contact: William B. Kessel, President and CEO, 616.447.3933 Robert N. Shuster, Chief Financial Officer, 616.522.1765