Market Overview

Independent Bank Corporation Reports 2018 Second Quarter Results

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GRAND RAPIDS, Mich., July 26, 2018 (GLOBE NEWSWIRE) -- Independent Bank Corporation (NASDAQ:IBCP) reported second quarter 2018 net income of $8.8 million, or $0.36 per diluted share, versus net income of $5.9 million, or $0.27 per diluted share, in the prior-year period.  For the six months ended June 30, 2018, the Company reported net income of $18.0 million, or $0.78 per diluted share, compared to net income of $11.9 million, or $0.55 per diluted share, in the prior-year period.  The increases in second quarter and year to date 2018 earnings as compared to 2017 primarily reflect increases in net interest income and in non-interest income and a decrease in income tax expense that were partially offset by increases in the provision for loan losses and in non-interest expense.

Significant items impacting comparable quarterly and year to date 2018 and 2017 results include the following:

  • The acquisition of TCSB Bancorp, Inc. ("TCSB"), and its subsidiary, Traverse City State Bank, on Apr. 1, 2018 (the "Merger") and the associated data processing systems conversions in June 2018.  The total assets, loans and deposits acquired in the Merger were approximately $342.8 million, $295.8 million (including $1.3 million of loans held for sale) and $287.7 million, respectively.
  • Merger related expenses of $3.1 million ($0.10 per diluted share, after taxes) and $3.3 million ($0.11 per diluted share, after taxes) for the three- and six-months ended June 30, 2018, respectively.
  • Positive changes in the fair value due to price of capitalized mortgage loan servicing rights of $0.5 million ($0.02 per diluted share, after taxes) and $2.0 million ($0.07 per diluted share, after taxes) for the three- and six-months ended June 30, 2018, respectively, as compared to negative changes of $0.6 million ($0.02 per diluted share, after taxes) and $0.5 million ($0.02 per diluted share, after taxes) for the three- and six-months ended June 30, 2017, respectively.
  • The passage of the "Tax Cuts and Jobs Act" which, among other things, reduced the federal corporate income tax rate to 21% (from 35%) effective January 1, 2018.

Second quarter 2018 highlights include:

  • Year-over-year increases in net income and diluted earnings per share of 48.7% and 33.3%, respectively;
  • A year-over-year increase in quarterly net interest income of $7.5 million, or 34.8%;
  • Total portfolio loan net growth of $101.4 million, or 19.6% annualized, excluding $294.5 million of TCSB loans acquired in the Merger;
  • Continued strong asset quality metrics; and
  • The payment of a 15 cent per share dividend on common stock on May 15, 2018.

William B. ("Brad") Kessel, the President and Chief Executive Officer of Independent Bank Corporation, commented: "We are pleased to report another quarter of solid financial performance.  Excluding the impact of Merger related expenses and the positive fair value change in the price of our capitalized mortgage loan servicing rights, our second quarter 2018 results exceeded our expectations.  The favorable impact of the TCSB acquisition combined with strong loan origination activity led to significant loan growth and increased net interest income.  We successfully completed the TCSB data processing conversions in June 2018, and are on-track to realize our projected cost savings of approximately $0.9 million per quarter beginning in the third quarter of this year.  As we look ahead to the remainder of 2018 and beyond, we are focused on building on the momentum generated in the first half of 2018."

Operating Results

The Company's net interest income totaled $29.0 million during the second quarter of 2018, an increase of $7.5 million, or 34.8% from the year-ago period, and up $5.0 million, or 21.1%, from the first quarter of 2018.  The Company's tax equivalent net interest income as a percent of average interest-earning assets (the "net interest margin") was 3.93% during the second quarter of 2018, compared to 3.60% in the year-ago period, and 3.71% in the first quarter of 2018.  The year-over-year quarterly increase in net interest income is due to increases in both average interest-earning assets and in the net interest margin.  Average interest-earning assets were $2.96 billion in the second quarter of 2018, compared to $2.42 billion in the year ago quarter and $2.61 billion in the first quarter of 2018.  Second quarter 2018 interest income on loans includes $0.6 million of accretion of the discount recorded on the TCSB loans acquired in the Merger.  The total discount initially recorded on the TCSB loans acquired in the Merger was $6.5 million (or approximately 2.2% of the total TCSB loans acquired in the Merger).  

For the first six months of 2018, net interest income totaled $52.9 million, an increase of $10.0 million, or 23.2% from the first half of 2017.  The Company's net interest margin for the first six months of 2018 was 3.83% compared to 3.65% in 2017.  The increase in net interest income for the first six months of 2018 is due to increases in both average interest-earning assets and in the net interest margin.

Non-interest income totaled $12.3 million and $24.0 million, respectively, for the second quarter and first six months of 2018, compared to $10.4 million and $20.8 million in the respective comparable year ago periods.  These increases were primarily due to growth in mortgage loan servicing income, net.

The Company adopted Financial Accounting Standards Board Accounting Standards Update 2014-09 "Revenue from Contracts with Customers (Topic 606)" ("ASU 2014-09") on Jan. 1, 2018, using the modified retrospective approach.  Although ASU 2014-09 did not have any impact on Jan. 1, 2018 shareholders' equity or 2018 net income, it did result in some classification changes in non-interest income and non-interest expense as compared to the prior year period.  Specifically, in the second quarter and first six months of 2018, interchange income and interchange expense each increased by $0.4 million and $0.7 million, respectively, due to classification changes under ASU 2014-09.  
                                                                                                                                
Net gains on mortgage loans were approximately $3.3 million in both the second quarters of 2018 and 2017.  For the first six months of 2018, net gains on mortgage loans totaled $5.8 million compared to $5.9 million in 2017.  An increase in mortgage loan sales volume in 2018 was offset by margin compression due principally to competitive factors.

Mortgage loan servicing, net, generated income of $1.2 million and a loss of $0.2 million in the second quarters of 2018 and 2017, respectively. For the first six months of 2018, mortgage loan servicing, net, generated income of $3.5 million as compared to income of $0.7 million in 2017. This activity is summarized in the following table:

     
    Three Months Ended   Six Months Ended
    6/30/2018   6/30/2017   6/30/2018   6/30/2017  
Mortgage loan servicing, net:  (Dollars in thousands)   
  Revenue, net $     1,372   $     1,073   $     2,564   $     2,162  
  Fair value change due to price     518     (648 )     1,976     (503 )
  Fair value change due to pay-downs   (655 )   (583 )   (1,084 )   (992 )
Total $   1,235   $   (158 ) $     3,456   $     667  
                         

Non-interest expenses totaled $29.8 million in the second quarter of 2018, compared to $22.8 million in the year-ago period.  For the first six months of 2018, non-interest expenses totaled $53.9 million versus $46.3 million in 2017.  These year-over-year increases in non-interest expense are primarily due to the TCSB acquisition (including the aforementioned Merger related expenses) as well as higher performance based compensation and health insurance costs. 

The Company recorded an income tax expense of $2.1 million and $4.1 million in the second quarter and first six months of 2018, respectively.  This compares to an income tax expense of $2.7 million and $5.3 million in the second quarter and first six months of 2017, respectively.  The decline in income tax expense is primarily due to a reduction in the statutory federal corporate income tax rate to 21% (from 35%) that became effective on Jan. 1, 2018.

Asset Quality

Commenting on asset quality, President and CEO Kessel added:  "Non-performing loans and assets as well as loan net charge-offs remain at low levels.  In addition, thirty- to eighty-nine day delinquency rates at June 30, 2018 were 0.04% for commercial loans and 0.42% for mortgage and consumer loans.  These early stage delinquency rates continue to be well-managed."

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

       
Loan Type   6/30/2018   12/31/2017   6/30/2017  
  (Dollars in thousands)
Commercial $   2,889   $   646   $   754  
Consumer/installment   671     543     754  
Mortgage   5,522     6,995     7,034  
  Total $   9,082   $ 8,184   $   8,542  
Ratio of non-performing loans to total portfolio loans   0.37 %   0.41 %   0.47 %
Ratio of non-performing assets to total assets   0.33 %   0.35 %   0.41 %
Ratio of the allowance for loan losses to non-performing loans   258.80 %     275.99 %   241.00 %
                   
  1. Excludes loans that are classified as "troubled debt restructured" that are still performing.

Non-performing loans have increased $0.9 million from Dec. 31, 2017.  This increase primarily reflects a rise in non-performing commercial loans.  ORE and repossessed assets totaled $1.7 million at June 30, 2018, compared to $1.6 million at Dec. 31, 2017. 

The provision for loan losses was an expense of $0.7 million and $0.6 million in the second quarters of 2018 and 2017, respectively.  The provision for loan losses was an expense of $1.0 million and $0.2 million in the first six months of 2018 and 2017, respectively. The level of the provision for loan losses in each period reflects the Company's 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.  The Company recorded loan net charge-offs of $0.2 million and $0.04 million in the second quarters of 2018 and 2017, respectively.  For the first six months of 2018 and 2017, the Company recorded loan net charge-offs of $0.05 million and loan net recoveries of $0.1 million, respectively.  At June 30, 2018, the allowance for loan losses totaled $23.5 million, or 0.95% of total portfolio loans, compared to $22.6 million, or 1.12% of total portfolio loans, at Dec. 31, 2017.

Balance Sheet, Liquidity and Capital

Total assets were $3.23 billion at June 30, 2018, an increase of $445.2 million from Dec. 31, 2017, primarily reflecting the impact of the Merger as well as loan growth.  Loans, excluding loans held for sale, were $2.47 billion at June 30, 2018, compared to $2.02 billion at Dec. 31, 2017. 

Deposits totaled $2.78 billion at June 30, 2018, an increase of $380.0 million from Dec. 31, 2017.  The increase in deposits is primarily due to the Merger and growth in brokered time deposits. 

Cash and cash equivalents totaled $58.7 million at June 30, 2018, versus $54.7 million at Dec. 31, 2017. Securities available for sale totaled $450.6 million at June 30, 2018, compared to $522.9 million at Dec. 31, 2017.

The Company recorded $29.0 million of goodwill, a core deposit intangible ("CDI") of $5.8 million and discounts of $6.5 million, $0.4 million and $1.5 million on loans, time deposits and borrowings (including subordinated debentures), respectively, related to the Merger.  These adjustments reflect the preliminary valuation of the assets acquired and liabilities assumed in the Merger.  The goodwill will be periodically tested for impairment, and the CDI will be amortized over a ten year period ($0.2 million of amortization for this CDI was recorded in the second quarter of 2018).  The discounts will be accreted based on the lives of the related assets or liabilities.

Total shareholders' equity was $337.1 million at June 30, 2018, or 10.42% of total assets.  Tangible common equity totaled $301.1 million at June 30, 2018, or $12.47 per share.  The Company's wholly owned subsidiary, Independent Bank, remains significantly above "well capitalized" for regulatory purposes with the following ratios:

       
Regulatory Capital Ratios 6/30/2018 12/31/2017 Well
Capitalized
Minimum
             
Tier 1 capital to average total assets  9.93 %   9.78 % 5.00 %
Tier 1 common equity to risk-weighted assets 12.53 % 12.95 % 6.50 %
Tier 1 capital to risk-weighted assets 12.53 % 12.95 % 8.00 %
Total capital to risk-weighted assets 13.52 % 14.10 % 10.00 %
             

Share Repurchase Plan

As previously announced, on Jan. 22, 2018, the Board of Directors of the Company authorized a share repurchase plan.  Under the terms of the 2018 share repurchase plan, the Company is authorized to buy back up to 5% of its outstanding common stock.    The repurchase plan is authorized to last through Dec. 31, 2018.  Thus far in 2018, the Company has not repurchased any shares.

Earnings Conference Call

Brad 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 Thursday, July 26, 2018.

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/ibcp180726.html.

A playback of the call can be accessed by dialing 1-877-344-7529 (Conference ID # 10121685). The replay will be available through Aug. 2, 2018.

About Independent Bank Corporation

Independent Bank Corporation (NASDAQ:IBCP) is a Michigan-based bank holding company with total assets of approximately $3.2 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 release may contain "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Any statements that are not historical facts, including statements about our expectations, beliefs, plans, strategies, predictions, forecasts, objectives, or assumptions of future events or performance, may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as "anticipates," "believes," "expects," "can," "could," "may," "predicts," "potential," "opportunity," "should," "will," "estimate," "plans," "projects," "continuing," "ongoing," "expects," "seeks," "intends" and similar words or phrases. Accordingly, these statements involve estimates, known and unknown risks, assumptions, and uncertainties that could cause actual strategies, actions, or results to differ materially from those expressed in them, and are not guarantees  of timing, future results, events, or performance. Because forward-looking statements are necessarily only estimates of future strategies, actions, or results, based on management's current expectations, assumptions, and estimates on the date hereof, there can be no assurance that actual strategies, actions or results will not differ materially from expectations. Therefore, readers are cautioned not to place undue reliance on such statements.  Factors that could cause or contribute to such differences are changes in general economic, political or industry conditions; changes in monetary and fiscal policies, including the interest rate policies of the Federal Reserve Board; volatility and disruptions in capital and credit markets; the interdependence of financial service companies; changes in regulation or oversight; unfavorable developments concerning credit quality; any future acquisitions or divestitures; the effects of more stringent capital or liquidity requirements; declines or other changes in the businesses or industries of Independent Bank Corporation's customers; the implementation of Independent Bank Corporation's strategies and business models; Independent Bank Corporation's ability to utilize technology to efficiently and effectively develop, market and deliver new products and services; operational difficulties, failure of technology infrastructure or information security incidents; changes in the financial markets, including fluctuations in interest rates and their impact on deposit pricing; competitive product and pricing pressures among financial institutions within Independent Bank Corporation's markets; changes in customer behavior; management's ability to maintain and expand customer relationships; management's ability to retain key officers and employees; the impact of legal and regulatory proceedings or determinations; the effectiveness of methods of reducing risk exposures; the effects of terrorist activities and other hostilities; the effects of catastrophic events; changes in accounting standards and the critical nature of Independent Bank Corporation's accounting policies.

In addition, factors that may cause actual results to differ from expectations regarding the April 1, 2018 acquisition of TCSB Bancorp, Inc. include, but are not limited to, the reaction to the transaction of the companies' customers, employees and counterparties; customer disintermediation; inflation; expected synergies, cost savings and other financial benefits of the transaction might not be realized within the expected timeframes or might be less than projected; credit and interest rate risks associated with the parties' respective businesses, customers, borrowings, repayment, investment, and deposit practices; general economic conditions, either nationally or in the market areas in which the parties operate or anticipate doing business, are less favorable than expected; new regulatory or legal requirements or obligations; and other risks.

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, 2017 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,
      2018       2017  
    (unaudited)
    (In thousands, except share
    amounts)
Assets
Cash and due from banks    $   36,433     $   36,994  
Interest bearing deposits        22,278         17,744  
  Cash and Cash Equivalents       58,711         54,738  
Interest bearing deposits - time       2,478         2,739  
Equity securities at fair value       336         -  
Trading securities       -         455  
Securities available for sale        450,593         522,925  
Federal Home Loan Bank and Federal Reserve Bank stock, at cost        16,321         15,543  
Loans held for sale, carried at fair value        50,915         39,436  
Loans held for sale, carried at lower of cost or fair value       13,216         -   
Loans        
  Commercial        1,106,987         853,260  
  Mortgage        988,622         849,530  
  Installment        371,708         316,027  
  Total Loans        2,467,317         2,018,817  
  Allowance for loan losses        (23,504 )       (22,587 )
  Net Loans        2,443,813         1,996,230  
Other real estate and repossessed assets       1,689         1,643  
Property and equipment, net        39,660         39,149  
Bank-owned life insurance        54,573         54,572  
Deferred tax assets, net       11,426         15,089  
Capitalized mortgage loan servicing rights       21,848         15,699  
Goodwill       29,012         -   
Other intangibles        7,004         1,586  
Accrued income and other assets        32,927         29,551  
  Total Assets    $   3,234,522     $   2,789,355  
         
Liabilities and Shareholders' Equity
Deposits        
  Non-interest bearing    $   871,959     $   768,333  
  Savings and interest-bearing checking       1,226,492         1,064,391  
  Reciprocal       66,540         50,979  
  Time       389,118         374,872  
  Brokered time       226,407         141,959  
  Total Deposits        2,780,516         2,400,534  
Other borrowings        40,584         54,600  
Subordinated debentures        39,354         35,569  
Accrued expenses and other liabilities        36,985         33,719  
  Total Liabilities        2,897,439         2,524,422  
         
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:         
  24,143,044 shares at June 30, 2018 and 21,333,869 shares at December 31, 2017       389,195         324,986  
  Accumulated deficit       (42,898 )       (54,054 )
  Accumulated other comprehensive loss       (9,214 )       (5,999 )
  Total Shareholders' Equity        337,083         264,933  
  Total Liabilities and Shareholders' Equity    $   3,234,522     $   2,789,355  
         


 
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
                     
    Three Months Ended   Six Months Ended
    June 30,   March 31,   June 30,   June 30,
      2018       2018       2017       2018       2017  
    (unaudited)
Interest Income   (In thousands, except per share amounts)
  Interest and fees on loans    $   29,674     $   23,353     $   19,949     $   53,027     $   39,807  
  Interest on securities                     
  Taxable        2,720         2,635       2,781         5,355         5,535  
  Tax-exempt        444         479       511         923         966  
  Other investments        265         330       292         595         604  
  Total Interest Income        33,103       26,797       23,533         59,900       46,912  
Interest Expense                    
  Deposits        3,209         2,287       1,478         5,496         2,921  
  Other borrowings and subordinated debentures       914         574       563         1,488         1,033  
  Total Interest Expense        4,123       2,861       2,041         6,984       3,954  
  Net Interest Income        28,980       23,936       21,492         52,916       42,958  
Provision for loan losses        650       315       583         965         224  
  Net Interest Income After Provision for Loan Losses        28,330       23,621       20,909         51,951       42,734  
Non-interest Income                    
  Service charges on deposit accounts        3,095         2,905       3,175         6,000         6,184  
  Interchange income        2,504         2,246       2,005         4,750         3,927  
  Net gains (losses) on assets                    
  Mortgage loans        3,255         2,571       3,344         5,826         5,915  
  Securities        9         (173 )     (34 )       (164 )       (7 )
  Mortgage loan servicing, net        1,235         2,221       (158 )       3,456         667  
  Other       2,217         1,943       2,114         4,160         4,099  
  Total Non-interest Income      12,315       11,713       10,446       24,028       20,785  
Non-interest Expense                    
  Compensation and employee benefits        15,869         14,468       13,380         30,337       27,527  
  Occupancy, net        2,170         2,264       1,920         4,434       4,062  
  Data processing       2,251         1,878       1,937         4,129       3,874  
  Merger related expenses       3,082         174         -         3,256         -  
  Furniture, fixtures and equipment        1,019         967       1,005         1,986       1,982  
  Communications       704         680       678         1,384       1,361  
  Loan and collection       692         677       670         1,369         1,083  
  Interchange expense       661         598       292         1,259         575  
  Advertising       543         441       519         984       1,025  
  Legal and professional       456         378       389         834       826  
  FDIC deposit insurance       250         230       202         480       400  
  Credit card and bank service fees       106         96       136         202       327  
  Net (gains) losses on other real estate and                     
  repossessed assets       (4 )       (290 )     91         (294 )     102  
  Other       1,962         1,574       1,542         3,536       3,186  
  Total Non-interest Expense        29,761       24,135       22,761         53,896       46,330  
  Income Before Income Tax       10,884       11,199       8,594         22,083       17,189  
Income tax expense        2,067       2,038       2,663         4,105         5,284  
  Net Income   $   8,817     $   9,161     $   5,931     $   17,978     $   11,905  
Net Income Per Common Share                    
  Basic   $   0.37     $   0.43     $   0.28     $   0.79     $   0.56  
  Diluted   $   0.36     $   0.42     $   0.27     $   0.78     $   0.55  
                     

 

 
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Selected Financial Data
                     
  June 30,   March 31,   December 31,   September 30,   June 30,  
    2018     2018     2017     2017     2017  
  (unaudited)  
  (Dollars in thousands except per share data)
Three Months Ended                    
  Net interest income $   28,980   $   23,936   $   23,316   $   22,912   $   21,492  
  Provision for loan losses     650       315       393       582       583  
  Non-interest income     12,315       11,713       11,444       10,304       10,446  
  Non-interest expense     29,761       24,135       23,136       22,616       22,761  
  Income before income tax     10,884       11,199       11,231       10,018       8,594  
  Income tax expense     2,067       2,038       9,520       3,159       2,663  
  Net income  $   8,817   $   9,161   $   1,711   $   6,859   $   5,931  
                     
  Basic earnings per share $   0.37   $   0.43   $   0.08   $   0.32   $   0.28  
  Diluted earnings per share     0.36       0.42       0.08       0.32       0.27  
  Cash dividend per share     0.15       0.15       0.12       0.10       0.10  
                     
  Average shares outstanding     24,109,322       21,364,708       21,332,053       21,334,247       21,331,363  
  Average diluted shares outstanding     24,509,963       21,674,375       21,661,133       21,651,963       21,646,941  
                     
  Performance Ratios                    
  Return on average assets     1.12 %     1.34 %     0.25 %     1.01 %     0.92 %
  Return on average common equity     10.57       14.04       2.51       10.27       9.15  
  Efficiency ratio (1)     71.14       66.72       66.14       67.38       70.29  
                     
  As a Percent of Average Interest-Earning Assets (1)                  
  Interest income     4.49 %     4.15 %     4.07 %     4.05 %     3.94 %
  Interest expense     0.56       0.44       0.42       0.39       0.34  
  Net interest income     3.93       3.71       3.65       3.66       3.60  
                     
  Average Balances                    
  Loans $   2,449,056   $   2,062,847   $   2,006,207   $   1,911,635   $   1,782,953  
  Securities available for sale     470,427       500,599       532,202       565,546       592,594  
  Total earning assets     2,963,982       2,611,890       2,574,779       2,522,060       2,423,283  
  Total assets     3,168,196       2,776,986       2,742,761       2,697,362       2,598,605  
  Deposits     2,701,362       2,417,906       2,340,593       2,315,806       2,239,605  
  Interest bearing liabilities     1,946,287       1,724,153       1,680,917       1,664,734       1,595,984  
  Shareholders' equity     334,626       264,584       270,099       265,074       260,095  
                     
End of Period                    
  Capital                    
  Tangible common equity ratio     9.41 %     9.54 %     9.45 %     9.67 %     9.79 %
  Average equity to average assets     10.56       9.53       9.85       9.83       10.01  
  Tangible common equity per share                     
  of common stock $   12.47   $   12.46   $   12.34   $   12.47   $   12.22  
  Total shares outstanding     24,143,044       21,374,816       21,333,869       21,332,317       21,334,740  
                     
  Selected Balances                    
  Loans $   2,467,317   $   2,071,435   $   2,018,817   $   1,937,094   $   1,811,677  
  Securities available for sale     450,593       489,119       522,925       548,865       583,725  
  Total earning assets     3,023,454       2,625,534       2,617,204       2,568,554       2,486,518  
  Total assets     3,234,522       2,793,119       2,789,355       2,753,446       2,665,367  
  Deposits     2,780,516       2,430,401       2,400,534       2,343,761       2,246,219  
  Interest bearing liabilities     1,988,495       1,719,771       1,722,370       1,701,624       1,646,599  
  Shareholders' equity     337,083       267,917       264,933       267,710       262,453  
                     
(1)  Presented on a fully tax equivalent basis assuming a marginal tax rate of 21% in 2018 and 35% in 2017.      
       

Reconciliation of Non-GAAP Financial Measures
Independent 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 of Non-GAAP Financial Measures                 
  Three Months Ended   Six Months Ended  
  June 30,   June 30,  
    2018       2017       2018       2017    
  (Dollars in thousands)  
 Net Interest Margin, Fully Taxable                 
  Equivalent ("FTE")                 
                 
Net interest income $   28,980     $   21,492     $   52,916     $   42,958    
  Add:  taxable equivalent adjustment      132         288         261         549    
Net interest income - taxable equivalent $   29,112     $   21,780     $   53,177     $   43,507    
Net interest margin (GAAP) (1)   3.92 %     3.56 %     3.81 %     3.61 %  
Net interest margin (FTE) (1)   3.93 %     3.60 %     3.83 %     3.65 %  
 
(1) Annualized          

 

             
 Tangible Common Equity Ratio                   
  June 30,   March 31,   December 31,   September 30,   June 30,  
    2018       2018       2017       2017       2017    
                                         
  (Dollars in thousands)  
Common shareholders' equity $   337,083     $   267,917     $   264,933     $   267,710     $   262,453    
Less:                    
  Goodwill     29,012         -         -         -         -    
  Other intangibles   7,004       1,500       1,586       1,673       1,759    
Tangible common equity $   301,067     $   266,417     $   263,347     $   266,037     $   260,694    
                     
Total assets $   3,234,522     $   2,793,119     $   2,789,355     $   2,753,446     $   2,665,367    
Less:                    
  Goodwill     29,012         -          -          -          -     
  Other intangibles     7,004         1,500         1,586         1,673         1,759    
Tangible assets $   3,198,506     $   2,791,619     $   2,787,769     $   2,751,773     $   2,663,608    
                     
Common equity ratio   10.42 %     9.59 %     9.50 %     9.72 %     9.85 %  
Tangible common equity ratio   9.41 %     9.54 %     9.45 %     9.67 %     9.79 %  
                     
                     
 Tangible Common Equity per Share of Common Stock:   
 
Common shareholders' equity $   337,083     $   267,917     $   264,933     $   267,710     $   262,453    
Tangible common equity $   301,067     $   266,417     $   263,347     $   266,037     $   260,694    
Shares of common stock                                        
  outstanding (in thousands)   24,143       21,375       21,334       21,332       21,335    
                                         
Common shareholders' equity per share  
  of common stock $   13.96     $   12.53     $   12.42     $   12.55     $   12.30    
Tangible common equity per share                                         
  of common stock $   12.47     $   12.46     $   12.34     $   12.47     $   12.22    
 

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

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