Exhibit 99.1


News Release

Independent Bank Corporation
4200 East Beltline
Grand Rapids, MI 49525
616.527.5820

For Release:
Immediately

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

INDEPENDENT BANK CORPORATION REPORTS
2018 FOURTH QUARTER AND FULL YEAR RESULTS

GRAND RAPIDS, Mich., Jan. 29, 2019 -
Independent Bank Corporation (NASDAQ: IBCP) reported fourth quarter 2018 net income of $9.9 million, or $0.41 per diluted share, versus net income of $1.7 million, or $0.08 per diluted share, in the prior-year period.  For the year ended Dec. 31, 2018, the Company reported net income of $39.8 million, or $1.68 per diluted share.  This compares to net income of $20.5 million, or $0.95 per diluted share, in 2017.  The increase in fourth quarter earnings as compared to 2017, primarily reflects an increase in net interest income and a decrease in income tax expense that were partially offset by a decrease in non-interest income and by increases in the provision for loan losses and in non-interest expense. The increase in full year 2018 earnings as compared to 2017, primarily reflects 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 fourth quarter and full year 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 (referred to as the “Merger” or “TCSB Acquisition”) and the associated data processing systems conversions in June 2018.  The total assets, loans and deposits acquired in the Merger were approximately $343.5 million, $295.8 million (including $1.3 million of loans held for sale) and $287.7 million, respectively.

·
Merger related expenses of $0.1 million ($0.004 per diluted share, after taxes) and $3.5 million ($0.115 per diluted share, after taxes) for the fourth quarter and year ended Dec. 31, 2018, respectively, and $0.3 million ($0.009 per diluted share, after taxes) for both the fourth quarter and year ended Dec. 31, 2017.

·
A loss on mortgage loans of $0.25 million ($0.008 per diluted share, after taxes) in the fourth quarter of 2018 on the pending sale of approximately $41.5 million of portfolio mortgage loans.  These loans were classified as held for sale at Dec. 31, 2018 and carried at the lower of cost or fair value.  This sale is expected to close on Jan. 31, 2019.

·
Changes in the fair value due to price of capitalized mortgage loan servicing rights (the “MSR Change”) of a negative $2.4 million ($0.078 per diluted share, after taxes) and a positive $0.2 million ($0.006 per diluted share, after taxes) for the fourth quarter and full year of 2018, respectively, as compared to a positive change of $0.4 million ($0.011 per diluted share, after taxes) and a negative change $0.7 million ($0.022 per diluted share, after taxes) for the fourth quarter and full year of 2017, respectively.

·
The passage of the "Tax Cuts and Jobs Act" in the fourth quarter of 2017, which, among other things, reduced the federal corporate income tax rate to 21% (from 35%) effective January 1, 2018.  Further, as a result of the reduction in the federal corporate income tax rate, the Company’s deferred tax assets, net (“DTA”), were remeasured at Dec. 31, 2017.  This remeasurement resulted in a reduction of these net assets and a corresponding increase in income tax expense of $6.0 million (or $0.275 per diluted share), which was recorded in the fourth quarter of 2017.

1

The fourth quarter of 2018 was highlighted by:


·
58.9% and 41.3% increases in net income and diluted earnings per share, respectively, over the year ago quarter, when excluding the impact of the MSR Change and the 2017 DTA remeasurement.

·
Growth in net interest income of $7.4 million, or 31.5%, compared to the year ago quarter.

·
Total portfolio loan growth of $19.9 million (representing a 3.1% annualized rate).

·
Payment of a 15 cent per share dividend on Nov. 15, 2018.

The Company’s full year 2018 results were highlighted by:


·
56.6% and 42.7% increases in net income and diluted earnings per share, respectively, over the prior year, when excluding the impact of the MSR Change, Merger related expenses and the 2017 DTA remeasurement.

·
Growth in net interest income of $24.1 million, or 27.0%.

·
Total portfolio loan growth of $269.2 million, or 13.3%, excluding loans acquired in the Merger.

·
A $130.0 million, or 5.8%, increase in total deposits, excluding non-brokered deposits acquired in the Merger and brokered deposits.

·
A 4.5% increase in tangible book value per share to $12.90 at Dec. 31, 2018.

William B. (“Brad”) Kessel, the President and Chief Executive Officer of Independent Bank Corporation, commented:  “We are very pleased with our fourth quarter and full year 2018 results. For the fourth quarter of 2018, our return on average assets and return on average equity were 1.18% and 11.43%, respectively.  If you exclude the after tax impact of the negative MSR Change, these ratios improve to 1.41% and 13.61%, respectively. For the full year of 2018, our return on average assets and return on average equity were 1.27% and 12.38%, respectively. The favorable impact of the TCSB Acquisition, combined with strong loan origination activity, led to meaningful loan growth and increased net interest income.  Net income and diluted earnings per share increased significantly in 2018 due to greater operating leverage and efficiency as well as a reduced corporate income tax rate. Reflecting our success and our optimism about the future, we recently announced a 20% increase in our quarterly common stock cash dividend to 18 cents per share, to be paid on Feb 15, 2019.”

Operating Results

The Company’s net interest income totaled $30.7 million during the fourth quarter of 2018, an increase of $7.4 million, or 31.5% from the year-ago period, and an increase of $1.0 million, or 3.3%, from the third 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 fourth quarter of 2018, compared to 3.65% in the year-ago quarter and 3.91% in the third quarter of 2018. The year-over-year quarterly increase in net interest income is due to the increase in the net interest margin as well as an increase in average interest-earning assets.  Average interest-earning assets were $3.12 billion in the fourth quarter of 2018 compared to $2.57 billion in the year-ago quarter and $3.04 billion in the third quarter of 2018. Fourth quarter 2018 interest income on loans includes $0.42 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 full-year of 2018, net interest income totaled $113.3 million, an increase of $24.1 million, or 27.0% from 2017.  This increase is due to increases in the net interest margin and average interest-earning assets. The Company’s net interest margin for all of 2018 increased to 3.88% compared to 3.65% in 2017.  Full year 2018 interest income on loans includes $1.66 million of accretion of the discount recorded on the TCSB loans acquired in the Merger.  Average interest-earning assets totaled $2.94 billion in 2018 compared to $2.47 billion in 2017.

Non-interest income totaled $9.0 million and $44.8 million, respectively, for the fourth quarter and full year of 2018, compared to $11.4 million and $42.5 million in the respective comparable year ago periods.  These variances were primarily due to changes in interchange income and in mortgage banking related revenues (net gains on mortgage loans and mortgage loan servicing, net), as described below.

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 fourth quarter and full year of 2018, interchange income and interchange expense each increased by $0.4 million and $1.5 million, respectively, due to classification changes under ASU 2014-09.

2

Net gains on mortgage loans were $2.0 million in the fourth quarter of 2018, compared to $2.9 million in the year-ago quarter.  For the full year of 2018, net gains on mortgage loans totaled $10.6 million compared to $11.8 million in 2017. An increase in mortgage loan sales volume in 2018 was more than offset by margin compression (due principally to competitive factors) and a loss recorded on a portfolio mortgage loan sale as described above.

Mortgage loan servicing generated a loss of $1.5 million and income of $1.0 million in the fourth quarters of 2018 and 2017, respectively. For all of 2018, mortgage loan servicing generated income of $3.2 million as compared to income of $1.6 million in 2017. This activity is summarized in the following table:

   
Three Months Ended
   
Year Ended
 
   
12/31/2018
   
12/31/2017
   
12/31/2018
   
12/31/2017
 
Mortgage loan servicing:
 
(Dollars in thousands)
 
Revenue, net
 
$
1,506
   
$
1,138
   
$
5,480
   
$
4,391
 
Fair value change due to price
   
(2,395
)
   
356
     
191
     
(719
)
Fair value change due to pay-downs
   
(622
)
   
(515
)
   
(2,514
)
   
(2,025
)
Total
 
$
(1,511
)
 
$
979
   
$
3,157
   
$
1,647
 

Capitalized mortgage loan servicing rights totaled $21.4 million at Dec. 31, 2018 compared to $15.7 million at Dec. 31, 2017.  As of Dec. 31, 2018, the Company serviced approximately $2.33 billion in mortgage loans for others on which servicing rights have been capitalized.

Non-interest expenses totaled $26.8 million in the fourth quarter of 2018, compared to $23.1 million in the year-ago period.  For the full year of 2018, non-interest expenses totaled $107.5 million versus $92.1 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 $2.3 million and $9.3 million in the fourth quarter and full-year of 2018, respectively.  This compares to an income tax expense of $9.5 million and $18.0 million in the fourth quarter and full-year 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, which was partially offset by an increase in income before income tax.  In addition, the fourth quarter and full year 2017 income tax expense was increased by $6.0 million due to the DTA remeasurement as described above.

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 Dec. 31, 2018 were 0.03% for commercial loans and 0.29% 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
 
12/31/2018
   
12/31/2017
   
12/31/2016
 
   
(Dollars in Thousands)
 
Commercial
 
$
2,220
   
$
646
   
$
5,163
 
Consumer/installment
   
781
     
543
     
907
 
Mortgage
   
6,033
     
6,995
     
7,294
 
Total
 
$
9,034
   
$
8,184
   
$
13,364
 
Ratio of non-performing loans to total portfolio loans
   
0.35
%
   
0.41
%
   
0.83
%
Ratio of non-performing assets to total assets
   
0.31
%
   
0.35
%
   
0.72
%
Ratio of the allowance for loan losses to non-performing loans
   
275.49
%
   
275.99
%
   
151.41
%


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

Non-performing loans at Dec. 31, 2018 increased $0.85 million from Dec. 31, 2017.  This increase primarily reflects an increase in commercial non-performing loans.  Other real estate and repossessed assets totaled $1.3 million at Dec. 31, 2018, compared to $1.6 million at Dec. 31, 2017.

The provision for loan losses was an expense of $0.6 million and $0.4 million in the fourth quarters of 2018 and 2017, respectively.  The provision for loan losses was an expense of $1.5 million and $1.2 million for all 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 mix, levels of non-performing and classified loans, and loan net charge-offs.  The Company recorded loan net charge-offs of $0.1 million and net recoveries of $0.7 million in the fourth quarters of 2018 and 2017, respectively.  For all of 2018 and 2017, the Company recorded loan net recoveries of $0.8 million and $1.2 million, respectively.  At Dec. 31, 2018, the allowance for loan losses totaled $24.9 million, or 0.96% of portfolio loans (1.06% when excluding the remaining TCSB acquired loan balances), compared to $22.6 million, or 1.12% of portfolio loans, at Dec. 31, 2017.

3

Balance Sheet, Liquidity and Capital

Total assets were $3.35 billion at Dec. 31, 2018, an increase of $563.9 million from Dec. 31, 2017, primarily reflecting the impact of the TCSB Acquisition as well as loan growth.  Loans, excluding loans held for sale, were $2.58 billion at Dec. 31, 2018, compared to $2.02 billion at Dec. 31, 2017.

Deposits totaled $2.91 billion at Dec. 31, 2018, an increase of $512.9 million from Dec. 31, 2017.  The increase in deposits is primarily due to the TCSB Acquisition and growth in reciprocal deposits and brokered deposits.

Cash and cash equivalents totaled $70.2 million at Dec. 31, 2018, versus $54.7 million at Dec. 31, 2017. Securities available for sale totaled $427.9 million at Dec. 31, 2018, compared to $522.9 million at Dec. 31, 2017.

In the second quarter of 2018, 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 reflected the preliminary valuation of the assets acquired and liabilities assumed in the Merger.  In the third quarter of 2018, goodwill was reduced by $0.7 million (to $28.3 million) related to the collection of a TCSB acquired loan that had been charged off in full prior to the Merger.  Because of the status of the collection activities related to this loan at the time of the Merger, the Company determined that this transaction was a measurement period adjustment and reduced goodwill accordingly.  The goodwill is being periodically tested for impairment, and the CDI is being amortized over a ten year period ($0.2 million and $0.6 million of amortization for this CDI was recorded in the fourth quarter and last nine months of 2018, respectively).  The discounts will be accreted based on the lives of the related assets or liabilities.

Total shareholders’ equity was $339.0 million at Dec. 31, 2018, or 10.11% of total assets.  Tangible common equity totaled $304.3 million at Dec. 31, 2018, or $12.90 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
 
12/31/2018
   
12/31/2017
   
Well
Capitalized
Minimum
 
Tier 1 capital to average total assets
   
9.44
%
   
9.78
%
   
5.00
%
Tier 1 common equity  to risk-weighted assets
   
11.94
%
   
12.95
%
   
6.50
%
Tier 1 capital to risk-weighted assets
   
11.94
%
   
12.95
%
   
8.00
%
Total capital to risk-weighted assets
   
12.94
%
   
14.10
%
   
10.00
%

Share Repurchase Plan

On Dec. 18, 2018, the Board of Directors of the Company authorized the 2019 share repurchase plan.  Under the terms of the 2019 share repurchase plan, the Company is authorized to buy back up to 5% of its outstanding common stock.    The repurchase plan is authorized to commence on Jan. 1, 2019 and last through Dec. 31, 2019.

During the fourth quarter of 2018, the Company repurchased 587,969 shares under its 2018 share repurchase plan (which expired on Dec. 31, 2018) at an average cost of $21.57 per share.

The Company intends to accomplish the 2019 repurchases through open market transactions, though the Company could execute repurchases through other means, such as privately negotiated transactions.  The timing and amount of any share repurchases will depend on a variety of factors, including, among others, securities law restrictions, the trading price of the Company's common stock, other regulatory requirements, potential alternative uses for capital, and the Company's financial performance. The repurchase program does not obligate the Company to acquire any particular amount of common stock, and it may be modified or suspended at any time at the Company's discretion. The Company expects to fund any repurchases from cash on hand.  Thus far in 2019 (through Jan. 25, 2019), the Company has repurchased 43,768 shares under its 2019 share repurchase plan at an average cost of $21.67 per share.

4

Earnings Conference Call

Brad Kessel, President and CEO, and Rob Shuster, CFO, will review the quarterly and full-year results in a conference call for investors and analysts beginning at 11:00 am ET on Tuesday, Jan. 29, 2019.

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 at the following event site/URL:  https://services.choruscall.com/links/ibcp190129.html.

A playback of the call can be accessed by dialing 1-877-344-7529 (Conference ID # 10127131). The replay will be available through Feb. 5, 2019.

About Independent Bank Corporation

Independent Bank Corporation (NASDAQ: IBCP) is a Michigan-based bank holding company with total assets of approximately $3.4 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.

5

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition

   
December 31,
 
   
2018
   
2017
 
   
(unaudited)
 
   
(In thousands, except share amounts)
 
Assets
 
Cash and due from banks
 
$
23,350
   
$
36,994
 
Interest bearing deposits
   
46,894
     
17,744
 
Cash and Cash Equivalents
   
70,244
     
54,738
 
Interest bearing deposits - time
   
595
     
2,739
 
Equity securities at fair value
   
393
     
-
 
Trading securities
   
-
     
455
 
Securities available for sale
   
427,926
     
522,925
 
Federal Home Loan Bank and Federal Reserve Bank stock, at cost
   
18,359
     
15,543
 
Loans held for sale, carried at fair value
   
44,753
     
39,436
 
Loans held for sale, carried at lower of cost or fair value
   
41,471
     
-
 
Loans
               
Commercial
   
1,144,481
     
853,260
 
Mortgage
   
1,042,890
     
849,530
 
Installment
   
395,149
     
316,027
 
Total Loans
   
2,582,520
     
2,018,817
 
Allowance for loan losses
   
(24,888
)
   
(22,587
)
Net Loans
   
2,557,632
     
1,996,230
 
Other real estate and repossessed assets
   
1,299
     
1,643
 
Property and equipment, net
   
38,777
     
39,149
 
Bank-owned life insurance
   
55,068
     
54,572
 
Deferred tax assets, net
   
5,779
     
15,089
 
Capitalized mortgage loan servicing rights
   
21,400
     
15,699
 
Other intangibles
   
6,415
     
1,586
 
Goodwill
   
28,300
     
-
 
Accrued income and other assets
   
34,870
     
29,551
 
Total Assets
 
$
3,353,281
   
$
2,789,355
 
                 
Liabilities and Shareholders' Equity
 
Deposits
               
Non-interest bearing
 
$
879,549
   
$
768,333
 
Savings and interest-bearing checking
   
1,194,865
     
1,064,391
 
Reciprocal
   
182,072
     
50,979
 
Time
   
385,981
     
374,872
 
Brokered time
   
270,961
     
141,959
 
Total Deposits
   
2,913,428
     
2,400,534
 
Other borrowings
   
25,700
     
54,600
 
Subordinated debentures
   
39,388
     
35,569
 
Accrued expenses and other liabilities
   
35,771
     
33,719
 
Total Liabilities
   
3,014,287
     
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: 23,579,725 shares at December 31, 2018 and 21,333,869 shares at December 31, 2017
   
377,372
     
324,986
 
Accumulated deficit
   
(28,270
)
   
(54,054
)
Accumulated other comprehensive loss
   
(10,108
)
   
(5,999
)
Total Shareholders’ Equity
   
338,994
     
264,933
 
Total Liabilities and Shareholders’ Equity
 
$
3,353,281
   
$
2,789,355
 

6

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations

   
Three Months Ended
   
Twelve Months Ended
 
   
December 31,
   
September 30,
   
December 31,
   
December 31,
 
   
2018
   
2018
   
2017
   
2018
   
2017
 
   
(unaudited)
 
Interest Income
 
(In thousands, except per share amounts)
 
Interest and fees on loans
 
$
32,838
   
$
31,000
   
$
22,643
   
$
116,865
   
$
84,281
 
Interest on securities
                                       
Taxable
   
2,782
     
2,737
     
2,628
     
10,874
     
10,928
 
Tax-exempt
   
408
     
412
     
522
     
1,743
     
2,000
 
Other investments
   
393
     
303
     
233
     
1,291
     
1,100
 
Total Interest Income
   
36,421
     
34,452
     
26,026
     
130,773
     
98,309
 
Interest Expense
                                       
Deposits
   
5,006
     
3,976
     
2,021
     
14,478
     
6,775
 
Other borrowings and subordinated debentures
   
746
     
779
     
689
     
3,013
     
2,348
 
Total Interest Expense
   
5,752
     
4,755
     
2,710
     
17,491
     
9,123
 
Net Interest Income
   
30,669
     
29,697
     
23,316
     
113,282
     
89,186
 
Provision for loan losses
   
591
     
(53
)
   
393
     
1,503
     
1,199
 
Net Interest Income After Provision for Loan Losses
   
30,078
     
29,750
     
22,923
     
111,779
     
87,987
 
Non-interest Income
                                       
Service charges on deposit accounts
   
3,092
     
3,166
     
3,208
     
12,258
     
12,673
 
Interchange income
   
2,669
     
2,486
     
2,154
     
9,905
     
8,023
 
Net gains on assets
                                       
Mortgage loans
   
2,026
     
2,745
     
2,876
     
10,597
     
11,762
 
Securities
   
209
     
93
     
198
     
138
     
260
 
Mortgage loan servicing, net
   
(1,511
)
   
1,212
     
979
     
3,157
     
1,647
 
Other
   
2,466
     
2,134
     
2,029
     
8,760
     
8,168
 
Total Non-interest Income
   
8,951
     
11,836
     
11,444
     
44,815
     
42,533
 
Non-interest Expense
                                       
Compensation and employee benefits
   
15,572
     
16,169
     
13,985
     
62,078
     
55,089
 
Occupancy, net
   
2,245
     
2,233
     
2,070
     
8,912
     
8,102
 
Data processing
   
2,082
     
2,051
     
1,987
     
8,262
     
7,657
 
Furniture, fixtures and equipment
   
1,051
     
1,043
     
927
     
4,080
     
3,870
 
Merger related expenses
   
111
     
98
     
274
     
3,465
     
284
 
Communications
   
737
     
727
     
638
     
2,848
     
2,684
 
Interchange expense
   
728
     
715
     
287
     
2,702
     
1,156
 
Loan and collection
   
782
     
531
     
666
     
2,682
     
2,230
 
Advertising
   
577
     
594
     
354
     
2,155
     
1,905
 
Legal and professional
   
528
     
477
     
526
     
1,839
     
1,892
 
FDIC deposit insurance
   
331
     
270
     
286
     
1,081
     
894
 
Credit card and bank service fees
   
104
     
108
     
97
     
414
     
529
 
Net gains on other real estate and repossessed assets
   
(53
)
   
(325
)
   
(738
)
   
(672
)
   
(606
)
Other
   
2,030
     
2,049
     
1,777
     
7,615
     
6,396
 
Total Non-interest Expense
   
26,825
     
26,740
     
23,136
     
107,461
     
92,082
 
Income Before Income Tax
   
12,204
     
14,846
     
11,231
     
49,133
     
38,438
 
Income tax expense
   
2,268
     
2,921
     
9,520
     
9,294
     
17,963
 
Net Income
 
$
9,936
   
$
11,925
   
$
1,711
   
$
39,839
   
$
20,475
 
Net Income Per Common Share
                                       
Basic
 
$
0.41
   
$
0.49
   
$
0.08
   
$
1.70
   
$
0.96
 
Diluted
 
$
0.41
   
$
0.49
   
$
0.08
   
$
1.68
   
$
0.95
 

7

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Selected Financial Data

   
December 31,
2018
   
September 30,
2018
   
June 30,
2018
   
March 31,
2018
   
December 31,
2017
 
   
(unaudited)
 
   
(Dollars in thousands except per share data)
 
Three Months Ended
                             
Net interest income
 
$
30,669
   
$
29,697
   
$
28,980
   
$
23,936
   
$
23,316
 
Provision for loan losses
   
591
     
(53
)
   
650
     
315
     
393
 
Non-interest income
   
8,951
     
11,836
     
12,315
     
11,713
     
11,444
 
Non-interest expense
   
26,825
     
26,740
     
29,761
     
24,135
     
23,136
 
Income before income tax
   
12,204
     
14,846
     
10,884
     
11,199
     
11,231
 
Income tax expense
   
2,268
     
2,921
     
2,067
     
2,038
     
9,520
 
Net income
 
$
9,936
   
$
11,925
   
$
8,817
   
$
9,161
   
$
1,711
 
                                         
Basic earnings per share
 
$
0.41
   
$
0.49
   
$
0.37
   
$
0.43
   
$
0.08
 
Diluted earnings per share
   
0.41
     
0.49
     
0.36
     
0.42
     
0.08
 
Cash dividend per share
   
0.15
     
0.15
     
0.15
     
0.15
     
0.12
 
                                         
Average shares outstanding
   
23,988,810
     
24,148,768
     
24,109,322
     
21,364,708
     
21,332,053
 
Average diluted shares outstanding
   
24,339,782
     
24,514,814
     
24,509,963
     
21,674,375
     
21,661,133
 
                                         
Performance Ratios
                                       
Return on average assets
   
1.18
%
   
1.46
%
   
1.12
%
   
1.34
%
   
0.25
%
Return on average common equity
   
11.43
     
13.83
     
10.57
     
14.04
     
2.51
 
Efficiency ratio (1)
   
67.11
     
63.63
     
71.14
     
66.72
     
66.14
 
                                         
As a Percent of Average Interest-Earning Assets (1)
                                 
Interest income
   
4.66
%
   
4.53
%
   
4.49
%
   
4.15
%
   
4.07
%
Interest expense
   
0.73
     
0.62
     
0.56
     
0.44
     
0.42
 
Net interest income
   
3.93
     
3.91
     
3.93
     
3.71
     
3.65
 
                                         
Average Balances
                                       
Loans
 
$
2,627,614
   
$
2,550,302
   
$
2,449,056
   
$
2,062,847
   
$
2,006,207
 
Securities available for sale
   
433,903
     
442,949
     
470,427
     
500,599
     
532,202
 
Total earning assets
   
3,121,640
     
3,038,221
     
2,963,982
     
2,611,890
     
2,574,779
 
Total assets
   
3,327,002
     
3,247,603
     
3,168,196
     
2,776,986
     
2,742,761
 
Deposits
   
2,873,889
     
2,789,969
     
2,701,362
     
2,417,906
     
2,340,593
 
Interest bearing liabilities
   
2,058,720
     
1,986,905
     
1,946,287
     
1,724,153
     
1,680,917
 
Shareholders' equity
   
344,779
     
341,998
     
334,626
     
264,584
     
270,099
 
                                         
End of Period
                                       
Capital
                                       
Tangible common equity ratio
   
9.17
%
   
9.51
%
   
9.41
%
   
9.54
%
   
9.45
%
Average equity to average assets
   
10.36
     
10.53
     
10.56
     
9.53
     
9.85
 
Tangible common equity per share of common stock
 
$
12.90
   
$
12.84
   
$
12.47
   
$
12.46
   
$
12.34
 
Total shares outstanding
   
23,579,725
     
24,150,341
     
24,143,044
     
21,374,816
     
21,333,869
 
                                         
Selected Balances
                                       
Loans
 
$
2,582,520
   
$
2,562,578
   
$
2,467,317
   
$
2,071,435
   
$
2,018,817
 
Securities available for sale
   
427,926
     
436,957
     
450,593
     
489,119
     
522,925
 
Total earning assets
   
3,162,911
     
3,078,083
     
3,023,454
     
2,625,534
     
2,617,204
 
Total assets
   
3,353,281
     
3,297,124
     
3,234,522
     
2,793,119
     
2,789,355
 
Deposits
   
2,913,428
     
2,798,643
     
2,780,516
     
2,430,401
     
2,400,534
 
Interest bearing liabilities
   
2,098,967
     
2,036,770
     
1,988,495
     
1,719,771
     
1,722,370
 
Shareholders' equity
   
338,994
     
345,204
     
337,083
     
267,917
     
264,933
 

(1)
Presented on a fully tax equivalent basis assuming a marginal tax rate of 21% in 2018 and 35% in 2017.

8

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
December 31,
   
Twelve Months Ended
December 31,
 
   
2018
   
2017
   
2018
   
2017
 
   
(Dollars in thousands)
 
Net Interest Margin, Fully Taxable Equivalent ("FTE")
                       
                         
Net interest income
 
$
30,669
   
$
23,316
   
$
113,282
   
$
89,186
 
Add:  taxable equivalent adjustment
   
126
     
286
     
510
     
1,123
 
Net interest income - taxable equivalent
 
$
30,795
   
$
23,602
   
$
113,792
   
$
90,309
 
Net interest margin (GAAP) (1)
   
3.91
%
   
3.60
%
   
3.85
%
   
3.61
%
Net interest margin (FTE) (1)
   
3.93
%
   
3.65
%
   
3.88
%
   
3.65
%

Adjusted Net Income, Earnings Per Diluted Share, Return on Equity and Return on Assets
                               
                                 
Net Income
 
$
9,936
   
$
1,711
   
$
39,839
   
$
20,475
 
Deferred tax assets adjustment
   
-
     
5,965
     
-
     
5,965
 
Adjusted net income
 
$
9,936
   
$
7,676
   
$
39,839
   
$
26,440
 
                                 
Average diluted shares outstanding
   
24,339,782
     
21,661,133
     
23,768,795
     
21,650,199
 
Average total assets
 
$
3,327,002
   
$
2,742,761
   
$
3,131,936
   
$
2,650,189
 
Average shareholders' equity
 
$
344,779
   
$
270,099
   
$
321,772
   
$
261,768
 
                                 
Diluted earnings per share
                               
Reported
 
$
0.41
   
$
0.08
   
$
1.68
   
$
0.95
 
Adjusted
 
$
0.41
   
$
0.35
   
$
1.68
   
$
1.22
 
Return on average assets(1)
                               
Reported
   
1.18
%
   
0.25
%
   
1.27
%
   
0.77
%
Adjusted
   
1.18
%
   
1.11
%
   
1.27
%
   
1.00
%
Return on average common equity(1)
                               
Reported
   
11.43
%
   
2.51
%
   
12.38
%
   
7.82
%
Adjusted
   
11.43
%
   
11.28
%
   
12.38
%
   
10.10
%


(1)
Annualized for three months ended December 31, 2018 and 2017.

9

Reconciliation of Non-GAAP Financial Measures (continued)
Independent Bank Corporation

Tangible Common Equity Ratio

   
December 31,
2018
   
September 30,
2018
   
June 30,
2018
   
March 31,
2017
   
December 31,
2017
 
   
(Dollars in thousands)
 
Common shareholders' equity
 
$
338,994
   
$
345,204
   
$
337,083
   
$
267,917
   
$
264,933
 
Less:
                                       
Goodwill
   
28,300
     
28,300
     
29,012
     
-
     
-
 
Other intangibles
   
6,415
     
6,709
     
7,004
     
1,500
     
1,586
 
Tangible common equity
 
$
304,279
   
$
310,195
   
$
301,067
   
$
266,417
   
$
263,347
 
                                         
Total assets
 
$
3,353,281
   
$
3,297,124
   
$
3,234,522
   
$
2,793,119
   
$
2,789,355
 
Less:
                                       
Goodwill
   
28,300
     
28,300
     
29,012
     
-
     
-
 
Other intangibles
   
6,415
     
6,709
     
7,004
     
1,500
     
1,586
 
Tangible assets
 
$
3,318,566
   
$
3,262,115
   
$
3,198,506
   
$
2,791,619
   
$
2,787,769
 
                                         
Common equity ratio
   
10.11
%
   
10.47
%
   
10.42
%
   
9.59
%
   
9.50
%
Tangible common equity ratio
   
9.17
%
   
9.51
%
   
9.41
%
   
9.54
%
   
9.45
%

Tangible Common Equity per Share of Common Stock:

Common shareholders' equity
 
$
338,994
   
$
345,204
   
$
337,083
   
$
267,917
   
$
264,933
 
Tangible common equity
 
$
304,279
   
$
310,195
   
$
301,067
   
$
266,417
   
$
263,347
 
Shares of common stock outstanding (in thousands)
   
23,580
     
24,150
     
24,143
     
21,375
     
21,334
 
                                         
Common shareholders' equity per share of common stock
 
$
14.38
   
$
14.29
   
$
13.96
   
$
12.53
   
$
12.42
 
Tangible common equity per share of common stock
 
$
12.90
   
$
12.84
   
$
12.47
   
$
12.46
   
$
12.34
 

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.


10


The following information was filed by Independent Bank Corp (IBCP) on Tuesday, January 29, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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